FORTUM. Power and heat company in the Nordic area, Russia, Poland and the Baltics. Investor / Analyst material May 2013

Transcription

1 FORTUM Power and heat company in the Nordic area, Russia, Poland and the Baltics Investor / Analyst material May 2013

2 Disclaimer This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any Fortum shares. Past performance is no guide to future performance, and persons needing advice should consult an independent financial adviser. 2

3 Content Fortum today, pages 4-17 European and Nordic power markets, pages Data on Fortum s nuclear fleet, pages Russia, pages Data on capacity payments, pages Fortum s investment programme, page 45 Financials and outlook, pages Hedges, pages

4 More than 130,000 shareholders Power and heat company in the Nordic countries, Russia, Poland and the Baltics Listed at the Helsinki Stock Exchange since 1998 Among the most traded shares on the NASDAQ OMX Helsinki stock exchange Market cap ~13 billion euros Households 11.4% Financial and insurance institutions 3.3% Other Finnish investors 10.3% Finnish State 50.8% Foreign investors 24.2% 30 April

5 Capital returns / Dividend for 2012 EUR 1.00 ~ EUR 0.9 billion Fortum s dividend policy is based on the following preconditions: The dividend policy ensures that shareholders receive a fair remuneration for their entrusted capital, supported by the company s long-term strategy that aims at increasing earnings per share and thereby the dividend. When proposing the dividend, the Board of Directors looks at a range of factors, including the macro environment, balance sheet strength as well as future investment plans. 5 year dividend per share (EUR) history Fortum Corporation's target is to pay a stable, sustainable and over time increasing dividend of 50-80% of earnings per share excluding one-off items 1,00 1,00 1,00 1,00 1,00 Fortum has since 1998 annually paid dividends in total ~9,518 MEUR % % % % % 5

6 Organisational structure Business Divisions President and CEO Tapio Kuula Staff Functions Power (Espoo) Executive Vice President Matti Ruotsala Heat (Stockholm) Executive Vice President Per Langer Russia (Chelyabinsk) Executive Vice President Alexander Chuvaev Electricity Solutions and Distribution (Espoo) Executive Vice President Timo Karttinen Finance Chief Financial Officer Markus Rauramo Corporate Communications Senior Vice President Helena Aatinen Corporate Human Resources Senior Vice President Mikael Frisk Country responsibles: Timo Karttinen / Finland, Norway; Per Langer / Sweden, Poland, Baltics; Alexander Chuvaev / Russia 6

7 Fortum s Mission and Strategy Mission Fortum s purpose is to create energy that improves life for present and future generations. We provide sustainable solutions for society and deliver excellent value to our shareholders. Strategy Build on the strong Nordic core Create solid earnings growth in Russia Build a platform for future growth Strong competence in CO 2 -free hydro and nuclear, efficient CHP production and energy markets 7

8 Our geographical presence today Nr 3 Nr 1 Nr 1 Nr 2 Power generation Heat Distribution Electricity sales Great Britain Power generation 1.1 TWh Heat sales 1.8 TWh Nordic countries Power generation Heat sales 51.6 TWh 14.5 TWh Distribution customers 1.6 million Electricity customers 1.2 million Russia Key figures 2012 Sales EUR 6.2 bn Operating profit EUR 1.9 bn Balance sheet EUR 25 bn Personnel 10,400 OAO Fortum Power generation 19.2 TWh Heat sales 26.4 TWh TGC-1 (~25%) Power generation Heat sales ~7 TWh ~8 TWh Poland Power generation 0.8 TWh Heat sales 4.3 TWh Baltic countries Power generation Heat sales 0.4 TWh 0.9 TWh 8

9 Divisions of Fortum Business description Comparable operating profit Power Division Fortum s power generation, physical operation and trading as well as expert services for power producers. EUR 1,144 million Heat Division Combined heat and power generation, district heating and cooling activities and b- to-b heating solutions. EUR 266 million Russia Division Power and heat generation and sales in Russia. It includes OAO Fortum and Fortum s slightly over 25% holding in TGC-1. EUR 68 million Electricity Solutions and Distribution Division Fortum's electricity sales and distribution activities. Two business areas: Distribution and Electricity Sales. Distr.: EUR 317 million El. sales: EUR 38 million Net assets EUR 6,454 million EUR 4,335 million EUR 3,846 million Distr.: EUR 3,911 million El. sales: EUR 59 million Volume (TWh) Nordic generation 49,2 Heat sales 19.7 Power sales: 4.2 Power sales.: 23.3 Heat sales.: 26.4 Distr.net. 26.6, reg.net El. sales: 13.0 Drivers Nordic power price, generation volumes Fuel mix, heat and power price New capacity, and price for that, power and heat price Distr.: Regulated El. sales: Sales margin 9

10 Fortum mid-sized European power generation player; major producer in global heat Power generation Heat production Customers Largest producers in Europe and Russia, 2011 TWh EDF E.ON Enel RWE GDF SUEZ Gazprom Rosenergoatom Vattenfall *) Inter RAO UES **) RusHydro NNEGC Energoat. Iberdrola EuroSibEnergo Fortum CEZ ***) IES EnBW PGE DTEK, Ukraine Statkraft SSE DEI ***) IES Gazprom *****) Dalkia *) Inter RAO UES Fortum **) RusHydro EuroSibEnergo ****) Sibgenco Vattenfall Quadra MOEK DTEK, Ukraine Lukoil TGC-2 KDHC, Korea Minskenergo Tatenergo Dong Energy PGNiG ELCEN, Rom. TGC-14 Largest global producers, 2011 TWh Enel EDF E.ON RWE Iberdrola DEI Centrica CEZ EDP Vattenfall SSE EnBW PGE GDF SUEZ Gas Natural Fenosa Tauron Fortum Dong Energy Hafslund Electricity customers in EU, 2011 millions * incl. Bashkirenergo, ** incl. RAO ES East, *** incl. TGC-5, TGC-6, TGC-7, TGC-9, **** incl. TGC-12, TGC-13, ***** incl. energy services Source: Company information, Fortum analyses, 2011 figures pro forma, heat production of Beijing DH not available. 10

11 EDF Rosenergoatom E.ON NNEGC Energoatom Enel RusHydro Vattenfall GDF SUEZ Irkutskenergo Statkraft RWE Iberdrola Fortum EnBW CEZ Verbund Krasnoyarskaya HPP Axpo Hidroelectrica EDP Gazprom Alpiq Ukrhydroenergo EPS, Serbia Gas Natural Fenosa E-CO Energi Norsk Hydro DEI Agder Energi Edison BKK Inter RAO UES SSE PGE IES Biggest nuclear and hydro generators in Europe and Russia TWh Total generation Other Nuclear Hydro Figures 2010 pro forma 11

12 DEI Drax RWE CEZ SSE Edipower Vattenfall Enel EDP E.ON GDF SUEZ Dong Union Fenosa EnBW Iberdrola Fortum total Verbund PVO Fortum EU EDF Statkraft Fortum's carbon exposure among the lowest in Europe g CO 2 /kwh electricity, % of Fortum's total power generation CO 2 -free 93% of Fortum s power generation in the EU CO 2 -free Close to 100% of the ongoing investment programme in the EU CO 2 -free Average 338 g/kwh Note: Fortum s specific emission of the power generation in 2012 in the EU were 42 g/kwh and in total 171 g/kwh. Only European generation except Fortum total which includes Russia. Source: PWC & Enerpresse, Novembre 2012 Changement climatique et Électricité, Fortum 12

13 Fortum s strategic route Länsivoima 45% 65% Länsivoima 100% Elnova 50% 100% Separation of oil businesses E.ON Finland Divestment of Fingrid shares Divestment of non-strategic heat business Neste IVO Gullspång Skandinaviska Elverk Birka Energi 50% Fortum 50% Stockholm Gullspång Stockholm Energi Lenenergo shares 1998 Stora Kraft Birka Energi 50% 100% Østfold Shares in Hafslund Shares in Lenenergo Starting TGC-1 District heat in Poland 2003 Divestment of Lenenergo shares TGC-10 Divestment of heat operations outside of Stockholm Divestment of small scale hydro 13

14 Fortum in the Nordic electricity value chain Competitive businesses Large customers Power generation Nordic wholesale market Power exchange and bilateral agreements Retail customers Private customers, small businesses Regulated businesses Independent transmission system operator Transmission and system services Distribution Independent distribution companies 14

15 Fortum's total power and heat production by source Fortum's power generation in 2012 Fortum's heat production in 2012 Hydro power 34% Nuclear power 32% Natural gas 62% Biomass 2% Coal 5% Natural gas 27% Oil 1% Peat 1% Waste 5% Heat pumps, electricity 8% Biomass 11% Coal 12% Total generation 73.1 TWh (Generation capacity 14,675 MW) Total production 43.3 TWh (Production capacity 22,431 MW) 15

16 Fortum's European power and heat production by source Fortum's European power generation in 2012 Fortum's European heat production in 2012 Hydro power 47% Biomass 27% Natural gas 21% Other 1% Biomass 2% Natural gas 3% Coal 4% Oil 2% Peat 2% Waste 10% Coal 20% Nuclear power 43% European generation 53.9 TWh (Generation capacity 11,271 MW) Heat pumps, electricity 18% European production 18.5 TWh (Production capacity 9,035 MW) 16

17 Fortum a forerunner in sustainability Dow Jones Sustainability World Index Included for ten consecutive years Fortum the only Nordic power and heat company Carbon Disclosure Leadership Index Fortum globally third best company in the utility sector 2012 Fortum the only Nordic power and heat company SAM Sustainability Yearbook STOXX Global ESG Leaders indices oekom OMX GES Sustainability Finland Index Storebrand SRI 17

18 European and Nordic power markets Fortum today, pages 4-17 European and Nordic power markets, pages Data on Fortum s nuclear fleet, pages Russia, pages Data on capacity payments, pages Fortum s investment programme, page 45 Financials and outlook, pages Hedges, pages

19 Market coupling milestones - cross-border power flows optimised by power exchanges Market coupling between NL, BE and FR since 2006 Germany Nord Pool Spot coupling started 11/2009 Market coupling for Central Western Europe (DE, FR, NL, BE) since 11/2010 with a continued coupling with Nord Pool Spot NorNed cable (NO-NL) included in January 2011 Poland coupled with Nord Pool Spot since December 2010 UK coupling started through BritNed cable in April 2011 Czech, Slovakia and Hungary coupled since September 2012 Estonian price area in Nord Pool Spot since April 2010, Lithuanian bidding area from 6/2012, Latvia to follow in June 2013, with the whole Baltic market then in Nord Pool Spot The TSOs and power exchanges are developing a single market coupling for the whole north-western Europe by November 2013, with the Iberian market to join early 2014 In addition to day-ahead coupling, intraday market coupling and balancing market integration targeted as well EU s European Target Model for cross-border power trading sets 2014 as deadline for an EU-wide market coupling

20 Current transmission capacity from Nordic area to Continental Europe is over 4000 MW Countries Transmission capacity MW From Nordics To Nordics Denmark - Germany 2,365 2,100 Sweden - Germany Sweden - Poland Norway - Netherlands Total 4,275 4, Theoretical maximum in transmission capacity ~35 TWh per annum Net export from Nordic area to Continental Europe during the Nordic wet year 2012 was ~18 TWh During 2011 net export was 7 TWh Approximately 20 TWh of net export is now reachable 700 2,

21 Nordic and Continental markets are integrating interconnection capacity will double by 2020 The Northern Seas Offshore Grid and the Baltic Energy Market Integration Plan are included as priority electricity corridors in EU s Infrastructure Guidelines, approved in April 2013 New interconnections will double the capacity to over 8,000 MW by 2020 NO-UK link of 1,400 MW agreed to be built by 2020; North Seas Countries Offshore Grid Initiative launched for supergrid development First direct 1,400 MW NO-DE link agreed to be built by 2018 EU financial support for a 700 MW DK-NL link, due to be built by 2017 Jutland DE capacity planned to grow by 1,000-1,500 MW by 2018 EU support to connect Kriegers Flak offshore wind area to DK&DE by 2020 New internal Nordic and Baltic grid investments provide for increased available capacity for export to the Continent and Baltics EU s European Energy Programme for Recovery co-financing Estlink 2 (2014) and NordBalt (2016) LitPol Link ( MW) to connect the Baltic market to Poland in 2015/20. It will open a new transmission route from the Nordic market to the Continent Svenska Kraftnät is starting a study to extend the South West DC Link from Sweden to Germany 21

22 reservoir content (TWh) Nordic water reservoirs reference level Q1 Q2 Q3 Q4 Source: Nord Pool Spot 22

23 Nordic year forwards Year 09 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 /MWh 70 2 May Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Source: NASDAQ OMX Commodities Europe 23

24 Wholesale price for electricity EUR/MWh Nord Pool System Price Forwards May Source: Nord Pool Spot, NASDAQ OMX Commodities Europe

25 Wholesale prices for electricity EUR/MWh Spot prices Forward prices Dutch German Nordic Russian* May 2013 * Including weighted average capacity price Source: Nord Pool Spot, NASDAQ OMX Commodities Europe, APX-ENDEX, Bloomberg Finance LP, ATS, NP Market Council, Fortum 25

26 USD / bbl Fuel and CO 2 allowance prices Crude oil price (ICE Brent) EUR / tco 2 USD / t GBp / therm CO 2 price (ICE ECX EUA) Coal price (ICE Rotterdam) 100 Gas price (ICE NBP) Source: ICE Market prices 2 May 2013; future quotations

27 Nordic power generation dominated by hydro, but fossil needed TWh/a Total Nordic generation 378 TWh in 2011 Fossil fuels Nuclear TWh % Biomass Wind Hydro * Denmark Norway Sweden Finland Net import in 2011: 3 TWh Source: ENTSO-E Memo 2011 *) Normal annual Nordic hydro generation 200 TWh, variation +/- 40 TWh. 27

28 Fortum s Nordic generation capacity Sweden Price areas MW SE Hydro Wind 14 SE1 Nordic Hydro Nuclear CHP Other thermal MW Wind 17 SE SE4 Hydro 1623 Nuclear CHP 612 Other thermal 297 Generation capacity in Sweden SE4 SE3 SE2 Nordic capacity Finland MW Hydro Nuclear CHP 703 Other thermal Wind 3 Generation capacity in Finland At the end of Q

29 Still a highly fragmented Nordic power market Power generation 378 TWh >350 companies Electricity distribution 15 million customers ~500 companies Electricity retail 15 million customers ~350 companies Others Vattenfall Others Fortum E.ON Others Vattenfall Fortum 33% Helsinki BKK Norsk Hydro E-CO Energi PVO Dong Energy E.ON Statkraft Fortum 54% Dong Energy Vattenfall Hafslund Elenia SEAS-NVE Helsinki Göteborg Syd Energi 52% E.ON Dong Energy Hafslund Statkraft Helsinki SEAS-NVE Bixia Göteborg, DinEl Source: Fortum, company data, shares of the largest actors, pro forma 2011 figures. 29

30 New capacity needed for increasing demand and retiring capacity replacements Growing global energy demand will be increasingly fulfilled by electricity in the future 250 % 200 % Growth, Primary energy demand Electricity generation ~240% Substantial demand growth in the emerging markets 150 % 100 % ~130% Retirements and moderate demand growth in the EU Globally, 5,900 GW of new capacity needed by % 0 % ~20% Capacity changes, (GW) ~ 40% US Europe Russia China India Other areas World total Retiring capacity ,976 New capacity, total ( , ,964 5,891 Source: IEA WEO 2012 (New polices scenario) 1) Total new capacity needed for increasing demand and retiring capacity replacements 30

31 New capacity will require over 60 EUR/MWh power price EUR/MWh Source: Nord Pool spot, NASDAQ OMX Commodities Europe Futures 2 May 2013 EUR/MWh Coal CO 2 cost Other costs ( variation) Gas Nuclear Hydro Wind Clean coal Estimated lifetime average cost in nominal 2014 terms. Large variations in cost of new hydro and wind due to location and conditions. 31

32 Fortum s investment programme Nordic region, Poland and Baltic countries Project Electricity, MW Heat, MW Commissioned Olkiluoto 3, Finland 400 Swedish nuclear upgrades 290 Blaiken, Sweden, wind power 30 Refurbishing of hydro power 10 annually Brista, Sweden Q (waste CHP) Järvenpää, Finland Q (biomass CHP) Jelgava, Latvia Q (biomass CHP) Värtan, Sweden (biomass CHP) Total ~930 ~450 Additional electricity capacity around 930 MW 100% CO 2 -free 32

33 Overview of Fortum s nuclear fleet Commercial operation started Generation Capacity Fortum s share Yearly production Fortum s share of production Share of Fortums Nordic production Majority owner Fortum s share Operated by Unit 1: 1977 Unit 2: 1981 LOVIISA OLKILUOTO OSKARSHAMN FORSMARK Unit 1: 496 MW Unit 2: 496 MW Total: 992 MW 8 TWh 8 TWh Unit 1: 1978 Unit 2: 1980 Unit 3: (Under construction) Unit 1: 880 MW Unit 2: 880 MW (Unit 3: 1,600 MW) Total: 1,760 MW (3,360) 27% 468 MW 14 TWh 4 TWh Unit 1: 1972 Unit 2: 1974 Unit 3: 1985 Unit 1: 473 MW Unit 2: 638 MW Unit 3: 1,400 MW Total: 2,511 MW 43% 1,089 MW 17 TWh 7 TWh Unit 1: 1980 Unit 2: 1981 Unit 3: 1985 Unit 1: 984 MW Unit 2: 996 MW Unit 3: 1,170 MW Total: 3,150 MW 22% 699 MW 25 TWh 5.5 TWh 18% 9% 16% 13% Fortum Fortum Pohjolan Voima 26.6% Teollisuuden Voima (TVO) E.ON 43.4% OKG Aktiebolag Vattenfall 22.2% Forsmarks Kraftgrupp Responsibilities Loviisa: Fortum is the owner, licensee and operator with all the responsibilities specified in the Nuclear Energy Act, Nuclear Liability Act, and other relevant nuclear legislation Other units: Fortum is solely an owner with none of the responsibilities assigned to the licensee in the nuclear legislation. Other responsibilities are specified in the Companies Act and the Articles of Association and are mostly financial. 33

34 Fortum's nuclear power in the Nordics Source: Fortum Forsmark Olkiluoto Loviisa Finnish units world class in availability Overview of production and consumption: - energy related links Oskarshamn 34

35 Variety of technologies and ages Unit Mwe (Net) Share (%) Share (Mwe) Commercial operation Age Type/ Generation * Supplier Loviisa 1 Loviisa ,0 100, PWR / 1 PWR / 1 AEE (Atomenergoexport) AEE (Atomenergoexport) Olkiluoto 1 Olkiluoto 2 Olkiluoto (1,600) 26,6 26,6 25, (400) (?) BWR / 3 BWR / 3 PWR / 3 Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval Areva / Siemens Oskarshamn 1 Oskarshamn 2 Oskarshamn ,400 43,4 43,4 43, BWR / 1 BWR / 2 BWR / 4 Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval Forsmark 1 Forsmark 2 Forsmark ,170 23,4 23,4 20, BWR / 3 BWR / 3 BWR / 4 Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval *Generation refers to technical resemblence based on KSU classification and not to reactor design generations. All reactors are of Generation II except Olkiluoto-3 (EPR) which is of Generation III. PWR = Pressurized Water Reactor The most common reactor type in the world (e.g. all French units, most US units). Also the Loviisa units are PWRs, but based on Russian design. High pressure prevents water from boiling n the reactor. The steam rotating the turbine is generated in separate steam generators. BWR = Boiling Water Reactor Similar to the PWR in many ways, but the steam is generated directly in the reactor. Popular reactor type e.g. in Sweden, the US and Japan. 35

36 Third party nuclear liability in case of severe accident Has been approved by the Parliament. In force onwards. Law approved by Parliament in 2010, requires separate decision from Government to come into force. 300 M 300 M Unlimited company responsibility Convention parties 500 M 145 M 500 M State responsibility Responsibility of company (insurance or guarantee) 145 M 240 M Old, Finland 145 M 360 M Current, Sweden 700 M Sweden (new, not in force) 700 M 200 M Finland, temporary legislation 700 M New Paris convention Requires ratification by 2/3 of member states to come into force. In Finland approved by Parliament in

37 Nuclear upgrades in Sweden Reactor OKG 1 Completion - Increase 100% (MW) 0 Fortum's capacity increase (MW) Additional generation for Fortum (TWh/a) Fortum's capacity after increase (MW) Fortum's generation after increase (TWh/a) ~2 OKG , ~3 OKG ~5 FKA 1 Decision ~ ~2 FKA ~2 FKA 3 Decision ~ ~2 Total ~290 ~2 ~1,950* ~15 Capacity increase and completion timetable based on recent estimate (Nord Pool). At * Fortum's share of Swedish nuclear capacity was 1,787 MW. 37

38 Russia Fortum today, pages 4-17 European and Nordic power markets, pages Data on Fortum s nuclear fleet, pages Russia, pages Data on capacity payments, pages Fortum s investment programme, page 45 Financials and outlook, pages Hedges, pages

39 Russia is the World s 4th largest power market TWh 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Power generation in 2011 based on gross output. Source: BP Statistical Review of World Energy June

40 Fortum - a major player in Russia OAO Fortum (former TGC-10) Operates in the heart of Russia s oil and gas producing region, fleet mainly gas-fired CHP capacity 19 TWh power generation, 25 TWh heat production in 2012; more than Fortum s Nordic heat sales (15 TWh) Investment programme to add 85%, almost 2,400 MW to power generation capacity TGC-1 Slightly over 25% of territorial generating company TGC-1 operating in north-west Russia ~6,800 MW electricity production capacity (more than 40% hydro), ~28 TWh electricity, ~31 TWh heat in 2012 TGC-1 St. Petersburg Nyagan Moscow Chelyabinsk OAO Fortum Tobolsk Tyumen 40

41 / MWh Day ahead wholesale market prices increase driven by recovering demand and gas price Key electricity, capacity and gas prices in the OAO Fortum area Day ahead power market prices for Urals Electricity spot price (market price), Urals hub, RUB/MWh I/13 I/ LTM Average regulated gas price, Urals region, RUB 1000 m 3 2,924 2,548 2,736 2, Average capacity price for CCS old capacity, trub/mw/month Average capacity price for CSA new capacity, trub/mw/month Average capacity price, trub/mw/month Achieved power price for OAO Fortum, EUR/MWh In addition to the power price generators receive a capacity payment. Source: ATS 41 2

42 Power market liberalisation two markets Capacity wholesale market Electricity wholesale market Capacity prices Competitive capacity selection (CCS) and free bilateral agreements (FBA) A higher, fixed capacity price for new capacity (CSA* agreements, built after 2007) Electricity prices Day ahead (spot) market, financial market, free bilateral agreements (FBA) and regulated bilateral agreements (RBA) Fully liberalised from 1 Jan 2011 except for volumes intended for households priced by RBA (~10% of volume) Lower capacity price for old capacity, price caps limits the price in some areas Old capacity intended for households are priced by regulated bilateral agreements (RBA) CSA is the intended mechanism for earning a (reasonable) return on invested capital in new capacity Capacity prices are a big part of a power generator s income a typical CHP plant ~35%, CCGT ~55%, of revenues In the day ahead (spot) market, the price mechanism is a day ahead hourly auction. Supply demand balance and variable cost (fuel) are the key drivers for the spot price Financial market for electricity started in June, * Capacity supply agreement

43 Capacity prices for new capacity considerably higher than prices for old capacity prices Long term rules and price parameters approved Both old and new capacity can participate in capacity auctions Old capacity (pre 2007) and new capacity priced differently Old capacity is priced by capacity auctions; price cap possibility New capacity under capacity supply agreements to receive guaranteed payments The payments for new capacity are based on approved pricing formulas Vary according to plant size, fuel, geographic location, capital costs Allow the recovery of capital costs and include return on invested capital; the targeted ROCE level 12-14% (with current government benchmark bond yields) After three years (2014), the regulator will review the earnings from the electricity-only market and can revise the payments, same goes after 6 years. Old capacity prices will depend on auction outcomes, but will likely remain relatively low; potentially price caps could limit the price 43

44 Key factors behind the profitability improvement in Russia Efficiency improvement programme Increasing heat production profitability Fuel efficiency improvement Cost savings New CSA capacity commissioning Additional capacity 2,388 MW; +85% Capacity is sold at CSA (Capacity Supply Agreement) contracts with guaranteed higher price Pace of new capacity increase of Fortum investment programme in Russia MW MW MW MW Total - 2,388 MW 44

45 85% increase in power generation capacity in Russia by the end of 2014 through the investment programme 45

46 Financials and outlook Fortum today, pages 4-17 European and Nordic power markets, pages Data on Fortum s nuclear fleet, pages Russia, pages Data on capacity payments, pages Fortum s investment programme, page 45 Financials and outlook, pages Hedges, pages

47 Income statement MEUR I/2013 I/ LTM Sales 1,991 1,901 6,159 6,249 Expenses -1,341-1,247-4,407-4,501 Comparable operating profit ,752 1,748 Items affecting comparability Operating profit ,874 1,738 Share of profit of associates and jv's Financial expenses, net Profit before taxes ,586 1,490 Income tax expense Net profit for the period ,512 1,428 Non-controlling interests EPS, basic (EUR) EPS, diluted (EUR)

48 Comparable and reported operating profit Fortum today, pages 4-16 MEUR European and Nordic power markets, pages Data on Fortum s nuclear fleet, pages Russia, pages Comparable operating Reported operating Comparable operating Reported operating profit profit profit profit I/2013 I/2012 I/2013 I/ Power ,146 1,175 Heat Russia Distribution Electricity Sales Other Data on capacity payments, pages Total ,752 1,874 Fortum s investment programme, page 45 Non-recurring items, IFRS accounting treatment (IAS 39) of derivatives and nuclear fund adjustments had an impact on the reported operating profit EUR -47 (85) million in the first quarter. Financials and outlook, pages Hedges, pages

49 Cash flow statement MEUR I/2013 I/ LTM Operating profit before depreciations ,538 2,413 Non-cash flow items and divesting activities Financial items and fx gains/losses Taxes Funds from operations (FFO) ,555 1,538 Change in working capital Total net cash from operating activities ,382 1,475 Paid capital expenditures ,422-1,437 Acquisition of shares Other investing activities Cash flow before financing activities

50 Key ratios MEUR LTM EBITDA 2,413 2,538 3,008 Comparable EBITDA 2,423 2,416 2,374 Interest-bearing net debt 7,433* 7,814 7,023 Comparable net debt/ebitda * Return on capital employed (%) Return on shareholders' equity (%) Good liquidity committed credit lines total EUR 2.7 billion 50

51 Debt Maturity Profile Bonds Financial institutions Other long-term debt CPs Other short-term debt MEUR , , , TOTAL 1,084 9,152 per 31 Mar, 2013 per 31 Dec, 2012 Average Interest Rate (incl. swaps and forwards) 4.1 % 4.5 % Portion of floating / fixed debt 52 / 48 % 45 / 55 % 51

52 Outlook Nordic markets Annual electricity demand growth estimated to be on average 0.5% Electricity continues to gain share of total energy consumption Russia Fortum s goal is to achieve an operating profit level of about EUR 500 million run-rate in its Russia Division during 2015 and to create positive economic added value in Russia after completing the on-going investment programme Key drivers and risks Wholesale price of electricity and volumes Demand and supply Fuels Hydrological situation Power plant availability CO 2 emissions allowance prices 52

53 Outlook Annual capex estimate excluding potential acquisitions 2013 EUR 1.1 to 1.4 billion 2014 EUR 0.9 to 1.1 billion Hedging Rest of 2013 approximately 80% hedge ratio at approximately EUR 45/MWh (Q4: 70% at EUR 45/MWh) 2014 approximately 45% hedge ratio at approximately EUR 42/MWh (Q4: 35% at EUR 43/MWh) Target for efficiency programme is to improve cash flow by EUR 1 billion during Taxation Effective tax rate for the Group 19-21% In Finland, a plan to reduce the corporate tax rate from 24.5% to 20% starting 1 January 2014 has been presented. The decrease would cause a one-time positive effect that would be booked in the fourth quarter Update of real estate taxation values is ongoing in Sweden and is expected to be finalised in July Proposal would increase Fortum s costs by approximately EUR 40 million in 2013 compared to Finnish Government have announced that the planned so-called windfall tax, to be introduced in 2014, will be cut to EUR 50 million from EUR 170 million. 53

54 Hedging improves stability and predictability EUR/MWh 80 Realised prices quarterly since Achieved power price Spot price, SE&FI avg onwards thermal and import from Russia excluded 54

55 Efficiency programme launched to maintain and strengthen the strategic flexibility and competitiveness "The core of our activities is to fulfill our strategy of long-term business operations, the aim of which is to strengthen our Nordic core business, create solid earnings growth in Russia and build a platform for future growth" 55

56 Fortum's efficiency programme Efficiency programme proceeding according to plan Integrated into division plans for WHY WHAT WHEN SPEED - Cash flow improved by EUR 1 billion - FLEXIBILITY CAPEX EUR million DIVESTMENTS EUR 500 million WORKING CAPITAL Reduction FIXED COSTS Reduce EUR 150 million compared to

57 Assessment of Fortum s electricity distribution business Fortum has decided to assess the future alternatives, including divestment, of its electricity distribution business In accordance with its strategy, Fortum seeks growth in low-carbon power generation, energy-efficient CHP production and customer offerings Fortum Distribution Customers: 1.6 million Distributed electricity: 43,954 GWh Length of network: 156,000 km Nr of employees: ~ 900 Sales: 1,070 MEUR Comparable operating profit: 317 MEUR Comparable EBITDA: 526 MEUR Net assets: 3,911 MEUR Norway Customers: 102,000 Distributed electricity: 2,405 GWh Sweden Customers: 900,000 Distributed electricity: 28,925 GWh Finland Customers: 633,000 Distributed electricity: 12,624 GWh 57

58