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Fortum Corporation Interim report January–September 2014 23 October 2014
Fortum Corporation Interim report January–September 2014 23 October 2014
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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.
Q3 2014 Results
Key figures (EUR) III/14 III/13 I-III/14 I-III/13 2013 LTM Sales, million 976 1,060 3,466 3,918 5,309 4,857
Comparable EBITDA, million 309 336 1,317 1,429 1,975 1,863
Operating profit, million 149 96 2,778 1,002 1,508 3,284
Comparable operating profit, million 183 167 915 979 1,403 1,339
Profit before taxes, million 95 27 2,721 904 1,398 3,215
Earnings per share 0.10 0.04 2.91 0.84 1.36 3.42
Items affecting comparability -0.03 -0.05 2.11 0.03 0.10 2.19
Net cash from operating activities, million 288 401 1,310 1,150 1,548 1,708
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Summary of the third quarter of 2014
• Good results in continuously demanding market environment
• Flexible hydro production partly offset weak electricity price
• Strong cash flow from operations
• The evaluation and preparation of the possible future divestment of the Swedish electricity distribution business continued according to plan
• Efficiency programme close to completion – is estimated to be successfully finalised by the end of 2014
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Market conditions in the third quarter 2014 Nordic countries • Power consumption in the Nordic countries flattish compared to the same period in 2013 • Hydro reservoirs 10 TWh below long-term average, but at the level of comparison period • Nordic system spot prices EUR 4 per MWh lower compared to the third quarter 2013,
while Finnish and Swedish area prices approximately EUR 5-6 per MWh lower
European business environment and carbon market • Several countries have signalled changes in their power market policy • Energy and climate policies to be merged in the new Commission structure • New minority Government in Sweden; long-term energy policy with a fully renewable
energy system to be established
Russia • Power consumption in Fortum’s operating areas unchanged • Spot price for power increased 2% (in RUB) in the Urals hub compared to the same
period in 2013
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Nordic water reservoirs
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Source: Nord Pool Spot
Q1 Q2 Q3 Q4
20
40
60
80
100
120
rese
rvoi
r con
tent
(TW
h)
0
2000 2003 2013 2012 reference level 2014
Wholesale price for electricity
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Source: Nord Pool Spot, NASDAQ OMX Commodities Europe
0
10
20
30
40
50
60
70
80
90
100
110EUR/MWh Nord Pool Spot System Price Forwards
20 October 2014
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023
0
30
60
90
120
150
USD
/ bb
l
Crude oil price (ICE Brent)
2006 2007 20102008 2009 20122011 2013 2014 20150
7
14
21
28
35
EUR
/ tC
O2
CO2 price (ICE ECX EUA)
2006 2007 20102008 2009 20122011 2013 2014 2015
0
50
100
150
200
250
USD
/ t
Coal price (ICE Rotterdam)
2006 2007 20102008 2009 20122011 2013 2014 20150
20
40
60
80
100
GB
p / t
herm
Gas price (ICE NBP)
2006 2007 20102008 2009 20122011 2013 2014 2015
8
Source: ICE
Market prices 20 October 2014; 2014-2015 future quotations
Fuel and CO2 allowance prices
Price development in the Nordic region and Russia
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Includes capacity income
-11% +2%
-7% -14%
Q3: New capacity driving improvement in Russia segment
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Comparable operating profit, EUR million
* The divested distribution operations are included in the segment information for 2013
*
January- September: Good results despite warm weather, low spot prices and weak rouble
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Comparable operating profit, EUR million
* The divested distribution operations are included in the segment information until the closing of the transactions
*
Financials
Comparable and reported operating profit
III/2014 III/2013 III/2014 III/2013 I-III/2014 I-III/2013 I-III/2014 I-III/2013
Power and Technology 167 139 124 44 601 652 537 644 Heat, Electricity Sales and Solutions -4 -3 4 8 55 68 116 83
Russia 1 -15 1 -15 102 46 102 46
Distribution 36 59 36 76 200 256 2,066 274
Other -16 -14 -16 -17 -43 -42 -44 -45
Total 183 167 149 96 915 979 2,778 1,002
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Comparable operating profit
Reported operating profit MEUR
• Non-recurring items (mainly to the sale of the Finnish electricity distribution business), IFRS accounting treatment (IAS 39) of derivatives and nuclear fund adjustments had an impact on the reported operating profit EUR -34 (-70) million in the third quarter and 1,863 (22) million in January-September.
Comparable operating profit
Reported operating profit
Note: The divested distribution operations are included in the segment information until the closing of the transactions.
Power and Technology
MEUR III/2014 III/2013 I-III/2014 I-III/2013 2013 LTM
Sales 495 496 1,568 1,709 2,252 2,111
Comparable EBITDA 197 190 692 765 1,007 934
Comparable operating profit 167 139 601 652 859 808
Net assets 6,083 6,285 6,355
Comparable RONA % 13.8 13.2
Gross investments 66 48 138 118 181 201 14
Q3 2014 • Lower achieved power price – average spot
price EUR 4 per MWh lower, area prices EUR 5-6 per MWh lower
• Higher hydro and nuclear production volumes • All planned annual nuclear maintenance
outages completed; except OKG 2
I-III/2014 • Lower achieved power price – average spot
price EUR 9.6 per MWh lower, area prices EUR 6-8 per MWh lower
• Higher hydro production – normalised hydro inflow and reservoir levels
• Nuclear availability high, production somewhat lower due to OKG 2 and longer planned maintenance outages
Heat, Electricity Sales and Solutions
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Q3 2014 • Heat sales volumes lower due to warm
weather, and divestments made in 2013 and 2014
MEUR III/2014 III/2013 I-III/2014 I-III/2013 2013 LTM
Sales 224 255 939 1,094 1,516 1,361
Comparable EBITDA 20 23 130 142 211 199
Comparable operating profit -4 -3 55 68 109 96
Net assets 2,188 2,275 2,295
Comparable RONA % 8.7 8.3
Gross investments 59 37 85 107 134 112
I-III/2014 • Warm weather during first and third quarter, and
divestments made in 2013 and 2014 burdened CHP volumes (despite new capacity)
• Retail sales also burdened by warm weather especially during the first quarter
Russia Q3 2014 • Comparable operating profit improved due to
CSA capacity payments, better electricity and heat spreads
• CCS (old capacity) auction held – majority of Fortum’s plant selected
• Nyagan 3 passed comprehensive certification tests that precede commissioning
MEUR III/2014 III/2013 I-III/2014 I-III/2013 2013 LTM
Sales 207 210 774 805 1,119 1,088
Comparable EBITDA* 40 23 217 143 258 332
Comparable operating profit 1 -15 102 46 156 212
Net assets 3,670 3,795 3,846
Comparable RONA % 5.2 6.6
Gross investments 105 125 261 294 435 402
I-III/2014 • Positive impact from CSA capacity of
EUR 122 (84) million • Overall, Russian results was negatively
affected by weakened rouble approximately EUR 16 million
16 * Excluding the net release of CSA provision
Distribution
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Q3 2014 • Volumes in Sweden in line with last year
MEUR III/2014 III/2013 I-III/2014 I-III/2013 2013 LTM
Sales 130 217 578 784 1,064 858
Comparable EBITDA 67 113 318 417 548 449
Comparable operating profit 36 59 200 256 332 276
Net assets 2,634 3,759 3,745
Comparable RONA % 8.8 8.9
Gross investments 29 56 89 165 255 179
I-III/2014 • Divestments of Finnish and Norwegian
electricity distribution businesses closed • Fortum continues to evaluate and prepare
the possible future divestment opportunity of the Swedish electricity distribution business
Note: The divested distribution operations are included in the segment information until the closing of the transactions
Income statement MEUR III/2014 III/2013 I-III/2014 I-III/2013 2013 LTM
Sales 976 1,060 3,466 3,918 5,309 4,857
Other income and expenses -793 -893 -2,551 -2,939 -3,906 -3,518
Comparable operating profit 183 167 915 979 1,403 1,339
Capital gains and other items affecting comparability -34 -70 1,863 22 106 1,947
Operating profit 149 96 2,778 1,002 1,508 3,284
Share of profit of associates and jv’s 1 3 111 115 178 174
Financial expenses, net -56 -72 -169 -212 -289 -246
Profit before taxes 95 27 2,721 904 1,398 3,215
Income tax expense -11 3 -134 -157 -186 -163
Net profit for the period 84 30 2,587 748 1,212 3,051
Non-controlling interests -1 -1 4 2 8 10
Net profit for the owners of the parent 85 31 2,583 746 1,204 3,041
EPS, basic (EUR) 0.10 0.04 2.91 0.84 1.36 3.42
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Cash flow statement MEUR III/2014 III/2013 I-III/2014 I-III/2013 2013 LTM
Operating profit before depreciations 276 265 3,185 1,461 2,129 3,853
Non-cash flow items and divesting activities 18 59 -1,903 -104 -262 -2,061
Financial items and fx gains/losses 47 68 52 -242 -188 106
Taxes -68 -68 -164 -149 -210 -225
Funds from operations (FFO) 273 324 1,170 966 1,469 1,673
Change in working capital 15 77 140 185 79 34
Total net cash from operating activities 288 401 1,310 1,150 1,548 1,708
Paid capital expenditures -194 -259 -524 -670 -1,004 -858
Divestments of shares* 1 92 2,818 129 144 2,833
Other investment activities 164 -82 383 44 -84 255
Cash flow before financing activities 259 152 3,987 653 604 3,938
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* Including Proceeds from the interest-bearing receivables relating to divestments
Key ratios
MEUR LTM 2013
Comparable EBITDA 1,864 1,975
Interest-bearing net debt 4,790 7,793
Comparable net debt/EBITDA 2.6 3.9
excluding Värme financing 2.2 3.4
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Return on capital employed, ROCE (%) 18.9 9.0
Return on shareholders’ equity, ROE (%) 29.0 12.0
Good liquidity – committed credit lines total EUR 2.2 billion
Debt Maturity Profile
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0
250
500
750
1000
1250
1500
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024+
Bonds Financial institutions Other long-term debt CPs Other short-term debt
MEUR
2014 32
2015 1,035
2016 863
2017 548
2018 629
2019 821
2020 76
2021 547
2022 1,057
2023 112
2024+
TOTAL
1,249
6,969
per 30 Sep, 2014 per 31 Dec, 2013 Average Interest Rate (incl. swaps and forwards) 3.9% 3.6% Portion of floating / fixed debt 47 / 53% 51 / 49%
• The efficiency programme is close to completion and is estimated to be successfully finalised during 2014
• Total annual cost savings visible in all divisions • Improved working capital efficiency • Divestments of non-core assets totalling approximately EUR 500 million
Fortum's efficiency programme 2013-2014
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SPEED - Cash flow improved by EUR 1 billion – FLEXIBILITY
CAPEX EUR 250-350 million
DIVESTMENTS EUR 500 million
WORKING CAPITAL Reduction
FIXED COSTS Reduce EUR 150 million compared to 2012
WHY WHAT WHEN 2013-2014
Outlook
Outlook
Nordic markets • Fortum continues to expect that the average annual electricity demand
growth will be 0.5% in the coming years • Electricity is expected to continue to gain share of total energy consumption
Russia • The target for the Russia Segment in Russian roubles, RUB 18.2 billion, to be
reached during 2015 is intact, but the euro result level will be volatile
Key drivers and risks • Wholesale price of electricity and volumes
• demand and supply • fuels • hydrological situation • power plant availability • CO2 emissions allowance prices
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Outlook
Annual capex estimate, excluding potential acquisitions • 2014 EUR 0.9 to 1.1 billion
Hedging
• The remaining 2014 approx. 70% hedge ratio at approx. EUR 43/MWh • 2015 approx. 40% hedge ratio at approx. EUR 41/MWh • 2016 approx. 10% hedge ratio at approx. EUR 39/MWh
The efficiency programme is close to completion and is estimated to be successfully finalised by the end of 2014 Taxation
• Effective tax rate for 2014 for the Group 19-21% • In Finland, the power plant tax (“windfall tax”) has been revoked
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For more information www.fortum.com/investors
