evli energy efficiency seminar - fortum.com2 capture system to be ... world coal institute - coal...

- a leading energy companyin the Nordic area

Evli Energy Efficiency SeminarFebruary 14, 2008 – Markku Vauhkonen

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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.

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• Fortum today• European Power Markets, Climate Change and 20-20-20• Case for Energy Efficiency• Fortum’s future

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Foreign investors 35.9%Finnish State 50.8%

Other Finnish investors 7.1%

Households 4.7% Financial and insurance institutions 1.5%

• Leading power and heat company in Nordic• Listed at the Helsinki Stock Exchange 1998• More than 50,000 shareholders• Among the most traded shares in Helsinki stock exchange• Market cap ~24 billion euros

Fortum - A leading Nordic power and heat company

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Baltic countriesHeat sales 1.2 TWh Distribution cust. 24,000Poland

Heat sales 3.5 TWhElectricity sales 7 GWh

NW Russia(in associated companies)Power generation ~6 TWhHeat production ~8 TWh

Nr 1

Nr 2

Heat

Electricity sales

Distribution

Power generation

1.6 million customers

51.1 TWh generation

1.3 million customers

20.4 TWh heat sales

Nordic

2007 data

Presence in focus market areas

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Fortum's strategy

Become the leadingpower and heat

company

Become theenergy supplier

of choice

Benchmark business performance

Fortum focuses on the Nordic and Baltic Rim markets as a platform for profitable growth

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Fortum contributes to mitigating climate change

• Climate-benign investment programme proceeding• Fortum currently one of the lowest-emitting power companies in Europe

– aims to maintain that position– in 2007 specific emissions in power generation 63 gCO2/kWh

• New lower specific emissions targets• Fortum established a new Renewables unit in 2007• Stepped-up R&D with strong emphasis on CO2 -free technologies and longer-term • CO2 capture system to be developed for Meri-Pori and Värtan power plants

– Meri-Pori one of the EU pilot projects• Fortum on 'The Global 100 Most Sustainable Corporations' list

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Towards a functioning European power market

Benefiting customers and

societies

• Market-based development• Increased competition• Increased efficiency

Directives:Market liberalisationStrategy:Market integration

1990's2000 -

2010 -

Today –regional Nordic

Tomorrow –European

Yesterday –national

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One market – one price

The most efficient single commodity

market in the world

TargetTLC market coupling

price convergencebetter utilisation of cross-border capacity

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IEA: A huge need for new capacity globally ...

Consumption of electricity to doubleA huge growth in primary energy demand

0 10,000 20,000 30,000

2030

2004

TWh

14,376 TWh

28,093 TWh

0 10,000 20,000

2030

2004

Mtoe*

11,204 Mtoe

17,095 Mtoe

+53%+53%+53% +95%+95%+95%

Source: IEA World Energy Outlook 2006 (The Reference Scenario)

* million tonnes oil equivalent

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... will lead to a huge need to invest

• Over 20 trillion dollar investments needed

• Share of power about 60% of this


0 2,000 4,000 6,000 12,000

Power1,680

11,276

697

8,754

CoalGas

Oil

The WorldEurope

Investment needbillion USD

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Fossil fuels will continue to play a key role

0

50

100

150

200

250

Oil Gas Coal

years

Source IEA World Energy Outlook 2006 (The Reference Scenario); *World Energy Council - survey of energy resources 2004, World Coal Institute - coal facts 2005 and BP Statistical Review of World Energy 7/2006

• Abundance of reserves in the near term

• The existing industrial and logistical infrastructure supports continuation of usage

• Fossil fuel based energy continues to cover around 80% of the total need for energy

estimated variation

Global reserve/production ratio*

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CO2 emissions to grow significantly from today


0

10

20

30

40

50

2004 2030

Billion tonnes

Global energy basedCO2 emissions

+55%+55%+55%

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Scientists agree globally: The climate change is truly happening and it will impact us all

• The climate is warming up due to human influence

• Vast changes by the end of the century– temperature + 2–4oC– sea water level + 20–60 cm– arctic summer ice cover no

longer exists– heat waves become more

frequent– tropical storms get stronger

• Early action will pay off– the costs can be limited to

<1% of GDP– without any actions, costs

could end up at 5-20% of GDP• A number of actions are needed

– CO2 needs to have a price– innovations need support– energy efficiency must be

improved– people must be involved

Sir Nicholas Stern:The Economics of Climate Change

Intergovernmental Panel on Climate Change, IPCC

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Emissions trading sets a market-based price on CO2

• A global problem shall require a global solution

• After Kyoto, a new, broader agreement in order to share the costs in a balanced and justified way

• Emissions trading to be developed

– more countries, more actors– auctioning of the allowances– no overlap in control

mechanismsSource: EU, based on the 23 NAPs decided by 18 July

2,109 2,1011,903

0

500

1,000

1,500

2,000

2,500

Phase 1 annualallocations

NAP 2 proposals

Commissiondecision

Mton CO2

EU Commission imposing heavy cuts on national proposals for NAP 2

Finland: condensing power will get abt 1/5 and CHP 2/3 of estimated needSweden: power and heat sector allocations cut by over 60%

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EU Energy Package to 2020 – a well functioning electricity market key for reaching the targets

• Accelerating the creation of common markets

• Energy efficiency +20%• Increasing investments in

technology development

• CO2 emissions -20% • Renewables share 20%• CO2 capture and storage

• Development of cross-border transmission

• Increase in own production• Enhancement of external

energy relations

Competitiveness Sustainability

Security of supply

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Business opportunity in energy losses

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Potential energy efficiency sources in industry

• Utilising heat losses between industries and municipalities and into electricity generation

• Heat recovery within facilities– Water– Ventilation, cooling– Heat pumps– Fumes

• Process planning and control• Pressurised air

– Heat recovery– Leakage/sectioning/pressure

losses• Motors, pumps and fans

– Dimensioning– Frequency converters– Effective motors

• Lightning – Equipment– Control– Effective

• Process design – e.g. reduction pumps and motors

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Investments that start to pay off

• Energy costs often more than 85 percent of the life cycle cost!

• Energy savings potential often 10-30 percent!

• Energy Efficiency investments pay-off often:

0,2 - 4 years!

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Fortum Service - Energy Efficiency Solutions

develops and carries out analysis, consulting and projects designed to improve the energy efficiency and maintenance costs for:

– Energy and heat companies

– Industry– Facility management– Consumer households

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Some pretty sure bets for the future…

• Higher demand, scarce resources => higher energy prices

• Convergence of the energy prices• CO2 –emissions will have a price, global

trading will start (incl. JI – CDM)• Consolidation of Nordic and European

power markets (grids and companies)• Emerging new technologies to improve new

energy generation forms• Energy efficiency design and investments –

key for industrial competitiveness

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• Focus on the Nordic and Baltic areas, Poland and Russia

– opportunities in Russia

• Climate change mitigation creates business opportunities

– flexible and climate-benign production portfolio

– investments in new CO2-free production capacity

– efforts in developing new technologies and energy efficiency solutions

• Strong financial position

Fortum is well positioned for the future

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evli energy efficiency seminar - fortum.com2 capture system to be ... world coal institute - coal...

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