positioning fortum for the decade of electricity · 2020. 3. 30. · operating profit, meur* fortum...
TRANSCRIPT
Positioning Fortum for the decade of electricity
Pekka Lundmark, President and CEO
13 November 2018
Positioning Fortum for the decade of electricity– For a cleaner world
2
Ensure value creation from investments
and portfolio optimisation
Competitive
benchmark portfolioPursue operational excellence
and increased flexibility
Drive focused growth in the
power value chain
Build options for
significant new businesses
Today
Profitability
Time
Increasing
uncertainty
3.
4.
Illustrative
2.
1.
2020’s 2030’s
This is what Fortum launched in 2016…
3
4
… and has successfully delivered
• Largest shareholder in Uniper
• Top benchmark performance in hydro, nuclear,
trading and Russia
• Active fleet development and capacity upgrades
• EUR 100 million fixed cost reduction
• Successful lobbying
• Russian EBIT target reached
• Restructuring of Hafslund and Fortum Oslo Varme
• Creating recycling and waste solutions by Ekokem
acquisition
• New CHP plants
• Forming Consumer Solutions with 2.5 million
customers
• Acquisition of Polish Duon
• Restructuring of heat business in Russia
• >140 MW of operational wind and 220 MW of
operational solar
• >1 GW solar and wind pipeline
• Russia’s first industrial scale windfarm
• Largest roof-top solar B2B contract in Nordics
• Charge&Drive and Plugsurfing, 200 000 e-mobility
users today
• Increasing business in Horse Power and Smart
Living
• Venture investments
• Demand response with 5 MW flex capacity and
~2 000 households
• Chempolis investments in biotechnology
Generation; 602
City Solutions; 105
Consumer Solutions; 53
Russia; 265
Other Operations; -77
1,070 1,085
808
644
811
949
2013 2014 2015 2016 2017 2018 LTM
Comparable
operating profit,
MEUR*
Fortum has transformed the company in line with its strategy and capital redeployment goals
5
~ EUR 7 billion… to acquisitions and investments (2016-2018)
~ EUR 10 billionfrom largest divestments (in 2013-2015) …
* from continued operations, excluding distribution network business
Achieved Nordic
power price,
EUR/MWh
46.441.4
33.0
31.031.8
33.2
Fortum’s assets are well positioned in prevailing market conditions
6
Source: Nasdaq Commodities, Bloomberg
0
10
20
30
40
50
2.1.2013 2.1.2014 2.1.2015 2.1.2016 2.1.2017 2.1.2018
Year 18 Year 19 Year 20
EUR/MWh
Year 2019Year 2018 Year 2020
20142013 2015 2016 2017 20181 November 2018
50
40
30
20
10
0
Nordic power price forwards
Among the lowest specific
emissions
Fortum: 96% of the power generation in
the EU and 61% of its total power
generation is CO2-free
Electricity specific emissions
for European generators
Growing in solar and wind
Fortum is targeting a multi gigawatt
portfolio in solar and wind
Fortum’s wind and solar power
generation capacity, MW
Increasing CO2-free power
generation
Annual CO2-free power generation has
tripled from 15 TWh in 1990 to 45 TWh in
2017
Fortum’s power generation, TWh
7
Fortum has a long green track record– ranking among the top utilities in Europe for low CO2 emissions
0
10
20
30
40
50
60
70
80
CO2-free Other
1990 1995 2000 2005 2010 20172014 2015 2016 2017 2018 2019 2020 2021 2022 2023
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
Wind Solar Projects under development
0
200
400
600
800
1 000
DE
I
EP
H
RW
E
CE
Z
Unip
er
En
el
A2
A
Ga
s N
.F.
En
BW
ED
P
Dra
x
SS
E
Va
tte
nfa
ll
En
eco
Iberd
rola
E.O
N
Ve
rbu
nd
Sta
tkra
ft
g CO2/kWh electricity, 2016*
FORTUM
TOTALFORTUM
EU
* Note: All figures, except “Fortum total”, include only European power generation.
Fortum’s specific emissions of the power generation in 2017 in the EU were 28 g/kWh and in total 174 g/kWh, same as in the previous year.
Source: PwC, December 2017, Climate Change and Electricity (including those companies with data for power generation available only), Fortum
mainly CO2 low
Fortum’s vision is even more valid today– For a cleaner world
8
Ensure value creation from investments
and portfolio optimisation
Competitive
benchmark portfolioPursue operational excellence
and increased flexibility
Drive focused growth in the
power value chain
Build options for
significant new businesses
Today
Profitability
Time
Increasing
uncertainty
3.
4.
Illustrative
2.
1.
2020’s 2030’s
9
Fortum’s long-term financial targets and dividend policy remain unchanged
Return on capital employed
(ROCE) of at least
10%
Comparable
Net debt/EBITDA ratio
at around
2.5x
Fortum’s dividend policy is
to pay a stable,
sustainable, and over
time increasing dividend
of 50-80% of earnings per share,
excluding one-time items
Three main drivers are shaping the future electricity markets
10
Technology
Development
Politics and
Regulation
• Solar and wind
• Digitalisation and
artificial intelligence
• Short-term and seasonal
storage
• E-mobility ecosystem
• Demand response
• Decarbonisation to
reach Paris agreement
targets
• Electrification in
heating, transportation
and key industrial
processes
• Resource efficiency
• National and
international interests
• Market models
• Emission trading
• Geopolitical uncertainty
Climate and
Environment
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Eu
rop
ea
n e
mis
sio
ns
(MtC
O2
eq.)
Europe needs to eliminate CO2 emissions to reach climate goals
Greenhouse gas emissions
(minimum targets from 1990 level)- 40%
- 60%
- 80%
Other
Gas
Oil
Coal
1 including international aviation and marine2 residential and commercial heating & cooling3 iron & steel and chemicals are among the biggest contributors4 non-energy related emissions: industrial processes and product use, waste management, agriculture, fugitive emissions
Source: IEA World Energy Outlook 2017, Eurostat, Eurelectric, Fortum Industrial Intelligence
- 95%
TODAY
Power
Transport1
Buildings2
Other4
Industry3
Energy-related
emissions
EU 2050 roadmap target
-100%
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Decarbonisation will increase electricity demand
Electric vehicles,
hydrogen
Heat pumps,
hydrogen
Electrified processes,
hydrogen
Means to decarbonise
via electrification
Carbon neutrality could double
electricity demand by 2050
Other
Industry
Buildings
Transport
Power
Today By 2050
Indirect electrification,
e.g. hydrogen production
Industry
Transport
Buildings
Electricity demand (TWh)
+100%
3,000
6,000
Source: Eurelectric study, May 2018, Scenario 312
Demand for flexibility is increasing because stable and flexible capacity is being replaced by intermittent generation
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2016e
European power generation (TWh)
Nuclear Coal OilGas Hydro Other renewablesWind Solar PV
Source: IEA World Energy Outlook 2017
13
Intermittent
Flexible
Stable
• Higher share of intermittent solar and wind
capacity
• Reduced share of flexible coal and oil - partly
compensated by increased gas
• Decline of stable nuclear generation
• Coal and nuclear phase-out in Europe will
accelerate the shift
• Stable share of flexible hydro production
• There is a need to increase the share of
flexible assets in the European power mix
• All sources of flexibility will be needed
• … and the value of flexible assets will increase
Volatility and uncertainty in the European power market increases the value of flexible assets
14
Increasing role of gas
Increased interconnection between
Nordics and Continent
Supply-demand balance
Commodity and CO2 prices
Intermittent renewables
Nuclear and coal closures
Weather conditions
Volatility and
uncertainty
15
3. Drive focused growth in the power
value chain
• Grow in CO2-free power generation
• Develop value-adding offerings and
solutions for customers
4. Build options for significant
new businesses
• Create new sizeable profit contributor
independent of power prices
• Build on industrial logic and synergies with
current businesses and competences
1. Pursue operational excellence and
increased flexibility
• Ensure benchmark performance
• Focus on cash flow and efficient use of
balance sheet
2. Ensure value creation from investments
and portfolio optimisation
• Increase shareholder value from Uniper
• Optimise portfolio to fit the changing business
environment
Fortum’s strategic priorities in a changing energy market
Fortum’s investment in Uniper supports Europe’s energy transition and secures a valuable cash flow contribution
Fortum is the single largest shareholder in Uniper
• CFO Markus Rauramo appointed Vice Chairman of
Uniper’s Supervisory Board
• Supervisory Board mandates extend until 2022
• The Russian regulatory decision limits Fortum’s
shareholding to a maximum of 50%
• Dividend and new Supervisory Board members are single
majority decisions at Uniper’s AGM
The Uniper investment is creating shareholder value
• Based on consensus estimates*, Uniper’s result is
expected to contribute by EUR 0.33-0.44 to Fortum’s EPS
• Uniper’s future dividends will contribute to Fortum’s cash
flow
• Shareholder value created on higher Uniper share price
compared to offer price of EUR 21.31
16
* = Consensus estimates as of 5 November 2018 for Uniper’s annual underlying net income 2018-2020
Generation volume, 121 TWh in 2017Accounting view
Gas
Coal
Hydro
Nuclear
Other
21
13
4818
82
10
Pie charts on map indicative of generation. Figures from
Uniper and Unipro annual reports 2017. Some figures might
not add up due to rounding.
17
3. Drive focused growth in the power
value chain
• Grow in CO2-free power generation
• Develop value-adding offerings and
solutions for customers
4. Build options for significant
new businesses
• Create new sizeable profit contributor
independent of power prices
• Build on industrial logic and synergies with
current businesses and competences
1. Pursue operational excellence and
increased flexibility
• Ensure benchmark performance
• Focus on cash flow and efficient use of
balance sheet
2. Ensure value creation from investments
and portfolio optimisation
• Increase shareholder value from Uniper
• Optimise portfolio to fit the changing business
environment
Fortum’s strategic priorities in a changing energy market
Cross-organisational development initiatives to ensure successful strategy execution
18 Continued development of existing, and step-change in new competences
Strengthen
Open Leadershipculture to boost
empowerment,
situation awareness
and agility
Become a
Digital Winner through data and analytics
leadership
Shape the
Regulatory Agendathrough
proactive dialogue
Develop
Sales and
Commercialisation excellence
Positioning Fortum for the decade of electricity– For a cleaner world
19
Ensure value creation from investments
and portfolio optimisation
Competitive
benchmark portfolioPursue operational excellence
and increased flexibility
Drive focused growth in the
power value chain
Build options for
significant new businesses
Today
Profitability
Time
Increasing
uncertainty
3.
4.
Illustrative
2.
1.
2020’s 2030’s