2014-07-18 08:00:03 CEST
2014-07-18 08:00:08 CEST
REGULATED INFORMATION
Fortum - Interim report (Q1 and Q3)
Good results despite seasonality, low spot prices and weak rouble
Espoo, Finland, 2014-07-18 08:00 CEST (GLOBE NEWSWIRE) -- FORTUM CORPORATION
INTERIM REPORT JANUARY - JUNE 2014 18 July 2014 at 9:00 EEST
April−June 2014
-- Comparable operating profit EUR 255 (289) million, -12%
-- Operating profit EUR 295 (429) million, of which EUR 41 (140) million
relates to items affecting comparability, i.e. mainly to the sale of the
Norwegian electricity distribution and heat businesses
-- Earnings per share EUR 0.28 (0.35), -20%, of which EUR 0.05 (0.12) per
share relates to items affecting comparability. The sale of the Norwegian
electricity distribution and heat businesses correspond to approximately
EUR 0.08 per share
-- Cash flow from operating activities totalled EUR 455 (282) million, +61%
-- The Finnish Government decided not to introduce a power plant tax (windfall
tax)
-- 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 and with current exchanges rates lower than EUR 500 million
January−June 2014
-- Comparable operating profit EUR 732 (813) million
-- Operating profit EUR 2,629 (905) million, of which EUR 1,897 (93) million
relates to items affecting comparability, i.e. mainly to the sale of the
electricity distribution business in Finland
-- Earnings per share EUR 2.81 (0.80), +251%, of which EUR 2.14 (0.08) per
share relates to items affecting comparability. The main effect relates to
the sale of the Finnish electricity distribution business totalling EUR
2.08 per share.
-- Sale of the Finnish and Norwegian electricity distribution as well as the
Norwegian heat business finalised
-- Cash flow from operating activities totalled EUR 1,022 (749) million, +36%
Key figures II/14 II/13* I-II/1 I-II/1 2013* LTM**
4 3
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Sales, EUR million 1,016 1,205 2,489 2,858 5,309 4,940
--------------------------------------------------------------------------------
Operating profit, EUR million 295 429 2,629 905 1,508 3,232
--------------------------------------------------------------------------------
Comparable operating profit, EUR 255 289 732 813 1,403 1,322
million
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Profit before taxes, EUR million 284 388 2,626 878 1,398 3,146
--------------------------------------------------------------------------------
Earnings per share, EUR 0.28 0.35 2.81 0.80 1.36 3.36
--------------------------------------------------------------------------------
Net cash from operating activities, 455 282 1,022 749 1,548 1,821
EUR million
--------------------------------------------------------------------------------
Shareholders' equity per share, EUR 12.86 10.89 11.28
--------------------------------------------------------------------------------
Interest-bearing net debt (at end 5,008 7,975 7,793
of period), EUR million
--------------------------------------------------------------------------------
Key financial ratios 2013* LTM**
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Return on capital employed, % 9.0 18.4
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Return on shareholders' equity, % 12.0 28.2
----------------------------------------------------------------
Net debt/EBITDA 3.7 1.3
----------------------------------------------------------------
Comparable net debt/EBITDA 3.9 2.6
----------------------------------------------------------------
Comparable net debt/EBITDA without Värme financing 3.4 2.2
----------------------------------------------------------------
*) Comparative period figures for 2013 presented in the interim report are
restated due to an accounting change for Fortum Värme and segment reporting
changes; see page 6 as well as Notes 2 and 4.
**) LTM, Last 12 months
Summary of outlook
-- Fortum continues to expect the annual electricity demand growth in the
Nordic countries to be on average 0.5% in the coming years
-- Capital expenditure guidance: EUR 0.9-1.1 billion in 2014, excluding
potential acquisitions
-- Power and Technology Segment's Nordic generation hedges: for the rest of
the calendar year 2014, approx. 55% hedged at EUR 45 per MWh; and for the
2015 calendar year, approx. 30% hedged at EUR 41 per MWh
-- The EUR 500 million run-rate level in operating profit (EBIT) target, to be
reached during 2015, in the Russia Segment corresponded to RUB 18.2 billion
at 2008 prevailing euro-rouble exchange rates. Fortum is keeping its
rouble-denominated target intact. The euro-denominated result level will be
volatile mainly due to the translation effect, and currently, the
unfavourable exchange balance converts into a lower profit level in euros.
Fortum's President and CEO Tapio Kuula
”Electricity spot prices continued to be under pressure. However, even though
the wholesale market prices for electricity have decreased, various taxes, fees
and subsidies are increasing end-consumers' energy costs. Reducing CO2
emissions should drive the EU's 2030 climate and energy policy as it would also
promote renewables and energy efficiency at the lowest cost to consumers and
industry. Furthermore, a common EU-wide, competitive and strongly networked
internal energy market, where also renewable energy is developed on market
basis, would not just improve competitiveness and mitigate environmental
impacts, but improve the EU's internal energy availability and security of
supply as well.
The Finnish Government decided in June that it will not, after all, introduce a
power plant tax (windfall tax) on nuclear, hydro and wind power built before
2004. The Government's decision is very welcome and the final decision to
revoke the tax is expected from the Parliament in fall 2014. Going forward,
predictability of the operating and regulatory environment for the capital
intensive energy sector continues to be vital.
During the second quarter of 2014, electricity demand was flattish both in the
Nordic countries and in Fortum's operating areas in Russia.
Fortum's achieved power price decreased. Nuclear volumes were also lower mainly
due to the difference in timing and length of maintenance breaks in Fortum's
partly owned plants. Higher hydro production volumes contributed positively and
partly offset the negative effects mentioned above. In addition, both heat and
distribution volumes were lower, which contributed negatively to the total
results. In Russia, better electricity and heat spreads, improved bad debt
collections and increased efficiency had a positive effect on the result. Cash
flow from operating activities continued strong.
At the time of the acquisition of the Russian subsidiary OAO Fortum in 2008,
the EUR 500 million run-rate level in operating profit (EBIT) target set to be
reached during 2015 in the Russia Segment corresponded to RUB 18.2 billion at
the then prevailing euro-rouble exchange rates. As earlier communicated, the
segment's profits are mainly impacted by changes in currency exchange rates as
well as power demand, gas price and other regulatory development. Fortum is
keeping its rouble-denominated target intact, but mainly due to the translation
effect, the euro-denominated result level will be volatile. Currently, the
unfavourable exchange balance converts into a lower profit level in euros.
However, the company is making every effort to mitigate the negative impacts.
In line with the conclusions of the assessment of the electricity distribution
business in 2013 and what was announced during the first quarter, the sale of
the Norwegian electricity distribution business was finalised during the second
quarter of 2014. The work on evaluating the possible future divestment of our
Swedish electricity distribution business continues according to plan.
Going forward, our strategic focus is on low-carbon power generation,
energy-efficient combined heat and power (CHP) production and sales as well as
innovative customer offerings. We strive for efficiency throughout our
businesses by optimising the current portfolio as well as by managing costs and
working capital."
Efficiency programme 2013-2014
Fortum started an efficiency programme in 2012 in order to maintain and
strengthen its strategic flexibility and competitiveness and to enable the
company to reach its financial targets in the future.
The aim is to improve the company's cash flow by more than approximately EUR 1
billion during 2013-2014 by reducing capital expenditures (capex) by EUR
250-350 million, divesting approximately EUR 500 million of non-core assets,
reducing fixed costs and focusing on working capital efficiency.
At the end of 2014, the cost run-rate is targeted to be approximately EUR 150
million lower compared to 2012, including growth projects.
If headcount reductions are needed, Fortum seeks to limit redundancies whenever
possible. The assessments will therefore be done at a unit level.
At the end of June, Fortum had divested non-core assets of approximately EUR
400 million since the start of the efficiency programme. At the end of 2013,
the company had been able to decrease its cost run-rate by approximately half
of the targeted EUR 150 million and working capital efficiency had been
improved. The programme is proceeding according to plan and will be finalized
by the end of 2014.
Assessment of the electricity distribution business
In March, Fortum completed the divestment of its Finnish electricity
distribution business to Suomi Power Networks Oy, owned by a consortium of
Finnish and international investors. In June 2014, Fortum finalised its sale of
the Norwegian electricity distribution business. The sales gains were booked in
Fortum's Distribution Segment in the first and second quarter of 2014 (Note 6)
respectively.
Fortum is currently evaluating possibilities to divest its distribution
business in Sweden. The outcome is dependent on the market development and
development of national regulation.
The decision to divest Fortum's electricity distribution business in Finland
and Norway is linked to last year's strategic assessment of the company's
future alternatives for its electricity distribution business. Fortum
originally announced the completion of the assessment and the sale of the
Finnish business in December 2013. The sale of the Norwegian business was
announced in April 2014.
Restatement related to IFRS changes and the new reporting structure
As of 1 January 2014, Fortum has applied the new IFRS 10 Consolidated Financial
Statements and 11 Joint Arrangements standards. The major effect of this
reassessment relates to Fortum Värme, operating in the capital area in Sweden,
which is treated as a joint venture and thus consolidated with the equity
method (Note 2). Comparative information for 2013 presented in this interim
report has been restated accordingly.
The segment information for 2013 has been restated due to the change in the
organisation from 1 March 2014.
As of 2014, presented figures have been rounded and consequently the sum of
individual figures may deviate from the sum presented.
Financial results
April-June
In the second quarter of 2014, Group sales were EUR 1,016 (1,205) million.
Comparable operating profit totalled EUR 255 (289) million and the reported
operating profit totalled EUR 295 (429) million. Fortum's operating profit for
the period was affected by non-recurring items. The sale of the Norwegian
electricity distribution and heat businesses as well as an IFRS accounting
treatment (IAS 39) of derivatives mainly used for hedging Fortum's power
production and nuclear fund adjustments amounted to EUR 41 (140) million (Note
4).
Sales by segment
EUR million II/14 II/13 I-II/14 I-II/13 2013 LTM
--------------------------------------------------------------------------------
Power and Technology 487 548 1,072 1,213 2,252 2,111
--------------------------------------------------------------------------------
Heat, Electricity Sales and 269 308 715 839 1,516 1,392
Solutions
--------------------------------------------------------------------------------
Russia 234 251 567 595 1,119 1,091
--------------------------------------------------------------------------------
Distribution 148 227 449 566 1,064 947
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Other 14 14 28 29 63 62
--------------------------------------------------------------------------------
Netting of Nord Pool transactions -101 -95 -234 -266 -478 -446
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Eliminations -35 -49 -108 -119 -228 -217
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Total 1,016 1,205 2,489 2,858 5,309 4,940
--------------------------------------------------------------------------------
Comparable operating profit by segment
EUR million II/14 II/13 I-II/14 I-II/13 2013 LTM
--------------------------------------------------------------------------------
Power and Technology 183 210 434 513 859 780
--------------------------------------------------------------------------------
Heat, Electricity Sales and 11 13 59 70 109 98
Solutions
--------------------------------------------------------------------------------
Russia 28 20 102 61 156 197
--------------------------------------------------------------------------------
Distribution 45 60 164 197 332 299
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Other -13 -14 -27 -28 -54 -53
--------------------------------------------------------------------------------
Total 255 289 732 813 1,403 1,322
--------------------------------------------------------------------------------
Operating profit by segment
EUR million II/14 II/13 I-II/14 I-II/13 2013 LTM
--------------------------------------------------------------------------------
Power and Technology 151 338 413 600 922 735
--------------------------------------------------------------------------------
Heat, Electricity Sales and 67 24 112 75 134 171
Solutions
--------------------------------------------------------------------------------
Russia 28 20 101 61 156 196
--------------------------------------------------------------------------------
Distribution 63 61 2,030 197 349 2,182
--------------------------------------------------------------------------------
Other -13 -14 -28 -28 -53 -53
--------------------------------------------------------------------------------
Total 295 429 2,629 905 1,508 3,232
--------------------------------------------------------------------------------
January−June
In January-June 2014, Group sales were EUR 2,489 (2,858) million. Comparable
operating profit totalled EUR 732 (813) million and the reported operating
profit totalled EUR 2,629 (905) million. Fortum's operating profit for the
period was affected by non-recurring items. The sale of the Finnish electricity
distribution business, the Norwegian electricity distribution and heat
businesses as well as an IFRS accounting treatment (IAS 39) of derivatives
mainly used for hedging Fortum's power production and nuclear fund adjustments
amounting to EUR 1,897 (93) million (Note 4).
The share of profit from associates in January-June was EUR 109 (112) million,
of which Fortum Värme represents EUR 48 (51) million. The share of profit from
Hafslund and TGC-1 are based on the companies' published first quarter 2014
interim reports (Note 12).
The Group's net financial expenses were EUR 113 (140) million. Net financial
expenses include changes in the fair value of financial instruments of EUR 0
(-6) million.
Profit before taxes was EUR 2,626 (878) million.
Taxes for the period totalled EUR 124 (160) million. The tax rate according to
the income statement was 4.7 % (18.2 %). In Finland, the corporate tax rate was
decreased from 24.5% to 20.0% starting 1 January 2014. The tax rate, excluding
the impact of the share of profit from associated companies and joint ventures
as well as non-taxable capital gains, was 20.6% (21.0%).
The profit for the period was EUR 2,502 (718) million. Fortum's earnings per
share was EUR 2.81 (0.80), of which EUR 2.14 (0.08) per share relates to items
affecting comparability. The earnings per share impact from the sale of the
Finnish electricity distribution business was EUR 2.08 per share (Note 6).
Financial position and cash flow
Cash flow
In January-June 2014, total net cash from operating activities increased by EUR
273 million to EUR 1,022 (749) million, mainly due to realised foreign exchange
differences turning to positive effect being EUR 293 million, which were partly
offset with a lower EBITDA. Realised foreign exchange gains and losses of EUR
155 (-138) million were related to the rollover of foreign exchange contract
hedging loans to Fortum's Swedish and Russian subsidiaries. Capital
expenditures decreased by EUR 81 million to EUR 330 (411) million. Proceeds
from divestments of shares totalled EUR 2,817 (37) million mainly from the
divestment of the Finnish distribution business as well as the Norwegian
electricity distribution and heat businesses. Total net cash used in investing
activities was positive EUR 2,706 (-248) million. Cash flow before financing
activities, i.e. financing, increased by EUR 3,226 million to EUR 3,727 (501)
million.
The proceeds were partially used to pay dividends totalling EUR 977 million in
April as well as payments of interest-bearing debt amounting to EUR 1,856
million. Cash and cash equivalents at the end of the period were EUR 2,157
(1,265) million.
Assets and capital employed
Total assets decreased by EUR 1,318 million to EUR 22,030 (23,348 at year-end
2013) million which includes the decrease of non-current assets, EUR 787
million. Intangible assets, property, plant and equipment as well as on
participation in associates and joint ventures were decreased by translation
differences EUR 360 million and divestments, EUR 292 million.
Assets of distribution Finland, amounting to EUR 1,173 million were presented
as Assets held for sale at the end of 2013. Cash and cash equivalents increased
by EUR 907 million.
Capital employed was EUR 18,675 (19,183 at year-end 2013) million, a decrease
of EUR 508 million.
Equity
Total equity was EUR 11,509 (10,124 at year-end 2013) million, of which equity
attributable to owners of the parent company totalled EUR 11,424 (10,024)
million and non-controlling interests EUR 85 (101) million.
The increase in equity attributable to owners of the parent company totalled
EUR 1,400 million and was mainly from the net profit of EUR 2,498 million for
the period offset by translation differences of EUR -117 million and paid
dividends of EUR 977 million.
Financing
Net debt decreased during January-June 2014 by EUR 2,785million to EUR 5,008
(7,793 at year-end 2013) million.
At the end of June 2014, the Group's liquid funds totalled EUR 2,157 (1,265 at
year-end 2013) million. Liquid funds include cash and bank deposits held by OAO
Fortum amounting to EUR 378 (113 at year-end 2013) million. In addition to the
liquid funds, Fortum had access to approximately EUR 2.2 billion of undrawn
committed credit facilities.
The Group's net financial expenses during January-June 2014 were EUR 113 (140)
million. Net financial expenses include changes in the fair value of financial
instruments of EUR 0 (-6) million.
Fortum Corporation's long-term credit rating with both S&P and Fitch has
remainted unchanged and is A- (negative outlook).
Key figures
For the last twelve months, net debt to EBITDA was 1.3 (3.7 at year-end 2013)
and comparable net debt to EBITDA 2.6 (3.9 at year-end 2013). Fortum is
currently financing Fortum Värme, and these loans EUR 873 (1,135 at year-end
2013) million are presented as interest-bearing loan receivables in Fortum's
balance sheet. However, the aim is to refinance the loans during 2014-2015. If
these loans are deducted from the net debt, the last-twelve-months comparable
net debt to EBITDA is 2.2 (3.4 at the year-end 2013).
Gearing was 44% (77%) and the equity-to-assets ratio 52% (43%). Equity per
share was EUR 12.86 (11.28). For the last twelve months, return on capital
employed totalled 18.4% (9.0% at year-end 2013) and return on shareholders'
equity 28.2% (12.0% at year-end 2013). Both return on capital employed and
return on equity were positively affected with the capital gain from the sale
of the Finnish electricity distribution business as well as the sale of the
Norwegian electricity distribution and heat businesses.
Outlook
Key drivers and risks
Fortum's financial results are exposed to a number of economic, strategic,
political, financial and operational risks. One of the key factors influencing
Fortum's business performance is the wholesale price of electricity in the
Nordic region. The key drivers behind the wholesale price development in the
Nordic region are the supply-demand balance, fuel and CO2 emissions allowance
prices as well as the hydrological situation. The completion of Fortum's
investment programme in Russia is also one key driver to the company's result
growth, due to the increase in production volumes and CSA payments.
The continued global economic uncertainty and Europe's sovereign-debt crisis
has kept the outlook for economic growth unpredictable. The overall economic
uncertainty impacts commodity and CO2 emissions allowance prices, and this
could maintain downward pressure on the Nordic wholesale price for electricity
in the short term. In Fortum's Russian business, the key factors are economic
growth, the rouble exchange rate, the regulation around the heat business and
further development of electricity and capacity markets. Operational risks
related to the investment projects in the current investment programme are
still valid. In all regions, fuel prices and power plant availability also
impact profitability. In addition, increased volatility in exchange rates due
to financial turbulence could have both translation and transaction effects on
Fortum's financials, especially through the Swedish krona (SEK) and the Russian
rouble (RUB). In the Nordic countries, also the regulatory and fiscal
environment for the energy sector has added risks for utility companies.
Nordic market
Despite macroeconomic uncertainty, electricity is expected to continue to gain
a higher share of the total energy consumption. Fortum continues to expect the
annual growth rate in electricity consumption to be on average 0.5%, while the
growth rate for the nearest years will largely be determined by macroeconomic
development in Europe and especially in the Nordic countries.
During January-June 2014, the price of oil and European Union emissions
allowances (EUA) appreciated, whereas the coal price declined. Price of
electricity for the upcoming twelve months ended practically unchanged in the
Nordic area whereas in Germany it decreased.
In mid-July 2014, the future quotation for coal (ICE Rotterdam) for the rest of
2014 was around USD 74 per tonne, and the price for CO2 for 2014 was about EUR
6 per tonne. The electricity forward price in Nord Pool for the rest of 2014
was around EUR 33 per MWh. For 2015, the price was around EUR 32 per MWh, and,
for 2016, around EUR 31 per MWh. In Germany, the electricity forward price for
the rest of 2014 was around EUR 34 per MWh and for 2015 EUR 35 per MWh. Nordic
water reservoirs were about 2 TWh below the long-term average and 1 TWh above
the corresponding level of 2013.
Power and Technology
The Power and Technology's Nordic power price typically depends on factors such
as hedge ratios, hedge prices, spot prices, availability and utilisation of
Fortum's flexible production portfolio, and currency fluctuations. Excluding
the potential effects from the changes in the power generation mix, a 1 EUR/MWh
change in the Power and Technology Segment's Nordic power sales (achieved)
price will result in an approximately EUR 45 million change in Fortum's annual
comparable operating profit. In addition, the comparable operating profit of
the Power and Tehnology Segment will be affected by the possible thermal power
generation volumes and its profits.
The ongoing, multi-year Swedish nuclear investment programmes are expected to
enhance safety, improve availability and increase the capacity of the current
nuclear fleet. The implementation of the investment programmes could, however,
affect availability. Fortum's power procurement costs from co-owned nuclear
companies are affected by these investment programmes through increased
depreciation and finance costs of associated companies.
As a result of the nuclear stress tests in the EU, the Swedish nuclear safety
authority (SSM) has decided to propose new regulations for Swedish nuclear
reactors. The process is on-going and the final proposal is expected by the end
2014. Fortum emphasis that maintaining a high level of nuclear safety is
highest priority, but considers EU level harmonisation of nuclear safety
requirements to be of utmost importance.
The process to review the Swedish nuclear waste fees is done in a three-year
cycle, and therefore SSM has given a new proposal for the nuclear waste fees. A
Government decision is expected by the end of 2014.
Russia
The generation capacity built after 2007 under the Russian Government's
Capacity Supply Agreements (CSA - “new capacity”) receives guaranteed capacity
payments for a period of 10 years. Prices for capacity under CSA are defined in
order to ensure a sufficient return on investments. The issue of prolonged CSA
payments from 10 to 15 years have been under discussion in the Russian
Government; however, no official decisions have yet been made.
Capacity not under CSA competes in the competitive capacity selection (CCS -
“old capacity”). The capacity selection for generation built prior to 2008 (CCS
- “old capacity”) for 2014 was held in September 2013. All of Fortum's capacity
was allowed to participate in the selection for 2014 and the majority of
Fortum's power plants were also selected. The volume of Fortum's installed
capacity not selected in the auction totalled 132 MW, which represents 4.6% of
Fortum's total old capacity in Russia.
The Russia Segment's new capacity will be a key driver for earnings growth in
Russia as it is expected to bring income from new volumes sold and to also
receive considerably higher capacity payments than the old capacity. However,
the received capacity payment will differ depending on the age, location, size
and type of the plants as well as seasonality and availability. The return on
the new capacity is guaranteed, as regulated in the CSA. CSA payments can vary
somewhat annually because they are linked to Russian Government long-term bonds
with 8 to 10 years maturity. In addition, the regulator will review the
earnings from the electricity-only market three years and six years after the
commissioning of a unit and may revise the CSA payments accordingly.
The value of the remaining part of the investment programme, calculated at the
exchange rates prevailing at the end of June 2014, is estimated to be
approximately EUR 0.4 billion, as of July 2014.
The Russian result is impacted by seasonal volatility caused by the heat
business' characteristics, with the first and last quarter being clearly the
strongest.
At the time of the acquisition of the Russian subsidiary OAO Fortum in 2008,
the EUR 500 million run-rate level in operating profit (EBIT) target set to be
reached during 2015 in the Russia Segment corresponded to approximately RUB 18
billion at the then prevailing euro-rouble exchange rates. As earlier
communicated, the segment's profits are mainly impacted by changes in currency
exchange rates as well as power demand, gas price- and other regulatory
development. Fortum is keeping its rouble-denominated target intact, but mainly
due to the translation effect, the euro-denominated result level will be
volatile. Currently, the unfavourable exchange balance converts into a lower
profit level in euros. However, every effort to mitigate the negative impacts
is continuously being made.
In 2013, the Ministry of Energy stated that heat reform should be developed
before changing the current electricity and capacity market model. Therefore,
at the end of the year, the Ministry of Energy proposed a new heat market model
(for public discussion), which is supposed to ensure a transition to
economically justified heat tariffs by 2020 and attract investments into the
heat sector. The new regulation concept is at an early stage and expected to be
further developed during 2014.
According to a forecast made by the Russian Ministry of Economic Development,
Russian gas price indexation will not take place as of July 2014. However,
year-on-year gas price growth is estimated to be 7.6% in 2014.
Distribution
Fortum is preparing for a possible sale of the Swedish electricity distribution
business. The decision to complete the process is dependent on market
development and development of national regulation, among other factors.
In Sweden, legal processes are under way concerning the appeal filed regarding
the network income regulatory period 2012-2015. The Administrative Court in
Sweden ruled in favour of the network companies in December 2013. The Energy
Market Inspectorate decided to appeal the decision, and was given during leave
to appeal to the Administrative Court of Appeals during the first quarter;
therefore, the process continues. The court hearing is expected in Q4 2014 or
Q1 2015.
The work to define the Swedish network income regulation model for the next
regulatory period 2016-2019 is ongoing, and a first proposal by the Energy
Market Inspectorate was given in March. Decisions are expected to be made
during 2014.
Capital expenditure and divestments
Fortum currently expects its capital expenditure in 2014 to be approximately
EUR 0.9-1.1 billion, excluding potential acquisitions. The Finnish distribution
business is included in the figure until the end of the first quarter 2014 and
the Norwegian until the end of June 2014. The annual maintenance capital
expenditure is estimated to be about EUR 400-500 million in 2014, below the
level of depreciation. Capex for electricity distribution in Finland and Norway
has been approximately EUR 150 million annually.
Fortum will gradually decrease its financing to Fortum Värme, the co-owned
power and heat company operating in the capital area in Sweden, during
2014-2015. At the end of 2013, Fortum Värme's share of debt totalled
approximately EUR 1 billion.
Taxation
The effective corporate tax rate for Fortum in 2014 is estimated to be 19-21%,
excluding the impact of the share of profits of associated companies and joint
ventures, non-taxable capital gains and non-recurring items. In Finland, the
corporate tax rate was reduced from 24.5% to 20% as of 1 January 2014.
The Finnish Government decided in June that it will not, after all, introduce a
power plant tax (windfall tax) on nuclear, hydro and wind power built before
2004. The final decision to revoke the tax will be made by the Parliament in
autumn 2014.
Hedging
At the end of June 2014, approximately 55% of Power and Technology's estimated
Nordic power sales volume was hedged at approximately EUR 45 per MWh for the
rest of 2014. The corresponding figures for the calendar year 2015 were
approximately 30% at approximately EUR 41 per MWh.
The hedge price for Power and Technology's Nordic generation excludes hedging
of the condensing power margin. In addition, the hedge ratio excludes the
financial hedges and physical volume of Fortum's coal-condensing generation as
well as the segment's imports from Russia.
The reported hedge ratios may vary significantly, depending on Fortum's actions
on the electricity derivatives markets. Hedges are mainly financial contracts,
most of them Nord Pool forwards.
Dividend payment
The Annual General Meeting 2014 decided to pay a dividend of EUR 1.10 per share
for 2013. The record date for the dividend was 11 April 2014, and the dividend
payment date was 22 April 2014.
Espoo, 17 July 2014
Fortum Corporation
Board of Directors
Further information:
Tapio Kuula, President and CEO, tel. +358 10 452 4112
Timo Karttinen, CFO, tel. +358 10 453 6555
Fortum's Investor Relations, Sophie Jolly, tel.+358 10 453 2552, Rauno
Tiihonen, tel. +358 10 453 6150 and investors@fortum.com
The condensed interim financial statements have been prepared in accordance
with International Accounting Standard (IAS) 34, Interim Financial Reporting,
as adopted by the EU. The interim financials have not been audited.
Publication of financial results in 2014:
-- Interim Report January-September on 23 October 2014 at approximately 9.00
EEST
Distribution:
NASDAQ OMX Helsinki
Key media
www.fortum.com
More information, including detailed quarterly information, is available on
Fortum's website at www.fortum.com/investors.
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