FORTUM - For a cleaner world - Equity story of Investor / Analyst material August 2021
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Equity story of FORTUM – For a cleaner world Investor / Analyst material August 2021
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. Any references to the future represent the management’s current best understanding. However the final outcome may differ from them. 2
Content Fortum in brief 4 – 12 Fortum’s strategy 13 – 21 Energy market transition 22 – 26 Half-year Financial Report 2021 27 – 45 Appendices 46 European and Nordic power markets 47 – 56 Fortum’s Nordic power generation in detail 57 Fortum’s evolution and strategic route 58 Historical achieved prices 59 Dividend 60 IR contact 61 3
Fortum in brief
Fortum in brief
Power generation assets
Key figures 20201
Sales EUR 49.0 bn
Comparable EBITDA EUR 2.4 bn
Total assets EUR 57.8 bn
Personnel 19,933
Main businesses1 Sales (€) Volume2 Capacity
India
Power 20.8 bn 142 TWh 50.3 GW
Gas 22.4 bn ~370 TWh 7.6 bcm3
Heat 0.8 bn 30 TWh 19.5 GW
1) Until 31 of March 2020 Uniper's contribution to the income statement was recognised in the Share of profit/loss of associates and joint ventures.
2) For Power - Power generation, for Gas - Long-term gas supply contracts and for Heat – Heat production
3) Gas storage capacity, billion cubic meters
4
Fortum in brief
Strong position to drive the energy transition in Europe
3rd largest 3rd largest 3rd largest 4th largest
power generator CO2-free power generator nuclear generator gas storage operator
in Europe and Russia in Europe in Europe in Europe
5
6
100
200
0
300
500
600
400
TWh
EDF
Rosenergoatom
EPH incl. LEAG
Europe
RusHydro
NNEGC Energoatom
Vattenfall
Fortum+Uniper
En+
Enel
ENGIE
Iberdrola
Statkraft
RWE
Source: Company information, Fortum analyses, 2019 figures pro forma.
CEZ
EnBW
Verbund
E.ON
Axpo
EDP
Slovenské elektrárne
Hafslund E-CO
Hidroelectrica
Ørsted
Gazprom
Acciona
SSE
Naturgy
Centrica
EPS
Alpiq
Norsk Hydro
Agder Energi
Ukrhydroenergo
Hydro
Nuclear
BKK
Lyse Energi
Other, incl. bio
DEI
Wind, solar, geoth.
EPH
PGE
Power generation by type
DTEK
Inter RAO UES
Consolidated Fortum is the third largest CO2-free power generator in
T Plus
Fortum in brief
Sibgenco
Fortum in brief
Renewables and CO2-free power generation capacity of Fortum
14.1 GW
Hydro Wind & Solar Nuclear
8.4 GW 1.2 GW 4.5 GW
7
Fortum in brief
Fortum is well positioned for the energy transition
Third largest CO2-free power generator in Europe with growing
portfolio of wind and solar
Significant provider of flexible hydro and gas-fired power generation
Major provider and trader of gas for Europe’s energy and industrial
customers
Versatile portfolio of decarbonisation and environmental solutions
Phase out or exit announced of ~8 GW coal-fired generation by 2030
8
Fortum in brief
Fortum’s CO2-free power generation increases by ~60% as Uniper is
consolidated as a subsidiary
Fortum's power generation, TWh
150
Fortum*:
Other
Coal
• CO2-free generation
120
Gas 45%
CO2-free
• Gas-fired power
90
generation 45%
60
• Share of coal-fired
generation 9%
30
• Share of coal of sales
revenue ~1%
* based on 2020 reported figures
0
Note: Fortum actuals 1990-2020. Uniper consolidated from Q2/2020 onwards, Q1/2020 generation of Uniper excluded.
9
Fortum in brief
Fortum is a forerunner in sustainability Fortum is listed in several
sustainability indices and ratings:
Our purpose is to drive the change for a cleaner world. We are securing a fast
and reliable transition to a carbon-neutral economy by providing customers
and societies with clean energy and sustainable solutions. This way we deliver
excellent shareholder value.
3rd largest CO2-free generator in Europe
CO2-free power generation, including renewable and nuclear power, was 64 TWh in 2020.
73% of power generation in Europe, and 45% of total power generation was CO2-free.
Specific CO2 emissions
Fortum’s specific CO2 emissions from total energy production in Europe were
188 gCO2/kWh in 2020, and 287 gCO2/kWh globally.
Growing in solar and wind
Targeting a multi-gigawatt wind and solar portfolio, which is subject to the capital
recycling business model. Targeting an indicative growth capex for EUR 3 billion
for 2021-2025, of which 50-55% to renewables.
Signatory of TCFD
Fortum an official signatory of TCFD on March 2021
MSCI ESG RATINGS DISCLAIMER STATEMENT: THE USE BY FORTUM CORPORATION OF ANY MSCI ESG RESEARCH LLC OR ITS AFFILIATES (“MSCI”) DATA, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO
NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT, RECOMMENDATION, OR PROMOTION OF FORTUM CORPORATION BY MSCI. MSCI SERVICES AND DATA ARE THE PROPERTY OF MSCI OR ITS INFORMATION PROVIDERS, AND ARE PROVIDED
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10Fortum in brief
Fortum's power generation and heat production by source
Fortum’s power generation in 2020 * Fortum's heat production in 2020 *
Natural gas 45% Natural gas 56%
Total Total
Waste1% power generation Others 1% heat production
Wind, solar 1% Heat pumps,
Bio 1% 142.1 TWh Hydropower 23% electricity 3% 29.6 TWh
Bio 5%
Coal 9%
Waste 9%
Nuclear power 20% Coal 26%
* Uniper consolidated as of Q2/2020
11Fortum in brief
Fortum key profitability drivers
Key market drivers: Fortum profitability drivers: Fortum Group’s indicative EBITDA by
business and market exposure
Power market European power generation
• EU coal/nuclear capacity closures • CO2-free generation: prices and volumes,
hedging, PPAs
• Growing share of renewables
• Gas-fired generation: capturing the
• Importance of gas-fired generation merchant upside
• Commodity prices • Coal exit path, value from sites
• Increasing interconnections between Gas midstream business
Nordics, Continental Europe, and the UK • Long-term contracts and sales
• Weather conditions • Gas storage, spread, and volatility
• Increased demand from decarbonisation • Optimisation business, price volatility
and electrification
Russia power generation
Gas market
• Thermal CSAs gradually shifting to CCS
• Decreasing gas production in Europe scheme, selective modernisation projects
• More volatile gas demand • Renewables capacity with higher CSAs
• Gas storage value • Berezovskaya 3 (CSA)
• Weather conditions Growth based on strategy
Source: Fortum & Uniper financial reporting
PPA= Power Purchase Agreement
CSA= Capacity Supply Agreements
12 CCS= Competitive Capacity Selection (=KOM)Fortum’s strategy
Our strategy – Driving the clean energy transition and delivering
sustainable financial performance
For a cleaner world
Strengthen and grow in CO2-free Leverage strong position in gas
Transform own operations to power generation to enable the energy transition Partner with industrial and
carbon neutral infrastructure customers
• Supply significant flexible and • Provide security of supply and
• Phase out and exit coal reliable CO2-free power generation flexibility in the power system • Provide decarbonisation and
• Transform gas-fired generation environmental solutions
• Grow sizeable portfolio of • Secure supply of gas for heat,
towards clean gas renewables power, and industrial processes • Build on first-mover position in
hydrogen
Value creation targets
Carbon neutral as a Group latest by 2050, Sustainable financial performance through
Strong financial position and over time
in line with the Paris Agreement, and in our attractive value from investments, portfolio
increasing dividend
European generation latest by 2035 optimisation, and benchmark operations
13Fortum’s strategy
Measuring success for Fortum
Climate and environmental targets:
• Group carbon neutral latest by 2050 (scope 1, 2, 3)
• European generation carbon neutral latest by 2035 (1, 2)
• CO2 emission reduction of at least 50% by 2030 in European
generation (1, 2)
• Scope 3 target for the indirect emissions from fuel sales business
(Cat. 11) to be set during 2021
• Biodiversity target: Number of major voluntary measures enhancing
biodiversity ≥12 in 2021
Financial targets: Shareholder value creation:
• Financial net debt/comparable EBITDA below 2x • Portfolio optimisation and delivering on investments
• Hurdle rates for new investments • Realising financial benefits from the cooperation with Uniper
• Rating of at least BBB
• Stable, sustainable, and over time increasing dividend
Social targets:
• Safety target: Total recordable incident frequency (TRIF)Fortum’s strategy
Fortum – A leader in clean power and gas
Core Grow Strategic transformation
Transform own operations Assets and businesses that have Businesses with potential Businesses and assets outside
to carbon neutral a role in energy transition and to grow profitably strategic scope
generate good cash-flow in the energy transition
Hydro Ambitious
Onshore wind
Strengthen and grow in coal exit plan
CO2-free power generation
District heating business
Nuclear Solar in the Baltics
Leverage strong position
in gas to enable Increasingly clean Hydrogen and 50% stake in
the energy transition gas-fired generation clean gas Stockholm Exergi
Consumer Solutions
Provide decarbonisation Industrial and business
Gas midstream
and environmental solutions infrastructure solutions
for industrial and District heating business
infrastructure customers in Poland
15Fortum’s strategy
Strategic steps going forward
2014-2020 2021-2022 2023-2025
Major transformation Balance sheet focus Growth in clean power and gas
Active portfolio rotation with Step up in Group EBITDA Growth in strategic areas
focus on assets essential in the Secure strong balance sheet Sustainable financial performance
energy transition and with good with benchmark operations
cash flow Rating of at least BBB
Details of strategy implementation Cooperation financial benefits
Uniper acquisition
and first investments Target to increase dividend
Focus on aligned strategy
Target to increase dividend
Flat dividend
16Fortum’s strategy
Indicative capital expenditure for growth investments
in 2021-2025 – renewables and clean gas
1 Renewables
On-shore wind and solar
2 Hydrogen and clean gas
Industrial decarbonisation solutions
3 Environmental and security of supply solutions
Waste-to-Energy, recycling, industrial and TSO services
4 Other
Venturing, innovation, digitalisation
Capital expenditure will depend on market conditions, asset rotation, and balance sheet strength
17Fortum’s strategy
Fortum is growing towards gigawatt scale target in
solar and wind power generation
Ånstadblåheia 10 MW
(Fortum share) PORTFOLIO STATUS CAPACITY, MW FORTUM SHARE, MW SUPPLY STARTS/STARTED
Nygårdsfjellet 6 MW
(Fortum share) FINLAND 90 18
Sørfjord 20 MW
● Kalax Operational 90 18 Q4 2020
(Fortum share)
NORWAY 181 36
● Nygårdsfjellet Operational 32 6 2006 and 2011
Solberg 15 MW
(Fortum share) Ulyanovsk-2 25 MW ● Ånstadblåheia Operational 50 10 2018
Kalax 18 MW
(Fortum share) ● Sørfjord Operational 99 20 Q4 2019- Q1 2021
(Fortum share)
Ulyanovsk SWEDEN 76 15
35 MW 35 MW solar ● Solberg Operational 76 15 2018
Samara 118 MW power plants RUSSIA 2,009 1,040
(Fortum share) ● Bugulchansk Operational 15 15 2016-2017
Volgograd 52,5 MW ● Pleshanovsk Operational 10 10 2017
(Fortum share) ● Grachevsk Operational 10 10 2017
Rostov 175+25 MW Astrakhan 170 MW ● Kalmykia Under construction 78+38 39+19 Q4 2021- H2 2022
(Fortum share) (Fortum share) ● Ulyanovsk Operational 35 35 2018
Kalmykia 58 MW Bhadla 31 MW (Fortum share) ● Ulyanovsk 2 Operational 50 25 1.1.2019
(Fortum share) Operational/Under
Amrit 2 MW (Fortum share) ● Rostov 350+50 175+25 Q1 2020- Q4 2021
construction
● Kalmykia Operational 200 100 1.12.2020
Kapeli 4 MW (Fortum share) ● Astrakhan Under construction 340 170 Q4 2021
● Volgograd Under construction 88+17 44+9 Q4 2021- Q4 2022
● Samara Under construction 237 118 Q4 2022
● Rusnano JV Under development 491 246 2022-2023
INDIA 185 81
First focus markets Pavagada 44 MW ● Amrit Operational 5 2 2012
Wind power plants (Fortum share) ● Kapeli Operational 10 4 2014
● Bhadla Operational 70 31 2017
Solar power plants ● Pavagada Operational 100 44 2017
TOTAL 2,541 1,190
Under development 491 246
*) NOTE: Table numbers not accounting; tells the size of renewables projects. All not consolidated to Fortum capacities. All Under construction 848 424
figures in MW and rounded to nearest megawatt. Additionally, target to invest 200 – 400 million euros in India solar and Operational 1,202 520
create partnership for operating assets. Under construction includes investment decisions made.
18Fortum’s strategy
Strong commitment to maintain rating of at least BBB
Ambition is to preserve financial flexibility and good Long term leverage target:
access to capital markets.
Financial net debt/comparable EBITDA
Fortum will carefully manage its balance sheet going
forward focusing onFortum’s strategy
Return targets for new investments
Return targets for new investments: Group 2021 capital expenditure,
including maintenance and
WACC+ hurdle rate: excluding acquisitions,
+100 bps for green investments is estimated to be EUR 1.4 billion
+200 bps for other investments
• Maintenance of EUR 700 million
The requirement might be higher depending on, e.g., business model and technology
• Growth of EUR 700 million
and will be evaluated case-by-case.
~EUR 3 bn Capital expenditure will depend on market conditions,
growth capex asset rotation, and balance sheet strength
for 2021-2025
20Fortum’s strategy
Fortum and Uniper cooperation estimated to deliver significant financial
benefits
Cooperation benefits focus on monetary, safety,
and environmental actions
• Positive cash impact on a consolidated group basis
is estimated to be ~EUR 100 million annually
• > EUR 50 million of these annual benefits gradually
materialising by the end of 2023 and reaching full
annual impact in 2025
• Approx. 450 people have been involved in various
work streams
21Energy market transition
Europe committed to be a forerunner in reducing GHG emissions across
all sectors
• EU is tightening both its 2030 and 2050
emissions targets
– Requires emission reductions in all sectors,
especially residential & commercial, transport,
and industry
• Sector coupling – clean electricity and gas
enable other sectors to decarbonise
– Emissions from some industrial and heavy
transport sectors are difficult to abate by
electrification
• Successful energy transition must balance
– Sustainability
– Affordability
– Security of supply
22Energy market transition
Energy transition will increase demand for electricity and hydrogen
Electricity
Hydrogen
Feedstocks
Agriculture
Industry
Transport
Residential and
commercial
Source:
IHS Markit Net Zero
Carbon Europe
scenario
23European and Nordic power markets
Nordic, Baltic, Continental and UK markets are integrating
– Interconnection capacity growing to over 13 GW by end-2023
• Several interconnectors are currently under DK1-DE maximum transmission capacity has been
Current Nordic/Baltic 1 upgraded from 1,780 MW to 2,500 MW in July 2020
construction or decided to be built
interconnector New 400 MW DK2-DE connection via Kriegers Flak
2
• New interconnections will increase the projects offshore wind area in operation December 2020
Nordic export capacity from the current 3
EU’s Connecting Europe Facility co-financed 3rd EE-LV
9.6 GW to over 13 GW by end of 2023 C transmission line, in operation January 2021
4 NO-DE NordLink is in commercial operation at
maximum 1,444 MW from March 2021
+ 5200 MW
Norway - UK 1,400 MW North Sea Link (NSL) is due
14.1 B 5 to be fully in operation by end-2021
Interconnection capacity (GW)
13.4 13.4 13.4
DK1-DE capacity to grow by further 1,000 MW to
6 3,500 MW with a new 400 kV line by end-2023
11.0 11.0 5
3 1,400 MW Denmark - UK Viking Link is being built
4 A 7 to be ready by end-2023
8.2
7 1 700 MW LT-PL Harmony Link to be built by 2025 as
6.9 9 8
a part of the Baltic synchronisation project
8
6 2 700 MW Hansa PowerBridge DC link between
9
Sweden and Germany by 2026/2027
New interconnectors New Nordic lines A 1,200 MW SE3-SE4 South West Link ready 7/2021
B 800 MW with first measures on SE2-SE3 by 2024
Existing interconnectors
C 800 MW 3rd 400 kV line SE1-FI ready in 2025
2020 2021 2022 2023 2024 2025 2026 2027 Russia Poland Germany
24 Estonia Netherlands
Years in the chart above refer to a snapshot of 1st of January each year.
Source: Fortum Market Intelligence Lithuania United KingdomEnergy market transition
Volatility and uncertainty in the European power market increases the
value of flexible assets
Intermittent renewables
Nuclear and coal closures
Increasing role of gas
Volatility and
Supply-demand balance
uncertainty
Increased interconnection between
Nordics and Continent
Commodity and CO2 prices
Weather conditions
25Energy market transition
Own transformation – coal exit to reach carbon neutrality by 2035 in
European generation
European generation CO2 net emissions:
Carbon neutral in our European generation by
2035 at the latest 2019 2030 2035
Transform own 100% -50% Carbon neutral
operations to carbon • Current trajectory to reduce CO2 emissions
neutral
in our European generation by at least
50%*) by 2030
Coal fired capacity in Europe (GW)
• Exit ~6 GW of coal capacity by end of 2025 10
Strengthen and grow in
CO2-free power • Aim to decarbonise gas-fired power
generation 8
generation and transit to clean gas over
time
6
Leverage strong 4
position in gas to enable Carbon neutral as a group by 2050 at the
the energy transition
latest in line with the Paris Agreement 2
**)
• Reduction of the Group’s coal-fired
0
generation capacity by >50% to ~5 GW by 2020 2025 2030 2035 2040 2045
Partner with industrial
and infrastructure the end of 2025
customers
• Over time transform the Russian business *) Base year 2019
**) Datteln4 decommissioning as defined in the German coal-exit law
portfolio by reducing the fossil exposure
26Half-year Financial Report January-June 2021 Fortum Corporation 17 August 2021
Markus Rauramo President and CEO 28 Fortum Interim Report January-June 2021
Market environment is improving
• Macroeconomic outlook is improving, and global growth forecasts have been upgraded lately as vaccination efforts
appear to reduce disruptive effects of new Covid-19 waves on economic activity
• Strong year-on-year European demand growth reflects recovery from the very low levels impacted by Covid-19
• Energy commodity prices are supported by the ongoing economic recovery
• European power markets characterised by very strong performance during Q2 2021
• Normalising power demand led to significant growth in thermal power generation in central Europe
• Increasing interconnection capacity and higher price volatility (due to renewables)
• “Fit for 55” package was presented by the European Commission in mid-July
CO2 • The package puts strong focus on carbon pricing and extends the EU ETS to new sectors
• Carbon prices continued to set new records in 2021
29Determined execution of our strategy
• We deliver • We deliver • We deliver
on our plans on our strategy on our way to net-zero
Use of coal in Fortum's Russia
Solid operational performance Divestments concluded
segment to cease at the end of
across segments of up to EUR 5.2 billion
2022
Financial performance fully Rating outlook improved Accelerated coal phase-out:
on track to “stable” early closures in GER and UK
30Good operational performance across the group despite
phasing effects
Comp. OP* Comp. EPS** OCF Leverage***
H1 1206
1.09 1002 1120H1, all segments improved
– significant impact from Uniper profits
Comparable operating profit
(EUR million) 510 -1 1206 Generation
higher achieved power price
Russia
stronger underlying performance
offsetting negative FX
39 4
55 2
596
City Solutions
higher power and heat sales
Consumer Solutions
higher margins from value added services
Uniper
Generation City Consumer fully consolidated from Q2 2020
I-II/2020 Russia Uniper Other I-II/2021
Solutions Solutions
32Q2 – Significant phasing effects in Uniper
segment
Comparable operating profit
(EUR million) Generation
successful physical optimisation partly
offset by slightly higher costs
11 0 -201
22 0
203 Russia
stronger underlying performance
offsetting lower CSAs
City Solutions
higher power sales
Consumer Solutions
higher margins from value added services
-2 35
Uniper
strong result in commodities business in Q2
2020 and negative phasing effect in Q2 2021
II/2020 Generation Russia City Consumer Uniper Other II/2021
Solutions Solutions
33Determined execution of our transformation strategy continues
Strengthening balance sheet Accelerated decarbonisation Balanced growth
EUR 5.2 billion of divestments in 1.5 years Fortum Russia division end of coal-fired Leverage target:
generation by end of 2022 Financial net debt/
• Stockholm Exergi: Sale of 50% ownership comparable EBITDA
• Sale of Argayash coal-fired CHP, Chelyabinsk ratioBernhard Günther CFO 35
Key financials
MEUR II/ II/ I-II/ I-II/ FY LTM
2021 2020 2021 2020 2020 H1 strong financial performance
Sales 17,128 12,330 38,621 13,687 49,015 73,950
LTM comparable EBITDA at EUR 3.2
Comparable EBITDA 348 512 1,827 1,055 2,434 3,206 billion
Comparable operating profit 35 203 1,206 596 1,344 1,954
LTM Comparable EPS at EUR 1.61
Comparable share of profits of
52 23 119 574 656 201
associates and joint ventures
Comparable profit before
97 209 1,354 1,110 1,897 2,141
Healthy credit metrics of ‘BBB’ with
income taxes improved outlook to “stable” by S&P and
Comparable net profit 79 155 915 968 1,483 1,431 Fitch
Comparable EPS 0.09 0.17 1.03 1.09 1.67 1.61
Latest announced divestments to bring
Net cash from operating Financial net debt / Comp. EBITDA clearly
289 440 1,120 1,002 2,555 2,673
activities
below target level ofGeneration: Q2
Q2'21 Q2'20
Higher achieved power prices Volumes
(TWh)
5,5 5,1 5,4 5,6
0,0 0,1
Q2 2021 vs. Q2 2020 Hydro Nuclear Wind
• Comparable operating profit +13% mainly due to higher achieved H1
H1'21 H1'20
Volumes
power prices and slightly higher volumes (TWh) 12,2 11,5 11,8 11,9
– Higher achieved power price EUR 38.1, +4.5 per MWh 0,3
0,0
– Very successful physical optimisation and higher spot prices Hydro Nuclear Wind
• Partly offset by slightly higher costs MEUR II/ II/ I-II/ I-II/ FY
2021 2020 2021 2020 2020 LTM
Sales 575 450 1,251 1,024 2,006 2,233
Comp.
243 212 558 485 886 959
EBITDA
H1 2021 vs. H1 2020
Comp. OP 195 173 464 409 722 778
• Positive contribution from higher achieved prices and slightly higher Comp. net
6,207 5,957 6,234
hydro volumes (+0.7 TWh) while nuclear volumes marginally lower (- assets
0.1 TWh) due to maintenance breaks Comp.
12.2 13.0
RONA %
• Tax-exempt capital gain of EUR 50 million in Q1 2021 Gross in-
35 34 62 68 228 222
vestment
37Nordic hydro reservoirs close to normal levels, strong spot prices
influenced by Continental European power prices
Reservoir content (TWh)
120
• High hydro power generation and below normal
Hydro reservoirs
precipitation led to normalisation of reservoirs
100
80 • Nordic reservoirs 3 TWh above long-term average at the
60 end of Q2 2021, 9 TWh below average in early August
40 Norway
20 Sweden
2000 2003 2020 2021 Average
Finland
0
Q1 Q2 Q3 Q4
EUR/MWh
80 • Nord Pool system spot price continued strong since Q1 2021
Realised system price
70 Futures 12 August 2021 recovery, reaching EUR 41.9 per MWh (5.6) in Q2 2021
Power price
60 Futures 6 May 2021
50 • Nordic spot price is supported by Continental European
40 power prices, which in turn are driven by increased gas and
30 carbon prices
20
10 • Below normal precipitation and wind generation, together
0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
with increased export capacity have driven the Nordic power
2019 2020 2021 2022 price
Source: Nord Pool, Nasdaq Commodities
38Higher achieved power prices
System spot power price, Nord Pool Achieved power price, Generation segment
EUR/MWh
Substantially higher spot
EUR/MWh
42 37,1 37,2 38,1
48 42,1 41,9 33,6 35,2
40
35 power prices in the Nordics
32 28
24 21 Increased achieved power
13,8
16
5,6
8,9
14
prices
8 7
0 0
Q2/2020 Q3/2020 Q4/2020 Q1/2021 Q2/2021 Q2/2020 Q3/2020 Q4/2020 Q1/2021 Q2/2021
Spot power price, Urals hub Achieved power price, Russia segment*
RUB/MW EUR/MW Russian power demand picking
1 200 1 109 1 074
1 158 1 156 24
23,3 23,1 22,5
21,1
22,5 up with increasing electricity
1 021
1 000 20 prices
800 16
Russian achieved price in rubles
600 12
400 8
200 4 increased
0 0
Q2/2020 Q3/2020 Q4/2020 Q1/2021 Q2/2021 Q2/2020 Q3/2020 Q4/2020 Q1/2021 Q2/2021
NOTE: Achieved power price (includes capacity payments) in RUB
increased by 7%
39 * Does not include Uniper’s subsidiary UniproRussia: Q2
Q2'21 Q2'20
Solid underlying performance Volumes
(TWh) 6,1 5,4
2,4 2,5
Q2 2021 vs. Q2 2020 Power Heat
• Comparable operating profit flat at EUR 37 million H1
H1'21 H1'20
Volumes
– Changes in CSA* payments, lower bond yield, and higher power prices (TWh) 14,6 13,8
9,9 8,7
– Impact of the Russian ruble exchange rate was EUR -2 million
Power Heat
• Strategy execution:
MEUR II/ II/ I-II/ I-II/ FY
– Divestment of Argayash CHP and decision to cease coal use by the end of 2021 2020 2021 2020 2020 LTM
2022
– Annual CO2 emissions to be reduced by ~2 million tonnes Sales 182 202 446 519 929 856
H1 2021 vs. H1 2020 Comp.
70 74 205 213 394 386
EBITDA
• Comparable operating profit increased by 1% Comp. OP 37 37 137 135 251 252
– EUR 17 million positive effect of the sale of the 116-MW solar project Comp. net
2,572 2,813 2,431
assets
– Changes in CSA* payments, lower bond yield, and higher power prices Comp.
11.1 12.7
RONA %
– Change in the Russian ruble exchange rate was EUR -23 million
Gross in-
30 47 37 51 91 76
vestment
* CSA = Capacity Supply Agreement
40City Solutions: Q2
Q2'21 Q2'20
Performance improved Volumes
(TWh)
1,8 2,0
0,8 0,6
Q2 2021 vs. Q2 2020 Power Heat
• District heating with higher power prices and higher power sales H1
H1'21 H1'20
Volumes
(TWh)
6,2 5,6
2,1 1,5
Power Heat
H1 2021 vs. H1 2020
MEUR II/ II/ I-II/ I-II/ FY
• Higher heat sales volumes, higher power prices, and higher 2021 2020 2021 2020 2020 LTM
Norwegian heat prices
Sales 256 212 674 554 1,075 1,196
Comp.
43 32 175 138 239 276
• Strategy execution: EBITDA
Comp. OP -4 -15 82 43 47 87
– Announced divestment of 50% ownership in Stockholm Exergi
Comp. net
2,572 3,628 3,679
– Announced divestment of 500 MW of solar power plants in India assets
Comp.
– Closing of the sale of the Baltic district heating business in July RONA %
2.8 4.4
Gross in-
39 30 86 69 333 350
vestment
41Consumer Solutions: Number of
Continued profitability improvement customers Q2 2021 2 320
Q4 2020 2 390
Q2 2021 vs. Q2 2020
• Comparable operating profit flat MEUR II/ II/ I-II/ I-II/ FY
2021 2020 2021 2020 2020 LTM
• 15th consecutive quarter of comparable EBITDA improvement
Sales 424 237 1,085 661 1,267 1,691
• The gas volume increased mainly due to an increase of enterprise
customers in Poland Comp.
36 35 89 82 153 161
EBITDA
Comp. OP 19 19 55 51 90 94
Comp. net
618 543 565
H1 2021 vs. H1 2020 assets
Gross in-
25 13 36 28 57 65
• Consumer Solutions’ competitiveness continued to strengthen vestment
• Several new digital services were launched during the first half of
2021
• Higher margins from value-added services
• Strategy execution:
– Strategic review ongoing
42Uniper: Q2 Q2'21 Q2'20 9,5 9,4
Solid underlying performance Volumes
(TWh)
3,2 3,5 2,9 2,8
8,4
5,3
Q2 2021 vs. Q2 2020 Hydro Nuclear Thermal CE Thermal RUS
• European Generation business benefitted from Irsching 4 & 5 H1 H1'21 H1'20 21,9
Volumes*
and Datteln 4 contribution (TWh)
19,1
9,4*
6,6 6,5 5,3*
• Global Commodities business was significantly below previous year 3,5* 2,8*
due to a positive effect of the realisation of hedges in the coal, freight, Hydro Nuclear Thermal CE Thermal RUS
and oil business in Q2 2020
MEUR II/ II/ I-II/ I-II/ FY
• Russian Power Generation’s Berezovskaya 3 back online in Q2 2021 2021 2020 2021 2020 2020 LTM
• Changes in fair value of derivatives of EUR -910 (160) million Sales 15,893 11,365 35,663 11,365 44,514 68,812
• Strategy execution: Comp.
-17 184 851 184 856 1,523
EBITDA
– Accelerated closure of more than 2 GW’s of coal: Heyden
Comp. OP -177 24 534 24 363 873
4, Wilhelmshaven, Scholven C, and Ratcliffe
Comp. net
8,233 7,768 7,432
assets
H1 2021 vs. H1 2020 Comp.
12.1
RONA %
• Uniper as a subsidiary from Q2 2020 Gross in-
184 145 320 145 639 813
vestment
• Strong Q1 2021 contribution (optimisation gains) * Uniper consolidated from Q2 2020
43Credit outlook improved
Solid credit metrics
debt
'BBB' long-term issuer credit rating,
debt
stable outlook
netnet
'BBB' long-term issuer credit rating,
stable outlook
Financial
Target ratio:
Financial
< 2x Financial net debt / Comp. EBITDA
Fortum’s objective:
Maintain solid investment grade rating of at least
BBB to maintain financial strength, preserve financial
flexibility, and good access to capital.
3 500
per 30 June 2021 Total loans EUR 9,790 million (excl. lease)
3 000 Bonds • Average interest of 1.5% (2020: 1.5%) for Group loan
Maturity profile
portfolio incl. derivatives hedging financial net
2 500 Financial institutions
• EUR 685 million (2020: 634) swapped to RUB with
2 000 Other long-term loans average interest 6.4% (2020: 6.2%) incl. hedging cost
Short-term loans • Average interest of 0.7% (2020: 0.9%) for EUR loans
1 500
Liquid funds of EUR 1,703 million
1 000
Undrawn credit facilities of EUR 5,100 million
500
0
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030+
44Outlook
Hedging 2021 Estimated annual capital Russia
Generation Nordic hedges: expenditure, including maintenance CSA changes:
For the rest of 2021: 75% hedged at EUR 33 and excluding acquisitions, of Lower bond yield, bond yield 6.3% (7.6%)
per MWh
For 2022: 60% hedged at EUR 31 per MWh EUR 1,400 million Changes in CSA and CCS capacities:
(Q1: 55% at EUR 31) see interim report p. 22-23, 25
of which maintenance capital expenditure
Uniper Nordic hedges: is EUR 700 million In 2021, in the Russia segment, the
negative financial effect related to the
For the rest of 2021: 90% hedged at EUR 26 Tax guidance for 2021: ending of the CSA period of two production
per MWh
The comparable effective income tax rate units is expected to exceed the positive
For 2022: 85% hedged at EUR 24 per MWh
for Fortum is estimated to be in the range effect of three units entering the four-year
(Q1: 80% at EUR 24)
of 20-25% period of higher CSA payments
For 2023: 45% hedged at EUR 22 per MWh
(Q1: 35% at EUR 21)
45Appendices
European and Nordic power markets
Western European countries exiting coal during this decade
• Sweden and Austria closed their last coal plants during 2020
FI: Phase-out
by mid-2029
• France is committed to phase out coal by 2022 DE: Phase-out SE: Last
by 2038 plant closed
• Portugal has 2023 as national exit goal, but operators aim for full closure 2020
already in 2021
UK: Phase-out by DK: Phase-out
• UK full exit by the end of 2024 by restricting coal plants’ access to market 2024 by 2030
• Italy and Ireland have both announced phase-out by 2025, also Hungary to
close its last coal plant by then
NL: Phase-out by
• Greece has stated 2028 as year for full phase-out end-2029
• Netherlands and Finland have 2029 as regulated phase-out year, Denmark
is committed to 2030 as is Slovakia FR: Phase-out by
2022
• Germany to phase out coal by end-2038 latest, possibly already 2035
AT: Last plant
• Significant coal countries without explicit exit date include e.g. Spain, closed 2020
Czechia and Poland SK: Phase-out
by 2030
– In Spain, significant number of coal plants have recently already closed, and
PT: Phase-out by
operators are underway to close down even the rest by mid-2020s 2023 HU: Last plant
to close 2025
– In Czechia, a multi-stakeholder commission has proposed a coal phase-out
by 2038, but no political decision available as of yet
IT: Phase-out by 2025 GR: Phase-out by
– Poland expects share of coal in the power mix to decline and targets lower- 2028
carbon generation in newbuilds, but no timeline for phase-out of coal exists
Phase-out from Phase-out from Phase-out from
power sector power sector power sector
latest by 2025 latest by 2030 latest by 2040
47European and Nordic power markets Decarbonisation requires other sectors to join • The EU has agreed to increase the 2030 total emissions reduction target to 55% vs 1990. • In July 2021, EU Commission put forward a “Fit for 55” package, laying out the roadmap for achieving the new ambitious climate target • Proposed EU ETS revisions widen its scope, tighten supply and push for faster decarbonisation: − Emissions reduction target increased from 43% to 61% from 2005 level − EU ETS scope to expand and include maritime sector − Higher LRF (4.2% instead of 2.2%) combined with cap rebasing − Free allocation to be gradually phased out − Higher MSR intake rate (24%) and thresholds (400-833) maintained − Cross Border Adjustment Mechanism (CBAM) proposed • Proposed revisions will have to go through the EU legislative process and are expected to take effect not earlier than late 2022 or 2023 Abatement cost ranges formed of typical values found in industry analyses. Sources: ICIS, Refinitiv, EU Commission. 48
European and Nordic power markets
Fortum major player in power, gas and heat
Power generation Gas Heat production
Largest generators in Europe and Russia, 2019 Largest European gas storage operators, 2018 Largest global producers, 2019
TWh TWh TWh
EDF STOGIT Gazprom
Rosenergoatom
T Plus
Fortum+Uniper Storengy
Sibgenco
RWE Hungarian Gas Storage
Gazprom Inter RAO UES
Enel Uniper Energy Storage Veolia
RusHydro NAM RusHydro
Inter RAO UES En+
Vattenfall Astora
EDF
ENGIE Enagas Fortum+Uniper
EPH Quadra
NNEGC Energoat. Gas Storage Poland
KDHC
En+ OMV Gas Storage
TGC-2
Iberdrola
TAQA Gas Storage Vattenfall
CEZ
PGE RAG.Energy.Storage Minskenergo
Statkraft PGE
TERÉGA
T Plus Lukoil
EnBW Depogaz Ploiești Tatenergo
Sibgengo innogy Gas Storage PGNiG
EDP E.ON
EPS Nafta
Kyivteploenergo
Verbund VNG Gasspeicher
Ørsted
Axpo
Conexus Baltic Grid Stockholm Exergi
DTEK
SSE EWE Gasspeicher EPH
E.ON TGC-14
MMBF
Naturgy Helen
DEI GSA CEZ
0 100 200 300 400 500 600 0 40 80 120 160 200 0 20 40 60 80 100 120 140
Source: Company information, Fortum analyses, 2019 figures pro forma. GIE Storage Database.
49 EPH incl. LEAG. No data from China.European and Nordic power markets
Commodity prices
USD / t Coal price (ICE API2 2022) EUR / tCO2 CO2 price (EUA DEC 2021)
125 60
100 48
75 36
50 24
25 12
0 0
Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21 Q3/21 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21 Q3/21
EUR / MWh Gas price (TTF 2022) USD / bbl Crude oil price (ICE Brent)
35 100
28 80
21 60
14 40
7 20
0 0
Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21 Q3/21 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21 Q3/21
Source: Bloomberg
50 12 August 2021European and Nordic power markets
Wholesale power prices
EUR/MWh Spot prices Forward prices
110
100
90
80
70 German
60
Nordic
50
40 Russian*
30
20
10
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Forwards 12 August 2021
Rolling 7-day average spot price
* Including weighted average capacity price
51 Source: Nord Pool, Bloomberg Finance LP, ATS, NP “Market Council”, FortumEuropean and Nordic power markets
Nordic year forwards
Year10 Year11 Year12 Year13 Year14 Year15 Year16 Year17 Year18 Year19 Year20 Year21 Year22 Year23
€/MWh 12 August 2021
Year23
70 Year22
60
50 Apr May Jun Jul
2021 2021 2021 2021
40
30
20
10
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
52 Source: Nasdaq Commodities, BloombergEuropean and Nordic power markets
German and Nordic forward spread
Spot price
EUR/MWh Nordic and German daily spot prices in 2019 – 2021 May June July
• After the price recovery seen in Q1 2021, Nordic system price has 120
2021 2021 2021
remained on average close to 40 €/MWh during Q2 2021. 100
• Continental European power prices have been driven higher by 80
increasing gas and carbon prices. 60
• German-Nordic spread for Q2 2021 realised at 18 €/MWh. 40
20
0
-20
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2019 2020 2021
Forward price
13 August 2021 Nordic Germany
• The German contract for 2022 delivery is trading around 80 €/MWh,
while corresponding Nordic SYS contract is close to 40 €/MWh. EUR/MWh Nordic and German year 2022 forwards in 2019 – 2021
• The German-Nordic spread for 2022 delivery has increased from 25 90
EUR/MWh during the start of 2021 to a level of 40 EUR/MWh recently. 80 70
• German contract is tracking the changes in short-run marginal costs for 60
gas and coal fired condensing units, reflecting the stronger exposure to 50
40
fossil fuel and CO2 prices.
30
• The Nordic contract is influenced by growing Nordic renewable supply 20
and limited interconnector capacity towards the Continental Europe. 10
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2019 2020 2021
12 August 2021 Nordic Germany
53
Source: Nord Pool, BloombergEuropean and Nordic power markets
CO2 price and Nordic spot power price
EUR / tCO2 CO2 price (EUA DEC 2021) & Nordic sys spot price
80
CO2 price (EUA DEC 2021)
70 Nordic system spot price
60
50
40
30
20
10
0
Oct Nov Dec Jan Feb March April May June July August
2020 2021
Until 13 August 2021
54 Source: BloombergEuropean and Nordic power markets
CO2 price and Nordic forward price
EUR / tCO2 CO2 price (EUA DEC 2021) & Year 22 forward price
60
CO2 price (EUA DEC 2021)
Nordic year 2022 forward
50
40
30
20
10
0
Oct Nov Dec Jan Feb March April May June July August
2020 2021
Until 12 August 2021
55 Source: BloombergEuropean and Nordic power markets
Nordic forward prices and Nordic sys spot averages
EUR/MWh
50
Year 2018 forward System spot 2018 average
Year 2019 forward System spot 2019 average
Year 2020 forward System spot 2020 average
40
30
20
10
0
2013 2014 2015 2016 2017 2018 2019 2020
56 Source: BloombergFortum’s Nordic power generation in detail
Fortum’s Nordic, Baltic and Polish generation capacity
Of which
GENERATION CAPACITY Fortum Uniper NORWAY MW FINLAND MW
Hydro 6,448 1,771 Price areas Hydro 1,553
Nuclear 4,8181 1,9961 NO4, Wind 993 Nuclear 1,487
NO4 SE1
CHP 1,185 2,4 4492 NO1, CHP 24 CHP 375
Other thermal 1,727 1,162 Generation capacity 123 Other thermal 565
Wind 1013,4 - Generation capacity 3,980
FI
SE2
NO3
Generation capacity, MW 14,279 5,378 Of which
SWEDEN Fortum Uniper BALTICS AND
NO5
Figures 31 December 2020 NO1 POLAND MW
Price areas
SE2, Hydro 3,185 1,635 Generation capacity, CHP
NO2 SE3
EE SE3, Hydro 1,587 13 in Estonia 434
SE4, Hydro 123 123 in Latvia 284
SE3, Nuclear 3,3311 1,9961 in Lithuania 184
1) Ringhals 1 (of which Uniper’s share 269 MW) closed at the end of 2020 LV
2) Öresundsverket 449 MW facility mothballed in 2018 DK1 SE4 SE3, CHP 6 - in Poland 233
3) The capacity includes the Sørfjord 99 MW wind portfolio in Norway, of
which a majority 80% ownership has been sold in January 2021. 1)
2) LT SE4, CHP 4492 4492
4) The capacity includes the 89 MW CHP assets in the Baltics and DK2 SE4, Other th. 1,162 1,162 in Latvia, Wind 24
the 2 MW wind power plant in Latvia, which have been divested in July 2021.
Gen. capacity 9,843 5,378
PL
Associated companies’ plants (not included in the MWs):
Stockholm Exergi (Former Fortum Värme) in Stockholm;
TSE in Naantali DENMARK, DK1 MW
Generation capacity, CHP 9
57Fortum’s evolution and strategic route
Fortum’s evolution and historical strategic route
Skandinaviska Birka Energi Länsivoima Elnova Østfold
Elverk 50% Fortum →100% 50% → 100%
50% Stockholm
Gullspång merged Shares in Divestment of Divestment of
with Hafslund Fingrid shares small scale hydro
Gullspång Stora Kraft Birka Energi TGC-1 E.ON Divestment
Stockholm Energi 50% → 100% established Finland of Lenenergo
shares
Shares in Divestment of Divestment of
Länsivoima Lenenergo Lenenergo Oil business heat operations non-strategic
45% → shares → District heating spin-off TGC-10 outside of heat business
65% in Poland → Stockholm
IVO FORTUM
NESTE 1996 1997 1998 2000 2002 2003 2005 2006 2007 2008 2011 2012
2014 2015 2016 2017 2018 2020 2021
Divestments of EUR ~5.2 bn
Divestment of electricity Divestment of DUON Nordkraft wind power Investment in Uniper Divestment of district heating businesses 0.5 GW solar divestment in India
distribution business electricity in Joensuu and Järvenpää
distribution Divestment of recharge infrastructure
Ekokem Restructuring of Divestment of Divestment of district heating
business
Divestment of electricity ownership in Hafslund ownership in business in the Baltics
distribution and heat businesses Hafslund Produksjon Majority owner in Uniper
Turebergs Russian wind power JV Divestment of Stockholm Exergi
Recycling Nordic wind capital recycling (80%)
Divestment of Grangemouth power
plant
Divestment of small hydro
Divestment of Gasum shares
58Historical achieved prices
Hedging improves stability and predictability
– principles based on risk mitigation, (Generation segment)
EUR/MWh Realised prices quarterly since 2000
80
70
60
50
40
30
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Achieved power price Spot price Fin,Sto,Sun avg (40/40/20)
59
2009 onwards thermal and import from Russia excludedDividend
Fortum’s dividend policy aiming at increasing dividend
Fortum dividends
EUR/share
1,20 1.12
1.10 1.10 1.10 1.10
1,00
Dividend policy: 0,80
“Fortum’s dividend policy is to pay a stable, 0,60
sustainable, and over time increasing dividend.” 0,40
0,20
0,00
2016 2017 2018 2019 2020
60Next events:
January-September Interim Report on 12 November 2021
For more information,
please visit www.fortum.com/investors
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Financial Communications
Ingela Ulfves Rauno Tiihonen Måns Holmberg Carlo Beck Pirjo Lifländer Camilla Nikk
Vice President, Manager Manager Manager IR Specialist Coordinator
Investor Relations and
Financial Communication
+358 (0)40 515 1531 +358 (0)10 453 6150 +358 (0)44 518 1518 +49 172 751 2480 +358 (0)40 643 3317 +358 (0)50 516 9484
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