and CEO Pekka Lundmark:
“2016 was a challenging year in many respects.
The beginning of the year was characterised by increased commodity market
volatility; especially coal and oil prices were very low. Nordic water
reservoirs were clearly above the long-term average, creating pressure on
electricity prices, and the British EU exit vote also created uncertainty. Late
in the year, however, some positive signs were seen on the power market, mainly
driven by improved commodity and emission prices, although the overall business
environment still continued to be demanding. Although some European economies
have started to recover, the industry's power demand is still too weak and
commodity prices are too low and volatile to support a material increase in
In the fourth quarter of 2016 Fortum’s results
continued to decline mainly due to significantly lower hydro production
volumes. The hydro situation continued dry especially in our key areas in
Sweden, but also the achieved power price was lower than in the fourth quarter
of 2015. The decline was partially offset by strong performance in the Russia
segment and improved availability and hence higher nuclear volumes, than in the
fourth quarter of 2015.
A positive development in 2016 was the Swedish
government’s budget proposal in September; it included the timetable for
lowering the real-estate tax on hydro assets and for phasing out the nuclear
capacity tax over the coming years. We are pleased with the swift decision and
the finalisation of a timetable, which gives regulatory stability to operate
the plants and plan the necessary safety investments. This is completely in
line with what we have been advocating for, a regulation and taxation policy
where the different forms of production are treated more equally.
Operationally, the year met our expectations, as
availability in our plants was good and ongoing projects progressed as planned.
We completed our extensive investment programme in Russia in the spring 2016,
and the new capacity has been the key driver for the earnings growth in the
In February, we published the key high-level
elements in our strategy. We also adjusted our operational model to better
enable strategy implementation. During the year we screened opportunities in
line with our strategy. The acquisition of the Polish electricity and gas sales
company DUON, wind power investments in Sweden, Norway and Russia, and the
acquisition of Ekokem, a leading Nordic circular economy company, are important
steps in the implementation of our strategy and give us access to new revenue
streams independent of the Nordic power price. In addition, as we are
continuously looking to optimise our production fleet, we divested the Tobolsk
power plant in Russia.
We updated our vision and mission in the autumn.
Our vision and mission go beyond just clean energy production, they express our
commitment to fuel and resource efficiency and how we enable our stakeholders,
customers and society to make sustainable choices. Our updated vision – ‘For a
cleaner world’ reflects
our ambition to drive the transformation towards a low-emission energy system
and optimal resource efficiency. Our role is to accelerate this change by
reshaping the energy system, improving resource efficiency and providing smart
We expect the energy sector transformation to
accelerate in the future. At the same time as we lower the cost and improve the
productivity of our existing operations, we will focus on additional organic
and M&A growth opportunities. We have two phases in our capital
redeployment. Priority one in phase one is generation consolidation in Europe –
consolidation of assets and businesses within our core competence and giving us
direct access to cash flows. Priority two in phase one is to take the
competencies that we have today in our combined heat and power production and
in the acquired Ekokem business, and widen the City Solution’s scope. The
overall goal of phase one is to maximize our cash flow to enable both a
competitive dividend and “phase two” investments into the future energy system.
Phase two involves growing in solar and wind, and new internal or external
energy ventures to take care of our long-term competitiveness.
I would like to thank all our employees and
partners for their excellent work in 2016. Thank you also to our customers and
shareholders for your continued trust in us.“
(Text from Fortum's Financial Statements Bulletin 2016)