You can watch a pre-recorded video recording of my comprehensive review for the Annual General Meeting here.
Year 2019 was successful in terms of our financial performance: our comparable operating profit increased by more than EUR 200 million from the previous year to EUR 1.2 billion, despite the Nordic spot power prices decreasing by 12 percent. Our cash flow was also very strong, about EUR 2 billion.
I am proud of the work we have already done for a carbon-neutral future − work which we are also committed to continue. In 2019, we invested a total of EUR 400 million in CO2-free energy production and infrastructure. Other major milestones last year included our decisions to make Espoo’s district heating carbon-neutral in the 2020s, to close down two coal-fired units in Naantali this summer, and to place the Meri-Pori power plant into the Finnish national peak-load reserve. Our joint venture in Stockholm will close down its last coal-fired unit this spring, after which one of the largest district heating networks in the world will be heated entirely with renewable and waste-based energy.
In March 2020, Fortum became the majority owner of Uniper. Together, Fortum and Uniper are Europe’s third largest producer of carbon-free electricity and our comparable EBITDA amounts to more than EUR 3 billion. This offers a solid basis for us, together with Uniper, to start building a future based on clean energy and transition towards a carbon-neutral Europe by 2050.
Stronger emissions trading system is the most effective way to achieve climate goals
Carbon-free power generation naturally plays a pivotal role in achieving climate goals. However, we believe that the most effective climate policy is to set an annually decreasing, binding ceiling for carbon emissions and use carbon pricing to steer emission reduction measures first to plants where they can be implemented most cost-efficiently, regardless of their location or industry. That is why we are pushing for a significant strengthening of the emissions trading system and increased allowance price control.
Climate science has defined a carbon budget for humanity to keep global warming below 1.5 degrees. The EU emissions trading system has proven its worth as an instrument setting a binding carbon budget and guiding the development of emissions: in 2019, the use of coal in power production in Europe decreased by almost a quarter as the price of CO2 tripled. Emissions trading began 15 years ago, and since then, emissions from power generation in Europe have nearly halved. Emissions trading steers development, on market terms, so that the least efficient plants are closed first.
We consider it a key priority for the EU to step up its climate ambitions and to adopt the new, stricter targets in emissions trading as soon as possible, so that companies have the required certainty to invest in emissions reductions. Extending emissions trading to other sectors would also be a major step forward in the EU climate policy. Policies that ensure positive emissions development become the more valuable, the closer we are to the target years of the climate policy, such as 2030.
Fortum and Uniper on a journey towards carbon neutrality
The Climate Law proposal of the European Commission sets a legally binding carbon-neutrality target for 2050. In setting the target, the proposal takes into account both greenhouse gas emissions and carbon capture through natural or other carbon sinks. The target, therefore, is not zero emissions, but carbon-neutrality: a balance between carbon emissions and sinks. We strongly advocate for the Commission’s target and aim to reach it using many different measures.
96% of Fortum’s electricity production in Europe is already CO2-free. In Fortum and Uniper’s combined portfolio, the share of coal-fired power generation in 2019 was 12 percent, and we are committed to reducing this share – without compromising security of supply or a fair cost of electricity and heat. Uniper has a clear phase-out plan for its coal-fired power production in Europe. Most of its coal-fired power plants are located in Germany, and the company has announced that it will shut down all of its old coal-fired power plants in Germany by the end of 2025, pending approval of the German coal-exit law in accordance with the government proposal. The Datteln 4 power plant with 1GW capacity will be decommissioned in 2038, at the latest. In the UK, coal-fired power generation will end as early as 2024 and in the Netherlands by 2030.
Natural gas and renewable energy sources play a key role when phasing out coal. Gas must also be made clean in the future, but in the short term, transition from coal to gas will yield fast emission reductions and give time to develop CO2-free production.
Our work towards a cleaner future will continue
A carbon-neutral future requires wide-ranging changes in society. Emission-free power and heat enable a great deal, but a total electrification of all industrial processes or, for instance, heavy traffic is probably not possible. That is why we also need clean gas, and Uniper is a pioneer in this development work.
To achieve a carbon-neutral society, we also need carbon sinks, because human activity will inevitably produce emissions, for example in food production. Carbon capture and storage is one potential alternative in reducing emissions and creating carbon sinks, and we participate in this development work in Stockholm and Oslo. In addition to clean energy and carbon sinks, I also believe that transition towards a circular economy is required. The circular economy also offers Fortum new business opportunities, for example in recycling plastics and batteries and creating new biomaterials.
In a carbon-neutral future, the role of energy companies will evolve and expand. Fortum is already a significant actor in the Nordic and Russian markets, and the Uniper investment will open the Central European market for us. Together we have scale, competences and resources that will not only help us succeed and grow, but also lead the European energy transition and build a cleaner future.