"Fortum’s operating environment in the third quarter of 2020 was characterised by continued uncertainty caused by Covid-19, low Nordic power prices due to high hydrology, and the seasonally weak third-quarter results of the Uniper segment. Thanks to our prudent hedging and portfolio rotation, we managed reasonably well. We are also continuing our determined work to align the strategies of Fortum and Uniper which we will present in more detail at our upcoming Capital Markets Day in December.
Nordic power prices continued to be depressed throughout the quarter as the Nordic hydro reservoirs stayed around historically high levels. Especially the Nordic system price and Norwegian area prices were low, whereas prices declined clearly less in the Swedish and Finnish price areas that are the most significant to Fortum. The strong CO2-price supported the central European power prices and the spread between the German and Nordic prices remained wide.
The Covid-19 pandemic continued to shake the world economy in the third quarter of 2020. As earlier this year, the impact on the Nordic power demand was limited. Out of Fortum’s businesses mainly our Russian operations continued to experience some adverse effects from lower power and heat demand.
The Generation segment’s results were burdened by longer nuclear maintenance outages that reduced the nuclear power generation. However, the impact was partly offset by the higher achieved power price and higher hydro volumes. Thanks to our higher hedge price and fairly high hedge level, we were able to counter the effect of the lower Nordic spot prices. The Consumer Solutions segment continued to improve and the results of the City Solutions segment were stable.
As highlighted already in previous quarters, Uniper’s strong first-quarter results were partly attributable to a shift between quarters. This further burdened the segment’s results in the third-quarter, which is typically a weaker quarter due to seasonal variations within the year. Uniper’s seasonally weaker third quarter did not affect its full year guidance as Uniper reiterated the outlook of an adjusted EBIT of EUR 800 to 1,000 million for 2020.
At Fortum, continuous portfolio optimisation is a mainstay. In August, Fortum closed the sale of the Järvenpää district heating business and recorded a tax-exempt capital gain of EUR 291 million. We have also proceeded with the strategic reviews of our Polish, Baltic, and Swedish district heating businesses as planned and are reviewing all alternatives, including possible divestments. We continue to put focus on our balance sheet and securing our overall financial strength. Equally, maintaining a credit rating of at least BBB continues to be a priority.
In September 2020, the EU Commission proposed to tighten the 2030 target for greenhouse gas emission reductions from the current 40% to 55% compared to 1990. This is a clear step in the right direction, even though it falls slightly short of the EU Parliament’s proposal of a 60% reduction. We fully support the Commission’s proposal and emphasise the necessity of extending the emission trading system to other sectors such as heating and transport, as an efficient tool for achieving the target.
Since I took office as CEO of Fortum, my main attention has been on the collaboration with Uniper and driving the strategy alignment. We are working on updating Fortum’s strategy and setting targets for the whole Group, and will present them at our upcoming Capital Markets Day on 3 December 2020."