CEO's review

Fortum's President and CEO Pekka Lundmark:

“The third quarter 2017 was a good quarter for Fortum. Our businesses are showing strong performance, market prices show signs of improving and we have taken substantial steps in our capital redeployment strategy.

Following the divestment of our Distribution businesses, we have been working hard to position Fortum for the future. At the beginning of August, we closed the Hafslund transaction that increased our presence in the Nordic heat and retail market, especially in Norway. Towards the end of September, we signed a transaction agreement with E.ON, currently the largest shareholder in Uniper. Our offer to E.ON, and all other shareholders in Uniper, provides an attractive opportunity to capitalise on the strong performance of Uniper since its spin-off. At the same time this is an attractive proposition to Fortum. Uniper and Fortum are a good strategic fit and our investment opens up many opportunities for close cooperation. We are investing in a successful company that has strong cash flow, operates close to our home markets, and has businesses that are well aligned with our core competencies. The investment will contribute toward a stable and sustainable dividend to our shareholders.

Over the years Fortum has been advocating for a sustainable transition to a low-carbon energy system. This means focusing on reducing emissions, without forgetting security of supply and affordability of energy. Large investments in flexibility, storage, and transmission capacity are needed to cope with the growing share of intermittent renewable energy production, and this will not happen overnight. Flexible power production, especially hydro and gas assets, is key to ensuring security of supply during the transition. Fortum and Uniper both possess such assets and are well positioned to take an active role in driving the European energy transition forward.

The third quarter showed an increase in EBITDA of 39%. Higher hydro volumes and achieved power price improved the financial performance of the Generation segment. The Russia segment continued on their quarterly upward trend, especially thanks to higher CSA payments. The third quarter is seasonally challenging for City Solutions. However, the results improved from last year especially due to the contribution from our Recycling and Waste Solutions unit (formerly Ekokem). The results of the Consumer Solutions segment are somewhat burdened by the tough competitive situation. After the closing of the Hafslund transaction we have put a lot of focus on working together with our new colleagues to further develop our retail strategy and offering. Our aim is to create a competitive service portfolio including digital solutions for our customer base of 2.5 million homes and businesses.

We have come a long way on our capital redeployment strategy. Between 2012-2017 we have, already before the Uniper investment, invested around 4 billion euros into renewables, circular economy and sustainable city solutions. The positive impact of these investments can already be seen in our improving results. We believe our investments in both Hafslund and Uniper will further strengthen our results and competencies for the future.“

(Text from Fortum's January-September 2017 Interim Report)

10/26/2017