“The continued high level of LNG imports, comforting gas storage levels and reduced energy demand have pushed European energy prices lower during the most recent two quarters this year. Precipitation was high in the Nordics during the third quarter, resulting in rapidly increasing inflow and hydro reservoir levels. In combination with increased capacity, as a result of the commissioning of Olkiluoto 3 and significant growth in installed wind capacity, this put pressure on and notably lowered the Nordic spot prices during the quarter. In the third quarter, power prices were volatile due to the higher share of wind supply, unexpected limitations in power supply and new concerns regarding security of supply ahead of the winter.
The lower Nordic spot power price is reflected in our third-quarter results; however, thanks to our prudent hedging and successful physical optimisation, we performed with resilience, and our achieved power price was at a solid level. The main reason for the result decline in our Generation segment was the lower achieved power price compared to one year ago, although this was partly offset by higher hydro volumes. The result development in the Consumer Solutions and Other Operations segments continued to weaken. In January-June, our overall Group performance was very strong, but signs of frail, softening markets and demand started to occur in the third quarter.
One of our strategy’s cornerstones is to deliver clean energy, and our focus now is to constantly optimise and ensure that our existing generation fleet stays competitive. In the third quarter, our operational efficiency ensured high availability and good load factors despite the annual outages at our nuclear power plant in Loviisa. We also announced the modernisation of our hydropower plant Untra, one of Sweden’s oldest hydropower plants, an investment of approximately EUR 60 million during 2023-2030. At the beginning of October, we also signed a fixed-price 13-year PPA agreement with the Norwegian Hydro Energi AS, which supports decarbonisation of industries while at the same time contributes to the stabilisation of our outright power portfolio.
Overall, geopolitical tensions are again on the rise and global economic growth is expected to be lacklustre; inflation is still high and elevated interest rates are not supporting investments at the moment. Our two-phased strategy responds well to this situation, and right now our focus is to manage the prevailing uncertainty. To succeed in this challenging environment going forward, we must transform and develop. Compared to a year ago, Fortum is a different and much smaller company. Therefore, we need to adjust to fit the new structure and purpose and are now launching an efficiency improvement programme with the target to lower annual fixed costs by EUR 100 million gradually until the end of 2025. We are also addressing turnaround actions for underperforming businesses as well as the rescope of our focus areas. To reach the target, it is unfortunately expected that actions will also include personnel reductions. To reflect the softer power demand and postponed investment appetite by industrials, we are lowering our growth capital expenditure guidance both on an annual level and also for growth, from up to EUR 1.5 billion to up to EUR 1 billion for the years 2023-2025.
Strong financial discipline is also of high strategic importance to us and continues to be the hallmark of our decisions and actions. Considering the current weaker market situation, we are very satisfied that we have managed to stabilise our financial position faster than expected. At the end of September, our leverage was very low at 0.2 times and we continue to have sufficient liquidity and credit line buffers. I am also pleased to say that we have started preparations for the Green Finance Framework.
Fortum welcomes the recent agreement on the European electricity market design legislation. The draft legislation, which was driven by the energy crisis last year, aims to respond to concerns relating to price volatility and to provide instruments that help to make the energy market more stable and predictable.
Despite the short-term uncertainty resulting from postponed investments and low visibility into demand growth, we maintain determined to drive decarbonisation together with our customers. The Nordics – and especially Fortum – are in a unique position in this clean energy transition as we are one of the few providers of CO2-free power at scale.”