At the end of September 2022, approximately 80% of the Generation segment’s estimated Nordic power sales volume was hedged at EUR 49 per MWh for the remainder of 2022, approximately 65% at EUR 49 per MWh for 2023 (hedges at the end of the second quarter of 2022: 60% at EUR 37 per MWh), and approximately 40% at EUR 38 per MWh for 2024.
The reported hedge ratios are based on the hedges and power generation forecasts of the Generation segment.
The reported hedge ratios may vary significantly, depending on Fortum’s actions on the electricity derivatives markets. Hedges are mainly financial contracts, most of which are electricity derivatives quoted on Nasdaq Commodities and traded either on Nasdaq Commodities or with bilateral counterparties. As an additional liquidity risk mitigation measure, Fortum has reduced its exposure on the Nasdaq Commodities exchange and increased the share of bilateral agreements.
Fortum updated its guidance on capital expenditure for 2022. The company currently expects its annual capital expenditure, including maintenance but excluding acquistions, for its continuing operations to be approximately EUR 550 million in 2022. In the January−June 2022 interim report, Fortum cancelled its guidance on capital expenditure for 2022 due to the general market uncertainty mainly related to Uniper. The maintenance capital expenditure in 2022 is estimated to be approximately EUR 300 million, well below the level of depreciation.
The Generation segment’s achieved Nordic power price typically depends on factors such as hedge ratios, hedge prices, spot prices, availability and utilisation of Fortum’s flexible generation portfolio, as well as currency fluctuations. Excluding the potential effects from changes in the power generation mix (currently approximately 45 TWh), a EUR 1 per MWh change in the Generation segment’s achieved Nordic power price will result in an approximately EUR 45 million change in the segment’s annual comparable operating profit. The achieved power price also includes the results of optimisation of Fortum’s hydro and nuclear generation, as well as operations in the physical and financial commodity markets.
In the Russia segment, the financial effect of the CSAs is expected to be negative in 2022 compared to 2021, due to the impact of the expiry of the CSA period of the Nyagan 1 generation unit, partly offset by a higher bond yield.
In 2022, the comparable effective income tax rate (excluding items affecting comparability) for Fortum’s continuing operations is estimated to be in the range of 21−23%. In 2023, the comparable effective income tax rate (excluding items affecting comparability) for Fortum is estimated to be in the range of 20−23%. Following the deconsolidation of Uniper, the weight of the profit in different jurisdictions has resulted in a downward trend in the lower end of the range of the tax rate guidance currently driven by the standard nominal tax rates in Fortum’s major operating countries.