Stock exchange release

Overall good year in a challenging environment

01 February 2012, 9:00 EET


Key figures IV/11 IV/10 2011 2010
Sales, EUR million 1,667 1,902 6,161 6,296
Operating profit, EUR million 579 321 2,402 1,708
Comparable operating profit, EUR million 508 541 1,802 1,833
Profit before taxes, EUR million 532 285 2,228 1,615
Earnings per share, EUR 0.47 0.26 1.99 1.46
Net cash from operating activities, EUR million 472 221 1,613 1,437
Shareholders’ equity per share, EUR     10.84 9.24
Interest-bearing net debt
(at end of period), EUR million
    7,023 6,826
Average number of shares, 1,000s     888,367 888,367


Key financial ratios 2011 2010
Return on capital employed, % 14.8 11.6
Return on shareholders’ equity, % 19.7 15.7
Net debt/EBITDA 2.3 3.0
Comparable net debt/EBITDA 3.0 2.8


- Fortum currently expects that the annual electricity demand growth in the Nordic countries will be about 0.5% in the coming years.
- Power Division's Nordic generation hedges: For the calendar year 2012, 65% at EUR 48 per MWh. The corresponding figures for the 2013 calendar year are 40% at EUR 46 per MWh.

Fortum’s President and CEO Tapio Kuula

Year 2011 was exceptional in many respects. The earthquake followed by a tsunami in Japan, the ongoing financial crisis in Europe and the unstable situation in the Middle East, all have had implications to the energy sector, which is becoming more and more exposed to global phenomena.

The underlying fundamentals for energy demand and the strengthening role of electricity have not changed - the mitigation of climate change is and will stay as one of the biggest global challenges. Fortum therefore highlights the role of CO2-free electricity in moving towards a Solar Economy. The company also strives for balanced management of economic, social and environmental responsibility. In the area of economic responsibility, the aim is to create long-term economic value, enable sustainable profitable growth, generate added value for shareholders and customers, while at the same time ensuring a safe working environment for all employees and contractors at Fortum sites.

During the fourth quarter, electricity demand decreased in the Nordic countries, but increased somewhat in Russia compared to the same period in 2010. Overall, operating profit and cash flow were good.

The storm on 26 December, the strongest in 30 years in Finland, and the smaller storm on the following day caused major damage to Fortum's electricity distribution grid mainly in southern, western and south-western Finland. We regret that, at the worst point, more than 190,000 Fortum customers in Finland were simultaneously without electricity. In addition to Finland, the storms caused some power outages and damage also in Sweden. A key priority as a part of customer service for the Distribution business area is to increase security of supply  in extreme weather conditions, especially by underground cabling the electricity grid as well as maintaining the existing grid.

During 2011, Fortum succeeded in achieving operational enhancements and the company continued with investments in order to support its long-term goals. Some highlights of the year in the different divisions were the following.

In the Power Division, preparation for the tender process for hydropower concessions in France started. We continued to invest in the development of wave and solar power. In addition, focus was on safety and nuclear-related R&D projects.  Post Fukushima, the Finnish nuclear safety authority (STUK) carried out an additional evaluation of nuclear power plant safety in cases of power loss, exceptional weather and environmental conditions. The safety assessments made in Finland showed that Loviisa and Olkiluoto nuclear power plants are safe and, in particular, Loviisa’s safety margin is sufficient. The Swedish nuclear safety authority (SSM) carried out corresponding safety evaluations in Sweden. The outcome of the evaluations in Sweden was in line with the assessments made in Finland.

The Heat Division inaugurated a new biomass-fired CHP (combined heat and power) plant in Pärnu in Estonia. Several new CHP plants are under construction in the Baltic region, Finland and Sweden, e.g. Klaipeda, Jelgava, Järvenpää, Brista 2. In addition, two companies were acquired in Poland and new pricing solutions to customers were launched in Finland and Sweden. Fortum also finalised the divestment of its district heat operations and heat production facilities outside the Stockholm area in Sweden.

In the Russia Division, where new capacity will be the key driver for positive economic added value, the ongoing investment programme continued to proceed well. A new unit at Chelyabinsk, as well as two new units in Tyumen and Tobolsk, were commissioned. Construction of the Nyagan power plant continued, and the Ring project to increase energy efficiency in Chelyabinsk, was started.

In the Electricity Solutions and Distribution Division, the rollout of smart metering to the network customers in Finland started, and in Sweden Fortum’s grids were opened to enable customers to sell their own produced electricity.

I feel confident that Fortum is well prepared going into 2012, and I would like to thank all employees for their efforts and commitment during 2011.

Financial results

October - December

In October – December, Group sales were EUR 1,667 (1,902) million. Group operating profit totalled EUR 579 (321) million. Fortum's operating profit for the fourth quarter of 2011 was affected by a EUR 72 (-221) million IFRS accounting treatment (IAS 39) of derivatives mainly used for hedging Fortum's power production. The comparable operating profit, which was not impacted by the accounting treatment, totalled EUR 508 (541) million.

Non-recurring items, mark-to-market effects and nuclear fund adjustments in the fourth quarter of 2011 amounted to EUR 71 (-220) million.

The share of profits from associates in the fourth quarter was EUR 19 (21) million. The share of profits from Hafslund and TGC-1 are based on the companies’ published third-quarter interim reports. (Note 14)

Sales by division

EUR million IV/11 IV/10 2011 2010
Power 654 752 2,481 2,702
Heat 478 598 1,737 1,770
Russia 274 254 920 804
Distribution* 244 287 973 963
Electricity Sales* 205 529 900 1,798
Other 32 7 108 51
Netting of Nord Pool transactions -134 -528 -749 -1,736
Eliminations -86 3 -209 -56
Total 1,667 1,902 6,161 6,296

* Part of the Electricity Solutions and Distribution Division

EUR million IV/11 IV/10 2011 2010
Power 351 336 1,201 1,298
Heat 96 122 278 275
Russia 35 17 74 8
Distribution* 49 91 295 307
Electricity Sales* 2 3 27 11
Other -25 -28 -73 -66
Total 508 541 1,802 1,833

* Part of the Electricity Solutions and Distribution Division

Operating profit by division

EUR million IV/11 IV/10 2011 2010
Power 443 129 1,476 1,132
Heat 100 124 380 303
Russia 35 16 74 53
Distribution* 41 93 478 321
Electricity Sales* -6 40 3 46
Other -34 -81 -9 -147
Total 579 321 2,402 1,708

* Part of the Electricity Solutions and Distribution Division

January - December
In 2011, Group sales were EUR 6,161 (6,296) million. Group operating profit totalled EUR 2,402 (1,708) million. Fortum's operating profit for the period was affected by a EUR 344 (-216) million IFRS accounting treatment (IAS 39) of derivatives mainly used for hedging Fortum's power production. The comparable operating profit, which was not impacted by the accounting treatment, totalled EUR 1,802 (1,833) million.

Non-recurring items, mark-to-market effects and nuclear fund adjustments amounted to EUR 600 (-125) million in 2011. Changes in fair values of derivatives hedging future cash flow accounted for EUR 344 (-216) million. Non-recurring items totalled EUR 284 (93) million, which mainly relates to the divestment of shares in Fingrid Oyj and the divestment of district heat operations and production facilities outside Stockholm. (Note 4)

The average Swedish krona (SEK) rate was approximately 6% stronger against the euro than in 2010. The strong SEK during the first half of the year also had a negative impact on the cash flow.

The share of profits of associates and joint ventures was EUR 91 (62) million. The improvement from last year was mainly due to the improvement in the contribution from TGC-1 and Hafslund ASA.

The Group’s net financial expenses increased to EUR 265 (155) million. The increase is attributable to higher interest expenses, mainly due to higher SEK interest rates and to higher average net debt in 2011 than in 2010. Net financial expenses were positively affected by changes in the fair value of financial instruments of 5 (12) million.

Profit before taxes was EUR 2,228 (1,615) million.

Taxes for 2011 totalled EUR 366 (261) million. The tax rate according to the income statement was 16.4% (16.2%). The tax rate excluding the tax rate change in Finland, the impact of share of profits of associated companies and joint ventures as well as non-taxable capital gains was 21.4% (2010: 17.7%). In Finland, the corporate tax rate was decreased to 24.5% from 26% starting 1 January 2012. In 2011, the one-time positive effect from the tax rate change is approximately EUR 29 million due to deferred taxes.

The profit for the period was EUR 1,862 (1,354) million. Fortum's earnings per share were EUR 1.99 (1.46). The effect on earnings per share by the accounting treatment of derivatives was EUR 0.29 (-0.18).  

Non-controlling (minority) interests amounted to EUR 93 (54) million. These are mainly attributable to Fortum Värme Holding AB, in which the city of Stockholm has a 50% economic interest. The increase in 2011, compared to 2010, is mainly due to the minority's share, EUR 32 million, of the gain recognised in the first quarter from the divestment of Fortum Värme’s heat businesses outside the Stockholm area.

Cash flow from operating activities totalled EUR 1,613 (1,437) million. It was affected by the realised foreign exchange gains and losses, which amounted to EUR -239 (-535) million in 2011. The negative currency impact occurred during the first quarter. The foreign exchange gains and losses relate to the rollover of foreign exchange contracts hedging loans to Fortum’s Swedish subsidiaries.

Fortum’s key financial ratios for 2011 were: return on capital employed 14.8% (11.6% at the end of 2010), return on shareholders' equity 19.7% (15.7% at the end of 2010) and net debt to EBITDA 2.3 (3.0 at the end of 2010). The comparable net debt to EBITDA for 2011 was 3.0.


Key drivers and risks

Fortum's financial results are exposed to a number of strategic, financial and operational risks. The key factor influencing Fortum's business performance is the wholesale price of electricity in the Nordic region. The key drivers behind the wholesale price development in the Nordic region are the supply-demand balance, fuel and CO2-emissions allowance prices as well as the hydrological situation.

The global economic uncertainty and Europe's sovereign-debt crisis weaken the outlook for economic growth and recovery, especially in the Euro zone. This, in combination with a stronger hydrological situation in the Nordic region, could put downward pressure on the Nordic wholesale price for electricity in the short to medium term. In the Russian business, the key factors are the regulation around electricity and capacity markets and operational risks related to the investment programme. Increased volatility in exchange rates due to financial turbulence might have both translation and transaction effects on Fortum's financials especially through the SEK and RUB.

Nordic market

Despite macroeconomic uncertainty, electricity will continue to gain a higher share of the total energy consumption. Fortum currently expects the average annual growth in electricity consumption to be about 0.5%, while the growth rate for the nearest years will largely be determined by the macroeconomic development in Europe and especially in the Nordic countries.

Whereas the price of oil increased during the fourth quarter, coal and gas prices decreased. The CO2 emissions allowance (EUA) prices continued to decline due to the prolonged financial and economic uncertainty in Europe as well as the uncertainty of future carbon reduction policies. Electricity forward prices decreased both in the Nordic countries and in Germany due to lower fuel and EUA prices. The Nordic prices declined also as a result of rising water reservoir levels in Scandinavia.

In late-January 2012, the electricity forward price in Nord Pool for the rest of 2012 was around EUR 40 per MWh. The electricity forward price for 2013 was around EUR 42 per MWh and for 2014 around EUR 42 per MWh. In Germany, the electricity forward price for the rest of the year was around EUR 49 per MWh and EUR 53 per MWh for 2013. At the same time, the future quotations for coal (ICE Rotterdam) for the rest of 2012 were around USD 111 per tonne and the market price for CO2-emissions allowances (EUA) for 2012 was about EUR 8 per tonne.

In late-January 2012, Nordic water reservoirs were about 12 TWh above the long-term average and 40 TWh above the corresponding level of 2011.


The Russian wholesale power market was liberalised from the beginning of 2011. All generating companies continue to sell a part of their electricity and capacity equalling the consumption of households and a special group of consumers (Northern Caucasus Republic, Tyva Republic, Buryat Republic) under regulated prices.

The new rules for the capacity market starting from 2011 have been approved by the Russian Government. The generation capacity built after 2007 under government capacity supply agreements (CSA – “new capacity”) receive guaranteed payments for a period of 10 years. Prices for capacity under CSA are defined in order to ensure a sufficient return on investments. Capacity not under CSA competes in competitive capacity selection (CCS – “old capacity”).

In December 2010, the first CCS for the year 2011 was held in accordance with the new rules of the capacity market. The new rules stipulate that capacity payments under CCS are made according to actual capacity instead of the previously used installed capacity. This decreased the old capacity payments for CHP power plants, especially during the summer period due to the temperature constraints. The capacity selection for 2012 was held in September 2011. The majority of Fortum’s power plants were selected in the auction, with a price level close to the level received in 2011.

Approximately 4% (120 MW) of the old capacity was not allowed to participate in the selection due to tightened minimal technical requirements. It will, however, receive capacity payments at the capacity market price for two additional years.

Upon completion, OAO Fortum's new capacity will be a key driver for solid earnings growth in Russia as it will bring income from new volumes sold and receive considerably higher capacity payments than the old capacity. However, the payment differs, depending on age, the location, size and type of the plants as well as seasonality and availability. The return for the new capacity is guaranteed, but could vary somewhat because it is linked to Russian Government long-term bonds with 8 to 10 years maturity. After completing the ongoing investment programme, Fortum targets a positive economic value added for the Russia Division.

In light of the improved demand and the development of the Russian capacity market, Fortum has accelerated the schedule of OAO Fortum's committed investment programme and is planning to commission the last new units by the end of 2014. The value of the remaining part of the investment programme, calculated at exchange rates prevailing at the end of December 2011, is estimated to be approximately EUR 0.9 billion as of January 2012. In 2012, the new units Nyagan 1 and Nyagan 2 will be commissioned.  

The Russian Government decided that gas prices will increase beginning 1 July 2012; the increase is expected to be 15%. On the other hand, prices for regulated electricity sales, heat sales and CCS capacity income will be indexed at rates lower than in 2011.

Capital expenditure and divestments

Fortum currently expects its capital expenditure in 2012 to be around EUR 1.6-1.8 billion and in 2013-2014 around EUR 1.1 -1.4 billion, excluding potential acquisitions. The main reason for the high capital expenditures in 2012 is the acceleration of Fortum's Russian investment programme. The annual maintenance capital expenditure is estimated to be about EUR 500-550 million in 2012, approximately at the level of depreciation.


The effective corporate tax rate for Fortum in 2012 is estimated to be 19-21%, excluding the impact of the share of profits of associated companies and joint ventures, non-taxable capital gains and non-recurring items. In Finland, the corporate tax rate was decreased to 24.5% from 26% starting January 1, 2012.


At the end of December 2011, approximately 65% of the Power Division's estimated Nordic power sales volume was hedged at approximately EUR 48 per MWh for the 2012 calendar year. The corresponding figures for the 2013 calendar year are about 40% at approximately EUR 46 per MWh.

The hedge price for Fortum Power Division's Nordic generation excludes hedging of condensing power margin. In addition, the hedge ratio excludes the financial hedges and physical volume of Fortum's coal-condensing generation as well as the division’s imports from Russia.

The reported hedge ratios may vary significantly, depending on Fortum's actions on the electricity derivatives markets. Hedges are mainly financial contracts, most of them Nord Pool forwards.


The Power Division's Nordic power price typically depends on e.g. the hedge ratio, hedge price, spot prices, availability and utilisation of Fortum's flexible production portfolio, and currency fluctuations. Excluding the potential effects from the changes in the power generation mix, a 1 EUR/MWh change in the Power Division’s Nordic power sales price will result in an approximately EUR 45 million change in Fortum's annual comparable operating profit. In addition, the comparable operating profit of the Power Division will be affected by the possible thermal power generation amount and its profit.

The ongoing Swedish nuclear investment programmes over several years will enhance safety, improve availability and increase the capacity of the current nuclear fleet. The implementation of the investment programmes might affect availability. Fortum’s power procurement costs from co-owned nuclear companies are affected by these investment programmes; however, the level of operating costs is expected to stabilise during the implementation period.

Fortum believes that additional safety criteria may be introduced for new and existing nuclear power plants. In Finland, the budget proposal for 2012 does not include windfall or uranium taxes - the implementation of which the Government proposed to investigate in its programme published in June 2011.

According to the legislation in Sweden, nuclear waste fees and guarantees are updated at regular intervals. At the end of December the Government decided upon fees and guarantees for the coming period of 2012-2014. The impact on Fortum’s comparable operating profit is estimated to be approximately EUR -15 million per year in 2012-2014.

Dividend distribution proposal

The parent company's distributable equity as of 31 December 2011 amounted to EUR 4,620,804,659.85. Since the end of the financial period, there have been no material changes in the financial position of the Company.

The Board of Directors proposes to the Annual General Meeting that Fortum Corporation pay a cash dividend of EUR 1.00 per share for 2011, totalling EUR 888 million based on the number of registered shares as of 31 January 2012. The dividend is proposed to be paid on 23 April 2012.

Espoo, 31 January 2012
Fortum Corporation
Board of Directors

Further information:
Tapio Kuula, President and CEO, tel. +358 10 452 4112
Juha Laaksonen, CFO, tel. +358 10 452 4519

Fortum’s Investor Relations, Sophie Jolly, +358 10 453 2552, and Rauno Tiihonen, +358 10 453 6150 / investors [at] fortum [dot] com

The Board of Directors has approved Fortum's 2011 financial statements and Fortum's auditors have issued their unqualified audit report for 2011 on 31 January 2012. The condensed interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, as adopted by the EU.

Fortum's Annual General Meeting will take place on 11 April 2012 and the possible dividend-related dates planned for 2012 are:
- Ex-dividend date 12 April 2012,
- Record date for dividend payment 16 April 2012 and
- Dividend payment date 23 April 2012.

Fortum’s Financial statements and Operating and financial review for 2011 will be published during week 12 at the latest.

Publication of financial results in 2012:                
- Interim Report January – March on 26 April 2012 at approximately 9:00 EEST
- Interim Report January – June on 19 July 2012 at approximately 9:00 EEST
- Interim Report January – September on 19 October 2012 at approximately 9:00 EEST

Key media

More information, including detailed quarterly information, is available on Fortum’s website at