Stock exchange release

Interim Report Q1 2012: Overall good operative results

26 April 2012, 09:00 EEST


January - March 2012

  • Comparable operating profit was EUR 651 (649) million, 0%
  • Operating profit was EUR 736 (900) million, of which EUR

-16 (173) million relates to the IFRS accounting treatment of derivatives.

  • Earnings per share was EUR 0.56 (0.76),-26%, of which -0.01 (0.14) EUR

       per share relates to the IFRS accounting treatment of derivatives

  • Cash flow from operating activities was strong and reached EUR 553 (454) million, +22%
  • Nordic system spot price was clearly lower than last year, EUR 38.2 (66.2)

Key figures I/12 I/11 2011 LTM*
Sales, EUR million 1,901 2,034 6,161 6,028
Operating profit, EUR million 736 900 2,402 2,238
Comparable operating profit, EUR million 651 649 1,802 1,804
Profit before taxes, EUR million 653 904 2,228 1,977
Earnings per share, EUR 0.56 0.76 1.99 1.79
Net cash from operating activities, EUR million 553 454 1,613 1,712
Shareholders’ equity per share, EUR 11.65 9.30 10.84 N/A
Interest-bearing net debt
(at end of period), EUR million
6,523 6,367 7,023 N/A
Average number of shares, 1,000s 888,367 888,367 888,367 888,367

*) Last twelve months


Key financial ratios 2011 LTM
Return on capital employed, % 14.8 12.8
Return on shareholders’ equity, % 19.7 16.7
Net debt/EBITDA 2.3 2.3
Comparable net debt/EBITDA 3.0 2.7



  • 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 rest of the calendar year 2012, 70% hedged at EUR 48 per MWh and for the 2013 calendar year, 45% hedged at EUR 46 per MWh.

Fortum’s President and CEO Tapio Kuula:

“Fortum performed well in the first quarter of 2012, despite the continuously demanding business environment. Nordic spot prices were clearly lower than last year. The Nordic water reservoir levels continued to increase and were above the long-term average throughout the first quarter. The strong hydro situation combined with warmer weather and pressed carbon dioxide (CO2) emission allowance prices, among other things, pushed Nordic electricity prices to below last year’s prices and below the continental prices. Electricity demand decreased in the Nordic countries, but increased slightly in Russia compared to the same period in 2011. Characteristic for Fortum’s business is its seasonality and we expect 2012 to be no different. The seasonal differences are driven by hydro levels, power prices, and the normal seasonality of the heat businesses.

In the first quarter 2012 the company’s comparable operating profit was on last year’s level, and both the balance sheet as well as liquidity remained strong.

The Power Division’s first-quarter comparable operating profit was somewhat higher than in the corresponding period in 2011. The system and all area prices were clearly lower, but a higher hedge price kept the achieved power price close to last year’s level. In addition, higher reservoir levels in the beginning of the year, compared to the corresponding period in 2011, increased hydro generation significantly. The Heat Division’s comparable operating profit decreased somewhat mainly due to lower volumes related to divestments in Sweden, Finland and Estonia. The comparable operating profit development in Russia was good, although electricity prices were clearly lower than a year ago. The Distribution business area's comparable operating profit decreased slightly. The decrease was mainly due to the warm weather, especially in March. Electricity Sales' comparable operating profit in the first quarter of 2012 was at last year’s level.

A strong business foundation is essential in a changing business environment. Fortum is committed to continuously improving its operational performance.”

Financial results

January - March

In the first quarter of 2012, Group sales were EUR 1,901 (2,034) million. Group operating profit totalled EUR 736 (900) million. Fortum's operating profit for the period was affected by a EUR -16 (173) 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 651 (649) million.

Non-recurring items, mark-to-market effects and nuclear fund adjustments amounted to EUR 85 (251) million, of which EUR -16 (173) million was attributed to changes in fair values of derivatives to hedge future cash flow. Non-recurring items totalled EUR 110 (82) million, which mainly relates to the divestment of shares in power and heat operations (Note 4).

Sales by division

EUR million I/12 I/11 2011 LTM
Power 655 693 2,481 2,443
Heat 625 725 1,737 1,637
Russia 310 295 920 935
Distribution* 308 311 973 970
Electricity Sales* 247 373 900 774
Other 44 30 108 122
Netting of Nord Pool transactions -188 -366 -749 -571
Eliminations -100 -27 -209 -282
Total 1,901 2,034 6,161 6,028

* Part of the Electricity Solutions and Distribution Division

Comparable operating profit by division

EUR million I/12 I/11 2011 LTM
Power 341 325 1,201 1,217
Heat 161 171 278 268
Russia 48 34 74 88
Distribution* 110 124 295 281
Electricity Sales* 9 11 27 25
Other -18 -16 -73 -75
Total 651 649 1,802 1,804

* Part of the Electricity Solutions and Distribution Division

Operating profit by division

EUR million I/12 I/11 2011 LTM
Power 367 489 1,476 1,354
Heat 213 265 380 328
Russia 48 34 74 88
Distribution* 117 125 478 470
Electricity Sales* 11 -20 3 34
Other -20 7 -9 -36
Total 736 900 2,402 2,238

* Part of the Electricity Solutions and Distribution Division

The share of profits of associates and joint ventures was EUR -7 (59) million. The Russian territorial generating company 1 (TGC-1) and Hafslund ASA contributed to the positive figure in the first quarter of 2011. TGC-1 is not included in the first-quarter results as TGC-1 has not published its 2011 IFRS Financial Statements.

The Group’s net financial expenses increased to EUR 76 (55) million. The increase is attributable to higher interest expenses, mainly due to higher SEK interest rates and to higher average net debt. Net financial expenses were negatively affected by changes in the fair value of financial instruments of EUR 7 (1) million.

Profit before taxes was EUR 653 (904) million.

Taxes for the period totalled EUR 119 (158) million. The tax rate according to the income statement was 18.3% (17.5). The tax rate excluding the impact of share of profits of associated companies and joint ventures as well as non-taxable capital gains was 21.0% (20.8). In Finland, the corporate tax rate was decreased to 24.5% from 26%, effective 1 January 2012.

The profit for the period was EUR 534 (746) million. Fortum's earnings per share were EUR 0.56 (0.76). The effect on earnings per share by the accounting treatment of derivatives was EUR -0.01 (0.14).

Non-controlling (minority) interests amounted to EUR 39 (68) million. These are mainly attributable to Fortum Värme Holding AB, in which the city of Stockholm has a 50% economic interest. The decrease compared to last year is mainly due to the minority's share, EUR 32 million, of the gain recognised in the first quarter 2011 from the divestment of Fortum Värme’s heat businesses outside the Stockholm area.

Financial position and cash flow

Cash flow

In the first quarter of 2012, total net cash from operating activities increased by 22% to EUR 553 (454) million. The major part of the increase was attributable to lower foreign exchange losses in cash flow, EUR 170 million, and the lower taxes paid, EUR 36 million, which was offset by the EUR -113 million increase in working capital. The foreign exchange gains and losses relate to the rollover of foreign exchange contracts hedging loans to Fortum’s Swedish subsidiaries. Capital expenditures in cash flow increased by EUR 66 million to EUR 272 (206) million. Acquisitions of shares totalled EUR 0 (19) million. Proceeds from divestments totalled EUR 276 (207) million in cash flow. Cash flow before financing activities, i.e. dividend distributions and financing, increased by EUR 97 million to EUR 536 (439) million.

After the reporting period, dividends amounting to EUR 888 million were paid on 23 April 2012 using the cash and cash equivalents Fortum had on 31 March and amounting to EUR 1 574 million.  

Assets and capital employed

Total assets increased by EUR 1,121 million to EUR 24,119 (22,998 at year-end 2011) million. Non-current assets increased by EUR 392 million from EUR 20,210 million to EUR 20,602 million. The majority, EUR 307 million, came from the increased value of property, plant and equipment, mainly due to the strengthening Russian rouble and other currencies. The increase in current assets was EUR 729 million, totalling EUR 3,517 million. The major part of the increase relates to the higher amount of cash and cash equivalents, EUR 843 million, offset by the EUR 183 million decrease in assets held for sale. The higher amount of cash was reserved for dividend payment amounting to EUR 888 million of 23 April 2012.

Capital employed was EUR 19,016 (17,931 at year-end 2011) million, an increase of EUR 1,085 million. The increase was due to the higher amount of total assets, totalling EUR 1,121 million and the minor decrease in interest-free liabilities totalling EUR 36 million. (These interim financial statements do not reflect the dividend paid in April).


Total equity was EUR 10,919 (10,161 at year-end 2011) million, of which equity attributable to owners of the parent company totalled EUR 10,346 (9,632 at year-end 2011) million and non-controlling interests EUR 573 (529 at year-end 2011) million. The increase in equity attributable to owners of the parent company totalled EUR 714 million and arose mainly from net profit for the period, amounting to EUR 495 million and from the translation differences mainly relating to Russian rouble totalling EUR 207 million.


Net debt decreased during the first quarter of 2012 by EUR 500 million to EUR 6,523 (7,023 at year-end 2011) million.

At the end of March 2012, the Group’s liquid funds totalled EUR 1,574 (747 at year-end 2011) million. Liquid funds include cash and bank deposits held by OAO Fortum amounting to EUR 249 (211 at year-end 2011) million. In addition to the liquid funds, Fortum had access to approximately EUR 2.7 billion of undrawn committed credit facilities.

The Group's net financial expenses in the first quarter of 2012 were EUR 76 (55) million. The increase in financial expenses is mainly attributable to higher market interest rates and higher average net debt during the quarter. Net financial expenses also include changes in the fair value of financial instruments of EUR -7 (-1) million.

Fortum Corporation's long-term credit rating from S&P and from Moody’s remained unchanged, A (negative) and A2 (stable), respectively.

Key figures

For the last twelve months net debt to EBITDA was 2.3 (2.3 at year-end 2011) and comparable net debt to EBITDA 2.7 (3.0 at year-end 2011). Gearing was 60% (69% at year-end 2011) and the equity-to-assets ratio 45% (44% at year-end 2011). For the last twelve months, return on capital employed was 12.8% (14.8% at year-end 2011) and return on equity 16.7% (19.7% at year-end 2011). Equity per share was EUR 11.65 (10.84 at year-end 2011).


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 continued global economic uncertainty and Europe's sovereign-debt crisis weaken the outlook for economic growth in the mid-term, especially in the Euro zone. The overall economic uncertainty impacts the commodity and CO2 emission allowance prices and in combination with the stronger hydrological situation in the Nordic region could maintain downward pressure on the Nordic wholesale price for electricity in the short term. In the Russian business, the key factors are the development of the regulation around electricity and capacity markets and operational risks related to the investment projects according to the investment programme. In all regions, fuel prices and power plant availability also impacts the profitability. In addition, 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 rate 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.

The price of crude oil increased throughout the first quarter of 2012, whereas the coal price continued to weaken. After declining since summer of 2011, the price of CO2 emissions allowance (EUA) abated, and the price fluctuated between EUR 6.6 - 9.5 per tonne. The electricity forward prices for the upcoming twelve months declined both in the Nordic countries and in Germany during the quarter, mainly with a lower expected spot price for the summer.

In late April 2012, the electricity forward price in Nord Pool for the rest of 2012 was around EUR 34 per MWh. The electricity forward price for 2013 was around EUR 40 per MWh and for 2014 around EUR 41 per MWh. In Germany, the electricity forward price for the rest of the year was around EUR 47 per MWh and EUR 51 per MWh for 2013. At the same time, the future quotations for coal (ICE Rotterdam) for the rest of 2012 were around USD 102 per tonne and the market price for CO2 emissions allowances (EUA) for 2012 was about EUR 7 per tonne.

In late April 2012, Nordic water reservoirs were about 15 TWh above the long-term average and 29 TWh above the corresponding level of 2011.


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 by increasing depreciation and finance costs.

European-wide safety evaluations have been carried out post Fukushima. As part of the evaluations, so-called peer reviews were carried out in March 2012 in several European nuclear power plants, including the Loviisa nuclear power plant. The European Commission will submit a consolidated report of the national reports to the European Council in June 2012. Fortum believes that some additional safety criteria could be introduced for nuclear power plants based on the evaluations and that they could be implemented for the Loviisa nuclear power plant within the framework of the annual investment programmes.

According to the legislation in Sweden, nuclear waste fees and guarantees are updated at regular intervals. At the end of December 2011, the Government decided upon fees and guarantees for 2012-2014. The negative impact on Fortum’s comparable operating profit is estimated to be approximately EUR 15 million per year in 2012-2014.

Nuclear fuel costs in all Fortum nuclear power plants are expected to increase in total by approximately EUR 15 million in 2012 due to the increased market price of uranium and enrichment.


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”). 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.

OAO Fortum's new capacity will be a key driver for earnings growth in Russia as it will bring income from new volumes sold and also receive considerably higher capacity payments than the old capacity. However, the received capacity payment will differ depending on age, the location, size and type of the plants as well as seasonality and availability. Especially the old capacity payments for CHP power plants are burdened during the summer period due to the temperature constraints evolving from lower heat demand.

Fortum is planning to commission the last new units by the end of 2014 of its EUR 2.5 billion investment programme. The value of the remaining part of the investment programme, calculated at exchange rates prevailing at the end of March 2012, is estimated to be approximately EUR 0.9 billion as of April 2012.  

The return for the new capacity is guaranteed as regulated in the Capacity Supply Agreement. The regulator reviews the earnings from the electricity-only market after three years and six years and could revise the CSA payments accordingly.  CSA payments can vary annually somewhat because they are linked to Russian Government long-term bonds with 8 to 10 years maturity.

Fortum currently estimates the commissioning of the new units Nyagan 1 and Nyagan 2 to be postponed by some months due to a construction delay. Fortum has made a provision (per unit) for penalties caused by possible commissioning delays, already in 2008. According to the agreement with the contractor, Fortum is entitled to adequate remedies in case of damages due to delays caused by the contractor.

After completing the ongoing investment programme in 2015, Fortum’s goal is to achieve an operating profit level of about EUR 500 million in its Russia Division and to create positive economic added value in Russia.

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 1 January 2012.

In March 2012, the Finnish Government announced that a so-called windfall tax will be introduced in 2014.

The process to update the real-estate taxation values for the year 2013 is ongoing in Sweden. The update is done in a cycle of six years.


At the end of March 2012, approximately 70% of the Power Division's estimated Nordic power sales volume was hedged at approximately EUR 48 per MWh for the rest of the calendar year 2012. The corresponding figures for the calendar year 2013 were about 45% 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.

Dividend Payment

The Annual General Meeting decided to pay a dividend of EUR 1.00 per share for 2011. The record date for the dividend payment was 16 April 2012 and the dividend payment date was 23 April 2012.

Espoo, 25 April 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, Rauno Tiihonen, +358 10 453 6150 and Janna Haahtela, +358 10 453 2538 / investors [at] fortum [dot] com

The condensed interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, as adopted by the EU. The interim financials have not been audited.

Publication of financial results in 2012:

  • 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