Stock exchange release

Fortum's Financial Statements Bulletin 2017: Strong results and efficient strategy implementation - Proposed dividend unchanged at EUR 1.10

02 February 2018, 9:00 EET



October-December 2017

  • Comparable EBITDA was EUR 424 (298) million, +42%
  • Comparable operating profit was EUR 295 (188) million, +57%
  • Operating profit was EUR 315 (202) million
  • Earnings per share was EUR 0.28 (0.16), of which EUR 0.01 (0.01) related to items affecting comparability
  • Cash flow from operating activities totalled EUR 295 (150) million

January-December 2017

  • Comparable EBITDA was EUR 1,275 (1,015) million, +26%
  • Comparable operating profit was EUR 811 (644) million, +26%
  • Operating profit was EUR 1,158 (633) million
  • Earnings per share was EUR 0.98 (0.56), of which EUR -0.14 related to a Swedish income tax case and EUR 0.38 (-0.02) related to items affecting comparability, including sales gains of approximately EUR 0.36 related to the Hafslund transaction
  • Cash flow from operating activities totalled EUR 993 (621) million
  • City Solutions division divided into City Solutions and Consumer Solutions to support strategy implementation
  • Operating profit target level (EBIT) of RUB 18.2 billion for the Russia segment was reached in the first quarter of 2017
  • Fortum and City of Oslo concluded the Hafslund ownership restructuring
  • Fortum signed the transaction agreement with E.ON regarding its 46.65% ownership in Uniper. Totally 46.93% of the shares received during the initial acceptance period
  • Fortum's Board of Directors proposes a dividend of EUR 1.10 per share (1.10)

Summary of outlook

  • Fortum expects the annual electricity demand in the Nordic countries to continue to grow by approximately 0.5% on average
  • Generation segment's Nordic generation hedges: approximately 70% hedged at EUR 28 per MWh for 2018 and approximately 40% at EUR 25 per MWh for 2019 

Key financial ratios

  2017 2016
Return on capital employed, % 7.1 4.0
Comparable net debt/EBITDA 0.8 0.0

Key figures 

EUR million or as   indicated IV/17 IV/16 2017 2016
Sales 1,432 1,143 4,520 3,632
Comparable EBITDA 424 298 1,275 1,015
Comparable operating profit 295 188 811 644
Operating profit 315 202 1,158 633
Share of profits of associates   and  joint ventures 34 15 148 131
Profit before income taxes 300 184 1,111 595
Earnings per share, EUR 0.28 0.16 0.98 0.56
Net cash from operating   activities 295 150 993 621
Shareholders’ equity per share,   EUR     14.69 15.15
Interest-bearing net debt (at   end of period)     988 -48

Fortum's President and CEO Pekka Lundmark:

“We are satisfied with the progress of our strategy implementation during the year. Following the earlier Ekokem and Hafslund transactions, we announced the bid for Uniper towards the end of 2017. By investing in Uniper, Fortum continues the capital redeployment to enable a more efficient use of our balance sheet. The offer period commenced in November. At the end of the initial acceptance period in mid-January 2018, 46.93% of Uniper's shares had been tendered to our offer, including E.ON's 46.65% shareholding. Uniper shareholders who have not yet accepted our offer still have a chance to do so within the additional acceptance period.

Uniper's and Fortum's businesses complement each other well. Together Fortum and Uniper have a good strategic mix of assets – both clean and secure – as well as the expertise required to successfully and affordably drive Europe’s transition towards a low-carbon energy system. We aim to take an active role in driving European energy transition. We see plenty of opportunities for co-operation with Uniper to add value for all stakeholders, and we have entered into talks with Uniper to formalise the relationship between our companies after the transaction is finalised. We truly see our investment as a win-win for all involved.

The Hafslund restructuring was concluded in the fourth quarter and the new business structure is now in place. Together with our new colleagues from Hafslund, we have updated the strategies for both our Consumer Solutions and City Solutions divisions. We have now set the path forward and will be working together on implementing the strategy. We target annual synergies of EUR 15-20 million by the end of 2020.

In line with our strategy, we are not only focusing on taking part in the European power sector consolidation, we are also investing in new renewable generation and targeting a gigawatt-scale portfolio of wind and solar power. Last month we commissioned Russia's first industrial wind power site with a capacity of 35 MW. In addition, we have recently started the implementation of other wind power plants in the Nordics and in Russia, invested in solar power in Russia, and commissioned our largest solar power plant in India.

Our performance improvement in the fourth quarter was broad-based, with comparable operating profit increasing in all operative segments. The Generation, City Solutions and Russia segments continued to perform well, while the Consumer Solutions segment continues to be under pressure due to the tight competitive situation. The acquisitions of Ekokem and Hafslund are already impacting our results positively, further strengthened by our continued Fortum-wide focus on efficiency. We have now reached the targeted EUR 100 million savings in fixed costs announced in 2016. The cost savings have enabled us to invest in new ventures for the future. Going forward we will continue to focus on cost efficiency and investment prioritisation.

Sustainability and safety continue to be very important for us at Fortum. 2017 was a challenging year in terms of occupational safety. We did not reach our targets for lost workday injury frequency, especially for contractors. This was a clear disappointment, even though we succeeded in reducing the number of severe accidents to only one. We continue to be committed to keeping our promise to provide a safe workplace for all. In 2017, our CO2 emissions decreased slightly. Our specific emissions remained at the same level as the previous year and continue to be at a low level compared to other European power producers.

As the strategy implementation and capital redeployment continues, our dividend payment capability will be further strengthened. Fortum's Board of Directors is proposing an unchanged dividend of EUR 1.10 per share for the calendar year 2017. Our ambition is to pay a stable, sustainable and over time increasing dividend now and in the future, and given the prevailing market conditions, our goal is to avoid a temporary dividend cut.

I would like to thank all our employees for the excellent work and true commitment during the year and our customers and all other stakeholders for the continued trust in us.“

Uniper investment 

In September 2017, Fortum announced it had signed a transaction agreement with E.ON under which E.ON had the right to decide to tender its 46.65% shareholding in Uniper SE into Fortum’s public takeover offer. In November, Fortum launched a voluntary public takeover offer to all Uniper shareholders at a total value of EUR 22 per share implying a premium of 36% to the price prior to intense market speculation on a potential transaction at the end of May. The offer is subject to competition and regulatory approvals. Already in October 2017, Fortum received approval from the US competition authorities. Fortum expects to finalise the transaction in mid-2018.

The investment in Uniper delivers on Fortum's previously announced capital redeployment strategy and investment criteria. Uniper’s businesses are well aligned with Fortum's core competencies, are close to Fortum's home markets and are highly cash generative. Fortum expects the investment to deliver an attractive return that will support the company in accelerating the development and implementation of sustainable energy technologies, without sacrificing a competitive dividend.

The offer will be financed with existing cash resources and committed credit facilities, with Barclays Bank PLC originally underwriting 100% of the credit facilities, including ongoing liquidity requirements. In October the credit facilities were syndicated to selected relationship banks of Fortum. Dividends received from the stake in Uniper will contribute to a stable and sustainable dividend for Fortum's shareholders. Fortum will account for Uniper as an associated company unless control according to IFRS is attained; as such, EBITDA and cash flow contribution, as well as the EPS effect on Fortum's results, will depend on the final outcome of the offer. As a result of this transaction, Fortum’s leverage will rise above our given guidance for net debt/EBITDA level of around 2.5x. Over time however, Fortum expects its cash generation in combination with the dividend from Uniper to reduce this level towards the stated target.

In January 2018, Fortum announced that shareholders representing 46.93% of the shares in Uniper had accepted the offer during the initial acceptance period, including E.ON. Uniper shareholders who have not tendered their shares to the offer within the initial acceptance period can still tender during the additional acceptance period that began on 20 January 2018 and ending on 2 February 2018. Fortum expects to publish the total amount of shares tendered on 7 February 2018.

Hafslund transaction 

On 26 April 2017, Fortum and the City of Oslo entered into an agreement to restructure their ownership in Hafslund ASA, one of the largest listed power groups in the Nordic region. On 4 August 2017, Fortum concluded the restructuring of the ownership in Hafslund. Fortum sold its 34.1% stake in Hafslund ASA to the City of Oslo, acquired 100% of Hafslund Markets AS and 50.0% of Hafslund Varme AS (currently Fortum Oslo Varme AS) including the City of Oslo's waste-to-energy company Klemetsrudanlegget AS (KEA), and 10% of Hafslund Produksjon Holding AS.

The total debt-free price of the acquisitions was EUR 940 million. The combined net cash investment of the transactions, including the dividend received in May 2017, was EUR 230 million. Fortum booked a one-time tax-free sales gain in its third-quarter 2017 results, totalling EUR 324 million, which corresponds to EUR 0.36 earnings per share. Transaction costs of EUR 4 million for the acquisitions were included in Items affecting comparability for the third quarter of 2017. The acquired businesses were consolidated into Fortum Group from 1 August 2017.

Financial results 

Sales by segment 

EUR million IV/17 IV/16 2017 2016
Generation 433 435 1,677 1,657
City Solutions 340 316 1,015 782
Consumer Solutions 453 221 1,097 668
Russia 314 289 1,101 896
Other 30 24 102 92
Netting of Nord Pool transactions -103 -129 -367 -384
Eliminations -34 -13 -103 -79
Total 1,432 1,143 4,520 3,632

Comparable EBITDA by segment 

EUR million IV/17 IV/16 2017 2016
Generation 191 116 603 527
City Solutions 110 90 262 186
Consumer Solutions 25 15 57 55
Russia 121 100 438 312
Other -23 -24 -83 -64
Total 424 298 1,275 1,015

Comparable operating profit by segment

EUR million IV/17 IV/16 2017 2016
Generation 160 87 478 417
City Solutions 61 50 98 64
Consumer Solutions 18 13 41 48
Russia 84 66 296 191
Other -28 -27 -102 -77
Total 295 188 811 644

Operating profit by segment 

EUR million IV/17 IV/16 2017 2016
Generation 163 77 501 338
City Solutions 64 62 102 86
Consumer Solutions 25 22 39 59
Russia 85 67 295 226
Other -21 -26 221 -77
Total 315 202 1,158 633

October-December 2017

In the fourth quarter of 2017, sales increased to EUR 1,432 (1,143) million, up by 25%. The growth was mainly driven by higher hydro volumes and the consolidation of Hafslund. Comparable EBITDA totalled EUR 424 (298) million. Comparable operating profit totalled EUR 295 (188) million. The increase in comparable operating profit mainly resulted from higher hydro volumes, higher power prices and higher CSA payments. The operating profit totalled EUR 315 (202) million. Fortum's operating profit for the period was impacted by items affecting comparability of EUR 20 (14) million, including updated provisions, sales gains, transaction costs and the IFRS accounting treatment (IAS 39) of derivatives mainly used for hedging, as well as nuclear fund adjustments (Note 4).

The share of profit from associated companies and joint ventures was EUR 34 (15) million, of which Hafslund represented EUR 0 (9) million, TGC-1 EUR 4 (4) million and Fortum Värme EUR 27 (25) million. The share of profit from TGC-1 is based on the company's published third-quarter 2017 interim reports (Note 12). Due to the restructuring of Hafslund and the divestment of Fortum's 34.1% share in the company, Fortum will no longer in the future have share of profits from Hafslund ASA.

January-December 2017

In 2017, sales were EUR 4,520 (3,632) million. The increase was mainly due to the strengthening Russian rouble and the consolidation of Ekokem, Hafslund and DUON. Comparable EBITDA totalled EUR 1,275 (1,015) million. Comparable operating profit totalled EUR 811 (644) million. Comparable operating profit was positively impacted by the consolidation of Hafslund, higher achieved power prices, lower real estate and capacity taxes in Swedish nuclear and hydro power plants and by improved result in the Russian operations. Operating profit totalled EUR 1,158 (633) million. Fortum's operating profit for the period was impacted by items affecting comparability of EUR 347 (-11) million, including updated provisions, sales gains, transaction costs and the IFRS accounting treatment (IAS 39) of derivatives mainly used for hedging, as well as nuclear fund adjustments (Note 4). The sales gains include a one-time tax-free sales gain of EUR 324 million from the divestment of the 34.1% stake in Hafslund ASA (Note 6).

In 2017, Fortum reached the targeted EUR 100 million savings in fixed costs announced in 2016. At the same time, the cost spend has been shifted to businesses under development and new ventures.

The share of profit from associates and joint ventures was EUR 148 (131) million, of which Hafslund represented EUR 39 (51) million, TGC-1 EUR 32 (38) million and Fortum Värme EUR 66 (66) million. The share of profit from Hafslund is based on the company’s published fourth-quarter 2016 and January-June 2017 interim reports. The share of profit from TGC-1 is based on the company’s published fourth-quarter 2016 and January-September 2017 interim reports (Note 12). Due to the restructuring of Hafslund and the divestment of Fortum's 34.1% share in the company, Fortum will no longer have share of profits from Hafslund ASA.

Net finance costs amounted to EUR 195 (169) million, including costs relating to financing arrangements for the Uniper transaction.

Profit before income taxes was EUR 1,111 (595) million.

Taxes for the period totalled EUR 229 (90) million. The effective income tax rate according to the income statement was 20.6% (15.2%). The comparable effective income tax rate, excluding the impact of the share of profit from associated companies and joint ventures as well as non-taxable capital gains and other major one-time income tax effects, was 18.8% (20.0%) (Note 8).

The profit for the period was EUR 882 (504) million. Earnings per share were EUR 0.98 (0.56), of which EUR -0.14 per share was related to a Swedish income tax case and EUR 0.38 (-0.02) per share was related to items affecting comparability (Note 20).

Financial position and cash flow

Cash flow

In 2017, net cash from operating activities increased by EUR 372 million to EUR 993 (621) million, due to a EUR 260 million increase in comparable EBITDA, a EUR 193 million decrease in realised foreign exchange gains and losses, a EUR 133 million decrease in income taxes paid and a EUR 183 decrease in working capital compared to the previous year. The foreign exchange gains and losses of EUR -83 (110) million relate to the rollover of foreign exchange contract hedging loans to Russian and Swedish subsidiaries. In June 2016, Fortum paid income taxes in Sweden totalling EUR 127 million regarding an ongoing tax dispute. The change in working capital in 2017 was EUR 81 (-102) million. The biggest impact was the effect of the daily cash settlements for futures in Nasdaq OMX Commodities Europe (Additional cash flow information).

Investments excluding acquisitions increased by EUR 58 million to EUR 657 (599) million compared to the previous year. Acquisition of shares amounted to EUR 972 (695) million mainly due to the Hafslund transaction in 2017 and the acquisitions of Ekokem and Polish DUON in 2016. Divestment of shares, mainly the Hafslund transaction, amounted to EUR 741 million (39). Net cash used in investing activities decreased to EUR 807 (1,701) million including the increase in cash collaterals of EUR -3 (-359) million given as trading collaterals to commodity exchanges.

Cash flow before financing activities was EUR 187 (-1,080) million, mainly impacted by the Hafslund transaction.

In 2017, Fortum paid dividends totalling EUR 977 (977) million. Payments of long-term liabilities totalled EUR 543 (934) million, including the repayment of bonds of EUR 343 million and other loan repayments of EUR 200 million. The net decrease in liquid funds was EUR 1,241 (3,064) million.

Assets and capital employed

At the end of the reporting period, total assets amounted to EUR 21,753 (21,964) million, a decrease of EUR 211 million. Liquid funds at the end of the period amounted to EUR 3,897 (5,155) million. Capital employed decreased by EUR 477 million and was EUR 18,172 (18,649) million.


Equity attributable to owners of the parent company totalled EUR 13,048 (13,459) million.

The decrease in equity attributable to owners of the parent company was EUR 411 million, mainly due to the net profit for the period of EUR 866 million, translation differences of EUR -369 million and the dividend payment of EUR 977 million.


Net debt increased by EUR 1,036 million to EUR 988 (-48) million.

At the end of the reporting period, the Group’s liquid funds totalled EUR 3,897 (5,155) million. Liquid funds include cash and bank deposits held by PAO Fortum amounting to EUR 246 (105) million. In addition to liquid funds, Fortum’s undrawn committed credit facilities totalled EUR 1.8 billion (Note 14), excluding committed credit facilities of EUR 12.0 billion for Fortum’s offer for Uniper shares.

Net financial expenses totalled EUR 195 (169) million, of which net interest expenses were EUR 132 (139) million. Net financial expenses include costs relating to financing arrangements of the Uniper transaction.

In September 2017, Standard & Poor's and Fitch Ratings placed both Fortum's long-term and short-term credit ratings on credit watch negative on possible adverse impacts of the planned Uniper investment. In January 2018, Standard & Poor's downgraded Fortum's long-term credit rating from BBB+ to BBB with a Negative Outlook due to the Uniper investment. The short-term rating was affirmed at level A-2. Fitch Ratings rates Fortum's long-term credit rating at level BBB+ and the short-term rating at level F2.

Key figures

At the end of 2017, the comparable net debt to EBITDA ratio was 0.8 (0.0).

Gearing was 7% (0%) and the equity-to-assets ratio 61% (62%). Equity per share was EUR 14.69 (15.15). Return on capital employed improved to 7.1% (4.0%). Fortum targets a long-term Return on capital employed of at least 10%.

Market conditions

Nordic countries 

According to preliminary statistics, electricity consumption in the Nordic countries was 108 (107) terawatt-hours (TWh) during the fourth quarter of 2017. In 2017, electricity consumption was 392 (390) TWh.

At the beginning of 2017, the Nordic water reservoirs were at 75 TWh, which is 8 TWh below the long-term average and 23 TWh lower compared to the previous year. At the end of 2017, the reservoirs were 86 TWh, which is 3 TWh above the long-term average and 11 TWh higher compared to the previous year. Precipitation in the Nordics, was clearly above the normal level both in the fourth quarter and during the full year 2017.

In the fourth quarter of 2017, the average system spot price in Nord Pool was EUR 30.6 (34.4) per MWh. The mild and wet weather resulting in higher hydro reservoirs and higher hydro production volumes, depressed the Nord Pool system price for the fourth quarter. The average area price in Finland was EUR 33.0 (37.5) per MWh and EUR 31.1 (36.7) per MWh in Sweden (SE3, Stockholm). Higher availability in the Nordic nuclear generation and the internal transmission capacity in combination with mild weather lowered area prices in Finland and Sweden compared to the year 2016.

The average system spot price in Nord Pool for the year 2017 was EUR 29.4 (26.9) per MWh, and the average area price in Finland was EUR 33.2 (32.4) per MWh and EUR 31.2 (29.2) per MWh in Sweden (SE3, Stockholm). The main driver for the price increase was the clearly higher marginal cost of coal condensing power, which has contributed to stronger continental prices and increased exports from the Nordics.

In Germany, the average spot price in the fourth quarter of 2017 fell to EUR 33.0 (37.6) per MWh, while the full-year price for 2017 increased to EUR 34.2 (29.0) per MWh.

The market price of CO2 emission allowances (EUA) increased from EUR 6.5 per tonne at the beginning of the year to EUR 8.2 per tonne at the end of 2017.


Fortum operates both in the Tyumen and Khanty-Mansiysk area of Western Siberia, where industrial production is dominated by the oil and gas industries, and in the Chelyabinsk area of the Urals, which is dominated by the metal industry. The Russian market is divided in two price zones and Fortum operates in the First Price Zone.

According to preliminary statistics, Russian electricity consumption was 281 (287) TWh during the fourth quarter of 2017. The corresponding figure for the First Price Zone (European and Urals part of Russia), was 215 (220) TWh. Russian electricity consumption in 2017 was 1,035 (1,027) TWh and the corresponding figure for the First Price Zone was 799 (787) TWh.

In the fourth quarter of 2017, the average electricity spot price, excluding capacity price, increased by 1.5% to RUB 1,221 (1,203) per MWh in the First Price Zone. In 2017, the average electricity spot price, excluding capacity price, was unchanged at RUB 1,204 (1,204) per MWh in the First Price Zone.

More detailed information about the market fundamentals is included in the tables at the end of the report (pages 63-65).

European business environment and carbon market

Revision of the EU ETS approved 

After two and a half years of legislative processing the revision of the EU Emissions Trading Scheme (ETS) for the period 2021-2030 was adopted in December. The new rules will increase the annual emission reduction target of the ETS from the current 1.74% to 2.2%. From the carbon market balance and pricing perspective the essential improvement is the strengthening of the Market Stability Reserve (MSR), including a temporary doubling of the intake rate from 12% to 24% during 2019-2023 and cancellation of allowances from the reserve from 2023 onwards. In addition, the new directive includes a provision for voluntary cancellation of allowances from the market.

However, the agreed setup is not yet in line with the Paris Climate Agreement and meets only the lower end of the EU 2050 goal to reduce emissions by 80-95% by 2050.

Swedish hydropower legislation

In June, the Swedish Government released a proposal on revision of hydro legislation including changes in the Environmental Act. This is a follow-up of the Swedish energy agreement done in summer 2016 and includes adjustments to meet requirements based on the EU Water Framework Directive. The aim is to mitigate environmental impacts and facilitate more efficient power production. According to the proposal, environmental permits for hydropower should be revised during a 20-year period in accordance with a national plan for prioritisation. The Ministry of Environment aims to have the revised legislation in place in March 2018.

Fortum emphasises the need to reform the Swedish system for hydro management. However, the proposal fails in ensuring a fair balance between environmental improvements and power production and a reasonable level of legal certainty.

The energy agreement requires hydro power companies to carry the full cost of environmental improvements. The largest hydro power companies are planning a joint fund in order to secure financing for the improvements. The fund is expected to be in operation from July 2018 provided that the revision of hydro legislation has been completed.

Swedish nuclear waste fund fee approved 

In December, the Swedish Government decided on the waste fund fees for the period 2018-2020. The fees are based on a new structure with a calculated lifetime of 50 years and on parts of the funds capital being invested in shares.

Swedish nuclear and hydro taxes adopted

In May, the Swedish Parliament adopted the proposed changes of nuclear and hydropower taxation in accordance with the energy agreement from June 2016. Starting from 1 July 2017, the tax on installed effect in nuclear reactors decreased by 90%, from SEK 14,770/MW/month to SEK 1,500/MW/month, and on 1 January 2018 the tax was abolished. The hydropower real-estate tax will be reduced from 2.8% to 0.5% in four steps by 2020.

Development of Nordic energy cooperation

Development of regional energy cooperation in the Nordic context moved forward in 2017. Following the June 2017 report by independent investigator Jorma Ollila, the Nordic energy ministers discussed the report in their annual meeting in November. They agreed on next-step actions to implement these proposals, including a proposal to establish a Nordic electricity market forum comprising various actors in the sector to discuss topics particularly related to development of the Nordic regional power market.


Nordic market 

Electricity is expected to continue to gain a higher share of total energy consumption. Electricity demand in the Nordic countries is expected to grow by approximately 0.5% on average, while the growth rate for the next few years will largely be determined by macroeconomic developments in Europe, and especially in the Nordic countries.

The price of oil and coal in 2017, was on a clearly higher level compared to the previous year. The price of CO2 emission allowances (EUA) also increased during the fourth quarter of 2017. The price of electricity for the upcoming 12 months decreased in the Nordics due to a stronger hydrological balance but increased in Germany due to higher fuel prices.

In late January 2018, the forward quotation for coal (ICE Rotterdam) for the remainder of 2018 was around USD 88 per tonne and the market price for CO2 emission allowances for 2018 around EUR 8.90 per tonne. The Nordic system electricity forward price at Nasdaq Commodities for the remainder of 2018 was around EUR 27 per MWh and for 2019 around EUR 26 per MWh. In Germany, the electricity forward price for the remainder of 2018 and 2019 was around EUR 35 per MWh. Nordic water reservoirs were about 2 TWh below the long-term average, and were 7 TWh higher than a year earlier.


The Generation segment’s achieved Nordic power price typically depends on such factors as hedge ratios, hedge prices, spot prices, availability and utilisation of Fortum's flexible production portfolio, and currency fluctuations. Excluding the potential effects from changes in the power generation mix, a 1 EUR/MWh change in the Generation segment’s Nordic power sales achieved price will result in an approximately EUR 45 million change in Fortum's annual comparable operating profit. Achieved power price includes also the results of optimization of Fortum’s hydro and nuclear production as well as operations in the physical and financial commodity markets.

As a result of the nuclear stress tests in the EU, the Swedish Radiation Safety Authority (SSM) has decided on new regulations for Swedish nuclear reactors. For the operators, this means that safety investments should be in place no later than 2020.

The process to review the Swedish nuclear waste fees is done in a three-year cycle. The Swedish Nuclear Fuel and Waste Management Co (SKB) has updated the new technical plan including earlier shut down of some nuclear plants for the SSM to review. The final decision on the new nuclear waste fees for years 2018-2020 was made by the Swedish Government in December 2017 and was in line with SSM’s proposal to the Government. On 25 October 2017, the Swedish Parliament decided on changes in the legal framework impacting calculations of nuclear waste fees and the investment of the nuclear waste fund. In the revised legal framework the assumed operating time for calculating the waste fee is 50 years, as opposed to the previous assumption of 40 years. The fund is now also allowed to invest in other financial instruments in addition to bonds. Based on these changes the annual waste fees for Fortum will increase by approximately EUR 8 million.

On 3 July 2017, Fortum announced the decision by the Administrative Court in Stockholm, Sweden, related to Fortum Sverige AB’s hydro production-related real-estate tax assessments for the years 2009–2014. The Court decided in Fortum’s favour. The disputed amount for the five years was a total of SEK 510 million (EUR 53 million). Fortum will book the tax income (subject to income tax) only after the legal decision has entered into force. Hydropower plants have been subject to a real-estate tax rate that has resulted in an approximately 12 times higher real-estate tax per kWh compared to any other production, due to different tax rates and different valuation factors. The tax authority has appealed the decision.

In October 2016, the Swedish Energy Agency presented a concrete proposal on how to increase the production of renewable electricity by 18 TWh in 2020-2030 within the electricity certificate system, as part of the Energy Agreement. In April 2017, the Swedish Government decided that the increase will be carried out in a linear manner.

In September 2016, the Swedish Government presented the budget proposal for the coming years. One of the key elements was the proposal that the taxation of different energy production forms should be more equal, and the tax burden of nuclear and hydro should be taken to the level of other production

technologies. The budget states that the nuclear capacity tax will be reduced to 1,500 SEK/MW per month from 1 July 2017 and abolished on 1 January 2018. As a result, the tax for Fortum decreased by EUR 32 million due to the tax decrease and by another EUR 5 million due to the premature closure of Oskarshamn 1 in the middle of the year. In 2017, the capacity tax was EUR 52 million. In 2018, there is no capacity tax. As stated in the Government’s budget, the hydropower real-estate tax will decrease from 2.8% to 0.5%; the tax will be reduced in four steps: in January 2017 to 2.2%; in January 2018 to 1.6%; in January 2019 to 1.0%; and in January 2020 to 0.5%. In 2017, the tax for Fortum decreased by EUR 20 million to EUR 95 million. In addition to the decrease in the tax rate, the hydropower real-estate tax values, which are linked to electricity prices, will be updated in 2019. The real-estate tax values are updated every six years. With the current low electricity prices, the tax values in 2019 would be clearly lower than today. The process for renewing existing hydro permits will also be reformed.

In 2015, the Swedish OKG AB decided to permanently discontinue electricity production at Oskarshamn’s nuclear plant units 1 and 2. Unit 1 was shut down on 17 June 2017, approximately 2 weeks earlier than planned, and unit 2 has been out of operation since June 2013. The closing processes for both units are estimated to take several years.

City Solutions 

In City Solutions, stable growth, cash flow and earnings are achieved through investments in new plants and through acquisitions. Fuel cost, availability, flexibility and efficiency as well as gate fees are key drivers in profitability, but also the power supply/demand balance, electricity price and the weather affect profitability.

In May 2016, the Finnish Government decided to increase the tax on heating fuels by EUR 90 million annually from 2017 onwards. The negative impact on Fortum is estimated to be approximately EUR 5 million per year.

The development of acquired business operations of Fortum Oslo Varme is estimated to require integration-related one-time costs and increased investments over the coming years. The realisation of cost synergies are estimated to gradually start materialising from 2019 onwards with targeted annual synergies of EUR 5-10 million expected to be achieved by the end of 2020.

Consumer Solutions

After the acquisition of Hafslund Markets in August, a new business strategy for Consumer Solutions was approved by the Fortum Board of Directors in December. The strategic objective is to establish Consumer Solutions as the leading consumer business in the Nordics, with a customer-centric multi-brand structure.

Competition in the Nordic electricity retail market is expected to remain challenging, with continued pressure on sales margins and increasing customer churn. To counter the market challenges and create a solid foundation for competitive operations, Consumer Solutions will continue its cost spend in developing new digital services for consumers.

The combined Hafslund Markets and Fortum Markets business, while largely complementary, have identified synergy potential, in terms of both revenue and costs. The short-term priority will be on achieving identified revenue synergies by leveraging established best practices and providing additional products and services to the whole customer base. The realisation of cost synergies will start materialising once the integration of Hafslund Markets is completed, expected from 2019, with cost synergy realisation gradually increasing over the coming years, and targeted annual synergies of approximately EUR 10 million to be achieved by the end of 2020.


The Russia segment's new capacity generation built after 2007 under the Russian Capacity Supply Agreement (CSA) has been a key driver for earnings growth in Russia, as it receives considerably higher capacity payments than the old capacity. Fortum will receive guaranteed capacity payments for a period of approximately 10 years from the commissioning of a plant. The received CSA payment will vary depending on the age, location, size and type of the plants, as well as on seasonality and availability. CSA payments can vary somewhat annually because they are linked to Russian Government long-term bonds with 8 to 10 years maturity. In addition, the regulator will review the earnings from the electricity-only market three and six years after the commissioning of a unit and could revise the CSA payments accordingly. Furthermore, the level of the CSA payments increases starting from the seventh year of the 10-year period.

In June 2017, 1,000 MW of the bids of the 50/50-owned Fortum-RUSNANO wind investment fund were selected in the Russian wind auction. The bids are for projects to be commissioned during the years 2018-2022 with a price corresponding to approximately EUR 115-135 per MWh. The projects will be covered by CSA for a period of 15 years.

The long-term Competitive Capacity Selection (CCS) for the years 2017-2019 was held at the end of 2015, the CCS for the year 2020 in September 2016, and the CCS for the year 2021 in September 2017. All Fortum plants offered in the auction were selected. Fortum also obtained forced mode status, i.e. it receives payments for the capacity at a higher rate for some of the "old capacity". For the years 2017-2019, forced mode status was obtained for 195 MW; for the year 2020, 175 MW, and for the year 2021, 105 MW.

In December 2017, Fortum acquired three solar power companies from Hevel Group, Russia's largest integrated solar power company. All three power plants are operational and will receive CSA payments for approximately 15 years after commissioning at an average CSA price corresponding to approximately EUR 430/MWh. The plants were commissioned in 2016 and 2017.

Fortum’s Ulyanovsk wind farm is listed in the registry of capacity as of January 2018. The 35 MW power plant is Russia’s first industrial wind park. It will receive CSA payments for a guaranteed period of 15 years.

The Russian gas price increased by 3.9% in July 2017 and the increase of the annual average gas price for 2017 was 2.0%.

Capital expenditure and divestments

Fortum currently estimates its capital expenditure, including maintenance but excluding acquisitions, to be in the range of EUR 600-700 million in 2018 most of which is related to hydro and CHP capacity as well as new investments in renewables. The maintenance capital expenditure in 2018 is estimated at approximately EUR 300 million, well below the level of depreciation.


The effective corporate income tax rate for Fortum in 2018 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 a Swedish income tax case.

On 11 May 2017, the Administrative Court in Stockholm, Sweden, gave its decisions related to Fortum’s income tax assessments for the year 2013. The Court’s decisions were not in Fortum’s favour. Fortum has appealled the decisions. If the decisions remain in force despite the appeal, the negative impact on the net profit would be approximately EUR 28 million (approximately SEK 273 million). Fortum has not made a provision for this, as, based on legal analysis, the EU Commission’s view and supporting legal opinions,

the cases should be ruled in Fortum’s favour. The assessments concern the loans given in 2013 by Fortum’s Dutch financing company to Fortum’s subsidiaries in Sweden. The interest income for these loans was taxed in the Netherlands. The Swedish tax authority considers just over a half of the interest relating to each loan as deductible, i.e. deriving from business needs. The rest of the interest is seen as non-deductible. The decisions are based on the changes in the Swedish tax regulation in 2013.

On 30 June 2017, the Court of Appeal in Stockholm, Sweden, ruled against Fortum related to Fortum's income tax assessments in Sweden for the years 2009-2012. Due to the decision of the Court of Appeal, Fortum booked a tax cost of 1,175 MSEK (EUR 123 million) in the second-quarter 2017 results. The booking did not have any cash flow effect for Fortum, as the additional taxes and interest have already been paid in 2016. The case concerns Fortum’s right to deduct intra-group interest expenses in Sweden in the years 2009-2012. Fortum restructured its operations and reallocated loans in 2004-2005 to secure future operations. Fortum does not agree with the Court's decision and had applied for the right to appeal from the Supreme Administrative Court.


At the end of 2017, approximately 70% of Generation's estimated Nordic power sales volume was hedged at EUR 28 per MWh for 2018, and approximately 40% at EUR 25 per MWh for 2019.

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 electricity derivatives quoted on Nasdaq Commodities.

Dividend distribution proposal

The distributable funds of Fortum Oyj as of 31 December 2017 amounted to EUR 5,170,240,554.04 including the profit of the financial period 2017 of EUR 932,525,770.24. The Company’s liquidity is good and according to the Board of Directors the proposed dividend will not compromise the Company’s liquidity.

The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 1.10 per share be paid for 2017.

Based on the number of registered shares as of 1 February 2018 the total amount of dividend proposed to be paid is EUR 977,203,749,50. The Board of Directors proposes, that the remaining part of the distributable funds be retained in the shareholders’ equity.

Annual General Meeting 2018

Fortum's Annual General Meeting 2018 is planned to take place on 28 March 2018 at 11:00 a.m. EET at the Finlandia Hall, Mannerheimintie 13, Helsinki.

The possible dividend related dates planned for 2018 are:

  • Ex-dividend date 29 March 2018
  • Record date for dividend payment 3 April 2018
  • Dividend payment date 10 April 2018

Espoo, 1 February 2018

Fortum Corporation
Board of Directors

Further information:

Pekka Lundmark, President and CEO, tel. +358 10 452 4112
Markus Rauramo, CFO, tel. +358 10 452 1909

Investor Relations and Financial Communications:
Ingela Ulfves, tel +358 40 515 1531
Måns Holmberg, tel. +358 44 518 1518
Rauno Tiihonen, tel. +358 10 453 6150
Pirjo Lifländer, tel. +358 40 643 3317, and investors [at] fortum [dot] com (investors[at]fortum[dot]com)

Media: Corporate Press Officer, Mari Kalmari, tel. +358 40 520 1709

This release is a summary of Fortum's Financial Statements Bulletin 2017. The bulletin in its entirety is available as an attachment to this release.

Fortum's Financial Statements Bulletin 2017

Financial calendar in 2018

Fortum’s Financial Statements and Operating and Financial Review for 2017 will be published during week 8 at the latest.

Fortum will publish three interim reports in 2018:

  • January-March on 26 April 2018, at approximately 9:00 EEST
  • January-June on 19 July 2018, at approximately 9:00 EEST
  • January-September on 24 October 2018, at approximately 9:00 EEST

Fortum’s Capital Markets Day will be held on 13 November 2018 at Fortums new headquarters in Espoo, Finland.


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