Stock exchange release

Fortum’s January–September 2021 Interim Report: Strong performance in an exceptional commodity market

12 November 2021, 09:00 EET

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FORTUM CORPORATION JANUARY–SEPTEMBER 2021 INTERIM REPORT 12 NOVEMBER 2021 AT 9:00 EET

This release is a summary of Fortum’s 2021 January–September 2021 Interim Report. The complete report is attached to this release as a PDF file. It is also available on the company's website at www.fortum.com/investors.

July–September 2021

  • Comparable EBITDA was EUR 574 (132) million
  • Comparable operating profit was EUR 260 (-179) million
  • Operating profit was EUR -3,105 (-1) million, mainly impacted by changes in fair values of non-hedge-accounted derivatives partly offset by capital gains from divestments
  • Comparable share of profits of associates and joint ventures was EUR 9 (19) million
  • Comparable earnings per share were EUR 0.19 (-0.10)
  • Earnings per share were EUR -0.82 (0.19)
  • Cash flow from operating activities totalled EUR 2,274 (790) million

January–September 2021

  • Comparable EBITDA was EUR 2,401 (1,187) million
  • Comparable operating profit was EUR 1,466 (416) million
  • Operating profit was EUR -2,600 (1,141) million, mainly impacted by changes in fair values of non-hedge-accounted derivatives partly offset by capital gains from divestments
  • Comparable share of profits of associates and joint ventures was EUR 127 (593) million. The comparison period includes Uniper for the fourth quarter of 2019 and first quarter of 2020
  • Comparable earnings per share were EUR 1.22 (0.99)
  • Earnings per share were EUR -0.12 (1.62)
  • Cash flow from operating activities totalled EUR 3,394 (1,792) million
  • Financial net debt-to-comparable EBITDA ratio for the last 12 months at 0.6 times, clearly below the target level of <2 times
  • On 2 July, Fortum concluded the sale of its district heating business in the Baltics. Total consideration of approximately EUR 710 million
  • On 20 September, Fortum concluded the sale of its 50% ownership in Stockholm Exergi for a total consideration of EUR 2.9 billion
  • S&P and Fitch upgraded rating outlook to “stable”, BBB rating reaffirmed

Summary of outlook

  • The Generation segment’s Nordic generation hedges: approximately 75% at EUR 34 per MWh for the remainder of 2021, approximately 65% at EUR 32 per MWh for 2022, and approximately 40% at EUR 31 per MWh for 2023
  • The Uniper segment’s Nordic generation hedges: approximately 85% at EUR 25 per MWh for the remainder of 2021, approximately 85% at EUR 22 per MWh for 2022, and approximately 55% at EUR 21 per MWh for 2023
  • Capital expenditure, including maintenance but excluding acquisitions, is expected to be approximately EUR 1,400 million in 2021

Key figures*

             
EUR million III/2021 III/2020 I-III/2021 I-III/2020 2020 LTM
Reported            
Sales 23,700 14,049 62,322 27,736 49,015 83,601
Operating profit -3,105 -1 -2,600 1,141 1,599 -2,142
Share of profit/loss of associates and joint ventures 11 25 152 543 656 265
Net profit -1,768 103 -1,117 1,444 1,855 -706
Net profit (after non-controlling interests) -721 174 -103 1,443 1,823 276
Earnings per share, EUR -0.82 0.19 -0.12 1.62 2.05 0.31
Net cash from operating activities 2,274 790 3,394 1,792 2,555 4,157
             
EUR million III/2021 III/2020 I-III/2021 I-III/2020 2020 LTM
Comparable            
EBITDA 574 132 2,401 1,187 2,434 3,648
Operating profit 260 -179 1,466 416 1,344 2,394
Share of profit/loss of associates and joint ventures 9 19 127 593 656 190
Net profit (after non-controlling interests) 170 -93 1,086 874 1,483 1,695
Earnings per share, EUR 0.19 -0.10 1.22 0.99 1.67 1.90
             
EUR million       30 Sept 2021 31 Dec 2020 LTM
Financial net debt (at period-end)       2,126 7,023  
Adjusted net debt (at period-end)       4,419 9,784  
Financial net debt/comparable EBITDA         2.9 0.6

* Uniper has been consolidated as a subsidiary from 31 March 2020. Previously, Uniper's contribution to the income statement was recognised in the Share of profit/loss of associates and joint ventures

Fortum’s President and CEO Markus Rauramo:

“Our operating environment in the third quarter has been marked by exceptional market dynamics and extreme commodity price movements. At the end of September, the forward price for 2022 delivery of natural gas in Europe (TTF hub) was 270% higher compared to a year ago. The factors behind the development are manyfold ranging from the strong economic recovery which has boosted energy consumption globally, to the cold weather in the first half of the year in Europe, Western Russia and Asia, which left gas storages depleted. At the same time Europe’s domestic gas production is dwindling, LNG cargos are finding more lucrative destinations on other continents and one-off events have to an extent limited also pipeline imports. The increased gas prices reflect a tight supply-demand balance for the winter, but forward prices indicate gradually normalising conditions thereafter.

The Continental and UK power prices have mirrored the high commodity prices, mainly the gas price. At the same time, spot power prices have also increased considerably in the Nordics following high prices in Continental Europe, very low hydro reservoir levels and below normal wind power production.

Overall we can be satisfied by the resilience of our Group in the third quarter. Our Uniper segment’s gas midstream business recorded a significant earnings improvement that prompted Uniper to update its guidance for full-year 2021. Considering the exceptional liquidity and funding requirements due to the turbulent market and high prices, Uniper fared well as part of our large and financially solid Group.

The main drivers of the clear increase in the comparable operating profit of the Generation segment were the higher power prices and higher volumes although the effect was somewhat offset by the fairly high hedge levels. The Russia segment’s earnings grew due to the economy recovery and strong commodity markets. In City Solutions, almost all business areas improved, while Consumer Solutions’ earnings decreased following as a result of intensified competition in the Nordic market.

We have made good progress in our strategy execution and have delivered on our deleveraging. During the reporting period, we completed the divestment of our Baltic district heating business for a total consideration of approximately EUR 710 million, followed by the closing of the sale of our 50% ownership in Stockholm Exergi Holding AB for approximately EUR 2.9 billion. These brought our financial net debt-to-comparable EBITDA to 0.6 times, significantly below our set target level of <2 times.

Our position as the largest renewable energy power producer in Russia strengthened further as the Fortum-Rusnano wind investment fund was awarded remuneration for new wind power generation in the recent wind CSA (Capacity Supply Agreement) auction, further expanding our wind and solar power portfolio in Russia further to 3.4 GW.

We have also continued the decarbonisation of our portfolio with the handover of Fortum Russia’s Argayash coal-fired combined heat and power plant (CHP) and Uniper’s Schkopau power plant to their new owners. With Schkopau, the Group’s lignite chapter in Germany came to an end.

In recent weeks, all eyes have been on Glasgow. The parties of the UNFCCC have been convening for their 26th conference to discuss the global mitigation efforts on climate change and the increasing expectations on climate ambition, financing, and finalising the rules of the Paris Agreement. While the EU is committed to reaching climate neutrality by 2050 in line with the Paris ambition, the high energy prices in Europe have understandably sparked a lot of public discussion. This debate should not result in interventions that slow down decarbonisation or complicate the negotiations on the execution of the EU’s Fit for 55 package. For the industry making investments to reach the climate targets, it is crucial to get clarity of the regulatory framework going forward.

Climate neutrality requires a fast and controlled phase-out of CO2-intensive energy sources and a rapid increase of CO2-free power generation to decarbonise also other sectors. In order to achieve this in Europe, the existing carbon-free generation should remain online and the permitting processes for new renewable investments should become faster. The price surge and market volatility experienced this fall have also highlighted how important natural gas is for the energy transition and how crucial it is to maintain security of supply and affordability of energy during the transition. Alongside renewable energy sources, the role of gas and nuclear power in the energy transition is central in our Group strategy.

From this perspective, we consider it crucial that both nuclear and gas be included in the scope of the EU sustainable finance taxonomy. All CO2-free technologies should be treated equally, in line with the scientific analysis of the Commission research centre (JRC), while natural gas should be given a transitionary role. Nuclear power is a clean, safe, and competitive source of energy in climate change mitigation. In Finland, it contributes today to one third of the Finnish generation mix and will presumably grow further. We are currently assessing the lifetime extension of our Loviisa Nuclear Power plant and see nuclear being a crucial solution for decarbonisation and an enabler for a carbon-neutral world.Espoo, 11 November 2021.”

Fortum Corporation
Board of Directors

Webcast/teleconference

A combined live webcast/teleconference for media, investors, and analysts will be arranged online at www.fortum.com/investors on 12 November 2021 at 11:00 EET.

To participate in the teleconference and Q&A, dial in using the numbers below:

FI: +358 9 817 10310
UK: +44 333 300 0804
US: +1 631 913 1422

PIN: 92145400#

Further information:

Investor Relations and Financial Communications: Ingela Ulfves, tel. +358 40 515 1531, Rauno Tiihonen, tel. +358 10 453 6150, Carlo Beck, tel. +49 172 751 2480, Nora Hallberg, tel. +358 40 720 1775, Pirjo Lifländer, tel. +358 40 643 3317, and investors [at] fortum [dot] com

Media: Pauliina Vuosio, tel. +358 50 453 2383

Financial calendar in 2022

Fortum Corporation’s Financial Statements Bulletin for the year 2021 will be published on 3 March 2022 at approximately 9.00 EET.

Fortum will publish three interim reports in 2022:

  • JanuaryMarch on 12 May 2022 at approximately 9.00 EEST
  • JanuaryJune on 12 August 2022 at approximately 9.00 EEST
  • JanuarySeptember 10 November 2022 at approximately 9.00 EET

Fortum’s Financial Statements and Operating and Financial Review for 2021 will be published during week 10 at the latest.

Uniper will publish its 2021 Annual Report on 23 February 2022.

Uniper will publish its interim reports in 2022:

  • Financial Results JanuaryMarch 2022 on 3 May 2022
  • Financial Results JanuaryJune 2022 on 2 August 2022
  • Financial Results JanuarySeptember 2022 on 3 November 2022

Distribution:

Nasdaq Helsinki
Key media
www.fortum.com

More information, including detailed quarterly information, is available at www.fortum.com/investors