Energy News Monitoring

Fortum is a leading clean-energy company, which operates power plants, generates and sells electricity and heat. It also provides waste services for the power generation industry and services for environmental construction.The company has operations in 10 counties with the key markets in the Nordic and Baltic countries, Russia, Poland and India, and is the largest power generator and the largest electricity retailer in the Nordic countries.

Fortum has 4 segments which are: the Generation segment, responsible for Nordic power production, including nuclear, hydro and thermal power production; the City Solutions, responsible for heating and cooling, waste-to-energy, biomass and other circular economy solutions; the Russia segment which comprises power and heat generation and sales in Russia and the Other segment, under which M&A, Solar & Wind Development, Technology and New Ventures are reported.

2017 was a significant year for Fortum. During the year Fortum invested in solar and wind power production, restructured its ownership in Hafslund, and at the end of 2017 announced new investment in Uniper, an international energy supply company. The previous investments in renewables, in the circular economy, and in Russia strengthened financial results in 2017. The improving market conditions also had a positive effect on Fortum´s financial results in 2017.

According to the Company´s Annual Report, the total sales turnover in 2017 increased to EUR 4,520 million or by almost 25% compared to EUR 3,632 million in 2016. The sales turnover in 2015 amounted EUR 3,459 million. The increase was mainly due to the strengthening Russian rouble and the consolidation of Ekokem, Hafslund and DUON¹. Fortum´s performance improved in 2017 by increasing comparable operating profits in most 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 comparable operational EBITDA totalled EUR 1,275 million and grew by 25% in 2017 compared to EUR 1,015 million in 2016 and EUR 1,102 million in 2015.The comparable operational profit of the company in 2017 increased to EUR 811 million or by 57% compared to EUR 644 million in 2016. The increase was mainly due to the consolidation of Hafslund, lower real estate and capacity taxes in Swedish nuclear and hydro power plants, and improved results in the Russian operations.

In the near future Fortum plans to invest EUR 200-400 million in solar power in India. While the market conditions in the Nord Pool area and in Russia are suitable for wind power, Fortum plans to invest into the largest wind farm in Russia as well as participating in the Blaiken wind park in Sweden, which is already operational, and in the Solberg wind farm in 2018. In 2017 Fortum bought the operational Nygårdsfjellet wind power farm in Norway and plans to invest further in two Norwegian wind farms in 2018 and 2019. Although the solar and wind capacity is small, the growth in 2017 was substantial and the wind and solar power capacity increased from 58 MW to 295 MW or by 500%.

In 2017, Fortum reached the targeted EUR 100 million savings in fixed costs announced in 2016. Net cash flow from operating activities in 2017 increased by EUR 372 million or by 60% to EUR 993 million compared to EUR 621 million in 2016, due to a EUR 260 million increase in comparable EBITDA, which was caused by 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.

Among the group the performance of three segments was indicated by an increase in comparable EBITDA of 14% (Generation), 41% (City Solutions) and by increase in comparable operating profit of 15% (Generation) and 53% (City Solutions). The Russian segment was indicated by an increase in comparable EBITDA of 40% from EUR 312 million to EUR 438 million in 2017, and incomparable operating profit of 55% from EUR 191 million to EUR 296 million in 2017. The Russian rouble had a positive effect of EUR 31 million. In 2017, total goodwill amounted to EUR 613 million and indicated an increase of 74% compared to EUR 353 million in 2016. The goodwill arose from acquisitions of Hafslund Markets Group and Fortum Oslo Varme Group.

In 2017 Fortum´s R&D expenditure totalled EUR 53 million compared to 52 million in 2016, or 1.2% and 1.4% of sales, respectively. Fortum takes an active role in creating solutions for sustainable cities, by developing new products and services to help to reduce their carbon footprint, and by building new energy ventures for the future effective sustainable energy system.

[1] In 2016 Fortum acquired Grupa DUON S.A., an electricity and gas sales company in Poland, and the Ekokem Corporation, a leading Nordic circular economy company specialising in material and waste recycling, final disposal solutions, soil remediation and environmental construction, as well as making wind power investments in Sweden, Norway and Russia.