Fortum January-September 2017 Interim Report: Improved results, Hafslund transactions concluded, investment in Uniper


July−September 2017

  • Comparable EBITDA EUR 210 (151) million, +39%
  • Comparable operating profit EUR 94 (58) million, +62%
  • Operating profit EUR 387 (-6) million, of which EUR 293 (-65) million related to items affecting comparability
  • Earnings per share EUR 0.40 (-0.03), of which EUR 0.34 (-0.06) related to items affecting comparability, including sales gains of approximately EUR 0.36 related to the Hafslund transactions
  • Cash flow from operating activities totalled EUR 185 (101) million
  • Fortum and City of Oslo concluded Hafslund ownership restructuring
  • Fortum signed transaction agreement with E.ON regarding their 46.65% ownership in Uniper

January−September 2017

  • Comparable EBITDA EUR 852 (717) million, +19%
  • Comparable operating profit EUR 516 (455) million, +13%
  • Operating profit EUR 843 (430) million, of which EUR 327 (-25) million related to items affecting comparability
  • Earnings per share EUR 0.70 (0.40), of which EUR -0.14 related to a Swedish income tax case and EUR 0.37 (-0.03) related to items affecting comparability
  • Cash flow from operating activities totalled EUR 699 (471) 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

Summary of outlook

  • Fortum continues to expect the annual electricity demand to grow in the Nordic countries by approximately 0.5% on average
  • Generation segment's Nordic generation hedges: approximately 65% hedged at EUR 30 per MWh for the rest of 2017, approximately 50% hedged at EUR 28 per MWh for 2018 and approximately 30% hedged at EUR 24 per MWh for 2019

Key financial ratios 

 ​​  2016  LTM 
Return on capital employed, %  4.0  6.4 
Comparable net debt/EBITDA  0.0  0.9 

Key figures 

EUR million or as indic​​ated  III/17  III/16  I-III/17  I-III/16  2016  LTM 
Sales  919  732  3,088  2,489  3,632  4,231 
Comparable EBITDA  210  151  852  717  1,015  1,150 
Comparable operating profit  94  58  516  455  644  705 
Operating profit  387  -6  843  430  633  1,046 
Share of profits of associates and
joint ventures 
21  11  114  116  131  129 
Profit before income taxes  351  -40  811  411  595  995 
Earnings per share, EUR  0.40  -0.03  0.70  0.40  0.56  0.86 
Net cash from operating activities  185  101  699  471  621  849 
Shareholders’ equity per share, EUR        14.59  14.75  15.15    
Interest-bearing net debt (at end of period)        1,075  -137  -48    

Fortum’s President and CEO Pekka Lundmark: Key figures 

“The third quarter 2017 was a good quarter for Fortum. Our businesses are showing strong performance, market prices show signs of improving and we have taken substantial steps in our capital redeployment strategy.

Following the divestment of our Distribution businesses, we have been working hard to position Fortum for the future. At the beginning of August, we closed the Hafslund transaction that increased our presence in the Nordic heat and retail market, especially in Norway. Towards the end of September, we signed a transaction agreement with E.ON, currently the largest shareholder in Uniper. Our offer to E.ON, and all other shareholders in Uniper, provides an attractive opportunity to capitalise on the strong performance of Uniper since its spin-off. At the same time this is an attractive proposition to Fortum. Uniper and Fortum are a good strategic fit and our investment opens up many opportunities for close cooperation. We are investing in a successful company that has strong cash flow, operates close to our home markets, and has businesses that are well aligned with our core competencies. The investment will contribute toward a stable and sustainable dividend to our shareholders.

Over the years Fortum has been advocating for a sustainable transition to a low-carbon energy system. This means focusing on reducing emissions, without forgetting security of supply and affordability of energy. Large investments in flexibility, storage, and transmission capacity are needed to cope with the growing share of intermittent renewable energy production, and this will not happen overnight. Flexible power production, especially hydro and gas assets, is key to ensuring security of supply during the transition. Fortum and Uniper both possess such assets and are well positioned to take an active role in driving the European energy transition forward.

The third quarter showed an increase in EBITDA of 39%. Higher hydro volumes and achieved power price improved the financial performance of the Generation segment. The Russia segment continued on their quarterly upward trend, especially thanks to higher CSA payments. The third quarter is seasonally challenging for City Solutions. However, the results improved from last year especially due to the contribution from our Recycling and Waste Solutions unit (formerly Ekokem). The results of the Consumer Solutions segment are somewhat burdened by the tough competitive situation. After the closing of the Hafslund transaction we have put a lot of focus on working together with our new colleagues to further develop our retail strategy and offering. Our aim is to create a competitive service portfolio including digital solutions for our customer base of 2.5 million homes and businesses.

We have come a long way on our capital redeployment strategy. Between 2012-2017 we have, already before the Uniper investment, invested around 4 billion euros into renewables, circular economy and sustainable city solutions. The positive impact of these investments can already be seen in our improving results. We believe our investments in both Hafslund and Uniper will further strengthen our results and competencies for the future.“

Uniper investment 

On 26 September 2017, Fortum announced it had signed a transaction agreement with E.ON under which E.ON has the right to decide to tender its 46.65% shareholding in Uniper SE into the public takeover offer in early 2018 for the same consideration as offered to all shareholders. The agreement further provides that if E.ON does not tender its Uniper stake, Fortum will have the right to sell to E.ON any Uniper shares acquired in connection with the offer and in addition receive a compensation payment from E.ON of at least 20% of the total equity value of E.ON's stake in Uniper. Fortum will launch a voluntary public takeover offer to all Uniper shareholders at a total value of EUR 22 per share. The total value implies a premium of 36% to the price prior to intense market speculation on a potential transaction at the end of May. The offer will be subject to competition and regulatory approvals. 

On 24 October 2017, Fortum submitted the offer document to the German Federal Financial Supervision Authority (BaFin). Fortum will publish the offer document following BaFin approval, expected in early November 2017. 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 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 towards 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. Whilst leverage at Fortum will increase as a result of this transaction to above our guidance net debt/EBITDA level of around 2.5x, Fortum expects its ongoing cash generation together with the dividend from Uniper to reduce this position toward our stated target.

Financial results 

Sales by segment 

EUR million III/​​17 III/16 I-III/17 I-III/16 2016 LTM
Generation 367 371 1,243 1,222 1,657 1,678
City Solutions 179 116 674 466 782 990
Consumer Solutions 238 126 644 447 668 865
Russia 200 175 786 606 896 1,076
Other 25 22 72 68 92 96
Netting of Nord Pool transactions  -73 -66 -264 -255 -384 -393
Eliminations -17 -14 -69 -66 -79 -82
Total 919 732 3,088 2,489 3,632 4,231

Comparable EBITDA by segment

EUR million III/17 III/16​​ I-III/17 I-III/16 2016 LTM
Generation 134 104 412 410 527 529
City Solutions 21 5 152 95 186 243
Consumer Solutions 10 11 32 40 55 47
Russia 61 43 317 212 312 417
Other -17 -12 -61 -40 -64 -85
Total 210 151 852 717 1,015 1,150

Comparable operating profit by segment

EUR million III/17 III/16 I-II​​I/17 I-III/16 2016 LTM
Generation 104 77 317 330 417 404
City Solutions -20 -25 37 14 64 87
Consumer Solutions 5 9 23 35 48 36
Russia 26 12 211 125 191 277
Other -21 -16 -73 -50 -77 -100
Total 94 58 516 455 644 705

Operating profit by segment

EUR million III/17 II​​I/16 I-III/17 I-III/16 2016 LTM
Generation 74 18 338 261 338 415
City Solutions -20 -33 38 23 86 101
Consumer Solutions 15 12 14 37 59 36
Russia 26 12 211 159 226 278
Other 293 -17 242 -51 -77 216
Total 387 -6 843 430 633 1,046

July-September 2017 

In the third quarter of 2017, sales were EUR 919 (732) million. The increase was mainly due to higher hydro volumes, the strengthening Russian rouble and the consolidation of Ekokem and Hafslund. Comparable EBITDA totalled EUR 210 (151) million. Comparable operating profit totalled EUR 94 (58) million. The comparable operating profit increased mainly due to higher hydro volumes, higher power prices, higher CSA payments and the consolidation of Ekokem. The operating profit totalled EUR 387 (-6) million. Fortum's operating profit for the period was impacted by items affecting comparability, including sales gains, transaction costs and the IFRS accounting treatment (IAS 39) of derivatives mainly used for hedging, as well as nuclear fund adjustments, amounting to EUR 293 (-65) million (Note 4). The sales gains include a one-time tax-free sales gain from the divestment of the 34.1% stake in Hafslund ASA, approximately EUR 324 million (Note 6).

The share of profit from associates and joint ventures was EUR 21 (11) million, of which Hafslund represented EUR 9 (10), TGC-1 EUR 8 (7) and Fortum Värme EUR -5 (-4) million. The share of profit from Hafslund and TGC-1 are based on the companies' published second-quarter 2017 interim reports (Note 12).

January-September 2017 

In January-September 2017, sales were EUR 3,088 (2,489) million. The increase was mainly due to the strengthening Russian rouble and the consolidation of Ekokem, DUON and Hafslund. Comparable EBITDA totalled EUR 852 (717) million. Comparable operating profit totalled EUR 516 (455) million and operating profit totalled EUR 843 (430) million. Fortum's operating profit for the period was impacted by items affecting comparability, including sales gains, transaction costs and the IFRS accounting treatment (IAS 39) of derivatives mainly used for hedging, as well as nuclear fund adjustments, amounting to EUR 327 (-25) million (Note 4). The sales gains include a one-time tax-free sales gain from the divestment of the 34.1% stake in Hafslund ASA, approximately EUR 324 million (Note 6).

The share of profit from associates and joint ventures was EUR 114 (116) million, of which Hafslund represented EUR 40 (42), TGC-1 EUR 28 (34) and Fortum Värme EUR 40 (40) million. The share of profit from Hafslund and TGC-1 are based on the companies' published fourth-quarter 2016 and first- and second-quarter 2017 interim reports (Note 12).

Net finance costs were EUR 146 (135) million, including costs relating to financing arrangements of the Uniper transaction.

Profit before income taxes was EUR 811 (411) million.

Taxes for the period totalled EUR 186 (54) million. The effective income tax rate according to the income statement was 22.9% (13.1%). 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 19.1% (19.0%) (Note 8).

The profit for the period was EUR 625 (357) million. Earnings per share were EUR 0.70 (0.40), of which EUR -0.14 per share were related to a Swedish income tax case and EUR 0.37 (-0.03) per share to items affecting comparability.

Financial position and cash flow 

Cash flow 

In January-September 2017, net cash from operating activities increased by EUR 228 million to EUR 699 (471) million, due to a EUR 135 million increase in comparable EBITDA, a EUR 184 million decrease in realised foreign exchange gains and losses, and a EUR 140 million decrease in income taxes paid. The foreign exchange gains and losses of EUR -72 (112) million relate to the rollover of foreign exchange contracts 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 increased by EUR 92 million to EUR 126 (34) million, which includes the effect of the daily cash settlements for futures in Nasdaq OMX Commodities Europe (Additional cash flow information). 

Investments, excluding acquisitions, increased from the previous year by EUR 103 million to EUR 470 (367) million. Acquisition of shares amounted to EUR 929 (666) million arising mainly from the Hafslund transaction. The impact of divestment of shares was EUR 740 million (39) also resulting mainly from Hafslund transaction. Net cash used in investing activities decreased to EUR 611 (1,439) million. The change included the increase in cash collaterals given as trading collaterals to commodity exchanges of EUR 24 (391) million.

Cash flow before financing activities was EUR 88 (-968) million.

Fortum paid dividends totalling EUR 977 (977) million in April 2017. Payments of long-term liabilities totalled EUR 467 (899) million, including the repayment of bonds of EUR 343 million and other loan repayments of EUR 124 million. The net decrease in liquid funds was EUR 1,261 (2,887) million.

Assets and capital employed 

Total assets decreased by EUR 504 million to EUR 21,460 (21,964 at the end of 2016) million.

Liquid funds at the end of the period were EUR 3,877 (5,155 at the end of 2016) million.

Capital employed was EUR 18,153 (18,649 at the end of 2016) million, a decrease of EUR 496 million.


Equity attributable to owners of the parent company totalled EUR 12,963 (13,459 at the end of 2016) million.

The decrease in equity attributable to owners of the parent company totalled EUR 496 million and was mainly due to the net profit for the period of EUR 622 million, translation differences of EUR -201 million and dividend payment of EUR 977 million.


Net debt increased by EUR 1,123 million to EUR 1,075 (-48 at the end of 2016) million.

At the end of September, the Group’s liquid funds totalled EUR 3,877 (5,155 at the end of 2016) million. Liquid funds include cash and bank deposits held by PAO Fortum amounting to EUR 268 (105 at the end of 2016) million. In addition to liquid funds, Fortum had access to EUR 1.9 billion of undrawn committed credit facilities (Note 14).

Net financial expenses were EUR 146 (135) million, of which net interest expenses were EUR 122 (132) million.

In September, 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. Standard & Poor's has rated Fortum's long-term credit rating at level BBB+ and the short-term rating at level A-2. Fitch Ratings has rated Fortum's long-term credit rating at level BBB+ and the short-term rating at level F2.

Key figures 

At the end of September, the comparable net debt to EBITDA for the last 12 months was 0.9 (0.0 at the end of 2016). 

Gearing was 8% (0% at the end of 2016) and the equity-to-assets ratio 62% (62% at the end of 2016). Equity per share was EUR 14.59 (15.15 at the end of 2016). Return on capital employed for the last 12 months totalled 6.4% (4.0% at the end of 2016). 

Market conditions 

Nordic countries 

According to preliminary statistics, electricity consumption in the Nordic countries was 82 (80) terawatt-hours (TWh) during the third quarter of 2017. In January-September 2017, electricity consumption was 283 (283) 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 than a year earlier. By the end of September, reservoirs were 2 TWh below the long-term average and 1 TWh higher than a year earlier. The Nordic precipitation during the third quarter was close to normal after a wetter-than-average first half of 2017. 

In the third quarter of 2017, the average system spot price in Nord Pool was EUR 28.5 (25.2) per MWh. The main driver for the price increase during 2017 has been the clearly higher marginal cost of coal condensing power than a year earlier, which has contributed to stronger continental prices and increased exports from the Nordics. The average area price in Finland was EUR 35.9 (31.6) per MWh and in Sweden SE3 (Stockholm) EUR 33.6 (29.6) per MWh. In addition to the nuclear maintenances, the limitations in transmission capacity from Norway to Sweden contributed to the higher area prices in Finland and Sweden. 

During January-September 2017, the average system spot price in Nord Pool was EUR 29.0 (24.4) per MWh, and the average area price in Finland was EUR 33.3 (30.8) per MWh and in Sweden SE3 (Stockholm) EUR 31.3 (26.7) per MWh. 

In Germany, the average spot price during the third quarter of 2017 was EUR 32.7 (28.3) per MWh and during January-September 2017 EUR 34.6 (26.1) per MWh. 

The market price of CO2 emission allowances (EUA) was EUR 6.5 per tonne at the beginning of the year and EUR 7.0 per tonne at the end of September 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. 

According to preliminary statistics, Russian electricity consumption was 235 (231) TWh during the third quarter of 2017. The corresponding figure for the First price zone (European and Urals part of Russia), where Fortum operates, was 182 (179) TWh. In January-September 2017, Russian electricity consumption was 756 (740) TWh and the corresponding figure for the First price zone was 587 (567) TWh. 

In the third quarter of 2017, the average electricity spot price, excluding capacity price, decreased by 2.2% to RUB 1,269 (1,298) per MWh in the First price zone. In January-September 2017, the average electricity spot price, excluding capacity price, decreased by 0.5% to RUB 1,198 (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 60-62). 

European business environment and carbon market 

Swedish corporate tax 

The proposal for a revised corporate tax covers implementation of the EU and OECD regulation, and it proposes changes to e.g. rules concerning interest deduction, compensation for non-deductibility of interest costs in the form of lowering the general corporate tax rate from 22 to 20 percent. The proposal includes some revisions to the current rules and the introduction of a profitability test. This would have a negative impact on capital-intensive businesses. Also the proposed targeted interest deduction limitation rule has been criticised, as the treatment of interest deductions would be unclear. 

Fortum's response emphasises the need to reform the proposal to ensure more predictable rules and to harmonise the rules with other countries. 

Swedish hydropower legislation 

The proposal for revised hydro legislation covers changes in the Environmental Act. This is a follow-up to the Swedish energy agreement in June 2016 and includes adjustments to meet requirements based on the EU Water Framework Directive. The aim is to mitigate environmental impacts and facilitate a 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 aims at having the revisions in place by 1 March 2018. 

Fortum's response emphasises the need to reform the Swedish system for hydro management. The proposal fails in ensuring a fair balance between environmental improvements and power production. 

Swedish nuclear waste fund fee 

In December 2017, the Swedish Government will decide on the waste fund fees for the years 2018-2020. The fees will be based on the new structure with a calculated lifetime of 50 years and on parts of the funds capital being invested in shares. On 20 October 2017 the Swedish Radiation Safety Authority (SSM) published their proposal. The Parliament will decide on a new regulatory framework for the fund at the end of 2017. 

Finnish renewable electricity tendering scheme 

In September 2017, a draft proposal for a new renewable electricity support scheme was released for consultation. According to the proposal, Finland will arrange auctions for 2 TWh of renewable electricity during 2018-2020. Tendering will be based on a premium that is paid for a maximum of 12 years. The first auction will be organised in autumn 2018 at the earliest. The scheme is open to new installations of all renewables technologies, excluding hydropower. 

Fortum views the proposed scheme as fairly market-based, but would prefer a fully fixed premium. Also the duration of the scheme should be shorter. After this transitional phase, renewable electricity investments should be fully market-based. 


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.   

During January-September 2017, the oil price has remained on a clearly higher level than the previous year. The coal price has continued to increase. The price of CO2 emission allowances (EUA) increased during the third quarter of 2017. The price of electricity for the upcoming twelve months increased both in the Nordic area and in Germany. 

In mid-October 2017, the quotation for coal (ICE Rotterdam) for the remainder of 2017 was around USD 92 per tonne and for CO2 emission allowances for 2017 around EUR 7.6 per tonne. The Nordic system electricity forward price in Nasdaq Commodities for the rest of 2017 was around EUR 30 per MWh and for 2018 around EUR 27 per MWh. In Germany, the electricity forward price for the rest of 2017 was around EUR 38 per MWh and for 2018 around EUR 37 per MWh. Nordic water reservoirs were about 1 TWh below the long-term average, close to the levels one year ago. 


The Generation segment’s achieved Nordic power price typically depends on such factors as the 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. 

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 safety investments that 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 for the SSM to review. The final decision on the new nuclear waste fees for years 2018-2020 will be made by the Swedish Government in December 2017. Based on SSM's proposal the annual waste fees for Fortum would increase by approximately EUR 8 million. On 1 June 2017, the Swedish Government submitted a proposal to the Parliament regarding the calculations of nuclear waste fees and the investment of the nuclear waste fund. According to the proposal the operating time for calculating the waste fee will be 50 years, as opposed to the current 40 years. The fund would also be allowed to invest in other financial instruments in addition to government bonds. The Parliament will decide on a new regulatory framework for the fund at the end of 2017. 

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 decisions were 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 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. In 2017, the tax for Fortum is estimated to decrease by approximately EUR 32 million to EUR 52 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 2018, there is no capacity tax. The hydropower real-estate tax will decrease over a four-year period beginning in 2017, from today's 2.8% to 0.5%. The real-estate tax on hydro will, as stated in the Government’s budget, 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 is estimated to decrease by approximately EUR 20 million to approximately 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 will be clearly lower than today. The process for renewing existing hydro permits will also be reformed. 

In 2015, 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, steady 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. 

Consumer Solutions 

In Consumer Solutions, profitability is achieved through competitive product and service offerings, efficient operations, scale benefits in systems and operations as well as prudent risk management. As the Consumer Solutions segment hedges most of the market risk exposure, it is typically more exposed to short-term variations in power prices and demand than to long-term price trends. Short-term volatility, often caused by temperature, can have a substantial impact on power prices and on power demand. 

The competitive environment affects the Consumer Solutions segment both through the sales margins of the products sold and the size of the customer base. The competition in the Nordic electricity retail market is expected to remain challenging, continuing to put pressure on sales margins. We have increased our focus and spend on developing new digital services for consumers, to reduce the effects of the challenging market conditions and to create a solid foundation for competitive operations in the future. 


The Russia segment's new capacity generation built after 2007 under the Russian Capacity Supply Agreement (CSA) is a key driver for earnings growth in Russia, as it is expected to bring income from new volumes sold and also to receive 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. In addition, 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 Capacity Supply Agreements (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’s plants were selected. Fortum has 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, 195 MW obtained forced mode status; for 2020, 175 MW; and for 2021, 105 MW. 

The Russian gas price was increased by 3.9% in July 2017, which is expected to increase the annual average gas price for 2017 by 2.0%. 

Capital expenditure and divestments 

Fortum currently expects its capital expenditure, excluding acquisitions, to be approximately EUR 800 million in 2017. The annual maintenance capital expenditure is estimated to be less than EUR 300 million in 2017, well below the level of depreciation. 


The effective corporate income tax rate for Fortum in 2017 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 decisions were not in Fortum’s favour. Fortum will appeal the decisions. If the decisions remain in force despite the appeal, the impact on the net profit would be approximately EUR 28 million (approximately SEK 273 million). Fortum has not made a provision 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 ensure future operations. Fortum does not agree with the Court's decision and has applied for the right to appeal from the Supreme Administrative Court.


At the end of September 2017, approximately 65% of Generation's estimated Nordic power sales volume was hedged at EUR 30 per MWh for the rest of 2017, approximately 50% at EUR 28 per MWh for 2018, and approximately 30% at EUR 24 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. 

Espoo, 25 October 2017 

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 & Financial Communications: Måns Holmberg, tel. +358 44 518 1518, Rauno Tiihonen, tel. +358 10 453 6150, Pirjo Lifländer +358 40 643 3317, and 

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

The condensed Interim Report has 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. 

Financial calendar in 2018 

Fortum Corporation’s financial statements bulletin for the year 2017 will be published on 2 February 2018 at approximately 9.00 EET. 

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 Annual General Meeting 2018 is planned to take place on 28 March 2018, and the possible dividend related dates planned for 2018 are: 

  • The ex-dividend date 29 March 2018
  • The record date for dividend payment 3 April 2018
  • The dividend payment date 10 April 2018 


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

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About Us

Fortum is a leading clean-energy company that provides its customers with electricity, heating and cooling as well as smart solutions to improve resource efficiency. We want to engage our customers and society to join the change for a cleaner world. We employ some 9,000 professionals in the Nordic and Baltic countries, Russia, Poland and India. In 2017, our sales were EUR 4.5 billion. Fortum's share is listed on Nasdaq Helsinki.