Core areas of the strategy
The core of our strategy is our strong expertise in CO2-free hydro and nuclear power and in efficient combined heat and power production. Our strengths also include solid experience operating in the energy markets. Our business focus areas will continue to be developed through these competencies.
Build on the strong Nordic core
Hydro and nuclear power have a significant role in Fortum's production portfolio. Both are CO2-free production forms and competitive with regard to variable costs. In 2013, about 85% of Fortum's European electricity production was based on hydro and nuclear power located in the Nordic countries.
Hydro power is particularly valuable in the integrating European energy market, where it can be used to balance out consumption peaks and the production fluctuations of growing wind and solar power.
Combined heat and power (CHP) production has a central role in our business throughout the Baltic region. Electricity produced in conjunction with district heat enables the use of bio- and waste fuels, and it is a more energy-efficient way to use traditional fossil fuels.
In 2013, Fortum assessed the future alternatives of its electricity distribution business. After thorough consideration, the company has concluded that divesting the electricity distribution business is the best solution for the business and its customers, Fortum's shareholders and the company's other businesses. Focusing on electricity and heat production and sales, is estimated to improve Fortum's long-term value creation. Fortum has electricity distribution business in Finland, Sweden and Norway. The assessment has no impact on Fortum's electricity retail customers. Fortum will continue to develop its electricity sales business as an integral part of the company's strategy and will continue offering innovative products and services to its approximately 1.2 million electricity retail customers in the Nordic countries also in the future.
Create solid earnings growth in Russia
Russia is the fourth biggest consumer of electricity globally and the growth of its electricity demand is outpacing that of the EU's. Fortum's investment programme is bringing new energy-efficient production units on stream; these are expected to significantly increase the share of sales and profits that Fortum earns from its Russian operations and will diversify Fortum's production portfolio geographically. Completing the investment programme is a key priority for us.
Fortum's production in Russia consists mainly of combined heat and power production. For the time being, the heating market in Russia is completely regulated and does not work effectively nor encourage the necessary investments in the sector. However, heating reform is being drafted in Russia. If realised, it would offer significant possibilities of value creation for Fortum.
Build a platform for future growth
Alongside our current business operations, we are pursuing precisely targeted new growth and developing future energy solutions. We are developing the solar power business through centralised large-scale production, commercial applications and distributed household applications.
Additionally, our research and development activities support the advancement towards a carbon dioxide-free future by promoting the adoption of new technologies, which could offer significant business opportunities in the future. Examples include wave power, new CHP concepts, and new solutions for customers.