Annual Report 2013 | Suomeksi |

5 Segment reporting

Download as Excel
Accounting policies + -
Fortum discloses segment information in a manner consistent with internal reporting to Fortum's Board of Directors and to Fortum Management Team led by the President and CEO. Fortum mainly has segments based on type of business operations, combined with one segment based on geographical area.
The Group's businesses are divided into the following reporting segments: Power, Heat, Russia, Distribution and Electricity Sales.
Revenue recognition
Revenue comprises the fair value consideration received or receivable at the time of delivery of products and/or upon fulfilment of services. Revenue is shown, net of rebates, discounts, value-added tax and selective taxes such as electricity tax. Revenue is recognised as follows:
Sale of electricity, heat, cooling and distribution of electricity
Sale of electricity, heat, cooling and distribution of electricity is recognised at the time of delivery. The sale to industrial and commercial customers and to end-customers is recognised based on the value of the volume supplied, including an estimated value of the volume supplied to customers between the date of their last meter reading and year-end.
Physical energy sales and purchase contracts are accounted for on accrual basis as they are contracted with the Group's expected purchase, sale or usage requirements.
Electricity tax is levied on electricity delivered to retail customers by domestic utilities in Sweden. The tax is calculated on the basis of a fixed tax rate per kWh. The rate varies between different classes of customers. Sale of electricity in the income statement is shown net of electricity tax.
Physical electricity sales and purchases are done through Nord Pool Spot. The sales and purchases are netted on Group level on an hourly basis and posted either as revenue or cost, according to whether Fortum is a net seller or a net buyer during any particular hour.
The prices charged of customers for the sale of distribution of electricity are regulated. The regulatory mechanism differs from country to country. Any over or under income decided by the regulatory body is regarded as regulatory assets or liabilities that do not qualify for balance sheet recognition due to the fact that no contract defining the regulatory aspect has been entered into with a specific customer and thus the receivable is contingent on future delivery. The over or under income is normally credited or charged over a number of years in the future to the customer using the electricity connection at that time. No retroactive credit or charge can be made.
Connection fees
Fees paid by the customer when connected to the electricity, gas, heat or cooling network are recognised as income to the extent that the fee does not cover future commitments. If the connection fee is linked to the contractual agreement with the customer, the income is recognised over the period of the agreement with the customer.
Connection fees paid by customers when connected to the electricity network before 2003 are refundable in Finland if the customer would ever disconnect the initial connection. Also fees paid by the customer when connected to district heating network in Finland are refundable. These connection fees have not been recognised in the income statement and are included in other liabilities in the balance sheet.
Contract revenue
Contract revenue is recognised under the percentage of completion method to determine the appropriate amount to recognise as revenue and expenses in a given period. The stage of completion is measured by reference to the contract costs incurred up to the closing date as a percentage of total estimated costs for each contract. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. They are presented as inventories, prepayments or other assets, depending on their nature.
The Group presents as an asset the amount due from customers for contract work for all contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceed progress billings. Progress billings not yet paid by customers and retention are included within 'trade and other receivables'. The Group presents as a liability the amount due to customers for contract work for all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less recognised losses).
5.1 Fortum’s business structure
Fortum's business operations are organised in four divisions and five corporate staff functions. The business divisions are Power, Heat, Russia and Electricity Solutions and Distribution. The Electricity Solutions and Distribution (ESD) Division consists of business areas Distribution and Electricity Sales. The staff functions are Corporate Finance, Corporate Communications, Corporate Human Resources, Corporate Relations and Corporate R&D and Innovation. The shared service centers, as parts of the staff functions, charge the companies according to service level agreements.
5.2 Segment structure in Fortum
The business divisions (Power, Heat and Russia) and the business areas of ESD Division (Distribution and Electricity Sales) are Fortum's reportable segments under IFRS.
Below is the description of the reportable segments:
Power consists of Fortum’s power generation, power trading and power capacity development as well as expert services for power producers. Power sells its power mainly to the Nordic power exchange Nord Pool Spot.
Heat segment's main business is combined heat and power (CHP) generation, district heating activities and business to business heating solutions in the Nordic countries and other parts of the Baltic Rim. The power from CHP-production is sold to Nord Pool Spot and to end customers mainly by long-term contracts.
Russia consists of power and heat generation and sales in Russia. It includes OAO Fortum and Fortum's over 25% interest in TGC-1, which is an associated company and consolidated according to the equity method.
Distribution owns and operates distribution and regional networks and distributes electricity to a total of 1.6 million customers in Sweden, Finland and Norway. Electricity distribution is a regulated business, and is therefore supervised by national energy authorities. Models and principles for supervision and considerations of reasonable tariffs differ from country to country.
Electricity Sales is responsible for retail sales of electricity as well as smart electricity solutions and services to a total of 1.2 million private customers. In addition, standardised products are offered for large corporate customers (Sales Trading). Electricity Sales buys its electricity from Nord Pool Spot.
Other segment includes mainly the shareholding in the associated company Hafslund ASA and Fortum Group staff functions.
5.3 Definitions for segment information
Financial target setting, follow up and allocation of resources in the group's performance management process is mainly based on the business units' comparable operating profit including share of profit from associated companies and comparable return on net assets. Fortum discloses in the segment information operating profit, comparable operating profit, comparable EBITDA and share of profit from associated companies as well as return on net assets and comparable return on net assets.
Consolidation by segment is based on the same principles as for the Group as a whole. Comparable operating profit is reported to give a better view of each segment's performance. The difference between Comparable operating profit and Operating profit is that Comparable operating profit does not include “Items affecting comparability”, which are:
• non-recurring items, which mainly consist of capital gains and losses;
• effects from fair valuations of derivatives hedging future cash flows which do not obtain hedge accounting status according to IAS 39. The major part of Fortum's cash flow hedges obtain hedge accounting where the fair value changes are recorded in equity;
See Note 7 Fair value changes of derivatives and underlying items in income statement.
• effects from the accounting of Fortum's part of the State Nuclear Waste Management Fund where the assets in the balance sheet cannot exceed the related liabilities according to IFRIC 5.
See Note 30 Nuclear related assets and liabilities.
The segments’ net assets consist primarily of non-interest-bearing assets and liabilities such as property, plant and equipment, intangible assets, participations in associated companies, inventories, operative related accruals and trade and other receivables and liabilities. Net assets also include Fortum's share of the State Nuclear Waste Management Fund, nuclear related provisions, pension and other provisions as well as assets and liabilities from fair valuations of derivatives hedging future cash flows which do not obtain hedge accounting status according to IAS 39.
Interest-bearing receivables and liabilities and related accruals, current and deferred tax items, as well as assets and liabilities from fair valuations of derivatives hedging future cash flows which obtain hedge accounting status according to IAS 39 are not allocated to the segments' net assets.
In comparable net assets, segment’s net assets are adjusted for assets and liabilities from fair valuations of derivatives hedging future cash flows which do not obtain hedge accounting status according to IAS 39 to be in line with comparable operating profit.
Gross investments in shares include investments in subsidiary shares, shares in associated companies and other shares in available for sale financial assets. Investments in subsidiary shares are net of cash and grossed with interest-bearing liabilities in the acquired company.
Gross divestments in shares include divestments in subsidiary shares, shares in associated companies and other shares in available for sale financial assets. Divestments in subsidiary shares are net of cash and grossed with interest-bearing liabilities in the sold company.
See also Financial key figures,
Definitions of key figures
and Quarterly financial information.
Quarterly segment information from 2005 to 2013 is available on Fortum's website www.fortum.com/investors/financial information.
5.4 Inter-segment transactions and eliminations
Power segment sells its production to Nord Pool Spot and Electricity Sales buys its electricity from Nord Pool Spot. Eliminations of sales include eliminations of sales and purchases with Nord Pool Spot that are netted on group level on an hourly basis and posted either as revenue or cost depending on if Fortum is a net seller or net buyer during any particular hour. Inter-segment sales, expenses and results for the different business segments are affected by intra-group deliveries, which are eliminated on consolidation. Inter-segment transactions are based on commercial terms.
5.5 Segment information 2013
Income statement
EUR million Note Power Heat Russia Distribution Electricity
Sales
Other Netting and
eliminations 1)
Total
Sales 2,248 1,565 1,119 1,075 744 69 -764 6,056
of which internal 70 8 - 36 73 67 -254 0
External sales 2,178 1,557 1,119 1,039 671 2 -510 6,056
Depreciation, amortisation and impairment -145 -216 -150 -219 -2 -8 - -740
Comparable EBITDA 1,003 489 258 550 50 -51 - 2,299
Comparable operating profit 858 273 156 331 48 -59 - 1,607
Non-recurring items 6 25 18 0 17 0 1 - 61
Changes in fair values of derivatives hedging future cash-flow 6, 7 15 -3 0 0 8 1 - 21
Nuclear fund adjustment 6, 30 23 - - - - - - 23
Operating profit 921 288 156 348 56 -57 - 1,712
Share of profit of associated companies and joint ventures 20, 30 4 19 46 5 0 31 - 105
Finance costs - net -318
Income taxes -220
Profit for the period 1,279
1) Netting and eliminations include eliminations of Group internal sales and netting of Nord Pool Spot transactions. Sales and purchases with Nord Pool Spot, EUR 510 million, are netted on Group level on an hourly basis and posted either as revenue or cost depending on if Fortum is a net seller or net buyer during any particular hour.
Impairment losses and restructuring costs
EUR million Power Heat Russia Distribution Electricity
Sales
Other Total
Recognised impairment losses for trade receivables 0 -3 -18 -2 -1 0 -24
Recognised impairment losses for intangible assets and property, plant and equipment -24 0 - - - - -24
Restructuring costs 0 -2 0 0 0 -2 -4
Impairment losses and restructuring costs are included in comparable operating profit.
Recognised impairment losses for property, plan and equipmenet in Power segment includes EUR 20 million impairment loss relating to the decision to discontinue electricity production at Inkoo power plan.
Assets and liabilities
EUR million Power Heat Russia Distribution Electricity
Sales
Other Eliminations Total
Non-interest-bearing assets 6,441 4,553 3,687 4,233 310 138 -268 19,094
Participations in associated companies and joint ventures 896 156 463 68 0 322 - 1,905
Assets included in Net assets 7,337 4,709 4,150 4,301 310 460 -268 20,999
Interest-bearing receivables 1,467
Deferred taxes 130
Other assets 1) 570
Cash and cash equivalents 1,254
Total assets 24,420
Liabilities included in Net assets 1,008 426 304 531 271 145 -268 2,417
Deferred tax liabilities 1,648
Other liabilities 575
Total liabilities included in Capital employed 4,640
Interest-bearing liabilities 2) 9,118
Total equity 10,662
Total equity and liabilities 24,420
1) Other assets at 31 December 2013 includes cash, EUR 15 million, included in Assets related to Assets held for sale.
2) Interest-bearing liabilitiesat 31 December 2013 includes interest-bearing liabilities, EUR 20 million, included in Liabilities related to Assets held for sale.
Investments/Divestments
EUR million Note Power Heat Russia Distribution Electricity
Sales
Other Total
Gross investments in shares 8, 20 2 0 0 0 - 13 15
Capital expenditure 18, 19 178 397 435 260 1 13 1,284
of which capitalised borrowing costs 2 11 56 - - - 69
Gross divestments of shares 79 11 - 52 - - 142
Comparable return on net assets 3)
Net assets
by segments
EUR millon
Return
on net
assets, %
Comparable
return
on net assets, %
Power 6,329 14.6 13.8
Heat 4,283 7.2 6.8
Russia 3,846 5.2 5.2
Distribution 3,770 9.2 8.8
Electricity Sales 39 148.9 137.9
Other 315 -9.6 -8.3
3) Including assets and liabilities relating to Assets held for sale.
Employees
Power Heat Russia Distribution Electricity
Sales
Other Total
Number of employees 31 Dec 1,709 2,102 4,162 852 496 565 9,886
Average number of employees 1,887 2,164 4,245 866 506 578 10,246
5.6 Segment information 2012
Income statement
EUR million Note Power Heat Russia Distribution Electricity
Sales
Other Netting and
eliminations 1)
Total
Sales 2,415 1,628 1,030 1,070 722 137 -843 6,159
of which internal 296 18 - 37 55 -66 -340 0
External sales 2,119 1,610 1,030 1,033 667 203 -503 6,159
Depreciation, amortisation and impairment -114 -210 -121 -209 -1 -9 - -664
Comparable EBITDA 1,260 481 189 529 40 -83 - 2,416
Comparable operating profit 1,146 271 68 320 39 -92 - 1,752
Non-recurring items 6 57 80 11 5 1 1 - 155
Changes in fair values of derivatives hedging future cash-flow 6, 7 3 -7 0 6 -1 -3 - -2
Nuclear fund adjustment 6, 30 -31 - - - - - - -31
Operating profit 1,175 344 79 331 39 -94 - 1,874
Share of profit of associated companies and joint ventures 20, 30 -12 20 27 8 0 -20 - 23
Finance costs - net -311
Income taxes -74
Profit for the period 1,512
1) Netting and eliminations include eliminations of Group internal sales and netting of Nord Pool Spot transactions. Sales and purchases with Nord Pool Spot, EUR 503 million, are netted on Group level on an hourly basis and posted either as revenue or cost depending on if Fortum is a net seller or net buyer during any particular hour.
Impairment losses and restructuring costs
EUR million Power Heat Russia Distribution Electricity
Sales
Other Total
Recognised impairment losses for trade receivables 0 -3 -8 -2 -1 0 -14
Recognised impairment losses for intangible assets and property, plant and equipment 0 0 - - - - 0
Restructuring costs 0 -2 - 0 0 0 -2
Impairment losses and restructuring costs are included in comparable operating profit.
Assets and liabilities
EUR million Power Heat Russia Distribution Electricity
Sales
Other Eliminations Total
Non-interest-bearing assets 6,477 4,628 3,833 4,319 292 326 -403 19,472
Participations in associated companies and joint ventures 903 157 476 109 0 334 1,979
Assets included in Net assets 7,380 4,785 4,309 4,428 292 660 -403 21,451
Interest-bearing receivables 1,393
Deferred taxes 177
Other assets 577
Cash and cash equivalents 963
Total assets 24,561
Liabilities included in Net assets 991 499 461 539 241 502 -403 2,830
Deferred tax liabilities 1,879
Other liabilities 432
Total liabilities included in Capital employed 5,141
Interest-bearing liabilities 8,777
Total equity 10,643
Total equity and liabilities 24,561
Investments/Divestments
EUR million Note Power Heat Russia Distribution Electricity
Sales
Other Total
Gross investments in shares 8 20 - 10 - - - 6 16
Capital expenditure 18 19 190 464 568 324 1 11 1,558
of which capitalised borrowing costs 1 10 68 1 - - 80
Gross divestments of shares 102 269 - 37 2 0 410
Comparable return on net assets
Net assets
by segments
EUR million
Return
on net
assets, %
Comparable
return on
net assets, %
Power 6,389 18.7 18.5
Heat 4,286 8.8 7.0
Russia 3,848 3.0 2.7
Distribution 3,889 9.1 8.8
Electricity Sales 51 152.3 203.1
Other 158 -68.8 -34.1
Employees
Power Heat Russia Distribution Electricity
Sales
Other Total
Number of employees 31 Dec 1,846 2,212 4,253 870 509 681 10,371
Average number of employees 1,896 2,354 4,301 873 515 661 10,600
5.7 Group-wide disclosures
The Group's operating segments operate mainly in the Nordic countries, Russia, Poland and other parts of the Baltic Rim area. Power, Distribution and Electricity Sales operate mainly in Finland and Sweden, whereas Heat operates in all of these geographical areas except Russia. Other countries are mainly Latvia, Lithuania and the U.K. The home country is Finland.
The information below is disclosing sales by product area as well as sales by the country in which the customer is located. Assets, capital expenditure and personnel are reported where the assets and personnel are located. Participations in associates and joint ventures are not divided by location since the companies concerned can have business in several geographical areas.
External sales by product area
EUR million 2013 2012
Power sales excluding indirect taxes 3,341 3,413
Heat sales 1,500 1,501
Network transmissions 1,024 1,002
Other sales 191 243
Total 6,056 6,159
Heating sales include sale of delivered heat and transmission of heat.
Due to the large number of customers and the variety of its business activities, there is no individual customer whose business volume is material compared with Fortum's total business volume.
Sales by market area based on customer location
EUR million 2013 2012
Nordic 4,464 4,641
Russia 1,121 1,029
Poland 205 220
Estonia 69 69
Other countries 197 200
Total 6,056 6,159
The Nordic power production is not split by countries since Nordic power production is mainly sold through Nord Pool Spot.
Capital expenditure by location
EUR million 2013 2012
Finland 266 338
Sweden 497 492
Russia 435 568
Poland 10 19
Estonia 16 10
Norway 13 35
Other countries 47 96
Total 1,284 1,558
Segment assets by location 1)
EUR million 2013 2012
Finland 4,371 4,401
Sweden 10,046 10,396
Russia 3,687 3,833
Poland 352 386
Estonia 200 203
Norway 245 285
Other countries 461 263
Eliminations -268 -295
Non-interest bearing assets 19,094 19,472
Participations in associates and joint ventures 1,905 1,979
Total 20,999 21,451
1) Including assets relating to Assets held for sale.
See also Note 9 Assets held for sale.
Number of employees on 31 December by location
2013 2012
Finland 2,477 2,647
Sweden 1,939 2,050
Russia 4,162 4,252
Poland 636 687
Estonia 210 204
Norway 141 145
Other countries 321 386
Total 9,886 10,371
X

Search Fortum Annual Report 2013

Start typing...

Search results