Annual Report 2013 | Suomeksi |

Financial performance and position

The strategic assessment of the electricity distribution business and inaugurations of power plants were in focus.

Key financial figures
EUR million 2013 2012 2011   Change 13/12
Sales 6,056 6,159 6,161 -2%
Operating profit 1,712 1,874 2,402 -9%
Operating profit, % of sales 28.3 30.4 39.0 -7%
Comparable operating profit 1,607 1,752 1,802 -8%
Profit before taxes 1,499 1,586 2,228 -5%
Profit for the period attributable to owners of the parent 1,204 1,416 1,769 -15%
Earnings per share, EUR 1.36 1.59 1.99 -14%
Net cash from operating activities 1,836 1,382 1,613 33%
Shareholders' equity per share, EUR 11.28 11.30 10.84 0%
Capital employed 19,780 19,420 17,931 2%
Interest-bearing net debt 7,849 7,814 7,023 0%
Equity-to-assets ratio, % 44 43 44 2%
Average number of shares, 1,000s 888,367 888,367 888,367 0%
Group financial targets
Target 2013 2012 2011   Change
13/12
ROCE, % 12 9.2 10.2 14.8 -10%
ROE, % 14 12.0 14.6 19.7 -18%
Capital structure:
Comparable net debt/EBITDA Around 3 3.4 3.2 3.0 6%
Net debt/EBITDA 3.2 3.1 2.3 3%

In 2013, electricity consumption in the Nordic countries was slightly lower than last year at 386 terawatt-hours (TWh), even though non-industrial consumption partly offset the decrease in industrial demand especially during the first half of the year. In Russia, in the areas where Fortum operates, consumption was flat at 767 TWh. 

The Nordic hydro reservoirs were below the long-term average and although the levels normalised towards the end of the year, they were still clearly lower than last year’s record-high levels. Precipitation was weak in Fortum’s operating areas during the first three quarters of the year; this put pressure on hydro volumes and thus impacted Fortum's results negatively. 

The comparable profit declined compared to the previous year and totalled approximately EUR 1.6 billion, and earnings per share were EUR 1.36. The cash flow from operating activities, however, was strong with all divisions contributing. We made good progress in sustainability and safety in 2013. Fortum received a special award for innovation from the Global District Energy Climate Awards organisation and was ranked as the best company in the Nordic climate index. We had our lowest-ever total recordable incidents (TRIF) among our own personnel.

In December 2013, Fortum completed the strategic assessment of its electricity distribution business. The conclusion was that divesting the electricity distribution business is the best solution in order to further develop our company according to its strategy. We also consider it to be the best solution for the distribution business itself and for its customers. Focusing on electricity and heat production and sales, is estimated to give Fortum more

strategic flexibility and to improve the company's long-term value creation.

In line with the conclusions of the completed assessment, Fortum agreed to sell its electricity distribution business in Finland to Suomi Power Networks Oy. The business is in very good shape and deserves to be developed further as a core business from its own standpoint. The buyer has a deep understanding of the social importance of infrastructure assets and is committed to developing reliable networks and services for the customers. We expect to close the deal during the first quarter of 2014; until then, work continues as usual in all business areas. Fortum is also evaluating the possible future divestment opportunities within the electricity distribution business country by country.

In 2014, we will continue our everyday work in serving our customers in all areas of our business. The year-end storms

in Finland, Sweden and Norway tested once again our ability to serve customers in challenging conditions. We have continuously improved the reliability of our networks. The same trend can be seen also in the results of the recent customer satisfaction survey: Fortum improved its ranking in electricity sales, distribution and as a supplier of district heat. 

2013 was a year of inaugurations at Fortum. In Jelgava, Latvia, and in Järvenpää, Finland, we commissioned new biomass-fired CHP plants. In Klaipeda, Lithuania, we took into production a waste-to-energy CHP plant, while in Brista, Sweden, test-runs were started. Fortum also commissioned the world's first bio-oil production facility that is integrated with a combined heat and power (CHP) plant in Joensuu, Finland. In Russia, the gas-fired thermal power plant Nyagan GRES was inaugurated by President of Russia Vladimir Putin and President of Finland Sauli Niinistö. Units 1 and 2 are now commissioned, and both are receiving capacity

payments. We will continue the determined implementation of our investment programme with three large units still under construction. Both with existing and with new power plants, we continue to build Fortum's future growth.

The on-going company-wide efficiency programme continued to proceed according to plan, and we are approximately half way through. The work will continue; we are continuously working on reducing fixed costs and capital expenditures, divesting non-core business and focusing on working capital efficiency.

Looking at the operating environment for Fortum overall, it’s clear that the markets will remain challenging also in 2014. Only through our own actions can we ensure that the premises for success are in place. 

Changes to the EU energy and climate policy are likely to be seen in 2014. It is crucial that determined measures to

mitigate climate change are continued. However, in order to safeguard the competiveness of European industries and get the much needed investments into low-carbon energy production and infrastructure, the EU climate policy should be steered by a single CO2 reduction target post-2020, and the existing overlapping steering mechanisms should be removed. In January, the European Commission published a new proposal for the EU's climate policy and energy policy - the proposal is a step in the right direction, but overlapping targets remain.

Regarding the tax climate, the governments in Finland and Sweden have made positive and material decisions on lowering the corporate tax rates to stimulate businesses; beyond that, the overall tax climate has tightened considerably. Fortum has appealed several cases raised by the tax authorities that have been addressed retroactively and also some cases that have already been scrutinised.

In Finland, the power plant tax (previously called the windfall tax) has been adopted as of 2014. It will be applied provided that the European Commission finds that it is in line with the general tax principles and regime in Finland and that it does not include forbidden state aid. The Swedish hydro real-estate tax is also being challenged.

We are pursuing growth, carefully considering and prioritising alternatives in line with our strategy. We consider Fortum to be well positioned among its peers and ready to grab emerging opportunities that are a good fit with our strategy focus on low-carbon power generation, energy-efficient combined heat and power (CHP) production and sales, and innovative customer offerings. Concentrating on electricity and heat production and sales is estimated to improve Fortum's long-term value creation.

To summarise, 2013 was a year full of activity as well as challenges; nevertheless, the result was satisfactory.

The dividend proposal reflects Fortum's dividend policy to pay a stable, sustainable and over time increasing dividend that supports shareholder value and the company's strategy. 

Sales, EUR million
Operating profit, EUR million
Return on capital employed, %
Return on shareholders' equity, %
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