Annual Report 2013 | Suomeksi |

Economic performance

EC1 Direct economic value generated and distributed

Fortum analyses the economic impacts and produced prosperity from its operations to different stakeholders in its operating countries and market areas. These include shareholders and investors, customers, employees, suppliers of services and goods, and the public sector. In terms of suppliers, Fortum analyses its impact also globally, paying special attention to risk countries.

In 2013, the difference between added value generated and distributed to stakeholders was EUR 1,136 million (2012: 746) for the development of own operations.

Monetary flows by stakeholder group in 2011-2013
EUR million 2013 2012 2011
Generation of added value
Income from customers Income from customers on the basis of products and services sold, financial income and income from divestment of business activities or plants 6,539 6,398 7,192
Purchases from suppliers Cash payments to suppliers of raw materials, goods and services -3,067 -3,002 -3,272
Fortum produced added value 3,472 3,396 3,920
Distribution of added value
Employees compensation Wages, salaries, remunerations and other indirect employee costs -529 -5431) -529
Funders compensation Dividends, interest and financial expenses paid to investors -1,216 -1,514 -1,431
Public sector Income and production taxes paid, support for society and donations -591 -593 -728
Distributed to stakeholders -2,336 -2,650 -2,688
Retained in business 1,136 746 1,232
1) Comparative period information for 2012 has been restated due to the accounting change for pensions.

Breakdown of Fortum's added value by operating country in 2011-2013
Capital expenditure Employee costs Taxes1) Total
EUR million 2013 2012 2011 2013 20122) 2011 2013 2012 2011 2013 2012 2011
Finland 266 338 239 208 221 209 153 137 250 627 696 698
Sweden 497 492 392 177 181 181 325 367 440 999 1,040 1,013
Russia 435 568 670 88 83 80 19 19 15 542 670 765
Estonia 16 10 12 5 5 7 1 1 0 22 16 19
Poland 10 19 18 15 18 21 7 10 8 32 47 47
Norway 13 36 19 15 16 14 2 2 1 30 54 34
Other countries 47 95 58 21 19 17 81 49 7 149 163 82
Total 1,284 1,558 1,408 529 543 529 588 585 721 2,401 2,686 2,658
1) Includes paid income taxes, production taxes and property taxes
2) Comparative period information for 2012 has been restated due to the accounting change for pensions.

Investments are not recognised in the calculation of distributed added value in accordance with GRI, but

Fortum has included investments in its own assessment of economic impacts, as their annual volume and impact on the society is significant.

Capital expenditure1) by country of operation in 2012-2013
Finland Sweden Estonia Poland Norway Other countries Total
EUR million 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012
Power
Hydropower 17 12 91 86 - - - - - - - - 108 98
Nuclear 
power
60 53 - - - - - - - - - - 60 53
Fossil-based
electricity
2 4 - - - - - - - - - - 2 4
Renewable-based 
electricity
4 1 3 27 - - - - - - - - 7 28
Other 1 1 - - - - - - - - 0 6 1 7
Total Power 84 71 94 113 - - - - - - 0 6 178 190
Heat
Fossil-based
heat
7 9 6 12 - - 2 3 - - 1 - 16 24
Fossil-based
electricity
- - - - - - 2 1 - - - - 2 1
Renewable heat, 
of which
17 66 218 150 - - - - - - 39 87 274 303
Waste 0 0 105 106 - - - - - - 14 47 119 153
Biofuels 17 66 111 41 - - - - - - 25 40 153 147
Other - - 2 3 - - - - - - - - 2 3
District heat network 14 12 42 33 16 10 6 15 4 21 4 0 86 91
Other 5 12 14 32 - 0 0 - - - 0 1 19 45
Total Heat 43 99 280 227 16 10 10 19 4 21 44 88 397 464
Distribution 128 158 123 151 - 0 - - 9 15 - - 260 324
Electricity Sales 1 - - 0 - - - - - - - 1 1 1
Other 10 10 0 1 - - 0 - - - 3 - 13 11
Total, excluding Russia Division 266 338 497 492 16 10 10 19 13 36 47 95 849 990
Russia
Fossil-based electricity 387 535
Fossil-based heat 48 32
Other 0 1
Total Russia 435 568
Total, including Russia Division 1,284 1,558
1) Includes capital expenditure to both intangible assets and property, plant and equipment.
Maintenance investments during 2013 in property, plant and equipment were EUR 239 million (2012: 247). Investments due to requirements of legislation were EUR 187 million (2012: 223). Investments increasing productivity were EUR 385 million (2012: 422) and growth investments were EUR 473 million (2012: 666).

EC2 Financial implications and other risks and opportunities for the organisation's activities due to climate change

Climate change poses both financial, regulatory and physical risks as well as opportunities for Fortum. As energy production and use is the largest source of greenhouse gases, the energy sector has a central role in building a low-carbon future. The energy industry has established visions and roadmaps of the future energy system and is prepared to invest in new climate-benign production capacity, provided that the related policy framework and preconditions of society are in place.

The primary impact of climate regulation for Fortum is the price of carbon dioxide in the EU's emissions trading and the cost arising from it. This also determines the financial value for the reduction of emissions. The price of CO2 increases the

production cost of fossil-based energy, but it also raises the prices of energy products. The best way to reduce the risk related to the price of carbon dioxide is to increase CO2-free and low-carbon production capacity.

In 2013, about 88% of Fortum's electricity production in the EU was CO2-free. In 2013, Fortum had a total of 83 (2012: 79) plants in six member states within the EU's emissions trading scheme. About 98% of the CO2 emissions in the EU area were included in the emissions trading system. In 2013, Fortum was granted 3.0 million tonnes in free emissions allowances. The company's emissions in the EU emissions trading scheme were 6.0 million tonnes. Thus, in terms of emissions allowances, Fortum showed a deficit.

In the third, ongoing ETS period, 2013-2020, the volume of Fortum's free emissions allowances will decrease significantly, because electricity production has to purchase all allowances from the market or auctions.

Only in Poland and the Baltic countries, Fortum's CHP plants will receive free allowances also for electricity production on the basis of the derogation rules of the Emissions Trading Directive.

In Russia, Fortum's CO2 emissions are growing in upcoming years as a result of the increasing energy production capacity. In Russia, carbon dioxide emissions do not have economic value, so far. During the Kyoto period 2008-2012, the so-called Joint Implementation (JI) mechanism could be utilised. Fortum implemented several projects in this framework.

Fortum is participating in two international climate funds, the Prototype Carbon Fund (PCF) and the Testing Ground Facility (TGF). In 2013, Fortum received a total 325,000 emission reduction units from these funds. Of the emission reduction units received, 274,000 were CER units and 51,000 

were ERU units. Fortum's emission reduction units received so far total 710,000 and we estimate that we will still receive about 300,000 units during the funds' operating period.

Fortum is exposed to physical risks of climate change, including changes in weather patterns that may change energy demand and supply from, e.g., hydropower plants. More frequent and intensive storms may impact the operation and maintenance of the distribution network. Higher precipitation may affect hydropower production, dam safety and bioenergy supply. In addition to climate change mitigation, Fortum is also taking measures to adapt its operations to climate change and to take impacts into consideration in e.g. production planning and in evaluating growth projects.

Concern about climate change is expected to result in an increasing demand for low-carbon and energy-efficient

energy products and solutions. Fortum's know-how in CO2-free hydro and nuclear power and in energy-efficient CHP as well as research and development in the future energy system and technologies, like wave and solar energy, can prove to be a competitive advantage. Fortum is investing in CO2-free production in Europe and sees business opportunities in providing climate-benign energy solutions for sustainable urban living and the electrification of transport.

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EC3 Coverage of the organisation's defined benefit plan obligations

Fortum's pension arrangements conform to the local regulations and practices in each country where Fortum companies operate; these are discussed in section 32 Pension obligations of the notes of the Financials 2013.

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