Fortum Oyj Corp Ord

Good morning, everyone. A warm welcome to Fortum's joint webcast and news conference on our first quarter 2026 results. My name is Ingela Ulves, and I'm heading the investor relations at Fortum. As always, this event is being recorded, and there will be a replay on the website later today. With me here in the studio are our CEO, Markus Raurama, and our CFO, Tiina Tuomela. They will present the group's financial and operational performance for the first quarter. Now let's go to our presentations, after which we will take your questions in the Q&A session. So with this, I hand over to you, Markus, to start.

Thank you very much, Ingella. A warm welcome to this call, also from my side. I will start by going through the key elements of our highlights and our financial performance, then say a couple of words about the market development. After that, Tina will provide more details on the financials and how the operational performance turned into our results. Let me now start with the highlights. Starting with achieved power price. In the first quarter, it was slightly above last year's level. 62.5 euros per megawatt hour compared to 60.1 in the first quarter last year. The realized market price, i.e. the blended price for Fortum's price areas, was 85.7 euros per megawatt hour compared to 46 euros per megawatt hour in the first quarter 2025. One of the clear highlights during the quarter was the optimization premium. It was again double-digit, as it was also one year ago. We keep our full year guidance for the premium intact, and it is expected to be between 8 to 10 euros per megawatt hour. The first quarter was characterized by relatively high spot prices and several price spikes, especially in January and February. Because of these high prices, we maximized our hydro generation, and the outcome was 5.9 TWh of output from hydro in the quarter. Nuclear generation was almost at last year's level, despite the unplanned outage in Oskarsham 3. Overall, our outright generation volume was 12.2 TWh, which is 0.6 TWh more than in the first quarter last year. Despite uncertainty in the operating environment, we continue to see robust underlying customer demand from various industrial sectors, which we believe reflects the long-term power demand growth. We see the data center sector remaining very active, particularly in Finland. As we have announced this year, we are supporting day one in its plans to build a data center in Nurmijärvi and end scale with its plans to establish a data center in Harjavalta. We are progressing with site development to meet future customer needs. Due to this high activity level from data centers and considering the projected demand growth, There has been discussions, especially in Finland, about future power availability. Current supply-demand balance in the Nordics shows a surplus with existing capacity. Lifetime extensions of nuclear power plants and preparedness to invest in renewables and other capacity can allow power generators to meet the foreseen increase in consumption. We have a strong balance sheet and good liquidity, so our overall financial position continues to be strong. The cash dividend of 74 euro cents per share was paid in the second quarter. After the reporting period, we signed a new 2.7 billion revolving credit facility, which replaces the previous one. Then over to our main figures and financial performance. Here are familiar comparable headline KPIs for the group's first quarter 2026. Positive development in all KPIs except cash flow and the reason for cash flow decrease is higher working capital. In Q1, our comparable operating profit totaled 521 million euros, an increase of 59 million euros. Comparable earnings per share increased from 42 to 45 cents per share. Operative cash flow decreased clearly to 355 million euros due to increased working capital. The increased working capital reflects higher sales prices. All of these lead to a leverage of 1.1 times measured by net debt to comparable EBITDA ratio. Tina will tell you more about our new net debt definition and transition of the Nordic power futures from Nasdaq to Euronext. Next, a few words about the market environment. Let's start by looking at the spot price and hydro reservoir situation for the Nordic market. It is good to note that this is not only Fortum's reservoirs, but the whole market. In the first quarter, Nordic spot prices increased significantly year on year. The reason was a combination of elevated consumption due to cold weather, reservoir levels being below average levels, and low wind power supply. Nordic power demand increased by approximately 8 TWh year on year, while wind availability was significantly below the seasonal average in the Nordics. In January and February, these weather conditions resulted in higher Nordic hydropower generation. At the beginning of the year, there was a moderate Nordic reservoir surplus, which then deteriorated during the quarter. In March, Nordic weather-driven fundamentals softened, resulting in a clear decline in spot prices and some recovery in the Nordic reservoir balance. Meanwhile, continental European electricity prices also strengthened in March, as gas prices surged following the escalation of the conflict in the Middle East. Precipitation levels were well below normal, particularly in January and February. Temperatures were colder than normal, while March was milder than the historical average. As a result, hydro inflows were close to normal, but Nordic hydro generation was above average, driven by higher power demand. The reservoir balance at the beginning of the year with the moderate surplus declined sharply during the quarter. This concludes my part, and I would now like to hand over to Tiina to talk more about business performance.

Thank you, Markus. Good morning, everyone, also on my behalf. I will now go through our financials in more detail. Let's start with the key figures. I will start with some of the comparable KPIs. The comparable operating profit for the first quarter amounted to 521 million euros, which is a clear increase from previous year. In the quarter also comparable net profit and comparable EPS increased. our comparable net profit for the quarter improved to 404 million euros. Consequently, our comparable EPS for the first quarter rose to 45 euro cents compared to 42 euro cents last year. Our cash flow during the quarter was 98 million lower than previous year and totaled 355 million euros. The positive effect of the higher EBITDA was offset by the negative change in working capital compared to the previous year. The main reason for the higher working capital comes from higher receivables in consumer solutions caused by higher power prices. Then over to the segment result for the comparable operating profit. Let's have a look at the first quarter. The group's comparable operating profits improved due to the higher result in generation segment. The profits of consumer solution was good and basically at the same level as last year, while the other operation segment's results declined. In the generation segment, comparable operating profits increased by 67 million to 503 million euros, mainly due to the higher hydro volumes and power prices, partly offset by the high hedge ratio. The optimization premium was good, and similar to last year, it was double-digit. Consumer solution comparable operating profits was almost at last year's level, which means that the result was the second best quarterly result. The reporting period includes a marginally positive effect of the acquisitions of Orange Energy completed in June 2025. In the other operation segment, comparable operating profit decreased by 8 million, showing a negative result of 28 million euros. The main reason was higher fixed cost and lower internal charges for services of enabling functions. Then over to the loan maturities, leverage and liquidity. Our financial position continues to be strong, primarily supporting our objective to maintain a credit rating of at least BBB. It naturally also provides a good financial foundation in this very uncertain and turbulent market environment, but it also cutters for growth and shareholder returns. In these uncertain times with various geopolitical conflicts, this is a very good position to be in. Before going through the reconciliation of our net debt, I want to highlight a few changes that we have made. These relate to our derivatives trading and our definition of net debt. In March this year, Nasdaq Nordic Power Futures business and trading with Nordic Futures transitioned to Euronext, and Fortum's position at Nasdaq was recreated to Euronext accordingly. Following the transition of our Power Futures business to Euronext, Fortum has simplified the measure for indebtedness and reports net debt instead of financial net debt from the first quarter of 2026 onwards. In the previously used financial net debt, the margin receivables and liabilities and the collateral arrangement receivables were netted. However, With the new definition, net debt, the net margin receivables and the collateral arrangement receivables are not netted anymore. From the first country onwards, the net debt is consequently defined only as interest-bearing loans, lease liabilities and liquid funds. Going forward, our leverage ratio is consequently net debt to comparable EBITDA compared to the earlier financial net debt to comparable EBITDA. The maximum leverage for the net debt to comparable EBITDA remains unchanged at 2.5 times. We have presented the effect of this change in our interim report. Following the change, our net debt increased by 364 million euros. Please see further information in notes 5 and 12 in our interim report. At the beginning of the first quarter, according to the new definition, our net debt was 1.8 billion euros. In the first quarter, the operating cash flow was 355 million, and investments amounted to 113 million euros. The change in interest-bearing receivables amounted to 40 million, while effects and other effects were 32 million euros. The change in collateral debt was 141 million euros. Consequently, at the end of the quarter, our net debt was 1.5 billion euros, and the leverage ratio for the net debt to comparable EBITDA was at 1.1 times. The dividend of 664 million euros was paid in April, i.e. in the second quarter. If considering this amount in the net debt, leverage would have been 1.6 times. Looking at our debt portfolio and the loan maturity profile, I want to highlight a few things. At the end of the quarter, our gross debt excluding leases totaled 3.8 billion euros. Our maturity profile is very balanced. and there are no large maturities in any single year. In February, we repaid a maturing 750 million euro bond. In 2028, a 500 million euro bond will mature. Bonds are and continue to be our primary source of funding. We continue to have ample liquidity reserves, 6.4 billion euros. with 2.5 billion of liquid funds and 3.9 billion of unrolled committed credit facilities and overdrafts at the end of March 2026. In April 2026, we successfully renewed our revolving credit facility with 2.7 billion euro facility. The syndication was well oversubscribed and a total of 15 banks participated in the facility. This new larger RCF further strengthens our liquidity position. The cost of our 3.8 billion euro loan portfolio is 3.4%, while the interest income that we get for our 2.5 billion euro liquid funds is 2%. The overall objective is to have sufficient liquidity while optimizing the balance between debt and cash to minimize funding costs. Then over to the final sections, the outlook. The outlook section includes guidance regarding our outright portfolio, capital expenditure and taxation. Let's start with the hedges. At the end of the first quarter, the hedge price for the rest of the year was 39 euros and the hedge ratio was 75%. The hedge price for 2027 is 40 euros. Same as last time disclosed, while the hedge ratio increased by 5 percentage points to 60%. Our optimization premium for 2026 is estimated to be between 8 to 10 euros per megawatt hour and the following years between 6 to 8 euros per megawatt hour. Based on announced outages, nuclear output for 2026 is estimated to be below the normal level of 26 terawatt hours. Based on current market information, we estimate that our nuclear volume will be between 23.5 and 24 terawatt hours in 2026. Previously, this close volume was between 24 to 24.5 terawatt hours. Our capital expenditure guidance is unchanged. We have 550 million committed for the year 2026. This includes maintenance, but excludes potential acquisitions. For the period 2026 to 2030, the committed capex is 2 billion euros, of which 750 million is growth. Annual maintenance is expected to be 250 million euros. The guidance for our corporate tax rate also remains unchanged for 2026. We expect the comparable effective income tax rate to be in the range of 18 to 20%. The Finnish government plans to decrease the corporate tax from 20% to 18% from the beginning of 2027. There is, however, no official law in place yet. Preliminary estimate is that this would lower the comparable effective income tax by one percentage point from 2027 onwards. This was all for my presentation, and now we are happy to answer your questions. So with this, Ingela, over to you.