Fortum Oyj Corp Ord

Good morning, everyone. A warm welcome to Fortum's webcast and news conference for the investor community and media on our half-year 2026 results. My name is Ingela Ulves and I'm heading investor relations at Fort. As always, this event is being recorded, so a replay will be available for you later today on our website. With me here in the studio are both our CEO, Markus Rauramaa, and our CFO, Tiina Tuomela. Markus and Tiina will present the group's financial and operational performance for the Q2 and half year. Now let's go to our presentation after which we can then take your questions in the Q&A session. I now hand over Markus to you to start.

Thank you very much, Ingela. A warm welcome to this call also from my side. I will start by going through the highlights of our Q2 and our financial performance and then talk 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. As you all know, Q2 and Q3 are relatively small quarters result-wise, and we typically generate most of the results during Q1 and Q4. Before we dive deeper into the results, let's look at the highlights of Q2. Our achieved power price in the second quarter amounted to 44.9 euros per megawatt hour compared to 48.1 euros per megawatt hour last year. The realized market price, which is the blended price for Fortum's price areas, was 53.1 euros per megawatt hour compared with 26.4 one year ago. One reason for the lower achieved power price was lower physical value creation, mainly due to lower income from ancillary services. Due to lower than normal generation volumes, the realized head ratio was high. There were more planned nuclear outage days compared to Q2 last year, and low spring floods further limited our ability to benefit from the higher spot price. It is also good to note that in the first quarter, we allocated more volumes to hydrogeneration, which limited our hydro volumes now in Q2. We keep our full year guidance for the optimization premium intact. It is still expected to be between 8 to 10 euros per megawatt hour Our outright generation volume was 9.1 terawatt hours which is 0.6 terawatt hours more than in the second quarter last year Nuclear generation was almost at last year's level 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. At the end of June, Fortum took a significant strategic step for growth in our consumer solutions business, as we announced a conditional voluntary cash tender offer to acquire all issued and outstanding shares in the Norwegian company Elmera AS. I will come back to more details of this transaction on my next slide. Also at the end of June, we announced our decision to end coal-fired power generation in Finland by closing and dismantling our Meripori coal power plant. Disclosure is part of our coal exit to end all coal-based energy production by the end of 2027 and reach net zero by 2040. The plant will be permanently closed as of 1st of March 2027. Fortum and the city of Pori are pursuing strong new growth in the Meripori Tahkoluoto area together with other industrial operators. Elmira Public Tender Offer We are very excited about this transaction as the combination of Elmera and our consumer solutions business will create a stronger Nordic business with greater capabilities to serve customers and create long-term value. We are also very pleased that Elmera's board of directors and the whole management are supporting the deal and recommending the transaction to all of its shareholders. Both the management and the board are also willing to tender all their shares in the transaction. The cash consideration is a 47 Norwegian krona to be offered for each Elmera share. This means a total value of the offer of 5.1 billion Norwegian krona or approximately 475 million euros. The completion of the offer is subject to certain customary closing conditions and regulatory approvals, as well as valid shareholders' acceptance of more than 90% of the company's shares. Let me go through the strategic rationale for the offer and how it supports our strategy and long-term value creation for our stakeholders. The rationale is built around four key elements. The ongoing structural change in the Nordic retail electricity market. Consumer Solutions and Elmera are two complementary businesses. This transaction creates value for our shareholders and other stakeholders, and it makes us fit for the future. Let me now briefly elaborate on each of these four points. First, there is an ongoing structural change in the Nordic retail electricity market. While the Nordic retail electricity market remains fragmented, customer expectations and digital requirements continue to increase in this sector, which is characterized by structurally low margins. As a result, scale, operational efficiency, technological capabilities and investment capacity are important to deliver competitive pricing and reliable service to our customers. So, consolidation is creating stronger and more capable businesses that can deliver greater value to Nordic customers while remaining competitive in a demanding market environment. Greater scale and resources strengthen the ability to invest in digital solutions, regulatory compliance, and operational excellence. Secondly, we have two complementary businesses. Oyj Corp Ord is an established retail electricity provider with a large and diversified customer base across the Nordics. The company has a recognized position in Norway combined with challenger positions in Sweden and Finland. It has developed a robust retail platform which is complementary to Fortum's existing business. Elmera has slightly below 1 million customers, mainly in Norway, but also in Finland and Sweden. This can be compared to Consumer Solutions' customer base of approximately 2.3 million. In 2025, Elmera sold 16 terawatt-hours of power to its customers, generating an EBITDA of approximately 66 million euros. The combination of the two brings together complementary businesses with their shared focus to deliver value to customers. By combining customer volumes, operational infrastructure and expertise across the value chain, the combined business is expected to achieve meaningful cost efficiencies and operational synergies to the benefit of Nordic customers. These efficiencies will strengthen the competitiveness of the combined business and support our ability to deliver competitive pricing and reliable service over time. The transaction will also enhance the combined businesses capacity to invest in products, digital solutions and capabilities that support customers across the Nordics. The third rationale is value for shareholders and other stakeholders. The transaction creates a compelling value proposition for shareholders and other stakeholders of both companies. The combination also benefits employees by creating a larger and more resilient organization with greater resources, broader capabilities, and increased opportunities for long-term development. And finally, being fit for the future. Our strategy is focused on supporting electrification The plan transaction is a natural extension of this strategy, strengthening our customer platform and expanding our presence across the region. Looking ahead, the combined business will be better positioned to offer customers competitive pricing and to respond to evolving customer needs and changing market conditions. Increased scale and efficiency are expected to strengthen our ability to invest in systems, technology, competence and operational excellence, which will support competitive pricing and reliable service for our customers long term. Together, we and Elmera will create a stronger Nordic platform with the scale, capabilities and financial strength required to remain competitive. We believe this offer provides El Mero shareholders with an attractive opportunity to realize value with certainty today. And for those who wish to remain exposed to the Nordic power market, Fortum continues to offer that opportunity as a listed company with a clear strategic focus on the region. Then I will move over to our main figures and financial performance. Let's look at our comparable headline KPIs for the group's second quarter and first half year of 2026. In the second quarter, comparable operating profit and EPS developed negatively. In Q2, our comparable operating profit totaled €106 million, a decrease of €9 million. Comparable earnings per share decreased from 9 to 8 cents per share. On the other hand, operative cash flow increased clearly to 324 million euros due to decrease in working capital. The decreased working capital reflects decreased sales prices. For the first half year, all KPIs developed positively. All of this resulted in a leverage of 1.4 times as measured by the net debt to comparable EBTA ratio. 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 Fortum's reservoirs, but the whole Nordic market. At the beginning of Q2, the reservoir balance had a small surplus of around 2 TWh, which declined during the quarter. During May, it moved into a rather large deficit of 9 TWh. This represented an intra-quarter swing of nearly 10 TWh, after which it partly recovered during June, and Q2 ended with a moderate deficit of around 5 TWh. In Q2, Nordic day-ahead prices increased significantly year-on-year, driven by lower reservoir levels, stronger continental crises, and low spring floods. Nordic power demand in Q2 developed sideways year-on-year, while wind availability was below seasonal average, both in the Nordics and especially in Central Western Europe. Nordic consumption was at 89 TWh. It is good to note that power demand in the Nordics is somewhat above 400 terawatt hours for the last 12 months. This concludes my part, and I would now like to hand over to Tiina to talk more about our business performance.

Thank you, Markus. Good morning, everyone, also on my behalf. I will now go through our finances 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 second quarter amounted to 106 million euros, which is a slight decrease from previous year. In the quarter, also comparable net profit and comparable EPS decreased. Our comparable net profit for the quarter declined to 74 million euros. Consequently, our comparable EPS for the second quarter declined to 8 euro cents compared to 9 euro cents last year. Our cash flow during the quarter was 121 million higher than in the comparable quarter last year and totaled 324 million euros. Slightly lower EPTA was offset by the positive change in working capital. The main reason for the lower working capital comes from the lower receivables in consumer solutions due to the lower power prices. Then over to the segment result for comparable operating profit. Let's have a look at the second quarter. The group's comparable operating profit declined by €9 million to €106 million, mainly due to the lower achieved power price and higher fixed costs, partly offset by higher hydro generation volumes. Achieved power price was affected by lower income from ancillary services and high hedge ratio. The profits of consumer solutions also declined slightly while the other operation segments' results improved. In the generation segment, comparable operating profits declined by 11 million to 110 million euros, mainly to the lower achieved power price, lower physical value creation, and higher fixed costs. The lower physical value creation was mainly a result of lower income from ancillary services. I also want to highlight our generation volumes as a result contributor. As you remember, we allocated as much as possible of our hyper generation to the spot market in the first quarter when prices were high. However, As hydrogeneration was exceptionally low in Q2 last year, Q2 volumes this year were still below the historical average. Nuclear volumes were slightly lower, mainly due to the plant outages days compared to Q2 2025. Consumer solution comparable operating profit declined by 5 million to 42 million euros, mainly due to the higher fixed cost. The reporting period includes a marginally positive effect of the acquisition of Orange Energy, completed in June 2025. Orange integration and carve-out have now been completed. In the other operations segment, comparable operating profit improved by 8 million, mainly due to the lower fixed cost. The circular solutions result was slightly higher compared to Q2 last year. The group comparable operating profit increased by 50 million to 627 million euros. The generation segment result increased mainly as a result of higher spot prices and hydro volumes, partly offset by the high hedge ratio. The result of the consumer solution segment decreased slightly, while the result of the other operation segment was almost flat. In the generation segment, the result increased by 57 million to 613 million euros impacted mainly by higher spot prices and hydro volumes partly offset by the high hedge ratio. Our hydro generation for the first half of 2026 was slightly below the long-term historical average with part of volumes allocated already during the first quarter. Comparable operating profit in consumer solution decreased by 7 million to 66 million euro, mainly to the higher fixed costs. In the other operation segment, comparable operating loss was almost unchanged at 53 million. The result of circular solution businesses was slightly higher compared to the first half of 2025. Then over to 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 is also patterns for growth and shareholder returns. In these uncertain times with various geopolitical conflicts, this is a very good position to be in. At the beginning of the second quarter, according to the new definition, our net debt was 1.5 billion euros. In the second quarter, the operating cash flow was 324 million, and investment amounted to 109 million euros. The change in interest-bearing receivables and net margining amounted to 24 million while effects and other effects were 14 million euros. The change in collateral debt was 119 million euros. Consequently, at the end of the quarter, our net debt was 1.8 billion euros and the leverage ratio for net debt to comparable EBITDA was at 1.4 times. The dividend of 664 million euros was paid in April, so during the second quarter. 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 last maturities in any single year. The 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, 6.5 billion euros with 2.1 billion of liquid funds and 4.4 billion of undrawn committed credit facilities and overdrafts at the end of June 2026. The cost for our €3.8 billion loan portfolio is 3.1%, while the interest income that we get for our €2.1 billion liquid funds is 2.1%. 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 section, the outlook. The outlook section includes guidance regarding our outright portfolio, capital expenditure and taxation. Let's start with the hedges. For the rest of the year, the hedge price is 40 euros and the hedge ratio is 80%. The hedge price for 2027 increased by 1 euro to 41 euros, while the hedge ratio increased by 5 percentage points to 65%. For the year 2026, optimization premium is estimated to be between 8 to 10 euros per megawatt hour. Predictability comes more uncertain the further out in time you go. Consequently, our long-term view continues to be 6 to 8 euros per megawatt hour for the year 2027 and onwards. Considering announced energies, 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 and 23.5 TWh in 2026. The guided range has been reduced by 0.5 TWh. 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 committee 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%. This was all for my presentation, and we are now happy to answer your questions. So with this, Ingela, over to you.