Fortum Oyj Cp Unsp/Adr

Good morning everyone and warmly welcome to Fortum's joint webcast and news conference for the investor community and media on our third quarter 2026 interim report. My name is Ingela Ulfves and I'm heading investor relations at Fortum. As always, there will be a replay on this webcast later today on our website. With me here in the studio are our CEO Markus Rauramo and our CFO Tiina Tuomela. Markus and Tiina will together present the group's financial and operational performance. Now let's go to our presentation after which we will take your questions in the Q&A session. So with this, I hand over to Markus 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 third quarter and our financial performance and then talk about market development. After that, Tiina will provide more details on the financials and how the operational performance turned into our results. Let me now start with the highlights. Our results in the third quarter improved compared to last year. At the same time, it is good to note that the third quarter typically is the smallest quarter result-wise and we generate most of the results during the first and fourth quarters. Before we dive deeper into the results, let's look at the highlights of the third quarter. Our achieved power price in the third quarter amounted to 45.5 euros per megawatt hour compared to 46.1 euro per megawatt hour last year. The realized market price, i.e. the blended price in Fortum's generation areas, was €46 per MWh, i.e. approximately €10 up compared to €36.7 per MWh one year ago. The main reasons for the slightly lower achieved power price were lower physical value creation and high hedge ratio. This year, nuclear generation was higher, as there were fewer nuclear outage days compared to the third quarter last year. Weaker hydro conditions and allocation of hydrovolumes to future periods resulted in somewhat lower hydro output. Our outright generation volume was 9.8 TWh, which is 0.7 TWh more than in the third quarter last year. We maintain our full year guidance for the optimization premium intact. It is expected to be between 8 to 10 euros per megawatt hour. We continue to have a strong balance sheet and good liquidity, so our overall financial position continues to be very robust. 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. One proof point of this strong customer demand is the 22-year Nuclear Lifetime Extension PPA with Google that we signed in September. At the end of the June, Fortum also took a significant strategic step for growth in our consumer solutions business as we announced the conditional voluntary cash tender offer to acquire all issued and outstanding shares in the Norwegian company Elmera Group ASA. I will come back to more details on both of these next. In September, we signed the largest sales agreement in Fortum's history. It is also the first large-scale lifetime extension nuclear PPA in Europe. The agreement provides economic certainty for the lifetime extension and power upgrades of the Lovisa nuclear power plant through 2050. and demonstrates the important role of nuclear power in meeting a growing customer demand for reliable, low-carbon electricity. Alongside the agreement, we also signed a memorandum of understanding covering potential future cooperation in renewables, flexibility solutions, nuclear new build and overall energy portfolio management services for Google. Then a couple of words about the Elmera PTO and process. 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 very pleased that Elmira's board of directors and the whole management supported the deal and recommended the transaction to all shareholders. As we received the approval from the competition authorities in Norway already in September and achieved the 90% threshold at the beginning of October, the PTO process has been rather fast and is now being finalized in the coming weeks. On 23rd of October we settled the voluntary cash tender offer for all issued and outstanding shares in Elmera, excluding Elmeras treasury shares. The total consideration was approximately 463 million euros and represents almost 92% of all Elmeras issued and outstanding share capital. Elmera is now expected to be consolidated into Fortum Group and included in the consumer solutions segment from 31st October onwards. Next, we intend to carry out a compulsory acquisition of the remaining shares or the squeeze-out process. After that, Elmera will be delisted from Euronext Oslo Börs. In the previous result call, I went through the strategic rationale for the offer and how it supports our strategy and long-term value creation for our stakeholders. In short, the rationale is built around four key elements. Number one, there is an ongoing structural change in the electricity market serving Nordic customers and small and medium-sized enterprise customers. Number two, Consumer Solutions and Elmera are two complementary businesses. Three, this transaction creates value for our shareholders and other stakeholders. And number four, it makes us fit for the future. Together, we and Elmera will create a stronger Nordic platform with the scale, capabilities and financial strength required to remain competitive. The combination of the two brings together complementary businesses with a 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 consumers. 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. Then I will move over to our main figures and financial performance. Let's look at our comparable headline KPIs for the group's third quarter and first nine months of 2026. In the third quarter, comparable operating profit increased, while EPS remained flat. Our comparable operating profit totalled 102 million euros, an increase of 5 million euros. Comparable earnings per share amounted to 8 euro cents per share. Operative cash flow increased slightly to 134 million euros. Also for the first nine months, All KPIs developed positively. Our leverage measured by the net debt to comparable EBDA ratio was 1.4 times. Next, a few words about the market environment. Let's first look at the spot price and hydro reservoir situation for the Nordic market. It's good to note that this is not Fortum's reservoirs, but the whole Nordic market. At the beginning of the third quarter, the reservoir balance had a deficit of around 5 TWh, which then declined rapidly in July to reach a significant deficit of 13 TWh by the end of the quarter. Nordic day ahead prices in the quarter increased year on year. Prices in some areas even doubled, driven by the lower reservoir levels and stronger continental price signals. Finnish spot prices were a notable outlier as they slightly declined year on year. During August and September, there were low wind periods when the entire Nordic market benefited from strong continental spot prices, which were driven by surging gas prices. Nordic power demand in the third quarter increased by one terawatt hour year on year, as power consumption totaled 85 terawatt hours. For the last 12 months, power demand in the Nordics was somewhat above 400 TWh. In September, Fingrid updated their demand forecast for the Finnish market. They anticipate slight growth for the coming years, mainly driven by increasing demand in the data center sector. In general, Finland is seen as one of the fastest growing areas of Europe, measured by power demand growth. 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. Comparable operating profit for the third quarter increased from the previous year and amounted to 102 million euros. In the quarter, comparable net profit decreased slightly to 65 million euros. Consequently, our comparable EPS for the third quarter remained stable at 8 euro cents. Our cash flow during the quarter was 3 million higher than in comparable quarter and totaled 134 million euros. Then over to the segment result for comparable operating profit. Let's have a look at the third quarter waterfall water segments. The main reason for the improvement in the group's comparable operating profit was higher nuclear generation. This was partly offset by lower physical value creation. The result in both consumer solutions and the other operations segment declined. In the generation segment, comparable operating profit increased by 29 million euros, impacted mainly by the higher nuclear volume, partly offset by lower physical value creation. The result of district heating business decreased somewhat, impacted mainly by reduced availability related to ongoing decarbonization projects and lower power prices in Poland. This was partly offset by higher heat volumes in the Nordic. Comparable operating profit for consumer solutions decreased by 9 million euros, mostly due to the lower sales margin compared to the extraordinarily strong margin last year. In the other operations segment, comparable operating profit decreased by 15 million euros, mainly due to the higher fixed cost, including certain one-off items. The result of the circular solution businesses was slightly lower compared to the comparison period. When looking at the year-to-date performance, we see the same result pattern across segments. The group's comparable operating profit increased by 55 million to 729 million euros. The generation segment's result increased, while the result in the consumer solutions and other operations segments decreased. In the generation segment, comparable operating profit increased by 86 million euros, positively impacted mainly by higher spot prices and higher nuclear and hydro volumes, partly offset by a high hedge ratio. The result of the district heating business increased mainly due to the higher volumes, higher sales price of power and new electricity-based production assets. This was partly offset by higher fuel costs and impacts from reduced availability in Poland. Comparable operating profit of the consumer solution segment decreased by 16 million to 80 million euros, mainly due to the lower sales margins compared to the strong sales margin in the comparison period and higher fixed costs. In the other operation segments, comparable operating profit Operating loss increased to 86 million euros. The result of the circular solutions businesses improved slightly compared to the comparison period. 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 turbulent market environment, but it also cutters the 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 third quarter, our net debt was 1761 million euros. In the third quarter, operating cash flow was 134 million and investment amounted to 146 million euros. The change in interest bearing receivables and margining amounted to 43 million, while effects and other effects were 29 million euros. The change in collateral debts was 24 million euros. Consequently, at the end of the quarter our net debt was 1,811 million euros and the leverage ratio for the net debt to comparable EBITDA was at 1.4 times. This does not take into account the Elmera transaction of 463 million euros, which was paid last week on 23rd October. 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 totalled 4 billion euros. Our maturity profile is very balanced and there are no large maturities in any single year. 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 reserve of 6.7 billion euros. At the end of September, these were split in 2.3 billion of liquid funds and 4.4 billion of undrawn committed credit facilities. The cost for our 4 billion euro loan portfolio is 3.4%, while interest income that we get for our 2.3 billion euro liquid funds is 2.5%. The overall objective is to have sufficient liquidity while optimizing the balance between debt and cash to minimize funding cost. 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 remainder of this year, the hedge price is 43 euros and the hedge ratio is 80%. The hedge price for 2027 increased by 1 euro to 42 euros, while the hedge ratio increased by 5 percentage points to 70%. The hedges for 2028 are now disclosed for the first time. The hedge price for 2028 is 42 euros, while the hedge ratio is 45%. We are including financial contracts and PPAs in these figures and it is good to note that the 2028 hedges include the share of the Google PPA for the first year of the contract. For the year 2026 we maintain the guidance for optimization premium estimated to be between 8 to 10 euros per megawatt hour. Predictability becomes more uncertain for the further out in time you go. Consequently, our longer-term guidance for the year 2027 and onwards is between 6 to 8 euros per megawatt hour. Taking into account all announced outages, nuclear output for 2026 is estimated to be below the normal level of 26 terawatt hours. Based on the current market information, we estimate that our nuclear volume will be approximately 23 TWh in 2026. Previously, our estimate was between 23 to 23.5 TWh. Our capital expenditure guidance remains unchanged. We have 550 million committed for the year 2026. This includes maintenance, but excludes potential acquisition, such as the Elmera transaction. For the period from 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 rates also remains unchanged for 2026. We expect the comparable effective income tax rate to be in the range of 18 to 20 percent. This was all for my presentation and now we are happy to answer your questions. So with this, Ingela, over to you.