Showing posts with label Fortum. Show all posts
Showing posts with label Fortum. Show all posts
Tuesday, 12 March 2013
Market buzz: Fortum considering selling grids
Reuters is reporting that Finnish State-controlled company Fortum (OMXH: FUM1V) has hired two banks to explore a potential sale of its power grids network. A deal might be the biggest in the Nordic countries in years and bring the company up to 5 billion Euros. Fortum hasn’t been happy with the returns from its distribution networks and has said it will make a decision on its future this year. The state involvement and the strategic nature of the deal would complicate matters.
Thursday, 19 July 2012
Poor result from Fortum
Finnish energy company Fortum’s (OMXH: FUM1V) comparable operating profit plunged 19% to 281 million Euros on sales of 1284 million on Q2 2012. Earnings per share of 0.21 EUR is historically very weak. Worryingly the utility itself called the result satisfactory and attributed the decline to very difficult business environment. Nordic power prices have been low on high water levels in Norway with average Nord Pool system price 24 Euros per MWh lower than in comparison period. Nuclear volumes were also down due to extended repairs in Sweden and Fortum also blamed economic uncertainty in Europe.
The company expects annual electricity demand growth of 0.5% in Nordic countries in the coming years. In the short term, the hydrological situation and economic uncertainty might make downward pressure on prices to continue. In Russia demand and prices were both down and the”demanding” construction project of the new units in Nyagan will be delayed”slightly further”. Industry regulation and completion of the investment programme are main areas of concern there.
The company expects annual electricity demand growth of 0.5% in Nordic countries in the coming years. In the short term, the hydrological situation and economic uncertainty might make downward pressure on prices to continue. In Russia demand and prices were both down and the”demanding” construction project of the new units in Nyagan will be delayed”slightly further”. Industry regulation and completion of the investment programme are main areas of concern there.
Thursday, 28 June 2012
Fortum investment plan in Russia nearing completion
Finnish utility Fortum Oyj (OMX: FUM1V) has been investing heavily in Russia in recent years. That push is close to a mature stage after the electricity generation and distribution firm noted of two developments in the Eastern neighbour. The returns on the Russian investments have clearly weighed on Fortum’s stock in the past few years. While the projects are seen as potentially very profitable, they are also considered high-risk. Analysts’ are also predicting a gradual decline in the traditionally rock solid dividend as the investments and government regulations eat away at the profits.
Yesterday Fortum said it is selling its heating network assets in the remote Western Siberian city of Surgut to Surgut City Grid LLC. The city is far away from Fortum’s other activities in Russia under OAO Fortum subsidiary and the company does not have a combined electric power plant in the region either, making the asset an outlier. The assets include 30.3 kilometres of trunk heating network, pump station and a peak heat plant with heat capacity of 407 MW that is only used in temperatures under -23 degrees Celsius. Fortum will recognize a minor gain on the sale in Q2 2012 results.
Today the obvious continuation in the news came as we learned that the construction of the last two units in the Russian investment plan will take place in Chelyabinsk instead of Tyumen, Western Siberia as was initially planned. The two 250 MW units support growing energy demand from metal industry in the Urals region. The units are agreed under Capacity Supply Agreement from 2008 amounting to a 2.5 billion Euro investment programme in total. After completion, OAO Forum’s capacity will increase by 85% to some 5100MW. Fortum stated a goal of an operating profit level around 500 million Euros after the investment program has been completed and to create positive value added in the Russian Division. Remaining value of the investment program was recently estimated at 0.9 billion.
Yesterday Fortum said it is selling its heating network assets in the remote Western Siberian city of Surgut to Surgut City Grid LLC. The city is far away from Fortum’s other activities in Russia under OAO Fortum subsidiary and the company does not have a combined electric power plant in the region either, making the asset an outlier. The assets include 30.3 kilometres of trunk heating network, pump station and a peak heat plant with heat capacity of 407 MW that is only used in temperatures under -23 degrees Celsius. Fortum will recognize a minor gain on the sale in Q2 2012 results.
Today the obvious continuation in the news came as we learned that the construction of the last two units in the Russian investment plan will take place in Chelyabinsk instead of Tyumen, Western Siberia as was initially planned. The two 250 MW units support growing energy demand from metal industry in the Urals region. The units are agreed under Capacity Supply Agreement from 2008 amounting to a 2.5 billion Euro investment programme in total. After completion, OAO Forum’s capacity will increase by 85% to some 5100MW. Fortum stated a goal of an operating profit level around 500 million Euros after the investment program has been completed and to create positive value added in the Russian Division. Remaining value of the investment program was recently estimated at 0.9 billion.
Thursday, 22 March 2012
Political risks realize in Finland
Finnish government sent a press release on the outcome of supplementary budget discussions. The governing parties agreed on 2.7 billion Euros in savings through 1.5 billion in tax increases and 1.2 billion Euros in cuts. The outcome is a disappointment to entrepreneurs as they had been hoping for more cuts and less tax hikes.
The compromise again highlights the current dynamic where the left-wing Social Democrats are able to use their leverage against the largest party the conservative National Coalition to tilt the balance of power. This also means the measures generally do not go as far in either direction as would happen if the government were decidedly left or right-leaning.
Some listed companies will be hit by these measures. A windfall tax appears to be coming from 2014 onwards, and it would have a slight effect on Fortum’s (OMX: FUM1V) after tax earnings. A tax on banks will be introduced from 2013. It is not yet clear whether this will hit financial transactions, earnings or all operations. Value Added Tax is increased by one percent across the board for all separate tax levels, affecting certain sectors more than others.
A so called solidarity tax will tax those earnings over 100 000 Euros per annum at a higher clip. This is supposed to be temporary but it is very hard to see a future government willing to remove this. Experts and highly educated people easily can and often should earn in excess of that sum and they are naturally irate. Companies hiring expert personnel may see this as an incentive to move operations overseas. Those getting an inheritance of over 1 million Euros will also see a larger portion of it disappear in taxes.
The compromise again highlights the current dynamic where the left-wing Social Democrats are able to use their leverage against the largest party the conservative National Coalition to tilt the balance of power. This also means the measures generally do not go as far in either direction as would happen if the government were decidedly left or right-leaning.
Some listed companies will be hit by these measures. A windfall tax appears to be coming from 2014 onwards, and it would have a slight effect on Fortum’s (OMX: FUM1V) after tax earnings. A tax on banks will be introduced from 2013. It is not yet clear whether this will hit financial transactions, earnings or all operations. Value Added Tax is increased by one percent across the board for all separate tax levels, affecting certain sectors more than others.
A so called solidarity tax will tax those earnings over 100 000 Euros per annum at a higher clip. This is supposed to be temporary but it is very hard to see a future government willing to remove this. Experts and highly educated people easily can and often should earn in excess of that sum and they are naturally irate. Companies hiring expert personnel may see this as an incentive to move operations overseas. Those getting an inheritance of over 1 million Euros will also see a larger portion of it disappear in taxes.
Wednesday, 1 February 2012
Fortum's Q4 satisfactory
Finnish energy company Fortum Oyj (OMX: FUM1V) lived up to market expectations with comparable operating profit toppling half a billion € in Q4 2011 and EPS of 47 cents. Full-year operating profit is a hair over 1.8 billion and EPS stands at 1.99, which includes some considerable non-recurring items such as the divestment of the shares in Fingrid Oyj. Fortum is proposing to keep its dividend at 1 Euro per share, corresponding to nearly 6% yield at current stock price. This is in line with the company policy to distribute 50-60% of annual net profit as dividends.
Fortum Oyj estimates 57 million in distribution costs from Tapani and Hannu storms, which at worst had nearly 190 000 Fortum customers without electricity simultaneously in Finland and also did considerable damage in Sweden. The major 2011 earthquake in Japan and the following backlash against nuclear power generation had big implications for Fortum going forward. The company has been looking to replace its existing reactors and even invest anew and now finds it harder politically to get the permits necessary to do so. The company wants to mitigate the effects of climate change and move towards Solar Economy.
Normally in times of economic certainty Fortum, as a company that has both a product that is relatively essential albeit somewhat sensitive to economic activity and the ability to pass on inflation to customers without delay, would fare fairly well but the issues mentioned above, as well as the uncertainty of the viability of its investments in Russia and in renewable energy, have caused the stock to lag. The company is speeding up the investment program in Russia and says it is progressing very well.
Most recently the electricity spot price in Nord Pool had been at a five-year low as water reservoir levels have been at a high level. Current extremely cold weather has made the prices spike in the last couple of days. Fortum’s stock is up more than 5% to trade above 17.5 Euros.
Fortum Oyj estimates 57 million in distribution costs from Tapani and Hannu storms, which at worst had nearly 190 000 Fortum customers without electricity simultaneously in Finland and also did considerable damage in Sweden. The major 2011 earthquake in Japan and the following backlash against nuclear power generation had big implications for Fortum going forward. The company has been looking to replace its existing reactors and even invest anew and now finds it harder politically to get the permits necessary to do so. The company wants to mitigate the effects of climate change and move towards Solar Economy.
Normally in times of economic certainty Fortum, as a company that has both a product that is relatively essential albeit somewhat sensitive to economic activity and the ability to pass on inflation to customers without delay, would fare fairly well but the issues mentioned above, as well as the uncertainty of the viability of its investments in Russia and in renewable energy, have caused the stock to lag. The company is speeding up the investment program in Russia and says it is progressing very well.
Most recently the electricity spot price in Nord Pool had been at a five-year low as water reservoir levels have been at a high level. Current extremely cold weather has made the prices spike in the last couple of days. Fortum’s stock is up more than 5% to trade above 17.5 Euros.
Sunday, 25 December 2011
Christmas storm Dagmar to disrupt traffic in Nordic countries
Hurricane force winds are starting to be felt in Norway and Sweden as Dagmar-storm has made landfall. Wind gusts up to 45 meters per second have been measured on the Norwegian coastline. Ships working the oil rigs have had to withstand 20 meter waves. Several flights and cruises between Norway and Denmark have been cancelled. Motorists are advised to wait out the storm before hitting the roads. Storm warning is in effect for this evening and night.
Class 2 warnings are in place in Sweden with Norrland considered as the area most at risk. Swedish Transport Administration Trafikverket said that all rail traffic to and from Norrland will be stopped from 8 PM local time on Sunday onwards. Round about 10 trains north of Gävle should be affected. Conditions in Sweden are also expected to improve for Boxing day.
In Finland Dagmar is expected to bother Christmas return traffic on Monday. The storm is still expected to be near peak-strength when it hits Finland, with up to 30 meters per second wind gusts. Highest winds on land are expected from early morning until early afternoon on the 26th. In addition to traffic hazards, power cuts are to be expected.
Some industries may reap some positives out of this include cable companies (such as those owned by Neo Industrial (HSE: NEO1V)), which can expect the trend to move electric cables underground to gain speed and pulp & paper companies, which have reported sluggish timber sales and will now have plenty of timber available, although usually they do not make large economic gains from storm-felled trees.
***MONDAY MORNING UPDATE***
Dagmar has caused major damage in Norway. Maximum gusts measured were 55.8 M/s (over 200 km/h, strong category 3 hurricane strength). Plenty of property damages are being reported and tanker BW Thames was in big trouble. Dagmar appears to be among the five worst hurricanes in the last 30 years to strike Norway. Early estimates of damages are in hundreds of millions as situation is now becoming clear. So far no casualties have been reported. 170 000 people are without electricity in Sweden and over 70 000 Fortum (OMX: FUM1V) and 30 000 Vattenfall customers are blacked out in Finland with worst yet to come there.
***MONDAY AFTERNOON UPDATE***
Travel is still severely affected in Norway, Sweden and Finland as trees have fallen on roads. Officials are recommending people to delay driving back from Christmas holidays if possible. Hundreds of thousands of people are without electricity. Repairs may take days in some cases. Hurricane force winds were felt in parts of Sweden and even in Finland maximum sustained winds of 28.5 m/s with gusts up to 35 m/s were measured on land. Another, albeit considerably weaker, storm is predicted to follow in Dagmar's wake tomorrow.
***MONDAY EVENING UPDATE***
A new storm has reached Norway, making repair efforts more challenging. There may be plenty of loose objects lying around after Dagmar and they may cause danger when flying around. Insurance claims from Berit, another large storm that only recently struck Norway, are estimated at 275 million NOK by Finance Norway (Finansnæringens Fellesorganisasjon, FNO) and the claims from Dagmar are expected to be higher.
Train travel is still severely affected as trees have damaged overhead electricity lines. Over 100 000 people in Norway, 150 000 people in Sweden and 200 000 people in Finland are currently without electricity. An elderly man died in Finland as a tree fell on top of him. In Finland the storm has been named Tapani.
***WEDNESDAY MORNING UPDATE***
Cato-storm followed Dagmar and caused further damage. Worries of potential landslides in Norway caused further anxiety. Estonia recommended people to store some water, if their water delivery is handled by electric pumps. People living outside residential areas can expect several days without electricity. Tuesday's storm was surprisingly strong particularly in Eastern Finland and in Ostrobothnia with 25 m/s gusts. A lot more people lost electricity as a result. Insurance companies have started to receive a lot of claims. Depending on the coverage of the insurance, even spoiled freezer food may be covered.
The amount of trees felled is so significant, that timber trade will be affected for a lenghty period. For example in South Norrland, Sweden, some forests may have a hard time recovering from the toll. Forestry vehicle companies and outdoor power products companies such as Husqvarna (OMX: HUSQ B), Ponsse( (OMXH:PON1V) and Kesla (OMXH: KELAS) can expect a spike in sales.
As an example from the damages that electricity companies will suffer, nearly 200 000 Fortum customers were without electricity at some point in Finland. If the cuts extend beyond 12 hours, electricity companies needs to compensate in bulk-transfer costs. Fortum did not comment on costs incurred as a result of the storms.
***UPDATE ON JANUARY 5***
Fortum did give an estimate of the damages after all this morning, saying the widespread power outages and grid damages will cost Fortum approximately 35 million in Finland and 10 million in Sweden. Vattenfall estimates 11 million in storm-related losses in Finland, with 5 million out of those as standard compensation to customers for power failures lasting over 12 hours, 1 million for voluntary compensation based on promises to customers for power cuts between 6 and 12 hours and 5 million for power grid repairs.
Federation of Finnish Financial Services estimated based on initial data that insurance companies will be compensating up to 70 million Euros worth of damages from the Christmas storms, with 40% of those costs stemming from damages to forest owners.
Class 2 warnings are in place in Sweden with Norrland considered as the area most at risk. Swedish Transport Administration Trafikverket said that all rail traffic to and from Norrland will be stopped from 8 PM local time on Sunday onwards. Round about 10 trains north of Gävle should be affected. Conditions in Sweden are also expected to improve for Boxing day.
In Finland Dagmar is expected to bother Christmas return traffic on Monday. The storm is still expected to be near peak-strength when it hits Finland, with up to 30 meters per second wind gusts. Highest winds on land are expected from early morning until early afternoon on the 26th. In addition to traffic hazards, power cuts are to be expected.
Some industries may reap some positives out of this include cable companies (such as those owned by Neo Industrial (HSE: NEO1V)), which can expect the trend to move electric cables underground to gain speed and pulp & paper companies, which have reported sluggish timber sales and will now have plenty of timber available, although usually they do not make large economic gains from storm-felled trees.
***MONDAY MORNING UPDATE***
Dagmar has caused major damage in Norway. Maximum gusts measured were 55.8 M/s (over 200 km/h, strong category 3 hurricane strength). Plenty of property damages are being reported and tanker BW Thames was in big trouble. Dagmar appears to be among the five worst hurricanes in the last 30 years to strike Norway. Early estimates of damages are in hundreds of millions as situation is now becoming clear. So far no casualties have been reported. 170 000 people are without electricity in Sweden and over 70 000 Fortum (OMX: FUM1V) and 30 000 Vattenfall customers are blacked out in Finland with worst yet to come there.
***MONDAY AFTERNOON UPDATE***
Travel is still severely affected in Norway, Sweden and Finland as trees have fallen on roads. Officials are recommending people to delay driving back from Christmas holidays if possible. Hundreds of thousands of people are without electricity. Repairs may take days in some cases. Hurricane force winds were felt in parts of Sweden and even in Finland maximum sustained winds of 28.5 m/s with gusts up to 35 m/s were measured on land. Another, albeit considerably weaker, storm is predicted to follow in Dagmar's wake tomorrow.
***MONDAY EVENING UPDATE***
A new storm has reached Norway, making repair efforts more challenging. There may be plenty of loose objects lying around after Dagmar and they may cause danger when flying around. Insurance claims from Berit, another large storm that only recently struck Norway, are estimated at 275 million NOK by Finance Norway (Finansnæringens Fellesorganisasjon, FNO) and the claims from Dagmar are expected to be higher.
Train travel is still severely affected as trees have damaged overhead electricity lines. Over 100 000 people in Norway, 150 000 people in Sweden and 200 000 people in Finland are currently without electricity. An elderly man died in Finland as a tree fell on top of him. In Finland the storm has been named Tapani.
***WEDNESDAY MORNING UPDATE***
Cato-storm followed Dagmar and caused further damage. Worries of potential landslides in Norway caused further anxiety. Estonia recommended people to store some water, if their water delivery is handled by electric pumps. People living outside residential areas can expect several days without electricity. Tuesday's storm was surprisingly strong particularly in Eastern Finland and in Ostrobothnia with 25 m/s gusts. A lot more people lost electricity as a result. Insurance companies have started to receive a lot of claims. Depending on the coverage of the insurance, even spoiled freezer food may be covered.
The amount of trees felled is so significant, that timber trade will be affected for a lenghty period. For example in South Norrland, Sweden, some forests may have a hard time recovering from the toll. Forestry vehicle companies and outdoor power products companies such as Husqvarna (OMX: HUSQ B), Ponsse( (OMXH:PON1V) and Kesla (OMXH: KELAS) can expect a spike in sales.
As an example from the damages that electricity companies will suffer, nearly 200 000 Fortum customers were without electricity at some point in Finland. If the cuts extend beyond 12 hours, electricity companies needs to compensate in bulk-transfer costs. Fortum did not comment on costs incurred as a result of the storms.
***UPDATE ON JANUARY 5***
Fortum did give an estimate of the damages after all this morning, saying the widespread power outages and grid damages will cost Fortum approximately 35 million in Finland and 10 million in Sweden. Vattenfall estimates 11 million in storm-related losses in Finland, with 5 million out of those as standard compensation to customers for power failures lasting over 12 hours, 1 million for voluntary compensation based on promises to customers for power cuts between 6 and 12 hours and 5 million for power grid repairs.
Federation of Finnish Financial Services estimated based on initial data that insurance companies will be compensating up to 70 million Euros worth of damages from the Christmas storms, with 40% of those costs stemming from damages to forest owners.
Tuesday, 19 July 2011
Fortum's Q2 comments
Fortum (OMX: FUM1V) keeps making solid money. Second quarter operating profit was 609 million Euro and earnings per share were 0.53 Euro. Nordic power consumption decreased a bit but that was offset by a slight advance in Russia. The company CEO Tapio Kuula says that uncertainties have arisen as a result of economic situation and energy policy sentiment in Europe.
Fortum says it understands the heightened nuclear safety concerns. The company says that wide political and social acceptance for nuclear power is important to Fortum. It stresses that climate change argument must not be forgotten in energy policy decision. CEO Kuula says that nuclear power will continue to have important role in Fortum’s operations and feels that German decision to scrap nuclear power will increase demand for natural gas, coal and wind based solutions.
Fortum expects Nordic power demand to be back at 2008 level by 2012-2014. Current Nordic water reservoirs are about 2 TWh below long-term average but up strongly from 2010 levels at the same time. Freshly completed Russian wholesale power market liberalization and Fortum’s new capacity coming online should bring solid earnings going forward.
Fortum is preparing for further growth and aims to maintain balance sheet strength to enable grabbing attractive growth opportunities. The company expects 2011 and 2012 annual CAPEX to be around 1.6 to 1.8 billion Euro. Fortum is down nearly 2% at 18.28 Euro per share at 14.45 local time. Interim report is available here.
Fortum says it understands the heightened nuclear safety concerns. The company says that wide political and social acceptance for nuclear power is important to Fortum. It stresses that climate change argument must not be forgotten in energy policy decision. CEO Kuula says that nuclear power will continue to have important role in Fortum’s operations and feels that German decision to scrap nuclear power will increase demand for natural gas, coal and wind based solutions.
Fortum expects Nordic power demand to be back at 2008 level by 2012-2014. Current Nordic water reservoirs are about 2 TWh below long-term average but up strongly from 2010 levels at the same time. Freshly completed Russian wholesale power market liberalization and Fortum’s new capacity coming online should bring solid earnings going forward.
Fortum is preparing for further growth and aims to maintain balance sheet strength to enable grabbing attractive growth opportunities. The company expects 2011 and 2012 annual CAPEX to be around 1.6 to 1.8 billion Euro. Fortum is down nearly 2% at 18.28 Euro per share at 14.45 local time. Interim report is available here.
Thursday, 14 July 2011
Hafslund Q2 2011
Norwegian power company Hafslund’s (OSE: HNA) second quarter results came out on 8th of July. The company had a solid cash flow from normal operations. Hydropower production returned to normal and sales price was up 11% in one year’s time. The float of Hafslund share is very low as city of Oslo and Fortum (OMX: FUM1V) own 53,73 and 34,10 percent of shares in Hafslund respectively.
Hafslund owns 8.93 percent of stocks in Renewable Energy Company (OSE: REC) and REC’s declining stock price has a mammoth of an effect and ate away most of the EBITDA this quarter. In the presentation to analysts in item ’Group cash flow statement’ EBITDA should read including REC or simply EBITDA as opposed to excluding . The REC investment is valued at fair value and the value impairnment charged to operating profit. As of today, REC share price has continued to decline notably.
Hafslund owns 8.93 percent of stocks in Renewable Energy Company (OSE: REC) and REC’s declining stock price has a mammoth of an effect and ate away most of the EBITDA this quarter. In the presentation to analysts in item ’Group cash flow statement’ EBITDA should read including REC or simply EBITDA as opposed to excluding . The REC investment is valued at fair value and the value impairnment charged to operating profit. As of today, REC share price has continued to decline notably.
Some Finnish heavy industry news in brief
Talvivaara Mining Company (OMX: TLV1V, LSE:TALV) will replace IT service company Tieto (HEL: TIE1V, OMXS: TIEN) in OMXH25 list on August 1, 2011.
Outotec (OMXH: OTE1V) received an order worth roughly 50 million Euros from Maaden Bauxite Alumina Company (JV of Saudi Arabian Mining Company (Maaden) and Alcoa) in Saudi Arabia. It will deliver alumina calcination technology, precisely two calciners to integrated aluminum complex at Ras Al Khair.
Metso (OMX: MEO1V) has received numerous large orders in last few days. Today the company said it is to provide mill maintenance to Amcor in Australia. Yesterday the company said it will supply minerals processing equipment to Taigang Group Lanxian Mining Co. Ltd. (TISCO) in China. On Tuesday Metso said it will deliver CHP boiler plants to Fortum (OMX: FUM1V) in Finland and in Latvia. And finally on Monday the company said it will perform replacement of chemical recovery boiler of UBE chemicals in Thailand.
Outotec (OMXH: OTE1V) received an order worth roughly 50 million Euros from Maaden Bauxite Alumina Company (JV of Saudi Arabian Mining Company (Maaden) and Alcoa) in Saudi Arabia. It will deliver alumina calcination technology, precisely two calciners to integrated aluminum complex at Ras Al Khair.
Metso (OMX: MEO1V) has received numerous large orders in last few days. Today the company said it is to provide mill maintenance to Amcor in Australia. Yesterday the company said it will supply minerals processing equipment to Taigang Group Lanxian Mining Co. Ltd. (TISCO) in China. On Tuesday Metso said it will deliver CHP boiler plants to Fortum (OMX: FUM1V) in Finland and in Latvia. And finally on Monday the company said it will perform replacement of chemical recovery boiler of UBE chemicals in Thailand.
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