Finland’s Fortum posts 8% increase in 2006 operating profits, year-on-year
Operating profits at Finnish power group Fortum increased by 8% to EUR 1.46 billion in 2006, compared year-on-year, according to full year results released on Wednesday.
The positive results were not enough to stem analysts’ dismay, with doubts cast on the levels at which Fortum hedged its power sales volumes in 2007 and 2008.
Fortum has hedged approximately 65% of its projected 2007 and 2008 output at roughly EUR 42.00/MWh — some analysts had been expecting hedging in the region of EUR 45.00/MWh.
Christopher Kuplent, an analyst at Credit Suisse said: “More disappointing, though, are 2007 and 2008 hedged power prices at EUR 42.00/MWh, which in our view have some way to go to meet our expectations of EUR 45.00/MWh and EUR 44.00/MWh, respectively.”
The company said it continued to make positive inroads into the power markets in Russia and Poland during 2006, as well as concentrating on new generation capacity in Finland and Sweden — both initiatives are projected to add 1,500 MW of generation capacity by 2010.
During the year, Fortum increased its stake in Russian power company TGC-1 to slightly more than 25%, while in Poland plans were announced in December to build a combined heat and power (CHP) plant at Czestochowa in southern Poland.
Group sales during 2006 totalled EUR 4.49 billion, up 15.8% year-on-year. Fortum’s power generation sales increased by 18.5% to EUR 2.44 billion, during the comparable period.
Fortum said the average Nord Pool (Nordic power exchange) spot price jumped 65.8% to EUR 48.6/MWh during 2006, compared with EUR 29.30/MWh during 2005. The group’s power generation sector achieved an average spot price of EUR 37.1/MWh for the period January-December 2006, compared with EUR 31.20/MWh during 2005.
Spot prices in the Nordic region — Finland, Sweden, Denmark and Norway — have been relatively high in 2006, due to lower reservoir levels and unplanned outages at nuclear power stations in Sweden during the third and fourth quarter of the year. Fortum said the loss of nuclear output stood at 0.6 TWh during the period September — December 2006.
In terms of power generation, Fortum produced 54.7 TWh of electricity during 2006, compared with 52.3 TWh during 2005. Of the 54.7 TWh produced by Fortum during the period, 53.5 TWh was produced in the Nordic region.
Fortum’s power generation mix was more diversified during 2006, compared year-on-year, due to the lower level of available hydropower generation capacity and the lack of available nuclear capacity in Sweden. During 2006, Fortum generated 19.8 TWh from hydropower sources, 24.4 TWh from nuclear plants and 9.3 TWh from thermal generation plants. During the comparable period, hydropower generation was down 6.6%, nuclear generation was down 5.4%, while thermal generation increased by 121% to make up the shortfall in generation output from the group’s two main power sources.
Power sales increased by 3.2% to 61.6 TWh during 2006, compared year-on-year, of which 58.1 TWh were sold in Finland and Sweden. This represents approximately 15% of total Nordic electricity consumption during the comparable period.
Fortum said unplanned outages at its nuclear plants at Forsmark and Oskarshamn in Sweden accounted for a loss of 1.6 TWh during 2006.
Fortum currently holds a 25% stake in Finland’s planned fifth nuclear reactor at Olkiluoto. The plant is scheduled to start producing electricity in 2010, with a generation capacity of 1,600 MW.
In its outlook statement, Fortum said the key driver going forward would be the price of wholesale electricity in the Nordic region, the level of hydropower reservoirs and the cost of CO2 certificates (for CO2-related results information see EDCM).
Shares in Fortum were down 3.1% at EUR 21.09 per share at 14:15 local time on Wednesday. JE
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