CEO’s Business Review 2019
Highlights 2019
Comparable operating profit
EUR 1,191
million, +21%
Decarbonisation continues
• Decommissioning of Inkoo
• Meri-Pori to capacity reserve
• Exiting the use of coal in
Espoo district heating in 2025
• Stockholm Exergi to close last
coal-fired unit
• TSE to close coal-fired Naantali 2
Agreement on increase of
Uniper ownership to more than
70%
Financial targets achieved
ROCE
10.0%
Comparable net debt/EBITDA
around 2.5x (Jan 2020)
300 MW
of solar and wind commissioned
in 2019
Projects of 2,326 MW
(including associates)
1
Fortum’s 2019 reporting entity
CEO’s Business Review 2019
Financials 2019
Governance 2019
Remuneration 2019
Tax Footprint 2019
Sustainability 2019
Sustainability to be published
in week 10 at the latest
2
CEO’s Business Review 2019
Dear stakeholders,
2019 was a successful year for Fortum. Our results developed clearly
positively and our cash flow increased substantially, both supported
by our investment in Uniper and continued focus on strengthening of
the balance sheet. We also achieved our long-term financial targets
as our return on capital employed was 10% and the comparable net
debt-to-EBITDA ratio was around 2.5x when adjusting our year-end net
debt with the impact of the divestment of the Joensuu district heating
business in January 2020 and the announced sale of a 80% share of our
Nordic wind portfolio.
Solid and consistent strategy implementation
Driving the change for a cleaner world is at the heart of Fortum’s
strategy and our ambition is to accelerate this change by reshaping
the energy system, improving resource efficiency, and providing smart
solutions.
During 2019, we continued our determined efforts to implement
Fortum’s strategy. We focused on operational excellence in all our
operations, assessed parts of our district heating business, continued
to build solar and wind power, reached an agreement to increase our
shareholding in Uniper, and improved our financial results substantially.
At year-end, we reached our long-term 10% target for return on capital
employed.
In June, we announced our intention to assess the strategic options
for the district heating and cooling business in Estonia and in Joensuu,
Finland. The assessment concluded in the divestment of the Joensuu
operations, for approximately EUR 530 million, which released cash,
strengthened our balance sheet, and unlocked value. In February 2020,
we announced our intention to extend the strategic assessment to
include our district heating and cooling businesses in all Baltic countries,
in Poland, and in Järvenpää, Finland.
The operating environment in 2019
During the fall of 2019 there was some progress in regulation and
policies regarding climate policy. We warmly welcome the firm climate-
orientation of the new EU Commission and the initiative for a European
Green Deal. We strongly advocate for the EU carbon-neutrality target
for 2050 which provides an excellent opportunity to push forward our
strategy “For a cleaner world”. Strengthening and broadening the scope
of the EU Emission Trading Scheme to also include the heating, cooling,
and transport sectors, should be a key tool to drive decarbonisation.
Fortum also supports the UN Global Compact and Caring for Climate
initiatives, and is committed to the principles of these initiatives.
After three years of clearly increasing power prices, the forward
contracts for Nordic power turned downwards in 2019. The decrease in
spot prices was somewhat larger for the system price, which decreased
by 12% from the previous year. The price of CO2 emission allowances
showed some volatility during the year, mainly due to uncertainty
regarding Brexit, but stabilised and ended close to the level of the
previous year, around 25 euros/tCO2. The European commodity markets
experienced clear weakness in 2019 due to high LNG supply and low
Chinese coal demand, resulting in both coal and gas prices declining by
more than 30%. The Nordic water reservoirs started the year at a slight
deficit, but stayed close to the long-term average for the rest of 2019.
Decarbonisation
We have continued our decarbonisation efforts during 2019 and will do
so in the future. We therefore decided to tighten our climate target for
specific CO2 emissions by 10% to 180 g/kWh, applicable to Fortum’s
stand-alone fleet for the year 2020. In wind and solar power we regard
building of new carbon-free power production capacities as more
important than owning the capacity once it has been commissioned.
Therefore, we build solar and wind power while utilising our ‘capital
recycling’ business model to release cash. Once commissioned, we
divest a stake in the portfolio by taking on external investors, which
enables us to invest more while at the same time having a limited equity
exposure. Another major effort is our commitment to carbon-neutral
district heating in Espoo, Finland, in the 2020s, accelerated by our goal
to discontinue the use of coal in Espoo in 2025. Other examples of work
for a cleaner energy system in Finland include the decommissioning of
the one-gigawatt Inkoo coal-fired power plant showing a recycling rate
of 92% of the material, placing the Meri-Pori coal-fired power plant into
the Finnish national peak-load reserve capacity system from July 2020,
as well as the recent decisions of Fortum’s associated company Turun
Seudun Energiantuotanto to close down the coal-fired unit Naantali
2 during 2019. In Sweden, Fortum’s joint venture Stockholm Exergi
decided to decommission its last coal-fired unit after the 2019–2020
heating season.
Strong operational performance – financial targets
achieved
The comparable operating profit for 2019 increased by more than
EUR 200 million to EUR 1.2 billion, mainly driven by a clear result
improvement in the Generation segment, supported by improved
results in the Consumer Solutions and Russia segments. In addition,
our share of profits from associated companies and joint ventures
increased to almost EUR 750 million, largely thanks to our share of
Uniper’s profits. Our focus on cash flow measures, in combination
with the strong results in 2019, increased our cash flow to more than
EUR 2 billion at year-end. Our comparable net debt-to-EBITDA ratio
at year-end was 3.0x. When adjusting the net debt with the impact
of the divestment of the Joensuu district heating business in January
2020 and the announced sale of a 80% share of our Nordic wind
portfolio, I am happy to say that we also achieved our other long-term
financial target of a comparable net debt-to-EBITDA ratio of around
2.5x. Maintaining strong cash flow and consistent deleveraging are
central for our credit rating. Fortum’s key objective is to have a solid
investment-grade rating of at least BBB to preserve financial flexibility
and good access to capital markets.
Based on Fortum’s 2019 results, our financial position and the
outlook for the coming years, Fortum’s Board of Directors proposes an
unchanged dividend of EUR 1.10 per share for the calendar year 2019.
With an earnings per share of EUR 1.67, the proposal corresponds to
a pay-out ratio of 66%, which is within the 50%-80% pay-out range as
defined in our dividend policy.
The Uniper investment
Fortum currently owns 49.99% of the shares in Uniper, a global energy
company that generates, trades and markets energy on a large scale.
Uniper operates power plants in Europe and Russia, with a total
generating capacity of around 34 gigawatts. Approximately 20% of the
generating capacity is CO2-free hydro and nuclear power, approximately
50% is gas-fired and the remaining is based on coal. Uniper also runs
an extensive energy trading business and has sizeable natural gas
storage sites, which play an important role in ensuring a secure and
flexible gas supply.
In October 2019, our investment in Uniper took a leap forward
with our agreement to buy an additional stake, in excess of 20%, in
the company. In November, we received approval from the Russian
Government Commission to close the transaction, subject to certain
conditions. The clarification of these conditions is somewhat delayed,
due to the recent change of the Russian Government. In December,
we received regulatory approval from the United States. We expect
to be able to close the transaction during the first quarter of 2020.
As announced previously, with closing we will seek adequate board
representation, including the chairmanship, in Uniper’s Supervisory
Board.
As the majority owner, Fortum will focus on cooperation and
strategic alignment with Uniper to the benefit of both companies.
Our two companies are already well-positioned to drive forward the
3
European energy transition to enable a carbon-neutral Europe by
2050. During the transition, Europeans expect their energy companies
to execute ambitious climate policies while continuing to provide
electricity and heat at all times and at an affordable cost. The German
Government’s coal exit law, presented at the end of January 2020,
reflects these requirements – coal-fired generation will be phased
out by the end of 2038 at the latest. Fortum stands for a strategy of
decarbonisation, which of course also applies to our investments, and
supports Uniper’s decision to close down the company’s old coal-fired
units as the company’s new coal-fired CHP plant Datteln 4 is taken into
use. As long as coal has to be used to provide for security of supply in
Germany, it makes sense to use it in the most efficient and clean units.
At Fortum’s Annual General Meeting last year we announced that
we will start reporting according to the Task Force on Climate-related
Financial Disclosures (TCFD) recommendations in 2019. Fortum’s TCFD
report will be included in the Sustainability 2019 report to be published
in week 10.
Finally, I would like to thank all our employees for their commitment
and hard work during the year and our customers and all other
stakeholders for their good cooperation and continued trust in us.
Pekka Lundmark
President and CEO
4
Three main drivers are shaping the future
electricity markets
The world we live in is changing at an ever-increasing pace. Staying
competitive requires companies to be aware of the underlying drivers
and to take an active role in driving the change for a better future.
Looking forward, Fortum is well positioned for the ongoing transition
in the energy sector towards a decarbonised world, both in terms of
asset base and performance. The main drivers influencing the ongoing
energy sector transformation are regarded to be:
Climate and environment
Climate change and global warming is inevitably among the most
pressing and profound challenges facing mankind. Limiting its impacts
requires global efforts, yet the commitments made by nation states so
far are insufficent to limit warming in line with the ambition of the Paris
Agreement.
The need to limit the climate impact of operations affects all
industries today. The energy sector has the responsibility to transition
towards carbon-neutral energy production while ensuring that energy
is available at all times at an affordable cost. The primary means to
enable the transition within electricity production include increasing
the share of renewable and CO2-free production technologies. As fossil
fuels are still needed, fuel-switching to more environmentally benign
fuels and improved fuel efficiency are means to reduce climate impacts.
In the European Union the effects of the substantial increase in the CO2
emission allowance price in 2018 can be seen in the clear increase in
the switching from coal-fired to gas-based power generation. In 2019,
this coal-to-gas switch is estimated to correspond to a reduction of
emissions of approximately 80 million tons of CO2.
Equally important, but less discussed areas requiring decarbonisation
are heating and traffic. In both, clean electricity and over-time
decarbonising gas can be part of the solution. Fortum has been
a staunch advocate for establishing carbon pricing for all sectors as
a basis for the decarbonisation of the European society.
During the fall of 2019 there was some progress in regulation and
policies regarding climate policy. We warmly welcome the firm climate-
5
orientation of the new EU Commission and their initiative for a European
Green Deal. We strongly advocate for the EU carbon-neutrality target
for 2050 and consider that it provides an excellent opportunity to push
forward our strategy “For a cleaner world”. However, Europe alone
cannot solve the climate challenge as it represents only 9% of the
global greenhouse gas emissions. In this context, we welcomed the
Russian ratification of the Paris Agreement in September. All parts of
the world have to contribute. The ultimate goal should be for the most
comprehensive global carbon pricing.
Politics and regulation
The increasing fragmentation in the international political scene
increases the regulatory uncertainty. Companies have to be prepared
for a possible future where national rather than international
market-based mechanisms drive the development of our operating
environment.
The energy sector is heavily influenced by national and EU-level
energy policies and regulations. Fortum’s strategy has been developed
based on scenarios for the future development of the regulatory
environment in both existing and potential new businesses and market
areas. The overall complexity and possible regulatory changes in
the various operating countries pose a risk if Fortum is not able to
anticipate, identify, and manage those changes efficiently.
Fortum maintains an active dialogue with the bodies involved in the
development of laws and regulations in order to manage these risks
and proactively contribute to the development of the energy policy and
regulatory framework.
Technology development
Technology development is an important driver for change.
In the energy sector the cost of wind and solar power is decreasing.
This development leads to an increasing share of intermittent power
production and fewer running hours for traditional baseload power. This
challenges the way the energy system has been functioning, where
production has been able to adapt to the changing power demand of
customers.
Another development area, with potential to revolutionise the
energy industry is hydrogen. With the increase of intermittent power
production we will see more hours with very low or even negative
prices. This cheap power can be used to produce synthetic hydrogen,
which can be converted into ‘green gas’, that can use the same storage
and transportation infrastructure as natural gas and can be burned in
the current gas-fired power plants. If made commercially viable, this
would enable transforming the current fossil-based gas-fired power
plants into ‘green gas’ -based power plants.
Digitalisation opens up for new storage and demand response
solutions, which will change the way the customer interacts with the
market. There will be new ways to produce, market, sell, and deliver
products and services offered by utilities, start-ups, and new market
entrants. Through these services, customers can take an active part
in balancing a future power system that is heavily dependent on
intermittent power production. In addition to power generation and
usage, the technology development is also rapid within the field of
transportation. Electric mobility is fast gaining ground as a result
of the development of battery technology and processing power.
The increasing production volumes are creating economies of scale
and reducing production costs of electrical vehicles. Smart charging
solutions for the growing amount of electrical vehicles create an
opportunity for substantial demand response solutions.
Looking forward, Fortum is well
positioned for the ongoing transition
in the energy sector towards a
decarbonised world
6
USD
100
80
60
40
20
0
Coal, USD/tonnes (Rotterdam 2020 index)
Market Development
After three years of clearly increasing power prices the forward
contracts for Nordic power turned downwards in 2019. The decrease in
spot prices was somewhat larger for the system price, which decreased
by 12% from the previous year. The price of CO2 emission allowances,
which was the main driver for the rapid increase in power prices in
2018, showed some volatility during the year, but ended close to the
level of the previous year, around 25 euros/tCO2.
High amounts of LNG on the global gas market pushed down the
European gas prices, with the TTF index for 2020 dropping by 33%. In
the coal market the weaker Chinese coal demand was the main driver
for declining coal prices, causing the Rotterdam index for 2020 to
decline by 31% during the year.
Power and commodity prices 2019
EUR
42
38
34
30
26
22
18
14
10
Power, EUR/MWh (Nordic 2020 forward)
Emission allowance, EUR/tCO2 (EUA DEC 2019)
Gas, EUR/MWh (TTF 2020 index)
Source: Bloomberg
Spot price development 2018 & 2019, EUR/MWh
The Nordic power prices
declined during 2019, but
resisted well compared to
the heavy drop in European
coal and gas prices
System 2019
System 2018
Helsinki 2019
Helsinki 2018
Stockholm 2019
Stockholm 2018
Source: Nord Pool
1
1
0102030405060JanFebMarchAprilMayJuneJulyAugSeptOctNovDec 7
Nordic water reservoirs, energy content, TWh
Q1
Q2
Q3
Q4
2000
2003
2018
2019
Average 2000–2018
Source: Nord Pool
The Nordic water reservoirs started the year at a deficit, but stayed
close to the long-term average for the remainder of 2019. At the
beginning of 2019, the Nordic water reservoirs were at 74 TWh, which
is 10 TWh lower than the long-term average and 8 TWh lower than
one year earlier. At the end of the year, the reservoirs were at 79 TWh,
which is 5 TWh below the long-term average and 5 TWh higher than
one year earlier.
The average system spot price in Nord Pool for the year 2019 was
EUR 38.9 (44.0) per MWh, a decrease of 12%. The average area price in
Finland was EUR 44.0 (46.8) per MWh and in Sweden (SE3, Stockholm)
EUR 38.4 (44.5) per MWh.
According to preliminary statistics, electricity consumption in
the Nordic countries was 392 (399) TWh during 2019, due to milder
weather during the first quarter and slightly lower industrial demand.
1
020406080100120 8
4.
Build options for significant
new businesses
3.
Drive focused growth in the
power value chain
Strategy
Profitability
The transition towards a cleaner world
The entire energy sector is undergoing significant transformation.
Our vision is “For a cleaner world” and reflects our ambition to drive
this transformation towards a low-emissions energy system with clean
energy and optimal resource efficiency built on sustainable materials.
Our mission is to engage our customers and society to drive the
change towards a cleaner world. Our role is to accelerate this change
by reshaping the energy system, improving resource efficiency, and
providing smart solutions. This way we deliver excellent shareholder
value.
Sustainability is at the core of Fortum’s strategy and our values –
curiosity, responsibility, integrity, and respect – form the foundation
for all our activities. We assess our impacts and address sustainability
throughout the value chain. We see sustainable energy and circular
economy solutions as today’s competitive advantage and a prerequisite
for business growth and success.
Fortum’s strategy
The ongoing transition towards CO2-free energy, driven by climate
change concerns, politics and regulation, as well as technology
development, brings significant opportunities for a company with
competences in clean energy. Fortum is well positioned for this
transition while the future market environment is increasingly uncertain.
As a response to this development, Fortum’s strategy is based on four
strategic priorities:
1. Pursue operational excellence and increased flexibility
2. Ensure value creation from investments and portfolio optimisation
3. Drive focused growth in the power value chain
4. Build options for significant new businesses
2.
Ensure value creation from investments
and portfolio optimisation
1.
Pursue operational excellence
and increased flexibility
Today
Increasing
uncertainty
Competitive
benchmark portfolio
Time
2030s
Pursue operational excellence and increased flexibility
Benchmark performance is essential for the long-term competitiveness
and is one of Fortum’s main strategic priorities in the short-term. For
the coming 2–3 years, Fortum prioritises value creation from its current
business portfolio. This is achieved through operational excellence and
increased flexibility. All sources of flexibility, both flexible generation
assets and demand response of large customers and consumers, will be
needed to balance the high degree of volatile renewable generation.
Operational excellence and increased flexibility contributes to
improving Fortum’s financial performance and cash flows to secure
sufficient financial headroom. Fortum continues to prioritise and
scrutinize capital expenditure.
Fortum’s key objective is to have a solid investment-grade rating of
at least BBB, to preserve financial flexibility and good access to capital
markets, and to strengthen its financial profile longer term. This will
provide appropriate financial stability and support to the enlarged
group.
9
Ensure value creation from investments and portfolio
optimisation
Over the recent years Fortum has made several sizeable investments
and aims to further improve its financial performance by ensuring value
creation from them. The investment in Uniper, currently accounted
for as an associated company, contributes to Fortum’s financial
performance both through Fortum’s share of Uniper’s result and its
dividend. Fortum will fully consolidate Uniper as a subsidiary in its
financial statements from closing of the acquisition of an additional 20%
stake in Uniper, expected by the end of the first quarter of 2020. As
Uniper’s largest shareholder, Fortum’s ambition is to increase value for
both companies and their stakeholders.
In addition, Fortum continues to review its business portfolio in line
with its strategic priorities emphasising CO2-free assets, flexibility, and
low operating cost to fit the changing business environment.
Drive focused growth in the power value chain
In the medium term, Fortum will build on its long-standing expertise to
grow in CO2-free power generation. When it comes to solar and wind
investments, Fortum aims to grow by utilising partnerships and other
forms of co-operation to enable a more asset-light structure. The future
utility will be increasingly relying on technology, digitalisation, software,
and services. Consequently Fortum will continue to develop value-
adding offerings and services for customers both in the consumer and
industrial sectors.
Build options for significant new businesses
Foreseeing the development of the power markets and regulatory
environment will be increasingly challenging towards the end of the
2020s. However, the uncertainty will create new business opportunities.
In the longer term, Fortum aims to build on existing expertise and
emerging technologies to create new businesses, independent of power
prices, with potential for sizeable profit contribution. Circular economy
meets these criteria, especially in the areas of waste and recycling as
well as bio economy. Furthermore, Fortum will focus on investments in
start-up ventures with disruptive potential.
10
Value-creating strategy
Input
Human and intellectual capital
• More than 8,000 energy sector professionals,
focus on diversity
• Certified environment, health and safety management
• Corporate culture that encourages innovation and R&D
investments totalling EUR 67 million in 2019
• Robust corporate governance and ethical
business conduct
• Brand and reputation
Supply chain
• Purchase EUR 3.8 billion, including investments
• Relationships with ~14,000 suppliers, over 60%
of procurement from Europe
Sources of energy
• Hydro, solar, wind
• Natural gas, uranium, coal, biofuels,
waste-derived fuels, peat
Assets
• Core operations in 10 countries
• ~14,200 MW power generation supply
• ~13,200 MW heat production capacity
• Some 130 own hydro power plants and 26 own CHP,
condensing and nuclear power plants; growing in solar
and wind
• Supplying heat in 24 cities and towns
• 5 waste-to-energy plants
Financial
• Capital employed EUR 19,929 million
• Net debt EUR 5,260 million
• Total assets EUR 23,364 million
Fortum
Vision
For a cleaner world
Mission
We encage our customers and society to drive
the change towards a cleaner world. Our role is to
accelerate this change by reshaping the energy system,
improving resource eifficiency and providing smart
solutions.
This way we deliver excellent shareholder value.
Strategy
• Pursue operational excellence and increased flexibility
• Ensure value creation from investments and portfolio
optimisation
• Drive focused growth in the power value chain
• Build options for significant new businesses
Output
Products
• 76 TWh electricity
• 26 TWh heat
• 96% of electricity production CO2 free in Europe,
59% in all operations
• 2.2 million tonnes of waste received from
our customers
Services and solutions
• Power and heat sales
• Electricity retail sales
• District heating and cooling
• Power solutions, e.g. energy-efficiency services
• Electricity trading services
• Nuclear expert services
• E-mobility charging solutions
• Environmental management and
material-efficiency services, incl. plastic recycling
and refining, metals recycling, and ash treatment
Emissions
• CO2: 19.1 million tonnes, 189 g CO2 /kWh
• SO2: 14,900 tonnes
• NOx: 24,900 tonnes
• Particles: 11,700 tonnes
• 22 tonnes of spent high-level radioactive fuel
in an interim storage
Impact
Economic impact
• Profitability
• Increased shareholder value
• Dividends to shareholders
• Investments
• Taxes to the public sector
• Wages and benefits to employees
• Payments to suppliers and partners
• Interest to creditors
Social impact
• Reliable supply of electricity and heat
• New, smart energy solutions for customers
• More active customer participation
• New partnership opportunities for cities, start-ups,
research institutions
• Safe work environment and wellbeing for
employees, contractors and suppliers
• Opportunities in career development for employees
Environmental impact
• Energy and resource efficiency
• Contribution to climate change mitigation and
circular economy
• Investments in renewable energy production
• Flexible generation enabling increasing use of
intermittent renewable energy sources
• Improved resource efficiency, recycling and
recovery through circular economy services
• Removing hazardous waste from circulation,
treatment and safe final disposal
• Improving air quality through advanced nitrogen
oxide reduction solutions
11
Sustainability at Fortum
2019 was the year of climate, which was also reflected in a stakeholder
study on our sustainability priorities. These priorities represent risks
and opportunities for Fortum, and on the other hand, our operations
have an impact on them. The study revealed that climate change
and greenhouse gas emissions are the most important sustainability
priorities for Fortum. In late 2019, Fortum’s Board of Directors approved
a new target for specific CO2 emissions from total energy production
for 2020: ≤180 gCO2/kWh. Additionally, the Board approved total
CO2 emissions from energy production as part of the earnings criteria
for the 2020–2022 long-term incentive plan for key employees and
executives. We are publishing our first Task Force on Climate-related
Financial Disclosures (TCFD) report as part of our 2019 Sustainability
Report. In 2019, our investments in hydro, wind and solar power, as
well as bioenergy nearly doubled, and our total investments in CO2-free
production increased to EUR 401 million, an increase of more than EUR
100 million from the previous year.
Energy efficiency and circular economy are among Fortum’s most
important sustainability priorities. We annually improve the energy
efficiency of our power and heat production. By the end of 2019, we
had improved the cumulative energy efficiency of our production by
1,707 GWh/year compared to year 2012. We promote the circular
economy by receiving and treating large volumes of customer waste. As
much of the waste stream as possible is recycled, reused, or recovered
as material. At the same time we safely remove hazardous waste from
circulation. Fortum’s plastic refinery processes all the plastic packaging
waste recycled by Finnish households. The growing electrification of
transportation increases the need for battery recycling. To tackle this in
the future, the innovation developed by Fortum will increase the battery
recycling rate to over 80%.
In 2019, we achieved significant improvements in contractor
safety, and the Lost Workday Injury Frequency (LWIF) of contractors
decreased. The safety of our own employees remained at a good level.
Fortum Sustainability prioritiesEconomic value creationHigh importanceStakeholder viewFortum viewMediumimportanceHigh importanceBusiness ethics and complianceSecurity of supplyWater useInnovation and digitalisationHuman rightsLabour rightsEmissions to air, land and waterCustomer rights and satisfactionCircular economyEmployee wellbeing, health and safetyEnergy efficiencyClimate change and GHG emissionsCorporate governanceDiversity and equal opportunityStakeholder engagement 12
During the year, our employees were offered an opportunity to
participate in a new Employee Share Savings programme, and more
than 40% signed up for the first savings period. We maintained our
ranking (50th) in the Equileap Gender Equality Top 100 assessment.
Additionally, we improved the confidential reporting of suspected
misconduct by adopting the new SpeakUp channel for employees and
partners.
To advance Fortum’s social responsibility, we developed a new
sustainability programme for the company. Sustainability projects,
sponsorships, donations, as well as local and university collaboration,
are grouped under the programme’s three themes: climate, people, and
materials. Implementation of the programme will begin in 2020.
Fortum’s Board of Directors
approved a new target for
specific CO2 emissions from
total energy production for
2020: ≤180 gCO2/kWh
13
Consumer Solutions
Consumer Solutions is responsible for the electricity and gas retail
businesses in the Nordics and Poland, including the customer service,
invoicing, and debt collection business. Fortum is the largest electricity
retail business in the Nordics, with approximately 2.4 million customers
across different brands in Finland, Sweden, Norway, and Poland. The
business provides electricity as well as related value-added and digital
services.
Russia
The Russia division comprises power and heat generation and sales in
Russia. The division also includes Fortum’s over 29% holding in TGC-1,
which is an associated company and is accounted for using the equity
method.
Business model
Fortum’s business activities cover the production and sales of electricity
and heat, waste-to-energy and circular economy solutions, as well as
energy-sector expert services and various consumer solutions. Fortum
is the third largest power generator and the largest electricity retailer in
the Nordic countries. Globally, the company is one of the leading heat
producers. As two thirds of Fortum’s power production is hydro and
nuclear, the company is also among the lowest-emitting generators in
Europe.
Fortum’s organisation consists of four business divisions: Generation,
City Solutions, Consumer Solutions, and Russia. With core operations
in 10 countries, Fortum employs a diverse team of more than
8,000 energy-sector professionals. At the end of 2019, Fortum had
some 130 hydro power plants, 26 combined heat and power (CHP),
condensing, and nuclear power plants, as well as four wind power parks
and four solar power plants. Globally, the company supplied heat in
24 cities and towns and had five waste-to-energy plants. Fortum’s key
markets are the Nordic and Baltic countries, Russia, Poland, and India.
Generation
Generation is responsible for Nordic power production. The division
comprises nuclear, hydro, wind, and thermal power production, as well
as power portfolio optimisation, trading, industrial intelligence, and
global nuclear services.
City Solutions
City Solutions is responsible for developing sustainable solutions for
urban areas into a growing business for Fortum. The division comprises
heating, cooling, waste-to-energy, biomass, and other circular economy
solutions as well as solar power production.
The business operations are located in the Nordics, the Baltic
countries, Poland, and India. The division also includes Fortum’s 50%
holding in Stockholm Exergi, which is a joint venture and is accounted
for using the equity method.
Future challenges and opportunities
Climate change
We believe that the growing awareness and concern about climate
change will increase the demand for low-carbon and resource- and
energy-efficient energy products and services. We are leveraging our
know how in CO2-free hydro, nuclear, wind, and solar power as well
as in energy-efficient CHP production by offering our customers low-
carbon energy solutions. We also believe that the electrification of
transportation, industry and services will increase the consumption of
low-carbon electricity in particular. Our strategy is targeting a multi-
gigawatt wind and solar portfolio.
Our circular economy services also respond to this demand
by utilising waste stream materials as efficiently as possible and
by reducing the formation of greenhouse gases generated from
biodegradable waste at landfills. Additionally, the use of non-recyclable
and non-recoverable waste in energy production replaces fossil fuel.
Our operations are exposed to the physical risks caused by climate
change, including changes in weather patterns that could alter energy
production volumes and energy demand. Fluctuating precipitation,
flooding, and extreme temperatures may affect e.g. hydropower
production, dam safety, availability of cooling water, and the price and
availability of biofuels.
Hydrological conditions, precipitation, temperatures, and wind
conditions also affect the short-term electricity price in the Nordic
power market. In addition to climate change mitigation, we also aim to
adapt our operations and we take climate change into consideration
in, among other things, the assessment of growth projects and
investments as well as in operation and maintenance planning.
Power price development
One of the key factors influencing Fortum’s business performance
is the Nordic electricity wholesale price. The key short-term drivers
behind the electricity wholesale price development in the Nordic region
are commodity prices, such as coal and gas, European electricity
wholesale prices, prices for CO2 emission allowances, the hydrological
situation, temperatures, and the electricity import-export balance. In
the longer term, global economic growth and changes to energy policy
and regulations impact commodity and CO2 emission allowance prices,
which, in turn, impact the Nordic wholesale price of electricity.
Regulatory environment
Changes in the regulatory and fiscal environment create risks and
opportunities for the energy and environmental management business.
The main strategic risk is that the regulatory and market environment
develops in a way that we have not been able to foresee and prepare
for. In response to these uncertainties, Fortum analyses and assesses
a number of future market and regulation scenarios, including the
impact of these on different generation forms and technologies. As
a result, Fortum’s strategy includes broadening of the revenue base
and diversification into new businesses, technologies, and markets.
The environmental management business is based on the framework
and opportunities created by environmental regulation. Being able to
respond to customer needs created by the tightening regulation is
a key success factor.
Research and development
Fortum’s goal is to be at the forefront of energy technology
and application development. To accelerate innovation and the
commercialisation of new offerings, Fortum is strengthening its
in-house innovation and digitalisation efforts and building partnerships
with leading global suppliers, promising technology and service
companies, as well as research institutions. Fortum makes direct and
indirect investments in start-ups that have promising new innovations
focused on connectivity, have disruptive potential, and accelerate
the transition towards a circular economy. Fortum also invests in
technologies that support better utilisation of the current asset
base and that can create new markets and products for Fortum. The
company is continuously looking for emerging clean energy solutions
and for solutions that increase resource and system efficiency.
Fortum has committed to invest EUR 150 million in Valo Ventures
over a period of 10 years. In 2019, the investments in Valo Ventures
14
and the related costs totalled EUR 23 million. Valo Ventures is an
independent fund investing in digital and cloud-scale technology
start-ups in North America and Europe. Valo Ventures is aligned with
Fortum’s strategy and vision “For a cleaner world”. Fortum launched
Valo Ventures together with Scott Tierney, former Google Capital
co-founder.
Fortum has committed to invest
EUR 150 million in Valo Ventures over
a period of 10 years
15
Market position
Fortum is the third largest power generator and the largest electricity retailer in
the Nordic countries. Globally, we are one of the leading heat producers. As two
thirds of our power production is hydro and nuclear, Fortum is also among the
lowest-emitting generators in Europe.
Nordic power generation, 400 TWh, over 350 companies
Largest heat producers globally, TWh
Vattenfall
Statkraft
Fortum
Uniper
E-CO Energi
PVO
Norsk Hydro
Agder Energi
Ørsted
BKK
Others
Source: Fortum, company information, 2018 figures pro forma. EPH incl. LEAG. No data from China.
Source: Fortum. company information. 2018 figures pro forma
Largest power generators in Europe and Russia, TWh
Nordic electricity retail, 16 million customers, ~350 companies
Fortum
Vattenfall
E.ON
Ørsted
Norlys
Fjordkraft
Helen
SEAS-NVE
Göteborg/Din El
Väre
Others
Source: Fortum. company information. 2018 figures pro forma
Source: Fortum, company information, 2018 figures pro forma, EPH incl. LEAG
1
1
1
1
020406080100120140160GazpromT PlusSibgencoInter RAO UESVeoliaRusHydroEn+EDFFortumQuadraTGC-2KDHCMinskenergoVattenfallPGELukoilTatenegroPGNiGKyivteploenergoØrstedEPHStockholm ExergiE.ONCEZHelenTGC-140100200300400500600EDFRosenergoatomRWEEnelGazpromRusHydroInter RAO UESUniperVattenfallENGIEEPH NNEGC
EnergoatomFortumEn+PGEIberdrolaCEZStatkraftT PlusEnBWSibgengoEDPEPSDTEKVerbundAxpoSSEE.ONNaturgyDEI 16
Long-term focus on no- or low-CO2
power production
Sustainability and CO2-free power generation have been part of
Fortum’s strategy for several decades. We believe that the energy
system needs to transform to a system with substantially lower
emissions, higher resource efficiency, and a higher share of power
generation based on renewables. The transformation will not happen
overnight and we must provide customers with a secure energy supply
at a competitive price during the transition towards lower emissions. In
our strategy implementation we have worked to increase our CO2-free
power generation.
Our generation capacity based on fossil fuels, is mainly located in
Russia. Our efforts are to constantly increase its efficiency and reduce
its specific emissions. In recent years, our investments in Russia have
been in renewables in order to increase our solar and wind power
capacity while targeting a multi-gigawatt solar and wind portfolio.
Increasing the CO2-free and low-CO2 power generation
Over the past decades Fortum has strived to contribute to a more
sustainable world. We have increased our annual CO2-free power
generation from around 15 TWh in 1990 to 44 TWh in 2019. The
development has not always been linear, as annual variations in
hydropower production have a significant impact. With approximately
20% of Uniper’s production capacity being hydro and nuclear power,
Fortum’s CO2-free power generation will increase by approximately 60%
through the consolidation of Uniper, which will happen after the closing
of the acquisition of an additional 20% stake, expected during the first
quarter of 2020. Around 50% of Uniper’s production capacity is gas-
based, and will play an important role as a low-CO2 and flexible source
of electricity during the ongoing energy transition.
On 30 January 2020, Uniper announced an ambitious phase-out plan
for its German hard-coal-fired power production. Pending approval
of the German coal-exit law, the company plans to shut down a total
of 1,500 MW of hard-coal capacity by the end of 2022 and a further
1,400 MW by the end of 2025. The last remaining hard-coal-fired
power plant would be the 1,100-MW Datteln 4 power plant that must
Fortum's power generation, TWh
CO₂-free
Gas
Coal
Other
Note: Fortum actuals 1990–2019 excluding associated company Stockholm Exergi. 2020 indicative figures adjusted for Nordic wind and Joensuu CHP assets sold in 2020.
Uniper’s disclosed 2018 numbers used for indicative consolidation 2020 with the following corrections/assumptions: normal hydrological year, accounting view adjusted to pro forma,
French coal assets sold, Datteln 4 approximately 2.2 TWh in 2020, no net increase in generation from Beresovskaya 3, coal-to-gas switch 2 TWh, Ringhals 2 closed on 31 Dec 2019.
Specific CO2 emissions of major utilities in Europe, gCO2/kWh electricity, 2018
186
Average 296
26
Note: Note: All figures, except "Fortum total", include only European power generation. For some
companies the PwC figures might also include heat production. Fortum's specific emissions of the
power generation in 2019 in Europe were 27 g/kWh and in total 183 g/kWh.
Source: PwC, December 2019, Climate change and Electricity, Fortum
1
1
02550751001251501752001990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020 ind.02004006008001,0001,200DEIPGEEPHRWEUniperCEZA2AEDPEnelNaturgyEnBWEngieSSEDraxFortum totalEnecoVattenfallØrstedIberdrolaPVOE.ONEDFVerbundFortum, EuropeStatkraft be decommissioned in 2038, at the latest, according to the draft law on
coal phase-outs in Germany.
Among the lowest specific emissions
Fortum was among the early proponents for a market-based price on
CO2 and is advocating for market-based solutions and a strong EU
Emission Trading Scheme to drive the necessary change in the energy
system. In our own operations we have invested in CO2-free power
generation, and the carbon exposure of our production in Europe is
among the lowest at 28 gCO2/kWh in 2019. The respective figure for
Fortum overall was 183 gCO2/kWh in 2019.
Grow in solar and wind
In addition to CO2-free hydro and nuclear power production, solar and
wind power play an essential role. During 2019, we commissioned
the 250-MW Pavagada 2 solar power plant in India, and started
the construction of the 250-MW Rajasthan solar power plant, with
commissioning expected during the fourth quarter of 2020.
The market conditions in the Nord Pool area and in Russia are more
suitable for wind power, and Fortum is continuously investing in these
areas. In Russia, Fortum has a wind and solar portfolio of around 2
GW, together with the joint venture with Rusnano. 120 MW is already
operational and another 550 MW is under construction. In 2019,
Fortum agreed to expand the shareholder base of its Nordic wind
portfolio, keeping a 20% ownership stake to manage the construction
and serve as a long-term asset manager for the wind portfolio.
Although our solar and wind capacity still is rather small compared to
Fortum’s total power generation capacity of more than 14 GW, our total
wind and solar portfolio has grown substantially during recent years.
Together with our associated companies, we have a portfolio of close
to three GW (Fortum’s share 2,024 MW) of solar and wind parks and
development projects in the Nordics, Russia, and India.
Wind and solar capacity
Operational
Under construction
Under development
Total
Capacity (including
associates), MW
713
987
1,339
3,039
Fortum share, MW
584
712
728
2,024
17
Fortum’s CO2-free power
generation will increase by
approximately 60% as we start
consolidating Uniper
Financials 2019
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
1
Financials 2019 – Reader’s guide
This report consists of the operating and financial review and the consolidated financial statements of Fortum Group, including the parent company financial statements.
Other parts of Fortum’s reporting entity include CEO letter, corporate governance statement, remuneration statement as well as tax footprint, which are published on
Fortum’s webpage. Sustainability reporting is an integrated part of Fortum’s annual reporting and additional information on sustainability operations can be found on Forum’s
website in sustainability section.
Operating and financial review
This section includes description of Fortum’s
financial performance during 2019. Here you will
also find a description of the risk management as
well as information on sustainability and Fortum
share performance.
Consolidated
financial statements
Primary statements
include Fortum’s consolidated
income statement, statement of comprehensive
income, balance sheet, statement of changes in
total equity and cash flow statement.
Notes
The notes to the consolidated financial statements
are grouped to six sections based on their
nature. Use the note number list on the right side
of the notes pages to navigate in the financial
statements.
Key figures
Key figures consist of financial key figures,
share key figures and operational key figures for
2018–2019. The financial key figures derive mainly
from the primary statements. Segment key figures
include information on segments.
Parent company financial statements
Here you can read the parent company financial
statements including the primary statements,
cash flow and notes to the financial statements.
Proposal for the use of profit
shown on the balance sheet
The Board of Directors proposal
for the dividend in 2019 is
disclosed in this section.
Auditor’s report
This section includes the audit report issued by
Fortum Oyj’s auditor, Deloitte Oy.
Key figures 2010–2019, operational key figures
and quarterly financial information
Look here for financial key figures, share key
figures, operational key figures and volume related
key figures for 2010–2019 as well as capex and
quarterly financial information for the years 2018
and 2019.
Investor information
Here you will find information on Fortum’s Annual
General Meeting, dividend payment, basic share
information as well as details of the financial
information available to shareholders in 2020.
Notes
1–3 Basis of preparation
These notes describe the basis of preparing the consolidated financial
statements and consist of the accounting policies, critical accounting
estimates and judgements and information about acquisitions and
disposals.
4–5 Risks
In the Risks section you will find notes that disclose how Fortum
manages financial risks and capital risks.
6–14 Income statement
These notes provide supporting information for the income statement.
15–34 Balance sheet
These notes provide supporting information for the balance sheet.
35–37 Off balance sheet items
The notes in this section provide information on items that are not
included on the balance sheet.
38–40 Group structure and related parties
This section includes information on related party transactions,
events after balance sheet date and the subsidiaries of Fortum group.
The following symbols show which amounts in the notes reconcile to
the items in income statement, balance sheet and cash flow statement.
IS = Income statement
BS = Balance sheet
CF = Cash flow
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
2
Financials 2019
Reader’s guide ..................................................................................................1
OPERATING AND FINANCIAL REVIEW .............................................................3
Financial performance and position ..................................................................3
Sustainability ..................................................................................................20
Risk management ...........................................................................................25
Fortum share and shareholders ......................................................................32
FINANCIAL STATEMENTS ..............................................................................35
Consolidated financial statements .................................................................35
Consolidated income statement .....................................................................35
Consolidated statement of comprehensive income .........................................36
Consolidated balance sheet ............................................................................37
Consolidated statement of changes in total equity..........................................38
Consolidated cash flow statement ..................................................................39
Notes to the consolidated financial statements .............................................41
Significant accounting policies ..............................................................41
1
2 Critical accounting estimates and judgements .......................................45
3 Acquisitions, disposals and assets held for sale .....................................45
Financial risk management ...................................................................48
4
5 Capital risk management .......................................................................55
Segment reporting ................................................................................57
6
Items affecting comparability ................................................................62
7
Fair value changes of derivatives and underlying items
8
in income statement ..............................................................................63
9 Other income and other expenses .........................................................64
10 Materials and services ...........................................................................65
Employee benefits and Board remuneration ..........................................65
11
Finance costs – net ...............................................................................69
12
Income tax expense ..............................................................................70
13
Earnings and dividend per share ............................................................72
14
Financial assets and liabilities by categories ..........................................73
15
Financial assets and liabilities by fair value hierarchy .............................77
16
17
Intangible assets ...................................................................................80
18 Property, plant and equipment and right-of-use assets..........................83
19 Participations in associated companies and joint ventures .....................85
20 Other non-current assets ......................................................................90
Interest-bearing receivables ..................................................................91
21
Inventories ............................................................................................91
22
Trade and other receivables ..................................................................92
23
Liquid funds ..........................................................................................93
24
Share capital .........................................................................................93
25
26 Non-controlling interests .......................................................................94
Interest-bearing liabilities ......................................................................94
27
28
Income taxes on the balance sheet ........................................................97
29 Nuclear related assets and liabilities ................................................... 100
30 Other provisions ................................................................................. 103
31 Pension obligations ............................................................................ 104
32 Other non-current liabilities ................................................................ 107
33
Trade and other payables ................................................................... 108
Leases ................................................................................................ 108
34
35 Capital and other commitments.......................................................... 109
36 Pledged assets and contingent liabilities ............................................ 110
37
Legal actions and official proceedings ................................................ 111
38 Related party transactions ................................................................. 113
Events after the balance sheet date .................................................... 113
39
Subsidiaries by segment on 31 December 2019 ................................. 114
40
Key figures .................................................................................................. 116
Financial key figures .................................................................................... 116
Share key figures ......................................................................................... 117
Segment key figures .................................................................................... 118
Definitions of key figures ............................................................................. 120
Parent company financial statements ......................................................... 123
Income statement ....................................................................................... 123
Balance sheet .............................................................................................. 123
Cash flow statement .................................................................................... 124
Notes .......................................................................................................... 125
Proposal for the use of the profit shown on the balance sheet ..................... 132
Auditor’s report .......................................................................................... 133
Key figures 2010–2019 .............................................................................. 137
Financial key figures .................................................................................... 137
Share key figures ......................................................................................... 139
Segment key figures .................................................................................... 140
Capital expenditure ..................................................................................... 146
Operational key figures ................................................................................ 148
Quarterly financial information ................................................................... 151
Investor information ................................................................................... 153
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
3
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Financial performance and position
Strong operational performance in 2019 – financial targets achieved
Key financial ratios 1)
Return on capital employed, %
Comparable net debt/EBITDA
1) See4Definitions of key figures.
Key figures
EUR million
IS Sales
Comparable EBITDA
IS Comparable operating profit
IS Operating Profit
- of sales %
IS Share of profit of associates and joint ventures
IS Profit before income tax
- of sales %
IS Earnings per share, EUR
CF Net cash from operating activities
Shareholders’ equity per share, EUR
Interest-bearing net debt (at end of period)
Return on shareholders' equity, %
Equity-to-assets ratio, %
2019
10.0
3.0
2018
6.7
3.6
2017
7.1
0.8
2019
5,447
1,766
1,191
1,110
20.4
744
1,728
31.7
1.67
2,015
14.61
5,260
11.9
57
2018
5,242
1,523
987
1,138
21.7
38
1,040
19.8
0.95
804
13.33
5,509
6.8
54
2017
4,520
1,275
811
1,158
25.6
148
1,111
24.6
0.98
993
14.69
988
6.6
61
Change
19/18
4%
16%
21%
-2%
1,858%
66%
76%
151%
10%
During 2019, we continued our determined efforts to implement Fortum’s strategy. We focused on operational
excellence in all our operations, re-assessed parts of our district heating business, continued to build solar and
wind power, reached an agreement to increase our shareholding in Uniper, and improved our financial results
substantially. At year-end, we reached our long term 10% target for return on capital employed.
In June, we announced our intention to assess the strategic options for the district heating and cooling business
value. We are initiating an extended assessment that includes our district heating and cooling businesses in all
Baltic countries, in Poland, and in Järvenpää, Finland.
In October, our Uniper investment took a leap forward with our agreement to buy an additional stake, in excess
of 20%, in the company. In November, we received approval to close the transaction from the Russian Government
Commission, subject to certain conditions. The clarification of these conditions is somewhat delayed, due to the
recent change of the Russian Government. In December, we received approval from the Unites States. We are still
confident to achieve closing during the first quarter of 2020. As announced previously, with closing we will seek
adequate board representation in the Supervisory Board of Uniper reflecting our ownership. This naturally includes
the chairmanship.
As the majority owner, Fortum will focus on cooperation and strategic alignment with Uniper. Our two
companies are already well-positioned to drive forward the European energy transition. Together, both companies
can benefit from a further aligned strategic focus to enable a carbon-neutral Europe by 2050. During the
transition, Europeans expect their energy companies to execute ambitious climate policies while continuing
to provide electricity and heat at all times and at an affordable cost. The German Government’s coal exit law,
presented last week, reflects these requirements – coal-fired generation will be phased out by the end of 2038 at
the latest. Fortum stands for a strategy of decarbonisation, which of course also applies to our investments, and
supports Uniper’s decision to close down the company’s old coal-fired units as the company’s new coal-fired CHP
plant Datteln 4 is taken into use. As long as coal has to be used to provide for security of supply in Germany, it
makes sense to use it in the most efficient and clean units.
We have continued our decarbonisation efforts during the year and will do so in the future. We have therefore
decided to tighten our climate target for specific CO2 emissions by 10% to 180 gCO2/kWh, applicable to Fortum’s
stand-alone fleet for the year 2020. We are building more solar and wind power while also utilising our ‘capital
recycling’ business model to release cash. This enables us to invest more with a limited equity exposure. Another
major effort is our commitment to carbon-neutral district heating in Espoo, Finland, in the 2020s, accelerated
by our goal to discontinue the use of coal in Espoo in 2025. Other examples of work for a cleaner energy system
in Finland include the sustainable decommissioning of the one-gigawatt Inkoo coal-fired power plant showing a
recycling rate of 92% of the material, placing the Meri-Pori coal-fired power plant into the Finnish national peak-
load reserve capacity system from July 2020, as well as the recent decisions of Fortum’s associated company
Turun Seudun Energiantuotanto to close down the coal-fired unit Naantali 2. In Sweden, Fortum’s joint venture
Stockholm Exergi has decided to decommission its last coal-fired unit after this heating season.
in Estonia and in Joensuu, Finland. The assessment concluded in the divestment of the Joensuu operations on 10
January 2020, for approximately EUR 530 million, releasing cash, strengthening our balance sheet, and unlocking
The comparable operating profit for 2019 increased by more than EUR 200 million to EUR 1.2 billion, mainly
driven by a clear result improvement in the Generation segment and also supported by improved results in the
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
4
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Consumer Solutions and Russia segments. In addition, our share of profits
from associated companies and joint ventures increased to almost EUR
750 million, largely thanks to our share of Uniper’s profits. Our focus on
cash flow measures, together with the strong results in 2019, increased
our cash flow to more than EUR 2 billion at year-end. Our comparable
net debt-to-EBITDA at year-end was 3.0x. When adjusting the net debt
with the impact of the divestment of the Joensuu district heat business
in January 2020 and the announced sale of a 80% share of our Nordic
wind portfolio, we also achieved our other long-term financial target of a
comparable net debt-to-EBITDA ratio of around 2.5x. Maintaining strong
cash flow and consistent deleveraging are also central for our credit
rating. Fortum’s key objective is to have a solid investment-grade rating
of at least BBB to preserve financial flexibility and good access to capital
markets after the Uniper transaction has been closed.
The fourth-quarter results were characterised by the strong
improvement in the Generation segment, driven by clearly higher hydro
volumes and good operational performance. The higher hedge price
helped us achieve a higher power price, in spite of the clearly lower spot
prices in the Nordics. All other operational segments also improved
their results. In City Solutions, the result recovered after a disappointing
third quarter. The hard work in Consumer Solutions continued to pay off
with EBITDA increasing for the ninth consecutive quarter. In the Russia
segment, the improvement in the heat business supported the results.
Based on Fortum’s 2019 results, our financial position and the outlook
for the coming years, Fortum's Board of Directors is proposing an
unchanged dividend of EUR 1.10 per share for the calendar year 2019.
With an earnings per share of EUR 1.67, the proposal corresponds to
a pay-out ratio of 65.9%, which is within the 50%-80% range of our
dividend policy.
Financial results
Sales by segment
EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Netting of Nord Pool transactions 1)
Eliminations
IS Total
2019
2,141
1,200
1,835
1,071
115
-529
-387
5,447
2018
1,842
1,110
1,759
1,069
103
-516
-125
5,242
Change
19/18
16%
8%
4%
0%
12%
4%
1) Sales and purchases with Nord Pool Spot are netted at the Group level on an hourly basis
and posted either as revenue or cost depending on whether Fortum is a net seller or net
buyer during any particular hour.
Comparable EBITDA by segment
EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total
2019
939
309
141
469
-91
1,766
Comparable operating profit by segment
EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other operations
IS Total
2019
794
121
79
316
-119
1,191
2018
763
310
110
417
-78
1,523
2018
628
135
53
271
-99
987
Change
19/18
23%
0%
28%
12%
-17%
16%
Change
19/18
26%
-10%
49%
17%
-20%
21%
Operating profit by segment
EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other operations
IS Total
2019
771
127
20
317
-127
1,110
2018
736
130
75
273
-76
1,138
Change
19/18
5%
-2%
-73%
16%
-67%
-2%
Share of profits of associated companies and joint ventures
EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other operations
IS Total
2019
10
37
0
59
638
744
2018
-72
74
0
36
0
38
Change
19/18
114%
-50%
-
64%
-
1,858%
For further information see4Note 6 Segment reporting.
Fortum's sales increased by 4% and comparable operating profit
improved by 21% and was EUR 1,191 (987) million. The higher hydro
and nuclear volumes and higher achieved power price in the Generation
segment as well as the improved performance in the Russia and
Consumer Solutions segments were the main contributors to the result
improvement.
Operating profit for the period was impacted by EUR -81 (151) million
of items affecting comparability, mainly from the fair value change of
non-hedge-accounted derivatives (4Note 7). In the third quarter of 2018,
Fortum recorded a capital gain of EUR 77 million from the sale of the
10% stake in Hafslund Produksjon.
The share of profit of associates and joint ventures was EUR 744 (38)
million. Fortum’s share of Uniper’s profits, EUR 632 (-2) million, comprises
Uniper’s October-December 2018 and January-September 2019 results
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
5
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
and the impact on Uniper’s results from the reinstatement of the UK
capacity market in the fourth quarter of 2019, totalling EUR 601 (-2)
million, as well as the fair value adjustments reversal according to the
purchase price allocation of Uniper for 2019, EUR 31 (-) million (4Note 3).
The share of profit of Uniper includes ‘Non-operating results’, EUR 392
(79) million. Co-owned nuclear companies accounted for EUR 16 (1)
million, Stockholm Exergi for EUR 24 (61) million, including the EUR -22
million effect of the impairment booked in Stockholm Exergi relating to
the early decommissioning of CHP6 (See Segment Review, City Solutions),
and TGC-1 for EUR 54 (40) million (4Note 19).
Net finance expenses amounted to EUR 125 (136) million, of which net
interest expenses were EUR 139 (114) million. Interest expenses include
the remaining amortised cost of EUR 13 million due to the prepayment of
the bridge financing for the acquisition of Uniper shares in 2018. Other
financial expenses include the EUR 10 million cost for the new committed
credit facilities related to the acquisition of an additional minimum stake
of 20.5% in Uniper. Net finance expenses included a positive impact of
EUR 40 million related to the regular nuclear technical update in Finland
(4Note 29).
Profit before income taxes was EUR 1,728 (1,040) million.
Taxes for the period totalled EUR 221 (181) million. The effective
income tax rate, according to the income statement, was 12.8% (17.5%).
The comparable effective income tax rate, excluding the impact of the
share of profit of associated companies and joint ventures as well as non-
taxable capital gains, tax rate changes, and other major one-time income
tax effects, was 22.4% (22.0%) (4Note 13).
The profit for the period was EUR 1,507 (858) million. Earnings per
share were EUR 1.67 (0.95), of which EUR -0.07 (0.15) per share were
related to items affecting comparability.
Cash flow
In 2019, net cash from operating activities was strong and increased
by EUR 1,211 million to EUR 2,015 (804) million, mainly impacted by
a EUR 356 (-524) million change in settlements for futures on Nasdaq
Commodities, the improved comparable EBITDA of EUR 1,766 (1,523)
Financial position and cash flow
EUR million
Interest expense
Interest income
Fair value gains and losses on financial
instruments
Other financial expenses - net
IS Finance costs - net
Interest-bearing liabilities
Less: Liquid funds
Interest-bearing net debt
2019
-167
28
8
6
-125
6,694
1,435
5,260
2018
-148
34
-8
-15
-136
6,093
584
5,509
Change
19/18
-13%
-18%
200%
140%
8%
10%
146%
-5%
million, dividends received of EUR 239 (61) million, and a EUR -33 (-146)
million change in working capital. The impact of the change of realised
foreign exchange gains and losses was EUR 14 (231) million.
Net cash from investing activities was EUR -369 (-4,398) million. The
comparison period in 2018 included the acquisition of Uniper shares.
Capital expenditure increased by EUR 116 million to EUR 695 (579)
million. Cash collaterals and restricted cash decreased by EUR 347
million, including the non-cash collateral arrangement in the first quarter
to release pledged cash from the Nordic power exchange, which had a
major positive impact of EUR 310 million. Consequently, cash flow before
financing activities increased significantly to EUR 1,646 (-3,594) million.
Proceeds from long-term liabilities were EUR 2,805 (1,764) million,
arising from the issuance of new bonds totalling EUR 2.5 billion under the
Euro Medium Term Note (EMTN) programme and a bilateral loan of EUR
300 million. The proceeds from the issued bonds were used to repay the
bridge financing of EUR 1,750 million related to the acquisition of Uniper
shares in 2018 and repayment of a bond of EUR 750 million. The total
payments of long-term liabilities were EUR 2,567 (586) million. The net
increase in liquid funds was EUR 806 (-3,268) million.
Dividends received totalled EUR 239 (61) million, mainly related to
dividends received from Uniper EUR 165 (-) million, Stockholm Exergi EUR
40 (39) million, Turun Seudun Energiantuotanto EUR 20 (10) million, and
TGC-1 EUR 10 (7) million.
Assets and capital employed
At the end of 2019, total assets amounted to EUR 23,364 (22,409)
million. Liquid funds at the end of the period increased to EUR 1,433
(584) million. Capital employed was EUR 19,929 (18,170) million.
Equity
Equity attributable to owners of the parent company totalled EUR 12,982
(11,841) million. The dividend of EUR 1.10 per share for 2018 was
approved by the 2019 Annual General Meeting (AGM) on 26 March 2019
and paid on 4 April 2019. The increase in equity of EUR 1,141 million
was mainly related to the net profit for the period of EUR 1,482 million,
the positive impact from fair valuation of cash flow hedges of EUR 561
million, and the positive translation differences of EUR 253 million, partly
offset by the dividend payment of EUR 977 million.
Financing
Net debt decreased by EUR 249 million to EUR 5,260 (5,509) million,
including lease liabilities of EUR 114 million. Interest-bearing liabilities
increased by EUR 601 million and liquid funds increased by EUR 851
million. The dividend, EUR 977 million, was paid on 4 April 2019.
At the end of 2019, the Group’s liquid funds (including cash balances
of EUR 2 million relating to assets held for sale) totalled EUR 1,435 (584)
million. Liquid funds include cash and bank deposits held by PAO Fortum
of EUR 201 (317) million. At the end of 2019, Fortum had undrawn
committed credit facilities amounting to EUR 1,800 (1,800) million, of
which EUR 1,750 million is maturing in June 2023. In the fourth quarter of
2019, Fortum signed additional committed credit facilities of EUR 8,300
million for the acquisition of Uniper shares as announced on 8 October
2019 (4Note 24). On 7 January 2020, Fortum cancelled EUR 3,000
million of these new committed credit facilities.
On 19 February 2019, Fortum issued bonds with a total nominal value
of EUR 2,500 million under its EMTN programme. The bonds were issued
in three tranches with the following maturities; EUR 1,000 million with
a 0.875% fixed coupon maturing on 27 February 2023; EUR 750 million
with a 1.625% fixed coupon maturing on 27 February 2026; and EUR
750 million with a 2.125% fixed coupon maturing on 27 February 2029.
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
6
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
The proceeds from the issued bonds were used to repay the bridge financing of EUR 1,750 million related to the
acquisition of the initial 49.99% stake in Uniper in 2018 and repayment of a 6% fixed-coupon bond of EUR 750
million, which resulted in a more balanced debt maturity profile. In April 2019, Fortum drew a five-year EUR 300
million bilateral financial loan.
Following Fortum’s announcement to acquire an additional stake of more than 20.5% of Uniper’s shares,
Standard & Poor’s and Fitch reviewed the credit rating of Fortum. In October 2019, Standard & Poor's placed
Fortum’s long-term credit rating of BBB on CreditWatch Negative. The short-term rating is at level A-2. In October
2019, Fitch Ratings placed Fortum's long-term credit rating of BBB and short-term credit rating of F2 on Rating
Watch Negative. Both rating agencies are expected to update the credit ratings after the closing of the acquisition
of at least an additional 20.5% of Uniper shares. Standard & Poor’s have announced that they will likely consolidate
Uniper into Fortum and link the issuer credit rating on Uniper to that of Fortum upon antitrust approval.
Fortum’s key objective is to have a solid investment-grade rating of at least BBB, in order to preserve financial
flexibility and good access to capital markets post-closing of the above-mentioned acquisition of Uniper shares,
and to strengthen its financial profile longer term. This will provide appropriate financial stability and support to
the enlarged group.
Change in net debt during 2019, EUR million
6,000
5,000
4,000
3,000
2,000
1,000
0
e
e t d
N
5,509
99
1,766
-249
239
142
165
323
107
695
88
345
281
46
5,260
977
0 1 8
a
p
p ti o
C
b t 2
I m
o
d
a
m
c t fr o
R
n o f I F
a r a
p
m
o
S 1 6
b l e E
D i v i d
B I T
n
e
d
D
A
s r e
N
e i v
c
n
e t fi
e
a
d
n
P
s t
s
e
x
e t a
m
o r k i n
o
e i n w
o
c
g
c i a l c
a i d i n
n
a
h
C
a
g c
n
u isiti o
p it a l
q
c
A
g
n
a
h
C
s
C
a
e
p
D i v
e i n i n t. b
x
e
s t m
a ri n
e
D i v i d
e
n t s
e
g r e
d
n
n
a
e r s
a r e
e p
s
b l e
w
e i v
a i d t o o
c
o f t h
o ll a t e r a l a rr a
s p
h c
s
a
n - c
o
N
n t
n
g
e
n t
e
X a
n
m
F
e r
d o t h
e t d
N
0 1 9
b t 2
e
Key figures
The comparable net debt-to-EBITDA ratio for 2019 was 3.0x (3.6x). The target is to steer the leverage from
the current net debt-to-EBITDA ratio towards the long-term over-the-cycle target of approximately 2.5x. When
adjusting net debt with the impact of the divestment of the Joensuu district heating business and the announced
sale of a 80% share of our Nordic wind portfolio, Fortum’s long-term target of around 2.5x was achieved.
Gearing was 40% (46%) and the equity-to-assets ratio was 57% (54%). Equity per share was EUR 14.61 (13.33).
Return on capital employed (ROCE) for 2019 was 10.0% (6.7%). Fortum targets a long-term over-the-cycle return
on capital employed of at least 10%.
Fortum’s key financial targets will be revisited in due course to ensure alignment with a commitment to retain a
solid investment grade rating of at least BBB.
Operating and regulatory environment
Nordic countries
According to preliminary statistics, electricity consumption in the Nordic countries was 392 (399) TWh, as milder
weather during the first quarter and slightly lower industrial demand caused a slight decrease in the power
demand.
At the beginning of 2019, the Nordic water reservoirs were at 74 TWh, which is 10 TWh lower than the long-
term average and 8 TWh lower than one year earlier. At the end of the year, the reservoirs were at 79 TWh, which
is 5 TWh below the long-term average and 5 TWh higher than one year earlier. In April 2019, the Norwegian
energy regulator (NVE) revised the Norwegian reservoir statistics. The reported reference levels and historical
deviations have been updated accordingly.
Power consumption
TWh
Nordic countries
Russia
Tyumen
Chelyabinsk
Russia Urals area
2019
392
1,059
94
35
260
2018
399
1,055
92
35
260
2017
392
1,035
95
33
261
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
7
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
During 2019, the average system spot price in Nord Pool was EUR 38.9 (44.0) per MWh. The average area price
in Finland was EUR 44.0 (46.8) per MWh and in Sweden (SE3, Stockholm) EUR 38.4 (44.5) per MWh.
In 2019, the average German spot price was EUR 37.7 (44.5) per MWh.
The market price of CO2 emission allowances (EUA) showed some volatility during the year, but ended the year
at the same price level as in the beginning of the year, at EUR 25 per tonne.
Average prices
Spot price for power in Nord Pool power exchange,
EUR/MWh
Spot price for power in Finland, EUR/MWh
Spot price for power in Sweden, SE3, Stockholm,
EUR/MWh
Spot price for power in Sweden, SE2, Sundsvall,
EUR/MWh
Spot price for power in European and Urals part
of Russia, RUB/MWh 1)
Average capacity price, tRUB/MW/month
Spot price for power in Germany, EUR/MWh
Average regulated gas price in Urals region, RUB/1,000 m3
Average capacity price for old capacity (CCS),
tRUB/MW/month 2)
Average capacity price for new capacity (CSA),
tRUB/MW/month 2)
Spot price for power (market price), Urals hub,
RUB/MWh 1)
CO2, (ETS EUA), EUR/tonne CO2
Coal (ICE Rotterdam), USD/tonne
Oil (Brent Crude), USD/bbl
1) Excluding capacity tariff.
2) Capacity prices paid only for the capacity available at the time.
Water reservoirs
TWh
Nordic water reservoirs level
Nordic water reservoirs level, long-term average
2019
38.9
44.0
38.4
37.9
1,289
624
37.7
3,910
154
1,096
1,117
25
61
64
2018
44.0
46.8
44.5
44.2
1,247
609
44.5
3,801
148
1,075
1,043
16
92
72
2017
29.4
33.2
31.2
30.8
1,204
535
34.2
3,685
148
899
1,041
6
84
55
31 Dec 2019 31 Dec 2018 31 Dec 2017
86
83
74
83
79
84
Russia
Fortum operates mainly in the Tyumen and Khanty-Mansiysk area of Western Siberia, where industrial production
is dominated by the oil and gas industries, and in the Chelyabinsk area of the Urals, which is dominated by the
metal industry. The Russian market is divided into two price zones and Fortum operates in the First Price Zone
(European and Urals part of Russia).
According to preliminary statistics, Russian electricity consumption was 1,059 (1,056) TWh and 807 (810) TWh
in the First Price Zone in 2019.
In 2019, the average electricity spot price, excluding capacity prices, was RUB 1,289 (1,247) per MWh in the
First Price Zone and RUB 1,117 (1,043) per MWh in the Urals hub.
Nordic water reservoirs, energy content, TWh
2000
2003
2018
2019
Average 2000–2018
Source: Nord Pool
Export/import
TWh (+ = import to, - = export from Nordic area)
Export/import between Nordic area and Continental Europe+Baltics
Export/import between Nordic area and Russia
Export/import Nordic area, total
2019
-8
8
0
2018
-10
8
-2
2017
-15
6
-9
1
020406080100120Q1Q2Q3Q4Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
8
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Regulatory environment
New EU institutions with a strong focus on climate
Following the EU elections in May, the new Parliament took office. The
Commission headed by President Ursula von der Leyen started at the
beginning of December and, without delay, issued the first outline of its
Green Deal.
The European Council, except Poland, endorsed the target of reaching
EU economy-wide climate neutrality by 2050. Meanwhile, the Commission
announced its intention to triple the budget of the Just Transition Fund
to EUR 100 billion, with the target to ease the transformation in heavily
fossil-reliant countries. Polish adherence will be reconsidered in the
European Council in June 2020, whilst the 2050 EU economy-wide target
will be part of the Climate Law due in February 2020.
Fortum welcomes the firm climate orientation of the new EU
institutions.
The European Green Deal emerging
In December, the European Commission published a Communication on
the European Green Deal. It will be the new Commission’s bold political
initiative, aiming at EU economy-wide climate neutrality by 2050. The
Commission is expected to launch up to 50 related initiatives during the
next two years.
While, the Green Deal will not be solely about climate ambition, it is
expected to deliver extensive growth for Europe bundling all EU policy
areas and all sectors of society. The Green Deal comprises, among other
things, energy supply, circular economy, ecosystems, biodiversity, and
mainstreaming of sustainability in all EU policies.
Practically all energy and climate targets and policies will be subject to
revision, and consequently, entail a regulatory risk. The Commission will
present a Green Financing Strategy in autumn 2020 in order to enable
the private sector to contribute to the financing of a green transition.
Fortum welcomes the Green Deal and considers sector integration and
electrification as offering significant solutions and business opportunities
to meet the ambitious goals of the Green Deal.
Sustainable finance regulation adopted
In December, the European Council and Parliament reached an
agreement on the taxonomy regulation of sustainable finance. The
taxonomy creates a unified classification system for what can be
considered sustainable investments. The regulation still needs to be
formally approved by the Council and Parliament and is expected to
enter into force by the end of 2022.
The regulation strongly leans towards renewable energy technologies.
Nuclear and gas may qualify as ‘transitional activities’, depending on the
outcome of the assessment that will be carried out by the Commission
during 2020. The status of waste-to-energy is still open whilst the
treatment of hazardous waste has been classified as sustainable.
As such, the objective of the sustainable finance initiative is in line with
Fortum's strategy. Fortum has, however, strongly advocated for an approach
based on CO2 emissions and technology-neutrality in compliance with the
Paris Agreement. There is a risk that if the taxonomy discriminates against
some low-carbon technologies, the financing costs of such investments will
increase in the future and result in unduly expensive decarbonisation.
EIB’s new energy lending policy approved
In November, the European Investment Bank (EIB) agreed on a new
energy lending policy and confirmed the EIB’s increased ambition in
climate action and environmental sustainability. EIB will align all financing
activities with the goals of the Paris Agreement from the end of 2020
and end financing for fossil fuel energy projects from the end of 2021.
The Sustainable Europe Investment Plan launched by the new
Commission targets to unlock EUR 1 trillion of climate action and
environmentally sustainable investments by 2030. The EIB will play a key
role in this and will gradually turn into a climate bank. EIB will no longer
consider new financing for fossil fuel energy projects, including gas. In
addition, EIB set a new Emissions Performance Standard of 250g of CO2/
kWh for power and heat projects. This will replace the current 550g of
CO2/kWh standard. Nuclear and renewable energy projects continue to
be eligible for funding. If in line with the EU waste hierarchy and national
waste management plans, waste-to-energy projects are also eligible.
The new EIB lending policy is well in line with Fortum’s strategy.
German climate and coal phase-out legislation
In September 2019, the German Government released an extensive
climate and energy package in order to meet the 2030 emission
reduction target of 55% and carbon-neutrality by 2050. In December, the
German Parliament approved the climate package. The package includes
a national emissions trading system for the transport and building sectors
with carbon prices of EUR 25 in 2021 and EUR 55 in 2025. To offset
the higher costs for consumers and companies, the climate package
includes subsidies for electric cars and tax incentives for greener heating,
electricity, and housing.
The climate protection law ("Klimaschutzgesetz") sets annual CO2
emission reduction targets for the period 2020–2030 for six sectors:
energy, industry, transport, buildings, agriculture, waste management,
and others.
In addition, the Government decided on a coal phase-out plan, based
on the earlier proposal and is committed to propose legislation in line
with the recommendations of the Coal Commission, and to publish a
gas strategy including hydrogen. The coal phase-out legislation was
approved by the federal cabinet on 29 January 2020 and is expected
to be completed in the first half of 2020. In the years 2026 and 2029,
the Government plans to carry out large-scale reviews of how the coal
phaseout is progressing. The review will inform the decision on whether
the phase-out can be brought forward by three years, i.e. that Germany
could phase out coal as early as 2035. With regards to the new coal-fired
plant Datteln 4, owned by Uniper, the Government announced its interest
to allow the commissioning of the plant while, at the same time, old and
less-efficient plants would be closed.
In Fortum’s opinion, it would be essential to have the respective
legislation become effective as soon as possible, as the first auctions for
the closure of hard coal plants are planned already for summer 2020 and
the first plants are to be closed in 2022.
Changed Swedish taxation resulted in new CHP and waste-
to-energy taxes
In line with a broad political agreement made in January 2019, containing
new taxes of up to EUR 1.5 billion, legislation on the taxation of waste
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
9
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
incineration was approved by the Swedish Government on 4 December
2019. The tax level was set at SEK 75/tonne in 2020 and will increase to
SEK 125/tonne by 2022.
As part of the tax change, the Government also passed a law to
increase the tax for fossil-fuelled CHP plants, effective from August 2019.
The Government has not specified the definition of a green tax, and
additional taxes are likely to be presented during the spring of 2020.
Swedish energy agreement collapses
In December, the Conservatives and Christian Democrats left the Swedish
broad energy agreement made in 2016. The main reason was the
ongoing disagreement on nuclear power, with the opposition wanting to
update the agreement with more nuclear friendly wording. The collapse
of the agreement will not have any major financial implications for Fortum
as key elements in the original agreement, mainly tax reductions for
hydro and nuclear power, have already been implemented. However, it
will most likely result in increasing regulatory uncertainty, especially for
nuclear power.
Segment reviews
Business model
Fortum’s business activities cover the production and sales of electricity
and heat, waste-to-energy and circular economy solutions, as well as
energy-sector expert services and various consumer solutions. Fortum
is the third largest power generator and the largest electricity retailer in
the Nordic countries. Globally, the company is one of the leading heat
producers. As two thirds of Fortum's power production is hydro and
nuclear, the company is also among the lowest-emitting generators in
Europe.
With core operations in 10 countries, Fortum employs a diverse team
of more than 8,000 energy-sector professionals. Fortum has some 130
hydro power plants, 26 combined heat and power (CHP), condensing,
and nuclear power plants, as well as four wind power parks and four solar
power plants. Globally, the company supplies heat in 24 cities and towns
and has five waste-to-energy plants. Fortum’s key markets are the Nordic
and Baltic countries, Russia, Poland, and India.
Fortum's business divisions are Generation, City Solutions, Consumer
Solutions and Russia. Other Operations includes corporate functions, R&D
and technology development projects, as well as Fortum's shareholding
in Uniper SE.
In November 2018, Fortum announced that the solar and wind
businesses were reorganised and the wind operations became a business
area within the Generation segment and the solar operations within
the City Solutions segment. Previously these were included in Other
Operations. The Russian wind and solar operations continue as a part of
the Russia segment. Fortum has restated its 2018 comparative segment
reporting figures in accordance with the new organisation structure.
Generation
Generation is responsible for Nordic power production. The segment
comprises nuclear, hydro, wind, and thermal power production, as well as
power portfolio optimisation, trading, industrial intelligence, and global
nuclear services.
EUR million
Sales
- power sales
of which Nordic power sales 1)
- other sales
Comparable EBITDA
Comparable operating profit
Operating profit
Share of profits of associates and joint
ventures 2)
Comparable net assets (at period-end)
Comparable return on net assets, %
Capital expenditure and gross
investments in shares
Number of employees
2019
2,141
2,006
1,568
135
939
794
771
10
6,147
12.8
260
1,109
2018
1,842
1,771
1,415
71
763
628
736
-72
6,485
10.8
262
1,091
Change
19/18
16%
13%
11%
90%
23%
26%
5%
114%
-5%
19%
-1%
2%
1) The Nordic power sales income and volume includes hydro, wind, and nuclear generation,
excluding minorities. It does not include thermal generation, minorities, customer business
or other purchases.
2) Power plants are often built jointly with other power producers, and owners purchase
electricity at cost including interest cost and production taxes. The share of profit/loss
is mainly IFRS adjustments (e.g. accounting for nuclear-related assets and liabilities) and
depreciations on fair-value adjustments from historical acquisitions (4Note 19).
The Generation segment's total power generation in the Nordic countries
increased due to higher hydro and nuclear volumes. The hydro volumes
in the comparison period were low mainly due to the historically low
levels in the third quarter of 2018. The segment’s overall operational
performance and the load factor for nuclear generation were at a good
level. The nuclear load factor for the Fortum fleet and partly owned
companies was at the highest level in Fortum’s history with the Loviisa 1
power plant setting a new production record. The CO2-free production
accounted for 100% (100%) of the total power generation.
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
10
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
The achieved power price in the Generation segment increased by
EUR 2.2 per MWh, +6%, driven by higher hedge prices and successful
optimisation of hydropower production, as well as higher first-quarter
spot power prices.
Comparable operating profit increased by 26%, mainly due to higher
hydro and nuclear volumes and the higher achieved power price.
Operating profit was affected by EUR -23 (108) million of items
affecting comparability, mainly related to the fair value change of non-
hedge-accounted derivatives. In the third quarter of 2018, Fortum
recorded a capital gain of EUR 77 million from the sale of the 10% stake
in Hafslund Produksjon (4Note 6).
The share of profits of associated companies and joint ventures
totalled EUR 10 (-72) million (4Note 19).
The annual outages of the Loviisa nuclear power plant were managed
well. The maintenance outages at Unit 1 and Unit 2 lasted 20 days and
26 days, respectively. Both units underwent a refuelling outage, during
which approximately one quarter of the fuel was replaced.
In June 2019, Posiva decided to start construction of the
encapsulation plant for spent nuclear fuel and start equipping the Onkalo
final depository with systems needed for the final disposal. The start
of the final disposal will still require licences to operate. In September
2019, the final disposal of spent nuclear fuel took a step forward, as the
foundation stone for Posiva’s encapsulation plant was laid at Onkalo, in
Eurajoki, Finland. Posiva will dispose of the high-level nuclear waste of
its owners, Fortum Power and Heat Oy (share of ownership 40%) and
Teollisuuden Voima (TVO) (share of ownership 60%).
In December 2019, 440 MW of the production capacity of Fortum’s
Meri-Pori power plant was selected for inclusion in the Finnish national
peak-load reserve capacity system from 1 July 2020 to 30 June 2022.
Power generation by source
TWh
Hydropower, Nordic
Wind power, Nordic
Nuclear power, Nordic
Thermal power, Nordic
Total
Nordic sales volume
TWh
Nordic sales volume
of which Nordic Power sales volume 1)
2019
20.3
0.4
23.5
0.2
44.4
2019
51.3
42.7
2018
19.1
0.3
22.8
0.1
42.3
Change 19/18
6%
33%
3%
100%
5%
2018
48.4
40.5
Change 19/18
6%
5%
1) The Nordic power sales income and volume includes hydro, wind, and nuclear generation, excluding minorities. It does not include thermal
generation, minorities, customer business or other purchases.
Sales price
EUR/MWh
Generation’s Nordic power price 1)
2019
36.8
2018
34.6
Change 19/18
6%
1) Generation’s Nordic power price includes hydro, wind, and nuclear generation, excluding minorities. It does not include thermal generation,
minorities, customer business or other purchases.
Nord Pool, power price, 2015–2019, EUR/MWh
Fortum achieved
Spot average
Spot price
Source: Nord Pool, Fortum
1
02040608020152016201720182019Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
11
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
City Solutions
City Solutions is responsible for developing sustainable solutions for
urban areas into a growing business for Fortum. The segment comprises
heating, cooling, waste-to-energy, biomass, and other circular economy
solutions, as well as solar power production. The business operations
are located in the Nordics, the Baltic countries, Poland, and India. The
segment also includes Fortum’s 50% holding in Stockholm Exergi, which
is a joint venture and is accounted for using the equity method.
EUR million
Sales
- heat sales
- power sales
- waste treatment sales 1)
- other sales 2)
Comparable EBITDA
Comparable operating profit
Operating profit
Share of profits of associates and joint
ventures
Comparable net assets (at period-end)
Comparable return on net assets, %
Capital expenditure and gross
investments in shares
Number of employees
2019
1,200
615
153
250
181
309
121
127
37
3,892
4.7
322
1,970
2018
1,110
604
134
211
161
310
135
130
74
3,794
5.5
242
2,017
Change
19/18
8%
2%
14%
18%
12%
0%
-10%
-2%
-50%
3%
-15%
33%
-2%
1) Waste treatment sales comprise gate fees at waste treatment plants and environmental
construction services.
2) Other sales comprise mainly operation and maintenance services and fuel sales.
Heat sales volumes were at the same level as in the previous year. Power
sales volumes increased, mainly due to higher power volumes in the new
unit in Naantali, Finland.
Comparable operating profit decreased by 10%. The main reason for
the decline was the profit of EUR 26 million recorded in the third quarter of
2018 from the sale of a 54% share of Fortum’s Indian solar portfolio, partly
offset by the positive impact of one-time effects in the fourth quarter of
2019 and the strong result improvement during the year in the Norwegian
heating and cooling business. The full-year comparable operating profit
from the recycling and waste business was close to the level of the
previous year. The cost synergies related to the Hafslund transaction
materialised gradually during 2019, with targeted annual synergies of EUR
5–10 million expected to be achieved by the end of 2020.
Operating profit was affected by EUR 7 (-5) million of items affecting
comparability, mainly related to capital gains and the fair value change of
non-hedge-accounted derivatives (4Note 6).
The share of profits of associated companies and joint ventures
totalled EUR 37 (74) million, the main part of which was related to the
share of profit of Stockholm Exergi, EUR 24 (61) million and Turun Seudun
Energiantuotanto EUR 13 (13) million (4Note 19).
In September 2019, Fortum announced, in line with Fortum’s strategy
and the target to achieve carbon-neutral district heating in Espoo during
the 2020’s, the intention to discontinue the use of coal in the Espoo district
heating network by the end of 2025.
In December 2019, the Swedish Government decided to implement new
taxes on fossil fuels used for heat production in CHP plants, taking effect
from August 2019. Consequently, during 2019, the board of Stockholm
Exergi decided to decommission the last coal-fired unit in Stockholm,
CHP6, starting from the end of the 2019–2020 heating season. Fortum’s
share of profits from Stockholm Exergi was impacted by EUR -22 million
related to the impairment booked in Stockholm Exergi’s fourth-quarter
2019 results.
On 20 December 2019, Fortum signed an agreement to sell its district
heating business in Joensuu, Finland, to Savon Voima Oyj. The total
consideration on a debt- and cash-free basis was approximately EUR 530
million, and the cash was received at the completion of the divestment
on 10 January 2020. Fortum will record a tax-exempt capital gain of
approximately EUR 430 million in the City Solutions segment’s first-quarter
2020 results.
Heat sales by country
TWh
Finland
Poland
Norway
Other countries
Total
2019
3.8
3.3
1.7
2.0
10.8
2018
3.8
3.5
1.6
1.9
10.8
Change
19/18
0%
-6%
6%
5%
0%
Power sales by country
TWh
Finland
Poland
Other countries
Total
2019
1.6
0.6
1.0
3.2
2018
1.4
0.5
1.0
2.9
Change
19/18
14%
20%
0%
10%
Consumer Solutions
Consumer Solutions is responsible for the electricity and gas retail
businesses in the Nordics and Poland, including the customer service,
invoicing, and debt collection businesses. Fortum is the largest electricity
retail business in the Nordics, with approximately 2.4 million customers
across different brands in Finland, Sweden, Norway, and Poland. The
business provides electricity as well as related value-added and digital
services.
EUR million
Sales
- power sales
- other sales
Comparable EBITDA
Comparable operating profit
Operating profit
Comparable net assets (at period-end)
Capital expenditure and gross
investments in shares
Number of employees
2019
1,835
1,630
206
141
79
20
640
55
1,327
2018
1,759
1,547
212
110
53
75
648
47
1,399
Change
19/18
4%
5%
-3%
28%
49%
-73%
-1%
17%
-5%
The electricity sales volumes increased by 1%, mainly due to increased
sales to business customers, partly offset by the impact of the warmer
weather in the first and fourth quarters and the reduced number of
customers. The decrease in the number of customers was the result of a
more selective customer acquisition and retention approach. Throughout
the year, the market sentiment in the Nordics continued to be challenging
with tough competition and high customer churn. However, during the
integration and restructuring of Hafslund, Fortum has been able to improve
its competitive position in the Nordics. Higher market prices, especially in
the first quarter, was the main driver for the 5% increase in sales.
Operating and financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
12
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Comparable operating profit increased by 49%, mainly supported by
higher sales margins. The higher sales margins are a result of the active
development of the product and service portfolios following the Hafslund
integration and subsequent development of the business. Part of the
improvement was related to favourable market conditions in the first
half of the year, temporarily increasing profitability in certain areas of the
customer portfolio. The annual EUR 10 million cost synergies related to
the Hafslund transaction, projected to materialise by the end of 2020,
fully materialised already during 2019.
Operating profit was affected by EUR -59 (22) million of items
affecting comparability, due to the fair value change of non-hedge-
accounted derivatives (4Note 6).
In August 2019, the Polish Price Freeze Act became effective. This had
a EUR -1 million impact on the operating profit.
Sales volumes
TWh
Electricity 1)
Gas 2)
1) 2018 figure corrected from previously published.
2) Not including wholesale volumes.
2019
30.6
4.1
2018
30.4
4.1
Change
19/18
1%
0%
Number of customers
Thousands 1)
Electricity
Gas
Total
1) Rounded to the nearest 10,000.
2019
2,340
40
2,380
2018
2,440
30
2,470
Change
19/18
-4%
33%
-4%
Russia
The Russia segment comprises power and heat generation and sales in
Russia. The segment also includes Fortum’s over 29% holding in TGC-1,
which is an associated company and is accounted for using the equity
method.
EUR million
Sales
- power sales
- heat sales
- other sales
Comparable EBITDA
Comparable operating profit
Operating profit
Share of profits of associates and joint
ventures
Comparable net assets (at period-end)
Comparable return on net assets, %
Capital expenditure and gross
investments in shares
Number of employees
2019
1,071
924
145
2
469
316
317
59
3,205
12.3
133
2,955
2018
1,069
872
193
4
417
271
273
36
2,789
10.3
117
2,941
Change
19/18
0%
6%
-25%
-50%
12%
17%
16%
64%
15%
19%
14%
0%
In 2018, Fortum and STS Corporation established the Yustek joint venture
for the heat distribution and supply in Chelyabinsk. The operations
of the Yustek joint venture started in November 2018 and became
fully operational in January 2019 by obtaining the single heat supplier
status and related tariffs. Fortum has transferred the heat networks
in Chelyabinsk and certain heat-only boilers with a capacity of 1,661
MW to the Yustek joint venture under a lease agreement. In 2018, the
businesses transferred to the Yustek joint venture had a marginal annual
effect on the comparable operating profit of the Russia segment.
Power generation volumes remained stable during the year. Heat
production volumes decreased following the transfer of the heat
distribution business in Chelyabinsk, including certain heat-only boilers,
Russian power generation and heat production
TWh
Russian power generation
Russian heat production
2019
29.3
17.3
2018
29.6
20.4
Change
19/18
-1%
-15%
to the Yustek joint venture. The warmer weather in both the Chelyabinsk
and Tyumen areas also had a negative impact.
Sales remained stable. The negative effect of the transfer of the heat
distribution business in Chelyabinsk to the Yustek joint venture, and lower
heat volumes due to the warmer weather in Chelyabinsk and Tyumen
were offset by higher electricity prices, higher CSA payments at Nyagan
2, and the stronger Russian rouble.
Comparable operating profit increased by 17%, supported by higher
electricity margins, lower bad-debt provisions, and higher received
CSA payments. The increase in CSA payments was related to Nyagan 2
receiving higher payments for the last years of the CSA period starting
from the third quarter of 2018. The effect of the change in the Russian
rouble exchange rate was EUR 4 million.
The share of profits of associated companies and joint ventures
totalled EUR 59 (36) million, mainly related to the share of profit of TGC-
1, EUR 54 (40) million, and the Yustek joint ventures in Chelyabinsk and
Tyumen, EUR 2 (1) million (4Note 19).
Key electricity, capacity and gas prices for Fortum Russia
Electricity spot price (market price),
Urals hub, RUB/MWh
Average regulated gas price, Urals
region, RUB/1,000 m3
Average capacity price for CCS and
other, tRUB/MW/month 1) 2)
Average capacity price for CSA, tRUB/
MW/month 2)
Average capacity price, tRUB/MW/
month
Achieved power price for Fortum in
Russia, RUB/MWh
Achieved power price for Fortum in
Russia, EUR/MWh 3)
2019
2018
1,117
1,043
3,910
3,801
154
148
1,096
1,075
624
609
1,990
1,888
27.3
25.6
Change
19/18
7%
3%
4%
2%
2%
5%
7%
1) Including capacity receiving payments under “forced mode status”, regulated tariffs, and
bilateral agreements.
2) Capacity prices paid for the capacity volumes, excluding unplanned outages, repairs, and
own consumption.
3) Translated using the average exchange rate.
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
13
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Other Operations
Other Operations comprises corporate functions, technology and
innovation, internal and external ventures, R&D, as well as Fortum's
shareholding in Uniper, which is consolidated as an associated company
from 30 June 2018 (4Note 3).
EUR million
Sales 1)
Comparable EBITDA
Comparable operating profit
Operating profit
Share of profits of associates and joint
ventures
Comparable net assets (at period-end)
Capital expenditure and gross
investments in shares
1) Mainly internal sales.
2019
115
-91
-119
-127
638
4,356
2018
103
-78
-99
-76
0
4,023
Change
19/18
12%
-17%
-20%
-67%
-
8%
49
4,003
-99%
Uniper investment and purchase price allocation
In 2017, Fortum announced a public takeover offer to buy shares in
Uniper. In June 2018, the offer was settled and Fortum’s ownership
was 47.12%. At the end of 2018, Fortum’s ownership in Uniper was
49.99%. The total acquisition cost for the initial 49.99% stake in Uniper
of EUR 3,968 million, including direct costs relating to the acquisition, is
reported in 'Participations in associated companies and joint ventures'.
The purchase price allocation was finalised during the second quarter
of 2019. Uniper's balance sheet as of 30 June 2018 has been used
as the starting point for the purchase price allocation; however, a fair
value adjustment of EUR 613 million has been made for the acquired
assets and liabilities. Fortum's share of the goodwill on Uniper's balance
sheet, EUR 930 million, is derecognised, as it is not an identifiable asset
according to IFRS. Potential future impairments of goodwill (existing
as of 30 June 2018) booked by Uniper will therefore be reversed to
Fortum’s share of profits of associates and joint ventures. The fair value
adjustments of EUR 613 million relates mainly to political and regulatory
risks that are reflected in the fair value of certain generation and
production assets. The fair value adjustment will be reversed to ‘Share
of profits of associates and joint ventures’ over a period of 20 years,
EUR 31 million annually. If Uniper reports negative impacts relating to
these generation and production assets, Fortum will assess the potential
need to use this fair value adjustment to reverse the negative impacts
(4Note 3).
In May 2019, Uniper hosted its AGM. The AGM approved the
proposed dividend of EUR 0.90 per share, which, for Fortum, corresponds
to received dividends of EUR 165 million.
On 8 October 2019, Fortum announced it had entered into
agreements with Elliott and Knight Vinke to acquire an additional stake
of at least 20.5% in Uniper for approximately EUR 2.3 billion, increasing
Fortum’s share in Uniper to more than 70.5% (subject to regulatory
clearances) and the total investment in Uniper to approximately EUR 6.2
billion, representing an average acquisition price of EUR 23.97 per share
(4Notes 3 and 19).
In 2018, in connection with the acquisition of the initial stake of
49.99% in Uniper, Fortum already received unconditional merger
clearance from the European Commission with no further clearance
required in the EU for any further acquisitions. On 30 December
2019, Fortum received regulatory clearance in the United States for
the transaction. On 14 November 2019, the Russian Government
Commission for Monitoring Foreign Investments approved, subject to
certain conditions, the closing of the acquisition. The clarification of these
conditions is still ongoing. Closing of the transactions is still subject to
customary merger control clearance in Russia, and is expected by the
end of the first quarter of 2020.
Fortum will fully consolidate Uniper as a subsidiary in its financial
statements from closing of the transaction. The transaction will be
financed with existing cash resources and committed credit facilities,
that were syndicated to 13 banks in the fourth quarter of 2019.
Fortum’s key objective is to have a solid investment-grade rating of at
least BBB, in order to preserve financial flexibility and good access to
capital markets post-closing of the acquisition of an additional stake of
at least 20.5% in Uniper, and to strengthen its financial profile longer
term. This will provide the appropriate financial stability and support for
the enlarged group. As Uniper publishes its interim reports later than
Fortum, Fortum's share of Uniper's results is accounted for with a time
lag of one quarter, with potential adjustments. Fortum’s 2019 Financial
Statements include Fortum’s share of Uniper's October-December 2018
and January-September 2019 results (4Note 3). Uniper will report its full
year 2019 results on 10 March 2020 and its first-quarter 2020 results on
7 May 2020.
On 30 January 2020, Uniper announced an ambitious phase-out plan
for its German hard-coal-fired power production. The company plans to
shut down a total of 1,500 MW of hard-coal capacity by the end of 2022
and a further 1,400 MW by the end of 2025. The last remaining hard-
coal-fired power plant would be the 1,100-MW Datteln 4 power plant
that must be decommissioned in 2038, at the latest, according to the
draft law on coal phase-outs in Germany.
Financial results of Other Operations
Comparable operating profit declined, mainly as a result of the increased
spend in Business Technology, including internal and external ventures.
The investments in Valo Ventures and the related costs totalled EUR 23
million.
The share of profits of associated companies and joint ventures
totalled EUR 638 (0) million (4Note 19). Fortum’s share of Uniper’s profits
EUR 632 (-2) million, comprises Uniper’s October-December 2018 and
January-September 2019 results and the impact from reinstatement of
the UK capacity market in the fourth quarter 2019, totalling EUR 601 (-2)
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
14
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
million, as well as the fair value adjustments reversal according to the
purchase price allocation of Uniper for 2019, EUR 31 (-) million (4Note 3).
EUR 392 (79) million of non-operating results from Uniper are included in
the share of profits (4Note 19).
Capital expenditures, divestments and investments
in shares
EUR million
Capital expenditure
Intangible assets
Property, plant and equipment
Total
75
638
713
53
532
584
2019
2018
Gross investments in shares
Subsidiaries
Associated companies and joint ventures
Other investments
Total
13
73
20
106
36
4,041
11
4,088
In 2019, capital expenditures and investments in shares totalled EUR 819
(4,672) million, of which the Solberg acquisition from the Solberg-Blaiken
asset swap amounted to EUR 36 million. Capital expenditures, excluding
the impact of the Solberg-Blaiken asset swap, were EUR 683 (584) million
(4Note 6). In 2018, investments in shares were mainly attributable to the
purchase of Uniper shares.
Fortum expects to start or has started power and heat production
capacity of new power plants and expects to upgrade its existing plants
as follows:
Generation
Hydro plants in Sweden
and Finland
Hydro plants in Sweden
and Finland
Sørfjord, Norway 1)
Kalax, Finland
City Solutions
Zabrze, Poland
Kivenlahti, Finland
Suomenoja, Finland
Pavagada 2, India
Rajasthan, India
Russia
Solar 3)
Type
Hydro
Hydro
Wind
Wind
CHP
Bio HOB 2)
Heat pump
Solar
Solar
Solar
Electricity
capacity
MW
Heat
capacity
MW
Supply
starts
14
~15
97
90
75
250
250
116
2019
2020
Q4/2019
-Q3/2020
Q1/2021
58
20
145 1 April 2019
2020
2021
5 August
2019
Q4/2020
2021–2022
1) The Sørfjord wind park is part of the transaction with Credit Suisse Energy Infrastructure
Partners and an 80% share will be sold once it is commissioned.
2) Biofuel-fired heat-only boiler (HOB).
3) Separate investment decision needed.
Generation
Through its interest in TVO, Fortum is participating in the building of
Olkiluoto 3 (OL3), a 1,600-MW nuclear power plant unit in Finland. OL3
is funded through external loans, share issues, and shareholder loans
according to shareholder agreements between the owners and TVO. As
a 25% shareholder in OL3, Fortum has committed to pro rata funding of
the project. At the end of the reporting period, Fortum's outstanding loan
receivables related to OL3 were EUR 170 million and the outstanding
commitment was EUR 63 million. In March 2019, the Finnish Government
granted an operating licence for OL3. According to the time schedule
updated by plant supplier Areva-Siemens consortium in December
2019, the plant will start regular electricity generation in March 2021
(4Note 37).
In December 2019, Fortum and Credit Suisse Energy Infrastructure
Partners (CSEIP) signed an agreement whereby funds advised by CSEIP
will acquire an 80% stake in Fortum’s Nordic wind portfolio. Fortum
will continue to manage the construction and serve as long-term asset
manager for the wind portfolio. The portfolio consists of the operational
Nygårdsfjellet (32 MW, Norway), Ånstadblåheia (50 MW, Norway), and
Solberg (76 MW, Sweden) wind parks as well as the Kalax (90 MW,
Finland) wind park, which is under construction. The parties have also
agreed that funds advised by CSEIP will invest in an 80% share of the
Sørfjord (97 MW, Norway) wind park, once it is fully commissioned.
Part of the capacities are already operational and the remaining part is
expected to be commissioned by the end of the third quarter of 2020.
In addition, Fortum and CSEIP have agreed on further cooperation
and exclusivity on a new project in Sävar, Sweden (154 MW) with
the ambition to build it at a later stage. The total consideration of the
divestment of the 80% stake on a debt- and cash-free basis is expected
to be approximately EUR 250 million, of which EUR 170 million is related
to the first quarter of 2020. The transaction is subject to regulatory
approvals in the EU and is expected to close in the first quarter of 2020.
The sale will have a minor positive effect on the Generation segment’s
first-quarter 2020 comparable operating profit.
In May 2019, Fortum announced the restructuring of Fortum’s and
Skellefteå Kraft’s ownership in the two jointly owned Swedish wind
parks Solberg and Blaiken. Through an asset swap arrangement, Fortum
became the sole owner of the 76-MW Solberg wind park and Skellefteå
Kraft the sole owner of the 248-MW Blaiken wind park. The Solberg-
acquisition related to the Solberg-Blaiken asset swap amounted to EUR
36 million. The asset swap arrangement was finalised in August 2019 and
had a minor impact on Fortum’s cash flow and results.
Operating and financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
15
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
In May 2019, Fortum made the investment decision to start
construction of the 90-MW Kalax wind park in Närpes, Finland. The
capital expenditure of the wind park is approximately EUR 90 million. The
wind park is expected to be fully operational in the first quarter of 2021
at the latest. In October 2019, Fortum signed a 12-year power purchase
agreement selling 70% of the power production of the Kalax wind park to
Neste Corporation.
In January 2019, Fortum acquired all remaining C-shares of TVO,
entitling it to 100% of the power production of the Meri-Pori coal
condensing power plant, an increase from 67% previously. In December,
440 MW of the production capacity of Fortum’s Meri-Pori power plant
was selected for inclusion in the Finnish national peak-load reserve
capacity system from 1 July 2020 to 30 June 2022.
City Solutions
In December 2019, Fortum signed an agreement to sell its district heating
business in Joensuu, Finland to Savon Voima Oyj. The total consideration
on a debt- and cash-free basis was approximately EUR 530 million. The
transaction was completed on 10 January 2020 and Fortum will record
a tax exempt capital gain of approximately EUR 430 million in the City
Solutions segment’s first-quarter 2020 results. In June 2019, Fortum
announced it would review and consider strategic options for the Joensuu
and Estonian district heating businesses. The strategic review of the
Estonian district heating business is still ongoing. An extended assessment
that includes the district heating and cooling businesses in all
Baltic countries, in Poland, and in Järvenpää, Finland, is also being initiated.
In May 2019, Fortum announced its plan to construct a new 20-MW
heat pump unit at the Suomenoja power plant in Espoo, Finland, to
produce carbon-neutral district heating and to replace fossil fuel-based
heat production. The unit is planned for commissioning in spring 2021
and will, together with the Kivenlahti bio-HOB, increase the share of
Espoo’s carbon-neutral district heating production in 2022 to over 50%.
The final investment decision to build the unit was made in the fourth
quarter of 2019.
In March 2019, Fortum announced that it had won the right from
Solar Energy Corporation of India to build a 250-MW solar power plant
in Rajasthan, India. Commissioning of the plant is expected in the fourth
quarter of 2020.
In June 2018, Fortum won the right to build a 250-MW solar power
plant in the Pavagada solar park in Karnataka, India. The capital
expenditure was approximately EUR 160 million. The plant was fully
commissioned by 5 August 2019.
In June 2018, Fortum signed an agreement to sell a 54% share of its
solar power company operating four solar power plants in India to UK
Climate Investments (40%) and Elite Alfred Berg (14%). In April 2019, Elite
Alfred Berg used its option to buy an additional 2% from Fortum.
In 2015, Fortum decided to build a new multi-fuel CHP plant in Zabrze,
Poland. The new plant is primarily fuelled by refuse-derived fuel (RDF)
and coal; however, it is also able to use a mixture of fuels. The new plant
has a production capacity of 145 MW of heat and 75 MW of electricity
and replaces the existing purely coal-fired units in Zabrze and Bytom.
Commissioning was somewhat delayed from the original plan and
commercial operations started on 1 April 2019.
Russia
In April 2019, the Ministry of Energy of the Russian Federation selected
Fortum and Energy Sales Company Vostok's 50/50 joint venture as
the guaranteed electricity retail supplier to 1.5 million customers in the
Chelyabinsk region as of 1 July 2019. The decision was made based
on an auctioning process held in March 2019. In the auction, the joint
venture committed to a 100% reimbursement of the RUB 4.8 billion debt
of Chelyabenergosbyt, corresponding to approximately EUR 66 million.
The transaction required a limited equity investment from Fortum, as the
joint venture financed the major part of the reimbursement with external
debt. For Fortum, the net impact of the reimbursement was substantially
lower due to the fact that Fortum was the single largest creditor, with
EUR 11 million of the debt.
In June 2019, Fortum won the right to build 5.6 MW of solar capacity
in Russian CSA auctions, in addition to the 110 MW won in June 2018.
The power plants are to be commissioned during the years 2021–2022.
In June 2018, the Fortum-Rusnano wind investment fund (50/50
joint venture) won the right to build 823 MW of wind capacity in a CSA
auction. The wind parks were to be commissioned during the years
2019–2023. During the fourth quarter of 2018, the wind investment fund
made an investment decision on a 100-MW wind farm. Power production
and capacity supply is expected to start during the first half of 2020.
In June 2017, the Fortum-Rusnano wind investment fund won the
right to build 1,000 MW of wind capacity in a CSA auction. The wind
parks were to be commissioned during the years 2018–2022. In the
fourth quarters of 2017, 2018, and 2019, the wind investment fund made
investment decisions on a 50-MW, a 200-MW, and a 250-MW wind
farm, respectively. On 1 January 2019, the 50-MW wind farm started
operation. Power production and capacity supply at the 200-MW wind
farm is expected to start during the first half of 2020 and at the 250-
MW wind farm during the fourth quarter of 2020.
The investment decisions related to the renewable capacities won by
Fortum and the Fortum-Rusnano wind investment fund in 2017, 2018,
and 2019 are made on a case-by-case basis. Fortum’s maximum equity
commitment is RUB 15 billion. In the longer term, Fortum seeks to
maintain an asset-light structure.
Research and development
Sustainability is at the core of Fortum’s strategy and, alongside Fortum’s
current businesses, the company is carefully exploring and developing
new sources of growth within renewable energy production.
Fortum's goal is to be at the forefront of energy technology
and application development. To accelerate innovation and the
commercialisation of new offerings, Fortum is strengthening its in-house
innovation and digitalisation efforts and building partnerships with
leading global suppliers, technology and service companies, and research
institutions. Fortum makes direct and indirect investments in start-ups
that have promising new innovations focused on connectivity, have
disruptive potential and accelerate the transition towards a circular
economy. Fortum also invests in technologies that support better
utilisation of the current asset base and that can create new markets and
products for Fortum. The company is continuously looking for emerging
clean energy solutions and for solutions that increase resource and
system efficiency.
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
16
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
The Group reports its R&D expenditure on a yearly basis. In 2019,
Fortum’s R&D expenditure was EUR 67 (56) million, or 1.2% (1.1%) of
sales.
R&D expenditure,
EUR million
R&D expenditure,
% of sales
2019
2018
2017
67
1.2
56
1.1
53
1.2
Change
19/18
20%
Changes in Group management
In August 2019, Fortum announced that Marco Ryan, a member
of Fortum’s Board of Directors, resigned from the Board following
his appointment at the energy company BP. Fortum's Shareholders'
Nomination Board evaluated the Board of Directors' ability to function
and concluded that the Board had full capacity to continue in its
remaining composition until the 2020 Annual General Meeting.
Annual General Meeting 2019
Fortum Corporation's Annual General Meeting on 26 March 2019
adopted the Financial Statements and the Consolidated Financial
Statements for the financial period 1 January-31 December 2018, and
discharged from liability the members of the Fortum Board of Directors
and the President and CEO for the year 2018.
The Annual General Meeting decided to pay a dividend of EUR 1.10
per share for the financial year that ended on 31 December 2018. The
record date for the dividend payment was 28 March 2019 and total
dividends of EUR 977 million were paid on 4 April 2019.
The Annual General Meeting confirmed the remuneration for Board
service for the upcoming term as follows: EUR 75,000 per year for the
Chairman, EUR 57,000 per year for the Deputy Chairman, EUR 40,000
per year for a Member, and EUR 57,000 per year for the Board member
acting as the Chairman of the Audit and Risk Committee if he or she is
not simultaneously acting as Chairman or Deputy Chairman of the Board.
In addition, a fee of EUR 600 will be paid for each Board meeting and
Board Committee meeting. For Board members living outside Finland in
Europe, the fee for each meeting will be doubled, and for Board members
living outside Europe, the fee for each meeting will be tripled. For Board
members living in Finland, the fee for each Board and Board Committee
meeting will be doubled for meetings held outside Finland and tripled for
meetings held outside Europe. For Board and Committee meetings held as
a telephone conference, the basic meeting fee will be paid to all members.
No fee will be paid for decisions made without a separate meeting.
The Annual General Meeting decided that the number of the members
in the Board of Directors will be nine. Mr. Matti Lievonen was elected
as Chairman, Klaus-Dieter Maubach as Deputy Chairman, and Ms Eva
Hamilton, Mr. Kim Ignatius, Ms Essimari Kairisto, Ms Anja McAlister, Mr.
Veli-Matti Reinikkala, Mr. Marco Ryan and Mr. Philipp Rösler as Members.
In August 2019, Marco Ryan resigned from the Board following his
appointment at the energy company BP.
In addition, Deloitte Oy was re-elected as the auditor with Reeta
Virolainen, APA, as the principal auditor. The auditor's fee is paid pursuant
to an invoice approved by the company.
The Annual General Meeting authorised the Board of Directors to
decide on the repurchase and disposal of the company's own shares up
to maximum of 20,000,000 shares, which corresponds to approximately
2.25% of all the shares in the company. Only the unrestricted equity
of the company can be used to repurchase own shares on the basis
of the authorisation. It was also decided that own shares cannot be
repurchased or disposed for the purposes of the company's incentive and
remuneration schemes. These authorisations cancelled the authorisations
resolved by the Annual General Meeting of 2018 and they will be
effective until the next Annual General Meeting and in any event no
longer than for a period of 18 months. The authorisations have not been
used as of 5 February 2020.
The Annual General Meeting authorised the Board of Directors to
decide on contributions in the total maximum amount of EUR 500,000 for
charitable or similar purposes, and to decide on the recipients, purposes
and other terms of the contributions. The authorisation will be effective
until the next Annual General Meeting. The authorisation has not been
used as of 5 February 2020.
Board decisions
At the meeting held after the Annual General Meeting 2019, Fortum’s
Board of Directors elected to the Nomination and Remuneration
Committee Matti Lievonen as Chairman and Eva Hamilton, Klaus-Dieter
Maubach and Anja McAlister as members. Furthermore, the Board
elected to the Audit and Risk Committee Kim Ignatius as Chairman and
Essimari Kairisto, Veli-Matti Reinikkala, Marco Ryan and Philipp Rösler as
members.
Shareholders Nomination Board
On 3 October 2019, Mr. Kimmo Viertola, Director General, Prime
Minister's Office, Ownership steering department (Chairman), Mr.
Jouko Pölönen, President and CEO, Ilmarinen Mutual Pension Insurance
Company, and Mr. Risto Murto, President and CEO, Varma Mutual
Pension Insurance Company were appointed to Fortum's Shareholders'
Nomination Board. In addition, the Chairman of Fortum's Board of
Directors, Mr. Matti Lievonen, is a member of the Shareholders'
Nomination Board.
On 31 January 2020, Fortum's Shareholders' Nomination Board
submitted its proposals to Fortum's Board of Directors for the 2020
Annual General Meeting concerning the number of the Board members,
the members to be nominated to the Board of Directors, and the election
of the Chairman and Deputy Chairman. The Shareholders' Nomination
Board did not reach a unanimous proposal, and consequently did not
make a proposal for the remuneration paid to the Board of Directors for
their following term of office.
Other major events during the reporting period
On 19 December 2019, the Board of Directors decided to commence
the 2020–2022 long-term incentive (LTI) plan for key employees and
executives. The Board of Directors also decided to update the terms
and conditions of the LTI programme, valid for the plans commencing
as of the beginning of 2020, to include more precise malus and
clawback clauses. The 2020–2022 LTI plan is part of Fortum's ongoing
LTI programme and otherwise follows the same principles as the
previous plan. The 2020–2022 LTI plan will comprise approximately 140
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
17
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
participants, including the members of Fortum Executive Management.
The Board of Directors also decided to establish a Restricted Share
programme, as a supplement to the LTI programme, and reserve
shares that potentially will be allocated under the 2020–2022 plan. The
Restricted Share programme will follow the main terms and conditions
of the general LTI programme with the exception that the allocated
shares will be delivered after the three-year plan period independent of
performance measures, subject to continued employment. The maximum
number of shares that may be delivered as a reward is expected to be
660,000 shares for the 2020–2022 LTI plan and 60,000 shares for the
2020–2022 Restricted Share plan.
On 11 October 2019, the Board of Directors decided to establish
an Employee Share Savings (ESS) programme and launch the savings
period for the year 2020 under that programme. The shares for the ESS
programme will be purchased from the market quarterly after Fortum’s
interim reports have been published. Dividends paid for the shares will
be reinvested in additional shares to be purchased from the market after
the dividend payment. The Board of Directors will annually decide on the
potential launch of each individual savings period. The ESS programme
participants will, as a gross reward, be granted one matching share for
each two purchased savings shares after approximately three years from
the beginning of the savings period. The total amount of all savings for the
2020 savings period may not exceed EUR 6 million. More than 40% of the
eligible employees took the opportunity to invest in the first ESS plan.
Events after the balance sheet date
On 6 February 2020, Fortum announced, in line with its strategy and
continued review of the business portfolio, that it had decided to assess
strategic options, including possible divestment, of its district heating and
cooling businesses in Poland, Estonia, Lithuania, Latvia, and Järvenpää in
Finland. Based on initial assessments, these district heating and cooling
businesses have been identified as operations that could provide higher
growth and value potential with an alternative ownership structure.
On 20 December 2019, Fortum signed an agreement to sell its
district heating business in Joensuu, Finland, to Savon Voima Oyj. The
total consideration on a debt- and cash-free basis was approximately
EUR 530 million, and the cash was received at the completion of the
divestment on 10 January 2020. Fortum will record a tax-exempt capital
gain of approximately EUR 430 million in the City Solutions segment’s
first-quarter 2020 results.
Key drivers and risks
Fortum's financial results are exposed to a number of financial, operational,
strategic, and sustainability-related risks. Fortum is exposed to these
risks both directly and indirectly through its associated companies and
joint ventures. The principal associated companies and joint ventures are
Uniper SE, TVO, OKG AB, Forsmarks Kraftgrupp AB, Kemijoki Oy, TGC-1,
and Stockholm Exergi AB. For more information about the risk exposures,
please see each respective company’s annual report.
One of the key factors influencing Fortum's business performance is
the Nordic electricity wholesale price. The key short-term drivers behind
the electricity wholesale price development in the Nordic region are
commodity prices, such as coal and gas, European electricity wholesale
prices, prices for CO2 emission allowances, the hydrological situation,
temperatures, and the electricity import-export balance. In the longer
term, global economic growth and changes to energy policy and
regulations impact commodity and CO2 emission allowance prices, which,
in turn, impact the Nordic wholesale price of electricity. In addition,
increased volatility in exchange rates could have both translation and
transaction effects on Fortum's financials, especially through the Russian
rouble and Swedish krona.
Operational risks resulting from failed internal processes or systems or
from external events can have a negative impact on Fortum’s results. In all
regions, fuel prices and power plant availability also impact profitability.
Changes in the regulatory and fiscal environment create risks and
opportunities for the energy and environmental management business.
The main strategic risk is that the regulatory and market environment
develops in a way that we have not been able to foresee and prepare for. In
response to these uncertainties, Fortum analyses and assesses a number
of future market and regulation scenarios, including the impact of these on
different generation forms and technologies. As a result, Fortum’s strategy
includes broadening of the revenue base and diversification into new
businesses, technologies, and markets. The environmental management
business is based on the framework and opportunities created by
environmental regulation. Being able to respond to customer needs created
by the tightening regulation is a key success factor.
For Fortum's Russian business, the key drivers are economic growth,
the rouble exchange rate, regulation of the heat business, and the
further development of the electricity and capacity markets. A key
profitability driver is the received capacity payments based on the CSA
contracts and Competitive Capacity Selection (CCS) auctions. The main
part of Fortum's generation capacity built after 2007 is entitled to CSA
payments for approximately 10 years after commissioning of each new
unit (approximately 15 years for renewable generation). The received
capacity payments vary, depending on the age, location, type, and size
of the plant, as well as on seasonality and availability. The CSA payments
are adjusted for, among other factors, the weighted average cost of
capital (WACC), the consumer price index (CPI), and re-examination of
earnings from the electricity-only (spot) market (done every three and six
years after commissioning of a unit). In addition, thermal power plants are
entitled to clearly higher CSA payments starting approximately six years
after commissioning.
For further details on Fortum’s risks and risk management, see
the4Risk management section of the Operating and financial review
and4Note 4 Financial risk management.
Outlook
Hedging
At the end of 2019, approximately 75% of the Generation segment's
estimated Nordic power sales volume was hedged at EUR 34 per MWh
for 2020, and approximately 40% at EUR 33 per MWh for 2021.
The reported hedge ratios may vary significantly, depending on
Fortum's actions on the electricity derivatives markets. Hedges are
mainly financial contracts, most of them electricity derivatives quoted on
Nasdaq Commodities.
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
18
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Capital expenditure and divestments
Fortum currently estimates its capital expenditure, including
maintenance but excluding acquisitions, to be approximately EUR 700
million (previously expected to be less than EUR 600–650 million)
in 2020. This includes approximately EUR 200 million of solar and
wind investments, which are subject to the capital recycling business
model. The maintenance capital expenditure in 2020 is estimated to be
approximately EUR 300 million, well below the level of depreciation.
Nordic market
Electricity is expected to continue to gain a higher share of total
energy consumption. Electricity demand in the Nordic countries during
the next few years is expected to grow annually by approximately
0.5% on average. The growth rate will largely be determined by the
macroeconomic development in Europe and especially in the Nordic
countries and, in the longer term, also by the rate of electrification of
industry, transportation, and heating.
During the fourth quarter of 2019 the gas price was at a low level,
and also the front-year gas price decreased. Coal prices decreased, EUA
prices developed sideways, and oil prices increased.
At the end of January 2020, the forward quotation for coal (ICE
Rotterdam) for the remainder of 2020 was around USD 53 per tonne and
the market price for EUAs for 2020 at the level of EUR 24 per tonne. The
Nordic system electricity forward price on Nasdaq Commodities for the
remainder of 2020 was around EUR 20 per MWh and for 2021 around
EUR 27 per MWh. In Germany, the electricity forward price for the
remainder of 2020 was around EUR 36 per MWh and for 2021 around
EUR 41 per MWh. The Nordic water reservoirs were about 6 TWh above
the long-term average and 13 TWh higher than one year earlier.
Generation
The Generation segment’s achieved Nordic power price typically depends
on factors such as hedge ratios, hedge prices, spot prices, availability and
utilisation of Fortum's flexible production portfolio, as well as currency
fluctuations. Excluding the potential effects from changes in the power
generation mix, a 1 EUR/MWh change in the Generation segment’s Nordic
power sales achieved price will result in an approximately EUR 45 million
change in Fortum's annual comparable operating profit. The achieved
power price also includes the results of optimisation of Fortum’s hydro
and nuclear production, as well as operations in the physical and financial
commodity markets.
In June 2018, the Swedish Parliament adopted new hydro legislation
effective 1 January 2019. The new legislation states that the power
industry shall create a joint hydropower fund to finance major parts of the
required environmental actions. Consequently, a fund has been established
with a total financial cap of SEK 10 billion to be paid over a 20-year period.
All major utilities will contribute to the fund based on their share of Swedish
hydropower production. Fortum's share of the fund's total financing is 23%.
In addition to the new legislation, the Government issued an ordinance that
came into force on 11 January 2019 to establish a national prioritisation
plan for the revision of hydropower permits.
In June 2018, the Swedish Administrative Court of Appeal gave its
decisions on Fortum Sverige AB’s hydropower production-related real-
estate tax assessments for the years 2009–2014. The court decisions
were not in Fortum’s favour. Fortum applied for the right to appeal from the
Supreme Administrative Court, but did not receive permission to appeal. As
the Administrative Court, the Administrative Court of Appeal in Stockholm,
and the Supreme Administrative Court have handled only the arguments
concerning state aid, the case concerning the other legal arguments has
now been transferred back to the Administrative Court. The disputed
amount, excluding interest for the time period, totals approximately SEK
510 million (approximately EUR 49 million). Moreover, Fortum's Swedish
companies have appeals for 2011–2016 pending before the Administrative
Court relating to the real-estate tax rate for their hydropower plants and
referring to the same legal grounds. Fortum has paid the real-estate tax in
accordance with the legislation. If the final court decision is unfavourable
to Fortum, it will not impact Fortum's results. In December 2018, Fortum
Sverige AB filed a complaint to the EU Commission regarding the Swedish
real-estate tax for hydropower plants for 2017 and prior years. Fortum
has asked the Commission to investigate whether the Swedish legislation
regarding the real-estate tax for hydropower plants and the Swedish court
decisions are in line with EU state aid rules.
According to the Swedish Government's budget proposal for the coming
years, presented in September 2016, the Swedish hydropower real-estate
tax will decrease from 2.8% to 0.5%. The tax is being reduced in four steps:
in January 2017 to 2.2%; in January 2018 to 1.6%; in January 2019 to 1.0%;
and in January 2020 to 0.5%. In 2018, the tax was EUR 65 million, in 2019
EUR 40 million, and in 2020 it is expected to be approximately EUR 25
million. In addition to the decrease in the tax rate, the hydropower real-
estate tax values, which are linked to electricity prices, were updated in
2019. The real-estate tax values are updated every six years.
City Solutions
In City Solutions, growth in cash flow and earnings is mainly achieved
through investments in new plants and through acquisitions. Heat prices,
fuel cost, CO2 prices, availability, taxation and regulatory changes,
flexibility and efficiency of the plants, as well as gate fees for receiving
waste are the key drivers for profitability, but power prices and weather
conditions also affect profitability. Fortum aims to create new businesses
with potential for sizeable profit contribution, e.g. within the areas of
waste and recycling and the bio-economy.
The development of Fortum Oslo Varme's business operations is
estimated to require one-time integration-related costs and investments
over the coming years. The cost synergies materialised gradually during
2019, with targeted annual synergies of EUR 5–10 million expected to be
achieved by the end of 2020.
In March 2019, Fortum announced that it had won the right from
Solar Energy Corporation of India to build a 250-MW solar power plant
in Rajasthan, India. The solar park will be entitled to a fixed tariff of
2.48 INR/kWh for 25 years. Commissioning of the plant is expected in
the fourth quarter of 2020.
In June 2018, Fortum won the right to build a 250-MW solar power
plant in the Pavagada solar park in Karnataka, India. The capital
expenditure was approximately EUR 160 million and the solar park is
entitled to a fixed tariff of 2.85 INR/kWh for 25 years. The plant was fully
commissioned by 5 August 2019.
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
19
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Consumer Solutions
Competition in the Nordic electricity retail market is expected to remain
challenging, with continued pressure on sales margins and customer
churn. To counter the market challenges and to create a solid foundation
for competitive operations, Consumer Solutions will continue its cost
spend in developing new digital services for consumers.
Russia
In the Russia segment, capacity payments based on CSA contracts are
a key driver for earnings growth, as capacity payments based on CSA
contracts are considerably higher than for CCS auctions. Currently,
Fortum's CSA capacity amounts to 2,368 MW. In February 2019, the
System Administrator of the wholesale market published data from 2018
regarding the WACC and the CPI, which were used to calculate the CSA
price for 2019. The CSA payments were revised downwards to reflect
the lower bond rates and upwards due to the lower earnings from the
electricity-only-market. The net impact of the adjustments was a minor
increase of the CSA payments for 2019.
In addition, thermal power plants are entitled to clearly higher CSA
payments starting approximately six years after commissioning. In 2020,
no such increase in CSA payments is expected for the Fortum generation
fleet.
Fortum’s other Russian generation capacity, totalling 2,560 MW, is
allowed to participate in the CCS auctions. The long-term CCS auctions
for the years 2018–2021 were held in 2015, 2016, and 2017. All Fortum
plants offered in the auctions were selected. The nominal CCS price was
111 tRUB/MW/month for 2018, 110 tRUB/MW/month for 2019, 115
tRUB/MW/month for 2020, and 134 tRUB/MW/month for 2021. The
CCS auctions for 2022–2024 were held in August 2019. The nominal
CCS price was 168 tRUB/MW/month for 2022, 171 tRUB/MW/month for
2023, and 182 tRUB/MW/month for 2024. The CCS auction for 2025
is expected to be held in February 2020. Fortum has also obtained
so-called "forced mode status", i.e. it receives payments with a higher
rate, for some of the units at the Argayash power plant. “Forced mode
status” was obtained for 195 MW for the years 2018–2019, for 175 MW
for the year 2020, and for 105 MW for the year 2021.
In June 2019, Fortum won the right to build 5.6 MW of solar capacity
in a CSA auction, in addition to the 110 MW won in June 2018. The
power plants will receive a guaranteed CSA price for a period of 15
years, corresponding to approximately RUB 14,000 per MWh and RUB
15,000 per MWh, respectively. The plants are to be commissioned during
2021–2022.
In June 2018, the Fortum-Rusnano wind investment fund (Fortum's
ownership 50%) won the right to build 823 MW of wind capacity in a CSA
auction. The wind parks were to be commissioned during 2019–2023
and will receive a guaranteed CSA price corresponding to approximately
RUB 7,000–8,000 per MWh for a period of 15 years. In December 2018,
the wind investment fund made an investment decision on a 100-MW
wind farm.
In June 2017, the Fortum-Rusnano wind investment fund won the
right to build 1,000 MW of wind capacity in a CSA auction. The wind
parks were to be commissioned during 2018–2022 and will receive a
guaranteed CSA price corresponding to approximately RUB 7,000–9,000
per MWh for a period of 15 years. In the fourth quarters of 2017, 2018,
and 2019, the wind investment fund made investment decisions on a
50-MW, 200-MW, and 250-MW wind farm, respectively.
The Russian Government increased the gas price by 1.4% in July 2019.
Fortum estimates the gas price to be increased by 3% in July 2020.
Other Operations
For information on the financial impact of the Uniper shareholding, please
see4Notes 3 and 19.
Income taxation
In June 2018, the Swedish Government decided to lower the Swedish
corporate tax in two steps, from 22.0% to 21.4%, effective January 2019,
and to 20.6%, effective January 2021.
In Belgium, Fortum has received income tax assessments for the years
2008–2012. The tax authorities disagree with the tax treatment of Fortum
EIF NV, which was later merged into Fortum Project Finance NV. Fortum
finds the tax authorities' interpretation to be inconsistent with the local
regulation and has appealed the decisions. The Court of First Instance
in Antwerp rejected Fortum's appeal for the years 2008 and 2009 in
June 2014. Fortum found the decision unjustifiable and appealed to the
Court of Appeal. In January 2016, Fortum received a favourable decision
from the Court of Appeal in Antwerp in which the Court disagreed with
the tax authorities' interpretation and the tax assessment for 2008 was
nullified. The tax authorities disagreed with the decision and filed an
appeal to the Supreme Court (Hof van Cassatie) in March 2016. In April
2019, the Advocate General at the Supreme Court issued his opinion,
which was in favour of Fortum Project Finance. In May 2019, the
Supreme Court, however, annulled the decision of the Court of Appeal
of Antwerp and referred the case back to the Court of Appeal of Ghent
for full retrial. Fortum's appeals concerning 2009–2012 are still pending
and Fortum expects the remaining years to follow the final decision
for 2008. Based on legal analysis and a supporting legal opinion, no
provision has been accounted for. The amount of additional tax claimed
is EUR 36 million for the year 2008, EUR 27 million for 2009, EUR 15
million for 2010, EUR 21 million for 2011, and EUR 15 million for 2012.
The tax has already been paid.
In March 2018, the Swedish Supreme Administrative Court decided
not to grant leave to appeal to Fortum with respect to the interest
deduction cases relating to the years 2009–2012. The unfavourable
decision of the Administrative Court of Appeal from June 2017 therefore
remains in force. The additional tax and interest, in total SEK 1,175
million (EUR 122 million), was paid in 2016 and booked as a cost in the
second-quarter 2017 results. There are strong grounds to argue that
these decisions of the Administrative Court of Appeal and the Supreme
Administrative Court violate EU law and fundamental rights under EU
law. On these grounds, Fortum filed a summons application in December
2018 to the District Court of Stockholm in which damages are claimed
from the Swedish state in these cases. Fortum also filed a request
to initiate a mutual agreement procedure between Sweden and the
Netherlands for the year 2012 (4Note 37).
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
20
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Sustainability
Sustainability at Fortum
Fortum gives balanced consideration in its operations to climate and
resource issues, as well as its impacts on personnel and society. Fortum
conducted a sustainability materiality analysis in 2019 and the renewed
sustainability priority areas are the following:
Personnel and society
Business ethics and
compliance
Customer rights and
satisfaction
Human rights
Corporate governance
Employee wellbeing, health
and safety
Labour rights
Innovation and digitalisation
Economic value creation
Stakeholder engagement Diversity and equal
opportunity
Climate and
resources
Climate change and
GHG emissions
Energy efficiency
Circular economy
Emissions to air, land
and water
Water use
Security of supply
The Group-level sustainability targets are linked to the main
sustainability priority areas and emphasise Fortum’s role in society. They
measure not only environmental and safety targets, but also Fortum’s
reputation, customer satisfaction, employee wellbeing, and the security
of power and heat production. Targets are set annually and are based
on continuous operational improvement. A new target in 2019 is the
Contractor safety improvement index.
The achievement of the sustainability targets is monitored in monthly,
quarterly and annual reporting. Fortum publishes a yearly Sustainability
Report with additional information on the company’s sustainability
performance.
Group sustainability targets and performance 2019
Climate and resources
Specific CO2 emissions from total energy
production as a five-year average, g/kWh
Energy-efficiency improvement by 2020, baseline
2012, GWh/a
Major EHS incidents, no. 1)
Energy availability of CHP plants, %
Personnel and society
Reputation index, based on One Fortum Survey
Customer satisfaction index (CSI), based on One
Fortum Survey
Lost Workday Injury Frequency (LWIF), own
personnel and contractors
Severe occupational accidents, no.
Quality of investigation process of occupational
accidents, major EHS incidents and near misses
GAP index, implementation of EHS minimum
requirements
Contractor safety improvement index
Sickness-related absences, %
Target
2019
2018
≤200
186
186
≥1,900
≤18
≥95.0
1,707
11
95.9
1,637
18
96.4
≥73.0
72.3
72.5
70–74
54–80
63–83
≤1.7
0
Level
3.0
Level
3.0
Level
2.0
≤2.5
1.7
1
Level
3.0
Level
3.0
Level
2.02)
3.0
1.8
4
Level
3.0
Level
2.0
-
2.8
1) The figure does not include the exceedances caused by possible changes in permit limits in
Russia.
2) The reporting of the Contactor safety improvement index started in the second quarter of
2019. The figure is still excluding City Solutions’ solar power sites.
Fortum’s goal is to achieve excellent financial performance in
strategically selected core areas through strong competence and
responsible ways of operating. Fortum measures financial performance
with return on capital employed (long-term target: at least 10%) and
capital structure (long-term target: comparable net debt/EBITDA
around 2.5x).
Fortum is a significant economic actor in its operating countries. The
most significant direct monetary flows of Fortum’s operations come
from revenue from customers, procurements of goods and services from
suppliers, compensation to lenders, dividends to shareholders, growth and
maintenance investments, employee wages and salaries, and taxes paid.
Fortum supports social development and wellbeing in its operating
countries by e.g. paying taxes. The tax benefits Fortum produces to
society include not only corporate income taxes, but also several other
taxes. In 2019, Fortum’s taxes borne were EUR 397 (299) million. Fortum
publishes its tax footprint annually.
Fortum is listed on the Nasdaq Helsinki exchange and is included
in the STOXX Global ESG Leaders, OMX Sustainability Finland, ECPI®,
Euronext Vigeo Eurozone 120, Euronext Vigeo Europe 120 and Equileap
Gender Equality indices. Fortum is also ranked in category B in the CDP
Climate Change 2019 rating, and it has received a rating A in the MSCI
ESG Ratings assessment in 2019, and a Prime Status (B-) rating by ISS
ESG Corporate Rating. In June 2019, Fortum became a constituent of the
FTSE4Good Index Series.
Fortum’s sustainability reporting covers all functions under Fortum’s
operational control, including subsidiaries in all countries of operation.
The figures for power and heat generation, capacities and investments
include also figures from Fortum’s share in associated companies and
joint ventures that sell their production to the owners at cost.
In the Financial Statements, Uniper is treated as an associated
company and Stockholm Exergi as a joint venture, and both companies
are consolidated with the equity method. Stockholm Exergi and Uniper
are not included in Fortum’s sustainability targets and indicators nor in the
descriptions of management practices. Stockholm Exergi’s and Uniper’s
sustainability information are available in the companies’ sustainability
reports that can be found on the companies’ own web pages.
Sustainability risks and opportunities
Fortum’s operations are exposed to risks, which if materialised can have
adverse effects on the environment and on the safety and security of
employees, contractors and neighbouring societies. Key sustainability
Operating and financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
21
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Fortum’s main internal policies and instructions guiding sustainability
Values
Code of Conduct
Supplier Code of Conduct
Disclosure Policy
Group Risk Policy
Sustainability Policy (including environmental, and
health and safety policies)
Minimum Requirements for EHS Management
Biodiversity Manual
Group Manual for Sustainability Assessment
Human Resources Policy
Leadership Principles
Accounting Manual
Investment Manual
Tax Principles
Group Instructions for Anti-Bribery
Group Instructions for Safeguarding Assets
Group Instructions for Conflicts of Interest
Anti-Money-Laundering Manual
Compliance Guidelines for Competition Law
Security Guidelines
Policy for Sponsoring and Donations
Group Instructions for Compliance Management
Economic matters
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Climate and resources
Environmental
matters
x
x
x
x
x
x
x
x
x
x
x
x
Social and
employee matters
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Personnel and society
Human rights
x
x
x
Anti-corruption
and bribery
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
risks, including climate-related risks, are reported to Fortum Executive
Management and the Audit and Risk Committee as part of the annual
review of material risks and uncertainties for the Group. These risks are
presented in the Risk management section in the Operating and financial
review. Climate change and the need for decarbonisation and resource
efficiency are changing the energy industry in a profound way, and these
changes also create new business opportunities for Fortum.
Sustainability governance and policies
Sustainability management at Fortum is strategy-driven and is based
on the company’s Values, the Code of Conduct, the Supplier Code of
Conduct, the Sustainability Policy and other Group policies and their
specifying instructions. As sustainability is an integral part of Fortum’s
strategy, the highest decision making on sustainability and climate-
related matters falls within the duties of the members of the Board of
Directors, who share joint responsibility in these matters.
Fortum Executive Management decides on the sustainability approach
and Group-level sustainability targets that guide annual planning. The
Group’s performance targets, including sustainability and climate-related
targets, are ultimately approved by Fortum’s Board of Directors. Fortum’s
line management is responsible for the implementation of the Group’s
policies and instructions and for day-to-day sustainability management.
Realisation of the safety targets is a part of Fortum’s short-term incentive
system.
Fortum is a participant of the UN Global Compact initiative and the
UN Caring for Climate initiative. Fortum respects and supports the
International Bill of Human Rights, the United Nations Convention on the
Rights of the Child, and the core conventions of the International Labour
Organisation (ILO). Additionally, Fortum recognises in its operations
the UN Guiding Principles on Business and Human Rights, the OECD
Guidelines for Multinational Enterprises and OECD Due Diligence
Guidance for Responsible Business Conduct, the International Chamber
of Commerce’s anti-bribery and anti-corruption guidelines, and the
Bettercoal initiative’s Code on responsible coal mining.
Operating and financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
22
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Business ethics
The Fortum Code of Conduct and Fortum Supplier Code of Conduct
define how we treat others, engage in business, safeguard corporate
assets, and how Fortum expects suppliers and business partners to
operate. Fortum’s Board of Directors is responsible for the company’s
mission and values and has approved the Fortum Code of Conduct.
Fortum has zero tolerance for corruption and fraud and does not award
donations to political parties or political activities, religious organisations,
authorities, municipalities or local administrations.
In addition to internal reporting channels, Fortum employees and
partners can report suspicions of misconduct confidentially by using the
“SpeakUp” channel on Fortum’s internal and external web pages.
Suspected misconduct and measures related to ethical business
practices and compliance with regulations are regularly reported to the
Audit and Risk Committee.
No cases of corruption or bribery were confirmed in 2019.
Climate and resources
Fortum’s Group-level targets for climate and resources are related to CO2
emissions, energy efficiency, secure supply of electricity and heat for
customers, and major Environmental, Health and Safety (EHS) incidents.
The Group Sustainability Policy together with the Minimum
Requirements for EHS Management steer Fortum’s environmental
management. Investments, acquisitions and divestments are assessed
based on the sustainability assessment criteria defined in the Group’s
Investment Manual. Operational-level activities follow the requirements
set forth in the ISO 14001 environmental management standard, and
99.8% (99.9%) of Fortum’s power and heat production worldwide has ISO
14001 certification.
Energy
Fortum’s energy production is primarily based on carbon dioxide-free
hydropower and nuclear power and on energy-efficient combined heat
and power (CHP). In line with the strategy, Fortum targets a multi-
gigawatt wind and solar portfolio, which is subject to the capital recycling
business model.
In 2019, Fortum’s power generation was 76.3 (74.6) TWh and heat
production 26.4 (29.8) TWh. 59% (57%) of the total power generation
was CO2-free. In Europe, 96% (96%) of the power generation was CO2-
free. Investments in CO2-free production were EUR 401 (278) million.
Investments in hydro, wind and solar power and bioenergy totalled
EUR 344 (180) million.
Fortum has a Group-level target to achieve annual energy-efficiency
improvements of ≥1,900 GWh by 2020 compared to 2012. Fortum
achieved 1,707 GWh/a by the end of 2019.
The main fuels that Fortum uses to produce electricity and heat are
natural gas, uranium, coal, waste-derived fuels and biomass fuels. The
most significant fuel was natural gas, which accounted for 63% (63%) of
the total fuel consumption. The next highest fuel use was uranium 20%
(21%). Coal accounted for 10% (8%) of the total fuel use, and waste-
derived fuels and biomass fuels 3% (4%) and 3% (3%), respectively. Russia
accounted for 99% of the use of natural gas and 57% of the use of coal.
An uninterrupted and reliable energy supply is critical for society
to function. With planned preventive maintenance and condition
monitoring, Fortum ensures that the power plants operate reliably to
produce the electricity and heat customers need. The energy availability
of the company’s CHP plants in 2019 was, on average, 95.9% (96.4%),
outperforming the target of ≥95.0%.
Climate
Fortum expects the concern about climate change to increase the
demand for low-carbon production and energy-efficient solutions and
products. Fortum aims to mitigate climate change by investing in CO2-
free energy production and by improving energy and resource efficiency.
Fortum is also adapting its operations to climate change in production
planning and in the assessment of growth projects and investments.
In 2019, Fortum’s direct CO2 emissions were 19.1 (20.1) Mt. 85%
of CO2 emissions originated from Russian power plants. Direct CO2
emissions decreased primarily because of the decreased power and heat
production. Of the total CO2 emissions, 2.1 (2.5) Mt were within the EU’s
emissions trading scheme (ETS). The estimate for Fortum’s free emission
allowances in 2019 is 0.7 (0.8) Mt.
Fortum’s total CO2 emissions (million tonnes, Mt)
Total emissions
Emissions subject to ETS
Free emission allowances
Emissions in Russia
2019
19.1
2.1
0.7
16.3
2018
20.1
2.5
0.8
16.9
2017
18.4
2.4
1.0
15.4
In 2019, Fortum’s specific carbon dioxide emissions from total energy
production were 189 (192) g/kWh. The specific CO2 emissions from total
energy production as a five-year average were 186 (186) g/kWh, which is
better than Fortum’s Group target of ≤200 g/kWh.
Circular economy
Fortum’s aim is to promote resource efficiency improvements and the
transition towards a more extensive circular economy. Resource efficiency
and maximising the added value of waste and biomass are key priorities in
the environmental approach, as defined in the Group Sustainability Policy.
In 2019, Fortum received about 1.6 (1.6) million tonnes of non-
hazardous waste and about 600,000 (600,000) tonnes of hazardous
waste from customers. As much of the waste stream as possible is
recycled, recovered or reused. Waste that is unsuitable for recycling or
reuse as a material is incinerated in Fortum’s waste-to-energy plants in
the Nordic countries, Lithuania and Poland.
Emissions
Fortum’s activities cause various emissions to air. In addition to carbon
dioxide (CO2) emissions, these include flue-gas emissions, such as sulphur
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
23
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
dioxide (SO2), nitrogen oxide (NOx) and particle emissions. All power
plants operate in compliance with their air emission limits.
disposal of the high-level radioactive spent fuel originating at the Loviisa
power plant is scheduled to begin at Olkiluoto in Eurajoki in the 2040s.
Fortum’s flue-gas emissions (1,000 tonnes)
Sulphur dioxide emissions
Nitrogen oxide emissions
Particle emissions
2019
14.9
24.8
11.7
2018
16.8
26.1
9.6
2017
18.8
26.4
15.8
Personnel and society
Fortum’s Group-level targets for personnel and society are related to
operational and occupational safety, employee wellbeing, as well as
reputation and customer satisfaction.
Fortum’s target regarding major EHS incidents is to have no more than
18 major EHS incidents annually. Major EHS incidents are monitored,
reported and investigated, and corrective actions are implemented. In
2019, there were 11 (18) major EHS incidents in Fortum’s operations.
The major EHS incidents included three fires, two environmental non-
compliances, four leaks, one explosion, and one INES (International
Nuclear Event Scale) level 1 incident. The major EHS incidents did not
have significant environmental impacts.
Water and biodiversity
Fortum uses large volumes of water at various types of power plants
and in district heating networks. In most cases, power plants do not
consume water – the water is discharged back to the same water
system from where it was withdrawn. Fortum withdrew a total of
2,100 (2,100) million m3 of water in production operations; 94% of this
amount was used as cooling water.
Fortum’s main impacts on biodiversity are related to hydropower
production. Fuel procurement and flue-gas emissions may also have a
negative impact on biodiversity. On the other hand, increasing CO2-free
production mitigates the biodiversity loss caused by climate change.
Fortum’s Biodiversity Manual and Biodiversity Action Plan define the
company’s approach to biodiversity management.
Radioactive waste
In 2019, 21.9 (20.3) tonnes of spent nuclear fuel was removed from
Loviisa power plant’s reactors in Finland. High-level radioactive spent fuel
is stored in an interim storage at the Loviisa power plant site. The final
Personnel
The Group Human Resources Policy is based on the company’s Values,
Leadership Principles and Code of Conduct. The HR Policy guides the
daily work in the company, and the implementation of the policy is
followed up regularly through the employee engagement survey, the
annual performance and development discussions, as well as other
feedback practices.
Fortum’s operations are mainly based in the Nordic countries, Russia,
Poland and the Baltic Rim area. The total number of employees at the end
of 2019 was 8,191 (8,286).
Group personnel statistics
Number of employees, 31 December
Average number of employees
Total amount of employee benefits, EUR million
Departure turnover, % (of permanent employees)
Permanent employees, %
Full-time employees, % (of permanent employees)
Female employees, %
Females in management, %
2019
8,191
8,248
480
11.2
96.8
97.7
32
30
2018
2017
8,286 8,785
8,767 8,507
423
10.5
95.2
98.1
32
29
459
16.1
95.9
98.2
32
30
and more detailed Group-level EHS manuals steer the work. A certified
OHSAS 18001 or ISO 45001 safety management system covers 96.5%
(97.0%) of Fortum’s power and heat production worldwide.
In 2019, Fortum’s Lost Workday Injury Frequency (LWIF) for own
personnel and contractors was 1.7 (1.8), achieving the set target level
(≤1.7). In 2019, there was one occupational violence case in Russia, which
was classified as severe accident. The Group target for 2019 was zero
severe occupational accidents.
In 2019, the quality of investigation process of occupational accidents,
major EHS incidents, and serious near misses was at the level of 3.0 (3.0),
achieving the set target level (3.0).
In 2019, the GAP index was at the level 3.0 (2.0), achieving the set
target level (3.0). The GAP index measures how well the Group's EHS
minimum requirements are realised at the power plant level.
Fortum is continuing its efforts to improve contractor safety, and
it systematically assesses contractor safety performance as part of
supplier qualification and during work. In 2019, contractor safety
improved significantly, and the Contractor safety improvement index
was at the level of 2.0, achieving the set target level (2.0). However, the
assessment had not yet covered all Fortum operations. The Contractor
safety improvement index measures how well Fortum has managed to
implement measures targeting improvements in contractor safety.
In 2019, Fortum introduced a “Safety walks” training programme for
Fortum’s top management. The programme paid special attention to top
management’s role in improving the safety culture. It included coaching
and practical training in the necessary personal leadership skills. It also
focused on systems and structures that support the transformation of
the safety culture.
Occupational safety
For Fortum, excellence in safety is the foundation of the company’s
business and an absolute prerequisite for efficient and interruption-free
production. Fortum strives to be a safe workplace for the employees,
contractors and service providers who work for the company. The Group
Sustainability Policy, the Minimum Requirements for EHS Management
Personnel wellbeing
Fortum’s goal with workplace wellbeing activities is to promote the health
and occupational safety of employees and the functionality of the work
community. In 2019, the Energise Your Day wellbeing programme was
expanded to the former Hafslund companies in Finland, Sweden, Norway
and Poland, and is now under way in all Fortum’s operating countries.
Operating and financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
24
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
A human rights assessment is carried out for investment projects –
especially in new operating areas – and also for new countries where
Fortum plans to expand the sales of products and services. In 2019, 6 (7)
of these assessments were made.
In 2019, there were no grievances related to human rights filed
through Fortum’s formal grievance channels, nor were there any
grievances carried over from the previous year.
Corporate citizenship
Fortum’s operations impact the local communities where the power
plants are located, and the company engages in many kinds of
collaboration with local stakeholders. According to Fortum’s Policy
for Sponsoring and Donations, the company’s sponsorships focus on
the wellbeing of children and youth, renewable energy projects, R&D
and innovations supporting Fortum’s strategy. In addition, Fortum
sponsors projects related to recycling, recovery and reuse. Fortum also
engages in collaboration with universities through different research and
development projects. In 2019, Fortum’s support for activities promoting
the common good totalled about EUR 2.7 (3.8) million. In addition, the
grants awarded by Fortum Foundation, not part of Fortum Group, totalled
about EUR 660,000 (680,000).
In 2019, the percentage of sickness-related absences was 3.0 (2.8),
which did not meet the target level of ≤2.5. Sickness absences increased
especially in Russia and Norway.
Society
Customer satisfaction
Fortum’s targets for reputation and customer satisfaction are monitored
annually. In the One Fortum Survey in 2019, the combined company
reputation index among key stakeholder groups was 72.3 (72.5) points,
on a scale of 0–100, which did not meet the target of ≥73.0 points.
The Group-level target (70–74 points, on a scale of 0–100) for
customer satisfaction was achieved among all business areas with two
exceptions: retail electricity sales and EV charging solutions for both
consumers and businesses.
Supply chain
Fortum’s total purchasing volume in 2019 was EUR 3.8 (3.7) billion,
and Fortum had about 14,000 suppliers of goods and services. Fortum
expects its business partners to act responsibly and to comply with the
Fortum Code of Conduct and the Fortum Supplier Code of Conduct.
Fortum assesses the performance of its business partners with supplier
qualification and supplier audits. In 2019, Fortum conducted a total of 14
(13) supplier audits in Poland, Russia, India, China, Indonesia and Vietnam.
In addition, one coal supplier in Kazakhstan was assessed against the
Bettercoal Code by a third party.
Human rights
Fortum’s goal is to operate in accordance with the UN Guiding
Principles on Business and Human Rights and to apply these principles
in company’s own operations as well as in country and partner risk
assessments and supplier audits.
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
25
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Risk management
Risk management framework and objectives
Fortum’s Risk Management framework is described in the Group Risk
Policy and supporting documents. The Group Risk Policy includes
an overview of Fortum’s risk management systems consisting of the
general principles of risk management and the main features of the risk
management process. The objectives of the risk management systems
are to;
• support the development of the Group strategy,
• support strategy execution,
• support the achievement of agreed targets within acceptable risk
levels so that the Group’s ability to meet financial commitments is not
compromised,
• ensure the understanding of material risks and uncertainties affecting
Fortum, and
• support the prevention of accidents that can have a severe effect on
the health and safety of employees or third parties, and from incidents
that can have a material impact on Fortum’s assets, reputation or the
environment.
Risk management organisation
The main principle is that risks are managed at source meaning that each
Division and Corporate Function Head is responsible for managing risks
that arise within their business operations. However, certain risks, such
as currency, interest rate, liquidity and refinancing risks, are managed
centrally.
The Audit and Risk Committee (ARC) is responsible for monitoring the
efficiency of the company’s risk management systems and for annually
reviewing the Group Risk Policy and the material risks and uncertainties.
Corporate Risk Management, a function headed by the Chief Risk Officer
(CRO) reporting to the CFO, provides instructions and tools which
support the Group in running an efficient risk management process.
Corporate Risk Management is responsible for assessing and reporting
Corporate Risk Policy Structure
Approving body
Board of Directors
President and CEO
Group
Risk Policy
Group
Risk Instructions
Division / Corporate
Function Head
Division / Corporate Function
Risk manuals and Guidelines
Reviewing Body
Audit and Risk Committee
CFO
CRO
maturity of risk management in Divisions and Corporate Functions and
for providing independent monitoring and reporting of material risk
exposures to Fortum Executive Management (FEM), the ARC and the
Board of Directors. Risk control functions and controllers in the business
monitor and report risks to the CRO.
Risk management process
Identify
Root causes
and
consequences
Assess
Impact
and
likelihood
Respond
Accept, avoid,
mitigate
or transfer
Control
Monitor
and report
Fortum’s risk management process is designed to support the achievement
of agreed targets by ensuring that risk management activities are
consistent with the general principles of risk management and that risks
are monitored and followed-up in a prudent manner. The main features of
risk management process consist of event identification, risk assessment,
risk response and risk control. Identification is regularly carried out
according to a structured process and risks are assessed in terms of
impact and likelihood according to a Group-common methodology. Impact
is assessed not only in monetary terms, but also in terms of health and
safety, environment and reputation. All risks have risk owners who are
responsible for implementing actions to respond to the risk. Risk responses
can be to accept, avoid, mitigate or transfer the risk. Risk control processes,
which include monitoring and reporting of risks, are designed to support
compliance with approved instructions, manuals and guidelines and to
ensure that risk exposures remain within approved limits and mandates.
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
26
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Fortum’s Board of Directors approves the Group Risk Policy and the
CEO approves Group Risk Instructions covering commodity market
risks, counterparty credit risks, and operational risks. Fortum also has
other Group policies and instructions covering e.g. compliance, privacy,
sustainability, treasury and cyber and information security risks which
are aligned with the Group Risk Policy. There are risk mandates or
limits defined for commodity market risks, counterparty credit risks and
financial risks. Divisions and Corporate Functions issues risk manuals and
guidelines as needed which detail how the Group Risk Instructions are
implemented.
Risk factors
Strategic risks
The main strategic risks are that energy policy, regulation, technology or
the business environment develop in ways that have not been foreseen
and prepared for. Future energy market and regulation scenarios,
including the impact of these to Fortum's business, are continuously
assessed and analysed. It is part of Fortum’s strategy to, in the long-
term, build options to broaden the base of revenues into new businesses,
technologies and markets.
Risks which could hinder Fortum in executing its strategy are
continuously assessed, monitored and reported as part of the strategy
work. These risks include an inability to identify and carry out successful
investments and acquisitions with the related project and integration risks.
Business Environment
Fortum operates in a global business environment and is therefore
exposed to political and other risks which affect the macroeconomic
development and consumer behaviour in the markets where Fortum
operates. As operations expand to new geographical regions, markets
and businesses, the operating environment becomes more complex and
this risk may increase. The current trend of increasingly nationalistic
policies and protectionism may lead to more trade restrictions which in
Investments &
Acquisitions
EHS & Social
Business
Environment
Business Ethics
& Compliance
Technology
Energy Policy
& Regulations
Property,
Plant &
Equipment
Strate g i c
Sustain
a
b
i
l
i
t
y
Fortum’s
Risks
F i n a ncial
O
p
e
r
a
tio
nal
Taxation
Commodity
Markets
& Fuels
Currency &
Interest Rates
Systems &
Processes
Cyber &
Information
Security
Counter-
party &
Credit
Liquidity &
Refinancing
turn could affect demand for Fortum’s products and services. Fortum
continuously monitors how the business environment develops in its
operating countries in order to be able to react quickly to market shifts
and changes in consumer behaviour.
Investment and acquisition risks
Fortum’s strategy includes growth of operations in new businesses,
technologies and geographies. This includes an increasing number of
partly-owned companies and joint ventures where Fortum does not
necessarily have full operational control. Fortum is exposed to a number
of risks indirectly through these companies and joint ventures. These risks
are monitored and followed-up through Fortum’s representation in the
respective company Board of Directors and through expert committees.
The principal associated companies and joint ventures are Forsmarks
Kraftgrupp AB, Kemijoki Oy, OKG AB, Stockholm Exergi AB, TGC-1,
Teollisuuden Voima Oyj and Uniper SE. The most significant of these is
Uniper SE due to its size, complexity and the phase of the investment.
For more information about the risk exposures in these companies,
please see each respective company’s annual report and other relevant
disclosures.
Fortum’s recent and current investments, as well as any future
investment or acquisition, including possible future partnerships, entail
risk such as:
• increased overall operating complexity and requirements for
management, personnel and other resources,
• inability to understand the value drivers and their uncertainties in
investments or potential acquisition targets,
• inability to manage complex integrations of companies with different
cultures and processes, including possibly uncooperative management,
• inability to understand and manage new markets and jurisdictions with
different cultural, ethical and legal frameworks,
• inability to understand and manage sustainability risks and safety
issues related to new businesses, markets and technologies.
Operating and financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
27
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
These risks are managed as part of the investment process. The
Investment Manual includes requirements for risk identification,
assessment and action plans for mitigating identified risks before
investment decisions are made. It also sets requirements to follow-up
risks in projects and acquisitions. Risks in large projects are mitigated
through contract structures and insurance coverage. Partner risk
assessments are performed before entering into joint ventures or other
material partnership agreements, and there is also a country entry
process which includes a country risk assessment before decisions to
enter into a new market can be made.
Energy policy and regulation risks
The energy business is heavily influenced by national and EU-level energy
policies and regulations. Fortum’s strategy has been developed based
on scenarios of the future development of the regulatory environment in
both existing and potential new businesses and market areas. The overall
complexity and possible regulatory changes in the various operating
countries pose a risk if Fortum is not able to anticipate, identify and
manage those changes efficiently.
Fortum maintains an active dialogue with the bodies involved in the
development of laws and regulations in order to manage these risks
and proactively contribute to the development of the energy policy and
regulatory framework.
Nordic/EU
Fortum’s strategy in the power and heat sectors is based on a market-
driven development, which would mean more interconnections and
competition supported by increasing policy harmonization. Even if the
Nordic power market has a long tradition of harmonization, national
policies vary considerably when it comes to e.g. taxation, permitting,
subsidies and market model meaning that Fortum has to manage
risks related to both EU regulation and national regulation. Potential
risks related to the future energy, circular economy and climate policy
framework include;
• increasing policy costs and uncoordinated national mechanisms
hindering an integrated, flexible and dynamic power market,
• overlapping national carbon policies diluting the EU ETS and carbon
price despite the ETS reform,
• increasing cost burden for hydro power in Finland, driven by fish
obligations, grid costs and real estate taxation,
• unbalanced implementation of the EU Water Framework directive in
Sweden leading to lower production volumes,
• stricter sustainability requirements for forest biomass leading to
reduced availability and increasing costs,
• implementation of national waste incineration taxes or restrictive
measures affecting the operational environment or the competitiveness
of the waste-to-energy business as part of overall circular economy
promotion,
• acceptability issues related to different fuels or technologies (bio,
waste, nuclear, wind, CCS etc.) potentially limiting or slowing down new
investments either in power production or transmission grids,
• substantial retroactive changes and/or discontinuation of prevailing
CHP support schemes in the Baltic countries and Poland or
deteriorating competitiveness of CHP due to fuel tax increases,
• undue heavy-touch price-regulation of district heating in order to
enhance the affordability and other social aspects of protecting the
end-customers.
The inter-linkage of these issues create uncertainty as changes in policies
in one area could undermine the effects of policy changes in other areas.
Russia
Fortum’s business in Russia is exposed to political, economic and social
uncertainties and risks resulting from changes in regulation, legislation,
economic and social upheaval and other similar factors. The current
economic sanctions may be enlarged and/or extended having direct and
indirect impacts on the business environment. The main energy policy-
related risks in Russia are linked to the development of the whole energy
sector, part of which, is liberalised, like the wholesale electricity market,
while other parts, like gas, heat, and retail electricity, are not. Regulated
sectors are inherently exposed to a risk of regulatory changes which
could affect Fortum’s operations.
Technology risks
Fortum’s strategy includes developing or acquiring new technologies, as
well as digitalising the business. Fortum’s R&D and innovation activities
focus on the development of the energy system towards a future
low-carbon economy and developing circular economy solutions, bio-
economy, other renewable energy concepts and innovative solutions
for its customers. New technologies expose Fortum to risks related to
intellectual property rights, data privacy and viability of technologies.
Technology risks are managed by assessing and monitoring the viability
of new technology throughout its development cycle, and selectively
developing and investing in a diversified portfolio of projects consisting
of different technologies.
Sustainability risks
Corporate social responsibility and sustainable development are integral
parts of Fortum’s strategy. Fortum gives balanced consideration to
economic, environmental and social responsibility. Changes to laws,
regulations and the business environment can pose a risk if not identified
and managed effectively and the same applies to changes in views of our
main stakeholders. In order to identify and manage these risks, Fortum
endorses a number of international voluntary charters, standards and
guidelines in the area of sustainability, conducts stakeholder surveys
annually in order to identify the most material issues for our stakeholders
and has defined internal policies and instructions on how to conduct
business. Divisions and Corporate Functions identify and assess
sustainability risks related to their operations and define mitigating
actions. Corporate Sustainability executes oversight as part of the
Group’s risk management process.
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
28
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Environmental, health and safety and social risks
Operating power and heat generation plants and circular economy
services involves the usage, storage and transportation of fuels and
materials, including hazardous waste, that can have adverse effects on
the environment and expose personnel, contractors and third parties
to safety risks. Assessment of environmental risks and preparedness
to operate in exceptional and emergency situations follows legislative
requirements as well as the requirements in the environmental
management standard (ISO 14001). The same approach, based on the
requirements in the operational health and safety standard (OHSAS
18001 or ISO 45001), applies to risks related to occupational health and
safety and how to operate in emergency situations.
Environmental, health and safety (EHS) risks as well as social
risks related to Fortum’s supply chain are evaluated through supplier
qualification as well as internal and external audits and risk assessments
including partner and country risk assessments. Corrective and
preventive actions are implemented when necessary. EHS and social
risks related to investments are evaluated in accordance with Fortum’s
Investment Manual. Environmental risks and liabilities in relation to past
actions have been assessed and, where necessary, provisions have been
made for future remedial costs.
Tax risk
Fortum operates in a number of countries and is therefore exposed to
changes in and conflicts between local and international taxation. Political
pressure has resulted in numerous new laws and rules with unclear
wording and wide scope creating differences in how tax authorities
interpret new rules. This has led to a tax environment with increased tax
burden and poor clarity of tax consequences. Clarity and predictability
around how our operations are taxed has decreased due to the changing
regulation. In addition, new regulation creates material volume of new
complex compliance work.
Fortum aims to identify simple and cost-efficient solutions to
manage taxes in a sustainable manner. Fortum's tax principle is that
tax is a consequence of business and that compliance with tax rules
and legislation and transparency result in a correct tax contribution.
This principle leaves no room for artificial or other aggressive solutions.
Fortum is continuously following the development of tax related issues
and their impact on the Group and maintains an active dialogue with tax
authorities in unclear cases. Tax-related issues are communicated openly
both internally and externally and Fortum’s tax footprint is published
annually.
Business ethics and compliance risks
Fortum’s operations are subject to laws, rules and regulations set forth
by the relevant authorities, exchanges, and other regulatory bodies
in all markets in which Fortum operates. Fortum’s ability to operate in
certain countries may be affected by future changes to local laws and
regulations.
Fortum’s Code of Conduct enhances the understanding of the
importance of business ethics for all Fortum employees, contractors and
partners. Prevention of corruption is one of the Code of Conduct’s focus
areas. Fortum has procedures for anti-corruption including prevention,
oversight, reporting and enforcement based on the requirements
prescribed in international legislation. Fortum's supplier code of conduct
sets sustainability requirements for suppliers of goods and services.
The Supplier Code of Conduct is based on the principles of the United
Nations Global Compact and is divided into four sections: business
principles including anti-corruption, human rights, labour standards and
environment.
Fortum systematically identifies, assesses, mitigates and reports
compliance risks including risks related to business ethics. Internal
controls are implemented to prevent the possibilities of unauthorised
activities or non-compliance with Group policies and instructions.
Fortum’s rolling compliance programme includes a risk-based
prioritisation of the development and implementation of mitigating
actions. Training and communication play a key role in increasing the
awareness in the organisation.
Financial risks
Commodity market and fuel risks
Fortum’s business is exposed to fluctuations in prices and availability
of commodities used in the production and sales of energy products.
The main exposure is toward electricity prices and volumes, prices
of emissions and prices and availability of fuels. Fortum hedges its
exposure to commodity market risks in accordance with approved
Hedging Guidelines and Mandates. For further information on hedge
ratios, exposures, sensitivities and outstanding derivatives contracts,
see4Note 4 Financial risk management.
Electricity price and volume risks
In competitive electricity markets, such as the Nordpool spot market
exchange in the Nordic region, the wholesale price of electricity is
determined as the balance between supply and demand. The short-
term factors affecting electricity prices and volumes on the Nordic
market include hydrological conditions, temperature, wind, CO2 emission
allowance prices, fuel prices, economic development, transmission
capacity and the import/export situation.
Electricity price risks are mainly hedged by entering into electricity
derivatives contracts on the Nasdaq Commodities exchange. The ability
to implement hedging strategies is dependent on a well-functioning and
liquid derivatives market. There is a risk of decreasing liquidity on the
Nasdaq Commodities exchange, and alternatives including use of OTC
derivative contracts and products traded on other exchanges are used
to mitigate this risk. Hedging strategies are continuously evaluated as
electricity and other commodity market prices, the hydrological balance
and other relevant parameters change. In 2019, the models used for
evaluating hedging strategies and reporting risk were developed to
cover more parameters and improve the use of especially hydrological
data. Hedging of the Generation segment’s power sales is performed
in EUR on a Nordic level covering both Finland and Sweden, and the
currency component of these hedges in the Swedish entity is currently
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
29
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
not hedged. In Russia, electricity and capacity prices are the main source
of market risk. Electricity price exposure is partly mitigated through
regulated fixed-price bilateral agreements, but the majority of electricity
sales is exposed to spot price risk. Capacity from newer units is sold
under capacity supply agreements where the price is set by the Russian
Federation to ensure the return on investments. Capacity from old units
has been sold until 2024 via capacity supply auctions which have already
been conducted.
Emission and environmental value risks
The European Union has an emissions trading scheme to reduce the
amount of CO2 emissions. In addition to the emissions trading scheme,
there are other trading schemes in environmental values in place in
Sweden, Norway and Poland. Part of Fortum’s power and heat generation
is subject to requirements of these schemes. There is currently no trading
scheme in Russia for emissions or other environmental values. However,
Russia has announced intentions to comply with the Paris Agreement, but
there is uncertainty related to how and when a possible carbon market
could be implemented.
The main factors influencing the prices of CO2 emission allowances
and other environmental values are political decisions and the supply
and demand balance. Fortum hedges its exposure to these prices
and volumes through the use of CO2 derivatives and environmental
certificates.
Fuel price and volume risks
Power and heat generation requires use of fuels that are purchased on
global or local markets. The main fuels used by Fortum are natural gas,
uranium, coal, various biomass-based fuels and waste. The main risk
factor for fuels that are traded on global markets such as coal and natural
gas, is the uncertainty in price. Prices are largely affected by demand
and supply imbalances that can be caused by, e.g. increased demand
growth in developing countries, natural disasters or supply constraints in
countries experiencing political or social unrest. For fuels that are sourced
on local or regional markets, such as bio-fuels, the volume risk in terms of
availability of the raw material of appropriate quality is more significant as
there may be a limited number of suppliers. Due to the current sanctions,
there are also risks related to imported fuels from Russia.
In the Nordic market, exposure to fuel prices is limited due to Fortum’s
flexible generation capacity which allows for switching between different
fuels according to prevailing market conditions. The remaining exposure
to fuel price risk is mitigated through fixed- price physical delivery
contracts or derivative contracts. The main fuel source for heat and
power generation in Russia is natural gas which is partially regulated
limiting the price risk exposure.
Liquidity and refinancing risks
Fortum's business is capital intensive and there is a constant need to
ensure efficient financing. Fortum maintains a diversified financing
structure in terms of debt maturity profile, debt instruments and
geographical markets. Liquidity and refinancing risks are managed
through a combination of cash positions and committed credit facility
agreements. The credit risk of cash positions has been mitigated by
diversifying the deposits to high-credit quality financial institutions and
issuers of corporate debt.
Fortum’s access to and cost of financing is dependent on having an
investment-grade rating. The current investment in Uniper has increased
Fortum’s leverage, and with the announced increase in ownership,
there is an increased risk of downgrade in the credit rating which could
negatively impact Fortum’s access to cost-efficient financing. After the
closing of transaction, through which an additional minimum of 20.5%
share in Uniper will be acquired, Fortum’s key objective is to maintain an
investment-grade rating and to strengthening its financial profile longer
term. Fortum maintains an active dialogue with credit rating agencies to
ensure understanding of Fortum’s strategy and planned measures which
target to achieve a financial and business profile that supports a solid
investment grade rating.
Currency and interest rate risks
Fortum’s debt portfolio consists of interest-bearing liabilities and
derivatives on a fixed- and floating-rate basis with differing maturity
profiles. Fortum manages the duration of the debt portfolio through
use of different types of financing contracts and interest rate derivative
contracts such as interest rate swaps.
Fortum’s currency exposures are divided into transaction exposures
(foreign exchange exposures relating to contracted cash flows and
balance sheet items where changes in exchange rates will have an
impact on earnings and cash flows) and translation exposure (foreign
exchange exposure that arises when profits and balance sheets in
foreign entities are consolidated at the Group level). The main principle is
that material transaction exposures should be hedged while translation
exposures are not hedged, or are hedged selectively. An exception is
the Generation segment’s hedging of power sales in Sweden where
the currency component is currently not hedged. The main translation
exposures toward the EUR/RUB, EUR/SEK and EUR/NOK are monitored
continuously. Changes in these currency rates affect Fortum’s profit level
and equity when translating results and net assets to euros.
Counterparty and credit risks
Fortum is exposed to counterparty risk whenever there is a contractual
arrangement with an external counterparty including customers,
suppliers, partners, banks, clearing houses and trading counterparties.
Credit risk exposures relating to financial derivative instruments are
often volatile. The majority of commodity derivatives are exchange-traded
and cleared through clearing houses such as Nasdaq Clearing AB or
through clearing banks. During 2019, Nasdaq Clearing AB has continued
implementation of its risk management enhancement program in order
to reduce the risk of member defaults. In addition, the trend toward more
use of futures contracts instead of forward contracts is decreasing the
credit exposure toward clearing houses. Derivatives contracts are also
entered into directly with external counterparties and such contracts are
limited to high-credit-quality counterparties active on the financial or
commodity markets.
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
30
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Due to the financing needs and management of liquidity, Fortum
has counterparty credit exposure toward a number of banks and
financial institutions. The majority of the exposure is to Fortum's key
relationship banks, which are highly creditworthy institutions, but also
includes exposure to the Russian financial sector in terms of deposits
with financial institutions as well as to banks that provide guarantees
for suppliers and contracting parties. Deposits in Russia have been
concentrated to the most creditworthy state-owned or controlled banks.
Credit risk exposures relating to customers is spread across a
wide range of industrial counterparties, small businesses and private
individuals over a range of geographic regions. The majority of exposure
is to the Nordic market, Poland and Russia. The risk of non-payment in
the electricity and heat sales business in Russia is higher than in the
Nordic market. In order to manage counterparty credit risk, Fortum has
routines and processes to identify, assess and control exposure. Credit
checks are performed before entering into commercial obligations
and exposure limits are set for larger individual counterparties.
Creditworthiness is monitored through the use of internal and external
sources so that mitigating actions can be taken when needed. Mitigating
actions include demanding collateral, such as guarantees, managing
payment terms and contract length, and the use of netting agreements.
Operational risks
Operational risks are unexpected events which can lead to negative
monetary, safety, environmental or reputational impacts as a result of
inadequate or failed internal processes, systems or equipment, or from
external events.
Systems and Process Risks
System and process risks are mainly caused by design failures or human
errors. Mitigation includes process automation, testing and education.
Process-related risks are assessed and controls for the most relevant
risks are defined and implemented as part of the internal controls
framework. IT-system risk management is based on an IT Service
Lifecycle Model, and related processes and practices which has been
developed using reference frameworks such as COBIT and ITIL. Business
continuity plans are in place for business critical processes.
Property, plant and equipment
Property, plant and equipment risks are primarily managed through
monitoring and maintenance planning. In addition, Fortum's industrial
assets are covered by a Group Master Policy covering property damage
and business interruption risks which mitigates the impact of internal and
external events should they occur.
Combined heat and power (CHP) and recycling and waste
Operational events at CHP and recycling and waste facilities, or in the
storage and transportation of fuels, waste and materials can lead to
physical damages, business interruption, and environmental, health
and safety and social impacts. Leakage and contamination of the
surrounding environment could lead to clean-up costs and third-party
liabilities. An explosion or fire at a facility could cause damages to the
plant or third-parties and lead to possible business interruption. These
risks are mitigated by condition monitoring, preventive maintenance and
other operational improvements as well as competence development of
personnel operating the plants. Furthermore, requirements for incoming
waste are clearly specified and samples are tested for selected waste
deliveries.
Hydro power
Operational events at hydro power generation facilities can lead to
physical damages, business interruptions, and third-party liabilities. A
long-term programme is in place for improving the surveillance of the
condition of dams and for securing the discharge capacity in extreme
flood situations. Third-party liabilities from dam failures are strictly
the plant owner’s responsibility. Together with other hydro power
producers, Fortum has a shared dam liability insurance programme
in place that covers Finnish and Swedish dam failure liabilities up to
SEK 10,000 million.
Nuclear power
Fortum owns the Loviisa nuclear power plant, and has minority interests
in two Finnish and two Swedish nuclear power companies. At the Loviisa
power plant, the assessment and improvement of nuclear safety is a
continuous process performed under the supervision of the Radiation and
Nuclear Safety Authority of Finland (STUK).
Third-party liability relating to nuclear accidents is strictly the plant
operator’s responsibility and must be covered by insurance. As the
operator of the Loviisa power plant, Fortum has a statutory liability
insurance policy of 600M SDR (Special Drawing Right) and the same type
of insurance policies are in place for the operators where Fortum has a
minority interest.
Wind and Solar
Fortum is involved in the construction, development and operations
of several wind and solar power production projects in the Nordics,
Russia and in India. Operational incidents during both construction and
operational phases can lead to accidents, delays in commissioning and
business interruption. These risks are mitigated as part of the project
planning and through maintenance and continuous training of personnel
involved in constructing and operating the plants.
Cyber and information security risks
Fortum’s business operations and customer related services are
dependent on well-functioning IT and information management systems
and processes. Due to the nature of the business, large amounts of data
are processed and used for decision-making, serving customers and in
internal and external communication and reporting. Securing information
and availability of the systems are essential for Fortum. Cyber security
risks, including risks related to information, operation technology (OT)
and digitalisation, are managed centrally by Corporate Security in
collaboration with Divisions and Corporate Functions, especially the
Business Technology function. The Group’s cyber security governance
model, instructions and procedures set requirements for managing and
mitigating cyber security risks.
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
31
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
The Business Technology function, other support functions and
outsourcing partners are responsible for identifying and mitigating
operational IT/OT security related risks as well as managing IT/OT security
incidents. Divisions are responsible for business continuity planning and
IT functions are responsible for IT service continuity.
Climate-related risks
Mitigating climate change, adapting to it and driving the transition
to a lower-carbon economy is an integral part of Fortum’s strategy.
Successfully managing climate-related risks and opportunities is a key
element in delivering on the strategy.
Management of climate-related risks is integrated into Fortum’s risk
management framework and follows the same governance and processes
as Fortum’s other material risk and uncertainties. Climate-related risks are
identified and assessed by the various business areas through an annual
bottom-up process. Risk owners are assigned for managing the risks and
they are regularly reported and followed-up in business area and division
management teams. In 2019, Fortum emphasized climate-related risks
as part of the process including a specific top-down review of climate-
related risks by Group experts. The key climate-related risks are reported
to FEM and the ARC as part of the annual review of material risks and
uncertainties for the Group.
Climate-related risks can be divided into two categories; transition
risks and physical risks. The identified physical risks are generally found
in the operational risk category whereas transition risks are generally
longer-term and part of the strategic risk category
Transition risks
Fortum’s strategy is to a large extent built on taking advantage of the
opportunities associated with the transition to a low-carbon economy and
successfully mitigating the risks. The transition to a low carbon economy
poses a number of strategic risks related to changes in energy and
climate policy and regulation, technology development and the business
environment in which Fortum operates. Additionally, Fortum’s brand
and reputation can be negatively impacted by changes in stakeholder
perception about Fortum’s ability to deliver on its strategy.
One of the key risks is that the transition develops faster and with
policy tools or technologies that have not been anticipated or planned for.
The key risks related to climate policy and regulation include the revision
of the EU targets for greenhouse gas reduction, renewable energy and
energy efficiency leading to overlapping or inefficient mechanisms,
tighter restrictions on incineration and burning of various fuels and a
more regulated electricity market due to the increase in intermittent
renewable production. Fortum favours a market-based approach to
decarbonisation with CO2 pricing as a key tool and clear criteria for
capacity remuneration. Fortum supports the use of waste and sustainable
biomass as part of the EU circular economy. Additionally, increased
flexibility in demand is needed to cope with the expected increase in
intermittent renewable production.
The transition to a low-carbon economy also poses risks if there
emerge new, disruptive technologies that create cheap sources of
flexibility or storage in the energy market. Additionally, if there is an
accelerated decline in the cost of renewable energy, it could decrease
the value of existing conventional power and heat generation assets.
Fortum continuously monitors technology development and invests into
a broad portfolio of innovative technologies. Fortum also monitors the
price development of renewables and evaluates both divestment and
investment opportunities to optimise the portfolio with the aim of lower
carbon emissions.
Climate-change may affect the demand and supply of energy products
due to consumer behaviour and changing weather patterns. This could
lead to, e.g. lower and more volatile electricity prices which negatively
affect the revenues of baseload generation assets. Energy efficiency
measures and warmer weather may also impact the demand for heating
to a larger extent than currently expected.
Stakeholder views on sustainability may lead to stricter demands
by shareholders. Stricter definitions of sustainable finance set by the
EU may also make it more difficult to access financing. Additionally,
there is a risk of increasing activity by NGOs which could affect key
stakeholder perception. Fortum’s investment in Uniper is currently
increasing the exposure to these risks. In order to mitigate these risks,
Fortum focuses on the sustainability impacts of strategy and business
decisions, communicating transparently about strategy implementation
to key stakeholders, ensuring a broad base of investors and flexibility in
financing including a diversified bond portfolio.
Physical risks
Fortum’s operations and assets are exposed to external events, the
frequency and magnitude of which may increase as a result of climate
change. Changes in precipitation, inflows and temperatures may affect
hydropower production as well as bioenergy supply and availability.
Intense storms with, e.g. flash floods could increase the risk of dam
breaches as well as causing local damages and production outages.
Warmer weather may also lead to a need for new cooling or process
water sources and extreme warm and dry summer periods could result
in forest fires which potentially damage assets or lead to grid outages
restricting power supply. Fortum adapts its operations to the changing
climate and takes it into consideration in production and maintenance
planning and in evaluating growth and investment projects. Climate
change scenarios are, e.g. taken into account in the long-term dam safety
investment program so that extreme flooding situations can be managed.
Operating and financial review Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
32
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Fortum share and shareholders
Fortum Corporation’s shares have been listed on Nasdaq Helsinki since 18 December 1998. The trading code
is FORTUM (until 25 January 2017: FUM1V). Fortum Corporation’s shares are in the Finnish book entry system
maintained by Euroclear Finland Ltd which also maintains the official share register of Fortum Corporation.
Share capital
Share capital
Share key figures
EUR
Earnings per share
Cash flow per share
Equity per share
Dividend per share
Payout ratio, %
Dividend yield, %
2019
1.67
2.27
14.61
1.10 1)
65.9 1)
5.0 1)
2018
0.95
0.91
13.33
1.10
115.8
5.8
2017
0.98
1.12
14.69
1.10
112.2
6.7
1) Board of Directors’ proposal for the planned Annual General Meeting 17 March 2020.
For full set of share Key figures 2010–2019, see the section4Key figures in the Financial Statements.
Shareholders value, share price performance and volumes
Fortum's mission is to deliver excellent value to its shareholders. Fortum’s share price has appreciated
approximately 22% during the last five years, while Dow Jones European Utility Index has increased 14%. During
the same period Nasdaq Helsinki Cap index has increased 37%. During 2019 Fortum’s share price appreciated
approximately 15%, while Dow Jones European Utility index increased 26% and Nasdaq Helsinki Cap index
increased 15%.
In 2019, a total of 372.3 million (2018: 474.7) Fortum Corporation shares, totalling EUR 7,467 million, were
traded on Nasdaq Helsinki. The highest quotation of Fortum Corporation shares during 2019 was EUR 22.50, the
lowest EUR 18.09, and the volume-weighted average EUR 20.14. The closing quotation on the last trading day of
the year 2019 was EUR 22.00 (2018: 19.10 ). Fortum's market capitalisation, calculated using the closing quotation
of the last trading day of the year, was EUR 19,542 million (2018: 16,966).
In addition to the Nasdaq Helsinki, Fortum shares were traded on several alternative market places, for example
at Boat, Cboe and Turquoise, and on the OTC market. During 2019, approximately 73% (2018: 68%) of Fortum's
shares were traded on markets other than the Nasdaq Helsinki Ltd.
EUR million
Registered shares at 1 January
Cancellation of treasury shares
Registered shares at 31 December
2019
Number of
shares
888,294,465
-
888,294,465
Share
capital
3,046
-
3,046
2018
Number of
shares
888,367,045
72,580
888,294,465
Share
capital
3,046
-
3,046
Fortum Corporation has one class of shares. By the end of 2019, a total of 888,294,465 shares (2018:
888,294,465) had been issued. Each share entitles the holder to one vote at the Annual General Meeting. All
shares entitle holders to an equal dividend. At the end of 2019 Fortum Corporation’s share capital, paid in its
entirety and entered in the trade register, was EUR 3,046,185,953.00.
In the merger of Länsivoima Oyj (former Lounais-Suomen Sähkö Oy) to Fortum Corporation in 2000, those
shareholders of Länsivoima Oyj that did not produce their share certificates and did not request their rights
to be registered in the book-entry system, received their respective shares of Fortum Corporation as merger
consideration to a joint book-entry account opened on their behalf (the “Joint Account”). The Annual General
Meeting 2018 of Fortum Corporation decided, that the rights to all such shares entered in the Joint Account and
to the rights attached to such shares that had not been requested to be registered in the book-entry system prior
to the decision by the Annual General Meeting 2018, were forfeited. In addition to the shares, the rights attached
to such shares, such as undrawn dividend, were forfeited. The provisions applicable to treasury shares held by the
company were applied to the forfeited shares. On 17 December 2018, Board of Directors decided to cancel all
these 72,580 Fortum shares owned by the company without decreasing the share capital. The cancellation was
entered in the Trade Register on 21 December 2018.
Shareholders
At the end of 2019 the Finnish State owned 50.76% of the company’s shares. The Finnish Parliament has
authorised the Government to reduce the Finnish State’s holding in Fortum Corporation to no less than 50.1% of
the share capital and voting rights.
The proportion of nominee registrations and direct foreign shareholders was 30.5% (2018: 30.8%).
Operating and financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
33
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Shareholders, 31 December 2019
Shareholders
Finnish State
Ilmarinen Mutual Pension Insurance Company
Varma Mutual Pension Insurance Company
The Finnish Social Insurance Institution
Kurikan Kaupunki
The State Pension Fund
Elo Mutual Pension Insurance Company
OP-Finland
Danske Invest Finnish Equity Fund
Schweizerische Nationalbank
Säästöpankki Kotimaa Mutual Fund
Nordea Pro Finland Fund
OP-Henkivakuutus Ltd.
Finnish Cultural Foundation
Nominee registrations and direct foreign ownership 1)
Other shareholders in total
Total number of shares
1) Excluding Schweizerische Nationalbank
By shareholder category
Finnish shareholders
Corporations
Financial and insurance institutions
General government
Non-profit organisations
Households
Non-Finnish shareholders
Total
No. of shares
450,932,988
11,773,000
8,921,167
7,030,896
6,203,500
4,600,000
4,530,000
2,867,011
2,150,000
2,029,745
1,222,017
1,161,013
909,824
821,611
268,856,293
114,285,400
888,294,465
Holding %
50.76
1.33
1.00
0.79
0.70
0.52
0.51
0.32
0.24
0.23
0.14
0.13
0.10
0.09
30.27
12.87
100.00
% of total amount of shares
1.30
1.72
55.80
1.21
9.48
30.50
100.00
Breakdown of share ownership, 31 December 2019
Number of shares owned
1–100
101–500
501–1,000
1,001–10,000
10,001–100,000
100,001–1,000,000
1,000,001–10,000,000
over 10,000,000
In the joint book-entry account and in special
accounts on 31 December
Nominee registrations
Total
No. of
shareholders
42,657
48,493
18,443
18,745
961
68
10
2
129,379
% of
shareholders
32.97
37.48
14.26
14.49
0.74
0.02
0.01
0.00
100.00
No. of shares
2,159,339
12,845,972
13,578,106
48,643,484
21,245,211
19,012,711
40,715,349
462,705,988
620,906,160
596
267,387,709
888,294,465
% of total
amount of
shares
0.24
1.45
1.53
5.48
2.39
2.14
4.58
52.09
69.90
0.00
30.10
100.00
Management shareholding 31 December 2019
At the end of 2019, the President and CEO and other members of the Fortum Executive Management owned
263,002 shares (2018: 193,227) representing approximately 0.03% (2018: 0.02%) of the total shares in the company.
A full description of the shareholdings and interests in long-term incentive schemes of the President and CEO
and other members of the Fortum Executive Management is shown in4Note 11 Employee benefits and Board
remuneration.
Authorisations from the Annual General Meeting 2019
In 2019, the Annual General Meeting decided to authorise the Board of Directors to decide on the repurchase
and disposal of the company’s own shares up to a maximum number of 20,000,000 shares, which corresponds
to approximately 2.25% of all the shares in the company. The authorisation is effective for a period of 18 months
from the resolution of the General Meeting. The authorisation had not been used by the end of 2019.
Dividend policy
The dividend policy ensures that shareholders receive a fair remuneration for their entrusted capital, supported
by the company’s long-term strategy that aims at increasing earnings per share and thereby the dividend. When
proposing the dividend, the Board of Directors looks at a range of factors, including the macro environment, balance
sheet strength as well as future investment plans. Fortum Corporation’s target is to pay a stable, sustainable and over
time increasing dividend, in the range of 50–80% of earnings per share, excluding one-off items.
Operating and financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
34
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Dividend distribution proposal
The distributable funds of Fortum Corporation as at 31 December 2019 amounted to EUR 4,219,128,198.51
including the profit of the financial period 2019 of EUR 213,409,797.80. The company’s liquidity is good and the
dividend proposed by the Board of Directors will not compromise the company’s liquidity.
The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 1.10 per share be paid
for 2019.
Based on the number of registered shares as at 5 February 2020 the total amount of dividend would be EUR
977,123,911.50. The Board of Directors proposes, that the remaining part of the distributable funds be retained in
the shareholders’ equity.
The Annual General Meeting will be held on 17 March 2020 at 11:00 EET at Finlandia Hall in Helsinki.
Market capitalisation, EUR billion
Share quotations, index 100 = quote on 2 January 2015
Total shareholder return, EUR
200
150
100
50
0
50
45
40
35
30
25
20
15
10
5
0
2015
2016
2017
2018
2019
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Fortum
OMXHCap
DJ STOXX
Fortum's share price, (EUR 22.00)
Fortum's total shareholder return, EUR 43.96 (dividends reinvested)
1
1
1
Operating and financial review051015202520152016201720182019 Operating and
financial review
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
35
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in total equity
Cash flow statement
EUR million
Comparable operating profit
Impairment charges
Capital gains and other
Changes in fair values of derivatives hedging future cash flow
Nuclear fund adjustment
Items affecting comparability
Operating profit
See4Definitions for key ratios
Note
8
6, 7
2019
1,191
-8
7
-72
-9
-81
1,110
2018
987
-4
102
98
-45
151
1,138
Consolidated income statement
EUR million
Sales
Other income
Materials and services
Employee benefits
Depreciation and amortisation
Other expenses
Comparable operating profit
Items affecting comparability
Operating profit
Share of profit of associates and joint ventures
Interest expense
Interest income
Fair value gains and losses on financial instruments
Other financial expenses - net
Finance costs - net
Profit before income tax
Income tax expense
Profit for the year
Attributable to:
Owners of the parent
Non-controlling interests
Earnings per share for profit attributable to the equity owners of the company
(EUR per share)
Basic
Note
6
9
10
11
6, 17, 18
9
6
7
6
6, 19
8
12
13
14
2019
5,447
110
-2,721
-480
-575
-591
1,191
-81
1,110
744
-167
28
8
6
-125
1,728
-221
1,507
1,482
25
1,507
2018
5,242
130
-2,795
-459
-536
-594
987
151
1,138
38
-148
34
-8
-15
-136
1,040
-181
858
843
15
858
1.67
0.95
As Fortum currently has no dilutive instruments outstanding, diluted earnings per share is the same as basic
earnings per share.
Consolidated financial statements Operating and
financial review
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
36
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in total equity
Cash flow statement
Consolidated statement of comprehensive income
EUR million
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent periods:
Cash flow hedges
Fair value gains/losses in the year
Transfers to income statement
Transfers to inventory/property, plant and equipment
Deferred taxes
Net investment hedges
Fair value gains/losses in the year
Deferred taxes
Exchange differences on translating foreign operations
Share of other comprehensive income of associates and joint ventures
Other changes
Items that will not be reclassified to profit or loss in subsequent periods:
Actuarial gains/losses on defined benefit plans
Actuarial gains/losses on defined benefit plans in associates and joint ventures
Other comprehensive income for the year, net of deferred taxes
Total comprehensive income for the year
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
Notes
2019
1,507
2018
858
4.6
19
31
82
635
-4
-151
-24
5
259
72
5
877
-21
-208
-229
649
2,155
2,120
36
2,155
-778
15
-2
162
32
-6
-525
-37
0
-1,141
3
43
46
-1,094
-236
-239
3
-236
Other comprehensive income (OCI) includes items of income and expense that are recognised in equity and not
recognised in the consolidated income statement. They include unrealised items, such as fair value gains and losses
on financial instruments hedging future cash flows. These items will be realised in the Consolidated income statement
when the underlying hedged items is recognised. OCI also includes gains and losses on fair valuation of other
investments, actuarial gains and losses from defined benefit plans, items on comprehensive income in associated
companies and translation differences.
Fair valuation of cash flow hedges mainly relates to fair valuation of derivatives, such as futures and forwards, hedging
electricity price for future transactions, where hedge accounting is applied. When electricity price is higher (lower) than the
hedging price, the impact on equity is negative (positive).
Translation differences from translation of foreign entities, mainly RUB and SEK.
Consolidated financial statements Operating and
financial review
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
37
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in total equity
Cash flow statement
Consolidated balance sheet
EUR million
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment and right-of-use assets
Participations in associates and joint ventures
Share in State Nuclear Waste Management Fund
Other non-current assets
Deferred tax assets
Derivative financial instruments
Long-term interest-bearing receivables
Total non-current assets
Current assets
Inventories
Derivative financial instruments
Short-term interest-bearing receivables
Income tax receivables
Trade and other receivables
Deposits and securities (maturity over three months)
Cash and cash equivalents
Liquid funds
Total current assets
Assets held for sale
Total assets
Note 31 Dec 2019 31 Dec 2018
17
18
19
29
20
28
4
21
22
4
21
28
23
24
3
1,143
10,123
6,435
813
151
77
180
651
19,571
230
131
384
133
1,176
76
1,356
1,433
3,486
307
1,087
9,981
5,978
899
139
70
229
683
19,065
233
326
409
172
1,620
29
557
584
3,344
-
23,364
22,409
EUR million
EQUITY
Equity attributable to owners of the parent
Share capital
Share premium
Retained earnings
Other equity components
Total
Non-controlling interests
Total equity
LIABILITIES
Non-current liabilities
Interest-bearing liabilities
Derivative financial instruments
Deferred tax liabilities
Nuclear provisions
Other provisions
Pension obligations
Other non-current liabilities
Total non-current liabilities
Current liabilities
Interest-bearing liabilities
Derivative financial instruments
Trade and other payables
Total current liabilities
Liabilities related to assets held for sale
Total liabilities
Total equity and liabilities
Note 31 Dec 2019 31 Dec 2018
25
26
27
4
28
29
30
31
32
27
4
33
3
3,046
73
9,982
-118
12,982
252
13,235
3,046
73
9,232
-510
11,841
236
12,077
6,118
137
865
813
87
125
167
8,311
570
252
943
1,766
52
5,007
362
720
899
91
98
182
7,358
1,086
829
1,058
2,973
-
10,129
10,332
23,364
22,409
Consolidated financial statements Operating and
financial review
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
38
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in total equity
Cash flow statement
Consolidated statement of changes in total equity
EUR million
Equity 1 January 2019
Net profit for the year
Translation differences
Other comprehensive income
Total comprehensive income for the year
Cash dividend
Other
BS Equity 31 December 2019
BS Equity 31 December 2017
Impact from change in accounting principle
(IFRS 9 and 15)
Equity 1 January 2018
Net profit for the year
Translation differences
Other comprehensive income
Total comprehensive income for the year
Cash dividend
Other
BS Equity 31 December 2018
Note
Share capital
3,046
Share premium
73
Retained earnings
and other funds
11,937
1,482
Translation of
foreign operations Cash flow hedges
-638
-2,705
Other OCI items
99
OCI items
associates and
joint ventures
30
Retained earnings
Other equity components
14
14
3,046
3,046
3,046
73
73
73
3,046
73
1,482
-977
-2
12,441
12,062
7
12,069
843
0
843
-977
2
11,937
247
247
-2,459
-2,187
-2,187
-519
-519
-2,705
7
561
568
-70
-40
-40
0
-599
-598
-638
0
-40
-40
60
70
70
1
28
29
99
-1
-136
-137
-108
24
24
-1
6
6
30
Owners
of the parent
11,841
1,482
253
385
2,120
-977
-2
12,982
Non-controlling
interests
236
25
6
5
36
-23
4
252
13,048
7
13,055
843
-518
-564
-239
-977
2
11,841
239
239
15
-7
-5
3
-6
0
236
Total equity
12,077
1,507
259
390
2,156
-1,000
2
13,235
13,287
7
13,295
858
-525
-569
-236
-983
2
12,077
Translation differences
Translation of financial information from subsidiaries in foreign currency is done using average rate for the income
statement and end rate for the balance sheet. The exchange rate differences occurring from translation to EUR are
recognised in equity. Translation differences impacted equity attributable to owners of the parent company with
EUR 253 million during 2019 (2018: -518). Translation differences are mainly related to RUB and SEK. Part of this
translation exposure has been hedged and the foreign currency hedge result, amounting to EUR -14 million (2018:
24), is included in other OCI items.
For information regarding exchange rates used, see4Note 1 Significant accounting policies. For information
about translation exposure see4Note 4.6 Interest rate risk and currency risk.
Cash flow hedges
The impact on equity attributable to owners of the parent from fair valuation of cash flow hedges, EUR 568 million
(2018: -598), mainly relates to fair valuation of derivatives, such as futures and forwards, hedging electricity
price for future transactions, where hedge accounting is applied. When electricity price is higher (lower) than the
hedging price, the impact on equity is negative (positive).
Cash dividends
A dividend for 2018 was decided in the Annual General Meeting on 26 March 2019 and paid on 4 April 2019.
See4Note 14 Earnings and dividend per share.
Consolidated financial statements Operating and
financial review
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
39
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in total equity
Cash flow statement
Consolidated cash flow statement
EUR million
Cash flow from operating activities
Profit for the year
Adjustments:
Income tax expense
Finance costs - net
Share of profit of associates and joint ventures
Depreciation and amortisation
Operating profit before depreciations (EBITDA)
Items affecting comparability
Comparable EBITDA
Non-cash flow items
Interest received
Interest paid
Dividends received
Realised foreign exchange gains and losses
Income taxes paid
Other items
Funds from operations
Change in settlements for futures
Change in working capital
Net cash from operating activities
Cash flow from investing activities
Capital expenditures
Acquisitions of shares
Proceeds from sales of fixed assets
Divestments of shares
Shareholder loans to associated companies and joint ventures
Change in cash collaterals and restricted cash
Change in other interest-bearing receivables
Net cash used in investing activities
17, 18
6
Note
2019
1,507
221
125
-744
575
1,685
81
1,766
-1
29
-177
239
14
-165
-13
1,691
356
-33
2,015
-695
-107
35
53
9
311
25
-369
2018
858
181
136
-38
536
1,674
-151
1,523
-90
23
-171
61
231
-94
-9
1,474
-524
-146
804
-579
-4,088
38
259
-24
-36
31
-4,398
EUR million
Cash flow before financing activities
Cash flow from financing activities
Proceeds from long-term liabilities
Payments of long-term liabilities
Change in short-term liabilities
Dividends paid to the owners of the parent
Dividends paid to non-controlling interests
Other financing items
Net cash from/used in financing activities
Total net increase(+)/decrease(-) in liquid funds
Liquid funds at the beginning of the year
Foreign exchange differences in liquid funds
Liquid funds at the end of the year 1)
Note
2019
1,646
2018
-3,594
2,805
-2,567
-78
-977
-23
1
-839
1,764
-586
135
-977
-5
-4
326
806
-3,268
584
44
1,435
3,896
-43
584
14
24
1) Includes cash balances of EUR 2 million relating to assets held for sale at 31 December 2019. See4Note 3 Acquisitions, disposals and assets held
for sale.
Realised foreign exchange gains and losses relate mainly to financing of Fortum’s Russian and Swedish subsidiaries and the fact
that the Group’s main external financing currency is EUR. The foreign exchange gains and losses arise from rollover of foreign
exchange contracts hedging these internal loans as major part of the forwards are entered into with short maturities i.e. less
than twelve months.
In Fortum's cash flow statement the daily cash settlements for futures are shown in cash flow from operating activities whereas
the changes in cash collaterals for forwards are included in cash flow from investing activities. The daily cash settlements are
included in trade and other receivables and the cash collaterals are included in the short-term interest-bearing receivables,
see4Note 21 Interest-bearing receivables for additional information.
Capital expenditures in cash flow do not include not yet paid investments. Capitalised borrowing costs are presented in
interest paid.
Consolidated financial statements
Operating and
financial review
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
40
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in total equity
Cash flow statement
Note
Change in net debt
EUR million
Net debt 1 January
Impact from change in accounting principle (IFRS 16 and IFRS 9)
Foreign exchange rate differences
Comparable EBITDA
Non-cash flow items
Paid net financial costs
Dividends received
Income taxes paid
Change in settlements for futures and working capital
Capital expenditures
Acquisitions
Divestments and proceeds from sale of fixed assets
Shareholder loans to associated companies
Change in other interest-bearing receivables
Dividends to the owners of the parent
Dividends to non-controlling interests
Other financing activities
Net cash flow (- increase in net debt)
Impact of non-cash collateral arrangement
Fair value change of bonds, amortised cost valuation, acquired debt and other
changes
Net debt 31 December
27
Additional cash flow information
Change in working capital
EUR million
Change in interest-free receivables, decrease(+)/increase(-)
Change in inventories, decrease(+)/increase(-)
Change in interest-free liabilities, decrease(-)/increase(+)
CF Total
2019
5,509
99
-51
1,766
-1
-142
239
-165
323
-695
-107
88
9
336
-977
-23
-4
646
281
68
5,260
2019
63
4
-100
-33
2018
988
1
15
1,523
-90
77
61
-94
-670
-579
-4,088
298
-24
-5
-977
-5
-7
-4,580
-
-75
5,509
2018
-186
-3
43
-146
Capital expenditure in cash flow
EUR million
Capital expenditure
Change in not yet paid investments, decrease(+)/increase(-)
Capitalised borrowing costs
CF Total
Note
6
2019
713
-9
-9
695
2018
584
5
-10
579
Capital expenditures for intangible assets and property, plant and equipment were in 2019 EUR 713 million (2018:
584). Capital expenditure in cash flow in 2019 EUR 695 million (2018: 579) is including payments related to capital
expenditure made in previous year i.e. change in trade payables related to investments EUR -9 million (2018: 5)
and excluding capitalised borrowing costs EUR -9 million (2018: -10), which are presented in interest paid.
See also information about the investments by segments and countries in4Note 6 Segment reporting.
Acquisition of shares in cash flow
Acquisition of shares, net of cash acquired, amounted to EUR 107 million during 2019 (2018: 4,088). Acquisition
of shares during 2018 include mainly the acquisition of shares in Uniper SE. For further information see4Note 3
Acquisitions, disposals and assets held for sale.
Divestment of shares in cash flow
EUR million
Proceeds from sales of subsidiaries, net of cash disposed
Proceeds from sales of associates and joint ventures
Proceeds from sales of other investments
CF Total
Note
3
19, 3
2019
15
33
4
53
2018
88
171
0
259
During 2019 there were no material divestments. For further information regarding divestments during 2018 see
Note 3 Acquisitions and disposals and assets held for sale.
Consolidated financial statements
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
41
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
1 Significant accounting policies
1.1 Basic information
Fortum Corporation (the Company) is a Finnish public limited liability company domiciled in Espoo, Finland.
Fortum’s shares are traded on Nasdaq Helsinki.
The operations of Fortum Corporation and its subsidiaries (together the Fortum Group) focus on the Nordic
and Baltic countries, Russia and Poland. Fortum's activities cover generation and sale of electricity, generation,
distribution and sale of heat, and energy-related expert services. In addition Fortum has major shareholdings
including a 49.99% participation in Uniper SE.
These financial statements were approved by the Board of Directors on 5 February 2020.
1.2 Basis of preparation
The consolidated financial statements of Fortum Group for the year ended 31 December 2019 have been
prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC Interpretations as
adopted by the European Union. The consolidated financial statements also comply with Finnish accounting
principles and corporate legislation.
The consolidated financial statements have been prepared under the historical cost convention, except for
financial assets and financial liabilities (including derivative instruments) at fair value through profit and loss or
other comprehensive income.
The figures in the consolidated financial statements have been rounded and consequently the sum of individual
figures may deviate from the sum presented. Key figures have been calculated using exact figures.
1.2.1 Measures for performance
According to the ESMA Guidelines on Alternative Performance Measures, an Alternative Performance Measure
(APM) is understood as a financial measure of historical or future financial performance, financial position, or cash
flows, other than a financial measure defined or specified in the applicable financial reporting framework.
Fortum uses APMs in the financial target setting and forecasting, management follow-up of financial
performance of segments and the Group, as well as the allocation of resources in the Group's performance
management process. Items affecting comparability are excluded from Comparable operating profit and
Comparable EBITDA and disclosed separately in Fortum's consolidated income statement to support the
understandability of business performance when comparing results between periods.
Items classified as Items affecting comparability include accounting effects from valuation according to IFRS
not arising from the performance of business operations. Such items include fair valuation of financial derivatives
hedging future cash flows where hedge accounting is not applied according to IFRS 9, Financial Instruments; and
the effects from accounting for Fortum's share of the State Nuclear Waste Fund where the asset on the balance
sheet cannot exceed the related provision according to IFRIC 5, Rights to Interests Arising from Decommissioning,
Restoration and Environmental Rehabilitation Funds. Further, business performance of operations cannot be
compared from one period to another without adjusting for one-time items relating to capital gains, significant
impairments and transaction costs arising from acquisitions. Such items are also treated as Items affecting
comparability. According to IFRS 3, Business Combinations, transaction costs related to the acquistions of
subsidiary shares are recognised in the consolidated income statement. Such costs are presented in Capital gains
and other within Items affecting comparability. The main business performance measurements have been used
consistently since 2005.
Definitions are presented in the section4Definitions of key figures.
1.3 Principles for consolidation
These consolidated financial statements comprise of the parent company, subsidiaries, joint ventures and
associated companies.
Fortum Group was formed in 1998 by using the pooling-of-interests method for consolidating Fortum Power
and Heat Oy and Fortum Oil and Gas Oy (the latter demerged to Fortum Oil Oy and Fortum Heat and Gas Oy
1 May 2004). In 2005 Fortum Oil Oy (current Neste Oyj) was separated from Fortum by distributing 85% of its
shares to Fortum's shareholders and by selling the remaining 15%. This means that the acquisition cost of Fortum
Power and Heat Oy and Fortum Heat and Gas Oy has been eliminated against the share capital of the companies.
The difference has been entered as a decrease in shareholders’ equity.
1.3.1 Subsidiaries
Subsidiaries are defined as companies over which Fortum has control. Control exists when Fortum is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity.
Acquisition of subsidiaries are accounted for using the acquisition method. The consideration transferred is
measured as the aggregate of acquisition date fair values of assets given and liabilities incurred or assumed.
Identifiable assets acquired and liabilities assumed are measured initially at acquisition date fair values, irrespective
of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share
of identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of net
assets of the subsidiary acquired, the difference is recognised directly in the consolidated income statement.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are no longer
consolidated from the date that control ceases.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
42
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Intercompany transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the
asset transferred. Where necessary, subsidiaries’ accounting policies have been changed to ensure consistency
with the policies the Group has adopted.
The Fortum Group subsidiaries are disclosed in4Note 40 Subsidiaries by segment on 31 December 2019.
1.3.2 Associates
Associated companies are entities over which the Group has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. The Group’s interests in associated
companies are accounted for using the equity method of accounting. See4Note 19 Participations in associated
companies and joint ventures.
1.3.3 Joint ventures
Joint ventures are arrangements in which the Group has joint control. Joint ventures are accounted for using the
equity method of accounting. See4Note 19 Participations in associated companies and joint ventures.
1.3.4 Non-controlling interests
Non-controlling interests in subsidiaries are identified separately from the equity of the owners of the parent
company. Non-controlling interests are initially measured at the non-controlling interests’ proportionate share
of the fair value of the acquiree’s identifiable net assets. Subsequent to acquisition, the carrying amount of non-
controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share
of subsequent changes in equity. See4Note 26 Non-controlling interests.
1.4 Foreign currency transactions and translation
1.4.1 Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (the functional currency). The consolidated financial
statements are presented in euros, which is the Company’s functional and presentation currency.
1.4.2 Transactions and balances
Transactions denominated in foreign currencies are translated using the exchange rate at the date of transaction.
Receivables and liabilities denominated in foreign currencies outstanding on the balance sheet date are translated
using the balance sheet date exchange rate. Exchange rate differences are recognised in the consolidated income
statement. Net exchange differences relating to financing components are recognised in financial income or
expenses, except when deferred to equity as qualifying cash flow hedges. Translation differences on financial
assets through other comprehensive income are included in Other equity components in equity.
1.4.3 Group companies
Income statement and cash flow statement of subsidiaries, whose functional currencies are not euro, are
translated into euro using the average exchange rates; whereas the balance sheets of such subsidiaries are
translated into euro using the closing exchange rates on the balance sheet date. On consolidation, exchange rate
differences arising from the translation of the net investment in foreign entities, and of borrowings and other
currency instruments designated as hedges for such investments, are taken to equity. When a foreign operation is
sold, such exchange differences are recognised in the consolidated income statement as part of the gain or loss
on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at closing rate.
The balance sheet date rate is based on the exchange rate published by the European Central Bank for the
closing date. The annual average exchange rate is calculated as an average of each month's end rate from the
European Central Bank and the end rate of the previous year.
Key exchange rates in Fortum’s consolidated financial statements
Sweden
Norway
Poland
Russia
Currency
SEK
NOK
PLN
RUB
Average rate
2019
10.5572
9.8524
4.2992
72.7949
2018
10.2591
9.6432
4.2614
73.8035
Balance sheet date rate
31 Dec 2019
10.4468
9.8638
4.2568
69.9563
31 Dec 2018
10.2548
9.9483
4.3014
79.7153
1.4.4 Associates and joint ventures
The Group’s interests in associated companies and joint ventures are accounted for by the equity method.
Associates and joint ventures, whose measurement and reporting currencies are not euro, are translated into the
Group reporting currency using the same principles as for subsidiaries.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
43
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
1.5 Other significant accounting policies
Fortum describes other significant accounting policies in conjunction with the relevant disclosure information. The
table below lists significant accounting policies and the financial statement note where they are presented, as well
as the relevant IFRS standard.
1.6 New accounting standards, amendments and interpretations
Fortum adopted IFRS 16, Leases on 1 January 2019. Other new standards, amendments and interpretations
effective from 1 January 2019 did not have a material impact on Fortum's consolidated financial statements.
Note
6 Segment reporting
6, 23 Segment reporting and Trade and other receivables
18 Property, plant and equipment and Right-of-use Assets
11 Employee benefits and Board remuneration
28 Income taxes on the balance sheet
19 Participations in associated companies and joint ventures
19 Participations in associated companies and joint ventures
15, 20 Financial assets and liabilities by categories and
Other non-current assets
17 Intangible assets
18 Property, plant and equipment and Right-of-use Assets
34 Leases
22 Inventories
14 Earnings and dividend per share
31 Pension obligations
IFRS standard
IFRS 8, IFRS 15
IFRS 15
IAS 20
IFRS 2
IAS 12
IFRS 11, IAS 28, IFRS 12
IAS 28, IFRS 12
IAS 32, IAS 36, IFRS 9
IAS 38
IAS 16, IAS 36, IAS 40
IFRS 16
IAS 2
IAS 33
IAS 19
29 Nuclear related assets and liabilities
IFRIC 5
IFRS 16 Leases
Nature of change IFRS 16 Leases replaced IAS 17 Leases and specifies how to recognise, measure, present and disclose
Date of adoption
and transition
method
leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and
liabilities for most leases on the balance sheet as the distinction between operating and finance lease is
removed. For lessors, there are no significant changes.
Fortum adopted IFRS 16 on 1 January 2019 using the modified retrospective method. In accordance with
the IFRS 16 transition guidance, comparatives were not restated. Right-of-use assets were recognised
equal to the value of lease liabilities, adjusted by the amount of any prepaid or accrued lease payments
recognised on the balance sheet before initial application.
IFRS 16 allows certain practical expedients to simplify the initial adoption of IFRS 16, as well as the
ongoing application of IFRS 16. On adoption, Fortum adjusted the right-of-use assets by the amount of
onerous lease contract provisions recognised on the consolidated balance sheet in accordance with IAS
37, Provisions, Contingent Liabilities and Contingent Assets. On an ongoing basis, Fortum has applied the
exemption of not recognising short-term leases and leases of low value assets on the consolidated balance
sheet.
Accounting policy
Segment reporting
Revenue recognition
Government grants
Share-based payments
Income taxes
Joint arrangements
Investments in associates
Other shares and
participations
Intangible assets
Tangible assets
Leases
Inventories
Earnings per share
Pensions and similar
obligations
Decommissioning
obligations for the nuclear
plant and spent fuel
Provisions
Contingent liabilities
Financial instruments
30 Other provisions
36 Pledged assets and contingent liabilities
4, 15, 16 Financial risk management,
Financial assets and liabilities by categories and
Financial assets and liabilities by fair value hierarchy
IAS 37
IAS 37
IAS 32, IFRS 7, IFRS 9,
IFRS 13
IAS 7
IFRS 9
Liquid funds
Borrowings
24 Liquid funds
27 Interest-bearing liabilities
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
44
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Impact
The adoption of IFRS 16 had the following impact on the consolidated opening balance sheet:
Other new standards and interpretations
Consolidated balance sheet
EUR million
Property, plant and equipment
and right-of-use assets
Other non-current assets
Total assets
Interest-bearing liabilities
Other provisions
Trade and other payables
Total equity and liabilities
31 Dec 2018
(IAS 17)
Capitalisation
of leases
Other
1 Jan 2019
(IFRS 16)
9,981
139
22,409
6,093
91
1,058
22,409
96
96
99
99
-1
-1
-3
-1
-4
10,077
138
22,504
6,192
88
1,057
22,504
Reconciliation of lease liabilities and operating lease commitments on transition is presented below:
EUR million
Operating lease commitments 31 December 2018
Leases not yet commenced but to which Fortum is committed
Leases with variable payments not included in the measurement of lease liabilities
Exempted from recognition
Discounting effect
Other changes
Lease liabilities 1 January 2019
216
-41
-16
-12
-28
-20
99
The majority of right-of-use assets are office buildings and land areas. No new leases were identified as
leases according to IFRS 16.
The weighted average incremental borrowing rate applied to lease liabilities on 1 January 2019 was 1.9%.
See4Note 34 Leases for lease accounting policy and required ongoing disclosures.
Physical settlement of contracts to buy or sell a non-financial item (IFRS 9)
In March 2019, IFRIC published an agenda decision on Physical settlement of contracts to buy or sell a non-
financial item (IFRS 9). The decision clarifies how an entity applies IFRS 9 to fixed price contracts to buy or sell a
non-financial item that are fair valued through profit or loss even though the contract is physically settled. The
published agenda decision discusses the presentation of these contracts in the income statement and will not
have an impact to net profit.
For Fortum the amount of contracts within the scope of the agenda decision is limited. Majority of Fortum’s
physical contracts are used for own expected purchase, sale or usage requirements and therefore are not fair
valued (”own use exemption” under IFRS 9). Physical contracts to buy or sell a non-financial item are fair valued
through income statement when fair value option to off-set accounting mismatch is used, or when own use
exemption or hedge accounting cannot be applied. Effects are treated as changes in fair values of derivatives
hedging future cash flow and adjusted to sales and materials and services, EUR -31 million and EUR -15 million,
respectively, when calculating Fortum's alternative performance measures.
New standards, amendments and interpretations effective from 1 January 2020
Other new standards, amendments and interpretations issued by the balance sheet date and effective from
1 January 2020, or later, are not expected to have a material impact on Fortum's consolidated financial
statements.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
45
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
2 Critical accounting estimates and judgements
3 Acquisitions, disposals and assets held for sale
The preparation of IFRS consolidated financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities existing at the balance sheet date, as well as the reported amounts of revenues and expenses during the
reporting period.
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances. Actual results
and timing may differ from these estimates.
The table below lists the areas where management's accounting estimates and judgements are most critical to
reported results and financial position; as well as where to find more information on the areas of critical accounting
estimate and judgement.
ACCOUNTING POLICIES
ASSETS HELD FOR SALE
Assets or disposal groups are classified as assets held for sale if their carrying amounts will be recovered principally through
a sale transaction rather than through continuing use. For this to be the case, the asset, or the disposal group, must be
available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such
assets or disposal groups, and the sale must be highly probable. These assets, or in the case of disposal groups, assets and
liabilities, are presented separately on the consolidated balance sheet and measured at the lower of the carrying amount and
fair value less costs to sell. Assets classified as held for sale, or included in a disposal group classified as held for sale, are not
depreciated.
Critical accounting estimates and judgements
Judgement used in the purchase price allocation of the acquisition of
Uniper shares
Assigned values and useful lives determined for intangible assets and
property, plant and equipment acquired in a business combination
Assumptions related to impairment testing of property, plant and
equipment and intangible assets as well as associated companies and
joint ventures
Judgement used when assessing the nature of Fortum's interest in
its investees, when considering the classification of Fortum's joint
arrangements, as well as commitments arising from these arrangements
Assumptions and estimates regarding future tax consequences
Assumptions made to determine long-term cash flow forecasts of
estimated costs for provision related to nuclear production
Assumptions made when estimating provisions
Assumptions used to determine future pension obligations
Note
3 Acquisitions, disposals and assets held
for sale
17, 18 Intangible assets; Property, plant and
equipment and right-of-use assets
17, 18 Intangible assets; Property, plant and
equipment and right-of-use assets
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS:
UNIPER PURCHASE PRICE ALLOCATION
Preparing purchase price allocation requires management to make judgements when determining the fair value of the assets
and liabilities acquired. In Uniper transaction the purchase price allocation has been based on publicly available information
since Uniper is a listed company and a competitor of Fortum. Due to the unique circumstances, preparing the purchase price
allocation has required management judgement.
19 Participations in associated companies
and joint ventures
3.1 Acquisitions
28 Income taxes on the balance sheet
29 Nuclear related assets and liabilities
30 Other provisions
31 Pension obligations
EUR million
Gross investments in shares in subsidiary companies
Gross investments in shares in associated companies and joint ventures
Gross investments in other shares
Total
2019
13
73
20
106
2018
36
4,041
11
4,088
3.1.1 Uniper investment
In September 2017, Fortum signed a transaction agreement with E.ON under which E.ON had the right to decide
to tender its 46.65% shareholding in Uniper SE into Fortum’s public takeover offer. In November 2017, Fortum
launched a voluntary public takeover offer (“offer”) to all Uniper shareholders. On 8 January 2018, E.ON decided to
tender its shares to Fortum’s offer. In February 2018, Fortum announced that shareholders representing 47.12% of
the shares in Uniper had accepted the offer. The completion of Fortum’s offer was subject to several competition
and regulatory approvals. The final regulatory decisions were received 15 June 2018. In line with the Russian
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
46
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
regulatory approvals, Fortum is allowed to purchase additional shares up to 50% of shares and voting rights in
Uniper. The final settlement of the offer took place on 26 June 2018.
The shareholders who tendered their shares to Fortum’s offer were paid EUR 21.31 per share. The shareholders
also benefitted from Uniper’s dividend that was paid following the Annual General Meeting in early June 2018.
Fortum paid a total consideration of EUR 3.7 billion for all shares tendered. The total consideration was financed
with existing cash resources of EUR 1.95 billion and bridge loan financing from committed credit facilities of EUR
1.75 billion. On 26 June 2018, Fortum closed the Uniper offer and became the company's largest shareholder with
47.35% of the shares. Since then Fortum acquired additional shares in Uniper and held 49.99% of the shares at 31
December 2018. There has been no change in the ownership during 2019.
On 8 October 2019, Fortum entered into agreements to acquire all the shares held by funds managed by Elliott
Management Corporation and its affiliates (“Elliott”) and Knight Vinke Energy Advisors Limited and its affiliates
(“Knight Vinke“), a total in excess of 20.5%. Fortum will pay approximately EUR 2.3 billion for the combined
shareholding, corresponding to EUR 29.93 per share. Upon closing of the transactions, Fortum’s share in Uniper
will increase to more than 70.5% and the total investment in Uniper to approximately EUR 6.2 billion, representing
an average acquisition price of EUR 23.97 per share. On 30 December 2019, Fortum received regulatory clearance
in the United States for the transaction. Closing of the transaction is still subject to customary merger control
clearances in Russia, and is expected by the end of the first quarter of 2020. Fortum will fully consolidate Uniper
as a subsidiary in its financial statements from closing of the transaction.
Uniper is an international energy company with activities in Europe, Russia and other markets worldwide.
Uniper’s businesses are well aligned with Fortum's core competencies. The company operates power plants in
Europe and Russia, with a total installed generation capacity of around 36 gigawatts, and it runs extensive energy
trading operations as well as maintains gas storage facilities in Germany, Austria and the UK.
In 2018, Uniper's sales totaled EUR 78.2 billion and adjusted EBITDA was EUR 1.5 billion. Uniper employs
around 12,000 people and had total assets of EUR 51 billion at the end of 2018. Uniper is listed on the Frankfurt
stock exchange.
Fortum consolidates Uniper as an associated company from 30 June 2018 with three months time lag. For
additional information see4Note 19 Participations in associated companies and joint ventures.
The purchase price allocation was finalised during Q2/2019. Uniper's balance sheet at 30 June 2018 was used
as the starting point for the purchase price allocation, however a fair value adjustment of EUR 613 million has
been made for the acquired assets and liabilities. The total acquisition cost including direct costs relating to the
acquisition, EUR 3,968 million, is reported in the 'Participations in associates and joint ventures'.
Fortum's share of the goodwill on Uniper's balance sheet, EUR 930 million, is derecognised as it is not an
identifiable asset according to IFRS. Potential future impairments of goodwill (existing at 30 June 2018) booked by
Uniper will thereby be reversed to Fortum's share of profits of associates and joint ventures.
Fair value adjustment, EUR 613 million, relates mainly to political and regulatory risks that are reflected in the
fair value of certain generation and production assets. The fair value adjustment will be reversed to Share of
profits of associates and joint ventures over a period of 20 years from 1 January 2019, approximately EUR 30
million on annual basis. If Uniper reports negative impacts relating to these generation and production assets,
Fortum will assess potential need to use this fair value adjustment to reverse these negative impacts. The
remaining fair value adjustment post tax at 31 December 2019 amounted to EUR 582 million.
Preparing purchase price allocation requires management to make judgements when determining the fair
value of the assets and liabilities acquired. In Uniper transaction the purchase price allocation has been based
on publicly available information since Uniper is a listed company and a competitor of Fortum. Due to the unique
circumstances, preparing the purchase price allocation has required management judgement.
For information about Fortum's share of profit from Uniper, see4Note 19 Participations in associated
companies and joint ventures. See also4Note 35 Capital and other commitments.
3.1.2 Acquisitions of subsidiary companies 2019
In May 2019, Fortum announced the restructuring of Fortum’s and Skellefteå Kraft’s ownership in the two jointly
owned Swedish wind parks Solberg and Blaiken. Through an asset swap arrangement, Fortum became the
sole owner of the 76-MW Solberg wind park and Skellefteå Kraft the sole owner of the 248-MW Blaiken wind
park. Both the investments in Solberg and divestment of Blaiken includes shares and assets. The asset swap
arrangement was finalised in August 2019 and had only a minor impact on Fortum’s cash flow and results.
Uniper purchase price allocation
Total acquisition cost
Acquired net assets at 30 June 2018
Fortum's share of goodwill on the balance sheet of Uniper at 30 June 2018
Fair value adjustment at 30 June 2018
Fair value of the acquired net assets at 30 June 2018
EUR million
3,968
5,512
-930
-613
3,968
3.1.3 Acquisitions of subsidiary companies 2018
In August 2018, Fortum acquired all shares of three independent Latvian heat producers SIA BK Enerģija, SIA
Energy & Communication and SIA Sprino as well as the shares of SIA Lake Development. The acquired production
companies will continue to deliver heat to Daugavpil's municipal district heating company PAS Daugavpils
Siltumtikli.
In October 2018, Fortum acquired the metal recycling business in Fincumet Group. In the transaction Fortum
acquired shares in three companies: Fincumet Oy, Niemen Romukauppa Oy and NJS-Patentti Oy.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
47
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
3.1.4 Other share transactions
In April 2017, Fortum and RUSNANO, a Russian state-owned development company, signed a 50/50 investment
partnership in order to secure the possibility of a Russian Capacity Supply Agreement (CSA) wind portfolio in
Russia. The wind investment fund 50/50 owned by Fortum and RUSNANO was awarded 1,000 MW wind capacity
in Russian wind CSA auction in June 2017. The investments decisions will be made on a case-by-case basis
within the total mandate of the wind investment fund. Fortum’s equity stake in the wind investment fund totals a
maximum of RUB 15 billion (EUR 214 million). The amount is invested over time (within approximately 5 years) as it
is subject to positive investment decisions. During 2019 Fortum invested EUR 66 million (2018: 61) in the fund.
3.2 Disposals
EUR million
Gross divestments of shares in subsidiary companies
Gross divestments of shares in associated companies and joint ventures
Gross divestments of other investments
Total
3.2.1 Disposals of subsidiary companies
During 2019 there were no material divestments.
2019
15
10
4
30
2018
147
160
0
306
On 20 December 2019, Fortum and Credit Suisse Energy Infrastructure Partners (CSEIP) signed an agreement
whereby funds advised by CSEIP are to acquire an 80% stake in Fortum’s Nordic wind portfolio. The total
consideration of the divestment of the 80% stake on a debt- and cash-free basis is expected to be approximately
EUR 250 million (including Sørfjord wind park which is still under construction), of which EUR 170 million is related
to the first quarter of 2020. The transaction is subject to regulatory approvals in the EU and is expected to close
in the first quarter of 2020. The sale will have a minor positive effect on the Generation segment’s first-quarter
2020 comparable operating profit.
On 20 December 2019, Fortum signed an agreement to sell its district heating business in Joensuu, Finland to
Savon Voima Oyj. The total consideration on a debt- and cash-free basis was approximately EUR 530 million and
the cash was received at the completion of the divestment on 10 January 2020. See4Note 39 Events after the
balance sheet date for additional information.
On 31 August 2018, Fortum sold a 54% share of its solar power company operating four solar power plants
in India to UK Climate Investments (40%) and Elite Alfred Berg (14%). In line with Fortum’s ‘capital recycling’
business model, the result from the transaction, EUR 26 million, is recognised in Other operations’ Comparable
operating profit. The total consideration from the divestment on a debt- and cash-free basis, including the effect
of deconsolidating Fortum's minority part of the net debt, is EUR 147 million. In April 2019, Elite Alfred Berg used
their option to buy an additional 2% from Fortum.
Divestments of shares in subsidiaries - Impact on financial position
EUR million
Gross divestments of shares in subsidiary companies
Intangible assets and property, plant and equipment
Other non-current and current assets
Liquid funds
Interest-bearing loans
Other liabilities and provisions
Net assets divested
Reclassified to participations in associates and joint ventures
Result from transaction
2019
15
9
1
0
0
-1
9
-
7
2018
147
138
7
12
-108
-4
45
20
26
3.2.2 Other disposals
In August 2019, the restructuring of Fortum’s and Skellefteå Kraft’s ownership in the two jointly owned Swedish
wind parks Solberg and Blaiken was finalised. See4Note 3.1.1 Aquisitions of subsidiary companies 2019 for
additional information.
In June 2018, Fortum sold its 10% ownership in Hafslund Produksjon Holding AS to Svartisen Holding AS, a
Norwegian company owned by the Finnish energy companies Vantaan Energia Oy, Oy Turku Energia – Åbo Energi
Ab and Oulun Seudun Sähkö. As part of the restructuring of the Hafslund ownership in 2017, Fortum acquired the
ownership in Hafslund Produksjon. The sales price for the shares was EUR 160 million and Fortum booked a sales
gain of EUR 77 million in the Generation segment 2018 results.
3.3 Assets held for sale
At 31 December 2019 assets relating to the disposal of Fortum's share in the Nordic wind portfolio, excluding the
Sørfjord wind park which is still under construction, (Generation segment) and assets relating to the disposal of the
district heating business in Joensuu, Finland (City Solutions segment), have been classified as assets held for sale.
EUR million
Assets held for sale
Intangible assets, property, plant and equipment and right-of-use assets
Other non-current and current assets
Liquid funds
Total
Liabilities related to assets held for sale
Lease liabilities
Deferred tax liabilities
Other liabilities and provisions
Total
31 Dec
2019
290
15
2
307
6
20
26
52
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
48
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
4 Financial risk management
Fortum's risk management framework, objectives, organisation and processes as well as a description of strategic,
sustainability, financial and operational risks can be found in the Risk management section of the Operating and
financial review (OFR).
In Russia, electricity prices are the main sources of market risk. The electricity price is highly correlated with
the gas price. Exposure is partly mitigated through regulated fixed-price bilateral agreements, but the majority of
electricity sales is exposed to spot price risk.
4.1 Commodity market and fuel risks
Fortum’s business is exposed to fluctuations in prices and volume of commodities used in the production and sales
of energy products. The main exposure is toward electricity prices and volumes, prices of emissions and prices and
availability of fuels. Fortum hedges its exposure to commodity market risks in accordance with approved Hedging
Guidelines and Mandates.
4.2 Electricity price and volume risk
Electricity price risk in the Nordic region is mainly hedged by entering into electricity derivatives contracts on
Nasdaq Commodities exchange. The main objective of hedging is to reduce the effect of electricity price volatility
on earnings. Hedging strategies cover several years in the short to medium term and are executed within
approved mandates. These hedging strategies are continuously evaluated as electricity and other commodity
market prices, the hydrological balance and other relevant parameters change. Hedging of the Generation
segment’s power sales is performed in EUR on a Nordic level covering both Finland and Sweden. The currency
component of these hedges in the Swedish entity is currently not hedged.
Fortum's sensitivity to the Nordic electricity market price is dependent on the hedge level for a given time
period. As per 31 December 2019, approximately 75% of the Generation segment's estimated Nordic power sales
volume was hedged for the calendar year 2020 with a price 34 EUR/MWh and approximately 40% for the calendar
year 2021 with a price 33 EUR/MWh. Assuming no changes in production volumes, hedge ratios or cost structure
a 1 EUR/MWh change in the market price of electricity would affect Fortum's 2020 comparable operating profit
by approximately EUR 11 million and for 2021 by approximately EUR 27 million. The volume used in this sensitivity
analysis is 45 TWh which includes the electricity production sold to the spot market in Sweden and Finland in the
Generation segment without minority owner's shares of electricity or other pass-through sales, and excluding the
volume of Fortum's coal-condensing generation. This volume is heavily dependent on price level, the hydrological
situation, the length of annual maintenance periods and availability of power plants. Sensitivity is calculated only
for electricity market price movements. Hydrological conditions, temperature, wind, CO2 allowance prices, fuel
prices, economic development, transmission capacity and the import/export situation all affect the electricity price
on short-term basis and effects of individual factors cannot be separated.
4.2.1 Sensitivity arising from financial instruments according to IFRS 7
Sensitivity analysis shows the sensitivity arising from financial electricity derivatives as defined in IFRS 7. These
derivatives are used for hedging purposes within Fortum. Sensitivities are calculated based on 31 December 2019
(31 December 2018) position. Positions are actively managed in the day-to-day business operations and therefore
the sensitivities vary from time to time. Sensitivity analysis includes only the market risks arising from derivatives
i.e. the underlying physical electricity sales and purchases are not included. Sensitivity is calculated with the
assumption that electricity forward and futures quotations in Nasdaq Commodities and in EEX would change 1
EUR/MWh for the period Fortum has derivatives.
Sensitivity according to IFRS 7
+/- 1 EUR/MWh change in electricity forward and futures quotations, EUR million
Effect on Profit before income tax
Effect on Equity
Effect
-/+
-/+
2019
4
49
2018
1
56
4.2.2 Electricity derivatives
The tables below disclose the Group's electricity derivatives used mainly for hedging electricity price risk. The fair
values represent the values disclosed on the balance sheet.
See also4Note 15 Financial assets and liabilities by categories for accounting principles and basis for fair value
estimations and4Note 8 Fair value changes of derivatives and underlying items in income statement.
Electricity derivatives by instrument 2019
Electricity derivatives
Total
Netting against electricity
exchanges 1)
Total
Volume, TWh
Fair value, EUR million
Under 1 year
31
1–5 years Over 5 years
0
22
Total
53
Positive
467
Negative
571
-372
95
-372
199
Net
-105
0
-105
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
49
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Electricity derivatives by instrument 2018
Electricity derivatives
Total
Netting against electricity
exchanges 1)
Total
Volume, TWh
Fair value, EUR million
Under 1 year
29
1–5 years Over 5 years
0
26
Total
55
Positive
848
Negative
1,712
-701
147
-701
1,011
Net
-864
0
-864
1) Receivables and liabilities against electricity exchanges arising from standard derivative contracts with same delivery period are netted.
Maturity analysis of commodity derivatives
Amounts in the table are fair values.
EUR million
Electricity derivatives, liabilities
Electricity derivatives, assets
Other commodity derivatives, liabilities
Other commodity derivatives, assets
Under
1 year
147
82
52
34
2019
1–5
years
52
13
11
10
Over
5 years
0
0
0
0
Under
1 year
706
94
77
116
Total
199
95
63
44
2018
1–5
years
305
53
13
24
Over
5 years
0
0
0
0
Total
1,011
147
90
140
4.3 Fuel price risks
Exposure to fuel prices is limited due to Fortum's flexible generation capacity, which allows for switching between
different fuels according to prevailing market conditions. The remaining exposure to fuel price risk is mitigated
through fixed-price physical delivery contracts or derivative contracts, such as coal and gas derivatives. These
derivatives are included in the table above as part of "Other commodity derivatives".
4.4 Emission allowance price and volume risk
Part of Fortum's power and heat generation is subject to requirements of emission trading schemes. Fortum
hedges its exposure to emission prices and volumes through the use of CO2 futures. Most of these CO2 futures are
own use contracts valued at cost and some are treated as derivatives in the accounts included in the table above
as part of "Other commodity derivatives".
4.5 Liquidity and refinancing risk
Fortum's business is capital intensive and the Group has a diversified loan portfolio mainly consisting of long-
term financing denominated in EUR. Long-term financing is primarily raised by issuing bonds under Fortum’s Euro
Medium Term Note programme as well as through bilateral and syndicated loan facilities from a variety of different
financial institutions.
Financing is primarily raised on parent company level and distributed internally through various internal
financing arrangements. For example Fortum’s Russian operations are financed via intra group internal long-term
RUB denominated loans. The internal RUB loan receivables are hedged via external forward contracts offsetting
the currency exposure for the internal lender. On 31 December 2019, 89% (2018: 95%) of the Group’s total
external financing was raised by the parent company Fortum Corporation.
On 31 December 2019, the total interest-bearing debt was EUR 6,688 million (2018: 6,093). Interest-bearing net debt
was EUR 5,260 million (2018: 5,509) including EUR 4 million relating to assets held for sale at 31 December 2019.
Fortum manages liquidity and refinancing risks through a combination of cash positions and committed credit
facility agreements with its core banks. The Group shall at all times have access to cash, marketable securities and
unused committed credit facilities including overdrafts, to cover all loans maturing within the next twelve-month
period. However, cash/marketable securities and unused committed credit facilities shall always amount to at least
EUR 500 million.
On 31 December 2019, loan maturities for the coming twelve-month period amounted to EUR 551 million
(2018: 1,086). Liquid funds amounted to EUR 1,433 million (2018: 584).
In the fourth quarter of 2019, Fortum signed new committed credit facilities of an additional EUR 8.3 billion for
the purchase of Uniper shares announced on 8 October 2019. At the end of December 2019, the committed and
undrawn credit facilities amounted to EUR 10.1 billion (Dec 31 2018: 1.8). On 7 January 2020, Fortum cancelled
EUR 3 billion of these new committed credit facilities.
Maturity of loans
EUR million
2020
2021
2022
2023
2024
2025 and later
Total
For more information on loans, see4Note 27 Interest-bearing liabilities.
2019
551
526
1,036
1,093
303
3,071
6,580
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
50
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Maturity of undiscounted lease liabilities
EUR million
Due within a year
Due after one year and within five years
Due after five years
Total
For more information on leases, see4Note 34 Leases.
Liquid funds, major credit lines and debt programmes 2019
EUR million
Liquid funds
Cash and cash equivalents
Deposits and securities over 3 months
Total
of which in Russia (PAO Fortum)
Committed credit lines
EUR 1,750 million syndicated credit facility
EUR 8,300 million syndicated credit facility 1)
Bilateral overdraft facilities
Total
Debt programmes (uncommitted)
Fortum Corporation, CP programme EUR 1,000 million
Fortum Corporation, CP programme SEK 10,000 million
Fortum Corporation, EMTN programme EUR 8,000 million
Total
2019
20
52
65
137
Total
facility
Drawn
amount
Available
amount
1,357
76
1,433
201
1,750
8,300
50
10,100
990
957
3,804
5,751
1,750
8,300
50
10,100
1,000
957
8,000
9,957
-
-
-
0
10
0
4,196
4,206
1) In the fourth quarter of 2019, Fortum signed new committed credit facilities of an additional EUR 8.3 billion for the purchase of Uniper shares
announced on 8 October 2019. On 7 January 2020, Fortum cancelled EUR 3.0 billion of these new committed credit facilities.
Liquid funds, major credit lines and debt programmes 2018
EUR million
Liquid funds
Cash and cash equivalents
Deposits and securities over 3 months
Total
of which in Russia (PAO Fortum)
Committed credit lines
EUR 1,750 million syndicated credit facility
Bilateral overdraft facilities
Total
Debt programmes (uncommitted)
Fortum Corporation, CP programme EUR 500 million
Fortum Corporation, CP programme SEK 5,000 million
Fortum Corporation, EMTN programme EUR 8,000 million
Total
Total
facility
Drawn
amount
Available
amount
556
29
584
317
1,750
50
1,800
820
948
5,552
7,320
1,750
50
1,800
1,000
975
8,000
9,975
-
-
0
180
27
2,448
2,655
Liquid funds amounted to EUR 1,433 million (2018: 584), including PAO Fortum's cash and bank deposits
amounting to EUR 201 million (2018: 317).
See also4Note 24 Liquid funds.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
51
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Maturity analysis of interest-bearing liabilities and derivatives
Amounts disclosed below are non-discounted expected cash flows (future interest payments and amortisations) of
interest-bearing liabilities and interest rate and currency derivatives excluding leases.
EUR million
Interest-bearing liabilities
Interest rate and currency
derivatives liabilities
Interest rate and currency
derivatives receivables
Total
2019
2018
Under
1 year
661
1–5
years
3,207
Over
5 years
3,333
Total
7,201
Under
1 year
1,212
1–5
years
3,616
Over
5 years
1,792
Total
6,620
4,163
807
91
5,061
3,665
682
16
4,363
-4,117
707
-821
3,193
-99
3,325
-5,037
7,225
-3,736
1,141
-726
3,572
-20
1,788
-4,482
6,501
On the balance sheet date, the average rate of outstanding currency and interest rate derivatives done in SEK and
RUB was 10.534 and 71.230, respectively.
4.6 Interest rate risk and currency risk
4.6.1 Interest rate risk
Fortum risk mandates state that the average duration of the net debt portfolio shall always be kept within a range
of 12 and 36 months and that the flow risk i.e. changes in interest rates shall not affect the net interest payments
of the Group by more than EUR 50 million for the next rolling 12-month period. Within these mandates, strategies
are evaluated and developed in order to find an optimal balance between risk and financing cost.
On 31 December 2019, the average duration of the net debt portfolio (including derivatives) was 2.6 years
(2018: 1.6). Approximately 65% (2018: 79%) of the debt portfolio was on a floating rate basis or fixed rate loans
maturing within the next 12-month period. The flow risk, measured as the difference between the base case net
interest cost estimate and the worst-case scenario estimate for Fortum's net debt portfolio for the coming 12
months, was EUR 10 million (2018: 13).
The average interest rate for the portfolio consisting mainly of EUR loans and including derivatives was 1.6% at
the balance sheet date (2018: 1.7%). Part of the external loans EUR 787 million (2018: 686) have been swapped
to RUB and the average interest cost for these loans, including cost for hedging the RUB, was 7.8% at the balance
sheet date (2018: 8.3%). The average interest rate on loans and derivatives on balance sheet date, 31 December
2019, was 2.3% (2018: 2.4%). Average interest rate on loans and derivatives for 2019 was 2.7% (2018: 3.0%).
The average interest rate on deposits and securities excluding Russian deposits on 31 December 2019 was
-0.13% (2018: -0.11%). Liquid funds held by PAO Fortum amounted to EUR 201 million (2018: 317) and the
average interest rate for this portfolio was 3.9% at the balance sheet date.
4.6.2 Currency risk
Fortum's policy is to hedge major transaction exposures on a local level in the reporting currency of each legal
entity in order to avoid exchange differences in the profit and loss statement. These exposures are mainly hedged
with forward contracts. An exception is the Generation segment’s hedging of power sales in Sweden where the
currency component is currently not hedged.
Translation exposures in the Fortum Group are generally not hedged as the majority of these assets are
considered to be long-term strategic holdings. In Fortum this means largely entities operating in Sweden, Russia,
Norway and Poland, whose base currency is not euro.
The currency risk relating to transaction exposures is measured using absolute EUR equivalent amounts from
each currency. The mandate for the open transaction exposure is EUR 50 million. On 31 December 2019 the open
transaction exposure, excluding Generation segment's EUR/SEK exposure, was EUR 1 million (2018: 6). The open
translation exposure on 31 December 2019 was EUR 8,292 million (2018: 7,723).
Had EUR been 5% weaker/stronger on closing date, then the impact from transaction exposure to profit and
loss statement would have been EUR +0.04/-0.04 million (2018: +0.3/-0.3 million) and impact from translation
exposure to group's equity EUR +414/-414 million (2018: +386/-386 million).
Group Treasury’s transaction exposure
EUR million
RUB
SEK
PLN
NOK
INR
USD
Other
Total
2019
2018
Net
Position
570
1,439
439
245
132
-147
-4
2,674
Hedge
-570
-1,440
-439
-244
-132
147
5
-2,673
Open
0
-1
1
0
0
0
1
1
Net
Position
541
969
366
296
93
-117
-16
2,132
Hedge
-541
-969
-365
-290
-93
116
16
-2,126
Open
0
0
0
6
0
0
0
6
Transaction exposure is defined as already contracted or forecasted foreign exchange dependent items and
cash flows. Transaction exposure is divided into balance sheet exposure and cash flow exposure. Balance sheet
exposure reflects currency denominated assets and liabilities for example loans, deposits and accounts receivable/
payable in currencies other than the company’s base currency. Cash flow exposure reflects future forecasted
or contracted currency flows in foreign currency deriving from business activities such as sales, purchases or
investments. Net foreign exchange differences from transaction exposure are entered under financial income
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
52
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
or expense when related to financial items or when related to accounts receivable/payable entered under items
included in operating profit. Conversion differences related to qualifying cash flow hedges are deferred to equity.
Fortum’s policy is to hedge balance sheet exposures in order to avoid exchange rate differences in the income
statement. The Group’s balance sheet exposure mainly relates to financing of non-euro subsidiaries and the fact
that the Group’s main external financing currency is EUR. For derivatives hedging this balance exposure Fortum
does not apply hedge accounting, because they have a natural hedge in the income statement. Realized cash
flows from derivatives however cause impact in group’s consolidated cash flow statement. In 2019 positive effect
was 14 million (2018: 231).
Contracted cash flow exposures shall be hedged to reduce volatility in future cash flows. These hedges
normally consist of currency derivative contracts, which are matched against the underlying future cash flow
according to maturity. Fortum has currency cash flow hedges both with and without hedge accounting treatment
under IFRS. Those currency cash flow hedges, which do not qualify for hedge accounting are mainly hedging
electricity derivatives. Unrealised hedges create volatility in the operating profit.
Interest rate and currency derivatives by instrument 2019
EUR million
Forward foreign exchange
contracts
Interest rate swaps
Interest rate and currency
swaps
Total
Of which long-term
Short-term
Notional amount
Remaining lifetimes
1–5
years
Over
5 years
Under 1 year
Fair value
Total
Positive
Negative
3,925
-
104
4,029
359
2,715
263
3,337
-
1,525
-
1,525
4,284
4,240
367
8,891
11
153
8
172
156
16
57
53
17
127
74
53
Interest rate and currency derivatives by instrument 2018
Group translation exposure
EUR million
RUB
SEK
NOK
PLN
Other
Total
Net
Investment
2,612
3,964
1,662
266
154
8,656
2019
Hedge
-222
-144
-
-
-
-365
Open
2,391
3,821
1,662
266
154
8,292
Net
Investment
2,364
3,704
1,625
291
128
8,111
2018
Hedge
-144
-244
-
-
-
-388
Open
2,220
3,460
1,625
291
128
7,723
EUR million
Forward foreign exchange
contracts
Interest rate swaps
Interest rate and currency
swaps
Total
Of which long-term
Short-term
Notional amount
Remaining lifetimes
1–5
years
Over
5 years
Under 1 year
Fair value
Total
Positive
Negative
3,240
1,515
383
5,137
310
2,242
265
2,817
-
225
-
225
3,550
3,982
648
8,179
43
159
66
268
152
116
20
70
-
90
44
46
Net
-45
100
-10
45
82
-37
Net
23
88
66
178
108
70
Translation exposure position includes net investments in foreign subsidiaries and associated companies. Exchange
differences arising from the translation of the net investment in foreign entities are taken to equity. The net effect
of exchange differences on equity attributable to equity holders mainly from RUB and SEK was EUR 253 million
in 2019 (2018: -518). Part of this translation exposure has been hedged and the foreign currency hedge result
amounted to EUR -14 million in 2019 (2018: 24).
4.7 Credit risk
Fortum is exposed to counterparty risk whenever there is a contractual arrangement with an external counterparty.
Credit risk exposures relating to financial derivative instruments are often volatile. The majority of commodity
derivatives are exchange-traded and cleared through clearing houses such as Nasdaq Clearing AB or through
clearing banks. Derivatives contracts are also entered into directly with external counterparties and such contracts
are limited to high-credit-quality counterparties active on the financial or commodity markets. Currency and
interest rate derivative counterparties are limited to investment grade banks and financial institutions. ISDA Master
agreements, which include netting clauses and in some cases Credit Support Annex agreements, are in place
with most of these counterparties. Commodity derivative counterparties are limited to those considered to be
creditworthy. Master agreements, such as ISDA, FEMA and EFET, which include netting clauses, are in place with
the majority of the counterparties.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
53
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Due to the financing needs and management of liquidity, Fortum has counterparty credit exposure toward a
number of banks and financial institutions. The majority of the exposure is toward Fortum's key relationship banks,
which are highly creditworthy institutions. Fortum also has exposure to the Russian financial sector in terms
of deposits with financial institutions as well as to banks that provide guarantees for suppliers and contracting
parties. Deposits in Russia have been concentrated to the most creditworthy state-owned or controlled banks. The
creditworthiness of banks and financial institutions is monitored so that mitigating actions can be taken as ratings
or the financial situation changes. The development of economic sanctions against Russia is followed as part of
the monitoring process.
Credit risk relating to customers is spread across a wide range of industrial counterparties, small businesses and
private individuals over a range of geographic regions. The majority of exposure is to the Nordic market, Poland
and Russia. The credit risk in the electricity and heat sales business in Russia is higher than in the Nordic market.
4.7.1 Credit quality of major financial assets
Fortum recognises the loss allowance for expected credit losses on financial assets classified to amortised cost
category at each reporting date. Impairment requirements are based on an expected credit loss (ECL) model
which replaced the incurred loss model of IAS 39. The impairment model is applied to financial assets such as
trade receivables, loan receivables and restricted cash given as collateral for commodity exchanges. Expected
credit loss is calculated on an individual contract basis for deposits, commercial papers and loan receivables.
No impairment loss is recognised on cash in bank accounts. The expected credit losses according to this model
are based on assessment of the individual counterparty's risk of default. The risk of default is evaluated at each
reporting date based on credit ratings to determine if credit risk has increased significantly. A change of credit
rating from investment to non-investment grade constitues a significant increase in credit risk. If the credit risk on
the financial asset has not increased significantly since the initial recognition, loss allowance equals to 12 month
ECL. If the credit risk on the financial asset has increased significantly since initial recognition, loss allowance
equals to the lifetime expected credit losses. There have been no significant increases in credit risk during 2019.
The loss allowance for deposits, commercial papers and loan receivables totalled EUR 1 million on 31 December
2019. Amounts for interest-bearing receivables including bank deposits and derivative financial instruments
recognised as assets are presented by counterparties.
Credit quality of major financial assets
EUR million
Investment grade receivables
Deposits, commercial papers and cash in bank accounts
Fair values of interest rate and currency derivatives
Fair values of electricity and other commodity derivatives
Total investment grade receivables
Energy exchange receivables
Fair value of derivatives on Nasdaq Commodities
Fair value of derivatives on European Energy Exchange AG
Fair value of derivatives on the Polish Power Exchange
Total energy exchange receivables
Associates and joint venture receivables
Loan receivables
Fair values of electricity and other commodity derivatives
Total associates and joint venture receivables
Other receivables
Investments in commercial papers
Russian deposits with non-investment grade banks
Restricted cash mainly given as collateral for commodity exchanges
Receivable from SIBUR related to divested shares of OOO Tobolsk CHP
Loan and other interest bearing receivables
Fair values of electricity and other commodity derivatives
Total other receivables
Total
2019
2018
Carrying
amount
of which
past due
Carrying
amount
of which
past due
1,099
172
4
1,275
54
0
4
58
625
4
629
156
60
65
57
6
72
416
2,378
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
168
268
58
494
76
4
75
155
641
22
663
46
260
379
70
2
53
810
2,122
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
54
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Deposits and securities
The following tables present bank deposits, commercial papers and fair values of derivatives by rating classes.
Interest rate and currency derivatives
EUR million
Counterparties with external credit rating from Standard & Poor’s,
Fitch and/or Moody’s Investment grade ratings
AAA
AA+/AA/AA-
A+/A/A-
BBB+/BBB/BBB-
Total investment grade ratings
Total associates and joint ventures
Counterparties without external credit rating from Standard &
Poor’s, Fitch or Moody’s
Total
2019
2018
Netted
Receivables
amount 1) Receivables
Netted
amount 1)
-
14
137
20
172
-
-
172
-
0
15
10
24
-
-
24
-
46
180
42
268
-
-
268
-
26
59
24
109
-
-
109
1) The netted amount includes the cash received in accordance with Credit Support Annex agreements EUR 65 million (2018: 75).
EUR million
Counterparties with external credit rating from Standard & Poor's, Fitch and/or Moody's
Investment grade ratings
AAA
AA+/AA/AA-
A+/A/A-
BBB+/BBB/BBB-
Total investment grade ratings
Non-investment grade ratings
BB+/BB/BB-
B+/B/B-
Below B-
Total non-investment grade ratings
Counterparties without external credit rating from Standard & Poor's, Fitch or Moody's
Government or municipality
Fortum Rating 5 - Lowest risk
Fortum Rating 4 - Low risk
Fortum Rating 3 - Normal risk
Fortum Rating 2 - High risk
Fortum Rating 1 - Highest risk
No rating
Total non-rated counterparties
2019
2018
-
198
545
356
1,099
60
-
-
60
-
156
-
-
-
-
-
156
-
62
30
76
168
260
-
-
260
-
46
-
-
-
-
-
46
Total
1,315
474
In addition, cash in other bank accounts totalled EUR 118 million on 31 December 2019 (2018: 110).
See4Note 24 Liquid funds.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
55
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Electricity, coal, gas and oil derivatives and CO2 emission
allowances treated as derivatives
EUR million
Counterparties with external credit rating from Standard & Poor’s,
Fitch and/or Moody’s Investment grade ratings
AAA
AA+/AA/AA-
A+/A/A-
BBB+/BBB/BBB-
Total investment grade ratings
Non-investment grade ratings
BB+/BB/BB-
B+/B/B-
Below B-
Total non-investment grade ratings
Total associates and joint ventures
Counterparties without external credit rating from Standard &
Poor’s, Fitch or Moody’s
Government or municipality
Fortum Rating 5 - Lowest risk
Fortum Rating 4 - Low risk
Fortum Rating 3 - Normal risk
Fortum Rating 2 - High risk
Fortum Rating 1 - Highest risk
No rating
Total non-rated counterparties
Total
2019
2018
Receivables
Netted
amount Receivables
Netted
amount
-
1
3
0
4
0
2
-
2
4
2
21
9
13
0
0
24
69
79
-
1
1
0
2
0
0
-
0
0
0
19
3
11
0
0
18
51
53
-
-
56
2
58
0
-
-
0
22
12
12
13
3
3
-
10
53
133
-
-
60
2
62
0
-
-
0
0
0
1
5
1
3
-
3
13
75
For derivatives, the receivable is the sum of the positive fair values, i.e. the gross amount. Netted amount includes
negative fair values where a valid netting agreement is in place with the counterparty. When the netted amount is
less than zero, it is not included. In cases where a parent company guarantee is in place, the exposure is shown on
the issuer of the guarantee.
All counterparties for currency and interest rate derivatives and the majority of counterparties for bank deposits
have an external rating from Standard & Poor's, Fitch and/or Moody's credit agencies. The above rating scale is for
Standard & Poor's and Fitch rating categories. For those counterparties only rated by Moody's, the rating has been
translated to the equivalent Standard and Poor's and Fitch rating category. For counterparties rated by more than
one rating agency, the lowest of the ratings is used.
In the commodity derivatives and commercial paper market, there are a number of counterparties not rated
by Standard & Poor's, Fitch or Moody's. For these counterparties, Fortum assigns an internal rating. The internal
rating is based on external credit ratings from other credit agencies. The rating from Bisnode is used for Nordic
counterparties and for other counterparties the rating from Dun & Bradstreet is used. Governments and municipal
companies are typically not rated, and are shown separately. This rating category does not include companies
owned by governments or municipalities. Counterparties that have not been assigned a rating by the above listed
credit agencies and small consumers are in the "No rating" category.
5 Capital risk management
Fortum updated its strategy and reconfirmed the dividend policy and long-term financial targets in November
2018. The update was a continuation of the strategy execution towards Fortum’s vision "For a cleaner world". The
strategy aims at strengthening Fortum’s competitiveness and ensuring a benchmark portfolio for the 2020's.
Fortum has undergone a remarkable transformation in recent years, starting with the exit from the regulated
power distribution business. This has enabled stronger focus on power and heat generation, through the strategic
investment in Uniper, and growth in sustainable bio and waste-based combined heat and power generation.
Furthermore, Fortum has created a solid base in solar and wind power, expanded in the consumer sector, and into
the recycling and waste business.
Pursuing operational excellence and increased flexibility as well as ensuring value creation from investments and
portfolio optimization are the key priorities. Benchmark performance is essential for long-term competitiveness.
For the next 2–3 years, Fortum prioritises profit creation from the current business portfolio. This will be achieved
through operational excellence and increased flexibility. All sources of flexibility, both flexible generation assets
and the demand response of large customers and consumers, will be needed to balance the high degree of
volatile renewable generation. Operational excellence and increased flexibility will contribute to improving Fortum's
financial performance and cash flows to create additional financial headroom. In addition, Fortum will continue to
prioritise and scrutinize capital expenditure. Through these measures, the target is to steer leverage from current
net debt to EBITDA ratio towards the long-term target ratio of around 2.5 times.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
56
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Over the recent years Fortum has made several sizeable investments and aims to further improve its financial
performance by ensuring value creation from them. The investment in Uniper, currently accounted for as an
associated company, will contribute to Fortum's financial performance both through Fortum's share of Uniper's
result and its dividend. As Uniper's largest shareholder, Fortum's ambition is to increase value for both companies
and their stakeholders.
In addition, Fortum continues to review its business portfolio in line with its strategic priorities emphasising
CO2-free assets, flexibility, and low operating cost to fit the changing business environment. Fortum will also drive
focused growth in the power value chain and seek to build options for significant new businesses for the future.
Financial targets give guidance on Fortum's view of the company's long-term value creation potential, its growth
strategy and business activities. The long-term over-the-cycle financial targets are Return on capital employed,
ROCE at least 10% and Comparable net debt to EBITDA around 2.5 times. These measures are considered as
Alternative Performance Measures.
The dividend policy ensures that shareholders receive a fair remuneration for their entrusted capital, supported
by the company’s long-term strategy that aims at increasing earnings per share and thereby the dividend. When
proposing the dividend, the Board of Directors looks at a range of factors, including the macro environment,
balance sheet strength as well as future investment plans. Fortum Corporation’s target is to pay a stable,
sustainable and over time increasing dividend, in the range of 50–80% of earnings per share, excluding one-off
items.
Following Fortum’s announcement to acquire an additional stake of more than 20.5% of Uniper’s shares,
Standard & Poor’s and Fitch reviewed the credit rating of Fortum. In October 2019, Standard & Poor's placed
Fortum’s long-term credit rating of BBB on CreditWatch Negative. The short-term rating is at level A-2. In October
2019, Fitch Ratings placed Fortum's long-term credit rating of BBB and short-term credit rating of F2 on Rating
Watch Negative. Both rating agencies are expected to update the credit ratings after the closing of the acquisition
of at least an additional 20.5% of Uniper shares.
Fortum’s key objective is to have a solid investment-grade rating of at least BBB, to preserve financial flexibility
and good access to capital markets post-closing of the above mentioned acquisition of Uniper shares, and to
strengthen its financial profile longer term. This will provide appropriate financial stability and support to the
enlarged group.
Fortum’s key financial targets will be revisited in due course to ensure alignment with a commitment to retain a
solid investment grade rating of at least BBB.
Comparable net debt/EBITDA ratio
EUR million
Interest-bearing liabilities
Less: Liquid funds 1)
Net debt
Operating profit
Add: Depreciation and amortisation
EBITDA
Less: Items affecting comparability
Comparable EBITDA
Comparable net debt/EBITDA
Note
27
2019
6,694
1,435
5,260
1,110
575
1,685
-81
1,766
2018
6,093
584
5,509
1,138
536
1,674
151
1,523
3.0
3.6
1) Net debt is calculated as interest-bearing liabilities minus liquid funds without deducting interest-bearing receivables amounting to EUR 1,035
million (2018: 1,092).
Return on capital employed, %
EUR million
Profit before income tax
Interest expenses
Other financial expenses
+Interest and other financial expenses
Profit before taxes + interest and other financial expenses
Capital employed
Total assets
Total liabilities
- Interest-bearing liabilities
- Total interest-free liabilities
Capital employed
Capital employed at the end of previous period
Average capital employed
Note
12
2019
1,728
167
15
181
1,909
23,364
10,129
6,694
3,435
19,929
18,170
19,051
2018
1,040
148
26
174
1,214
22,409
10,332
6,093
4,239
18,170
18,172
18,171
Return on capital employed, %
10.0%
6.7%
See4Definitions of key figures.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
57
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
6 Segment reporting
SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Fortum's operations comprise electricity, heating, cooling and waste management services. Revenue streams can be divided
into four groups: power sales to wholesale markets, power sales to retail customers, heating sales and waste treatment sales.
Revenue is recognized when goods are transferred or services are performed, i.e. when (or as) a performance obligation is
satisfied and control of the good or service underlying the particular performance obligations is transferred to the customer.
Revenue is shown at the price that Fortum expects to be entitled to and is presented net of rebates, discounts, value-added
tax and selective taxes, such as electricity tax.
The accounting policies for the different revenue streams are described below.
POWER SALES TO WHOLESALE MARKETS
Physical electricity trades to Nord Pool or other wholesale markets are made either the day before delivery or during the same
day, hence contract duration is very short. Transaction price is the spot price, there are no variable elements. Electricity sales
are recognised on delivery at the price defined in Nord Pool or other wholesale market. When Fortum is acting as an agent in
electricity trade by granting access to Nord Pool power trading system, Fortum presents the bilateral trades between Fortum
and the customer on a net basis, only the service fee is recorded as revenue.
POWER SALES TO RETAIL CUSTOMERS
Fortum’s contracts with consumer and business customers cover electricity sales, while the distribution service is delivered
by the transmission company operating the local network. There is only one performance obligation, which is to stand-ready
to supply electricity to the customer. The transaction price generally includes both a fixed monthly charge and a variable fee
based on the volume of electricity supplied. As Fortum's promise is to stand ready to deliver electricity, the fixed and variable
components are recognised based on the fees chargeable from the customer. If automated meter reading is not available,
electricity consumption between the last meter reading and the end of the month is estimated.
HEAT SALES
In many areas the district heating service covers both the distribution and sale of heat. Fortum is usually responsible for
delivering the whole service, even when heat is being produced by a third party, and is acting as a principal for heat sales as
well. There is only one performance obligation, which is to stand-ready to supply heat to the customer. The fees charged from
the customer generally comprise a fixed monthly charge and a variable fee based on the volume of heat supplied. As Fortum's
promise is to stand ready to deliver heat, the fixed and variable components are recognised based on the fees chargeable
from the customer. In Russia, Baltics and Poland there are also areas where Fortum operates only the heat production
facilities while some third party is responsible for the distribution of heat. In these areas the performance obligation is to
supply heat and revenue is recognised based on the volume of heat that Fortum is entitled to charge from the customer.
WASTE TREATMENT SALES
Majority of revenue from waste management services arises from fees charged for receiving waste from customers (i.e.
gate fees). The fee is usually determined based on the volume of waste received, there are no variable elements in pricing.
Fortum is required to treat the waste and this performance obligation is satisfied when treatment has been performed.
Transportation of the waste forms another performance obligation. Fees for waste treatment and transportation services are
separately agreed in the contract and correspond to the price that would be charged for these services separately. Revenue
for transportation service is recognised when the service has been provided.
Waste treatment sales include also various types of soil and landfill site projects, which mostly take place at customer
sites. Fees charged are invoiced based on payment schedules agreed with the customer. The customer obtains the benefit of
the construction work simultaneously when the construction work proceeds, and therefore project revenues are recognised
over time. Progress of the construction is best measured either through costs incurred, or the completed area of the
construction site.
COSTS FOR OBTAINING CUSTOMERS
Incremental costs for obtaining new customers as well as renewing existing customer contracts in Consumer Solutions
division are capitalised as intangible asset and amortised over the expected contract duration.
NETTING AND INTER-SEGMENT TRANSACTIONS
Generation segment sells its production to Nord Pool and Consumer Solutions segment buys its electricity from Nord Pool.
Eliminations of sales include eliminations of sales and purchases with Nord Pool that are netted at Group level on an hourly
basis and posted either as revenue or cost depending on if Fortum is a net seller or net buyer during any particular hour. Inter-
segment sales, expenses and results for the different business segments are affected by intragroup deliveries, which are
eliminated on consolidation. Inter-segment transactions are based on commercial terms.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
58
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
6.1 Business structure
Fortum's business divisions are Generation, City Solutions, Consumer Solutions and Russia. Other Operations
includes corporate functions, R&D and technology development projects, as well as Fortum's shareholding in
Uniper SE.
In November 2018, Fortum announced that the solar and wind businesses were reorganised and the wind
operations became a business area within the Generation segment and the solar operations within the City
Solutions segment. These were included in Other Operations until 31 December 2018. The Russian wind and
solar operations continue as a part of the Russia segment. Fortum has restated its 2018 comparative segment
reporting figures in accordance with the new organisation structure.
Description of reportable segments:
6.2 Segment structure
Fortum discloses segment information in a manner consistent with internal reporting to Fortum's Board of
Directors and Fortum Executive Management, led by the President and CEO. Fortum segments are based on
the type of business operation, combined with one segment based on geographical area. Fortum's reportable
segments are the business divisions Generation, City Solutions, Consumer Solutions and Russia.
Generation
City Solutions
Consumer Solutions
Russia
Group
s
n
o
i
s
i
v
D
i
Generation
City Solutions
Consumer Solutions
Russia
s Generation is responsible for Nordic power production.
t
The segment comprises nuclear, hydro, wind, and
n
e
thermal power production, as well as power portfolio
m
optimisation, trading, industrial intelligence, and global
g
nuclear services.
e
s
g
n
i
t
r
o
p
e
R
City Solutions is responsible for developing sustainable
solutions for urban areas into a growing business for
Fortum. The segment comprises heating, cooling,
waste-to-energy, biomass, and other circular economy
solutions, as well as solar power production. The
business operations are located in the Nordics, the
Baltic countries, Poland, and India. The segment also
includes Fortum’s 50% holding in Stockholm Exergi,
which is a joint venture and is accounted for using
the equity method.
Consumer Solutions is responsible for the electricity
and gas retail businesses in the Nordics and Poland,
including the customer service, invoicing, and debt
collection businesses. Fortum is the largest electricity
retail business in the Nordics, with approximately
2.4 million customers across different brands in Finland,
Sweden, Norway, and Poland. The business provides
electricity as well as related value-added and digital
services.
The Russia segment comprises power and heat
generation and sales in Russia. The segment also
includes Fortum’s over 29% holding in TGC-1, which is
an associated company and is accounted for using
the equity method.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
59
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
6.3 Definitions for segment information
Fortum’s segment information discloses the financial measurements used in financial target setting and
forecasting, management's follow up of financial performance and allocation of resources in the Group's
performance management process. These measurements that are considered as Alternative Performance
Measures, such as Comparable operating profit and Comparable return on net assets, have been used consistently
since 2005. See4Note 1 Significant accounting policies.
Segment reporting is based on the same accounting policies as Fortum Group.
6.4 Segment information
Consolidated income statement
EUR million
Power sales 2)
Heat sales
Waste treatment sales
Other sales
Sales
Internal eliminations
Netting of Nord Pool transactions 3)
IS External sales
Comparable EBITDA
IS Depreciation and amortisation
IS Comparable operating profit
Impairment charges
Capital gains and other
Changes in fair values of derivatives hedging future cash flow
Nuclear fund adjustment
IS Items affecting comparability
IS Operating profit
IS Share of profit/loss of associates and joint ventures
IS Finance costs - net
IS Income taxes
IS Profit for the year
Note
7
7
7, 8
7, 29
7
19, 29
City Solutions 1)
Consumer Solutions
Russia
Other Operations
Total
Generation 1)
2019
2,006
0
0
135
2,141
-259
2018
1,771
0
0
71
1,842
2
2019
153
615
250
181
1,200
-45
2018
134
604
211
161
1,110
-37
2019
1,630
0
0
206
1,835
3
2018
1,547
0
0
212
1,759
-11
2019
924
145
0
2
1,071
0
2018
872
193
0
4
1,069
0
1,883
1,844
1,155
1,073
1,839
1,748
1,071
1,069
939
-145
794
-3
3
-15
-9
-23
771
10
763
-135
628
-4
77
79
-45
108
736
-72
309
-188
121
0
5
2
0
7
127
37
310
-175
135
0
-1
-4
0
-5
130
74
141
-62
79
0
0
-59
0
-59
20
0
110
-57
53
0
0
22
0
22
75
0
469
-153
316
0
1
0
0
1
317
59
417
-147
271
0
2
0
0
2
273
36
2019
0
0
0
115
115
-86
29
-91
-28
-119
-6
-2
0
0
-8
-127
638
2018
0
0
0
103
103
-79
24
-78
-22
-99
0
23
0
0
23
-76
0
2019
4,714
760
250
639
6,363
-387
-529
5,447
1,766
-575
1,191
-8
7
-72
-9
-81
1,110
744
-125
-221
1,507
2018
4,324
797
211
550
5,883
-125
-516
5,242
1,523
-536
987
-4
102
98
-45
151
1,138
38
-136
-181
858
1) Sales, both internal and external, include effects from realised hedging contracts. Effect on sales can be negative or positive depending on the average contract price and the realised spot price.
2) Power sales contains realised result from commodity derivatives, which have not had hedge accounting status under IFRS 9, but have been considered operatively as hedges.
3) Sales and purchases with Nord Pool are netted at Group level on an hourly basis and posted either as revenue or cost depending on whether Fortum is a net seller or net buyer during any particular hour.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
60
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Segment assets and liabilities
EUR million
Non-interest-bearing assets
BS Participations in associates and joint ventures
Eliminations
Total segment assets
Interest-bearing receivables
BS Deferred tax assets
Other assets
BS Liquid funds
Total assets
Segment liabilities
Eliminations
Total segment liabilities
BS Deferred tax liabilities
Other liabilities
Total liabilities included in capital employed
Interest-bearing liabilities
BS Total equity
Total equity and liabilities
Note
19, 29
Generation
2019
6,433
838
2018
6,861
854
City Solutions
Consumer Solutions
Russia
Other Operations
Total
2019
3,728
584
2018
3,582
641
2019
942
0
2018
1,044
0
2019
2,630
681
2018
2,408
495
2019
192
4,331
2018
173
3,988
7,271
7,715
4,312
4,223
942
1,044
3,311
2,903
4,523
4,161
1,124
1,230
419
429
302
396
107
114
167
138
21
28
24
28
27
2019
13,924
6,435
-107
20,252
1,035
77
567
1,435
23,364
2,119
-107
2,012
885
537
3,435
6,694
13,235
23,364
2018
14,069
5,978
-114
19,933
1,092
70
731
584
22,409
2,308
-114
2,194
720
1,325
4,239
6,093
12,077
22,409
Segment assets and liabilities include assets held for sale. See4Note 3 Acquisitions, disposals and assets held for sale.
Gross investments / divestments
EUR million
Gross investments in shares
Capital expenditure
Gross divestments of shares
Note
19, 3
17, 18
3
Generation
2019
13
247
12
2018
14
248
160
City Solutions
Consumer Solutions
Russia
Other Operations
Total
2019
9
313
2
2018
33
209
147
2019
0
55
0
2018
0
47
0
2019
66
67
0
2018
63
54
0
2019
18
31
16
2018
3,977
26
0
2019
106
713
30
2018
4,088
584
306
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
61
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Comparable operating profit including share of profit of associates and joint ventures and Comparable return on net assets
EUR million
Comparable operating profit
Share of profit/loss of associates and joint ventures
Adjustment to share of profit/loss of associates and joint ventures 1)
Comparable operating profit including share of profit of associates and joint ventures
Segment assets at the end of the year
Segment liabilities at the end of the year
Comparable net assets
Comparable net assets average 2)
Comparable return on net assets, %
Note
19
Generation
2019
794
10
-13
791
7,271
1,124
6,147
6,190
2018
628
-72
94
650
7,715
1,230
6,485
6,019
City Solutions
Consumer Solutions
Russia
Other Operations
2019
121
37
22
179
4,312
419
3,892
3,823
2018
135
74
0
209
4,223
429
3,794
3,808
2019
79
0
0
79
942
302
640
602
2018
53
0
0
53
1,044
396
648
671
2019
316
59
0
375
3,311
107
3,205
3,041
2018
271
36
0
307
2,903
114
2,789
2,976
2019
-119
638
-461
58
4,523
167
4,356
4,192
2018
-99
0
-38
-137
4,161
138
4,023
2,361
12.8
10.8
4.7
5.5
13.2
7.8
12.3
10.3
1.4
-5.8
1) See4Definitions of key figures.
2) Average net assets are calculated using the opening balance of the financial year and each quarter's closing value.
Segment assets and liabilities include assets held for sale. See4Note 3 Acquisitions, disposals and assets held for sale.
Employees
Number of employees 31 Dec
Average number of employees
Generation
2019
1,109
1,122
2018
1,091
1,107
City Solutions
Consumer Solutions
Russia
Other Operations
Total
2019
1,970
1,979
2018
2,017
1,994
2019
1,327
1,379
2018
1,399
1,473
2019
2,955
2,942
2018
2,941
3,378
2019
830
825
2018
838
814
2019
8,191
8,248
2018
8,286
8,767
6.5 Group-wide disclosures
The Group's operating segments operate mainly in the Nordic countries, Russia, Poland and other parts of the
Baltic Rim area. Generation operates mainly in Finland and Sweden; Consumer Solutions operates mainly in the
Nordic countries and Poland; whereas City Solutions operates in all of these geographical areas except Russia.
Other countries include mainly Estonia, Latvia, Lithuania and India. The Group's domicile is Finland.
The table below presents sales by geographical area based on customer location. Assets, capital expenditure
and personnel are reported where assets and personnel are located. Participations in associates and joint ventures
are not presented by location since these companies may have business in several geographical areas.
Due to the large number of customers and the variety of business activities, there is no individual customer
whose business volume is material to Fortum's total business volume.
Sales by geographical area based on customer location
EUR million
Nordic
Russia
Poland
Other countries
IS Total
2019
3,740
1,071
375
261
5,447
2018
3,619
1,069
331
223
5,242
Nordic power production is not presented by country since Nordic power production is mainly sold through
Nord Pool.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
62
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Capital expenditure by country
EUR million
Finland
Sweden
Norway
Russia
Poland
Other countries
Total
Segment assets by country
EUR million
Finland
Sweden
Norway
Russia
Poland
Other countries and eliminations
Non-interest bearing assets
BS Participations in associates and joint ventures
Total
2019
199
114
115
67
47
171
713
2019
4,130
4,125
1,605
2,630
671
656
13,817
6,435
20,252
2018
215
89
97
54
86
43
584
2018
4,589
4,202
1,622
2,408
645
488
13,955
5,978
19,933
Segment assets in Finland include EUR 169 million (2018: 590) settlements paid for futures. Segment assets and
liabilities include assets held for sale. See4Note 3 Acquisitions, disposals and assets held for sale.
Number of employees on 31 December by country
Finland
Sweden
Norway
Russia
Poland
Other countries
Total
2019
2,234
985
660
2,955
560
797
8,191
2018
2,238
981
667
2,941
754
705
8,286
7 Items affecting comparability
EUR million
Impairment charges
Capital gains and other
Changes in fair values of derivatives hedging future cash flow
Nuclear fund adjustments
IS Total
2019
-8
7
-72
-9
-81
2018
-4
102
98
-45
151
Fortum uses Alternative performance measures (APMs) in the financial target setting and forecasting,
management's follow up of financial performance of segments and the Group as well as allocation of resources in
the Group's performance management process. The business performance of the operations cannot be compared
from one period to another without adjusting for items affecting comparability and therefore they are excluded
from Comparable operating profit and Comparable EBITDA. The main business performance measurements have
been used consistently since 2005.
Definitions are presented in the section4Definitions of key figures.
Impairment charges
Impairment charges are recognised in items affecting comparability and include impairment charges and potential
provisions (mainly dismantling). Impairment charges are adjusted from depreciation and amortisation. The
impairment charges during 2019 amounted to EUR -8 million (2018: -4).
Capital gains and other
Capital gains and other include capital gains and transaction costs from acquisitions, which are adjusted from
other income and other expenses, respectively. Capital gains and other in 2019 amounted to EUR 7 million (2018:
102). The comparison year includes the capital gain of EUR 77 million from the sale of Fortum’s 10% stake in
Hafslund Produksjon Holding AS and EUR 26 million from the sale of Espoo head office. For more information
regarding disposals of shares, see4Note 3 Acquisitions, disposals and assets held for sale.
Fair value changes on derivatives
Changes in the fair values of financial derivative instruments hedging future cash flows that do not qualify for
hedge accounting, or own use exemption cannot be applied, or physical contracts to buy or sell a non-financial
item, which are fair value using fair value option to offset accounting mismatch, are recognised in items affecting
comparability. This is done to improve the understanding of the financial performance when comparing results
from one period to another. For more information regarding fair value changes of derivatives, see4Note 8 Fair
value changes of derivatives and underlying items in income statement.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
63
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Nuclear waste management fund adjustment
Nuclear fund adjustment includes effects from the accounting principle of Fortum's part of the State Nuclear
Waste Management Fund where the assets on the balance sheet cannot exceed the nuclear related provisions
according to IFRIC 5. As long as the Fund is overfunded from an IFRS perspective, the effects to the operating
profit from this adjustment will be positive if the provisions increase more than the Fund and negative if actual
value of the fund increases more than the provisions. In addition adjustments are made for accounting effects
from valuation according to IFRS.
The nuclear cost estimates and technical plan was updated during 2019 which led to a decrease in provision
of EUR 100 million. The reduced provision led to negative nuclear fund adjustment of EUR 54 million. The
periodisation of the fund target led to a positive fund adjustment of EUR 51 million which is booked as an
interest-free receivable.
Fortum reassessed assumptions used for all nuclear related assets and liabilities during 2018. The increase of
the nuclear provision for the Loviisa nuclear power plant in Finland lead to recognition of an additional share of the
Finnish nuclear fund. The increase of the provision due to the reassessment and the additional share in the fund
were both included in Items affecting comparability in 2018. The net profit impact from all these nuclear related
adjustments was close to zero.
For more information regarding nuclear waste management, see4Note 29 Nuclear related assets and liabilities.
8 Fair value changes of derivatives
and underlying items in income statement
Fair value changes in operating profit presented below are arising from financial derivatives hedging future cash
flows where hedge accounting is not applied according to IFRS 9 and the ineffectiveness from cash flow hedges.
Table includes also fair value changes from physical contracts to buy or sell a non-financial items, which are fair
valued through income statement when fair value option to off-set accounting mismatch is used, or when own use
exemption or hedge accounting cannot be applied.
Fair value changes of currency derivatives in net financial expenses arise mainly from balance sheet hedges
without hedge accounting status according to IFRS 9, because they are natural hedges of loans and receivables.
Fair value change of interest rate hedges without hedge accounting is EUR -2 million (2018: -8).
EUR million
In operating profit
Fair value changes from derivatives not getting hedge accounting status
Electricity derivatives
Currency derivatives
Other commodity derivatives
Total effect in operating profit
In finance costs
Exchange gains and losses on loans and receivables 1)
Fair value changes of derivatives not getting hedge accounting status
Cross currency interest rate derivatives 1)
Foreign currency derivatives 1)
Rate difference on forward contracts
Currency derivatives
Interest rate derivatives
Fair value change of hedging derivatives in fair value hedge relationship
Fair value change of hedged items in fair value hedge relationship
Total 2)
Total effect in finance costs
Total effect on profit before income tax
2019
2018
5
-3
-73
-72
77
3
17
98
91
-100
30
-120
-1
-91
-2
27
-23
-89
2
-70
8
91
3
102
-8
-24
24
94
-6
92
1) Exchange gains and losses on loans, receivables and derivatives totaling EUR 0 million (2018: -1).
2) Including fair value gains and losses on hedged financial instruments and foreign currency and interest rate derivatives EUR 1 million (2018: -5).
See also4Note 12 Finance costs - net.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
64
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
9 Other income and other expenses
ACCOUNTING POLICIES
OTHER INCOME
Revenue from activities outside normal operations is reported in other income. This includes recurring items, such as rental
income and subsidies and non-recurring items, such as insurance compensation. In addition, profits from the capital recycling
business model are presented in other income, because the business results are realised through divesting the shareholding,
either partially or totally.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are recognised as expense as incurred and included in other expenses in the consolidated
income statement. If development costs are expected to generate future income, they are capitalised as intangible assets
and depreciated over the period of the income streams.
9.1 Other income
EUR million
Rental income
Insurance compensation
Subsidies
Other items
IS Total
2019
23
8
28
54
110
2018
12
1
47
71
130
In 2018, other included a profit of EUR 26 million from the partial sale of Fortum's solar power company in India
according to the 'capital recycling' business model. See also4Note 3 Acquisitions, disposals and assets held for
sale.
9.2 Other expenses
EUR million
Operation and maintenance costs
Property taxes
IT and telecommunication costs
Other items
IS Total
2019
134
71
94
292
591
2018
130
109
77
278
594
The major components recorded in other expenses are the external operation and maintenance costs of power
and heat plants. Property taxes include taxes relating to directly owned hydropower production of EUR 39 million
(2018: 65). Other includes expenses relating to properties and other operative expenses.
Principal auditor's fees
EUR million
Audit fees
Audit-related assignments
Tax assignments
Other assignments
Total
2019
2.3
0.3
0.0
0.8
3.3
2018
1.7
0.2
0.0
1.6
3.5
Deloitte Oy is the appointed auditor until the next Annual General Meeting in 2020. Audit fees include fees for the
audit of the consolidated financial statements, review of interim reports, as well as fees for the audit of Fortum
Corporation and its subsidiaries. Audit-related assignments include fees for assurance of sustainability reporting,
and other assurance and associated services related to the audit. Tax assignments include fees for tax advice
services. Other assignments consist of advisory services.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
65
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
10 Materials and services
11 Employee benefits and Board remuneration
EUR million
Materials
Materials purchased from associates and joint ventures
Transmission costs
External services
IS Total
2019
2,200
369
42
110
2,721
2018
2,296
372
41
86
2,795
Materials consists mainly of coal, gas and nuclear fuels used for producing power and heat.
Materials purchased from associates and joint ventures consist of nuclear and hydropower purchased at
production cost (including interest costs and production taxes) and purchased steam.
Total materials and services include production taxes of EUR 60 million (2018: 62), including hydro power
related property taxes of EUR 13 million (2018: 13). Taxes related to nuclear and hydro production are included in
taxes paid through purchases from associates and joint ventures.
See4Note 19 Participations in associated companies and joint ventures.
EUR million
Wages and salaries
Pensions
Defined contribution plans
Defined benefit plans
Social security costs
Share-based incentives 1)
Other employee costs
IS Total
2019
351
38
5
51
12
23
480
2018
345
34
7
48
3
23
459
1) Share-based incentives increased in 2019 mainly due to the higher earnings outcome from settled plans.
The compensation package for Fortum employees consists of salaries, fringe benefits, short-term incentives, profit
sharing paid to the Personnel Fund (in Finland) and share-based long-term incentives for selected key individuals.
The remuneration policy is determined by the Board of Directors. The Nomination and Remuneration
Committee of the Board of Directors discusses, assesses and makes recommendations and proposals to the
Board of Directors on the remuneration policy, remuneration of the President and CEO and the Fortum Executive
Management; and company-wide incentive arrangements for senior management and key personnel as well
as monitors these plans annually. Additionally, the Committee contributes to the Group's nomination issues by
proposing to the Board of Directors any nominations regarding the members of Fortum Executive Management.
For further information on pensions see4Note 31 Pension obligations.
11.1 Short-term incentives (STI)
Fortum’s STI programme is designed to support the achievement of the Group’s financial and other relevant
targets on an annual basis. As a main principle, all employees are covered by the programme or alternatively by a
business specific or a comparable local variable pay arrangement.
The Board of Directors determines the performance criteria and award levels for the Fortum Executive
Management. The awards are based on the achievement of Group financial performance, divisional targets and
individual targets. The target incentive opportunity is 20% and the maximum incentive opportunity is 40% of the
annual base salary. The Board of Directors assesses the performance of the President and CEO and the members
of the Fortum Executive Management on a regular basis.
Awards for other employees are based on a combination of Group, divisional, functional and personal or team
targets. The targets are set in annual performance discussions held at the beginning of the year. Awards under the
STI programme are paid solely in cash.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
66
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
11.2 Share-based long-term incentives (LTI)
The purpose of Fortum’s share-based long-term incentive programme is to support the delivery of sustainable
long-term performance, align the interests of management with those of shareholders and support in committing
and retaining key individuals.
Fortum’s LTI programme provides participants with the opportunity to earn company shares. Under the LTI
programme and subject to the decision of the Board of Directors, a new LTI plan commences annually. The
Board of Directors approves participation of the Fortum Executive Management members in each annually
commencing LTI plan. Subject to a decision by the Board of Directors the President and CEO is authorised to
decide on individual participants and potential maximum awards for other participants than the Fortum Executive
Management in accordance with the nomination guidelines approved by the Board of Directors. Participation in
the LTI plan precludes the individual from being a member in the Fortum Personnel Fund.
Each LTI plan begins with a three-year earnings period, during which participants may earn share rights if
the performance criteria set by the Board of Directors are fulfilled. If the minimum performance criteria are not
exceeded, no shares will be awarded. If performance is exceptionally good and the targets approved by the Board
of Directors are achieved, the combined gross value of all variable compensation cannot exceed 120% of the
person’s annual salary in any calendar year. After the earnings period has ended and the relevant taxes and other
employment-related expenses have been deducted, participants are paid the net balance in the form of shares.
For LTI plans commencing in 2013 to 2016, any shares awarded to Fortum Executive Management members
are subject to a three-year lock-up period. Subject to a decision by the Board of Directors, the lock-up period
can be reduced to one year for those Fortum Executive Management members whose aggregate ownership of
Fortum shares is greater than or equal to their annual salary. For other participants the lock-up period is one year.
If the value of the shares decreases or increases during the lock-up or retention period, the participant will carry
the potential loss or gain. For LTI plans commencing in 2017 and later, the share awards will not be subject to
a minimum lock-up period. However, Fortum Executive Management members whose aggregate ownership of
Fortum shares does not yet fulfil the shareholding requirement are required to retain at least 50% of the shares
received until the required level of shareholding is met.
The Board of Directors has the right to revise the targets set in the incentive plans, deviate from the payment
based on achievement of the set earnings criteria, or to discontinue any ongoing incentive plan.
The share plans under the LTI arrangement are accounted for as partly equity- and partly cash-settled
arrangements. The earned reward that the participants receive in shares is accounted for as an equity-settled
transaction. For participants receiving cash only, the total arrangement is accounted for as cash-settled
transaction. The reward is recognised as an expense during the earnings period with a corresponding increase in
the liabilities and for the transactions settled in shares in the equity. The social charges related to the arrangement
payable by the employer are accrued as a liability. The LTI liability including social charges at the end of the year
2019 was EUR 14 million (2018: 14), including EUR 7 million (2018: 8) recorded in equity.
Plans
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2013–2018
1
2014–2019
2015–2020
2016–2021
2017–2019
2018–2020
2019–2021
2
1
3
2
1
4
3
2
1
5
4
3
2
1
6
5
4
3
2
1
6
5
4
3
2
1
6
5
3
2
6
3
Earnings period
Lock-up period
Additional lock-up period for FEM
Share delivery
At year end 2019 approximately 160 key employees are participants in at least one of the six on-going annual
LTI plans (plans 2014–2019, 2015–2020, 2016–2021, 2017–2019, 2018–2020 and 2019–2021).
Shares granted
Grant date
Grant price, EUR
Plan
2016–2021
Plan
2015–2020
Plan
2013–2018
21 Feb 2019 13 Feb 2018 13 Feb 2017 12 Feb 2016
12.18
Plan
2014–2019
17.04
19.33
14.28
Number of shares granted
Number of shares subsequently forfeited or released from lock-
up and other changes
Number of shares under lock-up 31 December 2019
293,534
73,377
92,321
152,200
-21,415
272,119
-71,498
1,879
-92,150
171
-152,200
-
In addition to the shares granted above, share rights have been granted to participants that will receive cash
payments instead of shares after the lock-up period. The gross amount of share rights outstanding at the end of
the year 2019 for plan 2016–2021 was 148,040, for plan 2015–2020 18,310, for plan 2014–2019 17,793 and for
plan 2013–2018 32,066 share rights.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
67
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
11.3 Fortum Personnel Fund
The Fortum Personnel Fund (for employees in Finland only) has been in operation since 2000. The Board of
Directors determines the criteria for the fund's annual profit-sharing bonus. Persons included in Fortum's long-term
incentive schemes are not eligible to be members of this fund. Members of the personnel fund are the permanent
and fixed-term employees of the Group. The membership of employees joining the company starts at the
beginning of the next month after the employment relationship has been ongoing for five months. An employee is
entitled to make withdrawals right from the beginning of the membership. The membership in the fund terminates
when the member has received his/her share of the fund in full.
The profit-sharing received by the fund is distributed equally between the members. Each employee's share is
divided into a tied amount and an amount available for withdrawal. It is possible to transfer a maximum of 15% of
capital from the tied amount to the amount available for withdrawal each year.
The amount available for withdrawal (maximum 15% of the tied amount) is decided each year by the council of
the fund and it is paid to members who want to exercise their withdrawal rights.
The fund's latest financial year ended at 30 April 2019 and the fund then had a total of 2,280 members (2018:
2,233). At the end of April 2019 Fortum contributed EUR 2.4 million (2018: 2.0) to the personnel fund as an annual
profit-sharing bonus based on the financial results of 2018. The combined amount of members' shares in the fund
was EUR 20 million (2018: 19).
The contribution to the personnel fund is expensed as it is earned.
11.4 The President and CEO and the Fortum Executive Management remuneration
The Fortum Executive Management (FEM) consists of ten members, including the President and CEO. The
following table presents the total remuneration of the President and CEO and the FEM and takes into account the
changes in FEM during the year. The expenses are shown on accrual basis.
Management remuneration
EUR thousand
Salaries and fringe benefits
Performance bonuses 1)
Share-based incentives 1) 2)
Pensions (statutory)
Pensions (voluntary)
Social security expenses
Total
2019
2018
Pekka Lundmark,
President and CEO
1,057
200
898
207
265
39
2,666
Other
FEM members
3,382
661
3,506
748
647
344
9,287
Pekka Lundmark,
President and CEO
1,048
228
297
250
252
36
2,112
Other
FEM members
3,101
658
1,431
677
596
254
6,716
1) Based on estimated amounts.
2) Share-based incentives increased in 2019 mainly due to the higher earnings outcome from settled plans.
The annual contribution for the President and CEO Pekka Lundmark's pension arrangement is 25% of the annual
salary. The annual salary consists of base salary and fringe benefits. The President and CEO's retirement age is
63. In case his assignment is terminated before the retirement age, the President and CEO is entitled to retain the
benefits accrued in the arrangement.
For the other members of the FEM the retirement age varies between 62 and 65. According to Group policy,
all new supplementary pension arrangements are defined contribution plans. For the members of the FEM that
have defined contribution arrangements, the maximum pension premium percentage can be 25% of the annual
salary. Members, who have joined Fortum prior to 1 January 2009, are participating in defined benefit pension
arrangements, where the benefit is 60–66% of the final pensionable salary with the pension provided by an
insurance company or Fortum's Pension Fund.
A pension liability of EUR 824 thousand (2018: 624) related to the defined benefit plans for FEM members has
been recognised on the balance sheet. The additional pension arrangement for the President and CEO is a defined
contribution pension plan and thus no liability has been recognised on the balance sheet.
In the event that Fortum decides to give notice of termination to the President and CEO, he is entitled to the
salary for the notice period (6 months) and a severance pay equal to 12 months’ salary. Other FEM members’
termination compensation is equal to 6 to 12 months’ salary.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
68
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Number of shares delivered to the management
Number of shares held by members of the Board of Directors
The table below shows the number of shares delivered during 2019 and 2018 to the President and CEO and other
FEM members under the LTI arrangements. Shares delivered under the plans are subject to a lock-up period under
which they cannot be sold or transferred to a third party.
FEM members at 31 December 2019
Pekka Lundmark, CEO
Arun Aggarwal (member of FEM from 17 Oct 2018)
Alexander Chuvaev 1)
Per Langer
Risto Penttinen
Markus Rauramo
Arto Räty
Mikael Rönnblad
Sirpa-Helena Sormunen
Tiina Tuomela
Former FEM members
Kari Kautinen (member of FEM until 30 September 2018)
Total
2019 2)
2018 3)
25,765
-
33,522
5,057
6,232
11,137
4,931
3,435
6,012
7,206
N/A
103,297
6,453
-
15,930
1,621
1,767
2,103
-
-
1,879
2,117
2,059
33,929
1) Estimated number of shares after local tax and tax related deductions. Due to local legislation, share rights will be paid in cash instead of shares
after the three-year lock-up period.
2) Share delivery based on share plan 2016–2021.
3) Share delivery based on share plan 2015–2020.
11.5 Board of Directors and management shareholding
On 31 December 2019, the members of the Board of Directors owned a total of 8,540 shares (2018: 8,540), which
corresponds to 0.00% (2018: 0.00%) of the company’s shares and voting rights.
Board members at 31 December 2019
Matti Lievonen, Chairman
Klaus-Dieter Maubach, Deputy Chairman
Eva Hamilton
Kim Ignatius
Essimari Kairisto
Anja McAlister
Veli-Matti Reinikkala
Philipp Rösler
Total
2019
2018
1,500
-
40
4,000
-
-
3,000
-
8,540
1,500
-
40
4,000
-
-
3,000
N/A
8,540
The President and CEO and other members of the FEM owned a total of 263,002 shares (2018: 193,227), which
corresponds to approximately 0.03% (2018: 0.02%) of the company's shares and voting rights.
Number of shares held by members of the Fortum Executive Management
FEM members at 31 December 2019
Pekka Lundmark
Arun Aggarwal
Alexander Chuvaev
Per Langer
Risto Penttinen
Markus Rauramo
Arto Räty
Mikael Rönnblad
Sirpa-Helena Sormunen
Tiina Tuomela
Total
2019
2018
92,931
-
22,053
38,248
18,587
45,272
4,931
3,435
12,668
24,877
263,002
67,166
-
22,053
33,191
12,355
34,135
-
-
6,656
17,671
193,227
11.6 Board remuneration
The Board of Directors comprises five to ten members who are elected at the Annual General Meeting for a one-
year term of office, which expires at the end of the first Annual General Meeting following the election. At the end
of 2019 the Board of Directors consists of eight members.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
69
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
The Annual General meeting confirms the yearly compensation for the Board of Directors. Board members are
not offered any long-term incentive benefits or participation in other incentive schemes. There are no pension
arrangements for the Board members. Social security costs EUR 11 thousand (2018: 11) have been recorded for
the fees in accordance with local legislation in respective countries.
Fees for the Board of Directors
EUR thousand
Chairman
Deputy Chairman
Chairman of the Audit and Risk Committee 1)
Members
1) If not Chairman or Deputy Chairman simultaneously.
2019
75
57
57
40
2018
75
57
57
40
Every member of the Board of Directors receives a fixed yearly fee and additional fees for each meeting attended.
A meeting fee of EUR 600 is paid for Board and Committee meetings. For Board members living outside Finland
in Europe, the meeting fee is EUR 1,200; for Board members living outside Europe, the meeting fee is EUR 1,800.
For Board and Committee meetings held as a telephone conference, the meeting fee is paid as EUR 600 to all
members. No fee is paid for decisions made without a separate meeting.
Board members are entitled to travel expense compensation in accordance with the company’s travel policy.
Compensation for the Board of Directors
EUR thousand
Board members at 31 December 2019
Matti Lievonen, Chairman from 28 March 2018
Klaus-Dieter Maubach, Deputy Chairman from 28 March 2018
Eva Hamilton
Kim Ignatius, Chairman of the Audit and Risk Committee
Essimari Kairisto (member of the board from 28 March 2018)
Anja McAlister
Veli-Matti Reinikkala
Philipp Rösler (member of the board from 26 March 2019)
Former Board members
Sari Baldauf (Chairman until 28 March 2018)
Heinz-Werner Binzel (member of the board until 26 March 2019)
Marco Ryan (member of the board from 26 March 2019 to 1 August 2019)
Total
2019
2018
89
71
54
67
56
59
58
44
N/A
12
19
529
80
54
54
65
42
60
54
N/A
20
54
N/A
483
12 Finance costs - net
EUR million
Interest expense
Borrowings
Other interest expense
Capitalised borrowing costs
Total
Interest income
Loan receivables and deposits
Other interest income
Total
Note
18
Fair value gains and losses on financial instruments
8
Fair value change of interest rate derivatives not getting hedge accounting status
Fair value change of hedging derivatives in fair value hedge relationship
Fair value change of hedged items in fair value hedge relationship
Rate difference on forward contracts
Fair value gains and losses on other investments
Total
Exchange gains and losses
Loans and receivables
Cross currency interest rate derivatives
Foreign currency derivatives
Write down of loan receivables
Interest income on share of State Nuclear Waste Management Fund
Unwinding of discount on nuclear provisions
Unwinding of discount on other provisions
Other financial income
Other financial expenses
Total
IS Finance costs - net
8
8
8
21
29
29
30, 31
2019
-171
-4
9
-167
25
3
28
-2
27
-23
-1
7
8
91
30
-120
0
6
7
-10
17
-15
6
-125
2018
-155
-3
10
-148
31
3
34
-8
-24
24
3
-3
-8
-100
8
91
-13
7
11
-3
11
-26
-15
-136
Interest expenses include interest expenses on interest-bearing loans, interest on interest rate and currency swaps
and forward points on forward foreign exchange contracts hedging loans and receivables. Interest expenses were
EUR 167 million (2018: 148). Interest expenses in 2019 include the remaining amortised cost of EUR 13 million
due to the prepayment of the bridge financing for the acquisition of Uniper shares in 2018.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
70
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Interest income were EUR 28 million (2018: 34) including EUR 12 million (2018: 12) from shareholders' loans to
co-owned Swedish nuclear companies, and EUR 11 million (2018: 17) from deposits and commercial papers.
Fair value gain and losses were EUR 8 million (2018: -8). Fair value gains and losses on financial instruments
include change in clean price of interest rate and cross-currency swaps not getting hedge accounting and fair
value changes of interest rate derivatives in hedge relationship and hedged items. Accrued interest on these
derivatives is entered in interest expenses of borrowings. Fair value gains and losses include also rate difference
from forward contracts hedging loans and receivables without hedge accounting.
Exchange gains and losses were net zero including exchange rate differences arising from valuation of foreign
currency loans and receivables and exchange rate differences from forward foreign exchange contracts and
interest rate and currency swaps.
Unwinding of discount on nuclear provisions were EUR 7 million (2018: 11) including in 2019 the positive
impact of EUR 40 million related to the regular nuclear technical update in Finland and in 2018 positive effect
from changes in assumptions of EUR 49 million due to the adjustment to past unwinding of interest. For additional
information see Note 29 Nuclear related assets and liabilities.
Other financial income EUR 17 million (2018: 11) includes EUR 8 million from a receivable from SIBUR (2018:
10), a Russian gas processing and petrochemicals company regarding divested shares of OOO Tobolsk CHP and
EUR 6 million, which was returned from Nasdaq default fund in 2019. Other financial expenses were EUR 15
million (2018: 26) including EUR 10 million cost for the new committed credit facilities related to the acquisition
of an additional minimum stake of 20.5% in Uniper and in 2018 EUR 20 million cost regarding replenishment to
Nasdaq default fund.
Interest rate and currency derivatives in finance costs - net
EUR million
Interest rate and cross currency swaps
Interest expenses on borrowings
Exchange rate difference from derivatives
Rate difference in fair value gains and losses on financial instruments 1)
Total fair value change of interest rate derivatives in finance costs - net
Forward foreign exchange contracts
Interest expenses on borrowings
Exchange rate difference from derivatives
Rate difference in fair value gains and losses on financial instruments
Total fair value change of currency derivatives in finance costs - net
Total
2019
2018
20
30
25
75
-57
-120
-1
-178
-103
27
8
-32
3
-52
91
3
42
45
1) Fair value gains and losses on financial instruments include fair value changes from interest rate swaps not getting hedge accounting amounting
to EUR -2 million (2018: -8) and fair value change of hedging derivatives in fair value hedge relationship to EUR 27 million (2018: -24).
13 Income tax expense
13.1 Profit before tax
EUR million
Finnish companies
Swedish companies
Russian companies
Other companies 1)
IS Total
2019
303
383
312
730
1,728
2018
113
396
261
270
1,040
1) Includes share of profits from Uniper of EUR 632 million (2018: -2).
Profit before tax split by country represents the respective countries’ part of the profit before tax for Fortum
Group according to IFRS, i.e. based on the same accounting principles as for the Consolidated Financial
Statements. This means that the respective country profits include such items as for example share of profits from
associates and effects of accounting for nuclear provisions, which are not included in taxable profits in the local
subsidiaries.
13.2 Major components of income tax expense by major countries
EUR million
Current taxes
Finnish companies
Swedish companies
Russian companies
Other companies
Total
Deferred taxes
Finnish companies
Swedish companies
Russian companies
Other companies
Total
Adjustments recognised for current tax of prior periods
Finnish companies
Swedish companies
Russian companies
Other companies
Total
IS Income tax expense
2019
-40
-79
-51
-63
-233
-15
6
-6
30
15
-2
0
0
-1
-3
-221
2018
-7
-3
-38
-46
-94
-18
-73
-11
15
-87
-1
0
0
0
-1
-181
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
71
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
13.3 Income tax rate
The table below explains the difference between the theoretical enacted tax rate in Finland compared to the tax
rate in the consolidated income statement.
EUR million
Profit before tax
Tax calculated at nominal Finnish tax rate
Tax rate changes
Differences in tax rates and regulations
Tax exempt capital gains
Expenses not deductible for tax purposes
Share of profit of associates and joint ventures
Taxes related to dividend distributions
Changes in tax valuation allowance related to not recognised tax losses
Other items
Adjustments recognised for taxes of prior periods
IS Income tax expense
2019
1,728
-346
-3
-62
2
-8
220
-17
-5
1
-3
-221
%
20.0
0.2
3.6
-0.1
0.4
-12.7
1.0
0.3
-0.1
0.2
12.8
2018
1,040
-208
17
6
15
-13
7
-14
11
-2
0
-181
%
20.0
-1.6
-0.6
-1.5
1.3
-0.7
1.4
-1.0
0.2
0.0
17.5
Key tax indicators:
• The weighted average applicable income tax rate for 2019 is 23.6% (2018: 19.4%)
• The effective income tax rate in the income statement for 2019 is 12.8% (2018: 17.5%)
• The comparable effective income tax rate (excluding the share of profits from associates and joint ventures as
well as tax exempt capital gains, tax rate changes and other major one time income tax effects) for 2019 is
22.4% (2018: 22.0%).
See4Definitions of key figures.
The major items affecting the effective income tax rate are as follows:
Share of profit of associates and joint ventures during 2019 reduced the effective income tax rate with 12.7%,
main item being the share of profit from Uniper EUR 632 million. This share of profit has also largely impacted the
difference in tax rates and regulations increasing the rate with 3.6% overall.
Effective income tax rate impacted by gains or losses on sale of shares. In many countries like in Finland,
Sweden, Netherlands and Norway income on capital gains and losses is treated as tax exempt. The purpose of this
is to tax the operative income of the company and avoid taxing the same income twice in case of the sale of the
shares. Taxation of capital gains or losses is in line with the taxation of dividend income.
Fortum has had tax audits ongoing during 2019. Based on earlier audits Fortum has received income tax
assessments in Belgium for the years 2008–2012. In previous years, Fortum has appealed all assessments
received. Based on legal analysis, no provision has been accounted for in the financial statements related to
Belgium 2008–2012 tax audits.
For further information regarding the ongoing tax appeals see4Note 37 Legal actions and official proceedings.
During 2019 entities primarily in Sweden and Belgium used a portion of the deferred tax asset relating to tax
loss carry forwards.
Fortum has a material deferred tax liability owing to its investments in non-current assets. These assets are
depreciated more rapidly for tax than for accounting purposes resulting in lower current tax payments at the start
of an asset's lifetime and higher tax payments at the end of its lifetime. This difference results in a deferred tax
liability.
See also4Note 28 Income taxes on the balance sheet.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
72
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
14 Earnings and dividend per share
ACCOUNTING POLICIES
As Fortum currently has no dilutive instruments outstanding, diluted earnings per share is the same as basic
earnings per share.
14.2 Dividend per share
Dividends proposed by the Board of Directors are not recognised in the financial statements until they have been
approved by the Company’s shareholders at the Annual General Meeting.
A dividend in respect of 2019 of EUR 1.10 per share, amounting to a total dividend of EUR 977 million based on
the amount of shares registered as at 5 February 2020, is to be proposed at the planned Annual General Meeting
on 17 March 2020. These Financial statements do not reflect this dividend.
A dividend for 2018 of EUR 1.10 per share, amounting to a total of EUR 977 million, was decided in the Annual
General Meeting on 26 March 2019 and the dividend was paid on 4 April 2019.
A dividend for 2017 of EUR 1.10 per share, amounting to a total of EUR 977 million, was decided in the Annual
General Meeting on 28 March 2018 and the dividend was paid on 10 April 2018.
EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit attributable to the owners of the parent company by the
weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Group and
held as treasury shares.
DIVIDENDS
Dividends proposed by the Board of Directors are not recognised in the financial statements until they have been approved by
the Company's shareholders at the Annual General Meeting.
14.1 Earnings per share
Earnings per share, basic
IS Profit attributable to owners of the parent (EUR million)
Weighted average number of shares (thousand)
Basic earnings per share (EUR)
2019
1,482
888,294
2018
843
888,312
1.67
0.95
In the merger of Länsivoima Oyj (former Lounais-Suomen Sähkö Oy) to Fortum Corporation in 2000, those
shareholders of Länsivoima Oyj that did not produce their share certificates and did not request their rights
to be registered in the book-entry system, received their respective shares of Fortum Corporation as merger
consideration to a joint book-entry account opened on their behalf (the “Joint Account”). The Annual General
Meeting 2018 of Fortum Corporation decided, that the rights to all such shares entered in the Joint Account and
to the rights attached to such shares that had not been requested to be registered in the book-entry system prior
to the decision by the Annual General Meeting 2018, were forfeited. In addition to the shares, the rights attached
to such shares, such as undrawn dividend, were forfeited. The provisions applicable to treasury shares held by the
company were applied to the forfeited shares. On 17 December 2018, Board of Directors decided to cancel all
these 72,580 Fortum shares owned by the company without decreasing the share capital. The cancellation was
entered in the Trade Register on 21 December 2018. In 2018 these shares had minor impact on weighted average
number of shares.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
73
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
15 Financial assets and liabilities by categories
ACCOUNTING POLICIES
FINANCIAL ASSETS
Fortum classifies its financial assets in the following categories according to IFRS 9: financial assets at amortised cost,
financial assets at fair value through profit and loss and financial assets at fair value through other comprehensive income.
The classification is made at initial recognition and depends on the financial asset's contractual cash flow characteristics and
the Group's business model for managing them.
In order for the financial asset to be classified and measured at amortised cost or fair value through other comprehensive
income, it needs to give rise to cash flows that are solely payments of the principal and interest on the principal amount
outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. When the SPPI criteria is
not met, financial assets are classified to fair value through profit and loss category.
Financial assets are presented as non-current assets unless they are held for trading, expected to be realized within 12
months at the closing date or they have a maturity of under 12 months at closing date. These are classified as current assets.
FINANCIAL ASSETS AT AMORTISED COST
Fortum measures financial assets at amortised cost when the financial asset is included in the held-to-collect business model
with fixed or determinable payments that are payments of amount outstanding or interest on it. They arise when the Group
provides money, goods or services directly to a debtor. Financial assets at amortised cost include non-derivative financial
assets with fixed or determinable payments that are not quoted in an active market.
Financial assets at amortised cost are subject to impairment. Gains and losses from derecognitionof the asset are
recognised in profit and loss.
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
Financial assets at fair value through profit and loss include financial assets held for trading in the short term, financial
assets designated upon initial recognition irrevocably as fair value through profit and loss and financial assets mandatorily
recognised at fair value through profit and loss according to IFRS 9. Fortum has also elected to classify equity investments
(i.e. other investments) irrevocably as financial assets at fair value through profit and loss. These are mainly comprised of
shares in unlisted companies. Derivatives are classified as held for trading unless they are designated as effective hedging
instruments.
Gains and losses arising from changes in the fair value are included in the income statement in the period in which they
arise.
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
Other investments designated at fair value through other comprehensive income are not subject to impairment assessment
and are never recycled to profit and loss. Dividends received are recognised in profit and loss.
Fortum currently does not have material other investments that have been irrevocably classified as financial assets at fair
value through other comprehensive income.
DERECOGNITION
Fortum derecognises financial assets when the rights to receive cash flows from the assets have expired or when it has
substantially transferred the risks and rewards of the assets outside of the Group.
IMPAIRMENT
Fortum recognizes an allowance for expected credit losses (ECL) according to IFRS 9 for financial assets measured at
amortised cost. See further information on ECL in4Note 4.7.1 Credit quality of major financial assets and in4Note 23 Trade
and other receivables.
Financial assets measured at fair value through profit or loss are not included in ECL assessment as they are already
measured at fair value which takes into account expected credit losses. A financial asset is written-off when there is no
reasonable expectation of recovering the contractual cash flows.
FINANCIAL LIABILITIES
All financial liabilities are recognised initially at fair value. In the case of loans and borrowings and payables, incurred
transaction costs are deducted. In subsequent periods, all non-derivative financial liabilities are stated at amortised cost;
any difference between proceeds (net of transaction costs) and the redemption value is recognised as interest cost over the
period of the borrowing using the effective interest rate method.
Derivative financial instruments entered into by the Group, that are not designated as hedging instruments are classified
as liabilities at fair value through profit and loss. Amortisation of the effective interest rate and gains and losses of liabilities
are recognised in the statement of profit and loss.
Group’s financial liabilities include trade and other payables, loans and borrowings and derivative financial instruments.
Borrowings or portion of borrowings being hedged with a fair value hedge are recognised at fair value through profit and loss.
Derecognition of financial liabilities takes place when the Group has fulfilled the contractual obligations.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
74
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
Within the ordinary course of business the Group routinely enters into sale and purchase transactions for commodities. The
majority of these transactions take the form of contracts that were entered into and continue to be held for the purpose of
receipt or delivery of the commodity in accordance with the Group's expected sale, purchase or usage requirements ("own
use exemption"). Such contracts are not within the scope of IFRS 9. Physical contracts to buy or sell a non-financial item,
which are fair valued using the fair value option to off-set accounting mismatch, or where own use exemption or hedge
accounting cannot be applied are fair valued through income statement.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is
designated as a hedging instrument eligible for hedge accounting, and if so, the nature of the item being hedged. The Group
designates certain derivatives as either: (1) hedges of highly probable forecast transactions (cash flow hedges); (2) hedges of
the fair value of recognised assets or liabilities (fair value hedge); or (3) hedges of net investments in foreign operations.
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged
items, whether the hedged item is one or several risk components separately or in aggregation, as well as its risk
management objective and strategy for undertaking various hedge transactions. When applying hedge accounting the Group
also documents its assessment, of whether the derivatives that are used in hedging transactions are meeting the hedge
accounting effectiveness criteria: (1) there is an economic relationship between the hedged item and the hedging instrument,
(2) the effect of credit risk does not dominate the value changes that result from that economic relationship; and (3) the hedge
ratio of the hedging relationship is the same as applied in the risk management. The Group also documents its assessment,
both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly
effective by assessing the prospective capacity of the derivatives in offsetting changes in fair values or cash flows of hedged
items. Hedge accounting is discontinued only when the hedging relationship ceases to meet the hedge effectiveness criteria.
CASH FLOW HEDGE
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are
recognised in equity. Gain or loss relating to the ineffective portion is recognised immediately in the income statement.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit
and loss (for instance when the forecasted sale that is hedged takes place). However, when the forecast transaction that is
hedged results in the recognition of a non-financial asset (for example, inventory) or a liability, the gains and losses previously
deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.
When a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity is recognised
in the income statement when the forecast transaction is ultimately also recognised in the income statement. When a
forecasted transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately
recognised in the income statement.
Fortum hedges its exposure to commodity market risks and applies hedge accounting by risk components. Hedge
accounting is applied to Nordic electricity price risk, where the Nordic area priced physical electricity delivery is commonly
divided into three risk components: (1) system price risk, (2) electricity price area difference risk (EPAD) and (3) currency risk.
For each of these separate risk components there are specific derivative contracts available, which each are being a perfect
hedge without any ineffectiveness for the associated risk component.
FAIR VALUE HEDGE
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income
statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item
for which the effective interest method is used is amortised to profit and loss for the period to maturity.
NET INVESTMENT HEDGING IN FOREIGN OPERATIONS
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the
hedging instrument relating to the effective portion of the hedge is recognised in equity; the gain or loss relating to the
ineffective portion is recognised immediately in the income statement. Gains and losses accumulated in equity are included in
the income statement when the foreign operation is disposed of.
DERIVATIVES THAT DO NOT QUALIFY FOR HEDGE ACCOUNTING
Certain derivative instruments hedging future cash flows do not qualify for hedge accounting. Fair value changes of
commodity derivative instruments are recognised in items affecting comparability in the income statement, whereas fair
value changes of interest rate and currency derivative instruments are recognised in finance costs - net.
Financial assets and liabilities in the tables below are split into categories in accordance with IFRS 9. The categories are
further divided into classes which are the basis for valuing a respective asset or liability. Further information can be found in
the Notes mentioned in the table.
See4Note 1.6 Physical settlement of contracts to buy or sell non-financial item (IFRS 9)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
75
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Financial assets by category 2019
EUR million
Financial instruments in non-current assets
Other non-current assets
Derivative financial instruments
Electricity derivatives
Interest rate and currency derivatives
Other commodity future and forward contracts
Long-term interest-bearing receivables
Financial instruments in current assets
Derivative financial instruments
Electricity derivatives
Interest rate and currency derivatives
Other commodity future and forward contracts
Trade receivables
Short-term interest-bearing receivables
Liquid funds
Total
Financial assets by category 2018
EUR million
Financial instruments in non-current assets
Other non-current assets
Derivative financial instruments
Electricity derivatives
Interest rate and currency derivatives
Other commodity future and forward contracts
Long-term interest-bearing receivables
Financial instruments in current assets
Derivative financial instruments
Electricity derivatives
Interest rate and currency derivatives
Other commodity future and forward contracts
Trade receivables
Short-term interest-bearing receivables
Liquid funds
Total
Note
20
4
21
4
23
21
24
Note
20
4
21
4
23
21
24
Amortised cost
Fair value through profit and loss
Fair value through other
comprehensive income
Hedge accounting,
fair value hedges
Non-hedge accounting
Other financial assets
Cash flow hedges
75
628
736
69
1,433
2,941
153
153
12
2
10
40
7
34
105
75
23
315
413
1
1
42
9
53
Amortised cost
Fair value through profit and loss
Fair value through other
comprehensive income
Hedge accounting,
fair value hedges
Non-hedge accounting
Other financial assets
Cash flow hedges
90
642
800
379
584
2,495
122
122
52
4
24
84
97
116
377
49
41
30
120
1
26
10
19
0
56
Total
151
13
156
10
651
82
16
34
736
384
1,433
3,666
Total
139
53
152
24
683
94
116
116
800
409
584
3,170
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
76
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Financial liabilities by category 2019
Amortised cost
Fair value through profit and loss
Hedge
accounting,
fair value hedges
Non-hedge
accounting
Other financial
liabilities
Fair value through other
comprehensive income
Net investment and Cash
flow hedges
MEUR
Financial instruments in non-current liabilities
Interest-bearing liabilities
Derivative financial instruments
Electricity derivatives
Interest rate and currency derivatives
Other commodity future and forward contracts
Financial instruments in current liabilities
Interest-bearing liabilities
Derivative financial instruments
Electricity derivatives
Interest rate and currency derivatives
Other commodity future and forward contracts
Trade payables
Other liabilities
Total
1) Fair valued part of bond in fair value hedge relationship.
Financial liabilities by category 2018
MEUR
Financial instruments in non-current liabilities
Interest-bearing liabilities
Derivative financial instruments
Electricity derivatives
Interest rate and currency derivatives
Other commodity future and forward contracts
Financial instruments in current liabilities
Interest-bearing liabilities
Derivative financial instruments
Electricity derivatives
Interest rate and currency derivatives
Other commodity future and forward contracts
Trade payables
Other liabilities
Total
1) Fair valued part of bond in fair value hedge relationship.
Note
27
4
27
4
33
33
Note
27
4
27
4
33
33
3,736
2,293 1)
25
270
316
168
4,490
Lease liabilities
89
19
22
3
11
62
49
52
281
30
47
85
4
2,318
199
281
166
108
Amortised cost
Fair value through profit and loss
Fair value through other
comprehensive income
Hedge accounting,
fair value hedges
Non-hedge accounting
Cash flow hedges
4,077
1,086
334
212
5,709
930 1)
25
955
70
2
13
65
45
77
272
235
16
641
1
0
893
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Total
6,118
52
75
11
570
147
53
52
316
168
7,562
Total
5,007
305
44
13
1,086
706
46
77
334
212
7,830
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
77
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
16 Financial assets and liabilities
by fair value hierarchy
ACCOUNTING POLICIES
Fair value measurements are classified using a fair value hierarchy i.e. Level 1, Level 2 and Level 3 that reflects the significance
of the inputs used in making the measurements.
FAIR VALUES UNDER LEVEL 1 MEASUREMENT HIERARCHY
The fair value of some commodity derivatives traded in active markets (such as publicly traded electricity options, coal, gas
and oil futures) are market quotes at the closing date.
FAIR VALUES UNDER LEVEL 2 MEASUREMENT HIERARCHY
The fair value of financial instruments including electricity derivatives traded in active markets is based on quoted market
prices at the closing date. Known calculation techniques, such as estimated discounted cash flows, are used to determine
fair value of interest rate and currency financial instruments. The fair value of interest-rate swaps is calculated as the present
value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using forward
exchange market rates at the closing date. Fair values of options are determined by using option valuation models. The fair
value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate
that is available to the Group for similar financial instruments. In fair valuation, credit spread has not been adjusted, as quoted
market prices of the instruments used are believed to be consistent with the objective of a fair value measurement.
The Group bases the calculation on existing market conditions at each closing date. Financial instruments used in Fortum
are standardised products that are either cleared via exchanges or widely traded in the market. Commodity derivatives
are generally cleared through exchanges such as for example NASDAQ Commodities and financial derivatives done with
creditworthy financial institutions with investment grade ratings.
FAIR VALUES UNDER LEVEL 3 MEASUREMENT HIERARCHY
Investments in unlisted shares classified as other investments for which the fair value can't be reliably measured. Fair value
gains and losses of other investments are booked through profit and loss.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
78
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Financial assets
EUR million
In non-current assets
Other investments
Derivative financial instruments
Electricity derivatives
Hedge accounting
Non-hedge accounting
Interest rate and currency derivatives
Hedge accounting
Non-hedge accounting
Other commodity future and forward contracts
Non-hedge accounting
Interest-bearing receivables
In current assets
Derivative financial instruments
Electricity derivatives
Hedge accounting
Non-hedge accounting
Interest rate and currency derivatives
Hedge accounting
Non-hedge accounting
Other commodity future and forward contracts
Non-hedge accounting
Interest-bearing receivables
Total
Note
20
4
4
Level 1
2019
0
2018
0
Level 2
2019
2018
Level 3
2019
75
2018
49
Netting 1)
2019
2018
Total
2019
2018
23
146
149
4
93
585
19
97
9
26
154
2
1
101
304
9
7
2
10
29
1
2
314
281
606
203
234
-8
-15
-22
-94
23
41
-1
-5
-59
-265
-83
-502
-282
-630
-87
-793
615
1,116
34
132
30
120
75
1
12
154
2
10
23
42
39
9
7
34
315
724
49
1
52
149
4
24
41
10
84
19
97
116
30
675
1) Receivables to and liabilities from electricity and other commodity exchanges arising from standard derivative contracts with same delivery period are netted.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
79
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Financial liabilities
EUR million
In non-current liabilities
Interest-bearing liabilities 2)
Derivative financial instruments
Electricity derivatives
Hedge accounting
Non-hedge accounting
Interest rate and currency derivatives
Hedge accounting
Non-hedge accounting
Other commodity future and forward contracts
Non-hedge accounting
In current liabilities
Interest-bearing liabilities
Derivative financial instruments
Electricity derivatives
Hedge accounting
Non-hedge accounting
Interest rate and currency derivatives
Hedge accounting
Non-hedge accounting
Other commodity future and forward contracts
Non-hedge accounting
Total
Note
27
4
27
4
Level 1
2019
2018
Level 2
2019
2,293
38
37
72
3
0
281
143
328
4
49
11
18
1
334
345
158
177
3,248
2018
930
257
163
42
2
0
724
566
1
45
7
2,737
Level 3
2019
2018
Netting 1)
2019
2018
-8
-15
-22
-94
-1
-5
-59
-265
-83
-502
Total
2019
2,293
30
22
72
3
10
281
85
62
4
49
2018
930
235
70
42
2
13
641
65
1
45
0
0
-282
-630
-87
-793
52
2,963
77
2,121
1) Receivables to and liabilities from electricity and other commodity exchanges arising from standard derivative contracts with same delivery period are netted.
2) Fair valued part of bonds when hedge accounting is applied (fair value hedge).
Net fair value amount of interest rate and currency derivatives is EUR 45 million, including assets EUR 172 million and liabilities EUR 127 million. Fortum has cash collaterals based on Credit Support Annex agreements with some
counterparties. At the end of December 2019 Fortum had received EUR 65 million from Credit Support Annex agreements. The received cash has been booked as short-term interest-bearing liability.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
80
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
17 Intangible assets
ACCOUNTING POLICIES
Intangible assets, except goodwill, are stated at the historical cost less accumulated amortisation and impairment losses.
They are amortised on a straight-line method over their expected useful lives.
GOODWILL
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of net identifiable assets
of the acquired subsidiary, associate or joint venture at the date of acquisition. Goodwill on acquisitions of subsidiaries is
included in intangible assets and tested yearly for impairment. Goodwill on acquisition of associates and joint ventures is
included in investments in associates and joint ventures and is tested for impairment as part of the overall balance. Goodwill is
tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not
reversed. Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity sold.
COMPUTER SOFTWARE
Acquired computer software licences are capitalised on the basis of the costs incurred when bringing the software into use.
Costs associated with developing or maintaining computer software are recognised as an expense as incurred. Costs that
are directly associated with the production of identifiable and unique software products controlled by the Group, and that
will generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include
the software development employee costs and an appropriate portion of relevant overheads. Computer software costs
recognised as assets are amortised over their estimated useful lives (three to five years).
TRADEMARKS AND LICENSES
Trademarks and licences are shown at historical cost less accumulated amortisation and impairment losses, as applicable.
Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licences over their estimated
useful lives (15–20 years).
CONTRACTUAL CUSTOMER RELATIONSHIPS
Contractual customer relationships acquired in a business combination are recognised at fair value on acquisition date. The
contractual customer relations have a finite useful life and are carried at costs less accumulated amortisation. Amortisation is
calculated using the straight-line method over the expected duration of the customer relationship.
COSTS FOR OBTAINING CUSTOMERS
Incremental costs for obtaining new customers as well as renewing existing customer contracts are capitalised as intangible
assets and amortised over the expected contract duration.
EMISSION ALLOWANCES
The Group accounts for emission allowances based on currently valid IFRS standards where purchased emission allowances
are accounted for as intangible assets at cost, whereas emission allowances received free of charge are accounted for at
nominal value. For CO2 emissions from power and heat production, a provision is recognised. CO2 emission costs is settled by
returning emission allowances. To the extent that the Group already holds allowances to cover emission costs, the provision
is measured at the carrying amount of those allowances. Any shortfall of allowances held over the obligation is valued at the
current market value of allowances. The emission cost is recognised in the income statement within materials and services.
The sales gains and losses of emission allowances not used for covering the obligation from CO2 emissions, are reported in
other income.
IMPAIRMENT TESTING OF NON-FINANCIAL ASSETS
The individual assets’ carrying values are reviewed continuously to determine whether there is any indication of impairment.
An asset's carrying amount is written down immediately to its recoverable amount if it is greater than the estimated
recoverable amount.
In addition, impairment needs are assessed and documented once a year in connection with the long-term forecasting
process. Indications for impairment are analysed separately by each division as they are different for each business and
include risks such as changes in electricity and fuel prices, regulatory/political changes relating to energy taxes and price
regulations etc. Impairment testing needs to be performed if any of the impairment indications exists. Assets that have an
indefinite useful life and goodwill, are not subject to amortisation and are tested annually for impairment.
Value in use is determined by discounting the future cash flows expected to be derived from an asset. If it's not possible to
estimate the cash flows generated by an individual asset, the impairment testing is performed on a cash-generating unit level.
Fortum defines the cash-generating unit (CGU) as the smallest business area where the tested assets generate cash flows
that are independent of the cash flows generated by other assets in other business areas. Goodwill is allocated to the cash-
generating unit or lowest level of groups of cash-generating units that benefit from the synergies of the acquired goodwill.
Cash flow projections are based on the most recent long-term forecast that has been approved by management and the
Board of Directors. Cash flows arising from future investments such as new plants are excluded unless projects have been
started. The cash outflow needed to complete the started projects is included.
Non-financial assets other than goodwill that suffered an impairment charge are reviewed for possible reversal of the
impairment at each reporting date.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
81
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS: ASSIGNED VALUES AND USEFUL LIVES IN
ACQUISITIONS
In an acquisition acquired intangible and tangible assets are fair valued and their remaining useful lives are determined.
Management believes that the assigned values and useful lives, as well as the underlying assumptions, are reasonable.
Different assumptions and assigned lives could have a significant impact on the reported amounts.
The Group has significant carrying values in property, plant and equipment, intangible assets and participations in
associated companies and joint ventures which are tested for impairment according to the accounting policy described above.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS: ASSUMPTIONS RELATED TO IMPAIRMENT
TESTING
The Group has significant carrying values in property, plant and equipment, intangible assets and participations in associated
companies and joint ventures which are tested for impairment according to the accounting policy described in the notes. The
recoverable amounts of cash-generating units have been determined based on value in use calculations. These calculations
are based on estimated future cash flows from most recent approved long-term forecast. Preparation of these estimates
requires management to make assumptions relating to future expectations. Assumptions vary depending on the business the
tested assets are in. For power and heat generation business the main assumptions relate to the estimated future operating
cash flows and the discount rates that are used in calculating the present value.
Estimates are also made in an acquisition when determining the fair values and remaining useful lives of acquired
intangible and tangible assets.
EUR million
Cost 1 January
Translation differences and other
adjustments
Acquisition of subsidiary companies
Capital expenditure
Changes in emissions rights
Disposals
Sale of subsidiary companies
Transfer to assets held for sale 1)
Reclassifications
Cost 31 December
Accumulated depreciation 1 January
Translation differences and other
adjustments
Acquisition of subsidiary companies
Disposals
Sale of subsidiary companies
Transfer to assets held for sale 1)
Reclassifications
Depreciation for the period
Accumulated depreciation 31 December
BS Carrying amount 31 December
Goodwill
2019
588
2018
613
24
0
0
0
0
0
0
0
612
0
0
0
0
0
0
0
0
0
612
-27
0
0
0
0
0
-
3
588
0
0
0
0
0
-
0
0
0
588
1) See4Note 3 Acquisitions, disposals and assets held for sale.
Goodwill in groups of cash-generating units
EUR million
Consumer Solutions
City Solutions
Russia
Total
Other intangible assets
Total
2019
869
2018
796
0
12
75
14
-43
0
-12
40
954
370
-1
0
-43
0
-1
14
84
422
531
-21
22
53
16
-24
-6
-
35
869
325
-12
0
-24
0
-
0
81
370
499
2019
1,457
24
12
75
14
-43
0
-12
40
1,566
2018
1,409
-49
22
53
16
-24
-6
-
37
1,457
370
325
-1
0
-43
0
-1
14
84
422
1,143
-12
0
-24
0
-
0
81
370
1,087
2019
228
208
176
612
2018
226
207
154
588
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
82
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
The net operating assets of the CGUs and group of CGUs with allocated goodwill are tested yearly for possible
impairment. The tested net operating assets include both the goodwill and fair value adjustments arising from the
acquisition. At 31 December 2019, the recoverable values were greater than their carrying values and therefore no
impairments were booked.
The Group has considered the sensitivity of key assumptions as part of the impairment testing. When doing this
any consequential effect of the change on the other variables has also been considered. The calculations are most
sensitive to changes in estimated future EBITDA levels and changes in discount rate.
Management estimates that a reasonably possible change in the discount rate used or in future earnings would
not cause the carrying amount to exceed its recoverable amount in any of the tested units.
Based on the sensitivity analysis done, if the estimated future EBITDA were 10% lower than management's
estimates or pre-tax discount rate applied was 10% higher than the one used, the Group would not need to
recognise impairment losses for tested items.
Other intangible assets
Other intangible assets include capitalised sales commissions for customer acquisition with a carrying amount
totalling EUR 79 million at the end of 2019 (2018: 63). The carrying amount consists of capitalised sales
commission costs totalling EUR 186 million (2018: 111) and accumulated depreciations totalling EUR 108 million
(2018: 49).
Other items in other intangible assets include customer contracts, costs for software products and software
licenses, bought emission rights and emission rights received free of charge, which are recognised to the lower of
fair value and historical cost.
Impairment testing
Key assumptions used in impairment testing are presented below as well as the basis for determining the value
of each assumption. Assumptions are based on internal and external data that are consistent with observable
market information, when applicable. The assumptions are determined by management as part of the long-term
forecasting process for the Fortum Group.
Key assumptions
Power market development, recycling and waste solutions
market development
Regulation framework
Utilisation of power plants and treatment facilities
Forecasted maintenance investments
Discount rate
Basis for determining the value for key assumptions
Historical analysis and prospective forecasting
Current market setup and prospective forecasting
(e.g. CSA mechanism in Russia)
Past experience, technical assessment and forecasted market
development
Past experience, technical assessment and planned
maintenance work
Mostly market based information
The cash flows used in determining the value in use for each cash generating unit are based on the most recent
long-term forecasts and are determined in local currency. The period covered by cash flows is related to the useful
lives of the assets being reviewed for impairment. The growth rate used to extrapolate the cash flow projections
until the end of assets' useful lives is in line with the assumed inflation. In Russia the generation capacity built after
2007 under the Russian Government's Capacity Supply Agreements receives guaranteed capacity payments for a
period of 10 years after commissioning.
The discount rate takes into account the risk profile of the country in which the cash flows are generated. There
have not been any major changes in the discount rate components or in the methods used to determine them.
The long-term pre-tax discount rate used were: City Solutions 7.3%, Consumer Solutions 5.2%-7% depending on
location and Russia 11.4%.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
83
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
18 Property, plant and equipment and right-of-use assets
ACCOUNTING POLICIES
Property, plant and equipment comprise mainly power and heat producing buildings and machinery, waterfall rights, district
heating network and buildings and machinery as well as landfill sites and treatment areas used in waste treatment operations.
Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment
losses as applicable in the consolidated balance sheet. Historical cost includes expenditure that is directly attributable to
the acquisition of an item and capitalised borrowing costs. Cost may also include transfers from equity of any gains or losses
on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Acquired assets on the
acquisition of a new subsidiary are stated at their fair values at the date of acquisition.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can
be measured reliably. All other repairs and maintenance expenses are charged to the income statement during the financial
period in which they are incurred.
Additionally the cost of an item of property, plant and equipment includes the estimated cost of its dismantlement,
removal or restoration.
See4Note 30 Other provisions for information about asset retirement obligations,4Note 29, Nuclear related assets and
liabilities, for information about provisions for decommissioning nuclear power plants and4Note 34, Leases, for information
about right-of-use assets.
Land, water areas and waterfall rights are not depreciated since they have indefinite useful lives. Depreciation on other
assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful
lives, as follows:
Hydro power plant buildings, structures and machinery
Thermal power plant buildings, structures and machinery
Nuclear power plant buildings, structures and machinery
CHP power plant buildings, structures and machinery
Recycling and waste treatment facility buildings, structures and machinery
Solar and Wind power plant structures and machinery
District heating network
Other buildings and structures
Other tangible assets
Other machinery and equipment
Other non-current investments
40–50 years
25 years
25 years
15–25 years
15–40 years
25 years
30–40 years
20–40 years
20–40 years
3–20 years
5–10 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each closing date. An asset’s carrying
amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount. See further information on the impairment testing in4Note 17 Intangible assets.
GOVERNMENT GRANTS
Grants from the government are recognised at their fair value when there is a reasonable assurance that the grant will be
received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and
recognised in the income statement over the period necessary to match them with the costs that they are intended to
compensate. Government grants relating to the purchase of property, plant and equipment are deducted from the acquisition
cost of the asset and are recognised as income by reducing the depreciation charge of the asset they relate to.
BORROWING COSTS
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the
cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Qualifying assets are
assets that necessarily take a substantial period of time to get ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
84
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
EUR million
Cost 31 December
Impact from change in accounting principle (IFRS 16) 1)
Cost 1 January
Translation differences and other adjustments
Acquisition of subsidiary companies
Capital expenditure
Additions and decreases in right-of-use assets
Nuclear asset retirement cost
Disposals
Sale of subsidiary companies
Transfer to assets held for sale 2)
Reclassifications
Cost 31 December
Accumulated depreciation 1 January
Translation differences and other adjustments
Acquisition of subsidiary companies
Disposals
Sale of subsidiary companies
Transfer to assets held for sale 2)
Depreciation for the period
Reclassifications
Accumulated depreciation 31 December
BS Carrying amount 31 December
1) See additional information in4Note 1 Significant accounting policies and4Note 34 Leases.
2) See4Note 3 Acquisitions, disposals and assets held for sale.
Property, plant and equipment that are subject to restrictions in the
form of real estate mortgages amount to EUR 139 million (2018: 158).
See4Note 36 Pledged assets and contingent liabilities.
Borrowing costs of EUR 9 million were capitalised in 2019 (2018: 10).
The interest rate used for capitalisation varied between 2%-7% (2018:
2%-6%).
Land and waterfall rights
2018
2,694
-
2,694
-104
0
1
-
0
0
-1
-
1
2,591
2019
2,591
27
2,617
-55
0
12
4
0
-1
-4
-6
11
2,578
Buildings, plants and
structures
2019
3,851
57
3,908
114
1
8
25
0
-29
-22
-71
170
4,103
2018
3,805
-
3,805
-208
3
5
-
0
-33
-3
-
281
3,851
Machinery and
equipment
2019
7,979
12
7,992
253
3
181
3
-14
-85
-1
-250
386
8,467
2018
8,335
-
8,335
-328
8
3
-
16
-30
-132
-
107
7,979
0
0
0
0
0
0
2
0
1
2,577
0
0
0
0
0
-
0
0
0
2,591
1,678
28
0
-27
-18
-27
130
0
1,765
2,339
1,629
-86
0
-33
0
-
113
54
1,678
2,173
3,427
83
0
-54
-1
-64
356
-4
3,745
4,721
3,349
-177
0
-29
0
-
340
-55
3,427
4,552
Other tangible assets
2019
170
0
170
-1
5
2
0
0
-3
0
-14
42
201
135
-1
0
-3
0
-2
3
1
132
68
2018
163
-
163
-3
0
0
-
0
0
0
-
9
170
133
-2
0
0
0
-
3
1
135
35
Advances paid and
construction in progress
2018
626
-
626
-82
1
522
-
0
0
0
-
-436
631
2019
631
0
631
6
4
435
0
0
0
0
-30
-627
419
0
0
0
0
0
0
0
0
0
419
0
0
0
0
0
-
0
0
0
631
Total
2019
15,222
96
15,319
317
12
638
31
-14
-118
-27
-371
-18
15,768
5,241
111
0
-84
-19
-93
491
-3
5,644
10,123
2018
15,623
-
15,623
-725
14
532
-
16
-64
-136
-
-37
15,222
5,113
-265
0
-62
0
-
455
0
5,241
9,981
Capitalised borrowing costs
EUR million
1 January
Translation differences and other adjustments
Increases / disposals
Sale of subsidiary companies
Transfer to assets held for sale1)
Reclassification
Depreciation
31 December
1) See4Note 3 Acquisitions, disposals and assets held for sale.
Buildings, plants and
structures
2019
56
5
0
0
0
1
-2
59
2018
59
-6
0
0
-
3
0
56
Machinery
and equipment
2019
146
17
1
0
-2
8
-8
162
Advances paid and
construction in progress
2018
12
-1
10
0
-
-9
0
12
2019
12
0
8
0
0
-17
0
3
2018
175
-20
0
-4
-
6
-11
146
Total
2019
214
22
9
0
-3
-8
-11
224
2018
245
-26
10
-4
-
0
-11
214
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
85
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
19 Participations in associated companies and joint
ventures
ACCOUNTING POLICIES
The Group’s interests in associated companies and jointly controlled entities are accounted for using the equity method of
accounting. Assets acquired and liabilities assumed in the investment in associates or joint ventures are measured initially
at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the
identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of
the associate or joint venture acquired, the difference is recognised directly in the income statement.
The Group’s share of its associates or joint ventures post-acquisition profits or losses after tax and the expenses related
to the adjustments to the fair values of the assets and liabilities assumed are recognised in the income statement. The
cumulative post-acquisition movements are adjusted against the carrying amount of the investment. The Group's share of
post-acquisition adjustments to associates or joint ventures equity that has not been recognised in the associates or joint
ventures income statement, is recognised directly in Group's shareholder's equity and against the carrying amount of the
investment.
When the Group’s share of losses in an associate or a joint venture equals or exceeds its interest in the associate or joint
venture, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate or joint venture.
Unrealised gains on transactions between the Group and its associates or joint ventures are eliminated to the extent of
the Group’s interest in the associate or joint venture. Unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred. Accounting policies of associates or joint ventures have been changed
where necessary to ensure consistency with the policies adopted by the Group.
If more recent information is not available, the share of the profit of certain associated or joint venture companies is
included in the consolidated accounts based on the latest available information.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Management is required to make significant judgements when assessing the nature of Fortum's interest in its investees and
when considering the classification of Fortum's joint arrangements. In the classification, emphasis has been put on decision-
making, legal structure and financing of the arrangements.
19.1 Principal associated companies and joint ventures
Nature of the relationship
Forsmarks
OKG AB
Co-owned
nuclear
company
Kraftgrupp AB Kemijoki Oy
Co-owned
hydro
company
Co-owned
nuclear
company
Classification
Segment
Associated
company
Generation
Associated
company
Associated
company
Generation Generation
Domicile
Ownership interest, % 1)
Votes, %
Sweden
46
46
Sweden
26
26
Finland
58
28
Uniper SE
International
energy
company
(listed)
Associated
company
Other
Operations
Germany
49.99
49.99
TGC-1
Energy
company
(listed)
TVO Oyj
Co-owned
nuclear
company
Stockholm
Exergi AB
Power
and heat
company
Associated
company
Joint
venture
Russia Generation
Russia
29
29
Finland
28
28
Joint
venture
City
Solutions
Sweden
50
50
1) Kemijoki and TVO have different series of shares. The ownership interest varies due to the changes in equity assigned to the different share
series. The ownership interests for 2018 for Kemijoki Oy and TVO were 58% and 25%, respectively.
Shareholdings in power production companies
Power plants are often built jointly with other power producers. Under the consortium agreements, each owner
is entitled to electricity in proportion to its share of ownership or other agreements and each owner is liable
for an equivalent portion of costs. The production companies are not profit making, since the owners purchase
electricity at production cost including interest cost and production taxes. The share of profit of these companies
is mainly IFRS adjustments (e.g. accounting for nuclear related assets and liabilities) and depreciations on fair
value adjustments from historical acquisitions since the companies are not profit making under local accounting
principles.
Fortum has material shareholdings in such power production companies (mainly nuclear and hydro) that are
consolidated using equity method either as associated companies (OKG AB, Forsmarks Kraftgrupp AB and
Kemijoki Oy) or in some cases as joint ventures (Teollisuuden Voima Oyj (TVO)).
Management judgement is required when testing the carrying amounts for participations in associated companies and
In Sweden nuclear production company shareholdings are 45.5% ownership of the shares in OKG AB and
joint ventures for impairment. See4Note 17 Intangible assets for more information.
25.5% ownership of the shares in Forsmarks Kraftgrupp AB. Excluding non-controlling interests in the subsidiaries,
Fortum’s participation in the companies are 43.4% and 22.2% respectively, which reflects the share of electricity
produced that Fortum can sell further to the market. The minority part of the electricity purchased is invoiced
further to each minority owner according to their respective shareholding and treated as pass-through.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
86
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
In Finland Fortum has an ownership in power production company TVO that has three series of shares which
entitle the shareholders to electricity produced in the different power plants owned by TVO.
Shares in series A entitle to electricity produced in nuclear power plants Olkiluoto 1 and 2 and Fortum owns
26.6% of these shares. Series B entitles to electricity in the nuclear power plant presently being built, Olkiluoto 3,
and Fortum's ownership in this share series is 25%. Series C entitles to electricity produced in TVO’s share of the
coal condensing power plant Meri-Pori. Fortum acquired on 1 January 2019 all remaining C-shares of TVO and
owns now 100% of these shares. The Meri-Pori power plant is mainly used in Fingrid’s capacity reserve and as
back-up capacity. The Meri-Pori power plant is accounted for as a joint operation in Fortum.
See also Associated companies in4Note 37 Legal actions and official proceedings and Joint operations in the
accounting principles in4Note 18 Property, plant and equipment and right-of-use assets.
The most significant hydro production company shareholding is 63.8% of the hydro shares and 26.7% of
the monetary shares in Kemijoki Oy. Each owner of hydro shares is entitled to the hydropower production in
proportion to its hydro shareholding.
Shareholding in Uniper
During 2018 Fortum acquired 49.99% of the shares in Uniper, see4Note 3 Acquisitions, disposals and assets
held for sale. As Uniper is a listed company and publishes its interim reports later than Fortum, Fortum’s share of
Uniper's results is accounted for with a time-lag of one quarter with potential adjustments.
Shareholdings in other principal associated companies and joint ventures
Fortum has also other shareholdings in listed companies such as Territorial Generating Company 1 (TGC-1). The
shareholding in TGC-1 is accounted for as an associated company as Fortum has representatives in the Board of
Directors of the company. The share of profit of TGC-1 is accounted for based on previous quarter information
since updated interim information is not normally available.
In Sweden Fortum has a 50% ownership in Stockholm Exergi AB (publ) that is co-owned with the City of
Stockholm through Stockholms Stadshus AB. Stockholm Exergi produces district heating, district cooling and
electricity and supplies heat and cooling to customers in the Stockholm area.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
87
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Summarised financial information of the principal associated companies in 2019
Summarised financial information of the principal associated companies in 2018
EUR million
Balance sheet
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Equity
Attributable to the owners of the parent
Attributable to NCI
Statement of comprehensive income
Sales
Profit or loss
Attributable to the owners of the parent
Attributable to NCI
Total comprehensive income
Attributable to the owners of the parent
Attributable to NCI
Reconciliation to carrying amount in Fortum
Group
Group's interest in the equity of the associate
1 January 2019
Change in share of profit and OCI items
Dividends received
Translation differences and other adjustments
Group's interest in the equity of the associate
31 December 2019
Fair values on acquisitions and different
accounting principles 1)
Carrying amount 31 December 2019
Market value of listed shares 2)
OKG AB
31 Dec 2018
683
230
827
73
13
13
0
1 Jan 2018 -
31 Dec 2018
289
1
1
0
1
1
0
Forsmarks
Kraftgrupp AB
31 Dec 2018
2,473
388
2,704
124
33
33
0
Uniper SE
group
Kemijoki Oy
TGC-1 group
31 Dec 2018 30 Sept 2019 30 Sept 2019
2,162
312
395
152
1,926
1,775
152
23,917
16,728
12,507
16,012
12,125
11,547
578
474
4
295
131
52
52
0
1 Jan 2018 -
31 Dec 2018
536
-1
-1
0
-1
-1
0
1 Jan 2018 -
31 Dec 2018
48
-5
-5
0
-5
-5
0
1 Oct 2018 -
30 Sept 2019
77,895
1,085
1,107
-22
856
850
6
1 Oct 2018 -
30 Sept 2019
1,357
176
173
3
178
175
3
6
0
0
0
6
-6
0
9
0
0
0
8
77
86
33
-3
0
0
30
153
182
5,512
473
-165
0
5,820
-1,514
4,306
5,399
421
54
-10
56
523
-18
505
209
1) Impact of different accounting principles include mainly IFRS adjustments for Nuclear liabilities and assets, capitalised borrowing costs and for
Uniper the derecognition of goodwill in Uniper's balance sheet and fair value adjustment for the acquired assets and liabilities. For additional
information about the Uniper purchase price allocation, see4Note 3 Acquisitions, disposals and assets held for sale. Fortum records its share of
nuclear related assets and liabilities in its nuclear associated companies according to equity method. The basis for recognition is similar as for
Loviisa power plant, see accounting principles in4Note 29 Nuclear related assets and liabilities.
2) The market quotation for the TGC-1 share is affected by the low liquidity of the TGC-1 shares in the Russian stock exchanges. During 2019 trading
volumes of TGC-1 shares in relation to the number of shares of the company were approximately 19% (2018: 11%).
EUR million
Balance sheet
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Equity
Attributable to the owners of the parent
Attributable to NCI
Statement of comprehensive income
Sales
Profit or loss
Attributable to the owners of the parent
Attributable to NCI
Total comprehensive income
Attributable to the owners of the parent
Attributable to NCI
Reconciliation to carrying amount in Fortum
Group
Group's interest in the equity of the associate
1 January 2018
Change in share of profit and OCI items
Dividends received
Acquired net assets
Translation differences and other adjustments
Group's interest in the equity of the associate
31 December 2018
Fair values on acquisitions and different
accounting principles
Difference compared to acquisition price
Carrying amount 31 December 2018
Market value of listed shares
OKG AB
31 Dec 2017
581
273
760
82
13
13
0
1 Jan 2017–
31 Dec 2017
426
1
1
0
1
1
0
6
0
0
0
0
6
-6
-
0
Forsmarks
Kraftgrupp AB
31 Dec 2017
2,336
412
2,603
112
34
34
0
Uniper SE
group
Kemijoki Oy
TGC-1 group
31 Dec 2017 30 Sept 2018 30 Sept 2018
1,730
258
309
138
1,540
1,429
112
33,213
27,311
21,070
27,819
11,635
11,027
608
472
8
352
71
57
57
0
1 Jan 2017–
31 Dec 2017
637
-1
-1
0
-1
-1
0
1 Jan 2017–
31 Dec 2017
42
-11
-11
0
-11
-11
0
1 July 2018–
30 Sept 2018
17,091
1
-4
5
-10
1
-11
1 Oct 2017–
30 Sept 2018
1,229
132
127
5
130
125
5
9
0
0
0
0
9
82
-
90
41
-7
0
0
0
33
155
-
188
-
0
0
5,512
0
5,512
-
-1,544
3,968
4,135
454
40
-7
0
-66
421
-18
-
403
114
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
88
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Summarised financial information of the principal joint ventures in 2019 and 2018
EUR million
Balance sheet
Non-current assets
Current assets
of which cash and cash equivalents
Non-current liabilities
of which non-current interest-bearing liabilities
Current liabilities
of which current financial liabilities
Equity
Attributable to the shareholders of the company
Attributable to NCI
Statement of comprehensive income
Sales
Depreciation and amortisation
Interest income
Interest expense
Income tax expense or income
Profit or loss
Other comprehensive income
Total comprehensive income
Attributable to the shareholders of the company
Reconciliation to carrying amount in Fortum Group
Group's interest in the equity of the joint venture 31 December
Impact from change in accounting principle (IFRS 9)
Group's interest in the equity of the joint venture 1 January
Change in share of profit and OCI items
Dividends received
Investments
Divestments and capital returns
Translation differences and other adjustments
Group's interest in the equity of the joint venture 31 December
Fair values on acquisitions and different accounting principles 1)
Carrying amount 31 December
2019
TVO Oyj group Stockholm Exergi AB group
31 Dec 2019
2,541
305
0
1,356
983
365
223
1,126
1,125
1
30 Sept 2019
7,200
669
203
5,466
4,472
636
514
1,767
1,767
0
2018
TVO Oyj group Stockholm Exergi AB group
31 Dec 2018
2,581
313
15
1,271
903
418
246
1,205
1,205
0
30 Sept 2018
7,231
420
115
5,108
4,033
776
603
1,767
1,767
0
1 Oct 2018–30 Sept 2019
287
-46
13
-36
0
29
-18
10
10
1 Jan 2019–31 Dec 2019
658
-199
0
-18
-11
41
-17
24
24
1 Oct 2017–30 Sept 2018
338
-55
12
-44
0
-10
7
-2
-2
1 Jan 2018–31 Dec 2018
683
-138
0
-17
-5
113
2
116
116
448
-
448
1
0
0
0
2
451
-9
442
602
-
602
12
-40
0
0
-11
563
-63
500
280
145
425
-1
0
25
-2
0
448
-9
439
608
0
608
58
-39
0
0
-25
602
-68
535
1) Impact of different accounting principles include mainly IFRS adjustments for Nuclear liabilities and assets and capitalised borrowing costs. Fortum records its share of nuclear related assets and liabilities in its nuclear associated companies according to equity method. The basis for recognition is similar
as for Loviisa power plant, see accounting principles in4Note 29 Nuclear related assets and liabilities.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
89
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
19.2 Participations and shares of profits in associated companies and joint ventures
Participations in associated companies and joint ventures on the balance sheet
EUR million
Principal associates
Principal joint ventures
Other associates
Other joint ventures
BS Total
2019
5,079
942
65
348
6,435
2018
4,649
973
60
295
5,978
Changes in participation during the year
EUR million
Historical cost
Historical cost 31 December
Impact from change in accounting principle (IFRS 9)
Historical cost 1 January
Translation differences and other adjustments
Investments
Reclassifications
Divestments and capital returns
Historical cost 31 December
Equity adjustments
Equity adjustments 1 January
Translation differences and other adjustments
Share of profits of associates and joint ventures
Reclassifications
Divestments
Dividends received
OCI items associates and joint ventures
Equity adjustments 31 December
2019
2018
Associated
companies
Joint
ventures
Associated
companies
Joint
ventures
4,549
-
4,549
27
0
-1
0
4,576
160
29
696
-11
0
-176
-130
569
831
-
831
12
75
0
-29
889
437
-11
48
-4
2
-63
-8
401
680
20
699
-33
3,969
-3
-83
4,549
190
-29
-32
41
0
-10
1
160
598
145
743
-17
97
20
-12
831
432
-19
71
0
0
-51
5
437
Carrying amount at 31 December
5,144
1,290
4,709
1,269
During 2019 Fortum received EUR 239 million (2018: 61) in dividends from associates and joint ventures of
which EUR 165 million (2018:0) was received from Uniper and EUR 40 million (2018: 39) was received from
Stockholm Exergi.
For information about investments and divestments of shares in associated companies, see4Note 3 Acquisitions,
disposals and assets held for sale.
Share of profit of associates and joint ventures
EUR million
Principal associates
Uniper SE
OKG AB
Forsmarks Kraftgrupp AB
Kemijoki Oy
TGC-1
Principal associates, total
Principal joint ventures
Stockholm Exergi AB
TVO Oyj
Principal joint ventures, total
Other associates
Other joint ventures
IS Total
2019
2018
632
12
-3
-5
54
690
24
6
30
5
18
744
-2
-58
-7
-9
40
-35
61
1
62
3
9
38
There are no unrecognised share of losses of associated companies and joint ventures.
Uniper
Uniper’s share of profit is based on reported Net income/loss attributable to shareholders of Uniper SE including
impact from Non-operating results e.g. fair value measurement of derivative financial instruments which are
subject to volatility. Non-operating results impacted the share of profits in 2019 with EUR 392 million (2018: 79).
Fortum's 2019 share of profits from Uniper include Fortum’s share of Uniper’s Q4 2018 and Q1-Q3 2019 results
and the impact from reinstatement of UK capacity market in October 2019, as well as EUR 31 million reversal of
the fair value adjustment. The remaining fair value adjustment post tax at 31 December 2019 amounted to EUR
582 million. See more information in4Note 3 Acquisitions, disposals and assets held for sale.
Other associates and joint ventures
In 2019 the share of profit from Stockholm Exergi includes the EUR -22 million effect of the impairment booked in
Stockholm Exergi relating to the early decommissioning of combined heat and power (CHP) plant 6, CHP6.
Fortum reassessed assumptions used for all nuclear related assets and liabilities at 31 December 2018.
Assumptions were changed for the respective balances of the co-owned nuclear companies in Finland and
Sweden, i.e. Teollisuuden Voima Oyj (TVO), Oskarshamn Kraft Grupp AB (OKG), and Forsmarks Kraftgrupp
AB. The total impact of the change to share of profit from these associated companies and joint ventures was
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
90
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
EUR -37 million, net of tax, and including additional nuclear waste liability related to legacy waste obligations for
Swedish nuclear. The net profit impact from all these nuclear related adjustments was close to zero. For additional
information see4Note 29 Nuclear related assets and liabilities.
19.3 Transactions and balances
Associated company transactions
EUR million
Sales to associated companies
Interest income on loan receivables to associated companies
Purchases from associated companies
Joint venture balances
EUR million
Receivables from joint ventures
Long-term interest-bearing loan receivables
Trade receivables
Other receivables
2019
1
12
259
2018
0
12
256
Liabilities to joint ventures
Long-term loan payables
Trade payables
Other payables
2019
2018
61
68
18
293
21
3
60
53
18
293
31
14
Purchases from associated companies include mainly purchases of nuclear and hydro power at production cost
including interest costs and production taxes.
Associated company balances
EUR million
Receivables from associated companies
Long-term interest-bearing loan receivables
Trade receivables
Liabilities to associated companies
Long-term loan payables
Trade payables
2019
2018
564
0
1
0
581
1
0
2
For more info about interest-bearing receivables from associated companies, see4Note 21 Interest-bearing
receivables.
Joint venture transactions
EUR million
Sales to joint ventures
Purchases from joint ventures
2019
23
113
2018
39
124
Purchases from joint ventures include mainly purchases of nuclear and hydro power at production cost including
interest costs and production taxes.
For more info about interest-bearing receivables from joint ventures, see4Note 21 Interest-bearing receivables.
20 Other non-current assets
EUR million
Other investments
Interest-free receivables
BS Total
2019
75
75
151
2018
49
90
139
Other investments, i.e. shares which are not classified as associated companies or joint ventures, consist mainly
of shares in unlisted companies of EUR 75 million (2018: 49). This includes Fortum's indirect shareholding in
Fennovoima of EUR 33 million (2018: 33).
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
91
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
21 Interest-bearing receivables
22 Inventories
ACCOUNTING POLICIES
Inventories mainly consist of fuels consumed in the production process or in the rendering of services. Inventories are stated
at the lower of cost and net realisable value being the estimated selling price for the end product, less applicable variable
selling expenses and other production costs. Cost is determined using the first-in, first-out (FIFO) method.
Inventories which are acquired primarily for the purpose of trading are stated at fair value less selling expenses.
EUR million
Nuclear fuel
Coal
Oil
Biofuels
Materials and spare parts
Other inventories
BS Total
Write-downs in inventories amounted to EUR 4 million (2018: 6).
2019
66
44
8
4
58
50
230
2018
72
52
7
4
56
43
233
EUR million
Long-term loan receivables from associated companies
Long-term loan receivables from joint ventures
Other long-term interest bearing receivables
BS Total long-term interest-bearing receivables
Collateral arrangement securities
Other short-term interest-bearing receivables
BS Total short-term interest-bearing receivables
Total
2019
2018
Carrying
amount
564
61
26
651
281
103
384
1,035
Fair value
599
69
27
695
281
103
384
1,079
Carrying
amount
581
60
43
683
-
409
409
1,092
Fair value
601
68
43
712
-
409
409
1,121
Long-term interest-bearing receivables include receivables from associated companies and joint ventures of
EUR 625 million (2018: 641). These receivables include EUR 558 million (2018: 575) from Swedish nuclear
companies, OKG AB and Forsmarks Kraftgrupp AB, which are mainly funded with shareholder loans, pro rata each
shareholder’s ownership.
During Q1 2019 Fortum entered into a non-cash collateral arrangement to release pledged cash from Nordic
power exchange. Fortum has borrowed securities which have replaced pledged cash. At the end of December
2019 Fortum booked a short-term interest-bearing receivable of EUR 281 million and a corresponding short-term
liability. See4Note 27 Interest-bearing liabilities.
Other interest-bearing receivables include EUR 57 million (2018: 70) from SIBUR, a Russian gas processing and
petrochemicals company regarding divested shares of OOO Tobolsk CHP.
Short-term interest-bearing receivables include EUR 65 million (2018: 379) restricted cash mainly given as
collateral for commodity exchanges. The European Market Infrastructure Regulation (EMIR) came into force in
2016 requiring fully-backed guarantees.
For further information regarding credit risk management, see4Note 4.7 Credit risk.
Interest-bearing receivables
EUR million
Long-term loan receivables
Short-term receivables
Total
Effective
interest
rate, %
1.8
1.1
1.6
Carrying
amount
2019
651
384
1,035
Repricing
Under
1 year
607
384
991
1–5
years
21
Over 5
years
23
21
23
Fair
value
2019
668
384
1,052
Carrying
amount
2018
683
409
1,092
Fair
value
2018
712
409
1,121
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
92
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
23 Trade and other receivables
ACCOUNTING POLICIES
Trade receivables include revenue based on an estimate of electricity, heat and cooling already delivered but not yet
measured and not yet invoiced.
Impairment losses for trade receivables are calculated according to the expected credit loss (ECL) model. An allowance
is made on the balance sheet for the expected future credit losses and remains on the balance sheet until it is written off as
a credit loss. Allowances may remain on the balance sheet for several years pending the outcome of collection processes
and court proceedings. Write-off policies differ by country depending on local legislation and assessment of recovery
possibilities. For large trade receivables, ECL is calculated for the individual customer based on the probability of default
and expected recovery rate. These estimates are based on the customer's rating and adjusted if there are indications of
decreased creditworthiness, e.g. based on payment behaviour. ECL for trade receivables from small customers are calculated
on portfolio basis by country and business segment. The credit loss allowances are based on historical analysis of losses when
possible, or on average default rates for customers based on externally available information. These rates are adjusted if there
are any forward-looking indicators showing changes in expected credit losses. Trade receivables overdue more than 180 days
are generally considered to be credit-impaired and allowances are made for the full amount, adjusted for expected recovery
rates.
EUR million
Trade receivables
Accrued interest income
Accrued income and prepaid expenses
Cash settlements for futures
Other receivables
BS Total
2019
736
1
106
177
156
1,176
2018
800
1
59
592
168
1,620
Accrued income and prepaid expenses include the receivable of EUR 51 million related to the periodisation of the
Finnish nuclear waste management fund target, for additional information see4Note 29 Nuclear relates assets
and liabilities. Cash settlements for futures has decreased mainly due to lower electricity prices for the hedging
period. Futures are cash settled daily on Nasdaq Commodities exchange.
Trade receivables
Ageing analysis of trade receivables
EUR million
Not past due
Past due 1–30 days
Past due 31–90 days
Past due 91–180 days
Past due more than 181 days
Total
2019
Expected
credit loss
allowance
3
2
5
5
84
99
Expected
credit loss
rate, %
0
3
28
45
88
12
Gross
653
58
18
11
95
836
2018
Expected
credit loss
allowance
2
2
4
11
66
85
Expected
credit loss
rate, %
0
3
24
73
86
10
Gross
712
63
17
15
77
885
Changes in expected credit loss allowance
EUR million
1 January
Expected credit loss allowance recognised during the period
Write-offs
Translation differences and other changes
31 December
2019
85
7
-2
9
99
The majority of impaired trade receivables EUR 72 million (2018: 61) relate to the Russia segment.
Trade receivables by currency (Gross)
EUR million
EUR
SEK
RUB
NOK
PLN
Other
Total
2019
219
118
204
175
95
25
836
2018
64
27
-5
-2
85
2018
234
137
197
217
84
16
885
Trade receivables are arising from a large number of customers mainly in EUR, SEK, RUB and NOK mitigating the
concentration of risk.
For further information regarding credit risk management and credit risks, see4Counterparty risks in the
Operating and financial review and4Note 4.7 Credit risk.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
93
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
24 Liquid funds
25 Share capital
ACCOUNTING POLICIES
Cash and cash equivalents in Liquid funds include cash in hand, deposits held at call with banks and other short-term, highly
liquid investments with maturities of three months or less. Deposits and securities with maturity more than 3 months include
fixed term deposits and commercial papers with maturity more than three months but less than twelve months. Deposits and
securities are measured at amortised cost.
Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. Cash collaterals or otherwise
restricted cash are treated as short-term interest-bearing receivables.
EUR million
Cash at bank and in hand
Deposits and securities with maturity under 3 months
Cash and cash equivalents
Deposits and securities with maturity more than 3 months
BS Total 1)
2019
118
1,239
1,356
76
1,433
2018
203
353
556
29
584
1) Excluding cash balances of EUR 2 million relating to assets held for sale at 31 December 2019. See4Note 3 Acquisitions, disposals and assets
held for sale.
Liquid funds consists of deposits and cash in bank accounts amounting to EUR 893 million and commercial
papers of EUR 540 million. The average interest rate on deposits and securities excluding Russian deposits on 31
December 2019 was -0.13% (2018: -0.11%). Liquid funds held by PAO Fortum amounted to EUR 201 million (2018:
317), of which EUR 151 million (2018: 316) was held as bank deposits. The average interest rate for this portfolio
was 3.9% at the balance sheet date.
Liquid funds totalling EUR 1,099 million (2018: 168) are placed with counterparties that have an investment
grade rating. In addition, EUR 334 million (2018: 416) have been placed with counterparties separately reviewed
and approved by the Group's credit control department.
In the fourth quarter of 2019, Fortum signed new committed credit facilities of an additional EUR 8.3 billion for
the purchase of Uniper shares announced on 8 October 2019. At the end of December 2019, the committed and
undrawn credit facilities amounted to EUR 10.1 billion (Dec 31 2018: 1.8). On 7 January 2020, Fortum cancelled
EUR 3 billion of these new committed credit facilities.
For further information regarding credit risk management and credit risks, see4Note 4.7 Credit risk.
EUR million
Registered shares 1 January
Cancellation of Treasury shares
Registered shares 31 December
2019
2018
Number of shares
888,294,465
-
888,294,465
Share
capital Number of shares
888,367,045
3,046
-
72,580
888,294,465
3,046
Share
capital
3,046
-
3,046
Fortum Corporation has one class of shares. By the end of 2019, a total of 888,294,465 shares had been issued.
Each share entitles the holder to one vote at the Annual General Meeting. All shares entitle holders to an equal
dividend. At the end of 2019 Fortum Corporation’s share capital, paid in its entirety and entered in the trade
register, was EUR 3,046,185,953.00.
In the merger of Länsivoima Oyj (former Lounais-Suomen Sähkö Oy) to Fortum Corporation in 2000, those
shareholders of Länsivoima Oyj that did not produce their share certificates and did not request their rights
to be registered in the book-entry system, received their respective shares of Fortum Corporation as merger
consideration to a joint book-entry account opened on their behalf (the “Joint Account”). The Annual General
Meeting 2018 of Fortum Corporation decided, that the rights to all such shares entered in the Joint Account and
to the rights attached to such shares that had not been requested to be registered in the book-entry system prior
to the decision by the Annual General Meeting 2018, were forfeited. In addition to the shares, the rights attached
to such shares, such as undrawn dividend, were forfeited. The provisions applicable to treasury shares held by the
company were applied to the forfeited shares. On 17 December 2018, Board of Directors decided to cancel all
these 72,580 Fortum shares owned by the company without decreasing the share capital. The cancellation was
entered in the Trade Register on 21 December 2018.
Fortum Corporation's shares are listed on Nasdaq Helsinki. The trading code is FORTUM (FUM1V until 25 January
2017). Fortum Corporation's shares are in the Finnish book entry system maintained by Euroclear Finland Ltd.
Details on the President and CEO and other members of the Fortum Executive Management Team's shareholdings
and interest in the equity incentive schemes is presented in4Note 11 Employee benefits and Board remuneration.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
94
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
25.1 Authorisations from the Annual General Meeting 2019
On 26 March 2019, the Annual General Meeting decided to authorise the Board of Directors to decide on the
repurchase and disposal of the company's own shares up to a maximum of 20,000,000 shares, which corresponds
to approximately 2.25% of all the shares in the company. It was also decided that the repurchases or disposals
could not be made for the purposes of the company's incentive and remuneration schemes. The authorisation
cancelled the authorisation resolved by the Annual General Meeting of 2018. The authorisation is effective until
the next Annual General Meeting and, in any event, for a period no longer than 18 months. The authorisation had
not been used by the end of 2019.
25.2 Convertible bond loans and bonds with warrants
Fortum Corporation has not issued any convertible bonds or bonds with attached warrants, which would
entitle the bearer to subscribe for Fortum shares. The Board of Directors of Fortum Corporation has no unused
authorisations from the General Meeting of shareholders to issue convertible bond loans or bonds with warrants
or increase the company's share capital.
26 Non-controlling interests
Principal non-controlling interests
EUR million
PAO Fortum Group
AS Fortum Tartu Group
Fortum Oslo Varme AS Group
Other
BS Total
Russia
Estonia
Norway
2019
34
37
166
16
252
2018
33
37
152
14
236
27 Interest-bearing liabilities
Net debt
EUR million
Interest-bearing liabilities
Liquid funds
Net debt
1) See4Note 3 Acquisitions, disposals and assets held for sale.
Net debt
2019
6,694
1,435
5,260
Classified as
assets held
for sale 1)
-6
-2
-4
BS Total
2019
6,688
1,433
5,256
Net debt
2018
6,093
584
5,509
Net debt is calculated as interest-bearing liabilities less liquid funds without deducting interest-bearing receivables
amounting to EUR 1,035 million (2018: 1,092). Interest-bearing receivables mainly consist of shareholder loans to
partly owned nuclear companies regarded as long-term financing. For more information see4Note 21 Interest-
bearing receivables.
Interest-bearing liabilities
EUR million
Loans
Lease liabilities 1)
Total
2019
6,580
108
6,688
2018
6,093
-
6,093
1) Excludes lease liabilities of EUR 6 million relating to assets held for sale at 31 December 2019. See4Note 3 Acquisitions, disposals and assets
held for sale.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
95
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
EUR million
Bonds
Loans from financial institutions
Reborrowing from the Finnish State Nuclear Waste Management Fund
Lease liabilities
Other long-term interest-bearing liabilities
BS Total long-term interest-bearing liabilities
Current portion of long-term bonds
Current portion of loans from financial institutions
Current portion of other long-term interest-bearing liabilities
Commercial paper liabilities
Current portion of lease liabilities
Collateral arrangement liability
Other short-term interest-bearing liabilities
BS Total short-term interest-bearing liabilities
Total
2019
4,251
329
1,145
89
304
6,118
0
33
40
10
19
281
187
570
6,688
Loans
EUR million
Bonds
Loans from financial institutions
Reborrowing from the Finnish
State Nuclear Waste Management
Fund
Other long-term loans 1)
Total long-term loans 2)
Collateral arrangement liability
Commercial paper liabilities
Other short-term loans
Total short-term loans
Total 3)
Repricing
Effective
interest
rate, %
2.3
1.3
Carrying
amount
2019
4,251
362
Under
1 year 1–5 years
2,539
39
96
307
Over
5 years
1,616
16
0.5
3.3
1.9
0.8
0.2
2.6
1.5
1.9
1,185
304
6,102
281
10
187
478
6,580
1,185
202
1,790
281
10
187
478
2,268
2,578
102
1,734
2,578
1,734
Fair
value
2019
4,478
378
Carrying
amount
2018
2,496
1,847
1,250
346
6,452
281
10
187
478
6,930
1,158
309
5,810
-
207
76
283
6,093
1) Includes loans from Finnish pension institutions of EUR 33 million (2018: 38) and other loans of EUR 271 million (2018: 270).
2) Including current portion of long-term debt of EUR 73 million (Dec 31 2018: 803).
3) The average interest rate on loans and derivatives on 31 December 2019 was 2.3% (2018: 2.4%).
2018
1,746
1,799
1,158
-
303
5,007
750
48
5
207
-
-
76
1,086
6,093
Fair
value
2018
2,629
1,901
1,218
351
6,099
-
207
76
283
6,382
The interest-bearing debt increased in 2019 by EUR 595 million to EUR 6,688 million (2018: 6,093). The amount
of short-term financing increased with EUR 195 million, and at the end of the year the amount of short-term
financing EUR 478 million (2018: 283) included 65 million (2018: 75) from Credit Support Annex agreements.
During the first quarter of 2019 Fortum issued new bonds under its Euro Medium Term Note (EMTN)
programme with a total nominal amount of EUR 2.5 billion: EUR 1.0 billion, four-year bond with 0.875% fixed
coupon and two EUR 750 million bonds for seven- and ten-years with 1.625%/ 2.125% fixed coupons respectively.
In March 2019, Fortum repaid maturing bond of EUR 750 million and prepaid the bridge loan of EUR 1.75 billion
drawn in June 2018 for the financing of the shares in Uniper.
The amount of reborrowing from the Finnish State Nuclear Waste Management Fund and TVO was increased
by EUR 27 million to EUR 1,185 million. Further Fortum signed a five-year EUR 300 million bilateral financial loan
agreement which was drawn at the beginning of April 2019.
During the first quarter of 2019 Fortum entered into a non-cash collateral arrangement to release pledged cash
from Nordic power exchange. At end of December Fortum booked a short-term interest-bearing debt of EUR 281
million to the lender of the securities, which are included in interest-bearing receivables. See4Note 21 Interest-
bearing receivables.
The average interest rate for the portfolio consisting mainly of EUR loans was 1.6% at the balance sheet date
(2018: 1.7%). Part of the external loans EUR 787 million (2018: 686) have been swapped to RUB and the average
interest cost for these loans including cost for hedging the RUB was 7.8% at the balance sheet date (2018: 8.3%).
The average interest rate on total loans and derivatives at the balance sheet date was 2.3% (2018: 2.4%).
For more information, see4Note 4 Financial risk management 4Note 34 Leases and4Note 36 Pledged assets
and contingent liabilities.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
96
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Reconciliation of interest-bearing liabilities
EUR million
Bonds
Loans from financial institutions
Reborrowing from the Finnish State
Nuclear Waste Management Fund
Lease liabilities 3)
Other interest-bearing liabilities
Total
31 Dec 2018
2,496
1,848
1,158
-
592
6,093
Impact from change
in accounting policy
(IFRS 16) 1)
1 Jan 2019
2,496
1,848
Cash flow from
financing activities 2)
1,729
-1,497
Non-cash collateral
arrangement
Exchange rate
differences
-2
-3
Lease liabilities
Fair value changes
and amortised cost
28
14
Non-cash changes
99
99
1,158
99
592
6,192
27
-15
-88
156
281
281
-3
-8
25
25
42
1) See4Note 1 Significant accounting policies and4Note 34 Leases.
2) Repayments and borrowings.
3) Excludes lease liabilities of EUR 6 million relating to assets held for sale at 31 December 2019. See4Note 3 Acquisitions, disposals and assets held for sale.
EUR million
Bonds
Loans from financial institutions
Reborrowing from the Finnish State Nuclear Waste Management Fund
Other interest-bearing liabilities
Total
1) Repayments and borrowings.
27.1 Bond issues
Issued/Maturity
Fortum Corporation EUR 8,000 million EMTN Programme 1)
2011/2021
2012/2022
2019/2023
2019/2026
2019/2029
2013/2023
2013/2043
Total outstanding carrying amount 31 December 2019
1) EMTN = Euro Medium Term Note
31 Dec 2017
2,943
283
1,129
530
4,885
Cash flow from
financing activities 1)
-413
1,571
29
126
1,313
Divestments
Non-cash changes
Exchange rate
differences
-13
-10
Fair value changes
and amortised cost
-21
4
-58
-58
-6
-29
-17
Interest basis
Interest rate, %
Effective interest, %
Currency
Nominal value
million
Carrying amount
EUR million
Fixed
Fixed
Fixed
Fixed
Fixed
Floating
Fixed
4.000
2.250
0.875
1.625
2.125
Stibor 3M+1.13
3.500
4.123
2.344
0.996
1.638
2.247
3.719
EUR
EUR
EUR
EUR
EUR
SEK
EUR
500
1,000
1,000
750
750
1,000
100
508
1,034
998
759
760
96
97
4,251
31 Dec 2019
4,251
362
1,185
108
782
6,688
31 Dec 2018
2,496
1,848
1,158
592
6,093
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
97
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
28 Income taxes on the balance sheet
ACCOUNTING POLICIES
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the
consolidated income statement, because of items of income or expense that are taxable or deductible in other years and
items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the end of the reporting period.
Deferred tax is provided in full, using the balance sheet approach on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred tax
arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred tax is determined using tax
rates (and laws) that have been enacted or substantially enacted by the closing date and are expected to apply when the
related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS: ASSUMPTIONS AND
ESTIMATES REGARDING FUTURE TAX CONSEQUENCES
Fortum has deferred tax assets and liabilities which are expected to be realised through the income statement over the
extended periods of time in the future. In calculating the deferred tax items, Fortum is required to make certain assumptions
and estimates regarding the future tax consequences attributable to differences between the carrying amounts of assets and
liabilities as recorded in the financial statements and their tax basis.
Assumptions made include the expectation that future operating performance for subsidiaries will be consistent with
historical levels of operating results, recoverability periods for tax loss carry-forwards will not change, and that existing tax
laws and rates will remain unchanged into foreseeable future. Fortum believes that it has prudent assumptions in developing
its deferred tax balances.
Assumptions and estimates regarding uncertain tax positions are supported by external legal counsel or expert opinion.
If the actual final outcome (regarding tax disputes) would differ negatively from management's estimates with 10%, the
which the temporary differences can be utilised. Deferred tax assets are set off against deferred tax liabilities if they relate to
income taxes levied by the same taxation authority.
Group would need to increase the income tax liability by EUR 11 million at 31 December 2019. For additional information
regarding tax disputes, see4Note 37 Legal actions and official proceedings.
Deferred tax is provided on temporary differences arising from investments in subsidiaries, associates and joint ventures,
except where the timing of the reversal of the temporary difference is controlled by the Group, and it is probable that the
temporary difference will not be reversed in the foreseeable future.
The Group recognises liabilities for anticipated tax dispute issues based on estimates of whether additional taxes will be
due. No provision will be recognised in the financial statements if Fortum considers the claims unjustifiable. Therefore, if taxes
regarding ongoing tax disputes have to be paid before final court decisions, they will be booked as a receivable. Where the
final outcome of these matters is different from the amounts that were initially recorded, such differences will impact the
income tax and deferred tax provisions in the period in which such determination is made.
28.1 Deferred income taxes on the balance sheet
EUR million
BS Deferred tax assets
BS Deferred tax liabilities
Net deferred taxes
2019
1 Jan Change
7
-144
-137
70
-720
-651
31 Dec
77
-865
-788
2018
1 Jan Change
-3
100
97
73
-822
-749
31 Dec
70
-720
-651
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
98
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Movement in deferred tax assets and liabilities 2019
EUR million
1 Jan 2019
Charged to income statement
Charged to other comprehensive income
Exchange rate differences, reclassifications and other changes
Acquisitions and disposals
Transfer to assets held for sale 1)
31 Dec 2019
1) See4Note 3 Acquisition, disposals and assets held for sale.
Movement in deferred tax assets and liabilities 2018
EUR million
31 Dec 2017
Impact from change in accounting principle (IFRS 15)
1 Jan 2018
Charged to income statement
Charged to other comprehensive income
Exchange rate differences, reclassifications and other changes
Acquisitions and disposals
31 Dec 2018
Intangible assets
-106
-5
7
1
-1
0
-104
Property, plant
and equipment and
right-of-use assets
-788
-30
1
-29
-1
24
-823
Intangible assets
-101
-3
-104
0
0
3
-5
-106
Property, plant
and equipment
-806
-
-806
-24
0
41
1
-788
Pension
obligations
20
0
5
1
0
0
25
Pension
obligations
21
-
21
0
-2
-1
0
20
Provisions
-15
1
0
-3
0
0
-17
Provisions
7
-
7
-23
0
1
0
-15
Derivative
financial
instruments
169
19
-156
0
0
0
33
Tax losses
and tax credits
carry-forward
70
-5
0
-1
0
-2
63
Derivative
financial
instruments
35
-
35
-7
159
-18
0
169
Tax losses
and tax credits
carry-forward
116
-
116
-42
0
-3
0
70
Other
-1
35
-2
6
0
-1
36
Other
-20
-
-20
10
5
4
0
-1
Net deferred
taxes
-651
15
-144
-25
-2
20
-788
Net deferred
taxes
-747
-3
-749
-87
162
28
-5
-651
Retained earnings when distributed as dividends are subject to withholding tax (e.g. Russia) or distribution tax (e.g. Estonia). Provision has been made for these taxes only to extent that it is expected that these earnings will be remitted in
the foreseeable future. At the end of the year deferred income tax liabilities of EUR 13 million (2018:32) have been recognised for the withholding tax and other taxes that would be payable on the distributions.
Change in deferred taxes 2019 and 2018 are mainly related to change in derivative financial instruments through other comprehensive income.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
99
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Deferred income tax assets recognised for tax loss carry-forwards
Deferred income tax assets are recognised for tax loss carry-forward to the extent that realisation of the related
tax benefit through future profits is probable. The recognised tax assets relate to losses carry-forward with no
expiration date and partly with expiry date as described below.
EUR million
Losses without expiration date
Losses with expiration date
Total
2019
2018
Tax losses
171
170
340
Deferred
tax asset
36
29
65
Tax losses
197
110
307
Deferred
tax asset
43
28
70
Deferred tax assets of EUR 14 million (2018: 10) have not been recognised in the consolidated financial
statements, because the realisation is not probable. The major part of the unrecognised tax asset relates to loss
carry-forwards that are unlikely to be used in the foreseeable future.
28.2 Income tax receivables
EUR million
Sweden
Belgium
Other
Total
2019
0
114
19
133
2018
41
114
17
172
Income tax receivables reflect payments of corporate income tax done in relation to the year 2019 as well as
payments according to received tax audit assessments in relation to previous years.
The income tax receivable in Sweden in 2018 of EUR 41 million relate to overpayment of preliminary
income tax.
In Belgium, Fortum has in previous years received income tax assessments for the years 2008–2012. The
additional taxes of EUR 114 million have been paid during prior years and based on supporting legal opinions has
been booked as an income tax receivable.
See4Note 37 Legal actions and official proceedings.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
100
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
29 Nuclear related assets and liabilities
ACCOUNTING POLICIES
Fortum owns Loviisa nuclear power plant in Finland. In Fortum's consolidated balance sheet, Share in the State Nuclear Waste
Management Fund and the Nuclear provisions relate to Loviisa nuclear power plant. Fortum's nuclear related provisions and
the related part of the State Nuclear Waste Management Fund are both presented separately on the balance sheet. Fortum's
share in the State Nuclear Waste Management Fund is accounted for according to IFRIC 5, Rights to interests arising from
decommissioning, restoration and environmental rehabilitation funds which states that the fund assets are measured at
the lower of fair value or the value of the related liabilities since Fortum does not have control or joint control over the State
Nuclear Waste Management Fund. The Nuclear Waste Management Fund is managed by governmental authorities. The
related provisions are the provision for decommissioning and the provision for disposal of spent fuel.
The fair values of the provisions are calculated according to IAS 37 by discounting the separate future cash flows, which are
based on estimated future costs and actions already taken. The initial net present value of the provision for decommissioning
(at the time of commissioning the nuclear power plant) has been included in the investment cost and is depreciated over the
estimated operating time of the nuclear power plant. Changes in the technical plans etc., which have an impact on the future
cash flow of the estimated costs for decommissioning, are accounted for by discounting the additional costs to the current
point in time. The increased asset retirement cost due to the increased provision is added to property, plant and equipment
and depreciated over the remaining estimated operating time of the nuclear power plant. For power plant units taken from
use the increase is taken to income statement.
The provision for spent fuel covers the future disposal costs for fuel used until the end of the accounting period. Costs for
disposal of spent fuel are expensed during the operating time based on fuel usage. The impact of the possible changes in the
estimated future cash flow for related costs is recognised immediately in the income statement based on the accumulated
amount of fuel used until the end of the accounting period. The related interest costs due to unwinding of the provision is
recognised in the corresponding period.
The timing factor is taken into account by recognising the interest expense related to discounting the nuclear provisions.
The interest on the State Nuclear Waste Management Fund assets is presented as financial income.
Fortum's actual share of the State Nuclear Waste Management Fund, related to Loviisa nuclear power plant, is higher
than the carrying value of the Fund on the balance sheet. The legal nuclear liability should, according to the Finnish Nuclear
Energy Act, be fully covered by payments and guarantees to the State Nuclear Waste Management Fund. The legal liability is
not discounted while the provisions are, and since the future cash flow is spread over a very long time horison, the difference
between the legal liability and the provisions are material.
The annual fee to the Fund is based on changes in the legal liability, the interest income generated in the State Nuclear
Waste Management Fund and incurred costs of taken actions.
Fortum also has minority interests in nuclear power companies, i.e. Teollisuuden Voima Oyj (TVO) in Finland and OKG
Aktiebolag (OKG) and Forsmarks Kraftgrupp AB (Forsmark) in Sweden. The minority shareholdings are classified as
associated companies and joint ventures and are consolidated with equity method. Both the Finnish and the Swedish
companies are non-profit making, i.e. electricity production is invoiced to the owners at cost including depreciations, interest
costs and production taxes accounted for according to local GAAP. Accounting policies of the associates regarding nuclear
assets and liabilities have been changed where necessary to ensure consistency with the policies adopted by the Group.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS: ASSUMPTIONS MADE WHEN
ESTIMATING PROVISIONS RELATED TO NUCLEAR PRODUCTION
The provision for future obligations for nuclear waste management including decommissioning of Fortum's nuclear power
plant and related spent fuel is based on long-term cash flow forecasts of estimated future costs. The main assumptions are
technical plans, timing, cost estimates and discount rate. The technical plans, timing and cost estimates are approved by
governmental authorities.
Any changes in the assumed discount rate would affect the provision. If the discount rate used would be lowered, the
provision would increase. Fortum has contributed cash to the State Nuclear Waste Management Fund based on a non-
discounted legal liability, which leads to that the increase in provision would be offset by an increase in the recorded share of
Fortum's part of the State Nuclear Waste Management Fund on the balance sheet. The total effect on the income statement
would be positive since the decommissioning part of the provision is treated as an asset retirement obligation. This situation
will prevail as long as the legal obligation to contribute cash to the State Nuclear Waste Management Fund is based on a non-
discounted liability and IFRS is limiting the carrying value of the assets to the amount of the provision since Fortum does not
have control or joint control over the fund.
Based on the Nuclear Energy Act in Finland, Fortum has a legal obligation to fully fund the legal liability decided by the
governmental authorities, for decommissioning of the power plant and disposal of spent fuel through the State Nuclear Waste
Management Fund.
Both in Finland and in Sweden nuclear operators are legally obligated for the decommissioning of the plants and the
disposal of spent fuel (nuclear waste management). In both countries the nuclear operators are obligated to secure the
funding of nuclear waste management by paying to government operated nuclear waste funds. The nuclear operators also
have to give securities to guarantee that sufficient funds exist to cover future expenses of decommissioning of the power
plant and the disposal of spent fuel.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
101
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
29.1 Nuclear related assets and liabilities for 100% owned nuclear power plant, Loviisa
EUR million
Carrying values on the balance sheet
BS Nuclear provisions
BS Share in State Nuclear Waste Management Fund
Short term receivable from the State Nuclear Waste Management Fund
Legal liability and actual share of the State Nuclear Waste Management Fund
Liability for nuclear waste management according to the Nuclear Energy Act
Funding obligation target
Fortum’s share in the State Nuclear Waste Management Fund
Share of the fund not recognised on the balance sheet
2019
2018
813
813
51
1,214
1,135
1,180
316
899
899
-
1,180
1,180
1,153
254
Legal liability for Loviisa nuclear power plant
Finnish nuclear operators have submitted updated technical plan and cost estimates to the Ministry of Economic
Affairs and Employment in June 2019. The legal liability on 31 December 2019, decided by the Ministry of
Economic Affairs and Employment in November 2019, was EUR 1,214 million.
The legal liability is based on a cost estimate, which is done every year, and a technical plan, which is made
every third year. The cost estimate and technical plan was updated in 2019. The legal liability is determined by
assuming that the decommissioning would start at the beginning of the year following the assessment year. The
provisions are based on the same cash flows for future costs as the legal liability, but the legal liability is not
discounted to net present value.
Fortum’s share in the State Nuclear Waste Management Fund
According to Nuclear Energy Act, Fortum is obligated to contribute funds in full to the State Nuclear Waste
Management Fund to cover the legal liability. Fortum contributes funds to the Finnish State Nuclear Waste
Management Fund based on the yearly funding obligation target decided by the governmental authorities in
connection with the decision of size of the legal liability. Based on the law, Fortum applied for a periodisation of
the fund target, due to a change in the legal liability. The application was approved by the Ministry of Economic
Affairs and Employment in November 2019 confirming the fund target at EUR 1,135 million.
Nuclear provisions
EUR million
BS 1 January
Additional provisions
Provision used
Provision reversed
Unwinding of discount
BS 31 December
Fortum’s share in the State Nuclear Waste Management Fund
2019
899
10
-29
-100
32
813
813
2018
858
29
-26
-
38
899
899
Nuclear provision and fund accounted according to IFRS
Nuclear provisions include the provision for decommissioning and the provision for disposal of spent fuel. The
carrying value of the nuclear provisions, calculated according to IAS 37, decreased by EUR 86 million compared to
31 December 2018, totalling EUR 813 million on 31 December 2019. The decrease in provision during 2019 was
arising from the updated cost estimate. The decrease was EUR 100 million, of which the part relating to spent fuel
was recognised immediately to the income statement and the part relating to decommissioning was capitalised as
property, plant and equipment. The reduced provision led to negative nuclear fund adjustment of EUR 54 million
and positive effect to other financial expenses - net of EUR 40 million. The periodisation of the fund target led to a
positive fund adjustment of EUR 51 million, but did not have any impact on the provision. The increase of provision
in 2018 is mainly arising from changes in assumptions used for the provision.
The carrying value of the Fund on the balance sheet cannot exceed the carrying value of the nuclear provisions
according to IFRIC 5. The Fund is from an IFRS perspective overfunded with EUR 316 million, since Fortum's share
of the Fund on 31 December 2019 was EUR 1,180 million, while the carrying value of the fund on the balance
sheet was EUR 813 million and the short-term receivable from the fund EUR 51 million, see4Note 23 Trade and
other receivables.
Fortum's share of the Finnish Nuclear Waste Management Fund in Fortum's balance sheet can in maximum
be equal to the amount of the provisions according to IFRS. As long as the Fund is overfunded from an IFRS
perspective, the effects to operating profit from this adjustment will be positive if the provisions increase more
than the Fund and negative if actual value of the fund increases more than the provisions. This accounting effect
is not included in Comparable operating profit in Fortum's financial reporting. For more information see4Note 7
Items affecting comparability.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
102
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Borrowing from the State Nuclear Waste Management Fund
Participants in the Finnish State Nuclear Waste Management Fund are allowed to borrow from the fund according
to certain rules. Fortum uses the right to borrow back and has pledged shares in Kemijoki Oy as security for the
loans. The loans are renewed yearly. See4Note 27 Interest-bearing liabilities and4Note 36 Pledged assets and
contingent liabilities.
29.2 Nuclear power plants in associated companies and joint ventures
OKG, Forsmark and TVO are non-profit making companies, i.e. electricity production is invoiced to the owners
at cost including depreciations, interest costs and production taxes. Invoiced cost is accounted for according to
local GAAP. In addition to the invoiced electricity production cost, Fortum makes IFRS adjustments to comply with
Fortum's accounting principles. These adjustments include also Fortum's share of the companies' nuclear waste
funds and nuclear provisions. During 2018, assumptions for nuclear provision were also changed for the respective
balances of the co-owned nuclear companies in Finland and Sweden, i.e. Teollisuuden Voima, (TVO), Oskarshamn
Kraftgrupp AB (OKG) and Forsmark Kratgrupp AB. The total impact of the change to share of profit from these
associated companies and joint ventures was EUR -37 million, net of tax, and including additional nuclear waste
liability related to legacy waste obligations for Swedish nuclear. The net profit impact from all these nuclear-related
adjustments is close to zero.
The tables below present the 100% figures relating to nuclear funds and provisions for the companies as well as
Fortum's net share.
TVO’s total nuclear related assets and liabilities (100%)
EUR million
Carrying values on TVO’s balance sheet
Nuclear provisions
Share of the State Nuclear Waste Management Fund
of which Fortum’s net share consolidated with equity method
TVO’s legal liability and actual share of the State Nuclear Waste Management Fund
Liability for nuclear waste management according to the Nuclear Energy Act
Share of the State Nuclear Waste Management Fund
Share of the fund not recognised on the balance sheet
2019
2018
1,041
1,041
1,016
1,016
0
0
1,471
1,506
465
1,506
1,471
455
TVO's legal liability, provision and share of the fund are based on the same principles as described above for
Loviisa nuclear power plant. Both the technical plan and cost estimate update in 2019, had a small impact on
Fortum's share in TVO’s nuclear related assets and liabilities.
TVO's share of the Finnish State Nuclear Waste Management Fund is from an IFRS perspective overfunded with
EUR 465 million (of which Fortum's share EUR 124 million), since TVO's share of the Fund on 31 December 2019
was EUR 1,506 million and the carrying value on the balance sheet was EUR 1,041 million.
Participants in the Finnish State Nuclear Waste Management Fund are allowed to borrow from the fund
according to certain rules. Fortum is using the right to reborrow funds through TVO based on its ownership. See
more information in4Note 27 Interest-bearing liabilities.
OKG’s and Forsmark’s total nuclear related assets and liabilities (100%)
EUR million
OKG’s and Forsmark’s nuclear related assets and liabilities 1)
Nuclear provisions
Share in the State Nuclear Waste Management Fund
Net amount
of which Fortum’s net share consolidated with equity method
2019
2018
3,932
3,363
-570
3,930
3,230
-701
-201
-242
1) Accounted for according to Fortum’s accounting principles. Companies’ statutory financial statements are not prepared according to IFRS.
In Sweden Svensk Kärnbränslehantering AB (SKB), a company owned by the nuclear operators, takes care of all
nuclear waste management related activities on behalf of nuclear operators. SKB receives its funding from the
Swedish State Nuclear Waste Management Fund, which in turn is financed by the nuclear operators.
Nuclear waste fees and guarantees are updated every third year by governmental decision after a proposal
from Swedish Radiation Safety Authority (SSM). From September 2018 onwards the proposal is prepared by the
National Debt Office. The proposal is based on cost estimates done by SKB and the license holders. An updated
technical plan for nuclear waste management was decided by SKB in September 2019 and was handed in to SSM
in the end of September. In December 2017 the Swedish government decided the waste fees and guarantees for
years 2018–2020. Nuclear waste fees are currently based on future costs with the assumed lifetime of 50 years
(40 years in previous decision) for each unit of a nuclear power plant.
In addition to nuclear waste fees nuclear power companies provide guarantees for any uncovered liability and
unexpected events.
For more information regarding Fortum's guarantees given on behalf of nuclear associated companies,
see4Note 36 Pledged assets and contingent liabilities.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
103
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
30 Other provisions
ACCOUNTING POLICIES
Provisions for environmental obligations, asset retirement obligations, legal claims and other obligations are recognised
when the Group has a present legal or constructive obligation as a result of past events to a third party, it is probable that an
outflow of resources will be required to settle the obligation and the amount can be reliably estimated.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using
a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.
Increase in the provision due to the passage of time is recognised as interest expense.
ENVIRONMENTAL PROVISIONS
Environmental provisions are recognised, based on the current interpretation of environmental laws and regulations, when
it is probable that a present obligation has arisen and the amount of such liability can be reliably estimated. Environmental
expenditures resulting from the remediation of an existing condition caused by past operations, and which do contribute to
current or future revenues, are expensed as incurred.
Environmental provisions include provisions for obligations to cover landfills and clean-up obligations for contaminated
land areas. Provisions are determined based on the surface area of the landfill site, remaining land area to be landscaped or
otherwise cleaned-up, and the unit cost of conducting the coverage and clean-up activities in the future.
Environmental provisions are also recognised for aftercare and monitoring obligations arising from landfill permit holder’s
requirement to take into account potential danger to health or the environment posed by a landfill site for a period of at least
30, up to 60, years after the coverage. The aftercare and monitoring provision is determined on the basis of estimated costs
and estimated number of years of filling the landfill.
ASSET RETIREMENT OBLIGATIONS
Asset retirement obligation is recognised either when there is a contractual obligation towards a third party or a legal
obligation, and the amount can be reliably estimated. Obligating event is, e.g. when a plant is built on a leased land with an
obligation to dismantle and remove the asset in the future; or when a legal obligation towards Fortum changes. The asset
retirement obligation is recognised as part of the cost of an item of property, plant and equipment when the asset is put in
service. Costs are depreciated over the remainder of the asset's useful life.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS:
ASSUMPTIONS MADE WHEN ESTIMATING PROVISIONS
Provisions for present obligations require management to assess the best estimate of the expenditure needed to settle the
present obligation at the end of the reporting period. The actual amount and timing of the expenditure might differ from
estimates made.
EUR million
1 January
Increase in provisions
Provisions used
Unused provisions reversed
Transfer to assets held for sale 1)
Exchange rate differences and other
changes
31 December
Of which current provisions 2)
BS Of which non-current provisions
2019
2018
Environ-
mental
41
3
-1
-1
-1
8
49
0
49
Other
65
14
-22
-3
0
-2
52
13
38
Total
106
17
-23
-4
-1
6
101
13
87
Environ-
mental
43
0
0
0
0
-1
41
0
41
Other
79
25
-33
-4
0
-3
65
14
50
Total
122
25
-33
-4
0
-4
106
14
91
1) See4Note 3 Acquisitions, disposals and assets held for sale.
2) Included in trade and other payables on the consolidated balance sheet, see4Note 33 Trade and other payables.
Environmental provisions include mainly provisions for obligations to cover and monitor landfills, as well as to clean
contaminated land areas. The majority of the provision is estimated to be used within 10–15 years.
Dismantling provisions for the Finnish coal fired power plants are included in Other provisions.
For provisions for decommissioning, and provision for disposal of spent fuel for nuclear production,
see4Note 29 Nuclear related assets and liabilities.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
104
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
31 Pension obligations
ACCOUNTING POLICIES
The Group companies have various pension schemes in accordance with the local conditions and practises in the countries
in which they operate. The schemes are generally funded through payments to insurance companies or the Group’s pension
funds as determined by periodic actuarial calculations. The Group has both defined benefit and defined contribution plans.
The Group's contributions to defined contribution plans are charged to the income statement in the period to which the
contributions relate.
For defined benefit plans, pension costs are assessed using the projected unit credit method. The cost of providing
pensions is charged to the income statement as to spread the service cost over the service lives of employees. The net
interest is presented in financial items and the rest of the income statement effect as pension cost.
The defined benefit obligation is calculated annually on the balance sheet date and is measured as the present value of the
estimated future cash flows using interest rates of high-quality corporate bonds that have terms to maturity approximating
to the terms of the related pension liability. In countries where there is no deep market in such bonds, market yields on
government bonds are used instead. The plan assets for pensions are valued at market value. The liability recognised on the
balance sheet is the defined benefit obligation at the closing date less the fair value of plan assets. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past
service or the gain or loss related to a curtailment is recognised immediately in profit or loss. Gains or losses on settlements
of defined benefits plans are recognised when the settlement occurs.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS:
ASSUMPTIONS USED TO DETERMINE FUTURE PENSION OBLIGATIONS
The present value of the pension obligations is based on actuarial calculations that use several assumptions. Any changes in
these assumptions will impact the carrying amount of pension obligations.
Fortum’s pension arrangements
Finland
In Finland statutory pension benefits (as determined in Employee’s Pension Act /TyEL) provide the employees
pension coverage for old age, disability and death of a family provider. The benefits are insured with an insurance
company and determined to be defined contribution plans.
In addition the Group has additional old-age and survivors pension benefits arranged with the Fortum
Pension Fund. The Fortum Pension Fund is a closed fund managed by a Board, consisting of both employers' and
employees' representatives. The Fund is operating under regulation from Financial Supervisory Authority (FSA).
The liability has to be fully covered according to the regulations. The national benefit obligation related to the
defined benefit plans is calculated so that the promised benefit is fully funded until retirement. After retirement
the benefits payable are indexed yearly with TyEL-index. The promised benefit is defined in the rules of the Fund,
mostly 66% at a maximum of the salary basis. The salary basis is an average of the ten last years' salaries, which
are indexed with a common salary index to the accounting year.
Sweden
In Sweden the Group operates several defined benefit and defined contribution plans like the general ITP-pension
plan and the PA-KL and PA-KFS plans that are eligible for employees within companies formerly owned by
municipalities. The defined benefit plans are fully funded and have partly been financed through Fortum’s own
pension fund and partly through insurance premiums. The pension arrangements comprise normal retirement
pension, complementary retirement pensions, survivors' pension and disability pension. The most significant
pension plan is the ITP-plan for white-collar employees in permanent employment (or temporary employees after
a certain waiting period), who fulfil the age conditions. To qualify for a full pension the employee must have a
projected period of pensionable service, from the date of entry until retirement age, of at least 30 years.
The Swedish pension fund is managed by a Board, consisting of both employers' and employees'
representatives. The fund is operating under regulation from Swedish Financial Supervisory Authority and the
County Administrative Board and governed by Swedish law (no. 1967:531). The fund constitutes a security for the
employers' defined benefit pension plan liability and the fund has no obligations in relation to pension payments.
The employer must have a credit insurance from PRI Pensionsgaranti Mutual Insurance Company for the liability.
The liability does not have to be fully covered by the fund according to the regulations.
The part of the ITP multiemployer pension plan that is secured by paying pension premiums to Alecta, in
Fortum’s case the collective family pension, is accounted for as a defined contribution plan due to that there is no
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
105
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
consistent and reliable basis to allocate assets or liabilities to the participating entities within the ITP insurance.
The reason for this is that it is not possible to determine from the terms of the plan to which extent a surplus or a
deficit will affect future contributions.
Norway
Group companies operate both defined contribution and defined benefit plans. Some defined benefit schemes
offer benefits common for municipalities in Norway and some are private pension schemes. Benefits include old
age pensions, disability pension and survivor’s pension, including pension benefits from the National Insurance
Scheme (Folketrygden). The schemes are fully funded within the rules set out in the Norwegian insurance
legislation.
The majority of the defined benefit plans are closed, either private plans or public plans, that are operated
by the Fortum Pension Fund. The Fortum Pension Fund was established in 2018 and the participants were
transferred there from the Hafslund and Infratek's Pension Fund. The Group has also a closed public defined
benefit plan operated by Oslo Pensjonsforsikring AS. In addition, the Group has defined benefit plans with various
insurance companies.
Pension arrangements in other countries
Pension arrangements in Russia include payments made to the state pension fund. These arrangements are
treated as defined contribution plans. The Russian (in addition to the defined contribution plans) and Polish
companies participate in certain defined benefit plans, defined by collective agreements, which are unfunded
and where the company meets the benefit payment obligation as it falls due. The benefits provided under these
arrangements include, in addition to pension payments, one-time benefits paid in case of employee mortality
or disability as well as lump sum payments for anniversary and financial support to honoured workers and
pensioners.
In other countries the pension arrangements are done in accordance with the local legislation and practice,
mostly being defined contribution plans.
Main risks relating to defined benefit plans – Finland and Sweden
Overall risks
Finland - If the return of the fund’s assets is not enough to cover the raise in liability and benefit payments over
the financial year then the employer funds the deficit with contributions unless the fund has sufficient equity.
Sweden - As the pension fund is separated from the funding companies Fortum is not obliged to make
additional contributions to the pension fund in any case of deficit. However if the assets decrease to a level lower
than the liability according to Swedish GAAP, Fortum's credit insurance cost from PRI will increase.
Change in discount rate
Finland - The discount rate which is used to calculate the defined benefit obligation (according to IFRS) depends
on the value of corporate bond yields as at reporting date. A decrease in yields increases the benefit obligation
that is offset by increase in the value of fixed income holdings.
Investment and volatility risk
Finland - The pension fund's board accepts yearly an Investment Plan, which is based on an external asset-liability
analysis. The assets are allocated to stocks and stock funds, fixed income instruments and real estate. The
investments are diversified into different asset classes and to different asset managers taking into account the
regulation of the Financial Supervisory Authority.
Sweden - The pension fund operation is regulated by law and supervised by central administrative authorities
(Finansinspektionen and the County Administrative Board). The pension fund board decides yearly on a policy for
asset allocation and a risk management model that stipulates a maximum acceptable market value decrease of the
assets. The major assets are fixed income instruments, stock index funds and cash.
Risks relating to assumptions used
Actuarial calculations use assumptions for future inflation and salary levels and longevity. Should the actual
outcome differ from these assumptions, this might lead to higher liability.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
106
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Movement in the net defined benefit liability
EUR million
1 January
Included in consolidated income statement
Current service cost
Past service cost
Settlements
Net interest 1)
Included in OCI
Remeasurement gains(-)/losses(+)
Actuarial gains/losses arising from
changes in financial assumptions
Actuarial gains/losses arising from
experience adjustments
Return on plan assets (excluding amounts
included in net interest expense)
Exchange rate differences
Other
Contributions paid by the employer
Benefits paid
31 December
Present value of funded defined obligation
Fair value of plan assets
Funded status
Present value of unfunded obligation 2)
Net liability arising from defined benefit
obligation
Pension assets included in other non-
current assets on the balance sheet
BS Pension obligations on the balance sheet
Defined benefit
obligation
2019
483
2018
501
Fair value of plan assets
2018
-401
2019
-386
Net defined benefit
asset(-)/liability(+)
2019
97
2018
101
6
-1
0
10
14
50
52
-2
-2
49
-17
529
8
-1
-4
9
13
-8
-12
4
-7
-15
-17
483
0
-7
-6
-26
-26
1
-24
-2
13
-406
2
-7
-4
2
2
5
7
-1
13
-386
6
-1
0
2
7
25
52
-2
-26
0
24
-2
-4
123
524
-406
119
5
123
2
125
9
-1
-1
2
9
-6
-12
4
2
-2
-8
-1
-4
97
480
-386
94
3
97
1
98
1) Net interest is presented among financial items in income statement, the rest of costs related to defined benefit plans are included in staff costs
(row defined benefits plans in the staff cost specification in4Note 11 Employee benefits and Board remuneration).
2) The unfunded obligation relates to arrangements in Russia and Poland.
At the end of 2019 a total of 836 (2018: 833) Fortum employees are included in defined benefit plans providing
pension benefits. During 2019 pensions or related benefits were paid to a total of 3,665 (2018: 3,375) persons.
Contributions expected to be paid during year 2020 are EUR 3 million.
Fair value of plan assets
EUR million
Equity instruments
Debt instruments
Cash and cash equivalents
Real estate 1)
Investment funds
Company's own ordinary shares
Other assets
Total
1) Of which EUR 1 million (2018: 1) occupied by the Group.
2019
152
174
47
14
2
0
16
406
2018
129
173
51
12
1
5
16
386
When the pension plan has been financed through an insurance company, a specification of the plan assets has
not been available. In these cases the fair value of plan assets has been included in other assets.
The actual return on plan assets in Finland, Sweden and Norway totalled EUR 32 million (2018: 5).
Amounts recognised on the balance sheet by country 2019
EUR million
Present value of funded obligations
Fair value of plan assets
Deficit(+)/surplus(-)
Present value of unfunded obligations
Net asset(-)/liability(+) on the balance sheet
Pension asset included in non-current assets
BS Pension obligations on the balance sheet
Finland
283
-244
39
-
39
0
39
Amounts recognised on the balance sheet by country 2018
EUR million
Present value of funded obligations
Fair value of plan assets
Deficit(+)/surplus(-)
Present value of unfunded obligations
Net asset(-)/liability(+) on the balance sheet
Pension asset included in non-current assets
BS Pension obligations on the balance sheet
Finland
269
-233
37
-
37
0
37
Sweden
180
-104
76
-
76
0
76
Sweden
147
-102
45
-
45
0
45
Norway
61
-57
4
-
4
1
5
Norway
64
-52
12
-
12
1
13
Other
countries
0
0
0
5
5
0
5
Other
countries
0
0
0
3
3
0
3
Total
524
-406
119
5
123
2
125
Total
480
-386
94
3
97
1
98
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
107
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
The principal actuarial assumptions used
%
Discount rate
Future salary increases
Future pension increases
Rate of inflation
Finland
0.80
1.60
1.60
1.30
2019
Sweden
1.20
2.80
1.80
1.80
Norway
2.20
2.25
1.24
1.50
Finland
1.60
1.70
1.80
1.50
2018
Sweden
2.30
2.90
1.90
1.90
Norway
2.60
2.75
1.33
1.50
The discount rate in Finland is based on high quality European corporate bonds with maturity that best reflects
the estimated term of the defined benefit pension plans. The discount rate in Sweden is based on yields on
Swedish covered bonds with maturity that best reflects the estimated term of the defined benefit pension plans.
The covered bonds in Sweden are considered high quality bonds as they are secured with assets. The discount
rate in Norway is based on high-quality corporate bonds (covered bonds - OMF).
The life expectancy is the expected number of years of life remaining at a given age
Longevity at age 65
45 – male
45 – female
65 – male
65 – female
Sweden
23
25
22
24
Finland
22
27
21
25
Norway
23
27
21
24
The methods used in preparing the sensitivity analysis did not change compared to the previous period. Change
in mortality basis so that life expectancy increases by one year would increase the net liability in Finland, Sweden
and Norway with EUR 20 million (17%).
Maturity profile of the undiscounted defined benefit obligation
for Finland, Sweden and Norway as of 31 December 2019
EUR million
Maturity under 1 year
Maturity between 1 and 5 years
Maturity between 5 and 10 years
Maturity between 10 and 20 years
Maturity between 20 and 30 years
Maturity over 30 years
Future benefit payments
17
74
87
159
114
74
The weighted average duration of defined benefit obligation in Finland, Sweden and Norway at the end of year
2019 is 17 years.
32 Other non-current liabilities
The discount, inflation and salary growth rates used are the key assumptions used when calculating defined
benefit obligations. Effects of 0.5 percentage point change in the rates to the defined benefit obligation on 31
December 2019, holding all other assumptions stable, are presented in the table below.
Sensitivity of defined benefit obligation to changes in assumptions
EUR million
Connection fees
Other non-current liabilities
BS Total
2019
85
82
167
2018
109
73
182
Change in the assumption
0.5% increase in discount rate
0.5% decrease in discount rate
0.5% increase in benefit
0.5% decrease in benefit
0.5% increase in salary growth rate
0.5% decrease in salary growth rate
Impact to the pension obligation increase(+)/decrease(-)
Finland
-7%
8%
7%
-6%
1%
-1%
Sweden
-11%
12%
10%
-9%
2%
-2%
Norway
-8%
10%
7%
-6%
3%
-3%
Connection fees include refundable fees paid by the customer when connected to district heating network in
Finland. Connection fees were refundable until 2013.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
108
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
33 Trade and other payables
34 Leases
EUR million
Trade payables
Accrued expenses and deferred income
Accrued personnel expenses
Accrued interest expenses
Contract liabilities
Other accrued expenses and deferred income
Other liabilities
VAT liability
Current tax liability
Advances received
Current provisions 1)
Other liabilities
BS Total
1) See4Note 30 Other provisions.
2019
316
97
80
31
42
54
64
78
13
168
943
2018
334
103
98
40
80
34
30
110
14
214
1,058
Contract liabilities comprise mainly of project and waste management services that are invoiced but not delivered
at the reporting date.
The management considers that the amount of trade and other payables approximates fair value.
ACCOUNTING POLICIES
The Group leases mainly office buildings and land areas. Until 31 December 2018, the Group's leases were classified as
operating leases under the previous accounting standard, IAS 17 Leases; from 1 January 2019, the Group recognises all leases,
with the exception of short-term (i.e. lease term less than 12 months) and low value leases, in line with IFRS 16 Leases as
right-of-use assets with a corresponding lease liability at the date at which the leased asset is available for use by the Group.
See4Note 1 Significant accounting policies for information on the change in lease accounting policy.
A contract is, or contains a lease if the Group has the right to control the use of an identified asset for a period of time in
exchange for consideration. When determining the lease term, the Group assesses the probability of exercising extension and
termination options over the non-cancellable period by considering all relevant facts and circumstances.
Right-of-use assets and lease liabilities are initally recognised on the consolidated balance sheet at future fixed lease
payments over the lease term. Lease payments are discounted to present value using an effective interest rate. Right-of-use
assets are depreciated on a straight-line basis over the lease term, and reviewed periodically for indication of impairment.
When the future lease payments are revised due to changes in index-linked considerations or the lease term changes,
the right-of-use asset and the corresponding lease liability is remeasured. Any differences arising on reassessments are
recognised in the consolidated income statement.
Interest expense on lease liabilities is presented within Interest expense in the consolidated income statement. In the
consolidated cash flow statement, the principal portion of the lease payment is presented under Payments of long-term
liabilities, and the interest portion as Interest paid under Funds from operations. Variable lease payments, as well as costs for
leases not capitalised due to exemptions in the standard, are presented in Other expenses.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
109
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Amounts recognised in consolidated financial statements
35 Capital and other commitments
EUR million
In consolidated Income Statement
Depreciation
Interest expense on lease liabilities
On consolidated balance sheet
Additions to right-of-use assets
Of which land
Of which buildings, plants and structures
Of which machinery and equipment
Carrying amount of right-of-use assets
Of which land
Of which buildings, plants and structures
Of which machinery and equipment
Lease liabilities
In consolidated cash flow statement
Cash outflow for leases
2019
-18
-3
38
8
27
4
114
33
70
11
108
-18
Lease commitments
The Group has EUR 22 million off-balance sheet future commitments for leases that have not commenced on 31
December 2019.
See4Note 1 Significant accounting policies,4Note 4 Financial risk management,4Note 18 Property, plant and
equipment and right-of-use assets, and4Note 27 Interest-bearing liabilities for more information.
Capital commitments
EUR million
Property, plant and equipment
2019
260
2018
322
Capital commitments are off-balance sheet capital expenditures contracted for at the balance sheet date.
Other commitments
On 8 October 2019, Fortum entered into agreements to acquire all the shares in Uniper SE held by funds
managed by Elliott Management Corporation and its affiliates (Elliott) and Knight Vinke Energy Advisors Limited
and its affiliates (Knight Vinke), a total shareholding in excess of 20.5%. The transaction will be financed
with existing cash resources and committed credit facilities underwritten by Barclays Bank PLC. In the said
agreements Fortum has committed to paying the acquisition price of EUR 2.3–2.6 billion depending on the
amount of shares acquired.
Fortum has committed to provide a maximum of EUR 85 million to Voimaosakeyhtiö SF, for its participation in
the Fennovoima nuclear power project in Finland. Furthermore, Fortum's remaining direct commitment regarding
the construction of a waste-to-energy combined heat and power plant (CHP) in Kaunas, Lithuania is EUR 7 million
at maximum. The investment is made through Kauno Kogeneracinė Jėgainė (KKJ), a joint venture owned together
with Lietuvos Energija.
Fortum has also commited to provide a maximum of EUR 7 million to a joint venture with Numaligarh Refinery
Limited (NRL) and Chempolis to build and operate a biorefinery in Assam, India.
Teollisuuden Voima Oyj (TVO) is building Olkiluoto 3, the nuclear power plant, which is funded through external
loans, share issues and shareholder loans according to shareholders' agreement between the owners of TVO.
At end of December 2019, Fortum had EUR 170 million (2018: 170) outstanding receivables regarding Olkiluoto
3 and is additionally committed to provide at maximum EUR 63 million. TVO shareholder loan is classified as
participation in joint ventures.
In June 2018, the Swedish Government approved the legislation regarding Sweden’s national strategy for
implementation of the EU’s Water Framework Directive. The largest hydro industry companies will create a
common hydro-power fund to finance large parts of the environmental actions needed. The fund will have a total
financial cap of SEK 10 billion to be paid over a 20-year period, and the largest operators will contribute to the
fund proportionately based on their respective market share of hydro-power production. Fortum's share is 23% of
the funds' total financing.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
110
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
36 Pledged assets and contingent liabilities
ACCOUNTING POLICIES
CONTINGENT LIABILITIES
A contingent liability is disclosed when there is a possible obligation that arises from past events and whose existence is
only confirmed by one or more doubtful future events; or when there is an obligation that is not recognised as a liability or
provision because it is not probable that an outflow of resources will be required, or the amount of the obligation cannot be
reliably estimated.
EUR million
Pledged assets on own behalf
For debt
Pledges
Real estate mortgages
For other commitments
Pledges
Real estate mortgages
Pledged assets on behalf of others
Pledges
Contingent liabilities on own behalf
Other contingent liabilities
On behalf of associates and joint ventures
Guarantees
2019
2018
288
137
309
2
33
25
875
288
137
346
21
31
167
622
36.1 Pledged assets for debt
Participants in the Finnish State Nuclear Waste Management Fund are allowed to borrow from the Fund. Fortum
has pledged shares in Kemijoki Oy as a security. The value of the pledged shares amounts to EUR 269 million
(2018: 269).
Fortum Tartu in Estonia (60% owned by Fortum) has given real estate mortgages for a value of EUR 96 million
(2018: 96) as a security for an external loan. Real estate mortgages have also been given for loan from Fortum's
pension fund for EUR 41 million (2018: 41).
See4Note 27 Interest-bearing liabilities for related interest-bearing liabilities.
36.2 Pledged assets for other commitments
Pledges include restricted cash of EUR 21 million (2018: 346) and securities of EUR 281 million (2018: 0) for
trading of electricity, gas and CO2 emission allowances in Nasdaq Commodities, Intercontinental Exchange (ICE),
European Energy Exchange (EEX) and Polish Power Exchange (TGE). See4Note 21 Interest-bearing receivables.
Fortum has given real estate mortgages in power plants in Finland, total value of EUR 2 million (2018: 21),
as a security to the Finnish State Nuclear Waste Management Fund for the uncovered part of the legal liability
and unexpected events relating to future costs for decomissioning and disposal of spent fuel in Loviisa nuclear
power plant. According to the Nuclear Energy Act, Fortum is obligated to contribute the funds in full to the State
Nuclear Waste Management Fund to cover the legal liability. Any uncovered legal liability relates to periodising of
the payments to the fund. The size of the securities given is updated yearly in the second quarter based on the
decisions regarding the legal liabilities and the funding target which are determined at the end of the previous
year. See4Note 29 Nuclear related assets and liabilities.
36.3 Pledged assets on behalf of others
Pledged assets on behalf of others consist of restricted cash of EUR 33 million (2018: 31) posted as collateral
toward Nasdaq Clearing AB covering Fortum’s required contribution to the Commodity Market Default Fund
(default fund). The default fund is a mutualized fund whereby all participants on the Nordic power exchange (OMX
Nasdaq Commodities) post collateral in relation to their exposure on the market in order to cover potential defaults
by members which may cause losses exceeding the members' own collateral. See4Note 21 Interest-bearing
receivables.
36.4 Contingent liabilities on own behalf
On 1 January 2019, Fortum acquired all remaining C-shares of TVO entitling to the power production of the
Meri-Pori coal condensing power plant. Fortum is now entitled to 100% of the power production of the plant. The
guarantee amounted to EUR 125 million in December 2018 until the guarantee was released on 1 January 2019.
The Meri-Pori power plant is mainly used in Fingrid’s capacity reserve and as back-up capacity.
36.5 Guarantees on behalf of associates and joint ventures
Guarantees on behalf of associated companies and joint ventures mainly consist of guarantees relating to Fortum's
associated nuclear companies (Teollisuuden Voima Oyj, Forsmarks Kraftgrupp AB and OKG AB). Guarantees have
been given on behalf of Forsmarks Kraftgrupp AB and OKG AB amounting to SEK 8,239 million (EUR 789 million)
(2018: 526). There are two types of guarantees given. The Financing Amount is given to cover Fortum's share of
the uncovered part in the Nuclear Waste Fund, assuming no further production and that no further nuclear waste
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
111
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
fees are paid in. The uncovered amount is calculated by the authorities and is based on the difference between
the expected costs and the funds to cover these costs at the time of the calculation. The Supplementary Amount
constitutes a guarantee for deficits that can arise as a result of unplanned events. The amounts for the guarantees
are updated every third year by governmental decision. The Financing Amount given by Fortum on behalf of
Forsmarks Kraftgrupp AB and OKG AB is SEK 5,695 million (EUR 545 million) and the Supplementary Amount is
SEK 2,544 million (EUR 244 million).
The guarantee given on behalf of Teollisuuden Voima Oyj to the Finnish State Nuclear Waste Management Fund
amounts to EUR 21 million (2018: 36). The guarantee covers the unpaid legal liability due to periodisation as well
as risks for unexpected future costs.
Fortum has minority shares in legal companies owning nuclear power plants in Finland and Sweden. Fortum
consolidates these companies according to the equity method meaning that Fortum's share of the assets and
liabilities are netted to the balance sheet. For information regarding nuclear related assets and liabilities of Loviisa
nuclear power plant as well as Swedish and Finnish nuclear production companies where Fortum has a minority
shareholding see4Note 29 Nuclear related assets and liabilities.
The guarantees given to the Russian Wind fund have been relased during Q4 2019 (2018: EUR 48 million).
36.6 Other contingent liabilities
Fortum's 100% owned subsidiary Fortum Heat and Gas Oy has a contingent liability, based on the Finnish
Companies Act's (734/1978) Chapter 14a Paragraph 6, with Neste Oyj following the demerger of Fortum Oil and
Gas Oy in 2004.
37 Legal actions and official proceedings
37.1 Group companies
Tax cases in Finland
No tax cases with material impact in Finland.
Tax cases in Sweden
Cases relating to Swedish interest deductions
In March 2018, the Swedish Supreme Administrative Court decided not to grant Fortum leave to appeal with
respect to the interest deduction cases relating to the years 2009–2012. The unfavourable decision of the
Administrative Court of Appeal from June 2017 therefore remains in force. The additional tax and interest claimed,
in total SEK 1,175 million (EUR 122 million), was paid in 2016 and booked as a cost in 2017. There are strong
grounds to argue that the aforementioned decisions of the Administrative Court of Appeal and the Supreme
Administrative Court violate EU law and fundamental rights under EU law. On these grounds, Fortum has in
December 2018 filed a summons application to the District Court of Stockholm in which damages are claimed
from the Swedish state in these cases. Moreover, Fortum has filed a request to initiate a mutual agreement
procedure between Sweden and the Netherlands for the year 2012.
Cases relating to the Swedish hydro real estate tax
Fortum Sverige AB has through an appeal process in Swedish courts claimed that the property tax rate for
hydropower plants shall be lowered to the normal 0,5 percent of the tax assessment value. The case concerns
the years 2009–2014 and includes several legal arguments for the claim including state aid arguments. Fortum
Sverige AB did not receive a permission to appeal from the Supreme Administrative Court in this matter. As the
Administrative Court, the Administrative Court of Appeal in Stockholm and the Supreme Administrative Court have
handled only the arguments concerning state aid, the case has now been transferred back to the Administrative
Court concerning the other legal arguments. The disputed amount, excluding interest for the time period, totals
approximately SEK 510 million (approximately EUR 49 million).
Moreover, Swedish Fortum companies have appeals for 2011–2016 pending before the Administrative Court
relating to the property tax rate for their hydropower plants referring to the same legal grounds. Fortum has paid
the real estate tax in accordance with the legislation. If the final court decision would be unfavourable to Fortum,
this would not have any result impact for Fortum.
Fortum Sverige AB has in December 2018 filed a complaint to the EU commission regarding the Swedish
property tax for hydropower plants regarding 2017 and prior years. Fortum has asked the commission to
investigate whether the Swedish legislation regarding the property tax for hydropower plants and the Swedish
court decisions are in line with EU state aid rules.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
112
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Tax cases in Belgium
Fortum has received income tax assessments in Belgium for the years 2008, 2009, 2010, 2011 and 2012. The tax
authorities disagree with the tax treatment of Fortum EIF NV which was later merged into Fortum Project Finance
NV. Fortum finds the tax authorities interpretation not to be based on the local regulation and has appealed the
decisions. In June 2014, the court of First instance in Antwerp rejected Fortum's appeal for the years 2008 and
2009. Fortum found the decision unjustifiable and appealed to the Court of Appeal.
In January 2016, Fortum received a favourable decision from the Court of Appeal in Antwerp in which the
Court disagreed with the tax authorities' interpretation and the tax assessment for 2008 was nullified. The tax
authorities disagreed with the decision and filed an appeal to the Supreme Court (Hof van Cassatie) in March
2016. In April 2019, the Advocate General at the Supreme Court issued his opinion which was in favour of Fortum
Project Finance. He dismissed the arguments made by the Belgian State and confirmed the judgment of the Court
of Appeal of Antwerp.
In May 2019, the Supreme Court, however, annulled the decision of the Court of Appeal of Antwerp and
referred the case back to the Court of Appeal of Ghent for full retrial. Fortum's appeals concerning 2009–2012
are still pending and Fortum expects the remaining years to follow the final decision for 2008. Fortum has made
an assessment supported by legal opinions not to recognise a provision. The amount of additional tax claimed is
approximately EUR 36 million for the year 2008, approximately EUR 27 million for the year 2009, approximately
EUR 15 million for the year 2010, approximately EUR 21 million for the year 2011 and approximately EUR 15
million for the year 2012. The tax has already been paid.
2019. According to the Supplier’s plant ramp-up program the unit will produce 2–4 TWh of electricity, at varying
power levels, during the period of time between the first connection to the grid and the start of regular electricity
production.
According to the comprehensive settlement agreement signed in March 2018, TVO and the Supplier jointly
withdrew the pending arbitration proceedings under the International Chamber of Commerce (ICC) rules with
respect to costs and losses incurred in relation to delays in the construction of the OL3 EPR project. In June 2018,
the ICC tribunal confirmed the arbitration settlement by a consent award, and the arbitration proceedings were
terminated. The parties also withdrew the pending appeals in the General Court of the European Union.
The settlement agreement between TVO and the plant supplier consortium companies Areva NP, Areva GmbH
and Siemens AG as well as with Areva Group parent company Areva SA, a company wholly owned by the French
State, concerning the completion of the OL3 EPR project and related disputes entered into force late March 2018.
The settlement agreement stipulates that:
• In order to provide and maintain adequate and competent technical and human resources for the completion
of the OL3 EPR project, Areva will source the necessary additional resources from Framatome S.A.S., whose
majority owner is Electricité de France (EDF). The supplier consortium companies undertake that the funds
dedicated to the completion of the OL3 EPR project will be adequate and will cover all applicable guarantee
periods, including setting up a trust mechanism funded by Areva companies to secure the financing of the costs
of completion of the OL3 EPR project.
For critical accounting estimates regarding uncertain tax positions, see4Note 28 Income taxes on the balance
• The turnkey principle of the OL3 EPR plant contract and the joint and several liability of the supplier consortium
sheet. See also4Note 13 Income tax expense.
Other legal actions and official proceedings
In addition to the litigations described above, some Group companies are involved in other routine tax and other
disputes incidental to their normal conduct of business. Based on the information currently available, management
does not consider the liabilities arising out of such litigations likely to be material to the Group's financial position.
37.2 Associated companies
In Finland, Fortum is participating in the country's fifth nuclear power plant unit, Olkiluoto 3 (OL3), through the
shareholding in Teollisuuden Voima Oyj (TVO) with an approximately 25% share representing some 400 MW in
capacity.
OL3 was procured as a fixed-price turnkey project from a consortium (Supplier) formed by AREVA GmbH,
AREVA NP SAS and Siemens AG. As stipulated in the plant contract, the consortium companies have joint and
several liability for the contractual obligations. In accordance with the Supplier’s schedule updated in November
2018, regular electricity generation at the plant unit will commence in January 2020. According to the Supplier,
nuclear fuel will be loaded into the reactor in June 2019 and the first connection to the grid takes place in October
companies remain in full force. The agreement also noted the plant supplier’s schedule at the time the
agreement was signed, according to which regular electricity production in the unit will commence in May 2019.
The ICC arbitration concerning the costs and losses caused by the delay of the OL3 EPR project is settled by
financial compensation of EUR 450 million to be paid to TVO in two installments by the supplier consortium
companies.
• In the event that the supplier consortium companies fail to complete the OL3 EPR project by the end of 2019,
they will pay a penalty to TVO for such delay in an amount which will depend on the actual time of completion of
the OL3 EPR project and may not exceed EUR 400 million.
TVO received the first payment of EUR 328 million of the settlement amount in March 2018 at the entry into
force of the settlement agreement. In December 2019, the Supplier paid the second installment of financial
compensation amounting to EUR 122 million. The amount corresponding to the total settlement amount has been
entered as property, plant and equipment in the TVO Group balance sheet.
In December 2019, TVO received an updated schedule for the commissioning of the OL3 EPR plant unit from
the Supplier. According to the received information, nuclear fuel will be loaded into the reactor in June 2020, the
first connection to the grid will take place in November 2020, and the start of regular electricity production of the
OL3 EPR nuclear power plant unit will take place in March 2021.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
113
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
38 Related party transactions
39 Events after the balance sheet date
Disposal of district heating business, Joensuu, Finland
On 10 January 2020, Fortum concluded the sale of its district heating business in Joensuu, Finland, to Savon
Voima Oyj, as announced on 20 December 2019. The total consideration of the sale on a debt- and cash-free
basis was approximately EUR 530 million and the cash was received at the completion of the divestment on 10
January 2020. Fortum will record a tax-exempt capital gain of approximately EUR 430 million in the City Solutions
segment’s first-quarter 2020 results.
38.1 The Finnish State and companies owned by the Finnish State
At the end of 2019, the Finnish State owned 50.76% of the Company's shares (2018: 50.76%). The Finnish
Parliament has authorised the Government to reduce the Finnish State's holding in Fortum Corporation to no less
than 50.1% of the share capital and voting rights.
All transactions between Fortum and other companies owned by the Finnish State are on arm's length basis.
38.2 Board of Directors and Fortum Executive Management
The key management personnel of the Fortum Group are the members of Fortum Executive Management and
the Board of Directors. Fortum has not been involved in any material transactions with members of the Board of
Directors or Fortum Executive Management. No loans exist to any member of the Board of Directors or Fortum
Executive Management at 31 December 2019. The total compensation (including pension benefits and social
costs) for the key management personnel for 2019 was EUR 12 million (2018: 9).
See4Note 11 Employee benefits and Board remuneration for further information on the Board of Directors and
Fortum Executive Management remuneration and shareholdings.
38.3 Associated companies and joint ventures
In the ordinary course of business, Fortum engages in transactions with associated companies, joint ventures and
other related parties. These transactions are on the same commercial terms as they would be with third parties,
except for some associates and joint ventures, as noted below.
Fortum owns shareholdings in associated companies and joint ventures which own hydro and nuclear power
plants. Under consortium agreements, each owner is entitled to electricity in proportion to its share of ownership, or
based on other agreement. In turn, each owner is liable for an equivalent portion of costs, regardless of output. These
associated companies and joint ventures are not profit making since the owners purchase electricity at production
cost, including interest costs and production taxes.
For further information on transactions and balances with associated companies and joint ventures, see4Note 19
Participations in associated companies and joint ventures.
38.4 Pension funds
The Fortum pension funds in Finland, Sweden and Norway are stand-alone legal entities which manage pension
assets related to part of the pension coverage in these countries. Fortum has not paid contributions to the pension
funds in 2019. In 2018, Fortum paid a capital contribution of EUR 3 million to the newly established pension fund in
Norway. The assets in the pension fund in Finland include Fortum shares representing 0.04% (2018: 0.04%) of the
company's outstanding shares. Real estate mortgages have been given for a loan from Fortum's Finnish pension fund
for EUR 41 million (2018: 41).
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes
Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
114
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
40 Subsidiaries by segment on 31 December 2019
C = City Solutions
CS = Consumer Solutions
G = Generation
R = Russia
O = Other Operations
1) New company
2) Shares held by the parent company
Company name
Böle Vindkraft Ab/Oy
Ekopartnerit Turku Oy
Fincumet Oy
Fortum Asiakaspalvelu Oy 2)
Fortum Assets Oy
Fortum Growth Oy
Fortum Heat and Gas Oy 2)
Fortum Heat Estonia Oy 1)
Fortum Joensuu Oy 1), 2)
Fortum Markets Oy 2)
Fortum Norm Oy 2)
Fortum Power and Heat Holding Oy
Fortum Power and Heat Oy 2)
Fortum Real Estate Oy 2)
Fortum Recharge Oy 1)
Fortum Waste Solutions Oy 2)
Kalax Vindkraft Ab/Oy
Koillis-Pohjan Energiantuotanto Oy
Kotimaan Energia Oy
Kristinestad-Tjöck Vindpark Ab 1)
Molpe Vindkraft Ab/Oy
Närpes Vindkraft Ab/Oy
Niemen Romukauppa Oy
Nordic Wind Oy 1)
Oy Pauken Ab
Oy Tersil Ab
Oy Tertrade Ab
Pjelax Vindkraft Ab/Oy
Poikel Vindkraft Ab/Oy
Barry Danmark ApS
Fortum Energi A/S
Domicile
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Denmark
Denmark
Segment
G
C
C
CS
O
C
C,O
C
C
CS
O
G
CS,C,G,O,R
O
O
C
G
G
CS
G
G
G
C
G
O
O
O
G
G
O
CS
Group holding, %
100.0
51.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Company name
Fortum Waste Solutions A/S
Fortum Waste Solutions OW A/S
AS Anne Soojus
AS Fortum Tartu
AS Tartu Joujaam
AS Tartu Keskkatlamaja
Fortum CFS Eesti OU
Fortum Eesti AS
Fortum France S.A.S
Fortum Deutschland SE
Fortum Service Deutschland GmbH
Plugsurfing GmbH
Fortum Carlisle Limited
Fortum Energy Ltd
Fortum Glasgow Limited
Fortum O&M(UK) Limited
IVO Energy Limited
Fortum Insurance Ltd
Fortum Charge & Drive India Private Limited 1)
Fortum India Private Limited 2)
Fortum Solar India Private Limited
Fortum Solar Plus Private Limited
PT Fortum Energy Solution 1)
Fortum Finance Ireland Designated Activity Company 2)
Fortum Global Finance Designated Activity Company 1)
Fortum P&H Ireland Limited
Fortum Participation Ltd
Fortum Jelgava, SIA
Fortum Latvia SIA
SIA Fortum Daugavpils
SIA Lake Development
UAB Fortum Heat Lietuva
UAB Fortum Klaipeda
UAB Joniskio energija
UAB Svencioniu energija
Ånstadblåheia Vindpark AS
Fortum Consumer Solutions AS
Domicile
Denmark
Denmark
Estonia
Estonia
Estonia
Estonia
Estonia
Estonia
France
Germany
Germany
Germany
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Guernsey
India
India
India
India
Indonesia
Ireland
Ireland
Ireland
Ireland
Latvia
Latvia
Latvia
Latvia
Lithuania
Lithuania
Lithuania
Lithuania
Norway
Norway
Segment
C
C
C
C
C
C
O
C
G
O
C
O
C
O
C
C
G
O
O
C
C
C
C
O
O
O
O
C
C
C
C
C
C
C
C
G
CS
Group holding, %
100.0
100.0
100.0
60.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
95.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
66.2
50.0
100.0
100.0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
115
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Company name
Fortum Fiber AS 1)
Fortum Forvaltning AS
Fortum Hedging AS
Fortum Kundesenter AS
Fortum Markets AS
Fortum Oslo Varme AS
Fortum Recharge AS 1)
Fortum Tellier AS
Fortum Waste Solutions Norway AS
Fredrikstad EnergiSalg AS
Hafslund Strøm AS
Hallingkraft AS
Nordic Wind Norway AS 1)
NorgesEnergi AS
Nygårdsfjellet Vindpark AS
Oslo Energi AS
Solvencia AS
Sørfjord Vindpark AS
AMB Energia Sprzedaż Sp. z o.o.
Fortum Customer Services Polska Sp. z o.o.
Fortum Marketing and Sales Polska S.A.
Fortum Markets Polska S.A.
Fortum Network Częstochowa Sp. z o.o.
Fortum Network Płock Sp. z o.o.
Fortum Network Wrocław Sp. z o.o.
Fortum Power and Heat Polska Sp. z o.o.
Fortum Silesia SA
Fortum Sprzedaż Sp. z o.o.
Rejonowa Spółka Ciepłownicza Sp. z o.o.
Joint Stock Company Chelyabenergoremont
Fortum-New Generation 2 Limited Liability Company 1)
Fortum-New Generation 4 Limited Liability Company 1)
Fortum-New Generation 5 Limited Liability Company 1)
LLC Bugulchanskaya Solar power station
PAO Fortum
Ural Heat Networks Company Joint Stock Company
HQ Services Limited
Escandinava de Electricidad S.L.U
Blybergs Kraftaktiebolag
Brännälven Kraft AB
Bullerforsens Kraft Aktiebolag
Domicile
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Poland
Poland
Poland
Poland
Poland
Poland
Poland
Poland
Poland
Poland
Poland
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Rwanda
Spain
Sweden
Sweden
Sweden
Segment
C
O
G
CS
CS
C
O
CS
C
CS
CS
CS
G
CS
G
CS
CS
G
CS
CS
CS
CS
C
C
C
C,CS
C
CS
C
R
R
R
R
R
R
R
C
CS
G
G
G
Group holding, %
60.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
98.2
100.0
49.0
100.0
66.7
67.0
88.0
Company name
Energibolaget i Sverige Holding AB
Energikundservice Sverige AB
Fortum 1 AB
Fortum Energy AB
Fortum Fastigheter AB
Fortum Markets AB
Fortum Produktionsnät AB
Fortum Recharge AB 1)
Fortum Sverige AB
Fortum Sweden AB 2)
Fortum Vind Norr AB
Fortum Waste Solutions AB
Fortum Waste Solutions Holding AB
Göta Energi AB
Mellansvensk Kraftgrupp Aktiebolag
Nord Wind Sweden AB 1)
Nordgroup Waste Management AB
Oreälvens Kraftaktiebolag
Sävar Vindkraft AB
Solberg Vindkraft AB
Uddeholm Kraft Aktiebolag
Värmlandskraft-OKG-delägarna Aktiebolag
VG Power Tools AB
VG Power Turbo AB
FB Generation Services B.V.
Fortum 2 B.V.
Fortum 3 B.V.
Fortum Charge & Drive B.V.
Fortum Finance B.V.
Fortum H&C B.V. 1)
Fortum Holding B.V. 2)
Fortum Hydro B.V.
Fortum India B.V.
Fortum Power Holding B.V.
Fortum Russia B.V.
Fortum Russia Holding B.V.
Fortum SAR B.V.
Fortum Star B.V.
Nordic Wind B.V. 1)
PolarSolar B.V.
Valo Ventures I LP Fund
Domicile
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
USA
Segment
CS
CS
R
CS
O
CS
G
O
C,G,O
O
G
C
C
CS
G
G
C
G
G
G
G
G
C
C
O
O
G
O
O
O
C,G,O,CS
O
C
O
R
O
O
O
G
C
O
Group holding, %
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
86.9
100.0
100.0
65.0
100.0
100.0
100.0
73.3
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940Notes Operating and
financial review
Consolidated
financial statements
Notes
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
116
Financial key figures
Share key figures
Segment key figures
Definitions of key figures
Financial key figures
Fortum has adopted the IFRS 16 standard from 1 January 2019 onwards. Fortum has applied the transition relief
for not restating the comparative figures from 2018. See additional information in4Note 1 Significant accounting
policies.
For information of Alternative Performance Measures used by Fortum, see4Definitions of key figures
and4Note 1 Significant accounting policies.
EUR million or as indicated
Income statement
Sales
EBITDA 1)
Comparable EBITDA
Operating profit
- of sales %
Comparable operating profit
Share of profit of associates and joint ventures
Profit before income tax
- of sales %
Profit for the period
- of which attributable to owners of the parent
Financial position and cash flow
Capital employed
Interest-bearing net debt
Capital expenditure and gross investments in shares
- of sales %
Capital expenditure
Net cash from operating activities
2019
5,447
1,685
1,766
1,110
20.4
1,191
744
1,728
31.7
1,507
1,482
19,929
5,260
819
15.0
713
2,015
2018
5,242
1,674
1,523
1,138
21.7
987
38
1,040
19.8
858
843
18,170
5,509
4,672
89.1
584
804
Change
19/18%
4
1
16
-2
21
1,858
66
76
76
10
-5
-82
22
151
EUR million or as indicated
Key ratios
Return on capital employed, %
Return on shareholders' equity, %
Interest coverage
Interest coverage including capitalised borrowing costs
Funds from operations/interest-bearing net debt, %
Gearing, %
Comparable net debt/EBITDA
Equity-to-assets ratio, %
Other data
Dividends
Research and development expenditure
- of sales %
Average number of employees
1) EBITDA is defined as Operating profit + Depreciation and amortisation.
2) Board of Directors’ proposal for the planned Annual General Meeting on 17 March 2020.
See4Definitions of key figures.
2019
10.0
11.9
8.0
7.5
32.2
40
3.0
57
977 2)
67
1.2
8,248
2018
6.7
6.8
10.0
9.2
26.8
46
3.6
54
977
56
1.1
8,767
Change
19/18%
0
20
Key figures
Operating and
financial review
Consolidated
financial statements
Notes
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
117
Financial key figures
Share key figures
Segment key figures
Definitions of key figures
Share key figures
EUR million or as indicated
Data per share
Earnings per share
Cash flow per share
Equity per share
Dividend per share
Payout ratio, %
Dividend yield, %
Price/earnings ratio (P/E)
Share prices
At the end of the period
Average
Lowest
Highest
Other data
Market capitalisation at the end of the period, EUR million
Trading volumes 2)
Number of shares, 1,000 shares
In relation to weighted average number of shares, %
Number of shares, 1,000 shares
Number of shares excluding own shares, 1,000 shares
Average number of shares, 1,000 shares
Diluted adjusted average number of shares, 1,000 shares
Change
19/18%
76
149
10
0
2019
1.67
2.27
14.61
1.10 1)
65.9 1)
5.0 1)
13.2
22.00
20.06
18.09
22.50
2018
0.95
0.91
13.33
1.10
115.8
5.8
20.1
19.10
19.10
16.43
22.91
19,542
16,966
372,272
41.9
888,294
N/A
888,294
888,294
474,705
53.4
888,294
N/A
888,312
888,312
1) Board of Directors’ proposal for the Annual General Meeting on 17 March 2020.
2) Trading volumes in the table represent volumes traded on Nasdaq Helsinki. In addition to the Nasdaq Helsinki, Fortum shares were traded on
several alternative market places, for example at Boat, Cboe and Turquoise, and on the OTC market as well. During 2019, approximately 73%
(2018: 68%) of Fortum’s shares were traded on markets other than the Nasdaq Helsinki Ltd.
See4Definitions of key figures.
Key figures Operating and
financial review
Consolidated
financial statements
Notes
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
118
Financial key figures
Share key figures
Segment key figures
Definitions of key figures
Segment key figures
Sales by segment, EUR million
Generation
- of which internal
City Solutions
- of which internal
Consumer Solutions
- of which internal
Russia
- of which internal
Other Operations
- of which internal
Eliminations and Netting of Nord Pool transactions
Total
Comparable operating profit by segment, EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Comparable operating profit
Impairment charges
Capital gains and other
Changes in fair values of derivatives hedging future cash flow
Nuclear fund adjustment
Operating profit
Comparable EBITDA by segment, EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total
2019
2,141
259
1,200
45
1,835
-3
1,071
0
115
86
-916
5,447
2019
794
121
79
316
-119
1,191
-8
7
-72
-9
1,110
2019
939
309
141
469
-91
1,766
2018
1,842
-2
1,110
37
1,759
11
1,069
0
103
79
-641
5,242
2018
628
135
53
271
-99
987
-4
102
98
-45
1,138
2018
763
310
110
417
-78
1,523
Depreciation and amortisation by segment, EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total
Share of profit of associates and joint ventures by segment, EUR million
Generation
City Solutions
Russia
Other Operations
Total
Capital expenditure by segment, EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total
Gross investments in shares by segment, EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total
2019
145
188
62
153
28
575
2019
10
37
59
638
744
2019
247
313
55
67
31
713
2019
13
9
0
66
18
106
2018
135
175
57
147
22
536
2018
-72
74
36
0
38
2018
248
209
47
54
26
584
2018
14
33
0
63
3,977
4,088
Key figures Operating and
financial review
Consolidated
financial statements
Notes
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
119
Financial key figures
Share key figures
Segment key figures
Definitions of key figures
Gross divestments of shares by segment, EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total
Comparable net assets by segment, EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total
Comparable return on net assets by segment, %
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Average number of employees by segment
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total
2019
12
2
0
0
16
30
2019
6,147
3,892
640
3,205
4,356
18,239
2019
12.8
4.7
13.2
12.3
1.4
2019
1,122
1,979
1,379
2,942
825
8,248
2018
160
147
0
0
0
306
2018
6,485
3,794
648
2,789
4,023
17,739
2018
10.8
5.5
7.8
10.3
-5.8
2018
1,107
1,994
1,473
3,378
814
8,767
Key figures Operating and
financial review
Consolidated
financial statements
Notes
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
120
Financial key figures
Share key figures
Segment key figures
Definitions of key figures
Definitions of key figures
Alternative performance measures
Business
performance
Definition
Comparable
EBITDA
Operating profit + depreciations and amortisations -
items affecting comparablity
Comparable
operating
profit
Operating profit - items affecting comparability
Reason to use the measure
Comparable EBITDA is
representing the underlying
cash flow generated by the total
Group and segments. Used
as a component in the capital
structure target of Comparable
net debt
/EBITDA.
Comparable operating profit is
used in financial target setting
and forecasting, management’s
follow up of financial
performance and allocation
of resources in the group’s
performance management
process.
Items affecting
comparability
Impairment charges + capital gains and other +
changes in fair values of derivatives hedging future
cash flow + nuclear fund adjustment
Component used in calculating
comparable operating profit
and comparable EBITDA.
Impairment
charges
Impairment charges and related provisions (mainly
dismantling), which are adjusted from depreciation
and amortisation.
Component used in calculating
comparable operating profit
and comparable EBITDA.
Capital gains
and other
Capital gains and transaction costs from acquisitions,
which are adjusted from other income and other
expenses, respectively. Profits from the capital
recycling business model are presented in comparable
operating profit because the business results are
realised through divesting the shareholding, either
partially or totally.
Component used in calculating
comparable operating profit
and comparable EBITDA.
Reference to
reconciliation
4Note 5
Capital risk
management
Income
statement
Income
statement
Income
statement
Income
statement
Business
performance
Changes in
fair values of
derivatives
hedging future
cash flow
Nuclear fund
adjustment
Definition
Effects from financial derivatives hedging future cash-
flows where hedge accounting is not applied or own
use exemption cannot be used according to IFRS 9,
which are adjusted from other income or to sales and
materials and services respectively when calculating
Fortum's alternative performance measures.
Effects from the accounting of Fortum’s part of the
Finnish Nuclear Waste Fund where the asset on the
balance sheet cannot exceed the related liabilities
according to IFRIC interpretation 5, which are adjusted
from materials and services. In addition adjustments
are made for accounting effects from valuation
according to IFRS.
Comparable
return on net
assets, %
Comparable operating profit + share of profit
(loss) in associated companies and joint
ventures + adjustment for share of profit of
associated companies and joint ventures
Comparable net assets average
x 100
Adjustment for
Share of profit
of associated
companies and
joint ventures
Comparable
net assets
Adjustment for material items affecting comparability.
Non-interest bearing assets + interest-bearing assets
related to the Nuclear Waste Fund - non-interest
bearing liabilities - provisions (non-interest bearing
assets and liabilities do not include finance related
items, tax and deferred tax and assets and liabilities
from fair valuations of derivatives used for hedging
future cash flows).
Reason to use the measure
Component used in calculating
comparable operating profit
and comparable EBITDA.
Reference to
reconciliation
Income
statement
Component used in calculating
comparable operating profit
and comparable EBITDA.
Income
statement
Comparable return on net
assets is used in financial
target setting and forecasting,
management’s follow up of
financial performance and
allocation of resources in
the group’s performance
management process.
Share of profit of associates
and joint ventures is included
in profit component in the
comparable RONA calculation
and the adjustments are done
based on similar components as
in Items affecting comparability.
Comparable net assets is a
component in Comparable
return on net assets calculation
where return on capital
allocated directly to the
businesses is measured.
4Note 6
Segment
reporting
4Note 6
Segment
reporting
4Note 6
Segment
reporting
Key figures
Operating and
financial review
Consolidated
financial statements
Notes
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
121
Financial key figures
Share key figures
Segment key figures
Definitions of key figures
Capital
structure
Definition
Comparable net
debt / EBITDA
Interest-bearing net debt
Comparable EBITDA
Interest-bearing
net debt
Interest-bearing liabilities - liquid funds
Return on capital
employed
(ROCE), %
Profit before taxes + interest and other financial
expenses
x 100
Capital employed average
Capital
employed
Total assets - total non-interest bearing liabilities
Reason to use the measure
Reconciliation
Financial targets give guidance on
Fortum’s view of the company’s
long-term value creation
potential, its growth strategy and
business activities. Comparable
net debt to EBITDA is one of the
Fortum’s long-term over-the-cycle
financial targets measuring the
capital structure of the Group.
Interest-bearing net debt is
used in the follow-up of the
indebtedness of the group i.e.
capital structure especially as
a component in the long-term
over-the-cycle financial target of
Comparable net debt / EBITDA in
the Group.
Return on capital
employed (ROCE) is a long-
term over the cycle financial
ratio measuring the profitability
and how efficiently invested
capital is used. It gives guidance
on company’s long-term value
creation potential, its growth
strategy and business activities.
Capital employed is the book
value of the invested capital and
it is used as a component when
calculating the Return of capital
employed in the group.
4Note 5
Capital risk
management
4Note 27
Interest-
bearing
liabilities
4Note 5
Capital risk
management
4Note 5
Capital risk
management
Other key figures
Share based key figures
Earnings per share
(EPS)
Profit for the period - non-controlling interests
Average number of shares during the period
Cash flow per share Net cash from operating activities
Average number of shares during the period
Equity per share
Shareholders’ equity
Number of shares at the end of the period
Payout ratio, %
Dividend per share
Earnings per share
Dividend yield, %
Dividend per share
Share price at the end of the period
Price/earnings
(P/E) ratio
Share price at the end of the period
Earnings per share
Average share price Amount traded in euros during the period
Number of shares traded during the period
Market capitalisation Number of shares at the end of the period x share price at
the end of the period
Trading volumes
Number of shares traded during the period in relation to
the weighted average number of shares during the period
x 100
x 100
Key figures
Operating and
financial review
Consolidated
financial statements
Notes
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
122
Financial key figures
Share key figures
Segment key figures
Definitions of key figures
Other key figures
Definitions for tax figures
Funds from operations (FFO)
Net cash from operating activities before change in working capital
Effective income tax rate, % =
Income tax expense
Capital expenditure
Capitalised investments in property, plant and equipment and intangible assets including
maintenance, productivity, growth and investments required by legislation including
borrowing costs capitalised during the construction period. Maintenance investments
expand the lifetime of an existing asset, maintain usage/availability and/or maintains
reliability. Productivity investments improve productivity in an existing asset. Growth
investments’ purpose is to build new assets and/or to increase customer base within
existing businesses. Legislation investments are done at a certain point of time due to
legal requirements.
Gross investments in shares
Investments in subsidiary shares, shares in associated companies and joint ventures and
other investments. Investments in subsidiary shares are net of cash and grossed with
interest-bearing liabilities in the acquired company.
Profit before income tax
Comparable effective
income tax rate, %
Weighted average
applicable income tax rate
=
=
Income tax expense - effects from tax rate changes and major one time
income tax effects
Profit before income tax decreased by profits from associated companies
and joint ventures as well as tax exempt capital gains or losses
Sum of the proportionately weighted share of profits before taxes of each
group operating country multiplied with an applicable nominal tax rate of
the respective countries.
x 100
x 100
x 100
x 100
x 100
Return on shareholders’
equity (ROE), %
Profit for the year
Total equity average
Gearing, %
Interest-bearing net debt
Total equity including non-controlling interests
Equity-to-assets ratio, %
Total equity including non-controlling interests
Total assets
Interest coverage
Operating profit
Interest coverage including
capitalised borrowing costs
Net interest expenses
Operating profit
Net interest expenses - capitalised borrowing costs
Average number of
employees
Based on monthly average for the whole period
Key figures
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
123
Parent company financial statements, Finnish GAAP (FAS)
Income statement
EUR million
Sales
Other income
Employee benefits
Depreciation, amortisation and write-downs
Other expenses
Operating loss
Financial income and expenses
Loss/profit before appropriations
Group contributions received 1)
Profit before income tax
Income tax expense
Profit for the year
1) Taxable profits transferred from Finnish subsidiaries.
Balance sheet
EUR million
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Shares in Group companies
Interest-bearing receivables from Group companies
Interest-bearing receivables from associated companies
Other non-current assets
Derivative financial instruments
Deferred tax assets
Total non-current assets
Current assets
Other current receivables from Group companies
Other current receivables from associated companies
Derivative financial instruments
Note
2
3
4
8
6
7
2019
82
7
-37
-8
-84
-40
4
-35
286
251
-37
213
2018
82
8
-36
-8
-78
-33
751
719
85
803
-5
798
EUR million
Other current receivables
Deposits and securities (maturity over three months)
Cash and cash equivalents
Liquid funds
Total current assets
Total assets
EQUITY
Shareholders' equity
Share capital
Share premium
Hedging reserve
Retained earnings
Profit for the year
Total equity
Note
9
10
31 Dec 2019
10
70
1,095
1,165
1,614
21,471
31 Dec 2018
10
27
132
159
435
20,305
3,046
2,822
-20
4,025
213
10,087
3,046
2,822
-11
4,205
798
10,859
Note
31 Dec 2019
31 Dec 2018
Provisions for liabilities and charges
0
0
8
8
8
8
8
8
13, 14
9
9
13, 14
24
12
16,702
2,952
1
0
160
5
19,857
314
0
126
23
10
16,725
2,954
1
0
157
1
19,870
99
0
167
LIABILITIES
Non-current liabilities
External interest-bearing liabilities
Interest-bearing liabilities to Group companies
Interest-bearing liabilities to associated companies
Derivative financial instruments
Other non-current liabilities
Total non-current liabilities
Current liabilities
External interest-bearing liabilities
Trade and other payables to Group companies
Trade and other payables to associated companies
Derivative financial instruments
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
11, 13, 14
13, 14
11
12
12
13, 14
12
5,414
5,240
293
78
23
11,048
136
10
9
63
118
336
11,384
21,471
4,386
3,400
293
51
35
8,165
1,074
13
2
103
88
1,281
9,446
20,305
Parent company financial statements Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
124
EUR million
Cash flow from financing activities
Proceeds from long-term liabilities
Payment of long-term liabilities
Change in cashpool liabilities
Change in short-term liabilities
Dividends paid
Net cash from/used in financing activities
Net increase(+)/decrease(-) in liquid funds
Liquid funds at the beginning of the year
Liquid funds at the end of the year
2019
2,808
-2,540
1,838
-201
-977
927
1,006
159
1,165
2018
1,762
-530
110
-1,810
-977
-1,444
-3,347
3,506
159
Cash flow statement
EUR million
Cash flow from operating activities
Profit for the year
Adjustments:
Income tax expense
Group contributions
Finance costs - net
Depreciation, amortisation and write-downs
Operating profit before depreciation (EBITDA)
Non-cash flow items
Interest and other financial income received
Interest and other financial expenses paid
Dividends received
Group contributions received
Realised foreign exchange gains and losses
Income taxes paid
Funds from operations
Other short-term receivables increase(-)/decrease(+)
Other short-term payables increase(+)/decrease(-)
Change in working capital
Net cash from operating activities
Cash flow from investing activities
Capital expenditures
Acquisition of shares and capital contributions in subsidiaries
Capital returns
Proceeds from sales of fixed assets
Change in interest-bearing receivables and other non-current assets
Net cash used in investing activities
Cash flow before financing activities
2019
213
37
-286
-4
8
-32
0
26
-97
87
85
37
-3
102
-12
-1
-13
90
-8
0
0
0
-2
-11
79
2018
798
5
-85
-751
8
-24
0
18
-104
796
157
16
-6
853
9
-4
4
857
-16
0
0
0
-2,744
-2,760
-1,903
Parent company financial statements Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
125
Notes to the Parent Company Financial Statements, FAS
1 Accounting policies and principles
The financial statements of Fortum Oyj for the year ended 31 December 2019 are prepared in accordance with
Finnish Accounting Standards (FAS).
1.1 Sales
Sales include sales revenue from actual operations and exchange rate differences on trade receivables, less
discounts and indirect taxes such as value added tax.
1.2 Other income
Other income includes gains on the sales of property, plant and equipment and shareholdings, as well as all other
operating income not related to the sales of products or services, such as rents.
1.3 Foreign currency items and derivative instruments
Transactions denominated in foreign currencies have been valued using the exchange rate at the date of the
transaction. Receivables and liabilities denominated in foreign currencies outstanding on the balance sheet date
have been valued using the exchange rate quoted on the balance sheet date. Exchange rate differences have been
entered in the financial net in the income statement.
Fortum Oyj enters into derivative contracts mainly for hedging foreign exchange and interest rate exposures in
Fortum Group.
Finnish Accounting Board issued new requirements for accounting of financial derivatives on 13 December
2016 (KILA 1963/2016), whereby Fortum Oyj chose to apply IAS 39 standard in statutory financial statements.
Fortum Oyj applied IFRS 9 Financial Instruments standard from 1 Jan 2018 for derivative instruments and hedge
accounting.
Accounting principles of financial derivatives, see4Note 4 Financial risk management,4Note 15 Financial assets
and liabilities by categories and4Note 16 Financial assets and liabilities by fair value hierarchy in the Consolidated
financial statements.
1.4 Income taxes
Income taxes presented in the income statement consist of accrued taxes for the financial year and tax
adjustments for prior years.
1.5 Shares in group companies
The balance sheet value of shares in group companies consists of historical costs less write-downs. If the
estimated future cash flows generated by a non-current asset are expected to be permanently lower than the
balance of the carrying amount, an adjustment to the value must be made to write-down the difference as an
expense. If the basis for the write-down can no longer be justified at the balance sheet date, it must be reversed.
1.6 Intangible assets and Property, plant and equipment
The balance sheet value of intangible assets and property, plant and equipment consists of historical costs less
depreciation and possible impairments. Intangible assets and Property, plant and equipment are depreciated using
straight-line depreciation based on the expected useful life of the asset.
The depreciation is based on the following expected useful lives:
Buildings and structures
Machinery and equipment
Intangible assets
15–40 years
3–15 years
5–10 years
1.7 Pension expenses
Statutory pension obligations are covered through a compulsory pension insurance policy or Group's own pension
fund. Costs for pension fund are recorded in the income statement based on contributions paid pursuant to the
Finnish pension laws and regulations.
1.8 Long-term incentive schemes
Costs related to the Fortum long-term incentive plans are accrued over the earnings period and the related liability
is booked to the balance sheet.
1.9 Provisions
Foreseeable future expenses and losses that have no corresponding revenue to which Fortum is committed or
obliged to settle, and whose monetary value can be reasonably assessed, are entered as expenses in the income
statement and included as provisions on the balance sheet.
Parent company financial statements Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
126
2 Sales by market area
EUR million
Finland
Other countries
Total
3 Other income
EUR million
Rental and other income
Total
4 Employee benefits
EUR million
Personnel expenses
Wages, salaries and remunerations
Indirect employee costs
Pension costs
Other indirect employee costs
Other personnel expenses
Total
EUR thousand
Compensation for the President and CEO
Salaries and fringe benefits
Performance bonuses 1)
Share-based incentives 1) 2)
Pensions (statutory)
Pensions (voluntary)
Social security expenses
Total
2019
53
29
82
2019
7
7
2019
29
5
1
3
37
2018
52
30
82
2018
8
8
2018
26
6
1
3
36
2019
Pekka Lundmark,
President and CEO
2018
Pekka Lundmark,
President and CEO
1,057
200
898
207
265
39
2,666
1,048
228
297
250
252
36
2,112
EUR thousand
Compensation for the Board of Directors
2019
529
2018
483
The compensation above is presented on accrual basis. Paid salaries and remunerations for the President and CEO
Pekka Lundmark were EUR 2,213 thousand (2018: 1,594).
For the President and CEO Pekka Lundmark the retirement age of old-age pension is 63. The pension
obligations are covered through insurance company.
Board members are not in an employment relationship or service contract with Fortum, and they are not given
the opportunity to participate in Fortum’s STI or LTI programme, nor does Fortum have a pension plan that they
can opt to take part in. The compensation of the board members is not tied to the sustainability performance of
the Group.
See4Note 11 Employee benefits and Board remuneration and4Note 31 Pension obligations in the
Consolidated financial statements.
Average number of employees
5 Auditor’s fees
EUR thousand
Audit fees
Audit-related assignments
Tax assignments
Total
2019
268
2019
614
73
3
690
2018
265
2018
364
58
0
422
Deloitte Oy is the appointed auditor until the next Annual General Meeting, to be held in 2020. Audit fees include
fees for the audit of the consolidated financial statements, review of the interim reports as well as the fees for
the audit of Fortum Oyj. Audit related assignments include fees for assurance of sustainability reporting and other
assurance and associated services related to the audit. Tax assignments include fees for tax advice services.
1) Based on estimated amounts
2) Share-based incentives increased in 2019 mainly due to the higher earnings outcome from settled plans.
Parent company financial statements
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
127
6 Financial income and expenses
EUR million
Dividend income from group companies
Dividend income from associated companies and other
companies
Interest and other financial income from group companies
Write-downs of participations in group companies
Write-downs of participations in associated companies
Write-downs of loan receivables
Interest and other financial income
Exchange rate differences
Changes in fair values of derivatives
Interest and other financial expenses to group companies
Interest and other financial expenses
Total
Interest income
Interest expenses
Interest costs - net
7 Income tax expense
EUR million
Taxes on regular business operations
Taxes on group contributions
Total
Current taxes for the year
Current taxes for prior periods
Changes in deferred tax
Total
2019
87
0
32
-22
0
0
0
1
-7
-6
-80
4
27
-75
-48
2019
-20
57
37
36
0
1
37
2018
796
0
16
0
-2
-17
0
37
1
-2
-78
751
17
-75
-58
2018
-12
17
5
5
0
0
5
8 Non-current assets
Intangible assets
EUR million
Cost 1 January 2019
Additions
Disposals
Cost 31 December 2019
Accumulated depreciation 1 January 2019
Disposals
Depreciation for the year
Accumulated depreciation 31 December 2019
Carrying amount 31 December 2019
Carrying amount 31 December 2018
Property, plant and equipment
EUR million
Cost 1 January 2019
Additions and transfers between categories
Disposals
Cost 31 December 2019
Accumulated depreciation 1 January 2019
Disposals
Depreciation for the year
Accumulated depreciation 31 December 2019
Carrying amount 31 December 2019
Carrying amount 31 December 2018
Total
48
38
-38
48
25
-6
6
24
24
23
Total
14
4
-2
16
4
-1
2
5
12
10
Buildings and
structures
0
0
0
0
Machinery and
equipment
10
1
-1
10
Advances
paid and
construction
in progress
4
3
0
7
0
0
0
0
0
0
4
-1
2
5
5
5
0
-
-
0
7
4
Parent company financial statements Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
128
Investments
EUR million
Cost 1 January 2019
Additions 1)
Disposals
Cost 31 December 2019
Accumulated write-downs
1 January 2019
Impairment charges
Accumulated write-downs
31 December 2019
Carrying amount
31 December 2019
Carrying amount
31 December 2018
Shares
in Group
companies
17,847
0
0
17,847
Participation
in associated
companies
6
0
-
6
Receivables
from Group
companies
2,954
58
-60
2,952
Receivables
from
associated
companies
17
0
-
17
Other
non-current
assets
8
0
-
8
1,123
22
1,145
16,702
16,725
6
0
6
0
0
0
-
0
2,952
2,954
15
0
15
1
1
8
0
8
0
0
Total
20,831
59
-60
20,830
1,152
22
1,174
19,656
19,680
1) Additions regarding shares comprise acquisitions of shares and capital contributions and reclassification between other non-current assets and
shares in Group companies.
10 Changes in shareholders’ equity
EUR million
1 January 2019
Cash dividend
Change in hedging reserve
Profit for the year
31 December 2019
1 January 2018
Cash dividend
Change in hedging reserve
Profit for the year
31 December 2018
EUR million
Distributable funds
Retained earnings 31 December
Hedging reserve
Total
Share capital
3,046
-
-
-
3,046
3,046
-
-
-
3,046
Share
premium
2,822
-
-
-
2,822
2,822
-
-
-
2,822
Retained
earnings
5,002
-977
-
213
4,239
5,182
-977
-
798
5,002
Hedging
reserve
-11
-
-9
-
-20
-11
-
1
-
-11
2019
4,239
-20
4,219
Total
10,859
-977
-9
213
10,087
11,038
-977
1
798
10,859
2018
5,002
-11
4,991
9 Other current receivables
EUR million
Other current receivables from group companies
Trade receivables
Group contribution and other receivables
Accrued income and prepaid expenses
Total
Other current receivables
Trade receivables
Other receivables
Accrued income and prepaid expenses
Total
2019
9
286
18
314
0
4
6
10
2018
10
85
5
99
0
0
10
10
See4Note 4.5 Liquidity and refinancing risk in the Consolidated financial statements.
Parent company financial statements Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
129
11 Interest-bearing liabilities
EUR million
External interest-bearing liabilities
Bonds
Loans from financial institutions
Other long-term interest-bearing debt
Total long-term interest-bearing debt
Current portion of long-term bonds
Current portion of loans from financial institutions
Current portion of other long-term interest-bearing debt
Other short-term interest-bearing debt
Total short-term interest-bearing debt
Total 1)
Maturity of external interest-bearing liabilities
EUR million
2020
2021
2022
2023
2024
2025 and later
Total 1)
2019
4,251
311
852
5,414
0
26
34
76
136
5,550
2018
1,746
1,775
865
4,386
750
42
0
283
1,074
5,460
2019
136
520
1,033
1,093
300
2,468
5,550
See4Note 4.5 Liquidity and refinancing risk and4Note 27 Interest-bearing liabilities in the Consolidated financial
statements.
EUR million
External interest-bearing liabilities due after five years
Bonds
Other long-term liabilities
Total 1)
EUR million
Other interest-bearing liabilities due after five years
Interest-bearing liabilities to associated companies
Total
1) Excludes liabilities to Group and associated companies.
2019
1,616
852
2,468
2019
293
293
2018
97
865
962
2018
293
293
Non-discounted cash flows of interest-bearing liabilities and their maturities, see4Note 13 Financial derivatives.
12 Trade and other payables
EUR million
Trade and other payables to group companies
Trade payables
Deposits from group companies and other liabities
Accruals and deferred income
Total
Trade and other payables to associated companies
Accruals and deferred income
Total
Trade and other payables
Trade payables
Other liabilities
Accruals and deferred income
Total
2019
1
9
0
10
9
9
14
35
69
118
13 Financial derivatives
Interest rate and currency derivatives by instrument 2019
EUR million
Forward foreign exchange
contracts
Interest rate swaps
Interest rate and currency
swaps
Total
Of which long-term
Short-term
Notional amount
Remaining lifetimes
Under
1 year
10,489
0
104
10,592
1–5 years
716
2,715
263
3,694
Over
5 years
0
1,525
1,525
Fair value
Total
Positive
Negative
11,205
4,240
367
15,811
125
153
8
286
160
126
70
53
17
140
78
63
2018
3
10
0
13
2
2
11
5
73
88
Net
56
100
-10
146
82
63
Parent company financial statements
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
130
Interest rate and currency derivatives by instrument 2018
EUR million
Forward foreign exchange contracts
Interest rate swaps
Interest rate and currency swaps
Total
Of which long-term
Short-term
Notional amount
Remaining lifetimes
Under
1 year 1–5 years
786
8,523
2,242
1,515
265
383
3,293
10,420
Over
5 years
225
225
Total
9,309
3,982
648
13,938
Fair value
Positive Negative
83
70
0
154
51
103
99
159
66
324
157
167
Net
15
88
66
170
106
64
Maturity analysis of interest-bearing liabilities and derivatives
Amounts disclosed below are non-discounted expected cash flows (future interest payments and amortisations) of
interest-bearing liabilities and interest rate and currency derivatives.
EUR million
Interest-bearing liabilities
Interest rate and currency
derivatives liabilities
Interest rate and currency
derivatives receivables
Total
2019
2018
Under
1 year
269
1–5
years
3,151
Over
5 years
2,995
Total
6,415
Under
1 year
1,192
1–5
years
3,582
Over
5 years
1,437
Total
6,211
10,734
1,169
90
11,994
8,946
1,159
16
10,121
-10,818
185
-1,186
3,135
-100
2,986
-12,103
6,306
-9,037
1,101
-1,203
3,538
-21
1,433
-10,260
6,072
Interest-bearing liabilities include loans from the State Nuclear Waste Management Fund and Teollisuuden Voima
Oyj with balance value of EUR 1,185 million (2018: 1,158). These loans are renewed yearly and the related interest
payments are calculated for ten years in the table above.
14 Derivatives and liabilities by fair value hierarchy
Fair value measurements are classified using a fair value hierarchy i.e. Level 1, Level 2 and Level 3 that reflects the
significance of the inputs used in making the measurements. For further information look accounting principles in
Fortum consolidated accounts4Note 16 Financial assets and liabilities by fair value hierarchy.
Derivatives in financial assets
EUR million
In non-current assets
Derivative financial instruments
Interest rate and currency
derivatives
Hedge accounting
Non-hedge accounting
In current assets
Derivative financial instruments
Interest rate and currency
derivatives
Hedge accounting
Non-hedge accounting
Total
Level 1
Level 2
Level 3
Total
2019
2018
2019
2018
2019
2018
2019
2018
155
5
149
8
155
5
149
8
13
113
286
21
146
324
13
113
286
21
146
324
Derivatives and liabilities at fair value in financial liabilities
Level 2
Level 1
Level 3
Total
EUR million
In non-current liabilities
Interest-bearing liabilities 1)
Derivative financial instruments
Interest rate and currency
derivatives
Hedge accounting
Non-hedge accounting
In current liabilities
Derivative financial instruments
Interest rate and currency
derivatives
Hedge accounting
Non-hedge accounting
Total
2019
2018
2019
2018
2019
2018
2019
2018
2,293
930
2,293
930
73
5
43
8
73
5
43
8
5
58
2,434
5
98
1,083
5
58
2,434
5
98
1,083
1) Fair valued part of bond in the fair value hedge relationship.
Parent company financial statements
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
131
Net fair value amount of interest rate and currency derivatives is EUR 146 million (2018: 170), including assets
EUR 286 million (2018: 324) and liabilities EUR 140 million (2018: 154). Fortum Corporation has cash collaterals
based on Credit Support Annex agreements with some counterparties. At the end of December 2019 Fortum
Corporation had received EUR 65 million (2018: 75) from Credit Support Annex agreements. The received cash
has been booked as a short-term interest-bearing liability.
16 Related party transactions
See4Note 38 Related party transactions in the Consolidated financial statements.
Investments in group companies, associated companies and other holdings
15 Contingent liabilities and other commitments
EUR million
On own behalf
Other contingent liabilities
On behalf of group companies
Guarantees 1)
On behalf of associated companies
Guarantees on behalf of Swedish associated companies
Total
2019
1
566
819
1,385
1) Excludes parent company guarantee to acquire Uniper shares. See Guarantees on behalf of group companies below.
2018
2
113
532
647
Investments in group companies
Fortum Waste Solutions Oy
Fortum Asiakaspalvelu Oy
Fortum Heat and Gas Oy
Fortum Heat Estonia Oy
Fortum Joensuu Oy
Fortum Markets Oy
Fortum Norm Oy
Fortum Power and Heat Oy
Fortum Real Estate Oy
Fortum India Private Ltd
Fortum Finance Ireland Designated Activity Company
Fortum Sweden AB
Fortum Holding B.V.
Guarantees on behalf of group companies
On 8 October 2019, Fortum entered into agreements to acquire all the shares in Uniper SE held by funds
managed by Elliott Management Corporation and its affiliates (Elliott) and Knight Vinke Energy Advisors Limited
and its affiliates (Knight Vinke), a total shareholding in excess of 20.5%. The transaction will be financed with
existing cash resources and committed credit facilities underwritten by Barclays Bank PLC. In the said agreements
Fortum has committed to paying the acquisition price of EUR 2.3–2.6 billion (depending on the number of shares
acquired), for which Fortum Oyj has provided a parent company guarantee. See4Note 3 Acquisitions, disposals
and assets held for sale in the Consolidated financial statements.
Investments in associated companies
Wello Oy
Other holdings
AW-Energy Oy
Clic Innovation Oy
East Office of Finnish Industries Oy
Prototype Carbon Fund
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
India
Ireland
Sweden
The Netherlands
Finland
Finland
Finland
Finland
USA
No. of shares units
Holding %
3,520,800
10,010
2,000,000
91,197,543
91,197,543
24,039
250
91,197,543
2,000,000
1
25,000
1,000
61,062
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
0.10
100.00
100.00
100.00
1,100,000
18.60
2,854,688
100
1
N/A
3.43
3.80
5.88
Operating lease commitements
EUR million
Operating lease commitments
Due within a year
Due after one year and within five years
Due after 5 years
Total
2019
7
17
9
33
2018
8
28
14
49
17 Events after the balance sheet date
On 10 January 2020, Fortum concluded the sale of its district heating business in Joensuu, Finland, to Savon
Voima Oyj, as announced on 20 December 2019. The total consideration of the sale on a debt- and cash-free basis
was approximately EUR 530 million and the cash was received at the completion of the divestment on 10 January
2020.
Parent company financial statements
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
Investor
information
132
Proposal for the use of the profit shown on the balance sheet
The distributable funds of Fortum Corporation as at 31 December 2019 amounted to EUR 4,219,128,198.51
including the profit of the financial period 2019 of EUR 213,409,797.80. The company’s liquidity is good and the
dividend proposed by the Board of Directors will not compromise the company’s liquidity.
Based on the number of registered shares as at 5 February 2020 the total amount of dividend would be EUR
977,123,911.50. The Board of Directors proposes, that the remaining part of the distributable funds be retained in
the shareholders’ equity.
The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 1.10 per share be paid
for 2019.
Signatures for the operating and financial review and financial statements
Espoo, 5 February 2020
Matti Lievonen
Klaus-Dieter Maubach
Eva Hamilton
Kim Ignatius
Essimari Kairisto
Anja McAlister
Veli-Matti Reinikkala
Philipp Rösler
Pekka Lundmark
President and CEO
Proposal for the use of the profit shown on the balance sheet Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Key figures
2010–2019
Quarterly financial
information
Investor
information
133
Auditor’s report
To the Annual General Meeting of Fortum Oyj
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Fortum Oyj (business identity code 1463611-4) for the year ended
31 December, 2019. The financial statements comprise the consolidated income statement, consolidated
statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in total
equity, consolidated cash flow statement and notes to the consolidated financial statements, including a summary
of significant accounting policies, as well as the parent company’s income statement, balance sheet, cash flow
statement and notes to the financial statements.
In our opinion
• the consolidated financial statements give a true and fair view of the group’s financial position, financial
performance and cash flows in accordance with International Financial Reporting Standards (IFRS) as adopted by
the EU,
• the financial statements give a true and fair view of the parent company’s financial performance and financial
position in accordance with the laws and regulations governing the preparation of financial statements in Finland
and comply with statutory requirements.
Our opinion is consistent with the additional report submitted to the Audit Committee.
Basis for Opinion
We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good
auditing practice are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements
section of our report.
We are independent of the parent company and of the group companies in accordance with the ethical
requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
In our best knowledge and understanding, the non-audit services that we have provided to the parent company
and group companies are in compliance with laws and regulations applicable in Finland regarding these services,
and we have not provided any prohibited non-audit services referred to in Article 5(1) of regulation (EU) 537/2014.
The non-audit services that we have provided have been disclosed in note 9 to the consolidated financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current period. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
We have also addressed the risk of management override of internal controls. This includes consideration of
whether there was evidence of management bias that represented a risk of material misstatement due to fraud.
Auditor’s report Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Key figures
2010–2019
Quarterly financial
information
Investor
information
134
Key audit matter
Uniper investment
Refer to notes 2, 3 and 19.
• On 26 June 2018, Fortum closed the Uniper SE (Uniper)
offer and became the company's largest shareholder.
Fortum holds 49.99% of the shares as of 31 December
2019.
• Fortum consolidates Uniper as an associated company
from 30 June 2018. The total Uniper investment,
approximately EUR 4.0 billion, is reported in the
'Participations in associated companies and joint ventures'.
• Purchase price allocation was finalised during Q2/2019.
• In Uniper transaction the purchase price allocation has
been based on publicly available information since Uniper
is a listed company and a competitor of Fortum. Due to
the unique circumstances, preparing the purchase price
allocation has required management judgement.
How our audit addressed the key audit matter
• We have assessed management´s approach according to
which the purchase price allocation has been accounted
in the financial statements as well as the management
judgement applied in preparing the purchase price
allocation in line with IFRS.
• We have reviewed the management procedures and
methodology in determining the fair value of the net assets
acquired and preparing the purchase price allocation. We
have challenged the management judgement relating to
the key assumptions used in the valuation applied together
with our valuation specialist.
• We have tested the application of the valuation model
used as well as the mathematical accuracy of the cash flow
projections on a sample basis.
• Due to the size, Fortum´s investment in Uniper may have
• We have assessed the accounting treatment of the
significant effect on Fortum´s financial reporting.
purchase price allocation in line with IFRS supported by
our IFRS specialists and we have evaluated the accounting
principles of the purchase price allocation. We assessed
the adequacy of related disclosures in the financial
statements.
Key audit matter
Valuation of fixed assets and goodwill
Refer to Notes 2, 17 and 18.
• The consolidated balance sheet includes property, plant
and equipment amounting to EUR 10 123 million and
goodwill amounting to EUR 612 million.
• The main assumptions used in the valuation of energy
production property, plant and equipment and goodwill
relate to the estimated future operating cash flows and
the discount rates that are used in calculating the present
value.
• Estimates are also made in an acquisition when
determining the fair values and remaining useful lives of
acquired intangible and tangible assets.
• The potential indicators for impairment are among other
things changes in electricity and fuel prices, regulatory/
political changes relating to energy taxes and price
regulations.
• The assumptions used in the valuation of the balances in
question require management judgment.
How our audit addressed the key audit matter
• We have evaluated the process how management has
assessed the indicators for potential impairment. We have
performed audit procedures on impairment models relating
to material cash generating units.
• We have obtained entity’s impairment testing
documentation for goodwill and energy production assets
and tested and evaluated the rationale of key assumptions
applied by management on a sample basis, including
commodity price forecasts, profit and cash flow forecasts,
terminal values, foreign exchange rates and the selection
of discount rates.
• We have compared, that the forecasts used in the
impairment testing calculations are based on long term
forecast approved by management.
• We challenged management’s assumptions and judgments
with reference to historical data and, where applicable,
external benchmarks.
• This matter is a significant risk of material misstatement
referred to in EU Regulation No 537/2014, point (c) of
Article 10(2).
• We assessed the models used in the impairment testing
and carried out our testing for the sensitivity calculations.
• We assessed the adequacy of related disclosures in the
financial statements.
Auditor’s report Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Key figures
2010–2019
Quarterly financial
information
Investor
information
135
Key audit matter
Fair value measurement of derivatives and hedge accounting
Refer to Notes 4, 7, 8, 15 and 16.
• In Fortum’s consolidated financial statements total
derivative assets amounts to EUR 311 million and total
derivative liabilities amounts to EUR 389 million. The net
effect of changes in fair values of derivatives hedging
future cash flow amounts to EUR -72 million in items
affecting comparability in the consolidated income
statement and the cash flow hedges in other equity
components amount to EUR -70 million.
• The fair value and changes in fair values of derivative
financial instruments may have significant impacts
on Fortum´s financial statements. Fortum's business
is exposed to fluctuations in prices and volume of
commodities used in the production and sales of energy
products. The main exposure is toward energy prices.
Electricity price risk is hedged by entering into electricity
derivative contracts. Fortum uses derivative instruments to
reduce the effect of electricity price volatility.
Key audit matter
Nuclear related assets and liabilities
Refer to Notes 2 and 29.
• Nuclear related provisions and Fortum’s share of the
Finnish Nuclear Waste Management Fund in Fortum’s
balance sheet amount to EUR 813 million.
• Fortum's nuclear related provisions and the related part
of the Finnish State Nuclear Waste Management Fund
are both presented separately in the balance sheet as
disclosed in note 29.
• Fortum's share in the Finnish State Nuclear Waste
Management Fund is accounted for according to IFRIC
5 which states that the fund assets are measured at the
lower of fair value or the value of the related liabilities.
• Due to complexity and materiality, the accounting
treatment for nuclear decommissioning is complex and
requires application of special accounting practice and
management judgment when forming estimates for the
basis of accounting such as technical plans, timing, cost
estimates and discount rate.
How our audit addressed the key audit matter
• Our audit procedures included an assessment of internal
controls over the hedge accounting documentation
and effectiveness testing, measurement of fair value
measures, and evaluating the methodologies, inputs,
judgments made and assumptions used by management in
determining fair values.
• For Fortum’s fair valuation models, we evaluated rationale
of the models and accounting treatment applied. We
have compared the assumptions used by management in
valuation against externally available market data.
• We have assessed the existence and completeness of
outstanding derivative contracts as of 31 December 2019
by requesting confirmations from the counterparties.
• We have assessed that financial instruments included in
hedge relationships are accounted for in accordance with
IFRS 9.
• We have assessed the adequacy of the presentation for
derivative financial instruments and hedge accounting
applied in the financial statements.
How our audit addressed the key audit matter
• We have assessed Fortum’s accounting manual and
principles for Nuclear Decommissioning Accounting,
whether they are in line with IFRS accounting principles.
• We have assessed the assumptions and judgments made
and adopted by the management in the accounting for the
nuclear waste provisions and share in state nuclear waste
management fund which have been based on current
legislation and decisions set by Finnish State Nuclear
Waste Management Fund.
• We assessed the adequacy of related disclosures in the
financial statements.
Responsibilities of the Board of Directors and the President and CEO for the Financial
Statements
The Board of Directors and the President and CEO are responsible for the preparation of consolidated financial
statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS)
as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and
regulations governing the preparation of financial statements in Finland and comply with statutory requirements.
The Board of Directors and the President and CEO are also responsible for such internal control as they determine
is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the Board of Directors and the President and CEO are responsible for
assessing the parent company’s and the group’s ability to continue as a going concern, disclosing, as applicable,
matters relating to going concern and using the going concern basis of accounting. The financial statements are
prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company
or the group or cease operations, or there is no realistic alternative but to do so.
Auditor’s responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
parent company’s or the group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
• Conclude on the appropriateness of the Board of Directors’ and the President and CEO use of the going concern
basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to
Auditor’s report Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Key figures
2010–2019
Quarterly financial
information
Investor
information
136
events or conditions that may cast significant doubt on the parent company’s or the group’s ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the parent company or the group to cease to continue
as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures,
and whether the financial statements represent the underlying transactions and events so that the financial
statements give a true and fair view.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the group to express an opinion on the consolidated financial statements. We are responsible
for the direction, supervision and performance of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Other Reporting Requirements
the financial statements and our auditor´s report thereon. We have obtained the Operating and Financial Review
prior to the date of this auditor’s report, and the Financials is expected to be made available to us after that date.
Our opinion on the financial statements does not cover the other information.
In connection with our audit of the financial statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With
respect to the Operating and Financial Review, our responsibility also includes considering whether the Operating
and Financial Review has been prepared in accordance with the applicable laws and regulations.
In our opinion, the information in the Operating and Financial Review is consistent with the information in the
financial statements and the Operating and Financial Review has been prepared in accordance with the applicable
laws and regulations.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor´s report, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
Other opinions
We support that the financial statements should be adopted. The proposal by the Board of Directors regarding
the use of the profit shown on the balance sheet is in compliance with the Limited Liability Companies Act. We
support that the Board of Directors of the parent company and the President and CEO should be discharged from
liability for the financial period audited by us.
Espoo, 5 February 2020
Deloitte Oy
Audit Firm
Information on our audit engagement
We were first appointed as auditors by the Annual General Meeting on 16.3.2006, and our appointment
represents a total period of uninterrupted engagement of 13 years.
Reeta Virolainen
Authorised Public Accountant (KHT)
Other information
The Board of Directors and the President and CEO are responsible for the other information. The other information
comprises the Operating and Financial Review and the information included in the Financials but does not include
Auditor’s report Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Quarterly financial
information
Investor
information
137
Financial key figures
Share key figures
Segment key figures
Capital expenditure
Operational key figures
Financial key figures
Comparability of information presented in tables
Fortum announced the sale of Swedish Distribution business in March 2015. After the divestment of the Swedish Distribution business Fortum has no electricity distribution operations and therefore Distribution segment was treated as
discontinued operations in 2015, with restatement of year 2014, according to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
Information in the tables and graphs presented for year 2012 or earlier is not restated due to the adoption of IFRS 10 and IFRS 11. Adoption of standards influences treatment of Fortum’s holding in Stockholm Exergi AB (Exergi),
(previously AB Fortum Värme samägt med Stockholms stad), in the consolidated financial statements. From 1 January 2014 onwards Exergi is treated as a joint venture and thus consolidated with equity method. Before the change the
company was consolidated as a subsidiary with 50% minority interest.
Fortum adopted IFRS 16 on 1 January 2019, and IFRS 9 and IFRS 15 on 1 January 2018. Fortum applied the transition relief for not restating the comparatives of 2018 and 2017, respectively.
In 2019, Fortum classified certain assets as held for sale. These assets and the related liabilities are included in segment assets and liabilities at 31 December 2019.
For information of Alternative Performance Measures used by Fortum, see4Definitions of key figures and4Note 1 Significant accounting policies.
EUR million or as indicated
Income statement
Sales total Fortum
Sales continuing operations
EBITDA total Fortum 1)
EBITDA continuing operations
Comparable EBITDA total Fortum
Comparable EBITDA continuing operations
Operating profit total Fortum
- of sales %
Operating profit continuing operations
- of sales %
Comparable operating profit total Fortum
Comparable operating profit continuing operations
Share of profit/loss of associates and joint ventures total Fortum
Profit before income tax total Fortum
- of sales %
Profit before income tax continuing operations
- of sales %
Profit for the period total Fortum
- of which attributable to owners of the parent
Profit for the period continuing operations
- of which attributable to owners of the parent
2010
6,296
2,271
2,396
1,708
27.1
1,833
62
1,615
25.7
1,354
1,300
2011
6,161
3,008
2,374
2,402
39.0
1,802
91
2,228
36.2
1,862
1,769
2012
6,159
2,538
2,416
1,874
30.4
1,752
23
1,586
25.8
1,512
1,416
2013
5,309
2,129
1,975
1,508
28.4
1,403
178
1,398
26.3
1,212
1,204
2014
4,751
4,088
3,954
1,673
1,873
1,457
3,428
72.2
1,296
31.7
1,351
1,085
149
3,360
70.7
1,232
30.1
3,161
3,154
1,089
1,081
2015
3,702
3,459
4,640
196
1,265
1,102
4,245
114.7
-150
-4.3
922
808
20
4,088
110.4
-305
-8.8
4,142
4,138
-228
-231
2016
3,632
3,632
1,006
1,006
1,015
1,015
633
17.4
633
17.4
644
644
131
595
16.4
595
16.4
504
496
504
496
2017
4,520
4,520
1,623
1,623
1,275
1,275
1,158
25.6
1,158
25.6
811
811
148
1,111
24.6
1,111
24.6
882
866
882
866
2018
5,242
5,242
1,674
1,674
1,523
1,523
1,138
21.7
1,138
21.7
987
987
38
1,040
19.8
1,040
19.8
858
843
858
843
2019 Change 19/18%
5,447
5,447
1,685
1,685
1,766
1,766
1,110
20.4
1,110
20.4
1,191
1,191
744
1,728
31.7
1,728
31.7
1,507
1,482
1,507
1,482
4
4
1
1
16
16
-2
-2
21
21
1,858
66
66
76
76
76
76
Key figures 2010–2019 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Quarterly financial
information
Investor
information
138
Financial key figures
Share key figures
Segment key figures
Capital expenditure
Operational key figures
EUR million or as indicated
Financial position and cash flow
Capital employed total Fortum
Interest-bearing net debt
Interest-bearing net debt without Exergi financing
Capital expenditure and gross investments in shares total Fortum
- of sales %
Capital expenditure and gross investments in shares continuing operations
Capital expenditure total Fortum
Capital expenditure continuing operations
Net cash from operating activities total Fortum
Net cash from operating activities continuing operations
Key ratios
Return on capital employed total Fortum, %
Return on shareholders' equity total Fortum, %
Interest coverage total Fortum
Interest coverage including capitalised borrowing costs total Fortum
Funds from operations/interest-bearing net debt total Fortum, %
Funds from operations/interest-bearing net debt without Exergi financing
total Fortum, %
Gearing, %
Comparable net debt/EBITDA total Fortum
Comparable net debt/EBITDA without Exergi financing
Equity-to-assets ratio, %
Other data
Dividends
Research and development expenditure
- of sales %
Average number of employees total Fortum
Average number of employees continuing operations
1) EBITDA is defined as Operating profit + Depreciation and amortisation.
2) Board of Directors' proposal for the planned Annual General Meeting on 17 March 2020.
See4Definitions of key figures.
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019 Change 19/18%
16,124
6,826
17,931
7,023
19,420
7,814
1,249
19.8
1,222
1,437
11.6
15.7
13.7
10.0
20.5
78
2.8
40
1,482
24.1
1,408
1,613
14.8
19.7
10.5
8.5
21.5
69
3.0
44
1,574
25.6
1,558
1,382
10.2
14.6
7.6
5.7
19.9
73
3.2
43
888
30
0.5
11,156
888
38
0.6
11,010
888
41
0.7
10,600
19,183
7,793
6,658
1,020
19.2
1,005
1,548
9.0
12.0
6.7
5.3
18.8
22.1
77
3.9
3.4
43
977
49
0.9
9,532
17,918
4,217
3,664
843
17.7
695
774
626
1,762
1,406
19.5
30.0
19.9
15.7
42.9
49.3
39
2.3
2.0
51
1,155
41
1.0
8,821
8,329
19,870
-2,195
N/A
669
18.1
625
626
582
1,381
1,228
22.7
33.4
27.6
21.5
-59.7
N/A
-16
-1.7
N/A
61
977
47
1.4
8,193
8,009
18,649
-48
N/A
1,435
39.5
1,435
591
591
621
621
4.0
3.7
4.6
4.1
-1,503.4
N/A
0
0.0
N/A
62
977
52
1.4
7,994
7,994
18,172
988
N/A
1,815
40.2
1,815
690
690
993
993
7.1
6.6
8.7
7.8
83.9
N/A
7
0.8
N/A
61
977
53
1.2
8,507
8,507
18,170
5,509
N/A
4,672
89.1
4,672
584
584
804
804
6.7
6.8
10.0
9.2
26.8
N/A
46
3.6
N/A
54
977
56
1.1
8,767
8,767
19,929
5,260
N/A
819
15.0
819
713
713
2,015
2,015
10.0
11.9
8.0
7.5
32.2
N/A
40
3.0
N/A
57
977 2)
67
1.1
8,248
8,248
10
-5
-82
-82
22
22
151
151
0
20
Key figures 2010–2019 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Quarterly financial
information
Investor
information
139
Financial key figures
Share key figures
Segment key figures
Capital expenditure
Operational key figures
Share key figures
EUR or as indicated
Data per share
Earnings per share total Fortum
Earnings per share continuing operations
Earnings per share discontinued operations
Diluted earnings per share total Fortum
Diluted earnings per share continuing operations
Diluted earnings per share discontinued operations
Cash flow per share total Fortum
Cash flow per share continuing operations
Equity per share
Dividend per share
Extra dividend
Payout ratio, %
Dividend yield, %
Price/earnings ratio (P/E)
Share prices
At the end of the period
Average
Lowest
Highest
Other data
Market capitalisation at the end of the period, EUR million
Trading volumes 2)
Number of shares, 1,000 shares
In relation to weighted average number of shares, %
Number of shares, 1,000 shares
Number of shares excluding own shares, 1,000 shares
Average number of shares, 1,000 shares
Diluted adjusted average number of shares, 1,000 shares
2010
1.46
-
1.46
-
1.62
9.24
1.00
68.5
4.4
15.4
22.53
19.05
17.18
22.69
2011
1.99
-
1.99
-
1.82
10.84
1.00
50.3
6.1
8.3
16.49
19.77
15.53
24.09
2012
1.59
-
1.59
-
1.56
11.30
1.00
62.9
7.1
8.9
14.15
15.66
12.81
19.36
2013
1.36
-
1.36
-
1.74
11.28
1.10
80.9
6.6
12.2
16.63
15.11
13.10
18.18
2014
3.55
1.22
2.33
3.55
1.22
2.33
1.98
1.38
12.23
1.10
0.20
36.6
7.2
5.1
17.97
17.89
15.13
20.32
2015
4.66
-0.26
4.92
4.66
-0.26
4.92
1.55
1.38
15.53
1.10
-
23.6
7.9
3.0
13.92
16.29
12.92
21.59
2016
0.56
0.56
-
0.56
0.56
-
0.70
0.70
15.15
1.10
-
196.4
7.5
26.1
14.57
13.56
10.99
15.74
2017
0.98
0.98
-
0.98
0.98
-
1.12
1.12
14.69
1.10
-
112.2
6.7
16.8
16.50
15.28
12.69
18.94
2018
0.95
0.95
-
0.95
0.95
-
0.91
0.91
13.33
1.10
115.8
5.8
20.1
19.10
19.10
16.43
22.91
2019 Change 19/18%
76
76
76
76
149
149
10
0
1.67
1.67
-
1.67
1.67
-
2.27
2.27
14.61
1.10 1)
65.9 1)
5.0 1)
13.2
22.00
20.06
18.09
22.50
20,015
14,649
12,570
14,774
15,964
12,366
12,944
14,658
16,966
19,542
493,375
55.5
888,367
N/A
888,367
888,367
524,858
59.1
888,367
N/A
888,367
888,367
494,765
55.7
888,367
N/A
888,367
888,367
465,004
52.3
888,367
N/A
888,367
888,367
454,796
51.2
888,367
N/A
888,367
888,367
541,858
61.0
888,367
N/A
888,367
888,367
611,572
68.8
888,367
N/A
888,367
888,367
582,873
65.6
888,367
N/A
888,367
888,367
474,705
53.4
888,294
N/A
888,312
888,312
372,272
41.9
888,294
N/A
888,294
888,294
1) Board of Directors' proposal for the planned Annual General Meeting on 17 March 2020.
2) Trading volumes in the table represent volumes traded on Nasdaq Helsinki. In addition to the Nasdaq Helsinki, Fortum shares were traded on several alternative market places, for example at Boat, Cboe and Turquoise, and on the OTC market as well. In 2019, approximately 73% (2018: 68%) of Fortum's
shares were traded on markets other than the Nasdaq Helsinki Ltd.
See Definitions of key figures.
Key figures 2010–2019 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Quarterly financial
information
Investor
information
140
Financial key figures
Share key figures
Segment key figures
Capital expenditure
Operational key figures
Segment key figures
Fortum renewed its business structure as of 1 March 2014. The reorganisation lead to a change in Fortum's external financial reporting structure as previously separately reported segments Heat and Electricity Sales were combined into
one segment: Heat, Electricity Sales and Solutions.
Fortum has applied new IFRS 10 Consolidated financial statements and IFRS 11 Joint arrangements from 1 January 2014. The effect of applying the new standards to Fortum Group financial information relates to Stockholm Exergi
AB (publ) (previously AB Fortum Värme samägt med Stockholm Stad), that is treated as a joint venture and thus consolidated with equity method from 1 January 2014 onwards. Before the change the company was consolidated as a
subsidiary with 50% minority interest.
Fortum announced the sale of Swedish Distribution business in March 2015. After the divestment of the Swedish Distribution business Fortum does not have any distribution operations and therefore Distribution segment has been
treated as discontinued operations in 2015 with restatement of year 2014, according to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
Fortum reorganised its operating structure as of 1 April 2016. The business divisions are: Generation (mainly the former Power and Technology); City Solutions (mainly the former Heat, Electricity Sales and Solutions) and Russia. Because
of the minor financial impact, the comparable segment information for 2015 was not restated.
As of 1 March 2017, the City Solutions division was divided into two divisions: City Solutions and Consumer Solutions, both reported as separate reporting segments. Fortum has restated its 2016 comparison segment reporting figures
in accordance with the new organisation structure.
In November 2018, Fortum announced that the solar and wind businesses were reorganised and the wind operations became a business area within the Generation segment and the solar operations within the City Solutions segment.
Previously these were included in Other Operations. The Russian wind and solar operations continue as a part of the Russia segment. Fortum has restated its 2018 comparative segment reporting figures in accordance with the new
organisation structure.
See more information in4Note 6 Segment reporting.
Sales by segment, EUR million
Generation
- of which internal
City Solutions
- of which internal
Heat
- of which internal
Consumer Solutions
- of which internal
Electricity Sales
- of which internal
Russia
- of which internal
Other Operations
- of which internal
Distribution
- of which internal
Eliminations and Netting of Nord Pool transactions
Total for continuing operations
Discontinued operations
Eliminations 1)
Total
1) Sales to and from discontinued operations.
2010
2,702
-281
1,770
-8
1,798
158
804
-
51
169
963
18
-1,792
6,296
2011
2,481
-24
1,737
8
900
95
920
-
108
115
973
15
-958
6,161
2012
2,415
296
1,628
18
722
55
1,030
-
137
-66
1,070
37
-843
6,159
2013
2,252
69
1,516
87
1,119
-
63
54
1,064
19
-706
5,309
2014
2,156
85
1,332
34
1,055
0
58
44
-513
4,088
751
-89
4,751
2015
1,722
83
1,187
-13
893
0
114
75
-458
3,459
274
-31
3,702
2016
1,657
15
782
1
668
2
896
0
92
61
-463
3,632
2017
1,677
15
1,015
19
1,097
3
1,101
0
102
67
-470
4,520
2018
1,842
-2
1,110
37
1,759
11
1,069
0
103
79
-641
5,242
2019
2,141
259
1,200
45
1,835
-3
1,071
0
115
86
-916
5,447
3,632
4,520
5,242
5,447
Key figures 2010–2019
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Quarterly financial
information
Investor
information
141
Financial key figures
Share key figures
Segment key figures
Capital expenditure
Operational key figures
Comparable operating profit by segment, EUR million
Generation
City Solutions
Heat
Consumer Solutions
Electricity Sales
Russia
Other Operations
Distribution
Comparable operating profit
Impairment charges
Capital gains and other
Changes in fair values of derivatives hedging future cash flow
Nuclear fund adjustment
Other items affecting comparability 1)
Operating profit, continuing operations
Discontinued operations
Operating profit
2010
1,298
275
11
8
-66
307
1,833
93
-218
1,708
2011
1,201
278
27
74
-73
295
1,802
284
316
2,402
1) Other items affecting comparability comprise Changes in fair values of derivatives hedging future cash flow and Nuclear fund adjustment.
Comparable EBITDA by segment, EUR million
Generation
City Solutions
Heat
Consumer Solutions
Electricity Sales
Russia
Other Operations
Distribution
Total for continuing operations
Discontinued operations
Total
2010
1,398
462
13
94
-56
485
2,396
2011
1,310
471
29
148
-66
482
2,374
2012
1,146
271
39
68
-92
320
1,752
155
-33
1,874
2012
1,260
481
40
189
-83
529
2,416
2013
859
109
156
-54
332
1,403
61
45
1,508
2013
1,007
211
258
-49
548
1,975
2014
877
104
161
-57
1,085
305
-94
1,296
2,132
3,428
2014
998
204
304
-49
1,457
416
1,873
2015
561
108
201
-63
808
-918
22
-62
-150
4,395
4,245
2015
680
209
267
-53
1,102
163
1,265
2016
417
64
48
191
-77
644
27
38
-65
-11
633
633
2016
527
186
55
312
-64
1,015
1,015
2017
478
98
41
296
-102
811
6
326
14
1
1,158
1,158
2017
603
262
57
438
-83
1,275
1,275
2018
628
135
53
271
-99
987
-4
102
98
-45
1,138
1,138
2018
763
310
110
417
-78
1,523
1,523
2019
794
121
79
316
-119
1,191
-8
7
-72
-9
1,110
1,110
2019
939
309
141
469
-91
1,766
1,766
Key figures 2010–2019 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Quarterly financial
information
Investor
information
142
Financial key figures
Share key figures
Segment key figures
Capital expenditure
Operational key figures
Depreciation and amortisation, EUR million
Generation
City Solutions
Heat
Consumer Solutions
Electricity Sales
Russia
Other Operations
Distribution
Total for continuing operations
Discontinued operations
Total
Share of profit of associates and joint ventures by segment, EUR million
Generation
City Solutions
Heat
Electricity Sales
Russia
Other Operations
Distribution
Total for continuing operations
Discontinued operations
Total
Capital expenditure by segment, EUR million
Generation
City Solutions
Heat
Consumer Solutions
Electricity Sales
Russia
Other Operations
Distribution
Total for continuing operations
Discontinued operations
Total
2010
100
187
2
86
10
178
563
2010
-25
31
1
8
28
19
62
2010
97
304
0
599
9
213
1,222
2011
109
193
2
108
7
187
606
2011
3
19
2
30
23
14
91
2011
131
297
5
670
16
289
1,408
2012
114
210
1
121
9
209
664
2012
-12
20
0
27
-20
8
23
2012
190
464
1
568
11
324
1,558
2013
148
102
150
5
216
621
2013
4
91
46
32
4
178
2013
179
123
435
12
255
1,005
2014
121
100
147
8
377
150
526
2014
-14
88
35
37
146
3
149
2014
197
86
340
3
626
147
774
2015
118
101
117
10
346
50
395
2015
-111
59
32
40
20
0
20
2015
187
105
285
6
582
44
626
2016
110
121
7
123
13
373
373
2016
-34
76
38
51
131
131
2016
196
109
3
201
83
591
591
2017
125
163
16
142
18
464
464
2017
-1
80
31
38
148
148
2017
174
170
7
152
187
690
690
2018
135
175
57
147
22
536
536
2018
-72
74
36
0
38
38
2018
248
209
47
54
26
584
584
2019
145
188
62
153
28
575
575
2019
10
37
59
638
744
744
2019
247
313
55
67
31
713
713
Key figures 2010–2019 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Quarterly financial
information
Investor
information
143
Financial key figures
Share key figures
Segment key figures
Capital expenditure
Operational key figures
Gross investments in shares by segment, EUR million
Generation
City Solutions
Heat
Consumer Solutions
Russia
Other Operations
Distribution
Total for continuing operations
Discontinued operations
Total
Gross divestments of shares by segment, EUR million
Generation
City Solutions
Heat
Consumer Solutions
Electricity Sales
Russia
Other Operations
Distribution
Total for continuing operations
Discontinued operations
Total
Comparable net assets by segment, EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total for continuing operations
2010
25
1
-
1
0
27
2010
0
52
-
43
6
46
147
2011
17
32
24
1
-
74
2011
3
203
16
23
0
323
568
2012
-
10
-
6
-
16
2012
102
269
2
-
0
37
410
2013
2
11
0
2
0
15
2013
79
11
-
-
52
142
2014
2
37
27
4
69
0
69
2014
67
446
0
2
515
2,681
3,196
2010
2011
2012
2013
2014
2015
16
23
0
4
43
0
43
2015
0
27
0
-
27
6,369
6,395
2015
5,931
2,182
2,561
258
10,932
2016
7
698
117
0
22
844
844
2016
0
33
1
127
0
161
161
2016
5,815
2,873
154
3,284
514
12,641
2017
90
386
486
125
39
1,125
1,125
2017
0
0
55
0
687
742
742
2017
5,672
3,728
638
3,161
276
13,474
2018
14
33
0
63
3,977
4,088
4,088
2018
160
147
0
0
0
306
306
2018
6,485
3,794
648
2,789
4,023
17,739
2019
13
9
0
66
18
106
106
2019
12
2
0
0
16
30
30
2019
6,147
3,892
640
3,205
4,356
18,239
Key figures 2010–2019 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Quarterly financial
information
Investor
information
144
Financial key figures
Share key figures
Segment key figures
Capital expenditure
Operational key figures
Fortum is disclosing Comparable net assets instead of Net assets from 2016 onwards. Net assets until 2015 are disclosed below.
Net assets by segment, EUR million
Generation
City Solutions
Heat
Electricity Sales
Russia
Other Operations
Distribution
Total for continuing operations
Net assets related to discontinued operations
Total
1) Fortum is disclosing Comparable net assets instead of Net assets from 2016 onwards.
Comparable return on net assets by segment, %
Generation
City Solutions
Heat
Consumer Solutions
Electricity Sales
Russia
Distribution 1)
1) Classified as discontinued operations from 2014 onwards.
Return on net assets by segment, %
Generation
City Solutions
Heat
Electricity Sales
Russia
Distribution 2)
1) Fortum is disclosing Comparable net assets instead of Net assets from 2016 onwards.
2) Classified as discontinued operations from 2014 onwards.
2010
5,806
4,182
210
2,817
29
3,683
16,727
2010
22.3
7.7
9.3
0.7
9.3
2010
19.5
8.4
38.4
2.4
9.7
2011
6,247
4,191
11
3,273
208
3,589
17,519
2011
19.9
7.4
33.5
3.5
8.6
2011
24.6
9.9
4.2
3.5
13.7
2012
6,389
4,286
51
3,848
158
3,889
18,621
2012
18.5
7.0
203.1
2.7
8.8
2012
18.7
8.8
152.3
3.0
9.1
2013
6,355
2,295
3,846
295
3,745
16,537
2013
13.8
8.7
5.2
8.8
2013
14.5
9.7
5.2
9.3
2014
6,001
2,112
2,597
496
11,206
2,615
13,820
2014
14.2
8.7
5.6
9.3
2014
13.6
19.1
5.6
73.6
2015 1)
5,913
2,170
2,561
291
10,934
10,934
2015
9.5
7.9
8.2
2015 1)
-8.5
7.7
8.3
2016
6.9
5.9
44.3
8.0
2017
8.4
5.5
11.7
10.1
2018
10.8
5.5
7.8
10.3
2019
12.8
4.1
13.2
12.3
Key figures 2010–2019 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Quarterly financial
information
Investor
information
145
Financial key figures
Share key figures
Segment key figures
Capital expenditure
Operational key figures
Average number of employees
Generation
City Solutions
Heat
Consumer Solutions
Electricity Sales
Russia
Other Operations
Distribution
Total for continuing operations
Discontinued operations
Total
2010
1,891
2,482
538
4,555
592
1,098
11,156
2011
1,873
2,682
510
4,436
607
902
11,010
2012
1,896
2,354
515
4,301
661
873
10,600
2013
1,900
2,051
4,245
550
786
9,532
2014
1,685
1,913
4,196
536
8,329
492
8,821
2015
1,389
1,458
4,180
983
8,009
2016
1,064
1,529
877
3,814
711
7,994
2017
1,036
1,807
1,180
3,710
774
8,507
2018
1,107
1,994
1,473
3,378
814
8,767
2019
1,122
1,979
1,379
2,942
825
8,248
Key figures 2010–2019 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Quarterly financial
information
Investor
information
146
Financial key figures
Share key figures
Segment key figures
Capital expenditure
Operational key figures
Capital expenditure 1)
EUR million
Generation
Hydropower
Nuclear power
Windpower
Fossil-based electricity
Other
Total Generation
City Solutions
Fossil-based heat
Renewable, of which
waste
biofuels
solar
other
District heat network
Other
Total City Solutions
Consumer Solutions
Other
Total Consumer Solutions
Russia
Fossil-based electricity
Fossil-based heat
Renewable-based electricity, wind
Total Russia
Other
Other
Total Other
Total
Of which investments in CO2 free production
Finland
2019
12
57
22
7
4
102
2
39
19
20
1
17
3
62
15
15
20
20
199
112
2018
20
99
2
8
128
5
34
20
15
0
14
7
60
9
9
17
17
215
135
1) Includes capital expenditure to both intangible assets and property, plant and equipment.
Sweden
2019
2018
Russia
2019
2018
Poland
2019
2018
Norway
2019
Other countries
2018
2019
2018
Total
2019
2018
56
32
1
89
7
7
0
0
0
2
9
14
14
2
2
114
88
59
0
9
0
1
68
0
6
6
0
0
0
1
6
14
14
1
1
89
67
0
0
56
0
0
56
0
9
9
0
0
27
1
36
17
17
5
5
115
0
0
0
51
0
0
51
0
9
9
0
0
16
0
26
16
16
4
4
97
51
5
14
14
0
0
16
2
38
9
9
0
0
47
0
7
52
52
0
0
18
1
78
8
8
0
0
86
0
68
57
111
7
5
247
7
231
66
21
143
1
63
12
313
55
55
49
18
0
67
31
31
713
401
79
99
62
0
8
248
12
125
92
15
19
0
60
12
209
47
47
28
22
5
54
26
26
584
278
0
162
17
2
143
3
4
169
0
3
3
172
162
0
24
5
0
19
11
3
38
0
4
4
115
99
49
18
0
67
67
0
28
22
5
54
54
5
Key figures 2010–2019
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Quarterly financial
information
Investor
information
147
Financial key figures
Share key figures
Segment key figures
Capital expenditure
Operational key figures
Fortum classifies investments in four main categories,
EUR million
Generation
Fortum invested EUR 111 million (2018: EUR 62 million) into wind power
production in the Nordics. The largest wind power investment was EUR
52 million to the Sørfjord wind park in Norway. The wind investments
also include the EUR 30 million Solberg fixed asset acquisition that
is part of the Blaiken-Solberg wind park ownership swap. In Finland,
Fortum invested EUR 57 million (2018: 99) into the Loviisa nuclear power
plant. Fortum additionally invested EUR 68 million (2018: 79) into hydro
production, mainly maintenance, legislation and productivity investments.
Investments in CO2 free production were EUR 236 million (2018: 240).
Russia
Investments to the Russia division were EUR 67 million (2018: 54). They
consisted mainly of maintenance, legislation and productivity projects.
Investments in CO2 free production were EUR 0 million (2018: 5).
Other
Investments in Other segment were EUR 31 million (2018: 26). They
consisted mainly of IT investments and investments into internal
ventures. Other operations invested in Charge and Drive EUR 5 million
(2018: 9), mainly charging stations in Norway.
Maintenance
investments
Investments
required by
legislation
Investments
increasing
productivity
Growth
investments
2018
2019
City Solutions
The largest investment project in 2019 was EUR 140 million to the
Pavagada solar plant in India. Maintenance, legislation and productivity
investments totalled EUR 157 million (2018: 89). This amount consists
mainly of investments in district heat networks and plants as well as
the maintenance of existing CHP plants and measures defined by legal
requirements. Investments in CO2 free production were EUR 165 million
(2018: 34).
Consumer Solutions
Investments in Consumer solutions totalled EUR 55 million (2018:
47). The amount consists mainly of sales commissions for customer
acquisition that are capitalised starting from the implementation of IFRS
15 in 2018 and new product development costs.
1
Key figures 2010–20190501001502002503003504002842305514420613195152 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Quarterly financial
information
Investor
information
148
Financial key figures
Share key figures
Segment key figures
Capital expenditure
Operational key figures
Operational key figures
Note: Operational key figures are unaudited
Comparability of information presented in tables and graphs
Information in the tables and graphs presented for year 2012 or earlier is not restated due to the adoption of IFRS 10 and IFRS 11. Adoption of standards influences treatment of Fortum’s holding in Stockholm Exergi AB (Exergi),
(previously AB Fortum Värme samägt med Stockholms stad), in the the consolidated financial statements. From 1 January 2014 onwards Exergi is treated as a joint venture and thus consolidated with equity method. Before the change the
company was consolidated as a subsidiary with 50% minority interest.
Production
Fortum’s total power and heat production in EU and Norway, TWh
Power generation
Heat production
Fortum’s total power and heat production in Russia, TWh
Power generation
Heat production
Fortum’s power generation by source, total in the Nordic area, TWh
Hydro and wind power
Nuclear power
Thermal power
Total
Fortum’s power generation by source, total in the Nordic area, %
Hydro and wind power
Nuclear power
Thermal power
Total
2010
53.7
26.1
2010
16.1
26.0
2010
22.0
22.0
8.3
52.3
2010
42
42
16
100
2011
55.3
22.0
2011
17.4
25.4
2011
21.0
24.9
7.2
53.1
2011
40
47
13
100
2012
53.9
18.5
2012
19.2
24.8
2012
25.2
23.4
3.0
51.6
2012
49
45
6
100
2013
47.4
10.4
2013
20.0
24.2
2013
18.1
23.7
3.4
45.2
2013
40
52
8
100
2014
50.1
8.2
2014
23.3
26.4
2014
22.4
23.8
1.8
48.0
2014
46
50
4
100
2015
50.2
6.4
2015
25.7
25.8
2015
25.1
22.7
1.0
48.8
2015
51
47
2
100
2016
47.5
7.1
2016
25.5
20.7
2016
20.8
24.1
1.4
46.2
2016
45
52
3
100
2017
46.6
8.6
2017
26.3
20.0
2017
20.9
23.0
1.6
45.4
2017
46
51
3
100
2018
44.7
9.4
2018
29.6
20.4
2018
19.4
22.8
1.3
43.5
2018
45
52
3
100
2019
46.8
9.1
2019
29.3
17.3
2019
20.7
23.5
1.4
45.5
2019
45
52
3
100
Key figures 2010–2019
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Quarterly financial
information
Investor
information
149
Financial key figures
Share key figures
Segment key figures
Capital expenditure
Operational key figures
Power generation capacity by segment, MW
Generation
Heat
City Solutions
Russia
Other Operations
Total
Heat production capacity by segment, MW
Generation
Heat
City Solutions
Russia
Total
Fortum’s power generation capacity by
type and area, MW
Hydropower
Nuclear power
Combined heat and power
Condensing power
Wind power
Solar power
Total
Fortum’s heat production capacity
by area, MW
Heat
2010
9,728
1,600
2,785
2011
9,752
1,670
3,404
2012
9,702
1,569
3,404
2013
9,475
793
4,250
2014
9,063
803
4,758
2015
8,046
743
4,903
14,113
14,826
14,675
14,518
14,624
13,692
2016
8,039
760
4,482
53
13,334
2017
7,862
775
4,794
292
13,722
2018
7,867
788
4,912
157
13,724
2019
8,220
1,082
4,928
0
14,230
2010
250
10,448
13,796
24,494
2011
250
10,375
14,107
24,732
2012
250
8,785
13,396
22,431
2013
250
4,317
13,466
18,033
2014
0
3,936
13,466
17,402
2015
2016
2017
2018
2019
3,915
12,696
16,611
3,818
9,920
13,738
4,671
10,094
14,765
4,780
10,229
15,009
Finland
Sweden
Russia
Poland
Other
Total
2019
1,553
1,487
452
565
0
0
4,057
Finland
2019
2,002
2018
1,548
1,485
452
376
0
0
3,860
2018
1,993
2019
3,124
1,334
9
0
75
0
4,542
Sweden
2019
35
2018
3,124
1,334
9
0
75
0
4,542
2018
0
0
4,843
0
35
35
4,912
2019
0
0
4,858
0
35
35
4,928
Russia
2018
35
2019
8,437
2018
10,229
2019
0
0
233
0
0
0
233
Poland
2019
941
2018
0
0
186
0
0
0
186
2018
782
2019
0
0
137
0
84
250
471
Other
2019
1,834
2018
0
0
139
0
84
0
223
2019
4,677
2,821
5,689
565
194
285
14,230
Total
2018
1,971
2019
13,249
2018
15,009
4,812
8,437
13,249
2018
4,672
2,819
5,629
376
194
35
13,724
Key figures 2010–2019 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Quarterly financial
information
Investor
information
150
Financial key figures
Share key figures
Segment key figures
Capital expenditure
Operational key figures
Sales
Fortum’s total power and heat sales in EU and Norway, EUR million
Power sales
Heat sales
Fortum’s total power and heat sales in Russia, EUR million
Power sales
Heat sales
Fortum’s total power sales by area, TWh
Finland
Sweden
Norway
Russia
Other countries
Total
Fortum’s total heat sales by area, TWh
Finland
Russia
Sweden
Poland
Other countries
Total
Volume of distributed electricity in distribution networks, TWh
Finland
Sweden
Norway
Estonia
Total
2010
3,110
1,309
2011
2,868
1,278
2012
2,700
1,201
2013
2,462
538
2014
2,344
468
2015
1,921
423
2016
1,893
449
2017
2,244
524
2018
2,922
615
2010
505
287
2010
30.7
28.3
18.7
3.2
80.9
2010
9.6
26.8
10.9
4
3.6
54.9
2010
10
15.2
2.5
0.2
27.9
2011
590
324
2011
24.6
29.4
20.2
3.6
77.8
2011
8.5
26.7
8.5
4.3
3.4
51.4
2011
9.5
14.2
2.3
0.1
26.1
2012
713
300
2012
21.6
30.1
23.3
3.8
78.8
2012
5.8
26.4
8.5
4.3
2.9
47.9
2012
9.8
14.4
2.4
0
26.6
2013
822
290
2013
23.4
23.3
25.6
4.3
76.6
2013
5.5
24.1
-
4.1
3.1
36.8
2013
9.5
14.1
2.5
-
26.1
2014
758
285
2014
21.6
28.2
26.5
3.8
80.1
2014
3.2
26
-
3.4
2.8
35.4
2014
2.8
13.7
1.1
-
17.6
2015
661
228
2015
22.3
29.8
29.4
2.8
84.3
2015
3.1
25.4
-
3.4
1.2
33.2
2015
-
6.4
-
-
6.4
2016
691
199
2016
22.8
28.8
1.5
29.5
2.1
84.7
2016
3.6
20.7
0.1
3.6
1.4
29.4
2016
-
-
-
-
-
2017
837
258
2017
22.5
30.8
7.2
30.5
2.9
93.9
2017
3.9
19.8
0.3
3.7
2.2
29.9
2017
-
-
-
-
-
2018
872
193
2018
23.1
29.7
15.3
34.1
1.8
104
2018
3.8
20.7
0.3
3.5
3.2
31.5
2018
-
-
-
-
-
2019
3,063
618
2019
924
145
2019
23.1
31.5
15.0
33.8
2.5
105.8
2019
3.8
16.9
0.3
3.3
3.3
27.6
2019
-
-
-
-
-
Key figures 2010–2019
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Investor
information
151
Quarterly financial information
Note: Quarterly financial information is unaudited.
Selected data based on quarterly consolidated income statement
EUR million
IS Sales
Comparable EBITDA
IS Comparable operating profit
IS Operating profit
IS Share of profit/loss of associates and joint ventures
IS Finance costs - net
IS Profit before income tax
IS Income tax expense
IS Profit for the period
IS Non-controlling interests
IS Profit for the period, owners of the parent
Q1/2018
1,585
538
405
482
47
-36
493
-94
400
-16
384
Q2/2018
1,087
282
153
256
24
-39
241
-25
215
1
216
Q3/2018
971
230
96
91
12
-58
45
1
46
5
51
Q4/2018
1,599
473
333
309
-44
-4
261
-64
197
-5
192
2018
5,242
1,523
987
1,138
38
-136
1,040
-181
858
-15
843
Q1/2019
1,690
545
408
358
111
-46
424
-65
359
-19
341
Q2/2019
1,144
372
232
184
461
7
652
-45
607
0
607
Q3/2019
1,060
295
153
124
106
-32
198
-25
173
5
178
Q4/2019
1,553
552
399
444
65
-55
455
-88
367
-10
356
2019
5,447
1,766
1,191
1,110
744
-125
1,728
-221
1,507
-25
1,482
Earnings per share for profit attributable to the equity owners of the company
(EUR per share)
Basic
0.43
0.24
0.05
0.22
0.95
0.38
0.69
0.20
0.40
1.67
Quarterly financial information Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Investor
information
152
Quarterly sales by segment
EUR million
Generation 1)
City Solutions 1)
Consumer Solutions
Russia
Other Operations 1)
Netting of Nord Pool transactions 2)
Eliminations
IS Total
Q1/2018
498
381
547
336
23
-161
-39
1,585
Q2/2018
427
193
326
228
24
-92
-19
1,087
Q3/2018
360
178
332
200
25
-105
-17
971
Q4/2018
557
359
555
305
31
-157
-50
1,599
2018
1,842
1,110
1,759
1,069
103
-516
-125
5,242
1) Sales, both internal and external, includes effects from realised hedging contracts. Effect on sales can be negative or positive depending on the average contract price and realised spot price.
2) Sales and purchases with Nord Pool Spot is netted on Group level on an hourly basis and posted either as revenue or cost depending on if Fortum is a net seller or net buyer during any particular hour.
Quarterly comparable operating profit by segments
EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
IS Comparable operating profit
Impairment charges
Capital gains and other
Changes in fair values of derivatives hedging future cash flow
Nuclear fund adjustment
IS Operating profit
Q1/2018
220
88
17
104
-24
405
0
26
54
-4
482
Q2/2018
151
-21
11
37
-26
153
0
76
49
-22
256
Q3/2018
69
4
7
40
-24
96
0
1
-8
2
91
Q4/2018
188
64
17
89
-26
333
-4
-1
2
-21
309
2018
628
135
53
271
-99
987
-4
102
98
-45
1,138
The first and last quarters of the year are usually the strongest quarters for power and heat businesses.
Q1/2019
601
405
669
298
26
-192
-117
1,690
Q1/2019
223
92
26
99
-32
408
-3
3
-46
-5
358
Q2/2019
500
228
346
239
28
-99
-98
1,144
Q2/2019
191
-15
19
69
-32
232
0
3
-5
-46
184
Q3/2019
458
200
311
229
29
-100
-67
1,060
Q3/2019
140
-36
16
53
-21
153
-6
3
-27
0
124
Q4/2019
583
366
510
306
32
-139
-105
1,553
Q4/2019
239
80
19
94
-34
398
0
-2
5
42
444
2019
2,141
1,200
1,835
1,071
115
-529
-387
5,447
2019
794
121
79
316
-119
1,191
-8
7
-72
-9
1,110
Quarterly financial information Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2010–2019
Quarterly financial
information
153
Investor information
Fortum 2019 reporting entity comprises CEO's Business Review, Financials, Corporate Governance Statement and
Remuneration Statement, Tax footprint as well as Susatainability.
Annual General Meeting 2020
The Annual General Meeting 2020 of Fortum Corporation will be held on Tuesday, 17 March 2020, starting at
11:00 EET at Finlandia Hall, address: Mannerheimintie 13 e, Helsinki, Finland. The reception of shareholders who
have registered for the meeting will commence at 9.30 EET.
Payment of dividends
The Board of Directors proposes to the Annual General Meeting that Fortum Corporation pays a dividend of EUR
1.10 per share for 2019, totalling approximately EUR 977 million based on the registered shares as of 1 February
2020. The possible dividend related dates planned for 2020 are:
• the ex-dividend date 18 March 2020,
• the record date for dividend payment 19 March 2020 and
• the dividend payment date 26 March 2020.
Financial information in 2020
Fortum will publish three interim reports in 2020:
• January–March interim report on 29 April
• January–June half year financial review on 17 July, and
• January–September on 29 October.
The reports are published at approximately 9:00 EET in Finnish and English, and are available on Fortum’s website
at www.fortum.com/investors
Fortum’s management hosts regular press conferences, targeted at analysts and the media. Webcasts of
these conferences are available online at4www.fortum.com/investors. Management also gives interviews on
a one-on-one and group basis. Fortum observes closed and silent period of 30 days prior to publishing its results.
Fortum share basics
Listed on Nasdaq Helsinki
Trading ticker: FORTUM
Number of shares, 5 February 2020: 888,294,465
Sector: Utilities
Fortum’s activities in capital markets during 2019
Fortum’s Investor Relations activities cover equity and fixed-income markets to ensure full and fair valuation
of the Company’s shares, access to funding sources and stable bond pricing. The key task of Investor
Relations is to provide correct, adequate and up-to-date information regularly and equally to all market
participants. By doing this, Investor Relations aims to minimise the investor's risk and reduce the share's
volatility. Investors and analysts primarily are met on a regular basis in Europe and North America.
In 2019, Fortum met approximately 230 professional equity investors individually or in group meetings
and at investor conferences and maintained regular contact with equity research analysts at investment
banks and brokerage firms.
Interim Report January–
September 2020, 29 October
Financial Statements
Bulletin 2019, 6 February
Financial Statements 2019,
Latest week 8
Q 4
Q
3
2020
Q
1
Q 2
Interim Report
January–June 2020, 17 July
Annual General Meeting,
17 March
Interim Report
January–March 2020, 29 April
Investor information