Co-owned nuclear plants in Sweden and subsidiary in Russia weaken Fortum’s profit figures

Management says that progress in Russia is on track to reach targets

Last year, the government-controlled power utility Fortum had problems behind both borders, namely both in Sweden and in Russia.
As a result of longer-than-expected outages at co-owned nuclear plants in Sweden, nuclear volumes were clearly below normal.
In the Russia Division, the economic decline weakened the profit of Fortum’s subsidiary, rendering it negative.
The poor utilization rates of the nuclear plants have long attracted attention in Sweden. While the Finnish plants regularly operate at a capacity of more than 90 per cent, the Swedish plants have reached an average of only some 75% over the past few years.

In 2009, the weakest situation was recorded in September, when the Swedish nuclear plants were operating at a capacity of 45 per cent.
The decrease in Fortum’s Nordic nuclear power generation was mainly due to the extensive power increase and safety modernisation outage in Oskarshamn 3, which started at the beginning of March 2009 and ended in mid-December.
Oskarshamn 3’s capacity has increased by some 250 MW, of which Fortum’s share is approximately 110 MW.
However, Tapio Kuula, the President and CEO of Fortum, noted that as a ”realist” he believes that the Swedish plants are not likely to reach the same figures as the Finnish ones even in the future.

In Sweden, there are currently three nuclear plants, with a total of eight reactors.
Fortum owns 45 per cent of the Oskarshamn plant, which has three reactors.
The majority owner is the German energy company E.ON. The majority owner of the Swedish Forsmark nuclear power station is Vattenfall, while Fortum holds one-third of the shares.
On the other hand, long outages can also be profitable for the owners, as the decrease in power generation is bound to increase the wholesale price of electricity.
Particularly last autumn, the major buyers of electricity in Finand accused the producers of decreasing the volume deliberately and of manipulating the prices.
Fortum and other power facilities have denied all such accusations, saying that it is not possible to schedule outages according to the market situation.

In Russia, the OAO Fortum acquisition two years ago cost Fortum almost EUR 3 billion.
The facility produces electricity and heat.
In 2009 OAO Fortum continued to show a loss.
However, the net operating loss in 2009 was down to EUR 26 million from EUR 91 million in 2008.
According to CEO Kuula, the improvement in profitability was remarkable, while Fortum has confirmed its commitment to fulfil OAO Fortum’s investment programme.
Kuula noted further that the management initially promised that the result of the company would turn positive in two years after the acquisition, in other words, in the current year.
This is what he has also trusted in, as the power sector reform in Russia has progresssed as planned.
The Russia Division is underging a major reorganisation. Over one year, the number of OAO Fortum employees has been reduced from 7,300 to some 5,000.

In spite of the fact that the recession decreased the overall Nordic power consumption, Fortum recorded an excellent result in Finland and Sweden.
The Group sales were EUR 5,435 million, down by EUR 200 from 2008.
The profit for the period totalled EUR 1,351 million, roughly EUR 250 million lower than in the previous year.
”Fortum was, once again, able to weather the turbulent times and deliver good results. We improved our operational performance from a year ago and Fortum’s comparable operating profit increased clearly in the last quarter of the year”, said CEO Kuula in Fortum’s financial statement release.

When releasing the financial statements on Wednesday, CEO Tapio Kuula announced that the Board of Directors is proposing to the Annual General Meeting that Fortum Corporation pay a cash dividend of EUR 1.00 per share for 2009 - the same as for 2008.
HS.fi (International Edition)
http://www.hs.fi/english/article/Co-owned+nuclear+plants+in+Sweden+and+subsidiary+in+Russia+weaken+Fortum%E2%80%99s+profit+figures/1135252625746