Hello everybody. It's my pleasure to welcome you today both here in Espoo at our headquarters and also online to Fortum's joint webcasted news conference on our first quarter results. Please note that this event is being recorded, and a replay will be available afterwards on our website. My name is Ingela Ulfves, and with me here is also Måns and Rauno from our IR team. Our CEO, Pekka, and CFO, Markus, will present Fortum's Q1 numbers and performance, after which we will open up for questions and answers. You are also able to ask questions on our webcast chat. I now hand over to Pekka.
Thank you very much, Ingela. Good morning, dear investors, both here in Espoo and over the web. Great to have you join us again this morning. We are, for the most part, pleased with the results of the first quarter. There was a lot of volatility on the market, but despite that volatility, the Nordic power prices, the spot price, system price was up 22% in the quarter, and that's, of course, a very positive development for us. On the other hand, hydrology continued to be fairly dry. It improved during the quarter, but overall, our hydro volumes were low. That obviously then affected the results and took away much of the positive effects of the higher prices. When we look at earnings per share, which were EUR 0.38 per share, it's worth noting that there were items affecting comparability both this year and last year.
If those two are eliminated from the calculation, we are looking at an EPS improvement from EUR 0.36- EUR 0.42 in the quarter. Cash flow in the quarter was extremely positive, and we agreed to do it so that Markus will open up this a little bit more in detail in his part of the presentation that what elements this strong improvement consists of. When it comes to Uniper, first of all, we now reported our share of Uniper's profit. In our numbers, that was EUR 49 million. This was Uniper's last quarter of the year 2018. As you remember, we are now reporting Uniper with one quarter time lag. We are pleased that we have now restarted discussions with Uniper. As you remember, in February, Uniper announced that they are now ready for a fresh start in our relationship. These discussions have proceeded well.
We are working in multiple different work streams. However, we have agreed with Uniper that we do not comment the details or the content of the discussion, so that's why we will not open this up more than this in this presentation today. Once again, on the overall level, we are pleased with how things have proceeded. When it comes to the upcoming annual general meeting and especially the motions proposed by some other shareholders, I want to clarify that we are not a party to these notions, and we will today stick to the same policy as we have had for some time that we will not speculate on what we would do at the AGM regarding these or any other proposals that might be presented at the AGM. Once again, overall pleased with how things have developed with Uniper.
The last point on strategy implementation, we noted this initiative in our Capital Markets Day in November last year, where we said that operational excellence is a key focus in our strategy going forward. We mentioned in today's report, just to give you some scope of what the ambition level is, that we are talking about an improvement potential of a few tens of millions of euros. Technology will play an extremely important role. Digitalization investments, IoT, new technologies for efficiency improvements, flexibility improvements, demand supply balancing, et cetera, really represent a key element in this. Once again, we will open up this a little bit more in detail when the time goes forward, but we currently believe that we are looking at a few tens of millions of euros of potential. Here are some highlights of the news flow during the quarter.
I will not go through all of this. I will highlight a couple of things that you see on this slide. First of all, as you will have seen, we've launched a EUR 2.5 billion bond in the quarter. Markus will also go a little bit more in details about this, but this was the largest bond ever issued in Finland. Of course, the important thing for us is that this not only takes care of the refinancing needs, but it also lowers our total financing cost. This was a very positive thing. An interesting perhaps detail from result point of view, but we did launch a pilot together with a group of 23 pioneering companies, which is the first of its kind in the world. It's a marketplace for carbon capture and removal and capture and storage for a period of time.
For example, this initiative will offer certificates, which will create a market for wooden building elements, which capture and store CO2 for actually a long period of time. This is a very important initiative when it comes to the need to not only reduce CO2 emissions, but also create market-based solutions for CO2 removals. The third piece of news that I would like to highlight here is battery recycling. In our Recycling and Waste Solutions business, we have two key focus areas when it comes to recycling of materials. The first one we have talked quite a lot about, that is plastic recycling. We are running a major plastic recycling refinery here in Finland with good potential when the world wants to recycle more and more plastic.
Another megatrend obviously will be electric vehicles, now we launched actually a new technology and a new solution that increases the recyclability rates of electric vehicle batteries from 50%-80%. Of course, this market is still very small today, but over the coming years and decades, it will grow into a market that is estimated to be worth of potentially tens of billions of euros. We are clearly an early mover in this one, but we believe that we are also looking at some quite interesting technology-based competitive advantages here that we are developing together with our technology partners. Technology that is able to put back into circulation, for example, cobalt, nickel, and other scarce metals that there are in the electric vehicle battery. Moving on to hydrology.
The first quarter started with cold and dry weather, towards the end of the quarter or actually already in February, turned to mild, wet, and windy weather for two months, February and March. Hydro reservoirs improved during the quarter so that they are now closer to the reference level than what they were in the beginning of the quarter. In the beginning of the quarter, the Nordic water reservoirs were actually 9 TWh below the reference level. At the end of the first quarter, they were 3 TWh below, and that's also roughly the situation as we are speaking today. At the end of the first quarter, the water levels were 5 TWh above last year's level, and this delta has actually now continued to increase a little bit, currently we are roughly 7 TWh above last year's level.
This is, of course, very interesting and important. We do not predict the weather from now on, all we can look at is what the numbers are today. As you have seen, we have had now quite some time a situation where our hydro production volumes have been very low, this, of course, is now slowly improving the situation. Fuel prices in Q1 were on a downward trend. There were several factors behind this. First one is Chinese coal demand, which was weak. That affects coal prices, obviously globally. Another thing which did affect these prices during the quarter was the low LNG demand in Asia, which created a major flow of LNG into Europe, which pushed down gas prices. That created a situation where actually the coal demand for power generation decreased.
That supported coal to gas transition or switching in power generation, this then further actually pushed down the coal price. It was an interesting quarter from this dynamics point of view. When you add the carbon pricing development, which is quite strong, we do have an interesting situation in front of us. The carbon price obviously is now supported by the Market Stability Reserve that started in the beginning of 2019. Now in April, actually, we have seen carbon prices, CO2 prices that have been above EUR 27. These prices have held up very well despite the downward spiral in both coal and gas prices, this has clearly had a supporting element to the power prices.
With the current gas and coal prices, this famous switching band from coal to gas is now roughly from EUR 18-EUR 37 when we look at the EUA price. With the price of EUR 27, we are somewhere in the middle of that band. That means that we are now, we have now concrete evidence of this also, that we are seeing much more switching than last year. Nordic power prices in Q1, they were clearly, as I already mentioned, higher than a year ago. Spot price Q1 was 22% up from last year, EUR 46.90 versus EUR 38.60. This is explained by the increased thermal production costs due to just mentioned higher emission prices. However, during the quarter, the mild and windy weather, as I also explained, decreasing fuel prices lowered the spot price towards the end of the quarter.
Of course, the hydro situation has contributed to this development as well. We started the quarter with very dry hydrology, there was gradual improvement and high inflows during the quarter, or at least higher than earlier, which then pressed the price down a little bit during the quarter. Overall, 22% higher prices than a year ago. Then the always interesting comparison between German and Nordic prices. This was an interesting quarter because actually the spread was negative, i.e., the Nordic prices were higher than German prices, EUR 6 higher. As you can see in this picture, there were situations in Germany where actually the power price was negative due to very high wind production. Going forward, the other graph that you have on this slide, you see the forward price for 2020.
That spread has held up pretty well on the EUR 10 level. The historical average in forward prices, I believe, is somewhere around EUR 6 /MWh . That's the seven-year average that we are looking at at the moment. Here, just briefly, the prices in graphical format. Spot price Nordic up 24%. Of course, a very important and positive thing for us was that our achieved price in the quarter was +14%, EUR 38.40. On the Russian side, +12% development in spot price in ruble terms. Because of Forex, when we look at the achieved power price, which then also includes the capacity price, and translate that into euros, we had slightly 1% lower achieved price than a year ago. A few brief comments on each division. Generation division first.
We had, as already discussed, a quarter which had good prices, clearly lower hydro volumes, and this difference was actually quite significant, 25% lower production volumes. This was one of the lowest first quarters in our history in terms of hydro volumes. On the other hand, the low hydro volumes were compensated by good operational performance. What I would especially like to highlight was the load factor in nuclear production, which was actually quite close to 100% in the quarter. Another number that I would like to highlight in the Generation business is the last 12-month comparable return on net assets, which you can see here, which is now at 11%. Despite low hydro production, we have a pretty efficient production fleet and portfolio that is able to produce 11% return on net assets.
City Solutions does not have the same return on assets as Generation. We have currently a 5.5% return on net assets. We have discussed also in our strategy, this is one of the most important goals that we have is to improve this. One of the key elements or key contributors to the improvement targets is the Recycling and Waste business, which I already mentioned through the developments in plastic recycling and then a little bit longer term in EV battery recycling. Overall, in the division, we had a reasonably good quarter, 5% improvement in comparable operating profit. The Recycling and Waste business result did improve. We are pleased with that improvement. On the other hand, because of weather, the heat volumes were 10% lower than a year ago. That ate up quite a lot of the improvement potential that otherwise would have been there.
We did have an EBITDA of EUR 137 million compared to EUR 131 million. Once again, we are not satisfied with the 5.5% return on net assets. Consumer Solutions had a good quarter, 53% improvement in comparable operating profit. The gradual improvement coming through the Hafslund integration now starts to be visible in the results. What I do want to highlight, though, that more than half of this improvement, which was EUR 9 million in the quarter in comparable operating profit, had to do with market conditions that will not automatically repeat itself. This is, of course, typical to this business that you have price developments, and then you have structural development of your electricity contract base. I just want to highlight that this was really good quarter from this development point of view, and you should not automatically extrapolate this year-over-year improvement in the first quarter to full-year results.
That's why we wanted to highlight that, yes, the result is improving, some of this improvement that we saw in Q1 may not automatically repeat itself in the coming quarters. Overall, we are pleased with the development in this business. Then the last of the four divisions, Russia, we had in euro terms 5% lower comparable operating profit than last year. This was mainly because of Forex. Forex impact was EUR 8 million. We had EUR 5 million lower result than last year. In comparable currency terms, there would have been a EUR 3 million improvement. One thing that did affect the results, this is actually overall a positive thing, is that we did last year transfer our heat distribution business in Chelyabinsk to a 50-50 owned joint venture, YUSTEK.
That changes slightly now this year the seasonality of our Russian development because we transferred outside of our balance sheet a business that had a positive result in Q1 and Q4 and a negative result in Q2 and Q3 because of the typical seasonality in heat business. This had a negative comparable effect compared to the last year's Q1 result. On an annual level, the effect of this change is fairly close to neutral. Other than that, we are pleased with the Russian development. We have a higher contribution from the renewables generation. Nyagan 2, which was not in the last four year up-step of the CSA payments last year, is now there.
That is supporting the CSA payments for this quarter and overall other operational matters in Russia proceeding well as well. Despite the currency rate and the temporary effect from this heat transport network transfer, we are pleased with the quarter. Now I would ask Markus to continue.
Thank you, Pekka. Good morning also on my behalf. I will recap the Q1 with the waterfall. If we start from Generation, negative impact from volume, positive from price, both very large items for Generation for the quarter. For City Solutions, Recycling and Waste Solutions improved. I'm very happy about that. Heat volumes because of the temperatures down, the same price impact positive for City Solutions. In Consumer Solutions, higher sales margins, also continuing value-added service sales. All in all, we are very pleased with how things are proceeding for Consumer Solutions. In Russia, I would characterize it more like that operatively things are all the time going to the right direction. The new units are contributing, renewables are contributing, CSA payments are delivering.
The negative items were the EUR 8 million impact by foreign exchange and the profile change now when we don't have the heat distribution business in Chelyabinsk. That, again, as Pekka said, will neutralize itself over the year. This happens between the quarters. Operatively, actually, also Russia was in green. Finally, on other, negatively impacted by the higher incentive costs. That was an item. The other one was then that we continued to invest in R&D and venturing. These two together made the delta to previous year. All in all, EUR 3 million better on comparable operating profit comparing to last year. To the key financials. First, I give an overview, then I'll go to the income statement and cash flow statement in more detail.
First of all, sales up, this had, as you can see from EBITDA and comparable operating profit, little impact. I'll come back to that in a bit more detail. We had the fair value changes of derivatives, which then made the difference between the comparable operating profit and operating profit. Operating profit down, this was a fair valuation issue. Share of profits of associates and joint ventures up driven by Uniper, also contribution from Forsmark and Oskarshamn associated companies. And with this, profit before income tax down. On a comparable basis, if we clean out the items affecting comparability, instead of EPS going down, it would be actually up from EUR 0.36- EUR 0.42. We did have, as Pekka already pointed out, very strong net cash flow from operating activities, both for Q1 and last 12 months.
I will go through that in a bit more detail. On the income statement side, we had both sales increases in Generation and Consumer Solutions. The external impact is mostly coming from Consumer Solutions. We have some organizational changes which are leading to that. There's internal sales from Generation to other divisions. Externally, the top line increase mostly from Consumer Solutions, also we have the corresponding materials and services increases. The main item, otherwise employee benefits, depreciation, amortization, and other expenses are stable in the quarter. Items affecting comparability, negative, this is due to the fair value changes of non-hedge accounted financial instruments. This is partly relating nowadays also to what we call now proxy hedging.
Basically repeating what was already on the previous slide, share of profit of associates and joint ventures, main impact Uniper, and also then the nuclear fund valuation from Forsmark and Oskarshamn. Finance cost was negatively impacted by the prepayment of the EUR 1.75 billion bridge loan. That was a EUR 13 million item. Finally, income tax expense lower following the development of the taxable profit. On the cash flow statement side, we start from EBITDA. That was slightly up. Realized FX gains and losses, stable in this quarter. Last year, positive item due to the rolling of the internal loans. Paid financial costs and taxes actually both came down, both the financials and taxes, meaning that we paid less in this quarter than the year before. We had a very strong positive item from the daily settlements of futures.
Prices came down in the quarter. That has a positive impact on us. The opposite happened last year, you can see that the swings are massive, as we also pointed out in the end of the year. They can go both up and down, and the delta is very big. Change in working capital was now EUR - 22 million, last year, EUR 109 million. We actually had a decrease in receivables, so positive item, but also a decrease in payables. Net was EUR -22 million. Last year, we had a big increase in receivables, altogether for the year, EUR 186 million, which then explains the 2018 number. Capital expenditure, EUR 150 million versus EUR 133 million last year. I would just point out the acquisition of shares and divestments of shares, actually the 2018 and LTM.
There we have the acquisition of Uniper shares, divestment of Hafslund Produksjon, and the successful capital recycling of our India solar business, which contributed EUR 88 million to the numbers last year. We have an interesting item, change in cash collaterals and restricted cash, EUR +310 million. The main item there is that we now made an arrangement where we have a financial institution counterparty who places bonds with Nasdaq as security, and that released the cash back to us, which shows here. That means that on our balance sheet, you can see then our indebtedness towards the financial institution and corresponding receivable from Nasdaq. Here, the biggest part of the impact of this EUR 310 million came from this arrangement. These are the main cash flow items. I go over to the key financial indicators.
We continue our focus on maintaining our financial flexibility, balance sheet strength, and ensuring good access to capital. During Q1, we refinanced altogether EUR 3.1 billion. The biggest part of that was the EUR 2.5 billion bond. We issued four, seven, and 10-year debt with average coupon of around 1.4%. Part of that was swapped into floating rate, the actual cost for us is even lower than that. We did an extensive roadshow, met over 60 investors, and finally had way more than 200 investors investing, a total order book of EUR 6.5 billion. Our feeling is that the market is there for us. There is high interest in Fortum debt also going forward. Leverage, as you can see from the numbers, decreased from 3.6 x to 3.3 x. As we have also been indicating, we expect this to go down.
Good to remember that this is excluding our relative share of Uniper EBITDA and our relative share of Uniper debt. What we only show is the cost of the acquisition of the shares and then our part of the net profit of the company, which was the EUR 49 million. Our liquidity continues to be strong. At the end of the quarter, we had EUR 1.7 billion in cash. Of course, part of that was reserved for the EUR 977 million dividend payment that took place on the 4th of April. In addition to that, we have committed credit lines, major part of that being our revolving credit facility of EUR 1.8 billion. Average interest coming down nicely now at 2.2%. What I'm happy about is that also our next long-term debt maturities are only in 2021, and even that being EUR 500 million.
We will continue our focus on operational excellence, on ensuring our business performance, prioritizing our CapEx, and we will continue also to optimize our business portfolio as we have done before. To the outlook. We continue to forecast that electricity demand in the Nordics will grow at 0.5% on average. Hedges for the remaining part of the year, we have 75% hedged at EUR 32. Levels are same as end of year for the full year, but now we have one quarter behind us. We had a nice increase for 2020, up from 45%-55% and the hedge price up from EUR 29- EUR 31. Now we are also including the impact of the proxy hedges into the hedge price, but not into the ratio. This is more for transparency reasons. Of course, the impact has always been included in the achieved price.
This inclusion had a minor impact on prices. Just to put this into perspective, typically in the past, the physical optimization has been clearly bigger impact than the financial optimization or proxy hedging. CapEx guidance remains the same, EUR 600 million-EUR 650 million. Synergies from Hafslund, which are nicely materializing, EUR 15 million-EUR 20 million during 2019, 2020. Finally, the tax rate for the group remains at 19%-21%, most likely in the higher end of that for this year. I think we are now ready with Pekka to take questions. Thank you.
Thank you, Markus. Thank you, Pekka. As said, we're now ready to open up for the Q&A session. We will start again with the audience here in Espoo, and then after that, we will continue with questions from the teleconference participants. For those of you here in Espoo that have a question, please state your name and your company before asking, and also wait for a microphone. We are ready. Please go ahead.
Yes. Hi, Artem Beletski from SEB. Three questions from my side. First starting with City Solutions, you, Pekka, mentioned that you are not satisfied with current returns, what the business is generating. How you are planning to address this matter? Are we talking about some potential organic investments? What you are planning to do there, M&A, or what are key steps on that front? The second question is relating to Russian CSA, we have seen growth of 4% year-over-year in Q1. What we should keep in mind looking at the profile proceeding with 2019, or basically what should be the development there? The last one is just relating to proxy hedging. Could you maybe provide some further color where it has been. Let's say the impact on hedge price has been clearly less than EUR 1 /MWh , or what is the magnitude we are talking about there?
The City Solutions question obviously would require quite much longer answer than what I'm able to do here. We did open it little bit up at the capital market day, it's really multiple elements. One key thing is the development of new solutions with higher margins and with less capital involved. I mean, new service-based business models. I already mentioned the EV battery recycling. The plastic recycling potential is looking really, really good as well. Then, of course, we should not forget the traditional base business. There is, through new technology, possibility to optimize the value chain better than what we've been able to do so far. When it comes to district heating, obviously in some of the markets, we are fairly limited as to how much you can do price changes or price increases, and in some cases there are even higher taxes.
The potential there is limited, also there it's important to note that even though the return on capital is not that good, it's often very cash generative because of the nature of the business, which is fairly stable. Our goal is through new products, new services, less capital-intensive business models, new services also for district heating customers, then the applications of new technology to gradually improve the return on capital.
Okay, I can take the Russian CSA and proxy hedge question. First of all, just good to remember what are the factors that are impacting bond yields, the payment profile, the 10 year-15 year that is then played back to 10 years. The spot impact and CPI impact. These factors, bond yields had a negative impact this time, the 10 year-15 year delta positive impact, spot positive, and CPI positive. For the profile, we are now entering the part where we get the highest payments, and then gradually we'll get to the part where the CSA starts to fade out. You can calculate roughly from when we have commissioned and when we have announced that the unit should have been commissioned, the shape of the profile.
For the proxy hedging, what we mean by that is that through the underlying commodities that are impacting our energy prices, CO2, gas, German electricity, coal, et cetera, we try to simulate the position. We use instruments which may be liquid. To describe the magnitude, we have quite limited mandates, and have always had. Like I said, the biggest part is coming from system, the area prices, physical optimization, and then the financial optimization or proxy hedging has historically played the least role of these items.
Okay. Very clear. Thank you.
Thank you. There doesn't seem to be any further questions here. Maybe I add to the CSA just for this year that we have Nyagan 2 that came into the system from Q3 last year, which means that there will still be the impact then for Q2 this year. After that, no further impact for this year. Just to clarify the impact on 2019. Yes. Thank you. Operator, we are now ready for the questions from the teleconference. Please go ahead.
Ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad. Please hold until we have the first question. We have a question from Sam Arie for UBS. Your line is now open. Please go ahead.
Thank you. Good morning, everyone, and thank you as always for the presentation. I have two questions. The first one is on the hydro levels. I just wanted to ask, do you think the low levels you've seen this year are fundamentally within the range of normal? Could it be that we're seeing the start of some kind of long-term change in hydrology that's linked to climate change? When you talk to your experts about this, do you see any risk of an impact on underlying long-term value of hydro assets? I know that last year was a better year, this year was not so good, but I'm just wondering sort of on the underlying long-term direction, whether you see any risk there. My second question is on Uniper. Understood that you're not commenting on the AGM, that's clear.
Can I just ask, looking a bit further ahead, if you gain control of the Uniper Board in 2022 through the natural rotation of Board seats that we're expecting, then does that mean in 2022 that you will be in breach of your agreement with the Russian authorities, i.e., at least in theory, then there will be a chain of control from the Finnish government through to the Unipro or the processing activities. If so, is there a way to resolve that issue, sort of 2022 issue, without a domination of Uniper and Unipro? It'd be great if you could sort of talk us through how that works? Thank you.
Okay. Two questions that are both actually quite speculative. The first one, we have not been able to identify any kind of fundamental change in hydrology that could be related to some long-term permanent changes. Of course, the climate scientists do say that it would be likely that one of the effects of the climate change would be that the precipitation levels in the Nordic region would increase. This is, of course, gradual improvement, and there is always going to be a lot of variation. During the timeline that we've been looking at, I think it would be too much of a conclusion to say that we would have seen that, okay, now there are signs of real kind of long-term change. The answer to that question is no.
Uniper, you are absolutely right that in 2022, through the natural rotation of the Supervisory Board seats, we are able to, if we so wish, take control of the Supervisory Board. It is too early to speculate what that would mean for the current Russian decision. There is still a long time to go until 2022. As we have said multiple times, we believe that to a quite large extent, the issues that were identified by the Russian authorities as problems are of a fairly technical nature. From that point of view, they should be solvable. Of course, the decision clearly says that we cannot go over 50%. How do you define actual control? There is multiple definitions. It's not possible to speculate on that one, what would happen in 2022, unfortunately. Sam, I'm not able to shed more light on this than that, unfortunately.
Thank you very much for your answer on both questions. I appreciate it.
The next question is from Lueder Schumacher, Société Générale . Your line is now open. Please go ahead.
Yes, good morning. A few questions from my side. The first one is on the cash flow, the operating cash flow. You state in your results that the increase was mainly due to the change in settlements for futures. If you strip it out, you're still looking at a 26% increase in operating cash flow. Are you just being conservative or are there just too many moving parts that early in the year to be a bit more optimistic for the full year outlook on the operating cash flow? The second question is on Nordic power prices. You did point out in your presentation the unusually big discount Nordic prices have to Germany over the last few months, well, essentially since September last year, compared to the historic spread.
Do you expect this to correct in 2019? Or are there some structural problems that should prevent the normalization of Nordic power prices versus German prices? Lastly, have you seen a normalization of hydro volumes in April?
I can take the cash flow question, Lueder, then I need your help. Can you please clarify a little bit what you meant full year outlook on cash flow? How do you mean?
Just the way your result statement reads like, it's the entire improvement of the operating cash flow is due to the change in settlements for futures. If you strip this line out of your cash flow statement on page 17, you still get to an underlying increase of 26% in the operating cash flow, which I would say is still quite strong?
Yes. All right, I'll try to open it up again. If we look at the page with the cash flow statement, the key items that, of course, impact this is the EBITDA. We have the FX gains and losses, paid net financial cost, income taxes, settlement of futures, and change in working capital. What we are meaning is that the biggest swing came from settlement of futures. This time around, actually, the paid taxes and financials and also the change in working capital were clearly better than last year. There are many moving elements, but of course, what reflects maybe mostly the operative side in the very short term is the EBITDA. We are working on all of these items. Also the actions we are taking on operational excellence, on the funding, overall working capital management, all of these should contribute then to the operative cash flow.
If I continue from the spread question. I think you mentioned that there would have been a discount actually in the Nordic price, but I might have been unclear on that also in my presentation. It was the other way around that in Q1, the Nordic price was higher than the German price, and the difference was EUR 6. For the reasons that I described, the Nordic price was supported, for example, by the EUAs, and especially in the beginning, high coal prices compared to last year. Very much the hydrology was supporting prices. At the same time in Q1, the German price was then clearly affected by, for example, the high wind production. This caused the very high spread that actually went to the other direction in Q1 that has been the historical normal.
Also last year, the full year was different from the long-term average. The Nordic price for the full year was EUR 0.50 higher than in Germany. The spread was EUR 0.50. Historical average has been EUR 5 to the favor of the German price in realization. Of course, we do not give power price forecasts, so I'm unable to answer the second part of this question. I can only refer to the forward market that is currently indicating EUR 10 spread for 2019, so that the German price would be higher than the Nordic price. The hydrology question, and especially April, the difference to the reference level has stayed the same during April, i.e., 3 TWh below the reference.
In relative terms, comparing to the same time last year, the situation has improved, so that in the beginning of the second quarter, we were 5 TWh above last year's level, and now we are 7 TWh above last year's level as we speak today.
Okay. Thank you. Just coming back on the second question, I probably should have been clearer. I was less interested in the spot prices, which of course can vary a lot. I was more interested in the calendar forwards, where the spread has opened quite significantly since last September. I appreciate you don't make any price forecasts, but the discount has widened quite significantly, and you also mentioned this in your presentation compared to the historic spread, which seems unusual. Unless you think that the default of Einar Aas and all the implications from that, is there still an impact on trading behavior, trading volumes in the Nord Pool, that would explain such an increased discount compared to usual levels.
Actually, the discount was, during last year, especially when you look at the end of Q3 and beginning of Q4, it was even wider than what it is today. There we can all speculate how much this Einar Aas incident had to do with that. Of course, we have our view, but we do not publish it in detail. The discount has actually shrunk after that. Again, without giving out power price forecasts, we do not comment the kind of the future expectations on the spread. It is around EUR 10 at the moment, and there are multiple factors affecting it going forward. Interconnections between the Nordic and the German system, which obviously are being built, more interconnections, that should, everything else equal, should lower the spread. Increasing Nordic wind production should widen the spread.
In the same way, the German added tightness to the market that will come from the shutdown of nuclear, the potential implementation of the Coal Commission's recommendations should also increase the spread. There are multiple factors, and we are certainly not going to give out our own forecast as to how these relative factors would affect the spread going forward.
Okay. Thank you.
The next question is from Deepa Venkateswaran of Bernstein. Your line is now open. Please go ahead.
Hi. Thank you for taking my question. I know that you've clarified that you won't speculate on proposals in the AGM from other shareholders. I was just wondering in terms of the timing of your discussions with Uniper, I think earlier you said that the results would not be out before summer. I was just wondering whether these other proposals mean that there's a change to the timing of your discussions with Uniper, and you'll need to kind of conclude on something before May 22nd. Secondly, S&P has issued a report last week, outlining that if you entered into a domination agreement to buy Uniper, they would downgrade you. Would you be able to comment on this and your balance sheet capacity in the context of a potential domination? Thank you.
We do not comment on speculative questions. Obviously, credit rating is something that is very important for us, and it is very important for Uniper as well. In anything that we would do, and this is totally irrespective of the Uniper decision, we would always give a high priority to taking care of our credit rating. AGM in Uniper's development is, of course, an important milestone, but it's only one milestone. The discussions that we're having with Uniper in multiple streams, many of them are of quite long-term nature in their effect as well. We should not overestimate this one AGM as the only relevant milestone in this relationship. There will be many more milestones also after that.
Okay. Thank you.
The next question is from Peter Bisztyga of Bank of America Merrill Lynch. Your line is now open. Please go ahead.
Yeah, good morning. My question also, I guess, of a speculative nature, but I was wondering if you had any preliminary views on the outcome of the Finnish elections. Is there anything in the policies of the Social Democrats or any other potential coalition members that signals any change in direction in energy policy or indeed in the government's attitude towards Fortum? Just interested in your thoughts there. The second question, just on the first quarter results of the Russian division. I seem to remember last year in the first quarter, your profitability was down quite sharply year-on-year, and part of the explanation was higher bad debts, and there doesn't seem to be any evidence that that's reversed this year. I was just wondering if you could clarify that.
If you could actually quantify, please, the impact on operating profit of this district heating JV, please, in the first quarter.
If I take the election question first, obviously we do not know what kind of government we will have. The negotiations are actually starting right now. What gives us confidence, though, is that there was a fairly wide agreement before the election on the general direction on especially the climate policy and its connection to the European climate policy and instruments like the Emissions Trading System and the related steering mechanisms. I'm fairly confident that there would not be anything major coming from there. There could be smaller things, though. Of course, there is always going to be a question on taxation on multiple items in the energy value chain. Something that would have a substantial impact on our future and our results, I think it would be highly unlikely. The second part of that question, could that somehow affect government's policy towards Fortum?
I would like to repeat that, this obviously has been confirmed multiple times by the government also, that we are not a tool for the implementation of the Finnish government policy. We are a listed company with multiple shareholders, of course, the Finnish government being an extremely important one and the largest one, but we are not a tool in the Finnish energy policy.
Okay. I'll take the Russia question. Actually in Q1, both this year and last year, the impact of bad debt was rather minor. There was a bigger impact in Q2 of last year, by the default of Chelyabinsk guaranteeing electricity supplier, which cost us a bigger loss then. If I quantify the joint venture impact, I would put it that way that if we exclude the FX impact and the joint venture profile impact, the result would've been positive for the division. I wouldn't go further than that. There's a profile similar to the district heating profile that we have in our City Solution businesses.
Okay. All right. Thank you.
The next question is from Vincent Ayral of JP Morgan. Your line is now open. Please go ahead.
Yes, good morning. A follow-up actually on the district heating, Russia. You say that the overall impact at EBITDA would be fairly neutral on a full year basis. Should we conclude that it's a negative earnings activity? That's something I would like to understand. The second thing is when we look at basically consensus expectations and the results posted, we see indeed that Russia was a bit of a miss. It cannot really be from Forex because people know the Forex, they can measure it. It's more related to the district heating. Therefore, we should have seen a beat on the net income from JV and Associates. Where is this earnings from the heating? Has it been reported, the net income from this heating JV in Q1?
If not, we should expect it to be fully reported as part of the H2 in the Q2 results. That's the question regarding this. The other one is regarding your cash flow. I will come back on this. I heard, and I'm not sure I heard this thing all clearly, that you've had an agreement for the settlement futures on the Nasdaq commodities. I'd like to understand exactly what this means here. Could you explain us a bit more in details? What is happening here? Is it like a form of utilization? Is this impact we're seeing in Q1 something we should deem as recurring? A yes or no. Thank you very much.
Okay. I can take the two questions. You are correct that over the year should be neutral, both for us and both for the joint venture. What you can expect to see is that the profile has a negative impact on the Russia division, and it has a positive impact on the income from joint ventures and associates. You are correct. It will have the offsetting profile between these two lines. For the securities lending agreement we have. Basically, we need to post initial margin collateral when we are doing our hedging. This is the big element. We have had cash as collateral in Nasdaq. Now we are replacing that with securities that Nasdaq approves to replace that. The cash came back to us. We have borrowed securities from a bank, and now we are paying compensation for that.
Effectively for us, a loan. You can then see on the balance sheet both the debt and the receivable. Standard agreement, nothing special. There can be a small deviation on this item, but basically it's a large sum of money that has been there all the time for a longer time. You will not see recurring positive impacts going forward. It can go both up and down, but the impact will be limited.
If I summarize the second point, yes, this change should limit volatility on this item going forward. Regarding the heating Russia, the JV, you said we will see the offset in the net income JV and Associates. Did we see it in Q1? Was it reported in your net income from JV and Associates in Q1? If it has been, good. If it has not been, will we see it being reported in Q2 together with the Q2 numbers? Thank you.
Like I said, you will see the, let's say, the mirror impact of the profile in both ends. It is reported quarter- by- quarter both on the divisional comparable operating profit level and then in the income of Joint Ventures and Associates. Actually, just want to specify a bit more. If you look at the cash flow statement, we will continue to see the settlements for futures continues to be volatile, depending on the prices. This is the initial margins that we have posted, that are then lower in the cash flow statement. This item has not been as volatile either than the item higher up that is impacting the operative cash flow. I hope that clarifies.
Thank you.
The next question is from James Brand, Deutsche Bank. Your line is now open. Please go ahead.
Hello. Good morning. I guess it's just turned afternoon for you, so good afternoon. A couple of quick questions. On points that you brought out in the results statement around, firstly, new taxes in Sweden, and then secondly, on the hydropower legislation. Just looking for a bit more detail on both, really. On the fossil fuel taxes on CHP in Sweden, looks like you're saying that if it came in, it would be around EUR 40 million. I was wondering whether you could tell us what your share of that would be, and also whether there's any scope to pass through any of those tax increases if they came in your kind of heating contracts. Secondly, on the Water Framework Directive and the comment that it could impact on your production levels. Any more details?
I guess it's a little speculative at the moment, but any more comments or quantifications around that or the costs involved or the impact on production would be really interesting. Thanks.
Okay. I can comment maybe on the technology of pricing in Sweden. First of all, at this point, I would say that this is an issue that Stockholm Exergi still has to go through and look at it and its implications. What we have in Sweden is something called [Non-English content] . Annually, the company will discuss with the customers what is included in the price, is it fair price, does it cover the cost, et cetera. I would assume that this would be part of those elements there. That's an issue that Stockholm Exergi will have to handle then in due course.
Perhaps worth pointing out that that is really the only heating business operations, only CHP operation that we have in Sweden, Stockholm Exergi. Once again, it's reported as an associated company, so it's not in our comparable operating profit. That number, which is in our report, which you refer to, that is the potential total Swedish effect through additional taxes. The other question was about the?
I was just asking whether it's the impact of the whole of Sweden, but whether you would be able to detail what the impact would be on you? And whether or not it'd be able to be passed through? If you have that information at hand.
This we are unfortunately unable to comment because first of all, this is a matter for Stockholm Exergi, and there are still a lot of unclarities around this situation. As Markus explained, there will be the so-called [Non-English content] that will then clarify the expected result effect on Stockholm Exergi. You can roughly calculate if you take obviously the total CHP volumes in Sweden, that what volume-wise would be Stockholm Exergi is I guess 7 TWh- 8 TWh of heat, roughly. From there, you can make some kind of a rough estimate.
90% non-fossil.
Exactly. That's very important to note that 90% of that volume is non-fossil, mostly or to a large extent due to the new bio-fired power plant that was inaugurated in Stockholm a couple of years ago. There is a plan by Stockholm Exergi also to phase out the remaining coal in Stockholm within the next couple of years. When it comes to the water directive, what is the exact name of it? Water Framework Directive, I think is the exact term to be used. That discussion is still ongoing in the European Union, how that would be implemented. We are, of course, together with other Nordic hydro operators participating in that dialogue, Sweden has already made some decisions, which we have also published earlier, about the creation of a fund that would take the responsibility of these obligations.
Of course, this discussion continues on the European level. It's too early to speculate if there would be any additional effects on this one to our operations.
Is the risk from the Water Framework Directive that you'd actually have to kind of stop using dams in certain areas, or what's the kind of technical implications of the proposal?
At least when it comes to all those hydropower plants which are significant from a result point of view, we do not see any such risk. A totally different thing is then that if there are cases where there would be, from result point of view and from volume point of view, insignificant small dams where it would actually make more sense from the overall system point of view to dismantle them. This is something that would not have any effect on the big picture in terms of our hydro business.
Okay. Thank you very much.
The next question comes from Lars Paulsson, Bloomberg News. The line is now open. Please go ahead.
Good afternoon. I have a question about Swedish nuclear and there's a big debate among the political parties at the moment with the moderates and the liberals. They really want to see more nuclear power rather than the shutdowns that are going on. Where do you see this debate going, and would you be possibly interested in investing in new nuclear in Sweden? Thanks.
New nuclear in Sweden from investment decision point of view is, I have to say, currently a very remote thought. We are focusing on running the existing power plants together with our partners, and this is fully allowed by the agreement that was launched a few years ago. The discussion in Sweden is centering around the definition of the targeted system, whether they talk about totally renewable system or a totally fossil-free system. Of course, for us who believes that nuclear needs to be a key element in the future energy system and is a key enabler for emission reductions. We very much like to talk about CO2 free, in addition to, of course, renewables being important. Renewables and nuclear is really our focus.
Once again, this should not be mixed with any desire to start building new nuclear in Sweden, which currently is, from many different perspectives, quite a remote thought.
Okay. Thank you.
The next question is from [Jonathan Giosky] of Citibank. Your line is now open. Please go ahead.
Hi, it's Piotr Dzieciolowski from Citi. I have three small questions. Firstly, from top of my head, I think this collateral on hedging effect was around EUR 600 million, and you managed to receive EUR 300 million back in the first quarter. Correct me if I'm wrong on these numbers. Then is there still more of a collateral that will come back to you in form of cash going forward? Secondly, I wanted to ask you about the synergies on Hafslund. How much have you already materialized, and how much is there more to go, in terms of euro number? On this new bond, how much this new three bonds improve your financing cost? How much better condition is what you had before?
Thank you. If I take the Hafslund question, and Markus takes the two other ones. As you will have seen, our estimate is EUR 15 million-EUR 20 million gradually during 2019 and 2020, so that by the end of 2020, we would have achieved the full run rate. More detail than that, we are not opening up. Just as a reference, probably a safe way to assume would be that there would be a fairly linear implementation or realization of these synergies during these two years, which would indicate that yes, there was something already in Q1, but not yet that much.
With regards to the cash release, the collaterals, and the cash settlement. These are two different line items. On page 17 of the presentation, you can see the change of settlements for futures. That item will remain. That will remain volatile. Now, it was close to EUR +300 million , last year, EUR -500 million . Then we have below the net cash from operating activities, we have the change in cash settlements and restricted cash. This was the level where we released the cash that had been posted as initial margin collateral for the hedging. This has been a more stable amount. The volatility here will be clearly less than it has been on the settlements for the futures. We will not see a repeated impact. The scope will not enlarge of this arrangement. The scope is basically here. There can be small volatility.
For the financing cost, what we replaced with this EUR 2.5 billion bond was a EUR 750 million bond that matured that had a 6% coupon. Massive saving for that EUR 750 million part. For the part of the bridge facility that we refinanced, there, the cost actually was very competitive. Not a big difference for that part, for the EUR 1.75 billion. You can see that the average cost of our debt came down from 2.4%-2.2%.
Okay. Thank you very much.
There are no further questions at this time. Please go ahead, speakers.
Thank you, Operator, and thank you for all the questions. We seem to have some questions now on the chat, I'll hand over to Måns now to ask those.
First we have a question from Michael Charlton from Banco Santander relating to IFRS 16 and if that had a material impact on the net debt?
The answer is that the impact was quite limited.
Then we have a question from [Tony Borgio], saying that environmental groups have argued that selling dirty plants is not the solution to fight climate change, given the need to reduce greenhouse gases. In that respect, I understand they have written to Fortum recently, urging the Board to shut any dirty assets it may get control over in the future as a result of controlling Uniper. Would you care to comment on this approach?
We had an extensive discussion with NGOs on this one at the AGM. Obviously, we support strongly ambitious climate goals. We support a carbon neutrality goal for Europe for 2050. We believe that when it comes to power production, emissions trading should be the key instrument. The right way to do this whole thing would be market-based so that we would strengthen the linear reduction factor in ETS system so that it would deliver the results on a market-based way. The beauty of the carbon trading system is that it does deliver exactly the desired result. Then we would not need to make plant-by-plant, politically micromanaged decisions on shutdowns.
Having said that, Fortum's own carbon footprint in European Union is very limited. As we speak, we are dismantling one of the largest coal-powered plants that we have. We are, of course, going to continue on this path. When it comes to Uniper's assets, as I have said multiple times, Uniper is a listed company. They are now, of course, in discussions with authorities, especially in Germany, about the implementation of the Coal Commission's recommendations that will lead to an emissions reduction schedule and coal capacity reduction schedule for Germany. In addition to that, in all countries where Uniper operates, there is already a target year for the final year when coal can be used in energy production. These reductions are happening with or without our involvement.
We have a final question from Reuters news. Finland voted to ban coal in energy use by May 2029. Does that change your plans in any way for the remaining coal-using assets? Which assets would need to close earlier than expected? What will you replace that generation with? Will you invest in new biofuel plants?
We are investing in biofuel here in our hometown Espoo district heating system. Already before this law came into force, we had a goal with our partner, the city of Espoo, to make the city carbon neutral in energy production by 2030. This 2029 change is very little from that point of view. In district heating, coal can be replaced by multiple different sources. Of course, biomass is one, but what we give a very high priority is recycled excess heat from especially data centers, hospitals, et cetera. There is a lot of additional potential there. Electricity through large-scale heat pumps can also be used. We should not forget that the district heating system itself is a very good energy storage system as well. This is the main source or the main user of coal in our system.
In addition to that, we have one coal condensing part in Finland, which we own. It is mostly already today in capacity reserve and with very limited production volumes. Also from that point of view, the 2029 decision has very little impact on Fortum.
Thank you so much, everyone, for your questions and your active participation here today. This now concludes our webcast on the first quarter results. On behalf of Fortum, I want to wish you all a very nice rest of your day and upcoming weekend. Thank you.
Thank you.
Thank you.