Good morning everyone. A warm welcome again to Fortum's joint webcast and news conference for the investor community and media on our January-September interim report. My name is Ingela Ulfves and I'm heading the IR team at Fortum. As always, this event is being recorded and a replay will be available on the website later today. With me here in the studio are again our CEO Markus Rauramo and our CFO Tiina Tuomela. Markus and Tiina will present the group's financial and operational performance during the third quarter and first nine months of this year. I would also like to remind you of the upcoming Investor Day for analysts, institutional investors, and other capital market participants, to be held on 25th November. It is possible to attend both in person in Helsinki and also virtually online. The registration is open on our website until the 17th of November.
As we do not want to preempt the content and discussions for the event, we aim to strictly focus on the Q3 performance and results in today's webcast and then leave all the other topics to be addressed during the Investor Day. We look forward to your participation and hope that as many as possible of you are able to join us. Now let's go to our Q3 presentation, after which we will take your questions in the Q&A session. With this again I hand over to Markus to start.
Thank you very much, Ingela. A warm welcome to our Q3 results call also from my side. I will start by going through the key elements of our quarterly highlights and our financial performance. Then say a couple of words about the hydrological situation. After that, Tiina will provide more details on the financials and how the operational performance turned into our results. Let me now start with the highlights. Starting with a very positive point. Our third quarter achieved power price was higher than last year's level, EUR 46.1 per megawatt hour compared to EUR 44.1 per megawatt hour, supported by higher spot prices and strong physical optimization realized market prices. This means the blended price for Fortum's price areas was EUR 17 per megawatt hour higher than in the third quarter last year. A few words about the volume challenges we have faced this year.
As you remember from earlier quarters this year, both nuclear and hydro volumes have been clearly below the normal level. The same situation continued during the third quarter. This year has been abnormal when it comes to generation volumes. However, this should be seen as temporary due to hydrology and unplanned nuclear outages. It shows quite clearly in this third quarter, which is typically the smallest quarter result wise in our business. As said, unavailabilities in our nuclear generation fleet still continue to impact the fourth quarter. Tiina will talk more about generation volumes in her part of the presentation. The efficiency improvement program is coming to an end now. By the end of this year, Fortum reduces its annual fixed cost by EUR 100 million excluding inflation gradually until the end of 2025. The full run rate will be effective from the beginning of 2026.
In July, we announced the acquisition of a wind power project development portfolio in Finland, which we bought from the German renewables developer and constructor ABO Energy. This acquisition strengthens our development pipeline for renewables as we prepare for future growth with the acquired 4.4 GW portfolio. Fortum's pipeline of onshore wind and solar projects in the permitting phase is approximately 8 GW with more projects in the early development phase. Potential investment decisions for these projects will be made case by case. The projects will be backed by customer PPAs and need to meet our investment criteria. Currently there is sufficient power supply in the Nordic area and we can sell PPAs from our existing outright portfolio. Fortum's coal exit progresses with the decarbonization of the Zabrze CHP plant in Poland. Today we announced that we will invest approximately EUR 85 million in the plant's retrofit.
This is in line with our target to exit coal by the end of 2027. On another positive note, we also updated our optimization premium for the year 2025. Now we estimate the optimization premium to be approximately EUR 10 per megawatt hour for the year 2025. Previously, we forecasted EUR 7 - EUR 9 per megawatt hour. The main reason for the increase is higher power price volatility. The lower nuclear volumes this year also contribute slightly to the higher premium. I move over to our main figures and financial KPIs. Here are our familiar comparable headline KPIs for the group's third quarter and for the first nine months of 2025. As you see, all KPIs decreased in all periods, which reflects the lower generation volumes. In Q3, our comparable operating profit totaled EUR 97 million, while comparable EPS amounted to EUR 0.08.
On a cumulative basis, the group's comparable operating profit amounted to EUR 674 million. Our comparable EPS was EUR 0.59 per share. The operative cash flow was at a good level. However, it decreased to EUR 787 million. For the balance sheet, our leverage defined as financial net debt to comparable EBITDA was basically unchanged at 1.0x at the end of September. Tiina will go into more details on the result analysis in her part. Next I will say a few words about the market environment, especially hydro conditions. Let's look at the situation of the hydro reservoirs for the Nordic market. It's good to note this is not only for Fortum's reservoirs. As we have communicated earlier this year, reservoirs were record full during the winter, meaning in the first quarter. However, the water was mainly in Norway and northern parts of Sweden where Fortum does not have hydropower.
As the winter was mild and the snowpack was thin, this resulted in minor spring floods. Because of this, the reservoir levels decreased fast in the spring and as you can see now the reservoirs are close to normal level. As we have said, generation volumes will be clearly lower this year. The unplanned outages in our nuclear fleet, mainly in Oskarshamn 3 in Sweden, reduce our annual nuclear volumes by approximately 3.6 TWh for the full year 2025. This is based on announcements so far. The current estimate is that Oskarshamn would come back online on 1st of November. We have also highlighted the risk of lower hydro volumes for the full year. Unfortunately, this seems to be the case. For the last 12 months, hydro volumes are 17.8 TWh compared to a normal hydro output year, which is between 20 TWh and 20.5 TWh.
It is not possible to give an estimate for the full year as hydro conditions might change. The assumption is that our annual hydro volumes will be below that of a normal hydro year. Still, coming back to the power price volatility, lately we have again seen increased volatility, partly because of the introduction of the 15- minute market. The continued high power price volatility supports our capability to generate a premium through our optimization from a value creation perspective. This is reflected in the updated guidance. We expect our optimization premium for this year to be approximately EUR 10 per megawatt hour. This concludes my part and I would now like to hand over to Tiina to tell more about our business performance.
Thank you, Markus. Good morning everyone. Also, on my behalf, I will now go through our financials in more detail. Let's start with the key financials. I will start with some of the comparable KPIs. The comparable operating profit for the third quarter amounted to EUR 97 million. In the third quarter, both our comparable net profit and comparable EPS decreased. This reflects the lower result in the generation segment. At the same time, our consumer solutions business is doing well as they generated a record high third quarter result. We are very satisfied with the consumer solutions result performance this year. Our comparable net profit for the quarter declined to EUR 70 million. Consequently, our comparable EPS for the third quarter declined to EUR 0.08 compared to EUR 0.14 last year. Comparable EPS for the last 12 months is now EUR 0.77.
Our cash flow during the quarter declined by EUR 218 million and totaled EUR 131 million, mainly reflecting the lower result. Over to the segment result for comparable operating profit compared to the previous year. Our result in our generation segment decreased while both consumer solutions and other operations segment improved. In the generation segment, comparable operating profit decreased by EUR 84 million to EUR 92 million, mainly due to the lower nuclear and hydro volumes, lower hedge power price, and somewhat higher property taxes in nuclear and hydro in Sweden. It is also notable that similar to the second quarter, the hedge ratio was high also in this quarter. As a result of the lower volumes, the result contribution from the Pjelax wind farm was slightly negative. Seasonality is reflected in the district heating business, which was loss making, mainly impacted by lower sales price for power in Poland.
As said, the third quarter saw good performance in our consumer solutions business. The comparable operating profit reached an all-time high third quarter level of EUR 23 million. This is an increase of EUR 17 million, which mainly relates to the improved electricity margin in the Nordics and improved gas margin in the enterprise customer business in Poland. In the other operating segment, comparable operating profit improved by EUR 6 million, showing a negative result of EUR 80 million. The main reason for the improvement was lower fixed cost and higher internal charges for the services of enabling functions. Let's move on to the cumulative result waterfall for the segments. When looking at the waterfall for the first nine months of the comparable operating profit at the segment level, it shows the same pattern as for the third quarter.
Compared to the previous year, the result in our Generation segment decreased while both Consumer Solutions and Other Operations segments improved. In the Generation segment, comparable operating profit decreased clearly by EUR 305 million to EUR 648 million. The main reasons were lower hydro and nuclear volumes, lower spot and hedge power prices, and somewhat higher property taxes in Sweden, as well as higher nuclear fuel cost. The result contribution of the Pjelax wind farm was slightly negative and lower than in the comparison period. As a consequence of lower power prices in the comparison period, the result of the renewable business was positively impacted by a sales gain of EUR 16 million for the divestment of the Indian solar power portfolio. The result of the district heating business was at the same level as in the comparison period.
Lower fuel and CO2 cost as well as higher heat price offset the impact from lower sales price of the power, reaching an all-time high level. For the first nine months, the Consumer Solutions segment's comparable operating profit increased by EUR 36 million and was EUR 96 million for the first nine months of the year. The continued improvement was mainly as a result of improved gas margin in the enterprise customer business in Poland, improved electricity margin in the Nordics, and approximately EUR 13 million of cost synergies. In the Other Operations section, comparable operating profit improved by EUR 22 million and amounted to -EUR 70 million, mainly due to the positive impact from divestment in the recycling and waste business finalized in 2024, lower fixed cost, and higher internal charges for the services of enabling functions.
Over to the leverage and liquidity, our financial position continues to be strong, primarily supporting our objective to maintain a credit rating of at least BBB. It naturally also provides a good financial foundation in this uncertain and turbulent market environment, but it also caters for growth and shareholder returns. When considering our capital allocation principles, we balance leverage, investments, and dividends while always keeping the credit rating in mind. Fortum's current long-term credit rating by both S&P Global Ratings and Fitch Ratings is now BBB+ with stable outlook. I want to go through the reconciliation of our financial net debt in the third quarter. As you can see, it is fairly unchanged. At the end of the second quarter, our financial net debt was EUR 1.270 billion. In the third quarter, the operating cash flow was EUR 131 million and investment amounted to EUR 122 million.
The change in interest-bearing receivables amounted to EUR 14 million, while FX and other effects were EUR 9 million. At the end of the second quarter, our financial net debt was EUR 1.283 billion and the leverage ratio for financial net debt to comparable EBITDA was at 1.0x . Looking at our debt portfolio and the loan maturity profile, I want to highlight a few things. At the end of the quarter, our gross debt excluding leases totaled EUR 4.7 billion. Bonds are and continue to be our primary source of funding. Our maturity profile is very balanced and there are no large maturities in any single year. The next maturing bond is EUR 750 million in 2026. At the same time, our liquidity position is strong. We have ample liquidity reserve, EUR 7 billion, with EUR 3.1 billion of liquid ones and EUR 3.9 billion of undrawn committed credit facilities and overdrafts.
The cost for our EUR 4.7 billion loan portfolio is 3.3%, while the interest income that we get for our EUR 3.1 billion liquid ones has come further down and is now 2.1%. With the strong liquidity position, we continue to optimize our cash and credit lines. The overall objective is to have sufficient liquidity while optimizing the balance between debt and cash to minimize funding costs. Over to the final section, the outlook. The outlook section comprises four familiar elements: guidance for outright portfolio, taxes, CapEx guidance, and our fixed cost reduction program. As we have stated already a few times today, we will fall clearly behind the normal historical output level this year because of announced unavailabilities in nuclear and lower expected hydro output. For the sake of comparison, in a normal year our annual outright volume is approximately 47 TWh.
Based on announced outages, nuclear output for 2025 is now estimated to be 3.6 TWh lower this year, of which 3 TWh realized in the first nine months of 2025. Our hydro output for the last 12 months was 17.8 TWh compared to the normal level of 20 TWh- 20.5 TWh. About the hedges at the end of the third quarter, our hedge price for the rest of 2025 was EUR 42 and the hedge ratio was 90%. The hedge price for 2026 is EUR 41, one year or higher compared to the last time disclosed, while the hedge ratio increased by 10 percentage points to 70%. As an update today, our annual optimization premium for the year 2025 is estimated to be approximately EUR 10 per megawatt hour. Previously, it was between EUR 7- EUR 9 per megawatt hour.
The guidance for our corporate tax rate also remains unchanged for the years 2025 and 2026. We expect the comparable effective income tax rate to be in the range of 18%- 20%. The Finnish government plans to decrease the corporate tax from 20% to 18% from the beginning of 2027. There is, however, no official law in place yet. Our very preliminary estimate is that this would result in a 1 percentage point decrease in the corporate tax rate from the year 2027 onwards. I also want to repeat that in Sweden the property taxes are revised from 2025. For Fortum, the increase of the property taxes is now estimated to be approximately EUR 30 million for the years 2025 - 2030. The major part of the cost increase is recorded in our fixed cost. We do not make any changes to our capital expenditure at this point in time.
As this year is about to come to the end, we will come back to this topic in our Investor Day. Finally, a few words. In our fixed cost reduction program for the first nine months, our fixed costs were EUR 615 million. For the last 12 months, fixed costs totaled EUR 884 million. We reduce our recurring annual fixed cost base by EUR 100 million, excluding inflation, by the end of this year with a new run rate from the beginning of 2026. Our current estimate is that the new run rate for our fixed cost base in 2026 will be approximately EUR 870 million. This includes the fixed cost increase of EUR 20 million in the Swedish property tax. As mentioned before, there are additional costs for growth in 2025. These are related to, for example, renewables development, site development, build up of commercial organization, and the hydrogen pilot project.
This was all for my presentation and we are now happy to answer your questions. With this, Ingela, over to you.
Thank you, Tiina, and thank you, Markus. As this was a more straightforward quarter, the presentations were also a bit shorter. Now we are then ready to take your questions, and let's begin the Q&A session. You can also ask your questions in Finnish. Moderator, please go ahead.
If you wish to ask a question, please dial on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial 6 on your telephone keypad. The next question comes from James Brand from Deutsche Bank. Please go ahead.
Hi, good morning and thank you for taking my question. English unfortunately, two questions for me. The first is on demand. You highlighted that energy demand was pretty much in line with last year, and you said that was after industrial demand experienced a slowdown, particularly in Sweden. Could you just give a bit more detail in terms of what you're seeing there and what's caused that? Is that just the general economic situation at the moment, or is there something else going on? That's the first question. The second is on the supply business. You've obviously had a great year in supply and you've seen quite a significant step up in profitability. It looks like you'll be producing EBITDA of comfortably over EUR 200 million this year, depending on what happens in Q4.
I just want to get some color from you on whether you think the profitability that you've seen this year is sustainable going forwards, or whether it's been a slightly exceptional year and we would be expecting a step down in 2026. Not necessarily looking for precise guidance, but just directionally is this sustainable? Thank you very much.
Thank you. Good morning. English is absolutely fine. On the first one, I attribute the, let's say, sideways movement of the demand a bit to the global geopolitical turbulence, as it is difficult for our customers to take investment decisions. If I put this into big perspective, we see good signs of decarbonization and electrification going ahead. We get the incoming inquiries for new power, but investment decisions take long to take place. We see that consumers are saving and companies are being very scrutinous about their costs. That's my quick take on the customer side. On the supply side, I assume you meant our consumer solutions business. The business has experienced so far a very stable year. There have been few surprises. There's been volatility, but something we have been able to manage. We haven't had risk events like we had in 2021-2022.
In these conditions, this is a good indicator of what the business is able to produce. The team is doing really good work. We're getting in synergies from the earlier acquisitions and Mick and his team are working on the efficiencies continuously.
Thank you very much.
The next question comes from Harry Wyburd from BNP Paribas Exane. Please go ahead.
Hi. Morning, everyone. Thanks for my questions. The line went blank for me at the very beginning of the call. Apologies if I've missed something in the very early part. Two questions. Firstly, the CMD, I presume you'll want to sort of keep things back, but I wondered if you could clarify one very specific thing, which is have you been in negotiations with a data center or hyperscaler developer over a PPA during this quarter and would you rule out or rule in that you might announce a data center PPA at the CMD or on the 25th of November? The second one is on the data center tax in Finland. I read in the press and I noted in the release that the government has gone ahead with raising the power tax on data centers in Finland.
They also mentioned that there might be some offsetting support package, so I wondered if you could give us some color on what that support package might be and when it might be announced and whether there might be a bit of a blockage on data center PPAs in Finland until that's been straightened out. Are you seeing any discussion elsewhere in the Nordics along these lines about potential tax increases on data centers and politicization of data center demand? Thank you.
Thank you. Maybe, Tiina, if you take the more general tax question and then for the regarding, I don't think you missed anything material that you wouldn't be aware of. In the very beginning it was about the results and the markets. With regards to negotiations, we are in negotiations and discussions with actually several data center operators. Like we have said earlier, there are discussions going on about steel, aluminium, chemicals, hydrogen, and data center operators are looking for electricity contracts. I cannot, of course, I'll not preempt the CMD or investor day, but discussions are going on certainly on many fronts. More generally, indeed there's a discussion going on, as we can see it, globally, in various places regarding location of new industries, including data centers, and what kind of pressure that puts on the systems.
That's why we engage in discussions about how will the whole energy system develop and what are we doing to make sure that there's then additional supply. If customers are willing to pay for that, then how do we also bring stability to the market as well? On the Finnish case particularly, indeed this has been now in discussion for a longer time. That would or would not the lower tax rate be applied to data centers going forward? Now it seems that the government is going ahead with the tax increase, but then a compensating support for data centers up to a certain level. Those details, how does that work and what are the approvals needed for this whole setup? I think that's very much in the works still. Tiina, do you want to comment further on the Swedish Finnish tax?
Maybe to put some numbers around what has been discussed currently. In Finland we have the electricity tax, and the general level for the tax is EUR 0.0224 per kilowatt hour. Data centers have been among those with a reduced tax level, which has been EUR 0.0005 per kilowatt hour. This will change, so data centers will go back to this general tax level. As Markus said, there is also a plan to have some kind of support mechanism, which should compensate at least some part of the increase in the taxes. In Sweden there has also been discussion about the electricity tax, and they reduced the level from EUR 0.04 per kilowatt hour to EUR 0.03 per kilowatt hour. Sweden is still slightly higher than the Finnish tax level.
Got it. Okay, thank you. Just to clarify, on the first one, I think in your past conference calls you've generally said that you didn't have any substantive discussions on the go with datacenter developers. I think your past comments were that generally interest was more in the shorter tenors, as in three to five years. Markus, should I take your comments and you want to hold back for the CMD, but should I take that as a change in the comment there? Has the nature and substantiveness of your negotiations on PPAs changed since we last had the conference call on Q2?
Not materially, but in the CEO comment you would have noted that we said that we continue to see robust demand and that we thought very carefully. Like I said for the previous question, there is geopolitical turbulence. We see all kinds of questions around is the transition happening and so on. Our customer pipeline for the discussions we are having with the different sectors looks very similar to earlier quarters. It looks like industries and commercial actors continue to look for places where to locate their businesses. Robust is the good word. Okay.
Okay, thank you.
The next question comes from Anna Webb from UBS. Please go ahead.
Question two from me and then maybe a clarification if I can. Firstly, on data centers, when you do the site development, can I ask if you bundle that with PPA contracts? Do you always do the sell of the site and the PPAs, or are they sold separately, and what's the rationale on how you do that? Secondly, I think you said you had a negative contribution from the Pjelax wind farm, which was an issue as well earlier in the year. Can I ask what drives this? The operating cost for that should be pretty low. I know you mentioned low power prices, but how do you get to a negative result? It's still a little bit unclear to me. Also, is that a kind of one-off effect, or do you think this might be a headwind into the future?
Finally, just if I can clarify on the volumes. I know you said hydro volumes are variable and you can't comment on full year guidance, but if Q4 is normalized, can you comment on how much the delta in the first three quarters has been versus a normal year, and if Q4 was normal, what the loss would be on hydro? That would be really helpful, thank you.
Okay, I can start with the data center question and then Tiina, if it's okay if you can comment on the PLX impact and the hydro nuclear volumes. As you would know, when we developed what is now becoming the Microsoft cluster in the capital region in Finland, we developed three sites, then found Microsoft and we sold the sites and we actually did, we bundled that with a deal to do the world's largest heat offtake. We tried to look for solutions where actually we do a win-win both for our customers, for the society, and ourselves. This is supporting the Clean Heat Espoo project and decarbonization leading to a massive excess heat offtake.
Of course, our interest is that we would do PPAs with the site development, but then we need to look at the various customers' situations, how committal can one be at the stage when we do the sites? This is a dynamic discussion that we're having all the time depending on the demand for the sites, what all can we bundle to that? There is no one size fits all for these situations.
All right, then moving to the Pjelax. We commented that in the third quarter the Pjelax result was negative like previous year as well. These are usually the quarters when the power prices are low. This is also the reason if we look at it on cumulative basis, we can say that we are nearly to the zero level. It is in that sense, let's say, seasonal. The main reason really is the power price in the market than what the wind farm will capture. Even though the average price in the market is high, when it's windy, the prices tend to be lower. The capture rate has been lower. Now in the summer months, about the volumes, what comes to the hydro volume? We have stated the average production is between 20 TWh- 20.5 TWh per year.
This year I would say that particularly the second quarter was the biggest difference. There we had the production volume of 3.7 TWh , which is absolutely the lowest ever production volume in our history. That was due to the lower inflow to the water reservoirs. This second quarter the hydro volumes were roughly 1.5 TWh lower than our average production. That gives us some kind of indication what is the difference to our average production in general. In third quarter the production was lower than the previous year, but not that much difference if we compare the longer term average. Now the hydro reservoirs are nearly roughly on the zero level or 1 TWh lower. The outlook for the remaining of the year looks fairly, fairly kind of normal.
Great, thank you very much.
The next question comes from Julius Nickelsen from Bank of America. Please go ahead.
Great, thanks for taking my question. Just two for me. One, follow up on these PPAs discussions that you've mentioned with the data centers in the industry. I mean to the level that you can comment, do you see in these more long-term discussions that there is demand to pay a premium to the current futures curve? Because if I look at the 2027 hedging that you've now disclosed, it doesn't seem that there's much premium to the current futures. Secondly, on the optimization premium, obviously the upgrade to EUR 10 this year, you haven't touched a long-term guidance of 6- 8. Is it still fair to say that given how the opportunities shape out at the moment, that at least for the next one or two years we should be more at the upper end of that scale or is that difficult to forecast? Thank you.
Okay, again, I'll take the first question. Tiina, do you want to comment on the optimization premium? Indeed, compared to the implied forward curve, which I have to say is very thin, liquidity is not high at all when you go further out. When we think about the pricing, if we go out a few years and longer, then our price curve, implied price curve, is upward sloping. That reflects the point of view that, like was highlighted by the PLX example, new capacity with these prices is very hard to get to the market. The prices need to be higher for new supply to come to the market. To start with, the further out we go in time, the higher our expectation for the price. On top of that, there is still the optimization premium. What we agree with the customer is then separate from what we get.
On top of that, the third element I'll mention is the different characteristics. The more specific the customer demand is, the tighter the profile. If you want 8,500 hour product, that will have an impact on the availability of the product. If it's RFNBO earmarked to a certain asset, even more. This we see practically in the PPAs. We talk about several euros of impact for longer term contracts, depending on what characteristics a particular contract would have and then optimization premium on top of that. That's a good bridge to Tiina.
All right, very good, thank you. Thank you, Markus. The optimization premium, we had a guidance for this year, EUR 7- EUR 9 per megawatt hour. We increased that after a very strong first quarter. The volatility was high and we said that the optimization premium was around EUR 10 per megawatt hour. What we have seen is that the volatility in the market has increased. Also, as Markus mentioned, our production volume has been somewhat lower, which has improved the number. What we can see is that the predictability is getting more difficult. Therefore, what we have done is fine-tune the guidance further. We go to the year-end and see how the optimization premium will develop. EUR 10 for this year and, for the time being, for next year, EUR 6- EUR 8 per megawatt hour.
Great, thank you so much.
The next question comes from Louis Boujard from ODDO BHF. Please go ahead.
Yes, hi, good morning. Thank you for taking my question. Two on my side, maybe the first one. Regarding the hedging strategy, we see indeed that going forward 2026, 2027 prices are sloping downward on a hedge point of view. At the same time, optimization is quite strong and is expected to remain quite strong. I was wondering if you were thinking about eventually changing a little bit your hedging strategy going forward, notably in terms of duration or in terms of openness to the market prices in the short term, so that you could capture better the short term volatility of the market instead of having a stronger visibility into lower prices. Maybe the second question would be regarding what you mentioned and the wind farms relax.
Regarding the fact that the capture prices in the end are below 1 of the markets, regarding the fact that the wind of course blows for everyone. At the same time, do you think that it would make sense eventually to consider some investment in specific dedicated battery systems which would be related to the different farms that you could develop in the future, so that you could improve the returns expected from these wind farms? That would be my second question. Thank you very much.
Okay, thank you so much. With regards to the hedging strategy, this has, for the 13 years I've been with Fortum, always been the question: what is the strategy? The idea with the hedging is to get visibility into the short-term cash flows. When we go longer out, we can adjust also our operations. When you go three years out, we can do changes in our resources and processes and so on. If we look at spot price this quarter, the average in our areas was EUR 37, so rather close to the hedge price. Having an open position wouldn't have had a huge impact, but negative nonetheless versus achieved power price. In the comparable quarter last year, it was below EUR 20, so being open would have impacted our result massively if we just look at the spot prices. That's where the fundamental driver comes from.
Mostly when we do the bilateral hedging, as we did also in Nasdaq, it is financial hedging. We have still the possibility for the physical optimization. Of course, we have the risk that can we deliver the power at spot delivery, but that we settle, of course, always on a daily basis. Financial hedging with customers and then leaving the optimization in the longer run. We have said that we want to get to 20% rolling 10-year hedge level. Our wish is that we target to stabilize the cash flows also going further, and the idea with doing PPA backed investments if there is need for additional power stems from that. When we make investments, whether it's wind or solar or any other, the payback times typically are quite long and then stability has a positive impact on our internal cost of capital and thereby the return requirements.
That's a good bridge to the second question, which is that do we consider batteries or other flexibility connected to renewable investments? The answer is yes. That's part of our development. We are typically citing also space for batteries connected with the renewables investment so that there is a possibility to do it if the financial conditions are there. Historically, we have built some batteries since a long time. Actually, when Tiina was heading generation even we were doing that, so already many, many years ago. I believe that batteries will be, of course, a needed part of the system. What we see happening on that front also is that there are new uses coming that are catalyzed by volatility. For example, electrified heating, which I mentioned earlier, so heat offtake, heat pumps, electrical boilers, they can utilize very flexibly the low cost or even negatively priced hours.
The volatility will change also the business opportunities and we are capturing those as we speak.
Can I maybe very quick follow up? Sure, yeah. Just wondering, regarding batteries, do you consider that currently the regulation is supportive enough for you, or does it need any change?
There are issues that need to be considered. For example, on the consumer side, when we have investments behind the meter, then the taxation and grid fees and so on are of a lesser issue. When we get to two-way communication between customer assets and the market, these are things that need to be seriously addressed on European level and national level.
Thank you very much.
As a reminder, if you wish to ask a question, please dial key 5 on your telephone keypad. The next question comes from Harrison Williams from Morgan Stanley. Please go ahead.
Hey, good morning. Thanks for taking my questions. Two from me and possibly one clarification. Firstly, on the optimization premium, I appreciate that it's very strong this year with guidance at EUR 10 per megawatt hour. Can you give us what that number would be had you had a normalized nuclear year? Because clearly that is helped a little bit by the lower nuclear volumes. Just understanding if that's within the 6 - 8 range or kind of above the top end of that. The second question I had was again coming back to PPAs. I mean, I guess we've not yet seen any of these longer term PPA contracts being struck. Trying to understand, is this a case of off takers not being certain on their volume requirements in the five or ten year period, or is this a mismatch between pricing expectations?
Because you say yourself that you have maybe a higher exit forward curve than what we can see on our screens. Trying to understand where that is. Is that a volume mismatch or is that a price mismatch? The final clarification, thank you for the color on nuclear volumes this year. Can we clarify that next year you are still expecting a normalized 26 TWh output, or is there anything we should be aware of?
Thanks.
Okay, if I take the PPA question, And Tiina, if you take again the optimization, premium, and volume question, we start to follow a pattern here.
We will.
Okay, for the long term PPAs, we have a kind of inherent wish when we do new investments that are volatile and also we have the capture rate issue, so they would benefit from visibility long term otherwise. Historically, we have been hedging in the short term. The drive to do long term PPAs isn't really coming primarily from our side, it is how we communicate based on what we hear from the customers. Customers are making inquiries on 3 year, 5 year, 7 year, 10 year, and even longer PPAs. There are a couple of points I see there. One is this whole geopolitical situation. The customers' investment plans are taking time to materialize, so our customer pipeline has stayed very stable. Like I said, the outlook from that point of view is robust.
A contradictory point is that if I look at Nordic traditional heavy industries, they typically would have a wish to get visibility for various inputs, but the order books, whether it is steel or chemicals or pulp and paper, tend to be rather short. We talk about months or a year, and then locking in input costs creates a basis risk which we all are very, very familiar with. Even if something would look inherently very affordable, there's still a risk that your incomes go below your costs and then you have an out of the money contract. This is one structural thing that continues to be impacting our customers' ability to do long term contracts. Overall, there is structural demand for power, power availability. If the format to get that to the customers is the PPAs, then structurally we're heading that way.
We haven't done massive PPAs that we would have announced separately. If you look at our hedging levels and the volumes, that actually implies that we're doing hundreds of bilateral contracts, also longer term PPAs, which you can see in the 10 year rolling hedge ratio. We are doing also long term PPAs, but the volumes are not massive, but they're a good indication in line with what I said earlier. Then to the optimization premium and nuclear volume.
Thank you. When we calculate the optimization premium, we take the full volume as you said, so 40 TWh, 47 TWh in the normal year. This year has been exceptional when it comes to the nuclear, so 3.6 TWh more outages than what we planned at the beginning of the year, and also hydro being somewhat lower, particularly because of this low second quarter. Of course, what the final number will be will depend on what will happen and how we run in the fourth quarter. If we take roughly to give you an idea, the optimization premium would have been roughly at the same level as the previous year. Previous year it was 8.7, so somewhere 8.5 or that range with the normal, normal without particularly the nuclear extensions.
Then what comes to the next year nuclear production, the normal year we have indicated is roughly 46 TWh , and all the time the nuclear producers will put the UMMs with the updated outages. What we now know is that Loviisa and also Oskarshamn 3, they have their normal cyclical longer outages. Those are normal and planned and go according to the schedule, but they are a bit taking the production volume lower.
That's very helpful, thank you.
The next question comes from Harry Wyburd from BNP Paribas Exane, please go ahead.
Hi Markus, sorry to monopolize and to come back, but I'm sorry to really labor this topic, but it's driven a 10% or nearly 10% move in your shares since this morning. It's really important, I think, to get the language sort of understood correctly. I think from my question earlier, I interpreted that maybe there's been a positive change in your discussions with data center operators versus what you told us at Q2. In the subsequent questions, you've kind of mentioned that, you know, if you did a big PPA, you would announce that separately. You're doing, you're doing, you're not really doing big long-term PPAs. I think really to distill it down, what I think the market is questioning here is, you know, are you poised to sign a big long-term PPA, you know, with a sort of big industrial data center operator.
Just to really clarify what you said, is it plausible that you could sign a significantly sized long-term PPA with a data center operator, you know, announce it in the next few weeks, or is that something that we should interpret from your comments that that is less what you're looking at at the moment? Thank you, and sorry for the long question.
That's absolutely okay. Like I said, I think the one word, robust, says it very well. When we look at all the customer segments, there is continuous activity and from our point of view we see that electrification and decarbonization are driving industries. It will be more efficient, clean power is actually more affordable than fossil power. The brand promises that companies have made, these are all pushing ahead what we have been preparing for. The underlying activity is at a good level. In all honesty, there's a lot of uncertainty. Even with all these discussions, we don't know what they will materialize into before deals are done. Not to try to shy away from the question, but to give you color on how we address this is that we see the potential, but we see a lot of uncertainty.
That's why our preparation is that we're spending almost EUR 100 million a year in developing the renewables pipeline, pumped hydro, batteries, even new nuclear as a feasibility study for the future. We're developing the sites. We want to create the optionality that if there is additional demand we can answer that and then we have the efficiency programs, the availability, we improve our processes to be able to serve from our existing portfolio. It is not one or two discussions that we are having. It's a big list of customers that we're talking with all the time and preparing for that potential. Sorry for not being able to be clearer than that, but this is the very kind of honest picture of what is happening. The bottom line is that I'm positive about the whole decarbonization and electrification opportunity and the Nordics are in an excellent position to answer that.
It seems that the overall sentiment has a lot of uncertainty. Investment decisions also take time.
Okay, got it. Thanks very much for taking all that time to answer all the questions. Thank you.
Thank you.
There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Thank you so much. Thanks for all your questions. Very interesting and also happy to have gone through now the Q3 performance as there were some technical issues in the beginning. I will just quickly repeat what I said about the Investor Day. It was a reminder that we will host the Investor Day on the 25th of November, and also then saying that the registration is open until the 17th of November. You're able to attend both in person in Helsinki. Most welcome to join us at the event, but then also participate virtually online. Thank you for your participation and we all wish you a very nice rest of the day.
Thank you very much. Have a good day.
Thank you. Bye bye.