Good morning everyone, and welcome to Fortum's news conference on our first quarter interim results. As always, this event is being recorded, and you will find a replay later on today on our website. With me here today are CEO Markus Rauramo and our CFO Bernhard Günther who will present the Q1 figures, go through the group performance. After the presentations, we will then open up for the questions via the teleconference. With further ado, I hand over to start. Please go ahead.
Thank you, Ingela, and good morning on my behalf and welcome to our first quarter 2021 results call. I will first go through the highlights and our overall performance this year and then hand over to Bernhard to walk you through the numbers in more detail. The start of the year has been very strong for Fortum Group financially and operationally, which I'm very happy about, especially the good availability in all of our operations. The performance of all our segments was robust during the three winter months, and we also saw a notable improvement in the market fundamentals across our operating areas. The Nordic hydrology is now closer. EU carbon pricing has appreciated and also in Russia, the demand has picked up. First and foremost, we have moved in a very determined way ahead with our strategy execution.
As you may recall, I said in our full year webcast that I'm confident we could do more if we work closer, better, and more effectively together with Uniper. Change, of course, starts with leadership. Both companies have since that made changes in the management, and now we have a more diverse and Pan-European leadership teams determined to push forward the energy transition together. A significant step on our joint path forward was this Monday's announcement on the three strategic OneTeam cooperation areas that we introduced in November last year. Under the proposed plans we are now discussing with the employee representatives, Fortum would lead the operation of both companies Nordic hydro assets in the future. That would mean that approximately 180 Uniper employees, mainly in Sweden, would transfer to Fortum.
Uniper would take the lead in wind and solar business development in Europe, as well as the hydrogen businesses for the two companies. The proposed changes do not imply redundancies of jobs, and all existing locations in the new joint operating models would remain in operation. The stronger alignment and in governance and cooperation within the three focus areas will contribute significantly to the expected synergies that we have communicated before. A positive cash impact of approximately EUR 100 million annually on a consolidated group basis. More than EUR 50 million of these annual benefits are estimated to be achieved by the end of 2023, and the full effect of approximately EUR 1 million would be reached annually in 2025. We are well on track with what we promised in December.
In addition to that, I would also like to add that we are continuing our transformation, and we have disclosed divestments totaling EUR 1 billion this year. Strategic reviews of our Polish district heating operations, the 50% stake in Stockholm Exergi, and Consumer Solutions are still ongoing, and we will update you on this if and when decisions have been made. Moving over to financial performance. Looking at the first quarter, all indicators are up, whether it's earnings or cash flow. The winter season had its extremes this time, and we could secure security of supply across the portfolios for our customers, and we showed a portfolio optimization and strong quality in our operations. Both Fortum divisions and Uniper in delivering above previous year's levels, making a really strong first quarter.
The strong increase in comparable operating profit with close to EUR 2 billion in Q1 was largely attributable to the full consolidation of Uniper. As in Q1 last year, Uniper was still accounted for as an associated company. The comparable EPS gives a clearer year-on-year picture, as here Uniper was included in both quarters. Comparable EPS is up EUR 0.03 per share, with Uniper contributing EUR 0.51 of the EUR 0.94. Overall, the year-on-year effect is even more pronounced as you recall that in Q1 2020, Uniper was included in our associated results with two quarters, Q1 2020, but also Q4 2019. Consequently, it's clear Uniper delivered another extraordinary first quarter this time. This shows that our Uniper acquisition has been beneficial for us. When it comes to operating cash flow, this was up in all segments.
Now at over EUR 830 million for the group, bringing also our leverage down to the targeted below two times comparable EBITDA. We are now at nine times. Good to remember that dividend is not included in these figures as that was paid last week. One of the building blocks of our stability and earnings picture are the hedging activities that we'll talk about now on this slide. Here is the achieved prices for our existing outright positions, excluding the achieved prices for the 25 TWh of our subsidiary, Uniper. Fortum achieved prices in the Nordics are on the way up, compared to the volatility that we experienced over the last years, again, on a very reasonable level. Spot have been coming up substantially lately into a region of above EUR 60 per MWh as the supply situation is getting more balanced.
We are still in a wettish scenario, reservoir levels above average. Bernhard will elaborate more on this in the divisional section. Regards to Russia, achieved prices have also been up as demand has been increasing, but in EUR terms, we see a downward trend as the Russian ruble has weakened. Over to the divisional results in a bit more detail. The overview of comparable operating profit on a divisional level shows in essence three things. All segments have been contributing positively year on year, but what is clear here, of course, is that Uniper is the main driver for the increase based on the highlighted full consolidation in Q1 of this year. Generation and City Solutions show a strong uplift based on their margins, and the same applies for Consumer Solutions.
What is not visible in this picture is that Russia division showed a strong underlying performance with higher prices and volumes. The weakness of the Russian ruble then is covering the improved performance picture, and we are nearly flat year-on-year in EUR terms in Russia division. To sum this all up, I'm happy and satisfied with the performance across the group, segments improving year-on-year. I move over to our strategy execution. One of the key building blocks of our strategy is to transform our operations to carbon neutral, and we are progressing well and ahead of our initial plan. With regards to the coal exit, in April, the Wilhelmshaven 757 MW power plant was awarded in the second tender of the German hard coal tender to exit commercial operation by December of this year.
This is one year earlier than initially planned following the early closure of Heyden station at the end of last year. As I have communicated also before, our 900 MW lignite-fired power station, Schkopau, which is in Eastern Germany, will exit our portfolio October of this year as well. Our coal exit program goes hand in hand with our hydrogen activities. As the third-largest CO2-free power producer in Europe and a strong gas player, one of the few players covering the full value chain from green electricity, running electrolyzers, having the know-how to store and to transport hydrogen, and having the ability to structure off takes for industrial customers. Lately, several early-stage hydrogen projects have been initiated with the ambition to establish national hubs for hydrogen across Europe. The most recent examples are the hydrogen hubs in Wilhelmshaven, Rotterdam, and Hamburg.
Our focus is also to be actively involved in the debate in regulation and incentivization of hydrogen projects. One of our targets is on the ESG and climate lobbying. Influencing EU and national policies is important for us in order to achieve our ambitious climate goals. Because of this, we have decided to conduct a comprehensive review of our lobbying activities and practices, particularly in relation to climate policy during this year. As a part of the review, we will also clarify Fortum's lobbying practices and governance. Increasing the transparency of lobbying is an important principle for us. In addition, we will conduct a review concerning Paris Agreement alignment of lobbying of key energy relating industry associations, where Fortum is a member in Europe, Russia, and India. The regulatory environment within the EU took several positive steps forward in the beginning of this year.
Next to the tightening of the 2030 climate target to a 55% reduction of greenhouse gas emissions and a goal of climate neutrality by 2025, the first delegated act under the EU Sustainable Finance Taxonomy was adopted. The final version saw a clear improvement regarding hydropower, as the criteria are now aligned with the EU Water Framework Directive, making the bulk of Nordic CO2- free hydropower eligible under the taxonomy. What does this then all mean for Fortum? A few words on taxonomy before I hand over to Bernhard. On this slide, you can see our understanding of the alignment of Fortum's assets and investments with EU taxonomy. As you can see, majority of our earnings and CapEx are expected to be taxonomy aligned. This is good news.
As initial versions of the taxonomy, as I said, were about to exclude not only nuclear, but also hydropower generation. What, in essence, is one of the most sustainable resources we have, built to last for generations to come. There has been quite the discussion on how to measure the alignment. When it comes to revenue or sales, this is obviously not the right measure for taxonomy alignment. How often would you optimize and de-risk your portfolio? The market does not tell you if you have a clean fleet or clean investments, and therefore that would be misleading. To achieve a common language and clear definition of what is sustainable, the EU taxonomy is expected to give clear guidance with a common classification system for sustainable economic activities to facilitate sustainable investments that contribute towards Paris climate target.
Initial versions have been very narrow and biased towards certain emission-free technologies over others, and therefore excluded majority of Europe's existing carbon-free technologies. The final version saw a clear improvement regarding hydropower as the criteria, like I said, are now aligned with the EU Water Framework. The EU decided to allocate more time to take decisions regarding nuclear energy and natural gas. Also, delegated act addressing waste to energy is not final yet. The eligibility of nuclear power and gas will be addressed in a separate complementary delegated act in the summer. The expert group on the Commission's Joint Research Centre concluded that nuclear power generation does not cause more harm than other forms of power generation, and Fortum expects that the Commission will respect the view of this scientific expert group. The debate is expected not to be only scientific, but also political.
As for gas, we are glad that the Commission clearly highlighted the important role of natural gas in the energy transition. Flexible gas is needed to ensure security of supply on the path towards climate neutrality. We expect this role to be reflected in the upcoming legislation. Taxonomy is not only important for new investments, but also for existing capacity with high-maintenance investments. It obviously also has a spillover effect to other policy areas like R&D, funding, state aid rules, et cetera, which underline the importance of getting Taxonomy right. When it comes to our CapEx, the picture is rather clear. More than half of our EUR 3 billion growth CapEx is envisaged for investments in renewables. Additionally, we are allocating growth CapEx for hydrogen and clean gas projects.
When it comes to maintenance CapEx, most of our roughly EUR 700 million per annum are invested in taxonomy-aligned generation, like our hydro fleet. Having said this, I would now like to hand over to Bernhard, who will cover the financials and the divisional insight. Over to you, Bernhard.
Yes. Thank you, Markus. Hello from me as well. Carrying on now with the financials. In Q1, we have made some changes to our reporting to better reflect and present the underlying performance following the full consolidation of Uniper. We introduced a couple of alternative performance measures, i.e., comparable net profit and also comparable EPS. These are aligned with Uniper's adjusted net income. We are from now onwards presenting both reported and comparable numbers in our interim report to give you a better grip on our underlying performance. Today's overview shows, on the one hand, the classical year-on-year comparison. This is distorted by the Uniper consolidation effect up to the comparable operating profit level.
Therefore, on the other hand, as a reference, we also show the 2020 full-year figure and cumulated last consecutive four quarters, i.e., last 12 months, to give you another good indication of the earnings level of the combined group. Comparable EBITDA was close to EUR 1.5 billion in Q1 2021. As Uniper has been fully consolidated over the last four quarters, we see on an LTM basis now a comparable EBITDA level of nearly EUR 3.4 billion. Comparable operating profit was better than previous year in all our segments, as Markus said. As Uniper recorded an exceptionally strong Q1 2021, comparable operating profit totaled at EUR 1.17 billion. Comparable EPS for Q1 2020 and 2021 was already explained by Markus. I would only highlight that the last 12-month number for EPS totaled EUR 1.7 per share.
We see also a strong cash flow, as Markus mentioned, of EUR 0.8 billion for the quarter, the last 12 months, EUR 2.8 billion. As already mentioned again, the dividends of EUR 995 million have been paid in Q2 last week, and the Baltic District Heating divestment will be concluded in Q2 2021. It was, as you know, signed in March this year. Financial net debt over comparable EBITDA over the last 12 months was at 1.9 times, which currently is below our target level of two times. We are on a good track here. In Q1 2021, divestments were EUR 146 million. There was Russian solar, small Nordic hydro, and the remainder, respectively, second part of our Sørfjord Nordic wind portfolio. As Markus already said, with this, we have announced divestments of almost EUR 1 billion already this year. Moving on to the various segments.
Let's first look closer at the performance of generation. Comparable operating profit has increased by 14%. The result improvement was also supported by the higher achieved power price of EUR 37.2 per MWh with successful physical and financial optimization. The overall system price in the Nordics increased by 173% in this quarter, and for the Fortum-relevant price areas, it was a plus 124%. Generation volumes improved due to higher hydro volumes. The hydro volumes were actually at the highest level for almost 20 years that we recorded in this quarter. On the reservoirs you see at the top of this slide, last winter realized cold while the new NordLink cable increased the Nordic export capacity. This led to a generally high hydropower production in the Nordics and also high utilization of water reservoirs. Nordic water reservoirs, compared to long-term average, dropped from 20 TWh to 14 TWh during Q1.
As mentioned, we are still in a wet situation. Looking at Nordic power prices in the lower part of the slide. When you look at the graph, it is important to distinguish the spot and front-end development from the longer term, i.e., 2022, 2023, 2024 products. The Nordic spot prices, just like coal, gas, and carbon, saw a strong recovery during Q1 2021. The Nordic spot price recovery was partly driven by commodities and continental European power prices. The average spot price was at EUR 42.1 per MWh during the quarter, which is almost three times last year's average price. Also the Nordic fundamentals like cold winter, low precipitation, below normal wind production, and the new NordLink interconnector played an important part in the price recovery. Nordic power demand increased approximately 7% compared to Q1 2020.
This increase has been substantial both in the spot and the forward markets, but clearly less pronounced on forward prices. I'm now moving on to our Russia segment. Here, our comparable operating profit increased marginally. The effect of the change in the Russian ruble exchange rate was minus EUR 21 million, and we had positive effects from EUR 17 million from the sale of the 160 MW CSA-backed solar power project to the joint venture with the Russian Direct Investment Fund, higher power prices, and higher heat volumes. The net effect of the changes to CSA payments was slightly negative. Three units were entering the four-year period of higher CSA payments, whereas the CSA period ended for two units. That's the Tyumen CHP-1 and the Chelyabinsk CHP-3. There were also downward corrections to the CSA prices due to lower bond yields.
Fortum holds the largest portfolio of wind and solar power parks and projects of almost two gigawatts within its renewables joint ventures in Russia. 600 MW of the wind capacity is now operational. 495 MW under construction and 728 MW under development. In 2020, 550 MW of new wind capacity, including four wind power plants in the Rostov region and two in the Kalmykia region, started operations. Fortum also has 116 MW of solar capacity to be built, as just mentioned before. 78 MW of this capacity is expected to be commissioned in the fourth quarter of 2021, and the remaining part in the fourth quarter of 2022. It's good to note that Uniper's Russia operations is reported under the Uniper segment. Now moving on to City Solutions.
City Solutions, as you know, had a tough year in 2020 and was affected by both mild weather and low power prices, but also by COVID-19. In Q1 this year, comparable operating profit increased by almost 50%. Higher heat sales volumes in all heating areas, higher Norwegian heat prices due to the price link between heat and power prices there, and improved results in the recycling and waste business. As mentioned with regards to the sale of the Baltic district heating business, we will book a tax-free capital gain of EUR 240 million in Q2 when we close the transaction. During the quarter, we also commissioned part of the solar capacity in Jaisalmer, in the Indian province of Rajasthan. The remaining 100 MW of the total 250 MW capacity is expected to be commissioned in Q2. Moving on now to Consumer Solutions.
Consumer Solutions continues to deliver better results and is showing a double-digit comparable operating profit improvement of +12%. Our comparable EBITDA result is now improving for the 14th consecutive quarter in a row. This improvement was driven by higher margins from power sales and value-added services. The higher margins are a result of active development of our service offering. As already mentioned earlier, the strategic review of this business is ongoing. Now on to our largest segment, Uniper. As a general comment, we can state the obvious. In Uniper's global commodity business, the first quarter was characterized by periods of low temperatures in some of the world regions, including parts of Asia, North America, as well as Europe. These colder temperatures increased demand for gas and power, which enabled Uniper to successfully optimize its international portfolio.
This included both LNG deliveries to the Asian markets and sales of gas and power at higher price levels in parts of the U.S. The European generation business benefited from the solid performance of the fossil fleet. Datteln 4 in full operation, Irsching 4 and 5 being back on the market in Germany, and better availability of Maasvlakte 3 in the Netherlands, as well as payments from the U.K. capacity market. The positive impact was partly offset by an intra-year CO2 emission right-phasing effect that shifted margins from the first quarter to the fourth quarter of 2021. The nuclear generation business in the Nordics was negatively affected by lower achieved prices. Uniper's Russian business, Unipro, contributed positively to the comparable operating profit of the Uniper segment. Russian power prices were supported by growth in power demand, low hydro volumes, and high exports.
However, the result was negatively affected by the CSA period ending for the Chelyabinskaya and Yayvinskaya power plants and the change in the Russian ruble exchange rate. Moving on to debt and funding. Here, you will find the changes in our financial net debt and main items of our cash flow during Q1 2021, showing a decrease of some EUR 600 million, mainly related to the strong cash flow. The decrease in net financial debt. Considering our rating, our financial net debt to EBITDA ratio for the last 12 months was 1.9 times at the end of Q1 2021, and therefore well in our envisaged range of below two times. It's good to keep in mind that the dividend of almost EUR 1 billion was paid out in Q2 on the 7th of May, which is naturally not yet reflected in these Q1 figures.
The bond maturity profile is rather balanced. Regarding our maturity profile, we have a EUR 500 million bond maturing at the end of May this year. Our liquidity position is very good, with liquid funds of approximately EUR 3.6 billion. We have currently EUR 9.9 billion of gross debt, and the average interest rate for the whole loan portfolio is 1.5% at the moment. Now moving on to the last slide, that's the outlook. Our successful hedging has continued with marginal decrease in our achieved hedge prices. Uniper's hedges, as published by them last week, are 85% at EUR 27 for the rest of 2021, 80% at EUR 24 for 2022, and 35% at EUR 21 for 2023. Regarding CapEx for 2021, we repeat what we have already communicated.
Total group CapEx is estimated to be EUR 1.4 billion, of which maintenance is expected to be EUR 700 million, of which Uniper's share is approximately EUR 400 million. However, there might be some volatility between the years, and we have not provided guidance for normalized maintenance CapEx going forward. Finally, I also want to highlight that bond yields in Russia will have an impact on the CSA over the ongoing year, as the bond yields have declined during last year. The drop is from 7.6% to 6.3% and will accordingly lower the CSA payments. With this, I conclude our presentation and we are now ready to start the Q&A session. Ingela, back to you.
Thank you so much, Bernhard, and thank you, Markus, also for your presentation. We open up the Q&A session. Moderator, please go ahead.
Thank you. Our first question come from line of Artem Beletski from SEB. Please go ahead. Your line is open.
Yes, hi. This is Artem from SEB. Thank you for taking my questions. I actually have three to be asked. First, starting with the power markets, what is going on right now? In the past, you have been stating that high CO2 price should be positive also. For Nordic markets, looking at the development this year and also last year, CO2 prices are now over EUR 50 per tonne, actually it seems to be the case that there has been quite limited impact on Nordic prices. Could you maybe talk around this topic why we haven't seen any bigger impacts when it comes to Nordic markets? The other question is related to accelerated strategy together with Uniper. Could you maybe talk about the potential timeline when it comes to identifying further synergies relating to both companies and maybe whether current targets could be accelerated?
The last one is more technical, related to Russia and CSA rate per megawatt. There has been some 11% growth into one year-over-year. Is it a good assumption also for the rest of the year? I know that there has been quite a few moving parts when it comes to this year. Thank you.
Thank you for the questions, Artem. Maybe I take the two first ones and Bernhard can take the third one. The CO2 is a very important element in the short-term marginal cost of coal or/and gas condensing, which continues to be the anchor for the pricing in the European system. How much that impacts, whether it's coal or gas or CO2, how much that impacts various Nordic or national area prices, that depends on the local demand-supply balance and transmission capacities and/or bottlenecks. The connection definitely remains, but it is subject to the market conditions, and this will continue to be the case. There is buildup of renewables in Europe, phasing out of huge amounts of capacity. A lot of very cost-effective capacity will go out.
There is buildup of new renewable capacity in the Nordics, at the same time also closures of existing capacities. With regards to the synergy potential, we are indeed now working together tightly with Uniper to identify areas where we could create more value better and faster and broader than earlier. We believe there is potential and, in due course, we will communicate what the conclusions from this work would be. Having said that, I'm happy to say that, like we mentioned in the presentation, we communicated regarding the One Team approaches. Now we are in discussions with the employee representatives on the proposals, how to go forward with One Team approach led by Fortum for Nordic hydro optimization and One Team approach for renewables development in Europe led by Uniper, as well as for hydrogen.
We're starting to create the good platform to create value and capture the growth opportunities in these three areas. The third question I leave for Bernhard.
Yes. If I understood it correctly, your question was if basically the Russian CSA effects we have observed in Q1 compared to last year can be extrapolated to the full year, correct?
Yes, indeed.
Yeah. Broadly speaking, yes. Yeah.
Okay. Very clear. Thank you for these answers.
Thank you. Our next question comes from the line of Peter Bjerke from Bank of America. Please go ahead. Your line is open.
Yeah. Good morning. Two questions from me. Really both clarifications on where we are with the bigger picture on Uniper. First one being that you've replaced executive management now with your own people, but the supervisory board is controlled by you. I'm a little bit confused why you've been maintaining the position that you're going to wait until 2022, before considering putting in place a domination agreement. I'm not sure I understand what the purpose of that 2022 timing is. I was hoping you could elaborate a little bit as to why that is. Just taking you back a couple of years on this. When you first acquired E.ON's 47% stake in Uniper, you very clearly said at the time, in investor meetings, that that was your number two M&A target and that your number one target was to acquire 100% of Uniper.
I'm wondering if two years down the line, whether anything changed on that view and whether that is still your number one goal here.
Thank you for the question. With regards to the 2022 timeline, this is what we communicated earlier. We wanted to give visibility, stability into the situation of employees and other stakeholders and our target is to stay with our commitments which we have made. This is an earlier commitment and we stand behind that. Having said that, you mentioned the DPLTA or squeeze out, there is no restriction for us to buy shares actually of Uniper. We have not committed to not doing that. As you have seen in previous quarters, we have been increasing our shareholding somewhat. With regards to the 100% question, I would remain in that position that Uniper is a good investment and we did earlier make a public tender offer for 100% of the shares. We were ready to do that earlier with the fully financed bid.
Yes, there are synergies and benefits that can be achieved between the two companies and now Uniper is fully consolidated and a segment of the Fortum group and part of the de facto group. Like in many other jointly owned situations, there may be potential for increasing in ownership, that is both a commercial and an operational question. I would say operationally, now we are in a position in a de facto group, Uniper being a segment, that we can work closely together to create value for both companies. It remains a possibility and it is interesting for us, it's a commercial question if and when we would increase our ownership.
Okay. Thank you for that answer.
Thank you. Our next question comes from the line of James Brand from Deutsche Bank. Please go ahead. Your line is open.
Hi. Good morning. Thanks for the presentation. Two questions from me. The first might be a two-parter. The first is just on the taxonomy rules and some of your comments on that. I was just keen to understand, firstly, your comments on hydro better. You said the bulk of your hydro assets would be compliant. Maybe you could just tell us what that means. Is that 60% or is that 80% or 90%? What are the things we should be considering? Some of the pump storage doesn't comply with the EU Water Framework Directive. Is that the issue? I also noticed that you had nuclear as green, i.e. compliant. I was under the impression that nuclear and gas still had some uncertainty over how they'd be treated. I'm curious why you included nuclear as green.
Is that because you expect it to ultimately decided to be compliant? That's the first one, a two-parter. Secondly, in terms of the combinations, and where you're aligning with Uniper in terms of managing different kind of business streams. I noticed that there's no kind of Russian business stream there. Although I guess wind could kind of extend maybe to Russia. Why is there nothing included on the Russian businesses? Thank you.
With regards to taxonomy, I think the starting point for us is that we are the third largest CO2-free producer in Europe. The position we have been advocating for EU is that in order to achieve the EU climate change goals, then EU should not disadvantage any of the CO2-free production forms. This, I think, would be very important to maintain and very counterintuitive if that were not the case, because hydro and nuclear actually play such a big role in today's CO2-free production. The issues around hydro that what would then not be taxonomy-aligned, the discussions are around fishways, biodiversity, biotope protection, and so on. There's detail and interpretation that what is taxonomy-aligned and what not.
We are spending significant amounts of money into doing continuously improvements, which have been done actually from the very beginning, 100 years back, when some of our dams have been and hydro plants have been constructed. We have kept up with regulation all the time. This is the area. Pump storage is a very small part of our hydro portfolio. That's not the kind of critical bottleneck issue for us. With regards to nuclear, why we are positive is, I go back to the starting point that if nuclear were not as a CO2-free production form, if that was not taxonomy-aligned, then the taxonomy will have a big problem because then it contradicts, I think, with the EU's targets. It just does not make sense to me.
Like I said, the scientific evaluation of nuclear was that it's not more harmful than other CO2-free production forms. The safety requirements both for the operations and spent fuel handling are very tight and well taken care of. That's why we do assume that the outcome then in the separate work stream will be a nuclear positive. With regards to Russia, there is Russia and there are other areas of business that we have not yet tackled in the One Team approaches. We actually tackled three in those, which was very important because there is strong potential in the Nordic hydro and there is massive growth potential in renewables and hydrogen. These were three ones where we identified a lot of value upfront. Now that we have found good ways of working, we can then, like I said, broaden, deepen our value creation activities within the group.
Great. Thank you very much.
Thank you. Our next question comes from line of Deepa Venkateswaran from Bernstein. Please go ahead. Your line is open.
Thank you. I have three questions. On the Taxonomy, just following up from the previous question, would you be able to comment on what your expectation is for gas, and would you expect it to be unconditionally classified as green in the summer? Second question is on the Nordic power prices. Particularly, you've highlighted that you're expecting Olkiluoto 3 to commission in 2022. Where do you see that as having the impact on the Finnish premium over the Nord Pool system price? My third question is, does Uniper also lead the Russian wind and solar activities, or would they be restricted to continental Europe?
Do you have any comments on some recent developments in Russia where it seems like for future projects, there could be a substantial amount of fines for missing production volumes and local content. Do you still see Russia as an attractive market for renewable investments? Thank you.
Okay. Thank you for the very efficient and good questions. I think in Taxonomy and gas, this really boils down to the essence of the challenge we will face with Taxonomy. In our thinking, gas plays a very important role in reaching the EU climate targets. If we allow gas to provide flexibility and security of supply with actually little running hours and low absolute emissions, that will enable deeper penetration of renewables into the system. Technically, that must be the case. The dilemma for EU is that, okay, how do we formulate the Taxonomy around gas? Yes, we need to get out of fossil gas, but the fossil gas, until synthetic gas becomes competitive, will enable a faster decarbonization of the system. That's the nut to crack.
My answer is, I don't know if it will be, but we need to find a solution. If gas is completely disadvantaged, then it will be more difficult to get the gas peakers and the flexibility that the system requires. Olkiluoto 3 impact, because of course any power unit has to be in the market. The timetable is well known in the market, and I would assume that the impact of Olkiluoto 3 is seen in the area price forwards today. The market knows that it will come. The market knows exactly what the balance will be. With regards to the renewable cooperation, and the One Team led by Uniper, the Russian wind or Indian solar are not part of that, so it's European renewables. We have a very established operation in Russia, and we have an established operation in India.
Now the thing is to really get the continental European renewables growth started. With regards to fines and local content requirements in Russia, yes, especially the local content requirement, that was a certain kind of hurdle, and that was one of the reasons why we established the joint venture and now joint ventures with Rusnano and RDIF. We were able to get critical mass of megawatts to actually incentivize potential technology suppliers to localize their operations in Russia. This has been achieved. With regards to fines, we both Fortum and Uniper, Unipro, and before that, E.ON, all are very familiar with the Russian CSA system and the penalties. I think the whole CSA setup is actually an example of a well-functioning tariff system and a system that incentivized the type of capacities to come to market as a government has wanted.
Russia has kept up its promises and contractual commitments in a really good way. If you look globally, which countries have really followed through the commitments they made more than 10 years ago, Russia has actually delivered on that front. Of course, there are the geopolitical tensions and increased country risks and weaker Russian ruble. We understand that and observe that continuously. Operationally, we have done well in Russia, and our team has done really good work in commissioning last year, hundreds of megawatts of wind capacity in time, in budget, and in a very safe way. The same is continuing this year. Russia continues to be an interesting market for us, and we have enormous capabilities there with 15 GW of thermal production and now a two gigawatt renewable pipeline.
Thank you.
Thank you.
Thank you. Our next question comes from line of Sam Arie from UBS. Please go ahead.
Hi there. Good morning, everybody, and thank you for your very good presentation. Helpful Q&A this morning. Very good results, too, of course. I've got two questions. One probably Markus you'd describe as an efficient question. The other one is not very efficient, but I wanted to ask it anyway, or at least try to. My efficient question is on carbon. You spoke about this before, and I know you don't give a carbon price forecast, as it were, but can I ask if you expect the carbon pass-through to the Nordic market to increase or decrease or stay the same in the coming year? I know you do a lot of work on this type of thing, and I'm interested what your thinking is there about the pass-through, which has been very low recently, but wondering if you see any reason it might increase. Hopefully, that's my efficient question.
My broader one is on Uniper again, and you've made some helpful comments already, but for me, I think the point here is you've done an amazing job in the last 18 months. You've got the balance sheet sort of where you want it to be. The dividend is covered and growing. You're making progress on the cooperation and the synergies. I think you could argue the status quo looks fine, actually. It certainly doesn't seem like a burning platform. On the other hand, you've got this massive disposal plan, and it looks like you've got probably another EUR 5 billion or so coming in from that, which is way more cash than you need for the CapEx that you set out at the CMD last year.
If you don't do something on Uniper, then you're going to have a huge cash pile there, and it's going to be back to where we were five years ago, and everybody asking what you're going to do with the money. Can you just spend a bit more time to talk us through that trade-off? Are you happy with the status quo? What are the commercial issues that would sort of tip the balance and make you want to do something sooner on Uniper? Thank you.
Well, thank you, first of all, for the congratulations. Like I said in the beginning, we are happy, and I'm actually very happy for all of our employees who have made it possible actually to reach this result. It's not only the market that makes it possible, but the equipment has to work, the trading organization, global commodities, everything has to work. Risk management has to be in place. I'm really proud of what our people have done. Hydro availability of our district heating plants, nuclear availability, things worked, and that gives the strong platform that makes these kind of results possible, and the discipline that everyone's had. Also in a very difficult year with Corona. There's been enough disturbance to distract you from all of this.
Our 20,000 people managed that. With regards to carbon price, yes, I do expect that the carbon price will come through to the Nordic market and will impact the Nordic prices. I have to go back, unfortunately, and I apologize for that. I have to go back to the more detailed explanation, which is then that whatever area price we have is a function of the local demand, supply conditions, transmission capacities, all of that. It gets very granular when you start to look on a daily basis, as I quite often do, how are the energy flows going and what transmission lines are working and what are not. Why I'm positive about that there is a connection. Well, first of all, we see that transmission capacities are being increased. The 1.4 GW new line from Norway to U.K. is now in place.
There is two gigawatts more coming soon, increasing the transmission capacity from the Nordics to 13 GW. If we continue to have, on the forward curve, a large spread between Nordics and Germany, well, if it's persistent, then it's a good case for building more transmission capacity. On the other hand, we're getting closer and closer to the late 2020s, 2030, where we assume that because of technological development, we start to see synthetic hydrogen being competitive with the fossil alternative. This may be a big consumer of electricity. If the assumption is that Nordics have great conditions for renewables and clean energy production, we start to come closer and closer that also there are new types of demand that can be very significant. We'll see how it goes. I think the connection is there.
With regards to the Uniper question, okay, if we were in that fortunate situation that things work out nicely and we have capital to invest, we have together now with Uniper worked and are working to create the platforms where we can deploy capital. Renewables growth in clean gas, growth in infrastructure services, getting the teams aligned, and optimizing the investment possibilities. The possibility then to invest in Uniper shares is one opportunity that Fortum has. Like I said, it's then a question of, okay, what are the commercial elements around it and/or other structural issues? What else than a bigger share of the profit of Uniper would such share acquisitions bring us? Are there governance limitations or others that could be then impacted with increased ownership? From my point of view, it's an investment opportunity along with others.
I go back to Fortum history. We have had minority and majority positions in various setups for very long periods of time. We have the institutional capability to deal with this. Of course, there is extra work and extra governance around having minorities somewhere, but that's something we can deal with. I really want to find positive ways to work with the whole 20,000 employees in the group without these kind of governance issues disturbing or worrying someone that, of course, we don't want anything to go wrong on the governance side either. We are conscious of this. It's a trade-off.
Very helpful. Thank you, Markus. I couldn't ask for more, and it's very helpful to understand your thinking on both points.
Thank you, Sam.
Thank you. Our next question comes from line of Pasi Väisänen from Nordea.
Thanks. This is Pasi from Nordea. I have three issues related to sustainability. As already highlighted, you have listed hydropower as a taxonomy-aligned asset in your presentation. My understanding is that you do not have fish pathways around the dams, as already stated in taxonomy. Are you going actually to make these investments to get the green stamp for your hydropower assets? Secondly, you have listed offshore wind under the taxonomy-aligned assets. Are you actually going to invest to the offshore wind also, regardless it's actually not included in your strategy? Lastly, well, would it kind of make sense to immediately sell all coal-related power plants because, as we have seen, that actually is burden your kind of valuation multiples, and coal is giving a negative image kind of on financial markets currently. These three ones. Thanks.
With regards to hydropower, we are actually investing in biodiversity fishways improvements into the environmental performance large amounts of money every year. One part of that is that Sweden actually put in place the very large fund, which then creates funding up to billions of kronors, which will then fund this investment. We're actually doing this so fishways are not missing from our power plants, but there are areas where there are, and there are areas where there are not. This is a continuous dialogue we're having with environmental authorities, with the local societies we operate in. It's a question of finding the balance and really understanding that where do we get the how much money should be spent? What is the competitiveness? How can we provide the flexibility and base load that the system needs, find the right balance there.
Fishways are not the only way either to have the desired biotopes in the parts of the river that we would talk about. We are also breeding hundreds of thousands of fishlings per year and planting them into the rivers. We are doing many things to cover our obligations and increase the biodiversity. With regards to offshore wind, that is not in our plans at the moment. Our understanding is that that would be taxonomy-aligned. The question, would it make sense to sell all the coal? I would turn this question around and say rather that we have very limited coal left in our portfolio. We have the German coal, which now largely actually is exited already on an accelerated basis. We know that Heyden, Wilhelmshaven, Schkopau out. We have Scholven, Datteln left after that. Very little.
Two gigawatts in the U.K. out in 2025 latest. Netherlands will phase out in end of 2029. Basically we covered the whole coal portfolio with that, plus then the decarbonization of our operations in Espoo. After that we would have the Russian operations, Argayash, Beresovskaya, and one unit in Chelyabinsk left. Out of our total portfolio, coal has a small role. I think the more interesting question for us is actually that these coal-fired units, when they are taken out, these sites are actually where the energy flexibility, base load, and storage will be needed. They are in the kind of centers of the system where industry, industrial activity, societal activity has focused. It has focused around and grown around the places where energy is, or energy has come to the places where these activities, whichever came first.
When you take these 700, 800, one megawatt, one gigawatt units away, you will leave a big void into the energy system. For us, that's actually a big opportunity now to use these sites, which have grid connections, harbors, roads, railroads, society who can work with industrial activity. We have sites that are zoned for industrial activity already, and extremely capable people, really talented people, skilled operators who have operated very expensive and technically demanding equipment for decades. I think we have a unique position with these assets, and that's what we are focusing on now. Plus then taking care of the transition of our people and the societies in a very socially responsible way from the old business to the potential new business.
Great. Thanks. I hear you. That was all from my side.
Thank you.
Thank you. Our next question comes from line of Piotr Dzieciolowski from Citi. Please go ahead. Your line is open.
Hi, good morning, everybody. It's Piotr Dzieciolowski from Citi. I have two questions, please. First one, I'd like to ask you about the Uniper, because you stressed that it's a good investment for you. Is there anything you don't like in this company you would like to change more quicker? We've seen the recent management team change there. What are you actually hoping to get done with this new management team? Secondly, on the potential acquisition of Uniper further shares, how different would the full integration work versus the One Team approach? What kind of extra benefits you could get by buying full Uniper? Would that be only about the cost savings eventually, or would it be significant amounts? Have you looked at the other scenario? Thank you.
Yes, I have to repeat what you just said and I said earlier that we find Uniper to be a good investment. Uniper put us in the center of the energy transition. We are now firmly in continental Europe where the big change is happening. We have really strong competencies, a strong presence, long history, great relations with the surrounding society, and fantastic people in the organization. This is a platform we really, really want to build on and utilize. We are in much bigger markets than we were before. In addition to the continental European presence, Uniper gives us the global reach from the Americas to Asia, from Russia to Middle East, in the gas business, which is really exciting because we have to clean up both the electricity and the gas. Our business opportunity grew very significantly.
What we like, the CO2-free portfolio, the dynamic gas portfolio, strong global commodities business, strong performance also on the thermal side, across the business. Many good things. What I like to get more is more value add for Uniper and for Fortum, working more closely together, deeper, broader, broaden the activities to create value for everybody. On this platform, turn from providing things to the current market. In addition to that, also have focused growth. Really execute on the strategy that we communicated in the capital market day, grow in renewables, grow and increase in the clean gas, grow in the infrastructure and societal services, which we are actually doing at the moment. On the question, what extra benefits could there be? Like I said before, we are now a de facto group. We fully consolidate Uniper.
It's a segment of Fortum Group, and now we are working hand in hand together, of course, with the limitations of what two listed companies imposes on us. When we do things that benefit both Uniper and Fortum, and we carefully observe the value creation, I don't see many limitations that we would have in reality. Of course, there are costs of having two listed companies, or actually three, since there is also Unipro. Compared to the potential, these are rather small costs in the total picture of things.
Okay, thank you.
Thank you. If you do wish to ask a question, please press 01 on telephone keypad now. Our next question comes from line of Iiris Theman from Carnegie. Please go ahead, your line is open.
Hi. Thanks for taking my question. It is regarding new transmission capacity. I'm not sure if this has already been asked, but if I look at the power capacity increase in the Nordics this and next year, the next capacity increase looks to be higher than the annual interconnector capacity increase, and therefore, just looking at the capacity increase, it doesn't really support higher Nordic power price in the short term, perhaps in the long term as the demand seems to grow. The question is that how do you think the new interconnector capacity will impact both the Nordic and German prices in the short term? Thanks.
Yeah, I actually have to correct something I said earlier. The Norway-U.K. cable is actually in the end of this year, so then the interconnection increase is to dimension. Will change. It does make sense. If a spread to provide that flexibility and base load is through electricity transmission, in the long that can be good. For example, clean gases and transport them in some form, which is the transport.
Hello. Our next, Iiris Theman, do you want to follow up? I think I will give it to the next question, come from Wanda Serwinowska , Credit Suisse. Please go ahead, your line is open.
Hi, it's Wanda Serwinowska from Credit Suisse. Just one question, a follow-up on what where you are going to put your money, because is it EBITDA? Because if it's EBITDA, the only benefit from a higher share in Uniper, it's limited to cost-cutting and maybe a bit of synergies, but there is a bit of upside on the EPS. I'm just trying to understand what you look at, what your priorities are when you decide on the capital allocation. Thank you.
Yeah. Actually on that front, we have given very clear guidance in our capital market day last year, December. We said that in the next five years, our target is to spend around EUR 3 billion in growth CapEx. Around half of that, 50%-60% would go to renewables, and the rest would go to increasingly clean gas and infrastructure and industrial solutions. This actually is exactly where we are spending the CapEx money today and this year. This is roughly the picture of the capital allocation as we have it. Of course, at the same time, we are working all the time, be it Uniper individually, be it Fortum segments individually, to improve our competitiveness and profitability and efficiency. This is natural to keep up the competitiveness of our business.
If market conditions are good, if we are successful with our efficiency activities, the target there is to, over time, increase our capability to invest in growth and in the.
Because there is no upside or there is a limited EBITDA upside, but there is a quite substantial upside to your EPS. That's what how do you compare any growth CapEx, any CapEx, or any investment in Uniper?
The same would apply to other growth investments and Uniper payback for additional acquisition of Uniper shares. I think you're right in that there are multiple different indicators to look at. EBITDA comparable operating profit, net profit, EPS accretion, and then balance sheet. It's an evaluation of a multitude of different factors to look at in this case.
Thank you.
Thank you. We have no more questions from the line. I'll hand it back to our speakers.
Thank you, moderator, and thank you all for your questions. We seem to have one question on the chat, so I'll hand over to Måns now to ask that one.
Yes. Henry Steel from Odey Asset Management has two questions. One, with regards to in March, Fortum stated that the customary merger control clearance from Russian FAS could be expected within a few weeks, how is it taking so long? The second question is related to if Fortum would be interested in participating in the renewables of Vostok Oil Power Development. If so, would this be done together with RDIF or Rusnano?
Okay. Can you repeat the second question? I didn't quite get the beginning.
Yes. The second question is if Fortum would be interested in participating in the renewable segment of Vostok Oil Power Development, and if so, if we would partner up with Rusnano or RDIF.
With regards to finalizing the FAS approval with regards to the timeline or the authorities' decision-making process, that I don't have the ability to comment how long or why it takes as long as it takes. With regards to rest development in Russia overall, we have created a very strong platform in renewables, and we have participated in auctions in previous years with the Rusnano joint venture, and we have taken further steps with RDIF. With regards to what we would do going forward, that we would then come back to case by case if opportunities arise. We'll come back if there's something more to tell on that front.
Thank you.
Thank you so much. With this last question, this now concludes our webcast on the results. Thank you all for your participation here today. On behalf of Fortum, I wish you all a very nice rest of the day. Thank you.
Thank you.
Bye bye.