Earnings Call: Q1 2021

May 12, 2021

Good morning, everyone, and welcome to Fortum's Vistad News Conference on our Q1 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 Raurama and our CFO, Bernhard Baader, who will present the Q1 figures go through the group performance. After the presentations, we will then open up for the questions, the teleconference. So with further due, I hand over to Thijs to start. Please go ahead. Thank you, Ingel, and good morning on my behalf, and welcome to our Q1 2021 results call. I will first go through the highlights and our performance this year and then hand over to Bernhard to walk 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 Prestea of all our segments was robust during the 3 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 probably. And also in Russia the demand has picked up. But first and foremost, we have moved in a very determined way ahead with our strategy execution. Together with Uniper. And change of course starts leadership. Both companies have since that made changes in the management and now we have a more diverse and pan European A second step on our joint path forward was this Monday's announcement on the 3 Gigantim cooperation areas that we introduced in December 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 1 100 and 80 Uniper employees, mainly in Sweden, will transfer to Fortum. Uniper would take the lead in Wind and Solar Business Development in Europe as well as the hydrogen businesses for the 2 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 in governance and cooperation within the three focus areas will contribute significant to the expected synergies that we have communicated before. A positive cash impact of approximately NOK 100,000,000 annually on a consolidated group basis. More than €50,000,000 of these annual benefits are estimated to be achieved by the end of 'twenty three and the full effect of approximately NOK 1,000,000 would reach be reached annually in 2025. So we are well on track with what we promised in December. In addition to that, I would also like that we are continuing our transformation, and we have disclosed divestments total €1,000,000,000 this year. Strategic reviews of our Polish district heating operations, the 50% stake in Stokz Sergi and Consumer Solutions are still ongoing. And we will update you on this if and when decisions have been made. Then moving over to financial performance. Looking at the Q1, all indicators are up whether it's earnings or cash flow. Interseason had its extremes this time and we could secure security of supply across the portfolios of our customer for our customers and we showed a portfolio optimization and strong quality in our operations. Both Fortum divisions and Uniperd in delivering above previous year's levels, making a really strong Q1. The strong increase in comparable operating profit with close to EUR 2,000,000,000 in Q1 was largely attributable to the full consolidation of Uniper. As in Q1 last year, Uniper was still accounted for as an associated comp. The comparable EPS gives a clearer year on year picture as here Uniper was included in both quarters. Comparable EPS is up 0 point 0 $3 per share with the contribution of NOK 0.54. But overall, The year on year effect is even more pronounced as you recall that in Q1 2020 was included in our associated results with 2 quarters, Q1 2020, but also Q4 2019. Consequently, it's clear Uniper delivered another extraordinary Q1 this time. And this shows that our Uniper acquisition has been beneficial for When it comes to operating cash flow, this was up in all segments. Now at over SEK 830,000,000 for the group, bringing also our leverage down to the targeted below 2 times comparable EBITDA. We are now at 9 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 We'll talk about now on this slide. This year here is the achieved Prices for our existing outright positions, but excluding the achieved prices for the 25 terawatt hours of our subsidiary Uniper. Fortum achieved prices in the Nordics are on the way up and compared to the volatility that we experienced over the last years, again on a very reasonable level. Spot has been coming up substantially lately into a region of above EUR 60 per megawatt tower as the supply situation is getting balanced. But we are still in a wetish scenario, reservoir levels above average. Bernhard will elaborate more on this in the divisional section. In regards to Russia, achieved prices have also been up as the market has been increasing. But in euro terms, we see a downward trend as the Russian ruble has weakened. Then 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 Uniti 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 volumes. But the weakness of the Russian global then is covering the improved performance picture And we are nearly flat year on year in euro terms in Russia division. But to sum this all up, I'm happy and satisfied with the performance across the group, segments improving year on year. Then I move over to our strategy execution. 1 of the key building blocks of our strategy is to transform our operations to go neutral and we are progressing well ahead of our initial plan. With regards to the coal exit, In April, the Wilhelmshaven 157 Megawatt Power Plant was awarded in the sector of the German hard call tender to exit commercial operation by December of this year. And this is 1 year earlier than initially planned following the early close of Heiden station at the end of last year. As I have communicated also before, our 900 Megawatt lignite powered power station, Skopow, 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 3rd largest CEO of EU 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 offtake positions 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. But our focus is also to be involved in the debate in regulation and incentivization of Hydrogen Projects. 1 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. Also the regulatory environment within the EU took several positive steps forward in the beginning of this year. Next to the tightening of the 2,030 climate target to a 55% reduction of greenhouse gas emissions and a goal of climate neutrality by 2025, the 1st 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 border 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. Majority as you can see, majority in this picture, 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, we're 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 a 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 derisk your portfolio in 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 center 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, and 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 and D, funding, stated rules, etcetera, 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 3,000,000,000 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 €700,000,000 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. Carrying on now with the financials. In Q1, we have made some changes to our reporting to better reflect 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 4 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 €1,500,000,000 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 €3,400,000,000 Comparable operating profit was better than previous year in all our segments, as Markus said. And as Uniper recorded an exceptionally from Q1 2021. Comparable operating profit totaled at €1,170,000,000 Comparable EPS for Q1 20202021 was already explained by Marcus. I would only highlight That the last 12 months number for EPS totaled €1.7 per share. We see also a strong cash flow, as Markus mentioned, of €800,000,000 for the quarter 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 2 times. So we are on a good track here. In Q1 2021, divestments were €146,000,000 That was Russian solar, small Nordic hydro and the remainder, respectively, second part of our SURFJARD Nordic Wind Portfolio. As Markus already said, with this, we have announced divestments of almost SEK 1,000,000,000 Closer at the performance of generation. Comparable operating profit has increased by 14%. The result improvement was also supported by the high achieved power price of €37.2 per megawatt hour 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 plus 100 24%. 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 terawatt hours to 14 terawatt hours during Q1. So 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, 20 to 'twenty three, 'twenty four 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 €42.1 per megawatt hour during the quarter, Which is almost 3 times last year's average price. However, 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. And 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 exchange effect of the change in the Russian ruble exchange rate was minus €21,000,000 And we had positive effects from €17,000,000 from the sale of the 160 Megawatt 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. 3 units were entering the 4 year period of higher CSA payments, whereas the CSA period ended for 2 units. That's the TUMAN CHP-one and the Chelyabinsk CHP-three. And 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 2 gigawatt within its renewables joint ventures in Russia. And 728 Megawatt under development. In 2020, 5 megawatt of new wind capacity, including 4 wind power plants in the Rostov region and 2 in the Kalmykja region started operations. Fortum also has 116 megawatt of solar capacity to be built as just mentioned before. A 78 megawatt of this capacity is expected to be commissioned in the Q4 of 2021 and the remaining part in the Q4 of City Solutions, as you know, had tough year in 2020 and was affected by both mild weather and low power prices, but also by COVID-nineteen. 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 Part of the solar capacity in Jaisalmer, in the Indian province of Rajasthan. The remaining 100 megawatt of the total 2 50 megawatt 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. Now on to our largest segment, Uniper. As a general comment, we can state the obvious. In Uniper's global commodity business, the Q1 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 United States. The European generation business benefited from the solid performance of the fossil fleet. Datten 4 in full operation, Irshink 4 and 5 being back on the market in Germany and better availability of Maersklaqe 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 Q1 to the Q4 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 Chaturkskaya and Yevinskaya power plants And the change in the Russian ruble exchange rate. Now moving on to debt and funding. Of some €600,000,000 mainly related to the strong cash flow, so the decrease in net financial debt. At the end of Q1 2021 and therefore well in our envisaged range of below 2 times. And it's good to keep in mind that the dividend of almost SEK1 billion was paid out in Q2 on the 7th 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 €500,000,000 bond maturing at the end of May this year. Our liquidity position is very good with liquid funds of Approximately €3,600,000,000 We have currently €9,900,000,000 of gross debt, and the average interest rate For the whole loan portfolio is 1.5% at the moment. So 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 €27 for the rest of 2021, 80% at €24 for 2022 and 35% at €21 for 2023. Regarding CapEx for 2021, we repeat what we have already communicated. Total group CapEx is estimated 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 in the ongoing 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 and A session. So we open up the Q and A session. Moderator, please go ahead. Thank you. Our first question comes from the line of Artem Belevsky from SEB. Please go ahead. Your line is open. Yes. Hi, this is Artem from ECB. Thank you for taking my questions. Actually, I have 3 to be asked. So first, starting with So 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 those last year, so CRO prices are now over €50 per ton. And actually, it seems to be the case that there has been quite limited impact on Nordic price. Could you maybe talk around this topic, while we haven't seen any bigger impacts what comes to Nordic markets. Then 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 where the current targets could be accelerated. And the last one is more technical related to Russia and CSA rate per megawatt. There has been some 11% growth In Q1 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 what comes to this year. Thank you. Thank you for the questions, Harte. Maybe I take the 2 first ones and Bernhard can take the third one. So the CO2 is a very important element in the short term marginal cost of coal ore and gas condensing, which continues to be the anchor for the pricing in the European system. Then 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. So the connection definitely remains, but it is subject to the market conditions. And this will continue to be the case. So there is buildup of renewables in Europe phasing out of huge amounts of capacity. So a lot of very cost effective capacity will go out. There is buildup of new renewable capacity in the Nordics, but 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. So 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. So now we are in Discussions with the employee representatives on the proposals how to go forward with 1 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. So we're starting to create the good platform to create value and capture the growth opportunities in these three areas. Then the third question, I leave for Bernhard. Yes. So 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. Yes. Broadly speaking, yes. So, yes. Okay. Very clear. Thank you for these answers. Thank you. Our next question comes from the line of Peter Bisztyga from Bank of America. Please go ahead. Your line is open. Yes. Good morning. Two questions from me. So and really both sort of clarifications on Where we are with the sort of bigger picture on Uniper. First one being that you've replaced executive Management now with your own people, the supervisory board is sort of controlled by you. So I'm a little bit confused why You've been maintaining the sort of position that you're going to wait until 2022 before considering putting in place a domination agreement. I'm not So I understand what the purpose of that sort of 2022 sort of timing is. So I was hoping you could sort of elaborate a little bit As to why that is. And then just taking you back at sort of 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 2 M and A target and that your number one target was to acquire 100% of Uniper. I'm wondering if sort of 2 years down the line whether anything sort of changed on that view and whether that is So you're sort of number one goal here. Thank you for the questions. So With regards to the 2022 timeline, this is what we communicated earlier. So 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. So this is an earlier commitment and we stand behind that. Having said that, you mentioned DPLTA or squeeze out, but There is no restriction for us to buy shares actually of Uniper. So we have not committed to not doing that. And 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 The 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. And 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 Defaktor Group. Like in many other jointly owned situations, there may be potential for increasing in ownership, But then that is both a commercial and 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, but it's a commercial question if and when we would increase our ownership. Okay. Thanks for that answer. Hi, good morning. Thanks for the presentation. Two questions for me. The first might be a 2 parter. So the first is just on the taxonomy rules and some of your comments on that. You I 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%? And what are the things we should be considering? Are there some of the Pump storage doesn't comply with the water framework directive. Is that the issue? And then I also noticed that you had nuclear It's green, I. E. Compliance, but I was under the impression that nuclear and gas still had some uncertainty over how they'd be So I'm curious why you included Nucura's Green. Is that because you expect it to ultimately decided to be compliant? That's the first one, a 2 parter. And then secondly, in terms of the combinations and Where you're aligning with Uniper in terms of managing different kind of business streams. I know it's just that there's no kind of Russian business stream there, I guess, wind could kind of extend maybe to Russia. Why is there nothing included on the Russian businesses. Thank you. So with regards to taxonomy, I think the starting point for us is that we are the 3rd largest CO2 free producer in Europe. And 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 there not be taxonomy aligned, the discussions are around Fishways, biodiversity, biota protection and so on. And there Then there is 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. So we have kept up with regulation all the time. But this is the area. Pump storage is a Small part of our very small part of our hydro portfolio. So 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 forum is that if that was not taxonomy airline then the taxonomy will have a big problem because then it contradicts I think with the EU's targets. And it just does not make sense to me. But like I said, the scientific Evaluation of nuclear was that it's not more harmful than other CO2 free production forms. And the safety requirements both The operations and spent fuel handling are very, very tight and well taken care of. So 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. So we actually tackled 3 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. So these were 3 ones where we identified a lot of value upfront. And 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 the line of Deepa Pankajthyswaran from Bernstein. Please go ahead. Your line is open. Thank you. I have three questions. So 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. So particularly, you've highlighted that you're Expecting OLK3 to commission in 2022. What do you see that as having the impact on the Finnish premium over the North Pole system price? And my third question is, does Uniper also lead the Russian wind and solar activities or would they be restricted to Continental Europe? And 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. So do you still see Russia as an attractive market for renewable investments? Thank you. Okay. Thank you for the very efficient and good questions. So I think in taxonomy and gas this really kind of boils down to the essence of the challenge we will face with taxonomy. So In our thinking gas plays a very important role in reaching the EU climate targets. So 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. That's what I Just technically that is that must be the case. So then the dilemma for EU is that okay, so How do we formulate the taxonomy around gas? Because 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. So 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 speakers and the flexibility that the system requires. Volklotto 3 impact because of course any power unit has to be UMM ed in the market. So The timetable is well known in the market and I would assume that the impact of Alkalote 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 lead by Uniper, the Russian wind 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. So now the thing is to really get The European 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 Rusnana and RDIF. So we were able to get critical mass of megawatts to actually incentivize Potential technology suppliers to localize their operations in Russia. And 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. And I think the whole CSA setup It's actually an example of a well functioning tariff system and a system that incentivize The type of capacities to come to market as a government has wanted. And Russia has kept up its promises And contractual commitments in a really, 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 rubles. So We understand that and observe that continuously. But 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. And the same is continuing this year. So Russia continues to be an interesting market for us And we have enormous capabilities there with 15 gigawatts of thermal production and now a 2 gigawatt renewable pipeline. From UBS. Please go ahead. Your line is open. Hi, there. Good morning, everybody, and thank you Thank you for a very good presentation, helpful Q and A this morning and very good results too of course. I have Look, I've got 2 questions. 1 probably markets you described as an efficient question. The other one is not very efficient, but I want to ask it anyway or at least try to. My efficient question is on carbon. You spoke about this before, but 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 Will 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 you're 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 mean, I think you could argue the status quo looks fine actually. It certainly doesn't seem burning platform. On the other hand, you've got this massive disposal plan and it looks like you've got probably another €5,000,000,000 or so coming in from that, which is And a way more cash than you need for the CapEx that you set out at the CMD last year. But 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 Sort of 5 years ago and everybody asking what you're going to do with the money. So 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 these results. So It's not only the market that makes it possible, but the equipment has to work, the trading Global Commodities, everything has to work. Risk management has to be in place. So our people have really I'm really, really proud of What our people have done, hydro availability, availability of our district heating plants, nuclear availability, Things worked and that kind of 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. So there's been enough disturbance to distract you from all of this, but our 20,000 people managed that. With regards to carbon price, Yes, I do expect that the carbon price will come true to the Nordic market and will impact the Nordic prices. Again, 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 The whatever area price we have is a function of the local demand supply conditions, transmission capacities, all of that. And 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? But 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 gigawatt new line from Norway to U. K. Was is now in place. There is 2 gigawatts more coming soon, increasing the transmission capacity from the Nordics to 13 gigawatts. And 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 2030 where we assume that because of technological development we start to see Synthetic hydrogen being competitive with fossil the fossil alternative. And 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. But we'll see how it goes. I think the connection is there. Then with regards to the Uniper question and Okay. If we were in that fortunate situation that things work out nicely and we have capital to invest, Then we have together now with Uniper worked and are working to create the platforms where we can deploy capital, renewables growth, 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. And like I said, It's then a question of, okay, what is the what are the commercial elements around it and or other structural issues. So What else then 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? So from my point of view it's an investment along with investment opportunity along with others. And I go back to Fortum history. So we have had minority and majority positions in various setups for very long periods of time. So 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. And 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. So we are conscious of this. It's a trade off. Very helpful. Thank you. Thank you, Markus. I couldn't 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 the line of Pasi Vazenam from Nordea. Please go ahead. Your line is open. Thanks. This is Pasi from Nordea. I have 3 issues related to sustainability. And as already highlighted, You have listed hydropower as a taxonomic aligned asset in your presentation. So my understanding is that you do not Have a piece of pathways around the dams as already stated in the taxonomy. So are you going actually to make these investments to get the green stamp Secondly, you have listed offshore wind under the taxonomy light assets. So are you actually going to invest to the offshore wind also regardless, it's actually not included in your strategy? And lastly, Well, would it kind of make sense to immediately sell all coal related power plants? Because As we have seen, that actually is burdened your kind of valuation multiples and coal is giving a negative image kind of on financial markets currently, but these three ones. Thanks. Okay. So with regards to hydropower, we are actually investing in biodiversity, fish waste Improvements into the environmental performance, large amounts of money every year. And one part of that is that Sweden actually put in place the very large fund, which then creates funding up to SEK 1,000,000,000 which will then fund this investment. So We're actually doing this so fish waste 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 and it's a question of finding the balance and really understanding that where do we get A, how much money should be spent? What is the competitiveness? How can we provide the flexibility and base load that the system needs and 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. So we are also Breeding 100 of 1000 of fishlings per year and planting them into the rivers. So 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, but our understanding is that that would be taxonomy aligned. Then 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 call left in our portfolio. We have the German Coal, which now largely actually is exited already on an accelerated basis. So we know that Heiden Willemshaven, Skopow out. We have Shellven Datten left after that. So very, very little. 2 gigawatts in the U. K. Out in 2025 latest and then Netherlands will phase out in end of 2029. So basically we cover the whole gold portfolio with that Plus then the decarbonization of our operations in Espoo. After that we would have the Russian operations, Argoias Berezovskyyan and 1 unit in Chelyabinsk left. So Aruba total portfolio call 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 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. So when you take these 700, 801 Megawatt, 1 gigawatt units away you will leave a big void into the energy system. So 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 can who have operated very expensive and technically demanding equipment for decades. So 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. Thank you. Our next question comes from the line of Piotr Zdrojkovskiy from Citi. Please go ahead. Your line is open. Hi, good morning everybody. It's Piotr Ginni from Citi. I have two questions please. So first one, I'd like to ask you about Uniper because you stressed That it's a good investment for you. But is there anything you don't like in this company? You'd like to change more quicker? I mean, we've seen the Recent management team change there. So what are you actually hoping to get done with this new management team. And secondly, on the potential acquisition of Uniperf Hardershares, 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. So 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, strong presence, Long history, great relations with the surrounding society and fantastic people in the organization. So this is a platform we really, really want to build on and utilize. We are in much bigger markets than we were before. And 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. So our business opportunity grew very significantly. So 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, many good things. What I'd like to get more is more value add for Uniper and for Fortum working close more closely together, Deeper, broader broaden the activities to create value for everybody. And then on this platform turn from providing things to the current market In addition to that also have focused growth. So really execute on the strategy that we communicated in the Capital Market Day growing renewables, Growing increasingly clean gas, growing 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 to listed companies imposes on us. But 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 2 listed companies or actually 3 Since there is also Unipro. But compared to the potential these are rather Rather small cost in the total picture of things. And then back to Okay. Thank you. Thank you. Our next question comes from the line of Iris Thiemann from Carnegie. Please go ahead. Your line is open. Hi. Thanks for taking my question. It is regarding new transmission Power capacity increase in the Nordics this 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. So the question is that how do you think the new interconnector capacity will impact to both the Nordic and German prices in the short term. Thanks. Yes. I So I have to correct something I said earlier. So the Norway U. K. Cable It's actually in the end of this year. So then the interconnection increase in the next 2 dimension It does make sense. If a spread to provide that flexibility and base load is through electricity transmission in the long that can the good For example, clean gases and transport them in some form with the transport. Hello. So our next Eirish, do you want to follow-up? From Hi. It's Vanda Selinekskaya from Credit Suisse. Just one question, a follow-up on which I got you well where you are going to put your money because if it's EBITDA, because if it's EBITDA, the only benefit from a higher share in Uniper, it's limited So cost cutting and maybe a bit of synergies, but there is a bit of upside on the EPS. So I'm just trying to understand what you look at, what are your priorities are when you of the capital allocation. Thank you. Yes. So we actually on that front we have Given Very clear guidance in our Capital Market Day last year December. So we said that in the next 5 years, our target is to Spend around SEK 3,000,000,000 in growth CapEx and half of that around half of that 50%, 60% would go to renewables And then the rest would go to increasingly clean gas and infrastructure and industrial solutions. And this actually is exactly where we are spending the CapEx money today and this year. So this is roughly the picture of the capital allocation as we have it. Then 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. And 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 EBITDA upside or there is a limited EBITDA upside, but there is Quite substantial upside to your EPS. So that's what I mean. How do you quantify any growth CapEx But the same would apply to for additional acquisition of Uniper shares. And I think you're right in that there are multiple Different indicators to look at EBITDA Comparable I think Profit Net Profit EPS Accretion and then balance So it's an evaluation of a multitude of different factors to look at in this Thank you. We have no more questions from them. I'll hand it back to our speakers. Thank you, moderator, and thank you all for your questions. We seem to have a few questions one question in the chat. So I'll hand over to Mans now to ask that one. Yes. So Henry Steele from OOD Asset Management has two questions. 1 with regards in March, Fortum stated that the customer emerge control clearance for from Russian Fast that would be expected within a few weeks. And how is it taking so long? And then the second question is related to Did Fortum would be interested in participating in the renewals of Vostok Oil Power Development? And if so, would this Together with RDIF or Usnano. Okay. Can you repeat the second question? I didn't quite get the beginning. Yes. So the second question is if Fortum would be interested in participating in the Renewables segment of Vostok Oil Power Development. And if so, if we would partner up with Ruznan or RDIF. With regards to the to finalizing the FAS approval with regards to the time line or the authorities' decision making process that I 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 R Usenor 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. So we'll come back if there's something more to tell on that front. Thank you. Thank you so much. So with this last question, this now concludes our webcast on the results. Thank you all for your participation here today. And on behalf of Fortum, I wish you all a very nice rest of the day. Thank you. Thank you.