European Utilities Key Player Profiles: Fortum

Table of Contents

• CATALYST
• SUMMARY
• METHODOLOGY
• ANALYSIS
  • Key Player Scorecard examines 31 leading utilities drawn from across Europe' s competitive arenas
  • Key Players dominate power generation capacity market share in the Wmed competitive arena
  • Key Players dominate power generation output market share in the Wmed and CEE competitive arenas
  • Despite ongoing industry consolidation, in no competitive arenas do Key Players dominate power supply volume market share
  • Despite ongoing industry consolidation, in no competitive arenas do Key Players dominate gas volume market share
    • The Key Player Scorecard assesses utilities across four pillars: Performance, Scale, Growth and Exposure
      • The Performance pillar combines 5 financial metrics to measure business performance
      • The Scale pillar combines financial and operational metrics to measure the size of a utility
      • The Growth pillar measures the rate of growth of a utility' s financial and energy resources
      • The Exposure pillar combines both operational and financial measurements of risk
  • Fortum scores 37/100 on Datamonitor' s European Utility Scorecard and ranks 8 out of the 31 Key Players covered
  • Fortum' s scores vary widely across the four Scorecard pillars
    • Fortum achieves an overall ranking of 8, with a utility score of 37
    • Fortum' s overall ranking is buoyed by the utility' s above average scores in Performance and Exposure
    • Fortum outranks the Key Players in Performance, yet maintains a lower level of risk
    • Compared to the average Key Player, Fortum underperforms on both Scale and Growth
  • Fortum is the most profitable Key Player, contributing to a Performance ranking of 1
    • Fortum scores above the Key Player average on each Performance metric
    • Fortum has a top return on sales, yet is surpassed on return on fixed assets by several top ten utilities
    • Fortum has the top return on energy volume of all Key Players
  • Fortum is an average utility on Scale, ranking 15 on this pillar
    • Fortum significantly lags the Key Player average on gas supply volume
    • In generation capacity, Fortum ranks 14 with 11 GW
    • Fortum is effectively a power focused utility, with power volumes of 60 TWh compared to a gas volume of one TWh
    • Fortum has a negligible share of Key Player power customers
    • At 60 TWh, Fortum ranks 11 in terms of power volume
    • Fortum has less than one percent of Key Player gas customers
    • Fortum' s 1 TWh of gas supply volume translates into a 0.005% EU25 market share
    • Fortum ranks 21 in revenue and 11 in net income, respectively
  • Fortum' s bottom-ranked revenue growth pulls its Growth ranking down to 25
    • Fortum scores well above the Key Player average on profit and operating cash flow growth, but trails in the other Growth metrics
    • Fortum has an above average operating profit margin, yet a below average price earnings ratio
    • From 2001-2005, Fortum has had average annual profit growth of 20.4%, despite a sharp drop in annual revenue growth (-10.7%)
    • From 2004-2005, Fortum had operating cash flow growth of 13.8%, despite a decline in power supply volume growth of -37%
  • Fortum' s strong operating cash flow growth contributes to an above average Exposure rank of 8
    • Fortum scores below average on most Exposure metrics, yet ranks in the top half of Key Players on the overall pillar
    • Fortum has a short power and gas NTR of -16.2% and -100%, respectively
    • Fortum' s power supply volume obligations exceed its generation output, for a short power NTR of 9,772GW
    • Fortum has a debt to equity ratio of 74.1%
    • Fortum ranks 16 of the 31 Key Players in terms of debt leverage
    • Fortum' s operational cash flow has grown 13.8%, despite a drop in energy supply volume of -36.8%
  • Fortum' s business is focused on the Nordic competitive arena
    • Hydropower is Fortum' s main generation capacity fuel type
    • Sweden is Fortum' s most significant market for power sales
    • Fortum' s generation capacity is split between Finland and Sweden
    • Fortum has a negligible share of Key Player power customers
    • Fortum' s gas customers are located in Sweden
• APPENDIX
  • Definitions
  • Datamonitor Consulting
  • List of Tables
    • Table 1: The Key Players are drawn from across a diverse range of markets
    • Table 2: The Performance pillar combines 5 financial metrics to measure business performance
    • Table 3: The Scale pillar combines financial and operational metrics to measure the size of a utility
    • Table 4: The Growth pillar measures the rate of growth of a utility' s financial and energy resources
    • Table 5: The Exposure pillar combines both operational and financial measurements of risk
    • Table 6: Fortum scores 37/100 on Datamonitor' s European Utility Scorecard and ranks 8 out of the 31 Key Players covered
    • Table 7: Fortum scores 16.8/25 on the Performance pillar, and ranks 1 out of 31 on this measurement
    • Table 8: Fortum scores 2.5/25 on the Scale pillar, and ranks 15 out of 31 on this measurement
    • Table 9: Fortum scores 7.4/25 on the Growth pillar, and ranks 25 out of 31 on this measurement
    • Table 10: Fortum scores 10.3/25 on the Exposure pillar, and ranks 8 out of 31 on this measurement
    • Table 11: Fortum is the most profitable Key Player, contributing to a Performance ranking of 1
    • Table 12: Fortum is an average utility on Scale, ranking 15 on this pillar
    • Table 13: Fortum' s bottom-ranked revenue growth pulls its Growth ranking down to 25
    • Table 14: Fortum' s strong operating cash flow growth contributes to an above average Exposure rank of 8
    • Table 15: Return on fixed assets
    • Table 16: Return on sales
    • Table 17: Operating profit margin
    • Table 18: Return on energy volume
    • Table 19: Return on investment
    • Table 20: Generation Capacity / EU25 market total
    • Table 21: Power Supply Volume / EU25 market total
    • Table 22: Gas Supply Volume / EU25 market total
    • Table 23: Net income / Net income of 94 leading utilities
    • Table 24: Revenue / Revenue of 94 leading utilities
    • Table 25: Revenue growth, 2001-2005 CAGR
    • Table 26: Profit growth, 2001-2005 CAGR
    • Table 27: Growth in operating cash flow, 2004 to 2005
    • Table 28: Gas supply volume growth, 2004-2005
    • Table 29: Growth in power supply volume, 2004 to 2005
    • Table 30: Power NTR / Power supply volume
    • Table 31: Gas NTR / Gas supply volume
    • Table 32: Debt leverage
    • Table 33: Growth in operational cash flow - Growth in energy volume
  • List of Figures
    • Figure 1: Datamonitor' s Key Player Scorecard examines 31 leading utilities drawn from across Europe' s competitive arenas
    • Figure 2: Key Players dominate power generation capacity market share in the Wmed competitive arena
    • Figure 3: Key Players dominate power generation output market share in the Wmed and CEE competitive arenas
    • Figure 4: Despite ongoing industry consolidation, in no competitive arenas do Key Players dominate power supply volume market share
    • Figure 5: Despite ongoing industry consolidation, in no competitive arenas do Key Players dominate gas volume market share
    • Figure 6: Fortum achieves an overall ranking of 8, with a utility score of 37
    • Figure 7: Fortum' s overall ranking is buoyed by the utility' s above average scores in Performance and Exposure
    • Figure 8: Fortum outranks the Key Players in Performance, yet maintains a lower level of risk
    • Figure 9: Compared to the average Key Player, Fortum underperforms on both Scale and Growth
    • Figure 10: Fortum scores above the Key Player average on each Performance metric
    • Figure 11: Fortum has a top return on sales, yet is surpassed on return on fixed assets by several top ten utilities
    • Figure 12: Fortum has the top return on energy volume of all Key Players
    • Figure 13: Fortum significantly lags the Key Player average on gas supply volume
    • Figure 14: In generation capacity, Fortum ranks 14 with 11 GW
    • Figure 15: Fortum is effectively a power focused utility, with power volumes of 60 TWh compared to a gas volume of one TWh
    • Figure 16: Fortum has a negligible share of Key Player power customers
    • Figure 17: At 60 TWh, Fortum ranks 11 in terms of power volume
    • Figure 18: Fortum has less than one percent of Key Player gas customers
    • Figure 19: Fortum' s 1 TWh of gas supply volume translates into a 0.005% EU25 market share
    • Figure 20: Fortum ranks 21 in revenue and 11 in net income, respectively
    • Figure 21: Fortum scores well above the Key Player average on profit and operating cash flow growth, but trails in the other Growth metrics
    • Figure 22: Fortum has an above average operating profit margin, yet a below average price earnings ratio
    • Figure 23: From 2001-2005, Fortum has had average annual profit growth of 20.4%, despite a sharp drop in annual revenue growth (-10.7%)
    • Figure 24: From 2004-2005, Fortum had operating cash flow growth of 13.8%, despite a decline in power supply volume growth of -37%
    • Figure 25: Fortum scores below average on most Exposure metrics, yet ranks in the top half of Key Players on the overall pillar
    • Figure 26: Fortum has a short power and gas NTR of -16.2% and -100%, respectively
    • Figure 27: Fortum' s power supply volume obligations exceed its generation output, for a short power NTR of 9,772GW
    • Figure 28: Fortum has a debt to equity ratio of 74.1%
    • Figure 29: Fortum ranks 16 of the 31 Key Players in terms of debt leverage
    • Figure 30: Fortum' s operational cash flow has grown 13.8%, despite a drop in energy supply volume of -36.8%
    • Figure 31: Hydropower is Fortum' s main generation capacity fuel type
    • Figure 32: Sweden is Fortum' s most significant market for power sales
    • Figure 33: Fortum' s generation capacity is split between Finland and Sweden
    • Figure 34: Fortum has a negligible share of Key Player power customers
    • Figure 35: Fortum' s gas customers are located in Sweden