Fortum sees EUR 500 mln operating profit in Russia after 2014
MOSCOW. Sept 16 (Interfax) - Finnish energy concern Fortum, which runs the OAO (OJSC) Fortum generating company and a blocking stake in the TGK-1 genco, expects its Russia-based business to generate operating profit of more than EUR 500 million after 2014.
Fortum, the third biggest western investor in the Russian power industry after E.On and Enel, unveiled an updated strategy at a meeting with investors and analysts on Thursday. It said in a statement that OAO Fortum's committed investment program will increase its power capacity from the current approximately 2,800 MW to approximately 5,100 MW and is a key driver for solid earnings growth in Russia.
New capacity will bring income from new volumes sold and is expected to receive at least 3-4 times higher price in the capacity market than old capacity.
In light of the recovering post-crises demand and development of the Russian capacity market, Fortum has adjusted the schedule of the investment program and plans to commission the new units by the end of 2014. The commissioning of the first three units is now estimated to take place during the first half of 2011. The value of the remaining part of the program, calculated at the end of June 2010 exchange rates, is estimated to be EUR 1.7 billion from July 2010 onwards.
In the long term, Fortum's financial targets in Russia are dictated by basic economic logic: Fortum's return on invested capital needs to be higher that its cost of capital in Russia. In 2009, Fortum's weighted average cost of capital (WACC) in Russia was approximately 12%. Having completed the investment program, Fortum will have invested somewhat over EUR 4 billion into Russia by the end of 2014. Assuming an unchanged cost of capital, Fortum's comparable operating profit in Russia needs to be in excess of EUR 500 million shortly after the completion of the investment program.
OAO Fortum controls the Tyumen #1 and 2 CHP plants, Tobolsk CHP plant, Chelyabinsk #1, 2 and 3 CHP plants, Argayash CHP plant and Chelyabinsk GRES state district power plant.