Fortum Oyj

The March 2023 strategy update stipulates capital expenditure (capex) investment of between €650 million and €500 in 2024. Maintenance capex is about €300 million, slightly below depreciation, which we expect at about €350 million-€400 million. We believe that Fortum's investment levels are below peers', also on a relative basis, and we see a risk of underinvestment that might dampen future growth. The Uniper and Russia investment-and-divestment sequence took a lot of management time and attention in recent years. Subsequently, Fortum might take a while to ramp up investments again due to the relative dearth of opportunities and project management shortfall rather than for financial reasons. Sustained underinvestment in the business over time could however undermine Fortum's competitive and overall business

...We expect supportive power prices will enable Fortum to deliver robust earnings in 2023 and 2024 , despite earnings volatility risk. We expect Fortum's EBITDA for 2023 will be about 2 billion, and about 1.7 billion-2.1 billion for 2024, thanks to supportive power prices. Over the first three quarters of 2023, the achieved power price stood at 65 per megawatt hour (/MWh), which is higher than the historical average, but (post hedges) we expect volatility to remain high. Fortum's generation portfolio represents about 95% of total EBITDA, which means the group has a high exposure to power prices. To mitigate this, Fortum has hedged 65% of its production in 2024 at 47/MWh. Unlike most rated peers in the '###' category, Fortum does not have any meaningful share of regulated earnings, nor any material long-term power price contracts in place, making its earnings potentially more volatile than peers like Vattenfall, CEZ, and Orsted, as those either are more integrated or have longer-term contracts...

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