Energy company Fortum will report on Thursday an extremely ugly result for the first half of the year, due to the severe consequences of the Ukrainian war in the gas business of the subsidiary Uniper.
However, extremely high electricity prices are Fortum’s good padding in the energy crisis, he points out Interest capital strategist and analyst Juha Kinunen.
“Fortum’s core Nordic business faces record results over the next few years if the price of electricity remains extremely high,” he wrote in the research institute’s review.
In the Nordics, futures for 2023 are now hovering around EUR 190/MWh, while over the past ten years prices have typically been EUR 30-50/MWh, Kinnunen points out.
“Despite Fortum’s significant hedging, at these electricity prices the level of operating profit of the generation segment could rise to 2-3 billion euros in the next few years, while in a historical perspective the forecast of 1.2 billion for the current year is very high,” he estimates.
Inderes raised the operating profit forecast of the Generation segment for next year to 2.3 billion euros. Then the average electricity price reached would be 74 euros per megawatt hour.
In this case, the group’s operating profit next year will be around 1.58 billion euros, while this year Inderes expects a reported operating loss of no less than 12.6 billion euros due to Uniper’s losses.
Inderes also raised its 2024 forecasts for Fortum.
“Price sustainability is a mystery, but at these prices, Generation will do record results over the next few years. It is not yet clear how successful the fixing of price levels has been or will be, as the exchange in the derivatives market has shrunk significantly in some places,” Kinnunen reminds.
He adds that forecasts will come to life in the coming months, among other things, because the effects of a possible German stability package on Uniper are not yet clear.
On Tuesday afternoon, Fortum shares rose more than two percent to 10.68 euros. The stock has fallen about 60 percent this year.
Inderes has a “reduce” recommendation on the stock and a target price of €11.00.
Fortum, which is majority owned by the state, will announce its half-year report on Thursday at around 9am.