The financial targets were published in March 2023 and at the beginning of February 2024, Fortum's Board of Directors resolved on clarifications to Fortum’s strategy. Read the Stock Exchange Release: Fortum clarifies its strategic focus and targets in response to the changed operating environment
Strong financial foundation
- Stable credit rating of at least BBB.
- Leverage guidance: financial net debt/comparable EBITDA of 2.0-2.5 times in the longer term (2023: 0.5 times for continuing operations).
- Fortum's dividend policy is based on a payout ratio of 60-90% of comparable EPS . The payout ratio will be used so that the upper end of the range of the pay-out ratio is applied in situations with a strong balance sheet and low investments, while the lower end of the range would be applied with high leverage and/or significant investments and high capital expenditure. Dividend history is presented below.
Financial discipline
- Disciplined growth in clean energy. For the period of 2024–2026, Fortum’s capital expenditure is expected to be approximately EUR 1.7 billion (excluding acquisition) of which growth capital expenditure is expected to be EUR 800 million and annual maintenance capital expenditure EUR 300 million. Currently the uncommitted growth capital expenditure amounts to EUR 300 million.
- Hurdle rates for new investments of project WACC +150 bps to +400 bps hurdles depending on technology or investment project, as well as environmental targets.
How to reach the targets
Fortum is well-positioned to capture opportunities resulting from the energy transition. In the mid- to long-term, electricity is expected to continue to gain a significantly higher share of total energy consumption bringing decades of demand growth for the Nordics. Fortum will phase the implementation of its strategy to enable successful strategy execution and manage the market uncertainty and weaker investment sentiment. In the near term, a sharpened focus will be put on the core business to optimise the existing best-in-class operations, especially the generation portfolio, as well as manage business risks, for example to decrease the share of merchant exposure. Fortum continues to be prudent and disciplined in its capital allocation to maximise value creation from flexibility, efficiency, and cash flows. During this phase, Fortum prepares for future growth by developing a ready-to-build renewables pipeline. Furthermore, Fortum is investigating longer-term investments opportunities in new nuclear through its ongoing two-year feasibility study which is expected to be ready by the end of this year.
With these actions, Fortum will be prepared for growth longer term, which will be driven by decarbonisation through electrification of other sectors. With its already decarbonised production portfolio and hardly any fossil assets to replace, Fortum can partner and over time grow with industrial customers in clean energy while focusing on efficient capital allocation, attractive returns, balanced risk exposure, and sustainability.