Fortum Oyj's (OTC:FOJCF) CEO Pekka Lundmark on Q1 2016 Results - Earnings Call Transcript

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Fortum Oyj (OTC:FOJCF) Q1 2016 Earnings Conference Call April 28, 2016 9:00 AM ET

Executives

Sophie Jolly - Head of Investor Relations and Financial Communications

Pekka Lundmark - President and Chief Executive Officer

Timo Karttinen - Chief Financial Officer

Analysts

Artem Beletski - SEB

Emmanuel Turpin - Morgan Stanley

Peter Bisztyga - Bank of America

James Brand - Deutsche Bank

Mikko Ervasti - DNB Bank

Lueder Schumacher - Societe Generale

Sophie Jolly

Welcome everybody to Fortum's First Quarter 2016 Result Presentation. My name is Sophie Jolly and I am head of the Investor Relations and Financial Communications. With me here today are, CEO Pekka Lundmark and CFO, Timo Karttinen.

We will start by doing a presentation after which you will have time to do questions. We have approximately one hour time and then we will end by 5 o'clock Finnish time. But unfortunately, we are in a situation where Pekka is forbidden to talk and Timo will do the presentation this time. But I understood Pekka, that you wanted to say something before anyway, so please, Pekka?

Pekka Lundmark

Okay, thank you, Sophie. Dear investors, the reason I am not allowed to talk is that, I have a terrible flu and my doctor told me this morning that I am absolutely not allowed to talk in order to destroy my voice for the future. So that's why Timo has kindly agreed to do the presentation today. But just to show that that I partly disobey the doctor's order, I’d just say a couple of quick comments first on the result before Timo continues. I just want to say that, despite the low electricity prices, we are reasonably happy with the first quarter results. In these circumstances, I think it was a decent result and a lot is really happening.

We are not just waiting and hoping that there is - that the electricity prices would increase in the future. We are investing. We have launched a new strategy where one key theme is that we also want to find other revenue streams such are not only dependent on the Nordic wholesale price and some of these investments have already been launched during the first quarter.

During the quarter, we also completed the investment program in Russia, the one that was decided upon in already in 2008. So that one is now complete. But we also started several new initiatives.

We acquired an electricity sales and gas company in Poland. We announced or started wind projects of a project in Sweden and we also explained a little bit more detail what our strategy about solar power, especially in India is all about. We also launched a new operational model, new organization, that is targeted to be able to execute on the new strategy.

One key theme being to lift up and give enough visibility and freedom to maneuver for the new businesses and for the new innovations that we are developing including the ones that will have other revenue drivers than the Nordic wholesale price.

So what happened during the quarter? Once again, we are reasonably happy with the results, given the low electricity prices and now I would ask Timo to go through the result presentation and then, depending on my voice, I will also try to answer your questions at the end. But I am afraid that Timo will need to take a larger share than usual of those as well. Thank you very much.

Timo Karttinen

Thank you, Pekka. Good afternoon, everybody. Timo Karttinen here. I will kick-off with the presentation on the Page 3, our quarter one result numbers. Sales were down €50 million - €989 million all-in-all, the decrease was 50:50 split, you can say between the decrease of Ruble exchange rate and then the net decrease in the Power segment sales numbers.

Comparable EBITDA down roughly €40 million and that is explained by the reduction in the Power segment numbers. Operating profit was actually higher than last year, that's due to sales gains and then also due to the changes in fair values and the nuclear fund adjustments. I will come back to these items affecting comparability later on.

Comparable operating profit decline was all-in-all roughly €70 million and majority of that is explained by the decrease in Power segment and I will come back to the segment numbers also later in the presentation.

Earnings per share all-in-all were €0.37 during the quarter, compared to €0.33 last year’s same quarter. This quarter €0.37 included roughly €0.08 of these items affecting comparability in the earnings.

Net cash from operating activities was at the level of €375 million, there was roughly €140 million of decline and that decline is explained by lower comparable EBITDA, also, higher taxes paid in the cash flow, and then also lower realized foreign exchange gains and losses that are visible in the cash flow.

Then turning on to Page 4 and the summary of the first quarter. Really the biggest factor – the key factor influencing our business performance now and also during the latest quarter as you can say also during the couple of latest years is the low and what has been declining wholesale price of electricity in the Nordic area. Then when we look at the quarter one performance, we are glad to say that we had highest ever hydro volumes for quarter one during this year, 6.6 terawatt hours all-in-all.

Looking at the statistics, we then know that also other hydro producers had high volumes during the first quarter and that means that there was quite a lot of hydro in the system now as there was also a lot of hydro in the second half and during the summer of last year and that has been one of the factors – seasonal factors and local factors also pressing the spot prices down more than average hydro.

Now as we look at the Nordic market situation and the hydrological situation at the end of the first quarter, we are still a bit higher than normal in the hydro reservoirs, but then, on the other hand, the estimates we have available tell us that the snow content should be below normal. So, all-in-all, the Nordic hydro system should be fairly balanced as we go.

We had good availability in our nuclear during the first quarter. Our availability in the reactors, Finland and Sweden was 99% of the maximum during the quarter. Also very important highlight for us was that we finalized the multi-year investment program in Russia.

We completed, inaugurated and took into normal use the Chelyabinsk CHP power plant second unit, started to earn the CSA capacity payments from the 1st of March and that means that all the units there in the investment program are now ready and they are operational and also, we don't have any more provisions related to this investment program in our balance sheet after the first quarter.

We also continued to optimize our existing fleet as we do all the time, both in Russia and elsewhere and this time we sold the Tobolsk CHP plant that has the 665 million - megawatt of electrical capacity. We sold that to a local industrial operator in Tobolsk area. On the other hand also, as Pekka already mentioned, we acquired in Poland Duon electricity and gas retailer. So that's what – that is one example how we pursue and go forward with our strategy.

We launched our new vision, cornerstones and also updated our financial targets as we reported the whole year results in February. And this is an example, as said, of our strategy, developing our services and our products to our customers, acquisition of the sales company, Duon, in Poland. That is one of the leading independent providers of electricity and natural gas.

The Polish market is still dominated by the old incumbents, but as said, this is a good platform for us to enter there and to grow there, we have good capabilities here in the Nordic area in the electricity retail, and then on the other hand, we want to learn and we want to use our capabilities in the large and interesting Polish market.

The revenues for Duon for 2015 were roughly €200 million, EBITDA for 2015 was roughly €10 million, and we paid roughly €100 million for the Duon shares.

Then moving on to Page 6, market conditions in the first quarter in our operating areas, first, in the Nordic area, the power consumption was higher this year, 117 terawatt-hours, compared to 110 last year. This is partly explained by the colder weather, especially in January, but partly also in increase in the underlying consumption, especially in Norway and Sweden.

On the other hand, the system spot prices were lower on the level of €24, compared to €28 a year ago. So a significant drop, partly explained, as said, by the more than average hydro in the system during the first quarter, but, of course, partly also explained by the lower marginal cost of coal condense, both lowering coal price and lowering CO2 price, especially during the start of the quarter, now, at the end of the quarter and during April, we have of course seen already a bit pick-up both in coal prices and CO2 prices, as also the oil prices have rebounded somewhat from the lows that they made earlier in the year.

Then the area prices – so, the total price of the spot in those areas where we produce and where we sell both the system price component and the area price component, in Finland, average was €30.4. So, drop of roughly €2, compared to last year and in Sweden, the Sweden 3 or Stockholm area, which is the most important area for us for our Swedish production was €24.1 compared to €28.6. So, €4.5 drop year-on-year.

In Russia, the consumption was marginally up, fairly flat in our operating area 212 terawatt hours compared to 211 last year and then the spot price in Rubles in the Urals area was 3% lower this year, compared to last.

Then the next page, Page 7, more detailed about the Nordic water reservoirs. As we started the year, roughly 15 terawatt hours higher than average. We ended the quarter roughly 7 terawatt hours higher than the average, but, as said, the estimates we have indicate that there is less than average snow in the system.

So the system all-in-all should be fairly balanced as we go and this should, of course, also mean that the Nordic hydro production all-in-all should be normalizing. As you may remember this quarter, but also some quarters last year have been fairly high hydro production or very high hydro production in the system.

Then the page 8, Nordic power prices, both the history of the spot prices, system price, and then system forwards. Here we can see the price spike in January caused by the couple of weeks of cold weather, especially here in Finland and Sweden, also, shorter time in Norway.

But then when the temperatures rose again and actually February, March were already once again a bit over average. So also the spot prices declined. Also the forward prices have declined quite a lot if you look historically, but then also, on the other hand, during a couple of last weeks and months or so, there has been an uptick of couple of euros, compared to the lows that the forward prices made earlier in the year.

As I mentioned already earlier, so, the - as the hydrology situation has normalized, coal prices have improved somewhat and also CO2 prices have improved. So, these have all played in the changes in the forward prices.

Page 9 and the price development and also our achieved prices in our main areas. First on the left-hand side, the Nordic power prices once again, they are top-left corner, the spot price development decline of 15% or €4 quarter-on-quarter. Our achieved Nordic power price declined 19% from €37.7 to €30.7 this first quarter this year.

And once again, we produced quite a lot of hydro. So of course this marginal production – excess production or more production, so, that is sold to the spot and the spot prices were low, especially because there was a lot of hydro production. So, this affect more volume on lower prices, so this has then also been visible in our achieved power price.

On the right-hand side, we have the Russian spot prices, declining by 3% in Rubles. Top corner, there we can see the impact of the stagnant demand in Russia, because of the economic situation and then, also on the right bottom corner, our achieved prices in euros declined by €1 to €20.7 level.

There it's good to remember this of course, this number includes also the capacity payments that we receive and there it's good to remember that the first quarter last year, the average Ruble to Euro rate was 71, whereas first quarter this year, the average rate was roughly 81. So, of course, a lot of decline in the Ruble rate plays a part here in the declining Euro value of our achieved power price.

Then, moving forward to page 10, the segment operating profit numbers and differences between comparable and reported operating profit. First, the segment numbers, power and technology 153 compared to 203 last year. Heat, Electricity Sales and Solutions almost flat, 56 million compared to 58 last year. Russia declined from 79 to – declined from 97 to 79, but then as I come back on next page, so, underneath this decline is a lot of more provision releases last year, compared to this year and also, then the currency effect from the weakening Ruble. So I will come back to those later.

All-in-all, in our reported operating profit, we had €94 million of items affecting comparability, €44 million from sales gains and €50 million from these changes of fair value in our derivatives hedging and then also nuclear fund adjustments.

And then going to Page 11, the segment, waterfall comparison between the quarters last year and this year. As said the drop in power and technology, €50 million. We had 0.9 terawatt hours higher volumes, 0.4 terawatt hours more hydro and 0.5 terawatt hours more nuclear, but that wasn't by far enough to compensate the declining average price, the decline by €7. So, that explains the drop in the comparable operating profit.

Heat, Electricity Sales and Solutions, as said, fairly flat, compared to last year and Russia, minus 18, but in this minus 18, we had last year €29 million of CSA releases or provision releases. We had this year €2 million. So, that's €27 million difference and then also the weakening Russian Ruble meant that the Euro level of the profits was €11 million lower than would have been with the corresponding rate last year.

So, all-in-all, that's €38 million difference. So, the underlying Ruble level operating result, you can say, instead of €18 million lower would have been €20 million higher, taking these two things into consideration.

Then, turning to Page 12, and the income statement, let's look at the couple of items we haven't discussed already. First, share of profits of associates and joint ventures increasing to €67 million from €58 million.

Main contributors to the increase, Varme, joint venture with the City of Stockholm in Sweden, contributing by 44 instead of 38 and Hafslund in Norway, also contributing 14 instead of 8 last year. Our net financial expenses were also lower this year.

We had there a lower interest expense because we had lower average debt and also lower average interest cost, but then, also we had lower interest income, because we had less shareholder loans outstanding to our joint ventures and associates.

The income tax rate, directly according to the income statement was 15%, but when we exclude the non-taxable sales gains and profits from joint ventures and associates, the corresponding tax rate is a bit over 18%.

Then turning to Page 13 on cash flow statement, as said earlier, cash flow from operating activities in the continuing operations was €375 million. Then, cash used in investing activities, paid capital expenditures were €113 million and then these other investment activities, all-in-all, €310 million, that includes the Duon acquisition cost and then that also includes roughly €180 million cash collateral that we have deposited into NASDAQ Commodities Exchange.

Now, because of the changes in the European financial regulation, the NASDAQ Commodities is no longer accepting bank guarantees as collateral. So we need to put there, as all the other market participants need to put there, cash collateral instead and that number is now visible here this time in these other investment activities. So that means that the cash flow before financing activities, all-in-all was almost flat minus 4 during the quarter.

Then, moving forward to the – our debt portfolio, maturity profile, we have all-in-all €6 billion interest-bearing debt currently. Out of that, €750 million bonds – worth of bonds are maturing this year and actually they are maturing now during the second quarter. So, naturally, we pay them as we go during the quarter.

The average interest rate at the balance sheet date was 3.5%, declined from 3.7% at the start of the year. The external portfolio is consisting mainly of Euros and Swedish kronas. There the average interest cost is 2.4% and then, we have swept €677 million worth of this financing into Rubles with which we partly finance our Russian operations and that part of the financing with the cost for hedging the swaps – currency swaps is currently 12.7%.

Page 15, we continue to have a strong financial position. Our comparable EBITDA for continuing operations, €1.063 million last 12 months. Our interest-bearing net debt at the end of the first quarter more than €2.1 billion net cash, then it's good to remember that, during the April, so after the quarter-end, we have paid roughly €1 billion of dividends out of this net cash.

So, everything else equal, of course, that then impacts our net cash position. Comparable net debt-to-EBITDA at the quarter-end, minus 1.9 and as you remember, our target in a normal balance sheet situation would be to be around 2.5 with this ratio.

Return on capital employed including the sales gains impacts from the sales of the discontinued operations of the Swedish distribution grid last year 22.5 last twelve months there. Our target long-term over the cycle is to be 10 or above. Our liquid funds, all-in-all, totaled at the end of the quarter, once again €8.2 billion, and then on top of that, we have committed credit lines a bit more than €2 billion.

And then, moving on to the outlook, we continue to expect a slow, trend-wise increase in the consumption of electricity in our operating areas and also, we continue to expect that the electricity as an efficient form of energy usage will continue to gain share in the total energy consumption.

In Russia, we target to reach 18.2 billion Rubles operating profit level during 2017 or 2018. Our annual CapEx estimate for current year, €650 million excluding potential acquisitions but including, of course, the maintenance CapEx, approximately €300 million and €350 million.

Our hedging position at the end of first quarter, so for three quarters of 2016, roughly 60% hedged with the average hedge price of €30 and then, for next calendar year, roughly 30% hedged for roughly €28 per megawatt hour and for taxation, we continue to expect that the effective tax rate for the current year would be somewhere between 19% and 21%.

Sophie Jolly

Thank you, Timo. I think we will open for questions from the lines. Thank you.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from Artem Beletski with SEB. Please go ahead.

Artem Beletski

Yes, hi, this is Artem from SEB. Two quick ones from my side. So, first relating to Russia and CSA payments. So, there has been some upward revision relating to those ones due to higher applied bond rates. Could you maybe quantify roughly what kind of financial impact there will be out of it on annual basis? And maybe the other one is just a general question relating to your solar investments in India. Could you maybe talk about the levels of return on capital employed, what you are targeting there? And what is, so to say potential FX hedge what you are applying in to those investments?

Pekka Lundmark

If I take the second question and Timo will take the CSA impact. We have published our return on capital targets for the Group and we believe that the Indian solar, remembering the declining cost in technology, it is possible to achieve that type of returns in these projects. Of course, it can always vary a little bit between different sites and different projects, but the overall target is inline with the Group’s target.

Timo Karttinen

For the CSA, we haven't quantified the number, but it is true that the yearly revision of the cost of capital applied in the CSA payment got less. And so, in the early revision, the cost of capital has been increased. So, we are getting somewhat better capacity payments this year, compared to last, but we haven't quantified the amount.

Artem Beletski

All right. Thank you.

Sophie Jolly

Questions from the lines.

Operator

Our next question comes from Emmanuel Turpin with Morgan Stanley. Please go ahead.

Emmanuel Turpin

Good afternoon everyone. Got two questions please, relating to the same theme, which is reinvestment. Could you please give us an update on your recent developments and on ambitions in renewable power outside of hydro? I believe you've made some inroads and I would love a quick recap of what you decided, announced and also what would be your general ambitions there?

And as a follow-up, beyond just renewables, you have made some announcements, we've seen through the press, we've discussed some on this call acquiring Duon, there was an article recently about a project of waste to energy in the North of England and you've got solar in India.

For some of it, you've already paid for. Duon acquisition is paid for. For others, it's more in the future. I would love an idea of how much progress you've made on your investment. It should basically give us an idea of, if all these projects actually go to term, how much capital deployment would that represent and I guess it would be a deployment over the next few years. That would be an indicator of how busy and how successful you have been so far at making progress on redeploying capital. Thank you.

Pekka Lundmark

Okay. What we have – sorry – what we have said about renewables is that, that our target is one-gigawatt portfolio and the projects published so far are 65-megawatts in Sweden and 35-megawatts in Russia in wind. And in India, we have said that the capital we plan to invest there in India in solar will be between €200 million and €400 million. So that's what we have said so far about the allocation of capacity and capital into the one-gigawatt target in renewables. But obviously, this fulfills only a small part of the total. So there is definitely more to come. Then on the other investments, yes, Duon has been closed and cash-wise money paid, I guess…

Timo Karttinen

Roughly €100 million.

Pekka Lundmark

€100 million, yes and it has been paid as well, roughly €100 million. Then the other projects that you have mentioned, England, for example, we are studying several markets at the moment, and it's natural that when you are studying you participate in different types of requests for information in order to understand that what type of cases they are.

So they are neither firm binding bids or any other commitments regarding these projects. They will be published and in due course if and hopefully they will – they would be realized. In general, waste as a source of energy, recycling, adding value in that part of the overall energy chain is definitely something that is of interest to us.

We have such investments ongoing in the Nordics, in Baltics, and Poland and we have said that we will be looking to add a couple of more countries, most likely in Europe to that portfolio and we are also looking at some opportunities in certain cities in Asia to complete our portfolio.

Emmanuel Turpin

Thank you.

Sophie Jolly

We will continue with the lines.

Operator

Our next question comes from Peter Bisztyga with Merrill Lynch. Please go ahead.

Peter Bisztyga

Yes, good afternoon. Two questions please. Firstly, could you give us your perspective on the situation regarding the Swedish nuclear tax? We've obviously heard a lot of lobbying from the likes of Vattenfall to have the tax removed. But have you got any sort of sense whether there is any appetite from the Swedish Government to listen to this lobbying?

That's the first question and the second question, just a pretty simple one. Nuclear output was obviously very high in the first quarter. Could you just tell us if you've got any major maintenance outages – planned maintenance outages coming up over the course of the rest of the year? Thank you.

Pekka Lundmark

If I take the Swedish nuclear tax and Timo, if you take the – sorry – the planned potential outages, we are of course, of the same opinion with the Vattenfall and EON that in this type of market situation, the Swedish capacity tax on nuclear is completely counter-productive and it has made Swedish nuclear a loss-making business. At the same time, we at least believe – we at least belong to those people who are of the opinion that the Swedish Security of Supply and the Nordic Security of Supply will continue to need the capacity available from the six remaining reactors in Sweden after the already announced closures. So our opinion is that, something needs to be done and by far the best and most straightforward thing to be done would be the complete abolishment of the tax. So, this is our target and Vattenfall and EON have the same target. There has been – there have been recently certain signals in – also in public from the government that there seems to be growing understanding for the problem and there is this Energy Commission, Energikommissionen that is working in Sweden at the moment, which is across all political parties, trying to find a long-term solution for the Swedish regulatory environment. So, we are currently hopeful as to the understanding of the key decision-makers of the seriousness of the issue. It is not however, possible to estimate the likelihood of any decisions. We have said that the decision will be needed this year. Vattenfall has said the same. So this is not something that we can just sit and wait for a long time. We need the decision very soon.

Timo Karttinen

About the outages, can you still repeat, did you ask for a specific plants, or what’s the question, please?

Peter Bisztyga

Yes, the question was just, if you've got any major planned nuclear maintenance outages coming later in the year?

Timo Karttinen

Yes, the – all the major power plants in the Nordic area report and update all planned outages in the Nord Pool Spot pages and their lists and that is actually the first place where everybody is – has – it's mandated to report there. Typically, if you go and look at the history, so, of course, there is a yearly maintenance cycle for all the nuclear units, which is – I am not sure if it has already started here in Finland. No, it hasn't, but it's typically running from May then to at least August or if not September and that goes through both the Finnish units and the Swedish units where we are participating and where we are not. But, as said, that schedule is visible there at the Nord Pool site and there you can always see the most up-to-date information of everything that is known and planned.

Pekka Lundmark

And when you look at Nord Pool urgent market messages, you see there that the unit two in Ringhals, which has been out for maintenance for quite sometime will go back live on the 17 of September this year.

Peter Bisztyga

Right, thank you.

Sophie Jolly

Links are also found on our webpage. So you can go via there and have a look. We will continue with questions from the lines as long as we have them, so please.

Operator

Thank you. We will take our next question from James Brand with Deutsche Bank. Please go ahead.

James Brand

Hi, I have three questions. The first is just a follow-up from an early one, just on the return on capital that you are looking for from your Indian investments, I wasn't very clear of the answer there, because as far as I am aware, your target is for a long-term return on capital for the Group of 10%. So, just really will be helpful to get some guidance on what you are looking for from new investments and specifically in India, if you can answer that? And the second question is, well, two questions, follow-up questions on Russia. The first is that, you are guiding for the – to hit your target in 2017, 2018. Is there anything we should be aware of that you are expecting to boost your profits in 2017 and 2018 from this year's level, because, as far as I am aware, there wasn’t very much in terms of tariff rises coming through, but maybe your expectation is different from that, you’d see some tariff rises coming through or high gas prices. And thirdly, just in terms of the heat liberalization that you mentioned in your statement today coming through in 2020 or 2023, obviously, it's early days, but you've highlighted that as an opportunity for yourself in the past and I was just wondering whether you – there are any details that you could share with us, as to what that could mean for you? Thank you.

Pekka Lundmark

Thank you. The return on capital target is a Group-wide through the cycle type of target, and as of today, we have not published any more details as to what the target levels for the new investments would be for the different business areas.

That is a question that we, in one way or another plan to come back to at the Capital Market Day this fall. But I just said on a general level that that the investments we make including the one in India, are part of our plan to fulfill that Group target. But more specific than that, on an investment – per investment or country-by-country basis, I am unfortunately not able to be.

Then, Russia, we do not expect any new miracles to happen in order to be able to reach that target in 2017 or 2018. This includes a fairly conservative assumption on the gas price increases. The announced price increase for this year I think is 4.9%. We do not - in this target require it to be higher.

We do not need for this target, the heat reform to be implemented either. So, there is really nothing new. We have the new capacity now online and we have – we are receiving capacity payments from the 1st of March this year for the Chelyabinsk unit two, which is a key new contributor to the results. So, I believe that we are on the right path towards reaching that target.

Sophie Jolly

Maybe one comment to this, that the average gas price increase in 2016 is 4.9, but the gas prices always increase 1st of July in Russia. Last year, it was a bit above the 7% and this year it’s going to be 2%.

James Brand

And the expectations for – and it's probably too early days, but expectations for heat liberalization?

Pekka Lundmark

That's a plan that seems to be proceeding. But like in all countries, this is not only Russia, but these types of projects are complicated – have many dimensions and that's why it's very hard to give an estimate as to the probability happening in any specific year. But the latest developments are, in a way encouraging, I would call them that that there is progress. But there is still a lot to go – a lot to be done to be ready for the reform by 2020 or 2023.

James Brand

Great, thanks very much.

Sophie Jolly

Any more questions?

Operator

[Operator Instructions] So we will now move to Mikko Ervasti with DNB Bank. Please go ahead.

Mikko Ervasti

Yes, hi, good afternoon. My question is about the water reservoirs and your comments around that. So, you are saying that the levels have now normalized. But, for example, from your chart, when you look at that where the situation is right now and comparing that to the reference level and also last year's level, it seems that it's pretty much unchanged over these weeks of the 2016. So, could you please elaborate on that? Thank you.

Timo Karttinen

Yes, thanks for the question, certainly. So, as I think I said, so, the hydro reservoirs are still at the end of the first quarter or as we speak, they are somewhat higher than the hydro reservoir. But it's maybe the 6, 7 terawatt hours higher than the average. But then, on the other hand, the information we have available or the estimates we have available about the content of snow in the melting areas of the rivers and hydro reservoirs. So, the snow content is less than average.

So, then, the summer, both the reservoirs itself and the snow, so, that should be fairly according to the normal or average for the time of the year. So, in that context, for the whole both the hydro in the lakes and rivers and the snow, that should be close to normal.

Mikko Ervasti

Very clear. Thank you.

Operator

Our next question comes from Lueder Schumacher with Soc Gen. Please go ahead.

Lueder Schumacher

Good afternoon. Three very quick questions. The first one is on Duon. You say, you paid €100 million for that, can you just clarify if this is an enterprise value or if this is just equity and we should add debt to that? And you also described the company as a high-growth company.

I know, I appreciate it's not that big in the overall context, but what constitutes high growth in this context? Is it high single-digits, maybe even double-digit? And lastly, just on Swedish nuclear, you mentioned that a decision is needed this year. I was on the impression that Vattenfall was even pressing for a solution ahead of this summer.

Could it be that we could see news flow there over the next few months or is it really something that's likely to be – become more urgent as we go to Q3, Q4?

Pekka Lundmark

The timing for the decision, I mean, we agree with Vattenfall that it needs to be there as soon as possible. I am not 100% sure now what that each and everybody has said about the summer, because it's, we are already at the summer, but we have been talking about this year all the time and I think that's what has been at least said that this is not something that can wait for next year or anything.

It is an urgent issue. The reason why it is so urgent is not only because we are losing money with the current prices and taxes, but because there are investment decisions needed.

The certain safety upgrades which have been caused by the Fukushima accident will be required by the authorities and those decisions will need to be made very soon if they are to be implemented and obviously, we will not be in a position to be able to - or the operators are not be able in a position to make those decisions unless there is reason to believe that those investments will have a meaningful return.

Duon, it is enterprise value we are talking about €100 million roughly and high growth, I will not give you a number, but I can say that, we have a pretty high ambition level. This is a fairly small company. So percentages can be high. It is mostly currently working with small and medium-size business customers.

But we plan to use this platform to take our knowledge and learnings from the Nordic consumer markets as well and start building a platform for consumer electricity sales as we already have heat business in Poland.

We want to build consumer electricity sales business also and of course, when you start from very low levels, the percent shall be relative growth can be quite high. But we have not published any detailed growth target and as you correctly point out, we are talking about rather small numbers here in our overall context.

Lueder Schumacher

Thank you.

Operator

[Operator Instructions] It appears that we have no further question at this point on the phone.

Sophie Jolly

Thank you. If we have no further questions, I will thank you or we thank you for joining. Thank you for your questions. And we will be back with our Q2 results in July – 20th of July and do remember that we are reporting according to our new structure at that time for the first time.

So, thank you, ladies and gentlemen and on behalf of Fortum, Pekka, Timo, have a nice evening. Bye.

Pekka Lundmark

Thank you. Bye-bye.

Timo Karttinen

Thank you.

Operator

Ladies and gentlemen, that will conclude [Call Ends Abruptly]

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