Fortum just held a sellside debrief call with the CFO after yesterday''s results. Whilst comments were based on the disclosures to the market yesterday, the discussion overall gave an even stronger impression that a DC PPA could be imminent, with discussion covering theoretical PPA structure, pricing, and disclosure frameworks. There was also a mention that shareholder return could be on the agenda. Whilst our numbers suggest a very big PPA would need to be signed at a high premium to justify the this week''s share price squeeze, we are seeing new bullish incoming from generalist US accounts in the last 24h, and, as we stated in our results reaction yesterday, we think the shares will continue to be tough to position against for the next three weeks ahead of the CMD.
Detailed notes and comments from the call below.
PPA comments:
. How to interpret CEO comments on yesterday''s call. CFO [roughly quoting]: ''If read the newspapers, there is clearly an increase in interest in the market from DC operators ... what makes it interesting is that time to market with permitting etc is quicker in the Nordics than in many other countries ... [but] there is only a PPA when it is signed. Discussions don''t necessarily mean a PPA is here. Very difficult to promise anything at the moment.'' Would it be plausible for a PPA to be signed in the next three weeks? ''can''t comment''.
. Price structure of long term PPAs. Currently the market is looking for 3-7 year PPAs, it could be that DC and industrial consumers on greenfield sites might need longer term PPAs for their own funding purposes. And then the profiling, 24/7 etc depends on the customer''s needs and impacts the pricing of the contract. Are looking at NPV of forward curve vs. the PPA. NPV comparison is vs. Fortum''s own power price forecast.
. How a PPA would be priced. CFO: would be done by comparing the NPV of the PPA price under negotiation vs. NPV of Fortum''s own expectations for how market forwards develop. Fortum...
