* Underlying operating profit jumps
* Hedging levels limit profit
HELSINKI, Nov 12 (Reuters) - Finnish energy company Fortum
on Friday posted a bigger-than-expected rise in
underlying third-quarter operating profit, but extensive hedging
limited the windfall from rising energy prices.
Fortum's comparable operating profit rose to 260 million
euros ($298 million) from a loss of 179 million a year ago,
beating the 203 million expected by analysts in a
Nordic power prices are highly volatile and the high level
of hedging applied by the company's key Generation business,
which sells a large portion of its electricity output on forward
contracts, acted as a constraint on profits.
While spot prices surged, Generation's achieved
third-quarter power price rose only 18%, offset by the hedging
designed to lock in predictable revenues for the months ahead.
"The increased gas prices reflect a tight supply-demand
balance for the winter, but forward prices indicate gradually
normalizing conditions thereafter," Chief Executive Markus
Rauramo said in a statement.
For the remainder of the year, the Generation unit has sold
around 75% of its output at 34 euros per megawatt hour, only
around half the current market level of Nordic front-quarter
For 2022, Generation increased its hedging level to 65% from
60% previously, with the price of its contracts averaging 32
euros per megawatt hour, while Nordic front-year power contracts
currently trade at close to 40 euros.
"The outlook is slightly weaker in terms of hedging, I would
have expected Generation's hedge prices to be raised a bit
more," Inderes analyst Juha Kinnunen said, adding that he sees
the market remaining favorable for Fortum in the last three
months of the year.
Fortum's German subsidiary Uniper a week ago swung
to a comparable third-quarter operating profit of 9 million
euros from a loss of 310 million last year. The result was hit
though by 6.1 billion euros in negative fair value changes in
Majority owned by the Finnish government, Fortum last
December announced a new strategy, saying it aims to divest its
retail businesses and become carbon neutral by 2050.
The deadline prompted several environmental organizations to
urge the Finnish government to push for a faster exit from coal.
In April 2020, the world's largest asset manager Blackrock
which owns 0.97% of Fortum voted against the discharge
of the board because of the acquisition of coal-heavy Uniper.
During the third-quarter Fortum completed divesting its
Baltic district heating business and a 50% stake at Stockholm
Fortum's shares fell 2.8% to 25.62 euros by 1050 GMT.
($1 = 0.8739 euros)
(Reporting by Essi Lehto and Boleslaw Lasocki, editing by Terje
Solsvik, Elaine Hardcastle)