* Q4 op. profit 587 mln euros vs 546 mln in poll
* Considers selling distribution unit
* Shares up over 4 pct
(Recasts with hedging details, valuation, comments from CEO and
By Terhi Kinnunen
HELSINKI, Jan 31 Finnish utility Fortum
reported a stronger-than-expected 16 percent rise in
quarterly operating profit due to an increase in demand for
power and successful hedging of electricity prices.
The company also said it may sell its distribution unit and
focus on improving profitability of its power and heating
Its fourth-quarter comparable operating profit rose to 587
million euros ($796.5 million), up 16 percent from the year-ago
quarter and beating the average forecast of 546 million euros in
a Reuters poll.
Nordic electricity prices were under pressure for most of
2012 as high water reservoir levels made hydro power cheaper.
But Fortum's hedging, mostly via forwards on the Nord Pool
power exchange, helped push the average power price it obtained
in the quarter to 46.8 euros per megawatt-hour from 45.2 euros a
"The volatility in Nordic power wholesale electricity prices
will continue, therefore hedging will be important," Fortum
Chief Executive Tapio Kuula told a news conference.
The utility has hedged 70 percent of its electricity volumes
for 2013 at 45 euros per MWh as it again seeks to counter
Fortum has been trying to improve profitability at a time of
weak economic growth, lower power prices and prolonged outages
at the Oskarshamn nuclear power plant in Sweden, which it partly
Its shares were 4.5 percent higher at 14.05 euros by 1313
The company launched a restructuring programme in October
that includes plans to sell around 500 million euros in assets
and cut capital spending by 250 million to 350 million euros.
Fortum said it would decide this year whether to sell its
distribution business, which owns and operates networks in
Finland, Sweden and Norway and has 1.6 million customers.
A sale would help the company by allowing it to focus on its
FIM analyst Sanna Kaje said the distribution unit would
probably fetch a higher valuation multiple than the multiple for
the entire group.
Fortum's ratio of enterprise value to EBITDA (earnings
before interest, taxes and depreciation) is at 8.8, higher than
multiples of around 5-6 for rivals such as Germany's E.ON
or Austrian hydro power firm Verbund.
Some analysts say continuing economic uncertainty and slow
growth in Europe might dent electricity demand. Political
setbacks in EU carbon trading are also raising concerns over
Fortum forecast demand in the Nordic countries to be roughly
flat in the coming years.
It proposed a dividend of 1.00 euro per share for 2012,
unchanged from a year earlier.
($1 = 0.7370 euros)
(editing by Jane Baird)