fortum · investor / analyst material july 2015 . 2 disclaimer this presentation does not...

FORTUM

Power and heat company in the Nordic area, Russia and the Baltics – Highly committed to sustainability

Investor / Analyst material

July 2015

2

Disclaimer

This presentation does not constitute an invitation to underwrite, subscribe for,

or otherwise acquire or dispose of any Fortum shares.

Past performance is no guide to future performance, and persons needing

advice should consult an independent financial adviser.

Fortum today pages 4 – 16

European and Nordic power markets pages 17 – 24

Fortum’s nuclear fleet pages 25 – 28

Russia pages 29 – 31

Fortum’s investment programme page 31

Historical achieved prices page 32

Q1 2015 pages 33 – 56

Financials and outlook pages 44 – 56

Content

3

Appr. 116,000 shareholders

• Power and heat company in the Nordic countries, Russia, Poland and the Baltics

• Listed at the Helsinki Stock Exchange since 1998

• Among the most traded shares on the Nasdaq Helsinki stock exchange

• Market cap ~15 billion euros

4

30 June 2015

Foreign investors 30.4% Finnish State 50.8%

Other Finnish investors 7.7%

Finnish households 9.0%

Financial and insurance institutions 2.1%

Capital returns: 2014 EUR 1.30 per share ~ EUR 1.2 billion

• Fortum’s dividend policy is based on the following preconditions:

– The dividend policy ensures that shareholders receive a fair remuneration for their entrusted capital,

supported by the company’s long-term strategy that aims at increasing earnings per share and

thereby the dividend.

– When proposing the dividend, the Board of Directors looks at a range of factors, including the macro

environment, balance sheet strength as well as future investment plans.

5

Fortum's target is to pay a stable,

sustainable and over time increasing

dividend of 50-80% of earnings per share

excluding one-off items

Fortum has since 1998 annually paid dividends

in total ~11,648 MEUR

2010

68%

2011

50% 2012

63%

2013

81%

2014

37%

1.0 1.0 1.0 1.1

1.3*

5 year dividend per share (EUR) history

0.2

1.1

*Dividend of EUR 1.10 per share, and in addition an extra dividend EUR 0.20 per share for 2014.

Our strategic route

6

Birka Energi

50% → 100%

Gullspång

Neste

Divestment of

non-strategic

heat business

2007

Skandinaviska

Elverk

Länsivoima

45% → 65%

Birka Energi

50% Fortum

50% Stockholm Gullspång merged

with Stockholm Energi

TGC-10 Divestment of

Fingrid shares

Divestment of

heat operations

outside of

Stockholm

Divestment

of Lenenergo shares

1996

IVO Fortum

Divestment of

small scale

hydro

2012 2008 2015

1997

Lenenergo

shares →

Stora Kraft

Länsivoima

→100%

2000

Elnova

50% → 100%

Østfold

Shares in

Lenenergo

Shares in

Hafslund

District heating

in Poland →

2003

Oil business

spin-off

TGC-1

established

2005

2011

1998 2002

Divestment of electricity

distribution and heat

businesses

Divestment of electricity

distribution business

Divestment of

Grangemouth power plant

Divestment

of Gasum

shares

2014

2006

E.ON

Finland

Divestment of

electricity

distribution

business

http://en.wikipedia.org/wiki/File:Union_flag_1606_(Kings_Colors).svg

Fortum’s Mission and Strategy

7

Strategy

Fortum’s purpose is to create energy that improves life for present and future

generations. We provide sustainable solutions for society and deliver excellent

value to our shareholders.

Mission

Build on the strong

Nordic core

Create solid earnings

growth in Russia

Build a platform for

future growth

Strong competence in CO2-free hydro and nuclear, efficient CHP production and

energy markets

Fortum’s reporting segments and divisions

8

Russia

• Power and heat generation

and sales in Russia

• Includes OAO Fortum and

Fortum’s slightly over 29%

holding in TGC-1

Power and Technology

• Hydro, nuclear and thermal

power generation

• Power Solutions with expert

services

• Portfolio management and

trading

• Technology and R&D functions

The segment incorporates two

business divisions:

• Hydro Power and Technology

• Nuclear and Thermal Power

Heat, Electricity Sales

and Solutions

• Combined heat and power

(CHP) production

• District heating activities and

business to business heating

solutions

• Solar business

• Electricity sales and related

customer offering

• Corporate Sustainability

Our current geographical presence

9

Nordic countries

Power generation 48.0 TWh

Heat sales 3.3 TWh

Electricity customers 1.3 million

Power

generation

Electricity

sales

Heat

OAO Fortum

Power generation 23.3 TWh

Heat sales 26.0 TWh

Russia

Poland Power generation 0.7 TWh

Heat sales 3.4 TWh

Baltic countries Power generation 0.7 TWh

Heat sales 1.2 TWh

India Power generation 9 GWh

Key figures 2014 Sales EUR 4.1 bn

Comparable operating profit EUR 1.1 bn

Balance sheet EUR 21 bn

Personnel 8,200

10

Fortum mid-sized European power generation player; major producer in global heat

1) Formerly GDF SUEZ; 2) Veolia incl. Dalkia International and EDF incl. Dalkia's activities in France

Source: Company information, Fortum analyses, 2013 figures pro forma, heat production of Beijing DH not available.

Largest global producers, 2013 TWh

Largest producers in Europe and Russia, 2013 TWh

Power generation Heat production

Electricity customers in EU, 2013 Millions

Customers

Gazprom

DEI

EuroSibEnergo Iberdrola

Fortum EnBW

Vattenfall

CEZ

RWE

IES

DTEK

PGE

Rosenergoatom

NNEGC Energoat.

Enel E.ON EDF

1) ENGIE

Statkraft

Inter RAO UES RusHydro

EDP

0 100 200 300 400 500 600

1) ENGIE

DEI

CEZ

Enel

Centrica

EDP

Iberdrola

SSE

EnBW

Fortum

EDF

E.ON

RWE

Gas Natural Fenosa

PGE Tauron

Hafslund

Dong Energy

0 20 40 10 30

Vattenfall

0 20 40 60 80 100 120 140

KDHC

Quadra

Tatenergo

Minskenergo

DTEK

EuroSibEnergo

TGC-2

Fortum

Dong Energy

Enel

Lukoil

Sibgenco

IES

Vattenfall

PGNiG

Inter RAO UES

2) EDF

RusHydro

2 ) Veolia

Gazprom

Fortum Värme

Biggest nuclear and hydro generators in Europe and Russia

11

Figures 2012 pro forma

* incl. MOEK, ** incl. Bashkirenergo, *** incl. TGC-5, TGC-6, TGC-7, TGC-9

TWh

Total generation

0

50

100

150

200

250

300

350

400

450

500

550

600

ED

F

Ro

sen

erg

oa

tom

NN

EG

C E

nerg

oato

m

Ru

sH

ydro

Vatt

enfa

ll

E.O

N

Enel

Euro

Sib

Energ

o

GD

F S

UE

Z

Sta

tkra

ft

Fo

rtum

Iberd

rola

RW

E

EnB

W

CE

Z

Axpo

Verb

und

Gazpro

m

Hid

roele

ctr

ica

Centr

ica

Alp

iq

E-C

O E

nerg

i

Ukrh

ydro

energ

o

Nors

k H

ydro

EP

S, S

erb

ia

BK

K

Agder

Energ

i

ED

P

Ga

s N

atu

ral F

en

osa

DE

I

SS

E

Inte

r R

AO

UE

S

PG

E

DT

EK

IES

Other

Nuclear

Hydro

*

***

**

12

Fortum in the Nordic electricity value chain

Power generation

Nordic wholesale market

Power exchange and

bilateral agreements

Large customers

Retail customers

Private customers, small businesses

Fortum's power and heat production by source

13

Natural gas 31%

Nuclear power

33%

Coal 5%

Biomass 1%

Total generation 73.4 TWh

(Generation capacity 14,624 MW)

Hydro power 30%

Fortum's power generation

in 2014

Total production 34.6 TWh

(Production capacity 17,402 MW)

Fortum's heat production

in 2014

Peat 1% Waste 1%

Biomass 6%

Natural gas

77%

Coal 15%

Nuclear power

48%

Coal 4%

Hydro power 44%

Natural gas 2%

European generation 50.1TWh

(Generation capacity 9,851 MW)

Fortum's European

power generation in 2014

Biomass 2%

Natural gas

29%

Fortum's European

heat production in 2014

Peat 3%

Oil 1%

Waste 3%

Biomass 25%

Heat pumps, electricity 1%

Coal 38%

European production 8.2 TWh

(Production capacity 3,936 MW)

Fortum's European power and heat production

14

Fortum a forerunner in sustainability

We are highly committed to sustainability. Our purpose is to create energy

that improves life for present and future generations.

We provide sustainable solutions for society while delivering excellent value

to our shareholders. We want to act responsibly, both in the short term and

long term.

Fortum is listed in several sustainability indexes:

• Nordic Climate Disclosure Leadership Index (CDLI)

• STOXX® Global ESG Leaders indices

• oekom

• OMX GES Sustainability Finland Index

• ECPI® Indices

15

Emissions-free production is Fortum’s strategic choice

0

200

400

600

800

1 000

1 200

DE

I

RW

E

Dra

x

SS

E

CE

Z

E.O

N

Vatt

en

fall

ED

P

Enel

Edip

ow

er

EnB

W

Gas N

atu

ral F

enosa

GD

F S

UE

Z

Do

ng

En

erg

y

Fo

rtu

m to

tal

Iberd

rola

PV

O

ED

F

Verb

und

Fort

um

EU

Sta

tkra

ft

64

g CO2/kWh electricity, 2013

2014

64% of Fortum's total power generation CO2-free

94% of Fortum’s power generation in the EU CO2-free

Close to 100% of the ongoing investment programme

in the EU is CO2-free.

Average 328 g/kWh

200

Fortum's carbon exposure among the lowest in Europe

16

Note: : Fortum’s specific emissions of the power generation in 2014 in the EU were 39 g/kWh and in total 177 g/kWh.

Only European generation except “Fortum total“ which includes Russia.

Source:

PWC & Enerpresse, December 2014

Climate Change and Electricity, Fortum

Carbon market gradually tightening

Political decisions strengthening the EU

Emissions Trading System

Decision on the 2030 greenhouse gas

reduction target

Backloading decision, implementation started

in 2014

Market Stability Reserve (MSR), adoption

expected during summer 2015, to be

operational 2019

Upcoming review of Emissions Trading

System Directive

Robust and rebalanced EU carbon market

foreseen by early 2020’s

Current oversupply to halve early 2020’s and

gradually cease towards 2030

Gradual appreciation of allowance price.

17

EU ETS = European Union Emissions Trading System

EUA = allowance in the EU ETS

Source: Thomson Reuters Point Carbon

Market coupling milestones - cross-border power flows optimised by power exchanges

• Market coupling between NL, BE and FR since 2006

• Germany – Nord Pool Spot coupling started 11/2009

• Market coupling for Central Western Europe (DE, FR, NL, BE) since 11/2010 with a continued coupling with Nord Pool Spot

• NorNed cable (NO-NL) included in January 2011.

• Poland coupled with Nord Pool Spot since December 2010

• UK coupling started through BritNed cable in April 2011

• Estonian price area in Nord Pool Spot since 2010 and Lithuanian area since 6/2012. Latvia joined in June 2013

• Czech, Slovakia and Hungary coupled together since September 2012. Romania joined in November 2014

• A common day-ahead market coupling for the whole north-western Europe was started in February 2014. Iberia (Spain & Portugal) joined in May 2014. Italy and Slovenia joined in February 2015

• Flow-based cross-border capacity allocation for further trade optimisation taken into use in May 2015 for the CWE region

• CEE (Central Eastern Europe) market coupling region to join in 2016. Switzerland waiting for agreement with the EU

• In addition to day-ahead coupling, intraday market coupling and balancing market integration under development as well

18

2009

2/2015

2012-2014

2010-

2013

2016

2014

Current transmission capacity from Nordic area is over 5,000 MW

19

• Theoretical maximum in transmission capacity

~40 TWh per annum

• Net export from Nordic area to Continental Europe and

Estonia during year 2014 was 13 TWh

• During the dry year 2013 net export was 3 TWh

• Approximately 25 TWh of net export is now reachable

Countries Transmission capacity MW

From Nordics To Nordics

Denmark - Germany 2,225 2,100

Sweden - Germany 615 600

Sweden - Poland 600 600

Norway - Netherlands 700 700

Finland - Estonia 1000 1,016

Finland - Russia 320 1,300

Total 5,460 6,316

700

2,225 615 600

1,000

320

Nordic, Baltic, Continental and UK markets are integrating – interconnection capacity will double by 2021

20

Two 1400 MW NO-UK links as EU

Projects of Common Interest: NSN

link to England agreed to be ready

in 2021, NorthConnect to Scotland

still requiring Norwegian permission

First direct 1,400 MW NO-DE link

contracted to be built by end-2019

EU financial support for a 700 MW

DK-NL link, due to be built by 2019

Jutland – DE capacity planned to

grow by 860 MW by 2020, with

further 500 MW increase by 2022

Svenska Kraftnät agreed 3/2014

with 50Hertz to study a new Hansa

PowerBridge DC link between

Sweden and Germany

The Northern Seas Offshore Grid and the Baltic

Energy Market Integration Plan are included as

priority electricity corridors in EU’s Infrastructure

Guidelines, approved in April 2013

New interconnections will

double the export capacity

to over 10,000 MW by 2021

LitPol Link (500+500 MW) to

connect the Baltic market to

Poland by end-2015/20. It will open

a new transmission route from the

Nordic market to the Continent

EU’s European Energy Programme

for Recovery co-financing 700 MW

NordBalt (ready 12/2015)

New internal Nordic grid

investments provide for increased

available capacity for export to the

Continent and Baltics

EU’s Connecting Europe Facility

co-financing 3rd EE-LV transmission

line, due to be ready by 2020

New 400 MW Zealand-DE

connection through Kriegers Flak

offshore wind area with DC station

in DE planned to be built by 2019

New interconnectors

New Nordic lines

Existing interconnectors

Nordic year forwards

21

Source: Nasdaq Commodities

0

10

20

30

40

50

60

70

€/MWh 15 July 2015

Year15 Year17 Year19 Year10 Year11 Year12 Year13 Year14 Year16 Year18 Year20

2014

Q1

2008

Q2 Q3 Q4 Q1

2009

Q2 Q3 Q4 Q1

2010

Q2 Q3 Q4 Q1

2011

Q2 Q3 Q4 Q1

2012

Q2 Q3 Q4 Q1

2013

Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015

Q1 Q2 Q3

Wholesale prices for electricity

22

Source: Nord Pool Spot, Nasdaq Commodities, APX-ENDEX, Bloomberg Finance LP, ATS, NP “Market Council”, Fortum

* Including weighted average capacity price

Dutch

German

Nordic

Russian*

Spot prices Forward prices EUR/MWh

10

20

30

40

50

60

70

80

90

100

110

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

15 July 2015

Nordic power generation – dominated by hydro, but fossil needed

23

Source: ENTSO-E Statistical Factsheet 2014 *) Normal annual Nordic hydro generation 200 TWh, variation +/- 40 TWh.

0

20

40

60

80

100

120

140

160

Denmark Norway Sweden Finland

Fossil fuels

Nuclear

Biomass

Solar

Wind

Hydro *

TWh/a

Total Nordic generation

390 TWh in 2014

Net export in 2014: 10 TWh

23

85

TWh %

39

214

28

6

22

10

55

7

1 0

Wholesale electricity price too low to attract investments

24

NOTE: The presented figures are calculated based on data from recent public reports and do not represent Fortum’s view. Average achieved price (€/MWh) for the production

type depends on availability and flexibility. There are large variations in the cost of hydro, wind and solar depending on location and conditions.

0

10

20

30

40

50

60

70

80

90

100

110

Source: Nord Pool spot, Nasdaq Commodities

EUR/MWh

Futures

15 July 2015

1995 2015 2025 0

10

20

30

40

50

60

70

80

90

100

110

Onshore wind

Nuclear Utility scale Solar PV In Italy

Large hydro

Offshore wind

EUR/MWh

Average levelised costs of new electricity generation

Coal condensing

Gas

Commodity prices are forward prices as of August 2014.

Overview of Fortum’s nuclear fleet

25

LOVIISA OLKILUOTO OSKARSHAMN FORSMARK

Commercial operation started

Unit 1: 1977

Unit 2: 1981

Unit 1: 1978

Unit 2: 1980

Unit 3: (Under construction)

Unit 1: 1972

Unit 2: 1974

Unit 3: 1985

Unit 1: 1980

Unit 2: 1981

Unit 3: 1985

Generation Capacity

Fortum’s share

Unit 1: 496 MW

Unit 2: 496 MW

Total: 992 MW

Unit 1: 880 MW

Unit 2: 880 MW

(Unit 3: 1,600 MW)

Total: 1,760 MW (3,360)

27% 468 MW

Unit 1: 473 MW

Unit 2: 638 MW

Unit 3: 1,400 MW

Total: 2,511 MW

43% 1,089 MW

Unit 1: 984 MW

Unit 2: 1,120 MW

Unit 3: 1,170 MW

Total: 3,274 MW

22% 720 MW

Yearly production

Fortum’s share of production

8 TWh

8 TWh

14 TWh

4 TWh

17 TWh

7 TWh

25 TWh

5.5 TWh

Share of Fortums Nordic production

18% 9% 16% 13%

Majority owner

Fortum’s share

Fortum

Pohjolan Voima

26.6%

E.ON

43.4%

Vattenfall

22.2%

Operated by Fortum Teollisuuden Voima (TVO)

OKG Aktiebolag Forsmarks Kraftgrupp

Responsibilities Loviisa: Fortum is the owner, licensee and operator with all the responsibilities specified in the Nuclear Energy Act, Nuclear Liability Act, and other relevant nuclear legislation

Other units: Fortum is solely an owner with none of the responsibilities assigned to the licensee in the nuclear legislation. Other responsibilities are specified in the

Companies Act and the Articles of Association and are mostly financial.

Olkiluoto

Loviisa Forsmark

Oskarshamn

Fortum's nuclear power in the Nordics

26

• Finnish units world class in availability

• Overview of production and consumption:

www.fortum.com/investors - energy related links

Source: Fortum

Load factor (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013

2014

Osakarshamn 1 80 51 63 85 68 77 72 1 13 74

Oskarshamn 2 90 78 76 86 75 90 77 81 33 0

Oskarshamn 3 85 95 88 70 17 31 75 69 77 75

Forsmarks 1 85 76 81 81 88 93 79 88 87 94

Forsmark 2 94 72 85 79 64 39 94 82 89 89

Forsmark 3 95 92 88 69 86 81 85 93 88 82

Loviisa 1 95 93 94 86 96 93 94 84 92 92

Loviisa 2 95 88 96 93 95 89 94 91 93 89

Olkiluoto 1 98 94 97 94 97 92 94 90 97 94

Olkiluoto 2 94 97 94 97 95 95 90 96 93 97

Variety of technologies and ages

27

Planned capacity increases

• Oskarshamn 2 in 2017, capacity increase 180 MW (Fortum’s share 78 MW), Fortum’s share of total capacity after increase 355 MW

• Forsmark 1 in 2017-2020, capacity increase 120 MW (Fortum’s share 27 MW), Fortum’s share of total capacity after increase 257 MW

PWR = Pressurized Water Reactor The most common reactor type in the world (e.g. all French units, most US units). Also the Loviisa units are PWRs, but based on Russian design. High pressure

prevents water from boiling n the reactor. The steam rotating the turbine is generated in separate steam generators.

BWR = Boiling Water Reactor Similar to the PWR in many ways, but the steam is generated directly in the reactor. Popular reactor type e.g. in Sweden, the US and Japan.

*Generation refers to technical resemblence based on KSU classification and not to reactor design generations. All reactors are of Generation II except Olkiluoto-3 (EPR) which is of Generation III.

Unit MWe (Net) Share (%) Share (MWe) Commercial

operation

Age Type/

Generation *

Supplier

Loviisa 1

Loviisa 2

496

496

100,0

100,0

496

496

1977-05-09

1981-01-05

36

33

PWR / 1

PWR / 1

AEE (Atomenergoexport)

AEE (Atomenergoexport)

Olkiluoto 1

Olkiluoto 2

Olkiluoto 3

880

880

(1,600)

26,6

26,6

25,0

234

234

(400)

1979-10-10

1982-07-10

(?)

34

31

BWR / 3

BWR / 3

PWR / 3

Asea-Atom / Stal-Laval


Areva / Siemens

Oskarshamn 1

Oskarshamn 2

Oskarshamn 3

473

638

1,400

43,4

43,4

43,4

205

277

607

1972-02-06

1975-01-01

1985-08-15

42

39

28

BWR / 1

BWR / 2

BWR / 4




Forsmark 1

Forsmark 2

Forsmark 3

984

1,120

1,170

23,4

23,4

20,1

230

262

236

1980-12-10

1981-07-07

1985-08-18

33

32

28

BWR / 3

BWR / 3

BWR / 4




Third party nuclear liability in case of severe accident

28

Sweden

(new, not

in force)

Finland,

temporary

legislation

Current,

Sweden

700 M€

200 M€ 360 M€

500 M€ Responsibility of company

(insurance or guarantee)

Unlimited

company

responsibility

Convention

parties 300 M€

State

responsibility

300 M€

500 M€

700 M€

New Paris

convention

700 M€

145 M€

145 M€

Old,

Finland

240 M€

145 M€

In force since 1.1.2012.

Law approved by Parliament

in 2010, requires separate

decision from Government to

come into force.

Requires ratification by 2/3

of member states to come

into force. In Finland

approved by Parliament in

2005

Fortum - a major player in Russia

OAO Fortum (former TGC-10)

• Operates in the heart of Russia’s oil and gas producing region, fleet mainly gas-fired CHP capacity

• 23 TWh power generation, 26 TWh heat production in 2014

• Investment programme to add 85%, almost 2,400 MW to power generation capacity

TGC-1

• 29.5% of territorial generating company TGC-1 operating in north-west Russia

• ~7,200 MW electricity production capacity (more than 40% hydro),

~24 TWh electricity, ~28 TWh heat in 2014

Fortum and Gazprom Energoholding signed a protocol to start a restructuring process

of TGC-1. Currently Gazprom Energoholding owns 51.8% of the TGC-1 shares and

Fortum 29.5%. As part of the restructuring, Fortum will establish a joint venture together

with Rosatom to own the hydro assets of TGC-1, while Gazprom Energoholding

continues with the heat and thermal power businesses of TGC-1.

By utilising its present stake in TGC-1, Fortum would obtain a 75-plus-percent ownership

in the new hydro power company, and Rosatom a 25-minus-percent minority holding.

Provided that Fortum obtains a 75-plus-percent ownership in TGC-1 hydro assets, Fortum would be ready to participate

with a minority stake (max 15%) in the Finnish Fennovoima nuclear power project on the same terms and conditions as

the other Finnish companies currently participating in the project.

29

OAO Fortum

Tyumen

Tobolsk

Chelyabinsk

Nyagan

TGC-1

St. Petersburg

Moscow

30

Day ahead wholesale market prices in Russia

Key electricity, capacity and gas prices in the OAO Fortum area

II/15 II/14 I-II/15 I-II/14 2014 LTM

Electricity spot price

(market price), Urals hub,

RUB/MWh

1,021 1,132 1,036 1,075 1,089 1,069

Average regulated gas

price, Urals region, RUB

1000 m3

3,362 3,362 3,362 3,362 3,362 3,362

Average capacity price

for CCS ”old capacity”,

tRUB/MW/month

140 152 152 168 167 159

Average capacity price

for CSA ”new capacity”,

tRUB/MW/month

578 493 647 553 552 605

Average capacity price,

tRUB/MW/month 326 271 360 303 304 333

Achieved power price for

OAO Fortum, EUR/MWh 27.9 32.3 26.8 31.4 30.4 28.1

0

200

400

600

800

1 000

1 200

1 400

RU

B /

MW

h

0

5

10

15

20

25

30

35

40

€/

MW

h

In addition to the power price generators receive a capacity payment. Source: ATS

2008 2009 2010 2011 2012 2013 2014 2015

Day ahead power market prices for Urals

2008 2009 2010 2011 2012 2013 2014 2015

85% increase in power generation capacity in Russia by 2015 through the investment programme

31

Year Supply

starts

Power plant Fuel type Existing

capacity

2,785 MW

New

investments

2,388 MW

Production type Total

capacity

5,173 MW

< 2011 Tyumen CHP-2 Gas 755 CHP/Condensing 755

Chelyabinsk CHP-2 Gas, coal 320 CHP/Condensing 320

Argayash CHP Gas, coal 195 CHP/Condensing 195

Chelyabinsk CHP-1 Gas, coal 149 CHP/Condensing 149

2011 Feb/2011 Tyumen CHP-1 Gas 472 209 CHP/Condensing 681

June/2011 Chelyabinsk CHP-3 Gas 360 216 CHP/Condensing 576

Oct/2011 Tobolsk CHP Gas 452 213 CHP/Condensing 665

2013 April/2013 Nyagan 1 GRES Gas 418 Condensing 418

Dec/2013 Nyagan 2 GRES Gas 418 Condensing 418

2015 Jan/2015 Nyagan 3 GRES Gas 418 Condensing 418

2H/2015 Chelyabinsk GRES Gas 82 248 CHP/Condensing 330

2H/2015 Chelyabinsk GRES Gas 248 CHP/Condensing 248

2,785 MW 2,388 MW 5,173 MW

Hedging improves stability and predictability

32

2009 onwards thermal and import from Russia excluded

Interim report January–June 2015

Fortum Corporation

17 July 2015

IFRS restatement relating to discontinued operations

Distribution segment has been reclassified as discontinued operations in Q1/2015.

As a result, continuing operations and discontinued operations are presented

separately for Fortum Group. Comparative period information for 2014 has been

restated accordingly

Restated information for the interim periods of 2014 can be found in a stock

exchange release published 15 April 2015

34

Q2 2015 Results

35

Key figures (MEUR) II/2015 II/2014 I-II/2015 I-II/2014 2014 LTM

Sales, continuing operations 794 886 1,834 2,094 4,088 3,828

Comparable EBITDA, continuing operations 228 302 624 758 1,457 1,323

Operating profit:

Continuing operations 144 233 494 599 1,296 1,191

Discontinued operations 4,314 63 4,395 2,030 2,132 4,497

Fortum total 4,458 295 4,889 2,629 3,428 5,688

Comparable operating profit:


Discontinued operations 32 45 114 164 266 216

Fortum total 175 255 600 732 1,351 1,219

Profit before taxes:


Discontinued operations 4,313 61 4,394 2,029 2,128 4,493

Fortum total 4,456 284 4,887 2,626 3,360 5,621

Earnings per share:

Continuing operations 0.13 0.22 0.46 0.57 1.22 1.11

Discontinued operations 4.85 0.06 4.92 2.24 2.33 5.01

Fortum total 4.98 0.28 5.38 2.81 3.55 6.12

Net cash from operating activities, continuing operations 229 394 745 799 1,406 1,352

Summary of the second quarter of 2015

• Fortum’s results continued to be pressured by low electricity prices

• The second quarter was characterised by among the highest precipitation in recent

history, which resulted in high and partly must-run hydro power production

• Swedish electricity distribution business divestment completed the whole Distribution

sale

• The negotiations on Russian TGC-1 restructuring did not come to conclusions; Fortum

was unable to commit to the Finnish Fennovoima nuclear power project by the end of

June

– Should the negotiations proceed later, and depending on the conditions of the construction

license decision by the Finnish Government, Fortum would still be ready to participate with a

minority share of maximum 15% on the same terms and conditions as the other Finnish

companies currently participating

36

Market conditions in the second quarter of 2015

Nordic countries

• Power consumption in the Nordic countries at the same level as in Q2 2014

• The precipitation was among the highest recorded this century in Norway and

Sweden. In addition, by the end of the second quarter, large amounts of the

precipitation still remained as snow in Norway, because of the delayed snow melt

• Nordic system spot prices approximately EUR 5 per MWh lower than in Q2 2014,

while Finnish and Swedish area prices EUR 9-11 per MWh lower

European business environment and carbon market

• In May, a compromise was reached on the market stability reserve (MSR) of the

EU emissions trading system. In July, the Commission published a proposal to

revise the Emissions Trading Directive

Russia

• Power consumption in Fortum’s operating areas was on the same level as in Q2

2014

• Electricity spot price (in RUB) in the Urals hub declined 10% compared to Q2

2014

37

Nordic water reservoirs

38

Source: Nord Pool Spot

Q1 Q2 Q3 Q4

20

40

60

80

100

120

rese

rvo

ir c

on

ten

t (T

Wh)

0

2000 2003 2014 2013 reference level 2015

Wholesale price for electricity

39

Source: Nord Pool Spot, Nasdaq Commodities

0

10

20

30

40

50

60

70

80

90

100

110

EUR/MWh Nord Pool Spot System Price Forwards

14 July 2015

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025

0

30

60

90

120

150

US

D /

bb

l

Crude oil price (ICE Brent)

2007 2008 20112009 2010 20132012 2014 2015 20160

7

14

21

28

35

EU

R /

tC

O2

CO2 price (ICE ECX EUA)

2007 2008 20112009 2010 20132012 2014 2015 2016

0

50

100

150

200

250

US

D /

t

Coal price (ICE Rotterdam)

2007 2008 20112009 2010 20132012 2014 2015 20160

20

40

60

80

100

GB

p /

th

erm

Gas price (ICE NBP)

2007 2008 20112009 2010 20132012 2014 2015 2016

40

Source: ICE

Market prices 14 July 2015; 2015-2016 future quotations

Fuel and CO2 allowance prices

Price development in the Nordic region and Russia

41

Includes capacity income

-19%

-23% -14%

-10%

Q2: Low electricity prices continued to impact results negatively – somewhat compensated by hydro volumes

42

Comparable operating profit, EUR million

January - June: Clearly lower achieved power price

43

Comparable operating profit, EUR million

Financials

Comparable and reported operating profit

II/2015 II/2014 II/2015 II/2014 I-II/2015 I-II/2014 I-II/2015 I-II/2014

Power and Technology 114 183 117 151 317 434 320 413

Heat, Electricity Sales

and Solutions 11 11 9 67 68 59 73 112

Russia 35 28 36 28 132 102 133 101

Other -17 -13 -17 -13 -32 -27 -32 -28

Total, continuing

operations 143 210 144 233 486 568 494 599

Discontinued

operations 32 45 4,314 63 114 164 4,395 2,030

Total, Fortum 175 255 4,458 295 600 732 4,889 2,629

45

Comparable

operating profit

Reported

operating profit MEUR

Non-recurring items including approximately EUR -15 million effect from the cancellation of Olkiluoto 4 nuclear

power project, as well as an IFRS accounting treatment (IAS 39) of derivatives and nuclear fund adjustments for

continuing operations amounted to EUR 1 (23) million in the second quarter and EUR 8 (30) million in January-

June 2015.

Reported

operating profit Comparable

operating profit

Power and Technology

MEUR II/2015 II/2014 I-II/2015 I-II/2014 2014 LTM

Sales 404 487 904 1,072 2,156 1,988

Comparable EBITDA 143 213 375 496 998 877

Comparable operating profit 114 183 317 434 877 760

Net assets 6,093 6,113 6,001

Comparable RONA % 14.2 12.6

Gross investments 42 37 70 72 198 196

46

Q2 2015

• Clearly higher precipitation had a positive

impact on the hydro volumes, but put

pressure on the electricity spot price

• EUR -15 million effect of the cancelled

Olkiluoto 4 nuclear power project in Finland

H1 2015

• Clearly lower achieved power price

• First quarter was exceptionally mild

• Second quarter characterised by among

the highest precipitation in recent history

Heat, Electricity Sales and Solutions

47

Q2 2015

• Comparable operating profit on same level as

in comparison period -The lower electricity

power price was partly compensated by lower

fuel costs.


Sales 244 269 650 715 1,332 1,267



Net assets 2,073 2,176 2,112



H1 2015

• Comparable operating profit improved mainly

due lower fuel costs and higher heat prices

during the period

• In retail electricity sales, the customer base

continued to grow and the sales margin

improved

Russia

Q2 2015

• Improved result partly offset by lower electricity

prices, as well as bad debt provisions for heat

trade receivables

• Russian rouble affected the result negatively by

EUR 3 million

48


Sales 211 234 474 567 1,055 962

Comparable EBITDA* 65 64 159 177 304 286


Net assets 3,159 3,870 2,597



H1 2015

• Comparable operating profit improved due to

positive effect from new units

• Russian rouble affected the result negatively

by EUR 50 million

• Result includes CSA provision release of EUR

32 million

* Excluding the net release of CSA provision

Discontinued operations (Distribution)

49

Q2 and H1 2015

• On 1 June 2015, Fortum completed the divestment of its Swedish electricity distribution

business. Fortum booked a one-time sales gain of approximately EUR 4.3 billion,

corresponding to EUR 4.82 per share

Table below includes January-March 2014 results for the Finnish, January-May 2014 results for the Norwegian and full year 2014

results as well as January-May 2015 for the Swedish distribution business


Sales 95 148 275 449 751 577



Net assets 2,642 2,615


Income statement MEUR II/2015 II/2014 I-II/2015 I-II/2014 2014 LTM

Sales 794 886 1,834 2,094 4,088 3,828

Other income and expenses -651 -676 -1,348 -1,526 -3,003 2,825

Comparable operating profit 143 210 486 568 1,085 1,003

Items affecting comparability 1 23 8 30 211 189

Operating profit 144 233 494 599 1,296 1,191

Share of profit of associates and jv’s 22 37 80 107 146 119

Financial expenses, net -23 -46 -81 -109 -210 -182

Profit before taxes 143 224 493 597 1,232 1,128

Income tax expense -25 -27 -80 -89 -143 -134

Net profit, continuing operations 118 196 413 508 1,089 994

Net profit, discontinued operations 4,306 51 4,369 1,994 2,073 4,448

Net profit, Fortum total 4,424 247 4,782 2,502 3,161 5,441

EPS, basic (EUR), continuing operations 0.13 0.22 0.46 0.57 1.22 1.11

EPS, basic (EUR), discontinued operations 4.85 0.06 4.92 2.24 2.33 5.01

EPS, basic (EUR), Fortum Total 4.98 0.28 5.38 2.81 3.55 6.12

50

Cash flow statement


Cash from operating activities:

Realised FX gains/losses 35 81 203 155 352 400

Other funds from operations (FFO) 158 176 472 547 1,096 1,021

Change in working capital 36 137 70 97 -42 -69

Cash from operating activities, cont. operations 229 394 745 799 1,406 1,352

Cash from operating activities, discontinued

operations 66 61 154 222 356 288

Cash from operating activities, total Fortum 296 455 899 1,022 1,762 1,639

Cash used in investing activities:

Paid capital expenditures -107 -135 -209 -257 -622 -574

Proceeds from divestments 1 103 37 107 499 429

Other investment activities 222 164 241 209 364 416

Total investing activities, continuing operations 116 132 69 59 241 251

Total investing activities, discontinued operations

6,345 187 6,303 2,648 2,574 6,229

Cash used in investing activities, total Fortum

6,461 319 6,372 2,706 2,816 6,482

Cash flow before financing activities, total Fortum 6,757 774 7,272 3,727 4,578 8,123

51

Key ratios

MEUR LTM 2014

Comparable EBITDA, continuing operations 1,323 1,457

Comparable EBITDA, total Fortum 1,652 1,873

Interest-bearing net debt, total Fortum -1,846 4,217

Comparable net debt/EBITDA, total Fortum -1.1 2.3

excluding Värme financing -1.3 2.0

52

ROCE % Return on capital employed, total Fortum 29.0 19.5

Liquid funds totalled EUR 8.6 billion

Committed credit lines total EUR 2.2 billion

Debt portfolio and average interest rate at the balance sheet date 30 June 2015 (31 December 2014)

53

Total interest-bearing debt EUR

6,765 million

– Average interest 4.2% (3.7%)

– Portfolio mainly in EUR and

SEK with average interest

cost 2.9% (2.9%)

– EUR 786 (681) million

swapped to RUB, average

interest cost including cost

for hedging 14.3% (11.3%) 0

250

500

750

1000

1250

1500

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025+

Bonds Financial institutions Other long-term debt Other short-term debt

Maturity profile

Outlook

Outlook

Nordic markets

• Fortum continues to expect that the average annual electricity demand

growth will be on average approximately 0.5% in the coming years

• Electricity is expected to continue to gain share of total energy consumption

Russia

• The run-rate operating profit (EBIT) level for the Russia Segment, RUB 18.2

billion, is targeted to be reached during 2015, but the euro result level will be

volatile, due to the translation effect

Key drivers and risks

• Economic

• Political

• Currency

• Wholesale price of electricity and volumes

• demand and supply • fuels

• hydrological situation • power plant availability

• CO2 emissions allowance prices

55

Outlook

Annual capex estimate, excluding potential acquisitions

• 2015 approximately EUR 0.8 billion

Hedging

• Rest of 2015 approx. 45% hedge ratio at approx. EUR 41/MWh

• 2016 approx. 25% hedge ratio at approx. EUR 35/MWh

Taxation

• Effective tax rate for 2015 for the Group 19-21%

• The Swedish Parliament decided to approve the proposed tax increase

of 17% on installed nuclear capacity. The tax will be implemented as of

1 August 2015. The estimated impact on Fortum is approximately EUR

15 million annually, albeit corporate tax-deductable

56

Fortum Investor Relations For more information, please visit www.fortum.com/investors

Sophie Jolly Vice President

+358 (0)10 453 2552

[email protected]

Rauno Tiihonen

Manager

+358 (0)10 453 6150

[email protected]

Marja Mäkinen Manager (SRI)

+358 (0)10 452 3338

[email protected]

Meeting requests:

Arja-Tuula Tiainen Executive Assistant

+358 (0)10 453 4487

[email protected]

Next result publication:

Q3/2015 on 22 October 2015

57

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