fortum · power generation 53.1 twh heat sales 17.2 twh distribution customers 1.6 million...

FORTUM Power and heat company in the Nordic area, Russia, Poland and the Baltics

Investor / Analyst material

November 2012

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.

Content

3

Fortum today, pages 4 -16

European and Nordic power markets, pages 18 - 29

Data on Fortum’s nuclear fleet, pages 31 - 35

Russia, pages 37 - 44

Data on capacity payments, pages 40 - 41

Fortum’s investment programme, page 44

Financials and outlook, pages 46 – 55

Hedges, pages 52 - 53

More than 100,000 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 OMX Helsinki stock exchange

• Market cap ~13 billion euros

4

31 October 2012

Foreign investors 25.8% Finnish State 50.8%

Other Finnish investors 10.3%

Households 9.4%

Financial and insurance institutions 3.7

Capital returns

• Dividend 2011 EUR 1.00 per share, in total ~EUR 0.9 billion

• Dividend policy of 50-60% payout of previous year's results on average

5

Total ~ 8,630 MEUR

1999 2001 2003 2000 2002 2004

0.18 0.23 0.26

0.31 0.42

0.58

2005

1.12

Dividend per share EUR

0.13

1998

0.5

8

0.5

4

2006

1.26

0.7

3

0.5

3

2007

1.35

0.7

7

0.5

8

2008

1.00

72% 103% 78% 58%

1.00

2009

68%

1.00

2010

68%

1.00

2011

50%

Organisational structure

6

Business Divisions

President and CEO

Tapio Kuula

Electricity Solutions and Distribution (Espoo)

Executive Vice President Timo Karttinen

Power (Espoo) Executive Vice President

Matti Ruotsala

Heat (Stockholm) Executive Vice President

Per Langer

Russia (Chelyabinsk) Executive Vice President

Alexander Chuvaev

Finance Chief Financial Officer

Markus Rauramo

Corporate Communications Senior Vice President

Helena Aatinen

Corporate Human Resources Senior Vice President

Mikael Frisk

Staff Functions

Country responsibles: Timo Karttinen / Finland, Norway; Per Langer / Sweden, Poland, Baltics; Alexander Chuvaev / Russia

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 to the society and deliver

excellent value to our shareholders.

Mission

Build on the strong

Nordic core

Create solid earnings

growth in Russia

Build platform for

future growth

Competence in CO2-free hydro and nuclear, efficient CHP production and

energy markets

Our geographical presence today

8

TGC-1 (~25%)

Power generation ~7 TWh

Heat sales ~8 TWh

OAO Fortum

Power generation 17.4 TWh

Heat sales 26.7 TWh

Russia

Poland Power generation 0.6 TWh

Heat sales 4.3 TWh

Baltic countries Power generation 0.4 TWh

Heat sales 1.1 TWh

Distribution cust. ~24,000*

Nordic countries

Power generation 53.1 TWh

Heat sales 17.2 TWh

Distribution customers 1.6 million

Electricity customers 1.2 million

Nr 2 Power

generation

Electricity

sales

Nr 2

Nr 1 Heat

Distribution

Nr 1

Key figures 2011 Sales EUR 6.2 bn

Operating profit EUR 2.4 bn

Balance sheet EUR 23 bn

Personnel 10,800

Great Britain Power generation 1.2 TWh

Heat sales 2.1 TWh

* Distribution business sold Jan 1, 2012

Divisions of Fortum

9

Power Division

Fortum’s power generation,

physical operation and

trading as well as expert

services for power

producers.

Heat Division

Combined heat and power

generation, district heating

and cooling activities and

b- to-b heating solutions.

Electricity Solutions and

Distribution Division

Fortum's electricity sales and

distribution activities. Two

business areas: Distribution

and Electricity Sales.

Russia Division

Power and heat generation

and sales in Russia. It

includes OAO Fortum and

Fortum’s slightly over 25%

holding in TGC-1.

Business

description

Comparable

operating

profit

Net assets

Volume

(TWh)

Drivers

EUR 1,201 million

Distr.: EUR 3,589 million

El. sales: EUR 11 million

EUR 3,273 million

EUR 278 million Distr.: EUR 295 million

El. sales: EUR 27 million

EUR 74 million

Distr.net. 26.1, reg.net. 16.7

El. sales: 14.4

Heat sales 22.6

Power sales: 6.2 Nordic generation 48.1

EUR 6,247 million EUR 4,191 million

Fuel mix, heat and

power price

Nordic power price,

generation volumes New capacity, and price for

that, power and heat price

Power sales.: 20.2

Heat sales.: 26.7

Distr.: Regulated

El. sales: Sales margin

Fortum mid-sized European power generation player; Global #4 in heat

10

* incl. TGC-5, TGC-6, TGC-7, TGC-9, ** incl. TGC-12, TGC-13, *** incl. International Power

Source: Company information, Fortum analyses, 2010 figures pro forma, heat production of Beijing DH not available.

Largest global producers, 2010 TWh

Largest producers in Europe and Russia, 2010 TWh

Power generation Heat production

Electricity customers in EU, 2010 millions

Customers

DEI

Irkutskenergo

*) IES

Iberdrola

RusHydro Fortum

EnBW

Vattenfall

CEZ

RWE

PGE SSE

Statkraft

Rosenergoatom Gazprom

NNEGC Energoat.

Enel

E.ON EDF

0 100 200 300 400 500 600

Inter RAO UES

GDF SUEZ ***)

Onexim

Tatenergo

Minsk Energo Kievenergo

Irkutskenergo Bashkirenergo

RAO ES East Inter RAO UES

TGC-2

Fortum

Dong Energy KDHC, Korea

TGC-14

Lukoil

Gazprom

0 20 40 60 80 100 120 140

ELCEN, Rom.

Dalkia

SUEK **)

*) IES

Vattenfall

PGNiG

0 20 40 10 30

DEI

CEZ

Enel

Centrica

EDP

Iberdrola

SSE

EnBW

Fortum

EDF

E.ON

RWE

Gas Natural Fenosa

PGE

Tauron

GDF SUEZ

Hafslund

Dong Energy

Vattenfall

Biggest nuclear and hydro generators in Europe and Russia

11

TWh E

DF

Rosenerg

oato

m

E.O

N

NN

EG

C E

nerg

oato

m

Enel

RusH

ydro

Vattenfa

ll

GD

F S

UE

Z

Irkuts

kenerg

o

Sta

tkra

ft

RW

E

Iberd

rola

Fo

rtu

m

EnB

W

CE

Z

Verb

und

Kra

snoyars

kaya

HP

P

Axpo

Hid

roele

ctr

ica

ED

P

Gazpro

m

Alp

iq

Ukrh

ydro

energ

o

EP

S, S

erb

ia

Gas N

atu

ral F

enosa

E-C

O E

nerg

i

Nors

k H

ydro

DE

I

Agder

Energ

i

Edis

on

BK

K

Inte

r R

AO

UE

S

SS

E

PG

E

IES

0

50

100

150

200

250

300

350

400

450

500

550

600

Total generation

Other

Nuclear

Hydro

Figures 2010 pro forma

Fortum's carbon exposure among the lowest in Europe

12

Average 337 g/kWh

g CO2/kWh electricity, 2010

0

200

400

600

800

1000

DE

I

Dra

x

RW

E

CE

Z

SS

E

Vattenfa

ll

E.O

N

Enel

Do

ng

ED

P

GD

F S

UE

Z E

uro

pe

Unio

n F

enosa

Iberd

rola

PV

O

Fort

um

tota

l

ED

F

Verb

und

Fort

um

EU

Sta

tkra

ft

2011

65% of Fortum's total power generation CO2-free

85% of Fortum’s power generation in the EU CO2-free

Close to 100% of the ongoing investment programme

in the EU CO2-free

189 84

Source:

PWC & Enerpresse, Novembre 2011

Changement climatique et Électricité, Fortum

Note:

Fortum’s specific emission of the power generation in 2011 in the EU were 88 g/kWh and in

total 192 g/kWh. Figures for all other companies include only European generation.

Fortum’s strategic route

13

Divestment of

non-strategic

heat business

Länsivoima

→100% E.ON Finland

Separation of

oil businesses

Elnova

50%→100%

District heat

in Poland 2003 →

Østfold

Shares in

Hafslund

Shares in

Lenenergo

Starting

TGC-1

Divestment of

Lenenergo

shares

TGC-10

Divestment of

Fingrid shares

Divestment of

heat operations

outside of

Stockholm

2008 2005 2006 2007 2002 2003 2004 1999 2000 2001 1996 1998 2009 2010 2011

Länsivoima

45% → 65%

2012

Stockholm

Energi

Gullspång

Birka Energi 50% Fortum

50% Stockholm

Gullspång

Skandinaviska

Elverk

Birka Energi

50% → 100%

Stora

Kraft

Lenenergo

shares 1998→

IVO

1997

Neste

Divestment

of small

scale hydro

http://fi.wikipedia.org/wiki/Kuva:Flag_of_Russia.svg

http://fi.wikipedia.org/wiki/Tiedosto:Flag_of_Estonia.svg

http://upload.wikimedia.org/wikipedia/commons/4/4c/Flag_of_Sweden.svg

http://upload.wikimedia.org/wikipedia/commons/4/4c/Flag_of_Sweden.svg

14

Fortum in the Nordic electricity value chain

Competitive businesses

Regulated businesses

Power generation

Nordic wholesale market

Power exchange and

bilateral agreements

Large customers

Retail customers

Private customers, small businesses

Independent transmission system

operator

Independent distribution companies Distribution Transmission and

system services

Nuclear power

45%

Coal 9%

Other 1%

Hydro power 38%

Biomass 3%

European generation 55.3 TWh

(Generation capacity 11,422 MW)

Fortum's European

power generation in 2011

Natural gas 4%

European production 22.0 TWh

(Production capacity 10,625 MW)

Fortum's European

heat production in 2011

Waste 4%

Peat 3%

Heat pumps, electricity

12%

Oil 5%

Biomass fuels

24%

Natural gas

22%

Other 4%

Coal 26%

Fortum's European power and heat production

15

Fortum a forerunner in sustainability

• Dow Jones Sustainability World Index

– Included for ten consecutive years

– Fortum the only Nordic power and heat company

• Carbon Disclosure Leadership Index

– Fortum globally third best company in the utility

sector 2012

– Fortum the only Nordic power and heat company

• SAM Sustainability Yearbook

• STOXX® Global ESG Leaders indices

• oekom

• OMX GES Sustainability Finland Index

• Storebrand SRI

16

European and Nordic power markets

17









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, BeNeLux) since 11/2010 with a continued coupling mechanism 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

• Czech, Slovakia and Hungary coupled since September 2012

• The TSOs and power exchanges are developing a single market coupling for the whole western Europe by summer 2013

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

• Estonian price area in Nord Pool Spot since April 2010, Lithuanian bidding area from 6/2012, Latvia to follow in 2013

• EU’s European Target Model for cross-border power trading sets 2014 as deadline for an EU-wide market coupling

18

2009

2013

2012

2010-

2013

Current transmission capacity from Nordic area to Continental Europe is over 4000 MW

19

Countries Transmission capacity MW

From Nordics To Nordics

Denmark - Germany 2 365 2 100

Sweden - Germany 610 600

Sweden - Poland 600 600

Norway - Netherlands 700 700

Total 4 275 4 000

• Theoretical maximum in transmission capacity ~35 TWh

per annum

• Net export from Nordic area to Continental Europe in

2011 was ~6 TWh

• During Nordic dry year 2010 net import was ~8 TWh

• Approximately 20 TWh net export fairly easily reachable

700

2365 610 600

350

Nordic and Continental markets are integrating – interconnection capacity could double by 2020

20

Both TSO and merchant projects for

links to the UK by 2020; North Seas

Countries’ Offshore Grid Initiative

launched for supergrid development

First direct 1400 MW NO-DE link

agreed to be built by 2018

EU financial support for 700 MW

DK-NL link to connect offshore

wind, too

Jutland – DE capacity planned to

grow by 1000-1500 MW by 2017

EU support to connect Kriegers

Flak offshore wind area to DK&DE

by 2020

European Commission included the Northern

Seas Offshore Grid and the Baltic Energy Market

Integration Plan as priority electricity corridors in

its 2011 Infrastructure Package proposal

New interconnections

could double the capacity

to over 8000 MW by 2020

LitPol Link of 1000 MW to connect

the Baltic market to Poland by

2015/20. It would open a new

transmission route from the Nordic

market to the Continent

EU’s European Energy Programme

for Recovery cofinancing Estlink 2

and NordBalt

New internal Nordic grid

investments provide for increased

available capacity for export to the

Continent and Baltics

Nordic water reservoirs

21

2000 2003 2010 2012 2011 reference level

Q1 Q2 Q3 Q4

rese

rvo

ir c

on

ten

t (T

Wh

)

0

20

40

60

80

100

120

Source: Nord Pool Spot

22

Nordic year forwards

Year 15 Year 17 Year 09 Year 10 Year 11 Year 12 Year 13 Year 14 Year 16 €/MWh

0

10

20

30

40

50

60

70

2007

Q1 Q2 Q3 Q4 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

1 November 2012

Source: NASDAQ OMX Commodities Europe

Wholesale price for electricity

23

Source: Nord Pool Spot, NASDAQ OMX Commodities Europe

0

10

20

30

40

50

60

70

80

90

100

110

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

EUR/MWh Nord Pool System Price Forwards

30 October 2012

24

Wholesale prices for electricity

Source: Nord Pool Spot, NASDAQ OMX Commodities Europe, EEX, APX-ENDEX, Bloomberg Finance LP, ATS, Fortum

Dutch

German

Nordic

Russian*

Spot prices Forward prices EUR/MWh

10

20

30

40

50

60

70

80

90

100

110

0

* including capacity tariff estimate.

E.g 9.4 €/MWh for 2010, 6.8 for 2011 and 5.9 for 2012.

1 November 2012

2007 2008 2009 2010 2011 2012 2013 2014

25

Fuel and CO2 allowance prices

Source: ICE

Market prices 1 November 2012; 2012-2014 future quotations

Crude oil price (ICE Brent)

020406080

100120140160

US

D /

bb

l

2006 2007 20102008 2009 20122011 2013 2014

CO2 price (ICE ECX EUA)

0

5

10

15

20

25

30

35

EU

R /

tC

O2

2006 2007 20102008 2009 20122011 2013 2014

Coal price (ICE Rotterdam)

0

40

80

120

160

200

240

US

D /

t

2006 2007 20102008 2009 20122011 2013 2014

Gas price (ICE NBP)

0

20

40

60

80

100

GB

p /

th

erm

2006 2007 20102008 2009 20122011 2013 2014

Nordic power generation – dominated by hydro, but fossil needed

26

Source: ENTSO-E Memo 2011 *) 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

Wind

Hydro *

TWh/a

Total Nordic generation

378 TWh in 2011

Net import in 2011: 3 TWh

24

80

TWh %

57

200

17

6

21

15

53

5

Still a highly fragmented Nordic power market

27

30%

Fortum

Vattenfall

Dong Energy

Others

Statkraft

E.ON PVO

E - CO Energi

Agder Energi

Norsk Hydro Helsinki

Others

52%

Dong Energy

Vattenfall

Fortum

E.ON

G ö teborg

Helsinki

Hafslund

SEAS - NVE

Statkraft

Bixia

Others

53%

Fortum

Vattenfall

E.ON

SEAS-NVE

Hafslund

Helsinki

Göteborg

Syd Energi

Dong Energy

Elenia

Power generation

382 TWh

>350 companies

Electricity distribution

15 million customers

~500 companies

Electricity retail

15 million customers

~350 companies

Source: Fortum, company data, shares of the largest actors, pro forma 2010 figures.

New capacity needed for increasing demand and retiring capacity replacements

• Growing global energy demand

will be increasingly fulfilled by

electricity in the future

• Substantial demand growth in

the emerging markets

• Retirements and moderate

demand growth in the EU

• Globally, 5 900 GW of new

capacity needed by 2035

28

1) Total new capacity needed for increasing demand and retiring capacity replacements Source: IEA WEO 2012 (New polices scenario)

384

606

548

923

153

245

190

1487

70

666

631

1964

1976

5891 New capacity,

total (1

Capacity changes, 2012-2035 (GW)

Retiring capacity

US Europe Russia China India Other

areas

World

total

0 %

50 %

100 %

150 %

200 %

250 %

~20%

~ 40%

~130%

~240%

Growth, 2010-2035

Primary energy demand

Electricity generation

New capacity, except nuclear, will require over 60 EUR/MWh power price

29

0

10

20

30

40

50

60

70

80

90

100

110

Source: Nord Pool spot, NASDAQ OMX Commodities Europe

EUR/MWh

Futures

30 October 2012

1995 -97 -99 -01 -05 -07 -09 -11 -13 -03 -15 -17

Other costs ( variation)

CO2 cost

Coal Gas Nuclear Hydro Wind Clean coal

EUR/MWh

Estimated lifetime average cost in nominal 2014 terms.

Large variations in cost of new hydro and wind due to location and conditions.

0

10

20

30

40

50

60

70

80

90

100

110

Fortum’s investment programme – Nordic region, Poland and Baltic countries

30

Additional electricity capacity around 800 MW

100% CO2-free

Project Electricity, MW Heat, MW Commissioned

Olkiluoto 3, Finland 400

Swedish nuclear upgrades 290

Refurbishing of hydro power 10 annually

Brista, Sweden 20 57 Q4 2013

(waste CHP)

Klaipeda, Lithuania 20 60 Q1 2013

(waste CHP)

Total ~800 ~225

Jelgava, Latvia 23 45 Q3 2013

(biomass CHP)

Järvenpää, Finland 23 63 Q2 2013

(biomass CHP)

Overview of Fortum’s nuclear fleet

31

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: 1600 MW)

Total: 1760 MW (3360)

27% 468 MW

Unit 1: 473 MW

Unit 2: 638 MW

Unit 3: 1400 MW

Total: 2511 MW

43% 1089 MW

Unit 1: 984 MW

Unit 2: 996 MW

Unit 3: 1170 MW

Total: 3150 MW

22% 699 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

0

0

Fortum's nuclear power in the Nordics

32

• Finnish units world class in availability

• Availability improved in Swedish units

• Overview of production and consumption: www.fortum.com/investors - energy related links

Source: IAEA, NordPool. Rounded numbers.

Situation on 8 October 2012

2012 (from Oct 8 onwards) Load factor (%) 2005 2006 2007 2008 2009 2010 2011

Planned annual outages days in

Oskarshamn 1 80 51 63 85 68 77 72 25

Oskarshamn 2 90 78 76 86 75 90 77 0

Oskarshamn 3 85 95 88 70 17 31 75

Forsmark 1 85 76 81 81 88 93 79 0

Forsmark 2 94 72 85 79 64 39 94

Forsmark 3 95 92 88 69 86 81 85 0

Loviisa 1 95 93 94 86 96 93 94 0

Loviisa 2 95 88 96 93 95 89 94 0

Olkiluoto 1 98 94 97 94 97 92 94

Olkiluoto 2 94 97 94 97 95 95 90

0

0

Variety of technologies and ages

33

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-1 496 100,0 496 1977-05-09 34 PWR / 1 AEE (Atomenergoexport)

Loviisa-2 496 100,0 496 1981-01-05 30 PWR / 1 AEE (Atomenergoexport)

Olkiluoto-1 880 26,6 234 1979-10-10 32 BWR / 3 Asea-Atom / Stal-Laval

Olkiluoto-2 880 26,6 234 1982-07-10 29 BWR / 3 Asea-Atom / Stal-Laval

Olkiluoto-3 (1600) 25,0 (400) (?) PWR / 3 Areva / Siemens

Oskarshamn-1 473 43,4 205 1972-02-06 39 BWR / 1 Asea-Atom / Stal-Laval



Forsmark-1 984 23,4 230 1980-12-10 31 BWR / 3 Asea-Atom / Stal-Laval



Third party nuclear liability in case of severe accident

34

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€

Has been approved by the Parliament.

In force 1.1.2012 onwards.

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

Nuclear upgrades in Sweden

35

Reactor

OKG 1

Completion

-

Increase 100% (MW)

0

Fortum's capacity increase

(MW)

Additional generation for Fortum

(TWh/a)

Fortum's capacity

after increase

(MW)

Fortum's generation

after increase

(TWh/a)

- 205 ~2

OKG 2 2009, 2015 30 + 180 95 355 ~3

OKG 3 2011 255 110 607 ~5

FKA 1 Decision 2013 120 ~25 257 ~2

FKA 2 2012 120 25 259 ~2

FKA 3 Decision 2013 170 ~35 270 ~2

Total ~290 ~2 ~1,950* ~15

Capacity increase and completion timetable based on recent estimate (Nord Pool). At 31.12.2011

Fortum's share of Swedish nuclear capacity was 1,787 MW.

Russia

36









Russia is the World’s 4th largest power market

37

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

TWh

5,000

Power generation in 2011 based on gross output.

Source: BP Statistical Review of World Energy June 2012

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

• 17 TWh power generation, 27 TWh heat production in 2011;

more than Fortum’s Nordic heat sales

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

generation capacity

• Annual efficiency improvement reached

EUR 100 million in Q2 2011 (compared to 2008 level)

TGC-1

• Slightly over 25% of territorial generating company TGC-1

operating in north-west Russia

• ~6,400 MW electricity production capacity (appr. 50% hydro),

~26 TWh/a electricity, ~30 TWh/a heat

38

OAO Fortum

Tyumen

Tobolsk

Chelyabinsk

Nyagan

TGC-1

St. Petersburg

Moscow

39

Day ahead wholesale market prices – increase driven by recovering demand and gas price

2

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

III/2009 III/2008 III/12 III/11 LTM 2011

Electricity spot price

(market price), Urals hub,

RUB/MWh

Average regulated gas

price, Urals region, RUB

1000 m3

Average capacity price for

CCS ”old capacity”,

tRUB/MW/month

Average capacity price for

CSA ”new capacity”,

tRUB/MW/month

Average capacity price,

tRUB/MW/month

Achieved power price for

OAO Fortum, EUR/MWh

1 114 939 951 948 925 928

2,924 2,548 2,673 2,548 2,548 2,642

138 140 147 155 160 153

485 568 510 580 560 516

207 198 218 195 209 225

33.1 30.0 30.5 29.4 29.2 30.1

I-III/12 I-III/11

0

5

10

15

20

25

30

35

40

€ / M

Wh

Day ahead power market prices for Urals

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

2007 2008 2009 2010 2011 2012

Source: ATS

Power market liberalisation – two markets

40

Capacity wholesale market Electricity wholesale market

Capacity prices

• Competitive capacity selection (CCS) and free bilateral

agreements (FBA)

• A higher, fixed capacity price for new

capacity (CSA* agreements, built after 2007)

• Lower capacity price for old capacity, price caps limits the price in

some areas

• Old capacity intended for households are priced by regulated

bilateral agreements (RBA)

Electricity prices

• Day ahead (spot) market, financial market, free bilateral

agreements (FBA) and regulated bilateral agreements (RBA)

• Fully liberalised from 1 Jan 2011 except for volumes intended for

households priced by RBA (~10% of volume

* Capacity supply agreement

•CSA is the intended mechanism for earning a (reasonable) return on invested capital in new capacity

•Capacity prices are a big part of a power generator’s income

– a typical CHP plant ~35%, CCGT ~55%, of revenues

•In the day ahead (spot) market, the price mechanism is a day ahead hourly auction. Supply – demand balance and

variable cost (fuel) are the key drivers for the spot price

•Financial market for electricity started in June, 2010

41

Capacity prices for new capacity considerably higher than prices for old capacity prices

• Long term rules and price parameters approved

• Both “old” and “new” capacity can participate in capacity auctions

• Old capacity (pre 2007) and new capacity priced differently – Old capacity is priced by capacity auctions; price cap possibility

– New capacity under capacity supply agreements to receive guaranteed payments

• The payments for new capacity are based on approved pricing formulas – Vary according to plant size, fuel, geographic location, capital costs, …

– Allow the recovery of capital costs and include return on invested capital; the targeted ROCE level 12-14% (with current government benchmark bond yields)

– After three years (2014), the regulator will review the earnings from the electricity-only market and can revise the payments, same goes after 6 years.

• “Old” capacity prices will depend on auction outcomes, but will likely

remain relatively low; potentially price caps could limit the price

Long-term financial target will be dictated by basic economic logic

42

Assuming, having completed the investment programme, an invested capital of

~EUR 100 million improvement in

EBITDA through the efficiency

improvement programme

Invested capital

EUR

~2.5 bn

~4 bn

2011 ~2014

In 2009, WACC for Russia was ~12%

a

b

a

… and an unchanged

cost of capital b

The annual comparable

operating profit in Russia

needs to be ~EUR 500

million in order to beat the

cost of capital (WACC) after

the completion of the

investment programme

Key factors behind the profitability improvement in Russia

43

Efficiency improvement programme 2008-2011

– Increasing heat production profitability

– Fuel efficiency improvement

– Cost savings

New CSA capacity commissioning 2011-2014

– Additional capacity 2,388 MW; +85%

– Capacity is sold at CSA (Capacity Supply

Agreement) contracts with guaranteed higher

price

Pace of new capacity increase of Fortum investment programme in Russia

2011 - 638 MW

2012 - 0 MW

2013 - 1,254 MW

2014 - 496 MW

Total - 2,388 MW

85% increase in power generation capacity by the end of 2014 through the investment programme

44

85% increase in power generation capacity in Russia by the

end of 2014 through the investment programme

Total 2,785 2,388 5,173

Plant Fuel type Existing (MW) Planned (MW) Total

Tyumen CHP-2 Gas 755 755

Tyumen CHP-1 Gas 472 209 681

Tobolsk CHP Gas 452 213 665

Chelyabinsk CHP-3 Gas 360 216 576

Chelyabinsk CHP-2 Gas, coal 320 320

Argayash CHP Gas, coal 195 195

Chelyabinsk CHP-1 Gas, coal 149 149

Chelyabinsk GRES Gas 82 578

Nyagan GRES Gas 3 x 418 1,254

Boilers -

(CHP/Condensing)

(CHP/Condensing)

(Condensing)

(Condensing)

Supply date

2013

June/2011

Feb/2011; 2014

Oct/2011

2014 2 x 248 (CHP/Condensing)

Represents over 50%

of new capacity

Financials and outlook

45









Income statement

46

MEUR III/2012 III/2011 I-III/2012 I-III/2011 2011 LTM

Sales 1 140 1 144 4 325 4 494 6 161 5 992

Expenses -920 -847 -3 173 -3 200 -4 359 -4 332

Comparable operating profit 220 297 1 152 1 294 1 802 1 660

Items affecting comparability 3 17 90 529 600 161

Operating profit 223 314 1 242 1 823 2 402 1 821

Share of profit of associates and jv's 7 -2 26 72 91 45

Financial expenses, net -82 -72 -231 -199 -265 -297

Profit before taxes 148 240 1 037 1 696 2 228 1 569

Income tax expense -30 -46 -195 -278 -366 -283

Net profit for the period 118 194 842 1 418 1 862 1 286

Non-controlling interests -7 -4 36 70 93 59

EPS, basic (EUR) 0.14 0.23 0.91 1.52 1.99 1.38

EPS, diluted (EUR) 0.14 0.23 0.91 1.52 1.99 1.38

Comparable and reported operating profit

47









MEUR

III/2012 III/2011 III/2012 III/2011 I-III/2012 I-III/2011 I-III/2012 I-III/2011

Power 201 268 205 273 764 850 786 1 033

Heat -11 -14 -12 -10 173 182 221 280

Russia -12 -16 -12 -16 40 39 51 39

Distribution 57 62 58 60 216 246 225 437

Electricity Sales 9 4 11 6 29 25 33 9

Other -24 -7 -27 1 -70 -48 -74 25

Total 220 297 223 314 1 152 1 294 1 242 1 823

Comparable operating

profit

Reported operating

profit

Comparable operating

profit

Reported operating

profit

• Non-recurring items, IFRS accounting treatment (IAS 39) of derivatives and nuclear fund adjustments had an impact on the reported operating profit EUR 3 (17) million or earnings per share EUR 0.01 (0.02) in the third quarter, and EUR 90 (529) million or earnings per share EUR 0.11 (0.49) for January-September.

Cash flow statement

48

MEUR III/2012 III/2011 I-III/2012 I-III/2011 2011 LTM

Operating profit before depreciations 391 461 1 731 2 274 3 008 2 465

Non-cash flow items and divesting activities -35 -31 -150 -600 -726 -276

Financial items and fx gains/losses -162 0 -435 -290 -376 -521

Taxes -85 -104 -252 -362 -394 -284

Funds from operations (FFO) 109 326 894 1 022 1 512 1 384

Change in working capital 2 -49 89 119 101 71

Total net cash from operating activities 111 277 983 1 141 1 613 1 455

Paid capital expenditures -342 -361 -919 -864 -1 285 -1 340

Acquisition of shares 0 -24 -3 -44 -62 -21

Other investing activities -3 19 284 560 522 246

Cash flow before financing activities -234 -89 345 793 788 340

Key ratios

49

MEUR LTM 2011 2010Q3'12

EBITDA 2 465 3 008 2 271

Comparable EBITDA 2 292 2 374 2 396

Interest-bearing net debt 7,764* 7 023 6 826

Comparable Net debt/EBITDA 3.4 3.0 2.8

*) as of 30 September 2012

Return on capital employed (%) 10.4 14.8 11.6

Return on shareholders' equity (%) 13.1 19.7 15.7

Good liquidity – committed credit lines total EUR 2.7 billion

Debt Maturity Profile

50

0

250

500

750

1000

1250

1500

1750

2000

2250

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022+

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

MEUR

2012 506

2013 646

2014 1,282

2015 1,132

2016 868

2017 611

2018 201

2019 904

2020 76

2021 589

2022+

TOTAL

2,066

8,881

per 30 Sep, 2012 per 31 Dec, 2011

Average Interest Rate (incl. swaps and forwards) 4.9% 4.4%

Portion of floating / fixed debt 45 / 55% 47 / 53%

Outlook

• Key drivers and risks

– Wholesale price of electricity and volumes

• Demand and supply • Fuels

• Hydrological situation • Power plant availability

• CO2 emissions allowance prices

• Nordic markets

– Annual electricity demand growth estimated to be on average 0.5%

– Electricity continues to gain share of total energy consumption

• Russia

– Fortum’s goal is to achieve an operating profit level of about EUR 500 million and to create positive economic value added after completing the ongoing investment programme

51

Outlook

• Updated annual capex excluding potential acquisitions

– 2012 around EUR 1.5 (previously 1.6 to 1.8) billion

– 2013 EUR 1.1 to 1.4 (previously 1.1 to 1.4) billion

– 2014 EUR 0.9 to 1.1 (previously 1.1 to 1.4) billion

• Hedging

– rest of 2012 approximately 70% hedge ratio at approximately EUR 48/MWh

(Q2: 65% at EUR 49/MWh)

– 2013 approximately 60% hedge ratio at approximately EUR 45/MWh

(Q2: 55% at EUR 45/MWh)

– 2014 approximately 30% hedge ratio at approximately EUR 43/MWh

(Q2: n/a)

52

53

Hedging improves stability and predictability

0

10

20

30

40

50

60

70

80

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

EUR/MWh

Realised prices quarterly since 2000

Power's Nordic power price Spot price, SE&FI avg.

2009 onwards thermal and import from Russia excluded

2009 onwards new definition

Efficiency programme launched to maintain and strengthen the strategic flexibility and competitiveness

54

"The core of our activities is to fulfill our strategy of long-term

business operations, the aim of which is to strengthen our Nordic

core business, create solid earnings growth in Russia and build a

platform for future growth"

Short term - Fortum's efficiency programme 2013-2014

55

SPEED - Cash flow improved by EUR 1 billion - FLEXIBILITY

CAPEX EUR 250-350 million

DIVESTMENTS EUR 500 million

WORKING CAPITAL

Reduction

FIXED COSTS

Reduce EUR 150 million compared to 2012

WHY WHAT WHEN

2013-2014

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

fortum · power generation 53.1 twh heat sales 17.2 twh distribution customers 1.6 million...

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