Tapio Kuula, President and CEO

Next generation energy company Capital Markets Day 2012

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.

• Business environment

– Drivers

– Market in the future

– Fortum’s portfolio

• Power

– Nuclear position

• Russia

– Market

– CSA agreement

• Conclusions

Agenda

Global economic performance slowing; emerging nations still leading, uncertainty of the Eurozone recession duration

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•Emerging nations growth

cautiously slowing down

Source: IMF (World Economic Outlook Oct 2012)

•Sovereign debt crisis

and fiscal consolidation

•Retrenchment of European

banks affects credit availability

Demand in Fortum market areas: uncertainty and slow growth

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Source: IMF (World Economic Outlook Oct 2012), SCB, Finnish Energy Industries, ENTSO-E, APBE

•Slower growth prospects

than pre-crisis 2008

•Flattish power demand – Nordic markets to grow

0.5% on average

•Slow decision making around

EU emission trading and CO2

emission allowances

Volatile markets, weakened power prices

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Source: Source: Nord Pool Spot, NASDAQ OMX Commodities Europe, EEX, ATS, Mosenex, Fortum

* Russia prices not including capacity component for old assets

Capacity tariff estimate: 2010 9.4 €/MWh, 2011 6.8 €/MWh, 2012 5.9 €/MWh

Nordic system

Finland

Sweden

Germany

Russia*

Number of fundamental issues are impacting the energy supply and demand

Consumption Infrastructure Production Sourcing

Energy efficiency,

Tariffs

Market model,

Transmission

Subsidies,

Taxes

CO2 cost,

Licensing

European &

global economy Capital available and capital cost Fuel prices

Population growth,

Values/preferences

NIMBY,

Mistrust on markets Nuclear acceptability

Electric cars,

Demand side mgmt

Smart grids,

Storage,

Super grids

RES (solar, wind),

CCS Unconventional gas

Major physical impacts of climate change Fuel availability

Alternatives

DES,

New entrants,

New business models

Biomass availability

Political/

regulatory

Economic

Social

Technological

Environmental

Competition

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EU Energy Policy Objectives

EU 20-20-20 political targets

Other (national) political targets

Policy tools

RES generation is still today driven by political will and subsidies - but most likely within a decade especially solar power will be competitive without subsidies

• Competitiveness • Security of Supply • Environment

• Reduce greenhouse gas emissions • Increase renewable energy production • Reduce primary energy use through efficiency

• Decrease energy import dependence • Stimulate (domestic) industries • Stimulate (domestic) employment

• EU internal energy markets • EU ETS • RES subsidies • Energy efficiency legislation • Capacity remuneration schemes • Emission & biofuel legislation in transportation • Various energy-related taxation schemes

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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

Eventually somebody will have to pay the full cost

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Fortum's strategy – Hydro and nuclear

Hydro

• Solid and low risk in the existing environment

• Refurbishment investments to further improve efficiency, capacity and flexibility

• Opportunities for growth limited

• France and possibly some other selected markets

Nuclear

• Current nuclear assets still to carry and deliver

• Focus on safety, availability and Swedish upgrades

• Investment on new nuclear challenging

• Loviisa as CHP-nuclear could become an attractive option

• Strategic partnership models in lifetime extension and upgrades

Current fleet & fundaments Our growth potential

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Fortum's strategy – CHP and Russia

CHP

• Mostly district heating (DH) related business

• Future dependent on how markets/regulation and alternatives to DH develop

• Competitiveness of DH to remain, at least with existing infra structure

• Competitiveness and growth in CHP through bio/waste and bio-oil in Europe

• Industrial CHP in India

Russia

• CHP mostly DH, but also industrial CHP

• CHP risks very limited in Chelyabinsk and Tyumen

• Substantial investment programme ongoing until 2014

Current fleet & fundaments Our growth potential

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Power Divison

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Fortum's European power (and heat production)

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%

Power division’s business areas

Power Division

Renewable Energy

Power Solutions

Nuclear Competence

Center Co-owned Nuclear & Thermal

Physical Operations &

Trading • More than 244 hydro power

plants

• 10 wind power plants

• Expert services for

power producers

• Loviisa power plant, 2 units

• Technical support

• 8 co-owned nuclear power units

• 2 coal-fired power plants

• 1 CHP plant (UK)

• Power trading and delivery

process

• Power production and

margin optimisation

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Overview of Fortum’s nuclear fleet

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

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Olkiluoto

Loviisa Forsmark

Oskarshamn

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Fortum's nuclear power in the Nordics

• Finnish units world class in availability

• Availability has improved in Swedish units but

modernisations and upgrades still to be done

Source: IAEA, rounded numbers.

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

Oskarshamn 1 80 51 63 85 68 77 72

Oskarshamn 2 90 78 76 86 75 90 77

Oskarshamn 3 85 95 88 70 17 31 75

Forsmark 1 85 76 81 81 88 93 79

Forsmark 2 94 72 85 79 64 39 94

Forsmark 3 95 92 88 69 86 81 85

Loviisa 1 95 93 94 86 96 93 94

Loviisa 2 95 88 96 93 95 89 94

Olkiluoto 1 98 94 97 94 97 92 94

Olkiluoto 2 94 97 94 97 95 95 90

Well functioning power markets are important

The Nordic market is well functioning

- the fact that prices have been going down prove this

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Russia Divison

OAO Fortum

Tyumen

Tobolsk Moscow

St. Petersburg

Chelyabinsk

Nyagan

TGC-1 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

Russia is the World’s 4th largest power market

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Noviy Urengoy

Kemerovo

Chelyabinsk

St.Petersburg

Helsinki

Gas: 7.7 Eur/MWh

Coal: 7.6 Eur/MWh

Gas: 8.7 Eur/MWh

Coal: 9.8 Eur/MWh

Gas: 4.9 Eur/MWh

Coal: 4.3 Eur/MWh

Gas: 32.3 Eur/Mwh

Coal: 13.8 Eur/MWh

~ 400 km,

+ 3.96 Eur/MWh • According to current

regulation the

transportation costs of rail

roads are more expensive

than gas transportation

especially to the distant

regions

• Some cross-subsidies in

transportation between

regions exist.

Source: Metal expert, FTS, Alta-Soft online rail tariff calculation, , Russian PMT

Both fuel prices and transportation costs matter for the competitiveness of generation forms in various parts of Russia

Fuel prices do not include VAT and

local transportation costs. Coal price

are calculated for coal with 5000

kcal/kg

Gas price is average gas tariff for

2012, calorific value 7900 kcal/m3

Coal transportation cost is tariffs of

Russia's national railways company

Nyagan

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Capacity Supply Agreement (CSA)

• Fortum’s investment programme in Russia is

subjected to possible penalties if the new capacity is

substantially delayed or agreed major terms of the

CSA are not otherwise fulfilled

• CSA provisions made in 2008 in case of possible

penalties

• Provision made by unit, taking into account size, complexity etc.

of the unit

• The reversable provision is released after the unit is

comissioned

• A possible provision release is booked in the

comparable operating profit,

but not in comparable EBITDA

• Released provisions during 2011-2012

• Q2/2011 (22 MEUR)

• Q4/2011 (12 MEUR)

• Q1-Q3/2012 (0 MEUR)

•At the end of Q3/2012 the balance for

possible CSA penalty provisions was EUR

185 million

•The CSA provisions are reported in the Notes

(15) of the financial statement in every quarter

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Background: Generation built after 2007

under government CSA receive

quaranteed payments for a period of 10

years – in order to ensure a sufficient

return on investments

CSA • 10 years contracts for “new”

capacity

Financial market • 3-months ahead futures for

energy

Capacity auction • free prices, regulated prices

for “forced mode” capacity

Regulated bilateral capacity and energy

agreements • regulated prices & volumes

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Current structure of the Russian wholesale market - from the generators' point of view

Day ahead market Free bilateral energy agreements

Balancing market

• free prices & volumes

• determination of hourly planned production for the following day

• 'market' for deviations between actual and planned volumes

Main differences to the Nordic market model

• Power market and electricity price split into two components

• energy

• capacity

• Nodal energy pricing – about 6,600 nodes where prices differ due to losses and transmission bottlenecks

• Central dispatching

• No separate after-spot bids

Determination of actual total price according to

all sectors

Long-term Day-ahead Intra-day After operative day

Russia

The new capacity will be the key

driver for earnings growth –

operating profit level of about

EUR 500 million to be achieved

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Market will most probably not help us during

the next few years

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•Economic uncertainty, volatile markets

•Political/regulatory environment to be more volatile and not driven by energy-only market

•RES is expected to continue growth driven by markets

•Climate change is real: 3-5 °C temperature increase likely by 2100

•Nordic power supply/demand outlook

•Positive Russia power sector development

•We are gradually moving towards Solar Economy (i.e. hydro, solar, wind, wave etc.)

Summary of the key external issues relevant to Fortum

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Fortum in 2020 and beyond

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•Value, profitability, dividends and appreciation by all stakeholders

•Growth in competitive and sustainable energy production

•Geographical presence

•High technological competences within selected focus areas

•Strong strategic position, including value adding partnerships

Short term - Fortum's efficiency programme 2013-2014

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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

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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

Fortum’s Mission and Strategy

Fortum a forerunner in sustainability

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•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

•Fortum continues to believe in its CO2-free strategy also going forward

•We will not build a business model relying on subsidies

•Market and pricing might be changing

•The efficiency programme will strengthen our balance sheet

•More flexible and fast in the future

•We will be more competitive than before

Conclusion

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