FORTUM Power and heat company in the Nordic area, Russia, Poland and the Baltics. Investor/Analyst material July 2012

Transcription

1 FORTUM Power and heat company in the Nordic area, Russia, Poland and the Baltics Investor/Analyst material July 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. 2

3 Content Fortum today, pages 4-17 European and Nordic power markets, pages Data on Fortum s nuclear fleet, pages Russia, pages Data on capacity payments, pages Fortum s investment programme, page 46 Financials and outlook, pages Hedges, pages 54-55

4 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 ~12 billion euros Households 8.7% Financial and insurance institutions 3.2% Other Finnish investors 10.0% Finnish State 50.8% Foreign investors 27.3% 30 June

5 Capital returns Dividend per share EUR Total ~ 8,630 MEUR 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 the average % 103% 78% 58% 68% 68% 50% 5

6 Organisational structure Business Divisions President and CEO Tapio Kuula Staff Functions Power (Espoo) Executive Vice President Matti Ruotsala Heat (Stockholm) Executive Vice President Per Langer Russia (Chelyabinsk) Executive Vice President Alexander Chuvaev Electricity Solutions and Distribution (Espoo) Executive Vice President Timo Karttinen Finance Executive Vice President and Chief Financial Officer Juha Laaksonen Corporate Relations and Strategy Executive Vice President Anne Brunila Corporate Human Resources Senior Vice President Mikael Frisk Country responsibles: Timo Karttinen / Finland, Norway; Per Langer / Sweden, Poland, Baltics; Alexander Chuvaev / Russia 6

7 Fortum s Mission and Strategy Mission Fortum s purpose is to create energy that improves life for present and future generations. We provide sustainable solutions that fulfill the needs for low emissions, resource efficiency and energy supply security, and deliver excellent value to our shareholders. Strategy Leverage the strong Nordic core Create solid earnings growth in Russia Build platform for future growth Competence in CO 2 -free hydro, nuclear and energy efficient CHP production, and energy markets 7

8 Strategy builds on our competences and industry beliefs Two strong platforms for growth Competitiveness key for long term value creation Integrating European energy markets and a gradual decrease in the weight of the Nordic power price More attractive growth prospects in power and heat generation Nordic power wholesale and heat market Russian power and heat market Sustainable business models cannot rely on a continuous high level of subsidies Leverage our competences in nuclear, hydro and CHP Industrial restructuring opportunities Electricity solutions and distribution part of the Nordic core Strong focus on delivering value and stable returns to shareholders 8

9 Our geographical presence today Nr 1 Nr 1 Nr 2 Nr 2 Heat Distribution Power generation Electricity sales Great Britain Power generation 1.2 TWh Heat sales 2.1 TWh Nordic countries Power generation 53.1 TWh Heat sales 17.2 TWh Distribution customers 1.6 million Electricity customers 1.2 million Key figures 2011 Sales EUR 6.2 bn Operating profit EUR 2.4 bn Balance sheet EUR 23 bn Personnel 10,800 Russia OAO Fortum Power generation 17.4 TWh Heat sales 26.7 TWh TGC-1 (~25%) Power generation ~7 TWh Heat sales ~8 TWh 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* * Distribution business sold Jan 1,

10 Divisions of Fortum Business description Comparable operating profit Power Division Fortum s power generation, physical operation and trading as well as expert services for power producers. EUR 1,201 million Heat Division Combined heat and power generation, district heating and cooling activities and b- to-b heating solutions. EUR 278 million Russia Division Power and heat generation and sales in Russia. It includes OAO Fortum and Fortum s slightly over 25% holding in TGC-1. EUR 74 million Electricity Solutions and Distribution Division Fortum's electricity sales and distribution activities. Two business areas: Distribution and Electricity Sales. Distr.: EUR 295 million El. sales: EUR 27 million Net assets EUR 6,247 million EUR 4,191 million EUR 3,273 million Distr.: EUR 3,589 million El. sales: EUR 11 million Volume (TWh) Nordic generation 48.1 Heat sales 22.6 Power sales: 6.2 Power sales.: 20.2 Heat sales.: 26.7 Distr.net. 26.1, reg.net El. sales: 14.4 Drivers Nordic power price, generation volumes Fuel mix, heat and power price New capacity, and price for that, power and heat price Distr.: Regulated El. sales: Sales margin 10

11 Fortum mid-sized European power generation player; Global #4 in heat Power generation Heat production Customers Largest producers in Europe and Russia, 2010 TWh Largest global producers, 2010 TWh EDF E.ON Enel RWE ***) GDF SUEZ *) IES Gazprom Dalkia Fortum Vattenfall Gazprom Rosenergoatom Vattenfall Inter RAO UES **) SUEK Onexim Bashkirenergo Irkutskenergo Iberdrola NNEGC Energoat. RusHydro Fortum CEZ RAO ES East Inter RAO UES TGC-2 Tatenergo Lukoil EnBW Kievenergo *) IES Minsk Energo Irkutskenergo Statkraft PGE SSE Dong Energy KDHC, Korea PGNiG TGC-14 DEI ELCEN, Rom Electricity customers in EU, 2010 millions Enel EDF E.ON RWE Iberdrola CEZ DEI Centrica EDP Vattenfall GDF SUEZ SSE EnBW PGE Gas Natural Fenosa Tauron Fortum Dong Energy Hafslund * 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.

12 12 Biggest nuclear and hydro generators in Europe and Russia TWh Total generation Other Nuclear Hydro EDF Rosenergoatom E.ON NNEGC Energoatom Enel RusHydro Vattenfall GDF SUEZ Irkutskenergo Statkraft RWE Iberdrola Fortum EnBW CEZ Verbund Krasnoyarskaya HPP Axpo Hidroelectrica EDP Gazprom Alpiq Ukrhydroenergo EPS, Serbia Gas Natural Fenosa E-CO Energi Norsk Hydro DEI Agder Energi Edison BKK Inter RAO UES SSE PGE IES Figures 2010 pro forma

13 Fortum's carbon exposure among the lowest in Europe g CO 2 /kwh electricity, % of Fortum's total power generation CO 2 -free 85% of Fortum s power generation in the EU CO 2 -free Close to 100% of the ongoing investment programme in the EU CO2-free Average 337 g/kwh DEI Drax RWE CEZ SSE Source: PWC & Enerpresse, Novembre 2011 Changement climatique et Électricité, Fortum Vattenfall E.ON Enel Dong EDP GDF SUEZ Europe Union Fenosa Iberdrola PVO Fortum total EDF Verbund Fortum EU Statkraft 13 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.

14 Fortum s strategic route Länsivoima 45% 65% Länsivoima 100% Elnova 50% 100% Separation of oil businesses E.ON Finland Divestment of Fingrid shares Divestment of non-strategic heat business Neste IVO Gullspång Skandinaviska Elverk Birka Energi 50% Fortum 50% Stockholm Gullspång Stockholm Energi Lenenergo shares 1998 Stora Kraft Birka Energi 50% 100% Østfold Shares in Hafslund Shares in Lenenergo Starting TGC-1 District heat in Poland 2003 Divestment of Lenenergo shares TGC-10 Divestment of heat operations outside of Stockholm Divestment of non-strategic heat business 14

15 Fortum in the Nordic electricity value chain Competitive businesses Generation Nordic wholesale market Power exchanges and bilateral Large customers Retail companies Private customers, small businesses Regulated businesses Transmission and system services Distribution Independent transmission system operator Independent distribution companies 15

16 Fortum's European power and heat production Fortum's European power generation in 2011 Fortum's European heat production in 2011 Nuclear power 45% Coal 26% Biomass fuels 24% Other 1% Biomass 3% Natural gas 4% Coal 9% Hydro power 38% Other 4% Peat 3% Waste 4% Oil 5% Natural gas 22% Heat pumps, electricity 12% European generation 55.3 TWh (Generation capacity 11,422 MW) European production 22.0 TWh (Production capacity 10,625 MW) 16

17 Fortum a forerunner in sustainability Dow Jones Sustainability Index World Fortum is the only Nordic power and heat company listed in the index SAM Sustainability Yearbook 2010, 2011 and 2012 STOXX Global ESG Leaders indices oekom OMX GES Sustainability Finland Index Storebrand SRI (Fortum, the most responsible electricity company globally in 2006 and 2009) Carbon Disclosure Project (sector leader in CDLI index in 2011) 17

18 Fortum today, pages 4-17 European and Nordic power markets, pages Data on Fortum s nuclear fleet, pages Russia, pages Data on capacity payments, pages Fortum s investment programme, page 46 Financials and outlook, pages Hedges, pages 54-55

19 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 trough BritNed cable in April 2011 The TSOs and power exchanges are developing a single market coupling for the whole western Europe by end-2012 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 with full integration of the Baltic States during EU s European Target Model for cross-border power trading sets 2014 as deadline for an EU-wide market coupling 19

20 Current transmission capacity from Nordic area to Continental Europe is ~4000 MW Countries Transmission capacity MW From Nordics To Nordics Denmark - Germany Sweden - Germany Sweden - Poland Norway - Netherlands Total 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

21 Nordic and Continental markets are integrating interconnection capacity could double by 2021 Both merchant and TSO projects for links to the UK by 2018/21; North Seas Countries Offshore Grid Initiative launched for supergrid development New interconnections could double the capacity to over 8000 MW by 2021 First direct 1000 MW NO- DE link could be built by 2018/2021 EU financial support for 700 MW DK-NL link to connect offshore wind, too Jutland DE capacity to be increased by 500 MW in 2012 and by further 500 MW by 2018 EU support to connect Kriegers Flak offshore wind area to DK&DE; new 400 kv AC cable SE-DK also studied 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 internal Nordic grid investments provide for increased available capacity for export to the Continent and Baltics EU s European Energy Programme for Recovery cofinancing Estlink 2 and NordBalt 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 21

22 Nordic water reservoirs reservoir content (TWh) reference level Q1 Q2 Q3 Q4 Source: Nord Pool Spot 22

23 Nordic year forwards /MWh Year 09 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 5 July Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Source: NASDAQ OMX Commodities Europe 23

24 Wholesale price for electricity EUR/MWh Nord Pool System Price Forwards July Source: Nord Pool Spot, NASDAQ OMX Commodities Europe 24

25 Wholesale prices for electricity EUR/MWh Spot prices Forward prices Dutch German Nordic Russian* July 2012 * including capacity tariff estimate. E.g 9.4 /MWh for 2010, 6.8 for 2011 and 5.9 for Source: Nord Pool Spot, NASDAQ OMX Commodities Europe, EEX, APX-ENDEX, Bloomberg Finance LP, ATS, Fortum

26 Fuel and CO2 allowance prices USD / bbl Crude oil price (ICE Brent) EUR / tco CO 2 price (ICE ECX EUA) Coal price (ICE Rotterdam) 100 Gas price (ICE NBP) USD / t GBp / therm Source: ICE Market prices 17 July 2012; future quotations

27 Nordic power generation dominated by hydro, but fossil needed TWh/a Total Nordic generation 378 TWh in 2011 Fossil fuels Nuclear Biomass TWh % Wind Hydro * Denmark Norway Sweden Finland Net import in 2011: 3 TWh Source: ENTSO-E Memo 2011 *) Normal annual Nordic hydro generation 200 TWh, variation +/- 40 TWh. 27

28 Still a highly fragmented Nordic power market Power generation 382 TWh >350 companies Electricity distribution 15 million customers ~500 companies Electricity retail 15 million customers ~350 companies Others Vattenfall Others Fortum E.ON Others Vattenfall Fortum 30% Agder Energi Helsinki Norsk Hydro E-CO Energi PVO Dong Energy E.ON Statkraft Fortum 53% Dong Energy Vattenfall Hafslund Elenia SEAS-NVE Helsinki Göteborg Syd Energi 52% Dong Energy E.ON Hafslund Statkraft SEAS-NVE Helsinki Bixia Göteborg Source: Fortum, company data, shares of the largest actors, pro forma 2010 figures. 28

29 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, GW of new capacity needed by % 250% 200% 150% 100% 50% 0% Capacity changes, (GW) Retiring capacity Growth, Primary energy demand Electricity generation ~30% 544 ~ 50% 159 ~170% 217 ~260% US Europe Russia China India Other areas World total 2001 New capacity, total ( Source: IEA WEO 2011 (New polices scenario) 1) Total new capacity needed for increasing demand and retiring capacity replacements

30 New capacity, except nuclear, will require over 60 EUR/MWh power price EUR/MWh Source: Nord Pool spot, NASDAQ OMX Commodities Europe Futures 6 July EUR/MWh CO 2 cost Other costs ( variation) Coal Gas Nuclear Hydro Wind Clean coal Estimated lifetime average cost in nominal 2014 terms. Large variations in cost of new hydro and wind due to location and conditions. 30

31 Overview of Fortum s nuclear fleet Olkiluoto Forsmark Loviisa Oskarshamn Loviisa Olkiluoto Oskarshamn Forsmark Two units, built 1977 and MW = 976 MW Fortum s share: 100 % Two units, built 1978 and 1980 one under construction MW = 1760 MW Under construction 1600 MW Three units, built 1972,1974 and = 2511 MW Fortum s share: 43 % (1089 MW) Three units, built 1980,1981 and = 3150 MW Fortum s share: 22 % (699 MW) Yearly production 8 TWh Share of Fortum s Nordic power production: 18 % Fortum s share: 27 % (468 MW) Yearly production 14 TWh Fortum s share: 4 TWh Share of Fortum s Nordic power production: 9 % Yearly production 17 TWh Fortum s share: 7 TWh Share of Fortum s Nordic power production: 16 % Yearly production 25 TWh Fortum s share: 5,5 TWh Share of Fortum s Nordic power production: 13 % 31

32 Ownership structures and formal responsibilities Teollisuuden Voima Oyj Site Loviisa Licensee Fortum Power and Heat Oy Operator Fortum Power and Heat Oy Pohjolan Voima 56,8 EPV Energia 6,5 Fortum 26,6 Karhu Voima 0,1 Olkiluoto Teollisuuden Voima Oyj Teollisuuden Voima Oyj Mankala 8,1 Kemira 1,9 Oskarshamn OKG Aktiebolag OKG Aktiebolag Forsmark Forsmarks Kraftgrupp AB Forsmarks Kraftgrupp AB OKG Aktiebolag Karlstad kommun 2,1 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 Fortum 43,4 Forsmarks Kraftgrupp AB E.ON 54,5 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. Fortum 22,2 E.ON 9,9 Skellefteå Kraft 2,0 Vattenfall 66,0 32

33 Fortum's nuclear power in the Nordics Load factor (%) Source: IAEA, NordPool. Rounded numbers. Situation on 12 July 2012 Planned annual outages days in 2012 (from July 12 onwards) Oskarshamn Oskarshamn Oskarshamn Forsmark Forsmark Forsmark Loviisa Loviisa Olkiluoto Olkiluoto Finnish units world class in availability Availability improved in Swedish units Forsmark Olkiluoto Loviisa Overview of production and consumption: Oskarshamn investors - energy related links 33

34 Variety of technologies and ages Unit MWe (net) share [%] share [Mwe] Commercial Type / Age operation Generation* Supplier Loviisa , PWR / 1 AEE (Atomenergoexport) Loviisa , PWR / 1 AEE (Atomenergoexport) Olkiluoto , BWR / 3 Asea-Atom / Stal-Laval Olkiluoto , BWR / 3 Asea-Atom / Stal-Laval Olkiluoto-3 (1600) 25,0 (400) 2014 (?) PWR / 3 Areva / Siemens Oskarshamn , BWR / 1 Asea-Atom / Stal-Laval Oskarshamn , BWR / 2 Asea-Atom / Stal-Laval Oskarshamn , BWR / 4 Asea-Atom / Stal-Laval Forsmark , BWR / 3 Asea-Atom / Stal-Laval Forsmark , BWR / 3 Asea-Atom / Stal-Laval Forsmark , BWR / 4 Asea-Atom / Stal-Laval *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. 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. 34

35 Third party nuclear liability in case of severe accident Law approved by Parliament in 2010, requires separate decision from Government to come into force. Has been approved by the Parliament. In force onwards. Unlimited company responsibility 300 M 300 M Convention parties 500 M 145 M 500 M State responsibility Responsibility of company (insurance or guarantee) 145 M 700 M 700 M 145 M 700 M Requires ratification by 360 M 2/3 of member states 240 M 200 M to come into force. In Finland approved by Parliament in Current, Finland Current, Sweden Sweden (new, not in force) Finland, temporary legislation New Paris convention 35

36 Nuclear upgrades in Sweden 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) ~2 OKG , ~3 OKG ~5 FKA 1 Decision ~ ~2 FKA ~2 FKA 3 Decision ~ ~2 Total ~290 ~2 ~1,950* ~15 36 Capacity increase and completion timetable based on recent estimate (Nord Pool). At Fortum's share of Swedish nuclear capacity was 1,787 MW.

37 Fortum s investment programme Nordic region, Poland and Baltic countries Project Electricity, MW Heat, MW Commissioned Olkiluoto 3, Finland Swedish nuclear upgrades 290 Refurbishing of hydro power 10 annually Brista, Sweden Q (waste CHP) Klaipeda, Lithuania Q (waste CHP) Järvenpää, Finland Q (biofuel CHP) Jelgava, Latvia Q (biofuel CHP) Total ~800 ~225 Additional electricity capacity around 800 MW ~100% CO 2 -free 37

38 Fortum today, pages 4-17 European and Nordic power markets, pages Data on Fortum s nuclear fleet, pages Russia, pages Data on capacity payments, pages Fortum s investment programme, page 46 Financials and outlook, pages Hedges, pages 54-55

39 Russia is the World s 4th largest power market TWh 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, China US Japan Russia India Germany Canada France South Korea Brazil Nordic UK Power generation in 2011 based on gross output. Source: BP Statistical Review of World Energy June

40 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 Q (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 TGC-1 St. Petersburg Nyagan Moscow Chelyabinsk OAO Fortum Tobolsk Tyumen 40

41 Day ahead wholesale market prices increase driven by recovering demand and gas price Key electricity, capacity and gas prices in the OAO Fortum area Day ahead power market prices for Urals Electricity spot price (market price), Urals hub, RUB/MWh Average regulated gas price, Urals region, RUB 1000 m 3 Average capacity price for CCS old capacity, trub/mw/month II/12 III/2009 II/11 III/2008 I-II/12 I-II/ LTM ,548 2,548 2,548 2,548 2,548 2, / MWh Average capacity price for CSA new capacity, trub/mw/month Average capacity price, trub/mw/month Achieved power price for OAO Fortum, EUR/MWh In addition to the power price generators receive a capacity payment. Source: ATS 41 2

42 Power market liberalisation two markets 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) 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 * Capacity supply agreement 42

43 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 43

44 Long-term financial target will be dictated by basic economic logic a Invested capital EUR ~4 bn ~2.5 bn b In 2009, WACC for Russia was ~12% 2011 ~2014 ~EUR 100 million improvement in EBITDA through the efficiency improvement programme Assuming, having completed the investment programme, an invested capital of and an unchanged cost of capital 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 a b 44

45 Key factors behind the profitability improvement in Russia Efficiency improvement programme Increasing heat production profitability Fuel efficiency improvement Cost savings New CSA capacity commissioning 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 MW MW (Nyagan 1 in 2012 or 2013) MW MW Total - 2,388 MW 45 * Capacity Supply Agreement

46 85% increase in power generation capacity by the end of 2014 through the investment programme Power generation capacity (MW) Plant Supply date Fuel type Existing Planned Total Tyumen CHP-2 Gas Tyumen CHP-1 Feb/2011; 2014 Gas (CHP/Condensing) 681 Tobolsk CHP Oct/2011 Gas (Condensing) 665 Chelyabinsk CHP-3 June/2011 Gas (CHP/Condensing) 576 Chelyabinsk CHP-2 Gas, coal Argayash CHP Gas, coal Chelyabinsk CHP-1 Gas, coal Chelyabinsk GRES 2014 Gas 82 2*248 (CHP/Condensing) 578 Nyagan GRES 2012 or 2013, 2013, 2013 Gas 3*418 (Condensing) 1,254 Boilers - Total 2,785 2,388 5,173 46

47 Fortum today, pages 4-17 European and Nordic power markets, pages Data on Fortum s nuclear fleet, pages Russia, pages Data on capacity payments, pages Fortum s investment programme, page 46 Financials and outlook, pages Hedges, pages 54-55

48 Work continues according to our strategy Investment programme adds capacity Hedges create stability Strong financial position 48

49 Income statement MEUR II/2012 II/2011 I-II/2012 I-II/ LTM Sales Expenses Comparable operating profit Items affecting comparability Operating profit Share of profit of associates and jv's Financial expenses, net Profit before taxes Income tax expense Net profit for the period Non-controlling interests EPS, basic (EUR) EPS, diluted (EUR)

50 Comparable and reported operating profit Comparable operating Reported operating Comparable operating Reported operating MEUR profit profit profit profit II/2012 II/2011 II/2012 II/2011 I-II/2012 I-II/2011 I-II/2012 I-II/2011 Power Heat Russia Distribution Electricity Sales Other Total Non-recurring items, IFRS accounting treatment (IAS 39) of derivatives and nuclear fund adjustments had an impact on the reported operating profit EUR 2 (261) million or earnings per share EUR 0.00 (0.27) in the second quarter, and EUR 87 (512) million or earnings per share EUR 0.10 (0.47) for January-June. 50

51 Cash flow statement MEUR II/2012 II/2011 I-II/2012 I-II/ LTM Operating profit before depreciations Non-cash flow items and divesting activities Financial items and fx gains/losses Taxes Funds from operations (FFO) Change in working capital Total net cash from operating activities Paid capital expenditures Acquisition of shares Other investing activities Cash flow before financing activities Note: EUR 888 million paid in dividends during the second quarter

52 Key ratios MEUR LTM Q2'12 EBITDA Comparable EBITDA Interest-bearing net debt 7 420* Comparable Net debt/ebitda Return on capital employed (%) Return on shareholders' equity (%) *) as of 30 June 2012 Good liquidity committed credit lines total EUR 2.7 billion 52

53 Outlook Key drivers and risks Wholesale price of electricity 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 The commissioning of the new units Nyagan 1 and 2 postponed 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 53

54 Outlook Annual capex (excluding potential acquisitions) 2012 around EUR 1.6 to 1.8 billion 2013 and 2014 around EUR 1.1 to 1.4 billion annually Hedging rest of 2012 approximately 65% hedge ratio at approximately EUR 49/MWh (Q1: 70% at EUR 48/MWh) 2013 approximately 55% hedge ratio at approximately EUR 45/MWh (Q1: 45% at EUR 46/MWh) Business environment still looks challenging during the coming months 54

55 Hedging improves stability and predictability Realised prices quarterly since EUR/M Wh 2009 onw ards thermal and import from Russia excluded Power's Nordic power price 2009 onwards new definition Spot price, SE&FI avg. 55

56 Debt maturity profile MEUR , , Bonds Financial institutions Other long-term debt CPs Other short-term debt TOTAL 1,080 7,824 per 30 Jun, 2012 per 31 Dec, 2011 Average Interest Rate (incl. swaps and forwards) 4.8% 4.4% Portion of floating / fixed debt 37 / 63% 47 / 53% 56

57 57