FORTUM For a cleaner world. Investor / Analyst material February 2017

Transcription

1 FORTUM For a cleaner world Investor / Analyst material February 2017

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 Fortum s nuclear fleet pages Russia pages Fortum s investment programme page 34 Historical achieved prices page 35 Financial Statements 2016 pages IR contacts pages 54 3

4 Appr. 132,000 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 ~13 billion euros Finnish households 10.8% Financial and insurance institutions 1.8% Other Finnish investors 8.3% Finnish State 50.8% Foreign investors 28.3% 31 January

5 Capital returns: 2015 EUR 1.10 per share ~ EUR 1 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. 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 5 year dividend per share (EUR) history Fortum has since 1998 annually paid dividends in total ~13,603 MEUR % % % % % 5

6 Fortum For a cleaner world 6

7 Our strategic route Skandinaviska Elverk Gullspång Birka Energi 50% Fortum 50% Stockholm Gullspång merged with Stockholm Energi Stora Kraft Birka Energi 50% 100% Østfold Shares in Hafslund Shares in Lenenergo TGC-1 established Länsivoima 45% 65% Lenenergo shares Länsivoima 100% Elnova 50% 100% District heating in Poland Oil business spin-off E.ON Finland IVO Fortum Neste TGC-10 Divestment of Lenenergo shares Divestment of Fingrid shares Divestment of heat operations outside of Stockholm Divestment of small scale hydro Divestment of non-strategic heat business Divestment of electricity distribution business Divestment of electricity distribution and heat businesses Divestment of Grangemouth power plant Divestment of electricity distribution business Divestment of Gasum shares DUON Ekokem Turebergs Recycling Nordkraft wind power 7

8 Our current geographical presence Power generation Heat Electricity sales Nordic countries Power generation Heat sales Electricity customers 46.2 TWh 3.7 TWh 1.3 million Key figures 2016 Sales EUR 3.6 bn Comparable operating profit EUR 0.6 bn Balance sheet EUR 22 bn Personnel 8,100 Russia OAO Fortum Power generation Heat sales 25.5 TWh 20.7 TWh Poland Power generation 0.6 TWh Heat sales 3.6 TWh Baltic countries Power generation Heat sales 0.7 TWh 1.3 TWh India Power generation 29 GWh 8

9 Fortum mid-sized European power generation player; major producer in global heat Power generation Largest producers in Europe and Russia, 2014 TWh EDF Enel E.ON/Uniper RWE Rosenergoatom Gazprom Vattenfall Inter RAO UES ENGIE RusHydro NNEGC Energoat. Iberdrola EuroSibEnergo Fortum CEZ T Plus EnBW PGE Statkraft DTEK EDP DEI Gazprom T Plus Inter RAO UES 1 ) Veolia RusHydro EuroSibEnergo Sibgenco Fortum Quadra 1) EDF Vattenfall Beijing DH Lukoil TGC-2 Minskenergo KDHC Tatenergo DTEK PGNiG Dong Energy Enel Fortum Värme Heat production Largest global producers, 2014 TWh Enel EDF RWE E.ON Iberdrola DEI CEZ Centrica EDP Vattenfall ENGIE SSE EnBW Gas Natural Fenosa Tauron PGE Fortum Hafslund Dong Energy Customers Electricity customers in EU, 2014 Millions ) Veolia incl. Dalkia International and EDF incl. Dalkia's activities in France Source: Company information, Fortum analyses, 2014 figures pro forma 9

10 EDF Rosenergoatom RusHydro NNEGC Energoatom Enel E.ON Vattenfall EuroSibEnergo 1) ENGIE Statkraft Fortum Iberdrola RWE CEZ EnBW Axpo Verbund EDP Hidroelectrica Ukrhydroenergo Centrica Gazprom Alpiq EPS, Serbia Norsk Hydro E-CO Energi Gas Natural Fenosa Agder Energi BKK Lyse Energi DEI SSE Inter RAO UES PGE DTEK IES Biggest nuclear and hydro generators in Europe and Russia TWh Total generation Other Nuclear Hydro 10 1) Formerly GDF SUEZ Source: Company information, Fortum analyses, 2013 figures pro forma

11 Fortum in the Nordic electricity value chain Large customers Power generation Nordic wholesale market Power exchange and bilateral agreements Retail customers Private customers, small businesses 11

12 Fortum's power and heat production by source Fortum's power generation in 2016 Fortum's heat production in 2016 Natural gas 33% Nuclear power 33% Natural gas 71% Others 1% Biomass 1% Coal 4% Heat pumps, electricity 1% Peat 1% Waste 3% Biomass 7% Hydro power 28% Coal 17% Total generation 73.1 TWh (Generation capacity 13,334 MW) Total production 27.8 TWh (Production capacity 13,738 MW) 12

13 Fortum's European power and heat production Fortum's European power generation in 2016 Fortum's European heat production in 2016 Nuclear power 51% Coal 39% Other 1% Biomass 1% Coal 3% Others 1% Heat pumps, electricity 4% Peat 5% Biomass 27% Hydro power 44% Waste 12% Natural gas 12% European generation 47.5 TWh (Generation capacity 8,837 MW) European production 7.1 TWh (Production capacity 3,818 MW) 13

14 Fortum s Nordic, Baltic and Polish generation capacity Generation capacity MW Hydro Nuclear CHP Other thermal Wind 38 Nordic, Baltic and Polish generation capacity Sweden Price areas SE2 SE3 MW Hydro Wind 38 Hydro NO5 NO3 NO1 NO4 * SE1 SE2 FI Finland MW Hydro Nuclear CHP 456 Other thermal 376 Generation capacity in Finland Nuclear CHP 9 NO2 SE3 EE Baltics and Poland MW Generation capacity, CHP Generation capacity in Sweden Denmark, DK2 MW Generation capacity, CHP in Denmark 16 DK1 DK2 SE4 PL LT LV in Estonia in Latvia in Lithuania in Poland Associated companies plants (not included in the MWs) Fortum Värme, Stockholm; TSE, Naantali; KKJ, Kaunas * Fortum has acquired the 32 MW Nygårdsfjellet wind farm in Norway in January 2017 (not included in the MWs) Figures 31 December

15 Fortum a forerunner in sustainability Emissions-free production is Fortum s strategic choice 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

16 DEI RWE Drax SSE CEZ E.ON Vattenfall EDP Enel Edipower EnBW Gas Natural Fenosa ENGIE Dong Energy Iberdrola Fortum total PVO EDF Verbund Fortum EU Statkraft Fortum's carbon exposure among the lowest in Europe g CO 2 /kwh electricity, % of Fortum's total power generation CO 2 -free 96% of Fortum s power generation in the EU CO 2 -free 400 Average 311 g/kwh Note: Only European generation except Fortum total which includes Russia. In 2016 most of E.ON s generation was transferred to Uniper. Fortum s specific emissions of the power generation in 2016 in the EU were 28 g/kwh and in total 173 g/kwh. Source: PWC, November 2016, Climate Change and Electricity, Fortum 16

17 Fortum s renewables investment is already ramping up Bio, MW Power Heat Year Wind, MW Power Year Zabrze, Poland, waste/ coal CHP Associated companies, MW Naantali, Finland, bio-chp (49.5% share) Kaunas, Lithuania, waste-chp (49% share) Uljanovsk, Russia Solberg, Sweden Nygårdfellet, Ånstadblåheia, Sorfjord, Norway Solar, India, MW Bhadla 70 Paragada 100 Hydro, MW , 2019 Conts. starting Planning phase Maintenance/upgrade ~10 Annually Total: ~ 580 MW power and ~ 300 MW heat capacity (Fortum s share) 17

18 Market coupling milestones - Cross-border power flows optimised by power exchanges Market coupling between NL, BE and FR since 2006 Germany Nord Pool coupling started 11/2009 Market coupling for Central Western Europe (DE, FR, NL, BE) since 11/2010 with a continued coupling with Nord Pool. NorNed (NO-NL) and BritNed (UK-NL) included in Nord Pool price area for Estonia in 2010, Lithuania in 2012 and Latvia in Poland coupled with Nord Pool since 2010 Czech, Slovakia and Hungary coupled together since Romania joined in A common day-ahead market coupling for the whole north-western Europe (incl. Spain & Portugal) was started in Italy and Slovenia joined in 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 due to join latest in Switzerland waiting for agreement with the EU In addition to day-ahead coupling, European-wide intraday market coupling is due to be implemented in autumn 2017 Balancing market integration under development as well, based on both regional projects and the drafted EU Guideline on Electricity Balancing 18

19 Current transmission capacity from Nordic area is over 6,000 MW Countries Transmission capacity MW From Nordics To Nordics Denmark - Germany 2,225 2,100 Sweden - Germany Sweden - Poland Sweden - Lithuania Norway - Netherlands Finland - Estonia 1,016 1, Finland - Russia 320 1,300 1,016 Total 6,199 7,054 Theoretical maximum in transmission capacity ~40 TWh per annum, but restrictions especially between DK & DE 723 2, Net export from the Nordic area to Continental Europe and Baltics during year 2016 was 10 TWh During 2015 the net export was 18 TWh Approximately 25 TWh of net export is now reachable 19

20 Nordic, Baltic, Continental and UK markets are integrating Interconnection capacity will double by 2023 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 Two 1,400 MW NO-UK links as EU Projects of Common Interest: NSL to England agreed to be ready in 2021, NorthConnect to Scotland still requiring Norwegian permission 1,400 MW NordLink as first direct NO-DE link is being built by end-2019 New 1,400 MW DK-UK Viking Link not yet decided, but planned to be built by end MW COBRAcable from DK to NL due to be ready in May 2019 Jutland DE capacity planned to grow by 860 MW by 2020, with further 500 MW increase by 2022 New 400 MW Zealand DE connection Kriegers Flak offshore wind area by 2019 New interconnectors New Nordic lines Existing interconnectors New interconnections will double the export capacity to over 12,000 MW by 2023 New internal Nordic grid investments provide for increased available capacity for export to the Continent and Baltics EU s Connecting Europe Facility co-financing 3 rd EE-LV transmission line, due to be ready by 2020 EU s European Energy Programme for Recovery co-financed 700 MW NordBalt (operation started 2/2016) LitPol Link (500 MW in operation since 12/2015) with another 500 MW by It has opened a new transmission route from the Nordic market to the Continent Svenska Kraftnät and 50Hertz signed 1/2017 a cooperation agreement on building the 700 MW Hansa PowerBridge DC link between Sweden and Germany by 2025/26 20

21 reservoir content (TWh) Nordic water reservoirs reference level Q1 Q2 Q3 Q4 Source: Nord Pool 21

22 Nordic year forwards Year10 20 Year11 19 Year12 10 Year13 11 Year14 12 Year15 13 Year16 14 Year Year17 15 Year Year18 16 Year 17Year19 Year 18Year20 /MWh 1 February Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Source: Nasdaq Commodities

23 Wholesale power price EUR/MWh Nord Pool System Price Futures February Source: Nord Pool, Nasdaq Commodities

24 Wholesale power prices EUR/MWh Spot prices Forward prices German Nordic Russian* February * Including weighted average capacity price 24 Source: Nord Pool, Nasdaq Commodities, Bloomberg Finance LP, ATS, NP Market Council, Fortum

25 USD / bbl 150 Crude oil price (ICE Brent) 35 USD / t GBp / therm Fuel and CO 2 allowance prices CO 2 price (ICE EUA) EUR / tco Coal price (ICE Rotterdam) 100 Gas price (ICE NBP) Source: ICE Market prices 1 February 2017; future quotations

26 Nordic power generation Dominated by hydro, but fossil needed TWh/a Total Nordic generation 397 TWh in 2015 Fossil fuels Nuclear Biomass TWh % Solar Wind Hydro * Denmark Norway Sweden Finland Source: ENTSO-E Statistical Factsheet 2015 Net export in 2015: 16 TWh Net generating capacity as of 31 Dec 2015, MW Hydro Nuclear 7-31,200-16,184 9,076 3,263 2,752 *) Normal annual Nordic hydro generation 200 TWh, variation +/- 40 TWh. 26

27 Wholesale electricity price too low to attract investments EUR/MWh EUR/MWh Average levelised costs of new electricity generation Futures 1 February Gas condensing Onshore wind Coal condensing Solar PV In Spain Nuclear Large hydro Offshore wind Source: Nord Pool, Nasdaq Commodities Commodity prices are forward prices as of November 2016, extended with inflation 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. 27

28 Overview of Fortum s nuclear fleet Commercial operation started Generation Capacity Fortum s share Yearly production Fortum s share of production Share of Fortum s Nordic production Majority owner Fortum s share Unit 1: 1977 Unit 2: 1981 LOVIISA OLKILUOTO OSKARSHAMN FORSMARK Unit 1: 502 MW Unit 2: 502 MW Total: 1004 MW 8 TWh 8 TWh Unit 1: 1978 Unit 2: 1980 Unit 3: (Under construction) Unit 1: 880 MW Unit 2: 880 MW (Unit 3: 1,600 MW) Total: 1,760 MW (3,360) 27% 468 MW 14 TWh 4 TWh Unit 1: 1972 Unit 2: 1974 (out of oper.) Unit 3: 1985 Unit 1: 473 MW Unit 2: 638 MW Unit 3: 1,400 MW Total: 1,873 MW 43% 812 MW 12 TWh 5 TWh Unit 1: 1980 Unit 2: 1981 Unit 3: 1985 Unit 1: 984 MW Unit 2: 1,120 MW Unit 3: 1,167 MW Total: 3,271 MW 22% 727 MW 26 TWh 6 TWh 18% 9% 12% 13% Fortum Pohjolan Voima 26.6% Uniper 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. 28

29 Fortum's nuclear power in the Nordics Load factor (%) Oskarshamn Oskarshamn Oskarshamn Forsmark Forsmark Forsmark Loviisa Loviisa Olkiluoto Olkiluoto Source: Fortum Finnish units world class in availability Overview of production and consumption: - energy related links Oskarshamn Olkiluoto Forsmark FI Loviisa 29

30 Variety of technologies and ages Unit MWe (Net) Share (%) Share (MWe) Commercial operation Age Type/ Generation 1) Supplier Loviisa 1 Loviisa ,0 100, PWR / 1 PWR / 1 AEE (Atomenergoexport) AEE (Atomenergoexport) Olkiluoto 1 Olkiluoto 2 Olkiluoto (1,600) 26,6 26,6 25, (400) (end of 2018) BWR / 3 BWR / 3 PWR / 3 Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval Areva / Siemens Oskarshamn 1 Oskarshamn 2 Oskarshamn ,400 43,4 43,4 43, BWR / 1 BWR / 2 BWR / 4 Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval Forsmark 1 Forsmark 2 Forsmark ,120 1,167 23,4 23,4 20, BWR / 3 BWR / 3 BWR / 4 Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval 1) 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. Planned capacity increase: Forsmark 1, potential capacity increase of total ~110 MW in Closing of the units: OKG AB's Extraordinary shareholders' meeting decided on 14 October 2015 on the closure of Oskarshamn nuclear power plant units 1 and 2 in Sweden. Unit 1 will be taken out of operation and starting decommissioning Unit 2 has been out of operation since June 2013 due to an extensive safety modernisation, and it will not be put back into operation. The closing process for both units is estimated to take several years. 30 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.

31 Third party nuclear liability in case of severe accident In force since 1 January 2012 Law approved by Parliament in 2010, requires separate decision from Government to come into force. 300 M 500 M 145 M 300 M 500 M Unlimited company responsibility Convention parties State responsibility Responsibility of company (insurance or guarantee) 145 M 240 M Old, Finland 145 M 360 M Current, Sweden 700 M Sweden (new, not in force) 700 M 200 M Finland, temporary legislation 700 M New Paris convention Requires ratification by 2/3 of member states to come into force. In Finland approved by Parliament in

32 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 25 TWh power generation, 21 TWh heat production in 2016 Investment programme to add 85%, almost 2,200 MW to power generation capacity TGC % of territorial generating company TGC-1 operating in north-west Russia ~7,000 MW electricity production capacity (more than 40% hydro), ~26 TWh electricity, ~28 TWh heat in 2016 In December 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. In October 2015, Fortum announced that the discussions related to the potential restructuring of TGC-1 will continue, and it is not possible to estimate the time schedule or outcome of the discussions. TGC-1 St. Petersburg Nyagan Moscow Chelyabinsk OAO Fortum Tyumen 32

33 RUB / MWh / MWh Day ahead wholesale market prices in Russia Key electricity, capacity and gas prices in the OAO Fortum area 40 Day ahead power market prices for Urals Electricity spot price (market price), Urals hub, RUB/MWh IV/16 IV/ ,063 1,064 1,054 1, Average regulated gas price, Urals region, RUB 1000 m3 3,614 3,614 3,614 3,488 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 Fortum in Russia, RUB/MWh ,818 1,552 1,734 1,555 Achieved power price for Fortum in Russia, EUR/MWh In addition to the power price generators receive a capacity payment. Source: ATS 33

34 85% increase in power generation capacity in Russia through the investment program Year Supply starts Power plant Fuel type Existing capacity New investments Production type Total capacity < 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 Feb/2011 Tyumen CHP-1 Gas CHP/Condensing 681 June/2011 Chelyabinsk CHP-3 Gas CHP/Condensing 576 Oct/2011 Tobolsk CHP* Gas CHP/Condensing 665* 2013 April/2013 Nyagan 1 GRES Gas 418 Condensing 418 Dec/2013 Nyagan 2 GRES Gas 418 Condensing Jan/2015 Nyagan 3 GRES Gas 418 Condensing 418 Dec/2015 Chelyabinsk GRES Gas CHP/Condensing March/2016 Chelyabinsk GRES Gas 248 CHP/Condensing 248 2,333 MW 2,175 MW 4,508 MW 34 *Tobolsk power plant was sold in Q1/2016

35 Hedging improves stability and predictability onwards thermal and import from Russia excluded

36 Financial Statements 2016 Fortum Corporation 2 February 2017

37 Fortum s performance in 2016 Beginning of 2016 characterized by increased commodity market volatility and high hydro reservoirs creating pressure on electricity prices. End 2016 some positive signs were seen Comparable operating profit EUR 644 (808) million continued to decline due to significantly lower hydro production 20.7 (25.1) TWh and lower achieved power price 31 (33) EUR/MWh than in 2015 Operationally the year met our expectations The investment programme in Russia finalised Fixed costs have been reduced according to earlier announced plan (EUR 100 million) and progress has been good We updated our strategy, financial targets, vision and mission. We also adjusted the operational model to better enable strategy implementation The acquisition of Ekokem and DUON are important steps and access to new revenue streams Strategy execution in focus phase one and two The Board of Directors dividend proposal is EUR 1.10 per share 37

38 Market conditions in 2016 Nordic countries The electricity consumption totalled 390 (381) TWh The system spot price 26.9 (21.0) eur/mwh and Swedish area price 29.2 (22.0) eur/per MWh increased compared to the low levels of 2015, The Finnish area price was only somewhat higher than the year before, 32.4 (29.7) eur/mwh The market price of CO 2 emission allowances (EUA) was volatile during the quarter and was at EUR 6.5 (8.3) per tonne at the end of 2016 Russia Russian electricity consumption increased slightly and was 1,027 (1,007) TWh. The corresponding figure in Fortum s operating area in the First price zone (European and Urals part of Russia) was 787 (772) TWh The average electricity spot price, excluding capacity price, increased by 4.3% 38

39 Price development in the Nordic region and Russia +57% -0% -8% +23% NOTE: Achieved power price in roubles also increased 17% Includes capacity income 39

40 Q4 and FY 2016 Key figures (MEUR), continuing operations IV/2016 IV/ Sales 1, ,632 3,459 Comparable EBITDA ,015 1,102 Operating profit Comparable operating profit Share of profits of associates and joint ventures Profit before taxes Earnings per share, EUR Net cash from operating activities ,228 40

41 Generation Hydro production volumes lower than normal Electricity wholesale prices started to increase at the end of the year Positive taxation decision in Sweden taxation of different energy production forms more equal and the tax burden of nuclear and hydro on the level of other production technologies MEUR IV/16 IV/ Sales ,657 1,722 Comparable EBITDA Comparable operating profit Comparable net assets 5,815 5,931 Comparable RONA % Gross investments

42 City Solutions EBITDA improving Ekokem and DUON were acquired and integrated into City Solutions Unfavourable fuel mix and lower achieved power price burdened the result. In addition, 2015 included one-off positive effect in electricity sales MEUR IV/16 IV/ Sales ,424 1,187 Comparable EBITDA Comparable operating profit Comparable net assets 3,052 2,182 Comparable RONA % Gross investments

43 Russia The investment programme in Russia was completed. The new capacity has been the key driver for earnings growth Operationally good year with high utilisation rate Comparable EBITDA for 2016 more than EUR 300 million MEUR IV/16 IV/ Sales Comparable EBITDA* Comparable operating profit Comparable net assets 3,284 2,561 Comparable RONA % Gross investments * Excluding the net release of CSA provision

44 Q4/2016: Lower hydro volumes and achieved price Comparable operating profit, EUR million 1.6 TWh lower hydro volumes 2.7 EUR/MWh lower achieved price EUR 20 million higher CSA provision release in

45 2016: Lower hydro volumes and achieved price Comparable operating profit, EUR million 4.4 TWh lower hydro volumes 2.0 EUR/MWh lower achieved price EUR 50 million higher CSA provision release in 2015 Russian rouble EUR -13 million 45

46 Financials

47 Comparable and reported operating profit MEUR Comparable operating profit Reported operating profit Comparable operating profit Reported operating profit IV/2016 IV/2015 IV/2016 IV/ Generation City Solutions Russia Other Total, continuing operations Discontinued operations ,395 Total, Fortum ,245 Fortum's operating profit for the fourth quarter was impacted by items affecting comparability, including sales gains, updated provisions, and an IFRS accounting treatment (IAS 39) of derivatives mainly used for hedging Fortum's power production, as well as nuclear fund adjustments for continuing operations, amounting to EUR 14 (-205) million. Fortum's operating profit for 2016 was impacted by items affecting comparability, including sales gains, Ekokem transaction costs, updated provisions and an IFRS accounting treatment (IAS 39) of derivatives mainly used for hedging Fortum's power production, as well as nuclear fund adjustments for continuing operations, amounting to EUR -11 (-958) million. 47

48 Income statement MEUR IV/2016 IV/ Sales 1, ,632 3,459 Other income and expenses ,989-2,651 Comparable operating profit Items affecting comparability Operating profit Share of profit of associates and joint ventures Financial expenses, net Profit before taxes Income tax expense Net profit, continuing operations Net profit, discontinued operations ,369 Net profit, Fortum total ,142 EPS (EUR), continuing operations EPS (EUR), discontinued operations EPS (EUR), Fortum Total

49 Cash flow statement MEUR IV/2016 IV/ Cash from operating activities: Realised FX gains/losses Other funds from operations Change in working capital Cash from operating activities, cont. operations ,228 Cash from operating activities, discontinued operations Cash from operating activities, total Fortum ,381 Cash used in investing activities: Paid capital expenditures Acquisitions of shares Proceeds from divestments Other investment activities Total investing activities, continuing operations , Total investing activities, discontinued operations ,303 Cash used in investing activities, total Fortum ,701 6,268 Cash flow before financing activities, total Fortum ,080 7,650 49

50 Debt portfolio and average interest rate on the balance sheet date 31 December ) Maturity profile Bonds Financial institutions Other long-term debt Other short-term debt Total interest-bearing debt EUR 5,107 million Average interest 3.5% (2015: 3.7%) Portfolio mainly in EUR and SEK with average interest cost 2.1% (2015: 2.6%) EUR 805 million (2015: 641) swapped to RUB, average interest cost including cost for hedging 11.4% (2015: 12.8%) 1) In addition Fortum has received EUR 135 million based on Credit Support Annex agreements with several counterparties. This amount has been booked as a short term liability. 50

51 Fortum has a strong financial position MEUR Target Comparable EBITDA, continuing operations 1,015 1,102 Comparable EBITDA, total Fortum 1,015 1,265 Interest-bearing net debt, total Fortum -48-2,195 Comparable net debt/ebitda, total Fortum Around 2.5 ROCE % Return on capital employed, total Fortum At least 10% Liquid funds totalled EUR 5.2 billion Committed credit lines total EUR 2.0 billion 51

52 Outlook Nordic markets Fortum continues to expect that the annual electricity demand growth will be approximately 0.5% on average Electricity is expected to continue to gain share of total energy consumption Russia The targeted operating profit level (EBIT) for the Russia segment, RUB 18.2 billion, is expected to be reached during Annual capex estimate, excluding acquisitions Approximately EUR 800 million (maintenance capex below EUR 300 million) Hedging 2017 approximately 60% hedge ratio at EUR 30/MWh 2018 approximately 35% hedge ratio at EUR 26/MWh Taxation Effective tax rate for 2017 for the Group 19-21% In Sweden, reduced from 1 July 2017 nuclear taxes; abolished by Hydro assets real estate tax rate decreased from 2.8% to 0.5% over a four-year period 52

53 Annual General Meeting 2017 and dividend distribution proposal Fortum s Annual general meeting is planned to take place at 14:00 on Tuesday, 4 April 2017, at the Finlandia Hall, Mannerheimintie 13, in Helsinki, Finland The Board of Directors dividend proposal is EUR 1.10 per share Dividend-related dates planned for 2017 Ex-dividend date 5 April 2017 Record date for dividend payment 6 April 2017 Dividend payment date 13 April

54 Fortum Investor Relations and Financial Communications For more information, please visit Sophie Jolly Vice President +358 (0) Rauno Tiihonen Manager +358 (0) Next events: AGM on 4 April 2017 Ex-dividend date on 5 April 2017 Q1/2017 results on 27 April 2017 Q2/2017 results on 20 July 2017 Q3/2017 results on 26 October 2017 Måns Holmberg Manager (Financial Communications & Private investors) +358 (0) mans.holmberg@fortum.com Follow us on: Fortum ForEnergy blog at Pirjo Lifländer IR Specialist (Investor relations & Financial Communications) +358 (0) pirjo.liflander@fortum.com Meeting requests: Arja-Tuula Tiainen Executive Assistant +358 (0) arja.tiainen@fortum.com 54