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FORTUMPower and heat companyin the Nordic area, Russia, Poland and the Baltics
Investor/Analyst material
September 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.
Fortum today, pages 4 -17
European and Nordic power markets, pages 19 - 30
Data on Fortum’s nuclear fleet, pages 31 - 37
Russia, pages 39 - 46
Data on capacity payments, pages 42 - 43
Fortum’s investment programme, page 46
Financials and outlook, pages 48 – 56
Hedges, pages 54 - 55
Content
4
• 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
More than 100,000 shareholders
31 August 2012
Foreign investors 26.7%Finnish State 50.8%
Other Finnish investors 10.1%
Households 9.1%Financial and insurance institutions 3.3%
5
Total ~ 8,630 MEUR
1999 2001 20032000 2002 2004
0.180.23 0.26
0.310.42
0.58
2005
1.12
Dividend per share
EUR
0.13
1998
0.5
80
.54
2006
1.26
0.7
30
.53
• 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
2007
1.35
0.7
70
.58
2008
1.00
Capital returns
72% 103% 78% 58%
1.00
2009
68%
1.00
2010
68%
1.00
2011
50%
6
Organisational structure
Business
Divisions
President and CEO
Tapio Kuula
Electricity Solutions and Distribution (Espoo)
Executive Vice PresidentTimo Karttinen
Power (Espoo)Executive Vice President
Matti Ruotsala
Heat (Stockholm)Executive Vice President
Per Langer
Russia (Chelyabinsk)Executive Vice President
Alexander Chuvaev
FinanceChief Financial Officer
Markus Rauramo
Corporate Relations and Strategy
Executive Vice PresidentAnne Brunila
Corporate Human ResourcesSenior Vice President
Mikael Frisk
Staff Functions
Country responsibles: Timo Karttinen / Finland, Norway; Per Langer / Sweden, Poland, Baltics; Alexander Chuvaev / Russia
7
Strategy
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.
Mission
Leverage the strong
Nordic core
Create solid earnings
growth in RussiaBuild platform for
future growth
Competence in CO2-free hydro, nuclear and energy efficient CHP production,
and energy markets
Fortum’s Mission and Strategy
8
Strategy builds on our competences and industry beliefs
• Electricity
solutions and
distribution part of
the Nordic core
More attractive
growth prospects
in power and heat
generation
Two strong
platforms for
growth
• Nordic power
wholesale and
heat market
• Russian power
and heat
market
Competitiveness
key for long term
value creation
• Sustainable
business models
cannot rely on a
continuous high
level of subsidies
Integrating European
energy markets and
a gradual decrease
in the weight of the
Nordic power price
• Leverage our
competences in
nuclear, hydro and
CHP
• Industrial restructuring
opportunities
Strong focus on delivering value and stable returns to shareholders
9
Our geographical presence today
TGC-1 (~25%)
Power generation ~7 TWh
Heat sales ~8 TWh
OAO Fortum
Power generation 17.4 TWh
Heat sales 26.7 TWh
Russia
PolandPower generation 0.6 TWh
Heat sales 4.3 TWh
Baltic countriesPower 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
DistributionNr 1
Key figures 2011Sales EUR 6.2 bn
Operating profit EUR 2.4 bn
Balance sheet EUR 23 bn
Personnel 10,800
Great BritainPower generation 1.2 TWh
Heat sales 2.1 TWh
* Distribution business sold Jan 1, 2012
10
Divisions of Fortum
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 volumesNew capacity, and price for
that, power and heat price
Power sales.: 20.2
Heat sales.: 26.7
Distr.: Regulated
El. sales: Sales margin
11
Fortum mid-sized European power generation player; Global #4 in heat
* 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, 2010TWh
Power generation Heat production
Electricity customers in EU, 2010millions
Customers
DEI
Irkutskenergo
*) IES
Iberdrola
RusHydroFortum
EnBW
Vattenfall
CEZ
RWE
PGESSE
Statkraft
RosenergoatomGazprom
NNEGC Energoat.
Enel
E.ONEDF
0 100 200 300 400 500 600
Inter RAO UES
GDF SUEZ***)
Onexim
Tatenergo
Minsk EnergoKievenergo
IrkutskenergoBashkirenergo
RAO ES EastInter RAO UES
TGC-2
Fortum
Dong EnergyKDHC, Korea
TGC-14
Lukoil
Gazprom
0 20 40 60 80 100 120 140
ELCEN, Rom.
Dalkia
SUEK**)
*) IES
Vattenfall
PGNiG
0 20 4010 30
DEI
CEZ
Enel
Centrica
EDP
Iberdrola
SSE
EnBW
Fortum
EDF
E.ON
RWE
Gas NaturalFenosa
PGE
Tauron
GDF SUEZ
Hafslund
Dong Energy
Vattenfall
12
Biggest nuclear and hydro generators in Europe and Russia
Figures 2010 pro forma
TWhE
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
Ed
iso
n
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
13
Fortum's carbon exposure among the lowest in Europe
Source:
PWC & Enerpresse, Novembre 2011
Changement climatique et Électricité, Fortum
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
un
d
Fo
rtum
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
84189
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
Divestment of
non-strategic
heat business
Divestment of
non-strategic
heat business
Länsivoima→100%
E.ON FinlandSeparation of
oil businessesElnova
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
20082005 2006 20072002 2003 20041999 2000 20011996 1998 2009 2010 2011
Länsivoima45%→65%
2012
Stockholm
Energi
Gullspång
Birka Energi50% Fortum
50% Stockholm
Gullspång
Skandinaviska
Elverk
Birka Energi50% → 100%
Stora
Kraft
Lenenergo
shares 1998 →
IVO
1997
Neste
15
Private customers,
small businesses
Retail companies
Fortum in the Nordic electricity value chain
Large customers
Competitive
businesses
Regulated
businesses
Independent transmission
system operator
Independent
distribution companies
Generation
Nordic
wholesale
market
Power exchanges
and bilateral
Transmission and
system servicesDistribution
16
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%
17
• 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)
Fortum a forerunner in sustainability
Fortum today, pages 4 -17
European and Nordic power markets, pages 19 - 30
Data on Fortum’s nuclear fleet, pages 31 - 37
Russia, pages 38 - 45
Data on capacity payments, pages 42 - 43
Fortum’s investment programme, page 46
Financials and outlook, pages 48 – 56
Hedges, pages 54 - 55
191919
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 Q1/2013
• 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,
Lithuania bidding area opened in 6/2012, Latvia follow later on, full
integration of the Baltics during 2013–2014
• EU’s European Target Model for cross-border power trading
sets 2014 as deadline for an EU-wide market coupling
2009
2012-2013
2010-
2013
2012
2020
700
2100 600 600
350
Current transmission capacity from Nordic area to Continental Europe is ~4000 MW
CountriesTransmissioncapacity MW
From Nordics To Nordics
Denmark - Germany 2 100 1 550
Sweden - Germany 600 600
Sweden - Poland 600 600
Norway - Netherlands 700 700
Total 4 000 3 450
• 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
2121
Nordic and Continental markets are integrating –interconnection capacity could double by 2020
New interconnections could
double the capacity to over
8000 MW by 2020
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
EU support to connect Kriegers
Flak offshore wind area to
DK&DE by 2020
Jutland – DE capacity to grow by
280 MW from October 2012 and
by further 500 MW by 2018 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
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
Both TSO and merchant projects for links to the UK
by 2020; North Seas Countries’ Offshore Grid
Initiative launched for supergrid development
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
Nordic water reservoirs
Source: Nord Pool Spot
rese
rvo
ir c
on
ten
t (T
Wh
)
0
20
40
60
80
100
120
2000 2003 2010 20122011 reference level
Q1 Q2 Q3 Q4
Nordic year forwards
Source: NASDAQ OMX Commodities Europe
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 Q30
10
20
30
40
50
60
70
Year 15 Year 17Year 09 Year 10 Year 11 Year 12 Year 13 Year 14 Year 16€/MWh3 September 2012
0
10
20
30
40
50
60
70
80
90
100
110
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
24
Wholesale price for electricity
EUR/MWh Nord Pool System Price Forwards
3 September 2012
Source: Nord Pool Spot, NASDAQ OMX Commodities Europe
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 pricesEUR/MWh
0
10
20
30
40
50
60
70
80
90
100
110
2007 2008 2009 2010 2011 2012 2013
3 September 2012
* including capacity tariff estimate.
E.g 9.4 €/MWh for 2010, 6.8 for 2011 and 5.9 for 2012.
25
26
Fuel and CO2 allowance prices
Source: ICE
Market prices 3 September 2012; 2012-2013 future quotations
Coal price (ICE Rotterdam)
0
40
80
120
160
200
240
US
D /
t
2006 2007 20102008 2009 20122011 2013
Gas price (ICE NBP)
0
20
40
60
80
100
GB
p /
th
erm
2006 2007 20102008 2009 20122011 2013
CO2 price (ICE ECX EUA)
0
5
10
15
20
25
30
35
EU
R /
tC
O2
2006 2007 20102008 2009 20122011 2013
Crude oil price (ICE Brent)
020406080
100120140160
US
D /
bb
l
2006 2007 20102008 2009 20122011 2013
27
Nordic power generation – dominated by hydro, but fossil needed
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
28
Still a highly fragmented Nordic power market
Source: Fortum, company data, shares of the largest actors, pro forma 2010 figures.
30%
Fortum
Vattenfall
Dong Energy
Others
Statkraft
E.ONPVO
E-CO Energi
Agder Energi
Norsk HydroHelsinki
Others
52%
DongEnergy
Vattenfall
Fortum
E.ON
Göteborg
Helsinki
Hafslund
SEAS-NVE
Statkraft
Bixia
Others
53%
Fortum
Vattenfall
E.ON
SEAS-NVE
Hafslund
Helsinki
Göteborg
Syd Energi
DongEnergy
Elenia
Power generation
382 TWh
>350 companies
Electricity distribution
15 million customers
~500 companies
Electricity retail
15 million customers
~350 companies
29
New capacity needed for increasing demand and retiring capacity replacements
Source: IEA WEO 2011 (New polices scenario)
• 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
1) Total new capacity needed for increasing demand and retiring capacity replacements
464
708
544
938
159
204
217
1605
65
657
552
1784
2001
5896New capacity,
total (1
Capacity changes, 2011-2035 (GW)
Retiring capacity
~30%
~ 50%
~170%
~260%
0%
50%
100%
150%
200%
250%
300%
US Europe Russia China India Other
areas
World
total
Growth, 2009-2035
Primary energy demand
Electricity generation
30
New capacity, except nuclear, will require over 60 EUR/MWh power price
Other costs ( variation)
CO2 cost
Coal Gas Nuclear Hydro Wind Cleancoal
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
0
10
20
30
40
50
60
70
80
90
100
110
Source: Nord Pool spot, NASDAQ OMX Commodities Europe
EUR/MWh
Futures
3 September 2012
1995 -97 -99 -01 -05 -07 -09 -11 -13-03 -15 -17
3131
Olkiluoto
LoviisaForsmark
Oskarshamn
Olkiluoto
LoviisaForsmark
Oskarshamn
Olkiluoto
LoviisaForsmark
Oskarshamn
Overview of Fortum’s nuclear fleet
Loviisa
Two units, built 1977 and 1981
2 × 496 MW = 992 MW
Fortum’s share: 100 %
Yearly production 8 TWh
Share of Fortum’s Nordic power
production: 18 %
Olkiluoto
Two units, built 1978 and 1980
one under construction
880 + 880 MW = 1760 MW
Under construction 1600 MW
Fortum’s share: 27 % (468 MW)
Yearly production 14 TWh
Fortum’s share: 4 TWh
Share of Fortum’s Nordic power
production: 9 %
Oskarshamn
Three units, built 1972,1974 and
1985
473 + 638 + 1400 = 2511 MW
Fortum’s share: 43 % (1089 MW)
Yearly production 17 TWh
Fortum’s share: 7 TWh
Share of Fortum’s Nordic power
production: 16 %
Forsmark
Three units, built 1980,1981 and
1985
984 + 996 + 1170 = 3150 MW
Fortum’s share: 22 % (699 MW)
Yearly production 25 TWh
Fortum’s share: 5,5 TWh
Share of Fortum’s Nordic power
production: 13 %
32
Teollisuuden Voima Oyj
Karhu Voima
0,1
Mankala 8,1
Kemira 1,9
Fortum 26,6
Pohjolan
Voima 56,8
EPV Energia
6,5
Ownership structures and formal responsibilities
Forsmarks Kraftgrupp ABForsmarks Kraftgrupp ABForsmark
OKG AktiebolagOKG AktiebolagOskarshamn
Teollisuuden Voima OyjTeollisuuden Voima OyjOlkiluoto
Fortum Power and Heat OyFortum Power and Heat OyLoviisa
OperatorLicenseeSite
OKG Aktiebolag
E.ON 54,5
Fortum 43,4
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 legislationForsmarks Kraftgrupp AB
Vattenfall
66,0
Fortum 22,2
E.ON 9,9
Skellefteå
Kraft 2,0
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.
3333
Fortum's nuclear power in the Nordics
Olkiluoto
LoviisaForsmark
Oskarshamn
• 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 5 September 2012
2012 (from Sep 5 onwards)Load factor (%) 2005 2006 2007 2008 2009 2010 2011
Planned annual outages days in
Oskarshamn 1 80 51 63 85 68 77 72 31
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 11
Loviisa 2 95 88 96 93 95 89 94 23
Olkiluoto 1 98 94 97 94 97 92 94 0
Olkiluoto 2 94 97 94 97 95 95 90 0
0
0
34
Variety of technologies and ages
PWR = Pressurized Water ReactorThe 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 ReactorSimilar 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
operationAge
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
Oskarshamn-2 638 43,4 277 1975-01-01 36 BWR / 2 Asea-Atom / Stal-Laval
Oskarshamn-3 1400 43,4 607 1985-08-15 26 BWR / 4 Asea-Atom / Stal-Laval
Forsmark-1 984 23,4 230 1980-12-10 31 BWR / 3 Asea-Atom / Stal-Laval
Forsmark-2 996 23,4 233 1981-07-07 30 BWR / 3 Asea-Atom / Stal-Laval
Forsmark-3 1170 20,1 236 1985-08-18 26 BWR / 4 Asea-Atom / Stal-Laval
35
Third party nuclear liability in case of severe accident
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€
Law approved by
Parliament in 2010,
requires separate
decision from
Government to come
into force.
Has been approved by the Parliament.
In force 1.1.2012 onwards.
Old,
Finland
240 M€
145 M€ Requires ratification by
2/3 of member states
to come into force. In
Finland approved by
Parliament in 2005.
36
Nuclear upgrades in Sweden
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.
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
37
Fortum’s investment programme – Nordic region, Poland and Baltic countries
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)
Fortum today, pages 4 -17
European and Nordic power markets, pages 19 - 30
Data on Fortum’s nuclear fleet, pages 31 - 37
Russia, pages 39 - 46
Data on capacity payments, pages 42 - 43
Fortum’s investment programme, page 46
Financials and outlook, pages 48 – 56
Hedges, pages 54 - 55
39
Russia is the World’s 4th largest power market
Power generation in 2011 based on gross output.
Source: BP Statistical Review of World Energy June 2012
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
TWh
5,000
40
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
Fortum - a major player in Russia
OAO Fortum
Tyumen
TobolskMoscow
St. Petersburg
Chelyabinsk
Nyagan
TGC-1
0
5
10
15
20
25
30
35
40
€ / M
Wh
41
Day ahead wholesale market prices– increase driven by recovering demand and gas price
2
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
Key electricity, capacity and gas prices in the OAO Fortum area
III/2009 III/2008II/12 II/11 LTM2011
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
888 954 869 950 925 884
2,548 2,548 2,548 2,548 2,548 2,548
136 141 151 163 160 156
470 496 523 593 560 550
202 174 223 194 209 218
29.4 29.0 29.3 29.1 29.2 29.3
I-II/12 I-II/11
42
Power market liberalisation – two markets
Capacity wholesale market Electricity wholesale market
• 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 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
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
44
Long-term financial target will be dictated by basic economic logic
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 capitalb
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
45
Key factors behind the profitability improvement in Russia
* Capacity Supply Agreement
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 - 418 MW (Nyagan 1 in 2012 or 2013)
2013 - 836 MW
2014 - 496 MW
Total - 2,388 MW
46
85% increase in power generation capacity by the end of 2014 through the investment programme
Power generation capacity (MW)
Plant Fuel type Existing Planned 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*418 1,254
Boilers -
Total 2,785 2,388 5,173
(CHP/Condensing)
(CHP/Condensing)
(Condensing)
(Condensing)2012 or 2013, 2013, 2013
June/2011
Feb/2011
Oct/2011
2*248 (CHP/Condensing)2014
Supply date
Fortum today, pages 4 -17
European and Nordic power markets, pages 19 - 30
Data on Fortum’s nuclear fleet, pages 31 - 37
Russia, pages 39 - 46
Data on capacity payments, pages 42 - 43
Fortum’s investment programme, page 46
Financials and outlook, pages 48 – 56
Hedges, pages 54 - 55
484848
Work continues according to our strategy
• Investment programme adds capacity
• Hedges create stability
• Strong financial position
49
Income statement
MEUR II/2012 II/2011 I-II/2012 I-II/2011 2011 LTM
Sales 1 284 1 316 3 185 3 350 6 161 5 996
Expenses -1 003 -968 -2 253 -2 353 -4 359 -4 259
Comparable operating profit 281 348 932 997 1 802 1 737
Items affecting comparability 2 261 87 512 600 175
Operating profit 283 609 1 019 1 509 2 402 1 912
Share of profit of associates and jv's 26 15 19 74 91 36
Financial expenses, net -73 -72 -149 -127 -265 -287
Profit before taxes 236 552 889 1 456 2 228 1 661
Income tax expense -46 -74 -165 -232 -366 -299
Net profit for the period 190 478 724 1 224 1 862 1 362
Non-controlling interests 4 6 43 74 93 62
EPS, basic (EUR) 0.21 0.53 0.77 1.29 1.99 1.46
EPS, diluted (EUR) 0.21 0.53 0.77 1.29 1.99 1.46
505050
Comparable and reported operating profit
MEUR
II/2012 II/2011 II/2012 II/2011 I-II/2012 I-II/2011 I-II/2012 I-II/2011
Power 222 257 214 271 563 582 581 760
Heat 23 25 20 25 184 196 233 290
Russia 4 21 15 21 52 55 63 55
Distribution 49 60 50 252 159 184 167 377
Electricity Sales 11 10 11 23 20 21 22 3
Other -28 -25 -27 17 -46 -41 -47 24
Total 281 348 283 609 932 997 1 019 1 509
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 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.
515151
Cash flow statement
Note: EUR 888 million paid in dividends during the second quarter 2012
MEUR II/2012 II/2011 I-II/2012 I-II/2011 2011 LTM
Operating profit before depreciations 446 764 1 340 1 813 3 008 2 535
Non-cash flow items and divesting activities -16 -299 -115 -569 -726 -272
Financial items and fx gains/losses -131 12 -273 -290 -376 -359
Taxes -89 -144 -167 -258 -394 -303
Funds from operations (FFO) 210 333 785 696 1 512 1 601
Change in working capital 109 77 87 168 101 20
Total net cash from operating activities 319 410 872 864 1 613 1 621
Paid capital expenditures -305 -297 -577 -503 -1 285 -1 359
Acquisition of shares -3 -1 -3 -20 -62 -45
Other investing activities 32 331 287 541 522 268
Cash flow before financing activities 43 443 579 882 788 485
525252
Key ratios
MEUR LTM 2011 2010Q2'12
EBITDA 2 535 3 008 2 271
Comparable EBITDA 2 348 2 374 2 396
Interest-bearing net debt 7 420* 7 023 6 826
Comparable Net debt/EBITDA 3.2 3.0 2.8
Return on capital employed (%) 11.3 14.8 11.6
Return on shareholders' equity (%) 14.0 19.7 15.7
*) as of 30 June 2012
Good liquidity – committed credit lines total EUR 2.7 billion
535353
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
545454
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
55
Realised prices quarterly since 2000
0
10
20
30
40
50
60
70
80
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
EUR/MWh
Power's Nordic power price Spot price, SE&FI avg.
2009 onw ards thermal and import from Russia
excluded
Hedging improves stability and predictability
2009 onwards new definition
565656
Debt maturity profile
0
250
500
750
1000
1250
1500
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 540
2013 639
2014 1,264
2015 1,093
2016 869
2017 591
2018 195
2019 903
2020 74
2021 576
2022+
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%
On September 6th, 2012 Fortum Oyj issued a EUR 1,000 million ten-year bond under its EMTN programme. The bond carries a coupon of 2.25%. ISIN code for the bond is XS0825855751.
This new bond is not included in the numbers of this slide.
5757
