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RUSSIADIVISION

The Russia Division includes OAO For-tum and Fortum’s share in territorial generating company TGC-1. OAO Fortum currently comprises eight power plants with mainly gas-fired CHP capacity, oper-ating in the oil- and gas-producing area of the Urals and western Siberia. The company also owns and operates trunk heat networks in several cities in Russia. At the end of 2011, Fortum’s share in OAO Fortum was 97,55%, including shares owned by OAO Fortum’s fully-owned subsidiary. The total installed capacity of OAO Fortum and its subsidiaries is

Fortum’s Russia Division’s activities centre on power and heat generation and sales in Russia. The key driver to achieving positive economic value in the division is the fulfilment of the extensive investment programme, which will have increased Fortum’s electricity production capacity in Russia by ~2,400 megawatts (MW) by the end of 2014.

Russia Division in 2011

KEY FIGURES

EUR million  2011 2010 Change %Sales 920 804 14

power sales 590 505 17heat sales 324 287 13other sales 6 12 -50

Operating profit 74 53 40Comparable operating profit 74 8 825Comparable EBITDA 148 94 57Net assets (at end of period) 3,273 2,817 16Return on net assets, % 3.5 2.4 46Comparable return on net assets, % 3.5 0.7 400Capital expenditure and gross investments in shares 694 599 16Number of employees 4,379 4,294 2

approximately 3,400 MW electricity and approximately 14,000 MW heat, with a production of 17.4 terawatt-hours (TWh) electricity and 25.4 TWh heat in 2011.

Electricity is sold on the wholesale market and heat on the local markets. Russia also has an electricity capacity market, in which an electricity producer receives earnings for the production capacity it offers to market use. The pur-pose of the electricity capacity market is mainly to encourage investments in electricity production.

InvEStmEnt pRoGRammE In RUSSIa

plant FuelExisting capacity

electricity, mWnew capacity

electricity, mW total Supply starts1)

Argayash CHP 195 195Chelyabinsk CHP-1 149 149Chelyabinsk CHP-2 320 320Chelyabinsk CHP-3 Gas 360 216 576 2011Chelyabinsk GRES 82 82Tyumen CHP-1 Gas 472 190;2x248 1,157 2011, 2014Tyumen CHP-2 Gas 755 755Tobolsk CHP Gas 452 213 665 2011Nyagan (1-3) Gas 1,254 1,254 2012-2013total capacity 2,785 2,368 5,1531) Start of capacity sales, preceeded by test runs, licencing, etc.

2 Russia DiVisiON DiVisiON REViEW 2011

TGC-1 operates in north-west Russia, adjacent to the Finnish border. Fortum is the company’s second largest owner with a share of slightly over 25%.

Fulfilling the investment programme

Russia Division’s investment programme comprises eight new generation units and is one of the largest of its kind in the Russian power generation in terms of relative increase in the total installed capacity. In 2011, the execution of the investment programme progressed well and according to plan.

In February, the new unit at the Tyu-men combined heat and power (CHP) plant CHP-1 was taken into commercial operation, followed by new units in Che-lyabinsk CHP-3 in June and Tobolsk CHP in October. The volume of the new capac-

ity delivered to the market in accordance with the Capacity Supply Agreements (CSA) exceeds 600 MW, increasing the power supply in one of the hubs of the Russian metals industry, the Chelyabinsk region, and in the oil- and gas-rich Tyu-men region.

In 2012, the aim is to increase For-tum’s new-build capacity in Russia by inaugurating two of the three planned 418-MW units at the greenfield Nyagan Power Plant in Khanty-Mansiysk Autono-mous Okrug-Ugra. The plant will be Rus-sia’s most modern and technologically advanced CHP-plant.

Raising heat supply efficiency

As one of the largest global players in the field, Fortum brings world-class exper-tise and technologies to the Russian heat sector. For example, Fortum’s efforts to

modernise the Chelyabinsk and Tyumen heating systems create a solid founda-tion for delivering even better service to customers.

In November, Fortum commenced operations of stage one of the ambitious district heating project, the Chelyabinsk Heat Ring. The project will increase the efficiency of the heat supply in this city of one million residents in the southern Urals area by some 30%. The project also changes the way heat is delivered to homes and businesses across the city; the heat will be supplied via an encircling pipeline rather than a radial one.

Fortum also installed an automated metering system that ensures transpar-ency between the trunk and district heat networks in Tyumen, which is the second largest heat market for Fortum in Russia. More than 150 stations have been installed to enable the online collection of information about the status of the trunk networks. Implementation of the EHS

action plan continued

In 2011, extensive efforts to improve contractor safety in the Russia Division included training the managers of 28 companies. In addition, preparations for OHSAS 18001 certification, effective communication via the intranet and safety boards were a focus.

Elimination of the asbestos risk is one of the goals of the EHS action plan in Russia. About 340 tonnes of asbestos were removed during the year, and improvements in the procedures for handling and removing asbestos were implemented. An external assessment of asbestos handling was carried out in 2011.

DiVisiON REViEW 2011 Russia DiVisiON 3

Fortum CorporationKeilaniementie 1, Espoo | POB 1 | 00048 FORTUM | FINLANDtel. +358 10 4511 | fax +358 10 45 24447 | www.fortum.comDomicile Espoo, Business ID 1463611-4