Solar development & roof-top solutions – BOO/BOOT

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Executive Summary

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Solar power is an economically viable alternative to grid power & diesel power• Commercial & Industrial power consumers pay higher tariff as compared to cost of solar power in many

states• Unreliable power situation force consumers to opt for multiple back up solutions; increasing LCOE

(levelised cost of energy) of the consumers• Sharp decline in solar panel costs driving solar power cost to grid parity

Business model to serve both captive & third party consumers• Rooftop projects to be connected at LT level; No open access requirement• Private Solar parks to serve larger off-takers with open access, in policy driven Indian states

Benefits with Fortum:• Huge experience in build, own and operations of >35000 MW of Power plants worldwide, across various

energy technologies. • High emphasis on equipment selection, contractors, EHS, code of conduct & sustainability with all our

internal & external partners and processes• Ability to raise finances at competitive terms & shorter timelines, hence no impact on project timelines• Strong balance sheet support to scale up the business

Indian rooftop market is expected to grow more than 100%; govt. policies & drop in equipment prices are key enablers

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-

400

800

1,200

1,600

2,000

until 2014 2015 2016 2017 2018 2019

Residential Industrial Commercial

Government taking many steps to grow the rooftop market:

• Net metering policies introduced by many states

• Interest rate subvention scheme, supported by KfW & ADB, managed by IREDA, to reduce lending cost to less than 10% p.a

• Greater debt financing support from bankers & NBFCs

• Mandatory installations (eg. State of Haryana)

• Tax incentives for investors

Govt. of India has set a target of 40 GW by 2022 through solar rooftop

9 000

8 000

7 000

6 000

5 0004 800

200

2021-222020-212019-202018-192017-182016-172015-16

Annual Rooftop target capacity (MW)

Govt. Target: 40 GW by 2022 Conservative estimate – Business as usual

34,91 33,09 33,16 30,64 29,82

25,1620,83 19,99

20,56 20,80

6,53

5,88 5,74 5,52 5,41

5,24

-5%

2016

59.53

3.50

2015

60.72

4.00

2014

63.11

4.22

2013

64.71

4.91

2012

71.84Margin

Module

Inverter

BoS

Source: MNRE, Industry Research

EPC Cost In MINR/MW

Sharply increasing grid tariff has made commercial & industrial consumers in many states looking out for solar power

4

2

4

6

8

10

12

2009 2010 2011 2012 2013 2014

Maharashtra

2345678

2009 2010 2011 2012 2013 2014

Karnataka

Industry Commercial

2345678

2009 2010 2011 2012 2013 2014

Andhra Pradesh

2345678

2009 2010 2011 2012 2013 2014

Tamil Nadu

2

3

4

5

6

7

2009 2010 2011 2012 2013 2014

Haryana

2

3

4

5

6

7

2009 2010 2011 2012 2013 2014

Uttar Pradesh

Source: State tariff orders, Bridge to india

Tariff in INR/kWh

Pay per use: BOO/BOOT model for Rooftop/Co-located Clients

5

M

M

CONTRACTSYSTEM ARRANGEMENT

Rooftop – Captive consumption Applicable for:

Customers with low to medium energy demand (100kW to 5MW), depending on roof-space /land available

Shadow free metal/RCC roof or land to be provided by customer at no cost lease to Fortum for Solar plant construction

Customer to consume 100% generated energy. Deemed Generation applicable

Fortum to own, operate, maintain solar plant for PPA* duration .

Fortum to bill and client to pay on monthly basis for per unit energy generated from solar plant

Advantages

No upfront Capital Investment

Client to pay on per unit basis generated by solar plant

Consumption at the point of generation; no major transmission loss

Potential Savings on per unit consumption/bills from day 1

Net-metering applicable in select states, which allows exporting power on non-working days, accrue adjustments in next month electricity bill

No Open Access (OA) permission required – lesser time for installation

PPA – Power Purchase Agreement; LCOE – Levelised Cost of Electricity

Highlights

PPA tenor from 15-25 years with option of asset transfer at pre-agreed price (applicable for Rooftop systems only)

Minimum PPA tenor of 15 years for Rooftop

Plain vanilla arrangement with payment as per energy supply/generated

Fortum’s high emphasis on code of conduct, EHS compliance along with selection of only Tier 1 equipment & contractors; Performance warranty

Private Solar parks under Open Access for larger capacities and to solve locational constraints

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Highlights

PPA tenor from 10-25 years

Plain vanilla arrangement with payment as per energy supply

Fortum’s high emphasis on code of conduct, EHS compliance along with selection of only Tier 1 equipment & contractors; Performance Warranty

CONTRACTSYSTEM ARRANGEMENT

MMM

M

Private Solar Park – under Open Access

Applicable for:

Customers with medium to high energy demand (5MW to 50MW), with low roof-space

Plant construction on Fortum owned/leased land

Customer to draw contracted energy from applicable discom through Open Access

Fortum to own, operate, maintain solar plant.

Customer to pay solar energy bill monthly to Fortum, as per agreed PPA

Advantages

Potential lower LCOE than Grid electricity

Banking of energy to be used to set off higher grid tariff, if applicable

Potential Savings on electricity bills from day 1

No upfront Capital Investment

Business Case: 01MW Solar on Production Roof

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Parameter Detail

Solar consumptionCaptive, Co-located on available rooftop

Location Maharashtra, India

Solar Yield 4.5-5.5 kWh/kWp/day

Contract Demand > 1500 KVA

Shadow Free RooftopRequirement

10,000 sqm

Current Grid Tariff, MWH INR 8500-9500

Proposed Solar Plant01 MW Rooftop mounted / Ground mounted

Electrical energy from Solar, Year 1

1450 MWH

Power Evacuation 415V, LT

Operational Days per year > 300

Key assumptionsSolar, Grid escalation pegged at 3% Y-o-Y for 10 years

Typical saving estimates of ~ 120 mn over 25 years from a 1 MWp solar plant (assuming 10% diesel in energy mix)

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116.0

4.5

20272020

4.4

20242021

4.9

2018 2025

4.9

2022

4.9

2023

4.0

2016

4.0

2026

4.2

4.7

5.04.9

2017 2038

4.6

2036

4.7

2039

4.6

4.8

2034 2040

4.5

4.3

4.7

2033 Total

Savings

4.8

20322031 20372035

4.6

4.9

2030

4.8

5.0

2019 2028

4.7

2029

4.7Projected Savings from Grid (Rs. Mn)

Projected savings from diesel (Rs. Mn)

Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Projected Grid Tariff (Rs/KWh)

8.50 8.76 9.02 9.29 9.57 9.85 10.15 10.45 10.77 11.09 11.09 11.09 11.09 11.09 11.09 11.09 11.09 11.09 11.09 11.09 11.09 11.09 11.09 11.09 11.09

Proposed Solar Tariff (Rs/kWh)

6.50 6.70 6.90 7.10 7.32 7.54 7.76 7.99 8.23 8.48 8.48 8.48 8.48 8.48 8.48 8.48 8.48 8.48 8.48 8.48 8.48 8.48 8.48 8.48 8.48

Solar Energy (MWh)

1450 1440 1430 1420 1410 1400 1390 1380 1371 1361 1352 1342 1333 1323 1314 1305 1296 1287 1278 1269 1260 1251 1242 1234 1225

Savings (Rs mn) 2.61 2.67 2.73 2.79 2.86 2.92 2.99 3.06 3.13 3.20 3.17 3.15 3.13 3.11 3.09 3.06 3.04 3.02 3.00 2.98 2.96 2.94 2.92 2.90 2.88

Projected Diesel Price (Rs/kWh) 16 16 17 18 18 19 20 20 21 21 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22

Diesel savings(10%) (Rs mn)

1.38 1.34 1.44 1.55 1.51 1.61 1.70 1.66 1.75 1.70 1.83 1.81 1.80 1.79 1.78 1.76 1.75 1.74 1.73 1.72 1.70 1.69 1.68 1.67 1.66

Note: The above savings is calculates on generation estimates, estimated industrial tariffs for next 25 years with estimated grid tariff increase of 3% Y-o-Y & PPA tariff option by Fortum. It may vary depending upon the actuals

Sustainability: Key Pointers

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• CO2 replacement: 1275 tCO2 replacement per year by utilizing 1450MWH of electricity

from Solar

• 100% Green Power: Solar is 100% green power

• Local Job creation: 4 FTE for 01MW Solar power plant, for operation and maintenance

services

• Diesel reduction: Reducing electricity contribution from DG sets. Solar to replace some

part of the dirty fuel, which is also polluting & has escalating operating / maintenance

costs

• Water requirement: Approx 30KL of water would be required for module cleaning, with

approx. 16-20 cleaning cycles per year, depending on location/dust factors.

2016

This is Fortum

Fortum – Forerunner in clean energy

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Transition towards Solar Economy is ongoing

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Fortum's carbon exposure among the lowest in Europe

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Figures: 2015Source: PWC, Novembre 2015, Changement climatique et Électricité, Fortum

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Average 313 g/kWh

177

g CO2/kWh electricity, 2014

The figures include only European generation except “Fortum total“, which includes Fortum’s production in Russia

Fortum’s specific emissions of the power generation in the EU in 2015

were 21 g/kWh and in total 166 g/kWh

64 %97 %

64% of Fortum's total

power generation

CO2-free

97% of Fortum’s

power generation in

the EU CO2-free

Finnish State50.8%

Investors outside Finland25.2%

Finnish households 11.7%

Other Finnish investors 9.6%

Finnish financial and insurance institutions 2.7%

Fortum'sshareholders

31 January 2016

Fortum is listed on Nasdaq Helsinki

• Listed since 1998; currently among the

most traded shares on the Nasdaq

Helsinki stock exchange

• Approximately 139,000 shareholders

• Market cap ~12 billion euros

Figures: 31 January 2016

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• Sales: EUR 3.5 billion

• Balance sheet: EUR 23 billion

• Comparable operating profit: EUR 0.8 billion

• Personnel 31 Dec 2015: 7,800

Fortum worldwide

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Expert services globally

Nordic countries

• Power generation capacity

8,484 MW(+ Fortum Värme* 639 MW)

• Heat production capacity

1,974 MW(+ Fortum Värme* 3,891 MW)

• Electricity sales customers

1.3 million

India

Power generation capacity

15 MW

Baltic countries

• Power generation capacity

93 MW

• Heat production capacity

812 MW

Poland

• Power generation capacity

197 MW

• Heat production capacity

1,129 MW

Russia

• Power generation capacity

4,903 MW

• Heat production capacity

12,696 MW

Figures: 2015

*Joint venture AB Fortum Värme samägt med Stockholms Stad

Fortum's power and heat production by source

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Natural gas

31%

Hydro power

32%

Coal 4%Biomass 2%

Total generation 77.1 TWh

(Generation capacity 14,331 MW)

Nuclear power 30%

Fortum's power generation

in 2015

Waste 1%

Total production 39.7 TWh

(Production capacity 20,502 MW)

Fortum's heat production

in 2015

Peat 1%

Waste 7%

Heat pumps, electricity 7%

Oil 1%

Biomass 8%

Natural gas

61%

Coal 15%

Incl. Fortum’s associated company Fortum Värme; power generation 1.2 TWh (capacity 639 MW) and heat production 7.5 TWh (capacity 3,891 MW).

Fortum is expanding into emerging markets – in India since February 2012

• 5 MW

• Rajasthan

• 25 yrs PPA with NVVN

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June 2013

Amrit

Acquisition

Dec 31 2014

Kapeli

commissioning

• 10 MW

• Madhya Pradesh

• 25 yrs PPA with SECI

2017

Bhadla /Pavagada

commissioning

2013 2014 2015 2016 2017

• 70 MW / 100 MW

• Rajasthan/Karnataka

• 25 yrs PPA with NTPC

Kapeli project

executionBhadla project

execution

- 33 persons (26 head office, 7 Site)

Awarded for 1st greenfield solar plant worldwide in Kapeli

CSR activities in villages near Amrit, Kapeli plants

Thank you!