fortum power and heat company in the nordic area, russia...

FORTUM Power and heat company in the Nordic area, Russia, Poland and the Baltics

Investor/Analyst materialMay 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 - 30Data on Fortum’s nuclear fleet, pages 31 - 37

Russia, pages 39 - 46Data on capacity payments, pages 42 - 43Fortum’s investment programme, page 46

Financials and outlook, pages 48 – 56Hedges, 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 ~14.5 billion euros

More than 100,000 shareholders

30 April 2012

Foreign investors 27.5%Finnish State 50.8%

Other Finnish investors 10.0%

Households 8.6% Financial and insurance institutions 3.1%

5

Total ~ 8,630 MEUR

1999 2001 20032000 2002 2004

0.18 0.230.26 0.31

0.420.58

2005

1.12

Dividend per shareEUR

0.13

1998

0.58

0.54

2006

1.26

0.73

0.53

• 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

0.77

0.58

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 CEOTapio 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

FinanceExecutive Vice President and

Chief Financial OfficerJuha Laaksonen

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

1 February 2012

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 Russia

Build 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 shareholdersStrong focus on delivering value and stable returns to shareholders

9

Our geographical presence today

TGC-1 (~25%)Power generation ~7 TWhHeat sales ~8 TWh

OAO Fortum Power generation 17.4 TWhHeat sales 26.7 TWh

Russia

PolandPower generation 0.6 TWhHeat sales 4.3 TWh

Baltic countriesPower generation 0.4 TWhHeat sales 1.1 TWhDistribution cust. ~24,000*

Nordic countriesPower generation 53.1 TWhHeat sales 17.2 TWhDistribution customers 1.6 millionElectricity customers 1.2 million

Nr 2 Power generation

Electricity sales

Nr 2

Nr 1 Heat

DistributionNr 1

Key figures 2011Sales EUR 6.2 bnOperating profit EUR 2.4 bn Personnel 10,800

Great BritainPower generation 1.2 TWhHeat sales 2.1 TWh

* Distribution business sold Jan 1, 2012

10

Power DivisionFortum’s power generation, physical operation and trading as well as expert services for power producers.

Heat DivisionCombined heat and power generation, district heating and cooling activities and b- to-b heating solutions.

Electricity Solutions and Distribution DivisionFortum's electricity sales and distribution activities. Two business areas: Distribution and Electricity Sales.

Russia DivisionPower and heat generation and sales in Russia. It includes OAO Fortum and Fortum’s slightly over 25% holding in TGC-1.

Businessdescription

Comparableoperating profit

Net assets

Volume (TWh)

Drivers

EUR 1,201 million

Distr.: EUR 3,589 millionEl. 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. 14.1El. 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 andpower price

Nordic power price,generation volumes

New capacity, and price for that, power and heat price

Power sales.: 20.2 Heat sales.: 26.7

Distr.: RegulatedEl. sales: Sales margin

Divisions of Fortum

11

Fortum mid-sized European power generation player; Global #4 in heat

Largest global producers, 2010 TWh

Largest producers in Europe and Russia, 2010TWh

Power generation Heat productionElectricity customers in EU, 2010

millions

Customers

DEI

Irkutskenergo*) IES

Iberdrola

RusHydroFortum

EnBW

Vattenfall

CEZ

RWE

PGESSE

Statkraft

RosenergoatomGazprom

NNEGC Energoat.

EnelE.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 140ELCEN, Rom.

Dalkia

SUEK**)

*) IES

Vattenfall

PGNiG

0 20 4010 30

DEICEZ

Enel

CentricaEDP

Iberdrola

SSEEnBW

Fortum

EDFE.ONRWE

Gas NaturalFenosa

PGE

Tauron

GDF SUEZ

HafslundDong Energy

Vattenfall

* incl. TGC-5, TGC-6, TGC-7, TGC-9, ** incl. TGC-12, TGC-13, *** incl. International PowerSource: Company information, Fortum analyses, 2010 figures pro forma, heat production of Beijing DH not available.

12

Biggest nuclear and hydro generators in Europe and Russia

Figures 2010 pro forma

TWhE

DF

Ros

ener

goat

om

E.O

N

NN

EGC

Ene

rgoa

tom

Enel

Rus

Hyd

ro

Vatte

nfal

l

GD

F S

UE

Z

Irkut

sken

ergo

Sta

tkra

ft

RW

E

Iber

drol

a

Fort

um

EnBW CE

Z

Verb

und

Kras

noya

rska

ya H

PP

Axpo

Hid

roel

ectri

ca

ED

P

Gaz

prom

Alpi

q

Ukr

hydr

oene

rgo

EPS,

Ser

bia

Gas

Nat

ural

Fen

osa

E-C

O E

nerg

i

Nor

sk H

ydro

DE

I

Agde

r Ene

rgi

Edis

on

BKK

Inte

r RAO

UES

SSE

PGE

IES

050

100150200250300350400450500550600

Total generationOtherNuclearHydro

13

Fortum's carbon exposure among the lowest in Europe

Source: PWC & Enerpresse, Novembre 2011Changement 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

SSE

Vat

tenf

all

E.O

N

Ene

l

Don

g

EDP

GD

F S

UE

Z E

urop

e

Uni

on F

enos

a

Iber

drol

a

PVO

Fortu

m to

tal

ED

F

Ver

bund

Fortu

m E

U

Sta

tkra

ft

201165%

of Fortum's total power generation CO2 -free85%

of Fortum’s power generation in the EU CO2 -free

Close to 100%

of the ongoing investment programmein 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


Länsivoima→100% E.ON Finland

Separation of oil businesses

Elnova50%→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%

StoraKraft

Lenenergo

shares

1998 →

IVO

1997

Neste

http://fi.wikipedia.org/wiki/Kuva:Flag_of_Russia.svghttp://fi.wikipedia.org/wiki/Tiedosto:Flag_of_Estonia.svghttp://upload.wikimedia.org/wikipedia/commons/4/4c/Flag_of_Sweden.svghttp://upload.wikimedia.org/wikipedia/commons/4/4c/Flag_of_Sweden.svg

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 services

Distribution

http://www.nasdaqomx.com/

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 fuels24%

Natural gas22%

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


European and Nordic power markets, pages 19 -

30Data on Fortum’s nuclear fleet, pages 31 -

37



19

2006

2010

2009

2012

2010-

2013

2011

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, Nordic-CWE intraday market

coupling is due to be realised during 2012 as well• Estonian price area in Nord Pool Spot since April 2010

with full integration of the Baltic States during 2012–2013• EU’s European Target Model for cross-border power trading

sets 2014 as deadline for an EU-wide market coupling

2012

20

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

21

Nordic and Continental markets are integrating – interconnection capacity could double by 2021

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

EU support to connect Kriegers Flak offshore wind area to DK&DE; new 400 kV AC cable SE-DK also studied

Jutland – DE capacity to be increased by 500 MW in 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 merchant and TSO projects for links to the UK by 2018/21; 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

22

Nordic water reservoirs

2000 2003 2010 20122011 reference level

Q1 Q2 Q3 Q4

rese

rvoi

r con

tent

(TW

h)

0

20

40

60

80

100

120

Source: Nord Pool Spot

23

Nordic year forwards

2 May 2012

Year 15 Year 17Year 09 Year 10 Year 11 Year 12 Year 13 Year 14 Year 16€/MWh

0

10

20

30

40

50

60

70

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

Source: NASDAQ OMX Commodities Europe

24

0

10

20

30

40

50

60

70

80

90

100

110

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Wholesale price for electricity

EUR/MWh Nord Pool System Price Forwards

2 May 2012

Source: Nord Pool Spot, NASDAQ OMX Commodities Europe

25

Wholesale prices for electricity

Source: Nord Pool Spot, NASDAQ OMX Commodities Europe, EEX, APX-ENDEX, Bloomberg Finance LP, ATS, Fortum

Dutch

German

Nordic

Russian*

EUR/MWh Spot prices Forward prices

0

10

20

30

40

50

60

70

80

90

100

110

2007 2008 2009 2010 2011 2012 20132 May 2012

* including capacity tariff estimate. E.g 9.4 €/MWh for 2010, 6.8 for 2011 and 5.9 for 2012.

26

Fuel and CO2 allowance prices

Source: ICE

Market prices 2 May 2012; 2012-2013 future quotations

Coal price (ICE Rotterdam)

04080

120160200240

USD

/ t

2006 2007 20102008 2009 20122011 2013

Gas price (ICE NBP)

0

20

40

60

80

100

GB

p / t

herm

2006 2007 20102008 2009 20122011 2013

CO2 price (ICE ECX EUA)

05

101520253035

EUR

/ tC

O2

2006 2007 20102008 2009 20122011 2013

Crude oil price (ICE Brent)

020406080

100120140160

USD

/ bb

l

2006 2007 20102008 2009 20122011 2013

27

Nordic power generation – dominated by hydro, but fossil needed

Source: ENTSO-E Memo 2010 *) Normal annual Nordic hydro generation 200 TWh, variation +/- 40 TWh.

0

20

40

60

80

100

120

140

Denmark Norway Sweden Finland

Fossil fuels

Nuclear

Biomass

Wind

Hydro *

TWh/a

Total Nordic generation 382 TWh in 2010

Net import in 2010: 18 TWh

25

78

TWh %

71

196

12

7

20

19

51

3

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

Power generation382 TWh

>350 companies

Electricity distribution15 million customers

~500 companies

Electricity retail15 million customers

~350 companies

Others

52%

DongEnergy

Vattenfall

Fortum

E.ON

Göteborg

Helsinki

Hafslund

SEAS-NVE

Statkraft

Bixia

Fortum

Vattenfall

OthersE.ON

53%

SEAS-NVE

Hafslund

HelsinkiGöteborgSyd Energi

DongEnergy

LNI Verkko

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 Otherareas

Worldtotal

Growth, 2009-2035Primary energy demandElectricity 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.

0102030405060708090

100110

0102030405060708090

100110

Source: Nord Pool spot, NASDAQ OMX Commodities Europe

EUR/MWh

Futures2 May 2012

1995 -97 -99 -01 -05 -07 -09 -11 -13-03 -15 -17

31

Olkiluoto

LoviisaForsmark

Oskarshamn

Olkiluoto

LoviisaForsmark

Oskarshamn

Olkiluoto

LoviisaForsmark

Oskarshamn

Overview of Fortum’s nuclear fleet

LoviisaTwo units, built 1977 and 1981

2 × 488 MW = 976 MW

Fortum’s share: 100 %

Yearly production 8 TWh

Share of Fortum’s Nordic power production: 18 %

OlkiluotoTwo units, built 1978 and 1980 one under construction

880 + 880 MW = 1760 MWUnder construction 1600 MW

Fortum’s share: 27 % (468 MW)

Yearly production 14 TWh Fortum’s share: 4 TWh


OskarshamnThree units, built 1972,1974 and 1985473 + 638 + 1400 = 2511 MW


Yearly production 17 TWh Fortum’s share: 7 TWh


ForsmarkThree units, built 1980,1981 and 1985984 + 996 + 1170 = 3150 MW


Yearly production 25 TWhFortum’s share: 5,5 TWh


32

Teollisuuden Voima Oyj

Karhu Voima0,1

Mankala 8,1

Kemira 1,9

Fortum 26,6 Pohjolan

Voima 56,8

EPV Energia6,5

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 54,5Fortum 43,4

Karlstadkommun 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

Forsmarks Kraftgrupp AB

Vattenfall66,0

Fortum 22,2

E.ON 9,9

SkellefteåKraft 2,0Other 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 capacity in 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 7 May 2012

2012 (from

May

7th onwards)Load

factor

(%) 2005 2006 2007 2008 2009 2010 2011Planned

annual

outages

days

in

Oskarshamn 1 80 51 63 85 68 77 72 40Oskarshamn 2 90 78 76 86 75 90 77 27Oskarshamn 3 85 95 88 70 17 31 75

Forsmark 1 85 76 81 81 88 93 79 32Forsmark 2 94 72 85 79 64 39 94 39Forsmark 3 95 92 88 69 86 81 85 16Loviisa 1 95 93 94 86 96 93 94 42Loviisa 2 95 88 96 93 95 89 94 23

Olkiluoto 1 98 94 97 94 97 92 94 15Olkiluoto 2 94 97 94 97 95 95 90 8

9

http://www.fortum.com/

34

Variety of technologies and ages

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.

*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 operation AgeType /

Generation* Supplier

Loviisa-1 488 100,0 488 1977-05-09 34 PWR / 1 AEE (Atomenergoexport)Loviisa-2 488 100,0 488 1981-01-05 30 PWR / 1 AEE (Atomenergoexport)Olkiluoto-1 880 26,6 234 1979-10-10 32 BWR / 3 Asea-Atom / Stal-LavalOlkiluoto-2 880 26,6 234 1982-07-10 29 BWR / 3 Asea-Atom / Stal-LavalOlkiluoto-3 (1600) 25,0 (400) 2014 (?) PWR / 3 Areva / SiemensOskarshamn-1 473 43,4 205 1972-02-06 39 BWR / 1 Asea-Atom / Stal-LavalOskarshamn-2 638 43,4 277 1975-01-01 36 BWR / 2 Asea-Atom / Stal-LavalOskarshamn-3 1400 43,4 607 1985-08-15 26 BWR / 4 Asea-Atom / Stal-LavalForsmark-1 984 23,4 230 1980-12-10 31 BWR / 3 Asea-Atom / Stal-LavalForsmark-2 996 23,4 233 1981-07-07 30 BWR / 3 Asea-Atom / Stal-LavalForsmark-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,temporarylegislation

Current, Sweden

700 M€

200 M€360 M€

500 M€Responsibility of company(insurance or guarantee)

Unlimited companyresponsibility

Convention parties 300 M€

State responsibility

300 M€

500 M€

700 M€

New Parisconvention

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.

Current,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

Fortum to get 290 MW CO2 free capacity through 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)- 205 ~2

OKG 2 2009, 2015 30 + 180 95 350 ~3

OKG 3 2011 250 110 607 ~5FKA 1 Decision 2013 120 ~25 257 ~2FKA 2 2012 130 30 264 ~2FKA 3 Decision 2013 170 ~35 270 ~2Total ~290 ~2 ~1,950* ~15

Capacity increase and completion timetable based on recent estimate (Nord Pool). At 31.12.2010 Fortum's share of Swedish nuclear capacity was 1,778 MW.

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 2014

Swedish nuclear upgrades 290

Refurbishing of hydro power 10-20 annuallyBrista, Sweden 20 57 Q4 2013

(waste CHP)Klaipeda, Lithuania 20 60 Q1 2013

(waste CHP)

Total ~800 ~225

Jelgava, Latvia 23 45 Q3 2013(biofuel CHP)

Järvenpää, Finland 23 63 Q2 2013(biofuel CHP)



Russia, pages 39 -

46Data on capacity payments, pages 42 -

43Fortum’s investment programme, page 46


39

Russia is the World’s 4th largest power market

South

Korea

Germ

anyUS

China

Japa

nRu

ssia

India

Cana

da

Franc

e

Nordi

c UK

Braz

il

0500

1,0001,500

2,0002,500

3,0003,500

4,0004,500

TWh

Data 2010 based on gross output.Source: BP Statistical Review of World Energy June 2011

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

41

Day ahead wholesale market prices – increase driven by recovering demand and gas price

2

Key electricity, capacity and gas prices in the OAO Fortum area

III/2009 III/2008I/2012 I/2011 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

849 947 925 900

2,548

2,548 2,548 2,548

166

184 160 156

577 759

560 550

243 214 209 218

29.3 29.2 29.2 29.3

0

5

10

15

20

25

30

35

40

€/M

Wh

Day ahead power market prices for Urals

In addition to the power price generators receive a capacity payment.

2007 2008 2009 2010 2011 2012

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 capitalEUR

~2.5 bn

~4 bn

2011 ~2014

In 2009, WACC for Russia was ~12%

a

b

a

… and an unchanged cost of capital

b

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 capacity commissioning 2011-2014– Additional capacity 2,388 MW; +85%– Capacity is sold at CSA* contracts with

guaranteed higher price

Pace of new capacity increase of Fortum investment programme

in Russia

2011 -

638 MW 2012 -

836 MW (Nyagan 2 in 2012 or 2013)2013 -

418 MW2014 -

496 MWTotal

-

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 755Tyumen CHP-1 Gas 472 209; 2*248 1177 Tobolsk CHP Gas 452 213 665Chelyabinsk CHP-3 Gas 360 216 576Chelyabinsk CHP-2 Gas, coal 320 320Argayash CHP Gas, coal 195 195Chelyabinsk CHP-1 Gas, coal 149 149Chelyabinsk GRES Gas 82 82 Nyagan GRES Gas 3x418 1,254Boilers -

Total 2,785 2,388 5,173

(CHP/Condensing)

(CHP/Condensing)(Condensing)

(Condensing)

Supply date

2012, 2012 or 2013, 2013

June/2011

Feb/2011; 2014

Oct/2011




Financials and outlook, pages 48 –

56Hedges, pages 54 -

55

4848

Strong financial position

• Electricity will continue to gain a higher share of the total energy consumption

• Annual electricity demand growth approximately 0.5%

• Good production portfolio going forward- Growth in Russia

• Hedges create stability

49

Income statementMEUR I/2012 I/2011 2011 LTM

Sales 1 901 2 034 6 161 6 028Expenses -1 250 -1 385 -4 359 -4 224

Comparable operating profit 651 649 1 802 1 804

Items affecting comparability 85 251 600 434

Operating profit 736 900 2 402 2 238Share of profit of associates and jv's -7 59 91 25Financial expenses, net -76 -55 -265 -286

Profit before taxes 653 904 2 228 1 977Income tax expense -119 -158 -366 -327

Net profit for the period 534 746 1 862 1 650Non-controlling interests 39 68 93 64

EPS, basic (EUR) 0.56 0.76 1.99 1.79EPS, diluted (EUR) 0.56 0.76 1.99 1.79

50

Comparable and reported operating profit

MEURI/2012 I/2011 I/2012 I/2011 2011 2011

Power 341 325 367 489 1 201 1 476Heat 161 171 213 265 278 380Russia 48 34 48 34 74 74Distribution 110 124 117 125 295 478Electricity Sales 9 11 11 -20 27 3Other -18 -16 -20 7 -73 -9Total 651 649 736 900 1 802 2 402

Comparable operating profit

Reported operating profit


Reported operating profit

• IFRS accounting treatment (IAS 39) of derivatives had an impact on the reported operating profit. In the first quarter EUR -16 (173) million, or earnings per share EUR -0.01 (0.14).

51

Cash flow statement

MEUR I/2012 I/2011 2011 LTM

Operating profit before depreciations 894 1 049 3 008 2 853

Non-cash flow items and divesting activities -99 -270 -726 -555

Financial items and fx gains/losses -142 -302 -376 -216

Taxes -78 -114 -394 -358

Funds from operations (FFO) 575 363 1 512 1 724

Change in working capital -22 91 101 -12

Total net cash from operating activities 553 454 1 613 1 712

Paid capital expenditures -272 -206 -1 285 -1 351

Acquisition of shares 0 -19 -62 -43

Other investing activities 255 210 522 567

Cash flow before financing activities 536 439 788 885

52

Key ratios

Good liquidity – committed credit lines total EUR 2.7 billion

MEUR LTM 2011 2010Q1'12

EBITDA 2 853 3 008 2 271Comparable EBITDA 2 385 2 374 2 396Interest-bearing net debt 6 523 7 023 6 826Comparable Net debt/EBITDA 2.7 3.0 2.8

Return on capital employed (%) 12.8 14.8 11.6Return on shareholders' equity (%) 16.7 19.7 15.7

53

Outlook• Key drivers and risks

– Wholesale price of electricity• Demand• Fuels• CO2 emissions prices• Water reservoirs• Power plant availability

• Nordic markets– Annual electricity demand growth estimated to be approximately 0.5%– Electricity continues to gain share of total energy consumption

• Russia– Profits from Russia build up in pace with the capacity increase– 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

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 70% hedge ratio at approximately EUR 48/MWh(Q4: 65% at EUR 48/MWh)– 2013 approximately 45% hedge ratio at approximately EUR 46/MWh(Q4: 40% at EUR 46/MWh)

• In Finland, the Government announced that a so-called windfall tax will be introduced in 2014

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

56

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 903

2013 643

2014 1,261

2015 1,086

2016 867

2017 587

2018 194

2019 897

2020 74

2021 564

2022+ 1,021

per 31 Mar, 2012 per 31 Dec,

2011Average

Interest

Rate

(incl. swaps

and forwards)

4.6%

4.4%Portion

of floating

/ fixed

debt

43 / 57%

47 / 53%

5757

FORTUM�Power and heat company�in the Nordic area, Russia, Poland and the Baltics�DisclaimerSlide Number 3More than 100,000 shareholdersSlide Number 5Organisational structureSlide Number 7Slide Number 8Slide Number 9Divisions of FortumFortum mid-sized European power generation player; �Global #4 in heatBiggest nuclear and hydro generators in Europe and RussiaFortum's carbon exposure among the lowest in EuropeFortum’s strategic routeFortum in the Nordic electricity value chainFortum's European power and heat productionSlide Number 17Slide Number 18Market coupling milestones�- cross-border power flows optimised by power exchanges Slide Number 20Nordic and Continental markets are integrating – interconnection capacity could double by 2021Nordic water reservoirsNordic year forwardsWholesale price for electricityWholesale prices for electricityFuel and CO2 allowance pricesNordic power generation � – dominated by hydro, but fossil needed Still a highly fragmented Nordic power marketNew capacity needed for increasing demand and retiring capacity replacementsSlide Number 30Overview of Fortum’s nuclear fleetOwnership structures and formal responsibilitiesFortum's nuclear power capacity in NordicsVariety of technologies and agesThird party nuclear liability in case of severe accidentFortum to get 290 MW CO2 free capacity through upgrades in SwedenFortum’s investment programme �– Nordic region, Poland and Baltic countriesSlide Number 38Russia is the World’s 4th largest power marketSlide Number 40Day ahead wholesale market prices� – increase driven by recovering demand and gas priceSlide Number 42Capacity prices for new capacity considerably higher than prices for old capacity pricesSlide Number 44Slide Number 45Slide Number 46Slide Number 47Strong financial positionIncome statementComparable and reported operating profitCash flow statementKey ratiosOutlookOutlookHedging improves stability and predictabilityDebt Maturity ProfileSlide Number 57

FORTUM

Power and heat company

in the Nordic area, Russia, Poland and the Baltics

Investor/Analyst material

May 2012

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.


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

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 ~14.5 billion euros

30 April 2012

Foreign investors 27.5%

Finnish State 50.8%

Other Finnish investors 10.0%

Households 8.6%

Financial and insurance institutions 3.1%

Total ~ 8,630 MEUR

1999

2001

2003

2000

2002

2004

0.18

0.23

0.26

0.31

0.42

0.58

2005

1.12

Dividend per share

EUR

0.13

1998

0.58

0.54

2006

1.26

0.73

0.53

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

0.77

0.58

2008

1.00

Capital returns

72%

103%

78%

58%

1.00

2009

1.00

2010

1.00

2011

68%

68%

50%

Organisational structure

Country responsibles: Timo Karttinen / Finland, Norway; Per Langer / Sweden, Poland, Baltics; Alexander Chuvaev / Russia

1 February 2012

Business Divisions

President and CEO

Tapio Kuula

Electricity Solutions and

Distribution (Espoo)

Executive Vice President

Timo Karttinen

Power (Espoo)


Matti Ruotsala

Heat (Stockholm)


Per Langer

Russia (Chelyabinsk)


Alexander Chuvaev

Finance

Executive Vice President and

Chief Financial Officer

Juha Laaksonen

Corporate Relations

and Strategy


Anne Brunila

Corporate Human Resources

Senior Vice President

Mikael Frisk

Staff Functions

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 Russia

Build platform for

future growth

Competence in CO2-free hydro, nuclear and energy efficient CHP production,

and energy markets

Fortum’s Mission and Strategy

*

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

*

*

Our geographical presence today

* Distribution business sold Jan 1, 2012

TGC-1 (~25%)

Power generation ~7 TWh

Heat sales ~8 TWh

OAO Fortum

Power generation 17.4 TWh

Heat sales 26.7 TWh

Russia

Poland


Heat sales 4.3 TWh

Baltic countries


Heat sales 1.1 TWh

Distribution cust. ~24,000*

Nr 2

Power generation

Electricity

sales

Nr 2

Nr 1

Heat

Distribution

Nr 1

Nordic countries


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 Personnel 10,800

Great Britain


Heat sales 2.1 TWh

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. 14.1

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 volumes

New capacity, and price for that, power and heat price

Power sales.: 20.2

Heat sales.: 26.7

Distr.: Regulated

El. sales: Sales margin

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.

*)

IES

GDF SUEZ

***)

DEI

Irkutskenergo

Iberdrola

RusHydro

Fortum

EnBW

Vattenfall

CEZ

RWE

PGE

SSE

Statkraft

Rosenergoatom

Gazprom

NNEGC Energoat.

Enel

E.ON

EDF

0

100

200

300

400

500

600

Inter RAO UES

SUEK

**)

*)

IES

Onexim

Tatenergo

Minsk Energo

Kievenergo

Irkutskenergo

Bashkirenergo

RAO ES East

Inter RAO UES

TGC-2

Fortum

Dong Energy

KDHC, Korea

TGC-14

Lukoil

Gazprom

0

20

40

60

80

100

120

140

ELCEN, Rom.

Dalkia

Vattenfall

PGNiG

0

20

40

10

30

DEI

CEZ

Enel

Centrica

EDP

Iberdrola

SSE

EnBW

Fortum

EDF

E.ON

RWE

Gas Natural

Fenosa

PGE

Tauron

GDF SUEZ

Hafslund

Dong Energy

Vattenfall

Largest global producers, 2010

TWh

Largest producers in Europe and Russia, 2010

TWh

Power generation

Heat production

Electricity customers in EU, 2010

millions

Customers

Biggest nuclear and hydro generators in Europe and Russia

Figures 2010 pro forma

Total generation

Other

Nuclear

Hydro

0

50

100

150

200

250

300

350

400

450

500

550

600

TWh

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

Fortum's carbon exposure among the lowest in Europe

Source:

PWC & Enerpresse, Novembre 2011

Changement climatique et Électricité, Fortum

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.

0

200

400

600

800

1000

DEI

Drax

RWE

CEZ

SSE

Vattenfall

E.ON

Enel

Dong

EDP

GDF SUEZ Europe

Union Fenosa

Iberdrola

PVO

Fortum total

EDF

Verbund

Fortum EU

Statkraft

Average 337 g/kWh

g CO2/kWh electricity, 2010

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

84

189

Fortum’s strategic route

District heat in Poland 2003 →

Østfold

Shares in Hafslund

Shares in Lenenergo

Starting TGC-1

Divestment of Lenenergo shares

TGC-10

Stockholm

Energi

Gullspång

Birka Energi

50% Fortum

50% Stockholm

Gullspång

Skandinaviska

Elverk

Birka Energi

50% → 100%

Stora

Kraft

Lenenergo shares 1998 →



Länsivoima

→100%

E.ON Finland

Separation of

oil businesses

Elnova

50%→100%

Divestment of Fingrid shares

Divestment of heat operations outside of Stockholm

2008

2005

2006

2007

2002

2003

2004

1999

2000

2001

1996

1998

2009

2010

2011

Länsivoima

45%→65%

2012

IVO

1997

Neste

Fortum in the Nordic electricity value chain

Private customers,

small businesses

Retail companies

Large customers

Competitive

businesses

Regulated

businesses

Independent transmission

system operator

Independent

distribution companies

Nordic

wholesale

market

Power exchanges and bilateral

Generation

Transmission and system services

Distribution

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%

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

*

*









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, Nordic-CWE intraday market coupling is due to be realised during 2012 as well

Estonian price area in Nord Pool Spot since April 2010

with full integration of the Baltic States during 2012–2013

EU’s European Target Model for cross-border power trading

sets 2014 as deadline for an EU-wide market coupling

2006

2010

2009

2012

2010-2013

2011

2012

Current transmission capacity from Nordic area to Continental Europe is ~4000 MW

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

700

2100

600

600

350

Countries

Transmission

capacity

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

Nordic and Continental markets are integrating – interconnection capacity could double by 2021

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

EU support to connect Kriegers Flak offshore wind area to DK&DE; new 400 kV AC cable SE-DK also studied

Jutland – DE capacity to be increased by 500 MW in 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 merchant and TSO projects for links to the UK by 2018/21; 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

2000

2003

2010

2012

2011

reference level

Q1

Q2

Q3

Q4

reservoir content (TWh)

0

20

40

60

80

100

120

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

2 May 2012

Year 15

Year 17

Year 09

Year 10

Year 11

Year 12

Year 13

Year 14

Year 16

€/MWh

0

10

20

30

40

50

60

70

Wholesale price for electricity

Source: Nord Pool Spot, NASDAQ OMX Commodities Europe

Nord Pool System Price

Forwards

EUR/MWh

2 May 2012

Wholesale prices for electricity

Source: Nord Pool Spot, NASDAQ OMX Commodities Europe, EEX, APX-ENDEX, Bloomberg Finance LP, ATS, Fortum

Dutch

German

Nordic

Russian*

EUR/MWh

Spot prices

Forward prices

0

10

20

30

40

50

60

70

80

90

100

110

2007

2008

2009

2010

2011

2012

2013

2 May 2012

* including capacity tariff estimate.

E.g 9.4 €/MWh for 2010, 6.8 for 2011 and 5.9 for 2012.

Fuel and CO2 allowance prices

Source: ICE

Market prices 2 May 2012; 2012-2013 future quotations

Nordic power generation

– dominated by hydro, but fossil needed

Source: ENTSO-E Memo 2010

*) Normal annual Nordic hydro generation 200 TWh, variation +/- 40 TWh.

25

78

TWh

%

71

196

12

7

20

19

51

3

TWh/a

Total Nordic generation

382 TWh in 2010

Net import in 2010: 18 TWh

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.ON

PVO

E

-

CO

Energi

Agder

Energi

Norsk

Hydro

Helsinki

Others

52%

Dong

Energy

Vattenfall

Fortum

E.ON

G

ö

teborg

Helsinki

Hafslund

SEAS

-

NVE

Statkraft

Bixia

Fortum

Vattenfall

Others

E.ON

53%

SEAS

-

NVE

Hafslund

Helsinki

G

ö

teborg

Syd

Energi

Dong

Energy

LNI

Verkko

Power generation

382

TWh

>350 companies

Electricity distribution

15 million customers

~500 companies

Electricity retail

15 million customers

~350 companies

Main Message

Fortum is a leading Nordic energy company.

Nevertheless, with a market share of about 10 per cent for each phase of the energy chain, Fortum is, in fact, a relatively minor actor from a Nordic point of view.

Facts

In the Nordic electricity market, Fortum is responsible for

14% of the electricity generation (in TWh)

11% of the electricity networks (by number of electricity distribution customers)

9% of electricity retail (by number of electricity retail customers)

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

5896

New capacity,

total (1

Capacity changes, 2011-2035 (GW)

Retiring capacity

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%

~ 50%

~170%

~260%

New capacity, except nuclear, will require

over 60 EUR/MWh power price

Other costs

( variation)

CO2 cost

0

10

20

30

40

50

60

70

80

90

100

110

Coal

Gas

Nuclear

Hydro

Wind

Clean

coal

EUR/MWh

Estimated lifetime average cost in nominal 2014 terms.

Large variations in cost of new hydro and wind due to location and conditions.

1995

-97

-99

-01

-05

-07

-09

-11

-13

-03

-15

-17

Source: Nord Pool spot, NASDAQ OMX Commodities Europe

EUR/MWh

Futures

2 May 2012

Overview of Fortum’s nuclear fleet

Loviisa

Two units, built 1977 and 1981

2 × 488 MW = 976 MW

Fortum’s share: 100 %



Olkiluoto

Two units, built 1978 and 1980 one under construction

880 + 880 MW = 1760 MW

Under construction 1600 MW



Fortum’s share: 4 TWh


Oskarshamn

Three units, built 1972,1974 and 1985

473 + 638 + 1400 = 2511 MW



Fortum’s share: 7 TWh


Forsmark

Three units, built 1980,1981 and 1985

984 + 996 + 1170 = 3150 MW



Fortum’s share: 5,5 TWh


Ownership structures and formal responsibilities



Forsmark

OKG Aktiebolag

OKG Aktiebolag

Oskarshamn



Olkiluoto

Fortum Power and Heat Oy

Fortum Power and Heat Oy

Loviisa

Operator

Licensee

Site

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.

Chart10

EPV Energia

Fortum

Karhu Voima

Kemira

Mankala

Pohjolan Voima


6.5

26.6

0.1

1.9

8.1

56.8

Sheet1

Oskarshamn

E.ON54.5

Fortum43.4

Karlstad kommun2.1

Forsmark

Vattenfall66.0

Fortum22.2

E.ON9.9

Skellefteå Kraft2.0

TVO

EPV Energia6.56.66.56.5

Fortum26.62526.625.9

Karhu Voima0.10.10.10.1

Kemira1.9-1.91

Mankala8.18.18.18.1

Pohjolan Voima56.860.256.858.4

Sheet1

ownership

OKG Aktiebolag

Sheet2


Sheet3


Chart11

E.ON

Fortum

Karlstad kommun

ownership

OKG Aktiebolag

54.5

43.4

2.1

Sheet1

Oskarshamn

E.ON54.5

Fortum43.4

Karlstad kommun2.1

Forsmark

Vattenfall66.0

Fortum22.2

E.ON9.9


TVO


Fortum26.62526.625.9


Kemira1.9-1.91

Mankala8.18.18.18.1


Sheet1

ownership

OKG Aktiebolag

Sheet2


Sheet3


Chart13

Vattenfall

Fortum

E.ON

Skellefteå Kraft


66

22.1697

9.86

1.966

Sheet1

Oskarshamn

E.ON54.5

Fortum43.4

Karlstad kommun2.1

Forsmark

Vattenfall66.0

Fortum22.2

E.ON9.9


TVO


Fortum26.62526.625.9


Kemira1.9-1.91

Mankala8.18.18.18.1


Sheet1

ownership

OKG Aktiebolag

Sheet2


Sheet3


*

Fortum's nuclear power capacity in Nordics

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 7 May 2012

2012 (from May 7th onwards)

Load factor (%)

2005

2006

2007

2008

2009

2010

2011

Planned annual outages days in

Oskarshamn 1

80

51

63

85

68

77

72

40

Oskarshamn 2

90

78

76

86

75

90

77

27

Oskarshamn 3

85

95

88

70

17

31

75

Forsmark 1

85

76

81

81

88

93

79

32

Forsmark 2

94

72

85

79

64

39

94

39

Forsmark 3

95

92

88

69

86

81

85

16

Loviisa 1

95

93

94

86

96

93

94

42

Loviisa 2

95

88

96

93

95

89

94

23

Olkiluoto 1

98

94

97

94

97

92

94

15

Olkiluoto 2

94

97

94

97

95

95

90

8

9

Olkiluoto

Loviisa

Forsmark

Oskarshamn

*

*

*

Variety of technologies and ages

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.

*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.

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.

Current,

Finland

240 M€

145 M€

Requires ratification by 2/3 of member states to come into force. In Finland approved by Parliament in 2005.

Fortum to get 290 MW CO2 free capacity through upgrades in Sweden

Capacity increase and completion timetable based on recent estimate (Nord Pool). At 31.12.2010 Fortum's share of Swedish nuclear capacity was 1,778 MW.

Reactor

OKG 1Completion

-Increase 100% (MW)

0Fortum'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 22009, 201530 + 18095350~3

OKG 32011250110607~5

FKA 1Decision 2013120~25257~2

FKA 2201213030264~2

FKA 3Decision 2013170~35270~2

Total~290~2~1,950*~15

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

2014

Swedish nuclear upgrades

290

Refurbishing of hydro power

10-20

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

(biofuel CHP)

Järvenpää, Finland

23

63

Q2 2013

(biofuel CHP)









Russia is the World’s 4th largest power market

Data 2010 based on gross output.

Source: BP Statistical Review of World Energy June 2011

South Korea

Germany

US

China

Japan

Russia

India

Canada

France

Nordic

UK

Brazil

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

TWh

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

Tyumen

Tobolsk

Moscow

St. Petersburg

Chelyabinsk

Nyagan

OAO Fortum

TGC-1

Day ahead wholesale market prices

– increase driven by recovering demand and gas price

2

Key electricity, capacity and gas prices in the OAO Fortum area

III/2009

III/2008

I/2012

I/2011

LTM

2011

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

849 947 925 900

2,548 2,548 2,548 2,548

166 184 160 156

577 759 560 550

243 214 209 218

29.3 29.2 29.2 29.3

Day ahead power market prices for Urals

In addition to the power price generators receive a capacity payment.

2007

2008

2009

2010

2011

2012

*

Power market liberalisation – two markets

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

Capacity wholesale market

Electricity wholesale market

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

*

0

Long-term financial target will be dictated by basic economic logic

Assuming, having completed the investment programme, an invested capital of

a

… and an unchanged cost of capital

b

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

~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

*

Efficiency improvement programme 2008-2011

Increasing heat production profitability

Fuel efficiency improvement

Cost savings

New capacity commissioning 2011-2014

Additional capacity 2,388 MW; +85%

Capacity is sold at CSA* contracts with

guaranteed higher price

0

Key factors behind the profitability improvement in Russia

* Capacity Supply Agreement

Pace of new capacity increase of Fortum investment programme in Russia

2011 - 638 MW

2012 - 836 MW (Nyagan 2 in 2012 or 2013)

2013 - 418 MW

2014 - 496 MW

Total - 2,388 MW

*

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; 2*248

1177

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

82

Nyagan GRES

Gas

3x418

1,254

Boilers

-

Total

2,785

2,388

5,173

(CHP/Condensing)

(CHP/Condensing)

(Condensing)

(Condensing)

Supply date

2012, 2012 or 2013, 2013

June/2011

Feb/2011; 2014

Oct/2011









*

Strong financial position

Electricity will continue to gain a higher share of the total energy consumption

Annual electricity demand growth approximately 0.5%

Good production portfolio going forward

- Growth in Russia

Hedges create stability

*

Income statement

*

Comparable and reported operating profit

IFRS accounting treatment (IAS 39) of derivatives had an impact on the reported operating profit. In the first quarter EUR -16 (173) million, or earnings per share EUR -0.01 (0.14).

*

Cash flow statement

*

Key ratios

Good liquidity – committed credit lines total EUR 2.7 billion

*

Outlook

Key drivers and risks

Wholesale price of electricity

Demand

Fuels

CO2 emissions prices

Water reservoirs

Power plant availability

Nordic markets

Annual electricity demand growth estimated to be approximately 0.5%

Electricity continues to gain share of total energy consumption

Russia

Profits from Russia build up in pace with the capacity increase

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

*

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 70% hedge ratio at approximately EUR 48/MWh

(Q4: 65% at EUR 48/MWh)

2013 approximately 45% hedge ratio at approximately EUR 46/MWh

(Q4: 40% at EUR 46/MWh)

In Finland, the Government announced that a so-called windfall tax will be introduced in 2014

*

Hedging improves stability and predictability

2009 onwards new definition

Debt Maturity Profile

per 31 Mar, 2012 per 31 Dec, 2011

Average Interest Rate (incl. swaps and forwards)4.6%4.4%

Portion of floating / fixed debt 43 / 57% 47 / 53%

MEUR

2012903

2013643

20141,261

20151,086

2016867

2017587

2018194

2019897

202074

2021564

2022+1,021

*

*

*

*

Coal price

(ICE Rotterdam)

0

40

80

120

160

200

240

USD / t

20062007201020082009201220112013

Gas price

(ICE NBP)

0

20

40

60

80

100

GBp / therm

20062007201020082009201220112013

CO

2

price

(ICE ECX EUA)

0

5

10

15

20

25

30

35

EUR / tCO

2

20062007201020082009201220112013

Crude oil price

(ICE Brent)

0

20

40

60

80

100

120

140

160

USD / bbl

20062007201020082009201220112013

Realised prices quarterly since 2000

0

10

20

30

40

50

60

70

80

2000200120022003200420052006200720082009201020112012

EUR/MWh

Power's Nordic power priceSpot price, SE&FI avg.

2009 onwards thermal and import

from Russia excluded

0

5

10

15

20

25

30

35

40

€

/

MWh

MEUR

I/2012

I/2011

2011

LTM

Sales

1 901

2 034

6 161

6 028

Expenses

-1 250

-1 385

-4 359

-4 224


651

649

1 802

1 804

Items affecting comparability

85

251

600

434

Operating profit

736

900

2 402

2 238

Share of profit of associates and jv's

-7

59

91

25

Financial expenses, net

-76

-55

-265

-286

Profit before taxes

653

904

2 228

1 977

Income tax expense

-119

-158

-366

-327

Net profit for the period

534

746

1 862

1 650

Non-controlling interests

39

68

93

64

EPS, basic (EUR)

0.56

0.76

1.99

1.79

EPS, diluted (EUR)

0.56

0.76

1.99

1.79

UnitMWe (net)share [%]share [Mwe]

Commercial

operation

Age

Type /

Generation*

Supplier

Loviisa-1

488100,04881977-05-0934PWR / 1AEE (Atomenergoexport)

Loviisa-2

488100,04881981-01-0530PWR / 1AEE (Atomenergoexport)

Olkiluoto-1

88026,62341979-10-1032BWR / 3Asea-Atom / Stal-Laval

Olkiluoto-2


Olkiluoto-3

(1600)25,0(400)2014 (?)PWR / 3Areva / Siemens

Oskarshamn-1


Oskarshamn-2


Oskarshamn-3


Forsmark-1


Forsmark-2


Forsmark-3


MEUR

I/2012

I/2011

I/2012

I/2011

2011

2011

Power

341

325

367

489

1 201

1 476

Heat

161

171

213

265

278

380

Russia

48

34

48

34

74

74

Distribution

110

124

117

125

295

478

Electricity Sales

9

11

11

-20

27

3

Other

-18

-16

-20

7

-73

-9

Total

651

649

736

900

1 802

2 402

Comparable operating

profit

Reported operating

profit

Comparable operating

profit

Reported operating

profit

Olkiluoto

Loviisa

Forsmark

Oskarshamn

Olkiluoto

Loviisa

Forsmark

Oskarshamn

Olkiluoto

Loviisa

Forsmark

Oskarshamn

MEUR

I/2012

I/2011

2011

LTM

Operating profit before depreciations

894

1 049

3 008

2 853

Non-cash flow items and divesting activities

-99

-270

-726

-555

Financial items and fx gains/losses

-142

-302

-376

-216

Taxes

-78

-114

-394

-358

Funds from operations (FFO)

575

363

1 512

1 724

Change in working capital

-22

91

101

-12

Total net cash from operating activities

553

454

1 613

1 712

Paid capital expenditures

-272

-206

-1 285

-1 351

Acquisition of shares

0

-19

-62

-43

Other investing activities

255

210

522

567

Cash flow before financing activities

536

439

788

885

MEUR

LTM

2011

2010

Q1'12

EBITDA

2 853

3 008

2 271

Comparable EBITDA

2 385

2 374

2 396

Interest-bearing net debt

6 523

7 023

6 826

Comparable Net debt/EBITDA

2.7

3.0

2.8

Return on capital employed (%)

12.8

14.8

11.6

Return on shareholders' equity (%)

16.7

19.7

15.7

0

250

500

750

1000

1250

1500

20122013201420152016201720182019202020212022+

BondsFinancial institutionsOther long-term debtCPsOther short-term debt


Karhu Voima

0,1

Mankala 8,1

Kemira 1,9

Fortum 26,6

Pohjolan

Voima 56,8

EPV Energia

6,5

OKG Aktiebolag

E.ON 54,5

Fortum 43,4

Karlstad

kommun 2,1


Vattenfall

66,0

Fortum 22,2

E.ON 9,9

Skellefteå

Kraft 2,0

0

20

40

60

80

100

120

140

DenmarkNorwaySwedenFinland

Fossil fuels

Nuclear

Biomass

Wind

Hydro *

0

10

20

30

40

50

60

70

80

90

100

110

199519971999200120032005200720092011201320152017

0

10

20

30

40

50

60

70

fortum power and heat company in the nordic area, russia...

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