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FORTUM Power and heat company in the Nordic area, Russia and the Baltics
Investor / Analyst material
June 2015
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 – 16
European and Nordic power markets pages 17 – 27
Fortum’s nuclear fleet pages 28 – 31
Russia pages 32 – 34
Fortum’s investment programme page 34
Historical achieved prices page 35
Q1 2015 pages 36 – 55
Financials and outlook pages 44 – 55
Content
3
Appr. 114,000 shareholders
• Power and heat company in the Nordic countries, Russia, Poland and the Baltics
• Listed at the Helsinki Stock Exchange since 1998
• Among the most traded shares on the Nasdaq Helsinki stock exchange
• Market cap ~16 billion euros
4
31 May 2015
Foreign investors 30.3% Finnish State 50.8%
Other Finnish investors 7.9%
Households 8.8%
Financial and insurance institutions 2.2%
Capital returns: 2014 EUR 1.30 per share ~ EUR 1.2 billion
• Fortum’s dividend policy is based on the following preconditions:
– The dividend policy ensures that shareholders receive a fair remuneration for their entrusted capital,
supported by the company’s long-term strategy that aims at increasing earnings per share and
thereby the dividend.
– When proposing the dividend, the Board of Directors looks at a range of factors, including the macro
environment, balance sheet strength as well as future investment plans.
5
Fortum's target is to pay a stable,
sustainable and over time increasing
dividend of 50-80% of earnings per share
excluding one-off items
Fortum has since 1998 annually paid dividends
in total ~11,648 MEUR
2010
68%
2011
50% 2012
63%
2013
81%
2014
37%
1.0 1.0 1.0 1.1
1.3*
5 year dividend per share (EUR) history
0.2
1.1
*Dividend of EUR 1.10 per share, and in addition an extra dividend EUR 0.20 per share for 2014.
Our strategic route
6
Birka Energi
50% → 100%
Gullspång
Neste
Divestment of
non-strategic
heat business
2007
Skandinaviska
Elverk
Länsivoima
45% → 65%
Birka Energi
50% Fortum
50% Stockholm Gullspång merged
with Stockholm Energi
TGC-10 Divestment of
Fingrid shares
Divestment of
heat operations
outside of
Stockholm
Divestment
of Lenenergo shares
1996
IVO Fortum
Divestment of
small scale
hydro
2012 2008 2015
1997
Lenenergo
shares →
Stora Kraft
Länsivoima
→100%
2000
Elnova
50% → 100%
Østfold
Shares in
Lenenergo
Shares in
Hafslund
District heating
in Poland →
2003
Oil business
spin-off
TGC-1
established
2005
2011
1998 2002
Divestment of electricity
distribution and heat
businesses
Divestment of electricity
distribution business
Divestment of
Grangemouth power plant
Divestment
of Gasum
shares
2014
2006
E.ON
Finland
Divestment of
electricity
distribution
business
Fortum’s Mission and Strategy
7
Strategy
Fortum’s purpose is to create energy that improves life for present and future
generations. We provide sustainable solutions for society and deliver excellent
value to our shareholders.
Mission
Build on the strong
Nordic core
Create solid earnings
growth in Russia
Build a platform for
future growth
Strong competence in CO2-free hydro and nuclear, efficient CHP production and
energy markets
Fortum’s reporting segments and divisions
8
Russia
• Power and heat generation
and sales in Russia
• Includes OAO Fortum and
Fortum’s slightly over 29%
holding in TGC-1
Power and Technology
• Hydro, nuclear and thermal
power generation
• Power Solutions with expert
services
• Portfolio management and
trading
• Technology and R&D functions
The segment incorporates two
business divisions:
• Hydro Power and Technology
• Nuclear and Thermal Power
Heat, Electricity Sales
and Solutions
• Combined heat and power
(CHP) production
• District heating activities and
business to business heating
solutions
• Solar business
• Electricity sales and related
customer offering
• Corporate Sustainability
Our current geographical presence
9
Nordic countries
Power generation 48.0 TWh
Heat sales 3.3 TWh
Electricity customers 1.3 million
Power
generation
Electricity
sales
Heat
OAO Fortum
Power generation 23.3 TWh
Heat sales 26.0 TWh
Russia
Poland Power generation 0.7 TWh
Heat sales 3.4 TWh
Baltic countries Power generation 0.7 TWh
Heat sales 1.2 TWh
India Power generation 9 GWh
Key figures 2014 Sales EUR 4.1 bn
Comparable operating profit EUR 1.1 bn
Balance sheet EUR 21 bn
Personnel 8,200
10
Fortum mid-sized European power generation player; major producer in global heat
1) Veolia incl. Dalkia International and EDF incl. Dalkia's activities in France
Source: Company information, Fortum analyses, 2013 figures pro forma, heat production of Beijing DH not available.
Largest global producers, 2013 TWh
Largest producers in Europe and Russia, 2013 TWh
Power generation Heat production
Electricity customers in EU, 2013 Millions
Customers
Gazprom
DEI
EuroSibEnergo Iberdrola
Fortum EnBW
Vattenfall
CEZ
RWE
IES
DTEK
PGE
Rosenergoatom
NNEGC Energoat.
Enel E.ON EDF
GDF SUEZ
Statkraft
Inter RAO UES RusHydro
EDP
0 100 200 300 400 500 600
GDF SUEZ
DEI
CEZ
Enel
Centrica
EDP
Iberdrola
SSE
EnBW
Fortum
EDF
E.ON
RWE
Gas Natural Fenosa
PGE Tauron
Hafslund
Dong Energy
0 20 40 10 30
Vattenfall
0 20 40 60 80 100 120 140
KDHC
Quadra
Tatenergo
Minskenergo
DTEK
EuroSibEnergo
TGC-2
Fortum
Dong Energy
Enel
Lukoil
Sibgenco
IES
Vattenfall
PGNiG
Inter RAO UES
1) EDF
RusHydro
1 ) Veolia
Gazprom
Fortum Värme
Biggest nuclear an hydro generators in Europe and Russia
11
Figures 2012 pro forma
* incl. MOEK, ** incl. Bashkirenergo, *** incl. TGC-5, TGC-6, TGC-7, TGC-9
TWh
Total generation
0
50
100
150
200
250
300
350
400
450
500
550
600
ED
F
Ro
sen
erg
oa
tom
NN
EG
C E
nerg
oato
m
Ru
sH
ydro
Vatt
enfa
ll
E.O
N
Enel
Euro
Sib
Energ
o
GD
F S
UE
Z
Sta
tkra
ft
Fo
rtum
Iberd
rola
RW
E
EnB
W
CE
Z
Axpo
Verb
und
Gazpro
m
Hid
roele
ctr
ica
Centr
ica
Alp
iq
E-C
O E
nerg
i
Ukrh
ydro
energ
o
Nors
k H
ydro
EP
S, S
erb
ia
BK
K
Agder
Energ
i
ED
P
Ga
s N
atu
ral F
en
osa
DE
I
SS
E
Inte
r R
AO
UE
S
PG
E
DT
EK
IES
Other
Nuclear
Hydro
*
***
**
12
Fortum in the Nordic electricity value chain
Power generation
Nordic wholesale market
Power exchange and
bilateral agreements
Large customers
Retail customers
Private customers, small businesses
Fortum's power and heat production by source
13
Natural gas 31%
Nuclear power
33%
Coal 5%
Biomass 1%
Total generation 73.4 TWh
(Generation capacity 14,624 MW)
Hydro power 30%
Fortum's power generation
in 2014
Total production 34.6 TWh
(Production capacity 17,402 MW)
Fortum's heat production
in 2014
Peat 1% Waste 1%
Biomass 6%
Natural gas
77%
Coal 15%
Nuclear power
48%
Coal 4%
Hydro power 44%
Natural gas 2%
European generation 50.1TWh
(Generation capacity 9,851 MW)
Fortum's European
power generation in 2014
Biomass 2%
Natural gas
29%
Fortum's European
heat production in 2014
Peat 3%
Oil 1%
Waste 3%
Biomass 25%
Heat pumps, electricity 1%
Coal 38%
European production 8.2 TWh
(Production capacity 3,936 MW)
Fortum's European power and heat production
14
Fortum a forerunner in sustainability
We are highly committed to sustainability. Our purpose is to create
energy that improves life for present and future generations. We provide
sustainable solutions for society while delivering excellent value to our
shareholders. We want to act responsibly, both in the short term and
long term.
Fortum is listed in several sustainability indexes:
• Nordic Climate Disclosure Leadership Index (CDLI)
• STOXX® Global ESG Leaders indices
• oekom
• OMX GES Sustainability Finland Index
• ECPI® Indices
15
Emissions-free production is Fortum’s strategic choice
0
200
400
600
800
1 000
1 200
DE
I
RW
E
Dra
x
SS
E
CE
Z
E.O
N
Vatt
en
fall
ED
P
Enel
Edip
ow
er
EnB
W
Gas N
atu
ral F
enosa
GD
F S
UE
Z
Do
ng
En
erg
y
Fo
rtu
m to
tal
Iberd
rola
PV
O
ED
F
Verb
und
Fort
um
EU
Sta
tkra
ft
64
g CO2/kWh electricity, 2013
2014
64% of Fortum's total power generation CO2-free
94% of Fortum’s power generation in the EU CO2-free
Close to 100% of the ongoing investment programme
in the EU is CO2-free.
Average 328 g/kWh
200
Fortum's carbon exposure among the lowest in Europe
16
Note: : Fortum’s specific emissions of the power generation in 2014 in the EU were 39 g/kWh and in total 177 g/kWh.
Only European generation except “Fortum total“ which includes Russia.
Source:
PWC & Enerpresse, December 2014
Climate Change and Electricity, Fortum
Carbon market gradually tightening
Political decisions strengthening the EU
Emissions Trading System
Decision on the 2030 greenhouse gas reduction
target
Backloading decision, implementation started in 2014
Market Stability Reserve (MSR), adoption expected
during summer 2015, to be operational 2019
Upcoming review of ETS-Directive
Robust and rebalanced EU carbon market
foreseen by early 2020’s
Current oversupply to halve early 2020’s and
gradually cease towards 2030
Gradual appreciation of allowance price.
17
EU ETS = European Union Emissions Trading System
EUA = allowance in the EU ETS
Source: Thomson Reuters Point Carbon
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, NL, BE) since 11/2010 with a continued coupling with Nord Pool Spot
• NorNed cable (NO-NL) included in January 2011.
• Poland coupled with Nord Pool Spot since December 2010
• UK coupling started through BritNed cable in April 2011
• Estonian price area in Nord Pool Spot since 2010 and Lithuanian area since 6/2012. Latvia joined in June 2013
• Czech, Slovakia and Hungary coupled together since September 2012. Romania joined in November 2014
• A common day-ahead market coupling for the whole north-western Europe was started in February 2014. Iberia (Spain & Portugal) joined in May 2014. Italy and Slovenia joined in February 2015
• Flow-based cross-border capacity allocation for further trade optimisation taken into use in May 2015 for the CWE region
• CEE (Central Eastern Europe) market coupling region to join in 2016. Switzerland waiting for agreement with the EU
• In addition to day-ahead coupling, intraday market coupling and balancing market integration under development as well
18
2009
2/2015
2012-2014
2010-
2013
2016
2014
Current transmission capacity from Nordic area is over 5,000 MW
19
• Theoretical maximum in transmission capacity ~40 TWh
per annum
• Net export from Nordic area to Continental Europe and
Estonia during year 2014 was 13 TWh
• During the dry year 2013 net export was 3 TWh
• Approximately 25 TWh of net export is now reachable
Countries Transmission capacity MW
From Nordics To Nordics
Denmark - Germany 2,225 2,100
Sweden - Germany 615 600
Sweden - Poland 600 600
Norway - Netherlands 700 700
Finland - Estonia 1000 1,016
Finland - Russia 320 1,300
Total 5,460 6,316
700
2,225 615 600
1000
320
Nordic, Baltic, Continental and UK markets are integrating – interconnection capacity will double by 2021
20
Two 1400 MW NO-UK links as EU
Projects of Common Interest: NSN
link to England agreed to be ready
in 2021, NorthConnect to Scotland
still requiring Norwegian permission
First direct 1,400 MW NO-DE link
contracted to be built by end-2019
EU financial support for a 700 MW
DK-NL link, due to be built by 2019
Jutland – DE capacity planned to
grow by 860 MW by 2020, with
further 500 MW increase by 2022
Svenska Kraftnät agreed 3/2014
with 50Hertz to study a new Hansa
PowerBridge DC link between
Sweden and Germany
The Northern Seas Offshore Grid and the Baltic
Energy Market Integration Plan are included as
priority electricity corridors in EU’s Infrastructure
Guidelines, approved in April 2013
New interconnections will
double the export capacity
to over 10,000 MW by 2021
LitPol Link (500+500 MW) to
connect the Baltic market to
Poland by end-2015/20. It will open
a new transmission route from the
Nordic market to the Continent
EU’s European Energy Programme
for Recovery co-financing 700 MW
NordBalt (ready 12/2015)
New internal Nordic grid
investments provide for increased
available capacity for export to the
Continent and Baltics
EU’s Connecting Europe Facility
co-financing 3rd EE-LV transmission
line, due to be ready by 2020
New 400 MW Zealand-DE
connection through Kriegers Flak
offshore wind area with DC station
in DE planned to be built by 2019
New interconnectors
New Nordic lines
Existing interconnectors
Nordic water reservoirs
21
Source: Nord Pool Spot
Q1 Q2 Q3 Q4
20
40
60
80
100
120
rese
rvo
ir c
on
ten
t (T
Wh)
0
2000 2003 2014 2013 reference level 2015
Nordic year forwards
22
Source: Nasdaq Commodities
0
10
20
30
40
50
60
70
€/MWh 1 June 2015
Year15 Year17 Year19 Year10 Year11 Year12 Year13 Year14 Year16 Year18 Year20
2014
Q1
2008
Q2 Q3 Q4 Q1
2009
Q2 Q3 Q4 Q1
2010
Q2 Q3 Q4 Q1
2011
Q2 Q3 Q4 Q1
2012
Q2 Q3 Q4 Q1
2013
Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015
Q1 Q2
Wholesale price for electricity
23
Source: Nord Pool Spot, Nasdaq Commodities
0
10
20
30
40
50
60
70
80
90
100
110
EUR/MWh Nord Pool Spot System Price Forwards
1 June 2015
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025
Wholesale prices for electricity
24
Source: Nord Pool Spot, Nasdaq Commodities, APX-ENDEX, Bloomberg Finance LP, ATS, NP “Market Council”, Fortum
* Including weighted average capacity price
Dutch
German
Nordic
Russian*
Spot prices Forward prices EUR/MWh
10
20
30
40
50
60
70
80
90
100
110
0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
1 June 2015
0
30
60
90
120
150
US
D /
bb
l
Crude oil price (ICE Brent)
2007 2008 20112009 2010 20132012 2014 2015 20160
7
14
21
28
35
EU
R /
tC
O2
CO2 price (ICE ECX EUA)
2007 2008 20112009 2010 20132012 2014 2015 2016
0
50
100
150
200
250
US
D /
t
Coal price (ICE Rotterdam)
2007 2008 20112009 2010 20132012 2014 2015 20160
20
40
60
80
100
GB
p /
th
erm
Gas price (ICE NBP)
2007 2008 20112009 2010 20132012 2014 2015 2016
25
Source: ICE
Market prices 1 June 2015; 2015-2016 future quotations
Fuel and CO2 allowance prices
Nordic power generation – dominated by hydro, but fossil needed
26
Source: ENTSO-E Statistical Factsheet 2014 *) 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
Solar
Wind
Hydro *
TWh/a
Total Nordic generation
390 TWh in 2014
Net export in 2014: 10 TWh
23
85
TWh %
39
214
28
6
22
10
55
7
1 0
Wholesale electricity price too low to attract investments
27
NOTE: The presented figures are calculated based on data from recent public reports and do not represent Fortum’s view. Average achieved price (€/MWh) for the production
type depends on availability and flexibility. There are large variations in the cost of hydro, wind and solar depending on location and conditions.
0
10
20
30
40
50
60
70
80
90
100
110
Source: Nord Pool spot, Nasdaq Commodities
EUR/MWh
Futures
1 June 2015
1995 2015 2025 0
10
20
30
40
50
60
70
80
90
100
110
Onshore wind
Nuclear Utility scale Solar PV In Italy
Large hydro
Offshore wind
EUR/MWh
Average levelised costs of new electricity generation
Coal condensing
Gas
Commodity prices are forward prices as of August 2014.
Overview of Fortum’s nuclear fleet
28
LOVIISA OLKILUOTO OSKARSHAMN FORSMARK
Commercial operation started
Unit 1: 1977
Unit 2: 1981
Unit 1: 1978
Unit 2: 1980
Unit 3: (Under construction)
Unit 1: 1972
Unit 2: 1974
Unit 3: 1985
Unit 1: 1980
Unit 2: 1981
Unit 3: 1985
Generation Capacity
Fortum’s share
Unit 1: 496 MW
Unit 2: 496 MW
Total: 992 MW
Unit 1: 880 MW
Unit 2: 880 MW
(Unit 3: 1,600 MW)
Total: 1,760 MW (3,360)
27% 468 MW
Unit 1: 473 MW
Unit 2: 638 MW
Unit 3: 1,400 MW
Total: 2,511 MW
43% 1,089 MW
Unit 1: 984 MW
Unit 2: 1,120 MW
Unit 3: 1,170 MW
Total: 3,274 MW
22% 720 MW
Yearly production
Fortum’s share of production
8 TWh
8 TWh
14 TWh
4 TWh
17 TWh
7 TWh
25 TWh
5.5 TWh
Share of Fortums Nordic production
18% 9% 16% 13%
Majority owner
Fortum’s share
Fortum
Pohjolan Voima
26.6%
E.ON
43.4%
Vattenfall
22.2%
Operated by Fortum Teollisuuden Voima (TVO)
OKG Aktiebolag Forsmarks Kraftgrupp
Responsibilities Loviisa: Fortum is the owner, licensee and operator with all the responsibilities specified in the Nuclear Energy Act, Nuclear Liability Act, and other relevant nuclear legislation
Other units: Fortum is solely an owner with none of the responsibilities assigned to the licensee in the nuclear legislation. Other responsibilities are specified in the
Companies Act and the Articles of Association and are mostly financial.
Olkiluoto
Loviisa Forsmark
Oskarshamn
Fortum's nuclear power in the Nordics
29
• Finnish units world class in availability
• Overview of production and consumption:
www.fortum.com/investors - energy related links
Source: Fortum
Load factor (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
2014
Osakarshamn 1 80 51 63 85 68 77 72 1 13 74
Oskarshamn 2 90 78 76 86 75 90 77 81 33 0
Oskarshamn 3 85 95 88 70 17 31 75 69 77 75
Forsmarks 1 85 76 81 81 88 93 79 88 87 94
Forsmark 2 94 72 85 79 64 39 94 82 89 89
Forsmark 3 95 92 88 69 86 81 85 93 88 82
Loviisa 1 95 93 94 86 96 93 94 84 92 92
Loviisa 2 95 88 96 93 95 89 94 91 93 89
Olkiluoto 1 98 94 97 94 97 92 94 90 97 94
Olkiluoto 2 94 97 94 97 95 95 90 96 93 97
Variety of technologies and ages
30
Planned capacity increases
• Oskarshamn 2 in 2017, capacity increase 180 MW (Fortum’s share 78 MW), Fortum’s share of total capacity after increase 355 MW
• Forsmark 1 in 2017-2020, capacity increase 120 MW (Fortum’s share 27 MW), Fortum’s share of total capacity after increase 257 MW
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
Age Type/
Generation *
Supplier
Loviisa 1
Loviisa 2
496
496
100,0
100,0
496
496
1977-05-09
1981-01-05
36
33
PWR / 1
PWR / 1
AEE (Atomenergoexport)
AEE (Atomenergoexport)
Olkiluoto 1
Olkiluoto 2
Olkiluoto 3
880
880
(1,600)
26,6
26,6
25,0
234
234
(400)
1979-10-10
1982-07-10
(?)
34
31
BWR / 3
BWR / 3
PWR / 3
Asea-Atom / Stal-Laval
Asea-Atom / Stal-Laval
Areva / Siemens
Oskarshamn 1
Oskarshamn 2
Oskarshamn 3
473
638
1,400
43,4
43,4
43,4
205
277
607
1972-02-06
1975-01-01
1985-08-15
42
39
28
BWR / 1
BWR / 2
BWR / 4
Asea-Atom / Stal-Laval
Asea-Atom / Stal-Laval
Asea-Atom / Stal-Laval
Forsmark 1
Forsmark 2
Forsmark 3
984
1,120
1,170
23,4
23,4
20,1
230
233
236
1980-12-10
1981-07-07
1985-08-18
33
32
28
BWR / 3
BWR / 3
BWR / 4
Asea-Atom / Stal-Laval
Asea-Atom / Stal-Laval
Asea-Atom / Stal-Laval
Third party nuclear liability in case of severe accident
31
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€
Old,
Finland
240 M€
145 M€
In force since 1.1.2012.
Law approved by Parliament
in 2010, requires separate
decision from Government to
come into force.
Requires ratification by 2/3
of member states to come
into force. In Finland
approved by Parliament in
2005
Fortum - a major player in Russia
OAO Fortum (former TGC-10)
• Operates in the heart of Russia’s oil and gas producing region, fleet mainly gas-fired CHP capacity
• 23 TWh power generation, 26 TWh heat production in 2014
• Investment programme to add 85%, almost 2,400 MW to power generation capacity
TGC-1
• 29.5% of territorial generating company TGC-1 operating in north-west Russia
• ~7,200 MW electricity production capacity (more than 40% hydro),
~24 TWh electricity, ~28 TWh heat in 2014
• Fortum and Gazprom Energoholding have signed a protocol to start a
restructuring process of their ownership of TGC-1. Currently Gazprom Energoholding
owns 51.8% of the TGC-1 shares and Fortum 29.5%. As part of the restructuring,
Fortum will establish a joint venture together with Rosatom to own the hydro assets
of TGC-1, while Gazprom Energoholding continues with the heat and thermal power
businesses of TGC-1. By utilising its present stake in TGC-1, Fortum would obtain
a 75-plus-percent ownership in the new hydro power company. Rosatom would have a 25-minus-percent minority
holding in the new hydro power company. Provided that Fortum obtains a 75-plus-percent ownership in TGC-1 hydro
assets, Fortum would be ready to participate with a minority stake (max 15%) in the Finnish Fennovoima nuclear
power project on the same terms and conditions as the other Finnish companies currently participating in the project.
32
OAO Fortum
Tyumen
Tobolsk
Chelyabinsk
Nyagan
TGC-1
St. Petersburg
Moscow
33
Day ahead wholesale market prices in Russia
Key electricity, capacity and gas prices in the OAO Fortum area
I/15 I/14 2014 LTM
Electricity spot price (market
price), Urals hub, RUB/MWh 1,051 1,018 1,089 1,097
Average regulated gas price,
Urals region, RUB 1000 m3 3,362 3,362 3,362 3,362
Average capacity price for CCS
”old capacity”, tRUB/MW/month 163 183 167 162
Average capacity price for CSA
”new capacity”, tRUB/MW/month 715 609 552 589
Average capacity price,
tRUB/MW/month 394 335 304 321
Achieved power price for OAO
Fortum, EUR/MWh 26.0 30.7 30.4 29.0
0
200
400
600
800
1 000
1 200
1 400
RU
B / M
Wh
0
5
10
15
20
25
30
35
40
€/
MW
h
In addition to the power price generators receive a capacity payment. Source: ATS
2008 2009 2010 2011 2012 2013 2014 2015
Day ahead power market prices for Urals
2008 2009 2010 2011 2012 2013 2014 2015
85% increase in power generation capacity in Russia by 2015 through the investment programme
34
Year Supply
starts
Power plant Fuel type Existing
capacity
2,785 MW
New
investments
2,388 MW
Production type Total
capacity
5,173 MW
< 2011 Tyumen CHP-2 Gas 755 CHP/Condensing 755
Chelyabinsk CHP-2 Gas, coal 320 CHP/Condensing 320
Argayash CHP Gas, coal 195 CHP/Condensing 195
Chelyabinsk CHP-1 Gas, coal 149 CHP/Condensing 149
2011 Feb/2011 Tyumen CHP-1 Gas 472 209 CHP/Condensing 681
June/2011 Chelyabinsk CHP-3 Gas 360 216 CHP/Condensing 576
Oct/2011 Tobolsk CHP Gas 452 213 CHP/Condensing 665
2013 April/2013 Nyagan 1 GRES Gas 418 Condensing 418
Dec/2013 Nyagan 2 GRES Gas 418 Condensing 418
2015 Jan/2015 Nyagan 3 GRES Gas 418 Condensing 418
2H/2015 Chelyabinsk GRES Gas 82 248 CHP/Condensing 330
2H/2015 Chelyabinsk GRES Gas 248 CHP/Condensing 248
2,785 MW 2,388 MW 5,173 MW
Hedging improves stability and predictability
35
2009 onwards thermal and import from Russia excluded
Interim report January–March 2015 Fortum Corporation
29 April 2015
IFRS restatement relating to discontinued operations
Distribution segment has been reclassified as discontinued operations in Q1/2015.
As a result, continuing operations and discontinued operations are presented
separately for Fortum Group. Comparative period information for 2014 has been
restated accordingly.
Restated information for the interim periods of 2014 can be found in a stock
exchange release published 15 April 2015
37
Q1 2015 Results
38
Key figures (MEUR) I/2015 I/2014 2014 LTM
Sales, continuing operations 1,040 1,208 4,088 3,920
Comparable EBITDA, continuing operations 396 456 1,457 1,397
Operating profit:
Continuing operations 350 366 1,296 1,280
Discontinued operations 81 1,968 2,132 245
Fortum total 431 2,333 3,428 1,526
Comparable operating profit:
Continuing operations 343 358 1,085 1,070
Discontinued operations 82 119 266 229
Fortum total 425 477 1,351 1,299
Profit before taxes:
Continuing operations 350 374 1,232 1,208
Discontinued operations 80 1,968 2,128 240
Fortum total 431 2,341 3,360 1,450
Earnings per share:
Continuing operations 0.33 0.35 1.22 1.20
Discontinued operations 0.07 2.18 2.33 0.22
Fortum total 0.40 2.53 3.55 1.42
Net cash from operating activities, continuing operations 516 405 1,406 1,517
Summary of the first quarter of 2015
• Strong cash flow from operations
• Hydro production impacted by later spring floods and inflow; nuclear volumes impacted
by unplanned outages in co-owned plants
• Binding agreement to sell the Swedish electricity distribution business – concludes the
Distribution divestment process
• Discussions and preparations for a possible restructuring of Russian TGC-1 ownership
continue
• Nyagan 3, in Russia, started receiving capacity payments as of 1 January 2015
• Russian CSA payments revised upwards to reflect the higher bond rates
• Pekka Lundmark appointed new President and CEO, starting at the beginning of
September
39
Market conditions in the first quarter of 2015
Nordic countries
• Power consumption in the Nordic countries at the same level as in Q1 2014
• Hydro reservoirs at long-term average level
• Nordic system spot prices approximately EUR 2 per MWh lower than in Q1 2014,
while Finnish and Swedish area prices EUR1-3 per MWh lower
European business environment and carbon market
• European Commission is developing a reference market model for countries
planning a capacity market
• A market stability reserve of the EU emissions trading system is being negotiated
Russia
• Power consumption in Fortum’s operating areas was on the same level as in Q1
2014
• Electricity spot price (in RUB) in the Urals hub was on same level as in Q1 2014
• RUB strengthened during the quarter
40
Price development in the Nordic region and Russia
41
Includes capacity income
-7% +3%
-5% -15%
Q1: Fortum’s market environment remained weak
42
Comparable operating profit, EUR million
Financials
Comparable and reported operating profit
I/2015 I/2014 I/2015 I/2014
Power and Technology 203 251 203 262
Heat, Electricity Sales and Solutions 58 48 64 45
Russia 97 73 98 73
Other -15 -14 -15 -14
Total, continuing operations 343 358 350 366
Discontinued operations 82 119 81 1,968
Total, Fortum 425 477 431 2,333
44
Comparable
operating profit
Reported
operating profit MEUR
• Sales gains, IFRS accounting treatment (IAS 39) of derivatives and nuclear fund adjustments had an impact EUR 7 (8) million on the reported operating profit for continuing operations
Power and Technology
MEUR I/2015 I/2014 2014 LTM
Sales 500 586 2,156 2,070
Comparable EBITDA 232 282 998 948
Comparable operating profit 203 251 877 829
Net assets 6,019 6,276 6,001
Comparable RONA % 14.2 13.6
Gross investments 28 35 198 191
45
Q1 2015
• Lower achieved power price, hydro and nuclear volumes
• Later spring floods
• Several small unplanned outages in co-owned nuclear power plants
Heat, Electricity Sales and Solutions
46
Q1 2015
• Comparable operating profit improved mainly due to lower fuel costs and higher
heat prices during the period. In addition, the customer base in retail electricity
continued to grow and sales margin improved.
• Heat sales volumes as well as power sales volumes on approximately same levels
as Q1 2014
MEUR I/2015 I/2014 2014 LTM
Sales 406 446 1,332 1,292
Comparable EBITDA 82 74 204 212
Comparable operating profit 58 48 104 114
Net assets 2,164 2,365 2,112
Comparable RONA % 8.7 8.6
Gross investments 12 13 124 123
Russia
Q1 2015
• Lower heat production volumes, due to warm weather, and bad debt provisions for
heat trade receivables impacted the result negatively
• Russian rouble affected the result negatively by EUR 47 million
• Result includes CSA provision release of EUR 29 million
47
* Excluding the net release of CSA provision
MEUR I/2015 I/2014 2014 LTM
Sales 263 333 1,055 985
Comparable EBITDA * 94 113 304 285
Comparable operating profit 97 73 161 185
Net assets 3,104 3,619 2,597
Comparable RONA % 5.6 6.5
Gross investments 45 59 367 353
Discontinued operations (Distribution)
48
Q1 2015
• Binding agreement signed to divest the Swedish electricity distribution business
• Volumes in Sweden in line with last year
MEUR I/2015 I/2014 2014 LTM
Sales 180 300 751 631
Comparable EBITDA 112 171 416 357
Comparable operating profit 82 119 266 229
Net assets 2,634 2,872 2,615
Comparable RONA % 9.3 8.5
Gross investments 20 25 147 142
Table below includes January-March 2014 results for the Finnish, January-May 2014 results for the Norwegian
and full year 2014 results as well as January-March 2015 for the Swedish distribution business
Income statement
MEUR I/2015 I/2014 2014 LTM
Sales 1,040 1,208 4,088 3,920
Other income and expenses -697 -850 -3,003 -2,850
Comparable operating profit 343 358 1,085 1,070
Items affecting comparability 7 8 211 210
Operating profit 350 366 1,296 1,280
Share of profit of associates and jv’s 58 69 146 135
Financial expenses, net -57 -62 -210 -205
Profit before taxes 350 374 1,232 1,208
Income tax expense -55 -62 -143 -136
Net profit, continuing operations 295 312 1,089 1,072
Net profit, discontinued operations 63 1,943 2,073 193
Net profit, Fortum total 358 2,255 3,161 1,264
EPS, basic (EUR), continuing operations 0.33 0.35 1.22 1.20
EPS, basic (EUR), discontinued operations 0.07 2.18 2.33 0.22
EPS, basic (EUR), Fortum Total 0.40 2.53 3.55 1.42
49
Cash flow statement
MEUR I/2015 I/2014 2014 LTM
Cash from operating activities:
Realised FX gains/losses 168 74 352 446
Other funds from operations (FFO) 314 371 1,096 1,039
Change in working capital 34 -40 -42 32
Cash from operating activities, continuing operations 516 405 1,406 1,517
Cash from operating activities, discontinued operations 87 161 356 282
Cash from operating activities, total Fortum 603 566 1,762 1,799
Cash used in investing activities:
Paid capital expenditures -101 -123 -622 -600
Proceeds from divestments 36 3 499 532
Other investment activities 19 46 364 337
Total investing activities, continuing operations -46 -74 241 269
Total investing activities, discontinued operations
-43 2,461 2,574 70
Cash used in investing activities, total Fortum
-89 2,387 2,816 340
Cash flow before financing activities, total Fortum 514 2,953 4,578 2,139
50
Key ratios
MEUR LTM 2014
Comparable EBITDA, continuing operations 1,397 1,457
Comparable EBITDA, total Fortum 1,754 1,873
Interest-bearing net debt, total Fortum 3,714 4,217
Comparable net debt/EBITDA, total Fortum 2.1 2.3
excluding Värme financing 1.8 2.0
51
ROCE % Return on capital employed, total Fortum 9.0 19.5
Good liquidity – committed credit lines total EUR 2.2 billion
Debt Maturity Profile 31 March 2015
0
250
500
750
1000
1250
1500
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025+
Bonds Financial institutions Other long-term debt Other short-term debt
MEUR
2015 1,036
2016 863
2017 538
2018 621
2019 821
2020 75
2021 549
2022 1,087
2023 110
2024 3
2025+ 1,279
TOTAL 6,982
52
per 31 March 2015 per 31 Dec, 2014
Average Interest Rate 4.3% 3.7%
Portion of floating / fixed debt 47 / 53% 46 / 54%
Outlook
Outlook
Nordic markets
• Fortum continues to expect that the average annual electricity demand
growth will be on average approximately 0.5% in the coming years
• Electricity is expected to continue to gain share of total energy consumption
Russia
• The run-rate operating profit (EBIT) level for the Russia Segment, RUB 18.2
billion, is targeted to be reached during 2015, but the euro result level will be
volatile, due to the translation effect
Key drivers and risks
• Economic
• Political
• Currency
• Wholesale price of electricity and volumes
• demand and supply • fuels
• hydrological situation • power plant availability
• CO2 emissions allowance prices
54
Outlook
Annual capex estimate, excluding potential acquisitions
• 2015 approximately EUR 0.8 billion
Hedging
• Rest of 2015 approx. 50% hedge ratio at approx. EUR 41/MWh
• 2016 approx. 20% hedge ratio at approx. EUR 37/MWh
Taxation
• Effective tax rate for 2015 for the Group 19-21%
• The Swedish Government decided to re-propose an increase of 17%
on the tax on installed nuclear capacity to the spring budget
55
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Sophie Jolly Vice President
+358 (0)10 453 2552
Rauno Tiihonen
Manager
+358 (0)10 453 6150
Marja Mäkinen Manager (SRI)
+358 (0)10 452 3338
Meeting requests:
Arja-Tuula Tiainen Executive Assistant
+358 (0)10 453 4487
Next result publication:
Q2/2015 on 17 July 2015