FORTUM. Power and heat company in the Nordic area, Russia, Poland and the Baltics. Investor / Analyst material March 2015

Transcription

1 FORTUM Power and heat company in the Nordic area, Russia, Poland and the Baltics Investor / Analyst material March 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. 2

3 Content Fortum today pages 4 17 European and Nordic power markets pages Data on Fortum s nuclear fleet pages Russia pages Data on capacity payments pages Fortum s investment programme page 39 Financials and outlook pages Hedges pages Efficiency programme page 48 Facts of Distribution page 49 3

4 Appr. 110,000 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 ~18 billion euros Households 8.3% Financial and insurance institutions 2.3% Other Finnish investors 7.9% Finnish State 50.8% Foreign investors 30.7% 28 February

5 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. 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 5 year dividend per share (EUR) history 1.3* Fortum has since 1998 annually paid dividends in total ~11,648 MEUR % % % % %* * Board s proposal for the AGM 5

6 Fortum Executive Management as of 1 st February 2015 Interim President and CEO Timo Karttinen Business divisions Corporate staff functions Finance Chief Financial Officer Timo Karttinen Strategy and M&A Senior Vice President Kari Kautinen Legal General Counsel Sirpa-Helena Sormunen Human Resources and IT Senior Vice President Mikael Frisk Communications Senior Vice President Helena Aatinen Corporate Relations Senior Vice President Esa Hyvärinen Chief Operating Officer Matti Ruotsala Hydro Power and Technology Executive Vice President Per Langer Nuclear and Thermal Power Executive Vice President Tiina Tuomela Heat, Electricity Sales and Solutions Executive Vice President Markus Rauramo Russia Executive Vice President Alexander Chuvaev Distribution Executive Vice President Timo Karttinen 6 Country responsibles: Timo Karttinen/Finland, Norway; Per Langer/Sweden; Alexander Chuvaev/Russia; Markus Rauramo/Poland, Baltics, India

7 Fortum s Mission and Strategy Mission 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. Strategy Build on the strong Nordic core Create solid earnings growth in Russia Build a platform for future growth Strong competence in CO 2 -free hydro and nuclear, efficient CHP production and energy markets 7

8 Our current geographical presence Power generation Heat Nordic countries Power generation Heat sales 48.0 TWh 3.3 TWh Key figures 2014 Sales EUR 4.8 bn Comparable operating profit EUR 1.4 bn Balance sheet EUR 21 bn Personnel 8,600 Electricity sales Distribution Electricity customers Distribution customers in Sweden 1.3 million 0.9 million Russia OAO Fortum Power generation Heat sales 23.3 TWh 26.0 TWh Poland Power generation 0.7 TWh Heat sales 3.4 TWh Baltic countries Power generation Heat sales 0.7 TWh 1.2 TWh India Power generation 9 GWh 8

9 Fortum s reporting segments and divisions Power and Technology Heat, Electricity Sales and Solutions Russia Distribution 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 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 Power and heat generation and sales in Russia Includes OAO Fortum and Fortum s slightly over 29% holding in TGC-1 Electricity distribution activities 9

10 Fortum mid-sized European power generation player; major producer in global heat Power generation Largest producers in Europe and Russia, 2013 TWh EDF E.ON Enel RWE Rosenergoatom Gazprom Vattenfall GDF SUEZ Inter RAO UES RusHydro NNEGC Energoat. Iberdrola EuroSibEnergo CEZ Fortum EnBW PGE IES Statkraft DTEK EDP DEI Gazprom IES Inter RAO UES 1 ) Veolia RusHydro EuroSibEnergo Fortum Sibgenco Vattenfall Quadra 1) EDF TGC-2 Lukoil Minskenergo KDHC DTEK Dong Energy PGNiG Tatenergo Enel Fortum Värme Heat production Largest global producers, 2013 TWh Enel EDF E.ON RWE Iberdrola DEI CEZ Centrica EDP Vattenfall SSE EnBW GDF SUEZ Tauron PGE Gas Natural Fenosa Fortum Hafslund Dong Energy Customers Electricity customers in EU, 2013 Millions ) 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. 10

11 EDF Rosenergoatom NNEGC Energoatom RusHydro Vattenfall E.ON Enel EuroSibEnergo GDF SUEZ Statkraft Fortum Iberdrola RWE EnBW CEZ Axpo Verbund Gazprom Hidroelectrica Centrica Alpiq E-CO Energi Ukrhydroenergo Norsk Hydro EPS, Serbia BKK Agder Energi EDP Gas Natural Fenosa ** * DEI SSE Inter RAO UES PGE DTEK *** IES Biggest nuclear an hydro generators in Europe and Russia TWh Total generation Other Nuclear Hydro 11 Figures 2012 pro forma * incl. MOEK, ** incl. Bashkirenergo, *** incl. TGC-5, TGC-6, TGC-7, TGC-9

12 Fortum a forerunner in sustainability Nordic Climate Disclosure Leadership Index (CDLI) STOXX Global ESG Leaders indices oekom OMX GES Sustainability Finland Index ECPI Indices 12

13 DEI RWE Drax SSE CEZ E.ON Vattenfall EDP Enel Edipower EnBW Gas Natural Fenosa GDF SUEZ Dong Energy Fortum total Iberdrola PVO EDF Verbund Fortum EU Statkraft Fortum's carbon exposure among the lowest in Europe g CO 2 /kwh electricity, % of Fortum's total power generation CO 2 -free 94% of Fortum s power generation in the EU CO 2 -free Close to 100% of the ongoing investment programme in the EU CO 2 -free Average 328 g/kwh 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 13

14 Our strategic route Skandinaviska Elverk Gullspång Birka Energi 50% Fortum 50% Stockholm Gullspång merged with Stockholm Energi Stora Kraft Birka Energi 50% 100% Østfold Shares in Hafslund Shares in Lenenergo TGC-1 established Länsivoima 45% 65% Lenenergo shares Länsivoima 100% Elnova 50% 100% District heating in Poland Oil business spin-off IVO Fortum Neste E.ON Finland TGC-10 Divestment of Lenenergo shares Divestment of Fingrid shares Divestment of heat operations outside of Stockholm Divestment of small scale hydro Divestment of non-strategic heat business Divestment of electricity distribution business Divestment of electricity distribution and heat businesses Divestment of Grangemouth power plant Divestment of Gasum shares 14

15 Fortum in the Nordic electricity value chain Competitive businesses Large customers Power generation Nordic wholesale market Power exchange and bilateral agreements Retail customers Private customers, small businesses Regulated businesses Independent transmission system operator Transmission and system services Distribution Independent distribution companies 15

16 Fortum's power and heat production by source Fortum's power generation in 2014 Fortum's heat production in 2014 Nuclear power 33% Natural gas 31% Natural gas 77% Biomass 1% Coal 5% Waste 1% Peat 1% Biomass 6% Hydro power 30% Coal 15% Total generation 73.4 TWh (Generation capacity 14,624 MW) Total production 34.6 TWh (Production capacity 17,402 MW) 16

17 Fortum's European power and heat production Fortum's European power generation in 2014 Fortum's European heat production in 2014 Nuclear power 48% Coal 38% Biomass 2% Natural gas 2% Coal 4% Oil 1% Heat pumps, electricity 1% Waste 3% Peat 3% Natural gas 29% Hydro power 44% Biomass 25% European generation 50.1TWh (Generation capacity 9,851 MW) European production 8.2 TWh (Production capacity 3,936 MW) 17

18 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 /2015 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 Czech, Slovakia and Hungary coupled together since September Romania joined in November 2014 A common day-ahead market coupling for the whole northwestern Europe was started in February Iberia (Spain & Portugal) joined in May Italy and Slovenia joined on 24 February Switzerland waiting for agreement with EU CEE market coupling region to join in 2016, with flow-based cross-border capacity allocation for further trade optimisation In addition to day-ahead coupling, intraday market coupling and balancing market integration under development as well 18

19 Current transmission capacity from Nordic area is over 5000 MW Countries Transmission capacity MW From Nordics To Nordics Denmark - Germany 2,225 2,100 Sweden - Germany Sweden - Poland Norway - Netherlands Finland - Estonia ,016 Finland - Russia 320 1,300 Total 5,460 6, Theoretical maximum in transmission capacity ~40 TWh per annum Net export from Nordic area to Continental Europe and Estonia during year 2014 was 14 TWh During the dry year 2013 net export was 3 TWh Approximately 25 TWh of net export is now reachable 700 2,

20 Nordic, Baltic and Continental markets are integrating interconnection capacity will double by 2020 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 Two 1400 MW NO-UK links as EU Projects of Common Interest: NSN link to England agreed to be built by 2020, 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 2019, 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 New interconnections will double the export capacity to over 10,000 MW by 2020 New internal Nordic grid investments provide for increased available capacity for export to the Continent and Baltics 320 MW of export capacity available on the 1300 MW RU-FI link since December 2014 EU s Connecting Europe Facility co-financing 3 rd EE-LV transmission line, due to be ready by 2020 EU s European Energy Programme for Recovery co-financing 700 MW NordBalt (ready 12/2015) LitPol Link ( 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 20

21 reservoir content (TWh) Nordic water reservoirs reference level Q1 Q2 Q3 Q4 Source: Nord Pool Spot 21

22 Nordic year forwards Year10 Year11 Year12 Year13 Year14 Year15 Year16 Year17 Year18 Year19 Year20 /MWh 2 March Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Source: Nasdaq Commodities

23 Wholesale price for electricity EUR/MWh Nord Pool Spot System Price Forwards March, Source: Nord Pool Spot, Nasdaq Commodities

24 Wholesale prices for electricity EUR/MWh Spot prices Forward prices Dutch German Nordic Russian* March * Including weighted average capacity price Source: Nord Pool Spot, Nasdaq Commodities, APX-ENDEX, Bloomberg Finance LP, ATS, NP Market Council, Fortum 24

25 USD / bbl 150 Crude oil price (ICE Brent) 35 USD / t GBp / therm Fuel and CO 2 allowance prices CO 2 price (ICE ECX EUA) EUR / tco Coal price (ICE Rotterdam) 100 Gas price (ICE NBP) Source: ICE Market prices 2 March 2015; future quotations

26 Nordic power generation dominated by hydro, but fossil needed 160 Total Nordic generation 383 TWh in TWh % 120 Fossil fuels TWh/a Nuclear Biomass Wind Hydro * Denmark Norway Sweden Finland Net export in 2013: 0.4 TWh Source: ENTSO-E Statistical Factsheet 2013 *) Normal annual Nordic hydro generation 200 TWh, variation +/- 40 TWh. 26

27 Wholesale electricity price too low to attract investments EUR/MWh Source: Nord Pool spot, Nasdaq Commodities Futures 2 March EUR/MWh Coal condensing Average levelised costs of new electricity generation Onshore wind Nuclear Utility scale Solar PV In Italy Large hydro Gas Offshore wind 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. Commodity prices are forward prices as of August

28 Still a highly fragmented Nordic power market Power generation 384 TWh >350 companies Electricity distribution 15 million customers ~500 companies Electricity retail 15 million customers ~350 companies Others Vattenfall Others E.ON Vattenfall Fortum Others Vattenfall Fortum 33% Statkraft 57% Dong Energy Hafslund 53% Hafslund Dong Energy Helen Agder Energi E-CO Energi Norsk Hydro Dong Energy PVO E.ON Fortum Caruna Elenia SEAS-NVE Helen Syd Energi E.ON Statkraft Helen SEAS-NVE Göteborg, Din El Bixia Source: Fortum, company data, shares of the largest actors, pro forma 2013 figures. 28

29 New power generation capacity needed for increasing demand and retiring capacity replacements Growing global energy demand will be increasingly fulfilled by electricity in the future 250% 200% 150% Growth, Primary energy demand Electricity generation 225% Substantial demand growth in the emerging markets 100% 114% Retirements and moderate demand growth in the EU Globally, ~7,000 GW of new capacity needed by % 0% Capacity changes, (GW) 19% 41% US Europe Russia China India Other areas World total Retiring capacity ,442 Capacity increase , ,833 4,765 New capacity, total ( , ,620 7,207 Source: IEA WEO 2014 (New polices scenario) 1) Total new capacity needed for increasing demand and replacements of retiring capacity 29

30 Overview of Fortum s nuclear fleet Commercial operation started Generation Capacity Fortum s share Yearly production Fortum s share of production Share of Fortums Nordic production Majority owner Fortum s share Operated by Unit 1: 1977 Unit 2: 1981 LOVIISA OLKILUOTO OSKARSHAMN FORSMARK Unit 1: 496 MW Unit 2: 496 MW Total: 992 MW 8 TWh 8 TWh Unit 1: 1978 Unit 2: 1980 Unit 3: (Under construction) Unit 1: 880 MW Unit 2: 880 MW (Unit 3: 1,600 MW) Total: 1,760 MW (3,360) 27% 468 MW 14 TWh 4 TWh Unit 1: 1972 Unit 2: 1974 Unit 3: 1985 Unit 1: 473 MW Unit 2: 638 MW Unit 3: 1,400 MW Total: 2,511 MW 43% 1,089 MW 17 TWh 7 TWh Unit 1: 1980 Unit 2: 1981 Unit 3: 1985 Unit 1: 984 MW Unit 2: 1,120 MW Unit 3: 1,170 MW Total: 3,274 MW 22% 720 MW 25 TWh 5.5 TWh 18% 9% 16% 13% Fortum Fortum Pohjolan Voima 26.6% Teollisuuden Voima (TVO) E.ON 43.4% OKG Aktiebolag Vattenfall 22.2% 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. 30

31 Fortum's nuclear power in the Nordics Load factor (%) Osakarshamn Oskarshamn Oskarshamn Forsmarks Forsmark Forsmark Loviisa Loviisa Olkiluoto Olkiluoto Source: Fortum Finnish units world class in availability Overview of production and consumption: - energy related links Forsmark Oskarshamn Olkiluoto Loviisa 31

32 Variety of technologies and ages Unit MWe (Net) Share (%) Share (MWe) Commercial operation Age Type/ Generation * Supplier Loviisa 1 Loviisa ,0 100, PWR / 1 PWR / 1 AEE (Atomenergoexport) AEE (Atomenergoexport) Olkiluoto 1 Olkiluoto 2 Olkiluoto (1,600) 26,6 26,6 25, (400) (?) BWR / 3 BWR / 3 PWR / 3 Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval Areva / Siemens Oskarshamn 1 Oskarshamn 2 Oskarshamn ,400 43,4 43,4 43, BWR / 1 BWR / 2 BWR / 4 Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval Forsmark 1 Forsmark 2 Forsmark ,120 1,170 23,4 23,4 20, BWR / 3 BWR / 3 BWR / 4 Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval *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. 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 , 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. 32

33 Third party nuclear liability in case of severe accident In force since Law approved by Parliament in 2010, requires separate decision from Government to come into force. 300 M 300 M Unlimited company responsibility Convention parties 500 M 145 M 500 M State responsibility Responsibility of company (insurance or guarantee) 145 M 240 M Old, Finland 145 M 360 M Current, Sweden 700 M Sweden (new, not in force) 700 M 200 M Finland, temporary legislation 700 M New Paris convention Requires ratification by 2/3 of member states to come into force. In Finland approved by Parliament in

34 Russia is the World s 5th largest power market TWh 6,000 5,000 4,000 3,000 2,000 1,000 0 Power generation in 2013 based on gross output. Source: BP Statistical Review of World Energy June

35 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 % of territorial generating company TGC-1 operating in northwest Russia ~7,200 MW electricity production capacity (more than 40% hydro), ~24 TWh electricity, ~28 TWh heat in 2014 TGC-1 St. Petersburg Nyagan Moscow Chelyabinsk OAO Fortum Tobolsk Tyumen 35

36 RUB / MWh / MWh Day ahead wholesale market prices increase driven by recovering demand and gas price Key electricity, capacity and gas prices in the OAO Fortum area IV/14 IV/ Day ahead power market prices for Urals Electricity spot price (market price), Urals hub, RUB/MWh 1,041 1,043 1,089 1,021 Average regulated gas price, Urals region, RUB 1000 m 3 3,362 3,423 3,362 3, 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 In addition to the power price generators receive a capacity payment. Source: ATS 36

37 Power market liberalisation two markets Capacity wholesale market Electricity wholesale market Capacity prices Competitive capacity selection (CCS) and free bilateral agreements (FBA) A higher, fixed capacity price for new capacity (CSA* agreements, built after 2007) 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) 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) 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 supply agreement 37

38 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 38

39 85% increase in power generation capacity in Russia by 2015 through the investment programme Year Supply starts Power plant Fuel type Existing capacity 2,785 MW New investments 2,388 MW Production type < 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 Feb/2011 Tyumen CHP-1 Gas CHP/Condensing 681 June/2011 Chelyabinsk CHP-3 Gas CHP/Condensing 576 Oct/2011 Tobolsk CHP Gas CHP/Condensing April/2013 Nyagan 1 GRES Gas 418 Condensing 418 Dec/2013 Nyagan 2 GRES Gas 418 Condensing Jan/2015 Nyagan 3 GRES Gas 418 Condensing 418 1H/2015 Chelyabinsk GRES Gas CHP/Condensing 330 1H/2015 Chelyabinsk GRES Gas 248 CHP/Condensing 248 Total capacity 5,173 MW 2,785 MW 2,388 MW 5,173 MW 39

40 Income statement MEUR IV/2014 IV/ Sales 1,285 1,390 4,751 5,309 Other income and expenses ,400 3,906 Comparable operating profit ,351 1,403 Capital gains and other items affecting comparability , Operating profit ,428 1,508 Share of profit of associates and jv s Financial expenses, net Profit before taxes ,360 1,398 Income tax expense Net profit for the period ,161 1,212 Non-controlling interests Net profit for the owners of the parent ,154 1,204 EPS, basic (EUR)

41 Comparable and reported operating profit MEUR Comparable operating profit Reported operating profit Comparable operating profit Reported operating profit IV/2014 IV/2013 IV/2014 IV/ Power and Technology Heat, Electricity Sales and Solutions Russia Distribution , Other Total ,351 1,403 3,428 1,508 Non-recurring items (mainly to the sale of the Finnish electricity distribution business), IFRS accounting treatment (IAS 39) of derivatives and nuclear fund adjustments had an impact on the reported operating profit EUR 213 (83) million in the fourth quarter and 2,077 (106) million in January-December 2014 Note: The divested distribution operations are included in the segment information until the closing of the transactions. 41

42 Cash flow statement MEUR IV/2014 IV/ Operating profit before depreciations ,954 2,129 Non-cash flow items and divesting activities , Financial items and fx gains/losses Taxes Funds from operations (FFO) ,808 1,469 Change in working capital Total net cash from operating activities ,762 1,548 Paid capital expenditures ,004 Divestments of shares* , Other investment activities Cash flow before financing activities , * Including Proceeds from the interest-bearing receivables relating to divestments

43 Key ratios MEUR Comparable EBITDA 1,873 1,975 Interest-bearing net debt 4,217 7,793 Comparable net debt/ebitda excluding Värme financing Return on capital employed, ROCE (%) Return on shareholders equity, ROE (%) Good liquidity committed credit lines total EUR 2.2 billion 43

44 Debt Maturity Profile, 31 December, Bonds Financial institutions Other long-term debt CPs Other short-term debt MEUR , , TOTAL 1,245 6,983 per 31 Dec, 2014 per 31 Dec, 2013 Average Interest Rate (incl. swaps and forwards) 3.7% 3.6% Portion of floating / fixed debt 46 / 54% 51 / 49% 44

45 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) target for the Russia Segment; RUB 18.2 billion, is expected to be reached during 2015, but the euro result level will be volatile, mainly 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 45

46 Outlook Annual capex estimate, excluding potential acquisitions 2015 approximately EUR 0.9 billion Hedging 2015 approx. 50% hedge ratio at approx. EUR 40/MWh 2016 approx. 10% hedge ratio at approx. EUR 39/MWh Taxation Effective tax rate for 2015 for the Group 19-21% In Finland, the power plant tax ( windfall tax ) was revoked The Swedish Government proposal to increase the tax on installed nuclear capacity as of 2015 is on hold not in the current budget 46

47 Hedging improves stability and predictability 2009 onwards thermal and import from Russia excluded 47

48 Fortum's efficiency programme The efficiency programme successfully finalised during 2014 Total annual cost savings visible in all divisions Improved working capital efficiency Divestments of non-core assets totalling approximately EUR 800 million WHY WHAT WHEN SPEED - Cash flow improved by EUR 1 billion FLEXIBILITY CAPEX EUR million WORKING CAPITAL Reduction DIVESTMENTS EUR 500 million FIXED COSTS Reduce EUR 150 million compared to

49 Facts of Fortum s Distribution business MEUR Fortum s Swedish distribution operations in 2014 Operating profit 236 Comparable operating profit 235 Comparable EBITDA 366 Capital expenditure 134 Number of employees 390 Volume of distr. Electricity, TWh 26.9 Number of el. Distr. Custom. ( 000) 906 January 2013: Strategic assessment commenced December 2013: Assessment has been completed, divestment the best alternative Evaluation of divestment opportunities country by country Closed by the end of Q1/2014: Divestment of Distribution Finland Closed by the end of Q2/2014: Divestment of Distribution Norway Ongoing: Preparation and evaluation of divestment possibilities in Sweden 49

50 Annual General Meeting 2015 and dividend distribution proposal Fortum s Annual General Meeting will be held at 14:00 on 31 March 2015, in Helsinki, Finland The Board of Directors dividend proposal EUR 1.10 per share, and in addition extra dividend EUR 0.20 per share for 2014 Dividend-related dates planned for 2015 Ex-dividend date 1 April 2015 Record date for dividend payment 2 April 2015 Dividend payment date 14 April

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