Renewables driving energy system change

Per Langer, Executive Vice President , Hydro Power & Technology

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Our current geographical presence

Nordic countries

Power generation* 49.2 TWh

Heat sales* 10.9 TWh

Electricity customers 1.3 million

Power generation

Electricity sales

Heat

PolandPower generation 0.7 TWhHeat sales 3.4 TWh

Baltic countriesPower generation 0.7 TWhHeat sales 1.2 TWh

IndiaPower generation 9 GWh

Key figures 2014Sales EUR 4.1 bnComparable operating profit EUR 1.1 bnBalance sheet EUR 21 bn Personnel 8,200

* In addition, Fortum has a 29.5% share in TGC-1* Including Fortum’s associated company Fortum Värme; power generation 1.2 TWh and heat sales 7.6 TWh.

OAO Fortum Power generation 23.3 TWhHeat sales 26.0 TWh

Russia*

3

DEI

RW

E

Dra

x

SSE

CEZ

E.O

N

Vatte

nfal

l

EDP

Enel

Edip

ower

EnBW

Gas

Nat

ural

Fen

osa

GD

F SU

EZ

Don

g En

ergy

Fortu

m to

tal

Iber

drol

a

PVO

EDF

Verb

und

Fortu

m E

U

Stat

kraf

t0

200

400

600

800

1,000

1,200

64

g CO2/kWh electricity, 2013

201464% of Fortum's total power generation CO2-free94% of Fortum’s power generation in the EU CO2-free

Close to 100% of the ongoing investment programme in the EU CO2-free

Average 328 g/kWh

200

Fortum's carbon exposure among the lowest in Europe

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 2014Climate Change and Electricity, Fortum

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Solar EconomySolar based production with high overall system efficiency

Geothermal

Hydro

Wind

Sun

Ocean

Traditionalenergy production Exhaustible fuels that

burden the environment

Coal GasOil

Advancedenergy productionEnergy efficient and/or

low-emission production

Nuclear today

Nucleartomorrow

CHP

CCS

Bio

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Energy is an enabler

Storage

Active ConsumerDemand

Response

Low

Effi

cien

cy

Hig

h E

ffici

ency

High Emissions Emission free

Interconnectors

Smart applications

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Declining technology costs and more efficient technologies

2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q140.50

0.70

0.90

1.10

1.30

1.50

1.70

Solar module average selling price$/W

The curve represents an average of the selling prices reported by the following companies: Canadian Solar, Yingli Solar, Hanwha Solar, China Sunergy, Jinko Solar, Renesola, Trina Solar

-60% in selling prices in 11 quarters

H2 2007

H1 2008

H2 2008

H1 2009

H2 2009

H1 2010

H2 2010

H1 2011

H2 2011

H1 2012

H2 2012

H1 2013

0.70

0.80

0.90

1.00

1.10

1.20

1.30

Cost trend of onshore wind turbine prices, by contract date

€/W

Data exclude Asian turbines.

Battery storage costs are also decreasing

Value creation in electricity value chain will change dramatically

Future

Now

Energy

Flexibility/Capacity

Environmental/CO2-free

Consumer market

6

7

Nordic (hourly Nord Pool spot system price)

German (hourly EPEX spot price)

Average power prices in Nordics and Germanywere very close in December 2014 …

Source: Nord Pool Spot, Bloomberg Finance LP

Nordic (monthly Nord Pool spot system price)

German (monthly EPEX spot price)

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… but hourly prices were very different !Price pattern is getting more important than average price

Source: Nord Pool Spot, Bloomberg Finance LP

Nordic (hourly Nord Pool spot system price)

German (hourly EPEX spot price) December 2014

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Reality in Germany – and it is not getting easierMarch 2014

Source: Electricity generation graph: Bruno Burger, Fraunhofer ISE, price curve: Bloomberg Finance LP, Wind capacity: EWEA

-60

-40

-20

0

20

40

60

80Hourly power market price in Germany in March 2014€/MWh

Electricity generation in Germany in March 2014

WindSolar Conventional

MW

Installed capacity31 Dec ‘14

AverageGenerationin March ‘14

Solar 38 500 4 450

Wind 39 200 6 170

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To keep the power system supply-demand balance every moment, several markets are needed

Financial Intra Day Day Ahead

Managed by Nasdaq

CommoditiesManaged by

Nord Pool Spot

ELBASElspot

Managed byNord Pool Spot

Managed by TSOs

Balancingmarket

Balancesettlement,Imbalance

Power

Managedby TSOs

Forwards

36...12 h 33...1 hEnergy 12h ...0.5h

10 years...1d

Markets for energy Markets for flexibility

Capacity 10a...1d

More renewables

First steps in India – 15 MW solar power

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• December 2014, 10 MW solar PV plant in Madhya Pradesh commissioned– 70 acres – the first project to be commissioned under the Jawaharlal Nehru National Solar Mission

(JNNSM) Phase II Batch I.

• June 2013, Fortum acquired a 5 MW solar power plant in the state of Rajasthan in north-western India.

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Renewable CHP and DH investments of Fortum

Stockholm

JelgavaKlaipeda

Joensuu

JärvenpääEspoo

Częstochowa

JärvenpääBio-CHP

Bristaco-owned

waste-CHP

Värtanco-owned bio-CHP (ongoing)

JelgavaBio-CHP

KlaipedaWaste-CHP

CzestochowaCoal/bio-CHP

Espoosewage water

heat pump

Espooheat recovery from hospital

(ongoing)

Joensuu Pyrolysis oil production in

CHP plant

Naantalico-owned bio-CHP (ongoing)

Espoogeothermal

heat (ongoing)

ZabrzeCoal/waste-CHP

(ongoing)

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Bio-oil CHP+ concept: Renewable Energy and Flexibility

• Globally first CHP-integrated pyrolysis plant in commercial size was inaugurated November 29th, 2013 in Joensuu

• Plant produces Fortum Otso® bio-oil, which can now replace heavy fuel oil and in the future target is to produce higher value traffic biofuels and green chemicals

• Integrated bio-oil production increases flexibility and operation hours of CHP-plant

• In addition several other resource efficient benefits:– Synergies in operation and maintenance as well as in raw material and fuel

supply– Charcoal and the non-condensed gases that are created as a result of bio-oil

production can be used as fuel for the plant, so all raw materials can be utilized

• Fortum is actively carrying out R&D for new sustainable CHP+ concepts to maintain and increase CHP and district heating flexibility and competitiveness

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Wave power – three different technologies • Wave power has potential to cover 10 % of global power

consumption

• Wave power is now in demonstration phase

– Full-scale demonstration project in Sweden in co-operation and using technology by Seabased , power generation to grid is estimated to begin during 2015

– The plan is to start the demonstration with one Penguin unit with the capacity of 1MW during 2016 in Great Britain

– AW-Energy has been operating its pilot wave energy power plant in Portugal since 2012 and plans to deploy a full scale commercial power unit utilizing WaveRoller® near shore technology during 2016

Wello* Penguin

Seabased

AW Energy* Waveroller®

*Fortum is shareholder in the company

More flexibility

New solutions for electricity customers

• Electrical heating of 1000 customers to develop virtual power plant

• Captured value of all flexibility products• Dynamic real-time household DSM• Interesting and motivating digital interface for the customer

and community aspect

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Fortum Fiksu: online optimisation of heating systems Customer solutions to become prosumers

• Turnkey solar kits to private customers

• Fortum buys excess power from prosumers with hourly market price of electricity

• Integrated solar power and battery storage pilot

Demand side management pilot “Aurinkolaakso:”

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+=

New solutions in district heating

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• The aim is to increase the flexibility in heat demand to increase combined heat and power plant flexibility and thus reduce consumers’ heating costs

• Fortum is carrying out pilots in commercial building and apartment houses to demonstrate technologies and building energy storage capacities

• Open district Heating allows customers that generate waste heat to sell recovered energy at market price to Fortum

• Waste heat from datacenters in Stockholm equals the heat demand for approx. 55,000 apartments.

Open district heating network

Demand side management

Next generation energy company