Fortum January-September 2019 Interim Report: Strong results improvement and agreement on majority stake in Uniper

FORTUM CORPORATION INTERIM REPORT JANUARY-SEPTEMBER 2019 24 OCTOBER 2019 AT 9:00 EEST

This release is a summary of Fortum’s January-September 2019 Interim Report. The complete report is attached to this release as a pdf-file. It is also available on the company's website at www.fortum.com/investors.

July-September 2019

•  Comparable EBITDA was EUR 295 (230) million, +28%
•  Comparable operating profit was EUR 153 (96) million, +59%
•  Operating profit was EUR 124 (91) million, +36%
•  Share of profits of associated companies and joint ventures was EUR 106 (12) million, mainly related to Fortum’s share of Uniper’s profit
•  Earnings per share were EUR 0.20 (0.05), of which EUR -0.02 (-0.01) related to items affecting comparability and EUR 0.10 (-) to Uniper
•  Cash flow from operating activities totalled EUR 262 (133) million

January-September 2019

•  Comparable EBITDA was EUR 1,213 (1,051) million, +15%
•  Comparable operating profit was EUR 793 (654) million, +21%
•  Operating profit was EUR 666 (829) million, -20%
•  Share of profits of associated companies and joint ventures was EUR 678 (82) million, mainly related to Fortum’s share of Uniper’s profit
•  Earnings per share were EUR 1.27 (0.73), of which EUR -0.11 (0.17) related to items affecting comparability and EUR 0.60 (-) to Uniper. In 2018, the capital gain from the sale of the 10% stake in Hafslund Produksjon was EUR 0.09
•  Cash flow from operating activities totalled EUR 1,753 (767) million, mainly due to the change in settlements for futures and dividends received

Events after the balance sheet date

•  On 8 October 2019, Fortum announced it had entered into agreements with Elliott and Knight Vinke to acquire in excess of 20.5% in Uniper, increasing Fortum’s ownership to more than 70.5%. The transaction is subject to regulatory clearances

Summary of outlook

•  The Generation segment's Nordic generation hedges: approximately 80% hedged at EUR 33 per MWh for the remainder of 2019, approximately 70% at EUR 33 per MWh for 2020, and approximately 35% at EUR 33 per MWh for 2021
•  Capital expenditure, including maintenance but excluding acquisitions, is expected to be in the range of EUR 600-650 million in 2019. In 2020, capital expenditure is expected to decline

Key financial ratios

Key figures

Fortum's President and CEO Pekka Lundmark:

"The highlight of the third quarter was the doubling of the comparable operating profit of the Generation segment. Hydro volumes returned to normal from the historically low level a year ago. Nuclear volumes increased and were at a good level. In spite of the clearly lower spot prices we were able to increase our achieved power price with successful hedging, which further strengthened the results. The development of the Consumer Solutions and Russia segments continued to be positive, showing clear results improvements. Unfortunately, the results of the City Solutions segment was a disappointment. Several challenging external factors affected the results of the City Solutions segment, however, in order to improve the performance we are also reviewing internal corrective measures.

Based on the positive development, our return on capital employed has now increased to 9%, close to our long-term target of at least 10%. Our investment in Uniper is also contributing well to our results; our share of Uniper’s profit for the last twelve months is already EUR 532 million. It is, however, good to remember the fairly volatile nature of Uniper’s results, due to its large trading operations.

Soon after the third quarter we announced our agreement to acquire in excess of 20% of the shares in Uniper from Elliott and Knight Vinke. Once finalised, this will increase our ownership in Uniper to more than 70% and our total investment in the company to more than EUR 6 billion. The investment follows our prudent investment criteria to add value for Fortum shareholders. The transaction is still subject to regulatory approvals in the US and Russia. We expect to be able to close the transaction by the end of the first quarter next year.

Fortum and Uniper together have the sufficient size, expertise, and resources to succeed, to grow and to lead Europe’s energy transition. The companies’ competences are highly complementary, and we have an aggregate EBITDA of approximately EUR 3 billion. This puts us in a strong position to advance the transition and also to capture the growth opportunities it presents. This will be our key priority going forward.

Since the initial announcement of our investment in Uniper some two years ago, it has been our preference to agree with Uniper on a joint path forward. We are convinced that this change in Uniper’s ownership structure as well as a resolution of the complex relationship between all parties will return stability and put the focus solely on the business and the opportunities available. Accordingly, we announced our expectation for increased cooperation and strategic alignment as well as our intention to increase our representation on the Supervisory Board of Uniper, including the chairmanship. As a responsible and committed owner in Uniper, we also offered certain commitments to Uniper and its employees in order to provide predictability and stability. We are currently in discussions with Uniper on how to arrange these matters.

During the fall we have seen several positive developments relating to climate policy. We warmly welcome the firm climate-orientation of the new EU Commission and their initiative for a European Green Deal. We strongly advocate for the EU carbon-neutrality target for 2050 and consider that it provides an excellent opportunity to push forward our strategy ‘For a cleaner world’. We continue to promote carbon pricing for all sectors as a basis for the decarbonisation of European society. However, Europe alone cannot solve the climate challenge as it represents only 9% of the global greenhouse gas emissions. In this context, we welcomed the Russian ratification of the Paris Agreement in September. All parts of the world have to contribute; the ultimate goal should be for the most comprehensive global carbon pricing."

Espoo, 23 October 2019

Fortum Corporation
Board of Directors

News conference/webcast

The joint news conference for media, investors and analysts will be held on 24 October 2019 at 11.00 EEST at Fortum Head office in Keilalahdentie 2-4, Espoo.

The conference is available as a live webcast on Fortum's website at www.fortum.com/investors. To participate in the teleconference, please dial in approximately 5 minutes before the beginning of the event using the numbers below:

FI: +358 9 817 10310
SE: +46 856 642 651
UK: +44 333 300 0804
US: + 1 855 857 0686

Pin: 15441293#

The webcast recording and transcript will be published on Fortum's website at www.fortum.com/investors after the event.

Further information:

Investor Relations and Financial Communications: Ingela Ulfves, tel. +358 40 515 1531, Måns Holmberg, tel. +358 44 518 1518, Rauno Tiihonen, tel. +358 10 453 6150, Pirjo Lifländer, tel. +358 40 643 3317, and investors@fortum.com

Media: Pauliina Vuosio, tel. +358 50 453 2383

Financial calendar in 2020:

Financial Statements Bulletin for the year 2019 on 6 February 2020 at approximately 9:00 EET

Financial Statements and Operating and Financial Review for 2019 in week 8 at the latest

Fortum will publish three interim reports in 2020:

• January-March Interim Report on 29 April 2020 at approximately 9:00 EEST
• January-June Half-year Financial Report on 17 July 2020 at approximately 9:00 EEST
• January-September Interim Report on 29 October 2020 at approximately 9:00 EET

Fortum's Annual General Meeting 2020 is planned to take place on 17 March 2020. The possible dividend-related dates for 2020 are:

• The ex-dividend date 18 March 2020
• The record date for dividend payment 19 March 2020
• The dividend payment date 26 March 2020

Fortum’s Capital Markets Day 2020 is planned for 3 December 2020.

Distribution:

Nasdaq Helsinki
Key media
www.fortum.com

More information, including detailed quarterly information, is available on Fortum’s website at www.fortum.com/investors

Fortum

Fortum is a leading clean-energy company that provides its customers with electricity, heating and cooling as well as smart solutions to improve resource efficiency. We want to engage our customers and society to join the change for a cleaner world. We employ some 8,000 professionals in the Nordic and Baltic countries, Russia, Poland and India. In 2018, our sales were EUR 5.2 billion and 57% of our electricity generation was CO2 free. Fortum's share is listed on Nasdaq Helsinki. www.fortum.com