Annual Report 2009 This is a story of progress through and systematic work to Delivering reach our long-term goals. Confident in our competence, competence we always strive to deliver better results. Read how our story evolves in 2010 and beyond. Domicile Espoo, Business ID 1463611-4 Annual Report 2009 Investor information Annual General Meeting Investor relations at Fortum The Annual General Meeting of Fortum Mika Paloranta, Vice President, Corporation will be held on Thursday, Investor Relations, 25 March 2010 at 1:00 EET at the tel. +358 (0)10 452 4138, Finlandia Hall, address: Mannerheimintie fax +358 (0) 10 452 4176, 13 e, 00100 Helsinki. The reception of e-mail: [email protected] shareholders who have registered for the meeting will commence at 12:00 EET. Rauno Tiihonen, Manager, Investor Relations, Payment of dividends tel. +358 (0)10 453 6150, The Board of Directors proposes to the fax +358 (0) 10 452 4176, Fortum is a leading energy company focusing on the Nordic Annual General Meeting that Fortum e-mail: [email protected] countries, Russia and the Baltic Rim area. Activities cover Corporation pay a cash dividend of EUR 1.00 per share for 2009, totalling EUR 888 Ordering financial information the generation, distribution and sale of electricity and heat million based on the number of regis- Financial documents can be obtained and the operation and maintenance of power plants. Our tered shares as of 2 February 2010. from Fortum Corporation, Mail Room, POB 1, FI-00048, FORTUM, Finland, vision is to be the benchmark power and heat company Fortum share basics tel. +358 (0)10 452 9151, e-mail: excelling in sustainability. Listed on NASDAQ OMX Helsinki [email protected] Trading ticker: FUM1V Number of shares, 2 February 2010: Investor information is available online 888,367,045 at www.fortum.com/investors In 2009, Fortum’s sales totalled EUR 5.4 billion and oper- Sector: Utilities ating profit was EUR 1.8 billion. The company employs approximately 11,500 people. Fortum’s shares are quoted on NASDAQ OMX Helsinki. Annual Report 2009 Graphic design, illustrations and production: Miltton Oy Photographs: Tomi Parkkonen (cover, 7, 9, 11, 17, 78–81), Finnish Press Agency (inner front cover), Andrey Semenov (12), Petri Hakala (14), Stefan Sjödin (15, 30, 82), Fortum (15), Pekka Koski, Veho (15), Loviisan voimalaitos (15, 40), Echelon & Fortum (15), Johner (22), Natalia Zaitseva (52), Fennopress (64). Paper: Invercote Creato 300 g, Galerie Art Matt 130/100 g. Printing: Libris Oy 2010 Inner cover: CO2-free* hydropower is one of the most used sources of energy in the Nordic countries. Cover: A detail from the new CHP plant in Espoo, Finland. The plant was inagurated in December 2009. FORTUM CORPORATION 2009 1 Annual Report 2009 Fortum in brief 02 CHAPTER 5: DIVISIONS 53 Financial summary 04 Power 54 Competences ‘09 06 Heat 56 Electricity Solutions and Distribution: Distribution 58 CHAPTER 1: FORTUM IN 2009 15 Electricity Solutions and Distribution: Markets 60 Interview with the CEO 16 Russia 62 Strategy 19 CHAPTER 6: CORPORATE GOVERNANCE 65 CHAPTER 2: THE WORLD AROUND US 23 Corporate Governance Statement 66 Market development 24 Remuneration 74 Board of Directors 78 CHAPTER 3: INVESTING IN THE FUTURE 31 Group management 80 Investments 32 Trends 36 CHAPTER 7: FORTUM FINANCIALS 2009 82 Research & development activities 38 Operating and financial review 84 Consolidated financial statements 108 CHAPTER 4: SUSTAINABILITY 41 Notes to the consolidated financial statements 113 Environmental responsibility 42 Key figures 174 Social responsibility 46 Parent company financial statements, Finnish GAAP (FAS) 181 *CO2-free in this report refers Personnel 48 Proposal for the distribution of earnings 187 to the emissions during the Economic responsibility 50 Auditor’s report 188 production of wind, hydro and nuclear power as well as Statement by the Supervisory Board 189 production with biomass. Quarterly financial informa†ion 190 2 ANNUAL REPORT 2009 FORTUM CORPORATION 2009 Fortum in brief Fortum focuses on the Nordic, Russian Norway Russia and Baltic Rim markets where it has developed a good platform for future Heat sales 0.2 TWh Power generation capacity 2,785 MW growth. Distribution, customers 99,500 Heat sales 25.6 TWh Share of electricity customers 2.7% Employees 4,853 Employees 143 Distribution network Russia OAO Fortum Sweden Estonia Power generation capacity 5,885 MW Heat sales 1.0 TWh Heat sales 9.8 TWh Distribution, customers 24,100 Distribution, customers 894,700 Employees 357 Sweden Share of electricity customers 11.4% Finland Russia TGC-1 Employees 2,445 Norway Estonia Finland Lithuania Latvia Power generation capacity 5,096 MW Heat sales 0.1 TWh Lithuania Heat sales 8.0 TWh Employees 72 Distribution, customers 610,700 Share of electricity customers 13.4% Employees 2,700 Poland Poland Latvia Heat sales 3.7 TWh Heat sales 0.2 TWh Employees 756 Employees 98 FORTUM CORPORATION 2009 FORTUM IN BRIEF 3 Group business structure Power Heat Electricity Russia Division Division Solutions Division and Distribution Division The Power Division consists of Fortum’s The Heat Division consists of combined The Electricity Solutions and Distribu- The Russia Division consists of power power generation, physical operation heat and power generation, district tion Division is responsible for Fortum’s and heat generation and sales in and trading, operation, maintenance heating activities and business-to- electricity sales, solutions and distribu- Russia. It includes OAO Fortum and and development of power plants business heating solutions. tion activities. The division consists of Fortum’s over 25% holding in TGC-1. as well as expert services for power two business areas: Distribution and producers. Markets. Sales, EUR 5,435 million Comparable operating profit, Net assets, EUR 15,347 million Employees, 31 Dec, 11,613 EUR 1,888 million Other Markets Other Other Russia Distribution 1% Russia 1% 2% 4% Power 9% 14% 15% Russia 27% –1% Markets Power Power Heat 1% 36% 21% 37% 12% Other Russia Markets –4% 35% 21% Distribution 19% 12% 78% Heat Distribution Power 20% 25% 5% 10% Heat Heat Markets Distribution 4 ANNUAL REPORT 2009 FORTUM CORPORATION 2009 Operating profit excluding Comparable operating profit non-recurring items, fair plus profit from associated value changes of derivatives companies divided by not getting hedge accounting comparable net assets. Financial summary and nuclear fund adjustment. Key financial figures Key figures by division / business area Sales Comparable operating profit Comparable RONA% EUR million or as indicated 2009 2008 2007 EUR million or as indicated 2009 2008 2007 2009 2008 2007 2009 2008 2007 Sales 5,435 5,636 4,479 Power 2,596 2,892 2,350 1,469 1,528 1,095 26.6 28.0 18.9 EBITDA 2,292 2,478 2,298 Heat 1,394 1,466 1,356 227 250 290 7.2 7.3 9.2 Operating profit 1,782 1,963 1,847 Distribution 800 789 769 262 248 231 8.6 8.2 7.6 Comparable operating profit 1,888 1,845 1,564 Markets 1,449 1,922 1,683 22 –33 –1 18.6 –15.3 –0.6 Profit for the period, owners of the parent 1,312 1,542 1,552 Russia 623 489 - –26 –92 - –0.3 –3.8 0.0 Other 74 83 81 –66 –56 –51 –18.7 –1.7 –2.1 Capital employed 15,350 15,911 13,544 Eliminations –1,501 –2,005 –1,760 - - - Interest-bearing net debt 5,969 6,179 4,466 Total 5,435 5,636 4,479 1,888 1,845 1,564 Net debt / EBITDA (1 2.6 2.5 2.2 Return on capital employed, % (1 12.1 15.0 14.0 Return on shareholders’ equity, % (1 16.0 18.7 15.8 Capital expenditure 862 1,108 655 Gross investments in shares 67 1,516 317 Net cash from operating activities 2,264 2,002 1,670 1) Adjusted for REC and Lenenergo gains in 2007 Share key figures Sales, EUR million Operating profit,EUR million Return on capital employed, % EUR or as indicated 2009 2008 2007 Earnings per share 1.48 1.74 1.74 Cash flow per share 2.55 2.26 1.88 6,000 2,000 20 Equity per share 9.04 8.96 9.43 5,000 1,500 15 Dividend per share 1.00 (1 1.00 1.35 4,000 Current target Payout ratio, % 67.6 (1 57.5 77.6 3,000 1,000 10 Dividend yield, % 5.3 (1 6.6 4.4 2,000 500 5 1,000 1) Board of Directors’ proposal for the Annual 0 0 0 General Meeting on 25 March 2010 05 06 07 08 09 05 06 07 08 09 05 06 07 08 09 Discontinued oil operations Discontinued oil operations Discontinued oil operations Incl. REC and Lenenergo gains ˭ Key financial figures for the years 1998–2009 are presented in the Financial Statements, see pages 174–175. ˭ Definitions for the key figures are included on pages 179–180 in the Financial Statements. FORTUM CORPORATION 2009 FINANCIAL SUMMARY 5 Return on shareholders’ equity, % Net cash from operating activities, Capital expenditure and gross Interest-bearing net debt, EUR million EUR million investments in shares, EUR million 20 2,500 3,000 8,000 2,500 15 2,000 6,000 Current 2,000 target 1,500 10 1,500 4,000 1,000 1,000 5 2,000 500 500 0 0 0 0 05 06 07 08 09 05 06 07 08 09 05 06 07 08 09 05 06 07 08 09 Discontinued oil operations Discontinued oil operations Discontinued oil operations Incl. REC and Lenenergo gains Net debt / EBITDA Number of employees, 31 Dec Share quotations 2005–2009, Index 100 = quote on 3 January 2005 3.0 16,000 350 350 2.5 300 300 12,000 2.0 250 250 200 200 1.5 8,000 150 150 1.0 4,000 100 100 0.5 50 50 0 0 0 0 05 06 07 08 09 05 06 07 08 09 05 06 07 08 09 Continuing operations Fortum (Neste Oil spin-off adjusted) Adjusted with Lenenergo gains DJ European Utilities Total, incl.