Equity story of FORTUM – For a cleaner world Investor / Analyst material September 2020 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. Any references to the future represent the management’s current best understanding. However the final outcome may differ from them. 2 Content Fortum in brief 4 – 7 Energy market transition 8 – 11 Fortum’s strategic route 12 – 14 Half-Year Financial Report 15 – 35 Appendices 36 European and Nordic power markets 37 – 42 Fortum’s power generation 43 – 44 Historical achieved prices 45 Dividend 46 IR contacts 47 3 Fortum in brief Good position to drive CO2-free power generation in Europe ~60% 3rd largest 2nd largest 66% Increase in Fortum’s of our electricity CO2-free generator nuclear generator CO2-free power in Europe in Europe production in Europe generation was CO2-free in 2019 Fortum in brief Consolidated Fortum is the third largest CO2-free generator in Europe 5 Source: Company information, Fortum analyses, 2018 figures pro forma. EPH incl. LEAG Fortum in brief Fortum to grow and lead European energy transition 2019 combined comparable EBITDA(1,2) Europe & Russia Uniper EUR 1.6 bn EUR 3.3 bn Fortum EUR 1.8 bn Combined power generation (2019)(2) India 18 % 50 % Hydro Nuclear Other ~180 TWh 19 % Coal Gas 1 % Combined power generation assets 12 % Fortum Uniper 1) Comparable EBITDA is based on the Fortum's Comparable EBITDA and Uniper's Adjusted EBITDA as defined in Both Fortum and Uniper Fortum’s and Uniper's financial statements. No impacts from the assumed transaction has been included. 6 2) Based on 2019 reported generation volumes (accounting view in Uniper). Not consolidated in 2019. Fortum in brief Fortum’s CO2-free power generation increases by ~60% as Uniper is consolidated as a subsidiary Fortum's power generation, TWh 200 Fortum and Uniper 175 consolidated*: 150 • CO2-free generation +60% 125 • Gas-fired power 100 generation triples 75 • Share of coal-fired CO2-free Gas Coal Other generation ~12% 50 • Share of coal of sales 25 revenue ~1% * based on 2019 reported figures 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 ind. INDICATIVE GENERATION FOR 2020, NOT OFFICIAL GUIDANCE. Note: Fortum actuals 1990-2019 excluding associated company Stockholm Exergi. 2020 indicative figures adjusted for Nordic wind and Joensuu CHP assets sold in 2020. Uniper’s disclosed 2018 numbers used for indicative consolidation 2020 with the following corrections/assumptions: normal hydrological year, accounting view adjusted to pro forma, French coal assets sold, Datteln 4 7 approximately 2.2 TWh in 2020, no net increase in generation from Beresovskaya 3, coal-to-gas switch 2 TWh, Ringhals 2 closed on 31 Dec 2019. Energy market transition Europe needs to eliminate CO2 emissions to reach climate goals – this requires actions from all sectors MtCO2-eq 6 000 Greenhouse gas emissions 5 000 4 000 Coal Power - 40% 3 000 Oil Transport1 -50…-55% - 60% 2 000 Old climate targets Industry2 Gas - 80% 1 000 Buildings3 Others Others4 - 95% 0 Source Sector -100% 1990 2000 2010 2020 2030 2040 2050 Sources: EEA, IEA, Fortum 1 including international aviation and marine 2 8 iron & steel and chemicals are among the biggest contributors 3 residential and commercial heating & cooling 4 non-energy related emissions: industrial processes and product use, waste management, agriculture, fugitive emissions Energy market transition Volatility and uncertainty in the European power market increases the value of flexible assets Intermittent renewables Nuclear and coal closures Increasing role of gas Volatility and Supply-demand balance uncertainty Increased interconnection between Nordics and Continent Commodity and CO2 prices Weather conditions 9 Energy market transition The MSR introduces tightness to carbon market Linear reduction factor (LRF) tightens the market Market stability reserve restores scarcity Abatement from coal to gas switching by reducing future auction volumes depends on coal and gas prices, together MtCO2 represented by a switching range 2500 Eur/t 60 24% of cumulative surplus Need for abatement 2000 of CO2eq.) or inventory reduction Switch range CO2 price 50 1500 Mton 40 1000 Cap (excl. aviation) 57%of cap 30 500 20 EU ETS emissions (incl. call on EUAs from aviation) 0 Illustrative volumes( 10 43% of cap Free Auction MSR Auction Deficit Emissions 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 0 allocation pre- effect post- 2017 2018 2019 2020 MSR MSR 2 • Linear reduction factor (LRF) is the percentage of • When TNAC > 833 Mt, MSR deducts 24% of the • CO2 price has almost quadrupled since baseline supply1 by which the annual supply of TNAC from the auction volume each year placing November 2017, when the final decision was allowances (cap) is reduced every year. LRF is them into the reserve during 2019-2023 reached on the future EU ETS rules, including set at • MSR rate is 12% during 2024-2030 the intake rate of the Market Stability Reserve, • 1.74% for 2013-2020 (equals to a • When TNAC < 400 Mt, MSR releases 100 million which became operational in January 2019 reduction of 38 MtCO2/year) EUAs annually from the reserve adding them to • Market tightness forces the EUA market to find • 2.2% for 2021-2030 (equals to a future auctions ways to reducing demand, including by coal-to- reduction of 48 MtCO2/year) • 900 million back loaded allowances from 2014- gas switching, making the relative gas/coal price • In total, emissions are set to decrease by 43% by 2016 will be transferred into the MSR in 2019-2020 an important price anchor for CO2 2030 vs. 2005 • As from 2023, allowances in MSR above the total • Political risks also continue to play a role in EUA • Next LRF review is scheduled for 2024 number of allowances auctioned during the prices, with developments around Brexit and • 3.03% LRF from 2030 onwards would previous year will be cancelled national coal phase-out policies in particular deliver net zero emissions by 2050 • Next MSR review is scheduled in 2021 being closely watched 2 TNAC = total number of allowances in circulation = Efficiency assumptions in switching range; 1 10 Average annual total quantity of allowances released in 2008-2012. supply – (demand + allowances in the MSR). According to the latest at low-end: gas 52% and coal 34%; publication May 15, 2018 the TNAC corresponds to 1655 million at high-end: gas 45% and coal 42%. O&M allowances. cost assumptions apply. Energy market transition Western European countries exiting coal during this decade FI: Phase-out • Sweden and Austria closed their last coal plants during 2020 by mid-2029 DE: Phase- SE: Last • France is committed to phase out coal by 2022 out by 2038 plant closed 2020 • Portugal has 2023 as national exit goal, but operators aim for full UK: Phase-out by DK: Phase- closure already in 2021 2024 out by 2030 • UK targets full exit in 2024 by restricting coal plants’ access to NL: Phase-out by market end-2029 • Italy and Ireland have both announced phase-out by 2025 • Greece has stated 2028 as year for full phase-out FR: Phase-out by 2022 • Netherlands and Finland have 2029 as regulated phase-out year, Denmark is committed to 2030 AT: Last plant closed 2020 • Germany to phase out coal by end-2038 latest, possibly already 2035 PT: Phase-out by 2023 • Significant coal countries without explicit exit date include e.g. Spain, Czechia and Poland – In Spain, significant number of coal plants have recently already closed, and IT: Phase-out by 2025 operators are underway to close down even the rest by mid-2020s GR: Phase-out by 2028 – In Czechia, a multi-stakeholder commission to propose timing for phase-out during 2020 Phase-out from Phase-out from Phase-out from power sector power sector power sector – Poland expects share of coal in the power mix to decline and targets lower- latest by 2025 latest by 2030 latest by 2040 carbon generation in newbuilds, but no timeline for phase-out of coal exists 11 Fortum’s strategic route Portfolio well positioned for energy transition – overall combined share of coal based activities is moderate Coal share from generation and from sales (calculated from disclosed numbers assumptions below) Fortum 2019 Uniper 2019 Combined Sales, MEUR 5,447 65,804 71,251(1) Coal and lignite generation based sales, MEUR 217 810 1,027(1) Share of coal based sales 4% 1% 1% Generation (power and heat), TWh 103 104 207 Coal and lignite based, TWh 7 20 27 Share of coal based power generation 7% 19% 13% Note: Fortum sales data includes also heat production, Uniper sales data only power generation. For Fortum avg. coal based power sales price assumption 38 €/MWh and for heat 28 €/MWh; for Uniper avg. coal based sales price assumption 41 €/MWh. 1. Combined sales is presented for illustrative purposes only and do not include possible impacts from aligning differences in accounting principles, effects from co-owned power companies or eliminations of sales between the Groups. Source: Fortum Sustainability report 2019, page 17 and Fortum Financials 2019, page 3 and Fortum Q4 2019 additional quarterly tables. Uniper Annual Report 2019, pages 2, 110 and 132 12 Fortum’s strategic route Fortum is listed in several Fortum is a forerunner in sustainability sustainability indices and ratings: We engage our customers and society to drive the change towards a cleaner world.