President and CEO Markus Rauramo:

(text from Half-year 2020 Financial Report)

"Fortum has developed substantially over the past few years and is now at a pivotal turning point. I am excited to have taken on the responsibility to steer forward this great company as President and CEO from the beginning of July. Together with Uniper, we will accelerate the transformation towards the goal to become a leader in the European energy transition. My number one short-term priority will be to have a joint strategy for the consolidated Group by the end of the year. We will continue to reduce our coal-based production and pursue decarbonisation through growth in clean energy and, as part of our joint strategy, set new climate targets for the whole Group.

At Fortum, we continuously evaluate and optimise our business portfolio, as can be seen in the acquisitions and divestments we have made over the last few years. We will continue to do so with the aim to have a more focused business portfolio for the whole Group in the future. In the long term, we will also invest in profitable growth. These investments will be strategic, selective, and substantial.

In the shorter term, we will work to secure the financial strength of the Group, which in this current uncertain market situation due to Covid-19 is even more important. Having a strong balance sheet and a solid investment grade rating of at least BBB continues to be a priority for Fortum. We are focusing on optimising cash flow, maximising our profitability, prioritising our capital expenditure, and continuing the optimisation of our portfolio. This year we have already concluded or disclosed divestments for a total consideration of EUR 1.2 billion.

The strategic review of our selected district heating assets is proceeding well. In early July, we signed an agreement to divest our district heating business in the Järvenpää-Tuusula area in Finland for EUR 375 million and expect to record a capital gain of approximately EUR 290 million in our third-quarter results. At the end of July, we announced that we also initiated a strategic review of our 50% stake in Stockholm Exergi, in addition to the ongoing review of the Polish and Baltic district heating operations.

During the second quarter, the very wet hydrology continued, especially in Norway, and caused an exceptional 84% drop in the Nordic spot power price. The area prices for Finland and Sweden also declined, but to a lesser extent. At the same time, the CO2-price increased clearly during the second quarter. While all of this widens the spread between the German and Nordic power prices, it also increases the potential for a rebound in Nordic prices once the hydrological situation eventually normalises.

The low power prices negatively affected the results of the Generation segment, but our high hedge levels cushioned the impact. The market uncertainty due to the Covid-19 pandemic continued, but had only a marginal effect on the Nordic power consumption. In Russia, power consumption declined notably as a result of Covid-19 and lower demand from the oil and gas industries, pushing down the electricity market price. Coupled with the weaker Russian rouble, the contribution from the Russia segment clearly decreased from last year. The results of the Consumer Solutions and City Solutions segments were stable.

Following the majority transactions on Uniper in the first quarter, we already consolidated Uniper’s balance sheet from 31 March this year, and this quarter we consolidated Uniper as a subsidiary also in our income statement. Consequently, Uniper, for the first time, contributed to our comparable operating profit in the second quarter. Uniper successfully utilised the gas market conditions in the first quarter, which caused a profit shift between the quarters. The overall effect was positive and showed as a positive result in Fortum’s first-quarter share of Uniper’s profits, but also lowered the comparable operating profit for the Uniper segment in the second quarter. Similarly to our Generation and Russia segments, also the Uniper segment was affected by lower Nordic power prices and Covid-induced lower Russian power demand. Uniper’s hedging and optimisation activities, however, to a large extent mitigated the effects in the Nordics and central Europe. Since becoming the majority owner of Uniper we have slightly increased our ownership and earlier this week we reached the 75% ownership threshold.

Finally, I look forward to working together with all our employees, both at Fortum and Uniper, to utilise the combined knowledge and competencies to build a leader in the European energy transition."