Fortum Oyj Annual Report 2014

FY2014 Annual Report · Fortum Oyj

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Contents

This is Fortum .......................................................... 4

CEO’s review ................................................................................. 4
Operations and market areas .................................................... 9
Year 2014 in figures .................................................................11
Sales and production...............................................................11

Financial summary .................................................................17

Support for society ....................................................................69
Generating economic value .....................................................70
Distribution of added value 2014 ............................................70
Fortum as a tax payer ...............................................................73

Financials ................................................................ 77

Environmental summary .........................................................18

OpEratinG and FinanCial rEviEw ...................................77

Social summary ......................................................................19

Market position .......................................................................20
Strategy ........................................................................................23
Core areas of the strategy ........................................................23

Strategy realisation in 2014 ....................................................26

Future energy system ...............................................................27

Sustainability embedded in the strategy ...................................28

Research and development ......................................................31
Operating environment and market development .............32
European market development ................................................32

Russian market development ...................................................35

Carbon market development ....................................................36

Business .................................................................. 38

Group Business structure ........................................................38
Our operations............................................................................41
Hydropower .............................................................................41

Financial performance and position ......................................77
risk management .................................................................. 102
Fortum share and shareholders .......................................... 111

KEY FiGurES ..................................................................................118

COnSOlidatEd FinanCial StatEMEntS .........................131

Consolidated income statement .......................................... 131
Consolidated statement of comprehensive income ......... 133
Consolidated balance sheet .................................................. 134
Consolidated statement of changes in total equity ......... 135
Consolidated cash flow statement....................................... 136
notes to the consolidated financial statements ............... 139
1 Accounting policies ............................................................139

2. Critical accounting estimates and judgements ...................152

3. Financial risk management ..............................................154

4. Capital risk management ..................................................163

Nuclear power .........................................................................43

5. Segment reporting .............................................................164

CHP ........................................................................................46

6. Items affecting comparability ............................................174

Other production .....................................................................47

7. Fair value changes of derivatives and underlying items in

Power and heat distribution .....................................................48

income statement ..............................................................175

Electricity and heat sales .........................................................50

8. Acquisitions and disposals ................................................176

Expert services ........................................................................51

9. Assets held for sale ...........................................................178

In Society ................................................................. 52

Stakeholders ...............................................................................52
Stakeholder collaboration ........................................................52
Main stakeholder groups .........................................................54
Shareholders ...........................................................................58

Customers ...............................................................................58

Personnel ................................................................................59

Suppliers of goods and services ...............................................62

Authorities and energy industry organisations .........................66

Media .....................................................................................67

Non-governmental organisations .............................................67

Local communities ..................................................................67

10. Other income and other expenses ....................................179

11. Materials and services ...................................................180

12. Employee benefits ............................................................181

13. Finance costs – net ..........................................................187

14. Income tax expense ........................................................189

15. Earnings and dividend per share .....................................191

16. Financial assets and liabilities by categories ....................192

17. Financial assets and liabilities by fair value hierarchy .....196

18. Intangible assets .............................................................198

19. Property, plant and equipment ........................................199

20. Participations in associated companies and

joint ventures ..................................................................203

21. Other non-current assets ..................................................210

Contents

22. Long-term and short-term interest-bearing receivables ......210

GRI ......................................................................... 279

Standard disclosures .............................................................. 279
Report content .......................................................................280

Material aspects ....................................................................281

Management approach .........................................................285

Ethics and integrity ...............................................................295
assurance ................................................................................. 296
Assurance statement .............................................................296
Gri index .................................................................................. 298
Economic responsibility ........................................................ 309
Economic performance ..........................................................309

Plant decommissioning .........................................................310

System efficiency ...................................................................311
Environmental responsibility .............................................. 312
Materials ..............................................................................312

Energy...................................................................................313

Water ....................................................................................315

Biodiversity ...........................................................................316

Emissions ..............................................................................317

Effluents and waste ...............................................................320

Compliance ...........................................................................322

Supplier environmental assessment .......................................322

Environmental grievance mechanisms ...................................323
Social responsibility ............................................................... 324
Labour practices and decent work .........................................324

Human rights ........................................................................334

Society ..................................................................................336

Product responsibility ............................................................339
acronyms and units ............................................................... 341
legal notice .............................................................................. 342
Contact information ............................................................... 343

23. Inventories ......................................................................211

24. Trade and other receivables .............................................211

25. Liquid funds....................................................................213

26. Share capital ...................................................................213

27. Non-controlling interests ..................................................214

28. Interest-bearing liabilities ................................................214

29. Deferred income taxes .....................................................216

30. Nuclear related assets and liabilities ...............................218

31. Other provisions ..............................................................220

32. Pension obligations .........................................................221

33. Other non-current liabilities .............................................226

34. Trade and other payables ................................................226

35. Pledged assets .................................................................227

36. Leasing ...........................................................................228

37. Capital commitments .......................................................229

38. Contingent liabilities .......................................................229

39. Legal actions and official proceedings .............................230

40. Related party transactions ...............................................231

41. Events after the balance sheet date ..................................232

42. Subsidiaries by segment on 31 December 2014 ...............232

parEnt COMpanY FinanCial StatEMEntS ...................235

income statement ................................................................... 235
Balance Sheet .......................................................................... 236
Cash flow statement ............................................................... 237
notes to the parent company financial statement ........... 238

prOpOSal FOr thE diStriButiOn OF EarninGS ..........248

auditOr’S rEpOrt ......................................................................248

QuartErlY FinanCial inFOrMatiOn ...............................250

invEStOr inFOrMatiOn ..........................................................252

Governance ........................................................... 253

Corporate Governance Statement ....................................... 253
Governing bodies of Fortum ...................................................253

Internal controls in relation to financial reporting .................260
remuneration .......................................................................... 263
Board of directors ................................................................... 269
Group Management ............................................................... 273

Annual Report 2014

This is Fortum

Fortum's Annual Report 2014
Fortum's Annual Report 2014

Fortum is an energy company highly committed to sustainability. We strive to respond to the needs of our
customers by generating, selling and distributing low-carbon electricity and heat and by offering energy-sector
expert services.

THIS IS FORTUM
THIS IS FORTUM

CEO Tapio Kuula’s review
CEO Tapio Kuula’s review

President and CEO until 31 January 2015

In 2014, the significant weakening of the
global economy and the value of the rouble
increased the uncertainty in the operating
environment. There was positive development
in the EU’s climate policy, and in Europe a
decision was reached on energy and climate
targets for 2030. Fortum focused on
increasing the flexibility of its business
operations and prepared to take the next
significant steps in implementing the
company’s strategy.

Alongside energy market development and
the energy market model, climate change is
an important issue that must be resolved.

According to the latest assessment reports
by the Intergovernmental Panel on Climate
Change (IPCC), the global average
temperature is estimated to rise by as much
as three-four degrees Celsius by 2100
compared to the level of past decades.

The IPCC proposes relinquishing
dependence on fossil fuels by the end
of the century to keep climate
warming below two degrees.
Greenhouse gas emissions must be
reduced significantly, which requires
major changes to energy production.

Additionally, smart solutions are
needed to make energy distribution
and consumption more efficient.

Emissions-free production
Emissions-free production
is Fortum’s strategic
is Fortum’s strategic
choice
choice
Fortum’s strategy fits very well within the
frame of reference of measures mitigating
climate change. Our purpose is to create
energy that improves life for present and
future generations. We provide sustainable

This is an automatically generated PDF document of Fortum's online Annual Report and may not be as comprehensive as the complete Annual Report, which is available at http://annualreport2014.fortum.com/

Annual Report 2014

CEO's review

solutions for society while delivering excellent
value to our shareholders. We want to act
responsibly, both in the short term and long
term.

The cornerstones of our strategy are strong
expertise in CO2-free hydro and nuclear
power production, in efficient combined heat
and power (CHP) production, and in operating
in the energy markets.

Tighter EU emissions
Tighter EU emissions
reduction targets for 2030
reduction targets for 2030
Leaders of the EU countries decided in 2014
to decrease the member countries’ combined
carbon dioxide emissions from the 1990 level
by 40 per cent by 2030. In the EU,
preparations for a Market Stability Reserve
(MSR) to strengthen the steering effects of
emissions trading were also initiated. When
the price for carbon dioxide emissions is
adequately steering power plant operations
and future investments, the share of
renewable energy can be increased in a
market-based manner.

For cost and efficiency reasons, electricity
supply and generation must be viewed from a
Europe-wide perspective. When electricity is
generated with a method that is most
efficient for each area, a reasonable
electricity price for consumers and a
competitive supply for industry can be
ensured. Instead of massive production
subsidies from the public sector, it would be
important to ensure market functionality by
investing in, e.g., electricity interconnections
that would improve the security of electricity
supply throughout Europe.

The EU’s energy policy and
The EU’s energy policy and
national solutions
national solutions

Europe’s energy and climate policy
decision making in 2014 was
characterised by concerns about
competitiveness of the euro zone and
the security of energy supply. Europe
got into a situation in which the
wholesale price of electricity was low
in the weak economy, there was a
surplus of emission allowances on the
market and the share of heavily
subsidised renewable production
increased.

Due to the global market situation,
coal was economical and fossil fuels
were the most significant energy
source for industrial countries.

Electricity’s low market prices didn’t
encourage market-based investments;
instead, the majority of the new
energy production capacity was based
on public-sector subsidies, thereby
growing the end customers’ electricity
bill and the burden on taxpayers.

Concerns about the security of energy
supply led to the reinforcement of
national perspectives. Instead of
creating a European electricity
market, some EU countries advanced
towards national solutions. There were
discussions in some EU countries
about subsidies to maintain traditional
capacity and about the so-called
capacity mechanisms. However, from
the perspective of the EU’s integrated
energy market, this is partial
optimisation and an expensive
solution, and it doesn’t secure the
supply of electricity in Europe in the
long-term.

If and when European countries adopt
capacity mechanisms, they must not
be tied to a single technology; they
must be cross-border mechanisms
and they must cover both old and new
production capacity as well as all
production forms.

Predictable European
Predictable European
energy markets operating
energy markets operating
on a commercial basis
on a commercial basis
Even though the wholesale prices for
electricity have continued to decrease,
various taxes, fees and subsidies have
increased the end-customers’ energy costs.
Therefore, it is important to create a
predictable electricity market built on
consumer participation, utilisation of the
different value components of energy
sources, as well as the inclusion of various
energy producers.

Rather than advancing individual technologies
or narrow-scope regional solutions, it is
important to create the biggest possible
integrated electricity market model that
includes adequate physical transmission
capacity and that has transmission system
operators, grid companies and power
exchanges operating in close cooperation. In
addition, when environmental impacts are
given the right price through CO2 emissions,
it creates energy markets that are

competitive, attentive to environmental
requirements, and provide security of supply.

In the future, both industrial customers and
consumers should become involved in
balancing production and consumption and in
levelling consumption peaks in the electricity
system. This is most successful when the
premises are genuinely market-based and the
levelling of consumption benefits
economically both the electricity user and the
producer. This will be one of the central
challenges of energy market development in
the years ahead.

We increased our
We increased our
operational efficiency and
operational efficiency and
our flexibility
our flexibility
In a challenging market situation, Fortum’s
2014 results were strong. The wholesale
price of electricity, global economic
development and the weakened rouble were
clearly disappointing. The drop in also
commodity prices during the fourth quarter
was not foreseeable.

On the other hand, the price of CO2 emission
allowances in EU emissions trading
scheme increased somewhat; as a result, the
drop in the price of electricity in the
wholesale market was smaller than the
decrease in commodity prices. In the Nordic
countries, electricity production increased
slightly thanks to the growth in exports, and
demand in Russia remained at the 2013 level.

Fortum’s sales in 2014 were EUR 4,751
million. Comparable operating profit,
excluding items affecting comparability,
mainly profit from the sale of the electricity
distribution businesses in Finland and
Norway, totalled EUR 1,351 million and cash
from operating activities was a strong EUR
1,762 million. Earnings per share were
EUR 3.55, of which EUR 2.36 per share
relates to items affecting comparability.

During the year, we continued Fortum’s
internal transformation to further increase
efficiency and flexibility. We finalised
succesfully our two-year efficiency
programme, within which we decreased
investments, divested non-core assets,
reduced fixed costs and improved working
capital efficiency.

Annual Report 2014

CEO's review

We divested Finnish and
We divested Finnish and
Norwegian electricity
Norwegian electricity
distribution businesses
distribution businesses
Fortum sold its electricity distribution
business in Finland in spring 2014 to a new
distribution company owned by the Finnish
pension insurance companies Keva and
LocalTapiola Pension and the international
infrastructure investors First State
Investments and Borealis Infrastructure. The
Norwegian electricity distribution business
was sold to the energy company Hafslund
ASA. We are continuing to prepare and
evaluate opportunities to divest the Swedish
electricity distribution business.

By divesting the electricity distribution
businesses, Fortum is better equipped to
focus on the production and sales of efficient
and low-carbon electricity and heat.
This significantly increases Fortum’s strategic
freedom, and gives the company an
exceptionally good platform for improving
shareholder value.

Electricity sales and
Electricity sales and
services related to
services related to
electricity use are our
electricity use are our
core competences
core competences
Electricity has become a cornerstone of
modern society and the driving force of the
information society. With the electrification of
transportation, and as information technology
becomes even more integrated into the daily
life of consumers, electricity’s share in total
energy consumption will grow.

Fortum is continuously developing new tools
and services enabling business and private
customers to monitor, control and boost the
efficiency of their electricity consumption.
Customers are also offered open, two-way
solutions that enable them to sell the surplus
electricity they produce to Fortum.

Knowing consumers’ needs and identifying
changes is an important part of Fortum’s
strategy implementation. From this
perspective, the natural next steps are
growing the electricity sales-related business
and strengthening our expertise related to
the services offered to electricity users.

For the good of customers
For the good of customers
and the surrounding
and the surrounding
society
society
We are committed to the principles of the UN
Global Compact initiative. Our sustainability

indicators emphasise Fortum’s role in society
and measure environmental and safety
performance as well as the company’s
reputation, customer satisfaction, and the
delivery reliability of electricity and heat.

In 2014, we served our customers well.
Customer satisfaction improved in all
divisions, and customer loyalty and customer
willingness to recommend Fortum were
reflected in the growing number of
customers. Fortum became the biggest
electricity seller in the Nordic countries last
year. The quality of our products and services
were also appreciated. In terms of the
delivery reliability of electricity, we reached
our target. The average outage per customer
was 97 minutes during the year.

Customer satisfaction
Customer satisfaction

Results of the annual customer
satisfaction survey indicate that we
are moving in the right direction. The
survey results published late last year
indicate that Fortum’s customer
satisfaction had improved more than
that of any other major electricity
company’s.

Customer satisfaction has developed
very favourably for several years.
Fortum now has about 1.3 million
electricity customers in Finland,
Sweden and Norway; consequently,
Fortum is the biggest seller of
electricity in the Nordic countries.

We have collaborated with our
customers to modify electricity
agreements to meet their needs. We
offer electricity produced with
emissions-free hydropower through
easy-to-understand agreements with
logical, competitive pricing. This basic
work is supported with energy-
efficiency services the customers can
use to influence the cost of their
electricity bill.

Measured through the annual One Fortum
survey, the company’s reputation remained
stable and improved in Finland. However, in
Sweden our reputation among the
general public is not at the desired level, so
we must continue our efforts to improve it.

Russian investment
Russian investment
programme close to
programme close to
completion
completion
The investment programme consisting of
eight new production units in Russia has
advanced to the final phase. In 2014, the
last of the three big, new power plant units in
Nyagan was commissioned. The final two
units of the programme will be commissioned
in 2015 in Chelyabinsk.

Fortum’s target set at the time of the
acquisition of the Russian subsidiary OAO
Fortum in 2008 was to reach a run-rate level
in operating profit (EBIT) of RUB 18.2 billion
in the Russian Segment during 2015. We
have kept the rouble-denominated target
intact, but, due to the significant fluctuations
in the rouble exchange rates, the euro-
denominated result level will be volatile.

Acquiring TGC-1’s
Acquiring TGC-1’s
hydropower - Fortum’s
hydropower - Fortum’s
next step to growth
next step to growth
In December 2014, we announced our
intention to increase Fortum’s hydropower
production capacity by 60% through the
restructuring of TGC-1, a Russian Territorial
Generating Company. TGC-1 owns and
operates hydro and thermal power in north-
western Russia and heat distribution
networks in St. Petersburg. Gazprom
Energoholding owns 51.8% of the company’s
shares and Fortum 29.5%.

In the restructuring, Fortum and the Russian
company Rosatom would own the
hydropower production of TGC-1. Gazprom
Energoholding would continue with the heat
and thermal power operations of TGC-1.
Through our present stake in TGC-1, Fortum’s
share of the new, hydropower-
focused company would rise to more than
75%. Rosatom would become a minority
holder in the company, with a less than 25%
stake. The new company would be a
subsidiary of Fortum. We are working to
complete detailed structuring, practical
arrangements and final commercial terms.

Provided that Fortum obtains more than 75%
ownership in TGC-1’s hydro assets, we are
ready to participate with a minority stake
(max. 15%) in Fennovoima’s Finnish nuclear
power project on the same terms and
conditions as the other domestic companies
currently participating in the project.

The restructuring of TGC-1 and a minority
share in Fennovoima’s nuclear power plant

Annual Report 2014

CEO's review

project are in line with Fortum’s strategy,
which is based on strong expertise in CO2-
free hydro and nuclear power and in efficient
combined heat and power production as well
as operating in energy markets.

Increasing Fortum’s hydropower capacity by
60% would also balance the company’s
production structure and Russian business
operations. After the restructuring, 60% of the
Russian operations would be combined heat
and power production and condensing power
production, and the remaining 40% would be
hydropower. At the Fortum level, the share of
hydropower would increase from the current
one-third to over 40% of the total production
mix.

Hydropower balances the
Hydropower balances the
variability of wind and
variability of wind and
solar power
solar power
Emissions-free hydropower is a climate-
neutral production form that can be used to
reduce the energy sector’s emissions. From
the perspective of the entire energy system,
hydropower offers the opportunity to balance
the large variability of renewable energy
sources, particularly solar and wind power.

Hydropower balances
Hydropower balances
fluctuations in both
other
fluctuations in both other
renewable energy
renewable energy
production
and electricity
production and electricity
consumption
consumption

The values associated with electricity
are energy content, capacity and the
ability of the production forms to
respond to consumption peaks.
Despite the intermittency of
renewable energy, there must be
balance between production and
consumption at all times in the
electricity system. Maintaining the
balance – particularly as the share of
other renewable energy increases –
requires flexibility; in this respect,
hydropower meets this need very well.
This is precisely why hydropower
production is very attractive to
Fortum.

Fortum’s current hydropower
production is centralised in Finland
and Sweden. The company has 33
fully-owned or co-owned hydropower
plants in Finland and 126 in Sweden.
Their production capacity can be
increased mostly through plant

modernisations and by optimising the
use of water systems.

In 2014, we continued our
annual investments in hydropower
capacity upgrades. For example, the
refurbishment of the Imatra power
plant’s number-three unit,
commissioned in 1929, re-established
the plant as Finland’s biggest
hydropower plant in terms of capacity.
When the refurbishment of the
number-four unit is completed in
2015, the plant’s capacity will further
increase to 192 megawatts.

Therefore, it is important that we use this
opportunity wisely and in good collaboration
with authorities and stakeholder groups.
Fortum takes the local environmental impacts
of hydropower into consideration and is ready
to work with stakeholders to find solutions.

Russian heat reform
Russian heat reform
brings more business
brings more business
The roadmap for Russia’s heat sector reform
was approved by the Russian Government in
2014. With the reform, the district heat
pricing would be based only on a heat-only
boiler price methodology. The reform would
encourage investments in energy-efficient
production to reduce fuel consumption and in
upgrading district heating networks to reduce
heat loss.

The plan is to phase in new heat tariffs mostly
by 2020, starting in 2015. The reform would
start in the big cities with over 100,000
residents and in cities that have existing
combined heat and power production.

Thanks to Fortum’s production structure, we
are able to utilise energy-efficient combined
heat and power production in a competitive
manner. There have not yet been any final
decisions made on the implementation of
heat reform, but it could offer Fortum’s
existing plants the opportunity to increase
business in Russia.

Combined heat and power
Combined heat and power
production boosts
production boosts
resource efficiency
resource efficiency
Combined heat and power (CHP) production
is the most efficient fuel-based energy
production. The fuel efficiency of CHP
production can be as high as 90%. CHP
plants play a significant role in Fortum’s

energy production structure: CHP accounts
for about one third of electricity production
and about 90% of heat production.

In recent years, Fortum has built a lot of new
biomass- and waste-based combined heat
and power production capacity in Estonia,
Lithuania, Latvia, Poland, Sweden and
Finland.

Fortum’s co-owned TSE Turun Seudun
Energiantuotanto Oy is currently building a
new multifuel power plant in Naantali.
Additionally, a new biopower plant is
currently under construction in Stockholm,
and upon completion will be one of the
biggest in Europe. The plant is being built by
Fortum Värme, which is Fortum's and the city
of Stockholm’s joint venture. The value of the
investment is about EUR 500 million. The
amount of heat and electricity produced by
the plant will be equivalent to the annual heat
consumption of about 190,000 medium-sized
apartments. The plant will significantly reduce
the district heating-related CO2 emissions in
Stockholm.

Emissions-free energy
Emissions-free energy
with nuclear power
with nuclear power
Nuclear power accounts for about one third
of Fortum’s electricity production and plays a
significant role in reducing carbon emissions.
Fortum also has long experience in the
responsible use of nuclear power, and the
company’s expertise is globally recognised.
Nuclear power is needed to mitigate climate
change, and its efficiency can be further
improved significantly in combined heat and
power production.

The Loviisa nuclear power plant in
Finland operated by Fortum had a good
production year, and the plant’s load factor of
90.9% was excellent by international
standards. Safety is a top priority in nuclear
power plant operations, and Fortum
continuously invests in improvements to
safety.

In 2014, investments to improve safety
included a new air cooling system. The
investment will ensure removal of residual
heat in the plant units in improbable extreme
situations in which seawater for some reason
becomes unavailable for its normal cooling
function. During 2015-2018 several other
significant investment and modernisation
projects will be implemented at Loviisa.
These projects, such as the modernisation of
automation, secure reliable and profitable
electricity production at the plants to the end

Annual Report 2014

Operations and market areas

of the operating licenses, i.e. to 2027 and
2030.

with this because it was a very bleak year for
contractor safety.

capacity flexibility, cost structure, sustainable
operations or occupational safety.

A significant nuclear power sector issue for
Fortum in 2015 is the progression of the
Russian TGC-1 restructuring and the related
possible participation in the
Finnish Fennovoima nuclear power project.

Five accidents leading to the deaths of
contractor employees occurred during the
year, four in Sweden and one in Russia. My
deepest condolences to the families and co-
workers of the victims.

Organisational reform to
Organisational reform to
support strategic change
support strategic change
As part of Fortum’s strategic change, we
broadened the Group’s management team in
March 2014. The divestment of the electricity
distribution business puts Fortum in a new
situation in which the company has
significant business divestments and
investment programmes under way while
simultaneously preparing for growth. In light
of this, we strengthened the
Executive Management Team with
competencies related to strategy, mergers
and acquisitions, and corporate relations.

The 2013-2014 efficiency programme was
successfully completed, but there is still
internal development potential within Fortum.
With the organisational change, we
strengthened the opportunities to leverage
synergies between the businesses. The Chief
Operating Officer (COO) model offers
excellent opportunities to continue this
development.

The renewal also gave the Management Team
members the opportunity to expand their own
know-how and experience to the benefit of
the company, the Executive Management
Team work, and themselves.

Occupational safety is
Occupational safety is
important
important
As in the previous year, the occupational
safety of Fortum’s own employees remained
very good. Measured by the Total Recordable
Injury Frequency indicator, it was a record-
best year. However, we cannot be satisfied

Our goal is to prevent all serious injuries; we
cannot tolerate non-compliance when it
comes to safety practices. Immediate
corrective measures involved an inspection of
all Fortum’s construction sites and the most
significant ongoing maintenance work,
especially that involving hoisting work and
work performed at heights. Additionally, the
work safety guidelines and practices were
updated, and the safety practices for
construction projects were improved. All key
individuals will receive training on these
guidelines in 2015 in an effort to reduce
serious injuries by half.

We improve energy
We improve energy
efficiency
efficiency
At the end of 2014, Fortum’s Board of
Directors approved a new long-term energy
efficiency target. We aim to achieve an
annual energy savings of over 1,400
gigawatt-hours by 2020 compared to 2012.
The saving would be equivalent to the annual
heating energy need of more than 75,000
households, or the annual production of more
than two hundred 2.5-megawatt wind power
plants. The new target replaces the previous
target that measured the combustion
efficiencyof fossil fuels.

Ready to seize
Ready to seize
opportunities in the
opportunities in the
changing energy markets
changing energy markets
Fortum has a very strong competitive
position, whether measured by CO2-free
production, know-how, production structure,

Fortum’s strategy provides a clear view of the
future direction of development – both in the
short term and the long term. It enables value
creation, stronger earnings per share, and a
good premise for producing stable,
sustainable and over time increasing
dividends.

Thank you for the good
Thank you for the good
collaboration
collaboration
When the Annual Report is published, I have
already retired. It has been a great pleasure
to participate in Fortum's step-by-step
development from a national energy company
to a significant player in the Nordic countries
and Europe. Strategically, Fortum is right now
in a very interesting and exceptionally
competitive position in the sector. For this
reason, I would be pleased to continue
working on behalf of Fortum as a member of
the Board – if the spring 2015 Annual
General Meeting so decides.

I want to extend my sincere thanks to all
Fortum personnel in all our operating
countries for the work in 2014 and good
collaboration. I would also like to thank our
customers and shareholders for your trust. A
special thank you to Chairman of the Board
Sari Baldauf and to the whole Board of
Directors for your support in advancing
Fortum’s interests. Thank you also to Chief
Financial Officer Timo Karttinen, who has
assumed the responsibility for the duties of
the interim President and CEO.

I wish the best of success to Fortum, its
owners, customers, collaboration partners
and personnel.

Tapio Kuula

Annual Report 2014

Operations and market areas

Operations and market areas
Operations and market areas

Finland
Finland

Sweden
Sweden

Russia
Russia

4,551 MW

Power generation, capacity

4,950 MW

Power generation, capacity

4,758 MW

Power generation, capacity

1,936 MW

Heat production, capacity

16%

2,040

100%

82%

2.2 Mt

Share of retail customers

Employees 31 Dec 2014

ISO 14001 certified 1)

OHSAS 18001 certified 2)

CO2 emissions

Fortum Corporation's headquarters are situated in
Espoo, Finland

12%

1,201

100%

54%

0 Mt

Heat production, capacity

907,000

Distribution, customers

Share of retail customers

13,466 MW

Heat production, capacity

4,213

100%

Employees 31 Dec 2014

ISO 14001 certified 1)

OHSAS 18001 certified 2)

Employees 31 Dec 2014

16.7 Mt

CO2 emissions

ISO 14001 certified 1)

OHSAS 18001 certified 2)

CO2 emissions

Fortum Värme
Fortum Värme

627 MW

Power generation, capacity

3,636 MW

Heat production, capacity

694

100%

Employees 31 Dec 2014

ISO 14001 certified 1)

OHSAS 18001 certified 2)

0.8 Mt

CO2 emissions

Annual Report 2014

Year 2014 in figures

Poland
Poland

Lithuania
Lithuania

Latvia
Latvia

257 MW

Power generation, capacity

1,189 MW

Heat production, capacity

603

100%

Employees 31 Dec 2014

ISO 14001 certified 1)

OHSAS 18001 certified 2)

18 MW

89 MW

101

100%

Power generation, capacity

26 MW

Power generation, capacity

Heat production, capacity

225 MW

Heat production, capacity

Employees 31 Dec 2014

ISO 14001 certified 1)

OHSAS 18001 certified 2)

99%

Employees 31 Dec 2014

ISO 14001 certified 1)

OHSAS 18001 certified 2)

0.8 Mt

CO2 emissions

0.05 Mt

CO2 emissions

0.02 Mt

CO2 emissions

Norway
Norway

Great Britain
Great Britain

Estonia
Estonia

Fortum announced in October 2014 agreement to
sell its UK-based subsidiary Grangemouth CHP
Limited to its long term customer INEOS Industries
Holdings Ltd.

48 MW

Power generation, capacity

497 MW

Heat production, capacity

206

100%

Employees 31 Dec 2014

ISO 14001 certified 1)

OHSAS 18001 certified 2)

0.08 Mt

CO2 emissions

1) ISO 14001 is a standard for environmental management systems
2) OHSAS 18001 is a standard for occupational health and safety management systems

Power generation, capacity

Heat production, capacity

Share of retail customers

Employees 31 Dec 2014

ISO 14001 certified 1)

OHSAS 18001 certified 2)

CO2 emissions

100%

0 Mt

India
India

15 MW

Power generation, capacity

Heat production, capacity

Employees 31 Dec 2014

ISO 14001 certified 1)

OHSAS 18001 certified 2)

0 Mt

CO2 emissions

Annual Report 2014

Year 2014 in figures

Sales and production
Sales and production

Annual Report 2014

Year 2014 in figures

Annual Report 2014

Year 2014 in figures

Fortum's power production by energy source in 2012–2014

TWh

Hydro power

Nuclear power

Natural gas

Coal

Biomass

Peat

Other

Total

2014

22.3

23.8

22.5

3.6

0.9

0.1

0.2

73.4

2013

18.0

23.7

20.0

4.0

1.1

0.1

0.5

67.4

* Includes joint venture AB Fortum Värme samägt med Stockholms stad

Fortum’s power generation capacity, 31 Dec 2014

Hydropower

Nuclear power

Combined heat and power

Condensing power

Other

Total

Finland

Sweden

Russia

Poland

Other

1,526

1,460

438

1,126

3,088

1,820

4,758

257

4,551

4,950

4,758

257

108

2012*

25.2

23.4

19.4

3.3

1.3

0.1

0.3

73.1

Total

4,615

3,279

5,546

1,139

14,624

Fortum's heat production capacity, 31 Dec 2014

Heat

Finland

1,936

Sweden

Russia

13,466

Poland

1,189

Other

811

Total

17,402

Annual Report 2014

Year 2014 in figures

Sales and production including Fortum Värme
Sales and production including Fortum Värme

Annual Report 2014

Year 2014 in figures

Annual Report 2014

Year 2014 in figures

Fortum's power production by energy source in 2012-2014

TWh

Hydropower

Nuclear power

Natural gas

Coal

Biomass

Peat

Other

Total

2014

22.3

23.8

22.5

4.0

1.1

0.1

0.7

74.6

2013

18.0

23.7

20.0

4.5

1.6

0.1

0.8

68.7

Includes joint venture AB Fortum Värme samägt med Stockholms Stad

Fortum’s power generation capacity, 31 Dec 2014

Hydropower

Nuclear power

Combined heat and power

Condensing power

Other

Total

Finland

Sweden

Russia

Poland

Other

1,526

1,460

438

1,126

3,088

1,820

627

4,758

257

4,551

5,577

4,758

257

108

2012

25.2

23.4

19.4

3.3

1.3

0.1

0.3

73.1

Total

4,615

3,279

6,173

1,139

15,251

Includes joint venture AB Fortum Värme samägt med Stockholms Stad

Fortum's heat production capacity, 31 Dec 2014

Heat

Finland

1,936

Sweden

3,636

Russia

13,466

Poland

1,189

Other

811

Total

21,038

Includes joint venture AB Fortum Värme samägt med Stockholms Stad.

Annual Report 2014

Year 2014 in figures

Financial summary
Financial summary

The following table presents key figures of our operations. More data on Fortum's financial performance is
available in the Financials section of the Annual Report.

IFRS 11. Adoption of standards influences
treatment of Fortum’s holding in AB Fortum
Värme samägt med Stockholms stad in the
the consolidated financial statements. For
further information, see Note 1.6.1. New
IFRS standards adopted from 1 Jan 2014.

Key financial figures

EUR million or as indicated

Sales

EBITDA

Comparable EBITDA

Operating profit

Comparable operating profit

Profit for the period, owners of the parent

Capital employed

Interest-bearing net debt

Interest-bearing net debt without Värme financing

Net debt/EBITDA

Comparable net debt/EBITDA

Comparable net debt/EBITDA without Värme financing

Return on capital employed, %

Return on shareholders' equity, %

Capital expenditure

Gross investments in shares

Net cash from operating activities

Emissions subject to EU's ETS, million tonnes CO2

Free emission allocation, million tonnes CO2

Share key figures

EUR or as indicated

Earnings per share

Cash flow per share

Equity per share

Dividend per share

Extra dividend per share

Payout ratio, %

Dividend yield, %

2014

4,751

3,954

1,873

3,428

1,351

3,154

17,918

4,217

3,664

1.1

2.3

2.0

19.5

30.0

774

1,762

3.6

1.4

2013

5,309

2,129

1,975

1,508

1,403

1,204

19,183

7,793

6,658

3.7

3.9

3.4

9.0

12.0

1,005

1,548

5.1

1.8

2014

3.55

1.98

12.23

1.10 1)

0.20 1)

36.6 1)

7.2 1)

2013

1.36

1.74

11.28

1.10

80.9

6.6

2012

6,159

2,538

2,416

1,874

1,752

1,416

19,420

7,814

3.1

3.2

10.2

14.6

1,558

1,382

4.8

5.4

2012

1.59

1.56

11.30

1.00

62.9

7.1

1) Board of Directors' proposal for the Annual General Meeting on 31 March 2015.

Annual Report 2014

Year 2014 in figures

Sales, EUR million

6,296

6,161

6,159

5,309

4,751

7,500

5,000

2,500

Operating profit and comparable
operating profit, EUR million

3,428

2,402

1,833

1,708

1,802

1,874

1,752

1,508

1,403

1,351

3,500
3,000
2,500
2,000
1,500
1,000
500
0

Operating profit
Comparable operating profit

Environmental summary
Environmental summary

The following table presents the key figures of our environmental responsibility. All indicators measuring
Fortum's environmental responsibility are available in the GRI section.

Carbon dioxide emissions, million tonnes

Sulphur dioxide emissions, tonnes

Nitrogen oxide emissions, tonnes

Particle emissions, tonnes

ISO 14001 certified operations, % of sales

Specific CO2 emissions of power generation, g/kWh

5-year average in the EU, g/kWh

Specific CO2 emissions of total energy production, g/kWh

5-year average, g/kWh

Overall efficiency of fuel use, %

5-year average, %

Share of CO2-free energy in power generation, %

Share of renewable energy in power generation, %

Share of renewable energy in heat production, %

Utilisation rate of gypsum, %

Utilisation rate of ash, %

Environmental non-compliances

Water withdrawal, million m3

of which cooling water, million m3

Thermal load on waterways, TWh

*Figures unassured
**Includes joint venture AB Fortum Värme samägt med Stockholms Stad

2014*

20.3

20,400

28,700

21,300

100

177

189

198

100

2,178

2,094

2013

20.5

22,000

30,800

20,800

100

200

204

197

2,312

2,231

2012**

20.7

19,800

29,400

16,000

171

177

179

2,210

2,017

Annual Report 2014

Year 2014 in figures

Specific CO2 emissions of electricity
production in the EU in 2012-2014, gCO2/kWh

Specific CO2 emissions of total energy
production in 2012-2014, gCO2/kWh

Overall efficiency of fuel use in
2012-2014, %

100

2012

2013

2014

300

200

100

2012

2013

2014

2012

2013

2014

Specific emissions
Target (5-year average)

5-year average

Specific emissions
Target( 5-year average)

5-year average

Efficiency
5-year average

Target (5-year average)

Social summary
Social summary

The following table presents the key figures of our social responsibility. All indicators measuring Fortum's
social responsibility are available in the GRI section.

Average number of employees

Number of employees, 31 December

of whom permanently employed

Departure turnover, %

Female employees, %

Females in management, %

Health care expenditure, EUR/person 1)

Number of sickdays

Sickness absence rate, %

Lost workday injury frequency (LWIF)2), Fortum personnel

Lost workday injury frequency (LWIF)2), contractors

Fatalities

OHSAS 18001 certified operations, % of sales

1) Only in Finland
2) Injuries resulting in an absence of at least one day per million working hours
* Includes joint venture AB Fortum Värme samägt med Stockholms Stad

Personnel statistics from 2014, by country of operation

2014

8,821

8,592

8,260

8.1

542

2013

9,532

9,186

9,515*

9.7*

28*

31*

569

47,677

56,316*

2.4

1.0

3.2

2.5*

1.0

3.9

73*

Personnel at year-end

male

female

Personnel, average

Finland

Sweden

Russia

Poland

2,040

1,470

570

2,182

1,201

777

424

1,221

4,213

3,069

1,117

4,196

603

472

131

631

Other
countries

535

346

190

591

2012*

10,600

10,371

9,899

580

74,188

3.1

1.5

3.8

Total

8,592

6,134

2,432

8,821

Personnel expenses, 1,000 euros

184,045

104,295

82,804

13,884

20,219

413,021

Personnel expenses per person, 1,000 euros

84.3

85.4

19.7

22.0

34.2

46.8

Annual Report 2014

Year 2014 in figures

Number of employees, 31 Dec.

Personnel by country, 31 Dec. 2014
Other countries, 329

Personnel by division, 31 Dec. 2014

Other, 543

Hydro Power and Technology, 542

Finland, 2,040

Distribution, 390

Nuclear & Thermal Power, 1,097

15,000

10,000

5,000

10,585

10,780

10,371

9,186

8,592

Russia, 4,213

8,592

Sweden, 1,201

Poland, 603

Finland, 2,040
Poland, 603
Russia, 4,213

Sweden, 1,201

Estonia, 206

Other countries, 329

Heat, Electricity Sales and Solutions, 1,807

Russia, 4,213

Hydro Power and Technology, 542
Nuclear & Thermal Power, 1,097
Heat, Electricity Sales and Solutions, 1,807
Russia, 4,213
Other, 543

Distribution, 390

Market position
Market position

Fortum is the 3rd largest power generator in the Nordic countries, and one of the lowest-emitting power
producers in Europe. We are among the leading heat producers globally.

Annual Report 2014

Year 2014 in figures

Annual Report 2014

Strategy

Annual Report 2014

Strategy

Strategy
Strategy

Preparations for future growth are starting to take shape; by divesting the electricity distribution business gives
Fortum better opportunities to focus on the production and sales of efficient and low-carbon electricity and
heat. In addition, it increases Fortum's strategic freedom to develop the company, both in terms of the near
future and long-term, in order to improving earnings per share growth and shareholdervalue.

Fortum’s purpose is to create energy that
improves life for present and future
generations. We provide sustainable solutions
for society and deliver excellent value to our
shareholders.

At the core of Fortum’s strategy is our strong
expertise in CO2-free hydro and nuclear
power and in efficient combined heat and
power (CHP) production. Our strengths also
include our solid experience in operating in
the energy markets. We will continue
developing our business through these
competencies.

Sustainability is an integral part of Fortum’s
strategy. The tight link between business
operations and corporate responsibility
underscores the importance of sustainability
as a competitive advantage. In its operations,
Fortum gives balanced consideration to
economic, social and environmental
responsibility.

Fortum’s values – accountability, creativity,
respect and honesty – form the foundation
for our activities. We want to be a forerunner

in developing the future energy system – the
Solar Economy.

Core areas of the strategy
Core areas of the strategy

At the core of Fortum’s strategy is our strong
expertise in CO2-free hydro and nuclear
power and in efficient combined heat and
power production (CHP). Our strengths also
include solid experience operating in the
energy markets. We will continue developing
our business through these competencies.

Changing markets
Changing markets
In the coming years, far-reaching decisions
must be made in our main markets to
mitigate climate change, to develop the
energy markets, and to find a sustainable
operating model for the pan-European
market. Fortum’s strong position enables us
to actively participate in restructuring the
markets and developing new operating
models.

We are very competitive, whether measured
by CO2-free production volume,
competences in our strategic focus areas,
production mix, capacity flexibility, financial
position, cost structure, sustainability or
occupational safety.

We have a clear vision of how Fortum must
be developed in order to create added value
for our stakeholders, particularly for our
shareholders, both in the short term and the
long term.

We want to actively participate in energy
sector development and restructuring.

Business focus areas
Business focus areas
In 2013, we assessed the future alternatives
of our electricity distribution business. After
thorough consideration, we concluded that
divesting the electricity distribution business
is the best solution for the distribution
business' development and its customers,
Fortum’s shareholders and our other
businesses. In 2014, we divested our
electricity distribution businesses in Finland
and Norway. We are currently assessing and
preparing the possibilities to divest the
Swedish electricity distribution business. The
process is advancing as planned.

We believe that focusing on electricity and
heat production and sales will improve our
long-term value creation. With the proceeds

Annual Report 2014

Strategy

from the divestment of the electricity
distribution businesses in Finland and
Norway, we are pursuing growth
opportunities and developing our company in
line with our strategy: build on the strong
Nordic core and create solid earning growth
in Russia. We are developing new businesses
around these core areas and, in this way, we
are building a strong platform for future
growth.

Developing the electricity sales business is
also an integral part of our strategy. We sell
electricity and develop and offer innovative
products and services to more than 1.3
million electricity retail customers in the
Nordic countries.

Build on the strong
Build on the strong
Nordic core
Nordic core
We are building our future growth on the
strong position we have in the Nordic
countries, the Baltic countries and Poland.
The foundation for our operations in these
markets is our hydro and nuclear power
production, which is CO2-free and very
competitive in terms of cost structure and
flexibility. In 2014, more than 90% of our
European electricity production was
generated with Nordic hydro or nuclear
power.

As a natural continuation of our Nordic
business we seek new opportunities in hydro
and nuclear power as well as in combined
heat and power (CHP) production in the
integrating European energy market. We
estimate that the market integration will
continue and the significance of hydropower
will grow: hydropower can be used flexibly to
level consumption peaks and to balance
fluctuations in other renewable production.
We will also continue developing combined
heat and power (CHP) production which is a
more efficient way of production than
condensing power. In CHP production we can
also utilise bio- and waste-based fuels. We
estimate that the need for efficient CHP
plants and heat networks will grow, especially
in urban areas.

Solid earnings growth in
Solid earnings growth in
Russia
Russia
Russia is the world’s fifth biggest electricity
market where, in recent years, electricity
consumption has grown faster than the EU’s.
We have operated in Russia for more than 50
years, and we consider it to be one of our
home markets. We currently operate in the
Urals and Western Siberia in the Tyumen and
Khanty-Mansiysk area, where industrial

production is dominated by the oil and gas
industries, and in the Chelyabinsk area, which
is dominated by the metal industry.
Additionally, we have a 29.5% stake in the
hydropower and thermal power company
TGC-1, operating in north-western Russia.

We launched an extensive investment
programme in Russia in 2008; the
programme consists of 8 new power plant
units and the modernisation of existing units.
Six of the new units are already in
commercial operation, and the remaining two
units are estimated to be commissioned in
the first half of 2015. Our new units are very
energy efficient. The investment programme
will have nearly doubled our power generation
capacity in Russia once finalised in 2015. Our
sales revenue will grow along with the
increased production.

These eight new units will receive capacity
payments under the Russian Government’s
Capacity Supply Agreement (CSA); the
capacity payments are considerably higher
than the payments for energy produced with
the old capacity. The income from the new
capacity is guaranteed by capacity market
regulations for a period of 10 years, although
the payments can fluctuate slightly every
year.

In 2014, the Russian Government approved
the heat market reform roadmap, which aims
to reform the heat market and liberalise
prices by 2020 in big cities and by 2023
elsewhere. Heat reform creates incentives for
efficiency improvements. It also increases
profitability of Fortum's production capacity
and other efficient capacity.

Restructuring according
Restructuring according
to strategy in Russia
to strategy in Russia
In December 2014 we signed a protocol with
Gazprom Energoholding to start a
restructuring process of our ownerships in
TGC-1, a Territorial Generating Company.
TGC-1 owns and operates hydro and thermal
power plants in north-western Russia as well
as heat distribution networks in St.
Petersburg. Currently, Gazprom
Energoholding owns 51.8% of the TGC-1
shares and Fortum 29.5%. The company is
listed on the Moscow Exchange (MOEX).

In the restructuring, a company owned by
Fortum and Rosatom would be responsible
for hydropower production. Gazprom
Energoholding would continue with the heat
and thermal power businesses of TGC-1.
Through its present stake in TGC-1, Fortum’s
share of the hydropower-focused company
would rise to more than 75%, and the

company would become a Fortum subsidiary.
Rosatom would be a minority holder in the
company, with a less than 25% ownership.

We see the restructuring as an excellent
opportunity to increase our CO2-free
hydropower capacity, optimise our
production portfolio in Russia and increase
the flexibility that hydropower offers. If
realised, the arrangement will increase
Fortum’s hydro portfolio by 60%, some 12-13
TWh.

Provided that Fortum obtains a more than
75% ownership in TGC-1 hydropower
production, we are ready to participate with a
minority stake (max.15%) in the Finnish
Fennovoima nuclear power project on the
same terms and conditions as the other
Finnish companies participating in the
project.

A platform for future
A platform for future
growth
growth
Alongside our current businesses, we are
exploring and developing new sources of
growth that support our strategic core areas.
We are exploring growth opportunities in
these new businesses with prudence.

We are particularly interested in solutions we
can use to advance CO2-free energy
production. We believe that new CHP
concepts, such as pyrolysis, and wave
energy, can offer business opportunities in
the future. We are developing solar power
applications.

For consumers, we offer solutions that
improve energy efficiency. These include,
among others, turnkey solar kits for
households in Finland and Sweden as well as
our rapidly expanding Charge & Drive
concept for charging electric vehicle
batteries.

Financial targets
Financial targets
Our goal is to achieve excellent financial
performance in strategically selected core
areas through strong competence and
responsible ways of operating. The key
figures by which we measure our financial
success include return on capital employed
(target: 12%), return on shareholders' equity
(target: 14%) and capital structure (target:
comparable net debt/EBITDA around 3.0).

Dividend policy
Dividend policy
Fortum’s dividend policy is based on the
following preconditions:

Annual Report 2014

Strategy

• The dividend policy ensures that

shareholders receive a fair remuneration
for their entrusted capital, supported by
the company’s long-term strategy that
aims at increasing earnings per share and
thereby the dividend.

Group financial targets

• When proposing the dividend, the Board
of Directors looks at a range of factors,
including the macro environment, balance
sheet strength as well as future
investment plans.

Fortum Corporation's target is to pay a
stable, sustainable and over time increasing
dividend of 50-80% of earnings per share
excluding one-off items.

ROCE, %

ROE, %

Target

Capital structure, Comparable net debt/EBITDA

~3,0

2014

19.5

30.0

2.3

2013

9,0

12,0

3,4

2012

10,0

14,3

3,3

2011

14,8

19,7

2011

11.6

15,7

2.8

Annual Report 2014

Strategy

Strategy realisation in 2014
Strategy realisation in 2014

Step by step towards the future
Step by step towards the future

Build on the strong
Nordic core:

Finland:
• Loviisa Nuclear Power Plant automation renewal renegotiated and continued with a new partner, Rolls-
Royce. Automation modernisation project agreement with Areva-Siemens Consortium discontinued.
• Investing in Fortum's associated company Turun Seudun Energiantuotanto Oy´s (TSE) new multifuel CHP

plant in Naantali. Commissioning of the new power plant planned for autumn 2017.

• Refurbishment at Imatra hydropower plant started, covering two of the plant's seven units. The

refurbishment will increase the capacity of the power plant from 178 to 192 MW and will improve safety
and reliability.

• Construction of a heat pump at Suomenoja Power Plant, Espoo, utilising wastewater for heat production

Sweden:
• Continued investments in dam safety improvement project at Höljes hydro power plant in Värmland

Divestments:
• Finnish electricity distribution business
• Norwegian electricity distribution and heat businesses
• Grangemouth power plant, UK
• Several divestments of non-core assets as part of the efficiency programme: Tohkoja wind power project
in Kalajoki, Finland; ownership in Karlshamns Kraft AB, Sweden; shareholdings in Gasum Oy, Finland and
AS Võrguteenus Valdus, Estonia

• Continuing to prepare and evaluate possibilities to divest Swedish electricity distribution business

Expertise in nuclear power operations and nuclear waste issues:
• Extended deliveries of selective ion exchange materials for the purification of radioactive liquids at the

damaged Dai-ichi nuclear power plant in Fukushima, Japan

Create solid
earnings growth in
Russia:

• Commissioning of the third unit at Nyagan power plant (418 MW)
• Full scale commissioning of new gas turbines at Chelyabinsk CHP-1 (2 x 44 MW)
• Successful participation in Capacity Auction for 2015
• Protocol signed with Gazprom Energoholding to start a restructuring process of the ownership of TGC-1.

The restructuring would increase Fortum’s hydro portfolio by 60%.

• Focus on completing the remaining part of the investment programme during 2015

Build a platform
for future growth:

• Further development of pyrolysis technology in order to produce advanced biomass based fuels in co-

operation with Finnish consortium of Fortum, UPM and Valmet
• Comissioning of Kapeli 10 MW solar project in India in December
• Continued development of Fortum Charge & Drive business: established market leadership in both
Norway/Nordic countries with key partnerships and deals won, e.g. Renault and VW. Expanding the
Charge & Drive network. Fortum already has some 50 charging stations in Finland, 90 in Sweden and
nearly 200 in Norway. More than 100 stations are fast chargers.

• A partnership agreement with Cleantech Invest Plc on business development activities, potential future

cleantech investments as well as information sharing

• Continued involvement in wave power technology development: co-operation with Seabased AB in
Sweden and Wave Hub in the UK; acquiring a minority share of 13.6% in the Finnish wave energy
developer Wello Oy

• Collaboration with St1, aiming at building Finland’s first industrial-scale geothermal pilot heat plant

Annual Report 2014

Strategy

Future energy system –
the solar
Future energy system – the solar
economy
economy

We believe that the future energy system will
be based on emissions-free and inexhaustible
energy sources and on overall efficiency of
the energy system. Transitioning to a solar
economy changes the way electricity and
heat is produced and consumed.

In conventional energy production, the
combustion of non-renewable, fossil fuels,
like coal, oil and gas, provides the main
source of energy. This conventional energy
system, and particularly the use of coal,
burdens the environment and its total
efficiency is poor. With the growth in the
global demand for energy and in the
consumption of electricity in particular,
mitigating climate change is becoming an
increasingly important issue. Energy systems
and the use of limited natural resources must
be made more efficient.

A solar economy provides solutions to the
challenges of climate change and resource
scarcity. In a solar economy, energy from the
sun is used either directly as solar electricity
or heat or indirectly as hydro, wind and
bioenergy, and in the future also as ocean
energy. Demand flexibility and energy storage
are also underscored in the energy-efficient
system of the future. Transitioning to a solar
economy will take decades. During this time
traditional production forms will be further
developed and used alongside the production
forms of a solar economy.

Of the renewable energy forms, hydropower
and bioenergy have in many respects been
mature technologies for decades. Solar and
wind power will evolve into mature
technologies in the coming years, even
though there is still significant development

Towards a Solar Economy
Towards a Solar Economy

potential with both. The use of ocean energy
is in the test phase; its advancement into a
commercial technology may be more than a
decade out.

In a solar economy, the energy system is
more dynamic and smarter than today.
Electricity and heat can be produced both in
a centralised and distributed manner. The
active participation by consumers brings
flexibility to demand, which improves the
efficiency of the system. In the coming years,
demand flexibility will improve considerably
as both the technology and the business
models mature.

Annual Report 2014

Strategy

Gradual transition to a
Gradual transition to a
solar economy
solar economy
The energy system changes slowly, and the
transition from the current energy system
towards a solar economy requires technology
advancements as well as changes in the
operating environment over the course of
several decades. The energy markets and

infrastructure must be developed to enable
the investments required by the change. The
length of the transition period and the costs
depend on political decisions, society’s
priorities and investments in technology
advancements of production forms.

We want to promote both short- and long-
term development of the energy system

simultaneously. However, emission-free
energy sources that are currently in use or
under development are not yet able to fulfil
the energy demand of a modern and
developing society. That is why we are
continuing to widely utilise also traditional
energy forms, but our aim is to operate also
these as efficiently and sustainably as
possible.

Sustainability a part of the strategy
Sustainability a part of the strategy

regularly reported also to Fortum’s Board of
Directors. Sustainability targets affect every
Fortum employee and are part of Fortum’s
short-term incentive (STI) scheme. Fortum’s
Board of Directors annually decides on the
sustainability targets to be included in the
incentive scheme. In 2014 the incentive
scheme included an index measuring lost
workday injury frequency for Fortum
employees and for contractors, the number
of major environmental, health and safety
non-compliances (EHS non-compliances),
and Fortum’s ability to improve its
performance in the Dow Jones Sustainability
Assessment.

One of Fortum’s targets for 2015 is to reduce
the number of serious injuries by half.
Therefore, Fortum’s Board of Directors has
for 2015 approved for inclusion in the short-
term incentive scheme an index measuring
the number of serious injuries in addition to
the issues measured the previous year. In
2015, the weight of the sustainability index in
the STI is 20% (2014: 20%).

In these we succeeded:
Success in customer
satisfaction and
employee safety

Competitiveness, security of supply and
market-driven production enable long-term
profitable growth. A company that is
financially strong is able to shoulder its
responsibility for the environment, take care
of its personnel, oversee its supply chain,
meet the expectations of customers and
provide excellent value to its shareholders. At
the same time it can develop sustainable
energy solutions that benefit all of society.

Sustainability targets
Sustainability targets
The Fortum Executive Management Team
decides on Fortum’s sustainability approach
and Group-level sustainability targets that
guide annual planning. The targets and the
desired performance level are reviewed
annually and are ultimately approved by
Fortum’s Board of Directors. The Fortum
Executive Management Team monitors the
achievement of the targets in its monthly
meetings and in quarterly performance
reviews. The achievement of the targets is

Annual Report 2014

Strategy

Group sustainability targets and performance in 2013-2014

Target for the year 2014

Target result 70.8 in One Fortum
Survey

CSI divisional scores at level
“good” (70-74) in One Fortum
Survey

Status at the
end of 2014

Status at the
end of 2013

Remarks

70.4

69.8

67-77

61-77

Customer satisfaction improved in 4
out of 5 customer segments. Power
Solutions and Heat business areas
achieved the target.

Reputation index

Customer satisfaction index (CSI)

Environmental responsibility

Specific CO2 emissions

Electricity production in the EU

< 80 g/kWh, 5-year average

60 g/kWh

Total production (electricity & heat, all
countries)

Energy efficiency

Total efficiency of combustion
(Definition: produced energy divided by the
primary energy of fuel)

Major EHS incidents

< 200 g/kWh, 5-year average

198 g/kWh

197 g/kWh

> 70%, 5-year average

< 35 Fortum-wide

63%

64%

(Fires, leaks, explosions, INES1) events exceeding level 0, dam safety incidents, environmental non-compliances)

Social responsibility

Security of supply

SAIDI2)

< 100 minutes

97 minutes

103 min

CHP plant energy availability

> 95%

94.7%

94%

Occupational safety

Lost workday injury frequency (LWIF)3), Fortum
personnel

< 1

Lost workday injury frequency (LWIF)3),
contractors

< 3.5

1) International Nuclear Event Scale
2) System Average Interruption Duration Index
3) LWIF = Lost workday injury frequency per one million working hours

1.0

3.2

1.0

3.9

Emissions in 2014 were 39 (2013:
64) g/kWh.

Emissions in 2014 were 189 (2013:
204) g/kWh. 5-year average has
been increasing since 2008.

Efficiency in 2014 was 64% (2013:
59%). 5-year average has been
decreasing since 2008.

In 2013, energy efficiency KPI was
measured only for sites located in
Europe. In 2014, the KPI covers
whole Fortum.

In addition to Group-level targets approved by
Fortum’s Board of Directors, Fortum also has
division-level targets. These targets are
monitored and are reported in the same way
as the Group-level targets.

In terms of contractor safety, 2014 was a
rough year. There were three fatal accidents
involving our contractors’ employees: in

Sweden, a subcontractor’s employee
perished in the electricity distribution
business, and another subcontractor’s
employee at a hydropower plant; in Russia, a
subcontractor’s employee perished at the
Chelyabinsk power plant construction site.
Additionally, two contractor employees
perished in an accident at a construction site
at Fortum Värme in Stockholm. Fortum

Värme is no longer included within the sphere
of Fortum Group’s target setting for 2014, so
this accident is not seen in Fortum’s
statistics. Immediate corrective measures
were started after the accidents, and the
measures will continue during 2015.

Annual Report 2014

Strategy

Other sustainability targets and related performance in 2013-2014

Occupational safety

Total recordable injury frequency (TRIF) 1), Fortum personnel

Number of fatalities, Fortum personnel

Number of fatalities, contractors

Number of lost workday injuries, Fortum personnel

Number of lost workday injuries, contractors

Supply chain management

Supplier audits2)

1) TRIF = Total recordable injury frequency per one million working hours
2) Fortum and joint venture Fortum Värme conduct supplier audits with shared resources.

See also Note 12 Employee benefits and

Note 32 Pension obligations in the Consolidated financial statements.

Average number of employees

2014

301

2013

326

240

Annual Report 2014

Financial Statements

5 Financial income and expenses
5 Financial income and expenses

EUR million

Dividend income from group companies

Dividend income from associated companies and other companies

Interest and other financial income from group companies

Interest and other financial income from associated companies

Write-downs of participations in group companies

Interest and other financial income

Exchange rate differences

Interest and other financial expenses to group companies

Interest and other financial expenses

Total

Total interest income and expenses

Interest income

Interest expenses

Interest net

2014

-5

-169

-129

-170

-127

2013

210

-44

-8

-215

-16

-219

-179

Write-downs of participations in group companies are related to shares in Fortum Heat and Gas Oy and received dividend payments. Interest and other financial
income fromjoint venture is related to AB Fortum Värme samägt med Stockholm Stad.

6 Income tax expense
6 Income tax expense

EUR million

Taxes on regular business operations

Taxes on group contributions

Total

Current taxes for the period

Current taxes for prior periods

Changes in deferred tax

Total

For more information, see note 13 Contingent liabilities.

2014

-23

113

2013

-45

149

104

103

104

241

Annual Report 2014

Financial Statements

7 Non-current assets
7 Non-current assets

Intangible assets

EUR million

Cost 1 January 2014

Additions

Disposals

Cost 31 December 2014

Accumulated depreciation 1 January 2014

Disposals

Depreciation for the period

Accumulated depreciation 31 December 2014

Carrying amount 31 December 2014

Carrying amount 31 December 2013

Property, plant and equipment

EUR million

Cost 1 January 2014

Additions and transfers between categories

Disposals

Cost 31 December 2014

Accumulated depreciation 1 January 2014

Disposals

Depreciation for the period

Accumulated depreciation 31 December 2014

Carrying amount 31 December 2014

Carrying amount 31 December 2013

Intangible
assets total

Total

-7

-1

Buildings
and
structures

Machinery
and
equipment

Advances
paid and
construction
in progress

-1

-9

242

Annual Report 2014

Financial Statements

Investments

EUR million

1 January 2014

Reclassifications

Additions 1)

Disposals 2)

31 December 2014

Accumulated write-downs 1 January 2014 3)

Impairment charges

Accumulated write-downs 31 December 2014

Carrying amount 31 December 2014 4)

Shares
in Group
companies

17,139

-6

-152

16,981

-924

16,057

Participation in
associated
companies

Receivables
from Group
companies

Receivables
from
associated
companies

Other
non-current
assets

2,382

-378

220

-856

1,368

381

-199

211

1,368

211

-3

-2

-1

-3

Total

19,529

249

-1,207

18,571

-926

-1

-927

17,644

1) Additions regarding shares comprise acquisitions of shares and capital contributions and reclassification between other non-current assets and shares in Group
companies.

2) Disposals regarding shares comprise divestments and repayments of capital.

3) Write-downs of participations in group companies are related to shares in Fortum Heat and Gas Oy due to received dividend payments.

4) Receivables from associated companies are mainly from AB Fortum Värme samägt med Stockholm Stad, EUR 199 million .

8 Other current receivables
8 Other current receivables

EUR million

Other current receivables from group companies

Trade receivables

Other receivables

Accrued income and prepaid expenses

Total

Other current receivables from associated companies

Trade receivables

Accrued income and prepaid expenses

Total

Other current receivables

Trade receivables

Other receivables

Accrued income and prepaid expenses

Total

2014

2013

564

586

167

170

609

630

243

Annual Report 2014

Financial Statements

9 Liquid Funds
9 Liquid Funds

EUR million

Cash at bank and in hand

Bank deposits with maturity more than 3 months

Liquid funds

10 Changes in shareholders' equity
10 Changes in shareholders' equity

EUR million

Total equity 31 December 2013

Cash dividend

Profit for the period

Total equity 31 December 2014

Total equity 31 December 2012

Cash dividend

Profit for the period

Share
capital

3,046

Share
premium

2,822

Total equity 31 December 2013

3,046

2,822

EUR million

Distributable funds 31 December

2014

1,813

505

2,318

Retained
earnings

4,151

-977

2,265

5,439

4,562

-888

477

4,151

2014

5,439

2013

1,059

Total

10,019

-977

2,265

11,307

10,430

-888

477

10,019

2013

4,151

244

Annual Report 2014

Financial Statements

11 Interest-bearing liabilities
11 Interest-bearing liabilities

External interest-bearing liabilities

EUR million

Bonds

Loans from financial institutions

Other long-term interest-bearing debt

Total long-term interest-bearing debt

Current portion of long-term bonds

Current portion of loans from financial institutions

Commercial papers

Other short-term interest-bearing debt

Total short-term interest-bearing debt

Total external interest-bearing debt

Maturity of external interest-bearing liabilities

EUR million

2015

2016

2017

2018

2019

2020 and later

Total

External interest-bearing liabilities due after five years

EUR million

Bonds

Loans from financial institutions

Other long-term liabilities

Total

Other interest-bearing liabilities due after five years

EUR million

Interest-bearing liabilities to group companies

Interest-bearing liabilities to associated companies

Total

2014

3,974

514

781

5,269

660

137

286

1,083

6,352

2014

1,690

781

2,520

2014

261

270

2013

4,725

681

945

6,351

1,103

718

155

2,025

8,376

2014

1,083

835

511

594

809

2,520

6,352

2013

2,440

118

750

3,308

2013

248

257

245

Annual Report 2014

Financial Statements

12 Trade and other payables
12 Trade and other payables

EUR million

Trade and other payables to group companies

Trade payables

Other liabilities

Accruals and deferred income

Total

Trade and other payables to associated companies

Accruals and deferred income

Total

Trade and other payables

Trade payables

Other liabilities

Accruals and deferred income

Total

13 Contingent liabilities
13 Contingent liabilities

EUR million

On own behalf

Other contingent liabilities

On behalf of group companies

Guarantees

On behalf of associated companies

Guarantees

Contingent liabilities total

2014

2013

124

138

177

194

2014

2013

131

418

551

348

417

768

246

Annual Report 2014

Financial Statements

Operating leases

EUR million

Lease payments

Not later than 1 year

Later than 1 year and not later than 5 years

Total

Derivatives

EUR million

Forward rate agreements

Interest rate swaps

Forward foreign exchange contracts 1)

Interest rate and currency swaps

1) Includes also future positions.

2014

2013

2014

2013

Contract
or notional
value

5,721

14,866

1,473

Fair value

155

-77

233

Not
recog-
nised as
income

160

-1

Contract
or notional

value Fair value

6,658

18,614

928

105

-39

Not
recog-
nised as
income

100

-2

Fortum Oyj received in December 2013 an income tax assessment regarding transfer pricing for the year 2007. Fortum appealed the decision. In August 2014
The Board of Adjustment of the large Taxpayers' office approved Fortum's appeal. The Tax Recipients' Legal Services Unit within the tax authorities has
appealed this decision to the Administrative Court. If the appeal of the Tax Recipients' Legal Services Unit is successful, the impact on net profit would be
approximately EUR 136 million for the year 2007. Based on legal analyses, no provision has been recognized in the financial statements.

For more information, see Note 39 Legal actions and official proceedings to the consolidated financial statements.

14 Related party transactions
14 Related party transactions

See Note 40 Related party transactions in the Consolidated financial statements.

247

Annual Report 2014

Financial Statements

Proposal for the distribution of
Proposal for the distribution of
earnings
earnings

The distributable funds of Fortum Oyj as at
31 December 2014 amounted to EUR
5,438,689,036.90 including the profit of the
period of EUR 2,264,863,648.81. After the
end of the financial period there have been
no material changes in the financial position
of the Company.

The Board of Directors proposes to the
Annual General Meeting that a dividend of
EUR 1.10 per share be paid for 2014. In
addition the Board of Directors proposes to
the Annual General Meeting an extra dividend
of EUR 0.20 per share be paid for 2014.

Based on the number of registered shares as
of 3 February 2015 the total amount of
dividend proposed to be paid is EUR
1,154,877,158.50. The Board of Directors
proposes, that the remaining part of the profit
be retained in the shareholders’ equity.

Espoo, 3 February 2015

Auditor's report
Auditor's report

To the Annual General Meeting of
To the Annual General Meeting of
Fortum Oyj
Fortum Oyj
We have audited the accounting records, the
financial statements, the Operating and
Financial Review, and the administration of
Fortum Oyj for the financial period
1.1.-31.12.2014. The financial statements
comprise of the consolidated income
statement, statement of comprehensive
income, balance sheet, statement of changes
in equity, cash flow statement and notes to

the consolidated financial statements, as well
as the parent company's income statement,
balance sheet, cash flow statement and
notes to the financial statements.

Responsibility of the Board of
Responsibility of the Board of
Directors and the President and
Directors and the President and
CEOCEO
The Board of Directors and the President and
CEO are responsible for the preparation of
consolidated financial statements that give a

true and fair view in accordance with
International Financial Reporting Standards
(IFRS) as adopted by the EU, as well as for
the preparation of financial statements and
the Operating and Financial Review that give
a true and fair view in accordance with the
laws and regulations governing the
preparation of the financial statements and
the Operating and Financial Review in
Finland. The Board of Directors is responsible
for the appropriate arrangement of the

248

Annual Report 2014

Financial Statements

control of the company’s accounts and
finances, and the President and CEO shall
see to it that the accounts of the company
are in compliance with the law and that its
financial affairs have been arranged in a
reliable manner.

Auditor’s Responsibility
Auditor’s Responsibility
Our responsibility is to express an opinion on
the financial statements, on the consolidated
financial statements and on the Operating
and Financial Review based on our audit. The
Auditing Act requires that we comply with the
requirements of professional ethics. We
conducted our audit in accordance with good
auditing practice in Finland. Good auditing
practice requires that we plan and perform
the audit to obtain reasonable assurance
about whether the financial statements and
the Operating and Financial Review are free
from material misstatement, and whether the
members of the Board of Directors of the
parent company and the President and CEO
are guilty of an act or negligence which may
result in liability in damages towards the
company or have violated the Limited Liability
Companies Act or the articles of association
of the company.

An audit involves performing procedures to
obtain audit evidence about the amounts and
disclosures in the financial statements and
the Operating and Financial Review. The
procedures selected depend on the auditor’s
judgment, including the assessment of the
risks of material misstatement, whether due
to fraud or error. In making those risk
assessments, the auditor considers internal

control relevant to the entity’s preparation of
financial statements and Operating and
Financial Review that give a true and fair view
in order to design audit procedures that are
appropriate in the circumstances, but not for
the purpose of expressing an opinion on the
effectiveness of the company’s internal
control. An audit also includes evaluating the
appropriateness of accounting policies used
and the reasonableness of accounting
estimates made by management, as well as
evaluating the overall presentation of the
financial statements and Operating and
Financial Review.

We believe that the audit evidence we have
obtained is sufficient and appropriate to
provide a basis for our audit opinion.

Opinion on the consolidated
Opinion on the consolidated
financial statements
financial statements
In our opinion, the consolidated financial
statements give a true and fair view of the
financial position, financial performance, and
cash flows of the group in accordance with
International Financial Reporting Standards
(IFRS) as adopted by the EU.

Opinion on the company’s
Opinion on the company’s
financial statements and the
financial statements and the
Operating and Financial Review
Operating and Financial Review
In our opinion, the financial statements and
the Operating and Financial Review give a
true and fair view of both the consolidated
and the parent company’s financial
performance and financial position in
accordance with the laws and regulations

governing the preparation of the financial
statements and the Operating and Financial
Review in Finland. The information in the
Operating and Financial Review is consistent
with the information in the financial
statements.

Other opinions
Other opinions
We support that the financial statements
should be adopted. The proposal by the
Board of Directors regarding the treatment of
distributable funds is in compliance with the
Limited Liability Companies Act. We support
that the Board of Directors of the parent
company and the President and CEO should
be discharged from liability for the financial
period audited by us.

Espoo, 3 February 2015

Deloitte & Touche Oy
Authorized Public Audit Firm

Jukka Vattulainen
Authorized Public Accountant

249

Annual Report 2014

Quarterly financial information

Note: Quarterly financial information is unaudited.

Selected data based on quarterly consolidated income statement

EUR million

Sales

Comparable EBITDA

Comparable operating profit

Operating profit

Share of profit/loss of associates
and joint ventures

Finance costs - net

Profit before income tax

Income tax expense

Profit for the period

Profit for the period, non-controlling interests

Profit for the period, owners of the parent

Q1/
2013

Q2/
2013

Q3/
2013

Q4/
2013

2013

Q1/
2014

Q2/
2014

Q3/
2014

Q4/
2014

2014

1,654

1,205

1,060

1,390

5,309

1,473

1,016

664

524

477

-65

490

-86

404

-3

401

429

289

429

-75

388

-74

314

336

167

-72

547

423

507

-77

1,975

1,403

627

477

1,508

2,333

178

-289

-64

493

1,398

2,341

-29

-186

-86

465

1,212

2,255

-6

-8

-4

382

255

295

-48

284

-37

247

458

1,204

2,251

247

976

309

183

149

-56

-11

1,285

4,751

556

436

650

-48

1,873

1,351

3,428

149

-217

639

3,360

-64

-199

575

3,161

-4

-7

571

3,154

Earnings per share, basic, EUR

Earnings per share, diluted, EUR

0.45

0.35

0.04

0.52

1.36

2.53

0.28

0.10

0.64

3.55

Sales by quarter, EUR million

Comparable operating profit
by quarter, EUR million

2,000

1,000

1,654

1,473

1,205

1,016

1,060

976

1,390

1,285

750

500

250

2013

2014

2013

2014

250

Annual Report 2014

Quarterly financial information

Quarterly sales by segment

EUR million

Power and Technology

Heat, Electricity Sales and Solutions

Russia

Distribution

Other

Netting of Nord Pool transactions 1)

Eliminations

Total

Q1/
2013

Q2/
2013

Q3/
2013

Q4/
2013

665

531

344

339

-171

-70

548

308

251

227

-95

-49

496

255

210

217

-90

-42

543

422

314

280

-122

-67

2013

2,252

1,516

1,119

1,064

-478

-228

Q1/
2014

Q2/
2014

Q3/
2014

Q4/
2014

586

446

333

300

487

269

234

148

-133

-101

-72

-35

495

224

207

130

-67

-26

588

393

281

173

-121

-45

2014

2,156

1,332

1,055

751

-422

-179

1,654

1,205

1,060

1,390

5,309

1,473

1,016

976

1,285

4,751

1) Sales and purchases with Nord Pool Spot are netted at the Group level on an hourly basis and posted either as revenue or cost depending on if Fortum is a net seller or
net buyer during any particular hour.

Quarterly comparable operating profit by segments

EUR million

Power and Technology

Heat, Electricity Sales and Solutions

Russia

Distribution

Other

Comparable operating profit

Non-recurring items

Other items affecting comparability

Operating profit

Q1/
2013

303

Q2/
2013

210

137

-14

524

-51

477

-14

289

140

429

Q3/
2013

139

-3

-15

-14

167

-110

Q4/
2013

207

110

-12

2013

859

109

156

332

-54

423

1,403

Q1/
2014

251

119

-14

477

1,851

507

1,508

2,333

Q2/
2014

183

Q3/
2014

167

Q4/
2014

276

2014

877

104

161

266

-57

1,351

2,171

-94

-14

436

238

-24

650

3,428

-13

255

-32

295

-4

-16

183

-42

149

The first and last quarters of the year are usually the strongest quarters for power and heat businesses.

Quarterly information from 2005 to 2014 is available in Excel format on Fortum's website www.fortum.com/investors/financial information.

251

Annual Report 2014

Investor information

Fortum Corporation’s financial statements
include the financial statements of the parent
company and the consolidated financial
statements of the group. The operating and
financial review is attached to the financial
statements. The Corporate Governance
Statement, issued separately from the
operating and financial review, and the
Remuneration Statement, are published at
the same time as the financial statements.
The Company’s Annual Report, including
sustainability reporting, will be published in
the annual report 2014 internet site during
week ten. The additional GRI section will be
published on the same internet site at the
end of March 2015.

Annual General Meeting
Annual General Meeting
The Annual General Meeting of Fortum
Corporation will be held on Tuesday, 31
March 2015, starting at 14:00 EET
at Finlandia Hall, address: Mannerheimintie
13 e, Helsinki, Finland. The reception of
shareholders who have registered for the
meeting will commence at 13.00 EET.

Payment of dividends
Payment of dividends
The Board of Directors proposes to the
Annual General Meeting that Fortum
Corporation pays a dividend of EUR 1.10 per
share and an extra dividend of EUR 0.20 per
share for 2014, totaling approximately EUR
1,155 million based on the registered shares
as of 3 February 2015.The possible dividend-
related dates planned for 2015 are:

• the ex-dividend date 1 April 2015,
• the record date for dividend payment 2

April 2015 and

• the dividend payment date 14 April 2015.

Financial information in
Financial information in
20152015
Fortum will publish three interim reports in
2015: Q1 on 29 April, Q2 on 17 July, and Q3
on 22 October.

The reports are published at approximately
9:00 EET in Finnish and English, and are
available on Fortum's website at
www.fortum.com/investors

Fortum's management hosts regular press
conferences, targeted at analysts and the

Fortum`s activities in capital markets during 2014
Fortum`s activities in capital markets during 2014

Fortum`s Investor Relations (IR) activities cover equity and fixed-income markets to
ensure full and fair valuation of the Company`s shares, access to funding sources
and stable bond pricing. Investors and analysts primarily in Europe and North
America are met on a regular basis.

In 2014 Fortum met approximately 250 professional equity investros individually or
in group meetings, whilst maintaining regular contact with equity research analysts
at investment banks and brokerage firms. During the year, IR and senior
management gave approximately 20 presentations at investor confereces in
Scandinavia and the United Kingdom.

media. A webcast of these conferences is
available online at www.fortum.com.
Management also gives interviews on a one-
on-one and group basis. Fortum observes a
silent period of 30 days prior to publishing its
results.

Fortum share basics
Fortum share basics
Listed on Nasdaq Helsinki
Trading ticker: FUM1V
Number of shares, 4 February 2015:
888,367,045.
Sector: Utilities

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Corporate Governance Statement

GOVERNANCE
GOVERNANCE

Corporate Governance Statement
Corporate Governance Statement

Fortum Corporation's shares (FUM1V) have
been listed on Nasdaq Helsinki since 18
December 1998. Fortum's industrial sector,
according to the Global Industry
Classification Standard, is Electric Utilities.
The State of Finland is the majority owner in
Fortum with 50.76 % of the shares as at 31
December 2014.

Corporate governance at Fortum is based on
Finnish laws and the company's Articles of
Association. Fortum complies also fully with
the Finnish Corporate Governance Code

2010. The statement is issued separately
from the Operating and financial review, and
it has been reviewed by the Audit and Risk
Committee of Fortum's Board of Directors.

Fortum prepares consolidated financial
statements and interim reports in accordance
with the International Financial Reporting
Standards (IFRS), as adopted by the EU, the
Finnish Securities Markets Act as well as the
appropriate Financial Supervision Authority's
regulations and guidelines and Nasdaq
Helsinki's rules. The company's operating

and financial review and the parent company
financial statements are prepared in
accordance with the Finnish Companies Act,
Accounting Act, Securities Markets Act, and
the opinions and guidelines of the Finnish
Accounting Board. The auditor's report
covers the operating and financial review,
consolidated financial statements and the
parent company financial statements. The
Finnish Corporate Governance Code 2010 is
available on the website of the Securities
Market Association. (www.cgfinland.fi)

Governing bodies of Fortum
Governing bodies of Fortum

The decision-making bodies managing and
overseeing the Group's administration and
operations are the General Meeting of
Shareholders, the Board of Directors with its
two Committees, the Audit and Risk
Committee and the Nomination and
Remuneration Committee, and the President
and CEO, supported by the Fortum Executive
Management Team.

The General Meeting of Shareholders is the
highest decision-making body of Fortum
making resolutions in matters designated in
the Companies Act. The Board of Directors is
responsible for the company's strategic
development and for supervising and steering
the company's business and management.
The President and CEO, supported by the
Fortum Executive Management Team, has the
operational responsibility at the Group level
and is in charge of the day-to-day
management of the Group, and at the division
level, the operational responsibility is held by
the division head, supported by the division's
management team. In connection with the
reorganisation as of 1 March 2014 Fortum
Management Team was renamed as Fortum
Executive Management Team (FEM) and the
number of members was extended from nine
to twelve.

In addition, Fortum has an informal Advisory
Council consisting of representatives of
Fortum's stakeholder groups as invited by the

Governing bodies of Fortum
Governing bodies of Fortum

Board of Directors. The Advisory Council aims
to advance Fortum's businesses by
facilitating a dialogue and exchange of views
between Fortum and its stakeholders. During
2014, the Advisory Council consisted of 14
representatives of Fortum's stakeholder
groups and three employee representatives.

Fortum has not established a specific
Sustainability Committee for decision-making
on economic, environmental and social
issues. As sustainability is an integral part of
Fortum’s strategy, the highest decision-
making of these issues falls on the duties of
the Board of Directors who share joint

253

Annual Report 2014

Corporate Governance Statement

responsibility on sustainability matters. The
Audit and Risk Committee, members of the

Fortum Executive Management Team and
other senior executives support the Board of

Directors in the decision-making in the
aforementioned matters, when necessary.

General Meeting of Shareholders
General Meeting of Shareholders

The General Meeting of Shareholders is the
highest decision-making body of Fortum.
Every shareholder has the right to attend the
General Meeting and exercise his/her power
of decision in matters belonging to the
General Meeting by law. Each share is
entitled to one vote. A shareholder who is
present at the General Meeting of
Shareholders also has the right to request
information with respect to the matters to be
considered at the meeting.

Decisions at the General Meetings of
Shareholders are primarily made by a simple
majority of votes. Examples of such decisions
are the following: resolutions on the adoption
of the financial statements, payment of
dividends, discharging from liability of the
members of the Board of Directors and the
President and CEO, appointment of the Board
of Directors and the external auditors and
decision on their remuneration. However, for
instance, a change in the Articles of
Association of the company would require at
least 2/3 majority of the votes at the General
Meeting of Shareholders.

In accordance with the Articles of Association
and Companies Act, a notice to convene the
General Meeting of Shareholders is issued by
the Board of Directors. The notice is
delivered no more than three months and no
less than three weeks before the General

Meeting of Shareholders by publishing the
notice on the company's website and/or in
two newspapers chosen by the Board of
Directors. However, the notice shall be
delivered at least nine days before the record
date of the General Meeting of Shareholders.
The Annual General Meeting of Shareholders
is to be held once a year, in June at the
latest. An Extraordinary General Meeting of
Shareholders shall be held whenever the
Board of Directors finds it necessary or when
it is required by law to convene such a
meeting. No Extraordinary General Meeting of
Shareholders was held in 2014.

The duties of the Annual General
The duties of the Annual General
Meeting include:
Meeting include

• Adoption of the parent

company financial statements
and consolidated financial
statements

• Resolution on the use of the
profit shown on the balance
sheet and the payment of
dividends

• Resolutions on the discharge

from liability of the members of
the Board of Directors and the
President and CEO

• Resolution on the remuneration
of the members of the Board of
Directors

• Resolution on the number of
members of the Board of
Directors

• Election of the chairman,

deputy chairman and members
of the Board of Directors

• Resolution on the remuneration

of the external auditor

• Election of the external auditor

Board of Directors
Board of Directors

The Board of Directors is responsible for the
company’s strategic development and for
supervising and steering the company’s
business and management. Further, under
the Articles of Association and in line with the
Companies Act, the Board of Directors
represents the company and is responsible
for the proper arrangement of the control of
the company's accounts and finances. The
Board of Directors is also responsible for
defining the company’s mission and values.

The Board of Directors comprises five to eight
members who are elected at the Annual
General Meeting for a one-year term of office,
which expires at the end of the first Annual
General Meeting following the election. The
Annual General Meeting also elects the

Chairman and the Deputy Chairman of the
Board of Directors.

The Annual General Meeting resolved in April
2014 to remove the age limit of 68 years for
board members from the Articles of
Association, in accordance with the stand of
the Ownership Steering of the Finnish State.

The Board of Directors convenes according to
a previously agreed schedule to discuss
specified themes and other issues whenever
considered necessary. The Chairman of the
Board of Directors prepares the agenda for
the Board of Directors meeting based on the
proposal by the President and CEO. The
members of the Board of Directors have the
right to suggest specific matters and have
them included on the agenda. More than half

of the members must be present at the
meeting to constitute a quorum. Decisions of
the Board of Directors shall be made by a
simple majority. The Board of Directors has
approved a written charter for its work, the
main content of which is disclosed herein,
including the duties of the Board of Directors.

The President and CEO, the Chief Financial
Officer, and the General Counsel, as
secretary to the Board of Directors, attend
the Board meetings on a regular basis. Other
Fortum Executive Management Team
members and senior executives attend as
required.

As part of its duties, the Board of Directors
conducts an annual self-assessment in order
to further develop its work. In addition, in

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Annual Report 2014

Corporate Governance Statement

accordance with the Finnish Corporate
Governance Code 2010, the Board of
Directors annually evaluates which of the
directors are independent of the company
and which are independent of its significant
shareholders.

The Board of Directors does not have powers
to issue or buy back shares without
authorization from the General Meeting of the
Shareholders. Currently, there is no such
authorization for the Board of Directors.

Board of Directors in
Board of Directors in
20142014
Until the Annual General Meeting held on 8
April 2014, the Board of Directors comprised
the following seven members: Chairman Sari
Baldauf, Deputy Chairman Christian Ramm-
Schmidt, Minoo Akhtarzand, Heinz-Werner

Binzel, Ilona Ervasti-Vaintola, Kim Ignatius and
Joshua Larson.

The Annual General Meeting on 8 April 2014
re-elected Chairman Sari Baldauf, Deputy
Chairman Kim Ignatius (previously member),
Minoo Akhtarzand, Heinz-Werner Binzel, Ilona
Ervasti-Vaintola and Christian Ramm-Schmidt
(previously Deputy Chairman) and, in
addition, Petteri Taalas and Jyrki Talvitie were
elected as new members to the Board of
Directors until the end of the Annual General
Meeting in 2015.

In 2014, the Chairman, the Deputy Chairman
and the members of the Board of Directors
were all independent, non-executive directors
and also independent of the company's
significant shareholders. Three members,
including the Chairman, are female.

During 2014, the Board of Directors met 11
times and the attendance rate of its members
was 100 %.

The main focus areas of the Board of
Directors during 2014 consisted of in-depth
reviews of the economic environment and the
energy sector especially in-light of the recent
geopolitical development and possible
impacts, further development of the
company's strategy, including assessment of
the future strategic alternatives after
divestment of the electricity distribution
business e.g. the plan to restructure TGC-1
ownership, reorganisation of business
structure, review of succession plans as well
as further review of various operations. Based
on the self-assessment conducted during the
previous year, the Board of Directors set
certain focus areas and amended certain
processes in an effort to further enhance the
efficiency of the board work.

Fortum's Board of Directors on 31 December 2014
Fortum's Board of Directors on 31 December 2014

Name

Born Nationality Education

Occupation

Attendance in the
Board Meetings

Attendance in the Board
Committee Meetings

Chairman
Ms. Sari Baldauf

Deputy Chairman
Mr. Kim Ignatius

1955 Finnish

MSc (Econ.)

Non-executive chairman

11/11

1956 Finnish

BSc (Econ.)

CFO of Sanoma Corporation
Non-executive director

11/11

Ms. Minoo
Akhtarzand

1956 Swedish

MSc
(Electrical engineering)

Governor in the County of
Jönköping
Non-executive director

Mr. Heinz-Werner
Binzel

1954 German

Economics and electrical
engineering degree

Independent consultant
Non-executive director

11/11

1951 Finnish

LL.M, Trained on the bench

Non-executive director

11/11

Ms. Ilona Ervasti-
Vaintola

Mr. Christian
Ramm-Schmidt

Mr. Petteri
Taalas 1)

1946 Finnish

BSc (Econ)

1961 Finnish

PhD in Meteorology

Mr. Jyrki Talvitie 1)

1966 Finnish

Executive MBA, Master of Law

Member of Fortum's Board of Directors until 8 April 2014

Mr. Joshua Larson

1966 U.S. citizen

Master of International Affairs,
Bachelor in Russian language

Private investor and
consultant
Non-executive director

1) New member from 8 April 2014.

Senior Partner of Merasco
Capital Ltd.
Non-executive director

Director General of the
Finnish Meteorological
Institute
Non-executive director

Russian Direct Investment
Fund, Director
Non-executive director

11/11

9/9

2/2

Nomination and
Remuneration Committee,
3/3

Audit and Risk Committee,
6/6

Nomination and
Remuneration Committee,
3/3

Audit and Risk Committee,
6/6

Nomination and
Remuneration Committee,
3/3

Nomiation and
Remuneration Committee
3/3

Nomination and
Remuneration Committee,
3/3

Audit and Risk Committee,
4/5

Audit and Risk Committee,
1/1

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Annual Report 2014

Corporate Governance Statement

The duties of the Board of Directors
The duties of the Board of Directors

• Responsibility for the administration and the proper organisation of the

operations of the company

• Strategic development and steering of the company's business and fields of

activity

• Ensuring that the business complies with the relevant rules and regulations and

the company's Articles of Association

• Ensuring that the accounting and financial administration are arranged

appropriately

• Appointing and dismissing the President and CEO
• Confirming the Group's organisational structure at the top management level,

and appointing and dismissing the members of the Fortum Executive
Management Team

• Reviewing the main risks and providing instructions concerning the risks
• Confirming the Group's business plan on an annual basis
• Setting and follow-up of company and management performance targets
• Discussing and commenting on the interim reports
• Approving consolidated financial statements, operating and financial reviews,

and parent company financial statements

• Defining the dividend policy
• Deciding on major investments, divestments and business arrangements
• Confirming Group policies and principles, such as the Group Risk Policy
• Confirming the Group's ethical values and operating principles, including

sustainability, and overseeing their implementation

• Reviewing the Group's sustainability performance and report

Board committees
Board committees

The committees of the Board of Directors are
the Audit and Risk Committee and the
Nomination and Remuneration Committee.
The committees assist the Board of Directors
by preparing and reviewing in more detail
matters falling within the competence of the
Board of Directors.

The Board of Directors appoints members of
the Audit and Risk Committee and the
Nomination and Remuneration Committee
from among its members. Each committee
shall have at least three members. The
members shall have the expertise and
experience required by the duties of the
respective committee.

Members are appointed for a one-year term
of office, which expires at the end of the first
Annual General Meeting following the
election. All the members of the Board of
Directors have the right to attend the
committee meetings. The Chairman of the
committee reports on the committee work to
the Board of Directors regularly after each
meeting and, in addition, the committee
meeting materials and minutes are available
to all members of the Board of Directors. The

Board of Directors has approved written
charters for the committees; the charters are
updated based on need.

Audit and Risk
Audit and Risk
Committee
Committee
The Audit and Risk Committee assists the
Board of Directors in matters relating to
financial reporting, risks and control, in
accordance with the tasks specified for audit
committees in the Finnish Corporate
Governance Code 2010. The Audit and Risk
Committee oversees the financial reporting
process and monitors the efficiency of the
internal controls and risk management within
the Group. In addition, the committee
regularly reviews the business ethics
compliance reporting. The committee has a
written charter in which its duties have been
defined. The main content of the charter is
disclosed herein.

Pursuant to the Finnish Corporate
Governance Code 2010, the members of the
Audit and Risk Committee shall have the
qualifications necessary to perform the

responsibilities of the committee, and at least
one of the members shall have expertise
specifically in accounting, bookkeeping or
auditing. The members shall be independent
of the company, and at least one member
shall be independent of the company's
significant shareholders.

The external auditors, Chief Financial Officer,
Head of Internal Audit, Corporate Controller
and General Counsel, as secretary to the
committee, attend the committee meetings
on a regular basis. Other senior executives
attend to the meetings as invited by the
committee.

The Audit and Risk Committee reports on its
work to the Board of Directors regularly after
each meeting. The Audit and Risk Committee
annually reviews its charter, approves the
internal audit charter and the internal audit
plan and carries out a self- assessment of its
work. As regards the external auditor, the
committee reviews the audit plan and meets
with the external auditor regularly to discuss
the audit plan, audit reports and findings. In
addition, the committee evaluates the

256

Annual Report 2014

Corporate Governance Statement

independence of the external auditors and
monitors their performance.

Audit and Risk Committee in
Audit and Risk Committee in
20142014
After the Annual General Meeting on 8 April
2014, the Board of Directors elected from
amongst its members Kim Ignatius as the
Chairman and Heinz-Werner Binzel and Jyrki
Talvitie as members to the Audit and Risk
Committee. Until the Annual General Meeting
on 8 April 2014, the committee comprised
Kim Ignatius as the Chairman and Joshua
Larson and Heinz-Werner Binzel as members.

In 2014, the members were all independent
of the company and of its significant
shareholders. The Audit and Risk Committee
met 6 times in 2014 and the attendance rate
was 96 %.

Nomination and
Nomination and
Remuneration Committee
Remuneration Committee
The Nomination and Remuneration
Committee assists the Board of Directors in
issues related to nomination and
remuneration of the company's management.
The committee has a written charter in which
its duties have been defined. The main
content of the charter is disclosed herein.

Pursuant to the Finnish Corporate
Governance Code 2010, the members of a
remuneration committee shall be
independent of the company. The President
and CEO or other executives of the company
may not be appointed as members of the
committee.

The regular participants at the committee
meetings are the President and CEO, Senior
Vice President, Corporate Human Resources,
and General Counsel, as Secretary to the
Committee.

The duties of the Audit and Risk Committee include:
The duties of the Audit and Risk Committee include

• Monitoring the financial position of the company
• Supervising the financial reporting process
• Monitoring the reporting process of financial statements
• Communicating with the external auditor and reviewing the reports that the

auditor prepares for the committee

• Monitoring the statutory audit of the financial statements and consolidated

financial statements

• Holding annual private meetings with the external and internal auditors
• Preparing through the Board of Directors the proposal on the election of the
external auditor for shareholders to consider and for resolution at the Annual
General Meeting

• Evaluating the independence of the external auditor particularly the provision of

related services to the company to be audited

• Approving the operating instructions for internal audit
• Reviewing the charter, plans and reports of the internal audit function
• Monitoring the efficiency of the company's internal control, internal audit, and

risk management systems

• Reviewing the description of the main features of the internal control and risk
management systems in relation to the financial reporting process, which is
included in the company's Corporate Governance Statement
• Annual reviewing of the Group Risk Policy and risk exposures
• Reviewing reports on legal disputes and proceedings
• Reviewing the Corporate Governance Statement

The Nomination and Remuneration
Committee reports on its work to the Board
of Directors regularly after each meeting. The
Nomination and Remuneration Committee
conducts annually a self-evaluation of its
work.

Nomination and Remuneration Committee.
Until the Annual General Meeting on 8 April
2014, the committee comprised Sari Baldauf
as the Chairman and Minoo Akhtarzand, Ilona
Ervasti-Vaintola and Christian Ramm-Schmidt
as members.

Nomination and Remuneration
Nomination and Remuneration
Committee in 2014
Committee in 2014
After the Annual General Meeting on 8 April
2014, the Board of Directors elected from
amongst its members Sari Baldauf as the
Chairman and Minoo Akhtarzand, Ilona
Ervasti-Vaintola, Christian Ramm-Schmidt
and Petteri Taalas as members of the

In 2014, the members were all independent
of the company and of its significant
shareholders. The committee met 3 times
during 2014 and the attendance rate was
100 %.

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Annual Report 2014

Corporate Governance Statement

The duties of the Nomination and Remuneration Committee include:
The duties of the Nomination and Remuneration Committee include

• Preparing for the Board of Directors recommendations on the pay structures and

the bonus and incentive systems of the Group and its management

• Monitoring the functioning of the bonus systems to ensure that the management
bonus systems advance the achievement of the company's objectives and are
based on personal performance

• Evaluating the performance and the remuneration of the President and CEO as

well as other members of the Fortum Executive Management Team

• Preparing nomination and remuneration issues and proposals to the Board of
Directors concerning the President and CEO as well as other members of the
Fortum Executive Management Team

• Assisting the Board of Directors in reporting on remuneration at the Annual

General Meeting, as necessary

• Reviewing and preparing succession plans for the President and CEO and other

members of the Fortum Executive Management Team

• Monitoring, planning and promoting competence development in the Group

based on strategic target setting

Shareholders' Nomination Board
Shareholders' Nomination Board

The Annual General Meeting on 9 April 2013
established a permanent Shareholders'
Nomination Board.

The purpose and task of the Shareholders'
Nomination Board is to prepare and present
to the Annual General Meeting, and, if
necessary, to an Extraordinary General
Meeting, a proposal on the remuneration,
number and members of the Board of
Directors. In addition, the task of the
Shareholders' Nomination Board is to seek
candidates as potential board members.

The Shareholders' Nomination Board consists
of four members, three of which shall be
appointed by the company’s three largest
shareholders, who shall appoint one member
each. The Chairman of the Board of Directors
serves as the fourth member. The members
shall be nominated annually and their term of
office shall end when new members are
nominated to replace them.

Fortum’s three largest shareholders that are
entitled to appoint members to the
Shareholders' Nomination Board, shall be
determined on the basis of the registered
holdings as of the first working day in
September in the year concerned. The
Shareholders' Nomination Board shall
forward its proposals for the Annual General
Meeting to the Board of Directors by 31
January each year.

Shareholders' Nomination
Shareholders' Nomination
Board ahead of Annual
Board ahead of Annual
General Meeting 2015
General Meeting 2015
In September 2014, the representatives of
the company’s three largest registered
shareholders were invited to the
Shareholders' Nomination Board: the
Government Ownership Steering Department
of the Prime Minister's Office, the Social
Insurance Institution of Finland (KELA) and
the State Pension Fund (of Finland). The
State Pension Fund informed that they will
not use their right to nominate. The following
persons were appointed to the Shareholders'
Nomination Board: Eero Heliövaara, b. 1956,
MSc (Econ.) and MSc (Eng.), Director General
of the Government Ownership Steering
Department, Prime Minister's Office, and
Liisa Hyssälä, b. 1948, MSSc, DDS, Director
General, Social Insurance Institution of
Finland (KELA). The Chairman of the Board of
Directors, Sari Baldauf, acts as a member of
the Shareholders' Nomination Board.

The Nomination Board convened 4 times and
the attendance percentage at the meetings
was 100 %.

The Shareholders' Nomination Board will
propose to the Annual General Meeting 2015,
which will be held on 31 March 2015, that
the fees to be paid to the members of the
Board of Directors are for a term ending at
the end of the Annual General Meeting 2016

as follows: for the chairman, EUR 90,000 per
year; for the deputy chairman, EUR 65,000
per year; and for each member, EUR 45,000
per year, as well as for the chairman of the
Audit and Risk Committee EUR 65,000 per
year if he or she is not at the same time
acting as chairman or deputy chairman of the
Board of Directors. In addition, for each
Board of Directors and Board Committee
meeting a fee of EUR 600 is proposed. For
Board of Directors members living outside
Finland in Europe, the proposed fee for each
meeting will be doubled and for Board of
Directors members living outside Europe, the
proposed fee for each meeting will be tripled.
For Board of Directors members living in
Finland, the proposed fee for each Board of
Directors and Board Committee meeting will
be doubled for meetings held outside Finland
and tripled for meetings held outside Europe.
For Board of Directors and Committee
meetings held as a telephone conference the
proposed fee will be paid as single to all
members. No fee will be paid for decisions
made without a separate meeting.

The largest shareholder of the company, the
Finnish State, which owns approximately
50,76% of the shares in the company at the
date of the Notice to the Annual General
Meeting, has notified the Board of Directors
of the company that, in deviation from the
proposal made by the Shareholders'
Nomination Board, it will propose to the
Annual General Meeting that the yearly fees
to be paid to the members of the Board of

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Annual Report 2014

Corporate Governance Statement

Directors remain at the current level for the
following term of office.

In addition, the Shareholders' Nomination
Board has decided to propose to the Annual
General Meeting 2015 that the Board of
Directors comprises of the eight members
and that the following person be elected to
the Board of Directors for the upcoming term:
Ms Sari Baldauf (as chairman), Mr Kim
Ignatius (as deputy chairman), Ms Minoo
Akhtarzand, Mr Heinz-Werner Binzel, Mr
Petteri Taalas and Mr Jyrki Talvitie as well as
new members Ms Eva Hamilton and Mr Tapio
Kuula.

Shareholders' Nomination Board
Shareholders' Nomination Board
20142014
In September 2013, following the
establishment of the Shareholders’
Nomination Board, the following persons
were appointed to the Shareholders'
Nomination Board: Eero Heliövaara, Director
General of the Government Ownership
Steering Department, Prime Minister's Office;
Harri Sailas, b. 1951, MSc (Econ), President
and CEO, Ilmarinen Mutual Pension Insurance
Company; and Liisa Hyssälä, Director
General, Social Insurance Institution of
Finland (KELA). In addition, the Chairman of
the Board of Directors, Sari Baldauf, was a
member of the Shareholders' Nomination
Board. The Shareholders' Nomination Board

convened three times and the attendance
percentage at meetings was 92 %. The
Shareholders' Nomination Board presented
its proposal covering the members of the
Board of Directors and the remuneration be
paid to them, on 30 January 2014. The
Annual General Meeting decided on the
Board of Directors members and
remuneration in accordance with this
proposal on 8 April 2014.

The State of Finland, the majority owner in
Fortum, complies with the Government
Resolution on State Ownership Policy dated 3
November 2011. This resolution defines
criteria for Board of Directors candidates.

President and CEO
President and CEO

The President and CEO holds the position of
Managing Director under the Companies Act
and is the Chairman of the Fortum Executive
Management Team. The President and CEO is
in charge of the day-to-day management of
the Group, in accordance with the Companies
Act and with instructions and orders issued
by the Board of Directors. Under the
Companies Act, the President and CEO is
responsible for ensuring that the accounts of
the company comply with the applicable laws
and that its financial affairs have been
arranged in a reliable manner.

Tapio Kuula has served as the President and
CEO since May 2009. On 18 December
2014, Mr. Kuula started sick leave. Mr Timo
Karttinen, CFO of Fortum Corporation,
assumed responsibility for the duties of the
President and CEO during Tapio Kuula's sick
leave. On 22 January 2015 Fortum
announced that Tapio Kuula will retire on
disability starting 1 February 2015. Timo
Karttinen continues to assume responsibility
for the duties of the President and CEO as an
interim President and CEO until the
nomination of the new President and CEO.

The performance of the President and CEO is
evaluated by the Board of Directors. The
evaluation is based on objective criteria that
include the performance of the company and
the achievement of targets set by the Board
of Directors in advance.

Fortum Executive Management Team and
Fortum Executive Management Team and
operational organisation
operational organisation

The President and CEO is supported by the
Fortum Executive Management Team. The
Fortum Executive Management Team assists
the President and CEO in setting the strategic
and sustainability targets within the
framework approved by the Board of
Directors, preparing the Group's business
plans, and deciding on investments, mergers,
acquisitions and divestments within its
authorisation.

Financial and sustainability results are
monitored in the monthly reporting and
reviewed monthly by the Fortum Executive
Management Team. Quarterly Performance
Review meetings with the management are
embedded in the Fortum Performance
Management process.

Each member of the Fortum Executive
Management Team is responsible for the day-

to-day operations and the implementation of
operational decisions in their respective
organisations. The Fortum Executive
Management Team meets on a monthly
basis. On 31 December 2014, the Fortum
Executive Management Team consisted of
twelve members, including the President and
CEO. Three of the members were female.

Fortum renewed its business structure as of
1 March 2014. Fortum's new divisions and
responsibility areas are:

• The Hydro Power and Technology Division
and the Nuclear and Thermal Power
Division are both part of Power and
Technology reporting segment. The two
divisions are responsible for Fortum's
hydro, nuclear and thermal power
generation, expert services, portfolio

management and trading as well as
technology and R&D functions.

• The Heat, Electricity Sales and Solutions
Division consists of Fortum's combined
heat and power (CHP) production, district
heating and business-to-business heating
solutions, solar business, electricity sales
and related customer offering as well as
Corporate Sustainability.

• The Russia Division consists of power and

heat generation as well as heat
distribution in Russia. It also includes
Fortum’s approximately 29 % holding in
TGC-1, accounted for as an associated
company using the equity method.
• The Distribution Division focuses on
distribution activities in Sweden.

In addition, Fortum has established a role of
Chief Operating Officer (COO) to enhance

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Fortum's financial reporting structure 31 December 2014
Fortum's financial reporting structure 31 December 2014

agile and flexible operations and to focus on
performance and synergy. The Hydro Power
and Technology Division, the Nuclear and
Thermal Power Division and the Heat,
Electricity Sales and Solutions Division report
to the COO.

Fortum's Staff functions are Finance,
Strategy and Mergers & Acquisitions, Legal,
Human Resources and IT, Communications
and Corporate Relations.

Fortum Executive
Fortum Executive
Management Team on 31
Management Team on 31
December 2014
December 2014
• Tapio Kuula, President and CEO, Chairman
of the Fortum Executive Management
Team, born 1957, MSc (Eng), MSc (Econ)

• Helena Aatinen, Senior Vice President,

Corporate Communications, born 1959,
MSc (Econ)

• Alexander Chuvaev, Executive Vice

President, Russia Division, born 1960,
MSc (Eng)

• Mikael Frisk, Senior Vice President,

Corporate Human Resources, born 1961,
MSc (Econ)

• Esa Hyvärinen, Senior Vice President,
Corporate Relations, born 1967, MSc
(Econ.) and MSc (Agr.& For.) 1)

• Timo Karttinen, Chief Financial Officer and
Executive Vice President, Distribution
Division, born 1965, MSc (Eng)
• Kari Kautinen, Senior Vice President,

Strategy, Mergers and Acquisitions, born
1964, LL.M 1)

• Per Langer, Executive Vice President,
Hydro Power and Technology Division,
born 1969, MSc (Econ)

• Markus Rauramo, Executive Vice

President, Heat, Electricity Sales and
Solutions Division, born 1968, MSc (Econ
and Pol. Hist.)

• Matti Ruotsala, Chief Operating Officer,
Deputy to the President and CEO, born
1956, MSc (Eng)

• Sirpa-Helena Sormunen, General Counsel,

born 1959, LL.M 2)

• Tiina Tuomela, Executive Vice President,

Nuclear and Thermal Power Division, born
1966, MSc (Eng), MBA 1)

1) New member as of 1 March 2014

2) New member as of 1 September 2014

Internal controls in relation to financial
Internal controls in relation to financial
reporting
reporting

The internal control and risk management
systems relating to financial reporting are
designed to provide reasonable assurance
regarding the reliability of financial reporting
and to ensure compliance with applicable
laws and regulations.

Risk control processes for
Risk control processes for
financial reporting
financial reporting
Fortum's Board of Directors approves the
Group Risk Policy that sets the Group's
objective, principles and division of
responsibilities for risk management activities
and also sets the frame for the financial
reporting process. The controls of the

financial reporting process are embedded in
the internal control framework, and the
process-level internal control structure has
been created using a risk-based approach.
Fortum's internal control framework includes
the main elements from the framework
introduced by the Committee of Sponsoring
Organisations of the Treadway Commission
(COSO).

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Financial reporting framework in Fortum
Financial reporting framework in Fortum

Control environment
Control environment

Fortum's internal control framework supports
the execution of the strategy and ensures
regulatory compliance and reliability of the
financial reporting. The internal control
framework consists of Group-level policies
and processes as well as business and
support process-level controls.

Corporate Risk Management is responsible
for reporting risk exposures and maintaining
the company's risk management framework.

Corporate Accounting and Control is
responsible for the overall control structure of
the financial performance management
process. The control process is based on
Group instructions and guidelines relating to
financial reporting. The Controllers Manual
contains financial reporting instructions. This
manual is regularly reviewed and updated.
The finance process management supports
the finance organisation in ensuring a uniform
way of working and monitoring the
performance of the processes within the
Finance function.

Fortum's organisation is decentralised, and a
substantial degree of authority and
responsibility is delegated to the divisions in

Risk assessment
Risk assessment

Fortum's Control Governance
Fortum's Control Governance

form of control responsibilities. Fortum’s
control governance follows the so-called
“Three lines of defense” –model, see picture
“Fortum's Control Governance” .

Risks related to financial reporting are
identified and analysed annually as part of the
risk management process. Risks are reported
regularly in connection with the planning

process and the follow-up of actions and
improvements is integrated in operational
management. The control risk assessment
has been the basis for creating the process-

level internal control framework and the same
applies to the control points to prevent errors
in the financial reporting process. Cross-

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Corporate Governance Statement

divisional teams by process area update the
controls when needed.

After the organisational change, a review was
conducted to ensure a clear scope and roles
and responsibilities in controls. This

assessment included risks related to
potential fraud and other irregularities, as well
as risks of loss or misappropriation of assets.

Control activities
Control activities

Control activities are applied in the business
processes and, from a financial reporting
perspective, they ensure that potential errors
or deviations are prevented, discovered and
corrected. In financial reporting, the
Controllers Manual sets the standards.

The Corporate Accounting and Control unit
defines the design of the control points and
the internal controls covering the end-to-end
financial reporting process. Responsibilities
are assigned for the controls and also for
ensuring their operating effectiveness.

Fortum's processes include controls
regarding the initiation, approval, recording
and accounting of financial transactions. A
standardised way of working is also ensured
by Fortum's financial shared service centre,
which performs controls for the recognition,
measurement and disclosure of financial
information. The financial shared service
centre has been ISO 9001:2008 certified
since 2011.

All divisions have their own finance function
ensuring that relevant analyses of the

Information and communication
Information and communication

business performance are done, analyses
such as volumes, revenues, costs, working
capital, asset base, risks and investments.
These analyses are reviewed at different
levels of the Group and ultimately by the
Board of Directors.

The Controllers Manual includes the Fortum
Accounting manual, Investment manual and
reporting instructions and other policies
relating to financial reporting. The regular
Core Controllers' meetings, headed by the

Corporate Controller, steer the development
projects within the Finance function and
receive updates from different expert forums
within Finance. The regular Accounting
Network Forum meetings are used to inform

the finance community about upcoming
changes in IFRS, new accounting policies and
other changes in reporting.

Monitoring and follow-up
Monitoring and follow-up

Financial results are followed up in the
monthly reporting and reviewed monthly by
the Fortum Executive Management Team.
Quarterly Performance Review meetings with
the Group management are embedded in the
Fortum Performance Management process.

As part of the Fortum internal control
framework, all divisions assess the
effectiveness of the controls they are
responsible for. Division and corporate-level
controller teams are responsible for
assessing the financial reporting process, and
Corporate Risk Management consolidates
regularly these control assessments and
reports to the management and to the Audit
and Risk Committee on an annual basis.

Auditing
Auditing

Fortum performance management process
Fortum performance management process

Internal control design and operating
effectiveness are also assessed by Corporate
Internal audit. Audit results, including
corrective actions and status, are regularly
reported to the management and to the Audit
and Risk Committee.

Internal Audit
Internal Audit
Fortum’s Corporate Internal Audit is
responsible for assessing and assuring the
adequacy and effectiveness of internal
controls in the company. Furthermore, it

evaluates the effectiveness and adequacy of
the business processes and risk management
and compliance with laws, regulations and
internal instructions and guidelines. The
Standards for the Professional Practice of

Internal Audit form the basis for the work of
Internal Audit.

External Audit
External Audit
The company has one external auditor, which
shall be an audit firm certified by the Central

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Corporate Governance Statement

Chamber of Commerce. The external auditor
is elected by the Annual General Meeting for
a term of office that expires at the end of the
first Annual General Meeting following the
election.

Fortum's Annual General Meeting on 8 April
2014 elected Authorised Public Accountant
Deloitte & Touche Oy as the company's
external auditor, with Authorised Public
Accountant Jukka Vattulainen having the

principal responsibility. Jukka Vattulainen has
had the principal responsibility since 2010.

Compliance Management and Code of Conduct
Compliance Management and Code of Conduct

Fortum's Code of Conduct is based on the
shared corporate values of Accountability,
Creativity, Respect and Honesty, which form
the ethical basis for all work at Fortum.
Fortum's updated Code of Conduct was
implemented in the spring of 2012 (originally
launched in 2007) and is published in ten
languages. The Code of Conduct has been
approved by the Board of Directors.

Prevention of corruption is one of the Code of
Conduct's focus areas. Compliance risks,
such as corruption, are managed as part of
Fortum's operational risk management
framework and control procedures in all
Fortum's operating countries. Fortum has
procedures to ensure the prevention,
oversight, reporting and enforcement based
on the requirements prescribed in
international legislation. A country and
partner risk evaluation process to support the
understanding and management of
compliance needs at local and business
partner level has been developed by
Corporate risk management together with

other functions, such as the tax department
and sustainability.

The review of compliance risks is periodic,
documented and discussed in the network of
compliance risk persons and with the Fortum
Executive Management Team, which has
oversight of the process. A systematic
compliance risk assessment is included in the
business plans, and follow-up is a part of the
quarterly performance review. Line
management regularly reports on the
business ethical compliance activities to the
Fortum Executive Management Team and
further to the Audit and Risk Committee.
Support and advice on compliance issues is
given by the legal department.

Fortum employees are responsible for
reporting any suspected misconduct to their
own supervisors, to other management
members or, if necessary, directly to Internal
Audit. Additionally, Fortum employees and
partners can report suspicions of misconduct
confidentially via the “raise-a-concern
channel” on Fortum’s web pages to the

Fortum Head of Internal Audit. The report can
be submitted in several languages and
anonymously if necessary. Additionally in
Russia, Fortum has a separate compliance
organisation with compliance officers in
place.

Every Fortum employee is expected to
complete the Code of Conduct training
through the Code of Conduct eLearning tool.
The eLearning is part of the induction
programme for new Fortum employees. In
2015, a revision of the Code of Conduct
eLearning tool will be introduced. In addition,
separate anti-corruption training events for
division management teams and other
specific groups have been arranged by the
legal department.

The Code of Conduct and compliance topics
and instructions are communicated through
internal and external communication
channels. Alignment is enforced by top
management and with their full commitment.

Remuneration
Remuneration

Remuneration at Fortum is directed by the
Group’s remuneration principles and
Fortum’s general remuneration and benefits
practices. When determining remuneration,
the company’s financial performance and
external market data, particularly the
remuneration for similar positions among
peer companies, are taken into
consideration. The Board of Directors
approves, at the proposal of the Nomination
and Remuneration Committee, the
remuneration principles at the Group level
and decides on the bonus targets and the
remuneration of senior management
(President and CEO and other members of
the Fortum Executive Management Team).
Remuneration of the Board of Directors is

decided by the Annual General Meeting of
Fortum. Remuneration proposal is prepared
by Fortum's Shareholders' Nomination Board,
which is appointed in the previous Annual
General Meeting.

Fortum offers a competitive compensation
package for senior executives and other
members of the management teams. The aim
is to attract, commit and retain key resources
in all countries where Fortum operates. The
package offers employees a competitive base
salary. In addition to a salary, relevant
benefits and short-term and long-term
incentive schemes – with eventual payment
based on attainment of challenging
performance targets decided by the Board of
Directors – are also offered.

The Finnish Corporate Governance Code
2010 requires that Fortum issues a
remuneration statement regarding the
salaries and other remuneration paid by the
company. Furthermore, the Cabinet
Committee on Economic Policy, representing
the State owner, issued a statement in
August 2012 on the remuneration of
executive management and key individuals in
companies with State ownership. Fortum's
remuneration principles comply both with the
Finnish Corporate Governance Code 2010
and the statement issued by the Cabinet
Committee.

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Annual Report 2014

Remuneration

Short-term incentives
Short-term incentives

Fortum’s short-term incentive scheme (STI),
i.e. bonus system, supports the realisation of
the Group’s financial performance targets,
sustainability targets, values and structural
changes. The system ensures that the
performance targets of individual employees
align with the targets of the division and the
Group. All Fortum employees, with the
exception of certain personnel groups in
Poland and Russia, are covered by the
system.

The Board of Directors decides on the bonus
criteria – including all performance measures,

target values and performance scales – for
senior management. The bonuses paid to the
members of senior management are
dependent on the Group’s financial
performance – measured in 2014 by
profitability and cash flow, divisional targets
and success in reaching personal targets. The
performance bonus criteria also include
indicators related to sustainability targets.
The maximum bonus for senior management
is 40 % of the executive’s annual salary
including fringe benefits (annual salary = 12
times the salary paid in December of the year
in question).

The bonuses of the division heads, all of
whom are members the Fortum Executive
Management Team, are determined on the
basis of the division’s performance and the
Group’s financial performance. The criteria
used to assess the personal performance of
the executive are agreed in the annual
performance discussions held at the
beginning of the year.

The Board of Directors assesses the
performance of the President and CEO on a
regular basis.

Long-term incentives
Long-term incentives

The purpose of Fortum’s long-term incentive
system (LTI), i.e. share bonus system, is to
support the achievement of the Group’s long-
term targets by committing key individuals.
The Board of Directors approves the Fortum
management members and key individuals
entitled to participate in the share bonus
system. For the share bonus system
2014–2019 there are currently approximately
one hundred participants. Participation in the
system precludes the individual from being a
member in the Fortum Personnel Fund.

Fortum’s share bonus system is divided into
six-year share plans, within which participants
have the opportunity to earn company
shares. A new plan commences yearly, if the
Board of Directors so decides.

Each share plan begins with a three-calendar-
year period, during which participants may
earn share rights if the earnings criteria set
by the Board of Directors are fulfilled. For the
earnings period 2014–2016 the approved
key earning criteria are based on earnings per
share (EPS), return for shareholders and
reputation index.

After the earning period has ended and the
relevant taxes and other employment-related
expenses have been deducted from the gross
value of the earned share rights, participants
are paid the net balance of the earned rights
in the form of shares. The earning period is
followed by a subsequent lock-up period,
during which participants cannot transfer or
dispose of the shares. If the value of the
shares decrease or increase during the lock-
up period, the potential loss or gain is carried
by the participants.

Share bonus systems
Share bonus systems

For the Fortum Executive Management Team
members, the lock-up period may be
shortened to one year on an individual basis if
the value of the aggregate ownership of
Fortum shares corresponds to a minimum of
the annual base salary. For other participants,
the share bonus systems lock-up period is
changed to one year from Plan 2013–2018
onwards.

Fortum’s current long-term incentive system
is in line with the statement on the
remuneration of executive management and
key individuals in companies with State
ownership and the Finnish Corporate
Governance Code 2010 for listed companies.
PCA Corporate Finance, an independent
Finnish financial advisor, has been consulted
in matters related to remuneration.

The maximum value of shares, before
taxation, to be delivered to a participant after
the earning period cannot exceed the
participant’s annual salary.

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Remuneration

Pensions
Pensions

Fortum’s Finnish senior executives participate
in the Finnish TyEL pension system, which
provides for a retirement benefit based on
years of service and earnings in accordance
with the prescribed statutory system. Under
the Finnish pension system, earnings include
base pay, annual bonuses and taxable fringe
benefits, but gains realised from the share
bonus system are not included in that
definition. Finnish pension legislation offers a
flexible retirement from age 63 to age 68.

Fortum’s senior executives outside Finland
participate in pension systems based on
statutory pension arrangements and market
practices in their local countries.

In addition to the statutory pensions, the
members of the Fortum Executive
Management Team have supplementary
pension arrangements. The Group policy is
that all new supplementary pension
arrangements are defined contribution plans.

The retirement age for Fortum’s President
and CEO is 63 and for the other members of
the Fortum Executive Management Team
60-65. For the President and CEO and some
members of the Fortum Executive
Management Team, the maximum pension
can be 60 % of the pensionable salary, with
the pension insured by an insurance company
and for some members, the maximum is 66 %
of the pensionable salary, with the pension
provided by Fortum's Pension Fund.

Remuneration for Management
Remuneration for Management

The table below includes the salaries and
fringe benefits, short-term bonus- and long-
term share bonus payments to the President
and CEO and the Fortum Executive
Management Team during the year. Short-

term bonus (STI) payments are based on the
previous year’s targets and achieved results.
Long-term share bonus (LTI) includes the
shares delivered during the year. The table
also includes payments made to

supplementary pension arrangements for the
President and CEO and the Fortum Executive
Management Team.

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Annual Report 2014

Remuneration

Salaries
and
fringe
benefits
2014

Salaries
and
fringe
benefits
2013

Long-term

Short-term
bonus
2014

Short-term
bonus
2013

Long-term
bonus
2013

Voluntary
pensions
2014

Voluntary
pensions
2013

bonus
2014

Total
2014

Total
2013

1,005

795 1)

549

971

255

249

1,847

2,033

3,321

2,860

4,326

3,655

453

491

137

155

1,509

2,058

1,508

2,479

578

833

453

702

5,861

4,958

7,708

6,991

Thousands of euros

President and CEO

Other Executive
Management team
members 2)

Total

1) Amount is impacted by the sick leave during 2013.

2) Former CFO Markus Rauramo was granted a recruitment bonus in 2012 that was paid in three installments of EUR 33,334 in 2012, 2013 and 2014. In
addition former CFO Rauramo was paid EUR 80,000 compensation in 2013 for assuming duties of the President and CEO during March-November 2013.

The STI and LTI bonus payments to the
Executive Management Team, including the
President and CEO, amounted to a total of
EUR 2,549 thousand (2013: 2,634), which
corresponds to 0.83 % (2013: 0.77 %) of the
total compensation in the Fortum Group.

Timo Karttinen, who assumed the
responsibility for the duties of the President

and CEO during Tapio Kuula’s sick leave in
December 2014, did not receive any
compensation for these additional duties in
2014.

Number of shares delivered to the
Number of shares delivered to the
management
management
The following table shows the number of
Fortum shares delivered to the President and

CEO and other Fortum Executive
Management Team members under the long-
term incentive plans.

Number of shares

Tapio Kuula

Helena Aatinen

Alexander Chuvaev 1)

Mikael Frisk

Esa Hyvärinen (member of the FEM from 1 March 2014)

Timo Karttinen

Kari Kautinen (member of the FEM from 1 March 2014)

Per Langer

Markus Rauramo

Matti Ruotsala

Sirpa-Helena Sormunen (member of the FEM from 1 September 2014)

Tiina Tuomela (member of the FEM from 1 March 2014)

Kaarina Ståhlberg (member of the FEM until 31 March 2014)

2014 2)

15,187

909

13,793

6,463

1,382

6,639

1,739

5,517

1,679

3,463

1,156

210

2013

35,152

519

35,783

10,079

n/a

9,563

n/a

8,550

756

12,395

n/a

1) Share rights will be paid in cash instead of shares after the three-year lock-up period due to local legislation
2) Share delivery based on share plans 2008-2012 and 2011-2016.

Remuneration and terms of employment of President and CEO Tapio Kuula
Remuneration and terms of employment of President and CEO Tapio Kuula

Salary and
fringe benefits

Short-term
incentive
system
(bonus) *

EUR 81,530 /month, including free car allowance and phone allowances as fringe benefits.

The bonus can be earned annually based on the criteria approved by the Board of Directors. The maximum level is 40% of the annual salary
including fringe benefits.

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Annual Report 2014

Remuneration

Long-term
incentive
system (share
bonus) *

Pension

According to Fortum management's current share bonus system. The maximum value of shares (before taxation) cannot exceed the annual
salary of the President and CEO.

Retirement age is 63. The President and CEO’s supplementary pension is a defined contribution pension plan, and the annual contribution is
25% of the annual salary. The annual salary consists of the base salary, fringe benefits and bonus. If the President and CEO’s contract is
terminated before retirement age, he is entitled to retain the funds that have accrued in the pension fund.

Termination of
Contract

The notice period for both parties is six months. If the company terminates the contract, the President and CEO is entitled to the salary of the
notice period and to severance pay equal to 18 months’ salary.

*) Annual bonus payments (short- and long-term) cannot exceed 120% of annual salary. Annual salary = 12 times the salary paid in December of the year in question.

of Board of Directors
Compensation of Board of Directors
Compensation

The following table includes the
compensation paid for the Board of Directors

during 2014 and 2013. The amounts include
fixed yearly fees and meeting fees.

Thousands of euros

Board Members at 31 December 2014

Sari Baldauf, Chairman

Kim Ignatius, Deputy Chairman 1)

Minoo Akhtarzand

Heinz-Werner Binzel

Ilona Ervasti-Vaintola

Christian Ramm-Schmidt 2)

Petteri Taalas

Jyrki Talvitie

Former Board Members

Joshua Larson

1) Deputy Chairman from 8 April 2014
2) Deputy Chairman until 8 April 2014

Board members are not in an employment
relationship or service contract with Fortum,
and they are not given the opportunity to
participate in Fortum’s bonus or share bonus
systems, nor does Fortum have a pension
plan that they can opt to take part in. The

Thousands of euros/year

Chairman

Deputy Chairman

Chairman of the Audit and Risk Committee 1)

Members

1) if not Chairman or Deputy Chairman simultaneously

2014

Board service
2014

2013

Board service
2013

1 Jan - 31 Dec

8 Apr - 31 Dec

1 Jan - 31 Dec

1 Jan - 8 Apr

1 Jan - 31 Dec

compensation of the Board members is not
tied to the sustainability performance of the
Group.

Fees for the Board of Directors
Fees for the Board of Directors
The Annual General Meeting on 8 April 2014
confirmed the following annual fees for the
members of the Board of Directors:

2014

2013

Every member of the Board of Directors
receives a fixed yearly fee and a meeting fee.
The meeting fee of 600 euro is also paid for

committee meetings and is paid in double to
a member who lives outside Finland in Europe
and in triple to a member who lives outside

Europe. The members are entitled to travel
expense compensation in accordance with
the company’s travel policy.

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Annual Report 2014

Board of Directors

Read more about
Read more about
• Meeting attendances in the Corporate

Governance statement

• Fortum shares held by the members of
the Board of Directors section in the
Annual Report

268

Annual Report 2014

Board of Directors

Board of Directors
Board of Directors

Fortum's Board of Directors 31 December 2014

Sari Baldauf
Sari Baldauf

Chairman
Chairman
• Born 1955, nationality: Finnish
• MSc, Business Administration
• Independent member of Fortum’s Board

of Directors since 2009

• Chairman of the Nomination and

Remuneration Committee

Main occupation:
Main occupation:
• Non-executive Director

Primary work experience:
Primary work experience:
• Nokia Corporation, several senior

executive positions. Member of the Group
Executive Board until February 2005.

Key positions of trust:
Key positions of trust:
• Akzo Nobel N.V., Daimler AG, and

Deutsche Telekom AG: Member of the
Supervisory Board

• DevCo Partners Oy, Senior Advisor
• Finland’s Children and Youth Foundation,
Tukikummit Foundation, and Technology

Industries of Finland Centennial
Foundation: Member of the Board
• Savonlinna Opera Festival, Chairman of

the Board

• F-Secure Corporation, Member of the

Board 2005–2014

• Sanoma Corporation, Deputy Chairman

2003–2009

• Capman Corporation, Member of the

Board 2008–2011

• YIT Corporation, Member of the Board

2006–2008

• Hewlett-Packard Company, Member of

the Board 2006–2012

• Finnish Business and Policy Forum EVA,
Member of the Board and vice chair
2007–2013

• John Nurminen Foundation, Member of

the Board 2009–2013

Fortum shares as of 31 December 2014:
Fortum shares as of 31 December 2014
2,300 (31 December 2013: 2,300)

Key positions of trust: -
Key positions of trust: -
Fortum shares as of 31 December 2014
Fortum shares as of 31 December 2014:
2,400 (31 December 2013: 2,400)

Deputy Chairman
Deputy Chairman
• Born 1956, nationality: Finnish
• BSc (Econ)
• Independent member of Fortum's Board

of Directors since 2012

• Chairman of the Audit and Risk

Committee

Main occupation:
Main occupation:
• Sanoma Corporation, CFO

Primary work experience:
Primary work experience:
• TeliaSonera AB, Executive Vice President

and CFO 2003–2008

• Sonera Oyj, Executive Vice President and

CFO 2000–2002

• Tamro Oyj, Group CFO 1997–2000

Kim Ignatius
Kim Ignatius

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Board of Directors

Minoo Akhtarzand
Minoo Akhtarzand

• Born 1956, nationality: Swedish
• MSc, Electrical engineering
• Independent member of Fortum’s Board

of Directors since 2011

• Member of the Nomination and
Remuneration Committee

Main occupation:
Main occupation:
• Governor in the County of Jönköping

Primary work experience:
Primary work experience:
• Swedish National Rail Administration,

Director-General

• Regional Labour Agency, Director
• Vattenfall AB, various senior executive

positions

• Stockholm Energi, various positions

Key positions of trust:
Key positions of trust:
• Södertörn University, Chairman of the

Board

• The National Society for Road Safety in

the County of Jönköping, Chairman of the
Board

• The Swedish Export Credit Agency, Vice

Chairman of the Board

• Sveriges Radio 2007–2010, Vattenfall
Bränsle AB 2004–2006, Vattenfall
Vattenkraft AB 2003–2006, Vattenfall
Business service AB 2003–2006 and
Teracom AB (Telecommunication and IT)
2001–2007: Member of the Board.
• EIM (European Infrastructure Managers)
2009–2010 and Södertörn university
1997–2003: Vice Chairman of the Board
• Västerbergslagens Energi AB, Chairman of

the Board 2000–2004

• Chairman of several different Councils

Fortum shares as of 31 December 2014
Fortum shares as of 31 December 2014: -
(31 December 2013: -)

Heinz-Werner Binzel
Heinz-Werner Binzel

• Born 1954, nationality: German
• Economics and electrical engineering

degree

• Independent member of Fortum’s Board

of Directors since 2011

• Member of the Audit and Risk Committee

Key positions of trust:
Key positions of trust:
• TÜV Rheinland Holding AG, Member of
the Supervisory board, Chairman of the
Audit Committee

• RWE Solutions AG, Chairman of the
Supervisory board 2003–2006

Main occupation:
Main occupation:
• Independent consultant

Fortum shares as of 31 December 2014
Fortum shares as of 31 December 2014: -
(31 December 2013: -)

Primary work experience:
Primary work experience:
• RWE Energy AG, Board member for

procurement and sale of electricity, gas,
and water

• RWE Solutions AG, Board member as

CFO, CEO

• NUKEM GmbH, several senior executive
positions in Germany and the USA

270

Annual Report 2014

Board of Directors

Ilona Ervasti-Vaintola
Ilona Ervasti-Vaintola

• Born 1951, nationality: Finnish
• LL.M., Trained on the bench
• Member of Fortum’s Board of Directors
since 2008, independent since 1
November 2011

• Member of the Nomination and
Remuneration Committee

Main occupation:
Main occupation:
• Non-executive Director

Primary work experience:
Primary work experience:
• Sampo plc, Group Chief Counsel, Member

of the Group Executive Committee
2001–2011

• Mandatum Bank plc, Chief Counsel and
member of the Board 1998–2001
• Mandatum & Co Ltd, Director, Partner

1992–1998

• Union Bank of Finland Ltd, Head of

Financial Law Department, Legal counsel
1982–1992

Key positions of trust:
Key positions of trust:
• Securities Market Association, Deputy

Chairman of the Board 2012

• Finnish Literature Society 2005–2011,
Fiskars Corporation 2004–2010, OMX
Nordic Exchanges Group Ltd 2003–2008
and Stockholmsbörsen AB 2003–2007:
Member of the Board

• Legal Committee of the Central Chamber

of Commerce of Finland, Member
2002–2005 and Chairman 2005–2010

Fortum shares as of 31 December 2014
Fortum shares as of 31 December 2014:
4,000 (31 December 2013: 4,000)

Christian Ramm-Schmidt
Christian Ramm-Schmidt

Key positions of trust:
Key positions of trust:
• Atoy Oy, Merivaara Oy, Reima Oy:

Member of the Board

Fortum shares as of 31 December 2014
Fortum shares as of 31 December 2014:
2,250 (31 December 2013: 2,250)

• Born 1946, nationality: Finnish
• BSc (Econ)
• Independent member of Fortum’s Board

of Directors since 2006

• Member of the Audit and Risk Committee

Main occupation:
Main occupation:
• Merasco Capital Ltd., Senior Adviser

Primary work experience:
Primary work experience:
• Baltic Beverages Holding Ab (BBH),

President

• Baltika Breweries, Russia, Chairman of the

Board

• Fazer Biscuits Ltd., Fazer Chocolates Ltd.,
Fazer Confectionery Group Ltd., President

• ISS ServiSystems Oy, Director
• Rank Xerox Oy, Director

271

Annual Report 2014

Group Management

Petteri Taalas
Petteri Taalas

• Born 1961, nationality: Finnish
• PhD in Meteorology
• Independent Member of Fortum’s Board

of Directors since 2014

• Member of the Nomination and
Remuneration Committee

Main occupation:
Main occupation:
• Director General of the Finnish

Meteorological Institute

Primary work experience:
Primary work experience:
• World Meteorological Organization,

Director

• Finnish Meteorological Institute, remote
sensing (satellites), Research professor

• Finnish Meteorological Institute, Head of

research/senior scientist

Key positions of trust:
Key positions of trust:
• World Meteorological Organisation,
Member of Executive Council

• EUMETSAT (European Organisation for the
Exploitation of Meteorological Satellites),
Chairman of Council

• Intergovernmental Panel on Climate
Change (IPCC), Delegate for Finland
• University of Eastern Finland, Chairman of

the Board

• ECMWF (European Centre for Medium-
Range Weather Forecasts), Member of
Council

• Fortum Corporation, Stakeholders’

Advisory Council, Member 2011–2014

Fortum shares as of 31 December 2014
Fortum shares as of 31 December 2014: -
(31 December 2013: n/a)

Jyrki Talvitie
Jyrki Talvitie

Key positions of trust: -
Key positions of trust: -
Fortum shares as of 31 December 2014: -
Fortum shares as of 31 December 2014
(31 December 2013: n/a)

• Born 1966, nationality: Finnish
• Executive MBA, Master of Law
• Independent Member of Fortum’s Board

of Directors since 2014

• Member of the Audit and Risk Committee

Main occupation:
Main occupation:
• Russian Direct Investment Fund, Director

Primary work experience:
Primary work experience:
• VTB Bank, Moscow, Senior Vice President
• East Capital, Moscow, Chief

Representative, Senior Advisor

• URALSIB Financial Corporation, Moscow,
Head of International Business, Chief
Managing Director

• BNP-Paribas, Securities Services, Paris,

Senior Vice President

• The Bank of New York, London, Vice

President

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Group Management

Group Management
Group Management

Fortum Executive Management team 31 December 2014

Tapio Kuula
Tapio Kuula

• Born 1957, nationality: Finnish
• MSc (Eng), MSc (Econ)
• President and CEO since 2009
• Member of the Management Team since

1997

• Employed by Fortum since 1996

Previous positions:
Previous positions:
• Fortum Corporation, Senior Vice President

2005

• Fortum Power and Heat Oy, President

2000

• Fortum Corporation, Power and Heat

Sector, President 2000

• Fortum Power and Heat Oy, Executive

Vice President 1999

• Imatran Voima Oy, Executive Vice

Key positions of trust:
Key positions of trust:
• Fortum Foundation, Chairman of the

Board

• Varma Mutual Pension Insurance

Company, Chairman of the Supervisory
Board

• OAO Fortum, Chairman of the Board
• East Office of Finnish Industries Oy,
Deputy Chairman of the Board

• Northern Dimension Business Council,

Co-Chairman

• Finnish Fair Corporation, Member of the

Supervisory Board

• Finnish-Russian Chamber of Commerce,

Member of the Board

• Eurelectric, Member of the Board

President, Member of the Board, Member
of the Management Team 1997

Fortum shares as of 31 December 2014
Fortum shares as of 31 December 2014:
168,742 (31 December 2013: 153,555)

Helena Aatinen
Helena Aatinen

• Born 1959, nationality: Finnish
• MSc (Econ)
• Senior Vice President, Corporate
Communications since 2012

• Member of the Management Team since

2012

• Employed by Fortum since 2011

Previous positions:
Previous positions:
• Fortum Corporation, Vice President,
Corporate Communications 2011
• Finnish Forest Industries Federation,
Communications Director 2005

• Metso Corporation, Senior Vice President,

Corporate Communications 2002
• Metso Corporation, several positions in

Communications function 1997

Fortum shares as of 31 December 2014
Fortum shares as of 31 December 2014:
1,528 (31 December 2013: 619)

273

Annual Report 2014

Group Management

Alexander Chuvaev
Alexander Chuvaev

Mikael Frisk
Mikael Frisk

• Born 1960, nationality: Russian
• MSc (Eng)
• Executive Vice President, Russia Division
and General Director of OAO Fortum
since 2009

• Member of the Management Team since

2009

• Employed by Fortum since 2009

Previous positions:
Previous positions:
• GE Oil & Gas, Regional Executive Director,

Russia and CIS 2009

• SUEK, Investment Development Director,

Russia 2008

• JSC Power Machines, Managing Director,

Russia 2006

• Solar Turbines Europe S.A., various

positions in Europe and the USA 1991

Key positions of trust:
Key positions of trust:
• Energy Producers Council, Deputy Head

of the Supervisory Board

• Russian Union of Industrialists and
Entrepreneurs, Member of the
Board, Chairman of Commission on Public
Utility

• Territorial Generating Company No. 1

(TGC-1), Member of the Board
• Government Commission on the

Development of the Electric Power
Industry, Member

• Aggreko Aurasia LLC, Member of the

• GE Oil & Gas, Regional General Manager,

Board

Russia 2006

• JSC OMZ, Chief Operations Officer, Russia

2005

• GE, various positions in the USA and

Canada 1999

Fortum shares as of 31 December 2014
Fortum shares as of 31 December 2014:
14,713 (31 December 2013: 12,093)

Key positions of trust:
Key positions of trust:
• HENRY - The Finnish Association for

Human Resources Management, Member
of the Board

Fortum shares as of 31 December 2014:
Fortum shares as of 31 December 2014
46,591 (31 December 2013: 42,128)

• Born 1961, nationality: Finnish
• MSc (Econ)
• Senior Vice President, Corporate Human
Resources, since 2001. Responsible for
Corporate HR, IT and Business Process
Management.

• Member of the Management Team since

2001

• Employed by Fortum since 2001

Previous positions:
Previous positions:
• Nokia Mobile Phones, Vice President, HR

Global Functions 1998

• Nokia-Maillefer, Vice President, HR,

Lausanne, Switzerland 1993

• Nokia NCM Division, HR Development

Manager 1992

• Oy Huber Ab, HR Development Manager

1990

274

Annual Report 2014

Group Management

Esa Hyvärinen
Esa Hyvärinen

Fortum shares as of 31 December 2014
Fortum shares as of 31 December 2014:
15,156 (31 December 2013: n/a)

• Born 1967, nationality: Finnish
• MSSc (Econ) and M.Sc. (Agr. & For.)
• Senior Vice President, Corporate
Relations as of 1 March 2014

• Member of the Management Team as of 1

March 2014

• Employed by Fortum since 2006

Previous positions:
Previous positions:
• Fortum Corporation, Vice President,

Corporate Relations 2006

• Confederation of European paper
industries CEPI, Brussels, Head of
Recycling and Environmental units
2000–2006

• Finnish Ministry of Trade and Industry,

Senior Advisor 1997–2000

Key positions of trust:
Key positions of trust:
• Finnish Energy Industries, Member of the

Board

Timo Karttinen
Timo Karttinen

• Imatran Voima Oy, Vice President,
Electricity Procurement 1997

Key positions of trust:
Key positions of trust:
• OAO Fortum, Member of the Board
• Confederation of Finnish Industries,
Member of the Economy and tax
committee

Fortum shares as of 31 December 2014
Fortum shares as of 31 December 2014:
76,430 (31 December 2013: 69,791)

• Born 1965, nationality: Finnish
• MSc (Eng)
• Chief Financial Officer since 1 March

2014

• Member of the Management Team since

2004

• Employed by Fortum since 1991

Previous positions:
Previous positions:
• Fortum Power and Heat Oy, Executive

Vice President, Electricity Solutions and
Distribution Division 2009
• Fortum Corporation, Senior Vice

President, Corporate Development 2004

• Fortum Power and Heat Oy, Business Unit
Head, Portfolio Management and Trading
2000

• Fortum Power and Heat Oy, Vice

President, Electricity Procurement and
Trading 1999

275

Annual Report 2014

Group Management

Kari Kautinen
Kari Kautinen

Per Langer
Per Langer

• Member of the Board in several Fortum-

owned holdings in Russia

Fortum shares as of 31 December 2014
Fortum shares as of 31 December 2014:
22,276 (31 December 2013: n/a)

Key positions of trust:
Key positions of trust:
• Fortum Sweden AB, Chairman of the

Board

• EFA AB, Deputy Chairman
• Svensk Energi, Member of the Board
• Hafslund ASA, Member of the Board

Fortum shares as of 31 December 2014:
Fortum shares as of 31 December 2014
30,784 (31 December 2013: 25,267)

• Born 1964, nationality: Finnish
• LL.M
• Senior Vice President, Strategy, Mergers
and Acquisitions as of 1 March 2014
• Member of the Management Team as of 1

March 2014

• Employed by Fortum since 1998

Previous positions:
Previous positions:
• Fortum Corporation, Vice President,

Strategy, Mergers and Acquisitions 2012

• Fortum Corporation, Vice President,
Mergers and Acquisitions 2007
• Fortum, several managerial positions

1998

Key positions of trust:
Key positions of trust:
• OAO Fortum, Member of the Board of

Directors

• TGC-1, Member of the Board of Directors

• Born 1969, nationality: Swedish
• MSc (Econ)
• Executive Vice President, Hydro Power
and Technology Division as of 1 March
2014

• Member of the Management Team since

2009

• Employed by Fortum since 1999

Previous positions:
Previous positions:
• Fortum Power and Heat Oy, Executive
Vice President, Heat Division 2009
• Fortum Power and Heat Oy, President of

Heat 2007

• Fortum Power and Heat Oy, President of
Portfolio Management and Trading 2004
• Fortum Corporation, managerial positions

1999

• Gullspång Kraft, managerial positions

1997

276

Annual Report 2014

Group Management

Markus Rauramo
Markus Rauramo

• Born 1968, nationality: Finnish
• MSc (Econ and Pol. Hist.)
• Executive Vice President, Heat, Electricity
Sales and Solutions Division as of 1
March 2014

• Member of the Management Team since

2012

• Enso Oyj, Helsinki, several financial tasks

1993

Key positions of trust:
Key positions of trust:
• Ahlstrom Oyj, Member of the Board
• Wärtsilä Oyj Abp, Member of the Board
• Teollisuuden Voima Oyj, Member of the

• Employed by Fortum since 2012

Board

Previous positions:
Previous positions:
• Fortum Corporation, Chief Financial

Officer 2012

• AS Eesti Gaas, Member of the Supervisory

Board

• As Vörguteenus Valdus, Member of the

Supervisory Board

• Stora Enso Oyj, Helsinki, CFO and

• AB Fortum Värme samägt med

Member of the GET 2008

• Stora Enso International, London, SVP

Group Treasurer 2004

Stockholms stad, Chairman of the Board
of Directors

• Chairman or member of the Board of

• Stora Enso Oyj, Helsinki, VP Strategy and

several Fortum Corporation companies

Investments 2001

• Stora Enso Financial Services, Brussels,

VP Head of Funding 1999

Fortum shares as of 31 December 2014
Fortum shares as of 31 December 2014:
15,435 (31 December 2013: 13,756)

Matti Ruotsala
Matti Ruotsala

Key positions of trust:
Key positions of trust:
• Kemijoki Oy, Chairman of the Board
• PKC Group Oyj, Chairman of the Board
• Teollisuuden Voima Oyj, Chairman of the

Board

• Componenta Oyj, Member of the Board
• Halton Group Ltd, Member of the Board

Fortum shares as of 31 December 2014
Fortum shares as of 31 December 2014:
32,360 (31 December 2013: 28,897)

• Born 1956, nationality: Finnish
• MSc (Eng)
• Chief Operating Officer as of 1 March

2014

• Member of the Management Team since

2007

• Employed by Fortum since 2007

Previous positions:
Previous positions:
• Fortum Power and Heat Oy, Power

Division, Executive Vice President 2009
• Fortum Power and Heat Oy, President of

Generation 2007

• Valtra Ltd, Managing Director 2005
• AGCO Corporation, Vice President 2005
• Konecranes Plc, Chief Operating Officer

(COO) and Deputy CEO 2001

• Konecranes Plc and Kone Corporation,
several senior and managerial positions
1982

277

Annual Report 2014

GRI

Sirpa-Helena Sormunen
Sirpa-Helena Sormunen

Fortum shares as of 31 December 2014: -
Fortum shares as of 31 December 2014
(31 December 2013: n/a)

• Born 1959, nationality: Finnish
• LL.M
• General Counsel as of 1 September 2014
• Member of the Management Team since

1 September 2014

• Employed by Fortum since 2014

Previous positions:
Previous positions:
• Patria Oyj, General Counsel 2012
• Nokia and Nokia Siemens Networks
(NSN), several legal and managerial
positions 2004

• TeliaSonera Finland Oyj, Vice President,
Head of Legal, Mergers and Acquisitions
and Finance 2003

• Sonera Oyj, Senior Legal Counsel, Head of
Legal, Merger and Acquisitions 2000

Key positions of trust:
Key positions of trust:
• Nammo AS, Member of the Board of

Directors

Tiina Tuomela
Tiina Tuomela

• Born 1966, nationality: Finnish
• MSc (Eng), MBA
• Executive Vice President, Nuclear and
Thermal Power Division as of 1 March
2014

• Kemijoki Oy, Member of the Supervisory

Board

• Raskone Oy, Member of the Board of

Directors

• Teollisuuden Voima Oyj, Member of the

• Member of the Management Team as of 1

Board of Directors

March 2014

• Member of the Board of several

• Employed by Fortum since 1990

companies of the Fortum Corporation

Fortum shares as of 31 December 2014
Fortum shares as of 31 December 2014:
6,442 (31 December 2013: n/a)

Previous positions:
Previous positions:
• Fortum Power and Heat Oy, Vice

President, Finance in Power Division 2009

• Fortum Power and Heat Oy, Vice

President, Business Control and Support,
Generation 2005

• Fortum, several managerial positions

1990

Key positions of trust:
Key positions of trust:
• Ekokem Oy, Member of the Board of

Directors

278

Annual Report 2014

Standard disclosures

GRIGRI

We report annually on sustainability in accordance with the Global Reporting Initiative Reporting Guidelines.
Our reporting for 2014 follows the core option of the GRI G4 Guidelines. Deloitte & Touche Oy has provided
limited assurance for the sustainability information presented on our Finnish language web report with the
boundaries presented in the assurance statement.

Standard disclosures
Standard disclosures

Sustainability is an integral part of our
strategy. We report on sustainability in
accordance with the GRI G4 Guidelines and
the Electric Utilities Sector Disclosures. Of
the general standard disclosures, the
strategy, analysis and our Group-level
sustainability targets and their realisation
have been described mainly in the Strategy
section of our report. We describe the key
stakeholder groups and stakeholder
engagement in the Society section of our
report. We describe sustainability governance
practices in the Governance section of our
report.

We have reported other general and specific
standard disclosures required by the GRI G4
Guidelines and the sector disclosures in this
GRI section. In particular, we focus on
describing the material aspects we have
identified for the economic, environmental
and social responsibility and the related
indicators.

279

Annual Report 2014

Standard disclosures

Report content
Report content

This year we are not publishing a separate
sustainability report; we are reporting about
sustainability as part of our Annual Report.
We have reported the information required by
the Global Reporting Initiative (GRI) G4
reporting guidelines and the Electric Utilities
Sector Disclosures in different sections of the
Annual Report (see the GRI index). We have
reported the specific standard disclosures
with indicators in the GRI section of the
Annual Report. We will publish the Annual
Report in its entirety online, in Finnish and in
English, on our website at
annualreport2014.fortum.com.

The Annual Report describes our operations
and the material sustainability aspects for us
and for our stakeholders in 2014, and
includes some information from January-
February 2015 as well. The Sustainability
Report for 2013 was published in March
2014. Fortum reports sustainability
information annually; we will publish the next
report in March 2016.

The individuals who can provide more
information related to the Annual Report are
listed on our Contacts page.

Report scope and
Report scope and
boundaries
boundaries
Reporting related to operations and
management covers all functions under
Fortum's control, including subsidiaries in all
countries of operation. The consolidation
includes the parent company Fortum
Corporation and all the companies in which
Fortum Corporation has the power to govern
the financial and operating policies and in
which it generally holds, directly or indirectly,
more than 50% of the voting rights. Possible
deviations to this principle are reported in
conjunction with information applying
different boundaries. A list of the Fortum's
subsidiaries is in Note 42 Subsidiaries by
segment to the Financial Statements.

The most significant change in the report
boundary compared to the 2013 report is
related to the AB Fortum Värme samägt med
Stockholms stad company (Fortum Värme).
Application of the new IFRS standards has
resulted in Fortum Värme being classified in
the Financial Statements as a joint venture
and it is consolidated with the equity method
as of 1.1.2014. Until 2013, Fortum Värme
was treated as a Group subsidiary in which
non-controlling owners had a 50% share. As

of 2014, joint venture Fortum Värme is not
included in Fortum's sustainability targets or
key indicators or in the descriptions of
management practices. In this report, we
present joint venture Fortum Värme
separately in terms of material sustainability
aspects and indicators.

Information from previous years is mainly
presented as pro forma information, i.e.
presented on the basis of the organisation
and the functions of each year; the impacts
of ownership changes in production facilities,
for example, have not been updated
afterwards in the previous indicators. An
exception to this is joint venture Fortum
Värme, whose share has been removed from
2013 information whenever possible. The
corresponding removal has not been made in
the information for 2012. Possible deviations
from this rule are presented with the
indicator.

Material aspects and defining the
Material aspects and defining the
report content
report content
Material sustainability aspects included in the
report and the reporting boundaries are
presented in table Standard disclosures /
Material aspects. The selection of material
aspects is based on GRI G4 reporting
guidelines and on Fortum's own and our
stakeholders' views regarding the
significance of the impacts. As the premise
for the process, we used the aspects material
to the sector as presented in the
Implementation Manual and Electric Utilities
Sector Disclosures document. Our
understanding of stakeholder views is based
on the result of the One Fortum survey, the
stakeholder sustainability survey, and the
EPSI customer satisfaction survey, as well as
information gained through other stakeholder
collaboration. Our own assessment of the
significance of the impacts is based on the
systematic monitoring and reporting of
indicators for over 20 years.

Capacity changes
Capacity changes
New and acquired capacity
New and acquired capacity
In 2014, the Nyagan gas-fired power plant's
third unit was commissioned in Russia. At the
end of the year, we also commissioned the
Kapeli solar power plant in India.

The plants and the capacities acquired during
the year are included in the reporting starting
from the moment of possession. The same

applies to built new capacity and new plants
commissioned during the year.

Divested capacity
Divested capacity
Fortum divested its electricity distribution
business in Finland on 24 March 2014, and
both its electricity distribution business and
heat business in Norway on 30 June 2014.
These businesses are not included in the
2014 reporting.

Fortum divested its Grangemouth power plant
in Great Britain on 1 October 2014. The plant
data are included in the reporting until the
end of September 2014.

Measurement and
Measurement and
calculation principles
calculation principles
Data for economic performance indicators is
collected from the audited financial
statements and from financial accounting and
consolidation systems.

The environmental information of the report
covers the plants for which Fortum is the
legal holder of the environmental permit. In
such cases, the plant information is reported
in its entirety. The only exception is the
calculation of specific CO2 emissions from
Meri-Pori power plant, where the calculation
covers only Fortum's share of production and
emissions as specified in the operation
agreement between Fortum and Teollisuuden
Voima Oy. In the specific emissions
calculation, the production shares of minority
holdings are also included in the total
production.

Fortum utilises a Group-wide database with
instructions for collecting site-level
environmental data. Sites are responsible for
data input, emissions calculations and
assurance. The Corporate Sustainability unit
compiles all data and is responsible for
disclosed sustainability information.

Fortum's CO2 emissions subject to the EU
Emissions Trading Scheme are annually
verified at the site-level by external verifiers.
Direct and indirect greenhouse gas emissions
have been reported in accordance with the
Greenhouse Gas Protocol and based on the
Greenhouse Gas Analysis performed by an
external consultant.

Fortum's human resources (HR) management
system is currently used in all Fortum’s

280

Annual Report 2014

Standard disclosures

operating countries and is the main system
for employee-related personal and job
data. In Russia, the employee data system
covers mainly superiors. In addition, Russian
operations have their own, local data system.
Other social responsibility data, such as
occupational health-related data, originates
from various data systems and is collected by
designated individuals and delivered to the
Corporate Sustainability unit in the format
recommended by GRI.

Global Compact reporting
Global Compact reporting
Fortum has been a member of the United
Nations Global Compact initiative since June
2010. This report describes the realisation of
the Global Compact's ten principles in
Fortum's operations. Global Compact
approves the use of the indicators in the GRI
Guidelines in Communication on Progress
(COP) reporting. The GRI index presents the
indicators used to measure Fortum's
performance in fulfilling the principles of

human rights, labour standards, the
environment and anti-corruption.

Fortum joined the Caring for Climate initiative
in November 2013. Fortum meets the
reporting requirements of the Caring for
Climate initiative by participating annually in
the assessment in the CDP's climate change
programme and by publishing its response on
the CDP website.

Material aspects
Material aspects

The chosen material aspects of sustainability
are based on the GRI G4 Guidelines and on

Fortum’s own view and its stakeholders’
views on the significance of the impacts.

Identified
material aspect

Why the aspect is material

Economic responsibility

Economic
performance

Plant
decommissioning2)

System efficiency2)

Competitiveness, security of supply and
market-driven production enable long-term profitable
growth. A financially strong company can shoulder
responsibility for the environment, take care of its
employees, monitor its supply chain, meet customer
expectations, and produce excellent value to its
shareholders.

Producers of nuclear waste in Finland and Sweden
are responsible for nuclear waste management and
final disposal as well as the related costs. The legal
obligation also applies to decommissioning nuclear
power plants.

Better energy efficiency reduces the use of primary
energy and the environmental impacts of energy
production and use. We offer energy-efficiency
services also to customers. Until the end of 2014,
Fortum had a Group-level five-year average target
(>70%) for efficiency of fossil fuel-based production.

Environmental responsibility

Materials

We use large volumes of fuels in electricity and heat
production.

Boundary within
organisation on
a divisional
basis1)

Whole
organisation

NTP

Whole
organisation

Boundary
outside
organisation.
Stakeholders
impacted by
aspect.

Upstream
(suppliers,
investors)
Downstream
(customers,
investors, public
sector)

Downstream
(communities)
Upstream
(suppliers)

Downstream
(communities,
customers)

Upstream
(suppliers)

Own production
NTP
HESS
Russia

We use large volumes of fuel and other energy
sources, like hydropower, in electricity and heat
production.

Own production
Whole
organisation

Upstream
(suppliers)

Energy

Water

Geographical
boundary of
impact

Reported
indicators

All reporting
countries.
Especially
Finland, Sweden
and Russia

G4-EC1
G4-EC2
G4-EC3
G4-EC4

Finland and
Sweden

Aspect does not
have indicators

EU11
EU12

All operating
countries, except
India where
production is
solar power

G4-EN1
G4-EN2

G4-EN3
G4-EN5
G4-EN6

G4-EN8

Water is an important global sustainability issue for
stakeholders.

Downstream
(communities)

All operating
countries

Own production
NTP
HESS
Russia

281

Annual Report 2014

Standard disclosures

Biodiversity

Emissions

Hydropower production, electricity distribution and
fuel procurement can have an impact on local
biodiversity. Also fossil fuel-based energy production
may weaken local biodiversity particularly in Russia.

Fuel combustion in electricity and heat production
generates emissions into the air. Statutory limitations
target emissions in our operating countries.

Effluents and waste

Power plants use huge volumes of water for cooling
or as process water. The combustion of solid fuels
generates significant amounts of ash and gypsum.
Nuclear power production generates low-, medium-
and high-level radioactive nuclear waste.

Own production
NTP
HESS
Russia
Distribution

Own production
NTP
HESS
Russia

Upstream
(suppliers)

Finland, Sweden,
Baltics, Russia

G4-EN13
EU13

Downstream
(communities)

All operating
countries, except
India where
production is
solar power

Downstream
(communities)

All operating
countries

G4-EN15
G4-EN16
G4-EN17
G4-EN18
G4-EN21

G4-EN22
G4-EN23
G4-EN24

Compliance

Compliance with legislation in all our operating
countries forms the foundation of our social
operating license.

Own production
Whole
organisation

Downstream
(communities)

All operating
countries

G4-EN29

Supplier environmental
assessment

Environmental impacts from our supply chain are
related mainly to fuels, particularly coal, uranium, and
bioenergy. The possible environmental impacts
related to the procurement of raw materials are
included in the pre-selection and audits of Fortum’s
suppliers.

NTP
HESS
Russia

Upstream
(suppliers)

International

G4-EN32
G4-EN33

Environmental
grievance mechanisms

Our operations are guided by Fortum’s values, the
Code of Conduct and the Supplier Code of Conduct.
A grievance mechanism offers stakeholders a
channel for reporting misconduct.

Whole
organisation

Whole supply
chain

G4-EN34

All operating
countries,
international

Social responsibility

Sub-category: Labour practices and decent work

Employment

Labour/Management
relations

We are a significant employer in our operating
countries. We aspire to be a desired employer that
attracts and engages employees at all levels.

Collaboration between the employees and the
employer is based on local legislation, agreements
and Fortum’s Code of Conduct.

Occupational health
and safety

We strive to be a safe workplace for our employees
as well as for contractors working for us and for
service providers.

Training and education We aim to create interesting career and development

Diversity and equal
opportunity

opportunities to continuously advance personal
professional skills and know-how. It is important to
us to secure the expertise required to implement the
strategy.

We value diversity and we promote equal treatment
and opportunities in recruiting, remuneration,
personnel development and advancement, regardless
of race, religion, political views, gender, age,
nationality, language, sexual orientation, marital
status, or disability.

Equal remuneration for
women and men

We want to offer our personnel a fair, transparent
and competitive remuneration system.

Supplier assessment
for labour practices

About 50% of the goods and services we acquire
originate from risk countries. Violations related to
social issues are more likely to occur in these
countries than in non-risk countries.

Personnel
Whole
organisation

Personnel
HTP
NTP
HESS
Russia

Personnel
Whole
organisation

NTP
HESS
Russia

Downstream
(communities)

All operating
countries

Downstream
(society,
trade unions)

Upstream
(suppliers,
contractors)

G4-LA1
G4-LA2
EU18

G4-LA4

All operating
countries

G4-LA5
G4-LA6

All operating
countries

G4-LA9
G4-LA10
G4-LA11

All operating
countries

G4-LA12

All operating
countries

International

G4-LA13

G4-LA14
G4-LA15

Upstream
(suppliers)

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Standard disclosures

Labour practices
grievance mechanisms

Our operations are guided by Fortum’s values, the
Code of Conduct and the Supplier Code of Conduct.
A grievance mechanism offers stakeholders a
channel for reporting possible misconduct.

Sub-category: Human rights

Whole
organisation

Whole supply
chain

International

G4-LA16

Investment

Non-discrimination

Freedom of
association and
collective bargaining

Child labour

Forced or compulsory
labour

Assessment

Fortum has operations in countries where the
legislation and practices are not necessarily
consistent with all internationally recognised human
rights standards.

NTP
HESS
Russia

Upstream
(suppliers,
contractors)

Fortum has operations in countries where the
legislation and practices are not necessarily
consistent with all internationally recognised human
rights standards.

Fortum has procurements from suppliers that
operate in risk countries. With the exception of India,
freedom of association and collective bargaining are
protected by legislation in Fortum’s operating
countries.

Fortum has procurements from suppliers that
operate in risk countries. Of our operating countries,
India has not ratified the International Labour
Organisation’s (ILO) Convention on the minimum age
and the worst forms of child labour.

Fortum has procurements from suppliers that
operate in risk countries. Fortum has not identified
risks related to the use of forced labour in Fortum’s
own operations.

Personnel
Whole
organisation

HPT
NTP
HESS
Russia

Upstream
(suppliers)

Alongside the current businesses, we are pursuing a
platform for future growth by exploring and
developing new sources of growth that support our
strategic core areas. Human rights assessments are
part of the assessment process for projects.

Own production
HPT
NTP
HESS
Russia

Downstream
(communities)
Business partners

Russia, India

All operating
countries

G4-HR1
G4-HR2

G4-HR3

International

G4-HR4

International

G4-HR5

International

G4-HR6

International

G4-HR9

Supplier human rights
assessment

About 50% of the goods and services we acquire
originate from risk countries. Violations related to
social issues are more likely to occur in these
countries than in non-risk countries.

NTP
HESS
Russia

Upstream
(suppliers)

International

G4-HR10
G4-HR11

Human rights
grievance mechanisms

Our operations are guided by Fortum’s values, the
Code of Conduct and the Supplier Code of Conduct.
A grievance mechanism offers stakeholders a
channel for reporting possible misconduct.

Whole
organisation

Whole supply
chain

International

G4-HR12

Sub-category: Society

Local communities

Anti-corruption

Public policy

Anti-competitive
behaviour

Compliance

Fortum’s future operations in India may require the
acquiring of significant land areas and thus will
impact local communities. Hydropower production
has impacts on local communities.

We have identified corruption and bribery as a
significant business risk, and we absolutely reject
corruption and bribery.

The significance of energy issues will grow
continuously in society, and we want to engage in an
active dialogue to develop the sector.

Own production
HPT
HESS

Downstream
(communities)

India, Finland,
Sweden

G4-SO2

Whole
organisation

Whole supply
chain

International

Whole
organisation

Downstream
(communities)

All operating
countries

G4-SO3
G4-SO4
G4-SO5

G4-SO6

G4-SO7

Strict adherence to competition legislation is part of
compliance in operations.

Whole
organisation

Compliance with legislation in all our operating
countries forms the foundation of our social
operating license.

Whole
organisation

Whole supply
chain

All operating
countries

International

G4-SO8

283

Annual Report 2014

Standard disclosures

Grievance
mechanisms for
impacts on society

Disaster/Emergency
planning and
response2)

Our operations are guided by Fortum’s values, the
Code of Conduct and the Supplier Code of Conduct.
A grievance mechanism offers stakeholders a
channel for reporting possible misconduct.

We produce energy at hydro, nuclear and CHP plants
and we distribute electricity and heat. Exceptional
situations may have significant impacts on society.
The operational security of our operations is of
utmost importance to us.

Sub-category: Product responsibility

Whole
organisation

Whole supply
chain

International

G4-SO11

Whole
organisation

Downstream
(society,
customers)

All operating
countries, except
India

This
sector-specific
aspect doesn't
have indicators

Product and service
labelling

Marketing
communications

Access2)

Fortum complies with national legislation that is
based on EU legislation regarding the origin of
electricity. It requires that electricity producers
report the origin of the produced electricity, the CO2
emissions, and the amount of radioactive waste.
Customer satisfaction is a prerequisite for our
business and we monitor it regularly.

HESS
Russia
Distribution

Fortum is a significant retailer of electricity and heat.
Advertising and marketing communications is a key
part of the electricity and heat retail business.

HESS
Russia
Distribution

Electricity and heat security of supply is a
prerequisite for a functioning society. Security of
supply requires power plant operations to be as
uninterrupted as possible.

Whole
organisation

Downstream
(customers)

All operating
countries

G4-PR3
G4-PR5

Downstream
(customers)

Downstream
(communities,
customers)

All operating
countries, except
India

All operating
countries

G4-PR7

EU28
EU29
EU30

1) Divisions:

HPT: Hydro Power and Technology

NTP: Nuclear and Thermal Power

HESS: Heat, Electricity Sales and Solutions

Russia

Distribution

2) Sector-specific aspect

284

Annual Report 2014

Standard disclosures

Management approach
Management approach

Sustainability is an integrated part of the
strategy, and the Group-level sustainability
targets and results for 2014 are presented in
the section discussing Fortum’s strategy.
Fortum’s financial results are reported in the
Financial Statements section under Financial
performance and position.

Fortum’s values and Code of Conduct form
the foundation of our sustainability
management. Fortum’s Group-level policies
are approved by the Board of Directors, and
our public policies can be found on our
website. The policies are supplemented with
Group-level instructions and manuals, and
they are approved by either the President and
CEO or by the head of the function
responsible for the instruction.

International
International
commitments and
commitments and
initiatives
initiatives
Fortum respects and supports the United
Nations Universal Declaration of Human
Rights, the United Nations Convention on the
Rights of the Child, and the core conventions
of the International Labour Organisation
(ILO). Additionally, Fortum recognises in its
operations the UN Guiding Principles on
Business and Human Rights, the statutes of
the OECD Guidelines for Multinational
Enterprises, the International Chamber of
Commerce’s anti-bribery and anti-corruption
guidelines, and the Bettercoal initiative’s
Code on responsible coal mining. Fortum has
been a member of the UN Global Compact
initiative since June 2010 and joined the UN

Caring for Climate initiative in November
2013.

The steering effect of Group-level policies,
instructions, and international commitments
and initiatives on the management of
economic responsibility, environmental
responsibility and social responsibility is
presented in the table below. The
management approach related to material
aspects we have identified are presented in
more detail for economic, environmental,
labour practices and decent work, human
rights, society and product responsibility.
Additionally, more detailed information on the
management of the impacts related to
material aspects is provided in connection of
the indicator descriptions. Fortum’s
corporate governance is described in the
2014 Corporate Governance Statement.

The steering effect of international commitments and initiatives and Group-level policies and instructions

Social

responsibility:

Social

responsibility:

Economic

Environmental

Labour practices

responsibility:

Product

responsibility

and decent work

Human Rights

Society

responsibility

Fortum's values

Fortum Code of Conduct

Fortum Supplier Code of Conduct

The United Nations Universal Declaration of Human

Rights

The United Nations Convention on the Rights of the

Child

The core conventions of the International Labour

Organisation

The UN Global Compact initiative

The UN Caring for Climate initiative

The statutes of the OECD Guidelines for Multinational

Enterprises

The International Chamber of Commerce’s

anti-bribery and anti-corruption guidelines

The Bettercoal initiative’s Code on responsible coal

mining

Group risk policy

Sustainability policy (including environmental, and

occupational health and safety policies)

Fortum guidelines and minimum requirements for EHS

management

Biodiversity guidelines

Guidelines on sustainability assessment

Human resources policy

285

Annual Report 2014

Standard disclosures

Fortum Accounting manual

Group manual on investment evaluation and approval

procedure

Fortum Group instructions for anti-bribery

Fortum Group instructions for safeguarding assets

Group instructions for conflicts of interest

Group instructions on Competition Law

Fortum security guidelines

Sponsorship steering document

Responsible advertising and marketing guidelines

Environmental marketing guidelines

Economic
Economic

Economic performance
indicators

Material aspects

Targets

Description

Economic performance
Plant decommissioning (sector-specific aspect)
System efficiency (sector-specific aspect)

Our goal is to achieve excellent financial results in strategically selected core areas through strong expertise and responsible
ways of operating. We believe that competitiveness, security of supply and market-driven production enable long-term
profitable growth. A financially strong company can shoulder responsibility for the environment, take care of its employees,
monitor its supply chain, meet customer expectations, and produce excellent value to its shareholders.

Each new research and development target is assessed against the criteria of carbon dioxide emissions reduction and resource
efficiency. Likewise, each new investment proposal is assessed against sustainability criteria as part of Fortum’s investment
assessment and approval process. In our investments we seek the kinds of economically profitable alternatives that provide the
opportunity to increase capacity and reduce emissions.

We measure financial performance with the return on capital employed (target: 12%), return on shareholders’ equity (target:
14%), and capital structure (target: comparable net debt/EBITDA about 3).

The realisation of financial targets in 2014 is reported in the Financial performance and position section of the Financial
Statements.

Financial performance and position section of the Financial Statements

Policies

The financial management system is based on Group-level policies and their specifying instructions, and on good governance,
effective risk management, sufficient controls and the internal audit principles supporting them. Other key elements steering
financial management are presented in the table Steering effect of international commitments, initiatives, Fortum policies and
instructions.

The steering effect of Group-level policies, instructions, and international commitments and initiatives -table

Responsibilities

The CFO and the Group’s Financial unit, division management, and ultimately the CEO and the Board of Directors, are
responsible for issues related to finances and financial statements and for broader financial responsibility issues.

The Group’s short-term incentive (STI) system contains financial key indicators. The STI covers all Fortum employees.

Group’s short-term incentive (STI) system

Specific actions

We arranged special training about taxation-related risks, such as changes in the tax landscape and new markets, and about
risks related to fixed sites.

286

Annual Report 2014

Standard disclosures

Fortum as a tax payer

Monitoring and follow-up

Results

The Board decides on the company’s financial targets as a part of the annual business planning process. Realisation of the
targets is monitored on monthly basis both at the division level and by Fortum’s Executive Management Team. Fortum’s
management monitors the realisation of financial targets quarterly as part of the business performance assessment, and key
indicators are regularly reported to Fortum’s Board of Directors. Financial key indicators related to investments are monitored
in investment forums.

Fortum’s net sales for 2014 were EUR 4,751 million and the net cash from operating activities was a strong EUR 1,762 million.
After distributing added value to stakeholders, EUR 4,005 million was left to develop our own operations.
Taxes borne for the financial period were EUR 156 million in Finland and EUR 279 million in Sweden. Our tax footprint provides
a more detailed picture of us as a tax payer.
Our biggest investments, EUR 340 million, were in Russia.

Our performance in material aspects of economic responsibility is reported in more detail in the following sections:

Economic performance: EC1, EC2, EC3, EC4

Pensions: Financial Statements, Note 32 Pension obligations

Plant decommissioning: Financial Statements, Note 30

System efficiency: EU11, EU12

Environment
Environment

Environmental performance
indicators

Description

Material aspects

Materials
Energy
Water
Biodiversity
Emissions
Effluents and waste
Compliance
Supplier environmental assessment
Environmental grievance mechanisms

Targets

In environmental responsibility, we emphasise the efficient use of natural resources and the need to mitigate climate change.
Our expertise in carbon dioxide-free hydro and nuclear power production and in energy-efficient CHP production helps us in
realising environmental responsibility. Through research and development work we are creating prerequisites for
environmentally benign energy solutions.

We measure the realisation of the environmental responsibility with the following indicators, for which we have set Group-level
targets:
- Specific CO2 emissions
- Energy efficiency
- Significant environmental non-compliances
- Number of supplier audits (aspect: supplier environmental assessment)

The realisation of our environmental targets in 2014 is reported in the Strategy section in the table Sustainability targets and
performance in 2013-2014.
Supply chain management is reported in the Strategy section table Other sustainability targets and related performance in
2013-2014 as well as in the indicator EN32.

Sustainability targets and performance in 2013-2014

Supply chain management in the indicator EN32

Policies

Environmental management is based on Fortum's sustainability policy and on the Group's goal to certify all operative
functions in accordance with the ISO 14001 standard. The other key steering elements of environmental management are
presented in the table Steering effect of international commitments, initiatives, Fortum policies and instructions.

287

Annual Report 2014

Standard disclosures

We assess environmental risks as part of the Group's risk assessment process.

International commitments, initiatives, Fortum policies and instructions

Risk management

Responsibilities

The management of the divisions and the Group functions, and ultimately the CEO and the Board of Directors, are responsible
for issues related to sustainability. The Board has not appointed any member to be specifically responsible for sustainability
issues; instead, its decisions rely on the knowledge of Fortum's Executive Management Team and the Group's sustainability
experts, and on expert statements.

The Group’s short-term incentive (STI) system contains environmental key indicators. The STI covers all Fortum employees.

Short-term incentive system

Specific actions

We have described our actions to reduce environmental impacts in the following sections:

Environmental impacts of CHP production

Biomass and other biofuels, and waste-derived fuels

Improving energy efficiency

Compliance with the Industrial Emissions Directive (IED)

Hydropower production/reducing environmental impacts

Investigating EHS non-compliances and implementation of corrective measures

Monitoring and follow-up

EHS non-compliances are reported monthly and key indicators for CO2 emissions and energy efficiency are reported quarterly
to the Fortum's Executive Management Team as part of the business performance assessments. The Group's key indicators
are reported regularly to Fortum's Board of Directors and are published in Fortum's Interim Reports.

Internal and external auditors regularly audit our ISO 14001 standard-compliant management system. Deloitte & Touche Oy
has provided limited assurance for Fortum’s Finnish-language sustainability reporting with the boundaries presented in the
assurance statement. We use the Dow Jones Sustainability Assessment as an external benchmark when assessing our
sustainability performance. We map our stakeholders' views annually with the One Fortum survey and with separate
sustainability surveys.

Results

At year-end, 100% of our operative functions were ISO 14001 certified.

The five-year average of our specific CO2 emissions from our electricity production in EU was 60 g/kWh at the end of
December 2014 and the five-year average of our specific CO2 emissions from our total energy production was 198 g/kWh.
Both results are better than targeted.
The efficiency of fuel-based production was 64%, and the five-year average after December 2014 was 63%, which means that
the target level was not achieved.
There were 27 significant EHS non-compliances in Fortum's operations.
In 2014, Fortum conducted 14 supplier audits and the co-owned Fortum Värme conducted 9. Additionally, one of Fortum's
coal suppliers completed a self-audit process in line with the Bettercoal Initiative. The self-assessment and auditing process
of Fortum's biggest coal supplier was pending at the end of the year.

Our performance in material aspects of environmental responsibility is reported in more detail in the following sections:

Group sustainability targets and performance in 2013-2014

Materials: EN1, EN2

Energy: EN3, EN5, EN6

Water: EN8

Biodiversity: EN13, EU13

Emissions: EN15, EN16, EN17, EN18, EN19, EN21

Effluents and waste EN22, EN23, EN24

Compliance: EN29

Supplier environmental assessments: EN32, EN33

Grievance mechanisms related to the environment: Ethics and integrity and EN 34

288

Annual Report 2014

Standard disclosures

Labour practices and decent work
Labour practices and decent work

Social performance
indicators: Labour practices
and decent work

Material aspects

Description

Employment
Labour/Management relations
Occupational health and safety
Process safety
Training and education
Diversity and equal opportunity
Equal remuneration
Supplier assessment for labour practices
Labour practices grievance mechanisms

Targets

We aspire to be a desired and safe workplace for our employees and for contractors and service providers working for us. We
believe that all injuries can be avoided. Our social responsibility targets are related to employee well-being and competence
development, work and process safety, responsible business practices and responsible operations in our supply chain, and
good corporate citizenship.

We measure the realisation of social responsibility with the following indicators for which we have set Group-level targets:
- Lost Workday Injury Frequency (LWIF), Fortum personnel
- Lost Workday Injury Frequency (LWIF), contractors
- Number of supplier audits (aspect: supplier labour practices)

We have set a target for Total Recordable Injury Frequency (TRIF) for Fortum personnel. From the beginning of 2015, the TRIF
has been classified as a Group-level target. Our goal is to avoid serious work injuries, which we classify as fatalities and
accidents resulting in a permanent disability or a long absence.

The realisation of our social responsibility targets in 2014 is reported in the Strategy section in the table Sustainability targets
and performance in 2013-2014. TRIF and supply chain management are reported in the Strategy section table Other
sustainability targets and related performance in 2013-2014.

Sustainability targets and achievements in 2013-2014

Policies

Safety management is based on Fortum’s sustainability policy and on the Group’s target to certify all operative functions in
accordance with the OHSAS 18001 standard. The other key elements steering safety management are presented in the table
Steering effect of international commitments, initiatives, Fortum policies and instructions.

We assess safety risks as part of the Group’s risk assessment process.
Everyday safety management is guided with about 20 Group-level Environment, Health and Safety (EHS) instructions and EHS
training events. The Group-level instructions are supported by local-level instructions, which address in more detail the
material safety issues and local special requirements. They include, e.g., nuclear power plant safety and dam safety. The
instructions cover Fortum employees and contractor employees.

Personnel management is based on Fortum’s human resources policy and the supporting Group-level HR processes: strategic
planning, recruiting, personnel development, performance management, remuneration, and employment and workforce
administration.

International commitments, initiatives, Fortum policies and instructions

Risk assessment process

Responsibilities

The management of the divisions and the Group functions, and ultimately the CEO and the Board of Directors, are responsible
for issues related to sustainability. The Board has not appointed any member to be specifically responsible for sustainability
issues; instead, its decisions rely on the knowledge of Fortum’s Executive Management Team and the Group’s sustainability
experts, and on expert statements.

The Group’s short-term incentive (STI) system contains occupational safety key indicators. The STI covers all Fortum
employees.

289

Annual Report 2014

Standard disclosures

Short-term incentive system

Specific actions

Our safety development work is based on continuous improvement. In 2014 we developed the assessment of contractor
performance and the Group-level environment, health and safety instructions. We have described these actions in Our
stakeholders section.

We assess the level of operations of our business partners through pre-selection and supplier audits. During the year we
arranged one training event for contractors in Sweden focusing on the Supplier Code of Conduct’s requirements and work
safety practices. A total of 50 service and goods suppliers took part in the training.

Safety actions

Monitoring and follow-up

Fortum employee and contractor Lost Workday Injury Frequency (LWIF) is reported monthly to Fortum’s Executive
Management Team. The key indicators for safety are reported to the Executive Management Team every quarter as part of
the business performance assessment. The Group’s key indicators are reported regularly to Fortum’s Board of Directors and
are published in Fortum’s Interim Reports.

Monitoring work well-being is part of the Fortum Sound employee survey. The survey’s well-being index measures employee
views on, e.g., the openness of the dialogue in the work community, personal accountability, and how challenging work tasks
are.

In addition to the work well-being index, work well-being is monitored also with other Group-level indicators, like
illness-related absences, reported quarterly to the Executive Management Team, and the ratio between actual retirement age
and the statutory start of the retirement pension.

The results of the supplier surveys and audits assessing the realisation of labour rights and practices are recorded along with
corrective measures into the supplier database, which is accessible to all Fortum employees. Fortum has set a Group target
for the number of audits, and the audits that are conducted are reported quarterly to operative management.

Internal and external auditors regularly audit our OHSAS 18001 standard-compliant management system.

Deloitte & Touche Oy has provided limited assurance for Fortum’s Finnish-language sustainability reporting with the
boundaries presented in the assurance statement. We use the Dow Jones Sustainability Assessment as an external
benchmark when assessing our sustainability performance. We map our stakeholders’ views annually with the One Fortum
survey and with separate sustainability surveys.

Results

At year-end, 74% of our operative functions were OHSAS 18001 certified.

Fortum’s Lost Workday Injury Frequency (LWIF) was 1.0 in 2014. It meets the Group-level injury frequency target, which is
less than one injury per million working hours for own employees. The Lost Workday Injury Frequency for contractors was 3.2,
which is also better than the target of 3.5. Unfortunately, in 2014 there were three fatal accidents involving contractor
employees in Fortum’s operations. Because of these fatalities, all construction sites and important maintenance work were
inspected in terms of high-risk work and work performed at heights.

Our performance in the material aspect of labour practices and decent work are reported in more detail in the following
sections:

Employment: G4-10, G4-11, LA1, LA2 and EU18

Labour/Management relations: LA4

Occupational health and safety: LA5, LA6

Process safety

Training: LA9, LA10, LA11

Diversity and equal opportunity: LA12

Equal remuneration: LA13

Supplier assessment: environment, labour practices and human rights: LA14, LA15

Labour practices grievance mechanisms: LA16

290

Annual Report 2014

Standard disclosures

Human rights
Human rights

Social performance
indicators: Human rights

Material aspects

Description

Investment
Non-discrimination
Freedom of association and collective bargaining
Child labour
Forced or compulsory labour
Assessment
Supplier human rights assessment
Human rights grievance mechanisms

Targets

Our goal is to operate in accordance with the UN Guiding Principles on Business and Human Rights, and to apply these
principles in our own operations as well as in country and partner risk assessments and supplier audits.

Our social responsibility includes operating as a good corporate citizen and taking care of our own employees and the
surrounding communities. We advance the well-being and safety of the work community, respect for individuals, and mutual
trust and responsible operations in our supply chain and more broadly in society.

We have set a Group-level target for the number of supplier audits. Supply chain management is reported in the Strategy
section in the table Other sustainability targets and related performance in 2013-2014 and in the HR indicators we have
reported.

Sustainability targets and achievements in 2013-2014

Policies

The elements of our human rights management are described in the table Steering effect of international commitments,
initiatives, Fortum policies and instructions.

International commitments, initiatives, Fortum policies and instructions

Responsibilities

The management of the divisions and the Group functions, and ultimately the CEO and the Board of Directors, are responsible
for issues related to sustainability. The Board has not appointed any member to be specifically responsible for sustainability
issues; instead, its decisions rely on the knowledge of Fortum’s Executive Management Team and the Group’s sustainability
experts, and on expert statements.

Specific actions

Fortum has included the UN Guiding Principles on Business and Human Rights (protect-respect-remedy) as a part of a
systematic country and counterparty risk assessment.

A sustainability assessment is carried out for all of our investment projects and takes into consideration the environmental,
occupational health and safety, and social impacts of the project. Projects requiring approval by the Fortum Executive
Management Team are additionally subject to an assessment and approval by Group-level sustainability experts. The
sustainability assessment includes a human rights evaluation, especially in new operating areas.

We assess the level of operations of our business partners through pre-selection and supplier audits.

Monitoring and follow-up

Country-specific reports that address also human rights are presented to Fortum’s Board of Directors when needed.

Results

In 2014 a human rights impact assessment was conducted for 30 countries. A more detailed country assessment was
conducted for two countries.

Our performance in the material aspect of human rights is reported in more detail in the following sections:

Investment: HR1, HR2

291

Annual Report 2014

Standard disclosures

Non-discrimination: HR3

Freedom of association and collective bargaining, Child labour, and Forced or compulsory labour: HR4, HR5, HR6

Assessment: HR9

Supplier human rights assessments: HR10, HR11

Human rights grievance mechanisms: HR12

Society
Society

Social performance
indicators: Society

Material aspects

Description

Local communities
Anti-corruption
Public policy
Anti-competitive behaviour
Compliance
Grievance mechanisms for impacts on society
Disaster/Emergency planning and response (sector-specific aspect)

Targets

We believe that an excellent financial result and ethical business are intertwined. We follow good business practices and
ethical principles in all our operations. We compete fairly and ethically and work within the framework of applicable
competition laws and Group competition instructions. We avoid all situations where our own personal interests may conflict
with the interests of the Fortum Group. Notably, we never accept or give a bribe or other improper payment for any reason.

Our customer relations are based on honesty and trust. We treat our suppliers and subcontractors fairly and equally. We
select them based on their merit and we expect them to consistently comply with our requirements and with Fortum’s
Supplier Code of Conduct.

We report on our compliance with regulations and on the ethicalness of our business in the Governance section, and in the
GRI section under Ethics and integrity.

Compliance

Ethics and integrity

Policies

The elements of our social and compliancy management practices are described in the table Steering effect of international
commitments, initiatives, Fortum policies and instructions.

International commitments, initiatives, Fortum policies and instructions

Responsibilities

The management of the divisions and the Group functions, and ultimately the CEO and the Board of Directors, are responsible
for issues related to sustainability. The Board has not appointed any member to be specifically responsible for sustainability
issues; instead, its decisions rely on the knowledge of Fortum’s Executive Management Team and the Group’s sustainability
experts, and on expert statements.

Specific actions

Code of Conduct training is provided as part of the induction programme of all new employees. During the year, special
training was continued on anti-corruption and anti-competitive behaviour.

A renewal of the online training course on the Code of Conduct is planned to be implemented in 2015.

Compliance Management and Code of Conduct

Monitoring and follow-up

The risk assessment on compliance is part of the Group’s risk assessment process, and the results are reported twice per
year as part of the business performance assessment process. Significant risks and violations are reported regularly to the
Audit and Risk Committee.

Fortum has a channel available to all stakeholder groups for the reporting of misconduct.

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Standard disclosures

Results

The suspected misconduct reported in 2014 and their classifications are reported under Ethics and integrity.

Risks and violations

Our performance in material social aspects is reported in more detail in the following sections:

Local communities: SO2

Anti-corruption: SO3, SO4, SO5

Anti-competitive behaviour: SO7

Compliance: SO8

Disaster/Emergency planning and response

Product responsibility
Product responsibility

Social performance
indicators: Product
responsibility

Material aspects

Targets

Description

Product and service labelling
Marketing communications
Access (sector-specific aspect)

Our goal is to present products and services truthfully in all our marketing and communication materials. We do not present
misleading statements and we strictly follow responsible marketing communication guidelines. In statements regarding
environmental issues, we follow the regulations for environmental marketing.

We offer our customers environmentally friendly electricity and heat products and services, and we are one of the leading
suppliers of CO2-free electricity in the Nordic markets.

We have set Group-level targets:
- SAIDI (system average interruption duration index)
- Energy availability of CHP plants
- Customer satisfaction

The realisation of our availability and customer satisfaction targets in 2014 is reported in the Strategy section in the table
Sustainability targets and performance in 2013-2014.
Compliance is reported in the indicator PR7.

Electricity and heat products and services

Sustainability targets and performance in 2013-2014

Policies

The elements of our management practices related to product responsibility are described in the table Steering effect of
international commitments, initiatives, Fortum policies and instructions.
Additionally, our operations are guided by responsible marketing and environmental marketing guidelines.

International commitments, initiatives, Fortum policies and instructions

Responsibilities

The management of the divisions and the Group functions, and ultimately the CEO and the Board of Directors, are responsible
for issues related to sustainability. The Board has not appointed any member to be specifically responsible for sustainability
issues; instead, its decisions rely on the knowledge of Fortum’s Executive Management Team and the Group’s sustainability
experts, and on expert statements.

Specific actions

In 2014, we started the Customer in the Centre campaign.

We constantly have several projects under way to improve the availability and reliability of CHP plants. In 2014, we made
improvements in, e.g., fuel feed systems, steam circuits, and electricity and automation systems. The average energy
availability of Fortum’s CHP plants in 2014 was 94.7%; the annual target was 95%. We improved the availability of our
hydropower plants with refurbishments. The load factor describing the availability of the Loviisa nuclear power plant was high
by international standards: 90.9% (2013: 92.5%).

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Customer in the Centre campaign

Monitoring and follow-up

The SAIDI and energy availability results are reported monthly to Fortum’s Executive Management Team. Additionally, the key
indicators are reported quarterly to the Executive Management Team as a part of the business performance assessments. The
Group’s key indicators are reported regularly also to Fortum’s Board of Directors and are published in Fortum’s interim
reports.

Customer satisfaction is monitored annually with the One Fortum survey and the EPSI customer satisfaction survey.
The results of the surveys are presented to Fortum’s management and they are used to develop the business.
Customer satisfaction and Fortum’s reputation are part of the Group-level sustainability target setting, and they are reported
annually to the Board of Directors.

Compliance is reported on twice per year as part of the business performance assessments.

One Fortum survey and the EPSI customer satisfaction survey

Results

In 2014, there were no marketing communication or product labelling violations.
We served our customers well and our customer satisfaction improved in all divisions.

In 2014, the average duration of power outage per customer (SAIDI) was 97 minutes in Sweden, which is better than the
target of 100 minutes.

The average energy availability of Fortum’s CHP plants was 94.7%, which is slightly lower than the target of 95%.

Customer satisfaction

Power outages and plant availability

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Standard disclosures

Ethics and integrity
Ethics and integrity

We believe there is a clear connection
between high standards of ethical business
practices and excellent financial results. As
an industry leader, we go beyond simply
obeying the law: we embrace the spirit of
integrity and uphold the highest standards of
ethical business conduct wherever we
operate. The Fortum Code of Conduct and
Fortum Supplier Code of Conduct articulate
that spirit by defining how we treat others,
engage in business, and safeguard our
corporate assets, and what we expect from
our suppliers and business partners.

Fortum’s Board of Directors is responsible for
the company’s mission and values and has
approved the Fortum Code of Conduct. The
Supplier Code of Conduct, based on the 10
principles of the UN Global Compact, has
been approved by the Head of Procurement
and purchasing steering group.

Compliance risks are managed as part of
Fortum's operational risk management
framework and control procedures . This
process also includes risks related to
sustainability and business ethics. A
systematic compliance risk assessment is
included in the annual business planning
process, and follow-up is a part of the
quarterly performance review. Line
management regularly reports on the
business ethical compliance activities to the

Fortum Executive Management Team and
further to the Audit and Risk Committee.

Fortum’s compliance process includes a
grievance mechanism. The same mechanism
is used for reporting any suspected
misconduct relating to the environment,
labour practices, decent work or human
rights violations. “The Raise a concern”
channel is available for all stakeholders and
may also be used by suppliers and partners
to report cases of suspected misconduct
related to the procurement process. In
Russia, Fortum has a separate compliance
organisation in place and employees are
encouraged to use the channels provided by
the compliance organisation. They may,
however, also use the “Raise a concern”
channel should they so wish.

In 2014, altogether 225 concerns were
raised. The vast majority of the concerns,
197, were received via the channels provided
in Russia. During the reporting period, 113
cases led to an investigation and
98 investigations were closed. At the end of
the year, there were 15 investigations
ongoing, 11 of which in Russia. Two concerns
by suppliers were raised via the “Raise a
concern” channel. Both were related to a
possible conflict of interest; the
investigations were still ongoing at year-end.

Roughly half of the investigated cases were
related to non-compliance either with

company rules or with laws and regulations.
In these cases, corrective action was taken
by reviewing and developing existing
processes and instructions and by providing
training to employees. Fortum has zero
tolerance towards alcohol and drug use.
Some 19% of the cases were related to
alcohol abuse during working hours. As the
result of the investigations, nine employment
contracts were terminated either by
immediate dismissal or by mutual agreement,
and 11 written warnings were given. The
number of cases reported to police was 4;
these have advanced to court proceedings. In
23 of the cases investigated, there was no
cause for actions to be taken.

No cases of suspected corruption or bribery
were detected in 2014. At the end of 2014,
the local district court in Sweden issued a
decision on a matter that was reported in
Fortum’s Sustainability Report 2013, relating
to a possible malpractice of a person
employed by the joint venture Fortum Värme.
The person was found guilty of accepting
bribes and condemned to conditional
imprisonment and fines. The parties have
appealed the decision. The employment
contract was terminated in 2013. In addition,
a suspected case of bribery targeting a
former Fortum employee and originating from
the year 2006 is due in court in Sweden in
March 2015. The employment contract was
terminated in 2006.

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Assurance

Assurance
Assurance

Fortum reports on sustainability as part of the
Annual Report. The 2014 Annual Report is
published in Finnish and English on our
website at annualreport2014.fortum.com.
Information about sustainability has been
compiled in accordance with the GRI G4
Reporting Guidelines. The reporting takes into
consideration the Electric Utility Sector
Disclosures. In our own assessment, our
reporting follows the core option of the GRI
G4 Reporting Guidelines. We have also
adhered to the AA1000 Accountability

Principles Standard (AA1000APS) in our
reporting.

Fortum Oyj’s auditor Deloitte & Touche Oy
has provided limited assurance for the
sustainability information presented on
Fortum’s Finnish language website with the
boundaries presented in the assurance
statement.

Deloitte & Touche Oy has also provided
limited assurance for emissions calculations
(Scope 1-3) based on the GHG protocol

according to the requirements published by
CDP (Verification of Climate Data). The
assurance statement will be delivered to CDP
as part of Fortum’s CDP reporting.

The report content is not updated after
assurance, and any amendments to the
content will be reported the following year.

Read more about
Read more about
• Assurance statement

Assurance statement
Assurance statement

Independent assurance
Independent assurance
report on Fortum’s
report on Fortum’s
sustainability reporting
sustainability reporting
To the Management of Fortum
To the Management of Fortum
Corporation
Corporation
We have been engaged by Fortum
Corporation (hereafter: Fortum) to provide
limited assurance on Fortum’s sustainability
reporting for the reporting period of January
1, 2014 to December 31, 2014. The
information subject to the assurance
engagement is the sustainability performance
data in sections “This is Fortum”, “Business”,
“In Society” and “GRI” of the Annual Report
2014 (hereafter: Sustainability reporting
material). The information subject to the
assurance engagement is the Finnish version
of the reporting published in the website
http://annualreport2014.fortum.com/fi

Furthermore, the assurance engagement has
covered Fortum’s adherence to the AA1000
AccountAbility Principles with moderate level
of assurance.

Management’s responsibility
Management’s responsibility
Management is responsible for the
preparation of the Sustainability reporting
material in accordance with the Reporting
criteria as set out in Fortum’s reporting
principles, the Sustainability Reporting
Guidelines (G4 Core) of the Global Reporting
Initiative and principles of inclusivity,
materiality and responsiveness as set out in
the AA1000 AccountAbility Principles (2008)
(AA1000APS). This responsibility includes:
designing, implementing and maintaining
internal control relevant to the preparation

and fair presentation of the Sustainability
reporting material that are free from material
misstatement, selecting and applying
appropriate criteria and making estimates
that are reasonable in the circumstances. The
scope of the Sustainability reporting material
and the information included therein depends
on the material sustainability aspects
identified by Fortum’s as well as Fortum’s
reporting principles.

Auditor’s responsibility
Auditor’s responsibility
Our responsibility is to express a limited
(moderate) assurance conclusion on the
Fortum’s Sustainability reporting material
based on our engagement. This assurance
report has been prepared in accordance with
the terms of our engagement. We do not
accept, or assume responsibility to anyone
else, except to Fortum for our work, for this
report, or for the conclusions we have
reached.

We conducted our engagement in
accordance with International Standard on
Assurance Engagements (ISAE) 3000 to
provide public limited assurance on
performance data within the Fortum´s
Sustainability reporting material. In addition,
we have used the criteria in AA1000
Assurance Standard (2008) to evaluate the
adherence to principles as set out in
AA1000APS (2008) for type 1 moderate level
assurance. This requires that we plan and
perform the engagement to obtain required
level of assurance about whether any matters
come to our attention that cause us to
believe that the Sustainability reporting
material has not been prepared, in all

material respects, in accordance with the
Reporting criteria.

We did not perform any assurance
procedures on the prospective information,
such as targets, expectations and ambitions,
disclosed in the Sustainability reporting
material. Consequently, we draw no
conclusion on the prospective information.

A limited (moderate) assurance engagement
with respect to sustainability reporting
involves performing procedures to obtain
evidence about the information disclosed in
the Sustainability reporting material. The
procedures performed depend on the
practitioner’s judgment, but their nature is
different from, and their extent is less than, a
reasonable assurance engagement. It does
not include detailed testing of source data or
the operating effectiveness of processes and
internal controls and consequently they do
not enable us to obtain the assurance
necessary to become aware of all significant
matters that might be identified in a
reasonable assurance engagement.

Our procedures on this engagement included:

• Assessing the suitability of the reporting

policies and criteria used by management
and the consistent application of such
policies, the inclusiveness of the
stakeholders as well as the responses on
the stakeholder dialogue and the overall
presentation of these in the Sustainability
reporting material;

• Conducting interviews with senior

management responsible for sustainability
at Fortum to gain an understanding
ofFortum’s targets for sustainability as

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Assurance

to affect, our independence and impartiality
and from any involvement in the preparation
of the Sustainability reporting material. We
have confirmed to Fortum that we have
maintained our independence and objectivity
throughout the year and in particular that
there were no events or prohibited services
provided which could impair our
independence and objectivity.

This engagement was conducted by a
multidisciplinary team including assurance
and sustainability expertise with professional
qualifications. Our team is experienced in
providing sustainability reporting assurance.

Conclusion
Conclusion
On the basis of the procedures we have
performed, nothing has come to our attention
that causes us to believe the Sustainability
reporting material for the year from January 1,
2014 to December 31, 2014, is not prepared,
in all material respects, in accordance with
the AA1000APS (2008) AccountAbility
Principles or that the Sustainability reporting
material is not reliable, in all material
respects, with regard to the reporting criteria.

Espoo 24.3.2015

Deloitte & Touche Oy

Jukka Vattulainen
Authorized Public
Accountant

Lasse Ingström
Authorized Public
Accountant

part of the business strategy and
operations;

• Reviewing internal and external

documentation to verify to what extent
these documents and data support the
information included in the Sustainability
reporting material and evaluating whether
the information presented in the
Sustainability reporting material is in line
with our overall knowledge of
sustainability targets and management at
Fortum;

• Conducting interviews with employees
responsible for the collection and
reporting of sustainability information and
reviewing of the processes and systems
for data gathering, including the
aggregation of the data for the
Sustainability reporting material;

• Performing analytical review procedures
and testing data on a sample basis to
assess the reasonability of the presented
sustainability information;

• Performing a site visit to selected sites in

Nyagan, Russia to review compliance to
reporting policies, to assess the reliability
of the sustainability data reporting
process aswell as to test the data
collected for sustainability reporting
purposes on a sample basis;
• Evaluating the application of the
AA1000APS (2008) principles of
stakeholder inclusivity, materiality and
responsiveness;

We believe that the evidence we have
obtained is sufficient and appropriate to
provide a basis for our conclusion.

Observations & Recommendations
Observations & Recommendations
Based on our limited (moderate) assurance
engagement, we provide the following
recommendations in relation to the
AA1000APS (2008) principles. The
recommendations are to improve Fortum´s
management and reporting of sustainability in

the future and they do not affect our
conclusion:

• Inclusivity

• Materiality

Inclusivity – Fortum has a comprehensive
stakeholder inclusiveness process in
place and throughout this processFortum
has identified the relevant key stakeholder
groups for its operations. We recommend
Fortum to continue regular stakeholder
engagement through different channels
and to continue to participate in open
discussion with the general public.
Materiality – Fortum has a process in
place to determine important and material
issues for Fortum´s stakeholders. In 2014
Fortum has utilized the GRI G4 guidelines
and reviewed the sustainability aspects
that are material for Fortum’s business
and its stakeholders. We recommend
Fortum to continue concentrating on the
most material aspects in its sustainability
reporting.
Responsiveness – Fortum has adequate
procedures in place to respond to issues
that are material to its stakeholder and
Fortum is committed to communicate
responses in a manner that meets the
needs and expectations of its
stakeholders so they can take informed
decisions. We recommend Fortum to
further develop the open communication
in an integrated manner to support
Fortum’s business.

• Responsiveness

Our independence and
Our independence and
competences in providing
competences in providing
assurance to Fortum
assurance to Fortum
We complied with Deloitte’s independence
policies which address and, in certain cases,
exceed the requirements of the Code of
Ethics of the International Ethics Standards
Board for Accountants (IESBA) in their role as
independent auditors and in particular
preclude us from taking financial,
commercial, governance and ownership
positions which might affect, or be perceived

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Annual Report 2014

GRI index

GRI index
GRI index

GENERAL STANDARD DISCLOSURES

Code

Description

Section

Further information /
Omission and reason for
omission

Assurance 1)

Global
Compact

STRATEGY AND ANALYSIS

G4-1

G4-2

Statement from the most senior
decision-maker

Description of key impacts, risks and
opportunities

This is Fortum/CEO's review

This is Fortum/Strategy/Sustainability
embedded in the strategy

This is Fortum/Operating environment
and market development

ORGANISATIONAL PROFILE

G4-3

G4-4

Name of the organisation

Name of the organisation: Fortum Oyj

Primary brands, products, and services

Business/Group Business structure

G4-5

Location of headquarters

In Society/Stakeholders/Main
stakeholder groups/Customers

This is Fortum/Operations and market
areas

G4-6

Countries where the organisation
operates

This is Fortum/Operations and market
areas

G4-7

Nature of ownership and legal form

G4-8

Markets served

Business/Group Business structure

Financials/Operating and financial
review/Fortum share and shareholders

This is Fortum/Operations and market
areas

Business/Group Business structure

G4-9

Scale of the organisation

Business/Group Business structure

G4-10

Workforce

Financials/Operating and financial
review/Fortum share and shareholders

Financials/Notes to the consolidated
financial statements/5. Segment
reporting/5.7 Group-wide disclosures

GRI/Social/Labour Practices and Decent
work/Employment/G4-10

This is Fortum/Year 2014 in figures/
Social summary

Only total working hours of
contractors is reported. We do
not track contractors’ working
hours with the accuracy
required by the sector
supplement breakdown.

G4-11

Coverage of collective bargaining
agreements

GRI/Social/Labour Practices and Decent
work/Employment/G4-11

Sector-specific requirements
not reported. We do not track

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Annual Report 2014

GRI index

which of our contractors are
within the sphere of collective
bargaining agreements.

G4-12

Supply chain

G4-13

Significant changes during the
reporting period regarding size,
structure, ownership or supply chain

G4-14

Addressing the precautionary principle

In Society/Stakeholders/Main
stakeholder groups/Suppliers of goods
and services

In Society/Generating economic value/
Distribution of added value 2014

GRI/Standard disclosures/Report
content

Financials/Operating and financial
review/Fortum share and shareholders

In Society/Stakeholders/Main
stakeholder groups/Suppliers of goods
and services

Financials/Operating and financial
review/Risk management/Risk
management framework and objectives

GRI/Standard disclosures/Management
approach

G4-15

External charters, principles or
initiatives endorsed

GRI/Standard disclosures/Management
approach

G4-16

Memberships in associations

IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES

G4-17

Entities included in the organisation's
consolidated financial statements

G4-18

Process for defining report content

G4-19

Material aspects identified

In Society/Stakeholders/Main
stakeholder groups/Authorities and
energy industry organisations

A list of collaboration partners on
Fortum's website

Financials/Notes to the consolidated
financial statements/42. Subsidiaries by
segment

GRI/Standard disclosures/Report
content

GRI/Standard disclosures/Material
aspects

G4-20

G4-21

G4-22

G4-23

Aspect boundary for each material
aspect within the organisation

GRI/Standard disclosures/Material
aspects

Aspect boundary for each material
aspect outside the organisation

GRI/Standard disclosures/Material
aspects

Restatements of information provided
in previous reports

GRI/Standard disclosures/Report
content

Significant changes from previous
reporting periods in the scope and
aspect boundaries

GRI/Standard disclosures/Report
content

STAKEHOLDER ENGAGEMENT

G4-24

List of stakeholder groups engaged

In Society/Stakeholders/Main
stakeholder groups

In Society/Stakeholders/Stakeholder
collaboration

G4-25

Identification and selection of
stakeholders

In Society/Stakeholders/Stakeholder
collaboration

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Annual Report 2014

GRI index

G4-26

G4-27

Approaches to stakeholder
engagement

In Society/Stakeholders/Stakeholder
collaboration

Key topics and concerns raised
through stakeholder engagement

In Society/Stakeholders/Stakeholder
collaboration

In Society/Stakeholders/Main
stakeholder groups

Business/Our operations/Hydropower/
Stakeholder views

Business/Our operations/Nuclear
power/Stakeholder views

GRI/Standard disclosures/Report
content

Contact information

GRI/GRI-index

GRI/Assurance

REPORT PROFILE

G4-28

Reporting period

G4-29

Date of the previous report

G4-30

Reporting cycle

G4-31

G4-32

Contact information

GRI content index

G4-33

Approach regarding external assurance GRI/Assurance

GOVERNANCE

G4-34

Governance structure and committees

G4-35

Delegating authority

G4-36

Positions with responsibility

G4-37

Consultation with stakeholders

G4-38

Composition of the Board of Directors

G4-39

Position of the Chair of the Board

G4-40

Selection of the Board

G4-41

Avoiding conflicts of interest

Governance/Corporate Governance
Statement/Governing bodies of Fortum

GRI/Standard disclosures/Management
approach (Subtopics)

Governance/Corporate Governance
Statement/Governing bodies of Fortum

GRI/Standard disclosures/Management
approach (Subtopics)

Governance/Corporate Governance
Statement/Governing bodies of Fortum

In Society/Stakeholders

Governance/Corporate Governance
Statement/Governing bodies of Fortum/
Board of Directors

Governance/Corporate Governance
Statement/Governing bodies of Fortum/
Shareholders' Nomination Board

Governance/Corporate Governance
Statement/Governing bodies of Fortum/
Board of Directors

G4-42

Board's role in setting the
organisation's purpose, values and
strategy

Governance/Corporate Governance
Statement/Governing bodies of Fortum/
Board of Directors

Governance/Corporate Governance
Statement/Internal controls in relation to
financial reporting/Compliance
Management and Code of Conduct

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Annual Report 2014

GRI index

G4-43

Board's knowledge

G4-44

Board's performance evaluation

Financials/Operating and financial
review/Financial performance and
position/Sustainability

Governance/Corporate Governance
Statement/Governing bodies of Fortum/
Shareholders' Nomination Board

Governance/Corporate Governance
Statement/Governing bodies of Fortum/
Board of Directors

G4-45

Board's role in the identification and
management of risks

Financials/Operating and financial
review/Risk management

In Society/Stakeholders

G4-46

Reviewing the effectiveness of risk
management

Financials/Operating and financial
review/Risk management

G4-47

Frequency of risk reviews

G4-48

Approval of the sustainability report

G4-49

Communicating critical concerns

Financials/Operating and financial
review/Risk management

Governance/Corporate Governance
Statement/Governing bodies of Fortum/
Board of Directors

Working order of the Board on Fortum's
website

GRI/Standard disclosures/Ethics and
integrity

Governance/Corporate Governance
Statement/Internal controls in relation to
financial reporting/Compliance
Management and Code of Conduct

G4-50

Critical concerns reported to the Board Governance/Corporate Governance

G4-51

G4-52

G4-53

Remuneration policies for the Board
and senior executives

Remuneration

Inclusiveness of stakeholders’ views
regarding remuneration

ETHICS AND INTEGRITY

G4-56

Values and business principles

G4-57

Advice on ethical and lawful behaviour

G4-58

Reporting concerns about unethical or
unlawful behaviour

Statement/Governing bodies of Fortum/
Board Committees

Governance/Remuneration

Governance/Corporate Governance
Statement/Governing bodies of Fortum/
Shareholders' Nomination Board

Governance/Corporate Governance
Statement/Internal controls in relation to
financial reporting/Compliance
Management and Code of Conduct

GRI/Standard disclosures/Ethics and
integrity

GENERAL STANDARD DISCLOSURES FOR SECTOR (ELECTRIC UTILITY)

EU1

Installed capacity

GRI/Environmental/Energy/EN3

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Annual Report 2014

GRI index

EU2

Net energy output

This is Fortum/Year 2014 in figures/
Sales and production

We do not disclose a
country-specific breakdown of
production volumes.

EU3

Number of customer accounts

EU4

EU5

Length of transmission and distribution
lines

Allocation of CO2 emission allowances

Business/Our operations/Power and heat
distribution/Power distribution

GRI/Economic/System efficiency/EU12

GRI/Economic/Economic performance/
EC2

1) X = Externally assured

SPECIFIC STANDARD DISCLOSURES

Code

Description

Section 2)

DISCLOSURES ON MANAGEMENT APPROACH

G4-DMA

Management approach

ECONOMIC RESPONSIBILITY

GRI/Standard disclosures/Management
approach

G4-DMA

Management approach to economic
responsibility

GRI/Standard disclosures/Management
approach/Economic

Economic performance

G4-EC1

G4-EC2

Direct economic value generated and
distributed

Financial implications and other risks
and opportunities due to climate
change

EC1

EC2

Financials/Operating and financial
review/Risk management

Fortum's CDP-raporting

G4-EC3

Coverage of the organization's defined
benefit plan obligations

EC3

Financials/Notes to the consolidated
financial statements/32. Pension
obligations

G4-EC4

Financial assistance received from
government

EC4

Plant decommissioning

G4-DMA

Management approach

Plant decommissioning

Financials/Notes to the consolidated
financial statements/30. Nuclear related
assets and liabilities

Further information /
Omission and reason for
omission

Assurance 1)

Global
Compact

Costs of managing climate
change risks and opportunities
are not reported. Management
of risks and opportunities is an
integral part of Fortum’s
strategy and therefore
classified as
business-confidential
information.

Assistance by type and by
country is not reported. The
total amount of assistance
received is not significant.

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GRI index

Transmission and distribution
losses and technical and
non-technical losses are not
itemised; they are reported as a
whole. Data is not collected at
this level of detail.

More detailed information on
management approach to
environmental responsibility is
disclosed in conjunction with
some aspects and the
description of their indicators.

PCB inventory is not reported.
The information is not available.
The aim is to have an inventory
by 2020.

System efficiency

EU11

Average generation efficiency of
thermal plants

EU11

EU12

Transmission and distribution losses

EU12

ENVIRONMENTAL RESPONSIBILITY

G4-DMA

Management approach to
environmental responsibility

GRI/Standard disclosures/Management
approach/Environment

Materials

G4-EN1

Use of materials

G4-EN2

Recycled materials used

Energy

G4-EN3

Energy consumption within the
organisation

G4-EN5

Energy intensity

G4-EN6

Reduction of energy consumption

EN1

EN2

EN3

EN5

EN6

Business/Our operations/Electricity and
heat sales/Energy-efficiency services

Water

G4-EN8

Total water withdrawal by source

EN8

Biodiversity

G4-EN13

Habitats protected or restored

EU13

Emissions

G4-EN15

Biodiversity of offset habitats
compared to the biodiversity of the
affected areas

Direct greenhouse gas (GHG)
emissions (Scope 1)

EN13

EU13

EN15

This is Fortum/Year 2014 in figures/
Environmental summary

G4-EN16

G4-EN17

G4-EN18

Indirect greenhouse gas (GHG)
emissions (Scope 2)

Other indirect greenhouse gas (GHG)
emissions (Scope 3)

Greenhouse gas (GHG) emissions
intensity

EN18

EN16

EN17

EN18

G4-EN21

NOX, SOX, and other significant air
emissions

EN21

This is Fortum/Year 2014 in figures/
Environmental summary

303

Annual Report 2014

GRI index

This is Fortum/Year 2014 in figures/
Environmental summary

Effluents and waste

G4-EN22

Total water discharge by quality and
destination

EN22

G4-EN23

Total weight of waste by type and
disposal method

EN23

Business/Our operations/Nuclear
power/Nuclear waste management

This is Fortum/Year 2014 in figures/
Environmental summary

G4-EN24

Total number and volume of significant
spills

EN24

Compliance

G4-EN29

Significant fines and non-monetary
sanctions for noncompliance with
environmental laws and regulations

EN29

Supplier environmental assessment

G4-EN32

Percentage of new suppliers that were
screened using environmental criteria

GRI/Social/Labour Practices and Decent
work/Supplier assessment: Environment,
labour practices and human rights

G4-EN33

Significant actual and potential
negative environmental impacts in the
supply chain and actions taken

EN33

Environmental grievance mechanisms

G4-EN34

Number of grievances about
environmental impacts filed,
addressed, and resolved through
formal grievance mechanisms

EN34

GRI/Standard disclosures/Ethics and
integrity

SOCIAL RESPONSIBILITY: LABOUR PRACTICES AND DECENT WORK

G4-DMA

Management approach to social
responsibility, labour practices and
decent work

GRI/Standard disclosures/Management
approach/Labour practices and decent
work

Employment

G4-LA1

New employee hires and employee
turnover

LA1

This is Fortum/Year 2014 in figures/
Social summary

G4-LA2

Employee benefits by significant
operating countries

EU18

Contractor and subcontractor
employees that have undergone
relevant health and safety training

LA2

EU18

Emissions are not broken down
by effluent treatment method.
The aim is to have a breakdown
by 2018.

More detailed information on
management approach to
social responsibility is
disclosed in conjunction with
some aspects and the
description of their indicators.

Breakdown of employee
benefits is not done by country.
The aim is to have a breakdown
by 2018.

The number of trained
contractors is reported as a
whole, not by contractor group.
All contractors are trained. The
breakdown is not material.

304

Annual Report 2014

GRI index

Labour/Management relations

G4-LA4

Minimum notice periods regarding
operational changes

Occupational health and safety

G4-LA5

G4-LA6

Workforce represented in formal health
and safety committees

Type of injury and rates of injury,
occupational diseases, lost days, and
absenteeism, and total number of work
related fatalities

LA4

LA5

LA6

Training and education

G4-LA9

Average hours of training per employee

LA9

This is Fortum/Year 2014 in figures/
Social summary

G4-LA10

G4-LA11

Programmes for skills management
and lifelong learning

Percentage of employees receiving
regular performance and career
reviews

LA10

LA11

Diversity and equal opportunity

G4-LA12

Composition of governance bodies and
breakdown of employees

LA12

Governance/Corporate Governance
Statement/Governing bodies of Fortum/
Board of Directors

This is Fortum/Year 2014 in figures/
Social summary

Equal remuneration for women and men

G4-LA13

Ratio of basic salary and remuneration
of women to men

LA13

Supplier assessment for labour practices

G4-LA14

G4-LA15

Percentage of new suppliers that were
screened using labour practices
criteria

GRI/Social/Labour Practices and Decent
work/Supplier assessment: Environment,
labour practices and human rights

Significant actual and potential
negative impacts for labour practices
in the supply chain and actions taken

GRI/Social/Labour Practices and Decent
work/Supplier assessment: Environment,
labour practices and human rights

Labour practices grievance mechanisms

G4-LA16

Number of grievances about labour
practices filed, addressed, and
resolved through formal grievance
mechanisms

LA16

GRI/Standard disclosures/Ethics and
integrity

Not broken down by
contractors’ lost workdays by
region and gender. The
information is not tracked at
this level of detail.

Not reported for all countries.
The information is not available.
The aim is to get the
information for all countries by
2020.

Not reported by employee
group. The information is not
available. The aim is to get the
information and to report by
employee group by 2020.

Reporting doesn’t cover the
"labourers" employee group
because of the small size of the
group.

305

Annual Report 2014

GRI index

SOCIAL RESPONSIBILITY: HUMAN RIGHTS

G4-DMA

Management approach to social
responsibility, human rights

GRI/Standard disclosures/Management
approach/Human rights

Investment

G4-HR1

Human rights screening or clauses
included in significant investment
agreements

G4-HR2

Employee training on human rights
policies or procedures

Non-discrimination

G4-HR3

Incidents of discrimination and
corrective actions taken

Freedom of association and collective bargaining

G4-HR4

Supporting the right to freedom of
association and collective bargaining in
risk areas

Child labour

G4-HR5

Measures taken to eliminate child
labour in risk areas and in operations
of significant suppliers

Forced or compulsory labour

G4-HR6

Measures taken to eliminate forced
and compulsory labour in risk areas
and in operations of significant
suppliers

HR1

HR2

HR3

HR4

HR5

HR6

Assessment

G4-HR9

Operations that have been subject to
human rights reviews or impact
assessments

HR9

Supplier human rights assessment

G4-HR10

Percentage of new suppliers that were
screened using human rights criteria

GRI/Social/Labour Practices and Decent
work/Supplier assessment: Environment,
labour practices and human rights

G4-HR11

Significant actual and potential
negative human rights impacts in the
supply chain and actions taken

GRI/Social/Labour Practices and Decent
work/Supplier assessment: Environment,
labour practices and human rights

Human rights grievance mechanisms

G4-HR12

Number of grievances about human
rights impacts filed, addressed, and
resolved through formal grievance
mechanisms

HR12

GRI/Standard disclosures/Ethics and
integrity

More detailed information on
management approach to
social responsibility is
disclosed in conjunction with
some aspects and the
description of their indicators.

Percentage of human rights
assessments and agreements
that have human rights-related
terms is not reported. The aim
is to obtain this information by
2020.

Country-specific breakdown is
business confidential and is not
reported.

306

More detailed information on
management approach to
social responsibility is
disclosed in conjunction with
some aspects and the
description of their indicators.

Not reported because our
projects have no significant
displacements of people, and
information on total amounts of
compensation is not available.

For business partners, the most
material types of collaboration
partners are reported without a
complete breakdown by region.

Annual Report 2014

SOCIAL RESPONSIBILITY: SOCIETY

G4-DMA

Management approach to social
responsibility, society

GRI / Standard disclosures /
Management approach / Society

Local communities

G4-SO2

EU22

Operations with significant actual and
potential negative impacts on local
communities

SO2

Number of people physically or
economically displaced and
compensation

Anti-corruption

G4-SO3

Operations assessed for risks related
to corruption and the significant risks
identified

SO3

G4-SO4

Communication and training on
anti-corruption policies and procedures

SO4

G4-SO5

Confirmed incidents of corruption and
actions taken

SO5

Public policy

G4-SO6

Total value of political contributions

SO6

Anti-competitive behaviour

G4-SO7

Total number of legal actions for
anticompetitive behavior, anti-trust,
and monopoly practices and their
outcomes

Compliance

G4-SO8

Significant fines and non-monetary
sanctions for non-compliance with
laws and regulations

Grievance mechanisms for impacts on society

G4-SO11

Number of grievances about impacts
on society filed, addressed, and
resolved through formal grievance
mechanisms

SO7

SO8

SO11

Disaster/Emergency planning and response

G4-DMA

Management approach

GRI/Standard disclosures/Ethics and
integrity

Disaster/Emergency planning and
response

SOCIAL RESPONSIBILITY: PRODUCT RESPONSIBILITY

G4-DMA

Management approach to social
responsibility, product responsibility

GRI/Standard disclosures/Management
approach/Product responsibility

Product and service labeling

G4-PR3

Product and service information
required by procedures

PR3

GRI index

307

Annual Report 2014

GRI index

G4-PR5

Results of surveys measuring customer
satisfaction

PR5

Marketing communications

G4-PR7

Access

EU28

EU29

EU30

Total number of incidents of
noncompliance with regulations and
voluntary codes concerning marketing
communications

PR7

Power outage frequency

Average power outage duration

Average plant availability factor

EU28

EU29

EU30

1) X = Externally assured

2) If a path is not provided, the indicator is reported in conjunction with the relevant aspect.

We report the energy
availability of our power plants,
not the stoppage hours and
time availability. Energy
availability is more material in
terms of impact.

308

Annual Report 2014

Economic responsibility

responsibility
Economic responsibility
Economic

Economic performance
Economic performance

EC1 Direct economic
EC1 Direct economic
value generated and
value generated and
distributed
distributed
We analyse the economic impacts of our
operations and the produced well-being on
the different stakeholders in our operating

countries and market areas. The key
stakeholders include shareholders and
investors, customers, personnel, suppliers of
goods and services, and the public sector. In
terms of suppliers of goods and services, we
also assess the global impacts, paying
particular attention to suppliers of goods and
services operating in risk countries. In 2014,

Monetary flows by stakeholder group in 2012-2014

EUR million

Generation of added value

Income from customers

Divestments

Purchases from suppliers

Fortum produced added value

Distribution of added value

Employees compensation

Funders compensation

Public sector

Distributed to stakeholders

Retained in business

Income from customers on the basis of
products and services sold and financial
income.

Income from divestment of shares,

business activities or plants

Cash payments to suppliers of raw
materials, goods and services

Wages, salaries, remunerations and other
indirect employee costs

Dividends paid to investors, interest,
realised foreign exchange gains and losses
and other financial expenses

Income and production taxes paid, support
for society and donations

1) Comparative period information for 2013 has been restated due to the accounting change for Fortum Värme.
2) Comparative period information for 2012 has been restated due to the accounting change for pensions.

The distribution of the economic added value
generated by our operations to the most
significant operating areas is reported in the
following parts of the Annual Report:

• Sales by country based on customer

location

• Employee costs by country
• Taxes

Investments are not included in the
calculation of distributed added value in
accordance with GRI, but we have included
investments in our own assessment of

economic impacts, as their annual volume
and impact on the society is significant.
Capital expenditure by country and by
production type is presented in Financial
Statements Note 19.2 Investments.

Read more about
Read more about
• Our economic impacts

the difference between added value
generated and distributed to stakeholders
was EUR 4,005 (2013: 869) million for the
development of own operations.

2014

20131)

2012

4,901

5,630

6,398

3,219

-2,240

5,880

210

-2,766

3,073

-413

-460

-958

-504

-1,875

4,005

-1,212

-532

-2,204

869

-3,002

3,396

-5432)

-1,514

-593

-2,650

746

EC2 Financial
EC2 Financial
implications and other
implications and other
risks and opportunities
risks and opportunities
due to climate change
due to climate change
Climate change poses financial, regulatory
and physical risks as well as opportunities for
Fortum. As energy production and use is the
largest source of greenhouse gases, the
energy sector has a central role in building a
low-carbon future. The energy industry has
established visions and roadmaps of the
future energy system and is prepared to

309

Annual Report 2014

Economic responsibility

invest in new climate-benign production
capacity, provided that the related policy
framework and preconditions of society are in
place.

The primary impact of climate regulation for
Fortum is the price of carbon dioxide in EU
emissions trading and the cost arising from it.
This also determines the financial value for
the reduction of emissions. The price of CO2
increases the production cost of fossil-based
energy, but it also raises the prices of energy
products. The best way to reduce the risk
related to the price of carbon dioxide is to
increase CO2-free and low-carbon production
capacity.

Our energy production in Finland, Poland and
the Baltic countries is subject to the EU’s
emissions trading scheme. In Russia there is
no comparable control system for
greenhouse gases. In 2014, about 94%
(2013: 90%) of our electricity production in
the EU was CO2-free. In 2014, we had a total
of 49 (2013: 51) plants in six member states
within the EU’s emissions trading scheme.
About 98% of the CO2 emissions in the EU
area were included in the emissions trading
system. In 2014, Fortum was granted 1.4
(2013: 1.8) million tonnes in free emissions
allowances. The company’s emissions in the
EU emissions trading scheme were 3.6
(2013: 5.1) million tonnes. Thus, in terms of
emissions allowances, Fortum showed a
deficit.

In the third, ongoing ETS period, 2013-2020,
the volume of our free emissions allowances
will decrease significantly, because electricity
production has to purchase all allowances
from the market or auctions. Only in Poland
and the Baltic countries will our CHP plants

receive free allowances also for electricity
production on the basis of the derogation
rules of the Emissions Trading Directive.

In Russia, our CO2 emissions will grow in
upcoming years as a result of the increasing
energy production capacity. In Russia, carbon
dioxide emissions do not yet have economic
value.

Fortum is participating in two international
climate funds, the Prototype Carbon Fund
(PCF) and the Testing Ground Facility (TGF).
In 2014, we received a total 227,047
emission reduction units from these funds. All
emission reduction units received were CER
units. We have so far received a total of
999,077 emission reduction units, and we
estimate that we will still receive about
200,000 units during the funds’ operating
period.

Fortum is exposed to physical risks of climate
change, including changes in weather
patterns that may change energy demand
and supply from, e.g., hydropower plants.
More frequent and intensive storms may
impact the operation and maintenance of the
distribution network. Higher precipitation and
temperature may affect hydropower
production, dam safety and bioenergy supply.
In addition to climate change mitigation, we
are also taking measures to adapt
our operations to climate change and to take
the impacts into consideration, e.g. in
production planning and in evaluating growth
projects.

We expect the concern about climate
change result in an increasing demand for
low-carbon and energy-efficient energy
products and solutions. Our know-how in

Plant decommissioning
Plant decommissioning

CO2-free hydro and nuclear power and in
energy-efficient CHP as well as research and
development in the future energy system and
technologies can prove to be a competitive
advantage. We are investing in CO2-free
production in Europe and see business
opportunities in providing climate-benign
energy solutions for sustainable urban living
and the electrification of transport.

Read more about
Read more about
• Risks and opportunities of climate change

for Fortum

EC3 Coverage of the
EC3 Coverage of the
organization's
defined
organization's defined
benefit plan obligations
benefit plan obligations
Our pension arrangements conform to the
local regulations and practices in each
operating country; the arrangements are
discussed in Financial Statements Note 32
Pension obligations.

EC4 Financial assistance
EC4 Financial assistance
received from
received from
government
government
We received financial support from the public
sector in the form of production-related
subsidies, investments, R&D and other
significant grants (over EUR 0.5 million)
totalling EUR 3 (2013: 8) million. The figure
excludes free emission allowances and
electricity certificates. The Finnish State
owns 50.8% of Fortum.

Provisions related to nuclear power are
covered in the financial statement, note 30,
Nuclear related assets and liabilities.

In Finland and Sweden, the producers of
nuclear waste are responsible for
management and final disposal of the nuclear
waste and for the related costs. In Finland,
nuclear waste management principles and
timetables were decided on already back in
the 1980s, and the construction of waste
management solutions has advanced
according to plans.

The licence holders are responsible for the
management of power plant waste generated
during the operation of the Loviisa and

Olkiluoto nuclear power plants and for the
management of future decommissioning
waste. The practical implementation of the
final disposal of spent nuclear fuel from the
companies is handled by Posiva Oy, which is
co-owned by Fortum and TVO. Posiva Oy’s
construction licence application for the spent
nuclear fuel encapsulation plant and final
disposal facility is currently under
assessment by the Government and the
Radiation and Nuclear Safety Authority STUK.
The Radiation and Nuclear Safety Authority
noted in its statement in February 2015 that
the plant can be built to be safe.
Preparedness to start final repository

operations is estimated to be achieved
around 2020.

Svensk Kärnbränslehantering AB (SKB)
handles the final disposal of the nuclear
waste generated by Fortum’s co- owned
nuclear power plants in Sweden. In March
2011, the company submitted a construction
licence application to build an encapsulation
and final disposal plant for spent fuel; the
application is still being reviewed by the
authorities. The final repository for spent fuel
is planned to be built at Forsmark. After
construction and a test-run period, disposal
operations could start in the late 2020s.

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Economic responsibility

Read more about
Read more about
• Our nuclear power production

System efficiency
System efficiency

EU11 Average generation
EU11 Average generation
efficiency of thermal
efficiency of thermal
plants
plants
Until the end of 2014, Fortum had a Group-
level target (>70%) for overall efficiency of
fuel-use as a 5-year average. Efficiency in

2014 was 64.0% (2013: 59.4%) and the
5-year rolling average 63.2% (2013: 63.6%).
The calculation covers power plants and heat
boilers.

The accompanying table presents the
average thermal efficiency of our power
plants by country and by fuel. Co-firing

covers various combinations of coal, natural
gas, biomass, waste-derived fuels and peat.
For CHP plants, the efficiency calculations
take into account both electricity and heat
production.

Read more about
Read more about
• Combined heat and power production

Average thermal efficiency by country and fuel type

Finland

Russia

Poland

The Baltic countries

Great Britain

Coal

Gas

Biomass

Co-firing

EU12 Transmission and
EU12 Transmission and
distribution losses
distribution losses
At the end of 2014, Fortum had power
transmission business only in Sweden. The
total length of Fortum’s power distribution

and transmission networks was about 71,600
km. Overhead lines accounted for 22,600 km
and underground cables 49,000 km.

Our electricity transmission and distribution
losses in Sweden totalled 795 (2013: 813)

GWh. The losses were 3.0% (2013: 3.2%) of
the total amount of electricity transmitted
and distributed. Guarantees of origin (CO2-
free electricity) were acquired for all the
electricity purchased to compensate for
network losses.

311

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Environmental responsibility

responsibility
Environmental responsibility
Environmental

Materials
Materials

EN1 Use of materials
EN1 Use of materials
Our materials use mainly consists of fuels. In
our operations, we aim to use natural
resources efficiently and sparingly.

Fuel consumption in 2012-2014

Non-renewable fuels

Natural gas, million m3

Coal, 1,000 t

Waste-derived fuel, fossil 1,000 t

Peat, 1,000 t

Fuel oil, 1,000 t

Nuclear fuel, t

Renewable fuels

Biomass and bio liquids, 1,000 t

Waste-derived fuel, renewable 1,000 t

2014

8,148

2,539

161

1,264

177

1) Includes joint venture AB Fortum Värme samägt med Stockholms Stad

Fuel consumption by country in 2014

Natural gas, million m3

Coal, 1,000 t

Biomass and bio liquids, 1,000 t

Waste-derived fuel, 1,000 t

Peat, 1,000 t

Fuel oil, 1,000 t

Nuclear fuel, t

Other fuels, 1,000 t

Finland

800

321

122

Poland

402

193

Russia

7,805

1,336

2013

7,844

2,843

221

227

1,428

633

Other
countries

254

751

141

20121)

7,844

2,536

320

269

1,790

486

Total

8,148

2,539

1,264

264

161

In 2014, we used 8.1 billion m3 of natural gas
and 4.2 million tonnes of solid and liquid
fuels. Natural gas and 68% (2013: 67%) of
solid and liquid fuels were of non-renewable
origin.

Joint venture Fortum Värme used a total
of 1.6 (2013: 1.7) million tonnes of fuel, of
which various biomasses and bio liquids
accounted for 451,000 (2013: 667,000)
tonnes, waste derived fuels 930,000 (2013:

765,000) tonnes and coal 207,000 (2013:
249,000) tonnes.

The reported volumes are based on
measurements at the power plants and heat-
only boilers. The energy content of the fuels
is described in EN3.

EN2 Recycled materials
EN2 Recycled materials
usedused
We used 264,000 (2013: 221,000) tonnes of
waste-derived fuels in Finland and Lithuania.
Recycled input materials accounted for 6%
(2013: 5%) of the total mass of solid and
liquid fuels used.

In Sweden, joint venture Fortum Värme
used 930,000 (2013: 765,000) tonnes of

312

Annual Report 2014

Environmental responsibility

waste-derived fuels, which was 58% (2013:
45%) of total fuel use.

Reported volumes are based on
measurements at the power plants using
waste-derived fuels.

Energy
Energy

EN3 Energy consumption
EN3 Energy consumption
within the organisation
within the organisation
Fuel consumption
Fuel consumption
Fortum’s fuel consumption in own energy
production was 117 terawatt-hours (TWh), or

Fuel consumption in 2012-2014

petajoules

Natural gas

Nuclear fuel

Coal

Waste-derived fuel, fossil

Peat

Other fossil

Non-renewable fuels total

Biomass and bio liquids

Waste-derived fuel, renewable

Renewable fuels total

422 (2013: 419) petajoules (PJ). The most
significant fuel was natural gas,
which accounted for 65% (2013: 63%) of the
total fuel consumption. The shares of uranium
and coal were 19% (2013: 20%) and 11%
(2013: 13%) correspondingly.

2014

276.1

81.6

46.8

0.8

1.6

0.6

407.5

12.5

1.5

14.0

2013

264.5

83.3

53.0

1.0

2.2

1.0

405.0

12.3

1.2

13.5

20121)

273.8

89.0

51.0

3.3

2.7

2.1

421.9

21.9

4.9

26.8

1) Includes joint venture AB Fortum Värme samägt med Stockholms Stad

Biomass and bio liquids accounted for 3.0%
(2013: 3.1%) and waste-derived fuels 0.5%
(2013: 0.5%) of our total fuel consumption.

In Sweden, joint venture Fortum Värme used
a total of 6.2 TWh, or 22 (2013: 26) PJ of
fuels. Biomass and bio liquids accounted for
31% (2013: 44%) and waste-derived fuels 42%
(2013: 29%) of total fuel consumption.

Fuel consumption has been calculated based
on the volumes and fuel-specific heat values
measured at the power plants. Uranium
consumption has been calculated as the
thermal heat generation in the reactors.

Consumption of electricity and
Consumption of electricity and
heatheat
Our external electricity procurement for
power plants and heat boilers was 401
(2013: 406) GWh. In addition, 795 (2013:
813) GWh was purchased to offset losses
in electricity transmission and distribution in
Sweden.

In 2014, we did not buy heat or steam for
own use from external suppliers.

Joint venture Fortum Värme’s external
electricity purchases totalled 839 (2013:
934) GWh.

Reported electricity consumption is based on
measurements at our sites.

Electricity generation and heat
Electricity generation and heat
production
production
Corresponding to the fuel consumption and
electricity production discussed above, we
produced about 34,900 (2013: 31,100) GWh
of electricity, 33,700 (2013: 31,900) GWh of
heat and steam and 16 (2013: 12) GWh of
cooling for sale at our own power plants and
heat-only boilers.

In addition, we generated about 22,300
(2013: 18,000) GWh of hydro, solar and wind
power, including our power shares in the
shared companies.

Joint venture Fortum Värme produced 1,048
(2013: 1,207) GWh of electricity, 7,074
(2013: 8,164) GWh of district heat, 460
(2013: 455) GWh of cooling and 96 (2013:
106) GWh of town gas. In addition, Fortum
Värme produced 263 GWh of wind
power with leased wind turbines.

Our total power generation and heat
production by energy source are shown in the
following tables. The tables have been
consolidated in accordance with the
boundaries applied in financial reporting. The
figures for power generation include also
power shares in the hydro, wind and nuclear
power plants of shared companies.

64% of our total power generation was
carbon-free and 32% was produced from
renewable energy sources. 6% of our total
heat production was produced from
renewable, carbon-free energy sources.

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Annual Report 2014

Environmental responsibility

Fortum's power production by energy source in 2012–2014

TWh

Hydro power

Nuclear power

Natural gas

Coal

Biomass

Peat

Other

Total

1) Includes joint venture AB Fortum Värme samägt med Stockholms stad

Fortum's heat production by energy source in 2012-2014

TWh

Natural gas

Coal

Biomass and bioliquids

Heat pumps, electricity

Waste-derived fuel

Oil

Peat

Total

2014

22.3

23.8

22.5

3.6

0.9

0.1

0.2

73.4

2014

26.7

5.1

2.0

0.1

0.3

0.1

0.3

34.6

2013

18.0

23.7

20.0

4.0

1.1

0.1

0.5

67.4

2013

26.1

4.6

2.8

0.3

0.4

0.1

0.3

34.6

20121)

25.2

23.4

19.4

3.3

1.3

0.1

0.3

73.1

20121)

27.0

5.3

4.9

3.4

1.9

0.4

43.3

1) Includes joint venture AB Fortum Värme samägt med Stockholms Stad

Energy production capacity
Energy production capacity
Our power generation and heat production
capacities on 31 December 2014 are shown
in the following tables. The figures comply
with the boundaries used in financial
reporting and they include power shares from
hydro, wind and nuclear power plants of
shared companies.

Total energy consumption within
Total energy consumption within
Fortum
Fortum
Our total energy consumption, calculated as
the difference between the procured energy
resources (fuels and electricity) and net
production, was 167 (2013: 195) PJ.

Power generation capacity by country and energy source

Hydropower

Nuclear power

Wind and solar power

Natural gas

Coal

Biomass and bioliquids

Other fuels

Total

Finland

Sweden

Russia

Poland

Baltic
countries

1,526

1,460

284

1,212

3,088

1,820

4,501

257

228

4,551

4,950

4,758

257

India

Total

4,615

3,279

4,807

1,697

147

14,624

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Heat production capacity by country and energy source

Natural gas

Coal

Biomass and bioliquids

Peat

Other fuels

Total

Russia

12,575

891

Finland

1,432

265

195

Poland

Baltic countries

1,089

333

381

811

Total

14,397

2,245

619

111

17,402

1,936

13,466

1,189

EN5 Energy intensity
EN5 Energy intensity
In combustion-based energy production, we
aim to utilise the fuel as efficiently as
possible. Until 2014, we measured our
energy efficiency with the overall efficiency of
fuel use. This is calculated by dividing the
energy (electricity and heat) produced with
fuels by the heat energy of the fuels used.
Our target was to achieve the efficiency of
70%, calculated as a five-year average. In
2014, the fuel use efficiency was 64% and the
five-year average 63% (2013: 64%).

The energy intensity of our own production
was 1.37 (2013: 1.46). The intensity figure
has been calculated by dividing the sum
of fuel consumption and external electricity
procurement by the total energy production,
including hydro power and solar power.

EN6 Reduction of energy
EN6 Reduction of energy
consumption
consumption
We apply the principle of continuous
improvement in developing the energy
efficiency of the existing power plant fleet.
Out target is to achieve over 1,400 GWh of
annual energy savings by the year 2020 as
compared to 2012. This energy savings is
equal to the annual heat energy need of more
than 75,000 homes (18,500 kWh per home)
or more than the annual production of over
200 wind turbines of 2.5 MW. During 2013
and 2014, we have already achieved 681
GWh or 49% of this target. The actions
implemented in 2014 produced a total
savings of 592 GWh (2 131 TJ).

The most important measures have been

• The integration of the district heat

networks of the Chelyabinsk CHP-1 and
CHP-2 power plants in 2014.

This investment enables optimal operation
of the power plants and maximal
production of the new energy-efficient gas
turbine units at CHP-1. The annual energy
savings is an estimated 469 GWh.
• The hydropower plant refurbishments
produce 61 GWh of new hydropower
annually; the improvements implemented
in 2014 account for 20 GWh.

• Heat recovery from sealing steam and

other waste heat streams was
implemented at Joensuu power plant,
giving an annual fuel savings of 17.5
GWh.

Read more about
Read more about
• Our products for reducing custumers'

energy consumption

• Hydropower refurbishments
• Our other actions increasing energy

efficiency

WaterWater

EN8 Total water
EN8 Total water
withdrawal by source
withdrawal by source
We withdrew a total of 2,178 (2013: 2,312)
million cubic metres of water, of which the
majority, 2,094 (2013: 2,231) million cubic
metres, was used as cooling water for
condensers in thermal power plants. The
temperature of the water flowing through the
condensers rises slightly but the volume of
water remains unchanged when it is pumped
back into the water system. Power plants in

Russia and Poland also use cooling towers, in
which part of the water evaporates into the
atmosphere. The water added to the cooling
towers’ water circulation was previously
reported as cooling water. Since 2013, this
water is reported as part of the process water
because the volume and quality of the water
change significantly in the cooling towers'
water circulation. In Russia, water is used
also for pumping ash from coal-fired power
plants into ash ponds.

Reported water withdrawal is based on water
flow measurements at power plants and heat
boilers.

In hydropower production, all the water runs
through turbines, so the water volume and
quality remain unchanged. Hydropower
production is not included in the above
mentioned figures for water withdrawal.

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Water withdrawal by source in 2012-2014

million m3

Sea water

Fresh surface water

Tap water

Other source

Total

1) Includes joint venture AB Fortum Värme samägt med Stockholms Stad

Water use in 2012-2014

million m3

Cooling water

Process and auxiliary water

Recycled water

1) Includes joint venture AB Fortum Värme samägt med Stockholms Stad
2) Cooling tower make-up water counted as process water starting from 2013

2014

1,573

594

6.1

5.8

2,178

2014

2,094

842)

2013

1,702

598

6.8

5.3

2,312

2013

2,231

822)

20121)

1,629

573

8.1

0.2

2,210

20121)

2,017

Biodiversity
Biodiversity

Fortum’s impacts on biodiversity are primarily
related to hydropower production the
company has in Finland and Sweden.
Hydropower construction and the related
regulating of water change the conditions in
water systems and thus may impact the
diversity of the aquatic habitat and, in
particular, the fish population. Emissions of
energy production based on fossil fuels may
decrease local biodiversity especially in
Russia. In addition, our electricity distribution
operations and fuel procurement may have a
negative impact in areas that are rich in
biodiversity. Biodiversity aspects are taken
into consideration in fuel procurement.

Fortum’s Biodiversity guidelines set the
principles for taking biodiversity into
consideration and for managing the impacts
of the company’s operations on biodiversity.
In January 2014, we joined the Finnish
Business & Society’s (FiBS) Corporations and
Biodiversity programme. We also participated
in the Master Class training within the
framework of the programme.

The main impacts on biodiversity are
assessed in the pre-feasibility phase of a
project, and, in bigger projects, also as part
of the Environmental Impact Assessment
(EIA) process. We offset and reduce the
impacts of hydropower production on
biodiversity by stocking fish and through
voluntary environmental projects.

In electricity network operations,
underground cabling protects biodiversity and
reduces the impact on the landscape and
birds. The share of underground cables of our
electricity network in Sweden is 68%.
Measures to prevent bird collisions and
electric shocks include isolation of the live
parts of the network, mounting marker balls
on overhead lines and installing landing
perches on poles. New power lines are built
in public areas and along roadsides whenever
possible.

During 2014, we started gathering data on
the volume of certified wood fuel in Finland,
Sweden, Poland and the Baltics. This kind of
fuel originates from sustainable energy
sources in which special attention is paid to
biodiversity.

EN13 Habitats protected
EN13 Habitats protected
or restored
or restored
River fish habitats, particularly for grayling
and trout, were restored in four areas along
the Vuoksi river in Finland in 2013-2014. The
areas are located in the section of the river
between the Tainionkoski and the Imatra
power plants, and they are about 0.45
hectars in size; about 0.2 hectars of it was
restored in 2014. We used Fortum’s habitat
modelling in the restoration planning. In the
restoration, the shoreline areas of the
channels dredged during hydropower

construction were shaped, gravelled and
rocked to become spawning areas for
grayling and trout.

We implemented the project in partnership
with the city of Imatra, the Finnish
Association for Nature Conservation (FANC)
and the Southeast Finland Centre for
Economic Development, Transport and the
Environment (ELY centre). A restoration
expert from the ELY centre participated in the
restoration planning and guidance. The
follow-up study done by the ELY centre in
2014 found wild trout in two of the three
restoration areas. So there are good signs of
a successful restoration, but the final results
can be seen in a few years.

In Sweden, restoration opportunities to
protect the Gullspång river’s unique salmon
population were studied during the year.
Restoration opportunities were also studied
in the Rottan river. In the Bulsjöån river, the
integration of the local endangered
freshwater pearl mussel was monitored
through a research project in collaboration
with the local environmental authorities.

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EU13 Biodiversity of
EU13 Biodiversity of
offset habitats compared
offset habitats compared
to the biodiversity of the
to the biodiversity of the
affected areas
affected areas
Eldbäcken biochannel
Eldbäcken biochannel
In conjunction with the construction of our
new Eldforsen hydropower plant located on
the Västerdalälven river in Sweden, in 2011
we released water into the old river bed as a
voluntary environmental measure and built a
500-meter-long bypass, or biochannel, to
support biodiversity. One purpose of the
Eldbäcken biochannel was to offset the
biodiversity lost in conjunction with the
hydropower plant construction. However,
another goal of the project is to study how
different species colonise the channel habitat
and how they can be used to replace the
decreased biodiversity.

Emissions
Emissions

EN15 Direct greenhouse
EN15 Direct greenhouse
gas (GHG) emissions
gas (GHG) emissions
(Scope 1)
(Scope 1)
Our direct greenhouse emissions were 20.5
(2013: 20.7) million CO2-equivalent tonnes.

Direct GHG emissions in 2012-2014

MtCO2eq

CO2

CH4

N2O

HFCs

SF6

Total

The biochannel is a joint project of Fortum
and Karlstad University, and the shaping of
the channel and the studies are continuing.
In 2014 the channel was widened and wood
material was added to it to increase the
diversity; habitats were also created for the
endangered freshwater pearl mussel. The fish
population in the channel has been studied
with electro fishing and the results are
promising: The studies in 2014 found burbot
(Lota lota), minnows (Phoxinus phoxinus) and
brown trout (Salmo trutta) in the channel. The
biodiversity of the biochannel probably isn’t
as high as the diversity in the pre-
construction river channel, but it supports the
biodiversity in the entire river and locally.

Imatra’s urban brook
Imatra’s urban brook
In 2014, the city of Imatra built an urban
brook bypassing the Imatra hydropower
plant. The purpose of the brook is to act as a

substitute habitat, particularly as an area for
spawning and for juvenile fish, for the Vuoksi
river’s rare trout population. We participated
in the project by allowing the use of our land
and the water bypassing our power plant for
free. In particular, trout reproduction areas
have decreased in the Vuoksi river as a
consequence of hydropower plant
construction.

The fish reproduction area of the about
kilometre-long brook is about 0.2 hectars.
The biodiversity of a brook differs from the
original habitat of a big river, and its value for
juvenile fish production will be seen within
some years. The brook channel was finished
and water was released into it at the end of
the year, so it will take a few years for it to
evolve into a juvenile fish production area.
The development is accelerated by
introducing organic material and local trout to
the channel.

The share of carbon dioxide from direct
greenhouse gas emissions was over 99%.

The share of direct greenhouse gas emissions
of our total greenhouse gas emissions was
80%.

2014

20.3

0.01

0.15

0.0

20.5

2013

20.5

0.01

0.14

0.008

0.001

20.7

20121)

20.7

0.1

0.2

0.005

0.001

21.0

1) Includes joint venture AB Fortum Värme samägt med Stockholms Stad

Of the carbon dioxide emissions, 82% (2013:
75%) originated from the Russian operations
and 11% (2013: 17%) from Finland. Carbon
dioxide emissions increased in Russia with
the commissioning of the new capacity and
decreased in Finland due to the decline in
condensing power production.

Fortum’s direct biogenic carbon dioxide
emissions were 1.3 (2013: 1.2) million
tonnes.

Joint venture Fortum Värme’s
direct greenhouse gas emissions were 1,0
(2013: 1,0) million tonnes and direct biogenic

carbon dioxide emissions 1.3 (2013: 1.2)
million tonnes.

Carbon dioxide emissions as well as methane
and nitrous oxide emissions have been
calculated based on plant-specific fuel data.
Specific CO2 emission factors are based on
IPCC publications.

The specific CO2 emissions from electricity
generation, as requested by the document
"Electric Utilities Sector Disclosures", are
shown under the indicator EN18.

EN16 Indirect greenhouse
EN16 Indirect greenhouse
gas (GHG) emissions
gas (GHG) emissions
(Scope 2)
(Scope 2)
Greenhouse gas emissions from the
production of electricity purchased for our
own use were 136,000 tonnes of carbon
dioxide equivalent. Carbon dioxide emissions
accounted for over 99% of this.

The share of Scope 2 greenhouse gas
emissions of our total greenhouse gas
emissions was 1%.

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Scope 2 greenhouse gases of joint venture
Fortum Värme were 56,000 tonnes.

The Scope 2 emissions have been estimated
on the basis of country-specific breakdowns
of electricity production.

Fortum Markets buys the electricity sold to
customers from the Nordic electricity
exchange. Scope 2 greenhouse gas
emissions are not known for the production
of the electricity sold in the electricity

exchange. Consequently, we can not
estimate the share of Scope 2 greenhouse
gas emissions in the electricity sold to
customers.

Indirect GHG emissions (Scope 2) by country in 2014

tCO2eq

Finland

Sweden

Russia

Other countries

Total

Indirect GHG emissions (Scope 2) in 2012-2014

tCO2eq

CO2

CH4

N2O

Total

2014

136,000

389

136,000

20131)

309,000

600

5,200

315,000

2014

5,000

2,000

119,000

10,000

136,000

20121)

143,000

300

3,300

147,000

1) Includes joint venture AB Fortum Värme samägt med Stockholms Stad

EN17 Other indirect
EN17 Other indirect
greenhouse gas (GHG)
greenhouse gas (GHG)
emissions (Scope 3)
emissions (Scope 3)
Since 2013, we have reported the Scope 3
greenhouse emissions in accordance with
requirements of the Corporate Value Chain
(Scope 3) Accounting and Reporting
standard.

The majority of our Scope 3 emissions are
caused by the production and transportation

of fuels, purchases of goods and services,
and investments. Other activities (e.g.
employee travel and waste management)
account for less than 1%.

In 2014, our Scope 3 greenhouse gas
emissions were an estimated 5.0 million
tonnes. This was 19% of our total greenhouse
gas emissions.

We estimate that all of our Scope 3
greenhouse gases come from fossil energy
sources.

Indirect GHG emissions (Scope 3) in 2013-2014

tCO2eq

Fuel procurement

Purchased good and services

Capital goods

Other activities

Total

The Scope 3 greenhouse gas emissions of
joint venture Fortum Värme were 260,000
tonnes.

The volumes describing the scope of the
various activities have been obtained from
our monitoring and reporting system. The
specific emission factors used in calculating
the greenhouse gas emissions are based on
different literature sources.

2014

4,800,000

112,000

51,000

21,000

4,984,000

20131)

4,919,000

286,000

196,000

61,000

5,462,000

1) Includes joint venture AB Fortum Värme samägt med Stockholms Stad

EN18 Greenhouse gas
EN18 Greenhouse gas
(GHG) emissions
(GHG) emissions
intensity
intensity
Our specific CO2 emissions (Scope 1) from
total energy production were 189 (2013:
204) g/kWh. The five-year average, including

2014, increased to 198 (2013: 197) g/kWh.
The five-year average of the specific CO2
emissions from total energy production have
been increasing during the last five years,
although we are below the target level of
<200 g/kWh. The increase in the specific
emissions is a result of the increase in the
relative share of our Russian energy

production based on natural gas and coal in
our total production.

Our specific CO2 emissions (Scope 1) from
power production in the EU were 39 (2013:
64) g/kWh and the five-year average,
including 2014, was 60 (2013: 60) g/kWh.
The specific CO2 emissions from our power

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production are low compared to other
European power producers. Our specific
emissions in 2013 were about one-fifth of the
328 g/kWh average specific emissions of
major European utilities.

Including our Russian power production, our
specific emissions were about 60% of the
average level of European utilities. European
reference data for 2014 is not yet available.

The boundary for electricity production’s
specific carbon dioxide emissions differs from
other environmental reporting. Fortum’s
production shares in associate companies
are also included. This production is based on

hydro and nuclear power, and it doesn’t
cause any direct carbon dioxide emissions.

The specific carbon dioxide emissions (Scope
1) by country from electricity production, as
required by the document Electric Utilities
Sector Disclosures, are presented in the
following tables.

In the calculation of electricity production’s
specific emissions, CHP plant emissions have
been allocated for electricity and heat using
the efficiency method presented in the
Greenhouse Gas Protocol guidelines, using
heat production efficiency of 90% and
electricity production efficiency of 40%.

Specific CO2 emissions of total electricity generation in 2012-2014

Fortum Markets acquires all of the electricity
it sells to end consumers from the Nordic
electricity exchange. In 2014, a guarantee of
origin was acquired for all the electricity
(10.2 TWh) sold in Finland and Sweden, and
the electricity was sold to the end user as
carbon-free. In Norway, Fortum Markets sold
1.7 TWh of electricity, 0.3 TWh of which as
carbon-free hydro electricity. The specific
carbon dioxide emissions of the Nordic
electricity exchange’s residual distribution for
2014 will be known in June 2015. In 2013 it
was 258 g/kWh.

g/kWh

Finland

Sweden

Russia

Poland

Estonia

Latvia

Lithuania

India

Great Britain

Fortum total

2014

464

675

154

365

177

Specific CO2 emissions of electricity generation from fossil fuels in 2012-2014

g/kWh

Finland

Russia

Poland

Latvia

Great Britain

Fortum total

2014

758

464

675

330

365

482

2013

115

506

631

103

182

286

359

209

2013

730

506

631

333

359

519

2012

508

659

167

337

368

168

2012

675

508

659

337

368

515

EN21 NO
, and
EN21 NOXX, SO, SOXX, and
other significant air
other significant air
emissions
emissions
In 2014, our thermal energy production
emitted 28,700 (2013: 30,800) of nitrogen
oxides (NOX), 20,400 (2013: 22,000) tonnes

of sulphur dioxide (SO2) and 21,300 (2013:
20,800) tonnes of particles. Reduction in
sulphur and nitrogen emissions was caused
primarily by decrased condensing power
production in Finland.

and at most heat only boilers, emissions are
calculated using fuel data and fuel specific
emission factors. Emission factors can be
based on measurements at regular intervals
or information from the boiler manufacturer.

Reporting of emissions from our European
power plants is based on continuous
measurement. At our Russian power plants

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Fortum's SO2, NOX and particle emissions in 2012-2014

thousand tonnes

SO2

NOX

Particles

2014

20.4

28.7

21.3

1) Includes joint venture AB Fortum Värme samägt med Stockholms Stad

77% (2013: 70%) of the flue-gas emissions
(SO2 and NOX) and 98% (2013: 96%) of the
particle emissions originated from the
Russian operations. The most significant
source of particle emissions (14,800 tonnes
in 2014) was the Argayash power plant in
Russia.

Our mercury emissions into air were 126
(2013: 122) kg.

The specific emissions for sulphur oxide,
nitrogen oxides and particles are presented in
the following table in line with the
document "Electric Utilities Sector
Disclosures".

Specific emissions of energy production in 2014

g/MWh

Total energy production

Energy production with fuels

SO2

193

333

2013

22.0

30.8

20.8

NOX

271

468

20121)

19.8

29.4

16.0

Particles

201

348

Effluents and waste
Effluents and waste

EN22 Total water
EN22 Total water
discharge by quality and
discharge by quality and
destination
destination
Energy production’s impacts on water
systems are caused by the thermal load of
cooling water discharges and the impurities
in wastewater effluents. All wastewater is
conducted directly to municipal sewage
treatment plants or cleaned on-site before
being discharged into water systems.

In 2014, we used a total of 2,094 million
(2013: 2,231) cubic meters of cooling water,
which was discharged back into water
systems. The thermal load on the water
systems was 18 (2013: 19) TWh. The biggest
single user of cooling water was the Loviisa
nuclear power plant, which withdrew from
and discharged to the sea 1,377 million cubic
meters of cooling water. The Loviisa nuclear
power plant’s thermal load on the sea was 16
TWh. Temperature measurements indicate
that the cooling water has increased the
temperature of surface water by 1–2 ºC

within a 1–2 kilometre distance from the
discharge point.

Our plants generated a total of 33 (2013: 34)
million m3 of wastewater, of which 95% was
released into the environment after being
treated.

The reported waste water volumes are based
on flow measurements at our power plants
and heat boilers.

Waste water emissions by recipient in 2012-2014

million m3

Sea

Fresh water system

Municipal sewage

Other recipient

2014

9.0

22.4

1.2

0.5

2013

9.6

22.3

1.6

0.1

20121)

9.1

22.9

2.7

0.3

1) Includes joint venture AB Fortum Värme samägt med Stockholms Stad

During the year, about1.8 tonnes of oil was
released into water systems with the
wastewater discharges from our power
plants. In addition, about 1.5 tonnes of oil
was released into the environment in three
separate oil spill incidents.

Oil emission calculations are based on
analyses of periodically taken water samples
and flow measurements.

In recent years there have been frequent
violations of wastewater permits at Russian

power plants. They have been examined in
more detail in indicator EN29.

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EN23 Total weight of
EN23 Total weight of
waste by type and
waste by type and
disposal method
disposal method
Our thermal power plants use millions of
tonnes of solid fuels annually. Ash from
incineration and gypsum from flue gas
desulphurisation account for the clearly
largest share, over 90% on average, of the by-
products and wastes from our energy
production. All energy production generates
normal industrial waste, which is either
recycled or disposed of at landfill sites. Some
of the waste is classified as hazardous and is
transported for treatment at licensed
hazardous waste facilities. The volume of
radioactive wastes generated in nuclear
power production is small, but special
solutions are needed in their treatment and
disposal.

The total volume of by-products and wastes
was 697,000 (2013: 742,000) tonnes.

Ash and gypsum
Ash and gypsum
About 659,000 (2013: 677,000) tonnes of
ash, 9,800 (2013: 29,000) tonnes of gypsum
and 9,800 (2013: 15,800) tonnes of other
desulphurisation product were generated.
About 56% of the ash was generated at
Russian plants, 16% in Finland and 16% in
Poland. Reduced volume of ash and gypsum
was primarily caused by decreased
condensing power production in Finland.

In Europe, ash and gypsum from
desulphurisation are utilised and recycled as
efficiently as possible. In Russia, ash is stored
in ponds because there are no other uses for
it, with the exception of building
embankments for ash ponds. In addition, the
wet ash handling makes utilisation more
difficult. The ash recycling rate at Fortum was
34% (2013: 38%) and the gypsum recycling
rate 100% (2013: 99%).

Gypsum was utilised as a raw material in the
gypsum board industry. Fly ash was used in
the construction material industry, in road

Ash and gypsum handling in 2012-2014

construction and in backfilling mines. In
Finland, the Joensuu power plant received an
environmental permit for the construction of
a noise barrier to be built from the plant’s
ashes around the power plant site. The CE-
marking for the bottom ash of our power
plants was granted in 2014.

Any remaining by-products that cannot be
utilised are disposed of in landfills or put into
intermediate storage. About 434,000 (2013:
420,000) tonnes of ash and 9,800 (2013:
15,800) tonnes of desulphurisation product
from Suomenoja power plant were disposed
of in landfill sites. The desulphurisation
product from the Suomenoja power plant
has no potential for utilisation.

The reported volumes of ash and gypsum
from our European power plants are based on
weighing of the truckloads. At our Russian
power plants ash volumes are calculated
based on the ash contents of coal.

thousand tonnes

Ash utilisation

Ash disposal

Gypsum utilisation

Gypsum disposal

2014

226

434

9.8

2013

257

420

28.8

0.3

20121)

369

351

8.1

1.0

1) Includes joint venture AB Fortum Värme samägt med Stockholms Stad

Nuclear waste
Nuclear waste
We used 22.7 (2013: 20.1) tonnes of
uranium fuel at the Loviisa nuclear power
plant and produced a corresponding amount
of high-level radioactive nuclear waste. 2.88
(2013: 2.50) g/MWh of spent fuel was
generated per produced energy unit.

Until 1996, the spent fuel was returned to the
fuel supplier in Russia. Since 1997, all spent
fuel has been stored at the power plant site.
At the end of 2014, the plant units’ fuel
basins and the separate spent fuel storage
facility had a total of 633 tonnes of spent
nuclear fuel. The spent fuel will eventually be
moved to the final repository, which Posiva
Oy is planning in the Olkiluoto bedrock.

In addition to spent fuel, about 141 (2013:
160) m3 of low- and intermediate-level
radioactive waste was produced.
Intermediate-level waste includes liquid
evaporation waste and spent ion exchange
resins. For now, they are stored in storage
tanks in the plant area. At the end of 2014,

the storage tanks had 658 m3 of evaporation
waste and 566 m3 of ion exchange resins.
The total radioactivity of the liquid waste at
the end of 2014 was 15.8 TBq. Before final
disposal, the liquid waste is solidified in
concrete. The solidification plant is in the
finishing phase and will be commissioned
during 2016 at the latest.

Dry, low-level radioactive waste consists
mainly of slightly contaminated materials
generated in conjunction with maintenance
and repair work. After the level of
radioactivity has been measured, some of the
low-level radioactive waste can be classified
as non-radioactive waste and released from
control to be recycled or placed in ordinary
landfills. 121 tonnes of metals, among other
things, were released from control for
recycling and 24 tonnes of mixed waste for
transport to a landfill in 2014.

Low- and intermediate-level nuclear waste is
disposed of in the underground repository at
the power plant site in Loviisa. During 2014,

about 40 (2013: 38) m3 of low-level
maintenance waste was disposed of in the
repository. By the end of 2014, a total of
1,927 m3 of low-level waste had been placed
in the repository. The total radioactivity of the
low-level waste placed in the repository at the
end of 2014 was 448 GBq.

Other waste
Other waste
Our operations generated a total of 27,700
(2013: 33,800) tonnes of waste (excluding
the gypsum and ash deposited in landfills); of
this amount, 2,500 (2013: 5,000) tonnes was
hazardous waste. The oils containing PCB
were transported to hazardous waste
treatment plants as part of hazardous waste.

The reported volumes of other waste are
based on the information provided by the
waste companies.

Read more about
Read more about
• Nuclear waste management

321

20121)

12.7

18.8

4.7

5.8

42.0

Quantity (l)

1,000

200

300

1,500

Annual Report 2014

Environmental responsibility

Waste handling in 2012-2014

thousand tonnes

Recycling/recovery

Landfill

Hazardous waste recovery

Hazardous waste disposal

Total

1) Includes joint venture AB Fortum Värme samägt med Stockholms Stad

2014

7.7

17.5

0.1

2.4

27.7

2013

8.8

21.3

1.3

4.0

35.3

environment. The total estimated volume of
the oil spills was about 1,500 litres. The oil
spills did not cause major environmental
impacts.

Description

Fuel oil to soil

Hydraulic oil to river

Transformer oil to soil

EN24 Total number and
EN24 Total number and
volume of significant
volume of significant
spills
spills
In 2014, there were three oil spills of more
than 100 litres (2013: 9) into the

Major spills in 2014

Location

Joensuun power plant, Finland

Skedvi hydropower plant, Sweden

Edeforsen hydropower plant, Sweden

Total

Compliance
Compliance

EN29 Significant fines
EN29 Significant fines
andand non-monetary
non-monetary
sanctions for non-
sanctions for non-
compliance with
compliance with
environmental laws and
environmental laws and
regulations
regulations
There were no significant environmental non-
compliances or permit violations in our
European operations in 2014 (2013: 2). The

total number of permit violations related to
wastewater discharges in Russia was 15, i.e.
slightly higher than the previous year (2013:
12).

At the beginning of 2014 Fortum received a
corporate fine of SEK 140,000 for
an inadequate volume of water flow at the
Ljunga hydropower plant in Sweden in 2011.

An audit carried out by regulatory authorities
at Chelyabinsk CHP-2 power plant lead to a

total fine of RUB 12,000 for non-compliances
in waste and wastewater management.

Studies continued at the Russian plants on
measures to reduce the discharge water
permit violations. The technical malfunctions
occurring during the year were repaired, but
development projects requiring investments
were not implemented. The permit violations
were caused by high concentrations in the
feed water, technical malfunctions at the
plant, and problems stemming from the coal
quality.

Supplier environmental assessment
Supplier environmental assessment

rights. The assessment of suppliers is
addressed as a whole in the section Supplier
Assessment: Environment, labour practices
and human rights.

EN32 Percentage of new
EN32 Percentage of new
suppliers that were
suppliers that were
screened using
screened using
environmental criteria
environmental criteria
The assessment of our suppliers covers
aspects related to environmental
responsibility, labour practices and human

EN33 Significant actual
EN33 Significant actual
and potential negative
and potential negative
environmental impacts in
environmental impacts in
the supply chain and
the supply chain and
actions taken
actions taken
The most significant environmental impacts
of our supply chain are related mainly to

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Annual Report 2014

Environmental responsibility

fuels, particularly to coal and biomasses. We
purchase fuels from international and local
suppliers. We recognise that open-pit coal
mining can be challenging in terms of
environmental protection, and working
conditions in underground mines can create
occupational health and safety concerns. The
acquisition of biomass involves environmental
risks, such as illegal logging and loss of
biodiversity, but there are also economical,
social and reputational risks related to human
rights, labour rights and land ownership. In
2014, we had 134 fuels suppliers, 11% of
them operate in risk countries.

In 2014, we audited 14 suppliers (2013:13),
around 70% of which operate in risk
countries. Out of audited suppliers, only one
non-conformity related to environmental
issues was found. The supplier has made a
corrective action plan and we are monitoring
the implementation of it.

We are member of the Bettercoal initiative,
and we use the Bettercoal Code and tools in
assessing the sustainability of the coal supply
chain. In 2014, a total of 14 coal suppliers
conducted a self-assessment in line with the
Bettercoal initiative and one mine was
audited. At the end of the year, the approval
of the self-assessment and auditing process
of Fortum’s largest coal supplier was
pending.

plant is approved for bio-oil production by the
Energy Authority.

The joint venture Fortum Värme purchased
biomass and bio-oil from Sweden, Finland,
Russia, Brazil and Malaysia, among others.
Fortum Värme conducted a total of nine
audits of its own suppliers of biofuel and its
biggest contractors. Fortum Värme is a
participant in the WWF Global Forest & Trade
Network (GFTN) through GFTN Sweden and
became a member of the Forest Stewardship
Council (FSC) in 2012. Additionally, Fortum
Värme has been a member of the Roundtable
of Sustainable Palm Oil (RSPO) since 2005
and in 2014 became a member of the
Roundtable of Responsible Soy organisation.

Read more about
Read more about
• Responsible fuel purchasing

Environmental grievance mechanisms
Environmental grievance mechanisms

EN 34 Number of
EN 34 Number of
grievances about
grievances about
environmental impacts
environmental impacts
filed, addressed, and
filed, addressed, and
resolved through formal
resolved through formal
grievance mechanisms
grievance mechanisms
There was one grievance filed during the
review period regarding noise nuisance
experienced by some neighbours of the

Jelgava power plant. The power plant’s night-
time lighting was also considered a strong
nuisance.

The noise caused by the power plant’s
operation does not exceed the permitted
limits, but we have addressed the concern in
the neighbourhood by, e.g., enclosing the
equipment and by applying other technical
solutions to reduce the noise level. The
lighting in the power plant area is something
that cannot be reduced because adequate

lighting at night is a necessity for safe
operations. Besides, there are other
neighbours who consider the lighting of the
plant as an improvement of urban
environment and safety of the
neighbourhood.

There were no other grievances filed through
formal grievance channels, nor were there
any grievances carried over from a previous
review period.

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Social responsibility
Social responsibility

Labour practices and decent work
Labour practices and decent work

Employment
Employment

G4-10 Total workforce
G4-10 Total workforce
In 2014, an average of 8,821 (2013: 9,532)
employees worked at Fortum. The biggest
number of employees was in Russia, 4,196
(2013: 4,245) employees on average.

The number of Fortum's permanent
employees on 31 December 2014 was 8,260
(2013: 9,515), i.e. 96.1% (2013: 96.2%) of
the personnel. From these the number of full-

time employees was 8,078 (2013: 9,264) and
part-time 182 (2013: 251).

The percentage of fixed-term employees was
3.9% (2013: 3.8%). In general, Fortum does
not use supervised employees. The joint
venture Fortum Värme is included in the
2013 figures.

Fortum uses contractors as needed.
Contractors worked mainly in construction
and maintenance work. The exact breakdown

of hours is not reported. Contractor
employees worked at Fortum sites for a total
of approximately 1,359,000 (2013:
1,753,000) days during the year. The figure is
based on contractors' hourly logs and on
estimates based on job costs and average
hourly rates. The figure has been calculated
on the basis of an 8-hour work day.

Workforce by employment contract and employment type, broken down by region and gender

Finland

Sweden

Russia

Poland

Other countries

Total

Employment contract

Permanent

Fixed-term

Employment type (permanently
employed)

Full-time

Part-time

1,431

543

1,407

510

764

728

400

347

2,959

1,033

471

130

346

183

5,971

2,289

137

191

141

2,956

1,032

471

129

334

164

5,896

2,182

107

G4-11 Coverage of
G4-11 Coverage of
collective bargaining
collective bargaining
agreements
agreements
We respect our employees' freedom of
association and collective bargaining, and we
do not monitor the degree of unionisation of
our employees. We apply local collective
bargaining agreements in all countries where
we operate, in compliance with the scope of
each respective agreement.

Collective agreements cover about 90% of
Fortum's employees.

In Latvia, Sweden and Russia, all personnel
are within collective bargaining agreements.
In Finland, all personnel except top
management are within collective bargaining
agreements. In Estonia, approximately 25% of
the personnel are within the collective
agreements, and in Poland, 32% of the
personnel are within the national collective
bargaining agreements. There are no
collective agreements in Lithuania.
Employment contracts are based on local
legislation and on the company's human
resources policy.

LA1 New employee hires
LA1 New employee hires
and employee turnover
and employee turnover
During the year, 619 (2013: 552) new
employees joined Fortum and 668 (2013:
910) employment relationships were
terminated. Divestments and
outsourcing reduced the number of personnel
by a total of 468 (2013: 126). There were 34
(2013: 36) employees on international
assignment. Departure turnover in 2014 was
8.1% (2013: 9.7%). The joint venture Fortum
Värme is included in the 2013 figures.

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Total number and rate of new employee hires and employee turnover by age group, gender and region

New employee hires

age group

below 30

30-50

over 50

New recruits, %2)

Employees leaving

age group

below 30

30-50

over 50

Departure turnover, %2)

Employees leaving,
employee's initiative

age group

below 30

30-50

0ver 50

Voluntary departure turnover, % 2)

Average length of service
for employees leaving

age group

below 30

30-50

over 50

Finland

Sweden

Russia

Poland

Other countries

no.

1.6

no.

5.0

no.

1.2

no.

147

169

8.5

no.

2.2

no.

2.8

no.

0.7

no.

5.1

no.

2.5

Finland

Sweden

Russia

Poland

Other countries

no.

1.1

no.

4.0

no.

4.0

no.

118

6.8

no.

2.6

no.

8.0

no.

1.5

no.

5.9

no.

2.8

Finland

Sweden

Russia

Poland

Other countries

no.

0.8

no.

3.4

no.

3.5

no.

4.6

no.

1.6

no.

1.5

0.8

1.7

no.

2.6

no.

1.4

no.

3.9

no.

1.5

Finland

Sweden

Russia

Poland

Other countries1)

years

1) Data for Estonia is not complete
2) Percentage is calculated from country's number of employees

Service years of the permanent employees in 2012-2014, %

0-5 yrs.

6-10 yrs.

11-15 yrs.

16-20 yrs.

21-26 yrs.

27-30 yrs.

31+

2014

20131)

20121)

1) Includes joint venture AB Fortum Värme samägt med Stockholms Stad

325

Annual Report 2014

Social responsibility

benefits byby

Employee benefits

LA2LA2 Employee
significant
operating
significant operating
countries
countries
In principle, our employee benefits are
applicable for all employee groups and
working hours groups, for permanent and
temporary and for full- or part-time
employees. Our most significant operating
countries are the Nordic countries, the Baltic
countries, Russia and Poland. Employee
benefits, like occupational health care,
insurance, parental leaves and pensions are
typically country-specific and comply with
local legislation and the prevailing market
situation. Typical fringe benefits may include,
for example, car and mobile phone benefits.
In addition to fringe benefits, we also provide
various other employee benefits. These
include, for example, longevity pay and
gifts for years of service, discounted
electricity prices and recreational and leisure
activities. These benefits are generally for all
employees.

In Finland we participate in the Tekes EVE -
Electric Vehicle Systems Programme.
Employees choosing an electric company car
receive a monthly monetary subsidy. The
subsidy applies to battery electric vehicles
(BEVs) and Plug-in Hybrid Electric Vehicles
(PHEVs).

Personnel in Finland have also the possibility
to join the insurance fund Enerkemi. The
purpose of Enerkemi is to grant benefits in
accordance with the Sickness Insurance Act
as well as certain additional benefits
according to the rules of the Fund. The Fund
operates as an employee sick fund. The
additional benefits are significantly better
than market practices. The benefits include
additional compensation for medicine, dental
care and various medical devices.

We encourage our employees to exercise and
to enjoy culture. In Finland, Sweden and
Russia, all Fortum employees can join
different personnel clubs offering activities
related to sports, nature and the arts. In
2014, we supported employee recreational
and leisure activities in our biggest operating
countries with EUR 992,000.

• In Finland, the support for clubs, fitness
and culture vouchers, and activities
related to vacation homes was EUR
315,549.

• In Sweden, the support for clubs was EUR

107,890.

• In Poland, the support for employee

fitness was EUR 18,892. The support for
other recreational and well-being
activities, including support for leisure
activities and donations to pensioners,
was EUR 162,047.

• In Russia, support for employee

recreational activities, leisure camps and
other social activities was about EUR
387,247. In Russia, recreational activities
of employees' children (7-14 years) are
also supported by contributing to the
expenses of summer camps.

In 2014, we conducted a survey on employee
benefits in our biggest operating countries. In
the next phase, the survey will be done also
in the smaller operating countries. The aim of
these surveys is to ensure the
competitiveness of benefits compared to
market practices and the compliance with
regulations and decrees in all our operating
countries. Based on the survey, we can state
that our benefits in our most significant
operating countries are in a good level.

Incentive schemes
Incentive schemes
Fortum’s short-term incentive scheme, i.e.
bonus system, supports the realisation of the
Group’s financial performance targets,
sustainability targets, values and structural
changes. The system ensures that the
performance targets of individual employees
align with the targets of the division and the
Group. All Fortum employees, with the
exception of certain personnel groups in
Poland and Russia, are covered by the
system. In Poland and Russia there are other
incentive schemes. In 2014, nearly EUR 13
million from year 2013, i.e. about 85% of the
target level, was paid to individuals belonging
to the Fortum's short-term incentive scheme.

The purpose of Fortum’s long-term incentive
system, i.e. share bonus system, is to support
the achievement of the Group’s long-term
targets by committing key individuals. The
Board of Directors approves the Fortum
management members and key individuals
entitled to participate in the share bonus
system. The Board of Directors can also
exclude individual participants from the
system. Participation in the system precludes
the individual from being a member in the
Fortum Personnel Fund.

Pensions
Pensions
Fortum's pension arrangements are
presented in Financial Statements Note 32
Pension obligations, and in the Governance

section Pensions. Fortum has taken life
insurance to the top management.

EU18 Contractor and
EU18 Contractor and
subcontractor employees
subcontractor employees
that have undergone
that have undergone
relevant health and safety
relevant health and safety
training
training
The safety of employees of subcontractors
and contractors is as important to Fortum as
the safety of own employees. Contractor
safety targets are set based on a continuous
improvement principle. Safety incidents and
accidents are reported, accidents are
investigated, and safety performance
indicators are monitored on a monthly basis.
Contractor and subcontractor safety is
considered in all work phases – from the
selection of subcontractors for the actual
work to the post-performance evaluation.
Requirements are set forth in the corporate-
level safety instructions and the procurement
organisation's instructions, and they are
further specified in local instructions.

One of the key elements in the instructions is
the requirement to provide proper induction
training and on-site orientation to all
workers, including contractors, before
starting the work. Effective induction training
ensures a good understanding of site-specific
risks, procedures and safety requirements.
Induction training is valid only for a limited
period, typically, not more than three years.

Induction training includes, at minimum, site-
specific safety requirements, rules,
instructions, work permit procedures, the
main risks of the site and how to prepare for
them, the required personnel protective
equipment, near-miss and incident reporting,
emergency response, inspections,
housekeeping, fire protection, first-aid
systems, evacuation plans, and the contact
data for the individuals responsible for these
tasks.

Induction training including safety training is
provided for all contractors and
subcontractors who work at Fortum's sites
and facilities. Local organisations are
responsible for implementing the training.
Verification that the safety requirements
presented in the induction training are
understood is ensured by using interpreters,
when needed, and by testing.

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Labour/Management Relations
Labour/Management Relations

Collaboration between employees
and employer is based on local legislation,
local agreements and Fortum’s Code of
Conduct. In Finland, Fortum's employee
representation system is site-, company- and
division-specific, and representatives in the
cooperation bodies are chosen by the
employee representatives from amongst
themselves.

Group collaboration meetings in Finland are
held at least twice a year in conjunction with
the Group's financial statements and interim
reports. In addition to Group collaboration
meetings, there are also division- or function-
level cooperation bodies that meet a few
times per year. The cooperation and
employment group is comprised of seven
representatives chosen from amongst the
delegates. This group holds meetings
approximately five times per year under the
supervision of the Senior Vice President of
Human Resources. It is the decision-making
body in Finland-level collaboration issues, and
it appoints personnel representatives for the
preparation of various development projects.

In Sweden, the system is fundamentally
identical to Finland. In Sweden, collaboration
between personnel representatives and
Fortum management at the central level
takes place in the Council (Sverigerådet) that
convenes twice a year. The collaboration
forms are based on the agreement made
between the company and personnel
representatives. Additionally, there are a

significant number of meetings held locally
during the year.

In Estonia, the Working Councils of various
functions convened three times during 2014.
A council is for cooperation between an
employer and the employee representatives;
the focus is on resolving, for example,
occupational health and safety issues in the
enterprise. Additionally, there are meetings
between personnel representatives and
employer representatives on an as-needed
basis.

In Poland, some 30 meetings were arranged
with the local labour union. The meetings
focused on salary- and benefits-related
issues, occupational safety, improving
collaboration, and harmonisation of benefits.

In Russia, in line with local legislation, the
collective bargaining agreement and the
Fortum Code of Conduct, division
management closely collaborates with union
representatives within the labour relations
board and veteran council. These bodies
meet on an as-needed basis to resolve
various matters related to management and
employee relations.

As a rule, the Fortum European Council (FEC)
convenes once a year. FEC is a Europe-wide
cooperation body in which employees and
employer representatives meet to discuss
Fortum matters. In 2014, the Fortum
European Council (FEC) held a meeting in
May in Estonia, and personnel

Occupational health and safety
Occupational health and safety

representatives from Finland, Sweden,
Poland, and Estonia participated. Issues on
the Council's agenda included the CEO's
review; themed workshops included
occupational health and safety, well-being
and reviews of Fortum's Estonian operations.

LA4 Minimum notice
LA4 Minimum notice
periods regarding
periods regarding
operational changes
operational changes
In situations of organisational restructuring,
we negotiate with personnel representatives
in compliance with each country's local
legislation and contractual procedures. In
situations involving personnel reductions,
Fortum aims primarily to support the re-
employment of its personnel.

In Finland, the minimum notice period
depends on the scale of upcoming changes
and it varies from three to seven weeks. In
Poland, Latvia and Estonia, the minimum
notice period is four weeks. In Russia,
minimum notice period varies from nine and
eleven weeks. In Sweden, Norway and
Lithuania, there is no regulated minimum
notice period. In India, the minimum notice
period varies from 30 days to 90 days.

The minimum notice period is based on local
legislation, collective agreements or
employment contracts, which are in harmony
with the local legislation and agreements.

LA5 Workforce
LA5 Workforce
represented in formal
represented in formal
health and safety
health and safety
committees
committees
Workplace well-being and work safety are
regularly addressed in local-level
occupational safety committees, which
operate in line with local legislative
requirements and represent all personnel
groups. The committees exist in all our
significant operating countries.

All our employees are within the sphere of
occupational health care. Our occupational
health care is organised in all countries of
operation in accordance with local laws and
regulations. We emphasise the significance of

preventive activities in promoting well-being
in the company as well as employee
counselling for work-related or serious
illnesses.

Fortum conducts regular examinations in
accordance with local laws; employees who
in their work are exposed to e.g. noise, dust,
radiation or perform shift work are within the
sphere of the examinations. Occupational
health care participates also in various
discussions and assessments in the work
community. The occupational health care
professionals support supervisors by
providing information on preventive actions
as well as alternatives when the ability to
work decreases. Occupational health care
also offers methods and tools for these
situations.

In 2014, there were, on average, 2,096
(2013: 2,412) employees in Finland within
the sphere of Fortum's occupational health
care. About 83% (2013: 90%) of them used
Fortum's own occupational health care
services and about 17% (2013: 10%) used
contracted health clinics. The total costs of
Fortum's own occupational health care in
Finland were about EUR 0.94 (2013: 1.2)
million. The occupational health care costs
per person in Finland, calculated from the
share paid by Fortum, were EUR 542 (2013:
569). Preventive activities accounted for 53%
(2013: 45%) of occupational health care
visits.

In Sweden, all employees are within the
sphere of occupational health care services.
318 (2013: 439) employees used the
services. Occupational health care costs in

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Annual Report 2014

Social responsibility

Sweden were EUR 335 per person (2013:
113). The figures for 2013 also include the
joint venture Fortum Värme's data.

In Russia, employees are within the sphere of
a medical expenses insurance plan and can
use private medical services. Also each
production plant in Russia has a healthcare
station with nursing-level first-aid services.

LA6 Type of injury and
LA6 Type of injury and
rates of injury,
rates of injury,
occupational diseases,
occupational diseases,
lost days, and
lost days, and
absenteeism, and total
absenteeism, and total
number of work related
number of work related
fatalities
fatalities
In reporting injuries we comply with the
principles of the United States Occupational
Safety & Health Administration (OSHA) and
ILO's Practices on Recording and Notification
of Occupational Accidents and Diseases to
the extent they conform to the legislation in
Fortum's countries of operation.

Our performance in occupational safety for
own personnel further improved in 2014. The
lost workday injury frequency (LWIF) per
million working hours for Fortum's own
personnel remained at the previous year's
good level of 1.0 (2013: 1.0). There were 15
(2013: 16) work-related injuries resulting in
an absence, and the country breakdown was:
Finland 6, Russia 5, Poland 4. There were no
injuries resulting in an absence in other
countries. 13 of the injuries occurred with
male employees. Two of the injuries occurred
to female employees; one in Russia and one
in Poland.

Fortum personnel's total recordable injury
frequency (TRIF) per million working hours,
which includes also minor injuries that do not
lead to an absence, improved to 2.0 (2013:
2.5).

There were no work-related fatalities to own
personnel during 2014. There were 6 (2013:
3) serious occupational injuries resulting in
an absence of more than 30 days to own
personnel. Personnel absence days resulting
from work-related injuries increased
compared to 2013 and was 590 days (2013:
499). In calculating lost days, the lost work
days starting from the injury are counted,
based on the Group instructions.

Safety management at Fortum also
encompasses contractors and service
providers working at Fortum sites. The LWIF
per million working hours for contractors
improved and was 3.2 in 2014 (2013: 3.9).
There were a total of 35 (2013: 54)
contractor injuries resulting in an absence.
The country breakdown of contractor injuries
resulting in an absence was: Russia 13,
Finland 13, Sweden 6, Poland 1, Germany 1,
Great Britain 1. There were no injuries
resulting in an absence in other countries. All
of the injuries happened to males.

The fatalities and serious injuries during the
year were a big disappointment. Three work-
related fatalities involving contractor
employees occurred in 2014. Two were in
Sweden and one in Russia, and all of the
perished were men. There were 9 (2013: 10)
serious injuries, i.e. resulting in an absence of
more than 30 days, to contractor employees.

We strive to ensure safe and healthy work
conditions for personnel and support the
maintenance and development of working
capacity. The monitoring of sickness-related
absences is defined at the Group-level, and
the rate of absence due to sickness was 2.4%
(2013: 2.5%); the rate of absence due to
sickness was 2.2% (2013: 2.3%) for males
and 2.9% (2013: 3.3%) for females. The
sickness rate is calculated based on the
reported theoretical working hours of the
permanent employees. The figures for 2013
also include the joint venture Fortum Värme.

In 2014, there were 8 (2013: 4) cases of
suspected occupational diseases in Finland.
The suspected occupational diseases are

related to noise and asbestos. One of the
suspected noise-related cases has been
determined to be non-occupational;
investigations are still under way for the other
suspected cases. All the cases of suspected
occupational diseases involved males.

Joint venture Fortum Värme
Joint venture Fortum Värme
In terms of safety, the joint venture Fortum
Värme had a very mixed year. There were no
injuries resulting in an absence for own
personnel (2013: 4). The total recordable
injury frequency (TRIF) per million working
hours, which includes also minor injuries that
do not lead to an absence, improved and was
3.7 (2013: 6.9). The lost workday injury
frequency per million working hours for
contractors improved in 2014 and was 10.8
(2013: 13.2). There were a total of 20 (2013:
22) contractor employee work-related injuries
resulting in an absence. One of the injuries
occurred to a female worker. Contractor
injuries in plant maintenance work reduced
clearly in 2014 to 4 (2013: 14), but the
serious accidents in the CHP8 construction
project were a very big disappointment. Two
male employees of a contractor perished in
an accident at the project work site.

Improving contractor safety
Improving contractor safety
Contractor safety remains a major challenge
and will continue to be a focus area in 2015.
The biggest challenges are still the
construction and upgrade projects in Russia
and Sweden. To improve the situation,
several ongoing initiatives have been
extended and new development projects
have been started. To emphasise the
importance of contractor safety, the
contractor LWIF was made a Group-wide
sustainability key indicator in 2014.

Contractor safety is also more closely linked
to the short-term incentive systems. In 2015,
we will improve operating models for
construction projects to enhance safety, and
intensify the use of the contractor
management model – from contractor
selection to final assessment of performance.

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Key safety figures in 2012-2014

Lost workday injury frequency (LWIF)1), own personnel

Lost workday injuries, own personnel

Lost workday injury frequency (LWIF)1), contractors

Lost workday injuries, contractors

Total recordable injury frequency, own personnel 2)

Fatalities, own personnel

Fatalities, contractors3)

1) LWIF = Lost workday injury frequency per one million working hours
2) TRIF = Total recordable injury frequency per one million working hours
3) Additionally two contractor fatalities in joint venture Fortum Värme
4) Includes joint venture AB Fortum Värme samägt med Stockholms Stad

2014

2013

20124)

1.0

3.2

2.0

1.0

3.9

2.5

1.5

3.8

3.4

Occupational accidents, accident frequencies and absense days due to occupational accidents in 2014 by region and
gender

Finland Sweden Russia Poland

Great
Britain Germany Estonia Latvia Lithuania India

Own personnel

Occupational accidents causing absence, men

Occupational accidents causing absence, women

LWIF, men

LWIF, women

Absence from work due to occupational accidents for men,
days

Absence from work due to occupational accidents for
women, days

Contractors1)

Occupational accidents causing absence, men

Occupational accidents causing absence, women

2.3

LWIF, men

LWIF, women

12.5

4.9

1) The number of contractor absense days due to occupational accidents not available

0.7

0.5

3.6

4.4

257

225

1.7

1.9

35.5

6.9

Sickness absence rate of the permanent employees in 2012-2014

Finland

Sweden

Russia

Poland

Other countries

2014

2013

2012

Male

Female

2.3

2.0

3.6

2.0

3.7

4.1

2.0

4.7

2.2

Male

2.7

2.31)

2.0

2.6

2.3

Female

3.1

3.71)

1.9

4.6

2.9

Male

2.8

2.21)

2.1

3.5

2.9

Female

3.2

3.91)

2.2

5.0

3.0

1) Includes joint venture AB Fortum Värme samägt med Stockholms Stad

Read more about
Read more about
• Occupational and plant safety

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Training and education
Training and education

time being, registered in Finland, Sweden,
Poland and Norway.

LA9 Average hours of
LA9 Average hours of
training per employee
training per employee
In 2014, the total number of training hours
was 9,810. Courses and licenses are, for the

Training hours 2014

Total number of
training hours for
employees

Average training
hours per
employee

Total number of
training hours for
females

Average training
hours per female

Total number of
training hours for
males

Average training
hours per male

Finland

Blue-collar

White-collar

Other countries 1)

Blue-collar

White-collar

Grand Total

8,992

1,918

7,074

818

144

674

9,810

4.41

4.98

4.27

0.31

0.30

0.31

2.10

2,055

2,026

260

259

2,315

3.61

3.22

3.61

0.35

0.25

0.35

1.78

6,937

1,889

5,048

558

143

415

7,495

4.72

5.02

4.61

0.29

0.30

0.29

2.22

1) Other countries: Sweden, Poland, Norway

LA10 Programmes for
LA10 Programmes for
skills management and
skills management and
lifelong learning
lifelong learning
We offer our employees support in their
professional development needs based on a
70/20/10 approach in learning and
development: through on-the-job learning,
learning through others and through training.
Training includes both internal training
programmes and, on a needs basis, external
training. In 2014, training costs totalled
approximately EUR 3.6 (2013: 4.6) million.

All our new employees go through an
induction programme, such as Fortum
Passport, the online on-boarding programme.
It covers several topics, including the Code of
Conduct, sustainability principles and safety.
In addition, Fortum arranges an induction
day, Fortum Day, which is a face-to-face
event with the new recruits in different
countries. In 2014, 136 (2013: 107)
employees learned about Fortum's
operations through the Fortum Passport
programme. Fortum Day had 74 employee
participants in Finland and Sweden.

As part of Leading Performance and Growth
initiative launched in 2010, we have
continued to develop a culture of leadership
and coaching through the coaching training
offered for employees and by developing
team activities. By the end of 2014, around
one thousand Fortum supervisors had
participated in the initiative-based training for
supervisors and over a hundred people in the
coaching training.

Fortum offers MASTER courses for the new
managers to ensure they have the skills
needed to perform in their managerial role. In
addition, the intention is to harmonise and
develop the way of operating in HR processes
in Fortum. The main themes of the MASTER
courses in 2014 were performance and
development discussions, recruitment, labour
law, remuneration, leadership growth,
working environment and a new theme,
workforce administration. There was a total
of 16 MASTER training days with 134
participants.

In 2014, a total of 25 young supervisors from
different Fortum countries started in the new,
four-module Navigator Programme. The main
aim of the programme is to build internal

capabilities and develop leaders for future
business.

We aim to keep the skills and competencies
of our personnel at a level that maintains and
improves their value in the job market. In
case of redundancies, we offer outplacement
services and, case by case, investigate the
possibilities to arrange vocational training in
co-operation with local unemployment
authorities or vendors. Retraining for
employees who continue working is arranged
based on organisational and individual needs.

In case of redundancies, the content of the
severance package that we offer is decided
on the basis of local needs. The financial
compensation is usually based on the years
of employment at Fortum.

For employees nearing retirement age, we
arrange training regarding pension-related
issues and practicalities. Intended retirees
have the possibility to talk about and get
support for pre-retirement planning from
occupational health, if needed. They also
have the possibility to use the services
offered by retirement insurance companies.

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Level of education of the permanent employees in 2012-2014

Doctorate

University

Lower university

College

Vocational

Compulsory

Not indicated

2014

20131)

20121)

1) Includes joint venture AB Fortum Värme samägt med Stockholms Stad

LA11 Percentage of
LA11 Percentage of
employees receiving
employees receiving
regular performance and
regular performance and
career reviews
career reviews
Our permanent employees in all operating
countries are within the scope of the
performance and development discussion
processes, which are implemented in all
employee groups, and on a personal and/or
team level. The annual performance and
development reviews support the employee/
supervisor dialogue about goals,
achievements and opportunities for
professional development. The discussions
aim to commit and motivate employees,

engage them in the implementation of the
strategy, business goals and operating plans,
and improve operational planning, the
workplace atmosphere and the flow of
information, as well as promote performance
and growth at the individual and corporate
level.

Personal and/or team-specific targets
aligned with Fortum's strategy are set at the
beginning of the year. At the same time, the
needed competence is verified and last year's
performance is assessed. The achievement of
targets forms the basis for incentives to be
paid. Permanent employees who have a
minimum of three months of employment in
Fortum are within the scope of Fortum's
incentive plan.

Diversity and equal opportunity
Diversity and equal opportunity

LA12 Composition of
LA12 Composition of
governance bodies and
governance bodies and
breakdown of employees
breakdown of employees
We promote equal treatment and
opportunities in recruiting, remuneration,
development and career advancement,
regardless of the employee's race, religion,
political views, gender, age, nationality,
language, sexual orientation, marital status or
disabilities. We do not track the proportion of

minorities in our personnel. Any form of
harassment is forbidden and addressed
immediately. In Finland and Sweden, there
are separate guidelines in place for
workplace harassment and discrimination. In
2014, there were two alleged cases of
discrimination reported (2013: 0).

The average age of our permanent employees
was 44 years (2013: 44), and the share of
employees over 50 years was 33% (2013:
36%). Women accounted for 28% (2013: 28%)

The performance and development process
applies to all permanent employees, however,
the electronic tool used in the process in
2014 covered about 67% (2013: 67%) of the
personnel globally, out of which the
performance and development process was
conducted for 93% (2013: 97%). The
performance and development process was
nearly equally completed among female
employees 95% (2013: 95%) and male
employees 92% (2013: 98%). The company-
wide completion rate will be available when
all countries and employee groups are
covered by the electronic tool.

of our total personnel. Women accounted for
33% (2013: 31%) of the Group- and division-
level management teams. The Board of
Directors comprised eight members, three of
them, including the Chairman, were women.

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Personnel age distribution of permanent employees by age group, gender and personnel group

Finland

Sweden

Russia

Poland

Other countries

Male

Female

Male

Female

Male

Female

Male

Female

Male

Female

187

610

151

381

305

183

324

239

370

130

107

240

997

587

207

399

126

119

106

592

283

164

131

110

109

102

103

age group

below 30

30-50

over 50

b = blue-collars

w = white-collars

Group- and division-level management, by age and gender

age group

below 30

30-50

over 50

Men

Women

Equal remuneration for women and men
Equal remuneration for women and men

LA13 Ratio of basic salary
LA13 Ratio of basic salary
and remuneration of
and remuneration of
women to men
women to men
In line with our remuneration policy, we offer
a fair, transparent and competitive
compensation portfolio to our employees.
Salaries and wages are compliant with
established practices in each country and
based on local legislation and labour market
agreements. Salary level is based on personal
work performance, on defined competence
requirements, and on the market situation in
each country.

The comprehensive implementation of our
human resources data management system
enables the reporting of pay equality in all our
operating countries. In addition to the

centralised HR data management system, a
separate, local, data system is also used in
Russia and therefore the data on Russia’s pay
equality is reported separately. Our reporting
covers all personnel groups except
“workers”. A comparison in this group is not
possible because of the small group sizes.
Likewise, the number of personnel in some of
our operating countries is so small that a
country-specific comparison is not reliable.
We have reported these countries collectively
under “Other countries”.

In our operating countries, the base salaries
of female employees were, on average, 10%
less than the male base salaries in all
personnel groups. The total number of
personnel included in the comparison was
3,770 of which 1,294 (34%) are female. The
differences varied between countries; years

of service and job grade levels had the most
impact on the differences. The relative
number of females in terms of these
comparison factors affected the salary
differences.

Fortum’s short-term incentive (STI) system
includes a personal performance indicator.
We have included the STI in the pay equality
comparison for the personal bonus multiplier.
The difference between male and female in
personal bonus multiplier was 0.4%.

In Russia, the difference between female and
male salaries and wages was +0.6% for
comparable grade levels (1,728 individuals).
There was no comparison made for the
personal bonus multiplier.

The basic salary, remuneration and other key factors of women compared to men, %

Basic salary and personal bonus

Job grades

Service years

Basic salaries

Personal bonus
coefficient

Roles until middle
management and
specialists

Jobs with tactical or
strategical role

Average service years

-15

-19

-22

-10

-0.80

2.20

6.20

-3.30

0.40

-6.96

-9.66

10.84

0.93

-3.36

-0.46

0.33

-0.44

-1.37

-0.41

-14

-17

-27

-24

-20

Country

Finland

Sweden

Poland

Other countries 1)

Total 1)

1) Do not include Russia

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Supplier assessment: Environment, labour practices and
Supplier assessment: Environment, labour practices and
human rights
human rights

EN32, LA14 and HR10
EN32, LA14 and HR10
Percentage of new
Percentage of new
suppliers that were
suppliers that were
screened using
screened using
environmental criteria,
environmental criteria,
labour practices andand
labour practices
human rights criteria
human rights criteria
We expect our business partners to act
responsibly and to comply with the Fortum
Code of Conduct and Fortum Supplier Code
of Conduct. In 2014, approximately half of
our total volume of purchases was purchased
from suppliers operating in Europe, mostly in
Finland, Sweden and Poland. 15% of Fortum’s
purchases, excluding the Russia Division's
purchases, came from risk countries. When
the Russia Division's local purchases are
included, our purchases from risk countries
accounted for 50% of the total volume of
purchases.

Fortum's Supplier Code of Conduct is
implemented in all of Fortum's operating
countries and it is included in all purchase
agreements exceeding EUR 50,000. With the
Supplier Code of Conduct, Fortum aims to
ensure, among other things, that the supplier
provides safe working conditions for its
employees, complies with rules and
regulations, and reduces the environmental
impacts caused by its operations.

We assess the level of operations of our
business partners through pre-selection and
supplier audits. Pre-selection includes a
supplier questionnaire and verification of
credit. We use the supplier questionnaire to
identify general and sustainability-related
practices, and it covers issues related to
labour practices, human rights, health and
safety, and environment. The supplier
questionnaire also helps to identify high-risk
suppliers and the need for any further
actions. The questionnaire also helps
suppliers to understand our expectations for
compliance with the Supplier Code of
Conduct.

We perform pre-selection when the volume of
the purchase exceeds EUR 50,000 and, in
the case of a Nordic supplier, EUR 100,000.
Majority of our purchases is from the Nordic
countries and remain below EUR 100,000. In

2014, Fortum conducted pre-selection on
150 (2013: 200) suppliers and it covered 7%
of the new suppliers. This figure does not
include the Russia Division's suppliers, as
they have their own pre-selection.

The Russia Division conducts the pre-
selection in accordance with Russian
procurement law, and bidding is open to all
companies. In the Russian operations, we set
supplier requirements for business principles
and ethics, and we pay special attention to
anti-corruption and conflicts of interest.
Participating in bidding requires the potential
suppliers to also endorse their commitment
to compliance with Fortum’s Supplier Code of
Conduct.

Fortum is a member of the Bettercoal
initiative, and uses the Bettercoal Code and
tools in assessing the sustainability of the
coal supply chain.

We started the sustainability-related supplier
audits in 2012 and we have aimed to
increase the number of audits every year. In
the audit, we assess the
supplier's compliance with the requirements
in Fortum's Supplier Code of Conduct. Audits
are always done on-site and they include a
production inspection, employee interviews
and a review of documents and records. If
non-compliances are found, the supplier
makes a plan for corrective actions and we
monitor the implementation of it. The
suppliers we select to be audited are from
risk countries or they have a significant
supply contract. In 2014, we conducted a
total of 14 (2013: 13) audits of suppliers
operating in risk and in non-risk countries in
Bulgaria, China, Poland, Czech Republic,
Sweden and Russia. The most significant
non-compliances identified in the audits were
related to occupational safety, overtime
hours, working hours of young workers, and
management of the suppliers’ own
subcontractors

The joint venture Fortum Värme conducted a
total of nine audits of its own suppliers of
biofuel and its biggest contractors.

simplified, lighter auditing model. The lighter
model will enable also the buyer to verify a
supplier’s practices.

Read more about
Read more about
• Responsible supply chain management

LA15 andand HR11HR11
LA15
Significant actual
Significant actual andand
potential negative
potential negative
impacts for labour
impacts for labour
practices and human
practices and human
rights in the supply
rights in the supply
chain and actions taken
chain and actions taken
The majority of our purchases are from
countries, where the local regulation related
to labour practices is strong and well
implemented. In 2014, excluding the Russia
Division's suppliers, we had 125 suppliers
operating in risk countries and, when
included, 1,448 suppliers. Our risk country
classification is based on the ILO Decent
Work Agenda, the Human Development Index
of the United Nations and the Corruption
Perceptions Index by Transparency
International. Violations related to labour
practices and human rights are more
probable in risk countries than in no-risk
countries.

In terms of reviewing labour practices, the
focus is on health and safety issues and on
compliance with working hours and
remuneration legislation. In human rights, the
elimination of child and forced labour and
discrimination are important, as is freedom of
association. If non-compliances are found, we
require the supplier to make a plan for
corrective actions and we monitor the
implementation of it.

In 2014, we conducted a total of
14 (2013:13) audits of suppliers, around 70%
of which operate in risk countries. Out of the
audited suppliers, we found non-compliances
related to labour practices with seven (50%)
of them. The majority of the non-compliances
were related to health and safety, but there
were non-compliances related to working
hours legislation as well. Out of the audited
suppliers, we found non-compliances related
to human rights with three (21%) of them. The
observed non-compliances were related to

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Annual Report 2014

Social responsibility

the working hours of young employees.
Young employees are above the minimum
age, but under 18 years. Suppliers with
observed non-compliances have provided

corrective action plans and we are monitoring
the implementation of them.

The joint venture Fortum Värme conducted a
total of nine audits of its own suppliers of
biofuel and its biggest contractors.

Labour practices grievance mechanisms
Labour practices grievance mechanisms

LA16 Number of
LA16 Number of
grievances about labour
grievances about labour
practices filed, addressed,
practices filed, addressed,
and resolved through
and resolved through
formal grievance
formal grievance
mechanisms
mechanisms
There was one grievance filed during the
review period regarding the labour practices
of contractor employees at a power plant

Human rights
Human rights

Investment
Investment

HR1 Human rights
HR1 Human rights
screening or clauses
screening or clauses
included in significant
included in significant
investment agreements
investment agreements
A sustainability assessment is carried out for
all of our investment projects and it takes
into consideration the environmental,
occupational health and safety, and social
impacts of the project. Projects requiring
approval by the Fortum Executive
Management Team are additionally subject to
an assessment and approval by Group-level
sustainability experts. The sustainability
assessment includes a human rights
evaluation, especially in new operating areas.
A human rights assessment is also part of the
systematic assessment of country and
counterparty risk when planning a project.

In 2014, one significant investment project
outside the EU and Russia was implemented
when a new solar power plant was built in
India. Fortum’s human rights assessment

construction site in Russia. The social areas
at the source of the grievance were repaired.

There were no other grievances filed through
formal grievance channels, nor were there
any grievances carried over from a previous
review period.

model was used in this project. Additionally, a
lighter version of the model was used in the
assessment of projects under planning in 30
different countries.

Fortum's Supplier Code of Conduct is
implemented in all of Fortum's operating
countries and it is included in all purchase
agreements exceeding EUR 50,000.

HR2 Employee training
HR2 Employee training
on human rights policies
on human rights policies
or procedures
or procedures
The online course for Fortums's Code of
Conduct includes training in human rights-
related issues and the Code of Conduct e-
learning is part of the induction programme
of new Fortum employees.

Our own personnel are responsible for
conducting the sustainability-related supplier
audits, which cover the most important
human rights aspects related to purchases.
By conducting the audits on our own, we gain

a better idea of the supplier’s practices while
increasing the supplier’s understanding of
human rights issues. Fortum’s auditors each
receive 1.5 days of internal training, during
which they review the requirements of the
Supplier Code of Conduct, the sub-areas to
be audited, and the tools to be used to verify
compliance with the requirements. After the
training, supplier audits are started together
with an experienced auditor.

In 2014, we trained nine auditors from Russia
and Sweden. The total number of training
hours was 108 and less than 1% of our
personnel participated in the training. In
2015, we will continue training auditors and
developing competence in different divisions
and countries.Those who have completed the
internal training are recommended to also
complete auditor training on the Social
Accountability (SA8000) standard. With the
exception of one auditor, the SA8000 auditor
training has been completed by all of the
trained auditors who regularly conduct audits.

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Non-discrimination
Non-discrimination

HR3HR3 Incidents of
Incidents of
discrimination and
discrimination and
corrective actions taken
corrective actions taken
There were two incidents of alleged
discrimination reported in 2014 (2013: 0);
one was handled internally and the other will

go to court proceedings in 2015. The incident
handled internally resulted in termination of
employment for the employee who was guilty
of discrimination.

Freedom of association and collective bargaining, child labour
Freedom of association and collective bargaining, child labour
and forced and compulsory labour
and forced and compulsory labour

and forced labour inin

HR4 Supporting the right
HR4 Supporting the right
to freedom of association
to freedom of association
and collective bargaining
and collective bargaining
in risk areas
in risk areas
HR5 and HR6
Measures
HR5 and HR6 Measures
taken to eliminate
taken to eliminate
child and forced labour
child
risk areas and in
risk areas and in
operations of significant
operations of significant
suppliers
suppliers
We respect employees’ right to freedom of
association and collective bargaining as well
as the inviolability and integrity of labour
union representatives. In our operating
countries, freedom of association and
collective bargaining are guaranteed by law.
The exception to this is India, which has not
ratified the International Labour
Organisation’s (ILO) Convention on the right
to freedom of association and collective
bargaining. In India, we comply with the same
practices as in other countries of operation,
and we do not limit or prohibit the right to
freedom of association.

All forms of child labour are strictly prohibited
and in violation of Fortum’s Code of Conduct.
Of our operating countries, India has not
ratified the International Labour
Organisation’s (ILO) Convention on the
minimum age and the worst forms of child
labour. Our functions in India require job
applicants to be of adult age.

All forms of forced labour are strictly
prohibited and in violation of Fortum’s Code
of Conduct. We have not identified risks
related to the use of forced labour in our own
operations.

In 2014, about half of the total volume of our
procurements was purchased from Europe,
mainly from suppliers operating in Finland,
Sweden and Poland. Our purchases from risk
countries accounted for 15%, excluding the
Russia Division’s purchases. If the Russia
Division’s local procurements are included in
the calculation, our purchases from risk
countries were 50% of the total volume of
procurements. Our risk country classification
is based on the ILO’s Decent Work Agenda,
the Human Development index published by
the UN, and the Corruption Perceptions index
published by Transparency International. In
these countries, violations related to human

Assessment
Assessment

HR9HR9 Operations that have
Operations that have
been subject to human
been subject to human
rights reviews or impact
rights reviews or impact
assessments
assessments
We have a process in place for country and
partner risk assessment. The process has two
parts: a light and a deep assessment, and it

also covers human rights reviews and impact
assessments. A light assessment is done for
all new countries in where our business unit
is planning the sales of operation or
maintenance services, for example, and it is
based on publically available sources. In
2014, thirty of these assessments were
made. A deep assessment was done for two
countries. We consider the breakdown by

rights and social issues are more likely than
in non-risk countries.

In 2014, we continued sustainability-related
supplier audits, and we audited a total of 14
(2013: 13) suppliers. About 70% of the
audited suppliers operate in risk countries.
The audits assess how effectively the supplier
meets the requirements of Fortum’s Supplier
Code of Conduct. The audits also assess
what kinds of guidelines the supplier has in
place to prevent the use of child and forced
labour as well as how the right to freedom of
association is realised by the supplier.

In conjunction with material supplier audits
conducted in China, we found non-
compliances related to working hours of
young workers. The suppliers with the non-
compliances have made a plan for corrective
measures, and we are monitoring the
implementation of the plan. The audits
conducted did not reveal non-compliances
related to freedom of association and
collective bargaining, but we did give a
recommendation to two material suppliers to
improve the communication between
personnel and management.

The joint venture Fortum Värme conducted a
total of nine audits of its own suppliers of
biofuel and its biggest contractors.

country required by the indicator as a
business secret and we do not report it.

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Annual Report 2014

Social responsibility

Supplier human rights assessment
Supplier human rights assessment

HR10 Percentage of new
HR10 Percentage of new
suppliers that were
suppliers that were
screened using human
screened using human
rights criteria
rights criteria
Our supplier assessments cover aspects
related to environmental responsibility, work
conditions and human rights, and the supplier
assessments are reviewed as a whole in
section Supplier assessment: Environment,
labour practices and human rights.

HR11 Significant actual
HR11 Significant actual
and potential negative
and potential negative
human rights impacts in
human rights impacts in
the supply chain and
the supply chain and
actions taken
actions taken
The actual and potential negative impacts
related to working conditions and human
rights are reviewed as a whole in the section
Supplier assessment: Environment, labour
practices and human rights.

Human rights grievance mechanisms
Human rights grievance mechanisms

HR12 Number of
HR12 Number of
grievances about human
grievances about human
rights impacts filed,
rights impacts filed,
addressed, and resolved
addressed, and resolved
through formal grievance
through formal grievance
mechanisms
mechanisms
There were two grievances filed during the
review period regarding cases of alleged

Society
Society

Local communities
Local communities

We communicate openly, honestly and
proactively, and we engage in a dialogue with
the influential stakeholder groups located in
the vicinity of our power plants. We carry out
collaboration projects with local
communities. We conduct environmental
impact assessments (EIA) for our projects in
accordance with legislative requirements.
Hearing of stakeholders is part of the EIA
process. The environmental impact
assessments and reports are publicly
available. In addition, relevant stakeholders
are heard in all licensing procedures.

discrimination, which are reported on under
indicator HR3.

There were no other grievances filed through
formal grievance channels, nor were there
any grievances carried over from a previous
review period.

SO2 Operations with
SO2 Operations with
significant actual and
significant actual and
potential negative
potential negative
impacts on local
impacts on local
communities
communities
In the future, the construction of large solar
power plants in India may have an impact on
the livelihoods, land use and transport routes
of the local population. Minimising local
impacts and collaborating with
stakeholders is taken into consideration in
the project planning phase.

Our hydropower production in Sweden and
Finland has positive and negative impacts
on local communities. Hydropower
production and water regulation may alter the
flow rate and the range and rhythm of the

water level in waterways, compared to their
natural state. Hydropower construction and
use may weaken the reproduction and living
habitats for fish. The changes may have also
negative impacts on local communities. The
most significant negative impacts are related
to the recreational use of water systems,
particularly on the shores of lakes that are
strongly regulated, and the impacts on
fishing. Power plant dams also form an
obstacle to boating. We mitigate and
compensate the adversities through
numerous measures, such as stocking fish
and building boat launch ramps.

Read more about
Read more about
• Local collaboration

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Anti-corruption
Anti-corruption

SO3 Operations assessed
SO3 Operations assessed
for risks related to
for risks related to
corruption and the
corruption and the
significant risks
significant risks
identified
identified
In all our countries of operation and business
units, corruption-related risks are managed
as part of operative risk management and
control procedures. The assessment of
corruption-related risks is carried out on a
regular basis, is documented, and covers the
entire company. We use procedures to
ensure the prevention, oversight, reporting
and enforcement based on the requirements
prescribed in international legislation.

We have included a systematic compliance
risk assessment in business plans, and risk
monitoring is part of the business
performance review. Line management
regularly reports its activities to the Fortum
Management Team and further to the Board
of Directors’ Audit and Risk Committee to
ensure compliance with regulations.

The significant risks we have identified
include bribery and corruption, fraud and
embezzlement, non-compliance with
legislation or company guidelines, conflicts of
interest, improper use of company assets,
and working under the influence of alcohol or
drugs.

Read more about
Read more about
• Compliance Management and Code of

Conduct

SO4 Communication and
SO4 Communication and
training on anti-
training on anti-
corruption policies and
corruption policies and
procedures
procedures
Anti-corruption principles have been included
in Fortum's Code of Conduct since 2007; all
our employees and members of the Fortum
Board of Directors have participated in the
Code of Conduct training. Completing the
Code of Conduct e-learning course is part of
the induction programme of new employees.

In 2014, we continued the extensive anti-
corruption training for different functions. In
planning the training, we took into
consideration the risk profiles of the different
functions, and we used purchasing authority
of a certain monetary value as a special
criterion. The Legal department arranged a
total of 25 training events for people working
e.g. with procurements and investments.
Additionally, Russia’s compliance
organisation arranged one division-level,
seven regional and 20 plant-specific training
events. The measures taken during the year
are reported to the Board’s Audit and Risk
Committee.

We communicated about the Code of
Conduct and ethical business practices via,
e.g., the online personnel magazine and the
intranet as part of Fortum Sound employee
survey communications. We emphasised
ethical business practices also in customer
communication articles on the intranet.

We append our Supplier Code of Conduct to
all purchase agreements that have a value in
excess of EUR 50,000. These agreements
account for about 95% of our total purchase
volume, and geographically they primarily
target Finland, Sweden, Russia, Poland and
Estonia. Collaboration partners in this group
include fuel, material and service suppliers.

SO5 Confirmed incidents
SO5 Confirmed incidents
of corruption and actions
of corruption and actions
taken
taken
We have internal procedures in place for
dealing with potential cases of corruption in a
professional manner, in accordance with
applicable laws and with respect to the rights
and personal integrity of all parties
involved. We investigate each incident in
accordance with these procedures, including
a hearing of the relevant persons and parties,
and, if needed, we decide on the appropriate
consequences and corrective actions.

Additionally, after each incident, we
determined the need to increase awareness
about Fortum's Code of Conduct. We can do
this, e.g., through e-learning or by arranging
in-person training to ensure that the
employee is fully aware of what we consider
appropriate business conduct and what the
employee’s responsibility is in cases of non-
compliance.

Read more about
Read more about
• Ethics and integrity

Public policy
Public policy

SO6 Total value of
SO6 Total value of
political contributions
political contributions
We do not award donations to political
parties or to any kind of political activities,

religious organisations, authorities,
municipalities or local administrators.

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Anti-competitive behavior
Anti-competitive behavior

SO7 Total number of legal
SO7 Total number of legal
actions for anti-
actions for anti-
competitive behavior,
competitive behavior,
anti-trust, and monopoly
anti-trust, and monopoly
practices and their
practices and their
outcomes
outcomes
In 2014, a court ruling in Russia found the
Russia Division’s heat business guilty of

abuse of a dominant position. We have
appealed the decision to a higher court.

According to the ruling, the Russia Division’s
heat business had entered into a
competition-restricting agreement in 2010
with the administration of the city of Tyumen
and the heat distribution network operator.
The agreement was terminated in 2013, and
we have reported the incident in our 2013
Sustainability Report. According to the

court’s ruling in 2014, the agreement
restricted companies engaged in heat-only
production from entering the heat market in
some areas of Tyumen. The fines related to
the court ruling are presented under indicator
SO8.

Compliance
Compliance

SO8SO8 Significant fines and
Significant fines and
non-monetary sanctions
non-monetary sanctions
for non-compliance with
for non-compliance with
laws and regulations
laws and regulations
In Russia, we paid fines totalling about RUB
33 million related to the court ruling

presented in indicator SO7. There were no
non-monetary sanctions imposed.

Grievance mechanisms for impacts on society
Grievance mechanisms for impacts on society

there any grievances carried over from a
previous review period.

SO11 Number of
SO11 Number of
grievances about impacts
grievances about impacts
on society filed,
on society filed,
addressed, and resolved
addressed, and resolved
through formal grievance
through formal grievance
mechanisms
mechanisms
There were no grievances filed about impacts
on society during the review period, nor were

Disaster/Emergency planning and response
Disaster/Emergency planning and response

Contingency planning,
Contingency planning,
related plans and training
related plans and training
The main disaster and emergency situations
we prepare for are related to our operations,
such as power plant and dam safety and
securing the uninterrupted distribution of
electricity and heat. For dam and nuclear
safety, emergency preparedness obligations
in Finland and Sweden are based on
regulatory provisions; likewise, there are
terrorism-related preparedness obligations in
Russia. Otherwise, emergency preparedness
obligations prescribed by authorities are of a
general nature. Based on its own risk

assessment, Fortum independently defines
the crisis and exceptional situations it
prepares for and drafts action plans for.

development, e.g. for organising rehearsals.
Corporate Communications is responsible for
crisis communication.

Fortum’s crisis management and business
continuity plans are prepared for the Group,
division and local levels. The testing and
updating of the crisis management and
continuity plans are the responsibility of each
division and line organisation. Crises
impacting Group operations more broadly are
managed at the Group level. Crisis
communication instructions have been
prepared for e.g. power and heat outages and
for the Loviisa nuclear power plant. Corporate
Security is responsible for crisis management

In 2014, a crisis rehearsal was held for
Fortum’s Executive Management Team. In
Finland, the annual emergency exercise
related to a nuclear power accident was held
at the Loviisa power plant. Participants in the
exercise included Loviisa power plant’s
emergency preparedness organisation,
Fortum’s Executive Management Team,
Communications, and the Nuclear and
Thermal Power division, as well as key
authorities: emergency response centre,
national rescue services, police and the

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Radiation and Nuclear Safety Authority. In
late 2014, the emergency preparedness
organisation held crisis preparedness
rehearsals in Stockholm and Karlstad,
Sweden. Among other things, the exercises
tested the operation of alarm systems and
the crisis preparedness team’s actions in a

flood situation related to a dam accident. Fire
safety and rescue rehearsals were held in
Estonia and Latvia. Cyber security risks were
addressed during the year by drafting a cyber
security plan.

A goal for 2015 in preparing for crises and
exceptional situations is to improve the risk
management related to data security, and fire
and rescue operations.

Product responsibility
Product responsibility

Product and service labeling
Product and service labeling

PR3 Product and service
PR3 Product and service
information required by
information required by
procedures
procedures
For our products, the most pertinent
obligatory product information requirement is
valid for all the electricity we produce in EU
countries. We comply with EU legislation-
based national legislation on the origin of
electricity. This requiresthe electricity
producer to disclose the origin of the
produced electricity, the carbon dioxide
emissions and the amount of radioactive
waste.

In 2014, Fortum Markets sold electricity to
private and business customers in Finland,
Sweden and Norway. Electricity was acquired
from the Nord Pool electricity exchange.
Depending on the type of electricity
agreement, customers receive electricity
generated from different energy sources. The
origin of the electricity is verified in

Customer satisfaction1) in 2012-2014

Finland

Sweden

Norway

accordance with the European Guarantee of
Origin system.

Sources used to produce the electricity sold
by Fortum Markets in 2013:

• 37% renewable energy (35% was sold as

eco-labelled electricity)

• 58% nuclear power
• 5% fossil fuels

Emissions generated in the production of
electricity sold by Fortum:

• Accumulation of spent nuclear fuel: 1.6

mg/kWh

• Carbon dioxide: 32 g CO2/kWh

Due to the Nordic reporting practice, figures
for 2014 will be available in summer 2015.

PR5 Results of surveys
PR5 Results of surveys
measuring customer
measuring customer
satisfaction
satisfaction
The international and independent EPSI
Rating annually surveys the customer
satisfaction of electricity companies in
Finland, Sweden and Norway. According to
2014 EPSI survey, the general electricity
sector customer satisfaction remained at the
same level in Finland, decreased slightly in
Sweden, and improved in Norway. Fortum’s
customer satisfaction improved in Finland
and Norway, but decreased in Sweden.
According to the EPSI survey, Fortum’s
customer loyalty improved the most of all
electricity companies in Finland. Customer
loyalty and customer willingness to
recommend Fortum were also visible in the
growing customer base. Customer
assessment of the quality of Fortum’s
products and services also improved.

2014

2013

2012

1) In Finland and Norway research method was EPSI, in Sweden Svenskt Kvalitetsindex

We measure customer satisfaction and
development of the company’s reputation
and the factors impacting it among the
different stakeholder groups annually with the
extensive One Fortum survey. The survey
covers customers, public administration,
capital markets, non-governmental
organisations and opinion makers, and
Fortum’s personnel. In Finland and Sweden,
we also survey the views of the general
public. As in the previous year, in 2014 we
conducted the survey in Finland, Sweden,

Norway, Poland, the Baltic countries and
Russia.

Our reputation has remained strong amongst
the most important stakeholder groups and,
despite a small decline, is still the strongest
among stakeholder groups within the capital
markets. Among public administration
representatives, our reputation improved for
the third consecutive year.

Our reputation improved in Finland among all
stakeholder groups and especially among

customers. Customer satisfaction improved
the most in the heat business. Satisfaction
slightly decreased among private electricity
customers, but improved among business
customers in all market areas. Customers of
the Power Solutions unit continue to be very
satisfied and more loyal and willing to
recommend Fortum than previously.

Our reputation is still the weakest among the
general public and decreased from 2013, as
our reputation weakened in Sweden. Opinion
makers and non-governmental organisations

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have a more positive attitude towards Fortum
than previously.

Marketing communications
Marketing communications

PR7 Total number of
PR7 Total number of
incidents of non-
incidents of non-
compliance with
compliance with
regulations and voluntary
regulations and voluntary
codes concerning
codes concerning
marketing
marketing
communications
communications
There were no violations of regulations and
voluntary principles observed in 2014.

Access
Access

We apply international indicators (SAIFI,
SAIDI and CAIDI) to measure electricity
distribution reliability.

EU28 Power outage
EU28 Power outage
frequency
frequency
The number of fault-based power outages per
customer (SAIFI) in our Swedish electricity
network in 2014 was 1.15 (2013: 1.01).

EU29 Average power
EU29 Average power
outage duration
outage duration
The average duration of power outages per
customer (SAIDI) in our Swedish electricity
network in 2014 was 97 (2013: 103)

minutes. The average duration of power
outages caused by faults (CAIDI) was 81
(2013: 92) minutes. The average duration of
power outage per customer (SAIDI) target set
for 2014 was a maximum of 100 minutes.

this is considered a fault, which decreases
the availability. For hydropower plants,
outages due to faults and unplanned or
prolonged outages decrease the availability
factor only if they lead to spillage.

EU30 Average plant
EU30 Average plant
availability factor
availability factor
We measure the availability of our CHP and
hydropower plants with an energy availability
indicator. It is calculated by dividing the
power plant’s actual production with the
theoretical maximum production in the period
under review. The calculation excludes
planned maintenance outages. However, if an
outage of a CHP plant is longer than planned,

The average energy availability of our CHP
plants in 2014 was 94.7%; the target was
95%. The average energy availability of our
hydropower plants was 99.96%. The load
factor describing the energy availability of the
Loviisa nuclear power plant was 90.9% (2013:
92.5%), which is high by international
standards.

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Annual Report 2014

Acronyms and units

Acronyms and units
Acronyms and units

Acronyms used in the report

Acronym Term

Definition

GRI

EHS

CHP

LWIF

TRIF

SAIDI

CAIDI

SAIFI

CER

ERU

IUCN

Global Reporting Initiative

Environment, Health and Safety

Combined Heat and Power

International organisation promoting sustainability reporting

Lost Workday Injury Frequency

Frequency of injuries that lead to absence from work for one or more days

Total Recordable Injury Frequency

Frequency of all injuries that require medical treatment

System Average Interruption Duration Index

Cumulative duration of power outages per customer in a specified time interval

Customer Average Interruption Duration Index

Average duration of power outages in a specified time interval

System Average Interruption Frequency Index

Number of power outages per customer in a specified time interval

Certified Emission Reduction

Emission Reduction Unit

Emission reduction unit in projects under Clean Development Mechanisms

Emission reduction unit in Joint Implementation projects

International Union for Conservation of Nature

Quantities and units used in the report

Energy

1 terawatt hour (TWh) = 1,000 gigawatt hours (GWh) = 1,000,000 megawatt hours (MWh) = 1,000,000,000 kilowatt hours (kWh)

1 terawatt hour (TWh) = 3,600 terajoules (TJ)

1 terajoule (TJ) = 278 megawatt hours (MWh)

1 petajoule (PJ) = 1000 terajoules (TJ)

Capacity

1 megawatt (MW) = 1,000 kilowatts (kW) = 1,000,000 watts (W)

Volume

1 cubic metre (m3) = 1,000 litres (l)

1 normal cubic metre (Nm3) = 1 m3 of gas in normal atmospheric pressure (1.0 bar) and temperature 0 oC

Mass

1 tonne (t) = 1,000 kilograms (kg)

1 megatonne (Mt) = 1,000,000 tonnes (t) = 1,000,000,000 kilograms (kg)

Activity

1 becquerel (Bq) = 1 nuclear transformation per second

1 terabecquerel (TBq) = 1 000 gigabecquerels (GBq) = 1 000 000 000 000 becquerels

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Contact information

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Annual Report 2014

Contact information

Contact information
Contact information

Investor relations
Investor relations
Sophie Jolly
Sophie Jolly
Vice President, Investor Relations
tel. +358 10 45 32552,
sophie.jolly@fortum.com

Rauno Tiihonen
Rauno Tiihonen
Manager, Investor Relations
tel. +358 10 45 36150,
rauno.tiihonen@fortum.com

Marja Mäkinen
Marja Mäkinen
Manager, Investor Relations (SRI)
tel. +358 10 45 23338,
marja.makinen@fortum.com

Financial
Financial
communications
communications
Kati Suurmunne
Kati Suurmunne
Vice President, Financial Communications
tel. +358 10 45 23379,
kati.suurmunne@fortum.com

Anna Eskelinen
Anna Eskelinen
Manager, Financial Communications
tel. +358 10 45 23350,
anna.eskelinen@fortum.com

Sustainability
Sustainability
Ulla Rehell
Ulla Rehell
Vice President, Sustainability
tel. +358 10 45 29251,
ulla.rehell@fortum.com

Minna Torsner
Minna Torsner
Project Manager, Sustainability
tel. +358 10 45 34776,
minna.torsner@fortum.com

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