CEO’s Business Review 2018
Highlights 2018
Comparable operating profit
EUR
987
million, +22%
Strategy updated to
strengthen competitiveness
and ensure a benchmark
portfolio for the 2020s
Automation
modernisation project
in Loviisa NPP
Close to
3 GW
solar and wind portfolio
(including associates)
Uniper ownership
49.99%
31 December 2018
1
Fortum’s 2018 reporting entity
CEO’s Business Review 2018
Financials 2018
CEO's Business Review
Financials
Governance 2018
Remuneration 2018
Governance
Remuneration
Tax Footprint 2018
Sustainability 2018
Tax Footprint
Sustainability
To be published in week 11 at the latest
Materiality process: Our reporting for the year 2018 includes material
information on topics we estimate to have a significant effect on Fortum’s value
creation. Our understanding of stakeholder views is based on the results of the
One Fortum Survey, customer satisfaction surveys, the stakeholder sustainability
survey, as well as information gained through daily stakeholder collaboration.
2
CEO’s Business Review 2018
Dear stakeholders,
2018 was an eventful year for Fortum. We continued our strategy
implementation with the integration and development of our Hafslund
and Ekokem acquisitions, further investments in renewables, and most
significantly; closing the Uniper tender offer. Our long-term belief in
the need for large-scale decarbonisation took a leap forward with the
decision to strengthen the Market Stability Reserve and subsequent
tripling of emission allowance prices, having a clear positive impact
on power prices.
Determined strategy implementation and updated
strategy
Driving the change for a cleaner world is at the heart of Fortum’s strategy
and our role is to accelerate this change by reshaping the energy system,
improving resource efficiency, and providing smart solutions.
Over the previous years we have worked hard to deliver on our
strategy announced in early 2016. As a result, we now have a portfolio
of businesses with good profit potential for coming years. After taking
significant steps in the capital redeployment that began in 2016, we
updated Fortum’s strategy in November 2018. The updated strategy is
a natural continuation of the previous one and builds on four priorities.
Our first strategic priority is to pursue operational excellence and
increased flexibility in order to ensure benchmark performance of our
existing businesses and improve our long-term competitiveness. After
the large investments done during previous years it is only natural that
the second priority is to ensure value creation from these investments.
We will also continue to optimise our business portfolio, considering
the ongoing transformation and decarbonisation of the sector. As
our third priority, we will continue to drive focused growth in the
power value chain. We will build on our long-standing expertise with
the strategic focus on CO2-free power generation – For a cleaner world.
Foreseeing the market development towards the end of the 2020s will
be increasingly challenging, but we believe that the uncertainty will
also provide new business opportunities. Consequently, as our fourth
priority, we aim to build on our existing competences and emerging
technologies to create new businesses, independent of power prices,
that have the potential for sizeable profit contribution. One example
of initiatives in this area is our commitment to invest in Valo Ventures,
a new global venture capital fund. Valo Ventures invests in digital start-
ups focusing on key global megatrends that are central to Fortum’s
strategy. Fortum launched Valo Ventures together with Scott Tierney,
former Google Capital co-founder.
The operating environment in 2018
The urgent need to decarbonise society is perhaps the greatest challenge
of our time. The EU Commission published its long-term climate vision
in November. Fortum supports the net zero emission target for 2050,
as proposed in the most ambitious scenario. Cost-efficient emission
reduction pathways should be established for all sectors. The EU
emission trading scheme currently covers less than half of EU’s CO2
emissions. Therefore, strengthening and broadening the scope of the
EU ETS to e.g. heating, cooling, and transport should be a key tool
to drive decarbonisation. Fortum also supports the UN Global Compact
and Caring for Climate initiatives, and is committed to the principles of
these initiatives.
The market conditions in 2018 were characterised by the increasing
CO2 emission allowance price, volatile commodity and power prices,
as well as the dry Nordic hydrology. Following the decision in late 2017
to strengthen the EU emission trading scheme by increasing the linear
reduction factor and introducing the market stability reserve, the CO2
price increased from EUR 8 per tonne in the beginning of 2018. The CO2
price was volatile during the year was at EUR 25 per tonne at the end of
the year, more than three times higher than a year earlier. This resulted
in 50% higher power prices than a year earlier and the average system
spot price for 2018 was EUR 44 per megawatt-hour.
The Nordic water reservoirs were slightly above the long-term average
in the beginning of the year and decreased to very low levels in the third
quarter, which reduced Fortum’s third quarter hydropower production to
historically low levels. The year ended at 9 terawatt-hours below average.
Strong financial performance
The impact of the higher power prices is reflected in our full-year
comparable operating profit, which increased by 22%. The investment
in Uniper only had a marginal effect on Fortum’s 2018 results, as they
include only Fortum’s share of Uniper’s third-quarter results. In the
future, Uniper’s profit and dividends will contribute to Fortum’s earnings
per share and cash flow.
Our continued investments in wind and solar are starting to have
a positive impact on our results. Commissioned in the beginning
of 2018 and the first of its kind in Russia, the 35-MW Ulyanovsk wind
park is one example of this. The sale of a 54% stake in our 185-MW
solar power plants in India freed up capital for further investments, and
in June Fortum won a 250-MW auction for an Indian solar park with
a fixed tariff for 25 years. Our total wind and solar portfolio has grown
substantially during 2018. Together with our associated companies, we
have a portfolio of close to three gigawatts of solar and wind parks and
development projects in the Nordics, Russia, and India.
Highlight of the year for the Generation division was the clearly
improved results, driven by higher market prices. During the year we
also finalised the automation modernisation project at the Loviisa
nuclear power plant, the biggest single project since the construction of
the plant. Following strong improvement in Russia over the past years,
the 2018 results in roubles improved slightly. In the City Solutions and
Consumer Solutions divisions, 2018 was characterised by the integration
of Hafslund, which proceeded well. Unfortunately, the financial results
for these two divisions have not yet reached satisfactory levels. We will
continue the integration work, and expect the synergies to materialise
gradually during 2019 and 2020.
Based on the results of 2018 and the outlook for future years, Fortum’s
Board of Directors is proposing an unchanged dividend of EUR 1.10 per
share for the calendar year 2018.
The Uniper investment
Closing the offer on Uniper shares in June 2018 was the most significant
milestone during the year and at the end of December, Fortum held
49.99% of Uniper shares and voting rights.
The strategic rationale of our investment in Uniper is just as valid
today as it was when we launched our offer in 2017. Together Fortum and
Uniper have the strategic mix of assets – both clean and secure – as well
as the expertise required to successfully and affordably drive Europe’s
transition towards a low carbon energy system. Out of Uniper’s 38 GW
generation capacity approximately 50% is based on gas, 30% based on
coal, and 20% is hydro and nuclear power. While coal-fired generation
must be phased out over time, we have a responsibility to ensure
security of supply and affordable power and heat for Europeans during
the transition and here gas will play a crucial role. Uniper’s declared role
as a provider of security of supply is an excellent match with Fortum’s
ambition to accelerate the energy transition with increasing renewable
generation and innovative solutions.
Building on this base we have a clear vision for how Fortum and
Uniper can jointly build ‘The Utility of the Future’, and we want to work
with the company to explore how to best make this vision a reality for
the benefit of all shareholders and stakeholders of both companies.
To our disappointment, talks with Uniper did not proceed as anticipated
during 2018. However, in early February 2019, the Chairman of the
Supervisory Board of Uniper voiced the need for decisive action
to enable a fresh start to the relationship. We are delighted that Uniper
is now committed to work with us in order to establish in earnest how
the companies can work together strategically and operationally. Clearly,
it is in the interest of everybody that we now rapidly advance to create
value for the stakeholders of both companies.
3
Continued focus on decarbonisation
Fortum is one of Europe’s cleanest power producers. Our CO2-free
production capacity has grown substantially over the last few decades
and we will continue to focus on increasing it. To the extent we have
fossil-based power production, our goal and strategy is, of course,
to make it as efficient as possible. In 2018, 96% of our power generation
in the European Union was CO2-free and our specific CO2 emissions
measured by grams of CO2 per kilowatt-hour produced were
26 gCO2/kWh. Including the Russian power generation, which is mainly
gas-based, and our Indian solar power we are still in the category of one
of the cleanest utilities with 57% CO2-free and specific CO2 emissions
of 186 gCO2/kWh.
Decarbonising the power sector will play an essential role in
combatting climate change, but it will not be sufficient in order for
the EU to meet the targets of the Paris agreement or the 1.5 degree
target of the recent IPCC report. Reaching these targets will require
decarbonising transportation, heating, and industry, as well as
increasing the use of carbon sinks in order to reach carbon neutrality
by 2050. Fortum has focused on this in the updated strategy and will
develop new products and services to help our customers reduce their
carbon footprint, and by building new energy ventures that we believe
will play an important role in the future low-emission energy system.
Finally, I would like to thank all our employees for their commitment
and hard work during the year and our customers and all other
stakeholders for their continued trust in us.
Pekka Lundmark
President and CEO
Three main drivers are shaping the future
electricity markets
The world we live in is changing at an ever-increasing pace. Staying
competitive requires companies to be very aware of the underlying drivers
and to take an active role in driving the change for a better future.
Looking forward, Fortum is well positioned for the ongoing transition
in the energy sector towards a decarbonised world, both in terms of
asset base and performance. The main drivers influencing the ongoing
energy sector transformation are regarded to be:
Climate and environment
Climate change and global warming is one of the largest challenges
facing mankind. The problem is global, and global efforts and
commitment are required in order to solve it. Discussions about climate
change have been ongoing for decades, but actions have not been
sufficient, due to lack of commitment, although positive developments
have been seen in some regions.
With the adoption of the Paris Agreement in December 2015,
mitigation of climate change rose to the top of the agenda all over the
world. The commitment to mitigate climate change in order to limit
global warming is now so widely spread that it affects every industry.
The effects can be seen everywhere, e.g. the increase in low- or zero-
emission housing, better fuel efficiency, the increase in the number of
electric vehicles, the rapid growth in solar and wind power production,
fuel switches to more environmentally friendly fuels, increased resource
efficiency, and waste recycling.
In 2018, the United Nations International Panel on Climate Change
(IPCC) released its special report on limiting global warming to 1.5°C.
According to the IPCC, this requires “rapid and far-reaching transitions”
including carbon dioxide removal from the atmosphere. Global net CO2
4
emissions have to decline by 45% from 2010 to 2030 and be net-zero by
2050. According to the report, the power sector should reduce emissions
by 100% well before 2050. 70–85% of electricity should be produced
from renewable sources and the contribution of nuclear power increases
in all scenarios. The IPCC makes explicit references to carbon pricing as
a tool to help balance out the impact of higher energy prices in a carbon-
constrained world.
The whole energy industry is very heavily affected by this driver. This
can be seen in the transition to low-carbon and renewable generation,
which increases the share of intermittent power production and the need
for demand response and flexible generation capacity. The increased need
for resource efficiency paves the way for circular economy solutions.
Politics and regulation
In a global perspective, the relationships between economic powers
have recently developed in a way which does not ease reaching broad
consensus on climate change measures. The increasing fragmentation
in the international political scene increases the regulatory uncertainty.
Companies have to be prepared for a possible future where national
rather than international market-based mechanisms drive the
development of our operating environment.
The energy business is heavily influenced by national and EU-level
energy policies and regulations, and Fortum’s strategy has been
developed based on scenarios of the future development of the
regulatory environment in both existing and potential new businesses
and market areas. The overall complexity and possible regulatory
changes in Fortum’s various operating countries pose a risk if we are not
able to anticipate, identify, and manage those changes efficiently.
Fortum maintains an active dialogue with the bodies involved in the
development of laws and regulations in order to manage these risks
and proactively contribute to the development of the energy policy and
regulatory framework.
Technology development
Technology development has always been a driver for change. Rapid
technological development and high adoption rates quickly drive
down the costs for new technologies. Digitalisation is further fuelled
by the accelerated pace of commercialisation and adoption of new
technologies, such as artificial intelligence. The processing power of
devices is increasing and the amount of connected devices is growing
exponentially. This in combination with an ever-increasing amount of
data readily available for consumers and businesses creates the perfect
breeding ground for innovation.
In the energy sector the cost of wind and solar power is decreasing.
This development leads to an increasing share of intermittent power
production and fewer running hours for traditional baseload power.
This challenges the way the energy system has been functioning, where
production has been able to adapt to the changing power demand of
customers.
Digitalisation opens up for new storage and demand response
solutions, which will change the way the customer interacts with
the market. There will be new ways to produce, market, sell, and
deliver products and services offered by utilities, start-ups, and new
market entrants. Through these services, customers can take an active
part in balancing a future power system that is heavily dependent
on intermittent power production. In addition to power generation
and usage, the technology development is also rapid within the
field of transportation. Electric mobility is fast gaining ground as
a result of the development of battery technology and processing
power. The increasing production volumes are creating economies
of scale and reducing production costs of electrical vehicles. Smart
charging solutions for the growing amount of electrical vehicles create
an opportunity for substantial demand response solutions.
Power and emission allowance prices 2018
Power
EUR/MWh
50
45
40
35
30
25
20
5
Emission allowance,
EUR/tonne CO2
30
25
20
15
10
5
0
Jan
Feb
March
April
May
June
July
Aug
Sept
Oct
Nov
Dec
Power (Nordic 2019 forward)
Emission allowance (EUA DEC 2018)
Source: Bloomberg
Spot price development 2017 & 2018, EUR/MWh
60
50
40
30
20
10
0
Jan
Feb
March
April
May
June
July
Aug
Sept
Oct
Nov
Dec
System 2018
System 2017
Helsinki 2018
Helsinki 2017
Stockholm 2018
Stockholm 2017
Source: Nord Pool
6
The decision to tighten the EU
emission trading scheme by
increasing the linear reduction factor
and introducing the market stability
reserve caused the CO2 price to triple
during 2018.
Nordic water reservoirs, energy content, TWh
120
100
80
60
40
20
0
Q1
Q2
Q3
Q4
2000
2003
2017
2018
Reference level
Source: Nord Pool
Market Development
Whereas the main driver for the Nordic power price in 2016 and 2017
was the price of coal, the CO2 emission allowance price clearly had the
greatest impact on Nordic power prices in 2018. The decision to tighten
the EU emission trading scheme by increasing the linear reduction factor
and introducing the market stability reserve caused the CO2 price to
triple from EUR 8 per tonne at the beginning of the year to EUR 25 per
tonne at the end of 2018. During 2018, the CO2 price reached levels that
did enable switching from low efficiency coal-fired to high efficiency
gas-fired power production, eventhough the amount of switching was
limited.
The hydrological situation in the Nordic area weakend in the
beginning of 2018. During early fall water reservoirs initially reached
very low levels compared to the long-term average, which resulted in
Fortum’s third quarter hydro power production being historically low.
Precipitation increased thereafter, but there was still a deficit in the
water reservoirs at the end of the year.
Strategy
The transition towards a cleaner world
The entire energy sector is undergoing a transformation.
Our vision is “For a cleaner world” and reflects our ambition to drive
the transformation towards a low-emissions energy system and optimal
resource efficiency.
Our mission is to engage our customers and society to drive the change
towards a cleaner world. Our role is to accelerate this change by reshaping
the energy system, improving resource efficiency, and providing smart
solutions. This way we deliver excellent shareholder value.
Sustainability is an integral part of Fortum’s strategy in answering
to these challenges. Business and responsibility are interconnected,
underlining the role of sustainable solutions as a competitive advantage.
In our operations, we give balanced consideration to economic, social,
and environmental responsibility. We assess our impacts and address
sustainability throughout the value chain.
At the beginning of 2018, the Nordic water reservoirs were at 86 TWh,
Our values – curiosity, responsibility, integrity, and respect – form the
which is 3 TWh above the long-term average and 11 TWh higher than
one year earlier. At the end of 2018, the reservoirs were at 74 TWh, which
is 9 TWh below the long-term average and 12 TWh lower than one year
earlier.
The average system spot price in Nord Pool for the year 2018 was
EUR 44.0 (29.4) per MWh, an increase of 50%. In Finland the average
area price was EUR 46.8 (33.2) per MWh and in Sweden SE3 (Stockholm)
EUR 44.5 (31.2) per MWh. The dry hydrological situation combined with
the clearly higher marginal cost for coal condense, due to the higher
CO2 price, were the main reasons for the price increase.
According to preliminary statistics electricity consumption in the
Nordic countries increased by 2% during 2018 and was 399 (392) TWh.
The higher consumption was mainly driven by colder weather during the
first quarter of 2018 and the somewhat higher industrial consumption.
foundation for all our activities.
Fortum’s strategy
The ongoing transition towards CO2-free energy, driven by climate
change concerns, politics and regulation, as well as technology
development, brings significant opportunities for a company with
competences in clean energy. Fortum is well positioned fort this
transition. At the same time, the future market environment is
increasingly uncertain. As a response to this development, Fortum’s
updated strategy has four strategic priorities:
1. Pursue operational excellence and increased flexibility
2. Ensure value creation from investments and portfolio optimisation
3. Drive focused growth in the power value chain
4. Build options for significant new businesses
7
Pursue operational excellence and increased flexibility
Benchmark performance is essential for long-term competitiveness.
For the next 2–3 years, Fortum prioritises profit creation from the
current business portfolio. This will be achieved through operational
excellence and increased flexibility. All sources of flexibility, both
flexible generation assets and the demand response of large customers
and consumers, will be needed to balance the high degree of volatile
renewable generation.
Operational excellence and increased flexibility will contribute to
improving Fortum’s financial performance and cash flows to create
additional financial headroom. In addition, Fortum will continue to
prioritise and scrutinize capital expenditure. Through these measures,
the target is to steer leverage from current net debt to EBITDA ratio
towards the long-term target ratio of around 2.5 times. Having a solid
investment grade rating is a key priority for Fortum.
In addition, Fortum continues to review its business portfolio in line
with its strategic priorities emphasising CO2-free assets, flexibility, and
low operating cost to fit the changing business environment.
Ensure value creation from investments and portfolio optimisation
Over the recent years Fortum has made several sizeable investments
and aims to further improve its financial performance by ensuring value
creation from them. The investment in Uniper, currently accounted for
as an associated company, contributes to Fortum’s financial performance
both through Fortum’s share of Uniper’s result and its dividend. As
Uniper’s largest shareholder, Fortum’s ambition is to increase value for
both companies and their stakeholders.
Drive focused growth in the power value chain
Fortum will build on its long-standing expertise to grow in CO2-free
power generation. When it comes to solar and wind investments, Fortum
aims to grow by utilising partnerships and other forms of co-operation
for a more asset-light structure. The business of the future utility will be
increasingly relying on technology, digitalisation, software, and services.
Consequently Fortum will continue to develop value-adding offerings
and services for customers both in the consumer and industrial sectors.
Profitability
Illustrative
4.
Build options for significant
new businesses
3.
Drive focused growth in the
power value chain
Build options for significant new businesses
Foreseeing the development of the power markets and regulatory
environment will be increasingly challenging towards the end of the
2020s. However, the uncertainty will create new business opportunities.
Fortum aims to build on existing expertise and emerging technologies
to create new businesses, independent of power prices, with potential
for sizeable profit contribution. Circular economy meets these criteria,
especially in the areas of waste and recycling as well as bio economy.
Furthermore, Fortum will focus on investments in start-up ventures with
disruptive potential.
2.
Ensure value creation from investments
and portfolio optimisation
1.
Pursue operational excellence
and increased flexibility
Increasing
uncertainty
Competitive
benchmark portfolio
Today
2020s
Time
2030s
8
Value-creating strategy
Input
Human and intellectual capital
• More than 8,000 energy sector professionals,
focus on diversity
• Certified environment, health and safety management
• Corporate culture that encourages
innovation and R&D investments totalling
EUR 56 million in 2018
• Robust corporate governance and ethical
business conduct
Supply chain
• Purchases EUR 3.7 billion, including investments
• Long-standing relationships with ~14,000
suppliers worldwide
Sources of energy
• Hydro, solar, wind
• Natural gas, nuclear fuel, coal, waste, peat, biomass
Assets
• Core operations in 10 countries
• ~13,700 MW power generation capacity
• ~15,000 MW heat production capacity
• 124 own hydro power plants and 27 own CHP,
condensing and nuclear power plants;
growing in solar and wind
• Supplying heat in 23 cities and towns
• 5 major waste treatment facilities
Financial
• Capital employed EUR 18,170 million
• Net debt EUR 5,509 million
• Total assets EUR 22,409 million
Fortum
Vision
For a cleaner world
Mission
We engage our customers and society to drive the
change towards a cleaner world. Our role is to
accelerate this change by reshaping the energy system,
improving resource efficiency and providing smart
solutions. This way we deliver excellent shareholder
value.
Strategy
• Pursue operational excellence and increased flexibility
• Ensure value creation from investments and portfolio
optimisation
• Drive focused growth in the power value chain
• Build options for significant new businesses
Impact
Economic impact
• Profitability
• Increased shareholder value
• Dividends to shareholders
• Investments
• Taxes to the public sector
• Wages and benefits to employees
• Payments to suppliers and partners
• Interest to creditors
Social impact
• Reliable supply of electricity and heat
• New, smart energy solutions for customers
• More active customer participation
• New partnership opportunities for cities, start-ups,
research institutions
• Safe work environment and wellbeing for employees
and suppliers
• Opportunities in career development for employees
Environmental impact
• Energy and resource efficiency
• Contribution to climate change mitigation and
circular economy
• Investments in renewable energy production
• Flexible generation enabling increasing use of
intermittent renewable energy sources
• Higher degree of resource efficiency and recycling
through circular economy services
• Sustainable treatment and final disposal of
hazardous waste
Output
Products
• 75 TWh electricity
• 30 TWh heat
• 96% of electricity production CO2 free in Europe,
57% in all operations
• 660,000 tonnes recovered materials of the waste
received from our customers
Services and solutions
• Power, heat and steam sales
• Electricity retail sales
• District heating and cooling
• Power solutions
• Electricity trading services
• Nuclear expert services
• Energy efficiency services
• Electric vehicle charging services
• Bio-oil to replace fossil fuels
• Environmental management and material
efficiency services
Emissions
• CO2: 20.1 million tonnes, 192 g CO2/kWh
• SO2: 16,800 tonnes
• NOX: 26,100 tonnes
• Particles: 9,600 tonnes
• Ashes: 730,000 tonnes ash, 51% reused
• 20 tonnes of spent high-level radioactive fuel in
an interim storage and 14 tonnes of low-level
radioactive waste for final disposal
Sustainability at Fortum
In Fortum business and responsibility are tightly linked, underlining the
role of sustainable solutions as a competitive advantage. Our renewed
strategy steers us towards decarbonisation of the sector and the society
at large. Our specific CO2 emissions from electricity production are
one of the smallest among European major electricity utilities, and
we support the EU Commission’s long-term climate target of net zero
emissions for 2050, as proposed in the most ambitious scenario.
We annually improve the energy efficiency of our power and heat
production. In 2018 our annual energy-efficiency improvement was
135 GWh in total. We contribute to circular economy by receiving and
treating large amounts of waste from customers. As much of the waste
stream as possible is recycled, reused or recovered as material which
shows our strong commitment to smart and efficient use of resources.
Concurrently we safely take hazardous waste out of circulation. In 2018,
the material recovery rate of waste received from our customers was 59%.
We continuously grow our wind and solar power production.
Our strategy is targeting to a multi-gigawatt wind and solar portfolio.
In 2018, we made several new investment decisions and investments
in wind and solar power in the Nordics, Russia and India. In 2018 we
started the supply of the biggest portfolio of a roof-top solar electricity
system in the Nordic countries. We also commissioned 123 MW of
new wind power in Norway, Sweden and Russia. In addition, the
Fortum-Rusnano investment fund has been granted the right to build
Fortum’s sustainability focus areas
9
almost 2 GW of new wind power in Russia; the wind parks are to be
commissioned during the years 2019–2023.
2018 was a year of outstanding performance improvements, but
also a year of challenges in terms of occupational safety. Four severe
occupational accidents took place in our operations. In order to
improve our safety performance we organised training for division
managers, key individuals leading safety and procurement work, and
the most challenging business areas. We cherish workplace wellbeing
and organize activities to promote the health of our employees and the
functionality of the work community. In 2018 our Energise Your Day
wellbeing programme expanded to new sites and is currently under way
in ten operating countries.
Nuclear and dam safety remain at the top of our operational safety
priority list. The successfully completed large automation modernisation
project at our Loviisa nuclear power plant in 2018 further improves
our nuclear safety. Dam safety was improved through upgrading
activities at our existing dams to fulfil the current structural dam safety
requirements, and activities to ensure safe water management also in
extreme hydrological conditions.
Fortum’s responsibility towards the society includes providing secure
supply of energy and sustainable solutions for customers as well as
acting responsibly towards local communities and the environment.
In 2018, our support for activities promoting the common good totalled
about EUR 3.8 million. Our commitment to advance social sustainability
is also shown in Fortum’s new membership in the Work does not
discriminate campaign that promotes workplace equality, and in
the Equal by 30 campaign that promotes gender equality. This all paves
the way towards a more equal and diverse work environment at Fortum.
Long-term value and growthSustainable supply chainEnergy and resource efficiencyEconomic benefits to our stakeholdersClimate-benign energy production and systemsReduction of environmental impactsSecure energy supply for customersSolutions for sustainable citiesOperational and occupational safety Business ethics and complianceCustomersatisfactionPersonnel wellbeingPersonnel and societyClimate and resources 10
heating, cooling, waste-to-energy, biomass, and other circular economy
solutions as well as solar power production.
The business operations are located in the Nordics, the Baltic
countries, and Poland. The division also includes Fortum’s 50% holding
in Stockholm Exergi (formerly Fortum Värme), which is a joint venture
and is accounted for using the equity method.
Consumer Solutions
Consumer Solutions is responsible for the electricity and gas retail
businesses in the Nordics and Poland, including the customer service,
invoicing, and debt collection business. Fortum is the largest electricity
retail business in the Nordics, with approximately 2.5 million customers
across different brands in Finland, Sweden, Norway, and Poland. The
business provides electricity and related value added products as well as
new digital services.
Russia
Russia division comprises power and heat generation and sales in Russia.
The division also includes Fortum’s over 29% holding in TGC-1, which is
an associated company and is accounted for using the equity method.
Business model
Fortum’s business activities cover the production and sales of electricity
and heat, waste-to-energy and circular economy solutions, as well as
energy-sector expert services and various consumer solutions. Fortum
is the third largest power generator and the largest electricity retailer
in the Nordic countries. Globally, the company is one of the leading
heat producers. As two thirds of Fortum’s power production is hydro
and nuclear, the company is also among the lowest-emitting generators
in Europe.
Fortum’s organisation consists of four business divisions: Generation,
City Solutions, Consumer Solutions, and Russia. Until November 2018,
there were two development units focusing on growing new businesses:
M&A and Solar & Wind Development as well as Technology and New
Ventures. In November Fortum announced the reorganisation of
the solar and wind businesses. The wind operations became a business
area within the Generation division and the solar operations within
the City Solutions division. The Russian wind and solar operations
continued as a part of the Russia division.
With core operations in 10 countries, Fortum employs a diverse team
of more than 8,000 energy-sector professionals. Fortum has 124 hydro
power plants, 27 combined heat and power (CHP), condensing, and
nuclear power plants, as well as three wind power parks and three solar
power plants. Globally, the company supplies heat in 23 cities and towns
and has five main waste treatment facilities. Fortum’s key markets are
the Nordic and Baltic countries, Russia, Poland, and India.
Generation
Generation is responsible for Nordic power production. The division
comprises nuclear, hydro, wind, and thermal power production, as well
as power portfolio optimisation, trading, industrial intelligence, and
nuclear services globally.
City Solutions
City Solutions is responsible for developing sustainable solutions for
urban areas into a growing business for Fortum. The division comprises
11
support better utilisation of the current asset base and that can create
new markets and products for Fortum. The company is continuously
looking for emerging clean energy solutions and for solutions that
increase resource and system efficiency.
In December 2018, Fortum committed to invest EUR 150 million
in Valo Ventures over a period of 10 years. It is an independent
fund investing in digital and cloud-scale technology start-ups in
North America and Europe. Valo Ventures is aligned with Fortum’s
vision ‘For a cleaner world’ and strategy. Fortum launched Valo Ventures
together with Scott Tierney, former Google Capital co-founder.
Future challenges and opportunities
Climate change
We believe that the growing awareness and concern about climate
change will increase the demand for low-carbon and resource- and
energy-efficient energy products and services. We are leveraging our
know how in carbon dioxide-free hydro, nuclear, wind, and solar power
as well as in energy-efficient CHP production by offering our customers
low-carbon energy solutions. We also believe that the electrification
of transportation, industry and services will increase the consumption
of low-carbon electricity in particular. Our strategy is targeting to
a multi-gigawatt wind and solar portfolio.
Our circular economy services also respond to this demand by
utilising waste stream materials as efficiently as possible and by reducing
the formation of greenhouse gases generated from biodegradable waste
at landfills. Additionally, the use of non-recyclable and non-recoverable
waste in energy production replaces fossil fuel.
Our operations are exposed to the physical risks caused by climate
change, including changes in weather patterns that could alter energy
production volumes and energy demand. Fluctuating precipitation,
flooding, and extreme temperatures may affect e.g. hydropower
production, dam safety, availability of cooling water, and the price and
availability of biofuels.
Hydrological conditions, precipitation, temperatures, and wind
conditions also affect the short-term electricity price in the Nordic
power market. In addition to climate change mitigation, we also aim to
adapt our operations and we take climate change into consideration in,
among other things, the assessment of growth projects and investments
as well as in operation and maintenance planning.
Power price development
One of the key factors influencing Fortum’s business performance is
the wholesale price of electricity in the Nordic region. The key drivers
behind the wholesale price development in the Nordic region are the
supply-demand balance, the prices of fuel and CO2 emission allowances,
and the hydrological situation.
The overall economic growth impacts commodity and CO2 emission
allowance prices, which has an effect on the Nordic wholesale price of
electricity.
Regulatory environment
In the Nordic countries, the regulatory and fiscal environment for
the energy and environmental management sectors has also added
risks for companies. The main strategic risk is that the regulatory and
market environment develops in a way that we have not been able to
foresee and prepare for. In response to these uncertainties, Fortum has
analysed and assessed a number of future energy market and regulation
scenarios, including the impact of these on different generation forms
and technologies. As a result, Fortum’s strategy includes broadening the
base of revenues and diversification into new businesses, technologies,
and markets. The environmental management business is based on
the framework and opportunities created by environmental regulation.
Being able to respond to customer needs created by the tightening
regulation is a key success factor.
Research and development
Sustainability is at the core of Fortum’s strategy and, alongside Fortum’s
current businesses, the company is carefully exploring and developing
new sources of growth within renewable energy production.
Fortum’s goal is to be at the forefront of energy technology
and application development. To accelerate innovation and
the commercialisation of new offerings, Fortum is strengthening its
in-house innovation and digitalisation efforts and building partnerships
with leading global suppliers, promising technology and service
companies, and research institutions. Fortum makes direct and indirect
investments in start-ups that have promising new innovations focused
on connectivity, have disruptive potential and accelerate the transition
towards a circular economy. Fortum also invests in technologies that
12
Market position
Fortum is the third largest power generator and the largest electricity
retailer in the Nordic countries. Globally, we are one of the leading heat
producers. As two thirds of our power production is hydro and nuclear,
Fortum is also among the lowest-emitting generators in Europe.
Nordic power generation, 402 TWh, over 350 companies
Agder Energi
Ørsted
BKK
Others
Vattenfall
Statkraft
Fortum
Uniper
E-CO Energi
PVO
Norsk Hydro
Largest heat producers globally, TWh
150
120
90
60
30
0
l
s
u
P
T
m
o
r
p
z
a
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S
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l
Source: Fortum, company information, 2017 figures pro forma. EPH incl. LEAG. Chinese data incomplete.
Largest power generators in Europe and Russia, TWh
Source: Fortum, company information, 2017 figures pro forma
Nordic electricity retail, 15 million customers, ~350 companies
SE – Syd Energi
Din El, Göteborg
Jämtkraft
Others
Fortum
Vattenfall
Ørsted
E.ON
Fjordkraft
SEAS-NVE
Helen
600
500
400
300
200
100
0
F
D
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m
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r
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s
o
R
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W
R
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G
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m
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F
l
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N
N
m
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a
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B
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S
P
E
E
S
S
N
O
E
.
I
E
D
d
n
u
b
r
e
V
Source: Fortum, company information, 2017 figures pro forma
Source: Fortum, company information, 2017 figures pro forma. EPH incl. LEAG
Fortum’s power generation, TWh
80
70
60
50
40
30
20
10
0
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
CO2-free
Other
Specific CO2 emissions of major utilities in Europe, g CO2/kWh electricity, 2017
1,000
800
600
400
200
0
I
E
D
H
P
E
E
W
R
P
D
E
A
2
A
Z
E
C
l
e
n
E
r
e
p
n
U
i
y
g
r
u
t
a
N
W
B
n
E
x
a
r
D
E
S
S
i
e
g
n
E
174
l
a
t
o
t
m
u
t
r
o
F
l
l
a
f
n
e
t
t
a
V
o
c
e
n
E
d
e
t
s
r
Ø
l
a
o
r
d
r
e
b
I
F
D
E
O
V
P
N
O
E
.
Average 290
28
U
E
m
u
t
r
o
F
d
n
u
b
r
e
V
t
f
a
r
k
t
a
t
S
Note: All figures, except ”Fortum total”, include only European power generation.
Fortum’s specific emissions of the power generation in 2018 in the EU were 26 g/kWh and in total 186 g/kWh.
Source: PwC, December 2018, Climate Change and Electricity, Fortum
13
Long-term focus on no- or low-CO2 power
production
Sustainability and CO2-free power generation have been part of Fortum’s
strategy for several decades. We believe that the energy system needs
to transform to a system with substantially lower emissions, higher
resource efficiency, and a higher share of power generation based on
renewables. The transformation will not happen overnight and we must
provide customers with a secure energy supply at a competitive price
during the transition towards lower emissions. In implementing our
strategy we have worked to increase our CO2-free power generation.
We also have generation capacity based on fossil fuels, located mainly
in Russia, and we have worked to increase its efficiency and reduce its
specific emissions. We continue to focus on increasing our solar and
wind power capacity over the coming years, and we are targeting a multi-
gigawatt solar and wind portfolio.
Increasing the CO2-free power generation
Over the past decades Fortum has been working for a more sustainable
world. We have increased our annual CO2-free power generation from
around 15 TWh in 1990 to 43 TWh in 2018. The development has not
always been linear, as annual variations in hydropower production have
a significant impact.
Among the lowest specific emissions
We were among the early proponents for a market-based price on CO2.
We are advocating for market-based solutions and a strong EU ETS to
drive the necessary change in the energy system. In our own operations
we have invested in CO2-free power generation, and the carbon exposure
of our production in Europe is among the lowest at 26 gCO2/kWh in 2018.
The respective figure for Fortum overall was 186 gCO2/kWh in 2018.
14
Fortum’s wind and solar power generation capacity, MW
1,750
1,500
1,250
1,000
750
500
250
0
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Wind
Solar
Projects under development
planned
Includes Fortum’s capacities and Fortum’s share of the capacities of associates
and joint ventures
Grow in solar and wind
In addition to CO2-free hydro and nuclear power production, we believe
that solar and wind power will play an essential role in the future. Solar
power is becoming one of the most competitive forms of new power
generation in many parts of the world, and we are targeting investments
totalling EUR 200–400 million in solar power in India. During 2018
we divested a 54% stake in our 185-MW solar power plants in India to
free up capital for further investments, and in June 2018 Fortum won
a 250-MW auction for a new Indian solar plant.
The market conditions in the Nord Pool area and in Russia are more
suitable for wind power, and Fortum is increasing its investments
heavily. In January 2018, Fortum commissioned the country’s largest
wind farm in Russia and in January 2019 we commissioned a further
50-MW wind farm together with our partner Rusnano. In Norway,
Fortum commissioned the 50-MW Ånstablåheia wind farm and the
97-MW Sørfjord wind farm is due to be commissioned in 2019.
Although the solar and wind capacity is still small compared to
Fortum’s current total power generation capacity of close to 14,000 MW,
our total wind and solar portfolio has grown substantially during 2018.
Together with our associated companies, we have a portfolio of close to
three gigawatts (Fortum’s share 1,686 MW) of solar and wind parks and
development projects in the Nordics, Russia, and India.
Financials 2018
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
1
Financials 2018 – Reader’s guide
This report consists of the operating and financial review and the consolidated financial statements of Fortum Group, including the parent company financial statements.
Other parts of Fortum’s reporting entity include CEO’s business review, corporate governance statement, remuneration statement as well as tax footprint, which are
published on Fortum’s webpage. Sustainability reporting is an integrated part of Fortum’s annual reporting and additional information on sustainability operations can
be found on Forum’s website in sustainability section.
Operating and financial review
This section includes description of Fortum’s
financial performance during 2018. Here you will
also find a description of the risk management as
well as information on sustainability and Fortum
share performance.
Consolidated
financial statements
Primary statements
include Fortum’s consolidated income
statement, statement of comprehensive income,
balance sheet, statement of changes in total
equity and cash flow statement.
Notes
The notes to the consolidated financial
statements are grouped to six sections based
on their nature. Use the note number list on the
right side of the notes pages to navigate in the
financial statements.
Key figures
Key figures consist of financial key figures,
share key figures and operational key figures
for 2017–2018. The financial key figures derive
mainly from the primary statements. Segment
key figures include information on segments.
Parent company financial statements
Here you can read the parent company financial
statements including the primary statements,
cash flow and notes to the financial statements.
Proposal for the use of profit
shown on the balance sheet
The Board of Directors proposal
for the dividend in 2018
is disclosed in this section.
Auditor’s report
This section includes the audit report issued by
Fortum Oyj’s auditor, Deloitte Oy.
Key figures 2009–2018 and
quarterly financial information
Look here for financial key figures, share key
figures, operational key figures and volume
related key figures for 2009–2018 and quarterly
financial information for the years 2017 and 2018.
Investor information
Here you will find information on Fortum’s Annual
General Meeting, dividend payment, basic share
information as well as details of the financial
information available to shareholders in 2019.
Notes
1–3 Basis of preparation
These notes describe the basis of preparing the consolidated financial
statements and consist of the accounting policies, critical accounting
estimates and judgements and information about acquisitions and
disposals.
4–5 Risks
In the Risks section you will find notes that disclose how Fortum
manages financial risks and capital risks.
6–14 Income statement
These notes provide supporting information for the income statement.
15–33 Balance sheet
These notes provide supporting information for the balance sheet.
34–37 Off balance sheet items
The notes in this section provide information on items that are not
included in the balance sheet.
38–40 Group structure and related parties
This section includes information on related party transactions,
events after balance sheet date and the subsidiaries of Fortum group.
The following symbols show which amounts in the notes reconcile to
the items in income statement, balance sheet and cash flow statement.
IS = Income statement
BS = Balance sheet
CF = Cash flow
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
2
Financials 2018
Reader’s guide ���������������������������������������������������������������������������������� 1
OPERATING AND FINANCIAL REVIEW ������������������������������������������������ 3
Financial performance and position ������������������������������������������������������� 3
Sustainability ����������������������������������������������������������������������������������� 20
Risk management ����������������������������������������������������������������������������� 25
Fortum share and shareholders ����������������������������������������������������������� 31
FINANCIAL STATEMENTS ����������������������������������������������������������������� 34
Consolidated financial statements ����������������������������������������������������� 34
Consolidated income statement ���������������������������������������������������������� 34
Consolidated statement of comprehensive income ���������������������������������� 35
Consolidated balance sheet ��������������������������������������������������������������� 36
Consolidated statement of changes in total equity ���������������������������������� 37
Consolidated cash flow statement ������������������������������������������������������� 38
Notes to the consolidated financial statements ������������������������������������ 40
1 Accounting policies ������������������������������������������������������������������� 40
2 Critical accounting estimates and judgements �������������������������������� 47
3 Acquisitions and disposals ���������������������������������������������������������� 47
Financial risk management �������������������������������������������������������� 50
4
5 Capital risk management ����������������������������������������������������������� 57
Segment reporting �������������������������������������������������������������������� 59
6
Items affecting comparability ������������������������������������������������������ 64
7
Fair value changes of derivatives and underlying items
8
in income statement ������������������������������������������������������������������ 65
9 Other income and other expenses ����������������������������������������������� 66
10 Materials and services ��������������������������������������������������������������� 67
11 Employee benefits ��������������������������������������������������������������������� 67
Finance costs – net ������������������������������������������������������������������� 71
12
13
Income tax expense ������������������������������������������������������������������ 72
14 Earnings and dividend per share ������������������������������������������������� 74
Financial assets and liabilities by categories ����������������������������������� 75
15
Financial assets and liabilities by fair value hierarchy ������������������������ 79
16
17
Intangible assets ����������������������������������������������������������������������� 82
18 Property, plant and equipment ���������������������������������������������������� 85
19 Participations in associated companies and joint ventures ����������������� 89
20 Other non-current assets ������������������������������������������������������������ 94
Interest-bearing receivables �������������������������������������������������������� 95
21
22
Inventories ������������������������������������������������������������������������������� 95
23 Trade and other receivables �������������������������������������������������������� 96
Liquid funds ���������������������������������������������������������������������������� 97
24
Share capital ��������������������������������������������������������������������������� 97
25
26 Non-controlling interests ������������������������������������������������������������� 98
Interest-bearing liabilities ������������������������������������������������������������ 98
27
28
Income taxes in balance sheet �������������������������������������������������� 101
29 Nuclear related assets and liabilities ������������������������������������������� 104
30 Other provisions ��������������������������������������������������������������������� 107
31 Pension obligations ����������������������������������������������������������������� 108
32 Other non-current liabilities ������������������������������������������������������� 111
33 Trade and other payables �������������������������������������������������������� 112
Lease commitments ���������������������������������������������������������������� 112
34
35 Capital commitments ��������������������������������������������������������������� 113
36 Pledged assets and contingent liabilities �������������������������������������� 114
37
Legal actions and official proceedings ���������������������������������������� 115
38 Related party transactions �������������������������������������������������������� 117
39 Events after the balance sheet date �������������������������������������������� 118
Subsidiaries by segment on 31 December 2018 ��������������������������� 119
40
Key figures ����������������������������������������������������������������������������������� 121
Financial key figures ������������������������������������������������������������������������ 121
Share key figures ���������������������������������������������������������������������������� 122
Segment key figures ������������������������������������������������������������������������ 123
Definitions of key figures ������������������������������������������������������������������ 125
Parent company financial statements ����������������������������������������������� 128
Income statement ��������������������������������������������������������������������������� 128
Balance sheet �������������������������������������������������������������������������������� 128
Cash flow statement ����������������������������������������������������������������������� 129
Notes ������������������������������������������������������������������������������������������� 130
Proposal for the use of the profit shown on the balance sheet �������������� 137
Auditor’s report ����������������������������������������������������������������������������� 138
Key figures 2009–2018 ����������������������������������������������������������������� 142
Financial key figures ������������������������������������������������������������������������ 142
Share key figures ���������������������������������������������������������������������������� 144
Segment key figures ������������������������������������������������������������������������ 145
Operational key figures �������������������������������������������������������������������� 151
Quarterly financial information ������������������������������������������������������� 154
Investor information ���������������������������������������������������������������������� 156
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
3
3
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Financial performance and position
Improved 2018 results on higher market prices – New phase in strategy implementation started
Key financial ratios 1)
Return on capital employed,%
Comparable net debt/EBITDA
1) See Definitions of key figures.
Key figures
EUR million
IS Sales
Comparable EBITDA
IS Comparable operating profit
IS Operating Profit
- of sales%
IS Share of profits from associates and joint ventures
IS Profit before income tax
- of sales%
IS Earnings per share, EUR
CF Net cash from operating activities
Shareholders’ equity per share, EUR
Interest-bearing net debt (at end of period)*
Return on shareholders' equity,%
Equity-to-assets ratio,%
* Net cash in 2016
2018
6.7
3.6
2017
7.1
0.8
2016
4.0
0.0
2018
5,242
1,523
987
1,138
21.7
38
1,040
19.8
0.95
804
13.33
5,509
6.8
54
2017
4,520
1,275
811
1,158
25.6
148
1,111
24,6
0.98
993
14.69
988
6,6
61
2016
3,632
1,015
644
633
17.4
131
595
16.4
0.56
621
15.15
-48
3,7
62
Change
18/17
16%
19%
22%
-2%
-74%
-6%
-3%
-19%
-9%
2018 was an eventful year for Fortum� We continued our strategy implementation with the integration
and development of our Hafslund and Ekokem acquisitions, further investments in renewables, and most
significantly; closing the Uniper tender offer� Our long-term belief in the need for large-scale decarbonisation
took a leap forward with the strengthening of the Market Stability Reserve and subsequent tripling of emission
allowance prices, having a clear positive impact on power prices�
Over the previous years we have worked hard to deliver on our strategy announced in early 2016� As a result,
we now have a portfolio of businesses with good profit potential for coming years� After taking significant steps
in the capital redeployment that we began in 2016, we updated Fortum’s strategy in November 2018� The updated
strategy is a natural continuation of the previous one and builds on four priorities�
Our first strategic priority is to pursue operational excellence and increased flexibility in order to ensure
benchmark performance of our existing businesses and improve our long-term competitiveness� After the large
investments done during previous years it is only natural that the second priority is to ensure value creation
from these investments� We will also continue to optimise our business portfolio, considering the ongoing
transformation and decarbonisation of the sector� Despite the significant capital redeployment already made,
we will, as our third priority, continue to drive focused growth in the power value chain� We will build on our
long-standing expertise with the strategic focus on CO2-free power generation – For a cleaner world� Foreseeing
the market development towards the end of the 2020s will be increasingly challenging, but we believe that the
uncertainty will also provide new business opportunities� Consequently, as our fourth priority, we aim to build
on our existing competences and emerging technologies to create new businesses, independent of power prices,
that have the potential for sizeable profit contribution� One example of initiatives in this area is our commitment
to invest in Valo Ventures, a new global venture capital fund� Valo Ventures invests in digital start-ups focusing on
key global megatrends that are central to Fortum’s strategy� Fortum launched Valo Ventures together with Scott
Tierney, former Google Capital co-founder�
The urgent need to decarbonise society is perhaps the greatest challenge of our time� The EU Commission
published its long-term climate vision in November� Fortum supports the net zero emission target for 2050, as
proposed in the most ambitious scenario� Cost-efficient emission reduction pathways should be established for
all sectors� The EU emission trading scheme currently covers less than half of EU CO2 emissions� Therefore,
strengthening and broadening the scope of the EU ETS to e�g� heating, cooling, and transport should be a key
tool to drive decarbonisation�
Our continued investments in wind and solar are starting to have a positive impact on our results�
Commissioned in the beginning of 2018 and the first of its kind in Russia, the 35-MW Ulyanovsk wind park is one
example of this� The sale of a 54% stake in our 185-MW solar power plants in India freed up capital for further
investments, and in June Fortum won a 250-MW auction for an Indian solar park with a fixed tariff for 25 years�
Our total wind and solar portfolio has grown substantially during 2018� Together with our associated companies,
we have a portfolio of close to three gigawatts of solar and wind parks and development projects in the Nordics,
Russia, and India�
Closing the offer on Uniper shares in June 2018 was the most significant milestone during the year� We
have a clear vision for how Fortum and Uniper can jointly build ‘The Utility of the Future’, and we want to
work with the company to explore how to best make this vision a reality for the benefit of all shareholders
and stakeholders of both companies� To our disappointment, talks with Uniper have not yet proceeded as
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
4
4
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
anticipated, but the fundamentals of our investment case are intact and
we remain committed� Since the closing of the offer, we have increased
our shareholding in Uniper in order to further secure Fortum’s voting
position in any future Uniper General Meeting� At the end of 2018,
Fortum held 49�99% of Uniper shares and voting rights�
Fortum’s fourth quarter results improved, mainly as a result of
higher power prices and increased nuclear production, due to improved
availability� The results were still burdened by lower than average
hydropower generation volumes, due to low inflows and reservoir levels,
although the situation improved from the record low volumes seen in
the third quarter� The impact of the higher power prices is reflected
in our full-year comparable operating profit, which increased by 22%�
The investment in Uniper only had a marginal effect on Fortum’s 2018
results, as they include only Fortum’s share of Uniper’s third-quarter
results� In the future, Uniper’s profit and dividends will contribute to
Fortum’s earnings per share and cash flow�
Highlight of the year for the Generation division was the clearly
improved results, driven by higher market prices� During the year we
also finalised the automation modernisation project at the Loviisa
nuclear power plant, the biggest single project since the construction
of the plant� Following on the strong improvement in Russia over the
past years, the 2018 results in roubles improved slightly� In the City
Solutions and Consumer Solutions divisions, 2018 was characterised by
the integration of Hafslund, which proceeded well� Unfortunately the
financial results for these two divisions has not yet reach satisfactory
levels� We will continue the integration work, and expect the synergies to
materialise gradually during 2019 and 2020�
Based on the results of 2018 and the outlook for future years, Fortum’s
Board of Directors is proposing an unchanged dividend of EUR 1�10 per
share for the calendar year 2018�
Strategy update in November 2018
On 12 November 2018, Fortum announced its updated strategy� The
update is a continuation of the strategy execution towards Fortum’s
vision “For a cleaner world”� At the same time Fortum reconfirmed its
dividend policy and long-term financial targets� The strategy aims at
strengthening Fortum’s competitiveness and ensuring a benchmark
portfolio for the 2020’s� Pursuing operational excellence and increased
flexibility as well as ensuring value creation from investments and
portfolio optimisation are the key priorities� Fortum will also drive
focused growth in the power value chain and seek to build options
for significant new businesses for the future� The updated strategy
was presented in more details on Fortum’s Capital Markets Day on
13 November 2018�
Uniper investment
In September 2017, Fortum announced it had signed a transaction
agreement with E�ON under which E�ON had the right to decide to
tender its 46�65% shareholding in Uniper SE into Fortum’s public
takeover offer (PTO)� In November 2017, Fortum launched a voluntary
public takeover offer to all Uniper shareholders at a total value of EUR
22 per share, implying a premium of 36% to the price prior to intense
market speculation on a potential transaction at the end of May 2017� In
February 2018, Fortum announced that shareholders representing 47�12%
of the shares in Uniper had accepted the offer�
The PTO was conditional to regulatory and merger control approvals
in several countries� During the second quarter 2018, Fortum received
the required clearances in Russia under the Strategic Investment Law as
well as Competition Law� The clearances allow Fortum the acquisition
of up to 50% of shares and voting rights in Uniper� During the second
quarter, Fortum also received an unconditional merger clearance
decision from the European Commission� Clearances in the United
States and South Africa had already been granted earlier�
On 26 June 2018, Fortum closed the offer and became the largest
shareholder in Uniper with 47�35% of the shares� Fortum paid a total
consideration of EUR 3�7 billion for all shares tendered (EUR 21�31 per
share)� The total consideration was financed with existing cash resources
of EUR 1�95 billion and bridge loan financing of EUR 1�75 billion from
committed credit facilities� Since June 2018 Fortum has increased its
shareholding in Uniper in order to further secure its voting position
in any future Uniper General Meeting� On 31 December 2018, Fortum
owned 49�99% of the shares in Uniper�
The share of Uniper’s profit will contribute to the EPS and dividends
to the cash flow of Fortum� As a result of this transaction, Fortum’s
leverage rose above Fortum’s long-term target level for net debt/EBITDA
ratio of around 2�5x� Over time, however, Fortum expects its cash
generation in combination with the dividend from Uniper to reduce this
ratio towards the stated target�
Fortum has consolidated Uniper as an associated company from 30
June 2018� The total acquisition cost, including direct costs relating to
the acquisition, is reported in ‘Participations in associated companies
and joint ventures’� The purchase price allocation will be completed
within the one-year window from the acquisition date, according to
IFRS� As Uniper publishes its interim reports later than Fortum,
Fortum’s share of Uniper’s results will be accounted for with a time-lag
of one quarter, with potential adjustments� Fortum’s Financial
Statements 2018 only includes Fortum’s share of Uniper’s third-quarter
results, amounting to EUR -2 million ( Note 3)� Uniper will report its
full-year 2018 results on 12 March 2019�
Financial results
Sales by segment
EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other
Netting of Nord Pool transactions 1)
Eliminations
IS Total
Change
18/17
10%
8%
60%
-3%
26%
2018
1,837
1,094
1,759
1,069
129
-516
-130
5,242
2017
1,677
1,015
1,097
1,101
102
-367
-103
4,520
1) Sales and purchases with Nord Pool are netted at the Group level on an hourly basis and
posted either as revenue or cost depending on whether Fortum is a net seller or net buyer
during any particular hour.
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
5
5
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Comparable EBITDA by segment
EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other operations
IS Total
2018
762
284
110
417
-50
1,523
Comparable operating profit by segment
EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other operations
IS Total
Operating profit by segment
EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other operations
IS Total
2018
631
113
53
271
-79
987
2018
738
109
75
273
-57
1,138
2017
603
262
57
438
-83
1,275
2017
478
98
41
296
-102
811
2017
501
102
39
295
221
1,158
Change
18/17
26%
8%
93%
-5%
40%
19%
Change
18/17
32%
15%
29%
-8%
23%
22%
Change
18/17
47%
7%
92%
-7%
-126%
-2%
For further information see Note 6 Segment reporting�
Fortum has reassessed the assumptions for all nuclear related assets and
liabilities as of 31 December 2018� The increase in the nuclear provision
for the Loviisa nuclear power plant in Finland leads to recognition of an
additional share of the Finnish nuclear fund� As of 31 December 2018,
Fortum still has EUR 254 million in unrecognised nuclear waste fund
assets for Loviisa ( Note 29)� The increase in the provision and the
additional share in the fund are both included in items affecting
comparability� The changes in assumptions had a positive impact on
interests presented in other financial expenses� The assumptions have
also been changed for the respective balances of the co-owned nuclear
companies in Finland and Sweden i�e� Teollisuuden Voima Oyj (TVO),
Oskarshamn Kraftgrupp AB (OKG), and Forsmarks Kraftgrupp AB� The
total impact of the change to share of profit from associated companies
and joint ventures was EUR -37 million, net of tax, and including
additional nuclear waste liability related to legacy waste obligations for
Swedish nuclear� The net profit impact from all these nuclear related
adjustments is close to zero�
Fortum’s sales increased by 16%, mainly reflecting the consolidation
of Hafslund and higher power prices� Comparable operating profit
increased by 22%, mainly as a result of the higher achieved power price,
the positive impact from the consolidation of the acquired Hafslund
businesses, lower real-estate and capacity taxes in Swedish hydro and
nuclear power plants, higher received Capacity Supply Agreement (CSA)
payments in Russia, as well as the profit from the sale of a 54% share
of Fortum’s Indian solar power plants� The result improvement was
partly offset by the very low hydropower production volumes in the third
quarter and the weaker Russian rouble�
Operating profit for the period was positively impacted by EUR 151
(347) million of items affecting comparability, mainly due to the fair
value change of non-hedge accounted derivatives, capital gains, and
nuclear related adjustments� In 2017, the items affecting comparability
included a one-time capital gain of EUR 324 million from the divestment
of Hafslund ASA ( Note 6)�
The share of profit from associates and joint ventures decreased to
EUR 38 (148) million, mainly due to nuclear related adjustments of EUR
-37 million and other items relating to nuclear decommissioning of EUR
-33 million, mainly from OKG� The decrease was also due to that the
comparison period included the share of profit from Hafslund ASA of
EUR 39 million, divested in August 2017� Uniper accounted for EUR -2
(0) million, Stockholm Exergi (formerly Fortum Värme) for EUR 61 (66)
million, and TGC-1 for EUR 40 (32) million� The share of profit from
TGC-1 is based on the company’s published fourth-quarter 2017 and
January–September 2018 interim reports� The share of profit from Uniper
is based on the company’s published third-quarter 2018 interim report
( Note 19)�
Net finance costs amounted to EUR 136 (195) million� The decline was
mainly due to nuclear related adjustments of EUR 49 million�
Profit before income taxes was EUR 1,040 (1,111) million�
Taxes for the period totalled EUR 181 (229) million� The effective
income tax rate, according to the income statement, was 17�5% (20�6%)�
The comparable effective income tax rate, excluding the impact of the
share of profit from associated companies and joint ventures, non-
taxable capital gains, tax rate changes and other major one-time income
tax effects was 22�0% (18�8%) ( Note 13)�
The profit for the period was EUR 858 (882) million� Earnings per
share were EUR 0�95 (0�98), of which EUR 0�15 (0�38) per share was
related to items affecting comparability, including capital gains of
EUR 0�09 from the sale of the 10% stake in Hafslund Produksjon� In the
comparison period in 2017, the sales gain from the Hafslund transaction
was EUR 0�36 and the impact from a Swedish income tax case was
EUR -0�14�
Financial position and cash flow
EUR million
Interest expense
Interest income
Fair value gains and losses on
financial instruments
Other financial expenses - net
IS Finance costs - net
Interest-bearing liabilities
Less: Liquid funds
Interest-bearing net debt
2018
-148
34
-8
-15
-136
6,093
584
5,509
2017
-164
32
-12
-50
-195
4,885
3,897
988
Change
18/17
10%
6%
33%
70%
30%
25%
-85%
458%
Cash flow
In 2018, net cash from operating activities decreased by EUR 189 million
to EUR 804 (993) million, mainly impacted by an increase in comparable
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
6
6
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
EBITDA of EUR 248 million, an increase of realised foreign exchange
gains and losses of EUR 314 million, and the negative effect of a EUR
751 million increase in working capital� The foreign exchange gains and
losses of EUR 231 (-83) million relate to the rollover of foreign exchange
contract hedging loans to Russian and Swedish subsidiaries� The EUR
-670 (81) million change in working capital mainly resulted from the
daily cash settlements for futures on Nasdaq Commodities (Additional
cash flow information)�
Capital expenditure decreased by EUR 78 million to EUR 579 (657)
million, and was below the 2018 guidance of EUR 600–700 million�
Acquisition of shares was EUR 4,088 (972) million, mainly related to the
Uniper transaction ( Note 3)� The impact of divestment of shares was
EUR 259 (741) million, mainly resulting from the sale of the 10% stake in
Hafslund Produksjon and a 54% share of a solar power company�
Acquisitions and divestments in 2017 were mainly related to the
Hafslund transaction� Net cash used in investing activities increased to
EUR 4,398 (807) million�
Cash flow before financing activities was EUR -3,594 (187) million�
Proceeds from long-term liabilities were EUR 1,764 (35) million,
of which the main part is related to the bridge loan financing from
committed credit facilities for the acquisition of Uniper shares�
Payments of long-term liabilities totalled EUR 586 (543) million� The
dividends paid for 2017 amounted to EUR 977 million� The net decrease
in liquid funds was EUR 3,268 (1,241) million�
Assets and capital employed
At the end of the reporting period, total assets amounted to EUR 22,409
(21,753) million� Liquid funds at the end of the period decreased to
EUR 584 (3,897) million, impacted by the Uniper transaction� Capital
employed was EUR 18,170 (18,172) million�
Equity
Equity attributable to owners of the parent company totalled EUR 11,841
(13,048) million� The decrease of EUR 1,207 million was mainly due to
the dividends of EUR 977 million paid for 2017, the EUR -599 million
impact from fair valuation of cash flow hedges, and translation
differences of EUR -518 million, partly offset by the net profit for the
period of EUR 843 million� The dividend of EUR 1�10 per share for 2017
was approved by the 2018 Annual General Meeting on 28 March 2018 and
paid on 10 April 2018�
Financing
Net debt increased by EUR 4,521 million to EUR 5,509 (988) million,
mainly due to the closing of the Uniper offer in the latter part of the
second quarter�
At the end of 2018, the Group’s liquid funds totalled EUR 584 (3,897)
million� Liquid funds include cash and bank deposits of EUR 317 (246)
million held by PAO Fortum� In addition to liquid funds, Fortum’s
undrawn committed credit facilities totalled EUR 1�8 (1�8) billion
( Note 24)�
Net financial expenses totalled EUR 136 (195) million, of which net
interest expenses were EUR 114 (132) million� Net financial expenses
included the impact of EUR 49 million from nuclear related adjustments
( Note 29)� In 2017, net financial expenses included costs relating to
financing arrangements of the Uniper transaction�
On 12 September 2018, Fortum received information from Nasdaq
Commodities that it had closed-out the positions of a clearing
member and that the funds from the commodity member default
fund had been utilised to cover the loss� Fortum is trading on Nasdaq
Commodities and is a member of the default fund� On 13 September,
Nasdaq requested the members of the default fund to replenish their
contribution in the fund� Fortum’s participation in the default fund
was approximately EUR 30 million and the requested replenishment
was approximately EUR 20 million� Consequently, Fortum booked
Change in net debt during 2018, EUR million
6,000
5,000
4,000
3,000
2,000
1,000
0
-1,000
988
1,523
90
138
94
0 1 7
b l e E
b t 2
a r a
p
A
D
n - c
B I T
o
N
s
a
m s
n
h it e
e t fi
N
N
e
m
e t d
o
C
e s
x
o r ki n
s t
e t a
m
o
e i n w
a
g c
a
P
o
c
g
e c
c
a i d i n
n
a
h
n
C
4,521
579
298
29
4,088
977
47
5,509
670
p it a l
c
A
q
s
n
u isiti o
g
n
a
h
C
p
a
C
x
e
D iv
e i n i n t. b
e
n t s
g r e
e iv
c
b l e s
a
e
D ivi d
s p
d
n
a i d
X a
F
n
e r
e t d
d o t h
N
0 1 8
b t 2
e
e s t m
a ri n
e
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
7
7
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
approximately EUR 20 million as a financing cost in its 2018 results�
In November 2018, a legally binding agreement for a consensual
arrangement was finalised between the defaulting member and the
creditors of the defaulted member in order to recover part of the losses
arising from the default�
In January 2018, Standard & Poor’s downgraded Fortum’s long-term
credit rating from BBB+ to BBB with Negative Outlook� The short-term
rating was affirmed at level A-2� In June 2018, Fitch Ratings downgraded
Fortum’s long-term credit rating from BBB+ to BBB with Stable Outlook�
The short-term rating was downgraded to level F3� Having a solid
investment grade rating is a key priority for Fortum�
Key figures
At the end of 2018, the comparable net debt to EBITDA ratio for the last
12 months was 3�6x (0�8x), which is above the long-term over-the-cycle
target of approximately 2�5x�
Gearing was 46% (7%) and the equity-to-assets ratio 54% (61%)�
Equity per share was EUR 13�33 (14�69)� Return on capital employed
(ROCE) for the last twelve months was 6�7% (7�1%)� Fortum targets
a long-term over-the-cycle return on capital employed of at least 10%�
Operating and regulatory environment
Nordic countries
According to preliminary statistics, electricity consumption in the
Nordic countries was 399 (392) TWh� The higher consumption was
mainly driven by colder weather during the first quarter of 2018 and
the somewhat higher industrial consumption�
At the beginning of 2018, the Nordic water reservoirs were at 86 TWh,
which is 3 TWh above the long-term average and 11 TWh higher than
one year earlier� At the end of 2018, the reservoirs were at 74 TWh, which
is 9 TWh below the long-term average and 12 TWh lower than one year
earlier�
In 2018, the average system spot price in Nord Pool was EUR 44�0 (29�4)
per MWh, the average area price in Finland was EUR 46�8 (33�2) per MWh
and in Sweden SE3 (Stockholm) EUR 44�5 (31�2) per MWh�
In Germany, the average spot price was EUR 44�5 (34�2) per MWh
in 2018�
The market price of CO2 emission allowances (EUA) increased from
EUR 8 per tonne at the beginning of the year to EUR 25 per tonne at the
end of 2018�
Russia
Fortum operates mainly in the Tyumen and Khanty-Mansiysk area of
Western Siberia, where industrial production is dominated by the oil
and gas industries, and in the Chelyabinsk area of the Urals, which is
dominated by the metal industry� The Russian market is divided into two
price zones and Fortum operates in the First Price Zone (European and
Urals part of Russia)�
According to preliminary statistics, Russian electricity consumption
was 1,056 (1,035) TWh and the corresponding figure for the First Price
Zone was 810 (799) TWh in 2018�
In 2018, the average electricity spot price, excluding capacity price,
increased by 3�6% to RUB 1,247 (1,204) per MWh in the First Price Zone
and increased by 0�2% to RUB 1,043 (1,041) per MWh in the Urals hub�
Power consumption
TWh
Nordic countries
Russia
Tyumen
Chelyabinsk
Russia Urals area
Average prices
Spot price for power in Nord Pool power exchange, EUR/MWh
Spot price for power in Finland, EUR/MWh
Spot price for power in Sweden, SE3, Stockholm, EUR/MWh
Spot price for power in Sweden, SE2, Sundsvall, EUR/MWh
Spot price for power in European and Urals part of Russia, RUB/MWh 1)
Average capacity price, tRUB/MW/month
Spot price for power in Germany, EUR/MWh
Average regulated gas price in Urals region, RUB/1,000 m3
Average capacity price for old capacity, tRUB/MW/month 2)
Average capacity price for new capacity, tRUB/MW/month 2)
Spot price for power (market price), Urals hub, RUB/MWh 1)
CO2, (ETS EUA), EUR/tonne CO2
Coal (ICE Rotterdam), USD/tonne
Oil (Brent Crude), USD/bbl
1) Excluding capacity tariff.
2) Capacity prices paid only for the capacity available at the time.
2018
399
1,055
92
35
260
2018
44,0
46,8
44,5
44,2
1,247
609
44,5
3,801
148
1,075
1,043
16
92
72
2017
392
1,035
95
33
261
2017
29.4
33.2
31.2
30.8
1,204
535
34.2
3,685
148
899
1,041
6
84
55
2016
390
1,027
94
35
259
2016
26.9
32.4
29.2
29
1,204
481
29
3,614
140
815
1,054
5
59
45
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
8
8
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
31 Dec 2018 31 Dec 2017 31 Dec 2016
75
83
86
83
74
83
Water reservoirs
TWh
Nordic water reservoirs level
Nordic water reservoirs level, long-term average
Nordic water reservoirs, energy content, TWh
120
100
80
60
40
20
0
Q1
Q2
Q3
Q4
2000
2003
2017
2018
Reference level
Source: Nord Pool
Export/import
TWh (+ = import to, - = export from Nordic area)
Export/import between Nordic area and Continental Europe+Baltics
Export/import between Nordic area and Russia
Export/import Nordic area, total
2018
-10
8
-2
2017
-15
6
-9
2016
-10
6
-4
European regulatory environment
COP24 agreed on the operational rules of the Paris Agreement
On 15 December, the United Nation’s climate conference (COP24) in Poland approved the rules of the
implementation of the Paris Agreement� The Agreement will come into force in 2020� The rules include
monitoring and reporting of greenhouse gas emissions, reporting on climate finance, and the process for
increasing the climate ambition in the future� However, rules on market mechanisms and global carbon markets
are pending and will be negotiated late 2019�
The Paris Agreement asks countries to submit their long-term climate strategies and revisions of the existing
emission reduction commitments by early 2020� The current aggregated commitments are far from enough to
meet the global goal of keeping the temperature increase below 1�5°C� According to the International Panel on
Climate Change (IPCC), this requires “rapid and far-reaching transitions” including carbon dioxide removal from
the atmosphere� Global net carbon dioxide emissions have to decline by 45% from 2010 to 2030 and be net-zero
by 2050� According to the IPCC, the power sector should reduce emissions by 100% well before 2050�
The EU 2050 climate strategy sets the long-term framework
On 28 November, the European Commission published the proposal “A Clean Planet for All”, establishing a
strategic vision for 2050� The Commission foresees a 30–50% decline in energy consumption and a significantly
growing role of electricity by 50–200%� Concrete proposals for the EU targets and policies post 2030 are expected
from the next Commission�
Fortum considers the proposed strategy as ambitious and balanced� The carbon neutrality target for 2050
and the intermediate targets for 2030–2050 should be confirmed by the EU as soon as possible� In Fortum’s
view, carbon pricing will be the key measure for reaching carbon neutrality, and the EU should develop a market
mechanism to reward also the capture of CO2 directly from the air or from flue gases�
The German Coal Commission adopts its final report
The Coal Commission suggests in its report to the German Government that coal would be phased out from the
German energy mix by 2038� In 2032, there will be an assessment on the option to phase-out coal already in 2035�
The report suggests that after 2022, 30 GW of coal capacity could be online meaning that 12�5 GW of coal capacity
would have to be closed down compared to 2017� In 2030, only 17 GW of coal capacity would remain� Closing
down nuclear and coal at the same time underlines the important role of gas in the energy mix�
The report proposes compensations for coal plant operators� A compensation to customers should be offered
through lower grid fees or lowered electricity tax rates, as the Commission expects the power price to increase
as a result of the closures� Also the regions suffering from the coal phase-out should receive compensation in
order to mitigate the resulting negative structural effects on their economies� Furthermore, it is suggested that a
consequent amount of CO2 allowances would be cancelled so that the national policy measure would not water
down the operation of the EU Emission Trading Scheme (ETS)�
Fortum hopes that the German Government will give its opinion on the report as soon as possible, and that
the preparations for the respective laws and regulations will start swiftly� Detailed rules on compensations would
be necessary for the operators to make decisions on their production capacities�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
9
9
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Sustainable financing rules affect the whole
EU financing sector
In May 2018, the EU Commission presented the first set of legislative
proposals based on the strategy and action plan of sustainable financing�
This includes a proposal to develop an EU-wide taxonomy system to help
investors assess the sustainability and impact of economic activities� In
addition, the guidelines on non-financial reporting will be revised and
EU labels for green financial products will be developed�
The risk related to the taxonomy development is, among other things,
that it will take a negative view on certain low-carbon technologies (e�g�
waste-to-energy and nuclear) which can increase the financing costs of
future investments�
In Fortum’s view, while supporting the overall objective of the
Commission proposals, initiatives to promote sustainable investments in
the energy sector have to be technology neutral and aim for low-carbon
fossil-free solutions� It is also essential to ensure that the planned taxonomy
is developed in a transparent manner with a market-based approach�
EU waste package entered into force
The EU waste package, expected to effectively promote a circular
economy, was officially published in June 2018 and member states are
to implement the legislation by July 2020� The recycling targets for
municipal solid waste and packaging waste will be increased and the
landfilling of municipal waste will be further limited by 2030� Further,
the quality and comparability of waste statistics will be improved, the
calculation methods for recycling targets will be aligned, and e-registers
for hazardous waste will be established�
Rules on sustainable plastics use
In January 2018, the EU Commission published a communication for an
EU plastics strategy� The target is to transform the way plastic products
are designed, produced, used, and recycled in the EU� Better design of
plastic products, higher recycling rates, and better quality recyclates will
help boost the markets for secondary raw material plastics with greater
added value for a competitive European plastics industry� All Nordic
countries have developed their own roadmaps on sustainable plastics use�
Fortum welcomes the initiative to boost the markets for recycled
plastics� The plastics strategy is expected to result in business
opportunities for Fortum’s recycling and waste solutions�
Unexpected end-user price freeze in Poland
On 1 January 2019, the new Act on the Excise Tax and changes in other
laws suddenly and unexpectedly came into effect in Poland, freezing
end-user electricity prices at the level of 30 June 2018, with a proposed
governmental mechanism to compensate suppliers for potential losses�
The price freeze is a response to rapidly increased electricity prices,
caused by the higher CO2 price� The law is expected to be challenged
by the European Commission as the planned compensation to power
companies can be regarded as illegal state aid and the measure should
have been notified to the Commission before implementing it� Fortum
will continue to monitor the situation closely and will work jointly with
the relevant bodies to seek improved understanding and clarification of
the new legislation�
Segment reviews
Fortum’s business activities cover the production and sales of electricity
and heat, waste-to-energy and circular economy solutions, as well as
energy-sector expert services and various consumer solutions� Fortum
is the third largest power generator and the largest electricity retailer in
the Nordic countries� Globally, the company is one of the leading heat
producers� As two thirds of Fortum’s power production is hydro and
nuclear, the company is also among the lowest-emitting generators in
Europe�
With core operations in 10 countries, Fortum employs a diverse team
of more than 8,000 energy-sector professionals� Fortum has 124 hydro
power plants, 27 CHP (combined heat and power), condensing, and
nuclear power plants as well as three wind power parks and three solar
power plants� Globally, the company supplies heat in 23 cities and towns
and has five main waste treatment facilities� Fortum’s key markets are
the Nordic and Baltic countries, Russia, Poland, and India�
Fortum’s reportable segments under IFRS are Generation, City
Solutions, Consumer Solutions, and Russia� M&A and Solar & Wind
Development, Technology and New Ventures as well as corporate
functions are reported under Other Operations� Fortum’s participation
in Uniper SE is also reported as part of Other Operations�
In November 2018, Fortum announced that the solar and wind
businesses were reorganised as they have grown beyond the initial
development phase� The wind operations became a business area within
the Generation division and the solar operations a business within
the City Solutions division� The Russian wind and solar operations
continues as a part of the Russia division� The segment reporting will be
changed as of 2019 and 2018 figures will be restated accordingly�
Generation
The Generation segment comprises power production in the Nordics
including nuclear, hydro and thermal power production, power
portfolio optimisation, trading and industrial intelligence, and nuclear
services globally.
EUR million
Sales
- power sales
of which Nordic power sales 1)
- other sales
Comparable EBITDA
Comparable operating profit
Operating profit
Share of profits from associates and
joint ventures 2)
Comparable net assets (at period-end)
Comparable return on net assets,%
Capital expenditure and gross
investments in shares
Number of employees
2018
1,837
1,767
1,401
70
762
631
738
-72
6,295
11,1
194
1,075
2017
1,677
1,649
1,342
28
603
478
501
-1
5,672
8.4
264
1,035
Change
18/17
10%
7%
4%
150%
26%
32%
47%
-7,100%
11%
32%
-27%
4%
1) The Nordic power sales income and volume includes hydro and nuclear generation,
excluding minorities. It does not include thermal generation, minorities, customer business
or other purchases.
2) Power plants are often built jointly with other power producers, and owners purchase
electricity at cost including interest cost and production taxes. The share of profit/loss is
mainly IFRS adjustments (e.g. accounting for nuclear-related assets and liabilities) and
depreciations on fair-value adjustments from historical acquisitions ( Note 19).
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
10
10
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
The Generation segment’s total power generation in the Nordic countries decreased due to lower hydropower
volumes caused by low inflows and low reservoir levels in the third and fourth quarters and slightly lower nuclear
power generation resulting from the closure of Oskarshamn 1 in June 2017� The CO2-free production accounted
for 100% (99%) of the total power production�
The achieved power price in the Generation segment increased by EUR 2�8, +9% due to higher spot prices�
Comparable operating profit increased by 32%, driven by the higher achieved power price and lower real-estate
and capacity taxes in Swedish hydro and nuclear power plants, partly offset by lower hydro production volumes�
Operating profit was positively affected by EUR 108 (23) million of capital gains, fair value change of non-
hedge accounted derivatives, nuclear related adjustments, and impairment charges ( Note 6)�
The negative result contribution from associates and joint ventures was mainly due to nuclear related
adjustments� The adjustments had a positive impact on other financial expenses and the total impact on Fortum’s
net profit was marginal ( Note 19)�
Nord Pool, power price, 2014–2018, EUR/MWh
80
60
40
20
0
2014
2015
2016
2017
2018
In June 2018, Fortum sold its 10% ownership in Hafslund Produksjon and booked a one-time tax-free capital
Fortum achieved
Spot average
Spot price
gain of EUR 77 million in the Generation segment’s 2018 results�
Source: Nord Pool, Fortum
Power generation by source
TWh
Hydropower, Nordic
Nuclear power, Nordic
Thermal power, Nordic
Total
Nordic sales volume
TWh
Nordic sales volume
of which Nordic Power sales volume 1)
2018
19.1
22.8
0.1
42.0
2018
48.4
40.5
2017
20.7
23.0
0.5
44.2
Change 18/17
-8%
-1%
-80%
-5%
2017
51.8
42.2
Change 18/17
0%
-4%
1) The Nordic power sales income and volume includes hydro and nuclear generation, excluding minorities. It does not include thermal
generation, minorities, customer business or other purchases.
Sales price
EUR/MWh
Generation’s Nordic power price 2)
2018
34.6
2017
31.8
Change 18/17
9%
2) Generation’s Nordic power price includes hydro and nuclear generation, excluding minorities. It does not include thermal generation, minorities,
customer business or other purchases.
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
11
11
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
City Solutions
City Solutions develops sustainable city solutions into a growing
business for Fortum. The segment comprises heating and cooling,
waste-to-energy, biomass and other circular economy solutions. The
business operations are located in the Nordics, the Baltic countries
and Poland. The segment also includes Fortum’s 50% holding in
Fortum Värme, which is a joint venture and is accounted for using
the equity method.
EUR million
Sales
- heat sales
- power sales
- waste treatment sales 1)
- other sales 2)
Comparable EBITDA
Comparable operating profit
Operating profit
Share of profits from associates and
joint ventures
Comparable net assets (at period-end)
Comparable return on net assets,%
Capital expenditure and gross
investments in shares
Number of employees
2018
1,094
604
119
211
161
284
113
109
74
3,743
5.0
222
1,956
2017
1,015
523
121
195
175
262
98
102
80
3,728
5.5
556
1,907
Change
18/17
8%
15%
-2%
8%
-8%
8%
15%
7%
-8%
0%
-9%
-60%
3%
1) Waste treatment sales comprise gate fees at waste treatment plants and environmental
construction services.
2) Other sales comprise mainly operation and maintenance services and fuel sales.
On 4 August 2017, Fortum concluded the restructuring of its ownership
in Hafslund� As of 1 August 2017, Fortum’s 50% ownership in Fortum
Oslo Varme (the combined company of Hafslund’s Heat business area
and Klemetsrudanlegget) has been consolidated as a subsidiary to
Fortum in the results of City Solutions�
Heat sales volumes increased by 8% mainly driven by the
consolidation of Fortum Oslo Varme� The negative impact of the warm
weather in the second quarter offset the positive effects of the cold
weather in the first quarter�
Comparable operating profit increased by 15%� The positive effect
of EUR 37 (15) million of the consolidation of Fortum Oslo Varme was
partly offset by the weaker result in the recycling and waste business�
The seasonality of the City Solutions business has increased, due to
the consolidation of Fortum Oslo Varme and the new seasonal pricing�
On average, the annual effect of the seasonal pricing is neutral�
The consolidation of Fortum Oslo Varme had a positive effect of
EUR 70 (29) million on the comparable EBITDA�
Operating profit was negatively affected by EUR -4 (4) million of fair-
value change of non-hedge-accounted derivatives ( Note 6)�
Heat sales by country
TWh
Finland
Poland
Norway
Other countries
Total
Power sales by country
TWh
Finland
Poland
Other countries
Total
2018
3.8
3.5
1.6
1.9
10.8
2018
1.4
0.5
0.8
2.7
2017
3.9
3.7
0.7
1.8
10.0
2017
1.5
0.4
0.7
2.6
Change
18/17
-3%
-5%
129%
6%
8%
Change
18/17
-7%
25%
14%
4%
Consumer Solutions
Consumer Solutions comprises electricity and gas retail businesses
in the Nordics and Poland, including the customer service, invoicing,
and debt collection business. Fortum is the largest electricity retailer
in the Nordics with approximately 2.5 million customers across
different brands in Finland, Sweden, Norway, and Poland. The
business provides electricity and related value-added products as
well as new digital customer solutions.
EUR million
Sales
- power sales
- other sales
Comparable EBITDA
Comparable operating profit
Operating profit
Comparable net assets (at period-end)
Capital expenditure and gross
investments in shares
Number of employees
2018
1,759
1,547
212
110
53
75
648
47
1,399
2017
1,097
862
235
57
41
39
638
493
1,543
Change
18/17
60%
79%
-10%
93%
29%
92%
2%
-90%
-9%
On 4 August 2017, Fortum concluded the restructuring of its ownership
in Hafslund� As of 1 August 2017, Hafslund Markets has been
consolidated into the results of Consumer Solutions�
The consolidation of Hafslund and the cold weather in February and
March increased electricity sales volumes and, consequently, sales for
the segment� Increasing spot power prices during the year also had a
positive impact� The competition and customer churn in the Nordic
market continued to be a challenge�
Comparable operating profit increased by 29%, due to the
consolidation of Hafslund, partly offset by lower sales margins and the
amended service agreements for the divested electricity distribution
companies� The effect of the consolidation of Hafslund was EUR 31 (13)
million�
The consolidation of Hafslund had a positive effect of EUR 54 (22)
million on the comparable EBITDA� Due to the capitalisation of sales
commissions, the implementation of IFRS 15 had a positive effect of
EUR 32 million on the comparable EBITDA� EUR 22 million of the IFRS
15 effect was related to the Hafslund operations�
Operating profit was positively affected by EUR 22 (-2) million of fair-
value change of non-hedge-accounted derivatives ( Note 6)�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
12
12
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Sales volumes
TWh
Electricity
Gas*
* Not including wholesale volumes.
Number of customers
Thousands *
Electricity
Gas
Total
* Rounded to the nearest 10,000.
2018
30.3
4.1
2017
20.5
4.0
Change
18/17
48%
2%
Russia
The Russia segment comprises power and heat generation and sales
in Russia. The segment also includes Fortum’s over 29% holding in
TGC-1, which is an associated company and is accounted for using
the equity method.
2018
2,440
30
2,470
2017
2,470
20
2,490
Change
17/16
-1%
50%
-1%
EUR million
Sales
- power sales
- heat sales
- other sales
Comparable EBITDA
Comparable operating profit
Operating profit
Share of profits from associates and
joint ventures
Comparable net assets (at period-end)
Comparable return on net assets,%
Capital expenditure and gross
investments in shares
Number of employees
2018
1,069
872
193
4
417
271
273
36
2,789
10.3
117
2,941
2017
1,101
837
258
6
438
296
295
31
3,161
10.1
277
3,495
Change
18/17
-3%
4%
-25%
-33%
-5%
-8%
-7%
16%
-12%
2%
-58%
-16%
Power generation volumes increased, due to the commissioning of the
Chelyabinsk GRES unit 3 and good availability� Heat production volumes
increased, due to cold weather, partly offset by the transfer of the heat-
only boilers in Chelyabinsk to the Yustek joint venture� Power generation
volumes in the first quarter of 2017 were lower due to a maintenance
outage at the Nyagan power plant�
Sales declined due to the weaker Russian rouble and the transfer of
the heat business in Tyumen to the Yustek joint venture� The decline was
partly offset by higher received CSA payments and higher power and heat
sales volumes�
Comparable operating profit decreased by 8%� The new production
units and higher received CSA payments had a positive effect on the
results� The result was negatively impacted by the change in the Russian
rouble exchange rate, bad-debt provisions, and lower electricity margins�
The increase in CSA payments was related to Nyagan 1 and Nyagan 2
receiving higher payments for the last years of the CSA period, positive
spot market corrections, and contributions from renewable generation�
The increase in CSA payments was partly offset by the corrections
arising from lower bond yields� The result for the comparison period in
2017 was positively affected by a one-time item from improved bad-debt
collections� The effect of the change in the Russian rouble exchange rate
was EUR -32 million�
Key electricity, capacity and gas prices for Fortum Russia
Electricity spot price (market price),
Urals hub, RUB/MWh
Average regulated gas price, Urals
region, RUB/1,000 m3
Average capacity price for CCS and
other, tRUB/MW/month 1) 2)
Average capacity price for CSA, tRUB/
MW/month 2)
Average capacity price, tRUB/MW/
month
Achieved power price for Fortum in
Russia, RUB/MWh
Achieved power price for Fortum in
Russia, EUR/MWh 3)
2018
2017
1,043
1,041
3,801
3,685
148
1,075
609
148
899
535
1,888
1,813
25.6
27.5
Change
18/17
0%
3%
0%
20%
14%
4%
-7%
1) Including capacity receiving payments under “forced mode status”, regulated tariffs, and
bilateral agreements.
2) Capacity prices paid for the capacity volumes, excluding unplanned outages, repairs, and
own consumption.
3) Translated using the average exchange rate.
Russian power generation and heat production
TWh
Russian power generation
Russian heat production
2018
29.6
20.4
2017
26.3
20.0
Change
18/17
13%
2%
The Chelyabinsk GRES unit 3 was commissioned in November 2017�
Fortum’s 35-MW wind power plant was commissioned in January
2018, and the 35-MW solar plants have been consolidated since
December 2017�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
13
13
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
more investments into building new renewable capacity� Profits from the
capital recycling business model are recorded in comparable operating
profit because the business results are realised through divesting the
shareholding, either partially or totally�
Capital expenditures, divestments and investments in
shares
EUR million
Capital expenditure
Intangible assets
Property, plant and equipment
Total
53
532
584
2018
Gross investments in shares
Subsidiaries
Associated companies and joint ventures
Other investments
Total
36
4,041
11
4,088
2017
18
672
690
982
135
8
1,125
In 2018, capital expenditures and investments in shares totalled
EUR 4,672 (1,815) million, mainly related to the purchase of Uniper
shares� Capital expenditures were EUR 584 (690) million ( Note 6),
below the 2018 guidance of EUR 600–700 million� Capital expenditures
for 2018 were below the guidance level due to the timing of some capital
expenditures being shifted to 2019�
See also Note 18.2 Capital expenditure�
Fortum expects to start the supply of power and heat from new power
plants and to upgrade existing plants as follows:
Other Operations
Other Operations comprises the two development units ‘M&A and
Solar & Wind Development’ and ‘Technology and New Ventures’ as
well as corporate functions. Other Operations also includes Fortum’s
shareholding in Uniper, which is consolidated as an associated
company as of 30 June 2018 ( Note 3).
The total acquisition cost for Uniper, including direct costs relating to
the acquisition, is reported in ‘Participations in associated companies
and joint ventures’� The purchase price allocation will be completed
within the one-year window from the acquisition date, according to
IFRS� As Uniper publishes its interim reports later than Fortum,
Fortum’s share of Uniper’s results will be accounted for with a time-lag
of one quarter, with potential adjustments� Fortum’s Financial
Statements 2018 only includes Fortum’s share of Uniper’s third-quarter
results amounting to EUR -2 million ( Note 3)� Uniper will report its
full-year 2018 results on 12 March 2019�
In December 2018, Fortum committed to invest EUR 150 million in
Valo Ventures over a period of 10 years� Valo Ventures is a new global
venture capital fund launched by former Google Capital co-founder,
Scott Tierney� It is an independent fund investing in digital and cloud-
scale technology start-ups in North America and Europe� Valo Ventures
is aligned with Fortum’s vision ‘For a cleaner world’ and strategy� One of
Fortum’s strategic priorities to drive decarbonisation is building options
for significant new innovative businesses� Becoming a digital leader is
a critical enabler to achieve these goals�
In June 2018, Fortum agreed to sell a 54% share of its solar power
company operating four solar power plants in India� The transaction
was closed in August 2018� The total consideration from the divestment
on a debt- and cash-free basis, including the effect of deconsolidating
Fortum’s minority part of the net debt, was EUR 147 million� The
positive impact on Fortum’s 2018 comparable operating profit was
EUR 26 million� Fortum’s capital recycling business model enables
Fortum to efficiently utilise its key competences to develop, construct,
and operate power plants while utilising partnerships and other forms
of cooperation to create a more asset-light structure and thereby enable
Type
Electricity
capacity
MW
Heat
capacity
MW
Nuclear
Hydro
Hydro
Generation
Loviisa, Finland
Hydro plants in Sweden
and Finland
Hydro plants in Sweden
and Finland
City Solutions
Zabrze, Poland
Kivenlahti, Finland
Russia
Ulyanovsk
Solar 2)
Other Operations
Ånstadblåheia, Norway Wind
Wind
Sørfjord, Norway
Solar
Pavagada 2, India
Wind
Solar
CHP
Bio HOB 1)
5
5
~15
75
35
110
50
97
250
Supply
starts
2018
2018
2019
145 Q1/2019
2020
58
Jan 2018
2021–2022
Q4/2018
2019
2019
1) Biofuel-fired heat-only boiler (HOB).
2) Separate investment decision needed
Generation
Through its interest in TVO, Fortum is participating in the building of
Olkiluoto 3 (OL3), a 1,600-MW nuclear power plant unit in Finland� OL3
is funded through external loans, share issues and shareholder loans
according to shareholder agreements between the owners and TVO�
As a 25% shareholder in OL3, Fortum has committed to funding of the
project pro rata� At the end of 2018, Fortum’s outstanding receivables
regarding OL3 were EUR 170 million and the outstanding commitment
was EUR 63 million ( Note 19)� In March 2018, TVO and the supplier
consortium companies signed a comprehensive settlement agreement
whereby the arbitration concerning the delay of OL3 is settled by
financial compensation of EUR 450 million to be paid to TVO� Based on
the project schedule of March 2018 and the effect of the settlement
agreement, TVO estimated the total investment in OL3 to be
approximately EUR 5�5 billion� According to the time plan updated by
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
14
14
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
plant supplier Areva-Siemens Consortium in November 2018, the plant is
expected to start regular electricity production in January 2020�
In June 2018, Fortum sold its 10% ownership in Hafslund Produksjon
Holding AS to Svartisen Holding AS� As part of the restructuring of the
Hafslund ownership in 2017, Fortum acquired the ownership in Hafslund
Produksjon� The sales price for the shares was EUR 160 million� Fortum
booked a capital gain of EUR 77 million in the Generation segment 2018
results�
City Solutions
In October 2018, Fortum announced it is replacing part of its fossil-
based heat production by building a biofuel-fired heating facility in
Kivenlahti, Finland� The construction of the plant is a significant step
towards carbon neutral district heating production in Espoo, as the
plant will allow for the decommissioning of the old coal-fired heating
boiler in Suomenoja� The value of the investment is approximately EUR
40 million� The new facility will have a maximum heat output of 58 MW�
Construction started in November 2018 and heat production is expected
to begin in 2020�
The joint venture Kauno Kogeneracinė Jėgainė, owned by Fortum and
Lietuvos Energija, is building a waste-to-energy CHP plant in Kaunas,
Lithuania� The electricity capacity of the Kaunas plant will be 24 MW
and the thermal capacity approximately 70 MW� Fortum’s ownership in
the joint venture is 49%� The CHP plant is expected to be commissioned
in mid-2020�
In 2015, Fortum decided to build a new multi-fuel CHP plant in
Zabrze, Poland, which primarily will be fuelled by refuse derived fuel
(RDF) and coal but can also use biomass and a mixture of fuels� The new
plant replaces the existing purely coal-fired units in Zabrze and Bytom�
It will have a production capacity of 145 MW of heat and 75 MW of
electricity and the planned start of commercial operations is during the
first quarter of 2019�
Russia
In June 2018, Fortum won the right to build 110 MW of solar capacity in a
CSA auction� The power plants are to be commissioned during the years
2021–2022�
In June 2018, the Fortum-Rusnano wind investment fund (Fortum’s
ownership 50%) won the right to build 823 MW of wind capacity in a
CSA auction� The wind parks were to be commissioned during the years
2019–2023� During the fourth quarter 2018, the wind investment fund
made an investment decision on a 100-MW wind farm� Power production
is expected to start during the first half of 2020�
In June 2017, the Fortum-Rusnano wind investment fund won the right
to build 1,000 MW of wind capacity in a CSA auction� The wind parks
were to be commissioned during the years 2018–2022� In October 2017
and October 2018, the wind investment fund made investment decisions
on 50-MW and a 200-MW wind farm, respectively� On 1 January 2019, the
50-MW wind farm started operation� Power production at the 200-MW
wind farm is expected to start during the first half of 2020�
The investment decisions related to the renewable capacities won
by Fortum and the Fortum-Rusnano wind investment fund in 2017
and 2018 are made on a case-by-case basis� Fortum’s maximum equity
commitment is RUB 15 billion� In the longer term, Fortum seeks to
maintain an asset-light structure by forming potential partnerships and
other forms of co-operation�
Other Operations
In December 2018, Fortum committed to invest EUR 150 million in Valo
Ventures over a period of 10 years� It is an independent fund investing
in digital and cloud-scale technology start-ups in North America and
Europe�
In December 2018, Fortum won the right from Gujarat Urja Vikas
Nigam Ltd� to build a 250-MW solar power plant in Raghanesda
solar park in District Banaskhata, Gujarat, India� In January 2019,
the Government of Gujarat cancelled the result of the auction on
the grounds that it considers the winning tariffs to be too high� The
Government of Gujarat has indicated that there will be a new auction,
for which they intend to reduce the solar park charges to operators, in
order to lower the costs for the bidders and enable lower bids�
In June 2018, Fortum won the right to build a 250-MW solar power
plant in the Pavagada solar park in Karnataka, India� The capital
expenditure is estimated to be approximately EUR 120 million�
Commissioning of the plant is expected in 2019�
In June 2018, Fortum signed an agreement to sell a 54% share of its
solar power company operating four solar power plants in India to UK
Climate Investments (40%) and Elite Alfred Berg (14%)� Elite Alfred Berg
has the option to buy up to an additional 16% from Fortum� The total
capacity of this portfolio is 185 MW� Fortum aims to retain a significant
minority ownership in the solar power company and to continue to
provide operation and maintenance services based on a long-term
agreement� The total consideration from the divestment on a debt-
and cash-free basis, including the effect of deconsolidating Fortum’s
minority part of the net debt, was EUR 147 million� The positive impact
on Fortum’s third quarter comparable operating profit was EUR 26
million� The transaction was closed in August 2018�
In January 2017, Fortum finalised the acquisition of three wind power
projects from the Norwegian company Nordkraft� The transaction
consisted of the already operational Nygårdsfjellet wind farm as
well as the fully-permitted Ånstadblåheia and Sørfjord projects� The
Ånstadblåheia wind farm was commissioned during the fourth quarter
of 2018 and the Sørfjord wind farm is expected to be commissioned
in 2019� The total installed capacity of the three wind farms will be
approximately 180 MW�
In 2016, Fortum made the final investment decision on the 75-MW
Solberg wind park project in northern Sweden� Skellefteå Kraft is
participating in the project with a 50% share� The wind park was taken
into operation in the first quarter of 2018�
Research and development
Sustainability is at the core of Fortum’s strategy and, alongside Fortum’s
current businesses, the company is carefully exploring and developing
new sources of growth within renewable energy production�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
15
15
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Fortum’s goal is to be at the forefront of energy technology and
application development� To accelerate innovation and the
commercialisation of new offerings, Fortum is strengthening its
in-house innovation and digitalisation efforts and building partnerships
with leading global suppliers, technology and service companies, and
research institutions� Fortum makes direct and indirect investments in
start-ups that have promising new innovations focused on connectivity,
have disruptive potential and accelerate the transition towards a circular
economy� Fortum also invests in technologies that support better
utilisation of the current asset base and that can create new markets and
products for Fortum� The company is continuously looking for emerging
clean energy solutions and for solutions that increase resource and
system efficiency�
The Group reports its R&D expenditure on a yearly basis� In 2018,
Fortum’s R&D expenditure was EUR 56 (53) million, or 1�1% (1�2%)
of sales�
R&D expenditure,
EUR million
R&D expenditure,
% of sales
2018
2017
2016
56
1.1
53
1.2
52
1.4
Change
18/17
6%
Changes in Fortum’s Management
On 29 August 2018, Fortum announced that Mr� Kari Kautinen, Senior
Vice President, Solar & Wind Development and M&A, had resigned� He
left Fortum at the end of September 2018�
On 3 September 2018, Fortum announced that Mr� Arun Aggarwal,
M�Sc� (Eng�), 49, was appointed Senior Vice President, Business
Technology and member of Fortum’s Executive Management� This is a
new position at Fortum� Mr� Aggarwal has Group-wide responsibility
to lead Fortum’s strategic IT, as well as digital innovation and
transformation� He assumed this position in mid-October 2018 and
reports to the President and CEO�
Annual General Meeting 2018
Fortum Corporation’s Annual General Meeting, held in Helsinki on
28 March 2018, adopted the Financial Statements and the Consolidated
Financial Statements for the financial period 1 31 December 2017 and
discharged from liability the members of the Fortum Board of Directors
and the President and CEO for the year 2017�
The Annual General Meeting decided to pay a dividend of EUR 1�10
per share for the financial year that ended on 31 December 2017� The
record date for the dividend payment was 3 April 2018, and the dividend
payment date was 10 April 2018�
The Annual General Meeting confirmed the remuneration of EUR
75,000 per year to the Chairman, EUR 57,000 per year to the Deputy
Chairman, EUR 40,000 per year to each member of the Board, as well
as EUR 57,000 per year to the Board member acting as the Chairman of
the Audit and Risk Committee if he or she is not at the same time acting
as Chairman or Deputy Chairman of the Board� In addition, a EUR
600 meeting fee is paid for Board meetings as well as for committee
meetings� The meeting fee is doubled for Board members who live
outside Finland in Europe and tripled for members living outside
Europe� For Board members living in Finland, the fee for each Board and
Board Committee meeting is doubled for meetings held outside Finland
and tripled for meetings outside Europe� For Board and Committee
meetings held as a telephone conference, the basic meeting fee is paid
to all members� No fee is paid for decisions made without a separate
meeting�
The Annual General Meeting also confirmed the number of members
in the Board of Directors to be eight� Mr� Matti Lievonen was elected
as Chairman, Mr� Klaus-Dieter Maubach as a new member and
Deputy Chairman, Mr� Heinz-Werner Binzel, Ms� Eva Hamilton, Mr�
Kim Ignatius, Ms� Anja McAlister, and Mr� Veli-Matti Reinikkala were
re-elected as members, and Ms� Essimari Kairisto was elected as a new
member�
In addition, Deloitte Oy was re-elected as auditor, with Authorised
Public Accountant Ms Reeta Virolainen as the principal auditor� The
auditor’s fee is paid pursuant to an invoice approved by the company�
The Annual General Meeting authorised the Board of Directors to
decide on the repurchase and disposal of the company’s own shares
up to a maximum number of 20,000,000 shares, which corresponds
to approximately 2�25 per cent of all the shares in the company� It
was also decided that own shares could be repurchased or disposed
of in connection with acquisitions, investments or other business
transactions, or be retained or cancelled� The repurchases or disposals
could not be made for the purposes of the company’s incentive and
remuneration schemes� The authorisation cancelled the authorisation
resolved by the Annual General Meeting of 2017 and it will be effective
until the next Annual General Meeting and, in any event, for a period of
no longer than 18 months�
The Annual General Meeting decided on the following amendments
to the Articles of Association of the company:
The first sentence of Art� 6 is amended in order to set the maximum
number of members of the Board of Directors of the company at ten
members instead of the current eight members, as follows: “The Board
of Directors shall have a Chairman, a Deputy Chairman, and a minimum
of three (3) and a maximum of eight (8) ordinary members who are
elected at the General Meeting�” Art� 6 is otherwise unchanged�
Due to the new Auditing Act (1141/2015) which entered into force
on 1 January 2015, the reference to approval by the Central Chamber of
Commerce set forth in the first sentence of Art� 11 shall be deleted and
replaced with a reference to an auditing firm referred to in the Auditing
Act, as follows: “The company shall have one regular auditor who must
be an Auditing Firm referred to in the Auditing Act�” Art� 11 is otherwise
unchanged�
Due to the amendment of the Limited Liability Companies Act that
entered into force on 21 June 2017, the reference to Chapter 4, Section 2,
Subsection 2 of the Finnish Limited Liability Companies Act set forth in
the last sentence of Art� 12 shall be replaced with a reference to Chapter
5, Section 6 a of the Limited Liability Companies Act, as follows:
“However, the notice of GM must in any event be delivered at least nine
(9) days prior to the General Meeting Record Date referred to in Chapter
5, Section 6 a of the Finnish Limited Liability Companies Act�” Art� 12 is
otherwise unchanged�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
16
16
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
The Annual General Meeting of Fortum Corporation decided, in
accordance with Chapter 3, Section 14 a (3) of the Finnish Companies
Act, that the rights to all such shares entered in the Joint Account and
to the rights attached to such shares that had not been requested to
be registered in the book-entry system in accordance with Chapter 6,
Section 3 of the Act on the Book-Entry System and Clearing Operations
prior to the decision by the Annual General Meeting, are forfeited� In
the merger of Länsivoima Oyj (former Lounais-Suomen Sähkö Oy) to
Fortum Corporation in 2000, those shareholders of Länsivoima Oyj that
had not produced their share certificates and had not requested their
rights to be registered in the book-entry system, received their respective
shares of Fortum Corporation as merger consideration to a joint book-
entry account opened on their behalf (the “Joint Account”)� In addition
to the shares, the rights attached to such shares, such as undrawn
dividends, are forfeited� The provisions applicable to treasury shares
held by the company will apply to the forfeited shares�
At the meeting held after the Annual General Meeting, Fortum’s
Board of Directors elected, from among its members, to the Nomination
and Remuneration Committee Matti Lievonen as Chairman and Eva
Hamilton, Klaus-Dieter Maubach and Anja McAlister as members�
Furthermore, the Board elected to the Audit and Risk Committee Kim
Ignatius as Chairman and Heinz-Werner Binzel, Essimari Kairisto and
Veli-Matti Reinikkala as members�
Shareholders Nomination Board
On 5 October 2018, Mr� Kimmo Viertola, Director General, Prime
Minister’s Office, Ownership steering department (Chairman),
Mr� Risto Murto, President and CEO, Varma Mutual Pension Insurance
Company, and Mr� Jouko Pölönen, President and CEO, Ilmarinen Mutual
Pension Insurance Company were appointed to Fortum’s Shareholders’
Nomination Board� In addition, the Chairman of Fortum’s Board
of Directors Mr� Matti Lievonen, is a member of the Shareholders’
Nomination Board�
On 29 January 2019, Fortum’s Shareholders’ Nomination Board
submitted its proposals to Fortum’s Board of Directors for the 2019
Annual General Meeting concerning the number of the Board members,
the members to be nominated to the Board of Directors, and the election
of the Chairman and Deputy Chairman� The Shareholders’ Nomination
Board did not reach a unanimous proposal, and consequently did not
make a proposal for the remuneration paid to the Board of Directors for
their following term of office�
Other events during the reporting period
The Board of Directors of Fortum Corporation has decided to commence
the 2019–2021 long-term incentive (LTI) plan for key employees and
executives� The 2019–2021 LTI plan is part of Fortum’s ongoing LTI
programme and follows the same principles as the previous plan� The
performance measure applied to the 2019–2021 LTI plan will be based
on the total shareholder return measured relative to the peer group
comprising selected European utility companies� The 2019–2021 LTI plan
will comprise approximately 130 participants, including the members of
Fortum Executive Management�
Events after the balance sheet date
On 1 January 2019, Fortum acquired all remaining C-shares of TVO
entitling to the power production of the Meri-Pori coal condensing
power plant� Fortum is now entitled to 100% of the power production of
the plant, an increase from 67% previously� The Meri-Pori power plant is
mainly used in Fingrid’s capacity reserve and as back-up capacity� See
more information in Note 19 Participations in associated companies
and joint ventures�
Key drivers and risks
Fortum’s financial results are exposed to a number of economic,
strategic, energy policy and regulation, financial, and operational risks�
Fortum is exposed to these risks both directly and indirectly through its
associated companies�
Some of the key factors influencing Fortum’s business performance
are the European commodity and electricity wholesale prices� The key
short-term drivers behind the electricity wholesale price development in
the Nordic region are the prices of fuels and CO2 emission allowances,
the hydrological situation, temperature, economic development, and the
electricity import-export balance�
Global economic growth impacts commodity and CO2 emission
allowance prices, which, in turn, impact the Nordic wholesale price
of electricity� In all regions, fuel prices and power plant availability
also impact profitability� In addition, increased volatility in exchange
rates could have both translation and transaction effects on Fortum’s
financials, especially through the Russian rouble and Swedish krona�
In the Nordic countries, changes in the regulatory and fiscal
environment add risks for the energy and environmental management
sectors� The main strategic risk is that the regulatory and market
environment develops in a way that we have not been able to foresee
and prepare for� In response to these uncertainties, Fortum has
analysed and assessed a number of future energy market and regulation
scenarios, including the impact of these on different generation forms
and technologies� As a result, Fortum’s updated strategy includes
broadening of the revenue base and diversification into new businesses,
technologies, and markets� The environmental management business
is based on the framework and opportunities created by environmental
regulation� Being able to respond to customer needs created by the
tightening regulation is a key success factor�
For Fortum’s Russian business, the key drivers are economic growth,
the rouble exchange rate, regulation of the heat business, and the
further development of the electricity and capacity markets� A key
profitability driver is the received capacity payment based on the CSA
contracts and Competitive Capacity Selection (CCS) auctions� The main
part of Fortum’s generation capacity built after 2007 is entitled to CSA
payments for approximately 10 years after commissioning of each new
unit (approximately 15 years for renewable generation)� The received
capacity payments vary, depending on the age, location, type, and size
of the plant as well as on seasonality and availability� The CSA payments
are adjusted for, among other factors, the weighted average cost of
capital (WACC), the consumer price index (CPI), and re-examination of
earnings from the electricity-only (spot) market (done every three and
six years after commissioning of a unit)� In addition, thermal power
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
17
17
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
plants are entitled to clearly higher CSA payments starting approximately
six years after commissioning�
For further details on Fortum’s risks and risk management, see the
Risk management section of the Operating and financial review and
Note 4 Financial risk management�
Outlook
Hedging
At the end of 2018, approximately 75% of the Generation segment’s
estimated Nordic power sales volume was hedged at EUR 31 per MWh
for 2019, and approximately 45% at EUR 29 per MWh for 2020�
The reported hedge ratios may vary significantly, depending on
Fortum’s actions on the electricity derivatives markets� Hedges are
mainly financial contracts, most of them electricity derivatives quoted on
Nasdaq Commodities�
Capital expenditure and divestments
Fortum currently estimates its capital expenditure, including
maintenance but excluding acquisitions, to be in the range of
EUR 600–650 million in 2019� This includes solar and wind investments,
which can be divested through the capital recycling business
model� The maintenance capital expenditure in 2019 is estimated at
approximately EUR 300 million, well below the level of depreciation�
In 2020, capital expenditure is expected to decline�
Nordic market
Electricity is expected to continue to gain a higher share of total energy
consumption� Electricity demand in the Nordic countries is expected
to grow by approximately 0�5% on average, while the growth rate for
the next few years will largely be determined by the macroeconomic
development in Europe and especially in the Nordic countries�
During the fourth quarter of 2018, oil and coal prices started to
decrease, while EUA prices still increased� In late January 2019, the
forward quotation for coal (ICE Rotterdam) for the remainder of 2019
was around USD 84 per tonne and the market price for EUAs for 2019
at the level of EUR 23 per tonne� The Nordic system electricity forward
price at Nasdaq Commodities for the remainder of 2019 was around
EUR 48 per MWh and for 2020 around EUR 39 per MWh� In Germany,
the electricity forward price for the remainder of 2019 was around
EUR 51 per MWh and for 2020 around EUR 49 per MWh� The Nordic
water reservoirs were about 10 TWh below the long-term average and
were 8 TWh lower than one year earlier�
Generation
The Generation segment’s achieved Nordic power price typically
depends on factors such as hedge ratios, hedge prices, spot prices,
availability and utilisation of Fortum’s flexible production portfolio,
as well as currency fluctuations� Excluding the potential effects from
changes in the power generation mix, a 1 EUR/MWh change in the
Generation segment’s Nordic power sales achieved price will result in
an approximately EUR 45 million change in Fortum’s annual comparable
operating profit� The achieved power price also includes the results
of optimisation of Fortum’s hydro and nuclear production as well as
operations in the physical and financial commodity markets�
As a result of the nuclear stress tests in the EU, the Swedish Radiation
Safety Authority (SSM) has decided on new regulations for Swedish
nuclear reactors� For the operators, this means that safety investments
should be in place no later than 2020�
The process to review the Swedish nuclear waste fees is done in a
three-year cycle� In March 2017, the Swedish Government decided on the
new nuclear waste fees for years 2018–2020� In October 2017, the Swedish
Parliament decided on changes in the legal framework, impacting
calculations of nuclear waste fees and the investment of the nuclear
waste fund� In the revised legal framework, the assumed operating time
for calculating the waste fee is 50 years, as opposed to the previous
assumption of 40 years� The fund is now also allowed to invest in other
financial instruments in addition to bonds� Based on these changes, the
annual waste fees for Fortum increased by EUR 8 million in 2018�
On 19 June 2018, the Swedish parliament adopted new hydro
time hydropower shall be protected to be able to play a key role in the
future energy system� In order to protect hydropower, all exemptions of
the Water Framework Directives shall be utilised when classifying water
bodies� In the new legislation it is stated that the industry shall create
a joint hydropower fund to finance major parts of the environmental
actions needed� A fund has been established with a total financial cap of
SEK 10 billion to be paid over a 20-year period� The major utilities will
contribute to the fund based on their share of hydropower production�
Fortum’s share is expected to be 20–25% of the fund’s total financing� In
addition to the new legislation, the government has issued an ordinance
to establish a national prioritisation plan for the revision of hydropower
permits (valid from 11 January 2019)�
On 11 June 2018, the Swedish Administrative Court of Appeal gave
its decisions on Fortum Sverige AB’s hydropower production-related
real-estate tax assessments for the years 2009–2014� The court decisions
were not in Fortum’s favour� Fortum applied for the right to appeal
from the Supreme Administrative Court, but did not receive permission
to appeal� As the Administrative Court, the Administrative Court of
Appeal in Stockholm, and the Supreme Administrative Court have
handled only the arguments concerning state aid, the case concerning
the other legal documents is now transferred back to the Administrative
Court� The disputed amount, excluding interest for the time period,
totals approximately SEK 510 million (approximately EUR 50 million)�
Moreover, Fortum’s Swedish companies have appeals for 2011–2016
pending in the Administrative Court relating to the property tax rate for
their hydropower plants referring to the same legal grounds� Fortum has
paid the real-estate tax in accordance with the legislation� If the final
court decision is unfavourable to Fortum, it will not impact Fortum’s
results� In December 2018, Fortum Sverige AB filed a complaint to the
EU Commission regarding the Swedish property tax for hydropower
plants regarding 2017 and prior years� Fortum has asked the Commission
to investigate whether the Swedish legislation regarding the property tax
for hydropower plants and the Swedish court decisions are in line with
EU state aid rules�
legislation to come into force on 1 January 2019� According to the new
legislation all hydropower shall apply for updated permits� At the same
In September 2016, the Swedish Government presented the budget
proposal for the coming years, according to which the nuclear capacity
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
18
18
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
tax will be reduced to 1,500 SEK/MW per month from 1 July 2017 and
abolished on 1 January 2018� In 2017, Fortum’s Swedish nuclear capacity
tax was EUR 44 million� In 2018, there is no capacity tax� Further, the
Swedish hydropower real-estate tax will decrease from 2�8% to 0�5%�
The tax is being reduced in four steps: in January 2017 to 2�2%; in
January 2018 to 1�6%; in January 2019 to 1�0%; and in January 2020 to
0�5%� In 2018, the tax for Fortum decreased by EUR 20 million to EUR 65
million� In addition to the decrease in the tax rate, the hydropower real-
estate tax values, which are linked to electricity prices, will be updated
in 2019� The real-estate tax values are updated every six years� With the
current electricity prices, the tax values for the 2019–2024 period would
be lower than they are today�
In 2015, the Swedish OKG decided to permanently discontinue
electricity production at Oskarshamn’s nuclear plant units 1 and 2� Unit
1 was shut down on 17 June 2017 and unit 2 has been out of operation
since June 2013� The closing processes for both units are estimated to
take several years�
City Solutions
In City Solutions, stable growth, cash flow and earnings are achieved
through investments in new plants and through acquisitions� Fuel cost,
availability, flexibility, efficiency, as well as gate fees are key drivers
for profitability, but also the power supply/demand balance, electricity
prices, and weather conditions affect profitability�
The development of Fortum Oslo Varme’s business operations is
estimated to require integration-related one-time costs and increased
investments over the coming years� The realisation of cost synergies
is estimated to gradually start materialising from 2019 onwards, with
targeted annual synergies of EUR 5–10 million expected to be achieved
by the end of 2020�
Consumer Solutions
After the acquisition of Hafslund Markets in August 2017, a new business
strategy for Consumer Solutions was approved by the Fortum Board
of Directors in December 2017� The strategic objective is to establish
Consumer Solutions as the leading consumer business in the Nordics,
with a customer-centric, multi-brand structure�
Competition in the Nordic electricity retail market is expected
to remain challenging, with continued pressure on sales margins
and customer churn� To counter the market challenges and create
a solid foundation for competitive operations, Consumer Solutions
will continue its cost spend in developing new digital services for
consumers�
The combined Hafslund Markets and Fortum Markets business, while
largely complementary, has identified synergy potential, in terms of
both revenue and costs� The short-term priority will be on achieving
identified revenue synergies by leveraging established best practices
and providing additional products and services to the whole customer
base� The realisation of cost synergies will start materialising once the
integration of Hafslund Markets is completed, expected in 2019, with
cost synergy realisation gradually increasing over the coming years
and targeted annual synergies of approximately EUR 10 million to be
achieved by the end of 2020�
Russia
In the Russia segment, capacity payments based on CSA contracts
are a key driver for earnings growth, as it receives considerably higher
capacity payments than through the CCS auctions� Currently Fortum’s
CSA capacity amounts to 2,368 MW� In February 2018, the System
Administrator of the wholesale market published data on the WACC and
the CPI for 2017, which were used to calculate the 2018 CSA price� The
CSA payments were revised downwards accordingly to reflect the lower
bond rates� The regulator also reviewed the guaranteed CSA payments by
re-examining earnings from the electricity-only market and revised the
CSA payments upwards due to the lower earnings from the electricity-
only market�
Fortum’s other Russian generation capacity, totalling 2,544 MW, is
allowed to participate in the CCS auctions� The long-term CCS for the
years 2017–2019 was held at the end of 2015, the CCS for the year 2020
in September 2016, and the CCS for the year 2021 in September 2017� All
Fortum plants offered in the auction were selected� Fortum also obtained
“forced mode status”, i�e� it receives payments for the capacity at a
higher rate for some of the units at the Argayash power plant� For the
years 2017–2019, “forced mode status” was obtained for 195 MW; for the
year 2020 for 175 MW, and for the year 2021 for 105 MW� The date of the
CCS auction for 2022 has been postponed from 15 September 2018 to 1
May 2019�
In June 2018, Fortum won the right to build 110 MW of solar capacity
in a CSA auction� The power plants are to be commissioned during the
2021–2022 and will receive a guaranteed CSA price corresponding to
approximately RUB 14,000 per MWh for a period of 15 years�
In June 2018, the Fortum-Rusnano wind investment fund (Fortum’s
ownership 50%) won the right to build 823 MW of wind capacity in a
CSA auction� The wind parks were to be commissioned during 2019–2023
and will receive a guaranteed CSA price corresponding to approximately
RUB 7,000–8,000 per MWh for a period of 15 years� In December 2018,
the wind investment fund made an investment decision on a 100-MW
wind farm�
As of January 2018, Fortum’s Ulyanovsk wind farm is listed in the
registry of capacity� The 35-MW power plant is Russia’s first industrial
wind park� It will receive CSA payments for a period of approximately
15 years after commissioning� The CSA price currently corresponds to
approximately RUB 11,000 per MWh�
In June 2017, the Fortum-Rusnano wind investment fund won the
right to build 1,000 MW of wind capacity in a CSA auction� The wind
parks were to be commissioned during 2018–2022 and will receive a
guaranteed CSA price corresponding to approximately RUB 7,000–9,000
per MWh for a period of 15 years� In October 2017 and October 2018, the
wind investment fund made investment decisions on a 50-MW and a
200-MW wind farm, respectively�
The Russian annual average gas price growth was 3�1% in 2018�
Fortum estimates the Russian annual average gas price growth to be 3%
in 2019�
Other Operations
For information on the financial impact of the Uniper shareholding,
please see the Uniper investment section of Note 3�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
19
19
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
favourable decisions issued by the Administrative Court of Appeal in
October 2018 and by the Administrative Court in November 2018 did not
have any impact on profits� The amount of additional tax claimed by the
Swedish tax authority was originally SEK 273 million (EUR 26 million)
for the year 2013, SEK 282 million (EUR 27 million) for the year 2014,
and SEK 200 million (EUR 19 million) for the year 2015� The additional
tax cost for 2013 was paid in 2017 and was refunded to Fortum in 2018�
Additional taxes and interest for the years 2014 and 2015 had not been
paid by Fortum�
In June 2018, the Swedish government decided to lower the Swedish
corporate tax in two steps, from the current 22�0% to 21�4% from
January 2019 and to 20�6% from January 2021�
In March 2018, the Swedish Supreme Administrative Court decided
not to grant leave to appeal to Fortum with respect to the interest
deduction cases relating to the years 2009–2012� The unfavourable
decision of the Administrative Court of Appeal from June 2017 therefore
remains in force� The additional tax and interest, in total SEK 1,175
million (EUR 122 million), was paid in 2016 and booked as a cost in the
2017 results� There are strong grounds to argue that these decisions of
the Administrative Court of Appeal and the Supreme Administrative
Court violate EU law and fundamental rights under EU law� On these
grounds, Fortum filed a summons application in December 2018 to the
District Court of Stockholm in which damages are claimed from the
Swedish state in these cases� Fortum also filed a request to initiate a
mutual agreement procedure between Sweden and the Netherlands for
the year 2012 ( Note 37)�
In December 2018, Fortum won the right from Gujarat Urja Vikas
Nigam Ltd� to build a 250-MW solar power plant in Raghanesda
solar park in District Banaskhata, Gujarat, India� In January 2019,
the Government of Gujarat cancelled the result of the auction on
the grounds that it considers the winning tariffs to be too high� The
Government of Gujarat has indicated that there will be a new auction,
for which they intend to reduce the solar park charges to operators, in
order to lower the costs for the bidders and enable lower bids�
In June 2018, Fortum won the right to build a 250-MW solar power
plant in the Pavagada solar park in Karnataka, India� The capital
expenditure is estimated to be approximately EUR 120 million, and the
solar park will be entitled to a fixed tariff of 2�85 INR/kWh for 25 years�
Commissioning of the plant is expected in 2019�
Income taxation
In 2019, the effective corporate income tax rate for Fortum is estimated
to be 19–21%, excluding the impact of the share of profits of associated
companies and joint ventures, non-taxable capital gains, as well as tax
rate changes�
Fortum has received income tax assessments in Sweden for the
years 2013, 2014, and 2015 concerning the loans given by Fortum’s
Dutch financing company to Fortum’s subsidiaries in Sweden� The
interest income for these loans was taxed in the Netherlands� After
Fortum received a negative decision from the Administrative Court in
Stockholm in 2017, Fortum filed an appeal to the Administrative Court
of Appeal in Stockholm� In October 2018, the Administrative Court of
Appeal in Stockholm, Sweden, announced its decision relating to the
income tax assessment for the year 2013� The decision was favourable to
Fortum� The Administrative Court of Appeal confirmed that Fortum had
sufficient business reasons for the loans and accepted Fortum’s appeal�
The decision regarding the year 2013 is final� The Administrative Court
in Stockholm announced its decisions in the cases for 2014 and 2015 in
November 2018� Also these decisions were favourable to Fortum� The
decisions became non-appealable by the end of January 2019� Fortum
had not made provisions for the cases regarding the years 2013–2015,
as Fortum considers the additional tax unjustified� Therefore, the
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
20
20
Financial performance and position
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Sustainability
Sustainability approach
Fortum strives for balanced management of economic, social and
environmental responsibility in the company’s operations, emphasising
the following focus areas:
Economic responsibility
Economic benefits to
stakeholders
Long-term value and
growth
Social responsibility
Operational and
occupational safety
Secure energy supply for
customers
Sustainable supply chain Personnel wellbeing
Business ethics and
compliance
Customer satisfaction
Environmental
responsibility
Energy and resource
efficiency
Reduction of
environmental impacts
Climate-benign energy
production and systems
Solutions for sustainable
cities
The Group-level sustainability targets are linked to the main
sustainability focus areas and emphasise Fortum’s role in society� They
measure not only environmental and safety targets, but also Fortum’s
reputation, customer satisfaction, employee wellbeing, and the security
of power and heat production� Targets are set annually and are based on
continuous operational improvement�
The achievement of the sustainability targets is monitored in monthly,
quarterly and annual reporting� Fortum publishes a yearly Sustainability
Report with additional information on the company’s sustainability
performance�
Group sustainability targets and performance 2018
Economic responsibility
Reputation index, based on One Fortum Survey
Customer satisfaction index (CSI),
based on One Fortum Survey
Net Promoter Score (NPS)
in Consumer Solutions division
Environmental responsibility
Specific CO2 emissions from total energy
production as a five-year average, g/kWh
Energy-efficiency improvement by 2020,
base-line 2012, GWh/a
Major EHS incidents, no.
Social responsibility
Energy availability of CHP plants, %
Lost workday injury frequency (LWIF),
own personnel and contractors
Severe occupational accidents, no.
Quality of investigation process of occupational
accidents, major EHS incidents and near misses
GAP index, implementation of
EHS minimum requirements
Sickness-related absences, %
* Scaling revised
** Excluding DUON and Hafslund
Target
2018
2017
73.0
72.5
72.3
70–74 63–83 64–76
-6
-18
-
<200
186
188
>1,900
≤20
1,637
18
1,502
20
>95.0
96.4
96.1
≤2.1
0
Level
3.0
Level
3.0
≤2.2
1.8
4
Level
3.0
Level
2.0
2.8
2.4
1
Level
2.0 *
-
2.2 **
Fortum is listed on the Nasdaq Helsinki exchange and is included in
the STOXX Global ESG Leaders, OMX Sustainability Finland, ECPI®,
Euronext Vigeo Eurozone 120, Euronext Vigeo Europe 120, MSCI ESG
Ratings, and Equileap Gender Equality indices� Fortum is also ranked
in category B in the annual CDP Climate Change rating 2018, and it has
received a Prime Status (B-) rating by ISS-oekom Corporate Rating�
Fortum’s sustainability reporting covers all functions under Fortum’s
operational control, including subsidiaries in all countries of operation�
The figures for power and heat generation, capacities and investments
include also figures from Fortum’s share in associated companies and
joint ventures that sell their production to the owners at cost�
In the Financial Statements, Uniper is treated as an associated
company and Stockholm Exergi as a joint venture, and both companies
are consolidated with the equity method� Stockholm Exergi and Uniper
are not included in Fortum’s sustainability targets and indicators nor
in the descriptions of management practices� Stockholm Exergi’s and
Uniper’s sustainability information are available in the companies’
sustainability reports that can be found on the companies’ own
web pages� The Meri-Pori power plant is included fully in Fortum’s
sustainability figures, as Fortum holds the environmental permit�
Sustainability risks
Fortum’s operations are exposed to risks, which if materialised can have
adverse effects on the environment and on the safety and security of
employees, contractors and neighbouring societies� Key sustainability
risks are presented in the Risk management section in the Operating
and financial review� Climate change and the need for decarbonisation
and resource efficiency are changing the energy industry in a profound
way, and these changes also create new business opportunities for
Fortum�
Sustainability governance and policies
Sustainability management at Fortum is strategy-driven and is based
on the company’s Values, the Code of Conduct, the Supplier Code of
Conduct, the Sustainability Policy and other Group policies and their
specifying instructions� As sustainability is an integral part of Fortum’s
strategy, the highest decision making for these issues falls within the
duties of the Board of Directors, who share joint responsibility on
sustainability matters�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
21
21
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Fortum’s main internal policies and instructions guiding sustainability
Values
Code of Conduct
Supplier Code of Conduct
Disclosure Policy
Group Risk Policy
Sustainability Policy (including environmental,
and health and safety policies)
Minimum Requirements for EHS Management
Biodiversity Manual
Group Manual for Sustainability Assessment
Human Resources Policy
Leadership Principles
Accounting Manual
Investment Manual
Group Instructions for Anti-Bribery
Group Instructions for Safeguarding Assets
Group Instructions for Conflicts of Interest
Anti-Money-Laundering Manual
Compliance Guidelines for Competition Law
Security Guidelines
Policy for Sponsoring and Donations
Group Instructions for Compliance Management
Economic
responsibility
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Environmental
responsibility
x
x
x
x
x
x
x
x
x
x
x
x
Social and
employee matters
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Social responsibility
Human rights
x
x
x
Anti-corruption
and bribery
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Fortum Executive Management decides on the sustainability approach
and Group-level sustainability targets that guide annual planning� The
targets are ultimately approved by Fortum’s Board of Directors� Fortum’s
line management is responsible for the implementation of the Group’s
policies and instructions and for day-to-day sustainability management�
Realisation of the safety targets is a part of Fortum’s short-term incentive
system�
Fortum is a participant of the UN Global Compact initiative and the
UN Caring for Climate initiative� Fortum respects and supports the
International Bill 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�
Business ethics
The Fortum Code of Conduct and Fortum Supplier Code of Conduct
define how we treat others, engage in business, safeguard corporate
assets, and how Fortum expects suppliers and business partners to
operate� Fortum’s Board of Directors is responsible for the company’s
mission and values and has approved the Fortum Code of Conduct�
Fortum has zero tolerance for corruption and fraud and does not
award donations to political parties or political activities, religious
organisations, authorities, municipalities or local administrations�
In addition to internal reporting channels, Fortum employees and
partners can report suspicions of misconduct confidentially to Fortum’s
Head of Internal Audit via the “raise-a-concern channel” on Fortum’s
internal and external web pages�
Suspected misconduct and measures related to ethical business
practices and compliance with regulations are regularly reported to the
Audit and Risk Committee�
No cases of suspected corruption or bribery related to Fortum’s
operations were reported in 2018�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
22
22
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Economic responsibility
Fortum’s goal is to achieve excellent financial performance in
strategically selected core areas through strong competence and
responsible ways of operating� Fortum measures financial performance
with return on capital employed (long-term target: at least 10%) and
capital structure (long-term target: comparable net debt/EBITDA
around 2�5x)�
Fortum is a significant economic actor in its operating countries�
The most significant direct monetary flows of Fortum’s operations come
from revenue from customers, procurements of goods and services from
suppliers, compensation to lenders, dividends to shareholders, growth
and maintenance investments, employee wages and salaries, and taxes
paid� In 2018, investments in CO2-free production were EUR 278 (375)
million� Investments were a total of EUR 180 (291) million in hydro, wind
and solar power and bioenergy�
Fortum supports social development and wellbeing in its operating
countries by e�g� paying taxes� The tax benefits Fortum produces to
society include not only corporate income taxes, but also several other
taxes� In 2018, Fortum’s taxes borne were EUR 299 (445) million� Fortum
publishes its tax footprint annually�
Targets for reputation and customer satisfaction are monitored
annually� In the One Fortum Survey in 2018, company reputation among
key stakeholder groups was 72�5 (72�3) points, which did not meet the
target of 73�0 points�
The Group-level target (70–74 points, on a scale of 0–100) for
customer satisfaction was achieved among all business areas with two
exceptions: retail electricity sales to major customers and EV charging
solutions for consumers and businesses� The Consumer Solutions
division also used the Net Promoter Score (NPS) method to measure the
satisfaction of electricity sales customers; the score was -18, which did
not meet the target of -6�
Fortum’s total purchasing volume in 2018 was EUR 3�7 (3�2) billion
and Fortum had about 14,000 suppliers of goods and services� Fortum
expects its business partners to act responsibly and to comply with the
Fortum Code of Conduct and the Fortum Supplier Code of Conduct�
Fortum assesses the performance of its business partners with supplier
qualification and supplier audits� In 2018, Fortum conducted a total
of 13 (11) supplier audits in Finland, Lithuania, Poland, Netherlands,
Russia, Vietnam, and India� Most of the non-compliances identified in
the audits in 2018 were related to occupational safety, working hours and
remuneration� In addition, two of Fortum’s Russian coal suppliers were
audited against the Bettercoal Code by a third party�
Environmental responsibility
Fortum’s Group-level environmental targets are related to CO2
emissions, energy efficiency, and major environmental, health and
safety (EHS) incidents�
The Group Sustainability Policy together with the Minimum
Requirements for EHS Management steer Fortum’s environmental
management� Investments, acquisitions and divestments are assessed
based on the sustainability assessment criteria defined in the Group’s
Investment Manual� Operational-level activities follow the requirements
set forth in the ISO 14001 environmental management standard, and
99�9% (99�8%) of Fortum’s power and heat production worldwide has
ISO 14001 certification�
Circular economy
Fortum’s aim is to promote resource efficiency improvements and
the transition towards a more extensive circular economy� Resource
efficiency and maximising the added value of waste and biomass are
key priorities in the environmental approach, as defined in the Group
Sustainability Policy�
In 2018, Fortum received a total of 1�6 million tonnes of non-
hazardous waste and about 600,000 tonnes of hazardous waste from
customers� As much of the waste stream as possible is recycled,
recovered or reused� Waste that is unsuitable for recycling or reuse
as a material is incinerated in Fortum’s waste-to-energy plants in
the Nordic countries and Lithuania�
Sustainable energy production
Fortum’s energy production is primarily based on carbon dioxide-free
hydropower and nuclear power and on energy-efficient combined heat
and power (CHP)� In line with the strategy, Fortum is targeting a multi-
gigawatt solar and wind portfolio�
In 2018, Fortum’s power generation was 74�6 (73�2) TWh and heat
production 29�8 (28�6) TWh� 57% (61%) of the total power generation
was CO2-free� In the EU area, 96% (96%) of the power generation was
CO2-free�
The main fuels that Fortum uses to produce electricity and heat are
natural gas, nuclear fuel, coal, waste-derived fuels and biomass fuels�
The most significant fuel was natural gas, which accounted for 63%
(62%) of the total fuel consumption� The next highest fuel use was
uranium 21% (21%)� Coal accounted for 8% (10%) of the total fuel
use, and waste-derived fuels and biomass fuels 4% (3%) and 3% (3%),
respectively� Russia accounted for 98% of the use of natural gas and 56%
of the use of coal�
Climate change mitigation
Fortum expects the concern about climate change to increase the
demand for low-carbon production and energy-efficient solutions and
products� Fortum aims to mitigate climate change by investing in CO2-
free energy production and by improving energy and resource efficiency�
Fortum is also adapting its operations to climate change in production
planning and in the assessment of growth projects and investments�
In 2018, Fortum’s direct CO2 emissions were 20�1 (18�4) Mt� 84%
of CO2 emissions originated from Russian power plants� Direct CO2
emissions increased due to the increase in power production in Russia�
Of the total CO2 emissions, 2�5 (2�4) Mt were within the EU’s emissions
trading scheme (ETS)� The estimate for Fortum’s free emission
allowances is 0�8 (1�0) Mt�
Fortum’s direct CO2 emissions
Fortum’s total CO2 emissions (million tonnes, Mt)
Total emissions
Emissions subject to ETS
Free emissions allowances
Emissions in Russia
2018
2017
20.1 18.4 *
2.4 *
1.0
15.4
2.5
0.8
16.9
2016
18.6
2.7
1.0
15.5
* The figure has been revised from the one presented in the Financial Statements bulletin
2017, Financials 2017 and Sustainability 2017.
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
23
23
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
In 2018, Fortum’s specific carbon dioxide emissions from total energy
production were 192 (184) g/kWh� The specific CO2 emissions from total
energy production as a five-year average were 186 (188) g/kWh, which is
better than Fortum’s Group target of 200 g/kWh�
Fortum has a Group-level target to achieve annual energy-efficiency
improvements of more than 1,900 GWh by 2020 compared to 2012�
Fortum achieved 1,637 GWh/a by the end of 2018�
Decreasing environmental impact
Emissions into air
Fortum’s activities cause various emissions to air� In addition to carbon
dioxide (CO2) emissions, these include flue-gas emissions, such as
sulphur dioxide (SO2), nitrogen oxide (NOx) and particle emissions� All
power plants operate in compliance with their air emission limits�
Fortum’s flue-gas emissions into air
Fortum’s flue-gas emissions into air (1,000 tonnes)
Sulphur dioxide emissions
Nitrogen oxide emissions
Particle emissions
2016
2017
2018
22.5
18.8
16.8
26.1 26.4 * 24.9 *
16.8
15.8
9.6
* Figure revised
Water withdrawal
Fortum uses large volumes of water at various types of power plants and
in district heat networks� In most cases, power plants do not consume
water – the water is discharged back to the same water system from
where it was withdrawn� Fortum withdrew a total of 2,100 (2,100) million
m3 of water in power and heat production; 94% of this amount was used
as cooling water�
Radioactive waste
In 2018, 20�3 (23�4) tonnes of spent nuclear fuel was removed from
Loviisa power plant’s reactors in Finland� High-level radioactive spent
fuel is stored in an interim storage at the Loviisa power plant site� The
final disposal of the high-level radioactive waste is scheduled to begin at
Olkiluoto in Eurajoki in the 2020s�
Fortum’s operations are mainly based in the Nordic countries, Russia,
Poland and the Baltic Rim area� The total number of employees at the
end of 2018 was 8,286 (8,785)�
Biodiversity
Fortum’s main impacts on biodiversity are related to hydropower
production� Fuel procurement and flue-gas emissions may also have
a negative impact on biodiversity� On the other hand, increasing
CO2-free production mitigates the biodiversity loss caused by climate
change� Fortum’s Biodiversity Manual, revised in 2017, and the first
Biodiversity Action Plan, published in 2018, define the company’s
approach in biodiversity management�
Environmental incidents
Fortum’s target regarding major EHS incidents is to have no more than
20 major EHS incidents annually� Major EHS incidents are monitored,
reported and investigated, and corrective actions are implemented� In
2018, there were 18 (20) major EHS incidents in Fortum’s operations�
The major EHS incidents included 11 fires, two environmental non-
compliances, four leaks, and one dam safety incident� The growth
in circular economy services increases the risk of EHS incidents and
especially the risk of fires� The major EHS incidents did not have
significant environmental impacts�
Social responsibility
Fortum’s social responsibility targets are related to the secure supply of
electricity and heat for customers, operational and occupational safety,
as well as employee wellbeing�
Employees
The Group Human Resources Policy is based on the company’s Values,
Leadership Principles and Code of Conduct� The HR Policy guides the
daily work in the company, and the implementation of the policy is
followed up regularly through the employee engagement survey, the
annual performance and development discussions, as well as other
feedback practices�
Group employee statistics
Number of employees, 31 December
Average number of employees
Total amount of employee benefits, EUR million
Departure turnover, %
Permanent employees, %
Full-time employees, % (of permanent employees)
Female employees, %
Females in management, %
2018
2016
2017
8,286 8,785 8,108
8,767 8,507 7,994
334
423
13.0
10.5
96.1
95.2
98.5
98.1
29
32
25
29
459
16.1
95.9
98.2
32
30
Occupational safety
For Fortum, excellence in safety is the foundation of the company’s
business and an absolute prerequisite for efficient and interruption-free
production� Fortum strives to be a safe workplace for the employees,
contractors and service providers who work for the company� The Group
Sustainability Policy, the Minimum Requirements for EHS Management
and more detailed Group-level EHS manuals steer the work� A certified
OHSAS 18001 or ISO 45001 safety management system covers 97�0%
(98�4%) of Fortum’s power and heat production worldwide�
In 2018, the combined lost-workday injury frequency (LWIF) for own
personnel and contractors was 1�8 (2�4), which was better than the set
target level (≤2�1)� Unfortunately, 4 (1) severe occupational accidents
took place in the company’s operations in 2018; one in Sweden, one
in Lithuania and two in Russia� The severe accident in Sweden and in
Lithuania resulted in the fatality of a contractor employee� The Group
target in 2018 was zero severe occupational accidents�
Fortum continues its efforts to improve contractor safety� In 2018,
the company implemented tools to assess contractor safety performance
as part of the supplier qualification process and also evaluated their
safety practices in a more systematic manner during work� For 2019,
Fortum has defined a new Group target: Contractor safety improvement
index, focusing on identified actions that are based on the Group’s
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
24
24
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
requirements for contractor management to enhance safety (target
level 2�0)�
In 2018, the quality of investigation process of occupational accidents,
major EHS incidents, and serious near misses was at the level of 3�0,
achieving the set target level (3�0)� The GAP index, describing the
implementation of the Group’s EHS minimum requirements at the
power plant level, was at the level 2�0, which did not meet the set target
level (3�0)� The most significant deviations were detected in companies
that Fortum has acquired in recent years and in the sites operated by
contractors�
Fortum introduced a safety training programme, provided by an
external safety service provider, for both the management level and key
individuals leading safety and procurement work as well as the most
challenging business areas� Special attention was paid to the prevention
of unsafe behaviour, problem solving, the provision of positive feedback,
and the establishment of a safety leadership team�
Open leadership, personnel development and wellbeing
In 2018, more than 800 supervisors participated in the Strategy &
Open Leadership events that focused on strategy communications and
more in-depth open leadership� Additionally, training programmes on
the circular economy, the utilisation of data, communication skills,
wellbeing and stress management were arranged during the year for
management, supervisors and experts�
Fortum’s goal of workplace wellbeing activities is to promote the
health and occupational safety of employees and the functionality of the
work community� In 2018, the Energise Your Day wellbeing programme
was expanded to Fortum Recycling and Waste Solutions’ sites in Finland,
Sweden and Denmark, and is now under way in ten operating countries�
In 2018, the percentage of sickness-related absences was 2�8 (2�2),
which did not meet the target level of ≤2�2�
Respect for human rights
Fortum’s goal is to operate in accordance with the UN Guiding
Principles on Business and Human Rights and to apply these principles
in company’s own operations as well as in country and partner risk
assessments and supplier audits�
A sustainability assessment, including a human rights evaluation, is
carried out for investment projects – especially in new operating areas
– and also for new countries where Fortum plans to expand the sales
of products and services� In 2018, seven (15) of these assessments were
made�
In 2018, there were no grievances related to human rights filed
through Fortum’s formal grievance channels, nor were there any
grievances carried over from the previous year�
Society
An uninterrupted and reliable energy supply is critical for society
to function� With planned preventive maintenance and condition
monitoring, Fortum ensures that the power plants operate reliably to
produce the electricity and heat customers need� The energy availability
of the company’s CHP plants in 2018 was, on average, 96�4% (96�1%),
outperforming the target of >95�0%�
Fortum’s operations impact the local communities where the
power plants are located, and the company engages in many kinds of
collaboration with local stakeholders� According to Fortum’s Policy
for Sponsoring and Donations, the company’s sponsoring focuses on
the wellbeing of children and youth, renewable energy projects, R&D
and innovations supporting Fortum’s strategy, recycling, recovery and
reuse� Fortum also engages in collaboration with universities through
different research and development projects� In 2018, Fortum’s support
for activities promoting the common good totalled about EUR 3�8 (4�9)
million� In addition, the grants awarded by Fortum Foundation, not part
of Fortum Group, were about EUR 680,000 (696,000)�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
25
25
Financial performance and position
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Risk management
Risk management framework and objectives
Fortum’s Risk Management framework is described in the Group Risk
Policy and supporting documents� The Group Risk Policy includes
an overview of Fortum’s risk management systems consisting of the
general principles of risk management and the main features of the risk
management process� The objective of the risk management systems
are to;
• support the development of the Group strategy,
• support strategy execution,
• support the achievement of agreed targets within acceptable risk
levels so that the Group’s ability to meet financial commitments is not
compromised,
• ensure the understanding of material risks and uncertainties affecting
Fortum, and
• support the prevention of accidents that can have a severe effect
on the health and safety of employees or third parties, and from
incidents that can have a material impact on Fortum’s assets,
reputation or the environment�
Risk management organisation
The main principle is that risks are managed at source meaning that
each Division and Corporate Function Head is responsible for managing
risks that arise within their business operations� However, in order to
take advantage of synergies, certain risks are managed centrally� For
example, Group Treasury is responsible for managing currency, interest
rate, liquidity and refinancing risks and cyber and information security
risks are managed by Corporate Security�
The Audit and Risk Committee (ARC) is responsible for monitoring
the efficiency of the company’s risk management systems and for
annually reviewing the Group Risk Policy and the material risks and
uncertainties� Corporate Risk Management, a function headed by the
Chief Risk Officer (CRO) reporting to the CFO, provides instructions and
tools which support the Group in running an efficient risk management
Corporate Risk Policy Structure
Approving body
Board of Directors
President and CEO
Group
Risk Policy
Group
Risk Instructions
Division / Corporate
Function Head
Division / Corporate Function
Risk manuals and Guidelines
Reviewing Body
Audit and Risk Committee
CFO
CRO
process� Corporate Risk Management is responsible for assessing and
reporting maturity of risk management in Divisions and Corporate
Functions and for providing independent monitoring and reporting of
material risk exposures to Group Management, the ARC and the Board
of Directors� Risk control functions and controllers in the business
monitor and report risks to the CRO�
Risk management process
Identify
Root causes
and
consequences
Assess
Impact
and
likelihood
Respond
Accept, avoid,
mitigate
or transfer
Control
Monitor
and report
Fortum’s risk management process is designed to support the
achievement of agreed targets by ensuring that risk management
activities are consistent with the general principles of risk management
and that risks are monitored and followed-up in a prudent manner�
The main features of risk management process consist of event
identification, risk assessment, risk response and risk control�
Identification is regularly carried out according to a structured process
and risks are assessed in terms of impact and likelihood according
to a Group-common methodology� Impact is assessed not only in
monetary terms, but also in terms of health and safety, environment
and reputation� All risks have risk owners who are responsible for
implementing actions to respond to the risk� Risk responses can be to
accept, avoid, mitigate or transfer the risk� Risk control processes, which
include monitoring and reporting of risks, are designed to support
compliance with approved instructions, manuals and guidelines and to
ensure that risk exposures remain within approved limits and mandates�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
26
26
Financial performance and position
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Fortum’s Board of Directors approves the Group Risk Policy and the
Fortum Risk Map
CEO approves Group Risk Instructions covering commodity market
risks, counterparty credit risks, and operational risks� Fortum also has
other Group policies and instructions covering e�g� compliance, privacy,
sustainability, treasury and cyber and information security risks which
are aligned with the Group Risk Policy� There are risk mandates or
limits defined for commodity market risks, counterparty credit risks and
financial risks� Divisions and Corporate Functions issues risk manuals
and guidelines as needed which detail how the Group Risk Instructions
are implemented�
Risk factors
Strategic risks
The main strategic risks are that energy policy, regulation, technology or
the business environment develop in ways that we have not been able to
foresee and prepare for� Future energy market and regulation scenarios,
including the impact of these to Fortum’s business, are continuously
assessed and analysed� It is part of Fortum’s strategy to, in the long-
term, broaden the base of revenues and diversify into new businesses,
technologies and markets�
Risks which could hinder Fortum in executing its strategy are
continuously assessed, monitored and reported as part of the strategy
work� These risks include an inability to identify and carry out successful
investments and acquisitions with the related project and integration risks�
Business Environment
Fortum operates in a global business environment and is therefore
exposed to political and other risks which affect the macroeconomic
development and consumer behaviour in the markets where we operate�
As we increase operations to new geographical regions, this risk may
also increase� The current trend of increasingly nationalistic policies
and protectionism may lead to increased trade restrictions which in turn
could affect demand for our products and services� Fortum monitors the
development in order to react quickly to market shifts and changes in
consumer behaviour�
Investments &
Acquisitions
EHS & Social
Business
Environment
Business Ethics
& Compliance
Technology
Energy Policy
& Regulations
Strate g ic
Sustain
a
b
i
l
i
t
y
Fortum’s
Risks
Property,
Plant &
Equipment
O
p
e
r
a
tio
nal
F in a ncial
Commodity
Markets
& Fuels
Currency &
Interest Rates
Systems &
Processes
Cyber &
Information
Security
Counter-
party &
Credit
Liquidity &
Refinancing
Investment and acquisition risks
Fortum’s strategy includes growth of operations in new businesses,
technologies and geographies� This includes an increasing number
of associated companies and joint ventures where we do not exercise
control, including the Uniper investment and a joint-venture with
Rusnano for wind development in Russia� These recent investments as
well as any future investment or acquisition, including possible future
partnerships, entail risk such as:
• increased overall operating complexity and requirements for
management, personnel and other resources,
Taxation
• the need to understand the value drivers and their uncertainties in
investments or potential acquisition targets,
• the need to manage complex integrations of companies with different
culture and infrastructure,
• the need to understand and manage new markets with different
cultural, ethical and legal frameworks,
• the need to understand and manage risks related to sustainability and
safety issues related to new businesses, markets and technologies�
These risks are managed as part of the investment process which
includes requirements for risk identification and assessment and action
plans before investment decisions are made, and also sets requirements
to follow-up risks in projects and acquisitions� Risks in large projects are
mitigated through contract structures and insurance coverage� Partner
risk assessments are performed before entering into joint ventures or
other material partnership agreements, and there is also a country entry
process which includes a country risk assessment before decisions to
enter into a new market can be made�
Energy policy and regulation risks
The energy business is heavily influenced by national and EU-level
energy policies and regulations, and Fortum’s strategy has been
developed based on scenarios of the future development of the
regulatory environment in both existing and potential new businesses
and market areas� The overall complexity and possible regulatory
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
27
27
Financial performance and position
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
changes in Fortum’s various operating countries pose a risk if we are not
able to anticipate, identify and manage those changes efficiently�
end-customers which could be driven by an increase of national or
local political steering in this sector,
Fortum maintains an active dialogue with the bodies involved in the
• Introduction of a national plastic tax aiming to reduce the use of
development of laws and regulations in order to manage these risks
and proactively contribute to the development of the energy policy and
regulatory framework�
plastics,
• Emergence of windfall tax discussions following possible increasing
electricity and carbon price development�
Nordic/EU
Fortum’s strategy in the power and heat sectors is based on a market-
driven development, which would mean more interconnections and
competition supported by increasing policy harmonization� Even if the
Nordic power market has a long tradition of harmonization, national
policies vary considerably when it comes to e�g� taxation, permitting,
subsidies and market model meaning that we have to manage risks
related to both EU regulation and national regulation� Potential risks
related to the future energy and climate policy framework include;
• Increasing policy costs and uncoordinated national mechanisms
delaying the development towards an integrated, flexible and dynamic
power market,
• Overlapping national carbon policies diluting the EU ETS and carbon
price despite the ETS reform,
• Increasing cost burden for hydro power in Finland, driven by fish
obligations, grid costs and real estate taxation and unbalanced
implementation of the EU Water Framework directive in Sweden
leading to lower production volumes,
• Stricter sustainability requirements for forest biomass leading to
reduced availability and increasing costs,
• Implementation of national waste incineration taxes or
restrictive measures affecting the operational environment or the
competitiveness of the waste-to-energy business as part of overall
recycling promotion,
• Substantial retroactive changes and/or discontinuation of prevailing
CHP support schemes in Baltic countries and Poland or deteriorating
competitiveness of CHP due to fuel tax increases,
• Undue heavy-touch price-regulation of district heating in order to
enhance the affordability and other social aspects of protecting the
The inter-linkage of these issues create uncertainty as changes in
policies in one area could undermine the effects of policy changes in
other areas�
Russia
Our business in Russia is exposed to political, economic and social
uncertainties and risks resulting from changes in regulation, legislation,
economic and social upheaval and other similar factors� The current
economic sanctions may be enlarged and/or extended having direct and
indirect impacts on the business environment� The main energy policy-
related risks in Russia are linked to the development of the whole energy
sector, part of which, like the wholesale power market, is liberalised
while other parts, like gas, heat, and retail electricity, are not� Regulated
sectors are inherently exposed to a risk of regulatory changes which
could affect Fortum’s operations�
Technology risks
Fortum’s strategy includes developing or acquiring new technologies,
as well as digitalizing the business� Fortum’s R&D and innovation
activities focus on the development of the energy system towards
a future solar economy� Fortum is, for example, developing circular
economy, bio-economy and other renewable energy concepts as well as
innovative solutions for its customers� New technologies expose Fortum
to risks related to intellectual property rights, data privacy and viability
of technologies� Technology risks are managed primarily through
developing a diversified portfolio of projects consisting of different
technologies�
Sustainability risks
Corporate social responsibility and sustainable development are
integral parts of Fortum’s strategy� Fortum gives balanced consideration
to economic, environmental and social responsibility� Changes to
laws, regulations and the business environment can pose a risk if not
identified and managed effectively and the same applies to changes
in views of our main stakeholders� In order to identify and manage
these risks, Fortum endorses a number of international voluntary
charters, standards and guidelines in the area of sustainability,
conducts stakeholder surveys annually and has defined internal
policies and instructions on how to conduct business� Divisions and
Corporate Functions identify and assess sustainability risks related to
their operations and define mitigation measures annually� Corporate
Sustainability executes oversight as part of the Group’s risk management
process�
Environmental, health and safety and social risks
Operating power and heat generation plants, circular economy services
and waste management involves use, storage and transportation of fuels
and materials, including hazardous waste, that can have adverse effects
on the environment and expose personnel, contractors and third parties
to safety risks� Assessment of environmental risks and preparedness
to operate in exceptional and emergency situations follows legislative
requirements as well as the requirements in the environmental
management standard (ISO 14001)� The same approach, based on
the requirements in the operational health and safety standard
(OHSAS 18001 or ISO 45001), applies to risks related to occupational
health and safety and actions in emergency situations�
Environmental, health and safety (EHS) risks as well as social
risks related to Fortum’s supply chain are evaluated through supplier
qualification, internal and external audits and risk assessments including
partner and country risk assessment� Corrective and preventive actions
are implemented when necessary� EHS and social risks related to
investments are evaluated in accordance with Fortum’s Investment
manual� Environmental risks and liabilities in relation to past actions
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
28
28
Financial performance and position
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
have been assessed and provisions have been made for future remedial
costs�
certain countries may be affected by future changes to local laws and
regulations�
Fortum’s operations are exposed to physical risks caused by climate
change, including changes in weather patterns that could alter energy
demand and, for instance, hydropower production volumes� Changes
in precipitation and temperatures may affect hydropower production,
dam safety, and also bioenergy supply and availability� Fortum adapts
its operations to the changing climate and takes it into consideration,
for example, in production and maintenance planning and in evaluating
growth and investment projects�
Tax risk
Fortum operates in a number of countries and is therefore exposed to
changes in taxation and how tax authorities interpret tax laws� Political
pressure has resulted in numerous new laws and rules which have
created a tax environment that is leading to new or increased taxes
and new interpretations of existing tax laws� Clarity and predictability
around how our operations are taxed have decreased due to the changing
regulation� In addition, new regulation creates material volume of new
complex compliance work�
Fortum aims to identify simple and cost-efficient solutions to
manage taxes in a sustainable manner� Fortum’s tax principle is that tax
is a consequence of business and that compliance with tax rules and
legislation and transparency result in a correct tax contribution� This
principle leaves no room for artificial or other aggressive solutions�
Fortum is continuously following the development of tax related issues
and their impact on the Group and maintains an active dialogue with tax
authorities in unclear cases� Tax-related issues are communicated openly
both internally and externally and Fortum’s tax footprint is published
annually�
Business ethics and compliance risks
Fortum’s operations are subject to laws, rules and regulations set forth
by the relevant authorities, exchanges, and other regulatory bodies in
all markets in which Fortum operates� Fortum’s ability to operate in
Fortum’s Code of Conduct enhances the understanding of the
importance of business ethics for all Fortum employees, contractors and
partners� Prevention of corruption is one of the Code of Conduct’s focus
areas� Fortum has procedures for anti-corruption including prevention,
oversight, reporting and enforcement based on the requirements
prescribed in international legislation� Fortum’s supplier code of conduct
sets sustainability requirements for suppliers of goods and services�
The Supplier Code of Conduct is based on the principles of the United
Nations Global Compact and is divided into four sections: business
principles including anti-corruption, human rights, labour standards
and environment�
Fortum systematically identifies, assesses, mitigates and reports
compliance risks including risks related to business ethics� Internal
controls are implemented to prevent the possibilities of unauthorised
activities or non-compliance with Group policies and instructions�
Fortum’s rolling compliance programme includes a risk-based
prioritisation of the development and mitigating actions� Training and
communications plays a central role in increasing the awareness in the
organisation�
Financial risks
Commodity market and fuel risks
Fortum’s business is exposed to fluctuations in prices and availability
of commodities used in the production and sales of energy products�
The main exposure is toward electricity prices and volumes, prices of
emissions and prices and availability of fuels� Fortum hedges its
exposure to commodity market risks in accordance with approved
Hedging Guidelines and Mandates� For further information on hedge
ratios, exposures, sensitivities and outstanding derivatives contracts,
see Note 4 Financial risk management�
Electricity price and volume risks
In competitive electricity markets, such as the Nordpool spot market
exchange in the Nordic region, the wholesale price of electricity is
determined as the balance between supply and demand� The short-term
factors affecting electricity prices and volumes on the Nordic market
include hydrological conditions, temperature, wind, CO2 allowance
prices, fuel prices, economic development, transmission capacity and
the import/export situation�
Electricity price risks are mainly hedged by entering into electricity
derivatives contracts on the Nasdaq Commodities exchange� The ability
to implement hedging strategies is dependent on a well-functioning
and liquid derivatives market� There is a risk of decreasing liquidity on
the Nasdaq Commodities exchange, and alternatives including use of
OTC derivative contracts and proxy products traded on other exchanges
are used to mitigate this risk� Hedging strategies are continuously
evaluated as electricity and other commodity market prices, the
hydrological balance and other relevant parameters change� Hedging of
the Generation segment’s power sales is performed in EUR on a Nordic
level covering both Finland and Sweden, and the currency component
of these hedges in the Swedish entity is currently not hedged� In Russia,
electricity prices and capacity sales are the main sources of market risk�
The electricity price is highly correlated with the gas price� Exposure is
partly mitigated through regulated fixed-price bilateral agreements, but
the majority of electricity sales is exposed to spot price risk� In India,
the electricity price received from solar production are fixed through
long-term power-purchasing agreements�
Emission and environmental value risks
The European Union has an emissions trading scheme to reduce the
amount of CO2 emissions� In addition to the emissions trading scheme,
there are other trading schemes in environmental values in place in
Sweden, Norway and Poland� Part of Fortum’s power and heat generation
is subject to requirements of these schemes� There is currently no
trading scheme in Russia for emissions or other environmental values�
The main factors influencing the prices of CO2 allowances and other
environmental values are political decisions and the supply and demand
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
29
29
Financial performance and position
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
balance� Fortum hedges its exposure to these prices and volumes
through the use of CO2 futures and environmental certificates�
Fuel price and volume risks
Power and heat generation requires use of fuels that are purchased on
global or local markets� The main fuels used by Fortum are natural
gas, uranium, coal, various biomass-based fuels and waste� The main
risk factor for fuels that are traded on global markets such as coal and
natural gas, is the uncertainty in price� Prices are largely affected by
demand and supply imbalances that can be caused by, for example,
increased demand growth in developing countries, natural disasters or
supply constraints in countries experiencing political or social unrest�
For fuels traded on local markets, such as bio-fuels, the volume risk in
terms of availability of the raw material of appropriate quality is more
significant as there may be a limited number of suppliers� Due to the
sanctions and economic development in Russia, there are also risks
related to imported fuels from Russia�
In the Nordic market, exposure to fuel prices is limited due to
Fortum’s flexible generation capacity which allows for switching between
different fuels according to prevailing market conditions� The remaining
exposure to fuel price risk is mitigated through fixed-price physical
delivery contracts or derivative contracts� The main fuel source for heat
and power generation in Russia is natural gas� Natural gas prices are
partially regulated, so the price risk exposure is limited�
Liquidity and refinancing risks
Fortum’s business is capital intensive and there is a regular need to raise
financing� Fortum maintains a diversified financing structure in terms
of debt maturity profile, debt instruments and geographical markets�
Liquidity and refinancing risks are managed through a combination
of cash positions and committed credit facility agreements with its
core banks� The credit risk of cash positions has been mitigated by
diversifying the deposits to high-credit quality financial institutions and
issuers of corporate debt�
Currency and interest rate risks
Fortum’s debt portfolio consists of interest-bearing liabilities and
derivatives on a fixed- and floating-rate basis with differing maturity
profiles� Fortum manages the duration of the debt portfolio through
use of different types of financing contracts and interest rate derivative
contracts such as interest rate swaps�
Fortum’s currency exposures are divided into transaction exposures
(foreign exchange exposures relating to contracted cash flows and
balance sheet items where changes in exchange rates will have an
impact on earnings and cash flows) and translation exposure (foreign
exchange exposure that arises when profits and balance sheets in foreign
entities are consolidated at the Group level)� The main principle is that
material transaction exposures should be hedged while translation
exposures are not hedged, or are hedged selectively� An exception is
the Generation segment’s hedging of power sales in Sweden where
the currency component is currently not hedged� The main translation
exposures toward the EUR/RUB, EUR/SEK and EUR/NOK are monitored
continuously� Changes in these currency rates affect Fortum’s profit level
and equity when translating results and net assets to euros�
Counterparty & credit risks
Fortum is exposed to counterparty risk whenever there is a contractual
arrangement with an external counterparty including customers,
suppliers, partners, banks, clearing houses and trading counterparties�
Credit risk exposures relating to financial derivative instruments are
often volatile� The majority of commodity derivatives are exchange-
traded and cleared through clearing houses such as Nasdaq Clearing
AB or through clearing banks� The recent default of a trader active on
Nasdaq Commodities has shown that there is also credit risk toward
clearing houses� The trend toward more use of futures contracts instead
of forward contracts is decreasing the credit exposure toward clearing
houses� Derivatives contracts are also entered into directly with external
counterparties and such contracts are limited to high-credit-quality
counterparties active on the financial or commodity markets�
Due to the financing needs and management of liquidity, Fortum
has counterparty credit exposure to a number of banks and financial
institutions� The majority of the exposure is toward Fortum’s key
relationship banks, which are highly creditworthy institutions, but also
includes exposure to the Russian financial sector in terms of deposits
with financial institutions as well as to banks that provide guarantees
for suppliers and contracting parties� Deposits in Russia have been
concentrated to the most creditworthy state-owned or controlled banks�
Credit risk exposures relating to customers is spread across a wide
range of industrial counterparties, small businesses and private
individuals over a range of geographic regions� The majority of exposure
is to the Nordic market, Poland and Russia� The risk of non-payment
in the electricity and heat sales business in Russia is higher than in
the Nordic market� In order to manage counterparty credit risk, Fortum
has routines and processes to identify, assess and control exposure�
Credit checks are performed before entering into commercial obligations
and exposure limits are set for larger individual counterparties�
Creditworthiness is monitored through the use of internal and external
sources so that mitigating actions can be taken when needed� Mitigating
actions include demanding collateral, such as guarantees, managing
payment terms and contract length, and the use of netting agreements�
Operational risks
Operational risks are unexpected events which can lead to negative
monetary, safety, environmental or reputational impacts as a result of
inadequate or failed internal processes, systems or equipment, or from
external events�
Systems and Process Risks
System and process risks are mainly caused by design failures or human
errors� Mitigation includes process automation, testing and education�
Process-related risks are assessed and controls for the most relevant risks
are defined and implemented as part of the internal controls framework�
IT-system risk management is based on an IT Service Lifecycle Model,
and related processes and practices� ITIL and CobIT are the main
frameworks which have been used as reference for the model� Business
continuity plans are created for most critical processes�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
30
30
Financial performance and position
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Property, plant and equipment
Property, plant and equipment risks are primarily managed through
monitoring and maintenance planning� In addition, all Fortum’s
industrial assets are covered by a Group Master Policy covering property
damage and business interruption risks which mitigates the impact of
internal and external events�
Combined heat and power (CHP) and recycling and waste
Operational events at CHP and recycling and waste facilities, or in
the storage and transportation of fuels, waste and materials can lead
to physical damages, business interruption, and environment, health
and safety and social impacts� Leakage and contamination of the
surrounding environment could lead to clean-up costs and third-party
liabilities� An explosion or fire at a facility could cause damages to
the plant or third-parties and lead to possible business interruption�
Requirements for waste are clearly specified and samples are tested
for selected incoming waste deliveries� These risks are mitigated by
condition monitoring, preventive maintenance and other operational
improvements as well as competence development of personnel
operating the plants�
Hydro power
Operational events at hydro power generation facilities can lead to
physical damages, business interruptions, and third-party liabilities�
A long-term program is in place for improving the surveillance of
the condition of dams and for securing the discharge capacity in extreme
flood situations� In Sweden, third-party liabilities from dam failures are
strictly the plant owner’s responsibility� Together with other hydro power
producers, Fortum has a shared dam liability insurance program in place
that covers Swedish dam failure liabilities up to SEK 10,000 million�
Nuclear power
Fortum owns the Loviisa nuclear power plant, and has minority interests
in two Finnish and two Swedish nuclear power companies� At the Loviisa
power plant, the assessment and improvement of nuclear safety is
a continuous process performed under the supervision of the Radiation
and Nuclear Safety Authority of Finland (STUK)�
under the guidance of the Data Privacy Office and in accordance with
the Group Instructions for Privacy�
IT functions in the business, support functions and outsourcing
partners are responsible for identifying and mitigating operational
IT security related risks as well as managing IT security incidents�
IT functions are also responsible for IT service continuity�
Third-party liability relating to nuclear accidents is strictly the plant
operator’s responsibility and must be covered by insurance� As the
operator of the Loviisa power plant, Fortum has a statutory liability
insurance policy of 600M SDR (Special Drawing Right) and the same
type of insurance policies are in place for the operators where Fortum
has a minority interest�
Wind and Solar
Fortum is involved in the construction, development and operations
of several wind and solar projects in the Nordics, Russia and in India�
Operational incidents during both construction and operational
phases can lead to accidents, delays in commissioning and business
interruption� These risks are mitigated as part of the project planning
and through maintenance and continuous training of personnel
operating the plants�
Cyber and information security risks
Fortum’s business operations and customer related services are
dependent on well-functioning IT and information management systems
and processes� Due to the nature of the business, large amounts of data
are processed, often in real-time, and used for decision-making, serving
customers and in internal and external communication and reporting�
Securing information and availability of the systems are essential for
Fortum� Cyber security risks, including risks related to information,
industrial control systems (ICS), digitalization and privacy, are managed
centrally by Corporate Security in collaboration with business� Group
instructions and procedures set requirements for managing and
mitigating cyber security risks�
General Data Protection Regulation became applicable on 25th of
May 2018� The regulation contains a number of requirements related to
processing personal data� Fortum established a Group-wide program
to ensure the fulfilment of the requirements� The program was to a
large extent implemented during 2018 and the future work continues
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
31
31
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Fortum share and shareholders
Fortum Corporation’s shares have been listed on Nasdaq Helsinki since 18 December 1998� The trading code
is FORTUM (until 25 January 2017: FUM1V)� Fortum Corporation’s shares are in the Finnish book entry system
maintained by Euroclear Finland Ltd which also maintains the official share register of Fortum Corporation�
Share capital
Share capital
Share key figures
EUR
Earnings per share
Cash flow per share
Equity per share
Dividend per share
Payout ratio, %
Dividend yield, %
1) Board of Directors’ proposal for the Annual General Meeting 26 March 2019.
2018
0.95
0.91
13.33
1.10 1)
115.8 1)
5.8 1)
2017
0.98
1.12
14.69
1.10
112.2
6.7
2016
0.56
0.7
15.15
1.10
196.4
7.5
EUR million
Registered shares at 1 January
Cancellation of treasury shares
Registered shares at 31 December
2018
Number of
shares
888,367,045
72,580
888,294,465
Share
capital
3,046
-
3,046
Fortum Corporation has one class of shares� By the end of 2018, a total of 888,294,465 shares (2017: 888,367,045)
had been issued� Each share entitles the holder to one vote at the Annual General Meeting� All shares entitle
holders to an equal dividend� At the end of 2018, Fortum Corporation’s share capital, paid in its entirety and
entered in the trade register, was EUR 3,046,185,953�00�
For full set of share Key figures 2009–2018, see the section Key figures in the Financial Statements�
In the merger of Länsivoima Oyj (former Lounais-Suomen Sähkö Oy) to Fortum Corporation in 2000, those
Shareholders value, share price performance and volumes
Fortum’s mission is to deliver excellent value to its shareholders� Fortum’s share price has appreciated
approximately 17% during the last five years, while Dow Jones European Utility Index has increased 3%� During
the same period Nasdaq Helsinki Cap index has increased 27%� During 2018, Fortum’s share price appreciated
approximately 16%, while Dow Jones European Utility index decreased 3% and Nasdaq Helsinki Cap index
decreased 8%�
In 2018, a total of 474�7 million (2017: 582�9) Fortum Corporation shares, totalling EUR 9,065 million, were
traded on the Nasdaq Helsinki� The highest quotation of Fortum Corporation shares during 2018 was EUR 22�91,
the lowest EUR 16�43, and the volume-weighted average EUR 19�09� The closing quotation on the last trading
day of the year 2018 was EUR 19�10 (2017: 16�50)� Fortum’s market capitalisation, calculated using the closing
quotation of the last trading day of the year, was EUR 16,966 million (2017: 14,658)�
In addition to the Nasdaq Helsinki, Fortum shares were traded on several alternative market places, for
example at Boat, Cboe and Turquoise, and on the OTC market� In 2018, approximately 68% (2017: 61%) of
Fortum’s shares were traded on markets other than the Nasdaq Helsinki Ltd�
shareholders of Länsivoima Oyj that did not produce their share certificates and did not request their rights
to be registered in the book-entry system, received their respective shares of Fortum Corporation as merger
consideration to a joint book-entry account opened on their behalf (the “Joint Account”)� The Annual General
Meeting 2018 of Fortum Corporation decided, that the rights to all such shares entered in the Joint Account and
to the rights attached to such shares that had not been requested to be registered in the book-entry system prior
to the decision by the Annual General Meeting 2018, were forfeited� In addition to the shares, the rights attached
to such shares, such as undrawn dividend, were forfeited� The provisions applicable to treasury shares held by
the company were applied to the forfeited shares� On 17 December 2018, Board of Directors decided to cancel all
these 72,580 Fortum shares owned by the company without decreasing the share capital� The cancellation was
entered in the Trade Register on 21 December 2018�
Shareholders
At the end of 2018, the Finnish State owned 50�76% of the company’s shares� The Finnish Parliament has
authorised the Government to reduce the Finnish State’s holding in Fortum Corporation to no less than 50�1% of
the share capital and voting rights�
The proportion of nominee registrations and direct foreign shareholders was 30�8 % (2017: 30�6%)�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
32
32
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Shareholders, 31 December 2018
Shareholders
Finnish State
Ilmarinen Mutual Pension Insurance Company
Varma Mutual Pension Insurance Company
The Finnish Social Insurance Institution
Kurikan Kaupunki
The State Pension Fund
Elo Mutual Pension Insurance Company
OP-Finland
The Local Government Pensions Institution
Schweizerische Nationalbank
Danske Finnish Institutional Equity Fund
OP-Henkivakuutus Ltd.
Kauhajoen Kaupunki
Seligson & Co OMX 25 fund
Nominee registrations and direct foreign ownership 1)
Other shareholders in total
Total number of shares
1) Excluding Schweizerische Nationalbank
By shareholder category
Finnish shareholders
Corporations
Financial and insurance institutions
General government
Non-profit organisations
Households
Non-Finnish shareholders
Total
No. of shares
450,932,988
8,955,600
8,575,167
7,030,896
6,203,500
4,600,000
4,420,000
2,710,654
2,568,955
2,010,237
1,080,000
962,467
902,640
837,941
271,655,835
114,847,585
888,294,465
Holding %
50.76
1.01
0.97
0.79
0.70
0.52
0.50
0.31
0.29
0.23
0.12
0.11
0.10
0.09
30.58
12.93
100.00
% of total amount of shares
1.14
1.67
55.78
1.14
9.46
30.81
100.00
Breakdown of share ownership, 31 December 2018
Number of shares owned
1–100
101–500
501–1,000
1,001–10,000
10,001–100,000
100,001–1,000,000
1,000,001–10,000,000
over 10,000,000
In the joint book-entry account and in special
accounts on 31 December
Nominee registrations
Total
No. of
shareholders
37,557
47,199
18,498
18,684
949
70
10
1
122,968
% of
shareholders
30.54
38.38
15.04
15.19
0.77
0.06
0.01
0.00
100.00
No. of shares
1,980,752
12,546,537
13,621,769
48,637,140
20,834,163
22,060,974
48,155,009
450,932,988
618,769,332
596
269,524,537
888,294,465
% of total
amount of
shares
0.22
1.41
1.53
5.48
2.35
2.48
5.42
50.76
69.66
0.00
30.34
100.00
Management shareholding 31 December 2018
At the end of 2018, the President and CEO and other members of the Fortum Executive Management
owned 193,227 shares (2017: 200,667) representing approximately 0�02% (2017: 0�02%) of the total shares in
the company�
A full description of the shareholdings and interests in long-term incentive schemes of the President and CEO
and other members of the Fortum Executive Management is shown in Note 11 Employee benefits�
Authorisations from the Annual General Meeting 2018
In 2018, the Annual General Meeting decided to authorise the Board of Directors to decide on the repurchase
and disposal of the company’s own shares up to a maximum number of 20,000,000 shares, which corresponds
to approximately 2�25% of all the shares in the company� The authorisation is effective for a period of 18 months
from the resolution of the General Meeting� The authorisation had not been used by the end of 2018�
Dividend policy
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�
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, in the range of 50–80% of earnings per share, excluding
one-off items�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
33
33
Financial performance and position
Sustainability
Risk management
Fortum share and shareholders
Dividend distribution proposal
The distributable funds of Fortum Corporation as at 31 December 2018 amounted to EUR 4,991,388,741�37
including the profit of the financial period 2018 of EUR 797,840,404�43� The company’s liquidity is good and
the dividend proposed by the Board of Directors will not compromise the company’s liquidity�
The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 1�10 per share be paid
for 2018�
Based on the number of registered shares as at 31 January 2019 the total amount of dividend would be EUR
977,123,911�50� The Board of Directors proposes, that the remaining part of the distributable funds be retained
in the shareholders’ equity�
The Annual General Meeting will be held on 26 March 2019 at 11:00 EET at Finlandia Hall in Helsinki�
Market capitalisation, EUR billion
25
20
15
10
5
0
2014
2015
2016
2017
2018
Share quotations, index 100 = quote on 2 January 2014
Total shareholder return, EUR
200
150
100
50
0
2014
2015
2016
2017
2018
50
45
40
35
30
25
20
15
10
5
0
Fortum
OMXHCap
DJ STOXX
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Fortum’s share price, (EUR 19.10)
Fortum’s total shareholder return, EUR 37.04
(dividends reinvested)
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
34
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in total equity
Cash flow statement
Consolidated income statement
EUR million
Comparable operating profit
Impairment charges
Capital gains and other
Changes in fair values of derivatives hedging future cash flow
Nuclear fund adjustment
Items affecting comparability
Operating profit
See Definitions for key figures
Note
8
6
6, 7
2018
987
-4
102
98
-45
151
1,138
2017
811
6
326
14
1
347
1,158
EUR million
Sales
Other income
Materials and services
Employee benefits
Depreciation and amortisation
Other expenses
Comparable operating profit
Items affecting comparability
Operating profit
Share of profit of associates and joint ventures
Interest expense
Interest income
Fair value gains and losses on financial instruments
Other financial expenses - net
Finance costs - net
Profit before income tax
Income tax expense
Profit for the period
Attributable to:
Owners of the parent
Non-controlling interests
Earnings per share for profit attributable to the equity owners of the company
(EUR per share)
Basic
Note
6
9
10
11
6, 17, 18
9
6
7
6
6, 19
8
12
13
14
2018
5,242
130
-2,795
-459
-536
-594
987
151
1,138
38
-148
34
-8
-15
-136
1,040
-181
858
843
15
858
2017
4,520
55
-2,301
-423
-464
-576
811
347
1,158
148
-164
32
-12
-50
-195
1,111
-229
882
866
16
882
0.95
0.98
As Fortum currently has no dilutive instruments outstanding, diluted earnings per share is the same as basic
earnings per share�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
35
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in total equity
Cash flow statement
Consolidated statement of comprehensive income
EUR million
Profit for the period
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent periods:
Cash flow hedges
Fair value gains/losses in the period
Transfers to income statement
Transfers to inventory/fixed assets
Deferred taxes
Net investment hedges
Fair value gains/losses in the period
Deferred taxes
Exchange differences on translating foreign operations
Share of other comprehensive income of associates and joint ventures
Other changes
Items that will not be reclassified to profit or loss in subsequent periods:
Actuarial gains/losses on defined benefit plans
Actuarial gains/losses on defined benefit plans in associates and joint ventures
Other comprehensive income for the period, net of deferred taxes
Total comprehensive income for the year
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
Notes
2018
858
2017
882
4.6
19
31
31
-778
15
-2
162
32
-6
-525
-37
0
-1,141
3
43
46
-1,094
-236
-239
3
-236
22
76
-4
-19
23
-5
-372
-10
-2
-291
-13
6
-7
-298
584
571
13
584
Other comprehensive income (OCI) includes items of income and expense that are recognised in equity and not
recognised in the consolidated income statement. They include unrealised items, such as fair value gains and
losses on financial instruments hedging future cash flows. These items will be realised in the Consolidated income
statement when the underlying hedged items is recognised. OCI also includes gains and losses on fair valuation
of other investments, actuarial gains and losses from defined benefit plans, items on comprehensive income in
associated companies and translation differences.
Fair valuation of cash flow hedges mainly relates to fair valuation of derivatives, such as futures and forwards, hedging
electricity price for future transactions, where hedge accounting is applied. When electricity price is higher (lower) than
the hedging price, the impact on equity is negative (positive).
Translation differences from translation of foreign entities, mainly RUB and SEK.
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
36
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in total equity
Cash flow statement
Consolidated balance sheet
EUR million
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Participations in associates and joint ventures
Share in State Nuclear Waste Management Fund
Other non-current assets
Deferred tax assets
Derivative financial instruments
Long-term interest-bearing receivables
Total non-current assets
Current assets
Inventories
Derivative financial instruments
Short-term interest-bearing receivables
Income tax receivables
Trade and other receivables
Deposits and securities (maturity over three months)
Cash and cash equivalents
Liquid funds
Total current assets
Total assets
Note 31 Dec 2018 31 Dec 2017
17
18
19
29
20
28
4
21
22
4
21
28
23
24
1,087
9,981
5,978
899
139
70
229
683
19,065
233
326
409
172
1,620
29
557
584
3,344
1,064
10,510
1,900
858
140
73
281
1,010
15,835
216
240
395
172
997
715
3,182
3,897
5,918
22,409
21,753
EUR million
EQUITY
Equity attributable to owners of the parent
Share capital
Share premium
Retained earnings
Other equity components
Total
Non-controlling interests
Total equity
LIABILITIES
Non-current liabilities
Interest-bearing liabilities
Derivative financial instruments
Deferred tax liabilities
Nuclear provisions
Other provisions
Pension obligations
Other non-current liabilities
Total non-current liabilities
Current liabilities
Interest-bearing liabilities
Derivative financial instruments
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
Note 31 Dec 2018 31 Dec 2017
25
26
27
4
28
29
30
31
32
27
4
33
3,046
73
9,232
-510
11,841
236
12,077
3,046
73
9,875
54
13,048
239
13,287
5,007
362
720
899
91
98
182
7,358
1,086
829
1,058
2,973
4,119
214
819
858
100
102
175
6,388
766
200
1,112
2,078
10,332
8,466
22,409
21,753
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
37
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in total equity
Cash flow statement
Consolidated statement of changes in total equity
Retained earnings
Other equity components
EUR million
BS Total equity 31 December 2017
Impact from change in accounting principle
(IFRS 9 and 15)
Total equity 1 January 2018
Net profit for the period
Translation differences
Other comprehensive income
Total comprehensive income for the period
Cash dividend
Other
BS Total equity 31 December 2018
BS Total equity 31 December 2016
Net profit for the period
Translation differences
Other comprehensive income
Total comprehensive income for the period
Cash dividend
Other
BS Total equity 31 December 2017
Note
Share capital
3,046
Share premium
73
Retained earnings
and other funds
12,062
Translation of
foreign operations Cash flow hedges Other OCI items
70
-2,187
-40
3,046
73
3,046
3,046
73
73
3,046
73
7
12,069
843
0
843
-977
2
11,937
12,186
866
-9
857
-977
-4
12,062
-2,187
-519
-519
-2,705
-1,817
-369
-369
-2,187
14
14
-40
0
-599
-598
-638
-115
1
74
75
-40
70
1
28
29
99
58
1
11
11
70
OCI items
associated
companies and
joint ventures
24
Owners of the
parent
13,048
Non-controlling
interests
239
Total equity
13,287
24
-1
6
6
30
27
-1
-2
-3
24
7
13,055
843
-518
-564
-239
-977
2
11,841
13,459
866
-369
73
571
-977
-4
13,048
239
15
-7
-5
3
-6
0
236
84
16
-3
0
13
-2
145
239
7
13,295
858
-525
-569
-236
-983
2
12,077
13,542
882
-372
74
584
-979
141
13,287
Translation differences
Translation of financial information from subsidiaries in foreign currency is done using average rate for the
income statement and end rate for the balance sheet� The exchange rate differences occurring from translation
to EUR are booked to equity� Translation differences impacted equity attributable to owners of the parent
company with EUR -518 million during 2018 (2017: -369)� Translation differences are mainly related to RUB and
SEK� Part of this translation exposure has been hedged and the foreign currency hedge result, amounting to
EUR 24 million (2017: 28), is included in the other OCI items�
For information regarding exchange rates used, see Note 1 Accounting policies� For information about
translation exposure see Note 4.6 Interest rate risk and currency risk�
Cash flow hedges
The impact on equity attributable to owners of the parent from fair valuation of cash flow hedges, EUR -598
million (2017: 75), mainly relates to fair valuation of derivatives, such as futures and forwards, hedging electricity
price for future transactions, where hedge accounting is applied� When electricity price is higher (lower) than the
hedging price, the impact on equity is negative (positive)�
Non-controlling interests
Non-controlling interests increased with EUR 155 million during 2017 mainly due to the acquisition of Fortum
Oslo Varme AS, which is consolidated as a subsidiary with 50% non-controlling interest� See also Note 3
Acquisitions and disposals�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
38
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in total equity
Cash flow statement
Consolidated cash flow statement
EUR million
Cash flow from operating activities
Profit for the period
Adjustments:
Income tax expenses
Finance costs - net
Share of profit of associates and joint ventures
Depreciation and amortisation
Operating profit before depreciations (EBITDA)
Items affecting comparability
Comparable EBITDA
Non-cash flow items
Interest received
Interest paid
Dividends received
Realised foreign exchange gains and losses
Income taxes paid
Other items
Funds from operations
Change in working capital
Net cash from operating activities
Cash flow from investing activities
Capital expenditures
Acquisitions of shares
Proceeds from sales of fixed assets
Divestments of shares
Shareholder loans to associated companies and joint ventures
Change in cash collaterals and restricted cash
Change in other interest-bearing receivables
Net cash used in investing activities
Note
17, 18
2018
858
181
136
-38
536
1,674
-151
1,523
-90
23
-171
61
231
-94
-9
1,474
-670
804
-579
-4,088
38
259
-24
-36
31
-4,398
2017
882
229
195
-148
464
1,623
-347
1,275
-76
35
-187
58
-83
-83
-28
912
81
993
-657
-972
8
741
43
-3
34
-807
EUR million
Cash flow before financing activities
Cash flow from financing activities
Proceeds from long-term liabilities
Payments of long-term liabilities
Change in short-term liabilities
Dividends paid to the owners of the parent
Other financing items
Net cash used in financing activities
Total net increase(+)/decrease(-) in liquid funds
Liquid funds at the beginning of the year 1)
Foreign exchange differences in liquid funds
Liquid funds at the end of the period
Note
2018
-3,594
2017
187
1,764
-586
135
-977
-9
326
35
-543
68
-977
-12
-1,428
-3,268
-1,241
3,896
-43
584
5,155
-16
3,897
14
24
1) Opening balance 1 January 2018 adjusted EUR -1 million due to adoption of IFRS 9,
see Note 1.6 New IFRS standards adopted from 1 Jan 2018.
Realised foreign exchange gains and losses relate mainly to financing of Fortum’s Russian and Swedish subsidiaries and
the fact that the Group’s main external financing currency is EUR. The foreign exchange gains and losses arise from rollover
of foreign exchange contracts hedging these internal loans as major part of the forwards are entered into with short
maturities i.e. less than twelve months.
Capital expenditures in cash flow do not include not yet paid investments. Capitalised borrowing costs are presented in
interest paid.
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
39
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in total equity
Cash flow statement
Change in net debt
EUR million
Net debt 1 January
Impact from change in accounting principle (IFRS 9)
Foreign exchange rate differences
Comparable EBITDA
Non-cash flow items
Paid net financial costs
Income taxes paid
Change in working capital
Capital expenditures
Acquisitions
Divestments
Shareholder loans to associated companies
Change in other interest-bearing receivables
Dividends
Other financing activities
Net cash flow (- increase in net debt)
Fair value change of bonds, amortised cost valuation, acquired debt and other
Net debt 31 December
Additional cash flow information
Change in working capital
EUR million
Change in settlements for futures, decrease(+)/increase(-)
Change in interest-free receivables, decrease(+)/increase(-)
Change in inventories, decrease(+)/increase(-)
Change in interest-free liabilities, decrease(-)/increase(+)
CF Total
2018
988
1
15
1,523
-90
138
-94
-670
-579
-4,088
298
-24
-5
-977
-12
-4,580
-75
5,509
2018
-524
-186
-3
43
-670
2017
-48
-15
1,275
-76
-199
-83
81
-657
-972
749
43
31
-977
-17
-802
248
988
2017
141
-94
19
15
81
In Fortum’s cash flow statement the daily cash settlements for futures are shown as change in working capital
whereas the changes in cash collaterals for forwards are included in cash flow from investing activities� The cash
collaterals are included in the short-term interest-bearing receivables and the daily cash settlements are included
in the other receivables, see Note 21 Interest-bearing receivables and Note 23 Trade and other receivables�
Capital expenditure in cash flow
EUR million
Capital expenditure
Change in not yet paid investments, decrease(+)/increase(-)
Capitalised borrowing costs
CF Total
Note
6, 17, 18
2018
584
5
-10
579
2017
690
-17
-16
657
Capital expenditures for intangible assets and property, plant and equipment were in 2018 EUR 584 million (2017:
690)� Capital expenditure in cash flow in 2018 EUR 579 million (2017: 657) is including payments related to capital
expenditure made in previous year i�e� change in trade payables related to investments EUR 5 million (2017: -17)
and excluding capitalised borrowing costs EUR -10 million (2017: -16), which are presented in interest paid�
See also information about the investments by segments and countries in Note 6 Segment reporting and
the investment projects by segment in Note 18.2 Capital expenditure�
Acquisition of shares in cash flow
Acquisition of shares, net of cash acquired, amounted to EUR 4,088 million during 2018 (2017: 972)� Acquisition
of shares during 2018 include mainly the acquisition of shares in Uniper SE� During 2018 Fortum also acquired
100% of the shares in the Fincumet Group metal recycling companies, three Latvian heat producing companies
and other smaller companies� Fortum also invested in the wind investment fund owned 50/50 by Fortum and
RUSNANO� For further information see Note 3 Acquisitions and disposals�
Divestment of shares in cash flow
EUR million
Proceeds from sales of subsidiaries, net of cash disposed
Proceeds from sales of associates and joint ventures
CF Total
Note
3
2018
88
171
259
2017
54
687
741
Proceeds from sales of subsidiaries during 2018 include mainly the sale of the 54% share of Fortum’s solar power
company in accordance with the capital recycling business model� Proceeds from sales of associated companies
and joint ventures during 2018 include the sale of Fortum’s 10% ownership in Hafslund Produksjon Holding AS�
For further information see Note 3 Acquisitions and disposals�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
40
40
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
1 Accounting policies
1.1 Basic information
Fortum Corporation (the Company) is a Finnish public limited liability company with its domicile in Espoo,
Finland� Fortum’s shares are traded on Nasdaq Helsinki�
The operations of Fortum Corporation and its subsidiaries (together the Fortum Group) focus on the Nordic
and Baltic countries, Russia and Poland� Fortum’s activities cover generation and sale of electricity, generation,
distribution and sale of heat, and energy-related expert services� In addition Fortum has major shareholdings
including a 49�99% participation in Uniper SE�
These financial statements were approved by the Board of Directors on 31 January 2019�
1.2 Basis of preparation
The consolidated financial statements of the Fortum Group have been prepared in accordance with International
Financial Reporting Standards (IFRS) and IFRIC Interpretations as adopted by the European Union� The financial
statements also comply with Finnish accounting principles and corporate legislation�
The consolidated financial statements have been prepared under the historical cost convention, except for
financial assets and financial liabilities (including derivative instruments) at fair value through profit and loss or
other comprehensive income�
The figures in the consolidated financial statements have been rounded and consequently the sum of
individual figures may deviate from the sum presented� Key figures have been calculated using exact figures�
1.2.1 Measures for performance
According to the ESMA Guidelines on Alternative Performance Measures, an Alternative Performance Measure
(APM) is understood as a financial measure of historical or future financial performance, financial position, or
cash flows, other than a financial measure defined or specified in the applicable financial reporting framework�
Fortum uses Alternative performance measures (APMs) in the financial target setting and forecasting,
management’s follow up of financial performance of segments and the group as well as allocation of resources in
the group’s performance management process� The business performance of the operations cannot be compared
from one period to another without adjusting for items affecting comparability and therefore they are excluded
from Comparable operating profit and Comparable EBITDA� The main business performance measurements
have been used consistently since 2005�
Definitions are presented in the section Definitions of key figures�
1.2.2 Classification of current and non-current assets and liabilities
An asset or a liability is classified as current when it is expected to be realised in the normal operating cycle
or within twelve months after the balance sheet date or it is classified as financial assets or liabilities, except
financial derivatives, held at fair value through profit or loss� Liquid funds are classified as current assets�
All other assets and liabilities are classified as non-current assets and liabilities�
1.3 Principles for consolidation
The consolidated financial statements comprise of the parent company, subsidiaries, joint ventures and
associated companies�
The Fortum Group was formed in 1998 by using the pooling-of-interests method for consolidating Fortum
Power and Heat Oy and Fortum Oil and Gas Oy (the latter demerged to Fortum Oil Oy and Fortum Heat and Gas
Oy 1 May 2004)� In 2005 Fortum Oil Oy (current Neste Oyj) was separated from Fortum by distributing 85% of its
shares to Fortum’s shareholders and by selling the remaining 15%� This means that the acquisition cost of Fortum
Power and Heat Oy and Fortum Heat and Gas Oy has been eliminated against the share capital of the companies�
The difference has been entered as a decrease in shareholders’ equity�
1.3.1 Subsidiaries
Subsidiaries are defined as companies in which Fortum has control� Control exists when Fortum is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity�
The acquisition method of accounting is used to account for the acquisition of subsidiaries� The cost of an
acquisition is measured as the aggregate of fair value of the assets given and liabilities incurred or assumed at
the date of exchange� Identifiable assets acquired and liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date, irrespective of the extent of any minority interest� The excess
of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded
as goodwill� If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired,
the difference is recognised directly in the income statement�
Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are no
longer consolidated from the date that control ceases�
Intercompany transactions, balances and unrealised gains on transactions between Group companies are
eliminated� Unrealised losses are also eliminated unless the transaction provides evidence of an impairment
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30
31
32
33
34
35
36
37
38
39
40
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
41
41
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
of the asset transferred� Where necessary, subsidiaries’ accounting policies have been changed to ensure
consistency with the policies the Group has adopted�
The Fortum Group subsidiaries are disclosed in Note 40 Subsidiaries by segment on 31 December 2018�
1.3.2 Associates
Associated companies are entities over which the Group has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights� The Group’s interests in associated
companies are accounted for using the equity method of accounting�
1.3.3 Joint ventures
Joint ventures are arrangements in which the Group has joint control� Joint ventures are accounted for using
the equity method of accounting�
1.4.3 Group companies
The income statements of subsidiaries, whose measurement and reporting currencies are not euros, are
translated into the Group reporting currency using the average exchange rates for the year based on the month-
end exchange rates, whereas the balance sheets of such subsidiaries are translated using the exchange rates on
the balance sheet date� On consolidation, exchange differences arising from the translation of the net investment
in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments,
are taken to equity� When a foreign operation is sold, such exchange differences are recognised in the income
statement as part of the gain or loss on sale� Goodwill and fair value adjustments arising on the acquisition of
a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate�
The balance sheet date rate is based on the exchange rate published by the European Central Bank for
the closing date� The average exchange rate is calculated as an average of each month’s ending rate from the
European Central Bank during the year and the ending rate of the previous year�
1.3.4 Non-controlling interests
Non-controlling interests in subsidiaries are identified separately from the equity of the owners of the parent
company� The non-controlling interests are initially measured at the non-controlling interests’ proportionate
share of the fair value of the acquiree’s identifiable net assets� Subsequent to acquisition, the carrying amount of
non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’
share of subsequent changes in equity�
1.4 Foreign currency transactions and translation
The key exchange rates applied in the Fortum Group accounts:
Sweden
Norway
Poland
Russia
Currency
SEK
NOK
PLN
RUB
Average rate
2018
10.2591
9.6432
4.2614
73.8035
2017
9.6392
9.3497
4.2556
66.0349
Balance sheet date rate
31 Dec 2018
10.2548
9.9483
4.3014
79.7153
31 Dec 2017
9.8438
9.8403
4.1770
69.3920
1.4.1 Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of
the primary economic environment in which the entity operates (‘the functional currency’)� The consolidated
financial statements are presented in euros, which is the Company’s functional and presentation currency�
1.4.4 Associates and joint ventures
The Group’s interests in associated companies and joint ventures are accounted for by the equity method�
Associates and joint ventures, whose measurement and reporting currencies are not euro, are translated into
the Group reporting currency using the same principles as for subsidiaries, see 1.4.3 Group companies�
1.4.2 Transactions and balances
Transactions denominated in foreign currencies are translated using the exchange rate at the date of the
transaction� Receivables and liabilities denominated in foreign currencies outstanding on the closing date are
translated using the exchange rate quoted on the closing date� Exchange rate differences have been entered in
the income statement� Net conversion differences relating to financing are entered under financial income or
expenses, except when deferred in equity as qualifying cash flow hedges� Translation differences on financial
assets through other comprehensive income are included in Other equity components section of the equity�
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21
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23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
42
42
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
1.5 Other accounting policies
Fortum describes the other accounting principles in conjunction with the relevant note information� The table
below lists the significant accounting policies and the note where they are presented as well as the relevant IFRS
standard�
Note
6 Segment reporting
6, 23 Segment reporting and Trade and other receivables
18 Property, plant and equipment
11 Employee benefits
28 Income taxes in balance sheet
19 Participations in associated companies and joint ventures
19 Participations in associated companies and joint ventures
15, 20 Financial assets and liabilities by categories and
Other non-current assets
17 Intangible assets
18 Property, plant and equipment
34 Lease commitments
22 Inventories
14 Earnings and dividend per share
31 Pension obligations
IFRS standard
IFRS 8, IFRS 15
IFRS 15
IAS 20
IFRS 2
IAS 12
IFRS 11, IAS 28, IFRS 12
IAS 28, IFRS 12
IAS 16, IAS 36, IFRS 9
IAS 38
IAS 16, IAS 36, IAS 40
IAS 17
IAS 2
IAS 33
IAS 19
29 Nuclear related assets and liabilities
IFRIC 5
Accounting principle
Segment reporting
Revenue recognition
Government grants
Share-based payments
Income taxes
Joint arrangements
Investments in associates
Other shares and
participations
Intangible assets
Tangible assets
Leases
Inventories
Earnings per share
Pensions and similar
obligations
Decommissioning
obligation
Provisions
Contingent liabilities
Financial instruments
30 Other provisions
36 Pledged assets and contingent liabilities
4, 15, 16 Financial risk management, Financial assets and
liabilities by categories and Financial assets and liabilities
by fair value hierarchy
IAS 37
IAS 37
IAS 32, IFRS 7,
IFRS 9, IFRS 13
IAS 7
IFRS 9
Liquid funds
Borrowings
24 Liquid funds
27 Interest-bearing liabilities
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25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
43
43
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
1.6 Implementation of IFRS 9 and IFRS 15 from 1 January 2018
Fortum has adopted the following new or amended standards on 1 January 2018:
IFRS 9 Financial instruments
Nature of change The standard has new requirements for the classification and measurement of financial assets, hedge
Date of adoption
and transition
method
accounting and impairment of financial assets.
Fortum has applied the new rules retrospectively, but utilises the transition relief for not restating the
comparative figures and thus the transition effect is recognised as an adjustment to the retained
earnings as of 1 January 2018. Adjustments to opening balances on 1 January 2018 from IFRS 9 are
presented in the table ‘Opening balance adjustments from adoption of IFRS 9 and IFRS 15’.
Impact
Changes to hedge accounting requirements are however implemented prospectively and therefore have
no impact on the prior year figures nor presentation.
Hedging
IFRS 9 simplifies the hedge accounting requirements and aligns them with the company’s risk
management strategy and objectives. This have had the biggest impact on Fortum’s electricity price risk
hedging, as majority of the non-hedge accounted electricity derivatives qualified for hedge accounting
under IFRS 9. Fortum’s profit and loss volatility from commodity derivatives hedging future cash flows is
reduced as all fair value changes of the hedge accounted commodity derivatives are fully recognised
in other comprehensive income. Income statement volatility is reduced gradually due to prospective
implementation.
All Fortum’s derivatives (electricity, currency and interest rate) that have qualified for hedge accounting
under IAS 39 continued to do so also under IFRS 9. In addition the electricity system price products
that have previously failed to meet the rule-based criteria of IAS 39 have qualified for hedge
accounting under IFRS 9. The new possibility in IFRS 9 to apply hedge accounting for one or several
risk components, separately or in aggregation, has allowed Fortum to expand the scope of hedge
accounting to electricity price area differential (EPAD) commodity derivatives and FX derivatives, both of
them being perfect hedges for corresponding electricity price risk components.
Impairment
The new impairment requirements are based on an expected credit loss (“ECL”) model and replaced
the incurred loss model of IAS 39. The new impairment model contains financial assets such as trade
receivables, loan receivables and liquid funds.
The implementation of new ECL models resulted in minor increase in bad debt provision, that was
recognised as an adjustment of EUR 3 million (net of tax) in the retained earnings as of 1 January 2018.
Future impacts will fluctuate due to seasonality and the amount of the trade receivables.
Classification and measurement
Most of Fortum’s financial assets such as interest-bearing receivables and liquid funds are classified
under “Held-to-Collect” business model. These assets are measured at Amortised cost as they meet
the SPPI criteria (contractual terms define solely payments of principal and interest on specified
dates). When the SPPI criteria is not met, financial assets are classified to Fair value through profit or
loss-category. Reclassification of financial assets into the IFRS 9 categories had no impact on their
respective measurement basis and therefore no adjustment to retained earnings as of 1 January 2018
was recognised.
Certain investments (shareholder loan to Teollisuuden Voima Oyj, EUR 145 million, and shareholding in
Lapin Sähkövoima Oy, EUR 20 million) have been reclassified as Participation in associated company
and joint venture.
Impacts to the 2018 classifications are presented below:
Measurement category
Assets
Loans and other
receivables
Other financial assets
IAS 39
Loans and receivables at
amortised cost
Available-for-sale financial assets
Deposits and securities
Available-for-sale financial assets
IFRS 9
Amortised cost or fair value
through profit and loss
Fair value through other
comprehensive income
Amortised cost
Accounting policies
Accounting policies related to IFRS 9 are presented in Note 15 Financial assets and liabilities by
categories.
1
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3
4
5
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7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
44
44
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
IFRS 15 Revenue from Contracts with Customers
Nature of change IFRS 15 Revenue from Contracts with Customers introduces a comprehensive five-step model for
Date of adoption
and transition
method
Impact
recognising revenue. As a result of applying the five steps, revenue will be recognised when goods are
transferred or services performed at the price that the company expects to be entitled to.
Fortum has adopted the new standard from 1 January 2018 onwards by applying the modified
retrospective approach, which means that comparative information from 2017 is not restated. In the
modified retrospective approach the cumulative effect of transition is booked as an adjustment to the
retained earnings as of 1 January 2018. Adjustments to opening balances on 1 January 2018 from IFRS 15
are presented in the table ‘Opening balance adjustments from adoption of IFRS 9 and IFRS 15’.
IFRS 15 transition did not have a significant impact to Fortum’s financial statements and accounting
policies. The biggest change relates to treatment of sales commission costs for obtaining customers in
Consumer Solutions segment. Under IFRS 15 the sales commissions are capitalised and depreciated
over the expected contract term. Before adoption of IFRS 15 the sales commissions were mostly
expensed and the adoption of the new accounting standard thus impacts the timing and classification
of sales commission expenses. The change is mainly impacting Comparable EBITDA and capital
expenditure of Consumer Solutions segment.
In addition to the changed treatment of sales commissions, there are certain reclassification changes in
income statement and balance sheet, which mostly arise from IFRS 15 scope and principal versus agent
considerations.
Accounting policies related to IFRS 15 are presented in Note 6 Segment reporting.
Impact to the 2018 income statement and balance sheet is presented below:
Impact to income statement
EUR million
Sales
Other income
Materials and services
Depreciation and amortisation
Other expenses
Comparable operating profit
Income tax expense
Profit for the period
Comparable EBITDA
Impact to balance sheet
EUR million
Intangible assets
Other non-current assets
Inventories
Trade and other receivables
Total assets
Retained earnings
Deferred tax liabilities
Trade and other payables
Total equity and liabilities
2018
without IFRS 15
5,590
101
-3,114
-505
-626
986
-181
857
1,491
December 31, 2018
without IFRS 15
1,062
147
225
1,632
22,395
9,221
722
1,053
22,395
Sales
commissions
Reclassifications
-348
29
319
-31
32
1
0
1
32
0
0
0
2018
as reported
5,242
130
-2,795
-536
-594
987
-181
858
1,523
Sales
commissions
25
-8
Reclassifications
-4
14
11
-2
5
14
8
-8
0
0
0
December 31, 2018
as reported
1,087
139
233
1,620
22,409
9,232
720
1,058
22,409
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
45
45
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
1 Jan 2018
(IAS 39 and 18)
Change in
hedge
accounting
status
Change of
measurement
basis Re mea surement
Capitalisation
of sales
commission
Other
1 Jan 2018
(IFRS 9 and 15)
Opening balance adjustments from adoption
of IFRS 9 and IFRS 15
The following table presents the impact of applying IFRS 9 and 15
to the opening balance sheet as of 1 January 2018�
EUR million
ASSETS
Intangible assets
Participations in associates and joint
ventures
Long-term interest-bearing receivables
Measured at amortised cost
Measured at fair value through
profit and loss
Other non-current assets
Total non-current assets
Derivative financial instruments
Cash flow hedges
Non-hedge accounting
Short-term interest-bearing receivables
Measured at amortised cost
Measured at fair value through
profit and loss
Other current assets
Total current assets
Total assets
EQUITY
Total equity
LIABILITIES
Derivative financial instruments
Cash flow and fair value hedges
Non-hedge accounting
Other non-current liabilities
Total non-current liabilities
Derivative financial instruments
Cash flow hedges
Non-hedge accounting
Other current liabilities
Total current liabilities
Total liabilities
1,064
1,900
969
11,902
15,835
106
134
395
5,282
5,918
21,753
13,287
68
146
6,174
6,388
44
156
1,879
2,078
8,466
Total equity and liabilities
21,753
-77
77
0
-32
32
0
0
0
0
0
0
0
0
14
-14
0
0
0
70
-70
0
82
-82
0
0
0
-2
-2
-3
0
-3
-3
0
0
0
-3
20
-5
15
-3
-3
12
10
3
3
0
3
12
1,084
2,066
746
75
11,877
15,848
121
120
363
32
5,279
5,915
21,763
13,295
138
76
6,176
6,390
126
74
1,879
2,078
8,469
21,763
165
-145
-20
1
0
1
1
0
0
0
1
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
46
46
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
IFRIC 23 specifies how to reflect uncertainty in accounting for income taxes
IFRIC 23 Uncertainty over Income Tax Treatment
Nature of
change
Date of
adoption
Impact
1 January 2019
The systemically identified positions are analysed based on facts, circumstances, existing tax rules, court
praxis, expert statements and tax authority policy statements. Based on the analysis Fortum does not
expect that the interpretation will have any material effect on Fortum’s financial statements.
Other new standards effective from 1 January 2019
Other new standards issued by the balance sheet date and effective from 1 January 2019 or later do not have
a material impact on Fortum’s financial statements�
1.7 Adoption of new IFRS standards from 1 Jan 2019 or later
Fortum will apply the following new or amended standards and interpretations starting from 1 January 2019
or later:
IFRS 16 Leases
Nature of
change
Date of
adoption
Impact
New standard regarding lease accounting that will replace IAS 17. The new lease standard will result
in almost all leases being recognised on the balance sheet, as the distinction between operating and
finance lease is removed.
1 January 2019
Currently under IAS 17, lessees recognise leases either as operating leases or finance leases. The new
standard no longer distinguishes between operating and finance leases from a lessees point of view,
and most right-of-use assets are recognised in the balance sheet. For lessors, there are no significant
changes. In brief, IFRS 16 requirements contain the following:
• A lessee shall recognise all leases, except for short-term and low value leases, in the balance sheet.
• For lessees, both the value of the right-of-use asset and the corresponding liability shall be recognised
in the balance sheet.
Fortum has assessed the impact of the new standard to its statement of financial position. Assessment
has included:
• Reviewing current lease contracts reported as operating lease commitments
• Going through supplier lists and identifying potential lease arrangements
• Determining incremental borrowing rates
• Calculation of accounting impacts
• Implementing and integrating the new IFRS 16 software
Contracts have been gathered and reviewed. No material new leases have been identified. Majority of
the current operating leases are for the use of land and office buildings.
Fortum will apply the standard using the modified retrospective method, which means the comparative
figures will not be restated. Right-of-use assets will be initially recognised equal to the value of lease
liabilities, adjusted by the amount of any prepaid or accrued lease payments relating to that lease
recognised in the balance sheet before the initial application. In addition, Fortum will apply the
exemption of not recognising short-term leases and leases of low-value assets in the balance sheet.
The implementation of IFRS 16 will add right-of-use assets and corresponding lease liabilities
approximately EUR 100 million. The impact to the consolidated statement of income will not be material.
Further details on the impact will be disclosed in the Q1/2019 interim report.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
47
47
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
2 Critical accounting estimates and judgements
3 Acquisitions and disposals
The preparation of IFRS consolidated financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities existing at the balance sheet date as well as the reported amounts of revenues and expenses during
the reporting period�
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances� Actual results
and timing may differ from these estimates�
The table below is listing the areas where management’s accounting estimates and judgements are most
critical to reported results and financial position� The table is also showing where to find more information
about above-mentioned estimates and judgements�
Critical accounting estimates and judgements
Assigned values and useful lives determined for intangible assets and
property, plant and equipment acquired in a business combination
Assumptions related to impairment testing of property, plant and
equipment and intangible assets as well as associated companies and
joint ventures
Judgement used when assessing the nature of Fortum’s interest in its
investees and when considering the classification of Fortum’s joint
arrangements as well as commitments arising from these arrangements
Assumptions and estimates regarding future tax consequences
Assumptions made to determine long-term cash flow forecasts of
estimated costs for provision related to nuclear production
Assumptions made when estimating provisions
Assumptions used to determine future pension obligations
Note
17 Intangible assets
17 Intangible assets
19 Participations in associated companies
and joint ventures
28 Income taxes in balance sheet
29 Nuclear related assets and liabilities
30 Other provisions
31 Pension obligations
3.1 Acquisitions
EUR million
Gross investments in shares in subsidiary companies
Gross investments in shares in associated companies and joint ventures
Gross investments in available for sale financial assets
Gross investments in shares
2018
36
4,041
11
4,088
2017
982
135
8
1,125
Uniper investment
In September 2017, Fortum signed a transaction agreement with E�ON under which E�ON had the right to decide
to tender its 46�65% shareholding in Uniper SE into Fortum’s public takeover offer� In November 2017, Fortum
launched a voluntary public takeover offer (“offer”) to all Uniper shareholders� On 8 January 2018, E�ON decided
to tender its shares to Fortum’s offer� In February 2018, Fortum announced that shareholders representing
47�12% of the shares in Uniper had accepted the offer� The completion of Fortum’s offer was subject to several
competition and regulatory approvals� The final regulatory decisions were received 15 June 2018� In line with
the Russian regulatory approvals, Fortum is allowed to purchase additional shares up to the 50% of shares and
voting rights in Uniper� The final settlement of the offer took place on 26 June 2018�
The shareholders who tendered their shares to Fortum’s offer were paid EUR 21�31 per share� The shareholders
also benefitted from Uniper’s dividend that was paid following the Annual General Meeting in early June�
Fortum paid a total consideration of EUR 3�7 billion for all shares tendered� The total consideration was financed
with existing cash resources of EUR 1�95 billion and bridge loan financing from committed credit facilities of
EUR 1�75 billion� On 26 June 2018, Fortum closed the Uniper offer and became the company’s largest shareholder
with 47�35% of the shares� Since then Fortum has acquired additional shares in Uniper and holds 49�99% of the
shares as of 31 December 2018�
Uniper is an international energy company with activities in Europe, Russia and other markets worldwide�
Uniper’s businesses are well aligned with Fortum’s core competencies� The company operates power plants in
Europe and Russia, with a total installed generation capacity of around 36 gigawatts, and it runs extensive energy
trading operations as well as maintains gas storage facilities in Germany, Austria and the UK�
In 2017, Uniper’s sales totalled EUR 72�2 billion and adjusted EBITDA was EUR 1�7 billion� Uniper employs
around 12,000 people and had total assets of EUR 43 billion at the end of 2017� Uniper is listed on the Frankfurt
stock exchange�
Fortum consolidates Uniper as an associated company from 30 June 2018� The total acquisition cost including
direct costs relating to the acquisition, approximately EUR 4�0 billion as of 31 December 2018, is reported in
the ‘Participations in associated companies and joint ventures’�
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2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
48
48
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Fortum uses Uniper’s balance sheet as of 30 June 2018 (published 7 August 2018) as the starting point for
the purchase price allocation� Purchase price allocation is still on-going and Fortum is evaluating potential fair
value adjustments for the acquired assets and liabilities and identifying potential differences in order to align
the accounting principles� The purchase price allocation will take time due to the size of transaction and will be
completed within the one-year window from the acquisition date according to IFRS�
Fortum Oslo Varme, which is consolidated as a subsidiary with 50% non-controlling interest into the results of
City Solutions segment� Hafslund Produksjon Holding was treated as an associated company and reported in
the Generation segment until the divestment in June 2018, see further information in 3�2 below�
The initial purchase price allocation as of 31 July 2017 was finalised during Q3 2018� No material changes were
made compared to the information disclosed in the consolidated financial statements for 2017�
As Uniper publishes its interim reports later than Fortum, Fortum’s share of Uniper’s results will be accounted
In December 2017 Fortum acquired three solar power companies from Hevel Group� The Pleshanovskaya (10 MW)
for with a time-lag of one quarter with potential adjustments� The share of profits of associates in Fortum’s
financial statements 2018 includes Fortum’s share of Uniper’s third quarter results amounting to EUR -2 million�
3.1.1 Acquisitions of subsidiary companies 2018
In August 2018 Fortum acquired all shares of three independent Latvian heat producers SIA BK Enerģija,
SIA Energy & Communication and SIA Sprino as well as the shares of SIA Lake Development� The acquired
production companies will continue to deliver heat to Daugavpil’s municipal district heating company PAS
Daugavpils Siltumtikli�
In October 2018 Fortum acquired the metal recycling business in Fincumet Group� In the transaction Fortum
acquired shares in three companies: Fincumet Oy, Niemen Romukauppa Oy and NJS-Patentti Oy�
There were no other material acquisitions during 2018�
3.1.2 Acquisitions of subsidiary companies 2017
In January 2017 Fortum completed the acquisition of 100% of the shares in three wind power companies from
the Norwegian company Nordkraft� The transaction consists of the Nygårdsfjellet wind farm, which is already
operational, as well as the fully-permitted Ånstadblåheia and Sørfjord projects� The Ånstadblåheia wind farm was
commissioned during the fourth quarter of 2018 and the Sørfjord wind farm is expected to be commissioned in
2019� The total installed capacity of the three wind farms will be approximately 180 MW�
Fortum started a redemption process for the remaining shares of Ekokem Corporation (renamed as Fortum
Waste Solution Oy) in October 2016� The process was finalised in March 2017 after which Fortum owns 100% of
the shares in the company�
On 4 August Fortum concluded the restructuring of the ownership in Hafslund together with City of Oslo�
Fortum sold its 34�1% stake in Hafslund ASA to the City of Oslo� Fortum acquired 100% of Hafslund Markets AS,
50% of Hafslund Varme AS including the City of Oslo’s waste-to-energy company Klemetsrudanlegget AS (KEA),
currently Fortum Oslo Varme AS, and 10% of Hafslund Produksjon Holding AS� The total debt-free price of the
acquisition was approximately EUR 940 million�
The combined net cash investment of the transactions, including the dividend received in May 2017, was
approximately EUR 230 million�
Hafslund Markets and Fortum Oslo Varme are consolidated into Fortum Group from 1 August 2017� Hafslund
Markets is consolidated as a part of the Consumer Solutions segment� Fortum has operational responsibility of
and Grachevskaya (10 MW) solar power plants are located in the Orenburg region and the Bugulchanskaya
(15 MW) solar power plant in the Republic of Bashkortostan� All three power plants are operational and will
receive capacity Supply Agreement (CSA) payments for approximately 15 years after commissioning at an average
CSA price corresponding to approximately EUR 400/MWh� The plants were commissioned in 2016 and 2017�
EUR million
Consideration paid in cash
Unpaid consideration
Total consideration
Fair value of the acquired net
assets
Translation difference
Goodwill
Hafslund Markets AS Fortum Oslo Varme AS
152
0
152
589
0
589
374
1
215
84
0
69
Other
70
9
79
77
2
1
Fortum total
811
9
820
535
2
286
EUR million
Fair value of the
acquired net
identifiable assets
Cash and cash
equivalents
Intangible assets
Property, plant and
equipment
Other assets
Deferred tax liabilities
Other non-interest
bearing liabilities
Interest-bearing
liabilities
Net identifiable assets
Non-controlling
interests
Total
Hafslund Markets AS
Fortum Oslo Varme AS
Fortum total 1)
Acquired
book
values
Allocated
fair value
Total fair
value
Acquired
book
values
Allocated
fair value
Total fair
value
Acquired
book
values
Allocated
fair value
Total fair
value
158
12
5
179
-19
-176
0
158
0
158
284
-68
216
0
216
158
296
5
179
-88
-176
0
374
0
374
37
0
526
21
-21
-39
-445
79
51
29
37
0
733
21
-71
-39
-445
237
153
84
201
17
604
206
-46
-217
-489
275
51
225
334
208
-129
413
102
310
201
352
811
206
-175
-217
-489
688
153
535
207
-50
157
102
55
1) Including acquired book values and allocated fair values from the acquisition of Norwegian wind park companies, Russian solar power
companies as well as other smaller acquisitions.
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2
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4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
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32
33
34
35
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40
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
49
49
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
EUR million
Gross investment
Purchase consideration settled in cash
Cash and cash equivalents in acquired subsidiaries
Translation difference
Cash outflow in acquisition
Unpaid consideration
Interest-bearing debt in acquired subsidiaries
of which loans given by Fortum
Transaction adjustments to debt-like items
Translation difference
Total gross investment in acquired subsidiaries
Hafslund
Markets AS
Fortum Oslo
Varme AS
Other
Fortum total
589
158
1
432
54
0
486
152
37
0
116
445
-213
26
1
375
70
6
2
65
9
44
0
2
121
811
201
3
613
9
489
-213
80
4
982
3.1.3 Other share transactions
In April 2017, Fortum and RUSNANO, a Russian state-owned development company, signed a 50/50 investment
partnership in order to secure the possibility of a Russian Capacity Supply Agreement (CSA) wind portfolio in
Russia� The wind investment fund 50/50 owned by Fortum and RUSNANO was awarded 1,000 MW wind capacity
in Russian wind CSA auction in June 2017� The investments decisions will be made on a case-by-case basis
within the total mandate of the wind investment fund� Fortum’s equity stake in the wind investment fund totals
a maximum of RUB 15 billion� The amount is invested over time (within approximately 5 years) as it is subject to
positive investment decisions� During 2018 Fortum invested EUR 61 million (2017: 43) in the fund�
In October 2017 Fortum and SUENKO established a joint venture, JSC Ural-Siberian Heat and Power Company
(YUSTEK), for the heat supply in Tyumen, Russia� Fortum will continue as CHP owner and selling heat to
YUSTEK�
3.2 Disposals
EUR million
Gross divestments of shares in subsidiary companies
Gross divestments of shares in associated companies and joint ventures
Gross divestments of shares
2018
147
160
306
2017
55
687
742
3.2.1 Disposals of subsidiary companies
On 31 August 2018, Fortum sold a 54% share of its solar power company operating four solar power plants in
India to UK Climate Investments (40%) and Elite Alfred Berg (14%)� In line with Fortum’s ‘capital recycling’
business model, the result from the transaction, EUR 26 million, is recognised in Other operations’ Comparable
operating profit� The total consideration from the divestment on a debt- and cash-free basis, including the effect
of deconsolidating Fortum’s minority part of the net debt, is EUR 147 million� In addition, Elite Alfred Berg has
an option to buy up to an additional 16% from Fortum�
In July 2017 Fortum sold 100% of its shares in the Polish gas infrastructure company DUON Dystrybucja S�A�
to Infracapital, the infrastructure investment arm of M&G Investments� DUON Dystrybucja S�A� is transporting
grid gas and LNG in Poland� The company was acquired as part of the acquisition of the electricity and gas sales
company Grupa DUON S�A� (currently Fortum Markets Polska S�A�) in 2016� Fortum booked in 2017 a one-time
pre-tax sales gain in Consumer Solution segment totalling EUR 2 million�
In November 2017 Fortum sold its 51% stake in the Norwegian electricity sales company Røyken Kraft AS to
the minority shareholder Røyken Energiverk AS� The company was acquired as part of the Hafslund Markets AS
group in the restructuring of the ownership in Hafslund�
Divestments of shares in subsidiaries – Impact on financial position
EUR million
Gross divestments of shares in subsidiary companies
Intangible assets and property, plant and equipment
Other non-current and current assets
Liquid funds
Interest-bearing loans
Other liabilities and provisions
Net assets divested
Reclassified to participations in associates and joint ventures
Result from transaction
2018
147
138
7
12
-108
-4
45
20
26
2017
55
58
6
5
-3
-7
59
-
2
3.2.2 Other disposals
In June 2018 Fortum sold its 10% ownership in Hafslund Produksjon Holding AS to Svartisen Holding AS,
a Norwegian company owned by the Finnish energy companies Vantaan Energia Oy, Oy Turku Energia – Åbo
Energi Ab and Oulun Seudun Sähkö� As part of the restructuring of the Hafslund ownership in 2017, Fortum
acquired the ownership in Hafslund Produksjon� The sales price for the shares was EUR 160 million and Fortum
booked a sales gain of EUR 77 million in the Generation segment 2018 results�
On 3 August 2017 Fortum sold its 34�1% stake in Hafslund ASA to the City of Oslo in connection with the
restructuring of the ownership in Hafslund� Fortum booked a one-time tax-free sales gain in Other segment in
the 2017 results totalling approximately EUR 324 million including transaction costs, corresponding EUR 0�36
earnings per share�
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20
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40
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
50
50
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
4 Financial risk management
Risk management framework and objectives, organisation and processes as well as description of risks
i�e� strategic, sustainability, financial and operational risks are described in the Risk management part in
the Operating and financial review (OFR)�
4.1 Commodity market and fuel risks
Fortum’s business is exposed to fluctuations in prices and volume of commodities used in the production and
sales of energy products� The main exposure is toward electricity prices and volumes, prices of emissions and
prices and availability of fuels� Fortum hedges its exposure to commodity market risks in accordance with
approved Hedging Guidelines and Mandates�
4.2 Electricity price and volume risk
Electricity price risk is mainly hedged by entering into electricity derivatives contracts on Nasdaq Commodities
exchange� The main objective of hedging is to reduce the effect of electricity price volatility on earnings� Hedging
strategies cover several years in the short to medium term and are executed within approved mandates� These
hedging strategies are continuously evaluated as electricity and other commodity market prices, the hydrological
balance and other relevant parameters change� Hedging of the Generation segment’s power sales is performed
in EUR on a Nordic level covering both Finland and Sweden, and the currency component of these hedges in the
Swedish entity is currently not hedged�
In Russia, electricity prices and capacity sales are the main sources of market risk� The electricity price
is highly correlated with the gas price� Exposure is partly mitigated through regulated fixed-price bilateral
agreements, but the majority of electricity sales is exposed to spot price risk�
Fortum’s sensitivity to electricity market price is dependent on the hedge level for a given time period� As
per 31 December 2018, approximately 75% of the Generation segment’s estimated Nordic power sales volume
was hedged for the calendar year 2019 with a price 31 EUR/MWh and approximately 45% for the calendar year
2020 with a price 29 EUR/MWh� Assuming no changes in generation volumes, hedge ratios or cost structure
a 1 EUR/MWh change in the market price of electricity would affect Fortum’s 2019 comparable operating profit by
approximately EUR 11 million and for 2020 by approximately EUR 25 million� The volume used in this sensitivity
analysis is 45 TWh which includes the electricity generation sold to the spot market in Sweden and Finland in the
Generation segment without minority owner’s shares of electricity or other pass-through sales, and excluding the
volume of Fortum’s coal-condensing generation� This volume is heavily dependent on price level, the hydrological
situation, the length of annual maintenance periods and availability of power plants� Sensitivity is calculated only
for electricity market price movements� Hydrological conditions, temperature, wind, CO2 allowance prices, fuel
prices, economic development, transmission capacity and the import/export situation all affect the electricity
price on short-term basis and effects of individual factors cannot be separated�
4.2.1 Sensitivity arising from financial instruments according to IFRS 7
Sensitivity analysis shows the sensitivity arising from financial electricity derivatives as defined in IFRS 7� These
derivatives are used for hedging purposes within Fortum� Sensitivities are calculated based on 31 December 2018
(31 December 2017) position� Positions are actively managed in the day-to-day business operations and therefore
the sensitivities vary from time to time� Sensitivity analysis includes only the market risks arising from derivatives
i�e� the underlying physical electricity sales and purchases are not included� Sensitivity is calculated with the
assumption that electricity forward quotations in Nasdaq Commodities and in EEX would change 1 EUR/MWh
for the period Fortum has derivatives�
Sensitivity according to IFRS 7
+/- 1 EUR/MWh change in electricity forward quotations, EUR million
Effect on Profit before income tax
Effect on Equity
Effect
-/+
-/+
2018
1
56
2017
22
28
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
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financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
51
51
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
4.2.2 Electricity derivatives
The tables below disclose the Group’s electricity derivatives used mainly for hedging electricity price risk� The fair
values represent the values disclosed in the balance sheet�
See also Note 15 Financial assets and liabilities by categories for accounting principles and basis for fair
value estimations and Note 8 Fair value changes of derivatives and underlying items in income statement�
Electricity derivatives by instrument 2018
Volume, TWh
Fair value, EUR million
Maturity analysis of commodity derivatives
Amounts in the table are fair values�
EUR million
Electricity derivatives, liabilities
Electricity derivatives, assets
Other commodity derivatives, liabilities
Other commodity derivatives, assets
2018
Under
1 year
706
94
77
116
1–5
years
305
53
13
24
Over
5 years
Total
0 1,011
0
147
0
90
0
140
Under
1 year
162
90
13
36
2017
1–5
years
123
35
3
6
Over
5 years
0
0
0
0
Total
285
126
16
43
Electricity derivatives
Total
Netting against electricity
exchanges 1)
Total
Under 1
year
29
1–5 years
26
Over 5
years
0
Total
55
Positive
848
848
Negative
1,712
1,712
-701
147
-701
1,011
Electricity derivatives by instrument 2017
Volume, TWh
Fair value, EUR million
Electricity derivatives
Total
Netting against electricity
exchanges 1)
Total
Under 1
year
26
1–5 years
24
Over 5
years
0
Total
50
Positive
360
360
Negative
519
519
-234
126
-234
285
1) Receivables and liabilities against electricity exchanges arising from standard derivative contracts with same delivery period are netted.
Net
-864
-864
0
-864
Net
-159
-159
0
-159
4.3 Fuel price risks
Exposure to fuel prices is limited due to Fortum’s flexible generation capacity, which allows for switching
between different fuels according to prevailing market conditions� The remaining exposure to fuel price risk is
mitigated through fixed-price physical delivery contracts or derivative contracts, such as coal and gas derivatives
included in the table above as part of “Other commodity derivatives”�
4.4 Emission allowance price and volume risk
Part of Fortum’s power and heat generation is subject to requirements of emission trading schemes� Fortum
hedges its exposure to these prices and volumes through the use of CO2 futures� Most of these CO2 futures are
own use contracts valued at cost and some are treated as derivatives in the accounts included in the table above
as part of “Other commodity derivatives”�
4.5 Liquidity and refinancing risk
Fortum’s business is capital intensive and the Group has a diversified loan portfolio mainly consisting of long-
term financing denominated in EUR and SEK� Long-term financing is primarily raised by issuing bonds under
Fortum’s Euro Medium Term Note programme as well as through bilateral and syndicated loan facilities from
a variety of different financial institutions�
Financing is primarily raised on parent company level and distributed internally through various internal
financing arrangements� For example Fortum’s Russian operations are mainly financed via intra group internal
long-term RUB denominated loans� The internal RUB loan receivables are hedged via external forward contracts
offsetting the currency exposure for the internal lender� On 31 December 2018, 95% (2017: 90%) of the Group’s
total external financing was raised by the parent company Fortum Corporation�
On 31 December 2018, the total interest-bearing debt was EUR 6,093 million (2017: 4,885) and the interest-
bearing net debt was EUR 5,509 million (2017: 988)�
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2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
52
52
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Fortum manages liquidity and refinancing risks through a combination of cash positions and committed credit
facility agreements with its core banks� The Group shall at all times have access to cash, marketable securities
and unused committed credit facilities including overdrafts, to cover all loans maturing within the next twelve-
month period� However, cash/marketable securities and unused committed credit facilities shall always amount
to at least EUR 500 million�
On 31 December 2018, loan maturities for the coming twelve-month period amounted to EUR 1,086 million
(2017: 766)� Liquid funds amounted to EUR 584 million (2017: 3,897) and the total amount of committed and
undrawn credit facilities amounted to EUR 1,800 million (2017: 1,800)�
Maturity of interest-bearing liabilities
EUR million
2019
2020
2021
2022
2023
2024 and later
Total
Loan maturities per loan type, EUR million as of 31 December 2018
2018
1,086
33
2,267
1,042
100
1,565
6,093
2,500
2,000
1,500
1,000
500
0
1)
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029+
Bonds
Financial institutions
Other long-term debt
CPs
Other short-term debt
Liquid funds, major credit lines and debt programmes 2018
EUR million
Liquid funds
Cash and cash equivalents
Deposits and securities over 3 months
Total
of which in Russia (PAO Fortum)
Committed credit lines
EUR 1,750 million syndicated credit facility
Bilateral overdraft facilities
Total
Debt programmes (uncommitted)
Fortum Corporation, CP programme EUR 1,000 million
Fortum Corporation, CP programme SEK 10,000 million
Fortum Corporation, EMTN programme EUR 8,000 million
Total
Liquid funds, major credit lines and debt programmes 2017
EUR million
Liquid funds
Cash and cash equivalents
Deposits and securities over 3 months
Total
of which in Russia (PAO Fortum)
Committed credit lines
EUR 1,750 million syndicated credit facility
Bilateral overdraft facilities
Total 1)
Debt programmes (uncommitted)
Fortum Corporation, CP programme EUR 500 million
Fortum Corporation, CP programme SEK 5,000 million
Fortum Corporation, EMTN programme EUR 8,000 million
Total
1) Excluding committed credit facilities for Fortum’s offer for Uniper shares
Total
facility
Drawn
amount
Available
amount
556
29
584
317
1,750
50
1,800
820
948
5,552
7,320
1,750
50
1,800
1,000
975
8,000
9,975
-
-
0
180
27
2,448
2,655
Total
facility
Drawn
amount
Available
amount
3,182
715
3,897
246
1,750
50
1,800
500
508
5,057
6,065
1,750
50
1,800
500
508
8,000
9,008
-
-
0
-
-
2,943
2,943
1) In addition Fortum has received EUR 75 million based on Credit Support Annex agreements with several counterparties.
This amount has been booked as a short-term liability.
Liquid funds amounted to EUR 584 million (2017: 3,897), including PAO Fortum’s bank deposits amounting to
EUR 316 million (2017: 231)� See also Note 24 Liquid funds�
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2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
53
53
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Maturity analysis of interest-bearing liabilities and derivatives
Amounts disclosed below are non-discounted expected cash flows (future interest payments and amortisations)
of interest-bearing liabilities and interest rate and currency derivatives�
The average interest rate on deposits and securities excluding Russian deposits on 31 December 2018 was
-0�11% (2017: -0�27%)� Liquid funds held by PAO Fortum amounted to EUR 317 million (2017: 246) and the average
interest rate for this portfolio was 6�9% at the balance sheet date�
EUR million
Interest-bearing liabilities
Interest rate and currency
derivatives liabilities
Interest rate and currency
derivatives receivables
Total
2018
2017
Under
1 year
1,212
1–5
years
3,616
Over
5 years
1,792
Total
6,620
Under
1 year
895
1–5
years
2,723
Over
5 years
1,869
Total
5,487
3,665
682
16
4,363
3,210
1,005
4
4,219
-3,736
1,141
-726
3,572
-20 -4,482 -3,319 -1,092
2,636
6,501
785
1,788
-1 -4,413
5,293
1,871
On the balance sheet date the average rate of outstanding currency and interest rate derivatives done in SEK and
RUB was 9�90 and 74�86 respectively�
For further information regarding loans from the State Nuclear Waste Management Fund and Teollisuuden
Voima Oyj, see Note 29 Nuclear related assets and liabilities�
4.6 Interest rate risk and currency risk
4.6.1 Interest rate risk
Fortum risk mandates state that the average duration of the net debt portfolio shall always be kept within a range
of 12 and 36 months and that the flow risk i�e� changes in interest rates shall not affect the net interest payments
of the Group by more than EUR 50 million for the next rolling 12-month period� Within these mandates,
strategies are evaluated and developed in order to find an optimal balance between risk and financing cost�
On 31 December 2018, the average duration of the net debt portfolio (including derivatives) was 1�6 years (2017:
gross debt 1�5)� Approximately 79% (2017: 65%) of the debt portfolio was on a floating rate basis or fixed rate
loans maturing within the next 12-month period� The flow risk, measured as the difference between the base case
net interest cost estimate and the worst-case scenario estimate for Fortum’s net debt portfolio for the coming
12 months, was EUR 13 million (2017: gross debt 4)�
The average interest rate for the portfolio consisting mainly of EUR and SEK loans was 1�7% at the balance
sheet date (2017: 2�4%)� Part of the external loans EUR 686 million (2017: 773) have been swapped to RUB and
the average interest cost for these loans, including cost for hedging the RUB, was 8,3% at the balance sheet date
(2017: 9�5%)� The average interest rate on loans and derivatives on balance sheet date, 31 December 2018, was
2�4% (2017: 3�6%)� Average cumulative interest rate on loans and derivatives for 2018 was 3�0% (2017: 3�6%)�
4.6.2 Currency risk
Fortum’s policy is to hedge major transaction exposures on a local level in the reporting currency of each legal
entity in order to avoid exchange differences in the profit and loss statement� These exposures are mainly hedged
with forward contracts� An exception is the Generation segment’s hedging of power sales in Sweden where the
currency component is currently not hedged�
Translation exposures in the Fortum Group are generally not hedged as the majority of these assets are
considered to be long-term strategic holdings� In Fortum this means largely entities operating in Sweden, Russia,
Norway and Poland, whose base currency is not euro�
The currency risk relating to transaction exposures is measured using absolute EUR equivalent amounts from
each currency� The mandate for the open transaction exposure is EUR 50 million� On 31 December 2018 the
open transaction exposure, excluding Generation segment’s EUR/SEK exposure, was EUR 6 million (2017: 13)�
Translation exposure on 31 December 2018 was EUR 7,723 million (2017: 8,212)�
Had EUR been 5% weaker/stronger on closing date, then the impact from transaction exposure to profit and loss
statement would have been EUR +0�3/-0�3 million (2017: +0�7/-0�7 million) and impact from translation exposure
to group’s equity EUR +386/-386 million (2017: +411/-411 million)�
Group Treasury’s transaction exposure
EUR million
RUB
SEK
PLN
NOK
INR
USD
Other
Total
Net
Position
541
969
366
296
93
-117
-16
2,132
2018
Hedge
-541
-969
-365
-290
-93
116
16
-2,126
Net
Position
589
277
310
451
117
-118
-41
1,585
2017
Hedge
-589
-264
-310
-451
-117
118
41
-1,572
Open
0
0
0
6
0
0
0
6
Open
0
13
0
0
0
0
0
13
Transaction exposure is defined as already contracted or forecasted foreign exchange dependent items and
cash flows� Transaction exposure is divided into balance sheet exposure and cash flow exposure� Balance sheet
exposure reflects currency denominated assets and liabilities for example loans, deposits and accounts receivable/
payable in currencies other than the company’s base currency� Cash flow exposure reflects future forecasted
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financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
54
54
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
or contracted currency flows in foreign currency deriving from business activities such as sales, purchases or
investments� Net foreign exchange differences from transaction exposure are entered under financial income
or expense when related to financial items or when related to accounts receivable/payable entered under items
included in operating profit� Conversion differences related to qualifying cash flow hedges are deferred to equity�
Fortum’s policy is to hedge balance sheet exposures in order to avoid exchange rate differences in the income
statement� The Group’s balance sheet exposure mainly relates to financing of non-euro subsidiaries and the fact
that the Group’s main external financing currency is EUR� For derivatives hedging this balance exposure Fortum
does not apply hedge accounting, because they have a natural hedge in the income statement�
Contracted cash flow exposures shall be hedged to reduce volatility in future cash flows� These hedges
normally consist of currency derivative contracts, which are matched against the underlying future cash flow
according to maturity� Fortum has currency cash flow hedges both with and without hedge accounting treatment
under IFRS� Those currency cash flow hedges, which do not qualify for hedge accounting are mainly hedging
electricity derivatives� Unrealised hedges create volatility in the operating profit�
Group translation exposure
EUR million
RUB
SEK
NOK
PLN
Other
Total
Net
Investment
2,364
3,704
1,625
291
128
8,111
2018
Hedge
-144
-244
-
-
-
-388
Open
2,220
3,460
1,625
291
128
7,723
Net
Investment
2,673
4,769
1,600
294
136
9,472
2017
Hedge
-173
-1,087
-
-
-
-1,260
Open
2,500
3,682
1,600
294
136
8,212
Translation exposure position includes net investments in foreign subsidiaries and associated companies�
Exchange differences arising from the translation of the net investment in foreign entities are taken to equity�
The net effect of exchange differences on equity attributable to equity holders mainly from RUB and SEK was
EUR -518 million in 2018 (2017: -369)� Part of this translation exposure has been hedged and the foreign currency
hedge result amounted to EUR 24 million in 2018 (2017: 28)�
Interest rate and currency derivatives by instrument 2018
EUR million
Forward foreign exchange
contracts
Interest rate swaps
Interest rate and currency
swaps
Total
Of which long-term
Short-term
Under
1 year
3,240
1,515
383
5,137
2018
Notional amount
Remaining lifetimes
1–5
years
Over
5 years
2018
Fair value
Total
Positive
Negative
310
2,242
265
2,817
-
225
-
225
3,550
3,982
648
8,179
43
159
66
268
152
116
20
70
-
90
44
46
Interest rate and currency derivatives by instrument 2017
EUR million
Forward foreign exchange
contracts
Interest rate swaps
Interest rate and currency
swaps
Total
Of which long-term
Short-term
Under
1 year
2,864
305
311
3,480
2017
Notional amount
Remaining lifetimes
1–5
years
Over
5 years
2017
Fair value
Total
Positive
Negative
266
3,421
580
4,267
102
102
3,130
3,827
892
7,849
56
205
92
353
238
114
19
90
3
112
88
24
Net
23
88
66
178
108
70
Net
37
115
89
241
151
90
4.7 Credit risk
Fortum is exposed to counterparty risk whenever there is a contractual arrangement with an external counterparty�
Credit risk exposures relating to financial derivative instruments are often volatile� The majority of commodity
derivatives are exchange-traded and cleared through clearing houses such as Nasdaq Clearing AB or through
clearing banks� Derivatives contracts are also entered into directly with external counterparties and such
contracts are limited to high-credit-quality counterparties active on the financial or commodity markets�
Currency and interest rate derivative counterparties are limited to investment grade banks and financial
institutions� ISDA Master agreements, which include netting clauses and in some cases Credit Support Annex
agreements, are in place with most of these counterparties� Commodity derivative counterparties are limited to
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Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
55
55
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
those considered to be creditworthy� Master agreements, such as ISDA, FEMA and EFET, which include netting
clauses, are in place with the majority of the counterparties�
Due to the financing needs and management of liquidity, Fortum has counterparty credit exposure toward
a number of banks and financial institutions� The majority of the exposure is toward Fortum’s key relationship
banks, which are highly creditworthy institutions, but also includes exposure to the Russian financial sector
in terms of deposits with financial institutions as well as to banks that provide guarantees for suppliers and
contracting parties� Deposits in Russia have been concentrated to the most creditworthy state-owned or
controlled banks� The creditworthiness of banks and financial institutions are monitored so that mitigating
actions can be taken as ratings or the financial situation changes� The development of economic sanctions
against Russia is followed as part of the monitoring process�
Credit risk relating to customers is spread across a wide range of industrial counterparties, small businesses
and private individuals over a range of geographic regions� The majority of exposure is to the Nordic market,
Poland and Russia� The risk of non-payment in the electricity and heat sales business in Russia is higher than in
the Nordic market�
4.7.1 Credit quality of major financial assets
Fortum recognises the loss allowance for expected credit losses on financial assets classified to amortised cost
category at each reporting date� Impairment requirements are based on an expected credit loss (“ECL”) model
which replaces the incurred loss model of IAS 39� The new impairment model is applied to financial assets such
as trade receivables, loan receivables and restricted cash given as collateral for commodity exchanges� Expected
credit loss is calculated on individual contract basis for deposits, commercial papers and loan receivables� No
impairment loss is recognised on cash in bank accounts� The expected credit losses according to this model
are based on assessment of the individual counterparty’s risk of default� The risk of default is evaluated at each
reporting date based on credit ratings to determine if credit risk has increased significantly� A change of credit
rating from investment to non-investment grade constitutes a significant increase in credit risk� If the credit
risk on the financial asset has not increased significantly since the initial recognition, loss allowance equals to
12 month ECL� If the credit risk on the financial asset has increased significantly since initial recognition, loss
allowance equals to the lifetime expected credit losses� There have been no significant increases in credit risk
during 2018� The loss allowance for deposits, commercial papers and loan receivables totalled EUR 1 million on
December 31, 2018� Amounts for interest-bearing receivables including bank deposits and derivative financial
instruments recognised as assets are presented by counterparties�
Credit quality of major financial assets
EUR million
Investment grade receivables
Deposits, commercial papers and cash in bank accounts
Fair values of interest rate and currency derivatives
Fair values of electricity and other commodity derivatives
Total investment grade receivables
Energy exchange receivables
Fair value of derivatives on Nasdaq Commodities
Fair value of derivatives on European Energy Exchange AG
Fair value of derivatives on the Polish Power Exchange
Total energy exchange receivables
Associated companies and joint venture receivables
Loan receivables
Finance lease receivable
Fair values of electricity and other commodity derivatives
Total associated companies and joint venture receivables
Other receivables
Investments in commercial papers
Russian deposits with non-investment grade banks
Restricted cash mainly given as collateral for commodity exchanges
Receivable from SIBUR related to divested shares of OOO Tobolsk CHP
Loan and other interest-bearing receivables
Fair values of electricity and other commodity derivatives
Total other receivables
Total
2018
2017
Carrying
amount
of which
past due
Carrying
amount
of which
past due
168
268
58
494
76
4
75
155
641
0
22
663
46
260
379
70
2
53
810
2,122
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,348
353
56
3,757
37
2
13
52
864
41
9
914
249
141
363
102
35
51
941
5,664
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
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38
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financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
56
56
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Deposits and securities
The following tables present bank deposits, commercial papers and fair values of derivatives by rating classes�
Interest rate and currency derivatives
EUR million
Counterparties with external credit rating from Standard &
Poor’s, Fitch and/or Moody’s Investment grade ratings
AAA
AA+/AA/AA-
A+/A/A-
BBB+/BBB/BBB-
Total investment grade ratings
Total associated companies and joint ventures
Counterparties without external credit rating from Standard &
Poor’s, Fitch or Moody’s
Total
2018
2017
Netted
Receivables
amount 1) Receivables
Netted
amount 1)
-
46
180
42
268
-
-
268
-
26
59
24
109
-
-
109
-
51
292
10
353
0
-
353
-
30
100
9
140
0
-
140
1) The netted amount includes the cash received in accordance with Credit Support Annex agreements EUR 75 million (2017: 113).
EUR million
Counterparties with external credit rating from Standard & Poor’s, Fitch and/or Moody’s
Investment grade ratings
AAA
AA+/AA/AA-
A+/A/A-
BBB+/BBB/BBB-
Total investment grade ratings
BB+/BB/BB-
B+/B/B-
Below B-
Non-investment grade ratings
Counterparties without external credit rating from Standard & Poor’s, Fitch or Moody’s
Government or municipality
Fortum Rating 5 - Lowest risk
Fortum Rating 4 - Low risk
Fortum Rating 3 - Normal risk
Fortum Rating 2 - High risk
Fortum Rating 1 - Highest risk
No rating
Total non-rated counterparties
2018
2017
-
62
30
76
168
260
-
-
260
-
46
-
-
-
-
-
46
-
324
2,835
189
3,348
141
-
-
141
-
249
-
-
-
-
-
249
Total
474
3,738
In addition, cash in other bank accounts totalled EUR 110 million on 31 December 2018 (2017: 159)�
See Note 24 Liquid funds�
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2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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26
27
28
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Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
57
57
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Electricity, coal, gas and oil derivatives and CO2 emission
allowances treated as derivatives
EUR million
Counterparties with external credit rating from Standard &
Poor’s, Fitch and/or Moody’s Investment grade ratings
AAA
AA+/AA/AA-
A+/A/A-
BBB+/BBB/BBB-
Total investment grade ratings
Non-investment grade ratings
BB+/BB/BB-
B+/B/B-
Below B-
Total non-investment grade ratings
Total associated companies and joint ventures
Counterparties without external credit rating from Standard &
Poor’s, Fitch or Moody’s
Government or municipality
Fortum Rating 5 - Lowest risk
Fortum Rating 4 - Low risk
Fortum Rating 3 - Normal risk
Fortum Rating 2 - High risk
Fortum Rating 1 - Highest risk
No rating
Total non-rated counterparties
Total
2018
2017
Receivables
Netted
amount Receivables
Netted
amount
-
-
56
2
58
0
-
-
0
22
12
12
13
3
3
-
10
53
133
-
-
60
2
62
0
-
-
0
0
0
1
5
1
3
-
3
13
75
-
1
53
2
56
1
0
-
1
9
0
15
19
16
0
-
1
51
117
-
1
53
1
55
0
0
-
0
0
0
10
12
12
0
-
1
35
90
For derivatives, the receivable is the sum of the positive fair values, i�e� the gross amount� Netted amount includes
negative fair values where a valid netting agreement is in place with the counterparty� When the netted amount is
less than zero, it is not included� In cases where a parent company guarantee is in place, the exposure is shown
on the issuer of the guarantee�
scale is for Standard & Poor’s and Fitch rating categories� For those counterparties only rated by Moody’s,
the rating has been translated to the equivalent Standard and Poor’s and Fitch rating category� For counterparties
rated by more than one rating agency, the lowest of the ratings is used�
In the commodity derivatives and commercial paper market, there are a number of counterparties not rated
by Standard & Poor’s, Fitch or Moody’s� For these counterparties, Fortum assigns an internal rating� The internal
rating is based on external credit ratings from other credit agencies� The rating from Bisnode is used for
Nordic counterparties and for other counterparties the rating from Dun & Bradstreet is used� Governments and
municipal companies are typically not rated, and are shown separately� This rating category does not include
companies owned by governments or municipalities� Counterparties that have not been assigned a rating by
the above listed credit agencies are in the “No rating” category�
5 Capital risk management
Fortum updated its strategy and reconfirmed the dividend policy and long-term financial targets in November
2018� The update was a continuation of the strategy execution towards Fortum’s vision “For a cleaner world”�
The strategy aims at strengthening Fortum’s competitiveness and ensuring a benchmark portfolio for the 2020’s�
Fortum has undergone a remarkable transformation in recent years, starting with the exit from the regulated
power distribution business� This has enabled stronger focus on power and heat generation, through the
strategic investment in Uniper, and growth in sustainable bio and waste-based combined heat and power
generation� Furthermore, Fortum has created a solid base in solar and wind power, expanded in the consumer
sector, and into the recycling and waste business�
Pursuing operational excellence and increased flexibility as well as ensuring value creation from investments
and portfolio optimization are the key priorities� Benchmark performance is essential for long-term
competitiveness� For the next 2–3 years, Fortum prioritises profit creation from the current business portfolio�
This will be achieved through operational excellence and increased flexibility� All sources of flexibility, both
flexible generation assets and the demand response of large customers and consumers, will be needed to balance
the high degree of volatile renewable generation� Operational excellence and increased flexibility will contribute
to improving Fortum’s financial performance and cash flows to create additional financial headroom� In addition,
Fortum will continue to prioritise and scrutinize capital expenditure� Through these measures, the target is to
steer leverage from current net debt to EBITDA ratio towards the long-term target ratio of around 2�5 times�
Having a solid investment grade rating is a key priority for Fortum�
Over the recent years Fortum has made several sizeable investments and aims to further improve its financial
All counterparties for currency and interest rate derivatives and the majority of counterparties for bank
deposits have an external rating from Standard & Poor’s, Fitch and/or Moody’s credit agencies� The above rating
performance by ensuring value creation from them� The investment in Uniper, currently accounted for as
an associated company, will contribute to Fortum’s financial performance both through Fortum’s share of
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Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
58
58
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Uniper’s result and its dividend� As Uniper’s largest shareholder, Fortum’s ambition is to increase value for both
companies and their stakeholders�
In addition, Fortum continues to review its business portfolio in line with its strategic priorities emphasising
CO2-free assets, flexibility, and low operating cost to fit the changing business environment� Fortum will also
drive focused growth in the power value chain and seek to build options for significant new businesses for
the future�
Financial targets give guidance on Fortum’s view of the company’s long-term value creation potential, its
growth strategy and business activities� The long-term over-the-cycle financial targets are Return on capital
employed, ROCE at least 10% and Comparable net debt to EBITDA around 2�5 times� These measures are
considered as Alternative Performance Measures�
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� 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, in the range of 50–80% of earnings per share,
excluding one-off items�
In January 2018, Standard & Poor’s downgraded Fortum’s long-term credit rating from BBB+ to BBB with
Negative Outlook� The short-term rating was affirmed at level A-2� In June 2018, Fitch Ratings downgraded
Fortum’s long-term credit rating from BBB+ to BBB with Stable Outlook� The short-term rating was downgraded
to level F3�
Return on capital employed, %
EUR million
Profit before income tax
Interest expenses
Other financial expenses 1)
+Interest and other financial expenses
Profit before taxes + interest and other financial expenses
1) Other financial expenses, see also Note 12 Finance costs-net
Capital employed
Total assets
Total liabilities
- Interest-bearing liabilities
- Total interest-free liabilities
Capital employed
Capital employed at the end of previous period
Average capital employed
Note
2018
1,040
148
26
174
1,214
22,409
10,332
6,093
4,239
18,170
18,172
18,171
2017
1,111
164
25
189
1,300
21,753
8,466
4,885
3,581
18,172
18,649
18,411
Return on capital employed, %
6.7%
7.1%
See Definitions of key figures�
Comparable net debt/EBITDA ratio
EUR million
Interest-bearing liabilities
BS Less: Liquid funds
Net debt
Operating profit
Add: Depreciation and amortisation
EBITDA
Less: Items affecting comparability
Comparable EBITDA
Comparable net debt/EBITDA
Note
27
24
2018
6,093
584
5,509
1,138
536
1,674
151
1,523
2017
4,885
3,897
988
1,158
464
1,623
347
1,275
3.6
0.8
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
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Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
59
59
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
6 Segment reporting
ACCOUNTING POLICIES
REVENUE RECOGNITION
Fortum’s operations comprise electricity, heating, cooling and waste management services. The revenue streams can be divided
into four groups: power sales to wholesale markets, power sales to retail customers, heating sales and waste treatment sales.
Fortum has adopted the new IFRS 15 Revenue from Contracts with Customers standard from 1 January 2018 onwards
by applying the modified retrospective approach, which means that comparative information from 2017 is not restated.
IFRS 15 transition does not have a significant impact on Fortum’s financial statements and accounting policies. See
additional information on the transition impacts in Note 1 Accounting policies.
Revenue is recognized when goods are transferred or services are performed, i.e. when (or as) a performance
obligation is satisfied and control of the good or service underlying the particular performance obligations is transferred
to the customer. Revenue is shown at the price that Fortum expects to be entitled to and is presented net of rebates,
discounts, value-added tax and selective taxes such as electricity tax.
The accounting policies for the different revenue streams are described below.
POWER SALES TO WHOLESALE MARKETS
Physical electricity trades to Nord Pool or to other wholesale markets are made either during the same day or day
before the delivery and the duration of the contract is thus very short. The transaction price is the spot price and there
are no variable elements. Electricity sales are recognized upon delivery at the price defined in Nordpool or in other
wholesale market. When Fortum is acting as an agent in the power trades by granting access to the Nord Pool power
trading system, Fortum presents the bilateral trades between Fortum and the customer on a net basis, and only the fee
from the service is recorded as revenue.
POWER SALES TO RETAIL CUSTOMERS
Fortum’s contracts with the consumer and business customers cover the electricity sales, while the distribution service is
delivered by the transmission company operating the local network. There is only one performance obligation, which is to
stand-ready to supply electricity to the customer. The transaction price generally includes both a fixed monthly fee and a
variable fee that depends on the volume of electricity supplied. As Fortum’s promise is to stand ready to deliver electricity,
the fixed and variable components are recognised based on the fees chargeable from the customer. If automated meter
reading is not available, the electricity consumption between the last meter reading and end of the month is estimated.
HEATING SALES
In many areas the district heating service covers both the distribution and sale of heat. Even if heat is produced by a
third party, Fortum is usually responsible for delivering the whole service and is acting as a principal for the heat sales
as well. Fortum has concluded that the distribution and sale of heat are not separate performance obligations and
are both covered by the promise to stand-ready to supply heat to the customer. The fees charged from the customer
generally comprise a fixed monthly charge and a variable component that is determined based on the volume of heat
supplied. In accordance with the IFRS 15 principles, the fixed charge and the variable heat volume charge are allocated
and recognised in line with the fees chargeable from the customer. In Russia, Baltics and Poland there are also areas,
where Fortum operates only the heat production facilities while some third party is responsible for the distribution of
heat. In these areas the performance obligation is to supply heat and revenue is recognised based on the volume of
heat that Fortum is entitled to charge from the customer.
WASTE TREATMENT SALES
A majority of the revenues from waste management services arises from the fees charged for receiving the waste
from customers (i.e. gate fees). The fee is usually determined based on the volume of waste received and there are no
variable elements in the pricing. Fortum is required to treat the waste and this performance obligation is satisfied when
the treatment is performed. Transportation of the waste forms another performance obligation. The fees for waste
treatment and transportation services are separately agreed in the contract and correspond to the price that would be
charged for these services separately. Revenue for transportation service is recognised when service is provided.
Waste treatment business sales includes also various types of soil and landfill site projects which mostly take place
at the customer site. The fees charged from the customers are invoiced based on payment schedules agreed with
the customer. The customer obtains the benefits of the construction work simultaneously when the construction work
proceeds and therefore the projects are recognised over time. The progress of the construction is best measured
through the costs incurred or the completed area of the construction site.
COSTS FOR OBTAINING CUSTOMERS
Incremental costs for obtaining new customers as well as renewing existing customer contracts in Consumer Solutions
division are capitalised as intangible assets and amortised over the expected contract duration. The sales commission
costs were mostly expensed until end of 2017, but are capitalised from 1 January 2018 onwards due to adoption of IFRS
15 Revenue from contracts with customers. See additional information on impact of transition to IFRS 15 in Note 1
Accounting policies.
NETTING AND INTER-SEGMENT TRANSACTIONS
Generation segment sells its production to Nord Pool and Consumer Solutions buys its electricity from Nord Pool.
Eliminations of sales include eliminations of sales and purchases with Nord Pool that are netted on 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. Inter-segment sales, expenses and results for the different business segments are affected by intragroup
deliveries, which are eliminated on consolidation. Inter-segment transactions are based on commercial terms.
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40
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
60
60
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
6.1 Fortum’s business structure
Fortum’s business divisions are Generation, City Solutions, Consumer Solutions, Russia and Other Operations,
which includes M&A and Solar & Wind Development, Technology and New Ventures as well as corporate
functions� Fortum’s participation in Uniper SE is also reported as part of Other Operations�
In November 2018, Fortum announced that the solar and wind businesses were reorganised and the wind
operations became a business area within the Generation division and the solar operations within the City Solutions
division� The Russian wind and solar operations continue as a part of the Russia division� The management and
segment reporting will be changed from 2019 onwards and 2018 figures will be restated accordingly�
Below is the description of the reportable segments:
6.2 Segment structure in Fortum
Fortum discloses segment information in a manner consistent with internal reporting to Fortum’s Board of
Directors and to Fortum Executive Management led by the President and CEO� Fortum has segments based
on type of business operations, combined with one segment based on geographical area� Fortum’s reportable
segments under IFRS are the business divisions Generation, City Solutions, Consumer Solutions and Russia�
6.3 Definitions for segment information
Fortum’s segment information discloses the financial measurements used in financial target setting and forecasting,
management’s follow up of financial performance and allocation of resources in the group’s performance
management process� These measurements that are considered as Alternative Performance Measures, such as
Comparable operating profit and Comparable return on net assets, have been used consistently since 2005�
Generation
City Solutions
Consumer Solutions
Russia
Group
s
n
o
i
s
i
v
D
i
Generation
City Solutions
Consumer Solutions
Russia
s The Generation segment comprises power production
t
n
e
m
g
e
s
in the Nordics, including nuclear, hydro, and thermal
power production, power portfolio optimisation,
trading, industrial intelligence, as well as nuclear
services globally.
g
n
i
t
r
o
p
e
R
City Solutions develops sustainable solutions for
urban areas into a growing business for Fortum.
The segment comprises heating and cooling,
waste-to-energy, operation and maintenance services,
biomass, and other circular economy solutions.
The business operations are located in the Nordics,
the Baltic countries, and Poland. The segment also
includes Fortum’s 50% holding in Stockholm Exergi
(formerly Fortum Värme), which is a joint venture and
is accounted for using the equity method.
Consumer Solutions comprises electricity and gas retail
businesses in the Nordics and Poland, including the
customer service, invoicing and debt collection
business. Fortum is the largest electricity retailer in the
Nordics, with approximately 2.5 million customers
across different brands in Finland, Sweden, Norway
and Poland. The business provides electricity and
related value-added products as well as new digital
customer solutions.
The Russia segment comprises power and heat
generation and sales in Russia. The segment also
includes Fortum’s over 29% holding in TGC-1,
which is an associated company and is accounted for
using the equity method.
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Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
61
61
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Items affecting comparability are disclosed separately in Fortum’s income statement to support the
understanding of business performance when comparing results between periods� Items classified as Items
affecting comparability include accounting effects from valuation according to IFRS that are not arising from
the performance of the business operations� Such items include fair valuation of financial derivatives hedging
future cash-flows where hedge accounting is not applied according to IFRS 9 and effects from the accounting of
Fortum’s part of the Finnish Nuclear Waste Fund where the asset in the balance sheet cannot exceed the related
provisions according to IFRIC interpretation 5�
The business performance of the operations cannot be compared from one period to another without
adjusting for one-time items relating to capital gains, major impairment related items and transaction costs
arising from acquisitions� Therefore such items have also been treated as Items affecting comparability�
Transaction costs arising from acquisitions of subsidiary shares are included in capital gains and other within
items affecting comparability� According to IFRS 3 transaction costs related to the acquisitions of subsidiary
shares are recognised in the income statement�
Segment reporting is based on the same accounting principles as the Fortum Group�
See Definition of key figures�
6.4 Segment information
Income statement
EUR million
Power sales 3)
Heat sales
Waste treatment sales
Other sales
IS Sales
Internal eliminations
Netting of Nord Pool transactions 2)
External sales
Comparable EBITDA
IS Depreciation and amortisation
IS Comparable operating profit
Impairment charges
Capital gains and other
Changes in fair values of derivatives hedging future cash-flow
Nuclear fund adjustment
IS Items affecting comparability
IS Operating profit
IS Share of profit of associated companies and joint ventures
IS Finance costs - net
IS Income taxes
IS Profit for the year
Generation 1)
City Solutions 1)
Consumer Solutions
Russia
Other Operations
Total
Note
7
7
7, 8
7, 29
7
19, 29
2018
1,767
0
0
70
1,837
-2
1,835
762
-131
631
-4
77
79
-45
108
738
-72
2017
1,649
0
0
28
1,677
-15
1,662
603
-125
478
6
1
15
1
23
501
-1
2018
119
604
211
161
1,094
-37
1,057
284
-171
113
0
0
-4
0
-4
109
74
2017
121
523
195
175
1,015
-19
996
262
-163
98
0
1
3
0
4
102
80
2018
1,547
0
0
212
1,759
-11
1,748
110
-57
53
0
0
22
0
22
75
0
2017
862
0
0
235
1,097
-3
1,094
57
-16
41
0
2
-4
0
-2
39
0
2018
872
193
0
4
1,069
0
1,069
417
-147
271
0
2
0
0
2
273
36
2017
837
258
0
6
1,101
0
1,101
438
-142
296
0
0
0
0
0
295
31
2018
26
0
0
102
129
-80
49
-50
-30
-79
0
23
0
0
23
-57
0
2017
15
0
0
87
102
-67
35
-83
-18
-102
0
322
0
0
322
221
38
2018
4,331
797
211
549
5,888
-130
-516
5,242
1,523
-536
987
-4
102
98
-45
151
1,138
38
-136
-181
858
2017
3,483
782
195
531
4,991
-103
-367
4,520
1,275
-464
811
6
326
14
1
347
1,158
148
-195
-229
882
1) Sales, both internal and external, include effects from realised hedging contracts. Effect on sales can be negative or positive depending on the average contract price and realised spot price.
2) Netting and eliminations include eliminations of internal sales and netting of Nord Pool transactions. Sales and purchases with Nord Pool, EUR -516 million, are netted on 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.
3) Power sales contains realised result from commodity derivatives, EUR +70 million, which have not had hedge accounting status under IFRS 9, but have been considered operatively as hedges.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
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financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
62
62
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Segment assets and liabilities
EUR million
Non-interest-bearing assets
BS Participations in associated companies and joint ventures
Eliminations
Total segment assets
Interest-bearing receivables
BS Deferred tax assets
Other assets
BS Liquid funds
Total assets
Segment liabilities
Eliminations
Total segment liabilities
BS Deferred tax liabilities
Other liabilities
Total liabilities included in capital employed
Interest-bearing liabilities
BS Total equity
Total equity and liabilities
Gross investments / divestments
EUR million
Gross investments in shares
Capital expenditure
of which capitalised borrowing costs
Gross divestments of shares
Note
19, 29
Generation
2018
6,669
846
2017
6,097
785
2018
3,555
613
2017
3,517
611
2018
1,044
0
City Solutions
Consumer Solutions
Russia
Other Operations
Total
2017
923
0
923
2018
2,408
495
2017
2,812
472
2018
395
4,024
2,903
3,284
4,419
2017
452
32
483
7,515
6,882
4,168
4,128
1,044
21
28
28
27
1,220
1,210
425
400
396
285
114
124
155
207
2018
14,072
5,978
-117
19,933
1,092
70
731
584
22,409
2,311
-117
2,194
720
1,325
4,239
6,093
12,077
22,409
2017
13,801
1,900
-19
15,682
1,406
73
696
3,897
21,753
2,227
-19
2,208
819
554
3,581
4,885
13,287
21,753
Note
19, 3
17, 18
3
Generation
2018
8
186
3
160
2017
90
174
3
0
City Solutions
Consumer Solutions
Russia
Other Operations
Total
2018
32
190
4
0
2017
386
170
2
0
2018
0
47
0
0
2017
486
7
0
55
2018
63
54
0
0
2017
125
152
7
0
2018
3,985
108
3
147
2017
39
187
4
687
2018
4,088
584
10
306
2017
1,125
690
16
742
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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financial review
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financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
63
63
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Comparable operating profit including share of profits from associates and joint ventures and Comparable return on net assets
EUR million
Comparable operating profit
Share of profit of associated companies and joint ventures
Adjustment for Share of profit of associated companies and joint ventures
Comparable operating profit including share of profits from associates and joint ventures
Segment assets at the end of the period
Segment liabilities at the end of the period
Comparable net assets
Comparable net assets average 1)
Comparable return on net assets, %
1) Average net assets are calculated using the opening balance and end of each quarter values.
Employees
Number of employees 31 Dec
Average number of employees
Note
11
Generation
2018
631
-72
94
653
7,515
1,220
6,295
5,868
2017
478
-1
0
482
6,882
1,210
5,672
5,753
City Solutions
Consumer Solutions
Russia
Other Operations
2018
113
74
0
186
4,168
425
3,743
3,700
2017
98
80
0
178
4,128
400
3,728
3,218
2018
53
0
0
53
1,044
396
648
671
2017
41
0
0
41
923
285
638
348
2018
271
36
0
307
2,903
114
2,789
2,976
2017
296
31
0
327
3,284
124
3,161
3,248
2018
-79
0
-38
-117
4,419
155
4,264
2,619
2017
-102
38
0
-63
483
207
276
475
11.1
8.4
5.0
5.5
7.8
11.7
10.3
10.1
-4.5
-13.3
Generation
2018
1,075
1,087
2017
1,035
1,036
City Solutions
Consumer Solutions
Russia
Other Operations
Total
2018
1,956
1,940
2017
1,907
1,807
2018
1,399
1,473
2017
1,543
1,180
2018
2,941
3,378
2017
3,495
3,710
2018
915
888
2017
805
774
2018
8,286
8,767
2017
8,785
8,507
6.5 Group-wide disclosures
The Group’s operating segments operate mainly in the Nordic countries, Russia, Poland and other parts of
the Baltic Rim area� Generation operates mainly in Finland and Sweden, Consumer Solutions operates mainly in
Nordic countries and Poland, whereas City Solutions operates in all of these geographical areas except Russia�
Other countries are mainly Estonia, Latvia, Lithuania and India� The home country is Finland�
The information below is disclosing sales by the country in which the customer is located� Assets, capital
expenditure and personnel are reported where the assets and personnel are located� Participations in associates
and joint ventures are not divided by location since the companies concerned can have business in several
geographical areas� Sales by product area is presented in Income statement by segment� Due to the large number
of customers and the variety of its business activities, there is no individual customer whose business volume is
material compared with Fortum’s total business volume�
Sales by market area based on customer location
EUR million
Nordic
Russia
Poland
Other countries
IS Total
2018
3,619
1,069
331
223
5,242
2017
2,827
1,102
452
139
4,520
The Nordic power production is not split by countries since Nordic power production is mainly sold through
Nord Pool�
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2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
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Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
64
64
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Capital expenditure by location
EUR million
Finland
Sweden
Norway
Russia
Poland
Other countries
Total
Segment assets by location
EUR million
Finland
Sweden
Norway
Russia
Poland
Other countries and eliminations
Non-interest bearing assets
BS Participations in associates and joint ventures
Total
Segment assets in Finland include EUR 590 million (2017: 85) settlements paid for futures�
Number of employees on 31 December by location
Finland
Sweden
Norway
Russia
Poland
Other countries
Total
2018
215
89
97
54
86
43
584
2018
4,589
4,202
1,622
2,408
645
488
13,955
5,978
19,933
2017
179
104
46
152
92
115
690
2017
3,882
4,304
1,533
2,812
559
692
13,781
1,900
15,682
2018
2,238
981
667
2,941
754
705
8,286
2017
2,165
968
654
3,494
827
677
8,785
7 Items affecting comparability
EUR million
Impairment charges
Capital gains and other
Changes in fair values of derivatives hedging future cash flow
Nuclear fund adjustments
IS Total
2018
-4
102
98
-45
151
2017
6
326
14
1
347
Fortum uses Alternative performance measures (APMs) in the financial target setting and forecasting,
management’s follow up of financial performance of segments and the group as well as allocation of resources in
the group’s performance management process� The business performance of the operations cannot be compared
from one period to another without adjusting for items affecting comparability and therefore they are excluded
from Comparable operating profit and Comparable EBITDA� The main business performance measurements
have been used consistently since 2005�
Definitions are presented in the section Definitions of key figures�
Impairment charges and capital gains
EUR million
Impairment charges
Change in dismantling provision for the Finnish coal-fired power
plant Inkoo
Other impairment charges
Total
Capital gains and other
Hafslund Produksjon Holding AS, associated company
Espoo head office
Hafslund ASA, associated company
Transaction costs
Other non-recurring items
Total
Segment
2018
2017
Generation
Generation
Other Operations
Other Operations
Other Operations
Other Operations
-3
-1
-4
77
26
-4
2
101
6
6
324
-4
6
326
Fair value changes on derivatives
Changes in the fair values of financial derivative instruments hedging future cash flows that do not qualify for
hedge accounting are recognised in items affecting comparability� This is done to improve the understanding of
the financial performance when comparing results from one period to another�
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
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Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
65
65
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Nuclear waste management fund adjustment
Nuclear fund adjustment includes effects from the accounting principle of Fortum’s part of the State Nuclear
Waste Management Fund where the assets in the balance sheet cannot exceed the nuclear related provisions
according to IFRIC 5� As long as the Fund is overfunded from an IFRS perspective, the effects to the operating
profit from this adjustment will be positive if the provisions increase more than the Fund and negative if actual
value of the fund increases more than the provisions� In addition adjustments are made for accounting effects
from valuation according to IFRS�
Fortum has reassessed assumptions used for all nuclear related assets and liabilities as of 31 December 2018�
The increase of the nuclear provision for the Loviisa nuclear power plant in Finland leads to recognition of
an additional share of the Finnish nuclear fund� The increase of the provision due to the reassessment and
the additional share in the fund are both included in Items affecting comparability� The net profit impact from
all these nuclear related adjustments is close to zero� For additional information see Note 29 Nuclear related
assets and liabilities
For more information regarding disposals of shares, see Note 3 Acquisitions and disposals� For more
information regarding fair value changes of derivatives, see Note 8 Fair value changes of derivatives and
underlying items in income statement� For more information regarding nuclear waste management, see
Note 29 Nuclear related assets and liabilities�
8 Fair value changes of derivatives
and underlying items in income statement
Fair value changes in operating profit presented below are arising from financial derivatives hedging future cash
flows where hedge accounting is not applied according to IFRS 9 and the ineffectiveness from cash flow hedges�
Fair value changes of currency derivatives in net financial expenses are arising mainly from balance sheet
hedges without hedge accounting status according to IFRS 9, because they are natural hedges of loans and
receivables� Fair value change of interest rate hedges without hedge accounting is EUR -8 million (2017: -7)�
EUR million
In operating profit
Fair value changes from derivatives not getting hedge accounting status
2018
2017
Electricity derivatives
Currency derivatives
Other commodity derivatives
Ineffectiveness from cash flow hedges
Total effect in operating profit
In finance costs
Exchange gains and losses on loans and receivables 1)
Fair value changes of derivatives not getting hedge accounting status
Cross currency interest rate derivatives 1)
Foreign currency derivatives 1)
Rate difference on forward contracts
Currency derivatives
Interest rate derivatives
Fair value change of hedging derivatives in fair value hedge relationship
Fair value change of hedged items in fair value hedge relationship
Total 2)
Total effect in finance costs
Total effect on profit before income tax
77
3
17
0
98
-100
8
91
3
102
-8
-24
24
94
-6
92
-20
-1
25
11
14
-51
6
47
-4
49
-7
-31
31
42
-10
4
1) Exchange gains and losses on loans, receivables and derivatives totalling EUR -1 million (2017: 2).
2) Including fair value gains and losses on hedged financial instruments and foreign currency and interest rate derivatives EUR -5 million
(2017: -12). See also Note 12 Finance costs - net.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
66
66
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
9 Other income and other expenses
ACCOUNTING POLICIES
OTHER INCOME
Revenue from activities outside normal operations is reported in other income. This includes recurring items such
as rental income and subsidies and non-recurring items such as insurance compensation. In addition, profits from
the capital recycling business model are presented in other income, because the business results are realised through
divesting the shareholding, either partially or totally.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are recognised as expense as incurred and included in other expenses in the income
statement. If development costs will generate future income, they are capitalised as intangible assets and depreciated
over the period of the income streams.
9.1 Other income
EUR million
Rental income
Insurance compensation
Subsidies
Other items
IS Total
2018
12
1
47
71
130
2017
6
2
17
28
55
Increase in subsidies is due to reclassification from sales to other income according to IFRS 15� Other items
include a profit of EUR 26 million from the partial sale of Fortum’s solar power company in India according to
the ’capital recycling’ business model� See also Note 3 Acquisitions and disposals�
9.2 Other expenses
EUR million
Operation and maintenance costs
Property taxes
IT and telecommunication costs
Other items
IS Total
2018
130
109
77
278
594
2017
125
115
60
276
576
The major components recorded in other expenses are the external operation and maintenance costs of power
and heat plants� Property taxes include taxes relating to directly owned hydropower production EUR 65 million
(2017: 81)� Other items include expenses relating to properties and other operative expenses�
Principal auditors’ fees
EUR million
Audit fees
Audit related assignments
Tax assignments
Other assignments
Total
2018
1.7
0.2
0.0
1.6
3.5
2017
1.4
0.2
0.0
1.0
2.6
Deloitte Oy is the appointed auditor until the next Annual General Meeting, to be held in 2019� Audit fees include
fees for the audit of the consolidated financial statements, review of the interim reports as well as the fees for
the audit of Fortum Corporation and its subsidiaries� Audit related assignments include fees for assurance of
sustainability reporting and other assurance and associated services related to the audit� Tax assignments include
fees for tax advice services� Other assignments consist of advisory services�
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
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Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
67
67
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
10 Materials and services
EUR million
Materials
Materials purchased from associated companies and joint ventures
Transmission costs
External services
IS Total
2018
2,296
372
41
86
2,795
2017
1,769
431
39
63
2,301
Materials consists mainly of coal, gas and nuclear fuels used for producing power and heat�
Materials purchased from associated companies consist of nuclear and hydropower purchased at production
cost (including interest costs and production taxes) and purchased steam�
Total materials and services include production taxes EUR 62 million (2017: 109), of which nuclear related
capacity and property taxes EUR 4 million (2017: 48) and hydro power related property taxes EUR 13 million
(2017: 14)� Nuclear capacity tax in Sweden was abolished from 1 January 2018 in accordance with the energy
agreement adopted by the Swedish Parliament� Taxes related to nuclear and hydro production are included in
taxes paid through purchases from associated companies�
See Note 19 Participations in associated companies and joint ventures�
11 Employee benefits
EUR million
Wages and salaries
Pensions
Defined contribution plans
Defined benefit plans
Social security costs
Share-based incentives
Other employee costs
IS Total
2018
345
34
7
48
3
23
459
2017
312
32
8
44
4
23
423
The compensation package for Fortum employees consists of salaries, fringe benefits, short-term incentives,
profit sharing paid to the Personnel Fund (in Finland) and share-based long-term incentives for selected key
individuals�
The remuneration policy is determined by the Board of Directors� The Nomination and
Remuneration Committee of the Board of Directors discusses, assesses and makes recommendations and
proposals to the Board of Directors on the remuneration policy, remuneration of the President and CEO and
the Fortum Executive Management and company-wide incentive arrangements for senior management and key
personnel as well as monitors these plans annually� Additionally, the Committee contributes to the Group’s
nomination issues by proposing to the Board of Directors any nominations regarding the members of Fortum
Executive Management�
For further information on pensions see Note 31 Pension obligations
11.1 Short-term incentives (STI)
Fortum’s STI programme is designed to support the achievement of the company’s financial and other relevant
targets on an annual basis� As a main principle, all employees are covered by the programme or alternatively by
a business specific or a comparable local variable pay arrangement�
The Board of Directors determines the performance criteria and award levels for the Fortum Executive
Management� The awards are based on the achievement of Group financial performance, divisional targets and
individual targets� The target incentive opportunity is 20% and the maximum incentive opportunity is 40% of the
annual base salary� The Board of Directors assesses the performance of the President and CEO and the members
of the Fortum Executive Management on a regular basis�
Awards for other employees are based on a combination of Group, divisional, functional and personal targets�
The targets are set in annual performance discussions held at the beginning of the year� Awards under the STI
programme are paid solely in cash�
11.2 Share-based long-term incentives (LTI)
The purpose of Fortum’s share-based long-term incentive programme is to support the delivery of sustainable
long-term performance, align the interests of management with those of shareholders and support in committing
and retaining key individuals�
Fortum’s LTI programme provides participants with the opportunity to earn company shares� Under the LTI
programme and subject to the decision of the Board of Directors, a new LTI plan commences annually� The Board
of Directors approves participation of the Fortum Executive Management members in each annually commencing
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
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financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
68
68
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
LTI plan� Subject to a decision by the Board of Directors the President and CEO is authorised to decide on
individual participants and potential maximum awards for other participants than the Fortum Executive
Management in accordance with the nomination guidelines approved by the Board of Directors� Participation in
the LTI plan precludes the individual from being a member in the Fortum Personnel Fund�
Each LTI plan begins with a three-year earnings period, during which participants may earn share rights if
the performance criteria set by the Board of Directors are fulfilled� If the minimum performance criteria are not
exceeded, no shares will be awarded� If performance is exceptionally good and the targets approved by the Board
of Directors are achieved, the combined gross value of all variable compensation cannot exceed 120% of the
person’s annual salary in any calendar year� After the earnings period has ended and the relevant taxes and other
employment-related expenses have been deducted, participants are paid the net balance in the form of shares�
For LTI plans commencing in 2013 onwards, any shares awarded to Fortum Executive Management members
are subject to a three-year lock-up period� Subject to a decision by the Board of Directors, the lock-up period can
be reduced to one year for those Fortum Executive Management members whose aggregate ownership of Fortum
shares is greater than or equal to their annual salary� For other participants the lock-up period is one year� For
LTI plans commencing prior to 2013, the lock-up period is three years for all LTI plan participants� If the value of
the shares decreases or increases during the lock-up or retention period, the participant will carry the potential
loss or gain� For LTI plans commencing in 2017 and later, the share awards will not be subject to a minimum
lock-up period� However, Fortum Executive Management members whose aggregate ownership of Fortum shares
does not yet fulfil the shareholding requirement are required to retain at least 50% of the shares received until
the required level of shareholding is met�
The Board of Directors has the right to revise the targets set in the incentive plans, deviate from the payment
based on achievement of the set earnings criteria, or to discontinue any ongoing incentive plan�
The share plans under the LTI arrangement are accounted for as partly equity- and partly cash-settled
arrangements� The earned reward that the participants receive in shares is accounted for as an equity-settled
transaction� For participants receiving cash only, the total arrangement is accounted for as cash-settled
transaction� The reward is recognised as an expense during the earnings period with a corresponding increase
in the liabilities and for the transactions settled in shares in the equity� The social charges related to the
arrangement payable by the employer are accrued as a liability� The LTI liability including social charges at
the end of the year 2018 was EUR 14 million (2017: 18), including EUR 8 million (2017: 4) recorded in equity�
At year end 2018 approximately 120 key employees are participants in at least one of the six on-going annual
LTI plans (plans 2013–2018, 2014–2019, 2015–2020, 2016–2021, 2017–2019 and 2018–2020)�
Plans
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2012–2017
1
2013–2018
2014–2019
2015–2020
2016–2021
2017–2019
2018–2020
2
1
3
2
1
4
3
2
1
5
4
3
2
1
6
5
4
3
2
1
Earnings period
Lock-up period
Additional lock-up period for FEM
Share delivery
6
5
4
3
2
1
6
5
4
3
2
6
6
5
3
Shares granted
Grant date
Grant price, EUR
Plan
2015–2020
13 Feb 2018
17.04
Plan
2014–2019
13 Feb 2017
14.28
Plan
2013–2018
12 Feb 2016
12.18
Number of shares granted
Number of shares subsequently forfeited or released from lock-up
and other changes
Number of shares under lock-up at the end of the year 2018
73,377
-8,974
64,403
92,321
152,200
-84,807
7,514
-150,475
1,725
In addition to the shares granted above, share rights have been granted to participants that will receive cash
payments instead of shares after the lock-up period� The gross amount of share rights outstanding at the end of
the year 2018 for plan 2015–2020 was 72,284, for plan 2014–2019 17,793 and for plan 2013–2018 32,066 share rights�
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
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financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
69
69
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
The annual contribution for the President and CEO Pekka Lundmark’s pension arrangement is 25% of the annual
salary� The annual salary consists of base salary and fringe benefits� The President and CEO’s retirement age is
63� In case his assignment is terminated before the retirement age, the President and CEO is entitled to retain
the benefits accrued in the arrangement�
For the other members of the FEM the retirement age varies between 62 and 65� According to group policy
all new supplementary pension arrangements are defined contribution plans� For the members of the FEM that
have defined contribution arrangements, the maximum pension premium percentage can be 25% of the annual
salary� Members, who have joined Fortum prior 1 January 2009, are participating in defined benefit pension
arrangements, where the benefit is 60–66% of the final pensionable salary with the pension provided by an
insurance company or Fortum’s Pension Fund�
A pension liability of EUR 624 thousand (2017: 693) related to the defined benefit plans for FEM members has
been recognised in the balance sheet� The additional pension arrangement for the President and CEO is a defined
contribution pension plan and thus no liability has been recognised in the balance sheet�
In the event that Fortum decides to give notice of termination to the President and CEO, he is entitled to
the salary for the notice period (6 months) and a severance pay equal to 12 months’ salary� Other FEM members’
termination compensation is equal to 6 to 12 months’ salary�
Number of shares delivered to the management
The table below shows the number of shares delivered during 2018 and 2017 to the President and CEO and other
FEM members under the LTI arrangements� Shares delivered under the plans are subject to a lock-up period
under which they cannot be sold or transferred to a third party�
11.3 Fortum Personnel Fund
The Fortum Personnel Fund (for employees in Finland only) has been in operation since year 2000� The Board
of Directors determines the criteria for the fund’s annual profit-sharing bonus� Persons included in Fortum’s
long-term incentive schemes are not eligible to be members of this fund� Members of the personnel fund are
the permanent and fixed-term employees of the Group� The membership of employees joining the company
starts at the beginning of the next month after the employment relationship has been ongoing for five months�
An employee is entitled to make withdrawals right from the beginning of the membership� The membership in
the fund terminates when the member has received his/her share of the fund in full�
The profit-sharing received by the fund is distributed equally between the members� Each employee’s share is
divided into a tied amount and an amount available for withdrawal� It is possible to transfer a maximum of 15%
of capital from the tied amount to the amount available for withdrawal each year�
The amount available for withdrawal (maximum 15% of the tied amount) is decided each year by the council of
the fund and it is paid to members who want to exercise their withdrawal rights�
The fund’s latest financial year ended at 30 April 2018 and the fund then had a total of 2,233 members (2017:
2,320)� At the end of April 2018 Fortum contributed EUR 2�0 million (2017: 2�8) to the personnel fund as an
annual profit-sharing bonus based on the financial results of 2017� The combined amount of members’ shares in
the fund was EUR 19 million (2017: 21)�
The contribution to the personnel fund is expensed as it is earned�
11.4 The President and CEO and the Fortum Executive Management remuneration
The Fortum Executive Management (FEM) consists of ten members, including the President and CEO� The
following table presents the total remuneration of the President and CEO and the FEM and takes into account
the changes in FEM during the year� The expenses are shown on accrual basis�
Management remuneration
EUR thousand
Salaries and fringe benefits
Performance bonuses 1)
Share-based incentives 1)
Pensions (statutory)
Pensions (voluntary)
Social security expenses
Total
1) Based on estimated amounts.
2018
2017
Pekka Lundmark,
President and CEO
1,048
228
297
250
252
36
2,112
Other
FEM members
3,101
658
1,431
677
596
254
6,716
Pekka Lundmark,
President and CEO
998
187
334
231
229
41
2,019
Other
FEM members
3,387
589
1,030
665
712
257
6,640
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
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financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
70
70
Basis of preparation
Risks
Income statement
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
FEM members at 31 December 2018
Pekka Lundmark, CEO
Arun Aggarwal (member of FEM from 17 Oct 2018)
Alexander Chuvaev 1)
Per Langer
Risto Penttinen
Markus Rauramo
Arto Räty
Mikael Rönnblad (member of FEM from 15 May 2017)
Sirpa-Helena Sormunen
Tiina Tuomela
Former FEM members
Timo Karttinen (member of FEM until 28 February 2017)
Kari Kautinen (member of FEM until 30 September 2018)
Matti Ruotsala (member of FEM until 31 October 2017)
Total
2018 2)
2017 3)
6,453
-
15,930
1,621
1,767
2,103
-
-
1,879
2,117
N/A
2,059
N/A
33,929
4,463
-
15,480
2,358
1,793
4,185
-
-
1,777
2,563
3,626
2,274
4,176
42,695
1) Estimated number of shares after local tax and tax related deductions. Due to local legislation, share rights will be paid in cash instead of
shares after the three-year lock-up period.
2) Share delivery based on share plan 2015–2020.
3) Share delivery based on share plan 2014–2019.
11.5 Board of Directors and management shareholding
On 31 December 2018, the members of the Board of Directors owned a total of 8,540 shares (2017: 9,200),
which corresponds to 0�00% (2017: 0�00%) of the company’s shares and voting rights�
Number of shares held by members of the Board of Directors
Board members at 31 December 2018
Matti Lievonen, Chairman
Klaus-Dieter Maubach, Deputy Chairman
Heinz-Werner Binzel
Eva Hamilton
Kim Ignatius
Essimari Kairisto
Anja McAlister
Veli-Matti Reinikkala
Former Board member
Sari Baldauf
Total
2018
2017
1,500
-
-
40
4,000
-
-
3,000
N/A
8,540
1,500
N/A
-
-
2,400
N/A
-
3,000
2,300
9,200
The President and CEO and other members of the FEM owned a total of 193,227 shares (2017: 200,667) which
corresponds to approximately 0�02% (2017: 0�02%) of the company’s shares and voting rights�
Number of shares held by members of the Fortum Executive Management
FEM members at 31 December 2018
Pekka Lundmark
Arun Aggarwal
Alexander Chuvaev
Per Langer
Risto Penttinen
Markus Rauramo
Arto Räty
Mikael Rönnblad
Sirpa-Helena Sormunen
Tiina Tuomela
Former FEM member
Kari Kautinen
Total
2018
2017
67,166
-
22,053
33,191
12,355
34,135
-
-
6,656
17,671
60,713
N/A
14,713
31,570
10,588
32,032
-
-
4,777
15,554
N/A
193,227
30,720
200,667
11.6 Board remuneration
The Board of Directors comprises five to ten 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� At the
end of 2018 the Board of Directors consists of eight members�
The Annual General meeting confirms the yearly compensation for the Board of Directors� Board members are
not offered any long-term incentive benefits or participation in other incentive schemes� There are no pension
arrangements for the Board members� Social security costs EUR 11 thousand (2017: 14) have been recorded for
the fees in accordance with local legislation in respective countries�
Fees for the Board of Directors
EUR thousand
Chairman
Deputy Chairman
Chairman of the Audit and Risk Committee 1)
Members
1) If not Chairman or Deputy Chairman simultaneously.
2018
75
57
57
40
2017
75
57
57
40
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
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Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
71
71
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Every member of the Board of Directors receives a fixed yearly fee and additional fees for each meeting attended�
A meeting fee of EUR 600 is paid for board and committee meetings� For board members living outside Finland
in Europe, the meeting fee is EUR 1,200; for board members living outside Europe, the meeting fee is EUR 1,800�
For board and committee meetings held as a telephone conference, the meeting fee is paid as EUR 600 to all
members� No fee is paid for decisions made without a separate meeting�
Board members are entitled to travel expense compensation in accordance with the company’s travel policy�
Compensation for the Board of Directors
EUR thousand
Board members at 31 December 2018
Matti Lievonen, Chairman from 28 March 2018
Klaus-Dieter Maubach, Deputy Chairman from 28 March 2018
Heinz-Werner Binzel
Eva Hamilton
Kim Ignatius, Chairman of the Audit and Risk Committee
Essimari Kairisto (member of the board from 28 March 2018)
Anja McAlister (member of the board from 4 April 2017)
Veli-Matti Reinikkala
Former Board members
Sari Baldauf (Chairman until 28 March 2018)
Minoo Akhtarzand (member of the board until 4 April 2017)
Tapio Kuula (member of the board until 7 November 2017)
Jyrki Talvitie (member of the board until 4 April 2017)
Total
2018
80
54
54
54
65
42
60
54
20
N/A
N/A
N/A
483
2017
49
N/A
57
54
67
N/A
47
58
84
16
43
17
492
12 Finance costs - net
EUR million
Interest expense
Borrowings
Other interest expense
Capitalised borrowing costs
Total
Interest income
Loan receivables and deposits
Other interest income
Total
Note
18
Fair value gains and losses on financial instruments
8
Fair value change of interest rate derivatives not getting hedge accounting status
Fair value change of hedging derivatives in fair value hedge relationship
Fair value change of hedged items in fair value hedge relationship
Rate difference on forward contracts
Fair value gains and losses on other investments
Total
Exchange gains and losses
Loans and receivables
Cross currency interest rate derivatives
Foreign currency derivatives
Write down of loan receivables
Interest income on share of State Nuclear Waste Management Fund
Unwinding of discount on nuclear provisions
Unwinding of discount on other provisions
Other financial income
Other financial expenses
Total
IS Finance costs - net
8
8
8
23
29
29
30, 31
2018
-155
-3
10
-148
31
3
34
-8
-24
24
3
-3
-3
-8
-100
8
91
-13
7
11
-3
11
-26
-15
-136
2017
-170
-10
16
-164
28
3
32
-7
-31
31
-4
-
-12
-51
6
47
0
6
-45
-3
14
-25
-50
-195
Interest expenses include interest expenses on interest-bearing loans, interest on interest rate and currency swaps
and forward points on forward foreign exchange contracts hedging loans and receivables� Other interest
expenses for 2017 include the interest expense of SEK 69 million (EUR 7 million) relating to the Swedish income
tax assessment for 2009–2012� See Note 37 Legal actions and official proceedings�
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
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financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
72
72
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Interest income includes EUR 12 million (2017: 12) from shareholders’ loans to co-owned Finnish and Swedish
nuclear companies, and EUR 17 million (2017: 10) from deposits and commercial papers�
Fair value gains and losses on financial instruments include change in clean price of interest rate and
cross currency swaps not getting hedge accounting and fair value changes of interest rate derivatives in
hedge relationship and hedged items� Accrued interest on these derivatives is entered in interest expenses of
borrowings� Fair value gains and losses include also rate difference from forward contracts hedging loans and
receivables without hedge accounting�
Exchange gains and losses includes exchange rate differences arising from valuation of foreign currency loans
and receivables and exchange rate differences from forward foreign exchange contracts and interest rate and
currency swaps�
Fortum has reassessed the assumptions used for all nuclear related assets and liabilities as of 31 December
2018� Unwinding of discount rate on nuclear provisions, EUR 11 million, includes positive effect from changes in
assumptions of EUR 49 million� This represents the adjustment to past unwinding of interest� The net profit
impact from all the nuclear related adjustments is close to zero� For additional information see Note 29
Nuclear related assets and liabilities�
Other financial income includes EUR 10 million from SIBUR receivable (2017: 14)� Other financial expenses
includes 20 million replenishment to Nasdaq default fund and 2017 includes EUR 16 million financial cost related
to financing commitment for Uniper acquisition�
Fair value changes on interest rate and currency derivatives
EUR million
Interest rate and cross currency swaps
Interest expenses on borrowings
Exchange rate difference from derivatives
Rate difference in fair value gains and losses on financial instruments 1)
Total fair value change of interest rate derivatives in finance costs - net
Forward foreign exchange contracts
Interest expenses on borrowings
Exchange rate difference from derivatives
Rate difference in fair value gains and losses on financial instruments
Total fair value change of currency derivatives in finance costs - net
Total fair value change of interest and currency derivatives in finance costs - net
2018
2017
27
8
-32
3
-52
91
3
42
45
21
6
-38
-11
-68
47
-4
-25
-36
1) Fair value gains and losses on financial instruments include fair value changes from interest rate swaps not getting hedge accounting
amounting to EUR -8 million (2017: -7) and fair value change of hedging derivatives in fair value hedge relationship EUR -24 million (2017: -31),
totalling EUR -32 million (2017: -38).
13 Income tax expense
13.1 Profit before tax
EUR million
Finnish companies
Swedish companies
Russian companies
Other companies
IS Total
2018
113
396
261
270
1,040
2017
76
240
269
526
1,111
Profit before tax split by country represents the respective countries’ part of the profit before tax for Fortum
Group according to International Financial Reporting Standards (IFRS), i�e� based on the same accounting
principles as for the Consolidated Financial Statements� This means that the respective country profits include
such items as for example share of profits from associates and effects of accounting for nuclear provisions, which
are not included in taxable profits in the local subsidiaries�
13.2 Major components of income tax expense by major countries
EUR million
Current taxes
Finnish companies
Swedish companies
Russian companies
Other companies
Total
Deferred taxes
Finnish companies
Swedish companies
Russian companies
Other companies
Total
Adjustments recognised for current tax of prior periods
Finnish companies
Swedish companies 1)
Russian companies
Other companies
Total
IS Income tax expense
2018
2017
-7
-3
-38
-46
-94
-18
-73
-11
15
-87
-1
0
0
0
-1
-181
-15
2
-11
-34
-58
11
-34
-43
24
-42
-13
-115
0
-1
-129
-229
1) Income tax expense 2017 from the unfavourable decisions in the Administrative Court of Appeal in Sweden relating to the income tax
assessments for 2009–2012.
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Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
73
73
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Fortum has had tax audits ongoing during 2018� Based on earlier audits Fortum has received income tax
assessments in Belgium for the years 2008–2012� In previous years, Fortum has appealed all assessments received�
Based on legal analysis, no provision has been accounted for in the financial statements related to Belgium
2008–2012 tax audits�
For further information regarding the ongoing tax appeals see Note 37 Legal actions and official
proceedings�
During 2018 entities primarily in Sweden and Russia used a portion of the deferred tax asset relating to tax loss
carry forwards�
Fortum has a material deferred tax liability owing to its investments in non-current assets� These assets are
depreciated more rapidly for tax than for accounting purposes resulting in lower current tax payments at the start
of an asset’s lifetime and higher tax payments at the end of its lifetime� This difference results in a deferred
tax liability�
See also Note 28 Income taxes in the balance sheet�
13.3 Income tax rate
The table below explains the difference between the theoretical enacted tax rate in Finland compared to the tax
rate in the consolidated income statement�
EUR million
Profit before tax
Tax calculated at nominal Finnish tax rate
Tax rate changes
Differences in tax rates and regulations
Income not subject to tax
Tax exempt capital gains
Expenses not deductible for tax purposes
Share of profit of associated companies and joint ventures
Taxes related to dividend distributions
Changes in tax valuation allowance related to not recognised tax
losses
Other items
Adjustments recognised for taxes of prior periods
IS Income tax expense
2018
1,040
-208
17
6
1
15
-13
7
-14
11
-3
0
-181
%
20.0
-1.6
-0.6
-0.1
-1.5
1.3
-0.7
1.4
-1.0
0.3
0.0
17.5
2017
1,111
-222
6
5
0
77
-3
33
-10
-2
3
-117
-229
%
20.0
-0.6
-0.4
0.0
-6.9
0.3
-2.9
0.9
0.2
-0.3
10.5
20.6
Key tax indicators:
• The weighted average applicable income tax rate for 2018 is 19�4% (2017: 21�7%)
• The effective income tax rate in the income statement for 2018 is 17�5% (2017: 20�6%)
• The comparable effective income tax rate (excluding the share of profits from associates, joint ventures as well
as tax exempt capital gains, tax rate changes and other major one-time income tax effects) for 2018 is 22�0%
(2017: 18�8%)�
See Definitions of key figures�
The major items affecting the effective income tax rate are as follows:
The one-time tax-free capital gain (EUR 100 million) in Ireland and Netherlands 2018 from the sale of Hafslund
Produksjon Holding AS and Fortum Sun BV reduced the effective income tax rate with 1�5%� Tax rate changes
mainly in Sweden and Norway during 2018 reduced the effective income tax rate with 1�6%�
Effective income tax rate impacted by gains or losses on sale of shares� In many countries like in Finland,
Sweden, Netherlands and Norway income on capital gains and losses is treated as tax exempt� The purpose of
this is to tax the operative income of the company and avoid taxing the same income twice in case of the sale of
the shares� Taxation of capital gains or losses is in line with the taxation of dividend income�
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Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
74
74
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
As Fortum currently has no dilutive instruments outstanding, diluted earnings per share is the same as basic
earnings per share�
14.2 Dividend per share
Dividends proposed by the Board of Directors are not recognised in the financial statements until they have been
approved by the Company’s shareholders at the Annual General Meeting�
A dividend in respect of 2018 of EUR 1�10 per share, amounting to a total dividend of EUR 977 million based
on the amount of shares registered as at 31 January 2019, is to be proposed at the Annual General Meeting on
26 March 2019� These Financial statements do not reflect this dividend�
A dividend for 2017 of EUR 1�10 per share, amounting to a total of EUR 977 million, was decided in the Annual
General Meeting on 28 March 2018 and the dividend was paid on 10 April 2018�
A dividend for 2016 of EUR 1�10 per share, amounting to a total of EUR 977 million, was decided in the Annual
General Meeting on 4 April 2017� The dividend was paid on 13 April 2017�
14 Earnings and dividend per share
ACCOUNTING POLICIES
EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit attributable to the owners of the parent company by
the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by
the Group and held as treasury shares.
DIVIDENDS
Dividends proposed by the Board of Directors are not recognised in the financial statements until they have been
approved by the Company’s shareholders at the Annual General Meeting.
14.1 Earnings per share
Earnings per share, basic
IS Profit attributable to owners of the parent (EUR million)
Weighted average number of shares (thousand)
Basic earnings per share (EUR)
2018
843
888,312
2017
866
888,367
0.95
0.98
In the merger of Länsivoima Oyj (former Lounais-Suomen Sähkö Oy) to Fortum Corporation in 2000, those
shareholders of Länsivoima Oyj that did not produce their share certificates and did not request their rights
to be registered in the book-entry system, received their respective shares of Fortum Corporation as merger
consideration to a joint book-entry account opened on their behalf (the “Joint Account”)� The Annual General
Meeting 2018 of Fortum Corporation decided, that the rights to all such shares entered in the Joint Account and
to the rights attached to such shares that had not been requested to be registered in the book-entry system prior
to the decision by the Annual General Meeting 2018, were forfeited� In addition to the shares, the rights attached
to such shares, such as undrawn dividend, were forfeited� The provisions applicable to treasury shares held by
the company were applied to the forfeited shares� On 17 December 2018, Board of Directors decided to cancel all
these 72,580 Fortum shares owned by the company without decreasing the share capital� The cancellation was
entered in the Trade Register on 21 December 2018� In 2018 these shares had minor impact on weighted average
number of shares�
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Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
75
75
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
15 Financial assets and liabilities by categories
ACCOUNTING POLICIES
FINANCIAL ASSETS
Fortum classifies its financial assets in the following categories according to IFRS 9: financial assets at amortised cost,
financial assets at fair value through profit and loss and financial assets at fair value through other comprehensive
income. The classification is made at initial recognition and depends on the financial asset’s contractual cash flow
characteristics and the Group’s business model for managing them.
In order for the financial asset to be classified and measured at amortised cost or fair value through other
comprehensive income, it needs to give rise to cash flows that are solely payments of the principal and interest on
the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument
level. When the SPPI criteria is not met, financial assets are classified to fair value through profit and loss category.
Financial assets are presented as non-current assets unless they are held for trading, expected to be realized within
12 months at the closing date or they have a maturity of under 12 months at closing date. These are classified as
current assets.
FINANCIAL ASSETS AT AMORTISED COST
Fortum measures financial assets at amortised cost when the financial asset is included in the held-to-collect business
model with fixed or determinable payments that are payments of amount outstanding or interest on it. They arise
when the Group provides money, goods or services directly to a debtor. Financial assets at amortised cost include non-
derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Financial assets at amortised cost are subject to impairment. Gains and losses from derecognition of the asset are
recognised in profit and loss.
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
Financial assets at fair value through profit and loss include financial assets held for trading in the short term, financial
assets designated upon initial recognition irrevocably as fair value through profit and loss and financial assets
mandatorily recognised at fair value through profit and loss according to IFRS 9. Fortum has also elected to classify
equity investments (i.e. other investments) irrevocably as financial assets at fair value through profit and loss. These
are mainly comprised of shares in unlisted companies. Derivatives are classified as held for trading unless they are
designated as effective hedging instruments.
Gains and losses arising from changes in the fair value are included in the income statement in the period in which
they arise.
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
Other investments designated at fair value through other comprehensive income are not subject to impairment
assessment and are never recycled to profit and loss. Dividends received are recognised in profit and loss.
Fortum currently does not have material other investments that have been irrevocably classified as financial assets
at fair value through other comprehensive income.
DERECOGNITION
Fortum derecognises financial assets when the rights to receive cash flows from the assets have expired or when it has
substantially transferred the risks and rewards of the assets outside of the Group.
IMPAIRMENT
Fortum recognizes an allowance for expected credit losses (“ECL”) according to IFRS 9 for financial assets measured at
amortised cost. See further information on ECL in Note 4.7.1 Credit quality of major financial assets and in
Note 23 Trade and other receivables.
Financial assets measured at fair value through profit or loss are not included in ECL assessment as they are already
measured at fair value which takes into account expected credit losses. A financial asset is written-off when there is no
reasonable expectation of recovering the contractual cash flows.
FINANCIAL LIABILITIES
All financial liabilities are recognised initially at fair value. In the case of loans and borrowings and payables, incurred
transaction costs are deducted. In subsequent periods, all non-derivative financial liabilities are stated at amortised
cost; any difference between proceeds (net of transaction costs) and the redemption value is recognised as interest cost
over the period of the borrowing using the effective interest rate method.
Derivative financial instruments entered into by the Group, that are not designated as hedging instruments are
classified as liabilities at fair value through profit and loss. Amortisation of the effective interest rate and gains and
losses of liabilities are recognised in the statement of profit and loss.
Group’s financial liabilities include trade and other payables, loans and borrowings and derivative financial
instruments. Borrowings or portion of borrowings being hedged with a fair value hedge are recognised at fair value
through profit and loss. Derecognition of financial liabilities takes place when the Group has fulfilled the contractual
obligations.
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Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
76
76
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
Within the ordinary course of business the Group routinely enters into sale and purchase transactions for commodities.
The majority of these transactions take the form of contracts that were entered into and continue to be held for
the purpose of receipt or delivery of the commodity in accordance with the Group’s expected sale, purchase or usage
requirements. Such contracts are not within the scope of IFRS 9.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether
the derivative is designated as a hedging instrument eligible for hedge accounting, and if so, the nature of the item
being hedged. The Group designates certain derivatives as either: (1) hedges of highly probable forecast transactions
(cash flow hedges); (2) hedges of the fair value of recognised assets or liabilities (fair value hedge); or (3) hedges of net
investments in foreign operations.
The Group documents at the inception of the transaction the relationship between hedging instruments and
hedged items, whether the hedged item is one or several risk components separately or in aggregation, as well
as its risk management objective and strategy for undertaking various hedge transactions. When applying hedge
accounting the Group also documents its assessment, of whether the derivatives that are used in hedging transactions
are meeting the hedge accounting effectiveness criteria: (1) there is an economic relationship between the hedged
item and the hedging instrument, (2) the effect of credit risk does not dominate the value changes that result from
that economic relationship; and (3) the hedge ratio of the hedging relationship is the same as applied in the risk
management. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of
whether the derivatives that are used in hedging transactions are highly effective by assessing the prospective capacity
of the derivatives in offsetting changes in fair values or cash flows of hedged items. Hedge accounting is discontinued
only when the hedging relationship ceases to meet the hedge effectiveness criteria.
CASH FLOW HEDGE
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges
are recognised in equity. Gain or loss relating to the ineffective portion is recognised immediately in the income
statement. Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item
will affect profit and loss (for instance when the forecast sale that is hedged takes place). However, when the forecast
transaction that is hedged results in the recognition of a non-financial asset (for example, inventory) or a liability,
the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement
of the cost of the asset or liability. When a hedge no longer meets the criteria for hedge accounting, any cumulative
gain or loss existing in equity is recognised in the income statement when the forecast transaction is ultimately also
recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain
or loss that was reported in equity is immediately recognised in the income statement.
Fortum hedges its exposure to commodity market risks and applies hedge accounting by risk components. Hedge
accounting is applied to Nordic electricity price risk, where the Nordic area priced physical electricity delivery is
commonly divided into three risk components: (1) system price risk, (2) electricity price area difference risk (EPAD) and
(3) currency risk. For each of these separate risk components there are specific derivative contracts available, which
each are being a perfect hedge without any ineffectiveness for the associated risk component.
FAIR VALUE HEDGE
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the
income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to
the hedged risk.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged
item for which the effective interest method is used is amortised to profit and loss for the period to maturity.
NET INVESTMENT HEDGING IN FOREIGN OPERATIONS
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on
the hedging instrument relating to the effective portion of the hedge is recognised in equity; the gain or loss relating to
the ineffective portion is recognised immediately in the income statement. Gains and losses accumulated in equity are
included in the income statement when the foreign operation is disposed of.
DERIVATIVES THAT DO NOT QUALIFY FOR HEDGE ACCOUNTING
Certain derivative instruments hedging future cash flows do not qualify for hedge accounting. Fair value changes of
commodity derivative instruments are recognised in items affecting comparability in the income statement, whereas fair
value changes of interest rate and currency derivative instruments are recognised in finance costs - net.
Financial assets and liabilities in the tables below are split into categories in accordance with IFRS 9. The categories
are further divided into classes which are the basis for valuing a respective asset or liability. Further information can be
found in the Notes mentioned in the table.
In the comparative period ending 31.12.2017, financial assets and liabilities are split in accordance with IAS 39. See
Note 1.6 Implementation of IFRS 9 and IFRS 15 from 1 January 2018 for more information.
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Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
77
77
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Financial assets by categories 2018 according to IFRS 9
Amortised cost
Fair value through profit and loss
Fair value through other
comprehensive income
Hedge accounting,
fair value hedges
Non-hedge accounting
Other investments
Cash flow hedges
Total financial assets
EUR million
Financial instruments in non-current assets
Other non-current assets
Derivative financial instruments
Electricity derivatives
Interest rate and currency derivatives
Other commodity future and forward contracts
Long-term interest-bearing receivables
Financial instruments in current assets
Derivative financial instruments
Electricity derivatives
Interest rate and currency derivatives
Other commodity future and forward contracts
Trade receivables
Other short-term interest-bearing receivables
Liquid funds
Total
Note
20
4
21
4
23
21
24
Financial assets by categories 2017 according to IAS 39
EUR million
Financial instruments in non-current assets
Other non-current assets
Derivative financial instruments
Electricity derivatives
Interest rate and currency derivatives
Other commodity future and forward contracts
Long-term interest-bearing receivables
Financial instruments in current assets
Derivative financial instruments
Electricity derivatives
Interest rate and currency derivatives
Other commodity future and forward contracts
Trade receivables
Other short-term interest-bearing receivables
Liquid funds
Total
20
4
21
4
23
21
24
74
969
638
395
1,928
4,004
90
642
800
379
584
2,495
122
122
52
4
24
41
84
97
116
30
448
49
49
Available-for-sale
financial assets
65
140
35
85
7
69
29
36
0
13
21
85
0
140
261
119
1,968
2,033
1
26
10
19
0
56
139
53
152
24
683
94
116
116
800
409
584
3,170
Finance lease
Total financial assets
140
35
238
7
1,010
90
114
36
638
395
3,897
6,600
41
41
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5
6
7
8
9
10
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12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Loans and receivables
Fair value through profit and loss
Fair value through other
comprehensive income
Note
Amortised cost
Hedge accounting,
fair value hedges
Non-hedge accounting
Cash flow hedges
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Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
78
78
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Financial liabilities by categories 2018 according to IFRS 9
Amortised cost
Fair value through profit and loss
Fair value through other
comprehensive income
MEUR
Financial instruments in non-current liabilities
Interest-bearing liabilities
Derivative financial instruments
Electricity derivatives
Interest rate and currency derivatives
Other commodity future and forward contracts
Financial instruments in current liabilities
Interest-bearing liabilities
Derivative financial instruments
Electricity derivatives
Interest rate and currency derivatives
Other commodity future and forward contracts
Trade payables
Other liabilities
Total
1) Fair valued part of bond in fair value hedge relationship.
Financial liabilities by categories 2017 according to IAS 39
MEUR
Financial instruments in non-current liabilities
Interest-bearing liabilities
Derivative financial instruments
Electricity derivatives
Interest rate and currency derivatives
Other commodity future and forward contracts
Financial instruments in current liabilities
Interest-bearing liabilities
Derivative financial instruments
Electricity derivatives
Interest rate and currency derivatives
Other commodity future and forward contracts
Trade payables
Other liabilities
Total
Note
27
4
27
4
33
33
Note
27
4
27
4
33
33
Non-hedge accounting
Cash flow hedges
Total financial liabilities
Hedge accounting,
fair value hedges
930 1)
25
70
2
13
65
45
77
995
272
4,077
1,086
334
212
5,709
235
16
641
1
0
893
5,007
305
44
13
1,086
706
46
77
334
212
7,830
Fair value through profit and loss
Fair value through other
comprehensive income
Other financial liabilities
Hedge accounting,
fair value hedges
Non-hedge accounting
Cash flow hedges
Amortised costs
Fair value
Total financial liabilities
26
26
100
43
3
131
12
13
302
23
19
31
12
0
85
3,082
1,037
766
318
208
4,374
1,037
4,119
123
88
3
766
162
24
13
318
208
5,824
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2
3
4
5
6
7
8
9
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12
13
14
15
16
17
18
19
20
21
22
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24
25
26
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Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
79
79
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
16 Financial assets and liabilities
by fair value hierarchy
ACCOUNTING POLICIES
Fair value measurements are classified using a fair value hierarchy i.e. Level 1, Level 2 and Level 3 that reflects
the significance of the inputs used in making the measurements.
FAIR VALUES UNDER LEVEL 1 MEASUREMENT HIERARCHY
The fair value of some commodity derivatives traded in active markets (such as publicly traded electricity options, coal,
gas and oil futures) are market quotes at the closing date.
FAIR VALUES UNDER LEVEL 2 MEASUREMENT HIERARCHY
The fair value of financial instruments including electricity derivatives traded in active markets is based on quoted
market prices at the closing date. Known calculation techniques, such as estimated discounted cash flows, are used
to determine fair value of interest rate and currency financial instruments. The fair value of interest-rate swaps is
calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts
is determined using forward exchange market rates at the closing date. Fair values of options are determined by using
option valuation models. The fair value of financial liabilities is estimated by discounting the future contractual cash
flows at the current market interest rate that is available to the Group for similar financial instruments. In fair valuation,
credit spread has not been adjusted, as quoted market prices of the instruments used are believed to be consistent
with the objective of a fair value measurement.
The Group bases the calculation on existing market conditions at each closing date. Financial instruments used in
Fortum are standardised products that are either cleared via exchanges or widely traded in the market. Commodity
derivatives are generally cleared through exchanges such as for example NASDAQ Commodities and financial
derivatives done with creditworthy financial institutions with investment grade ratings.
FAIR VALUES UNDER LEVEL 3 MEASUREMENT HIERARCHY
Investments in unlisted shares classified as other investments for which the fair value can’t be reliably measured.
Fair value gains and losses of other investments are booked through profit and loss.
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2
3
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5
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13
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24
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26
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31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
80
80
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Financial assets
EUR million
In non-current assets
Other investments 1)
Derivative financial instruments
Electricity derivatives
Hedge accounting
Non-hedge accounting
Interest rate and currency derivatives
Hedge accounting
Non-hedge accounting
Other commodity future and forward contracts
Non-hedge accounting
Interest-bearing receivables
In current assets
Derivative financial instruments
Electricity derivatives
Hedge accounting
Non-hedge accounting
Interest rate and currency derivatives
Hedge accounting
Non-hedge accounting
Other commodity future and forward contracts
Non-hedge accounting
Interest-bearing receivables
Total
Note
20
4
4
Level 1
2018
2017
Level 2
2018
2017
Netting 2)
2018
2017
Total
2018
Level 3
2018
49
2017
65
0
29
2
0
0
8
8
203
234
186
202
23
146
149
4
93
585
19
97
5
66
153
85
28
253
85
29
1
-22
-94
-5
-30
41
76
-5
-1
-83
-502
-7
-192
-87
-793
-151
-386
1,116
705
30
120
32
173
2017
65
0
35
153
85
7
76
21
69
85
29
36
32
694
49
1
52
149
4
24
41
10
84
19
97
116
30
675
1) Other investments, i.e. shares which are not classified as associated companies or joint ventures, consist mainly of shares in unlisted companies of EUR 49 million (Dec 31, 2017: 65). This includes Fortum’s indirect shareholding in Fennovoima of EUR 33 million (Dec 31, 2017: 25). Fair value gains and
losses of other investments are booked through profit and loss. Other investments at fair value through other comprehensive income are immaterial.
Other investments include listed shares at fair value of EUR 0 million (2017: 0). The cumulative fair value change booked in Fortum’s equity was EUR -2 million (2017: -3).
2) Receivables and liabilities against electricity and other commodity exchanges arising from standard derivative contracts with same delivery period are netted.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
81
81
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Financial liabilities
EUR million
In non-current liabilities
Interest-bearing liabilities
Derivative financial instruments
Electricity derivatives
Hedge accounting
Non-hedge accounting
Interest rate and currency derivatives
Hedge accounting
Non-hedge accounting
Other commodity future and forward contracts
Non-hedge accounting
In current liabilities
Derivative financial instruments
Electricity derivatives
Hedge accounting
Non-hedge accounting
Interest rate and currency derivatives
Hedge accounting
Non-hedge accounting
Other commodity future and forward contracts
Non-hedge accounting
Total
Note
27
4
4
Level 1
2018
2017
Level 2
2018
2017
Level 3
2018
2017
Netting 2)
2018
2017
Total
2018
2017
930 1)
1,037 1)
930
1,037
257
163
42
2
0
724
566
1
45
28
131
45
43
1
39
315
12
12
18
1
3
7
-22
-94
-5
-30
-5
-1
-83
-502
-7
-192
235
70
42
2
13
641
65
1
45
23
100
45
43
3
31
131
12
12
158
177
160
170
7
2,737
4
1,667
0
0
-87
-793
-151
-386
77
2,121
13
1,451
1) Fair valued part of bonds in fair value hedge relationship.
2) Receivables and liabilities against electricity and other commodity exchanges arising from standard derivative contracts with same delivery period are netted.
Net fair value amount of interest rate and currency derivatives is EUR 178 million, including assets EUR 268 million and liabilities EUR 90 million� Fortum has cash collaterals based on Credit Support Annex agreements with some
counterparties� At the end of December 2018 Fortum had received EUR 75 million from Credit Support Annex agreements� The received cash has been booked as short-term interest-bearing liability�
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
82
82
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
17 Intangible assets
ACCOUNTING POLICIES
Intangible assets, except goodwill, are stated at the historical cost less accumulated amortisation and impairment
losses. They are amortised on a straight-line method over their expected useful lives.
GOODWILL
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of net identifiable
assets of the acquired subsidiary, associate or joint venture at the date of acquisition. Goodwill on acquisitions of
subsidiaries is included in intangible assets and tested yearly for impairment. Goodwill on acquisition of associates
and joint ventures is included in investments in associates and joint ventures and is tested for impairment as part of
the overall balance. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.
Impairment losses on goodwill are not reversed. Gains and losses on disposal of an entity include the carrying amount
of goodwill relating to the entity sold.
COMPUTER SOFTWARE
Acquired computer software licences are capitalised on the basis of the costs incurred when bringing the software into
use. Costs associated with developing or maintaining computer software are recognised as an expense as incurred.
Costs that are directly associated with the production of identifiable and unique software products controlled by
the Group, and that will generate economic benefits exceeding costs beyond one year, are recognised as intangible
assets. Direct costs include the software development employee costs and an appropriate portion of relevant
overheads. Computer software costs recognised as assets are amortised over their estimated useful lives (three to
five years).
TRADEMARKS AND LICENSES
Trademarks and licences are shown at historical cost less accumulated amortisation and impairment losses, as
applicable. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licences
over their estimated useful lives (15–20 years).
CONTRACTUAL CUSTOMER RELATIONSHIPS
Contractual customer relationships acquired in a business combination are recognised at fair value on acquisition date.
The contractual customer relations have a finite useful life and are carried at costs less accumulated amortisation.
Amortisation is calculated using the straight-line method over the expected duration of the customer relationship.
COSTS FOR OBTAINING CUSTOMERS
Incremental costs for obtaining new customers as well as renewing existing customer contracts are capitalised as
intangible assets and amortised over the expected contract duration. The sales commission costs were mostly
expensed until end of 2017, but are capitalised from 1 January 2018 onwards due to adoption of IFRS 15 Revenue from
contracts with customers. See additional information on adoption of IFRS 15 in Note 1.6 Implementation of IFRS 9
and IFRS 15 from 1 January 2018 and Note 6 Segment reporting.
EMISSION ALLOWANCES
The Group accounts for emission allowances based on currently valid IFRS standards where purchased emission
allowances are accounted for as intangible assets at cost, whereas emission allowances received free of charge are
accounted for at nominal value. For CO2 emissions from power and heat production, a provision is recognised. CO2
emission costs are settled by returning emission allowances. To the extent that the Group already holds allowances to
cover emission costs, the provision is measured at the carrying amount of those allowances. Any shortfall of allowances
held over the obligation is valued at the current market value of allowances. The emission cost is recognised in the
income statement within materials and services. The sales gains and losses of emission allowances not used for
covering the obligation from CO2 emissions, are reported in other income.
IMPAIRMENT TESTING OF NON-FINANCIAL ASSETS
The individual assets’ carrying values are reviewed continuously to determine whether there is any indication of
impairment. An asset’s carrying amount is written down immediately to its recoverable amount if it is greater than
the estimated recoverable amount.
In addition, impairment needs are assessed and documented once a year in connection with the long-term
forecasting process. Indications for impairment are analysed separately by each division as they are different for each
business and include risks such as changes in electricity and fuel prices, regulatory/political changes relating to energy
taxes and price regulations etc. Impairment testing needs to be performed if any of the impairment indications exists.
Assets that have an indefinite useful life and goodwill, are not subject to amortisation and are tested annually for
impairment.
Value in use is determined by discounting the future cash flows expected to be derived from an asset. If it’s not
possible to estimate the cash flows generated by an individual asset, the impairment testing is performed on a cash-
generating unit level. Fortum defines the cash-generating unit as the smallest business area where the tested assets
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2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
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40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
83
83
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
generate cash flows that are independent of the cash flows generated by other assets in other business areas.
Goodwill is allocated to the cash-generating unit or lowest level of groups of cash-generating units that benefit from
the synergies of the acquired goodwill. Cash flow projections are based on the most recent long-term forecast that has
been approved by management and the Board of Directors. Cash flows arising from future investments such as new
plants are excluded unless projects have been started. The cash outflow needed to complete the started projects is
included.
Non-financial assets other than goodwill that suffered an impairment charge are reviewed for possible reversal of
the impairment at each reporting date.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS:
ASSIGNED VALUES AND USEFUL LIVES IN ACQUISITIONS
In an acquisition acquired intangible and tangible assets are fair valued and their remaining useful lives are
determined. Management believes that the assigned values and useful lives, as well as the underlying assumptions, are
reasonable. Different assumptions and assigned lives could have a significant impact on the reported amounts.
The Group has significant carrying values in property, plant and equipment, intangible assets and participations in
associated companies and joint ventures which are tested for impairment according to the accounting policy described
above.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS:
ASSUMPTIONS RELATED TO IMPAIRMENT TESTING
The Group has significant carrying values in property, plant and equipment, intangible assets and participations
in associated companies and joint ventures which are tested for impairment according to the accounting policy
described in the notes. The recoverable amounts of cash-generating units have been determined based on value in
use calculations. These calculations are based on estimated future cash flows from most recent approved long-term
forecast. Preparation of these estimates requires management to make assumptions relating to future expectations.
Assumptions vary depending on the business the tested assets are in. For power and heat generation business
the main assumptions relate to the estimated future operating cash flows and the discount rates that are used in
calculating the present value.
Estimates are also made in an acquisition when determining the fair values and remaining useful lives of acquired
intangible and tangible assets.
EUR million
Cost 31 December
Impact from change in accounting
principle (IFRS 15) 1)
Cost 1 January
Translation differences and other
adjustments
Acquisition of subsidiary companies
Capital expenditure
Changes in emissions rights
Disposals
Sale of subsidiary companies
Reclassifications
Cost 31 December
Accumulated depreciation 31 December
Impact from change in accounting
principle (IFRS 15) 1)
Accumulated depreciation 1 January
Translation differences and other
adjustments
Acquisition of subsidiary companies
Disposals
Sale of subsidiary companies
Reclassifications
Depreciation for the period
Accumulated depreciation 31 December
BS Carrying amount 31 December
Goodwill
2018
613
0
613
-27
0
0
0
0
0
3
588
0
0
0
0
0
0
0
0
0
0
588
2017
353
0
353
-27
286
0
0
0
0
0
613
0
0
0
0
0
0
0
0
0
0
613
Other intangible assets
2017
386
2018
764
32
796
-21
22
53
16
-24
-6
35
869
313
12
325
-12
0
-24
0
0
81
370
499
0
386
-20
381
18
0
-14
-2
15
764
273
0
273
-6
30
-14
-1
2
30
313
451
Total
2018
1,377
32
1,409
-49
22
53
16
-24
-6
37
1,457
313
12
325
-12
0
-24
0
0
81
370
1,087
2017
739
0
739
-47
667
18
0
-14
-2
15
1,377
273
0
273
-6
30
-14
-1
2
30
313
1,064
1) See additional information in Note 1 Accounting policies and Note 6 Segment reporting
Goodwill
Total goodwill in the balance sheet as of 31 December 2018 amounted to EUR 588 million (2017: 613)�
In 2018 Fortum finalised the purchase price allocation of Hafslund Markets Group and Fortum Oslo Varme
Group acquired in 2017� The acquisitions enable scale benefits and combination of competences that support
Fortum’s strategic growth and cash flow ambitions in the Nordic retail electricity and district heating markets
and will also enhance the development of new and greener technologies and services� Hafslund Markets is
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
84
84
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
integrated in Consumer Solutions segment and Fortum Oslo Varme in City Solutions segment� The goodwill
from the acquisition is allocated to these segments�
See more information on the acquisitions in Note 3 Acquisitions and disposals�
Goodwill in groups of cash-generating units
EUR million
Consumer Solutions
City Solutions
Russia
Total carrying amount 31 December
2018
226
207
154
588
2017
228
208
177
613
Other intangible assets
Other intangible assets include capitalised sales commissions for customer acquisition with a carrying amount
totalling EUR 63 million at the end of 2018� The carrying amount consists of capitalised sales commission costs
totalling EUR 111 million and accumulated depreciations totalling EUR 49 million� The sales commissions were
mostly expensed until end of 2017, but are capitalised from 1 January 2018 onwards due to adoption of IFRS 15
Revenue from contracts with customers� See additional information on adoption of IFRS 15 in Note 1.6
Implementation of IFRS 9 and IFRS 15 from 1 January 2018 and Note 6 Segment reporting�
Other items in other intangible assets include customer contracts, costs for software products and software
licenses, bought emission rights and emission rights received free of charge, which are recognised to the lower of
fair value and historical cost�
17.1 Impairment testing
The impairment testing of the allocated goodwill in 2018 is described below�
Key assumptions
Power market development, recycling and
waste solutions market development
Regulation framework
Utilisation of power plants and treatment facilities
Forecasted maintenance investments
Discount rate
Basis for determining the value for key assumptions
Historical analysis and prospective forecasting
Current market setup and prospective forecasting
(e.g. CSA mechanism in Russia)
Past experience, technical assessment and forecasted
market development
Past experience, technical assessment and planned
maintenance work
Mostly market-based information
The cash flows used in determining the value in use for each cash generating unit are based on the most
recent long-term forecasts and are determined in local currency� The period covered by cash flows is related to
the useful lives of the assets being reviewed for impairment� The growth rate used to extrapolate the cash flow
projections until the end of assets’ useful lives is in line with the assumed inflation� In Russia the generation
capacity built after 2007 under the Russian Government’s Capacity Supply Agreements receives guaranteed
capacity payments for a period of 10 years�
The discount rate takes into account the risk profile of the country in which the cash flows are generated�
There have not been any major changes in the discount rate components or in the methods used to determine
them� The long-term pre-tax discount rate used were: City Solutions 7�3%, Consumer Solutions 6�9% and
Russia 11�4%�
The net operating assets of the CGUs and group of CGUs with allocated goodwill are tested yearly for possible
impairment� The tested net operating assets include both the goodwill and fair value adjustments arising from
the acquisition� As of 31 December 2018, the recoverable values were greater than their carrying values and
therefore no impairments were booked�
The Group has considered the sensitivity of key assumptions as part of the impairment testing� When doing
this any consequential effect of the change on the other variables has also been considered� The calculations are
most sensitive to changes in estimated future EBITDA levels and changes in discount rate�
Key assumptions used in impairment testing are presented below as well as the basis for determining the value
Management estimates that a reasonably possible change in the discount rate used or in future earnings would
of each assumption� Assumptions are based on internal and external data that are consistent with observable
market information, when applicable� The assumptions are determined by management as part of the long-term
forecasting process for the Fortum Group�
not cause the carrying amount to exceed its recoverable amount in any of the tested units�
Based on the sensitivity analysis done, if the estimated future EBITDA were 10% lower than management’s
estimates or pre-tax discount rate applied was 10% higher than the one used, the Group would not need to
recognise impairment losses for tested items�
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
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22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
85
85
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
18 Property, plant and equipment
ACCOUNTING POLICIES
Property, plant and equipment comprise mainly power and heat producing buildings and machinery buildings,
waterfall rights, district heating network and buildings and machinery as well as landfill sites and treatment areas
used in waste treatment operations. Property, plant and equipment are stated at historical cost less accumulated
depreciation and accumulated impairment losses as applicable in the consolidated balance sheet. Historical cost
includes expenditure that is directly attributable to the acquisition of an item and capitalised borrowing costs. Cost may
also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases
of property, plant and equipment. Acquired assets on the acquisition of a new subsidiary are stated at their fair values
at the date of acquisition.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of
the item can be measured reliably. All other repairs and maintenance expenses are charged to the income statement
during the financial period in which they are incurred.
Additionally the cost of an item of property, plant and equipment includes the estimated cost of its dismantlement,
removal or restoration.
See Note 30 Other provisions for information about asset retirement obligations and Note 29, Nuclear related
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each closing date. An asset’s
carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount. See further information on the impairment testing in Note 17 Intangible assets.
GOVERNMENT GRANTS
Grants from the government are recognised at their fair value when there is a reasonable assurance that the grant
will be received and the Group will comply with all attached conditions. Government grants relating to costs are
deferred and recognised in the income statement over the period necessary to match them with the costs that they are
intended to compensate. Government grants relating to the purchase of property, plant and equipment are deducted
from the acquisition cost of the asset and are recognised as income by reducing the depreciation charge of the asset
they relate to.
BORROWING COSTS
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to
the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Qualifying
assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.
assets and liabilities, for information about provisions for decommissioning nuclear power plants.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Land, water areas and waterfall rights are not depreciated since they have indefinite useful lives. Depreciation
on other assets is calculated using the straight-line method to allocate their cost to their residual values over their
estimated useful lives, as follows:
Hydro power plant buildings, structures and machinery
Thermal power plant buildings, structures and machinery
Nuclear power plant buildings, structures and machinery
CHP power plant buildings, structures and machinery
Recycling and waste treatment facility buildings, structures and machinery
Solar and Wind power plant structures and machinery
District heating network
Other buildings and structures
Other tangible assets
Other machinery and equipment
Other non-current investments
40–50 years
25 years
25 years
15–25 years
15–40 years
25 years
30–40 years
20–40 years
20–40 years
3–20 years
5–10 years
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
86
86
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
EUR million
Cost 1 January
Translation differences and other adjustments
Acquisition of subsidiary companies
Capital expenditure
Nuclear asset retirement cost
Disposals
Sale of subsidiary companies
Reclassifications
Cost 31 December
Accumulated depreciation 1 January
Translation differences and other adjustments
Acquisition of subsidiary companies
Disposals
Sale of subsidiary companies
Depreciation for the period
Reclassifications
Accumulated depreciation
31 December
Land and waterfall
rights
2018
2,694
-104
0
1
0
0
-1
1
2,591
0
0
0
0
0
0
0
0
2017
2,765
-89
15
2
0
-1
0
3
2,694
0
0
0
0
0
0
0
0
Buildings, plants and
structures
2018
3,805
-208
3
5
0
-33
-3
281
3,851
2017
3,621
-154
161
15
0
-21
-49
232
3,805
Machinery and
equipment
2018
8,335
-328
8
3
16
-30
-132
107
7,979
2017
7,147
-237
900
139
-6
-40
-14
445
8,335
1,629
-86
0
-33
0
113
54
1,550
-38
52
-17
-9
112
-21
3,349
-177
0
-29
0
340
-55
2,898
-72
244
-36
-3
317
1
1,678
1,629
3,427
3,349
BS Carrying amount 31 December
2,591
2,694
2,173
2,175
4,552
4,986
Other tangible assets
2018
163
-3
0
0
0
0
0
9
170
133
-2
0
0
0
3
1
135
35
2017
135
-2
0
0
0
-1
0
31
163
114
-2
0
-1
0
4
18
133
29
Advances paid and
construction in progress
2017
824
-18
32
516
0
1
-2
-726
627
2018
626
-82
1
522
0
0
0
-436
631
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
1
Total
2018
15,623
-725
14
532
16
-64
-136
-37
15,222
5,113
-265
0
-62
0
455
0
2017
14,492
-500
1,109
672
-6
-62
-65
-15
15,623
4,562
-112
297
-54
-12
434
-2
5,241
5,113
631
626
9,981
10,510
The decrease in property, plant and equipment arises mainly from
translation differences and divestment of a 54% share in a solar power
company�
See additional information on the divestment in Note 3
Acquisitions and disposals�
Property, plant and equipment that are subject to restrictions in
the form of real estate mortgages amount to EUR 158 million (2017: 318)�
See Note 36 Pledged assets and contingent liabilities�
18.1 Capitalised borrowing costs
EUR million
1 January
Translation differences and other adjustments
Increases / disposals
Sale of subsidiary companies
Reclassification
Depreciation
31 December
Buildings, plants and
structures
2018
59
-6
0
0
3
0
56
2017
55
-3
0
0
10
-2
59
Machinery
and equipment
2018
175
-20
0
-4
6
-11
146
Advances paid and
construction in progress
2017
41
-1
6
0
-34
0
12
2018
12
-1
10
0
-9
0
12
2017
162
-11
10
0
22
-8
175
Total
2018
245
-26
10
-4
0
-11
214
2017
258
-16
16
0
-3
-10
245
Borrowing costs of EUR 10 million were capitalised in 2018 (2017: 16)� The interest rate used for capitalisation varied between 2%–6% (2017: 2%–13%)�
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
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Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
87
87
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
18.2 Capital expenditure 1)
EUR million
Generation
Hydropower
Nuclear power
Fossil-based electricity
Other renewable-based electricity
Other
Total Generation
City Solutions
Fossil-based heat
Fossil-based electricity
Renewable, of which
waste
biofuels
other
District heat network
Other
Total City Solutions
Consumer Solutions
Other
Total Consumer Solutions
Russia
Fossil-based electricity
Fossil-based heat
Renewable-based electricity, wind
Total Russia
Other
Renewable-based electricity, wind
Renewable-based electricity, solar
Other
Total Other
Total
Of which investments in CO2 free production
Finland
2018
20
99
8
126
5
34
20
15
0
14
7
60
9
9
2
17
19
215
135
2017
24
84
3
111
2
23
17
6
0
11
4
41
2
2
25
25
179
115
Sweden
2018
59
2017
62
59
62
0
6
6
0
0
0
1
6
14
14
9
1
9
89
67
1
1
10
11
2
2
22
7
28
104
84
1) Includes capital expenditure to both intangible assets and property, plant and equipment.
Russia
2018
2017
Poland
2018
2017
Norway
2018
Other countries
2017
2018
2017
Total
2018
7
52
52
0
0
18
1
78
8
8
0
0
86
0
3
0
72
72
13
1
90
1
1
92
0
0
9
9
0
0
16
0
26
16
16
51
4
55
97
51
13
13
13
2
2
24
7
31
46
24
0
5
5
0
0
11
3
19
0
19
5
24
43
19
0
0
4
3
0
8
3
15
0
99
3
102
115
99
28
22
5
54
54
5
81
18
53
152
152
53
79
99
8
186
12
106
92
15
0
60
12
190
47
47
28
22
5
54
62
19
26
108
584
278
2017
87
84
0
0
3
174
6
0
112
106
7
0
32
19
170
7
7
81
18
53
152
45
99
42
187
690
375
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
88
88
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Fortum classifies investments in four main categories,
EUR million
400
350
300
250
200
150
100
50
0
367
206
148
152
86
95
131
88
Maintenance
investments
Investments
required by
legislation
Investments
increasing
productivity
Growth
investments
2017
2018
18.2.1 Generation
In Finland, Fortum invested EUR 99 million (2017: 84) into the Loviisa
nuclear power plant� Fortum invested additionally EUR 79 million
(2017: 87) into hydro production, mainly maintenance, legislation and
productivity investments� The biggest of these were Åsen refurbishment
EUR 10 million in Sweden and Imatra dam safety EUR 10 million in
Finland� Investments in CO2 free production were EUR 178 million
(2017: 171)�
18.2.2 City Solutions
Growth investments in City Solutions totalled EUR 100 million
(2017: 107) in year 2018� The largest investment project in 2018 was
the new CHP plant in Zabrze, Poland� Maintenance, legislation and
productivity investments totalled EUR 89 million (2017: 62)� This
amount consists mainly of investments in district heat networks and
plants as well as the maintenance of existing CHP plants and measures
defined by legal requirements� Investments in CO2 free production were
EUR 15 million (2017: 7)
18.2.3 Consumer Solutions
Investments in Consumer solutions totalled EUR 47 million (2017: 7)�
The amount consists mainly of sales commissions for customer
acquisition that are capitalised starting from the implementation of IFRS
15 in 2018 (see Note 1.6 Implementation of IFRS 9 and IFRS 15 from
1 January 2018) and new product development costs�
18.2.4 Russia
Growth investments in Russia totalled EUR 10 million (2017: 96)�
Additionally, EUR 44 million (2017: 56) was invested in maintenance,
legislation and productivity projects� Investments in CO2 free production
were EUR 5 million (2017:53)�
18.2.5 Other
Other Division’s investments include solar investments in India
EUR 19 million (2017: 99) and investments in wind power production
EUR 62 million (2017: 45)� Wind investments include Solberg wind
park in Sweden, as well as Ånstadblåheia and Sørfjord wind parks in
Norway� Other Division invested also in Charge and Drive EUR 9 million
(2017: 13), mainly charging poles in Norway� Investments in CO2 free
production were EUR 81 million (2017: 144)�
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
89
89
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
19 Participations in associated companies and joint
ventures
ACCOUNTING POLICIES
The Group’s interests in associated companies and jointly controlled entities are accounted for using the equity
method of accounting. Assets acquired and liabilities assumed in the investment in associates or joint ventures are
measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of
the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than
the fair value of the net assets of the associate or joint venture acquired, the difference is recognised directly in the
income statement.
The Group’s share of its associates or joint ventures post-acquisition profits or losses after tax and the expenses
related to the adjustments to the fair values of the assets and liabilities assumed are recognised in the income
statement. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment.
The Group's share of post-acquisition adjustments to associates or joint ventures equity that has not been recognised
in the associates or joint ventures income statement, is recognised directly in Group's shareholder's equity and against
the carrying amount of the investment.
When the Group’s share of losses in an associate or a joint venture equals or exceeds its interest in the associate
or joint venture, including any other unsecured receivables, the Group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of the associate or joint venture.
Unrealised gains on transactions between the Group and its associates or joint ventures are eliminated to the extent
of the Group’s interest in the associate or joint venture. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Accounting policies of associates or joint ventures have
been changed where necessary to ensure consistency with the policies adopted by the Group.
If more recent information is not available, the share of the profit of certain associated or joint venture companies is
included in the consolidated accounts based on the latest available information.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Management is required to make significant judgements when assessing the nature of Fortum's interest in its investees
and when considering the classification of Fortum's joint arrangements. In the classification, emphasis has been put on
decision-making, legal structure and financing of the arrangements.
19.1 Principal associated companies and joint ventures
OKG AB
Nature of the relationship Co-owned
nuclear
company
Kraftgrupp AB Kemijoki Oy
Co-owned
hydro
company
Co-owned
nuclear
company
Forsmarks
Classification
Segment
Associated
company
Generation
Associated
company
Associated
company
Generation Generation
Uniper SE
International
energy
company
(listed)
Associated
company
Other
TGC-1
Energy
company
(listed)
TVO Oyj
Co-owned
nuclear
company
Stockholm
Exergi AB
Power
and heat
company
Associated
company
Joint
venture
Russia Generation
Joint
venture
City
Solutions
Sweden
50
50
Domicile
Ownership interest, % 1)
Votes, %
Sweden
46
46
Sweden
26
26
Finland
58
27
Germany
49.99
49.99
Russia
29
29
Finland
25
25
1) Kemijoki and TVO have different series of shares. The ownership interest varies due to the changes in equity assigned to the different share
series. The ownership interests for 2017 for Kemijoki Oy and TVO were 59% and 26% respectively.
Shareholdings in power production companies
Power plants are often built jointly with other power producers� Under the consortium agreements, each owner
is entitled to electricity in proportion to its share of ownership or other agreements and each owner is liable
for an equivalent portion of costs� The production companies are not profit making, since the owners purchase
electricity at production cost including interest cost and production taxes� The share of profit of these companies
is mainly IFRS adjustments (e�g� accounting for nuclear related assets and liabilities) and depreciations on fair
value adjustments from historical acquisitions since the companies are not profit making under local accounting
principles�
Fortum has material shareholdings in such power production companies (mainly nuclear and hydro) that
are consolidated using equity method either as associated companies (OKG AB, Forsmarks Kraftgrupp AB and
Kemijoki Oy) or in some cases as joint ventures (Teollisuuden Voima Oyj (TVO))�
Management judgement is required when testing the carrying amounts for participations in associated companies
In Sweden nuclear production company shareholdings are 45�5% ownership of the shares in OKG AB and 25�5%
and joint ventures for impairment. See Note 17 Intangible assets for more information.
ownership of the shares in Forsmarks Kraftgrupp AB� Excluding non-controlling interests in the subsidiaries,
Fortum’s participation in the companies are 43�4% and 22�2% respectively, which reflects the share of electricity
produced that Fortum can sell further to the market� The minority part of the electricity purchased is invoiced
further to each minority owner according to their respective shareholding and treated as pass-through�
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
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Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
90
90
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Summarised financial information of the principal associated companies and joint
ventures
Impact of different accounting principles presented in the tables below on the line Fair values on acquisitions and
different accounting principles include mainly IFRS adjustments for Nuclear liabilities and assets and capitalised
borrowing costs in Swedish associates� Fortum records its share of nuclear related assets and liabilities in its
nuclear associated companies according to equity method� The basis for recognition is similar as for Loviisa
power plant, see accounting principles in Note 29 Nuclear related assets and liabilities�
The purchase price allocation for Uniper acquisition is still on-going and Fortum is evaluating potential fair
value adjustments and identifying potential differences in order to align the accounting principles� The purchase
price allocation will take time due to the size of transaction and will be completed within the one-year window
from the acquisition date according to IFRS� Difference between the acquisition price and Fortum’s share of
Uniper’s net book value acquired is presented below on line ‘Difference compared to acquisition price’�
In Finland Fortum has an ownership in power production company TVO that has three series of shares which
entitle the shareholders to electricity produced in the different power plants owned by TVO�
Shares in series A entitle to electricity produced in nuclear power plants Olkiluoto 1 and 2 and Fortum owns
26�6% of these shares� Series B entitles to electricity in the nuclear power plant presently being built, Olkiluoto 3,
and Fortum’s ownership in this share series is 25%� Series C entitles to electricity produced in TVO’s share of the
coal condensing power plant Meri-Pori, and Fortum’s ownership in this share series is 26�6%� The Meri-Pori
power plant is accounted for as a joint operation in Fortum� Fortum increased its ownership in Series C of TVO to
100% on 1 January 2019, see Note 39 Events after the balance sheet date�
See also Associated companies in Note 37 Legal actions and official proceedings and Joint operations in
the accounting principles in Note 18 Property, plant and equipment�
The most significant hydro production company shareholding is 63�8% of the hydro shares and 28�27% of
the monetary shares in Kemijoki Oy� Each owner of hydro shares is entitled to the hydropower production in
proportion to its hydro shareholding�
Shareholdings in other principal associated companies and joint ventures
During 2018 Fortum has acquired 49�99% of the shares in Uniper, see Note 3 Acquisitions and disposals� As
Uniper is a listed company and publishes its interim reports later than Fortum, Fortum’s share of Uniper’s results
will be accounted for with a time-lag of one quarter with potential adjustments� Fortum’s financial statements
2018 includes Fortum’s share of Uniper’s third quarter results�
Fortum has also other shareholdings in listed companies such as Territorial Generating Company 1 (TGC-1)�
The shareholding in TGC-1 is accounted for as an associated company as Fortum has representatives in the Board
of Directors of the company� The share of profit of TGC-1 is accounted for based on previous quarter information
since updated interim information is not normally available�
In Sweden Fortum has a 50% ownership in Stockholm Exergi AB (publ) (previously AB Fortum Värme Holding
samägt med Stockholms stad) that is co-owned with the City of Stockholm through Stockholms Stadshus AB�
Stockholm Exergi produces district heating, district cooling and electricity and supplies heat and cooling to
customers in the Stockholm area�
In August 2017 Fortum sold its 34�1% stake in Hafslund ASA to the City of Oslo in connection with
the restructuring of the ownership in Hafslund� Hafslund ASA was accounted for as an associated company
and the share of profits was accounted for according to the latest quarter information available�
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
91
91
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Summarised financial information of the principal associated companies in 2018
Summarised financial information of the principal associated companies in 2017
EUR million
Balance sheet
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Equity
Attributable to the owners of the parent
Attributable to NCI
Statement of comprehensive income
Sales
Profit or loss
Attributable to the owners of the parent
Attributable to NCI
Total comprehensive income
Attributable to the owners of the parent
Attributable to NCI
Reconciliation to carrying amount in the
Fortum group
Group's interest in the equity of the associate
at 1 January 2018
Change in share of profit and OCI items
Dividends received
Acquired net assets
Translation differences and other
adjustments
Group's interest in the equity of the
associate at 31 December 2018
Fair values on acquisitions and different
accounting principles
Difference compared to acquisition price
Carrying amount at 31 December 2018
Market value for listed shares 1)
OKG AB
31 Dec 2017
581
273
760
82
13
13
0
1 Jan 2017–
31 Dec 2017
426
1
1
0
1
1
0
6
0
0
0
0
6
-6
-
0
Forsmarks
Uniper SE
Kraftgrupp AB Kemijoki Oy
31 Dec 2017
2,336
412
2,603
112
34
34
0
1 Jan 2017–
31 Dec 2017
637
-1
-1
0
-1
-1
0
9
0
0
0
0
9
82
-
90
group TGC-1 group
31 Dec 2017 30 Sept 2018 30 Sept 2018
1,730
258
309
138
1,540
1,429
112
33,213
27,311
21,070
27,819
11,635
11,027
608
472
8
352
71
57
57
0
1 Jan 2017–
31 Dec 2017
42
-11
-11
0
-11
-11
0
1 July 2018–
30 Sept 2018
17,091
1
-4
5
-10
1
-11
1 Oct 2017–
30 Sept 2018
1,229
132
127
5
130
125
5
41
-7
0
0
0
33
155
-
188
-
0
0
5,512
0
5,512
-
-1,544
3,968
4,135
454
40
-7
0
-66
421
-18
-
403
114
1) The market quotation for the TGC-1 share is affected by the low liquidity of the TGC-1 shares in the Russian stock exchanges. During 2018
trading volumes of TGC-1 shares in relation to the number of shares of the company were approximately 11% (2017: 10%).
EUR million
Balance sheet
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Equity
Attributable to the owners of the parent
Attributable to NCI
Forsmarks
OKG AB
31 Dec 2016
628
428
961
82
13
13
0
Kraftgrupp AB Kemijoki Oy
31 Dec 2016
465
12
264
144
69
69
0
31 Dec 2016
2,367
466
2,599
198
36
36
0
Hafslund ASA
group 1)
30 June 2017
2,329
325
1,091
585
978
978
0
TGC-1 group
30 Sept 2017
1,938
312
420
168
1,663
1,540
123
Statement of comprehensive income
Revenue
Profit or loss from continuing operations
Other comprehensive income
Total comprehensive income
Attributable to the owners of the parent
Attributable to NCI
1 Jan 2016–
31 Dec 2016
430
1
0
1
1
0
1 Jan 2016–
31 Dec 2016
756
0
0
0
0
0
1 Jan 2016–
31 Dec 2016
55
-10
0
-10
-10
0
1 Oct 2016–
30 June 2017
1,240
118
-12
105
105
0
1 Oct 2016–
30 Sept 2017
1,289
81
1
82
83
-1
Reconciliation to carrying amount in the
Fortum group
Group's interest in the equity of the associate
at 1 January 2017
Change in share of profit and OCI items
Dividends received
Divestments
Translation differences and other
adjustments
Group's interest in the equity of the
associate at 31 December 2017
Fair values on acquisitions and different
accounting principles
Carrying amount at 31 December 2017
Market value for listed shares 1)
6
0
0
0
0
6
16
22
10
0
0
0
-1
9
92
101
48
-6
0
0
0
41
157
197
349
36
-23
-363
1
0
0
0
471
32
-5
0
-44
454
-25
429
196
1) Divested in August 2017, see also Note 3 Acquisition and disposals.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
92
92
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Summarised financial information of the principal joint ventures in 2018 and 2017
EUR million
Balance sheet
Non-current assets
Current assets
of which cash and cash equivalents
Non-current liabilities
of which non-current interest-bearing liabilities
Current liabilities
of which current financial liabilities
Equity
Attributable to the shareholders of the company
Attributable to NCI
Statement of comprehensive income
Revenue
Depreciation and amortisation
Interest income
Interest expense
Income tax expense or income
Profit or loss from continuing operations
Other comprehensive income
Total comprehensive income
Attributable to the shareholders of the company
Attributable to NCI
Reconciliation to carrying amount in the Fortum group
Group's interest in the equity of the joint venture at 31 December
Impact from change in accounting principle (IFRS 9) 1)
Group's interest in the equity of the joint venture at 1 January
Change in share of profit and from OCI items
Dividends received
Investments
Divestments and capital returns
Translation differences and other adjustments
Group's interest in the equity of the joint venture at 31 December
Fair values on acquisitions and different accounting principles 2)
Carrying amount at 31 December
2018
TVO Oyj group Stockholm Exergi AB group
31 Dec 2018
2,581
313
15
1,271
903
418
246
1,205
1,205
0
30 Sept 2018
7,231
420
115
5,108
4,033
776
603
1,767
1,767
0
2017
TVO Oyj group Stockholm Exergi AB group
31 Dec 2017
2,642
266
15
1,461
1,071
230
112
1,216
1,216
0
30 Sept 2017
6,900
606
192
5,159
4,186
673
484
1,674
1,674
0
1 Oct 2017–30 Sept 2018
338
-55
12
-44
0
-10
7
-2
-2
0
1 Jan 2018–31 Dec 2018
683
-138
0
-17
-5
113
2
116
116
0
1 Oct 2016–30 Sept 2017
343
-56
14
-46
0
-4
9
5
5
0
1 Jan 2017–31 Dec 2017
689
-139
0
-17
-35
125
-7
118
117
0
280
145
425
-1
0
25
-2
0
448
-9
439
608
0
608
58
-39
0
0
-25
602
-68
535
279
-
279
0
0
-
0
0
280
-11
269
588
-
588
59
-21
-
0
-18
608
-75
533
1) See additional information in Note 1.6 Implementation of IFRS 9 and IFRS 15 from 1 January 2018.
2) Impact of different accounting principles include mainly IFRS adjustments for Nuclear liabilities and assets and capitalised borrowing costs. Fortum records its share of nuclear related assets and liabilities in its nuclear associated companies according to equity method. The basis for recognition is
similar as for Loviisa power plant, see accounting principles in Note 29 Nuclear related assets and liabilities.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
93
93
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
19.2 Participations and shares of profits in associated companies and joint ventures
Participations in associated companies and joint ventures in the balance sheet
EUR million
Principal associates
Principal joint ventures
Other associates
Other joint ventures
BS Carrying amount 31 December
2018
4,649
973
60
295
5,978
2017
749
802
121
229
1,900
Changes in participation during the year
EUR million
Historical cost
Historical cost 31 December
Impact from change in accounting principle (IFRS 9) 1)
Historical cost 1 January
Translation differences and other adjustments
Investments
Reclassifications 2)
Divestments and capital returns
Historical cost 31 December
Equity adjustments
Equity adjustments 1 January
Translation differences and other adjustments
Share of profits of associates and joint ventures
Reclassifications 2)
Divestments
Dividends received
OCI items associated companies and joint ventures
Equity adjustments 31 December
2018
2017
Associated
companies
Joint
ventures
Associated
companies
Joint
ventures
680
20
699
-33
3,969
-3
-83
4,549
190
-29
-32
41
0
-10
1
160
598
145
743
-17
97
20
-12
831
432
-19
71
0
0
-51
5
437
864
864
-30
83
-1
-236
680
289
-18
73
1
-128
-29
2
190
636
636
-8
52
-81
0
598
324
-13
75
81
0
-29
-5
432
Carrying amount at 31 December
4,709
1,269
870
1,031
1) See additional information in Note 1.6 Implementation of IFRS 9 and IFRS 15 from 1 January 2018.
2) On 31 August 2018, Fortum sold a 54% share of its solar power company and as a consequence the subsidiary was reclassified as a joint
venture.
During 2018 Fortum received EUR 61 million (2017: 58) in dividends from associates and joint ventures of which
EUR 39 million (2017: 21) was received from Stockholm Exergi� Dividends received during 2017 include EUR 23
million from Hafslund ASA�
For information about investments and divestments of shares in associated companies, see Note 3 Acquisitions
and disposals�
Share of profit of associates and joint ventures
EUR million
Principal associates
OKG AB
Forsmarks Kraftgrupp AB
Kemijoki Oy
Uniper SE
TGC-1
Hafslund ASA (divested in August 2017)
Principal associates, total
Principal joint ventures
Stockholm Exergi AB
TVO Oyj
Principal joint ventures, total
Other associates
Other joint ventures
IS Total
2018
2017
-58
-7
-9
-2
40
-
-35
61
1
62
3
9
38
8
2
-9
0
32
39
73
66
-4
63
0
12
148
There are no unrecognised share of losses of associated companies and joint ventures�
Fortum has reassessed assumptions used for all nuclear related assets and liabilities as of 31 December 2018�
Assumptions have been changed for the respective balances of the co-owned nuclear companies in Finland and
Sweden, i�e� Teollisuuden Voima Oyj (TVO), Oskarshamn Kraft Grupp AB (OKG), and Forsmarks Kraftgrupp AB�
The total impact of the change to share of profit from these associated companies and joint ventures was EUR -37
million, net of tax, and including additional nuclear waste liability related to legacy waste obligations for Swedish
nuclear� The net profit impact from all these nuclear related adjustments is close to zero� For additional
information see Note 29 Nuclear related assets and liabilities�
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
94
94
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
19.3 Transactions and balances
Associated company transactions
EUR million
Sales to associated companies
Interest income on loan receivables to associated companies
Purchases from associated companies
2018
0
12
256
2017
1
12
319
Purchases from associated companies include mainly purchases of nuclear and hydro power at production cost
including interest costs and production taxes�
Joint venture balances
EUR million
Receivables from joint ventures
Long-term interest-bearing loan receivables
Finance lease receivables from joint ventures
Trade receivables
Other receivables
Liabilities to joint ventures
Long-term loan payables
Trade payables
Other payables
2018
60
0
53
18
293
31
14
2017
208
41
23
17
285
19
7
Associated company balances
EUR million
Receivables from associated companies
Long-term interest-bearing loan receivables
Trade receivables
Other receivables
Liabilities to associated companies
Long-term loan payables
Trade payables
2018
581
1
0
0
2
For more info about receivables from associated companies, see Note 21 Interest-bearing receivables�
Joint venture transactions
EUR million
Sales to joint ventures
Interest income on joint venture loan receivables
Purchases from joint ventures
2018
39
0
124
2017
656
1
1
2
0
2017
109
1
153
Purchases from joint ventures include mainly purchases of nuclear and hydro power at production cost including
interest costs and production taxes�
Change in long-term interest-bearing loan receivables, see Note 1.6 Implementation of IFRS 9 and IFRS 15
from 1 January 2018�
For more info about interest-bearing receivables from joint ventures, see Note 21 Interest-bearing
receivables�
20 Other non-current assets
EUR million
Other investments
Interest-free receivables
BS Total
2018
49
90
139
2017
65
74
140
Other investments, i�e� shares which are not classified as associated companies or joint ventures, consist mainly
of shares in unlisted companies of EUR 49 million (2017: 65)� This includes Fortum’s indirect shareholding in
Fennovoima of EUR 33 million (Dec, 31 2017: 25)� Fair value gains and losses of Other investments are booked
through profit and loss� Other investments at fair value through other comprehensive income are immaterial�
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
95
95
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
21 Interest-bearing receivables
22 Inventories
EUR million
Long-term loan receivables from associated companies
Long-term loan receivables from joint ventures
Finance lease receivables from joint ventures
Other long-term interest-bearing receivables
BS Total long-term interest-bearing receivables
Other short-term interest-bearing receivables
Total short-term interest-bearing receivables
Total
2018
2017
Carrying
amount
581
60
0
43
683
409
409
1,092
Fair value
601
68
0
43
712
409
409
1,121
Carrying
amount
656
208
41
106
1,010
395
395
1,406
Fair value
689
229
41
111
1,071
395
395
1,466
Long-term interest-bearing receivables include receivables from associated companies and joint ventures
EUR 641 million (Dec 31, 2017: 905)� These receivables include EUR 575 million (Dec 31, 2017: 638) from Swedish
nuclear companies, OKG AB and Forsmarks Kraftgrupp AB, which are mainly funded with shareholder loans, pro
rata each shareholder’s ownership�
Finance lease relating to heat pipelines in Tyumen area, which are leased to joint venture YUSTEK, has been
ACCOUNTING POLICIES
Inventories mainly consist of fuels consumed in the production process or in the rendering of services. Inventories
are stated at the lower of cost and net realisable value being the estimated selling price for the end product, less
applicable variable selling expenses and other production costs. Cost is determined using the first-in, first-out (FIFO)
method.
Inventories which are acquired primarily for the purpose of trading are stated at fair value less selling expenses.
EUR million
Nuclear fuel
Coal
Oil
Biofuels
Materials and spare parts
Other inventories
BS Total
2018
72
52
7
4
56
43
233
2017
83
45
7
3
54
25
216
reassessed and classified as operating lease�
Write-downs in inventories amounted to EUR 6 million (2017: 0)�
Interest-bearing receivables includes also EUR 70 million (2017: 102) from SIBUR, a Russian gas processing
and petrochemicals company regarding divested shares of OOO Tobolsk CHP�
Short-term interest-bearing receivables include EUR 379 million (2017: 363) restricted cash mainly given as
collateral for commodity exchanges� The new European Market Infrastructure Regulation (EMIR) came into force
in 2016 requiring fully-backed guarantees�
For further information regarding credit risk management, see Note 4.7 Credit risk�
Interest-bearing receivables
EUR million
Long-term loan receivables
Short-term receivables
Total interest-bearing receivables
Effective
interest
rate, %
2.5
0.4
1.7
Carrying
amount
2018
683
409
1,092
Repricing
Under
1 year 1–5 years
4
-
4
633
409
1,042
Over
5 years
45
-
45
Fair
value
2018
712
409
1,121
Carrying
amount
2017
1,010
395
1,406
Fair
value
2017
1,071
395
1,466
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
96
96
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
23 Trade and other receivables
ACCOUNTING POLICIES
Trade receivables include revenue based on an estimate of electricity, heat and cooling already delivered but not yet
measured and not yet invoiced.
Impairment losses for trade receivables are calculated according to the expected credit loss (“ECL”) model. For
large trade receivables, ECL is calculated for the individual customer based on the probability of default and expected
recovery rate. These estimates are based on the customer’s rating and adjusted if there are indications of decreased
creditworthiness, e.g. based on payment behaviour. ECL for trade receivables from small customers are calculated
on portfolio basis by country and business segment. The impairment reservations are based on historical analysis of
losses when possible, or on average default rates for customers based on externally available information. These rates
be adjusted if there are any forward-looking indicators showing changes in expected credit losses. Trade receivables
overdue more than 180 days are generally considered to be credit-impaired and reservations are made for the full
amount, adjusted for expected recovery rates.
EUR million
Trade receivables
Accrued interest income
Accrued income and prepaid expenses
Cash settlements for futures
Other receivables
BS Total
2018
800
1
59
592
168
1,620
2017
743
1
29
85
139
997
Cash settlements for futures has increased mainly due to higher electricity prices for the hedging period� Futures
are cash settled daily on Nasdaq Commodities exchange�
23.1 Trade receivables
Ageing analysis of trade receivables
EUR million
Not past due
Past due 1–30 days
Past due 31–90 days
Past due 91–180 days
Past due more than 181 days
Total
2018
Expected credit
loss allowance
2
2
4
11
66
85
Expected credit
loss rate, %
0
3
24
73
86
10
Gross
712
63
17
15
77
885
2017
Gross
632
54
36
19
68
809
Impaired
2
2
3
3
57
66
Changes in expected credit loss allowance
EUR million
Closing balance 31 December 2017 under IAS 39
Impact from change in accounting principle
Opening balance 1 January 2018 under IFRS 9
Expected credit loss allowance recognised during the period
Write-offs
Recovery of previously recognised expected credit loss allowance
Translation differences and other changes
Closing balance 31 December 2018 under IFRS 9
2018
66
-1
64
27
-9
-5
7
85
On 31 December 2018, EUR 61 million of the expected credit loss allowance refers to the Russia segment�
Trade receivables by currency (Gross)
EUR million
EUR
SEK
RUB
NOK
PLN
Other
Total
2018
234
137
197
217
84
16
885
2017
206
137
207
177
69
13
809
Trade receivables are arising from a large number of customers mainly in EUR, SEK, RUB and NOK mitigating
the concentration of risk�
For further information regarding credit risk management and credit risks, see Counterparty risks in the
Operating and financial review and Note 4.7 Credit risk�
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
97
97
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
24 Liquid funds
ACCOUNTING POLICIES
Cash and cash equivalents in Liquid funds include cash in hand, deposits held at call with banks and other short-
term, highly liquid investments with maturities of three months or less. Deposits and securities with maturity more than
3 months include fixed term deposits and commercial papers with maturity more than three months but less than
twelve months. Deposits and securities are measured at amortised cost.
Bank overdrafts are shown within borrowings in current liabilities in the balance sheet. Cash collaterals or otherwise
restricted cash are treated as short-term interest-bearing receivables.
EUR million
Cash at bank and in hand
Deposits and securities with maturity under 3 months
Cash and cash equivalents
Deposits and securities with maturity more than 3 months
BS Total
2018
203
353
556
29
584
2017
1,928
1,253
3,182
715
3,897
Liquid funds consist of deposits and cash in bank accounts amounting to EUR 518 million and commercial
papers EUR 66 million� The average interest rate on deposits and securities excl� Russian deposits on
31 December 2018 was -0�11% (2017: -0�27%)� Liquid funds held by PAO Fortum amounted to EUR 317 million
(2017: 246), of which EUR 316 million (2017: 231) was held as bank deposits� The average interest rate for this
portfolio was 6�9% at the balance sheet date�
Liquid funds totalling EUR 168 million (2017: 3,348) are placed with counterparties that have an investment
grade rating� In addition, EUR 416 million (2017: 549) have been placed with counterparties separately reviewed
and approved by the Group’s credit control department�
The committed and undrawn credit facilities amounted to EUR 1,800 million (2017: 1,800)�
For further information regarding credit risk management and credit risks, see Note 4.7 Credit risk�
25 Share capital
EUR million
Registered shares at 1 January
Cancellation of Treasury shares
Registered shares at 31 December
2018
2017
Number of shares
888,367,045
72,580
888,294,465
Share
capital Number of shares
888,367,045
3,046
-
-
888,367,045
3,046
Share
capital
3,046
-
3,046
Fortum Corporation has one class of shares� By the end of 2018, a total of 888,294,465 shares had been issued�
Each share entitles the holder to one vote at the Annual General Meeting� All shares entitle holders to an equal
dividend� At the end of 2018 Fortum Corporation’s share capital, paid in its entirety and entered in the trade
register, was EUR 3,046,185,953�00�
In the merger of Länsivoima Oyj (former Lounais-Suomen Sähkö Oy) to Fortum Corporation in 2000, those
shareholders of Länsivoima Oyj that did not produce their share certificates and did not request their rights
to be registered in the book-entry system, received their respective shares of Fortum Corporation as merger
consideration to a joint book-entry account opened on their behalf (the “Joint Account”)� The Annual General
Meeting 2018 of Fortum Corporation decided, that the rights to all such shares entered in the Joint Account and
to the rights attached to such shares that had not been requested to be registered in the book-entry system prior
to the decision by the Annual General Meeting 2018, were forfeited� In addition to the shares, the rights attached
to such shares, such as undrawn dividend, were forfeited� The provisions applicable to treasury shares held by
the company were applied to the forfeited shares� On 17 December 2018, Board of Directors decided to cancel all
these 72,580 Fortum shares owned by the company without decreasing the share capital� The cancellation was
entered in the Trade Register on 21 December 2018�
Fortum Corporation’s shares are listed on Nasdaq Helsinki� The trading code is FORTUM (FUM1V before
25 January 2017)� Fortum Corporation’s shares are in the Finnish book entry system maintained by Euroclear
Finland Ltd�
Details on the President and CEO and other members of the Fortum Executive Management Team’s
shareholdings and interest in the equity incentive schemes is presented in Note 11 Employee benefits�
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
98
98
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
25.1 Authorisations from the Annual General Meeting 2018
On 28 March 2018, the Annual General Meeting decided to authorise the Board of Directors to decide on
the repurchase and disposal of the company’s own shares up to a maximum of 20,000,000 shares, which
corresponds to approximately 2�25% of all the shares in the company� It was also decided that own shares could
be repurchased or disposed of in connection with acquisitions, investments or other business transactions, or
be retained or cancelled� The repurchases or disposals could not be made for the purposes of the company’s
incentive and remuneration schemes� The authorisation cancelled the authorisation resolved by the Annual
General Meeting of 2017� The authorisation is effective until the next Annual General Meeting and, in any event,
for a period no longer than 18 months� The authorisation had not been used by the end of 2018�
25.2 Convertible bond loans and bonds with warrants
Fortum Corporation has not issued any convertible bonds or bonds with attached warrants, which would
entitle the bearer to subscribe for Fortum shares� The Board of Directors of Fortum Corporation has no unused
authorisations from the General Meeting of shareholders to issue convertible bond loans or bonds with warrants
or increase the company’s share capital�
26 Non-controlling interests
Principal non-controlling interests
EUR million
PAO Fortum Group
AS Fortum Tartu Group
Fortum Oslo Varme AS Group
Other
BS Total
Russia
Estonia
Norway
2018
33
37
152
14
236
2017
37
34
150
18
239
27 Interest-bearing liabilities
Net debt
EUR million
Interest-bearing liabilities
Liquid funds
Net debt
2018
6,093
584
5,509
2017
4,885
3,897
988
Net debt is calculated as interest-bearing liabilities less liquid funds without deducting interest-bearing
receivables amounting to EUR 1,092 million (Dec 31,2017: 1,406)� Interest-bearing receivables mainly consist of
shareholder loans to partly owned nuclear companies regarded as long-term financing� For more information see
Note 21 Interest-bearing receivables�
Interest-bearing debt
EUR million
Bonds
Loans from financial institutions
Reborrowing from the Finnish State Nuclear Waste Management Fund
Other long-term interest-bearing debt
BS Total long-term interest-bearing debt
Current portion of long-term bonds
Current portion of loans from financial institutions
Current portion of other long-term interest-bearing debt
Commercial paper debt
Other short-term interest-bearing debt
BS Total short-term interest-bearing debt
Total interest-bearing debt
2018
1,746
1,799
1,158
303
5,007
750
48
5
207
76
1,086
6,093
2017
2,521
155
1,129
314
4,119
422
129
10
0
206
766
4,885
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
99
99
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Reconciliation of interest-bearing liabilities
Non-cash changes
EUR million
Bonds
Loans from financial institutions
Reborrowing from the Finnish State
Nuclear Waste Management Fund
Other interest-bearing debt
Total interest-bearing debt
1) Repayments and borrowings.
31 Dec 2017
2,943
283
1,129
530
4,885
EUR million
Bonds
Loans from financial institutions
Reborrowing from the Finnish State
Nuclear Waste Management Fund
Other interest-bearing debt
Total interest bearing debt
1) Repayments and borrowings.
31 Dec 2016
3,329
393
1,094
291
5,107
Cash
flow from
financing
activities 1) Divestments
Exchange
rate
differences
-13
-10
Fair value
changes and
amortised
cost 31 Dec 2018
2,496
-21
1,848
4
-58
-58
-6
-29
-17
1,158
592
6,093
-413
1,571
29
126
1,313
Non-cash changes
Cash
flow from
financing
activities 1) Acquisitions
-343
-144
35
13
-439
42
233
275
Exchange
rate
differences
-16
-8
Fair value
changes and
amortised
cost 31 Dec 2017
2,943
-27
283
-8
-31
-27
1,129
530
4,885
Interest-bearing debt
EUR million
Bonds
Loans from financial institutions
Reborrowing from the Finnish
State Nuclear Waste Management
Fund
Other long-term interest-bearing
debt 1)
Total long-term interest-bearing
debt 2)
Commercial paper debt
Other short-term interest-bearing
debt
Total short-term interest-bearing
debt
Total interest-bearing debt 3)
Repricing
Effective
interest
rate, %
3.7
0.9
Carrying
amount
2018
2,496
1,847
Under
1 year 1–5 years
1,552
-
847
1,847
Over
5 years
97
-
Fair
value
2018
2,629
1,901
Carrying
amount
2017
2,943
283
Fair
value
2016
3,143
303
0.5
3.6
2.2
0.1
-0.3
0.0
2.1
1,158
1,158
309
208
-
-
5,810
207
4,060
207
1,552
-
-
1,218
1,129
1,192
101
198
-
351
324
373
6,099
207
4,679
-
5,011
-
76
76
-
-
76
206
207
283
6,093
283
4,343
-
1,552
-
198
283
6,382
206
4,885
207
5,218
1) Includes loans from Finnish pension institutions EUR 38 million (2017: 48) and other loans EUR 270 million (2017: 276).
2) Including current portion of long-term debt EUR 803 million (Dec 31,2017: 560).
3) The average interest rate on loans and derivatives on 31 December 2018 was 2.4% (2017: 3.6%)
The interest-bearing debt increased in 2018 by EUR 1,208 million to EUR 6,093 million (2017: 4,885)� The amount
of short-term financing increased with EUR 77 million, and at the end of the year the amount of short-term
financing EUR 283 million (2017: 206) included 75 million (2017: 113) from Credit Support Annex agreements�
During the first quarter of 2018 Fortum increased the amount of reborrowing from the Finnish State Nuclear
Waste Management Fund and TVO by EUR 29 million to EUR 1,158 million� In March Fortum repaid two SEK
bonds equivalent to EUR 413 million (SEK 4�15 billion)� In June Fortum Oyj made a bridge loan drawdown of
EUR 1�75 billion from existing committed credit facilities for Fortum’s offer for Uniper shares� No major financing
transactions during last quarters�
The average interest rate for the portfolio consisting mainly of EUR and SEK loans was 1�7% at the balance
sheet date (2017: 2�4%)� Part of the external loans EUR 686 million (2017: 773) have been swapped to RUB and
the average interest cost for these loans including cost for hedging the RUB was 8�3% at the balance sheet
date (2017: 9�5%)� The average interest rate on total loans and derivatives at the balance sheet date was 2�4%
(2017: 3�6%)�
For more information please see Note 4 Financial risk management and Note 36 Pledged assets and
contingent liabilities�
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Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
100
100
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
27.1 Bond issues
Issued/Maturity
Fortum Corporation EUR 8,000 million EMTN Programme 1)
2009/2019
2011/2021
2012/2022
2013/2023
2013/2043
Total outstanding carrying amount 31 December 2018
1) EMTN = Euro Medium Term Note
Interest basis
Interest rate, %
Effective interest, %
Currency
Nominal value million
Fixed
Fixed
Fixed
Floating
Fixed
6.000
4.000
2.250
Stibor 3M+1.13
3.500
6.095
4.123
2.344
3.719
EUR
EUR
EUR
SEK
EUR
750
500
1,000
1,000
100
Carrying amount
EUR million
750
513
1,039
98
97
2,496
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Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
101
101
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
28 Income taxes in balance sheet
ACCOUNTING POLICIES
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the
consolidated income statement, because of items of income or expense that are taxable or deductible in other years
and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that
have been enacted or substantively enacted by the end of the reporting period.
Assumptions made include the expectation that future operating performance for subsidiaries will be consistent with
historical levels of operating results, recoverability periods for tax loss carry-forwards will not change, and that existing
tax laws and rates will remain unchanged into foreseeable future. Fortum believes that it has prudent assumptions in
developing its deferred tax balances
Assumptions and estimates regarding uncertain tax positions are supported by external legal counsel or expert
Deferred tax is provided in full, using the balance sheet approach on temporary differences arising between the
opinion.
tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if
the deferred tax arises from initial recognition of an asset or liability in a transaction other than a business combination
that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred
tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the closing date and
are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilised. Deferred tax assets are set off against deferred tax liabilities if
they relate to income taxes levied by the same taxation authority.
Deferred tax is provided on temporary differences arising from investments in subsidiaries, associates and joint
ventures, except where the timing of the reversal of the temporary difference is controlled by the Group, and it is
probable that the temporary difference will not be reversed in the foreseeable future.
The Group recognises liabilities for anticipated tax dispute issues based on estimates of whether additional taxes
will be due. No provision will be recognised in the financial statements if Fortum considers the claims unjustifiable.
Therefore, if taxes regarding ongoing tax disputes have to be paid before final court decisions, they will be booked as
a receivable. Where the final outcome of these matters is different from the amounts that were initially recorded, such
differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS:
ASSUMPTIONS AND ESTIMATES REGARDING FUTURE TAX CONSEQUENCES
Fortum has deferred tax assets and liabilities which are expected to be realised through the income statement over
the extended periods of time in the future. In calculating the deferred tax items, Fortum is required to make certain
assumptions and estimates regarding the future tax consequences attributable to differences between the carrying
amounts of assets and liabilities as recorded in the financial statements and their tax basis.
If the actual final outcome (regarding tax disputes) would differ negatively from management’s estimates with 10%,
the Group would need to increase the income tax liability by EUR 11 million as of 31 December 2018. For additional
information regarding tax disputes, see Note 37 Legal actions and official proceedings.
28.1 Deferred income taxes in the balance sheet
EUR million
BS Deferred tax assets
BS Deferred tax liabilities 1)
Net deferred taxes
2018
1 Jan Change
-3
100
97
73
-822
-749
31 Dec
70
-720
-651
2017
1 Jan Change
7
-203
-197
66
-616
-550
31 Dec
73
-819
-747
1) 1 January 2018 opening balance includes EUR -3 million of impact from change in accounting principle, IFRS 15. See additional information in
Note 1 Accounting policies and Note 6 Segment reporting.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority�
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Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
102
102
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Movement in deferred tax assets and liabilities 2018
EUR million
Closing balance 31 Dec
Impact from change in accounting principle (IFRS 15) 1)
1 Jan 2018
Charged to income statement
Charged to other comprehensive income
Exchange rate differences, reclassifications and other changes
Acquisitions and disposals
31 Dec 2018
1) See additional information in Note 1 Accounting policies and Note 6 Segment reporting.
Intangible assets
-101
-3
-104
0
0
3
-5
-106
Property, plant
and equipment
-806
Pension
obligations
21
Provisions
7
Derivative
financial
instruments
35
Tax losses
and tax credits
carry-forward
116
-806
-24
0
41
1
-788
21
0
-2
-1
0
20
7
-23
0
1
0
-15
35
-7
159
-18
0
169
116
-42
0
-3
0
70
-20
Other Net deferred taxes
-747
-3
-749
-87
162
28
-5
-651
-20
10
5
4
0
-1
Retained earnings when distributed as dividends are subject to withholding tax (e�g� Russia) or distribution tax (e�g� Estonia)� Provision has been made for these taxes only to extent that it is expected that these earnings will be remitted in
the foreseeable future� At the end of the year deferred income tax liabilities of EUR 32 million (2017: 28) have been recognised for the withholding tax and other taxes that would be payable on the distributions�
Change in deferred taxes 2018 are mainly related to change in derivative financial instruments through other comprehensive income�
Movement in deferred tax assets and liabilities 2017
EUR million
1 Jan 2017
Charged to income statement
Charged to other comprehensive income
Exchange rate differences, reclassifications and other changes
Acquisitions and disposals
31 Dec 2017
Intangible assets
-12
7
0
2
-98
-101
Property, plant
and equipment
-717
-38
0
29
-79
-806
Pension
obligations
14
1
3
1
2
21
Provisions
20
-10
0
-2
0
7
Derivative
financial
instruments
36
16
-18
1
0
35
Tax losses
and tax credits
carry-forward
100
8
0
-2
10
116
Other Net deferred taxes
-550
-42
-15
22
-161
-747
8
-26
0
-6
4
-20
Deferred tax assets and liabilities from acquisitions and disposals in 2017 are mainly related to restructuring of the ownership in Hafslund together with the City of Oslo, acquisition of Solar power plants in Russia and wind power
companies in Norway� In addition, the deferred tax asset relating to tax loss carry forwards increased net in 2017 mainly because of the additional taxable losses in the Netherlands partly offset by the usage of losses carry forwards in
Russia�
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12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
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Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
103
103
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Deferred income tax assets recognised for tax loss carry-forwards
Deferred income tax assets are recognised for tax loss carry-forward to the extent that realisation of the related
tax benefit through future profits is probable� The recognised tax assets relate to losses carry-forward with no
expiration date and partly with expiry date as described below�
In Belgium, Fortum has in previous years received income tax assessments for the years 2008–2012�
The additional taxes have been paid during prior years, in total EUR 114 million and based on supporting
legal opinions booked as an income tax receivable�
See Note 37 Legal actions and official proceedings�
EUR million
Losses without expiration date
Losses with expiration date
Total
2018
2017
Tax losses
197
110
307
Deferred
tax asset
43
28
70
Tax losses
413
103
516
Deferred
tax asset
90
26
116
Deferred tax assets of EUR 10 million (2017: 20) have not been recognised in the consolidated financial
statements, because the realisation is not probable� The major part of the unrecognised tax asset relates to loss
carry-forwards that are unlikely to be used in the foreseeable future�
Tax loss carry-forwards decreased in 2018 mainly because of use of losses carry forwards in Russia and
Sweden�
28.2 Income tax receivables
EUR million
Sweden
Belgium
Other
Total Income tax receivables
2018
41
114
17
172
2017
28
114
30
172
Income tax receivables reflect payments of corporate income tax done in relation to the year 2018 as well as
payments according to received tax audit assessments in relation to previous years�
In October 2018 the Administrative Court of Appeal in Sweden announced its decision relating to the income
tax assessment for the year 2013� The decision was favorable to Fortum� The additional taxes claimed 2013
have been paid during prior year, in total EUR 26 million and based on supporting legal opinion booked as an
income tax receivable� Due to the favorable decision the amount was refunded to Fortum in 2018� The income tax
receivable in Sweden 2018 of EUR 41 million relate to overpayment of preliminary income tax�
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12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
104
104
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
29 Nuclear related assets and liabilities
ACCOUNTING POLICIES
Fortum owns Loviisa nuclear power plant in Finland. In Fortum’s consolidated balance sheet, Share in the State Nuclear
Waste Management Fund and the Nuclear provisions relate to Loviisa nuclear power plant. Fortum’s nuclear related
provisions and the related part of the State Nuclear Waste Management Fund are both presented separately in the
balance sheet. Fortum’s share in the State Nuclear Waste Management Fund is accounted for according to IFRIC 5,
Rights to interests arising from decommissioning, restoration and environmental rehabilitation funds which states that
the fund assets are measured at the lower of fair value or the value of the related liabilities since Fortum does not
have control or joint control over the State Nuclear Waste Management Fund. The Nuclear Waste Management Fund is
managed by governmental authorities. The related provisions are the provision for decommissioning and the provision
for disposal of spent fuel.
The fair values of the provisions are calculated according to IAS 37 by discounting the separate future cash flows,
which are based on estimated future costs and actions already taken. The initial net present value of the provision for
decommissioning (at the time of commissioning the nuclear power plant) has been included in the investment cost and
is depreciated over the estimated operating time of the nuclear power plant. Changes in the technical plans etc., which
have an impact on the future cash flow of the estimated costs for decommissioning, are accounted for by discounting
the additional costs to the current point in time. The increased asset retirement cost due to the increased provision is
added to property, plant and equipment and depreciated over the remaining estimated operating time of the nuclear
power plant. For power plant units taken from use the increase is taken to income statement.
The provision for spent fuel covers the future disposal costs for fuel used until the end of the accounting period.
Costs for disposal of spent fuel are expensed during the operating time based on fuel usage. The impact of the
possible changes in the estimated future cash flow for related costs is recognised immediately in the income statement
based on the accumulated amount of fuel used until the end of the accounting period. The related interest costs due
to unwinding of the provision is recognised in the corresponding period.
The timing factor is taken into account by recognising the interest expense related to discounting the nuclear
provisions. The interest on the State Nuclear Waste Management Fund assets is presented as financial income.
Fortum’s actual share of the State Nuclear Waste Management Fund, related to Loviisa nuclear power plant,
is higher than the carrying value of the Fund in the balance sheet. The legal nuclear liability should, according to
the Finnish Nuclear Energy Act, be fully covered by payments and guarantees to the State Nuclear Waste Management
Fund. The legal liability is not discounted while the provisions are, and since the future cash flow is spread over a very
long time horison, the difference between the legal liability and the provisions are material.
The annual fee to the Fund is based on changes in the legal liability, the interest income generated in the State
Nuclear Waste Management Fund and incurred costs of taken actions.
Fortum also has minority interests in nuclear power companies, i.e. Teollisuuden Voima Oyj (TVO) in Finland
and OKG Aktiebolag (OKG) and Forsmarks Kraftgrupp AB (Forsmark) in Sweden. The minority shareholdings are
classified as associated companies and joint ventures and are consolidated with equity method. Both the Finnish and
the Swedish companies are non-profit making, i.e. electricity production is invoiced to the owners at cost including
depreciations, interest costs and production taxes accounted for according to local GAAP. Accounting policies of
the associates regarding nuclear assets and liabilities have been changed where necessary to ensure consistency with
the policies adopted by the Group.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS:
ASSUMPTIONS MADE WHEN ESTIMATING PROVISIONS RELATED TO NUCLEAR PRODUCTION
The provision for future obligations for nuclear waste management including decommissioning of Fortum’s nuclear
power plant and related spent fuel is based on long-term cash flow forecasts of estimated future costs. The main
assumptions are technical plans, timing, cost estimates and discount rate. The technical plans, timing and cost
estimates are approved by governmental authorities.
Any changes in the assumed discount rate would affect the provision. If the discount rate used would be lowered,
the provision would increase. Fortum has contributed cash to the State Nuclear Waste Management Fund based on
a non-discounted legal liability, which leads to that the increase in provision would be offset by an increase in the
recorded share of Fortum’s part of the State Nuclear Waste Management Fund in the balance sheet. The total effect
on the income statement would be positive since the decommissioning part of the provision is treated as an asset
retirement obligation. This situation will prevail as long as the legal obligation to contribute cash to the State Nuclear
Waste Management Fund is based on a non-discounted liability and IFRS is limiting the carrying value of the assets to
the amount of the provision since Fortum does not have control or joint control over the fund.
Based on the Nuclear Energy Act in Finland, Fortum has a legal obligation to fully fund the legal liability decided
by the governmental authorities, for decommissioning of the power plant and disposal of spent fuel through the State
Nuclear Waste Management Fund.
Both in Finland and in Sweden nuclear operators are legally obligated for the decommissioning of the plants
and the disposal of spent fuel (nuclear waste management). In both countries the nuclear operators are obligated
to secure the funding of nuclear waste management by paying to government operated nuclear waste funds.
The nuclear operators also have to give securities to guarantee that sufficient funds exist to cover future expenses of
decommissioning of the power plant and disposal of spent fuel.
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financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
105
105
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Fortum has reassessed the assumptions used for all nuclear related assets and liabilities as of 31 December
2018� The increase in the nuclear provision for the Loviisa nuclear power plant in Finland leads to recognition
of an additional share of the Finnish nuclear fund� As of 31 December 2018, Fortum still has EUR 254 million
in unrecognised nuclear waste fund assets for Loviisa� The increase in the provision and the additional share
in the fund are both included in Items affecting comparability� The changes in assumptions also had a positive
impact on interests presented in other financial expenses� The assumptions have also been changed for the
respective balances of the co-owned nuclear companies in Finland and Sweden, i�e� TVO, OKG and Forsmark�
The total impact of the change to share of profit from these associated companies and joint ventures was
EUR -37 million, net of tax, and including additional nuclear waste liability related to legacy waste obligations
for Swedish nuclear� The net profit impact from all these nuclear-related adjustments is close to zero�
29.1 Nuclear related assets and liabilities for 100% owned nuclear power plant, Loviisa
EUR million
Carrying values in the balance sheet
BS Nuclear provisions
BS Fortum’s share of the State Nuclear Waste Management Fund
Legal liability and actual share of the State Nuclear Waste Management Fund
Liability for nuclear waste management according to the Nuclear Energy Act
Funding obligation target
Fortum’s share of the State Nuclear Waste Management Fund
Share of the fund not recognised in the balance sheet
2018
899
899
1,180
1,180
1,153
254
2017
858
858
1,161
1,153
1,125
267
Legal liability for Loviisa nuclear power plant
The legal liability on 31 December 2018, decided by the Ministry of Economic Affairs and Employment in
November 2018, was EUR 1,180 million�
The legal liability is based on a cost estimate, which is done every year, and a technical plan, which is made
every third year� The current technical plan was updated in 2016� The legal liability is determined by assuming
that the decommissioning would start at the beginning of the year following the assessment year�
Fortum’s share in the State Nuclear Waste Management Fund
According to Nuclear Energy Act, Fortum is obligated to contribute funds in full to the State Nuclear Waste
Management Fund to cover the legal liability� Fortum contributes funds to the Finnish State Nuclear Waste
Management Fund based on the yearly funding obligation target decided by the governmental authorities in
connection with the decision of size of the legal liability� The current funding obligation target decided in
November 2018 is EUR 1,180 million�
Nuclear provisions
EUR million
BS 1 January
Additional provisions
Provision used
Unwinding of discount
BS 31 December
Fortum’s share in the State Nuclear Waste Management Fund
2018
858
29
-26
38
899
899
2017
830
4
-21
45
858
858
Nuclear provision and fund accounted according to IFRS
Nuclear provisions include the provision for decommissioning and the provision for disposal of spent fuel�
The carrying value of the nuclear provisions, calculated according to IAS 37, increased by EUR 41 million
compared to 31 December 2017, totalling EUR 899 million on 31 December 2018� The provisions are based on the
same cash flows for future costs as the legal liability, but the legal liability is not discounted to net present value�
The increase is mainly arising from the change in the assumptions used for the provisions�
The carrying value of the Fund in the balance sheet cannot exceed the carrying value of the nuclear provisions
according to IFRIC Interpretation 5� The Fund is from an IFRS perspective overfunded with EUR 254 million,
since Fortum’s share of the Fund on 31 December 2018 was EUR 1,153 million and the carrying value in
the balance sheet was EUR 899 million�
Fortum’s share of the Finnish Nuclear Waste Management Fund in Fortum’s balance sheet can in maximum
be equal to the amount of the provisions according to IFRS� As long as the Fund is overfunded from an IFRS
perspective, the effects to operating profit from this adjustment will be positive if the provisions increase more
than the Fund and negative if actual value of the fund increases more than the provisions� This accounting effect
is not included in Comparable operating profit in Fortum financial reporting� For more information see Note 7
Items affecting comparability�
Borrowing from the State Nuclear Waste Management Fund
Participants in the Finnish State Nuclear Waste Management Fund are allowed to borrow from the fund
according to certain rules� Fortum uses the right to borrow back and has pledged shares in Kemijoki Oy as
security for the loans� The loans are renewed yearly� See Note 27 Interest-bearing liabilities and Note 36
Pledged assets and contingent liabilities�
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12345678 910111213141516171819202122232425262728293031323334353637383940
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
106
106
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
29.2 Nuclear power plants in associated companies and joint ventures
OKG, Forsmark and TVO are non-profit making companies, i�e� electricity production is invoiced to the owners
at cost including depreciations, interest costs and production taxes� Invoiced cost is accounted for according to
local GAAP� In addition to the invoiced electricity production cost, Fortum makes IFRS adjustments to comply
with Fortum’s accounting principles� These adjustments include also Fortum’s share of the companies’ nuclear
waste funds and nuclear provisions�
The tables below present the 100% figures relating to nuclear funds and provisions for the companies as well
as Fortum’s net share�
TVO’s total nuclear related assets and liabilities (100%)
EUR million
Carrying values in TVO’s balance sheet
Nuclear provisions
Share of the State Nuclear Waste Management Fund
of which Fortum’s net share consolidated with equity method
TVO’s legal liability and actual share of the State Nuclear Waste Management Fund
Liability for nuclear waste management according to the Nuclear Energy Act
Share of the State Nuclear Waste Management Fund
Share of the fund not recognised in the balance sheet
2018
1,016
1,016
0
1,506
1,471
455
2017
953
953
0
1,482
1,437
484
TVO’s legal liability, provision and share of the fund are based on the same principles as described above for
Loviisa nuclear power plant and includes in 2018 the impact from adjustments following the reassesment�
TVO’s share of the Finnish State Nuclear Waste Management Fund is from an IFRS perspective overfunded
with EUR 455 million (of which Fortum’s share EUR 121 million), since TVO’s share of the Fund on 31 December
2018 was EUR 1,471 million and the carrying value in the balance sheet was EUR 1,016 million�
Participants in the Finnish State Nuclear Waste Management Fund are allowed to borrow from the fund
according to certain rules� Fortum is using the right to reborrow funds through TVO based on its ownership�
See more information in Note 27 Interest-bearing liabilities�
OKG’s and Forsmark’s total nuclear related assets and liabilities (100%)
EUR million
OKG’s and Forsmark’s nuclear related assets and liabilities 1)
Nuclear provisions
Share in the State Nuclear Waste Management Fund
Net amount
of which Fortum’s net share consolidated with equity method
2018
2017
3,930
3,230
-701
3,398
3,105
-293
-242
-114
1) Accounted for according to Fortum’s accounting principles. Companies’ statutory financial statements are not prepared according to IFRS.
In Sweden Svensk Kärnbränslehantering AB (SKB), a company owned by the nuclear operators, takes care of all
nuclear waste management related activities on behalf of nuclear operators� SKB receives its funding from the
Swedish State Nuclear Waste Management Fund, which in turn is financed by the nuclear operators�
Nuclear waste fees and guarantees are updated every third year by governmental decision after a proposal from
Swedish Radiation Safety Authority (SSM)� The proposal is based on cost estimates done by SKB� A new technical
plan for nuclear waste management was decided by SKB during 2016� In 2017 SKB submitted the cost estimates
based on the revised technical plan to SSM� In December 2017 the Swedish government decided the waste fees
and guarantees for years 2018–2020� Nuclear waste fees are currently based on future costs with the assumed
lifetime of 50 years (40 years in previous decision) for each unit of a nuclear power plant�
In addition to nuclear waste fees nuclear power companies provide guarantees for any uncovered liability and
unexpected events�
For more information regarding Fortum’s guarantees given on behalf of nuclear associated companies,
see Note 36 Pledged assets and contingent liabilities�
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12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
107
107
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
30 Other provisions
ACCOUNTING POLICIES
Provisions for environmental obligations, asset retirement obligations, restructuring costs and legal claims are recognised
when the Group has a present legal or constructive obligation as a result of past events to a third party, it is probable
that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation
using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to
the obligation. The increase in the provision due to the passage of time is recognised as interest expense.
ENVIRONMENTAL PROVISIONS
Environmental provisions are recognised, based on current interpretation of environmental laws and regulations,
when it is probable that a present obligation has arisen and the amount of such liability can be reliably estimated.
Environmental expenditures resulting from the remediation of an existing condition caused by past operations, and
which do contribute to current or future revenues, are expensed as incurred.
Environmental provisions include provisions for obligations to cover landfills and clean-up obligations for contaminated
land areas. Provisions are determined based on the surface area of the landfill site, remaining land area to be
landscaped or otherwise cleaned-up, and the unit cost of conducting the coverage and clean-up activities in the future.
Environmental provisions are also booked for aftercare and monitoring obligations arising from landfill permit
holder’s requirement to take into account potential danger to health or the environment posed by a landfill site for
a period of at least 30 (up to 60) years after the coverage. The aftercare and monitoring provision is determined on
the basis of estimated costs and estimated number of years of filling the landfill.
ASSET RETIREMENT OBLIGATIONS
Asset retirement obligation is recognised either when there is a contractual obligation towards a third party or a legal
obligation and the obligation amount can be estimated reliably. Obligating event is e.g. when a plant is built on
a leased land with an obligation to dismantle and remove the asset in the future or when a legal obligation towards
Fortum changes. The asset retirement obligation is recognised as part of the cost of an item of property, plant and
equipment when the asset is put in service. The costs will be depreciated over the remainder of the asset’s useful life.
RESTRUCTURING PROVISIONS
A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and
has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan
or announcing its main features to those affected by it. The measurement of a restructuring provision includes only
the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by
the restructuring and not associated with the ongoing activities of the entity. Restructuring provisions comprise mainly
employee termination payments and lease termination costs.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS:
ASSUMPTIONS MADE WHEN ESTIMATING PROVISIONS
Provisions for present obligations require management to assess the best estimate of the expenditure needed to settle
the present obligation at the end of the reporting period. The actual amount and timing of the expenditure might
differ from estimates made.
EUR million
1 January
Acquisitions
Provisions for the period
Provisions used
Provisions reversed
Exchange rate differences and other
changes
31 December
Of which current provisions 1)
BS Of which non-current provisions
2018
2017
Environ-
mental
43
0
0
0
0
-1
41
0
41
Other
79
0
25
-33
-4
-3
65
14
50
Total
122
0
25
-33
-4
-4
106
14
91
Environ-
mental
47
0
0
0
0
-4
43
0
43
Other
82
7
31
-35
-10
4
79
22
57
Total
129
7
31
-35
-10
0
122
22
100
1) Included in trade and other payables in the balance sheet, see Note 33 Trade and other payables.
Environmental provisions include mainly provisions for obligations to cover and monitor landfills as well as to
clean contaminated land areas� Main part of the provisions are estimated to be used within 10–15 years�
Dismantling provisions for the Finnish coal fired power plants are included in Other provisions�
Regarding provisions for decommissioning and provision for disposal of spent fuel for nuclear production,
see Note 29 Nuclear related assets and liabilities�
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12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
108
108
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
31 Pension obligations
ACCOUNTING POLICIES
The Group companies have various pension schemes in accordance with the local conditions and practises in
the countries in which they operate. The schemes are generally funded through payments to insurance companies or
the Group’s pension funds as determined by periodic actuarial calculations. The Group has both defined benefit and
defined contribution plans.
The Group’s contributions to defined contribution plans are charged to the income statement in the period to which
the contributions relate.
For defined benefit plans, pension costs are assessed using the projected unit credit method. The cost of providing
pensions is charged to the income statement as to spread the service cost over the service lives of employees. The net
interest is presented in financial items and the rest of the income statement effect as pension cost.
The defined benefit obligation is calculated annually on the balance sheet date and is measured as the present
value of the estimated future cash flows using interest rates of high-quality corporate bonds that have terms to
maturity approximating to the terms of the related pension liability. In countries where there is no deep market in such
bonds, market yields on government bonds are used instead. The plan assets for pensions are valued at market value.
The liability recognised in the balance sheet is the defined benefit obligation at the closing date less the fair value of
plan assets. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the
future payments is available.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to
past service or the gain or loss related to a curtailment is recognised immediately in profit or loss. Gains or losses on
settlements of defined benefits plans are recognised when the settlement occurs.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS:
ASSUMPTIONS USED TO DETERMINE FUTURE PENSION OBLIGATIONS
The present value of the pension obligations is based on actuarial calculations that use several assumptions.
Any changes in these assumptions will impact the carrying amount of pension obligations.
Fortum’s pension arrangements
Finland
In Finland statutory pension benefits (as determined in Employee’s Pension Act /TyEL) provide the employees
pension coverage for old age, disability and death of a family provider� The benefits are insured with an insurance
company and determined to be defined contribution plans�
In addition the Group has additional old-age and survivors pension benefits arranged with the Fortum
Pension Fund� The Fortum Pension Fund is a closed fund managed by a Board, consisting of both employers’ and
employees’ representatives� The Fund is operating under regulation from Financial Supervisory Authority (FSA)�
The liability has to be fully covered according to the regulations� The national benefit obligation related to
the defined benefit plans is calculated so that the promised benefit is fully funded until retirement� After
retirement the benefits payable are indexed yearly with TyEL-index� The promised benefit is defined in the rules
of the Fund, mostly 66% at a maximum of the salary basis� The salary basis is an average of the ten last years’
salaries, which are indexed with a common salary index to the accounting year�
Sweden
In Sweden the Group operates several defined benefit and defined contribution plans like the general ITP-
pension plan and the PA-KL and PA-KFS plans that are eligible for employees within companies formerly owned
by municipalities� The defined benefit plans are fully funded and have partly been financed through Fortum’s own
pension fund and partly through insurance premiums� The pension arrangements comprise normal retirement
pension, complementary retirement pensions, survivors’ pension and disability pension� The most significant
pension plan is the ITP-plan for white-collar employees in permanent employment (or temporary employees
after a certain waiting period), who fulfil the age conditions� To qualify for a full pension the employee must have
a projected period of pensionable service, from the date of entry until retirement age, of at least 30 years�
The Swedish pension fund is managed by a Board, consisting of both employers’ and employees’
representatives� The fund is operating under regulation from Swedish Financial Supervisory Authority and
the County Administrative Board and governed by Swedish law (no� 1967:531)� The fund constitutes a security
for the employers’ defined benefit pension plan liability and the fund has no obligations in relation to pension
payments� The employer must have a credit insurance from PRI Pensionsgaranti Mutual Insurance Company for
the liability� The liability does not have to be fully covered by the fund according to the regulations�
The part of the ITP multiemployer pension plan that is secured by paying pension premiums to Alecta, in
Fortum’s case the collective family pension, is accounted for as a defined contribution plan due to that there is no
consistent and reliable basis to allocate assets or liabilities to the participating entities within the ITP insurance�
The reason for this is that it is not possible to determine from the terms of the plan to which extent a surplus
or a deficit will affect future contributions�
Norway
Group companies operate both defined contribution and defined benefit plans� Some defined benefit schemes
offer benefits common for municipalities in Norway and some are private pension schemes� Benefits include old
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28
29
30
31
32
33
34
35
36
37
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12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
109
109
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
age pensions, disability pension and survivor’s pension, including pension benefits from the National Insurance
Scheme (Folketrygden)� The schemes are fully funded within the rules set out in the Norwegian insurance
legislation�
The majority of the defined benefit plans are closed, either private plans or public plans, that are operated
by the Fortum Pension Fund� The Fortum Pension Fund was established in 2018 and the participants were
transferred there from the Hafslund and Infratek’s Pension Fund� The Group has also a closed public defined
benefit plan operated by Oslo Pensjonsforsikring AS� In addition, the Group has defined benefit plans with
various insurance companies�
Pension arrangements in other countries
Pension arrangements in Russia include payments made to the state pension fund� These arrangements are
treated as defined contribution plans� The Russian (in addition to the defined contribution plans) and Polish
companies participate in certain defined benefit plans, defined by collective agreements, which are unfunded
and where the company meets the benefit payment obligation as it falls due� The benefits provided under these
arrangements include, in addition to pension payments, one-time benefits paid in case of employee mortality
or disability as well as lump sum payments for anniversary and financial support to honoured workers and
pensioners�
In other countries the pension arrangements are done in accordance with the local legislation and practice,
mostly being defined contribution plans�
Main risks relating to defined benefit plans – Finland and Sweden
Overall risks
Finland – If the return of the fund’s assets is not enough to cover the raise in liability and benefit payments over
the financial year then the employer funds the deficit with contributions unless the fund has sufficient equity�
Sweden – As the pension fund is separated from the funding companies Fortum is not obliged to make
additional contributions to the pension fund in any case of deficit� However if the assets decrease to a level lower
than the liability according to Swedish GAAP, Fortum’s credit insurance cost from PRI will increase�
Change in discount rate
Finland – The discount rate which is used to calculate the defined benefit obligation (according to IFRS) depends
on the value of corporate bond yields as at reporting date� A decrease in yields increases the benefit obligation
that is offset by increase in the value of fixed income holdings�
Investment and volatility risk
Finland – The pension fund’s board accepts yearly an Investment Plan, which is based on an external asset-
liability analysis� The assets are allocated to stocks and stock funds, fixed income instruments and real estate�
The investments are diversified into different asset classes and to different asset managers taking into account
the regulation of the Financial Supervisory Authority�
Sweden – The pension fund operation is regulated by law and supervised by central administrative authorities
(Finansinspektionen and the County Administrative Board)� The pension fund board decides yearly on a policy
for asset allocation and a risk management model that stipulates a maximum acceptable market value decrease of
the assets� The major assets are fixed income instruments, stock index funds and cash�
Risks relating to assumptions used
Actuarial calculations use assumptions for future inflation and salary levelrs and longevity� Should the actual
outcome differ from these assumptions, this might lead to higher liability�
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
110
110
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Movement in the net defined benefit liability
EUR million
Balance at 1 January
Included in profit or loss
Current service cost
Past service cost
Settlements
Net interest 1)
Included in OCI
Remeasurement gains(-)/losses(+)
Actuarial gains/losses arising from
changes in financial assumptions
Actuarial gains/losses arising from
experience adjustments
Return on plan assets (excluding amounts
included in net interest expense)
Exchange rate differences
Other
Contributions paid by the employer
Benefits paid
Acquisitions of subsidiary companies
Balance at 31 December
Present value of funded defined obligation
Fair value of plan assets
Funded status
Present value of unfunded obligation 2)
Net liability arising from defined benefit
obligation
Pension assets included in other non-
current assets in the balance sheet
BS Pension obligations in the balance
sheet
Defined benefit
obligation
2018
501
2017
452
Fair value of plan assets
2017
-378
2018
-401
Net defined benefit
asset(-)/liability(+)
2018
101
2017
74
8
-1
-4
9
13
-8
-12
4
-7
-15
-17
0
483
6
0
-3
9
12
10
16
-6
-5
5
-18
50
501
2
-7
-4
2
2
5
7
-1
13
0
-386
5
-7
-2
7
7
4
11
-3
14
-43
-401
9
-1
-1
2
9
-6
-12
4
2
-2
-8
-1
-4
0
97
480
-386
94
3
97
1
98
7
0
2
2
10
17
16
-6
7
-1
16
-3
-3
7
101
497
-401
96
4
101
2
102
1) Net interest is presented among financial items in income statement, the rest of costs related to defined benefit plans are included in staff costs
(row defined benefits plans in the staff cost specification in Note 11 Employee benefits).
2) The unfunded obligation relates to arrangements in Russia and Poland.
At the end of 2018 a total of 833 (2017: 985) Fortum employees are included in defined benefit plans providing
pension benefits� During 2018 pensions or related benefits were paid to a total of 3,375 (2017: 3,160) persons�
Contributions expected to be paid during year 2019 are EUR 3 million�
Fair value of plan assets
EUR million
Equity instruments
Debt instruments
Cash and cash equivalents
Real estate, of which EUR 1 million (2017: 42) occupied by the Group
Investment funds
Company’s own ordinary shares
Other assets
Total
2018
129
173
51
12
1
5
16
386
2017
126
156
48
47
1
5
18
401
When the pension plan has been financed through an insurance company, a specification of the plan assets has
not been available� In these cases the fair value of plan assets has been included in other assets�
The actual return on plan assets in Finland, Sweden and Norway totalled EUR 5 million (2017: 0)�
Amounts recognised in the balance sheet by country 2018
EUR million
Present value of funded obligations
Fair value of plan assets
Deficit(+)/surplus(-)
Present value of unfunded obligations
Net asset(-)/liability(+) in the balance sheet
Pension asset included in non-current assets
BS Pension obligations in the balance sheet
Finland
269
-233
37
Sweden
147
-102
45
Norway
64
-52
12
37
0
37
45
0
45
12
1
13
Amounts recognised in the balance sheet by country 2017
EUR million
Present value of funded obligations
Fair value of plan assets
Deficit(+)/surplus(-)
Present value of unfunded obligations
Net asset(-)/liability(+) in the balance sheet
Pension asset included in non-current assets
BS Pension obligations in the balance sheet
Finland
295
-245
50
Sweden
141
-105
36
Norway
61
-51
10
50
0
50
36
1
37
10
1
11
Other
countries
0
0
0
3
3
0
3
Other
countries
0
0
0
4
4
0
4
Total
480
-386
94
3
97
1
98
Total
497
-401
96
4
101
2
102
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
111
111
Basis of preparation
Risks
Income statement
Balance sheet
Balance sheet
Off balance sheet items
Group structure and related parties
The principal actuarial assumptions used
%
Discount rate
Future salary increases 1)
Future pension increases 2)
Rate of inflation
Finland
1.60
1.70
1.80
1.50
2018
Sweden
2.30
2.90
1.90
1.90
Norway
2.60
2.75
1.33
1.50
Finland
1.50
1.90
2.00
1.70
2017
Sweden
2.40
2.80
1.80
1.80
Norway
2.30
2.50
1.34
1.50
1) The percentage in Finland for 2017 has been corrected to 1.90% from 2.90%.
2) The percentage in Sweden for 2017 has been corrected to 1.80% from 2.80%.
The discount rate in Finland is based on high quality European corporate bonds with maturity that best reflects
the estimated term of the defined benefit pension plans� The discount rate in Sweden is based on yields on
Swedish covered bonds with maturity that best reflects the estimated term of the defined benefit pension plans�
The covered bonds in Sweden are considered high quality bonds as they are secured with assets�
The methods used in preparing the sensitivity analysis did not change compared to the previous period� Change
in mortality basis so that life expectancy increases by one year would increase the net liability in Finland, Sweden
and Norway with EUR 17 million (19%)�
Maturity profile of the undiscounted defined benefit obligation
for Finland, Sweden and Norway as of 31 December 2018
EUR million
Maturity under 1 year
Maturity between 1 and 5 years
Maturity between 5 and 10 years
Maturity between 10 and 20 years
Maturity between 20 and 30 years
Maturity over 30 years
Future benefit payments
17
72
89
172
135
107
The life expectancy is the expected number of years of life remaining at a given age
Longevity at age 65
45 - male
45 - female
65 - male
65 - female
Sweden
23
25
22
24
Finland
22
27
21
25
The weighted average duration of defined benefit obligation in Finland, Sweden and Norway at the end of year
2018 is 14 years�
Norway
23
27
22
25
32 Other non-current liabilities
The discount, inflation and salary growth rates used are the key assumptions used when calculating defined
benefit obligations� Effects of 0�5 percentage point change in the rates to the defined benefit obligation on
31 December 2018, holding all other assumptions stable, are presented in the table below�
EUR million
Connection fees
Other liabilities
BS Total
Sensitivity of defined benefit obligation to changes in assumptions
2018
109
73
182
2017
109
66
175
Change in the assumption
0.5% increase in discount rate
0.5% decrease in discount rate
0.5% increase in benefit
0.5% decrease in benefit
0.5% increase in salary growth rate
0.5% decrease in salary growth rate
Impact to the pension obligation increase(+)/decrease(-)
Finland
-7%
7%
6%
-6%
1%
-1%
Sweden
-11%
11%
10%
-9%
2%
-3%
Norway
-10%
11%
7%
-7%
4%
-3%
Fees paid by the customer when connected to district heating network in Finland were refundable until 2013�
These connection fees have not been recognised in the income statement and are included in other liabilities in
the balance sheet�
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2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
112
112
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
33 Trade and other payables
34 Lease commitments
EUR million
Trade payables
Accrued expenses and deferred income
Accrued personnel expenses
Accrued interest expenses
Contract liabilities
Other accrued expenses and deferred income
Other liabilities
VAT-liability
Current tax liability
Energy taxes
Advances received
Current provisions 1)
Other liabilities
BS Total
1) See also Note 30 Other provisions.
2018
334
103
98
40
80
34
30
2
110
14
212
1,058
2017
318
97
113
-
174
43
25
15
98
22
209
1,112
ACCOUNTING POLICIES
OPERATING LEASES
Leases of property, plant and equipment, where the Group does not have substantially all of the risks and rewards of
ownership are classified as operating leases. Payments made under operating leases are recognised in the income
statement as costs on a straight-line basis over the lease term.
Payments received under operating leases where the Group leases out fixed assets are recognised as other income
in the income statement.
FINANCE LEASES
Leases of property, plant and equipment, where the Group has substantially all the risks and rewards of ownership, are
classified as finance leases. Finance leases are capitalised at the commencement of the lease term at the lower of the
fair value of the leased property and the present value of the minimum lease payments determined at the inception of
the lease.
Based on IFRS 15 a contract liability is presented for an obligation to transfer goods or services to a customer
when payment has already been received� Contract liabilities on 31 December 2018 are comprised mainly of
project and waste management services that are invoiced but not delivered at the reporting date� Fortum has
adopted the new IFRS 15 “Revenue from Contracts with Customers” standard from 1 January 2018 onwards and
comparative information 2017 has not been restated� See additional information on adoption of IFRS 15 in
Note 1 Accounting policies and Note 6 Segment reporting�
The management considers that the amount of trade and other payables approximates fair value�
34.1 Leases as a lessor
Operating leases
The operating rental income recognised in income statement was EUR 12 million (2017: 6)�
Finance leases
Fortum does not have material finance lease arrangements where the Group is acting as a lessor�
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
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34.2 Leases as lessee
Operating leases
Fortum leases mainly land and office buildings under various non-cancellable operating leases, some of which
contain renewal options� The future costs for non-cancellable operating lease contracts are stated below� Lease
rental expenses amounting to EUR 32 million (2017: 33) are included in the income statement in other expenses�
Future minimum lease payments on operating leases
EUR million
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
Total
2018
30
88
98
216
2017
23
72
65
160
Finance leases
Fortum does not have material finance lease arrangements where the Group is acting as a lessee�
35 Capital commitments
EUR million
Property, plant and equipment
2018
322
2017
362
Capital commitments are capital expenditures contracted for at the balance sheet date but not recognised in
the financial statements� The decrease in capital commitments compared to previous year comes mainly from
progressing of the automation investment in Loviisa nuclear power plant and Zabrze CHP investments, partly
offset by the new Kivenlahti Bio-HOB investment�
For more information regarding capital expenditure, see Note 18 Property, plant and equipment�
Other commitments
Fortum has committed to provide a maximum of EUR 85 million to Voimaosakeyhtiö SF, for its participation
in the Fennovoima nuclear power project in Finland� Furthermore, Fortum’s remaining direct commitment
regarding the construction of a waste-to-energy combined heat and power plant (CHP) in Kaunas, Lithuania is
EUR 7 million at maximum� The investment is made through Kauno Kogeneracinė Jėgainė (KKJ), a joint venture
owned together with Lietuvos Energija�
Fortum has also committed to provide a maximum of EUR 12 million to a joint venture with Numaligarh
Refinery Limited (NRL) and Chempolis to build and operate a biorefinery in Assam, India�
Teollisuuden Voima Oyj (TVO) is building Olkiluoto 3, the nuclear power plant, which is funded through
external loans, share issues and shareholder loans according to shareholders’ agreement between the owners of
TVO� As of January 1, 2018 TVO shareholder loans EUR 145 million has been classified as participation in joint
ventures, which is described in Note 1.6 New IFRS standards adopted from 1 Jan 2018� At end of December
2018 Fortum had EUR 170 million (2017: 145) outstanding receivables regarding Olkiluoto 3 and is additionally
committed to provide at maximum EUR 63 million�
In June 2018 the Swedish Government approved the legislation regarding Sweden’s national strategy for
implementation of the EU’s Water Framework Directive� The largest hydro industry companies will create
a common hydro-power fund to finance large parts of the environmental actions needed� The fund will have
a total financial cap of SEK 10 billion to be paid over a 20-year period, and the largest operators will contribute
to the fund proportionately based on their respective market share of hydro-power production� Fortum’s share
is expected to be 20–25% of the fund’s total financing�
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36 Pledged assets and contingent liabilities
ACCOUNTING POLICIES
CONTINGENT LIABILITIES
A contingent liability is disclosed when there is a possible obligation that arises from past events and whose existence
is only confirmed by one or more doubtful future events or when there is an obligation that is not recognised as
a liability or provision because it is not probable that an outflow of resources will be required or the amount of the
obligation cannot be reliably estimated.
36.2 Pledged assets for other commitments
Pledges also include restricted cash given as trading collateral of EUR 346 million (2017: 346) for trading of
electricity and CO2 emission allowances in Nasdaq Commodities, in Intercontinental Exchange (ICE), European
Energy Exchange (EEX) and Polish Power Exchange (TGE)� See also Note 21 Interest-bearing receivables�
Fortum has given real estate mortgages in power plants in Finland, total value of EUR 21 million in December
2018 (2017: 141), as a security to the Finnish State Nuclear Waste Management Fund for the uncovered part of
the legal liability and unexpected events relating to future costs for decommissioning and disposal of spent fuel
in Loviisa nuclear power plant� According to the Nuclear Energy Act, Fortum is obligated to contribute the funds
in full to the State Nuclear Waste Management Fund to cover the legal liability� Any uncovered legal liability
relates to periodising of the payments to the fund� The size of the securities given is updated yearly in Q2 based
on the decisions regarding the legal liabilities and the funding target determined at the end of the previous year�
Due to the yearly update, the amount of real estate mortgages given as a security decreased by EUR 120 million�
2018
2017
See also Note 29 Nuclear related assets and liabilities�
EUR million
Pledged assets on own behalf
For debt
Pledges
Real estate mortgages
For other commitments
Pledges
Real estate mortgages
Pledged assets on behalf of others
Pledges
Contingent liabilities on own behalf
Other contingent liabilities
On behalf of associated companies and joint ventures
Guarantees
36.1 Pledged assets for debt
Finnish participants in the State Nuclear Waste Management Fund are allowed to borrow from the fund� Fortum
has pledged shares in Kemijoki Oy as a security� The value of the pledged shares was EUR 269 million on
31 December 2018 (2017: 269)�
Fortum Tartu in Estonia (60% owned by Fortum) has given real estate mortgages for a value of EUR 96 million
(2017: 96) as a security for an external loan� Real estate mortgages have also been given for loan from Fortum’s
pension fund for EUR 41 million (2017: 41)�
The mortgage for loans of Russian solar plants was released during the beginning of 2018 (2017: 41)�
Regarding the relevant interest-bearing liabilities, see Note 27 Interest-bearing liabilities�
288
137
346
21
31
167
622
300
177
346
141
12
161
598
Pledged assets on behalf of others
Pledged assets on behalf of others consist of restricted cash EUR 31 million (2017: 12) posted as collateral toward
Nasdaq Clearing AB covering Fortum’s required contribution to the Commodity Market Default Fund (default
fund)� The default fund is a mutualised fund whereby all participants on the Nordic power exchange (Nasdaq
Commodities) post collateral in relation to their exposure on the market in order to cover potential defaults by
members which may cause losses exceeding the members’ own collateral� The increase in the pledged amount is
due to the replenishment given in September 2018� See also Note 21 Interest-bearing receivables�
36.3 Contingencies on own behalf
Fortum owns the coal condensing power plant Meri-Pori in Finland� Teollisuuden Voima Oyj (TVO) has
the contractual right to participate in the plant with 45�45%� Based on the participation agreement Fortum has
to give a guarantee to TVO against breach in contract� The amount of the guarantee is set to EUR 125 million
(2017: 125)� The guarantee was released on 1 January 2019, see Note 39 Events after the balance sheet date�
36.4 Contingencies on behalf of associated companies
Guarantees and other contingent liabilities on behalf of associated companies and joint ventures mainly consist
of guarantees relating to Fortum’s associated nuclear companies Teollisuuden Voima Oyj (TVO), Forsmarks
Kraftgrupp AB (FKA) and OKG AB (OKG)� The guarantees are given in proportion to Fortum’s respective
ownership in each of these companies�
According to law, nuclear companies operating in Finland and Sweden shall give securities to the Finnish
State Nuclear Waste Management Fund and the Swedish Nuclear Waste Fund respectively, to guarantee that
sufficient funds exist to cover future expenses of decommissioning of the power plant and disposal of spent fuel�
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Off balance sheet items
Group structure and related parties
In Finland, Fortum has given a guarantee on behalf of TVO to the Finnish State Nuclear Waste Management Fund
to cover Fortum’s share of TVO’s uncovered part of the legal liability and for unexpected events� The amount
of guarantees is updated every year in June based on the legal liability decided in December the previous year�
Due to the yearly update, the amount of guarantees given were EUR 36 million (2017: 50)� The guarantee covers
the unpaid legal liability due to periodisation as well as risks for unexpected future costs�
In Sweden, Fortum has given guarantees on behalf of FKA and OKG to the Swedish Nuclear Waste Fund to
cover Fortum’s part of FKA’s and OKG’s liability� Guarantees for the period of 2015–2017 has been given on behalf
of Forsmarks Kraftgrupp AB and OKG AB amounting to SEK 5,393 million (EUR 526 million) at 31 December
2018 (2017: EUR 548 million)� There are two types of guarantees given on behalf of Forsmarks Kraftgrupp AB
and OKG AB� The Financing Amount is given to cover Fortum’s share of the uncovered part in the Nuclear
Waste Fund, assuming no further production and that no further nuclear waste fees are paid in� The uncovered
amount is calculated by the authorities and is based on the difference between the expected costs and the funds
to cover these costs at the time of the calculation� The amounts for the guarantees are updated every third year
by governmental decision� The Supplementary Amount constitutes a guarantee for deficits that can arise as
a result of unplanned events� The Financing Amount given by Fortum on behalf of Forsmarks Kraftgrupp AB
and OKG AB was SEK 3,843 million (EUR 375 million) and the Supplementary Amount was SEK 1,550 million
(EUR 151 million) at 31 December 2018�
Fortum has given guarantees to secure bank loans obtained by WEDF Second Wind Farm LLC and WEDF
Third Wind Farm LLC, which are subsidiaries of the 50–50 Wind-fund with Rusnano� The guarantees given
on pro rata basis are security for loans relating to wind farms’ development and amount to RUB 3,840 million
(EUR 48 million) at 31 December 2018�
36.5 Other contingent liabilities
Fortum’s 100% owned subsidiary Fortum Heat and Gas Oy has a collective contingent liability with Neste Oyj
of the in 2004 demerged Fortum Oil and Gas Oy’s liabilities based on the Finnish Companies Act’s (734/1978)
Chapter 14a Paragraph 6�
37 Legal actions and official proceedings
37.1 Group companies
Tax cases in Finland
No tax cases with material impact in Finland�
Tax cases in Sweden
Cases relating to Swedish interest deductions
In March 2018 the Swedish Supreme Administrative Court decided not to grant leave to appeal to Fortum
with respect to the interest deduction cases relating to the years 2009–2012� The unfavourable decision of
the Administrative Court of Appeal from June 2017 therefore remains in force� The additional tax and interest
claimed, in total SEK 1,175 million (EUR 122 million), was paid in 2016 and booked as a cost in 2017� There
are strong grounds to argue that the aforementioned decisions of the Administrative Court of Appeal and
the Supreme Administrative Court violate EU law and fundamental rights under EU law� On these grounds
Fortum has in December 2018 filed a summons application to the District Court of Stockholm in which damages
are claimed from the Swedish state in these cases� Moreover, Fortum has filed a request to initiate a mutual
agreement procedure between Sweden and the Netherlands for the year 2012�
Fortum has received income tax assessments in Sweden for the years 2013, 2014 and 2015 in December 2015,
December 2016 and October 2017, respectively� The assessments concern the loans given in 2013, 2014 and
2015 by Fortum’s Dutch financing company to Fortum’s subsidiaries in Sweden� The interest income for these
loans was taxed in the Netherlands� The tax authorities considered, based on 2013 tax regulation, over a half of
the interest relating to each loan as deductible, i�e� deriving from business needs� The rest of the interest is seen
as non-deductible� After Fortum received a negative decision from the Administrative Court in Stockholm in 2017,
Fortum filed an appeal to the Administrative Court of Appeal in Stockholm� In October 2018 the Administrative
Court of Appeal in Stockholm, Sweden announced its decision relating to the income tax assessment for
the year 2013� The decision was favorable to Fortum� The Administrative Court of Appeal confirmed that Fortum
had sufficient business reasons for the loans and accepted Fortum’s appeal� The decision regarding the year
2013 is final�
The Administrative Court of Stockholm announced its decisions in the cases for 2014 and 2015 in November
2018� Also these decisions, like the decision from the Administrative Court of Appeal for 2013, were favorable to
Fortum and in line with the tax authorities’ changed opinion based on the year 2013 decision� The decisions will
become non-appealable by the end of January 2019�
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Fortum had not made provisions for the cases regarding the years 2013–2015� Therefore, the favorable
decisions issued by the Administrative Court of Appeal in October 2018 and by the Administrative Court in
November 2018 do not have any impact on profits�
The amount of additional tax claimed by the Swedish tax authority has originally been SEK 273 million
(EUR 26 million) for the year 2013, SEK 282 million (EUR 27 million) for the year 2014, and SEK 200 million
(EUR 19 million) for the year 2015� The additional tax for 2013 was paid in 2017 and was refunded to Fortum due
to the favorable decision from the Administrative Court of Appeal in the fourth quarter of 2018� Additional taxes
and interest for the years 2014 and 2015 have not been paid by Fortum�
Cases relating to the Swedish hydro real estate tax
Fortum Sverige AB has through an appeal process in Swedish courts claimed that the property tax rate for
hydropower plants shall be lowered to the normal 0,5 percent of the tax assessment value� The case concerns
the years 2009–2014 and includes several legal arguments for the claim including state aid arguments� Fortum
Sverige AB did not receive a permission to appeal from the Supreme Administrative Court in this matter� As the
Administrative Court, the Administrative Court of Appeal in Stockholm and the Supreme Administrative Court
have handled only the arguments concerning state aid, the case is now transferred back to the Administrative
Court concerning the other legal arguments� The disputed amount, excluding interest for the time period, totals
approximately SEK 510 million (approximately EUR 50 million)�
Moreover, Swedish Fortum companies have appeals for 2011–2016 pending in the Administrative Court relating
to the property tax rate for their hydropower plants referring to the same legal grounds� Fortum has paid the
real estate tax in accordance with the legislation� If the final court decision would be unfavorable to Fortum, this
would not have any result impact for Fortum�
Fortum Sverige AB has in December 2018 filed a complaint to the EU commission regarding the Swedish
property tax for hydropower plants regarding 2017 and prior years� Fortum has asked the commission to
investigate whether the Swedish legislation regarding the property tax for hydropower plants and the Swedish
court decisions are in line with EU state aid rules�
Tax cases in Belgium
Fortum has received income tax assessments in Belgium for the years 2008, 2009, 2010 and 2011� The tax
authorities disagree with the tax treatment of Fortum EIF NV� Fortum finds the tax authorities interpretation
not to be based on the local regulation and has appealed the decisions� The court of First instance in Antwerpen
rejected Fortum’s appeal for the years 2008 and 2009 in June 2014� Fortum found the decision unjustifiable and
appealed to the Court of Appeal�
In January 2016 Fortum received a favourable decision from the Court of Appeal in which the Court disagreed
with the tax authorities’ interpretation and the tax assessment for 2008 was nullified� The tax authorities
disagreed with the decision and filed an appeal to Hof van Cassatie (Supreme Court) in March 2016� Fortum’s
appeals concerning 2009–2011 are still pending and Fortum expects the remaining years to follow the final
decision for 2008� Based on legal analysis and a supporting legal opinion, no provision has been accounted
for� The amount of additional tax claimed is approximately EUR 36 million for the year 2008, approximately
EUR 27 million for the year 2009, approximately EUR 15 million for the year 2010 and approximately
EUR 21 million for the year 2011� The tax has already been paid�
In November 2015 Fortum received an income tax assessment from the Belgian tax authorities for the year
2012� The tax authorities disagree with the tax treatment of Fortum Project Finance NV� Fortum finds the tax
authorities’ interpretation not to be based on the local regulation and has filed an objection against the tax
adjustment� In line with treatment of the cases concerning 2008–2011, no provision has been accounted for�
The amount of additional tax claimed is approximately EUR 15 million for the year 2012� The tax has already
been paid�
For critical accounting estimates regarding uncertain tax positions, see Note 28 Income taxes in balance
sheet� See also Note 13 Income tax expense�
In addition to the litigations described above, some Group companies are involved in other routine tax and
other disputes incidental to their normal conduct of business� Based on the information currently available,
management does not consider the liabilities arising out of such litigations likely to be material to the Group’s
financial position�
37.2 Associated companies
In Finland, Fortum is participating in the country’s fifth nuclear power plant unit, Olkiluoto 3 (OL3), through
the shareholding in Teollisuuden Voima Oyj (TVO) with an approximately 25% share representing some 400 MW
in capacity�
OL3 was procured as a fixed-price turnkey project from a consortium (Supplier) formed by AREVA GmbH,
AREVA NP SAS and Siemens AG� As stipulated in the plant contract, the consortium companies have joint and
several liability for the contractual obligations� In accordance with the Supplier’s schedule updated in November
2018, regular electricity generation at the plant unit will commence in January 2020� According to the Supplier,
nuclear fuel will be loaded into the reactor in June 2019 and the first connection to the grid takes place in October
2019� According to the Supplier’s plant ramp-up program the unit will produce 2–4 TWh of electricity, at varying
power levels, during the period of time between the first connection to the grid and the start of regular electricity
production�
According to the comprehensive settlement agreement signed in March 2018, TVO and the Supplier jointly
withdrew the pending arbitration proceedings under the International Chamber of Commerce (ICC) rules with
respect to costs and losses incurred in relation to delays in the construction of the OL3 EPR project� In June 2018,
the ICC tribunal confirmed the arbitration settlement by a consent award, and the arbitration proceedings were
terminated� The parties also withdrew the pending appeals in the General Court of the European Union�
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The settlement agreement between TVO and the plant supplier consortium companies Areva NP, Areva GmbH
and Siemens AG as well as with Areva Group parent company Areva SA, a company wholly owned by the French
State, concerning the completion of the OL3 EPR project and related disputes entered into force late March 2018�
The settlement agreement stipulates that:
• In order to provide and maintain adequate and competent technical and human resources for the completion
of the OL3 EPR project, Areva will source the necessary additional resources from Framatome S�A�S�, whose
majority owner is Electricité de France (EDF)� The supplier consortium companies undertake that the funds
dedicated to the completion of the OL3 EPR project will be adequate and will cover all applicable guarantee
periods, including setting up a trust mechanism funded by Areva companies to secure the financing of the
costs of completion of the OL3 EPR project�
• The turnkey principle of the OL3 EPR plant contract and the joint and several liability of the supplier
consortium companies remain in full force� The agreement also noted the plant supplier’s schedule at the time
the agreement was signed, according to which regular electricity production in the unit will commence in
May 2019� The ICC arbitration concerning the costs and losses caused by the delay of the OL3 EPR project is
settled by financial compensation of EUR 450 million to be paid to TVO in two installments by the supplier
consortium companies�
38 Related party transactions
38.1 The Finnish State and companies owned by the Finnish State
At the end of 2018, the Finnish State owned 50�76% of the Company’s shares (2017: 50�76%)� The Finnish
Parliament has authorised the Government to reduce the Finnish State’s holding in Fortum Corporation to no
less than 50�1% of the share capital and voting rights�
All transactions between Fortum and other companies owned by the Finnish State are on arm’s length basis�
38.2 Board of Directors and Fortum Executive Management
The key management personnel of the Fortum Group are the members of Fortum Executive Management and
the Board of Directors� Fortum has not been involved in any material transactions with members of the Board of
Directors or Fortum Executive Management� No loans exist to any member of the Board of Directors or Fortum
Executive Management at 31 December 2018� The total compensation (including pension benefits and social
costs) for the key management personnel for 2018 was EUR 9 million (2017: 9)�
See Note 11 Employee benefits for further information on the Board of Directors and Fortum Executive
• The parties withdraw all on-going legal actions related to OL3 EPR, including the ICC arbitration and appeals
Management remuneration and shareholdings�
in the General Court of the European Union�
• The supplier consortium companies are entitled to receive an incentive payment, in a maximum amount of
EUR 150 million, upon timely completion of the OL3 EPR project�
• In the event that the supplier consortium companies fail to complete the OL3 EPR project by the end of 2019,
they will pay a penalty to TVO for such delay in an amount which will depend on the actual time of completion
of the OL3 EPR project and may not exceed EUR 400 million�
TVO received the first payment of EUR 328 million of the settlement amount in March 2018 at the entry into
force of the settlement agreement� The second payment of EUR 122 million is payable upon completion of
the OL3 EPR project or, in any event, on December 31, 2019 at the latest� The amount corresponding to the total
settlement amount has been entered as property, plant and equipment in the TVO Group balance sheet�
38.3 Associated companies and joint ventures
In the ordinary course of business Fortum engages in transactions on commercial terms with associated
companies and other related parties, which are on same terms as they would be for third parties, except for some
associates as discussed later in this note�
Fortum owns shareholdings in associated companies and joint ventures which in turn own hydro and nuclear
power plants� Under the consortium agreements, each owner is entitled to electricity in proportion to its share
of ownership or other agreements� Each owner is liable for an equivalent portion of costs regardless of output�
These associated companies are not profit making, since the owners purchase electricity at production cost
including interest costs and production taxes�
In addition to the litigations described above, some Group companies are involved in other routine tax and
For further information on transactions and balances with associated companies and joint ventures,
other disputes incidental to their normal conduct of business� Based on the information currently available,
management does not consider the liabilities arising out of such litigations likely to be material to the Group’s
financial position�
see Note 19 Participations in associated companies and joint ventures�
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Group structure and related parties
38.4 Pension fund
The Fortum pension funds in Finland, Sweden and Norway are stand-alone legal entities which manage
pension assets related to part of the pension coverage in Finland, Sweden and Norway� In 2018 Fortum paid
a capital contribution of EUR 3 million to the newly established pension fund in Norway� Fortum has not paid
contributions to the pension funds in Finland and Sweden neither in 2018 nor in 2017� The assets in the pension
fund in Finland include Fortum shares representing 0�04% (2017: 0�04%) of the company’s outstanding shares�
Real estate mortgages have also been given for a loan from Fortum’s Finnish pension fund for EUR 41 million
(2017: 41)�
39 Events after the balance sheet date
On 1 January 2019, Fortum acquired all remaining C-shares of TVO entitling to the power production of the
Meri-Pori coal condensing power plant� Fortum is now entitled to 100% of the power production of the plant,
an increase from 67% previously� The Meri-Pori power plant is mainly used in Fingrid’s capacity reserve and as
back-up capacity� See more information in Note 19 Participations in associated companies and joint ventures�
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40 Subsidiaries by segment on 31 December 2018
C = City Solutions
CS = Consumer Solutions 2) Shares held by the parent company
G = Generation
R = Russia
O = Other Operations
1) New company
Company name
Ekopartnerit Turku Oy
Fincumet Oy 1)
Fortum Asiakaspalvelu Oy 2)
Fortum Assets Oy
Fortum C&H Oy
Fortum Environmental Construction Oy
Fortum Growth Oy
Fortum Heat and Gas Oy 2)
Fortum Markets Oy 2)
Fortum Norm Oy 2)
Fortum Power and Heat Holding Oy
Fortum Power and Heat Oy 2)
Fortum Real Estate Oy 2)
Fortum Waste Solutions Oy 2)
Kiinteistö Oy Espoon Energiatalo
Koillis-Pohjan Energiantuotanto Oy
Kotimaan Energia Oy
Niemen Romukauppa Oy 1)
NJS-Patentti Oy 1)
Oy Pauken Ab
Oy Tersil Ab
Oy Tertrade Ab
Vindin Böle Ab/Oy
Vindin Kalax Ab/Oy
Vindin Molpe Ab/Oy
Vindin Pjelax Ab/Oy
Vindin Poikel Norra Ab/Oy
Vindin Pörtom Ab/Oy
Fortum Project Finance N.V. 2)
Barry Danmark ApS 1)
Fortum Energi A/S
Fortum Waste Solutions A/S
Domicile
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Belgium
Denmark
Denmark
Denmark
Segment Group holding, %
51.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
C
C
CS
O
O
C
O
C, O
CS
O
G
C, G, O, R
O
C
O
G
CS
C
C
O
O
O
O
O
O
O
O
O
O
O
CS
C
Company name
Fortum Waste Solutions OW A/S
AS Anne Soojus
AS Fortum Tartu
AS Tartu Joujaam
AS Tartu Keskkatlamaja
Fortum CFS Eesti OU
Fortum Eesti AS
Fortum France S.A.S
Fortum Deutschland SE
Fortum Service Deutschland GmbH
Plugsurfing GmbH 1)
Fortum Carlisle Limited
Fortum Energy Ltd
Fortum Glasgow Limited
Fortum O&M (UK) Limited
IVO Energy Limited
Fortum Insurance Ltd
Fortum India Private Limited 2)
Fortum Solar India Private Limited
Fortum Solar Plus Private Limited 1)
Fortum Finance Ireland Designated Activity Company 2)
Fortum P&H Ireland Limited
Fortum Participation Ltd
Fortum Jelgava, SIA
Fortum Latvia SIA
SIA BK Energija 1)
SIA Energy & Communications 1)
SIA Lake Development 1)
SIA Sprino 1)
UAB Fortum Heat Lietuva
UAB Fortum Klaipeda
UAB Joniskio energija
UAB Svencioniu energija
Fortum Consumer Solutions AS
Fortum Forvaltning AS
Fortum Hedging AS
Fortum Kundesenter AS
Domicile
Denmark
Estonia
Estonia
Estonia
Estonia
Estonia
Estonia
France
Germany
Germany
Germany
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Guernsey
India
India
India
Ireland
Ireland
Ireland
Latvia
Latvia
Latvia
Latvia
Latvia
Latvia
Lithuania
Lithuania
Lithuania
Lithuania
Norway
Norway
Norway
Norway
Segment Group holding, %
100.0
100.0
60.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
96.0
66.2
50.0
100.0
100.0
100.0
100.0
C
C
C
C
C
O
C
O
O
C
O
C
O
C
C
G
O
O
O
O
O
O
O
C
C
C
C
C
C
C
C
C
C
CS
O
CS
CS
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
120
120
Basis of preparation
Risks
Income statement
Balance sheet
Off balance sheet items
Group structure and related parties
Company name
Fortum Markets AS
Fortum Oslo Varme AS
Fortum Tellier AS
Fortum Waste Solutions Norway AS
FOV OT AS 1)
Fredrikstad EnergiSalg AS
Hafslund Strøm AS
Hallingkraft AS
Mitt Hjem Norge AS
NorgesEnergi AS
Nygårdsfjellet Vindpark AS
Oslo Energi AS
Solvencia AS
Sørfjord Vindpark AS
Ånstadblåheia Vindpark AS
AMB Energia Sprzedaż Sp. z o.o.
Fortum Customer Services Polska Sp. z o.o.
Fortum Marketing and Sales Polska S.A.
Fortum Markets Polska S.A.
Fortum Network Częstochowa Sp. z o.o.
Fortum Network Płock Sp. z o.o.
Fortum Network Wrocław Sp. z o.o.
Fortum Power and Heat Polska Sp. z o.o.
Fortum Silesia SA
Fortum Sprzedaż Sp. z o.o.
Rejonowa Spółka Ciepłownicza Sp. z o.o.
Fortum New Generation 1 LLC 1)
Fortum New Generation LLC
Joint Stock Company Chelyabenergoremont
LLC Bugulchanskaya Solar power station
LLC Grachevskaya Solar power station
LLC Pleshanovskaya Solar power station
PAO Fortum
Ural Heat Networks Company Joint Stock Company
HQ Services Limited 1)
Escandinava de Electricidad S.L.U
Blybergs Kraftaktiebolag
Brännälven Kraft AB
Bullerforsens Kraft Aktiebolag
Energibolaget i Sverige Holding AB
Domicile
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Poland
Poland
Poland
Poland
Poland
Poland
Poland
Poland
Poland
Poland
Poland
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Rwanda
Spain
Sweden
Sweden
Sweden
Sweden
Segment Group holding, %
100.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
98.2
100.0
49.0
100.0
66.7
67.0
88.0
100.0
CS
C
CS
C
C
CS
CS
CS
CS
CS
O
CS
CS
O
O
CS
CS
CS
CS
C
C
C
C, CS
C
CS
C
R
R
R
R
R
R
R
R
C
CS
G
G
G
CS
Company name
Energikundservice Sverige AB
Fortum 1 AB
Fortum Fastigheter AB
Fortum Markets AB
Fortum Produktionsnät AB
Fortum Sweden AB 2)
Fortum Sverige AB
Fortum Waste Solutions AB
Fortum Waste Solutions Holding AB
Fortum Vind Norr AB
Göta Energi AB
Hafslund Energi AB
LPN Transformator AB 1)
Mellansvensk Kraftgrupp Aktiebolag
Nordgroup Waste Management AB
Oreälvens Kraftaktiebolag
SverigesEnergi Elförsäljning AB
Sävar Vindkraft AB 1)
Tellier Service AB
Uddeholm Kraft Aktiebolag
VG Power Tools AB
VG Power Turbo AB
Värmlandskraft-OKG-delägarna Aktiebolag
FB Generation Services B.V.
Fortum 2 B.V.
Fortum 3 B.V.
Fortum Charge & Drive B.V.
Fortum Finance B.V.
Fortum Holding B.V. 2)
Fortum Hydro B.V.
Fortum India B.V.
Fortum Power Holding B.V.
Fortum Russia B.V.
Fortum Russia Holding B.V.
Fortum SAR B.V.
Fortum Star B.V.
Fortum Wave Power B.V.
PolarSolar B.V.
RPH Investment B.V.
Valo Ventures I LP Fund 1)
Domicile
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
USA
Segment Group holding, %
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
86.9
100.0
65.0
100.0
100.0
100.0
100.0
100.0
100.0
73.3
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.0
CS
R
O
CS
G
O
C, G, O
C
C
O
CS
CS
G
G
C
G
CS
O
CS
G
C
C
G
O
O
O
O
O
C, G, O, CS
O
O
O
R
O
O
O
O
O
R
O
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
12345678 910111213141516171819202122232425262728293031323334353637383940 Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
121
121
Financial key figures
Share key figures
Segment key figures
Definitions of key figures
Financial key figures
Fortum has adopted the IFRS 9 and IFRS 15 standards from 1 January 2018 onwards� Fortum has applied the transition relief for not restating the comparative figures from 2017�
See additional information in Note 1 Accounting policies
For information of Alternative Performance Measures used by Fortum, see Definitions of key figures and Note 1 Accounting policies�
EUR million or as indicated
Income statement
Sales
EBITDA 1)
Comparable EBITDA
Operating profit
- of sales %
Comparable operating profit
Share of profit/loss of associates and joint ventures
Profit before income tax
- of sales %
Profit for the period
- of which attributable to owners of the parent
Financial position and cash flow
Capital employed
Interest-bearing net debt
Capital expenditure and gross investments in shares
- of sales %
Capital expenditure
Net cash from operating activities
2018
5,242
1,674
1,523
1,138
21.7
987
38
1,040
19.8
858
843
18,170
5,509
4,672
89.1
584
804
2017
4,520
1,623
1,275
1,158
25.6
811
148
1,111
24.6
882
866
18,172
988
1,815
40.2
690
993
Change
18/17 %
16
3
19
-2
22
-74
-6
-3
-3
0
-458
157
-15
-19
EUR million or as indicated
Key ratios
Return on capital employed, %
Return on shareholders' equity, %
Interest coverage
Interest coverage including capitalised borrowing costs
Funds from operations/interest-bearing net debt, %
Gearing, %
Comparable net debt/EBITDA
Equity-to-assets ratio, %
Other data
Dividends
Research and development expenditure
- of sales %
Average number of employees
1) EBITDA is defined as Operating profit + Depreciation and amortisation.
2) Board of Directors’ proposal for the planned Annual General Meeting on 26 March 2019.
2018
6.7
6.8
10.0
9.2
26.8
46
3.6
54
977 2)
56
1.1
8,767
Change
18/17 %
0
6
2017
7.1
6.6
8.7
7.8
83.9
7
0.8
61
977
53
1.2
8,507
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
122
122
Financial key figures
Share key figures
Segment key figures
Definitions of key figures
Share key figures
EUR million or as indicated
Data per share
Earnings per share
Cash flow per share
Equity per share
Dividend per share
Payout ratio, %
Dividend yield, %
Price/earnings ratio (P/E)
Share prices
At the end of the period
Average
Lowest
Highest
Other data
Market capitalisation at the end of the period, EUR million
Trading volumes 2)
Number of shares, 1,000 shares
In relation to weighted average number of shares, %
Number of shares, 1,000 shares
Number of shares excluding own shares, 1,000 shares
Average number of shares, 1,000 shares
Diluted adjusted average number of shares, 1,000 shares
Change
18/17 %
-3
-19
-9
0
2018
0.95
0.91
13.33
1.10 1)
115.8 1)
5.8 1)
20.1
19.10
19.10
16.43
22.91
2017
0.98
1.12
14.69
1.10
112.2
6.7
16.8
16.50
15.28
12.69
18.94
16,966
14,658
474,705
53.4
888,294
N/A
888,312
888,312
582,873
65.6
888,367
N/A
888,367
888,367
1) Board of Directors’ proposal for the Annual General Meeting on 26 March 2019.
2) Trading volumes in the table represent volumes traded on Nasdaq Helsinki. In addition to the Nasdaq Helsinki, Fortum shares were traded on
several alternative market places, for example at Boat, Cboe and Turquoise, and on the OTC market as well. In 2018, approximately 68% (2017:
61%) of Fortum’s shares were traded on markets other than the Nasdaq Helsinki Ltd.
See Definitions of key figures�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
123
123
Financial key figures
Share key figures
Segment key figures
Definitions of key figures
Segment key figures
Sales by segment, EUR million
Generation
- of which internal
City Solutions
- of which internal
Consumer Solutions
- of which internal
Russia
- of which internal
Other Operations
- of which internal
Eliminations and Netting of Nord Pool transactions
Total
Comparable operating profit by segment, EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Comparable operating profit
Impairment charges
Capital gains and other
Changes in fair values of derivatives hedging future cash flow
Nuclear fund adjustment
Operating profit
Comparable EBITDA by segment, EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total
2018
1,837
2
1,094
37
1,759
11
1,069
0
129
80
-646
5,242
2018
631
113
53
271
-79
987
-4
102
98
-45
1,138
2018
762
284
110
417
-50
1,523
2017
1,677
15
1,015
19
1,097
3
1,101
0
102
67
-470
4,520
2017
478
98
41
296
-102
811
6
326
14
1
1,158
2017
603
262
57
438
-83
1,275
Depreciation and amortisation, EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total
Share of profit of associates and joint ventures by segment, EUR million
Generation
City Solutions
Russia
Other Operations
Total
Capital expenditure by segment, EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total
Gross investments in shares by segment, EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total
2018
131
171
57
147
30
536
2018
-72
74
36
0
38
2018
186
190
47
54
108
584
2018
8
32
0
63
3,985
4,088
2017
125
163
16
142
18
464
2017
-1
80
31
38
148
2017
174
170
7
152
187
690
2017
90
386
486
125
39
1,125
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
124
124
Financial key figures
Share key figures
Segment key figures
Definitions of key figures
Gross divestments of shares by segment, EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total
Comparable net assets by segment, EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total
Comparable return on net assets by segment, %
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Average number of employees
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total
2018
160
0
0
0
147
306
2018
6,295
3,743
648
2,789
4,264
17,739
2018
11.2
5.0
7.8
10.3
-4.5
2018
1,087
1,940
1,473
3,378
888
8,767
2017
0
0
55
0
687
742
2017
5,672
3,728
638
3,161
276
13,474
2017
8.4
5.5
11.7
10.1
-13.3
2017
1,036
1,807
1,180
3,710
774
8,507
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
125
125
Financial key figures
Share key figures
Segment key figures
Definitions of key figures
Definitions of key figures
Alternative performance measures
Business
performance
Definition
Comparable
EBITDA
Operating profit + depreciations and amortisations -
items affecting comparablity
Comparable
operating
profit
Operating profit - items affecting comparability
Items affecting
comparability
Impairment charges + capital gains and other + changes
in fair values of derivatives hedging future cash flow +
nuclear fund adjustment
Impairment
charges
Impairment charges and related provisions (mainly
dismantling), which are adjusted from depreciation and
amortisation.
Capital gains
and other
Capital gains and transaction costs from acquisitions,
which are adjusted from other income and other
expenses respectively. Profits from the capital recycling
business model are presented in comparable operating
profit because the business results are realised through
divesting the shareholding, either partially or totally.
Reason to use the measure
Comparable EBITDA is
representing the underlying
cash flow generated by the
total Group and segments.
Used as a component in
the capital structure target
of Comparable net debt
/EBITDA.
Comparable operating
profit is used in financial
target setting and
forecasting, management’s
follow up of financial
performance and
allocation of resources in
the group’s performance
management process.
Component used in
calculating comparable
operating profit and
comparable EBITDA.
Component used in
calculating comparable
operating profit and
comparable EBITDA.
Component used in
calculating comparable
operating profit and
comparable EBITDA.
Income
statement
Income
statement
Income
statement
Business
performance
Changes in
fair values of
derivatives
hedging future
cash flow
Nuclear fund
adjustment
Reference to
reconciliation
Note 5
Capital risk
management
Definition
Effects from financial derivatives hedging future cash-
flows where hedge accounting is not applied according
to IFRS 9, which are adjusted from other income.
Reason to use the measure
Component used in
calculating comparable
operating profit and
comparable EBITDA.
Reference to
reconciliation
Income
statement
Effects from the accounting of Fortum’s part of the Finnish
Nuclear Waste Fund where the asset in the balance sheet
cannot exceed the related liabilities according to IFRIC
interpretation 5, which are adjusted from materials and
services. In addition adjustments are made for accounting
effects from valuation according to IFRS.
Component used in
calculating comparable
operating profit and
comparable EBITDA.
Income
statement
Income
statement
Comparable
return on net
assets, %
Comparable operating profit + share of profit
(loss) in associated companies and joint ventures
+ adjustment for share of profit of associated
companies and joint ventures
x 100
Comparable net assets average
Note 6
Segment
reporting
Note 6
Segment
reporting
Comparable return on
net assets is used in
financial target setting and
forecasting, management’s
follow up of financial
performance and
allocation of resources in
the group’s performance
management process.
Share of profit of
associates and joint
ventures is included
in profit component
in the comparable
RONA calculation and
the adjustments are
done based on similar
components as in Items
affecting comparability.
Adjustment for material items affecting comparability.
Adjustment for
Share of profit
of associated
companies
and joint
ventures
Comparable
net assets
Non-interest bearing assets + interest-bearing assets
related to the Nuclear Waste Fund - non-interest bearing
liabilities - provisions (non-interest bearing assets and
liabilities do not include finance related items, tax and
deferred tax and assets and liabilities from fair valuations
of derivatives used for hedging future cash flows).
Comparable net assets is a
component in Comparable
return on net assets
calculation where return on
capital allocated directly to
the businesses is measured.
Note 6
Segment
reporting
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
126
126
Financial key figures
Share key figures
Segment key figures
Definitions of key figures
Capital structure
Definition
Reason to use the measure
Reconciliation
Other key figures
Share based key figures
Note 5
Capital risk
management
Earnings per share
(EPS)
Profit for the period - non-controlling interests
Average number of shares during the period
Comparable net
debt / EBITDA
Interest-bearing net debt
Comparable EBITDA
Interest-bearing
net debt
Interest-bearing liabilities -
liquid funds
Return on capital
employed (ROCE), %
Profit before taxes + interest
and other financial expenses
x 100
Capital employed average
Financial targets give guidance
on Fortum’s view of the company’s
long-term value creation potential,
its growth strategy and business
activities. Comparable net debt to
EBITDA is one of the Fortum’s long-
term over-the-cycle financial targets
measuring the capital structure of the
Group.
Interest-bearing net debt is used in
the follow-up of the indebtedness
of the group i.e. capital structure
especially as a component in the
long-term over-the-cycle financial
target of Comparable net debt /
EBITDA in the Group.
Return on capital employed (ROCE)
is a long-term over the cycle financial
ratio measuring the profitability and
how efficiently invested capital is
used. It gives guidance on company’s
long-term value creation potential,
its growth strategy and business
activities.
Note 27
Interest-bearing
liabilities
Note 5
Capital risk
management
Capital employed
Total assets - total non-
interest bearing liabilities
Capital employed is the book value
of the invested capital and it is used
as a component when calculating
the Return of capital employed in the
group.
Note 5
Capital risk
management
Cash flow per share Net cash from operating activities
Average number of shares during the period
Equity per share
Shareholders’ equity
Number of shares at the end of the period
Payout ratio, %
Dividend per share
Earnings per share
Dividend yield, %
Dividend per share
Share price at the end of the period
Price/earnings
(P/E) ratio
Share price at the end of the period
Earnings per share
x 100
x 100
Average share price Amount traded in euros during the period
Number of shares traded during the period
Market capitalisation Number of shares at the end of the period x share price
at the end of the period
Trading volumes
Number of shares traded during the period in relation
to the weighted average number of shares during the
period
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
127
127
Financial key figures
Share key figures
Segment key figures
Definitions of key figures
Net cash from operating activities before change in working capital
Effective income tax rate, % =
Income tax expense
Definitions for tax figures
Profit before income tax
Comparable effective
income tax rate, %
=
Income tax expense - effects from tax rate changes and major one time
income tax effects
Profit before income tax decreased by profits from associated companies
and joint ventures as well as tax exempt capital gains or losses
Weighted average
applicable income tax rate
=
Sum of the proportionately weighted share of profits before taxes of each
group operating country multiplied with an applicable nominal tax rate of
the respective countries.
x 100
x 100
Other key figures
Funds from operations
(FFO)
Capital expenditure
Capitalised investments in property, plant and equipment and intangible assets
including maintenance, productivity, growth and investments required by legislation
including borrowing costs capitalised during the construction period. Maintenance
investments expand the lifetime of an existing asset, maintain usage/availability and/
or maintains reliability. Productivity investments improve productivity in an existing asset.
Growth investments’ purpose is to build new assets and/or to increase customer base
within existing businesses. Legislation investments are done at a certain point of time
due to legal requirements.
Gross investments in shares
Investments in subsidiary shares, shares in associated companies and other investments.
Investments in subsidiary shares are net of cash and grossed with interest-bearing
liabilities in the acquired company.
x 100
x 100
x 100
Return on shareholders’
equity (ROE), %
Profit for the year
Total equity average
Gearing, %
Interest-bearing net debt
Total equity
Equity-to-assets ratio, %
Total equity including non-controlling interests
Total assets
Interest coverage
Operating profit
Interest coverage including
capitalised borrowing costs
Net interest expenses
Operating profit
Net interest expenses - capitalised borrowing costs
Average number of
employees
Based on monthly average for the whole period
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
128
Parent company financial statements, Finnish GAAP (FAS)
Income statement
EUR million
Sales
Other income
Employee costs
Depreciation, amortisation and write-downs
Other expenses
Operating profit
Financial income and expenses
Profit before appropriations
Group contributions 1)
Profit before income tax
Income tax expense
Profit for the period
1) Taxable profits transferred from Finnish subsidiaries.
Balance sheet
EUR million
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Shares in Group companies
Participations in associated companies
Interest-bearing receivables from Group companies
Interest-bearing receivables from associated companies
Other non-current assets
Derivative financial instruments
Deferred tax assets
Total non-current assets
Current assets
Other current receivables from Group companies
Other current receivables from associated companies
Derivative financial instruments
Note
2
3
4
8
6
7
2018
82
8
-36
-8
-78
-33
751
719
85
803
-5
798
2017
73
6
-32
-6
-79
-38
823
785
157
943
-10
933
Note
31 Dec 2018
31 Dec 2017
8
8
8
8
8
8
8
13, 14
9
9
13, 14
23
10
16,725
0
2,954
1
0
157
1
19,870
99
0
167
10
21
16,725
2
212
15
0
242
0
17,226
173
0
132
EUR million
Other current receivables
Deposits and securities (maturity over three months)
Cash and cash equivalents
Liquid funds
Total current assets
Total assets
EQUITY
Shareholders’ equity
Share capital
Share premium
Hedging reserve
Retained earnings
Profit for the period
Total shareholders’ equity
Note
9
10
31 Dec 2018
10
27
132
159
435
20,305
31 Dec 2017
14
714
2,792
3,506
3,825
21,052
3,046
2,822
-11
4,205
798
10,859
3,046
2,822
-11
4,249
933
11,038
Provisions for liabilities and charges
0
0
LIABILITIES
Non-current liabilities
External interest-bearing liabilities
Interest-bearing liabilities to Group companies
Interest-bearing liabilities to associated companies
Derivative financial instruments
Other non-current liabilities
Total non-current liabilities
Current liabilities
External interest-bearing liabilities
Trade and other payables to Group companies
Trade and other payables to associated companies
Derivative financial instruments
Trade and other current payables
Total current liabilities
Total liabilities
Total equity and liabilities
11, 13, 14
13, 14
11
12
12
13, 14
12
4,386
3,400
293
51
35
8,165
1,074
13
2
103
88
1,281
9,446
20,305
3,448
3,290
285
94
44
7,160
657
1,991
4
102
100
2,854
10,014
21,052
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
129
EUR million
Cash flow from financing activities
Proceeds from long-term liabilities
Payment of long-term liabilities
Change in cash pool liabilities
Change in short-term liabilities
Dividends paid
Net cash used in financing activities
Net increase(+)/decrease(-) in liquid funds
Liquid funds at the beginning of the period
Liquid funds at the end of the period
2018
1,762
-530
110
-1,810
-977
-1,444
2017
35
-482
967
-2,038
-977
-2,495
-3,347
-1,429
3,506
159
4,935
3,506
Cash flow statement
EUR million
Cash flow from operating activities
Profit for the period
Adjustments:
Income tax expense
Group contributions
Finance costs - net
Depreciations, amortisation and write-downs
Operating profit before depreciations (EBITDA)
Non-cash flow items
Interest and other financial income
Interest and other financial expenses paid
Dividend income
Group contribution received
Realised foreign exchange gains and losses
Income taxes paid
Funds from operations
Other short-term receivables increase(-)/decrease(+)
Other short-term payables increase(+)/decrease(-)
Change in working capital
Net cash from operating activities
Cash flow from investing activities
Capital expenditures
Acquisition of shares and capital contributions in subsidiaries
Acquisition of other shares
Capital returns
Proceeds from sales of fixed assets
Change in interest-bearing receivables and other non-current assets
Net cash used in investing activities
Cash flow before financing activities
2018
798
5
-85
-751
8
-24
0
18
-104
796
157
16
-6
853
9
-4
4
857
-16
0
0
0
0
-2,744
-2,760
-1,903
2017
933
10
-157
-823
6
-32
0
6
-101
944
145
-28
23
957
-12
12
0
957
-15
-380
0
-
0
504
109
1,066
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
130
Notes to the Parent Company Financial Statements, FAS
1 Accounting policies and principles
The financial statements of Fortum Oyj are prepared in accordance with Finnish Accounting Standards (FAS)�
1.1 Sales
Sales include sales revenue from actual operations and exchange rate differences on trade receivables, less
discounts and indirect taxes such as value added tax�
1.2 Other income
Other income includes gains on the sales of property, plant and equipment and shareholdings, as well as all other
operating income not related to the sales of products or services, such as rents�
1.3 Foreign currency items and derivative instruments
Transactions denominated in foreign currencies have been valued using the exchange rate at the date of the
transaction� Receivables and liabilities denominated in foreign currencies outstanding on the balance sheet date
have been valued using the exchange rate quoted on the balance sheet date� Exchange rate differences have been
entered in the financial net in the income statement�
Fortum Oyj enters into derivative contracts mainly for hedging foreign exchange and interest rate exposures in
Fortum Group�
Accounting principles of financial derivatives, see Note 4 Financial risk management, Note 15 Financial
assets and liabilities by categories and Note 16 Financial assets and liabilities by fair value hierarchy in the
Consolidated financial statements�
1.4 Income taxes
Income taxes presented in the income statement consist of accrued taxes for the financial year and tax
adjustments for prior years�
1.5 Shares in group companies
The balance sheet value of shares in group companies consists of historical costs less write-downs� If the
estimated future cash flows generated by a non-current asset are expected to be permanently lower than the
balance of the carrying amount, an adjustment to the value must be made to write-down the difference as an
expense� If the basis for the write-down can no longer be justified at the balance sheet date, it must be reversed�
1.6 Property, plant and equipment and depreciation
The balance sheet value of property, plant and equipment consists of historical costs less depreciation and
possible impairments� Property, plant and equipment are depreciated using straight-line depreciation based on
the expected useful life of the asset�
The depreciation is based on the following expected useful lives:
Buildings and structures
Machinery and equipment
Other intangible assets
15–40 years
3–15 years
5–10 years
1.7 Pension expenses
Statutory pension obligations are covered through a compulsory pension insurance policy or Group’s own
pension fund� Costs for pension fund are recorded in the income statement based on contributions paid
pursuant to the Finnish pension laws and regulations�
1.8 Long-term incentive schemes
Costs related to the Fortum long-term incentive plans are accrued over the earnings period and the related
liability is booked to the balance sheet�
1.9 Provisions
Foreseeable future expenses and losses that have no corresponding revenue to which Fortum is committed or
obliged to settle, and whose monetary value can be reasonably assessed, are entered as expenses in the income
statement and included as provisions in the balance sheet�
1.10 Presentation of the primary statements and notes
Information presented in the notes is given separately for Fortum Group companies and for associated
companies of the Group�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
131
2 Sales by market area
EUR million
Finland
Other countries
Total
3 Other income
EUR million
Rental and other income
Total
4 Employee costs
EUR million
Personnel expenses
Wages, salaries and remunerations
Indirect employee costs
Pension costs
Other indirect employee costs
Other personnel expenses
Total
EUR thousand
Compensation for the President and CEO
Salaries and fringe benefits
Performance bonuses 1)
Share-based incentives 1)
Pensions (statutory)
Pensions (voluntary)
Social security expenses
Total
1) Based on estimated amounts.
EUR thousand
Compensation for the Board of Directors
The compensation above is presented on accrual basis� Paid salaries and remunerations for the President and
CEO Pekka Lundmark were EUR 1,594 thousand (2017: 1,405)�
For the President and CEO Pekka Lundmark the retirement age of old-age pension is 63� The pension
obligations are covered through insurance company�
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 STI or LTI programme, nor does Fortum have a pension plan that they
can opt to take part in� The compensation of the board members is not tied to the sustainability performance of
the Group�
See Note 11 Employee benefits and Note 31 Pension obligations in the Consolidated financial
statements�
Average number of employees
5 Auditor’s fees
EUR thousand
Audit fees
Audit related assignments
Tax assignments
Other assignments
Total
2018
265
2018
364
58
0
0
422
2017
258
2017
295
64
0
81
440
Deloitte Oy is the appointed auditor until the next Annual General Meeting, to be held in 2019� Audit fees include
fees for the audit of the consolidated financial statements, review of the interim reports as well as the fees for the
audit of Fortum Oyj� Audit related assignments include fees for assurance of sustainability reporting and other
assurance and associated services related to the audit� Tax assignments include fees for tax advice services� Other
assignments consist of advisory services�
2018
52
30
82
2018
8
8
2018
26
6
1
3
36
2017
46
27
73
2017
6
6
2017
25
5
1
1
32
2018
Pekka Lundmark,
President and CEO
2017
Pekka Lundmark,
President and CEO
1,048
228
297
250
252
36
2,112
2018
483
998
187
334
231
229
41
2,019
2017
492
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
132
6 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
Write-downs of participations in group companies
Write-downs of participations in associated companies
Write-downs on loan receivables
Interest and other financial income
Exchange rate differences
Changes in fair values of derivatives
Interest and other financial expenses to group companies
Interest and other financial expenses
Total
Interest income
Interest expenses
Interest costs - net
7 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
2018
796
0
16
0
-2
-17
0
37
1
-2
-78
751
17
-75
-58
2018
-12
17
5
5
0
0
5
2017
944
0
12
-35
-3
-1
0
22
-16
-1
-99
823
13
-81
-68
2017
-21
31
10
6
0
3
10
8 Non-current assets
Intangible assets total
EUR million
Cost 1 January 2018
Additions
Disposals
Cost 31 December 2018
Accumulated depreciation 1 January 2018
Disposals
Depreciation for the period
Accumulated depreciation 31 December 2018
Carrying amount 31 December 2018
Carrying amount 31 December 2017
Property, plant and equipment
EUR million
Cost 1 January 2018
Additions and transfers between categories
Disposals
Cost 31 December 2018
Accumulated depreciation 1 January 2018
Disposals
Depreciation for the period
Accumulated depreciation 31 December 2018
Carrying amount 31 December 2018
Carrying amount 31 December 2017
Intangible assets total
39
20
11
48
30
-11
6
25
23
10
Total
27
5
18
14
6
-4
2
4
10
21
Buildings and
structures
1
0
1
0
Machinery and
equipment
7
5
3
10
1
-1
0
0
0
0
5
-3
2
4
5
2
Advances
paid and
construction
in progress
18
14
4
0
0
4
18
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
133
Investments
EUR million
Cost 1 January 2018
Additions 1)
Disposals
Cost 31 December 2018
Accumulated write-downs
1 January 2018
Impairment charges
Accumulated write-
downs 31 December 2018
Carrying amount
31 December 2018
Carrying amount
31 December 2017
Shares
in Group
companies
17,847
Participation
in associated
companies
6
0
Receivables
from Group
companies
212
2,742
Receivables
from
associated
companies
16
0
Other
non-current
assets
8
0
17,847
1,123
1,123
16,725
16,725
6
3
2
6
0
2
2,954
0
0
2,954
212
17
1
14
15
1
15
8
8
8
0
0
Total
18,089
2,742
0
20,831
1,135
17
1,152
19,680
16,954
1) Additions regarding shares comprise acquisitions of shares and capital contributions and reclassification between other non-current assets and
shares in Group companies.
10 Changes in shareholders’ equity
EUR million
Total equity 31 December 2017
Cash dividend
Change in hedging reserve
Profit for the period
Total equity 31 December 2018
Total equity 31 December 2016
Cash dividend
Change in hedging reserve
Profit for the period
Total equity 31 December 2017
EUR million
Distributable funds
Retained earnings 31 December
Hedging reserve
Distributable funds 31 December
Share capital
3,046
Share
premium
2,822
Hedging
reserve
-11
3,046
2,822
3,046
2,822
3,046
2,822
1
-11
-23
11
-11
2018
5,002
-11
4,991
Retained
earnings
5,182
-977
798
5,002
5,226
-977
933
5,182
Total
11,038
-977
1
798
10,859
11,072
-977
11
933
11,038
2017
5,182
-11
5,170
9 Other current receivables
EUR million
Other current receivables from group companies
Trade receivables
Group contribution and other receivables
Accrued income and prepaid expenses
Total
Other current receivables from associated companies
Accrued income and prepaid expenses
Total
Other current receivables
Trade receivables
Other receivables
Accrued income and prepaid expenses
Total
2018
10
85
5
99
0
0
0
0
10
10
2017
9
157
6
173
0
0
0
0
14
14
See Note 4.5 Liquidity and refinancing risk in the Consolidated financial statements�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
134
11 Interest-bearing liabilities
EUR million
External interest-bearing liabilities 1)
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
Other short-term interest-bearing debt
Total short-term interest-bearing debt
Total external interest-bearing debt
Maturity of external interest-bearing liabilities 1)
EUR million
2019
2020
2021
2022
2023
2024 and later
Total
2018
1,746
1,775
865
4,386
750
42
283
1,074
5,460
2017
2,521
82
844
3,448
422
122
114
657
4,105
2018
1,074
27
2,261
1,039
98
962
5,460
See Note 4.5 Liquidity and refinancing risk and Note 27 Interest-bearing liabilities in the Consolidated
financial statements�
EUR million
External interest-bearing liabilities due after five years 1)
Bonds
Other long-term liabilities
Total
EUR million
Other interest-bearing liabilities due after five years
Interest-bearing liabilities to associated companies
Total
1) Does not include liabilities to group and associated companies.
2018
97
865
962
2018
293
293
2017
198
844
1,042
2017
285
285
Non-discounted cash flows of interest-bearing liabilities and their maturities, see Note 13 Financial derivatives�
12 Trade and other payables
EUR million
Trade and other payables to group companies
Trade payables
Deposits from group companies and other liabities
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 Financial derivatives
2018
3
10
0
13
2
2
11
5
73
88
Interest rate and currency derivatives by instrument 2018
EUR million
Forward foreign exchange
contracts
Interest rate swaps
Interest rate and currency
swaps
Total
Of which long-term
Short-term
Under 1
year
0
1,515
383
10,420
Notional amount
Remaining lifetimes
1–5 years
Over 5
years
Fair value
Total
Positive
Negative
786
2,242
265
3,293
0
225
225
9,309
3,982
648
13,938
99
159
66
324
157
167
83
70
0
154
51
103
2017
3
1,987
0
1,991
4
4
21
2
76
100
Net
15
88
66
170
106
64
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
135
Interest rate and currency derivatives by instrument 2017
EUR million
Forward foreign exchange contracts
Interest rate swaps
Interest rate and currency swaps
Total
Of which long-term
Short-term
Notional amount
Remaining lifetimes
Under
1 year
7,790
305
311
8,406
1–5
years
517
3,421
580
4,518
Over
5 years
102
102
Total
8,307
3,827
892
13,025
Fair value
Positive Negative
104
90
3
196
94
102
77
205
92
373
242
132
Net
-27
115
89
177
148
29
Maturity analysis of interest-bearing liabilities and derivatives
Amounts disclosed below are non-discounted expected cash flows (future interest payments and amortisations)
of interest-bearing liabilities and interest rate and currency derivatives�
EUR million
Interest-bearing liabilities
Interest rate and currency
derivatives liabilities
Interest rate and currency
derivatives receivables
Total
2018
2017
Under
1 year
1,192
1–5
years
3,582
Over
5 years
1,437
Total
6,211
Under
1 year
2,752
1–5
years
2,613
Over
5 years
1,509
Total
6,875
8,946
1,159
16
10,121
8,132
1,256
4
9,392
-9,037
1,101
-1,203
3,538
-21 -10,260
6,072
1,433
-8,191
2,693
-1,341
2,529
-1
1,511
-9,534
6,733
Interest-bearing liabilities include loans from the State Nuclear Waste Management Fund and Teollisuuden
Voima Oyj of EUR 1,158 million (2017: 1,129)� These loans are renewed yearly and the related interest payments are
calculated for ten years in the table above�
14 Derivatives and liabilities by fair value hierarchy
Fair value measurements are classified using a fair value hierarchy i�e� Level 1, Level 2 and Level 3 that reflects the
significance of the inputs used in making the measurements� For further information look accounting principles
in Fortum consolidated accounts Note 16 Financial assets and liabilities by fair value hierarchy�
Derivatives in financial assets
EUR million
In non-current assets
Derivative financial instruments
Interest rate and currency
derivatives
Hedge accounting
Non-hedge accounting
In current assets
Derivative financial instruments
Interest rate and currency
derivatives
Hedge accounting
Non-hedge accounting
Total
Level 1
Level 2
Level 3
Total
2018
2017
2018
2017
2018
2017
2018
2017
149
8
154
87
149
8
154
87
-
-
21
146
324
88
44
373
-
-
21
146
324
88
44
373
Derivatives and liabilities at fair value in financial liabilities
EUR million
In non-current liabilities
Interest-bearing liabilities 1)
Derivative financial instruments
Interest rate and currency
derivatives
Hedge accounting
Non-hedge accounting
In current liabilities
Derivative financial instruments
Interest rate and currency
derivatives
Hedge accounting
Non-hedge accounting
Total
Level 1
Level 2
Level 3
Total
2018
2017
2018
2017
2018
2017
2018
2017
930
1,037
930
1,037
43
8
47
47
43
8
47
47
5
98
1,083
14
88
1,233
-
-
5
98
1,083
14
88
1,233
-
-
1) Fair valued part of bond in the fair value hedge relationship.
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
136
Net fair value amount of interest rate and currency derivatives is EUR 170 million (2017: 177), including assets
EUR 324 million (2017: 373) and liabilities EUR 154 million (2017: 196)� Fortum Corporation has cash collaterals
based on Credit Support Annex agreements with some counterparties� At the end of December 2018 Fortum
Corporation had received EUR 75 million (2017: 113) from Credit Support Annex agreements� The received cash
has been booked as a short-term interest-bearing liability�
15 Contingent liabilities
EUR million
On own behalf
Other contingent liabilities
On behalf of group companies
Guarantees
On behalf of associated companies
Guarantees on behalf of Swedish associated companies
Contingent liabilities total
Operating leases
EUR million
Operating lease commitments
Due within a year
Due after one year and within five years
Due after 5 years
Total
2018
2
113
532
647
2018
8
28
14
49
2017
2
221
548
771
2017
7
28
18
54
16 Related party transactions
See Note 38 Related party transactions in the Consolidated financial statements�
Investments in group companies, associated companies and other holdings
No. of shares units
Holding %
Investments in group companies
Fortum Waste Solutions Oy
Fortum Asiakaspalvelu Oy
Fortum Heat and Gas Oy
Fortum Markets Oy
Fortum Norm Oy
Fortum Power and Heat Oy
Fortum Real Estate Oy
Fortum Project Finance N.V.
Fortum Holding B.V.
Fortum India Private Ltd
Fortum Finance Ireland Designated Activity Company
Fortum Sweden AB
Investments in associated companies
AW-Energy Oy
Wello Oy
Other holdings
Clic Innovation Oy
East Office of Finnish Industries Oy
Prototype Carbon Fund
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Belgium
The Netherlands
India
Ireland
Sweden
Finland
Finland
Finland
Finland
USA
3,520,800
10,010
2,000,000
24,039
250
91,197,543
2,000,000
727,820
61,062
1
25,000
1,000
806
1,100,00
100
1
N/A
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.99
100.00
0.10
100.00
100.00
13.60
18.60
3.80
5.88
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
137
Proposal for the use of the profit shown on the balance sheet
The distributable funds of Fortum Corporation as at 31 December 2018 amounted to EUR 4,991,388,741�37
including the profit of the financial period 2018 of EUR 797,840,404�43� The company’s liquidity is good and the
dividend proposed by the Board of Directors will not compromise the company’s liquidity�
Based on the number of registered shares as at 31 January 2019 the total amount of dividend would be
EUR 977,123,911�50� The Board of Directors proposes, that the remaining part of the distributable funds be
retained in the shareholders’ equity�
The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 1�10 per share be paid
for 2018�
Signatures for the operating and financial review and financial statements
Espoo, 31 January 2019
Matti Lievonen
Klaus-Dieter Maubach
Heinz-Werner Binzel
Eva Hamilton
Kim Ignatius
Essimari Kairisto
Anja McAlister
Veli-Matti Reinikkala
Pekka Lundmark
President and CEO
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
138
Auditor’s report
To the Annual General Meeting of Fortum Oyj
Report on the Audit of Financial Statements
Opinion
We have audited the financial statements of Fortum Oyj (business identity code 1463611-4) for the year ended
31 December, 2018� The financial statements comprise the consolidated balance sheet, consolidated income
statement, consolidated statement of comprehensive income, consolidated statement of changes in total equity,
consolidated cash flow statement and notes to the consolidated financial statements, including a summary of
significant accounting policies, as well as the parent company’s balance sheet, income statement, cash flow
statement and notes to the financial statements�
In our opinion
• the consolidated financial statements give a true and fair view of the group’s financial position, financial
performance and cash flows in accordance with International Financial Reporting Standards (IFRS) as adopted
by the EU,
• the financial statements give a true and fair view of the parent company’s financial performance and financial
position in accordance with the laws and regulations governing the preparation of financial statements in
Finland and comply with statutory requirements�
Our opinion is consistent with the additional report submitted to the Audit Committee�
Basis for opinion
We conducted our audit in accordance with good auditing practice in Finland� Our responsibilities under good
auditing practice are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements
section of our report�
We are independent of the parent company and of the group companies in accordance with the ethical
requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical
responsibilities in accordance with these requirements�
In our best knowledge and understanding, the non-audit services that we have provided to the parent company
and group companies are in compliance with laws and regulations applicable in Finland regarding these services,
and we have not provided any prohibited non-audit services referred to in Article 5(1) of regulation (EU) 537/2014�
The non-audit services that we have provided have been disclosed in Note 9 to the consolidated financial
statements
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion�
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current period� These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters�
We have also addressed the risk of management override of internal controls� This includes consideration of
whether there was evidence of management bias that represented a risk of material misstatement due to fraud�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
139
Key audit matter
Uniper Acquisition
Refer to Notes 3 and 19.
• On 26 June 2018, Fortum closed the Uniper SE (Uniper)
offer and became the company’s largest shareholder.
Fortum holds 49.99% of the shares as of 31 December
2018.
• Fortum consolidates Uniper as an associated
company from 30 June 2018. The total acquisition
cost approximately EUR 4.0 billion, is reported in the
‘Participations in associated companies and joint
ventures’.
• As a listed company, Uniper publishes its interim reports
later than Fortum, Fortum’s share of Uniper’s results will
be accounted for with a timelag of one quarter with
potential adjustments. Fortum’s financial statements 2018
includes Fortum’s share of Uniper’s third quarter result.
• Purchase price allocation is still ongoing and it will
be completed within the oneyear window from the
acquisition date according to IFRS.
• The assessment of the nature of interest in investee as
well as the classification of joint arrangements requires
management judgement. Due to the size, the Uniper
acquisition may have significant effect on Fortum´s
financial reporting.
How our audit addressed the key audit matter
• We have reviewed the relevant agreements and minutes
of the board of directors to recognize the material terms
affecting the accounting treatment in the financial
statements.
• We have assessed management´s approach according to
which the acquisition has been accounted in the financial
statements as well as methods applied in making the
significant judgements relating to the acquisition in line
with IFRS.
• We have challenged the management judgement
relating to the classification of the acquisition as joint
arrangements and assessed the classification, the
reporting of the share of profit/loss of associates and
joint ventures as well as the accounting treatment of the
ongoing purchase price allocation in line with IFRS.
• We assessed the adequacy of related disclosures in the
financial statements.
Key audit matter
Valuation of fixed assets and goodwill
Refer to Notes 2, 17 and 18.
• The consolidated balance sheet includes property, plant
and equipment amounting to EUR 9,981 million and
goodwill amounting to EUR 588 million.
• The main assumptions used in the valuation of energy
production property, plant and equipment and goodwill
relate to the estimated future operating cash flows and
the discount rates.
• In acquisition the assumptions relates to determining
the fair values and remaining useful lives of acquired
intangible and tangible assets.
• The potential indicators for impairment are among other
things changes in electricity and fuel prices, regulatory/
political changes relating to energy taxes and price
regulations.
• The assumptions used in the valuation of the balances in
question require management judgment.
How our audit addressed the key audit matter
• We have evaluated the process how management has
assessed the indicators for potential impairment. We
have performed audit procedures on impairment models
relating to material cash generating units.
• We obtained entity’s impairment testing documentation
for goodwill and energy production assets when tested
and evaluated the rationale of key assumptions applied
by management, including commodity price forecasts,
profit and cash flow forecasts, terminal values, foreign
exchange rates and the selection of discount rates.
• We have compared, that the forecasts used in the
impairment testing calculations are based on long term
forecast approved by management.
• We challenged management’s assumptions and
judgments with reference to historical data and, where
applicable, external benchmarks.
• This matter is a significant risk of material misstatement
referred to in EU Regulation No 537/241, point (c) of
Article 10(2).
• We assessed the models used in the impairment testing
and carried out our testing for the sensitivity calculations.
• We assessed the adequacy of related disclosures in the
financial statements.
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
140
Key audit matter
Fair value measurement of derivatives and hedge
accounting
Refer to Notes 4, 7, 8, 15 and 16.
• In Fortum’s consolidated financial statements total
derivative assets amounts to EUR 555 million and total
derivative liabilities amounts to EUR 1,191 million. The net
effect of changes in fair values of derivatives hedging
future cash flow amounts to EUR 98 million in items
affecting comparability in the consolidated income
statement and the cash flow hedges in other equity
components amount to EUR -638 million.
• The fair value and changes in fair values of derivative
financial instruments may have significant impacts
on Fortum´s financial statements. Fortum’s business
is exposed to fluctuations in prices and volume of
commodities used in the production and sales of energy
products. The main exposure is toward energy prices.
Electricity price risk is hedged by entering into electricity
derivative contracts. Fortum uses derivative instruments to
reduce the effect of electricity price volatility.
Key audit matter
Nuclear related assets and liabilities
Refer to Notes 2 and 29.
• Nuclear related assets and liabilities in consolidated
balance sheet amount to EUR 858 million.
• Fortum’s nuclear related provisions and the related part
of the Finnish State Nuclear Waste Management Fund
are both presented separately as disclosed in note 29.
• Fortum’s share in the Finnish State Nuclear Waste
Management Fund is accounted for according to IFRIC
5 which states that the fund assets are measured at the
lower of fair value or the value of the related liabilities.
How our audit addressed the key audit matter
• Our audit procedures included an assessment of internal
controls over the hedge accounting documentation
and effectiveness testing, measurement of fair value
measures, and evaluating the methodologies, inputs,
judgments made and assumptions used by management
in determining fair values.
• For Fortum’s fair valuation models, we evaluated rationale
of the models and accounting treatment applied. We
have compared the assumptions used by management in
valuation against externally available market data.
• We have assessed the existence and completeness of
outstanding derivative contracts as of 31 December 2018
by requesting confirmations from the counterparties.
• We have assessed that financial instruments included in
hedge relationships are accounted for in accordance with
IFRS 9.
• We have assessed the adequacy of the presentation for
derivative financial instruments and hedge accounting
applied in the financial statements.
How our audit addressed the key audit matter
• We have assessed Fortum’s accounting manual and
principles for Nuclear Decommissioning Accounting,
whether they are in line with IFRS accounting principles.
• We have assessed the assumptions and judgments made
and adopted by the management in the accounting for
the nuclear waste provisions and share in state nuclear
waste management fund have been based on current
legislation and decisions set by Finnish State Nuclear
Waste Management Fund.
• Due to complexity and materiality, the accounting
• We assessed the adequacy of related disclosures in the
treatment for nuclear decommissioning is complex and
requires application of special accounting practice and
management judgment when forming estimates for the
basis of accounting such as technical plans, timing, cost
estimates and discount rate.
financial statements.
Responsibilities of the Board of Directors and the President and CEO
for the financial statements
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, and of financial statements that give a true and fair view in accordance with the
laws and regulations governing the preparation of financial statements in Finland and comply with statutory
requirements� The Board of Directors and the President and CEO are also responsible for such internal control
as they determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error�
In preparing the financial statements, the Board of Directors and the President and CEO are responsible for
assessing the parent company’s and the group’s ability to continue as going concern, disclosing, as applicable,
matters relating to going concern and using the going concern basis of accounting� The financial statements
are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent
company or the group or cease operations, or there is no realistic alternative but to do so�
Auditor’s responsibilities in the audit of financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion�
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with good auditing practice will always detect a material misstatement when it exists� Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of the financial statements�
As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain
professional skepticism throughout the audit� We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion� The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control�
• Obtain an understanding of internal control relevant to the audit 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
parent company’s or the group’s internal control�
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management�
• Conclude on the appropriateness of the Board of Directors’ and the President and CEO use of the going
concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
141
related to events or conditions that may cast significant doubt on the parent company’s or the group’s ability
to continue as a going concern� If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion� Our conclusions are based on the audit evidence obtained up to the date
of our auditor’s report� However, future events or conditions may cause the parent or the group to cease to
continue as a going concern�
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures,
and whether the financial statements represent the underlying transactions and events so that the financial
statements give a true and fair view�
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the group to express an opinion on the consolidated financial statements� We are responsible
for the direction, supervision and performance of the group audit� We remain solely responsible for our
audit opinion�
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit�
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards�
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the financial statements of the current period and are therefore the
key audit matters� We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication�
Other Reporting Requirements
does not include the financial statements and our auditor’s report thereon� We have obtained the Operating and
Financial Review prior to the date of this auditor’s report, and the Financials is expected to be made available to
us after that date�
Our opinion on the financial statements does not cover the other information�
In connection with our audit of the financial statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated�
With respect to Operating and Financial Review, our responsibility also includes considering whether the
Operating and Financial Review has been prepared in accordance with the applicable laws and regulations�
In our opinion, the information in the Operating and Financial Review is consistent with the information
in the financial statements and the Operating and Financial Review has been prepared in accordance with the
applicable laws and regulations�
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are required to
report that fact� We have nothing to report in this regard�
Other opinions
We support that the financial statements should be adopted� The proposal by the Board of Directors regarding
the use of the profit shown on the balance sheet 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, 31 January 2019
Deloitte Oy
Audit Firm
Information on our audit engagement
We were first appointed as auditors by the Annual General Meeting on 16�3�2006, and our appointment
represents a total period of uninterrupted engagement of 12 years�
Reeta Virolainen
Authorised Public Accountant (KHT)
Other information
The Board of Directors and the President and CEO are responsible for the other information� The other
information comprises the Operational and Financial Review and the information included in the Financials, but
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
142
142
Financial key figures
Financial key figures
Share key figures
Segment key figures
Operational key figures
Financial key figures
Comparability of information presented in tables and graphs
Fortum announced the sale of Swedish Distribution business in March 2015� After the divestment of the Swedish Distribution business Fortum has no electricity distribution operations and therefore Distribution segment was treated as
discontinued operations in 2015, with restatement of year 2014, according to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
Information in the tables and graphs presented for year 2012 or earlier is not restated due to the adoption of IFRS 10 and IFRS 11� Adoption of standards influences treatment of Fortum’s holding in Stockholm Exergi AB (publ)
(previously AB Fortum Värme Holding samägt med Stockholms stad) in the consolidated financial statements� From 1 January 2014 onwards Stockholm Exergi is treated as a joint venture and thus consolidated with equity method�
Before the change the company was consolidated as a subsidiary with 50% minority interest�
Fortum has adopted the IFRS 9 and IFRS 15 standards from 1 January 2018 onwards� Fortum has applied the transition relief for not restating the comparative figures from 2017� See additional information in
Note 1 Accounting policies�
For information of Alternative Performance Measures used by Fortum, see Definitions of key figures and Note 1 Accounting policies�
EUR million or as indicated
Income statement
Sales total Fortum
Sales continuing operations
EBITDA total Fortum 1)
EBITDA continuing operations
Comparable EBITDA total Fortum
Comparable EBITDA continuing operations
Operating profit total Fortum
- of sales %
Operating profit continuing operations
- of sales %
Comparable operating profit total Fortum
Comparable operating profit continuing operations
Share of profit/loss of associates and joint ventures
total Fortum
Profit before income tax total Fortum
- of sales %
Profit before income tax continuing operations
- of sales %
Profit for the period total Fortum
- of which attributable to owners of the parent
Profit for the period continuing operations
- of which attributable to owners of the parent
2009
5,435
2,292
2,398
1,782
32.8
2010
6,296
2,271
2,396
1,708
27.1
2011
6,161
3,008
2,374
2,402
39.0
2012
6,159
2,538
2,416
1,874
30.4
2013
5,309
2,129
1,975
1,508
28.4
1,888
1,833
1,802
1,752
1,403
21
1,636
30.1
1,351
1,312
62
1,615
25.7
1,354
1,300
91
2,228
36.2
1,862
1,769
23
1,586
25.8
1,512
1,416
178
1,398
26.3
1,212
1,204
2014
4,751
4,088
3,954
1,673
1,873
1,457
3,428
72.2
1,296
31.7
1,351
1,085
149
3,360
70.7
1,232
30.1
3,161
3,154
1,089
1,081
2015
3,702
3,459
4,640
196
1,265
1,102
4,245
114.7
-150
-4.3
922
808
20
4,088
110.4
-305
-8.8
4,142
4,138
-228
-231
2016
3,632
3,632
1,006
1,006
1,015
1,015
633
17.4
633
17.4
644
644
131
595
16.4
595
16.4
504
496
504
496
2017
4,520
4,520
1,623
1,623
1,275
1,275
1,158
25.6
1,158
25.6
811
811
148
1,111
24.6
1,111
24.6
882
866
882
866
2018
5,242
5,242
1,674
1,674
1,523
1,523
1,138
21.7
1,138
21.7
987
987
38
1,040
19.8
1,040
19.8
858
843
858
843
Change
18/17 %
16
16
3
3
19
19
-2
-2
22
22
-74
-6
-6
-3
-3
-3
-3
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
143
143
Financial key figures
Financial key figures
Share key figures
Segment key figures
Operational key figures
EUR million or as indicated
Financial position and cash flow
Capital employed total Fortum
Interest-bearing net debt
Interest-bearing net debt without Värme financing
Capital expenditure and gross investments in shares total
Fortum
- of sales %
Capital expenditure and gross investments in shares
continuing operations
Capital expenditure total Fortum
Capital expenditure continuing operations
Net cash from operating activities total Fortum
Net cash from operating activities continuing operations
Key ratios
Return on capital employed total Fortum, %
Return on shareholders’ equity total Fortum, %
Interest coverage total Fortum
Interest coverage including capitalised borrowing costs total
Fortum
Funds from operations/interest-bearing net debt total
Fortum, %
Funds from operations/interest-bearing net debt without
Värme financing total Fortum, %
Gearing, %
Comparable net debt/EBITDA total Fortum
Comparable net debt/EBITDA without Värme financing
Equity-to-assets ratio, %
Other data
Dividends
Research and development expenditure
- of sales %
Average number of employees total Fortum
Average number of employees continuing operations
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
15,350
5,969
16,124
6,826
17,931
7,023
19,420
7,814
929
17.1
862
2,264
12.1
16.0
12.4
10.3
37.6
70
2.5
43
1,249
19.8
1,222
1,437
11.6
15.7
13.7
10.0
20.5
78
2.8
40
1,482
24.1
1,408
1,613
14.8
19.7
10.5
8.5
21.5
69
3.0
44
1,574
25.6
1,558
1,382
10.2
14.6
7.6
5.7
19.9
73
3.2
43
888
30
0.5
13,278
888
30
0.5
11,156
888
38
0.6
11,010
888
41
0.7
10,600
19,183
7,793
6,658
1,020
19.2
1,005
1,548
9.0
12.0
6.7
5.3
18.8
22.1
77
3.9
3.4
43
977
49
0.9
9,532
17,918
4,217
3,664
843
17.7
695
774
626
1,762
1,406
19.5
30.0
19.9
15.7
42.9
49.3
39
2.3
2.0
51
1,155
41
1.0
8,821
8,329
19,870
-2,195
N/A
669
18.1
625
626
582
1,381
1,228
22.7
33.4
27.6
21.5
18,649
-48
N/A
1,435
39.5
1,435
591
591
621
621
4.0
3.7
4.6
4.1
-59.7
-1,503.4
N/A
-16
-1.7
N/A
61
977
47
1.4
8,193
8,009
N/A
0
0.0
N/A
62
977
52
1.4
7,994
7,994
18,172
988
N/A
1,815
40.2
1,815
690
690
993
993
7.1
6.6
8.7
7.8
83.9
N/A
7
0.8
N/A
61
977
53
1.2
8,507
8,507
18,170
5,509
N/A
4,672
89.1
4,672
584
584
804
804
6.7
6.8
10.0
9.2
26.8
N/A
46
3.6
N/A
54
977 2)
56
1.1
8,767
8,767
Change
18/17 %
0
-458
157
157
-15
-15
-19
-19
0
6
1) EBITDA is defined as Operating profit + Depreciation and amortisation.
2) Board of Directors’ proposal for the planned Annual General Meeting on 26 March 2019.
See Definitions of key figures�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
144
144
Financial key figures
Share key figures
Share key figures
Segment key figures
Operational key figures
Share key figures
EUR million or as indicated
Data per share
Earnings per share total Fortum
Earnings per share continuing operations
Earnings per share discontinued operations
Diluted earnings per share total Fortum
Diluted earnings per share continuing operations
Diluted earnings per share discontinued operations
Cash flow per share total Fortum
Cash flow per share continuing operations
Equity per share
Dividend per share
Extra dividend
Payout ratio, %
Dividend yield, %
Price/earnings ratio (P/E)
Share prices
At the end of the period
Average
Lowest
Highest
Other data
Market capitalisation at the end of the period, EUR million
Trading volumes 2)
Number of shares, 1,000 shares
In relation to weighted average number of shares, %
Number of shares, 1,000 shares
Number of shares excluding own shares, 1,000 shares
Average number of shares, 1,000 shares
Diluted adjusted average number of shares, 1,000 shares
Change
18/17 %
-3
-3
-3
-3
-19
-19
-9
0
2009
1.48
-
1.48
-
2.55
9.04
1.00
67.6
5.3
12.8
18.97
15.91
12.60
19.20
2010
1.46
-
1.46
-
1.62
9.24
1.00
68.5
4.4
15.4
22.53
19.05
17.18
22.69
2011
1.99
-
1.99
-
1.82
10.84
1.00
50.3
6.1
8.3
16.49
19.77
15.53
24.09
2012
1.59
-
1.59
-
1.56
11.30
1.00
62.9
7.1
8.9
14.15
15.66
12.81
19.36
2013
1.36
-
1.36
-
1.74
11.28
1.10
80.9
6.6
12.2
16.63
15.11
13.10
18.18
2014
3.55
1.22
2.33
3.55
1.22
2.33
1.98
1.38
12.23
1.10
0.20
36.6
7.2
5.1
17.97
17.89
15.13
20.32
2015
4.66
-0.26
4.92
4.66
-0.26
4.92
1.55
1.38
15.53
1.10
-
23.6
7.9
3.0
13.92
16.29
12.92
21.59
2016
0.56
0.56
-
0.56
0.56
-
0.70
0.70
15.15
1.10
-
196.4
7.5
26.1
14.57
13.56
10.99
15.74
2017
0.98
0.98
-
0.98
0.98
-
1.12
1.12
14.69
1.10
-
112.2
6.7
16.8
16.50
15.28
12.69
18.94
2018
0.95
0.95
-
0.95
0.95
-
0.91
0.91
13.33
1.10 1)
115.8 1)
5.8 1)
20.1
19.10
19.10
16.43
22.91
16,852
20,015
14,649
12,570
14,774
15,964
12,366
12,944
14,658
16,966
580,899
65.4
888,367
N/A
888,230
888,230
493,375
55.5
888,367
N/A
888,367
888,367
524,858
59.1
888,367
N/A
888,367
888,367
494,765
55.7
888,367
N/A
888,367
888,367
465,004
52.3
888,367
N/A
888,367
888,367
454,796
51.2
888,367
N/A
888,367
888,367
541,858
61.0
888,367
N/A
888,367
888,367
611,572
68.8
888,367
N/A
888,367
888,367
582,873
65.6
888,367
N/A
888,367
888,367
474,705
53.4
888,294
N/A
888,312
888,312
1) Board of Directors’ proposal for the Annual General Meeting on 26 March 2019.
2) Trading volumes in the table represent volumes traded on Nasdaq Helsinki. In addition to the Nasdaq Helsinki, Fortum shares were traded on several alternative market places, for example at Boat, Cboe and Turquoise, and on the OTC market as well. In 2018, approximately 68% (2017: 61%) of
Fortum’s shares were traded on markets other than the Nasdaq Helsinki Ltd.
See Definitions of key figures�
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
145
145
Financial key figures
Share key figures
Segment key figures
Segment key figures
Operational key figures
Segment key figures
Fortum renewed its business structure as of 1 March 2014� The reorganisation lead to a change in Fortum’s external financial reporting structure as previously separately reported segments Heat and Electricity Sales were combined into
one segment: Heat, Electricity Sales and Solutions�
Fortum has applied new IFRS 10 Consolidated financial statements and IFRS 11 Joint arrangements from 1 January 2014� The effect of applying the new standards to Fortum Group financial information relates to Stockholm Exergi
AB (publ) (previously AB Fortum Värme Holding samägt med Stockholms stad), that is treated as a joint venture and thus consolidated with equity method from 1 January 2014 onwards� Before the change Stockholm Exergi was
consolidated as a subsidiary with 50% minority interest�
Fortum announced the sale of Swedish Distribution business in March 2015� After the divestment of the Swedish Distribution business Fortum does not have any distribution operations and therefore Distribution segment has been
treated as discontinued operations in 2015 with restatement of year 2014, according to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations�
Fortum reorganised its operating structure as of 1 April 2016� The business divisions are: Generation (mainly the former Power and Technology); City Solutions (mainly the former Heat, Electricity Sales and Solutions) and Russia�
Because of the minor financial impact, the comparable segment information for 2015 was not restated�
As of 1 March 2017, the City Solutions division was divided into two divisions: City Solutions and Consumer Solutions, both reported as separate reporting segments� Fortum has restated its 2016 comparison segment reporting
figures in accordance with the new organisation structure� See more information in Note 6 Segment reporting�
Fortum has adopted the IFRS 9 and IFRS 15 standards from 1 January 2018 onwards� Fortum has applied the transition relief for not restating the comparative figures from 2017� See additional information in
Note 1 Accounting policies�
Sales by segment, EUR million
Generation
- of which internal
City Solutions
- of which internal
Heat
- of which internal
Consumer Solutions
- of which internal
Electricity Sales
- of which internal
Russia
- of which internal
Other Operations
- of which internal
Distribution
- of which internal
Eliminations and Netting of Nord Pool transactions
Total for continuing operations
Discontinued operations
Eliminations 1)
Total
1) Sales to and from discontinued operations.
2009
2,531
254
1,399
23
1,449
67
632
-
71
-5
800
13
-1,447
5,435
2010
2,702
-281
1,770
-8
1,798
158
804
-
51
169
963
18
-1,792
6,296
2011
2,481
-24
1,737
8
900
95
920
-
108
115
973
15
-958
6,161
2012
2,415
296
1,628
18
722
55
1,030
-
137
-66
1,070
37
-843
6,159
2013
2,252
69
1,516
87
1,119
-
63
54
1,064
19
-706
5,309
2014
2,156
85
1,332
34
1,055
0
58
44
-513
4,088
751
-89
4,751
2015
1,722
83
1,187
-13
893
0
114
75
-458
3,459
274
-31
3,702
2016
1,657
15
782
1
668
2
896
0
92
61
-463
3,632
2017
1,677
15
1,015
19
1,097
3
1,101
0
102
67
-470
4,520
2018
1,837
2
1,094
37
1,759
11
1,069
0
129
80
-646
5,242
3,632
4,520
5,242
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
146
146
Financial key figures
Share key figures
Segment key figures
Segment key figures
Operational key figures
Comparable operating profit by segment, EUR million
Generation
City Solutions
Heat
Consumer Solutions
Electricity Sales
Russia
Other Operations
Distribution
Comparable operating profit
Impairment charges
Capital gains and other
Changes in fair values of derivatives hedging future cash flow
Nuclear fund adjustment
Other items affecting comparability 1)
Operating profit, continuing operations
Discontinued operations
Operating profit
2009
1,454
231
22
-20
-61
262
1,888
29
-135
1,782
2010
1,298
275
11
8
-66
307
1,833
93
-218
1,708
1) Other items affecting comparability comprise Changes in fair values of derivatives hedging future cash flow and Nuclear fund adjustment.
Comparable EBITDA by segment, EUR million
Generation
City Solutions
Heat
Consumer Solutions
Electricity Sales
Russia
Other Operations
Distribution
Total for continuing operations
Discontinued operations
Total
2009
1,547
393
28
55
-51
426
2,398
2010
1,398
462
13
94
-56
485
2,396
2011
1,201
278
27
74
-73
295
1,802
284
316
2,402
2011
1,310
471
29
148
-66
482
2,374
2012
1,146
271
39
68
-92
320
1,752
155
-33
1,874
2012
1,260
481
40
189
-83
529
2,416
2013
859
109
156
-54
332
1,403
61
45
1,508
2013
1,007
211
258
-49
548
1,975
2014
877
104
161
-57
1,085
305
-94
1,296
2,132
3,428
2014
998
204
304
-49
1,457
416
1,873
2015
561
108
201
-63
808
-918
22
-62
-150
4,395
4,245
2015
680
209
267
-53
1,102
163
1,265
2016
417
64
48
191
-77
644
27
38
-65
-11
633
633
2016
527
186
55
312
-64
1,015
1,015
2017
478
98
41
296
-102
811
6
326
14
1
1,158
1,158
2016
603
262
57
438
-83
1,275
1,275
2018
631
113
53
271
-79
987
-4
102
98
-45
1,138
1,138
2018
762
284
110
417
-50
1,523
1,523
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
147
147
Financial key figures
Share key figures
Segment key figures
Segment key figures
Operational key figures
Depreciation and amortisation, EUR million
Generation
City Solutions
Heat
Consumer Solutions
Electricity Sales
Russia
Other Operations
Distribution
Total for continuing operations
Discontinued operations
Total
Share of profit of associates and joint ventures by segment, EUR million
Generation
City Solutions
Heat
Electricity Sales
Russia
Other Operations
Distribution
Total for continuing operations
Discontinued operations
Total
Capital expenditure by segment, EUR million
Generation
City Solutions
Heat
Consumer Solutions
Electricity Sales
Russia
Other Operations
Distribution
Total for continuing operations
Discontinued operations
2009
93
162
6
75
10
164
510
2009
-35
30
0
20
-4
10
21
2009
96
358
1
215
4
188
862
2010
100
187
2
86
10
178
563
2010
-25
31
1
8
28
19
62
2010
97
304
0
599
9
213
1,222
2011
109
193
2
108
7
187
606
2011
3
19
2
30
23
14
91
2011
131
297
5
670
16
289
1,408
2012
114
210
1
121
9
209
664
2012
-12
20
0
27
-20
8
23
2012
190
464
1
568
11
324
1,558
2013
148
102
150
5
216
621
2013
4
91
46
32
4
178
2013
179
123
435
12
255
1,005
2014
121
100
147
8
377
150
526
2014
-14
88
35
37
146
3
149
2014
197
86
340
3
626
147
2015
118
101
117
10
346
50
395
2015
-111
59
32
40
20
0
20
2015
187
105
285
6
582
44
2016
110
121
7
123
13
373
373
2016
-34
76
38
51
131
131
2016
196
109
3
201
83
591
2017
125
163
16
142
18
464
464
2017
-1
80
31
38
148
148
2017
174
170
7
152
187
690
2018
131
171
57
147
30
536
536
2018
-72
74
36
0
38
38
2018
186
190
47
54
108
584
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
148
148
Financial key figures
Share key figures
Segment key figures
Segment key figures
Operational key figures
Total
Gross investments in shares by segment, EUR million
Generation
City Solutions
Heat
Consumer Solutions
Russia
Other Operations
Distribution
Total for continuing operations
Discontinued operations
Total
Gross divestments of shares by segment, EUR million
Generation
City Solutions
Heat
Consumer Solutions
Electricity Sales
Russia
Other Operations
Distribution
Total for continuing operations
Discontinued operations
Total
Comparable net assets by segment, EUR million
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
Total for continuing operations
2009
57
1
3
1
5
67
2009
10
1
-
-
2
1
14
2010
25
1
-
1
0
27
2010
0
52
-
43
6
46
147
2011
17
32
24
1
-
74
2011
3
203
16
23
0
323
568
2012
-
10
-
6
-
16
2012
102
269
2
-
0
37
410
2013
2
11
0
2
0
15
2013
79
11
-
-
52
142
774
2014
2
37
27
4
69
0
69
2014
67
446
0
2
515
2,681
3,196
2009
2010
2011
2012
2013
2014
626
2015
16
23
0
4
43
0
43
2015
0
27
0
-
27
6,369
6,395
2015
5,931
2,182
2,561
258
10,932
591
2016
7
698
117
0
22
844
844
2016
0
33
1
127
0
161
161
2016
5,815
2,873
154
3,284
514
12,641
690
2017
90
386
486
125
39
1,125
1,125
2017
0
0
55
0
687
742
742
2017
5,672
3,728
638
3,161
276
13,474
584
2018
8
32
0
63
3,985
4,088
4,088
2018
160
0
0
0
147
306
306
2018
6,295
3,743
648
2,789
4,264
17,739
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
149
149
Financial key figures
Share key figures
Segment key figures
Segment key figures
Operational key figures
Fortum is disclosing Comparable net assets instead of Net assets from 2016 onwards� Net assets until 2015 are disclosed below�
Net assets by segment, EUR million
Generation
City Solutions
Heat
Electricity Sales
Russia
Other Operations
Distribution
Total for continuing operations
Net assets related to discontinued operations
Total
1) Fortum is disclosing Comparable net assets instead of Net assets from 2016 onwards.
Comparable return on net assets by segment, %
Generation
City Solutions
Heat
Consumer Solutions
Electricity Sales
Russia
Distribution 1)
1) Classified as discontinued operations from 2014 onwards.
Return on net assets by segment, %
Generation
City Solutions
Heat
Electricity Sales
Russia
Distribution 2)
1) Fortum is disclosing Comparable net assets instead of Net assets from 2016 onwards.
2) Classified as discontinued operations from 2014 onwards.
2009
5,494
3,787
125
2,260
382
3,299
15,347
2009
26.4
7.6
18.6
0.0
8.6
2009
24.5
7.9
28.9
0.0
8.7
2010
5,806
4,182
210
2,817
29
3,683
16,727
2011
6,247
4,191
11
3,273
208
3,589
17,519
2010
22.3
7.7
9.3
0.7
9.3
2010
19.5
8.4
38.4
2.4
9.7
2011
19.9
7.4
33.5
3.5
8.6
2011
24.6
9.9
4.2
3.5
13.7
2012
6,389
4,286
51
3,848
158
3,889
18,621
2012
18.5
7.0
203.1
2.7
8.8
2012
18.7
8.8
152.3
3.0
9.1
2013
6,355
2,295
3,846
295
3,745
16,537
2013
13.8
8.7
5.2
8.8
2013
14.5
9.7
5.2
9.3
2014
6,001
2,112
2,597
496
11,206
2,615
13,820
2014
14.2
8.7
5.6
9.3
2014
13.6
19.1
5.6
73.6
2015 1)
5,913
2,170
2,561
291
10,934
10,934
2015
9.5
7.9
8.2
2015 1)
-8.5
7.7
8.3
2016
6.9
5.9
44.3
8.0
2017
8.4
5.5
11.7
10.1
2018
11.2
5.0
7.8
10.3
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
150
150
Financial key figures
Share key figures
Segment key figures
Segment key figures
Operational key figures
Average number of employees
Generation
City Solutions
Heat
Consumer Solutions
Electricity Sales
Russia
Other Operations
Distribution
Total for continuing operations
Discontinued operations
Total
2009
2,068
2,652
629
6,170
593
1,166
13,278
2010
1,891
2,482
538
4,555
592
1,098
11,156
2011
1,873
2,682
510
4,436
607
902
11,010
2012
1,896
2,354
515
4,301
661
873
10,600
2013
1,900
2,051
4,245
550
786
9,532
2015
1,389
1,458
4,180
983
8,009
2016
1,064
1,529
877
3,814
711
7,994
2017
1,036
1,807
1,180
3,710
774
8,507
2018
1,087
1,940
1,473
3,378
888
8,767
2014
1,685
1,913
4,196
536
8,329
492
8,821
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
151
151
Financial key figures
Share key figures
Segment key figures
Operational key figures
Operational key figures
Note: Operational key figures are unaudited
Comparability of information presented in tables and graphs
Information in the tables and graphs presented for year 2012 or earlier is not restated due to the adoption of IFRS 10 and IFRS 11� Adoption of standards influences treatment of Fortum’s holding in Stockholm Exergi AB (publ)
(previously AB Fortum Värme Holding samägt med Stockholms stad) in the the consolidated financial statements� From 1 January 2014 onwards Stockholm Exergi is treated as a joint venture and thus consolidated with equity method�
Before the change the company was consolidated as a subsidiary with 50% minority interest�
Production
Fortum’s total power and heat production in EU and Norway, TWh
Power generation
Heat production
Fortum’s total power and heat production in Russia, TWh
Power generation
Heat production
Fortum’s power generation by source, total in the Nordic area, TWh
Hydro and wind power
Nuclear power
Thermal power
Total
Fortum’s power generation by source, total in the Nordic area, %
Hydro and wind power
Nuclear power
Thermal power
Total
2009
49.3
23.2
2009
16.0
25.6
2009
22.1
21.4
4.6
48.1
2009
46
44
10
100
2010
53.7
26.1
2010
16.1
26.0
2010
22.0
22.0
8.3
52.3
2010
42
42
16
100
2011
55.3
22.0
2011
17.4
25.4
2011
21.0
24.9
7.2
53.1
2011
40
47
13
100
2012
53.9
18.5
2012
19.2
24.8
2012
25.2
23.4
3.0
51.6
2012
49
45
6
100
2013
47.4
10.4
2013
20.0
24.2
2013
18.1
23.7
3.4
45.2
2013
40
52
8
100
2014
50.1
8.2
2014
23.3
26.4
2014
22.4
23.8
1.8
48.0
2014
46
50
4
100
2015
50.2
6.4
2015
25.7
25.8
2015
25.1
22.7
1.0
48.8
2015
51
47
2
100
2016
47.5
7.1
2016
25.5
20.7
2016
20.8
24.1
1.4
46.2
2016
45
52
3
100
2017
46.6
8.6
2017
26.3
20.0
2017
20.9
23.0
1.6
45.4
2017
46
51
3
100
2018
44.7
9.4
2018
29.6
20.4
2018
19.4
22.8
1.3
43.5
2018
45
52
3
100
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
152
152
Financial key figures
Share key figures
Segment key figures
Operational key figures
Power generation capacity by segment, MW
Generation
Heat
City Solutions
Russia
Other Operations
Total
Heat production capacity by segment, MW
Generation
Heat
City Solutions
Russia
Total
Fortum’s power generation capacity by
type and area, MW
Hydropower
Nuclear power
Combined heat and power
Condensing power
Wind power
Solar power
Total
Fortum’s heat production capacity
by area, MW
Heat
2009
9,709
1,446
2,785
2010
9,728
1,600
2,785
2011
9,752
1,670
3,404
2012
9,702
1,569
3,404
2013
9,475
793
4,250
2014
9,063
803
4,758
2015
8,046
743
4,903
13,940
14,113
14,826
14,675
14,518
14,624
13,692
2016
8,039
760
4,482
53
13,334
2017
7,862
775
4,794
292
13,722
2018
7,867
788
4,912
157
13,724
2009
250
10,284
13,796
24,330
2010
250
10,448
13,796
24,494
2011
250
10,375
14,107
24,732
2012
250
8,785
13,396
22,431
2013
250
4,317
13,466
18,033
2014
0
3,936
13,466
17,402
2015
2016
2017
2018
3,915
12,696
16,611
3,818
9,920
13,738
4,671
10,094
14,765
Finland
Sweden
Russia
Poland
Other
Total
2018
1,548
1,485
452
376
0
0
3,860
Finland
2018
1,993
2017
1,547
1,480
452
376
0
0
3,854
2017
1,941
2018
3,124
1,334
9
0
75
0
4,542
Sweden
2018
35
2017
3,125
1,334
9
0
75
0
4,543
2017
0
0
4,760
0
0
35
4,794
2018
0
0
4,843
0
35
35
4,912
Russia
2017
35
2018
10,229
2017
10,094
2018
0
0
186
0
0
0
186
Poland
2018
782
2017
0
0
186
0
0
0
186
2017
786
2018
0
0
139
0
84
0
223
Other
2018
1,971
2017
0
0
128
0
32
185
345
2018
4,672
2,819
5,629
376
194
35
13,724
Total
2017
1,909
2018
15,009
2017
14,765
4,780
10,229
15,009
2017
4,672
2,814
5,534
376
107
220
13,722
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
153
153
Financial key figures
Share key figures
Segment key figures
Operational key figures
Sales
Fortum’s total power and heat sales in EU and Norway, EUR million
Power sales
Heat sales
Fortum’s total power and heat sales in Russia, EUR million
Power sales
Heat sales
Fortum’s total power sales by area, TWh
Finland
Sweden
Norway
Russia
Other countries
Total
Fortum’s total heat sales by area, TWh
Finland
Russia
Sweden
Poland
Other countries
Total
Volume of distributed electricity in distribution networks, TWh
Finland
Sweden
Norway
Estonia
Total
2009
2,802
1,095
2010
3,110
1,309
2011
2,868
1,278
2012
2,700
1,201
2013
2,462
538
2014
2,344
468
2015
1,921
423
2016
1,893
449
2017
2,244
524
2009
390
219
2009
26.1
26.9
19.5
3.2
75.7
2009
8.0
25.6
9.8
3.7
3.5
50.6
2009
9.4
14.0
2.3
0.2
25.9
2010
505
287
2010
30.7
28.3
18.7
3.2
80.9
2010
9.6
26.8
10.9
4.0
3.6
54.9
2010
10.0
15.2
2.5
0.2
27.9
2011
590
324
2011
24.6
29.4
20.2
3.6
77.8
2011
8.5
26.7
8.5
4.3
3.4
51.4
2011
9.5
14.2
2.3
0.1
26.1
2012
713
300
2012
21.6
30.1
23.3
3.8
78.8
2012
5.8
26.4
8.5
4.3
2.9
47.9
2012
9.8
14.4
2.4
0.0
26.6
2013
822
290
2013
23.4
23.3
25.6
4.3
76.6
2013
5.5
24.1
-
4.1
3.1
36.8
2013
9.5
14.1
2.5
-
26.1
2014
758
285
2014
21.6
28.2
26.5
3.8
80.1
2014
3.2
26.0
-
3.4
2.8
35.4
2014
2.8
13.7
1.1
-
17.6
2015
661
228
2015
22.3
29.8
29.4
2.8
84.3
2015
3.1
25.4
-
3.4
1.2
33.2
2015
-
6.4
-
-
6.4
2016
691
199
2016
22.8
28.8
1.5
29.5
2.1
84.7
2016
3.6
20.7
0.1
3.6
1.4
29.4
2016
-
-
-
-
-
2017
837
258
2017
22.5
30.8
7.2
30.5
2.9
93.9
2017
3.9
19.8
0.3
3.7
2.2
29.9
2017
-
-
-
-
-
2018
2 922
615
2018
872
193
2018
23.1
29.7
15.3
34.1
1.8
104.0
2018
3.8
20.7
0.3
3.5
3.2
31.5
2018
-
-
-
-
-
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
154
154
Quarterly financial information
Note: Quarterly financial information is unaudited�
Selected data based on quarterly consolidated income statement
EUR million
IS Sales
Comparable EBITDA
IS Comparable operating profit
IS Operating profit
IS Share of profit/loss of associates and joint ventures
IS Finance costs - net
IS Profit before income tax
IS Income tax expense
IS Profit for the period
IS Non-controlling interests
IS Profit for the period, owners of the parent
Q1/2017
1,232
423
313
389
59
-36
412
-72
340
-5
335
Q2/2017
937
219
109
66
35
-52
49
-118
-69
0
-70
Q3/2017
919
210
94
387
21
-58
351
4
355
2
357
Q4/2017
1,432
424
295
315
34
-49
300
-43
257
-12
244
2017
4,520
1,275
811
1,158
148
-195
1,111
-229
882
-16
866
Q1/2018
1,585
538
405
482
47
-36
493
-94
400
-16
384
Q2/2018
1,087
282
153
256
24
-39
241
-25
215
1
216
Q3/2018
971
230
96
91
12
-58
45
1
46
5
51
Q4/2018
1,599
473
333
309
-44
-4
261
-64
197
-5
192
2018
5,242
1,523
987
1,138
38
-136
1,040
-181
858
-15
843
Earnings per share for profit attributable to the equity owners of the
company (EUR per share)
Basic
0.38
-0.08
0.40
0.28
0.98
0.43
0.24
0.05
0.22
0.95
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
155
155
Quarterly sales by segment
EUR million
Generation 1)
City Solutions 1)
Consumer Solutions
Russia
Other Operations 1)
Netting of Nord Pool transactions 2)
Eliminations
IS Total
Q1/2017
474
290
242
349
24
-118
-29
1,232
Q2/2017
402
205
164
238
24
-73
-23
937
Q3/2017
367
179
238
200
25
-73
-17
919
Q4/2017
433
340
453
314
30
-103
-34
1,432
2017
1,677
1,015
1,097
1,101
102
-367
-103
4,520
1) Sales, both internal and external, includes effects from realised hedging contracts. Effect on sales can be negative or positive depending on the average contract price and realised spot price.
2) Sales and purchases with Nord Pool Spot is netted on 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
Generation
City Solutions
Consumer Solutions
Russia
Other Operations
IS Comparable operating profit
Impairment charges
Capital gains and other
Changes in fair values of derivatives hedging future cash flow
Nuclear fund adjustment
IS Operating profit
Q1/2017
136
56
12
132
-24
313
0
1
74
2
389
Q2/2017
78
1
6
53
-28
109
0
1
-46
4
66
Q3/2017
104
-20
5
26
-21
94
0
317
-19
-5
387
Q4/2017
160
61
18
84
-28
295
6
8
5
1
315
2017
478
98
41
296
-102
811
6
326
14
1
1,158
The first and last quarters of the year are usually the strongest quarters for power and heat businesses�
Q1/2018
497
375
547
336
32
-161
-41
1,585
Q1/2018
220
87
17
104
-23
405
0
26
54
-4
482
Q2/2018
425
187
326
228
33
-92
-20
1,087
Q2/2018
152
-21
11
37
-27
153
0
76
49
-22
256
Q3/2018
359
174
332
200
30
-105
-18
971
Q3/2018
70
-22
7
40
1
96
0
1
-8
2
91
Q4/2018
555
358
555
305
34
-157
-52
1,599
Q4/2018
189
68
17
89
-30
333
-4
-1
2
-21
309
2018
1,837
1,094
1,759
1,069
129
-516
-130
5,242
2018
631
113
53
271
-79
987
-4
102
98
-45
1,138
Operating and
financial review
Consolidated
financial statements
Notes
Key
figures
Parent company
financial statements
Proposal for the use of the profit
shown on the balance sheet
Auditor’s
report
Key figures
2009–2018
Quarterly financial
information
Investor
information
156
Investor information
Fortum 2018 reporting entity comprises CEO’s Business Review, Financials, Corporate Governance Statement and
Remuneration Statement, Tax Footprint as well as Sustainability�
Annual General Meeting 2019
The Annual General Meeting 2019 of Fortum Corporation will be held on Tuesday, 26 March 2019, starting at
11:00 EET at Finlandia Hall, address: Mannerheimintie 13 e, Helsinki, Finland� The reception of shareholders who
have registered for the meeting will commence at 9�30 EET�
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 for 2018, totalling approximately EUR 977 million based on the registered shares as of
31 January 2019� The possible dividend related dates planned for 2019 are:
• the ex-dividend date 27 March 2019,
• the record date for dividend payment 28 March 2019 and
• the dividend payment date 4 April 2019�
Financial information in 2019
Fortum will publish three interim reports in 2019:
• January–March interim report on 26 April
• January–June half year financial review on 19 July, and
• January–September on 24 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 media� Webcasts of these
conferences are available online at www.fortum.com/investors� Management also gives interviews on a one-
on-one and group basis� Fortum observes closed and silent period of 30 days prior to publishing its results�
Fortum share basics
Listed on Nasdaq Helsinki
Trading ticker: FORTUM
Number of shares, 31 January 2019: 888,294,465
Sector: Utilities
Fortum’s activities in capital markets during 2018
Fortum’s Investor Relations 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� The key task of
Investor Relations is to provide correct, adequate and up-to-date information regularly and equally to all
market participants� By doing this, Investor Relations aims to minimise the investor’s risk and reduce the
share’s volatility� Investors and analysts primarily are met on a regular basis in Europe and North America�
In 2018, Fortum met approximately 500 professional equity investors individually or in group meetings
and at investor conferences and maintained regular contact with equity research analysts at investment
banks and brokerage firms�
Interim Report January–
September 2019, 24 October
Financial Statements
Bulletin 2018, 1 February
Financial Statements 2018,
4 February
Financials 2018, Week 8
Q 4
Q
3
2019
Q
1
Q 2
Interim Report
January–June 2019, 19 July
Annual General Meeting,
26 March
Interim Report
January–March 2019, 26 April