Financial statements and operating

and financial review 2022

Fortum Oyj

Business ID: 1463611-4

This ESEF report is a translation and has been published voluntarily.

1

Table of contents

OPERATING AND FINANCIAL REVIEW

Financial performance and position

2

Sustainability

18

Risk management

29

Fortum share and shareholders

37

FINANCIAL STATEMENTS

Consolidated financial statements

Consolidated income statement

40

Consolidated statement of comprehensive income

41

Consolidated balance sheet

42

Consolidated statement of changes in total equity

43

Consolidated cash flow statement

44

Notes to the consolidated financial statements

1 Significant accounting policies

46

2 Critical accounting estimates and judgements

49

3 Acquisitions, disposals, assets held for sale and

discontinued operations

50

4 Financial risk management

53

5 Capital risk management

58

6 Segment reporting

59

7 Comparable operating profit and comparable net profit

64

8 Other income and other expenses

66

9 Materials and services

66

10 Employee benefits and Board remuneration

67

11 Finance costs

–

net

70

12 Income tax expense

71

13 Earnings and dividend per share

72

14 Financial assets and liabilities by categories

73

15 Financial assets and liabilities by fair value hierarchy

77

16 Intangible assets

80

17 Property, plant and equipment and right-of-use assets

81

18 Participations in associated companies and joint

ventures

83

19 Impairment testing

86

20 Other non-current assets

88

21 Interest-bearing receivables

88

22 Inventories

88

23 Trade and other receivables

89

24 Liquid funds

90

25 Share capital

90

26 Non-controlling interests

91

27 Interest-bearing liabilities

91

28 Income taxes on the balance sheet

94

29 Nuclear-related assets and liabilities

96

30 Other provisions

99

31 Pension obligations

100

32 Other non-current liabilities

103

33 Trade and other payables

103

34 Leases

104

35 Capital and other commitments

105

36 Pledged assets and contingent liabilities

106

37 Legal actions and official proceedings

107

38 Related party transactions

107

39 Events after the balance sheet date

109

40 Group companies by segment

110

Key figures

Financial key figures

112

Share key figures

113

Segment key figures

114

Definitions and reconciliations of key figures

116

Parent company financial statements

Income statement

123

Balance sheet

123

Cash flow statement

124

Notes

125

Signatures for the operating and financial review and

financial statements

132

Auditor’s report

133

Auditor’s assurance report of ESEF financial

statements

137

2

OPERATING AND FINANCIAL REVIEW

Financial performance and position

Weathering through the European energy crisis - a year of decisive actions

IFRS restatement relating to discontinued operations

Fortum lost control of Uniper on the signing of the agreement in principle to sell the shares in Uniper SE to

the German State on 21 September 2022. Thus, Uniper was deconsolidated at 30 September 2022.

Fortum’s consolidated income statement and consolidated cash flow statement were modified in 2022 to

include discontinued operations. As required by IFRS, comparatives for 2021 were restated.

Comparatives for 2020 have not been restated.

Discontinued operations include Fortum’s former subsidiary Uniper SE and its consolidated group

companies. The Generation segment was restated regarding Fortum's ownership in the Swedish nuclear

operator OKG AB as an associated company instead of the earlier proportionate consolidation. Income

statement information in this operating and financial review and financial statements include only

continuing operations, unless otherwise specified.

See



Note 1

,



Note 2

and



Note 3

.

Key figures, continuing operations

Key figures, continuing operations excl. Russia

Fortum is pursuing a controlled exit from the Russian market with potential divestments of its Russian

operations as the preferred path, and in 2022 Fortum introduced new APMs to provide additional financial

information excluding the Russia segment. See also



Note 1

.

Key figures, total of continuing and discontinued operations

See



Definitions and reconciliations of key figures

.

The year 2022 started with managing Uniper's liquidity challenges. These were a consequence of

nervousness in the gas market - amid rapidly increasing and volatile gas prices resulting in significantly

higher margining requirements for Uniper. Within a month, in February, Russia attacked Ukraine, marking

the beginning of shock-like effects of the war and a full-blown energy crisis in Europe that drastically

changed our operating environment.

At Fortum, we started tackling the issues one by one. Our immediate step was to halt all new activities

in Russia; we would not do any new investment projects or provide any financing to our Russian

subsidiaries. The decision to pursue a controlled exit from Russia was made in May. The divestment

process has progressed and is still ongoing, but any major divestment in the Russian energy sector

requires approval by the Russian Government Commission and the President. From a governance point

of view, we have separated the management and steering of the Russian operations from the rest of the

Group, simultaneously ensuring compliance with applicable laws and regulations, including sanctions. At

3

the end of the year, we recorded additional impairments of approximately EUR 990 million related to our

operations in Russia, amounting to a total of EUR 1.7 billion during the year.

The dramatic year also ended our five-year journey with Uniper. The energy crisis escalated during the

summer when Russia decided to cut pipeline gas exports to Germany and most of Europe, causing

massive losses to gas midstream companies. Particularly

Uniper, as Germany’s largest importer of

Russian gas, was hit severely. Therefore, a long-term solution to rescue Uniper was required and in

September Fortum agreed to sell its ownership to the German State. The divestment was completed at

the end of December. Fortum’s total pre

-tax loss from the Uniper investment is slightly below EUR 6

billion. This outcome clearly is not what we wanted or had worked for over the past years, yet it was

necessary and it provides a chance for a new beginning for Fortum.

Geopolitical tensions and gas curtailments also caused power prices to soar in the derivatives markets.

Fortum’s hedged power volumes on the Nasdaq exchange were a

ffected through the unprecedentedly

rapidly increasing and historically high power future prices that led to unforeseen margining requirements.

This put Fortum’s liquidity under pressure. In September, Fortum agreed with the Finnish State on a

bridge financing facility of EUR 2.35 billion to be able to manage its liquidity position in case of further

power price hikes during the winter period. In November, as a condition for the loan arrangement,

Fortum’s Extraordinary General Meeting resolved on a directed

share issue (1% of outstanding shares) to

the Finnish State-owned holding company, Solidium, without payment. We are grateful that the Finnish

Government came to our aid. Also elsewhere in Europe EU member states provided energy companies

with massive liquidity support to manage their margining requirements.

Despite the tight situation at the end of the summer, we were able to manage our liquidity well. At the end

of the year, our financial situation was solid as Uniper repaid its EUR 4 billion shareholder loan and we

received the sales proceeds of EUR 0.5 billion from the divestment of our Uniper shares. For 2023,

refinancing will be a key priority for us, and we aim to return to the bond markets to rebuild our financial

flexibility. Strong financial discipline will be the hallmark of our decisions and actions going forward.

During 2022, we also saw rapid developments in the regulatory environment. EU institutions focused on

finalising the extensive ‘Fit for 55’ legislative package the main effect of which

was a revision of the EU’s

emissions trading system, ETS. It also has an ambition to tackle the energy crisis by, for example,

introducing regulation on an emergency intervention to address high energy prices. On the flip side, there

is a risk that uncoordinated and very different actions by member states could lead to distortions of

competitiveness; Finland, for example, is enacting a national windfall tax, whereas Sweden is

implementing the revenue cap in accordance with the EU regulation.

Furthermore, as an immediate reaction to the Russian invasion of Ukraine, the Commission published

the ‘REPowerEU’ plan. It states the EU’s intention to phase out its dependency on Russian fossil fuels,

outlining a series of measures to deliver on this ambition.

While crisis measures are undoubtedly necessary, it is crucial that these interventions are temporary

and separate from the long-term structural reform of the power market design, which has started in the

EU. Overall, to secure investments in the energy transition in the longer term, the regulatory environment

needs to be clear, predictable and reliable.

As much as we would like to say the storm is over and we will get back to normal, unfortunately the

energy crisis is not over yet. For the short-term, uncertainty prevails. Many economists forecast that global

growth will slow down in the face of elevated inflation, higher interest rates, reduced investments, and

multidimensional disruption effects caused by Russia’s invasion of Ukraine. Europe is highly dependen

t

on energy imports and thus high prices and supply constraints are likely to continue. And, due to low

liquidity on the derivative markets, we must be prepared for continued volatile and unpredictable

commodity markets.

As our operating environment turned upside-down in the past year, over the recent months we have

worked hard to realign the company and renew our strategy to the new realities. A strong focus on

sustainability is at the heart of our strategy and our purpose

–

To power a world where people, businesses

and nature thrive together

–

is our North Star. Our new financial targets further guide how we look at

investments going forward and pursue our business priorities: Delivering reliable clean energy and Drive

decarbonisation in industries.

The most recent example of how we aim to implement our new strategy is the Finnish Government’s

welcome decision to grant a new operating licence for both units at Fortum’s Loviisa nuclear power plant

until the end of 2050. This helps to fulfil our goal to provide reliable, firm capacity and stability which is

crucial for maintaining the increasingly intermittent energy system and enabling the decarbonisation of

industries. Continuing production at Loviisa is also an investment in providing the clean power Finland

needs to meet its ambitious climate targets.

In our 2022 financial results, the Generation segment’s solid performance was the main driver throughout

the year. The segment benefitted from the higher power prices in the Nordics and was supported by very

good physical optimisation. In the fourth quarter, the segment’s comparable operating profit was very strong,

though somewhat offset by lower hydro volumes. Based on the solid results of Fortum’s continuing

operations in 2022, Fortum

’

s Board of Directors is proposing to the Annual General Meeting a dividend of

EUR 0.91 per share.

Most importantly, throughout this crisis and turbulence we have been running our power plants reliably

and efficiently; providing energy to people and industries when they need it the most. We have also

strengthened our customer service capabilities to better help our customers manage the energy crisis.

Uniper divestment

On 21 December, Fortum concluded the sale of its ownership in Uniper SE to the German State. On 19

December, the final agreements of the stabilisation package were signed between Fortum, the German

Government and Uniper. All required approvals for the completion of the stabilisation package, including

the State Aid clearances from the European Commission, were obtained.

On 21 September, Fortum, the German Government and Uniper signed an agreement in principle on a

long-term solution that allowed the German State to take full control of Uniper. This final Uniper

stabilisation framework agreement replaced the initial agreement between the same parties, signed in

July 2022. After July, the European energy crisis escalated further and the severity of the situation made it

apparent that the previously agreed stabilisation measures were insufficient and difficult to implement. By

21 September, Uniper had accumulated significant negative earnings amounting to billions of euros in

gas-related losses, and it had become evident that the company, as privately-owned, was not able to fulfil

its role as a critical energy provider of security of supply in Germany.

The Uniper Extraordinary General Meeting (EGM) was held on 19 December. The EGM resolved on

the capital increase of Uniper and all newly issued shares were subscribed by the German State for EUR

1.70 per share. After the equity capital increase, the German State acquired all of Fortum‘s approximately

293 million shares in Uniper SE for EUR 1.70 per share, a total consideration of approximately EUR 0.5

billion. In addition, Uniper repaid the shareholder loan of EUR 4.0 billion granted by Fortum. From the

EUR 4.0 billion parent company guarantee facility that Fortum had granted to Uniper, a total of EUR 3.0

billion was released by year-end 2022. The remaining approximately EUR 1.0 billion, with a full German

State back-to-back guarantee (indemnity), will be released by the end of June 2023 at the latest.

Further, as part of the signed package, Fortum has a right of first offer in case Uniper intends to divest

all or parts of its Swedish hydro and nuclear assets until the end of 2026.

Following the change of control in Uniper to the German State, Fortum’s representatives on Uniper’s

Supervisory Board resigned: Fortum’s President and CEO Markus Rauramo, who was the Chair of the

Supervisory

Board, Fortum’s CFO Bernhard Günther, Vice Chair of the Supervisory Board, as well as

Fortum’s General Counsel Nora Steiner

-

Forsberg and Head of Fortum’s CEO Office Esa Hyvärinen.

In 2017, Fortum became a major shareholder in Uniper with a 46.65% ownership stake and a majority

shareholder in 2019, eventually increasing its shareholding in Uniper to approximately 80%.

The total pre-tax loss from the Uniper investment in the legal Fortum entity owning the Uniper shares is

slightly below EUR 6 billion, which is the net effect from the investments in Uniper SE shares of

4

approximately EUR 7.2 billion, the sales proceeds of EUR 0.5 billion received, and dividends of

approximately EUR 0.9 billion received during Fortum’s Uniper ownership.

Additional information related to Fortum’s disclosures on

Russia, APMs

Russia’s attack war in Ukraine and its decision to use energy as a weapon fundamentally changed the

geopolitical situation and operating environment for Fortum. Due to the circumstances, Fortum has

consequently limited its disclosure on the Russian operations and operating environment in Russia

compared to previous years.

As Fortum is pursuing a controlled exit from the Russian market with potential divestments of its

Russian operations as the preferred path, in the reporting of 2022 Fortum introduced the following new

Alternative Performance Measures (APMs): ‘Comparable EBITDA from continuing operations excl.

Russia’, ‘Comparable operating profit from continuing operations excl. Russia’, ‘Comparable net profit

from continuing operations excl. Russia’, ‘Comparable earnings per share from continuing operations excl.

Russia’, and ‘Financial net debt

/comparable EBITDA

excl. Russia’ to provide additional financial

performance indicators to support meaningful comparison of financials for Fortum

’

s strategic businesses

(



Note 1

and



Definitions and reconciliations of key figures

).

Solidium’s bridge financing loan to Fortum and directed

share issue without payment to Solidium

In 2022, the Russ

ian war in Ukraine and Russia’s decision to use energy as a weapon escalated to an

energy crisis in Europe that also affected the Nordic power market. In August 2022, dramatically

increased spot and futures power prices in the Nordics led to unprecedentedly high collateral

requirements for utility companies that hedge their power sales on the market. At the end of August,

Fortum’s collaterals tied up on the Nordic commodities exchange Nasdaq increased to record

-high levels

of approximately EUR 5 billion. As prices came down, net margin receivables decreased to EUR 2.9

billion at the end of September and were EUR 2.3 billion at the end of December.

In order to ensure sufficient liquidity buffers for potential further collateral requirements in case of rising

and volatile power prices, Fortum agreed with its majority owner, the Finnish State, on a EUR 2.35 billion

bridge financing loan provided by the State-owned holding company Solidium. The bridge financing,

announced on 6 September, was put in place in accordance with the schedule and terms set by the

Finnish State. Alternative financing for the equivalent amount and with more favourable terms than the

bridge financing was not available on such short notice before the end of September due to the

company’s un

resolved strategic matters.

According to the terms of the arrangement, the first tranche was to be drawn by 30 September 2022 at

the latest in order for the loan facility to remain effective thereafter. Therefore, on 26 September, Fortum

announced to draw down the first minimum tranche of EUR 350 million. To date, no further drawdowns

have

been made due to the company’s good liquidity position. The liquidity facility matures in September

2023, and the last required tranche may be drawn by 31 March 2023. The plan is to repay the drawn EUR

350 million amount and at the same time cancel the entire EUR 2,350 million bridge loan facility by the

end of March 2023.

The bridge loan facility is linked to the six-month Euribor; the margin for the first six months is 10% and

for the following six months 12%.

One condition subsequent of the drawdown of the loan, was a directed share issue which entitled

Solidium to subscribe up to 8.97 million new ordinary registered shares in Fortum. The directed share

issue required a

pproval by Fortum’s Extraordinary General Meeting (EGM) with

a two-thirds majority of

the shares and votes present. On 23 November, an EGM convened and resolved that the new shares,

amounting to 1% of Fortum’s share capital, were issued without payment aft

er the execution of the share

issue. As a consequence, the shares under control of the Finnish State increased from 50.76% to

51.26%, correspondingly diluting the ownership of other shareholders.

The arrangement also contains restrictions regarding management remuneration. The remuneration to be

paid to the Board of Directors will not be increased during 2022 and 2023. Members of Fortum’s Executive

Management team will not be paid short- or long-term incentives under STI and LTI programmes

accumulated in 2022 and 2023, and their salaries will not be increased during 2022 or 2023.

The arrangement does not include dividend restrictions.

In 2022, Fortum had sufficient liquid funds to meet current collateral requirements. In the latter part of

2022, the Nordic power prices declined from the record levels at the end of August and the market was

less volatile. However, Fortum remained prepared for continued market turbulence, and drawing the first

tranche in September ensured that it had access to the loan should the collateral requirements increase

again during the winter. As an additional liquidity risk mitigation measure, Fortum has reduced its

exposure on the Nasdaq Commodities exchange and increased the share of bilateral agreements.

In the longer term, Fortum calls for necessary regulatory changes to the EU EMIR (European Market

Infrastructure Regulation), which sets the legal framework for margining and collateral requirements. The

current implementation does not distinguish between requirements for pure financial counterparties and

power generators that have lower risks, as they possess the power generation assets and thus the power

generation. A review of the EMIR is essential to restore stability and predictability both for energy

producers and users and to release power producers from unreasonable collateral requirements.

Financial results

Sales by segment

EUR million

2022

2021

Change

22/21

Total continuing operations excl. Russia

7,774

5,519

41%

Total continuing operations

8,804

6,422

37%

Comparable EBITDA by segment

EUR million

2022

2021

Change

22/21

Total continuing operations excl. Russia

2,025

1,612

26%

Total continuing operations

2,436

2,016

21%

5

Comparable operating profit by segment

EUR million

2022

2021

Change

22/21

Generation

1,600

1,123

42%

City Solutions

28

135

-79%

Consumer Solutions

97

52

87%

Other Operations

-115

-142

19%

Total continuing operations excl. Russia

1,611

1,167

38%

Russia

260

261

0%

IS

Total continuing operations

1,871

1,429

31%

Operating profit by segment

EUR million

2022

2021

Change

22/21

Generation

1,403

1,066

32%

City Solutions

719

2,671

-73%

Consumer Solutions

-149

495

-130%

Other Operations

-6

-134

96%

Total continuing operations excl. Russia

1,967

4,098

-52%

Russia

-690

227

-404%

IS

Total continuing operations

1,277

4,325

-70%

Share of profits of associated companies and joint ventures by

segment

EUR million

2022

2021

Change

22/21

Generation

-194

64

-403%

City Solutions

14

42

-67%

Consumer Solutions

-

-

-

Other Operations

-6

0

-100%

Total continuing operations excl. Russia

-185

106

-275%

Russia

-443

62

-815%

IS

Total continuing operations

-629

168

-474%

Comparable share of profits of associated companies and joint

ventures by segment

EUR million

2022

2021

Change

22/21

Generation

-49

0

-100%

City Solutions

14

42

-67%

Consumer Solutions

-

-

-

Other Operations

-6

0

-100%

Total continuing operations excl. Russia

-40

42

-195%

Russia

30

62

-52%

Total continuing operations

-11

104

-111%

For further information see



Note 6

.

Sales were EUR 8,804 (6,422) million driven by record-high power prices.

Comparable operating profit was EUR 1,871 (1,429) million. The main reason for the improvement was

the higher achieved power price with strong physical and financial optimisation which, however, was partly

offset by lower hydro volumes in the Generation segment.

Operating profit for the period was impacted by EUR -593 (2,897) million of items affecting

comparability of which EUR -905 million were impairments related to property, plant and equipment and

goodwill for the Russia segment and EUR -393 million were changes in fair values of non-hedge-

accounted derivatives. Items affecting comparability also included tax-exempt capital gains of EUR 785

million related to the divestments of the ownership in Fortum Oslo Varme AS, Recharge and Plugsurfing.

In the comparison period, items affecting comparability included tax-exempt capital gains of EUR 2,350

million related to divestments of Stockholm Exergi Holding AB, a EUR 254 million gain from the sale of the

district heating business in the Baltics and EUR 50 million gain from the sale of eight small hydropower

plants in Sweden (



Note 3

,



Note 7

and



Note 19

).

Comparable share of profits of associates and joint ventures was EUR -11 (104) million (



Note 18

).

The share of profits of associates and joint ventures amounted to EUR -629 million and included EUR

-

475 million of impairments related to Fortum’s ownership in the Russian TGC

-1 and joint ventures.

Finance costs

–

- net amounted to EUR -193 (-161) million. The change in finance cost

–

- net relates

mainly to foreign exchange gains from rouble receivables and the closing of rouble hedges and fair value

changes, impairments and reversals of EUR -303 million recorded in 2022, which include expected credit

losses of EUR 117 million related to Russian deposits and receivables, as well as EUR 171 million of write

downs of other shares. Comparable finance costs

–

- net amounted to EUR 155 (-127) million. (



Note 11

).

Profit before income taxes was EUR 455 (4,332) million. Profit before taxes was impacted by the

impairments related the Russian operations. In addition, items affecting comparability included tax-exempt

capital gains of EUR 2,350 million in 2021. Comparable profit before income taxes was EUR 2,014

(1,405) million.

Income taxes for the period totalled EUR 556 (-325) million. Adjustments to income tax expense include

EUR 746 million relating to onetime tax impact realised in Ireland mainly due to the Uniper divestment

(



Note 7

). Comparable income taxes were EUR -454 (-290) million (



Note 12

).

Net profit was EUR 1,011 (4,008) million. Comparable net profit attributable to the owners of the parent

was EUR 1,550 (1,091) million. Comparable net profit is adjusted for items affecting comparability,

adjustments to the share of profit of associates and joint ventures, net finance costs, and income tax

expenses (



Note 7.2

and



Definitions and reconciliations of key figures

).

Earnings per share for continuing operations were EUR 1.14 (4.49). Earnings per share for total

Fortum, including the effect from discontinued operations, were EUR -2.72 (0.83). Comparable earnings

per share for continuing operations were EUR 1.74 (1.23) and comparable earnings per share for total

Fortum, including the effect from discontinued operations, were EUR -1.11 (2.00). Comparable earnings

per share for continuing operations excluding Russia were EUR 1.21 (0.96) (



Note 7

).

6

Financial position and cash flow

EUR million

2022

2021

Change

22/21

Interest expense

-179

-154

-16%

Interest income

87

25

248%

Other financial expenses

–

- net

-101

-32

-216%

IS

Finance costs

–

- net

-193

-161

-20%

Financial net debt

1,084

789

-37%

Adjusted net debt

1,117

3,227

65%

Cash flow

In 2022, net cash from operating activities increased by EUR 985 million to EUR 2,104 (1,119) million,

mainly due to the improved comparable EBITDA as well as the change in working capital.

Net cash from investing activities, EUR 1,464 (-512) million, was positively impacted in 2022 by the

EUR 2,500 (-2,500) million change in the shareholder loans to Uniper. In 2021, Fortum granted Uniper a

shareholder loan of EUR 4,000 million of which EUR 2,500 million was drawn in 2021 and EUR 1,500

million in 2022. In December 2022, when Fortum sold its ownership in Uniper and the transaction was

closed, the EUR 4,000 million shareholder loan was repaid to Fortum. The consideration of EUR 498

million received for the sale of the Uniper shares is presented in the cash flow from discontinued

operations.

The change in margin receivables was EUR -1,311 (-1,000) million. Capital expenditure amounted to

EUR 534 (470) million. Divestment of shares and capital returns of EUR 1,156 (3,816) million mainly

include the divestment of the 50% ownership in the district heating company Fortum Oslo Varme AS in

Norway. Divestment of shares in the comparison period 2021 mainly include the divestments of the 50%

stake in the Swedish district heating and cooling company Stockholm Exergi and the district heating

business in the Baltics.

Net cash used in financing activities was EUR -4,686 (1,603) million. The net decrease in interest-

bearing liabilities was EUR 3,637 (increase 2,500) million while the change in margin liabilities was EUR

150 (63) million.

The net decrease in liquid funds for continuing operations was EUR 1,119 (increase 2,211) million.

Liquid funds at the beginning of the period, EUR 7,592 million, included liquid funds of EUR 2,966

million held by Uniper. Net decrease in liquid funds for discontinued operations of EUR 2,563 million

include the impact from the deconsolidation of Uniper offset by the consideration of EUR 498 million

received for the shares in Uniper.

Assets

At the end of 2022, total assets amounted to EUR 23,642 (149,661) million. The decrease from December

2021 was related to the deconsolidation of Uniper in the third quarter of 2022.

Equity

Total equity amounted to EUR 7,737 (13,665) million. Equity attributable to owners of the parent company

totalled EUR 7,670 (12,131) million. The change from December 2021 was mainly related to the net loss

for the year of EUR 2,416 million of the total of continuing and discontinued operations, the EUR -1,189

million impact from the fair valuation of cash flow hedges and the dividend payment of EUR 1,013 million.

A dividend of EUR 1.14 euro per share was paid on 6 April 2022.

Financing

Since the second half of 2021, the very volatile commodity markets with unprecedentedly high prices have

required significantly higher collaterals related to power and gas on the commodities exchanges. To

manage this price volatility and the high price levels, Fortum took precautionary financing measures to

secure its liquidity position and financial flexibility. Despite these liquidity constraints, the Group managed

its financial position and ended the year with a strong balance sheet. At the end of 2022, the ratio for

financial net debt to comparable EBITDA for continuing operations was 0.4 times. At the end of 2022, the

ratio for financial net debt to comparable EBITDA for continuing operations excluding Russia was 0.6

times.

At the end of 2022, financial net debt was EUR 1,084 (789) million and adjusted net debt EUR 1,117

(3,227) million (

).

At the end of 2022

UR 3,919 (7,592) million (

).

In January 2022, Fortum signed a EUR 3,000 million revolving credit facility to manage especially

EUR 500 million of its EUR 800 million bilateral revolving credit facility.

In March 2022, Fortum extended the maturity of its EUR 3,000 million revolving credit facility to July

2022. Additionally, Fortum repaid EUR 247 million of the nuclear waste fund loans totalling EUR 918

million after the repayment. The dividend, EUR 1,013 million, was paid on 6 April 2022.

In May 2022, in conjunction with the closing of the divestment of Fortum Oslo Varme AS in Norway,

Fortum deconsolidated a related EUR 210 million shareholder loan from the City of Oslo.

In June 2022, Fortum signed a new EUR 5,500 million revolving credit facility which consists of a EUR

3,100 million Liquidity revolving credit facility and a EUR 2,400 million Core revolving credit facility. Fortum

drew EUR 2,000 million from the Liquidity revolving credit facility. The above-mentioned EUR 3,000

million revolving credit facility was cancelled and the EUR 1,750 million revolving credit facility was repaid

and cancelled in June 2022. Fortum also drew the total EUR 800 million amount of its bilateral revolving

credit facility. Further, the remaining balance of EUR 450 million of the bridge loan was repaid.

During the third quarter, as spot and future power prices in the Nordics rose dramatically

collateral requirements increased to a record-high level and Fortum drew the remaining EUR 1,100 million

of the Liquidity revolving credit facility: EUR 600 million in July and EUR 500 million in August.

Additionally, the EUR 2,400 million Core revolving credit facility was fully utilised with two drawdowns:

EUR 1,000 million in August and EUR 1,400 million in September. Fortum repaid a maturing bond of EUR

1,000 million in September 2022.

In September 2022, in order to have preparedness for even higher collateral requirements, Fortum

signed a EUR 2,350 million bridge financing with the Finnish State-owned company Solidium. EUR 350

million of this facility has been drawn.

In November 2022, Fortum repaid EUR 1,400 million part of the Core revolving credit facility and

extended the EUR 800 million bilateral revolving credit facility to mature in December 2023. In December

2022, Uniper repaid the shareholder loan of EUR 4,000 million to Fortum. Fortum repaid the remaining

EUR 1,000 million of the Core revolving credit facility, EUR 2,000 million of the Liquidity credit facility and

the full amount of the EUR 800 million bilateral revolving credit facility.

Fortu

the shareholder loan combined with declining Nordic power prices and release of collaterals. By the end

-bearing liabilities were EUR 7,785 million and liquid funds EUR 3,919

million.

-bearing liabilities excluding Russia were EUR 7,581

million and liquid funds excluding Russia amounted to EUR 3,672 million.

Current loans, including EUR 1,629 million of the current portion of long-term loans, amounted to EUR

4,108 million. Short-term loans, EUR 2,479 million, include EUR 1,100 million of drawdowns from Liquidity

revolving credit facility, a EUR 350 million drawdown from the Solidium bridge financing facility, and use of

commercial paper programmes of EUR 475 million (

).

7

At the end of 2022, Fortum had undrawn committed credit facilities of EUR 7,200 million, including the

Liquidity revolving credit facility of EUR 2,000 million (maturity in June 2023 with 6+6 months extension

options by Fortum), the Core revolving credit facility of EUR 2,400 million (maturity in June 2025 with 1+1

year extension options by the lenders), the Solidium bridge financing facility of EUR 2,000 million (maturity

in September 2023) and the bilateral EUR 800 million revolving credit facility (maturity in December 2023).

In addition, Fortum has EUR 100 million committed overdraft limits that are valid until further notice.

On 3 August 2022, S&P Global Ratings (S&P) affirmed Fortum’s current BBB long

-term credit rating

with negative outlook following the announced stabilisation package to provide financial relief to Uniper.

On 5 July, due to the Russian gas curtailment, S&P had placed Fortum on CreditWatch Negative.

On 5 August 2022, Fitch Ratings affirmed Fortum’s long

-term credit rating at BBB with negative outlook

on Uniper’s stabilisation package. On 23 June 2022, Fitch had changed Fortum’s outlook from stable to

negative.

Following the completion of the Uniper divestment and the announcement of Fortum’s new strategy, the

rating agencies are expected to revisit Fortum’s ratings

.

Change in financial net debt during 2022, EUR million

Operating environment

European power markets

Year 2022 goes down in history for Russia’s brutal attack on Ukraine. As one of the consequences of the

war, European energy markets have faced a shock that compares with the oil crisis in the 1970s. Some

25% of European gas supply was lost during the year, leading to a harsh situation that has tested the

limits of European energy supply and energy markets. Europe has been able to cope with the loss of the

majority of imported Russian pipeline gas, due to reduced energy demand and increased liquefied natural

gas (LNG) imports.

According to preliminary statistics, power consumption in the Nordic countries was 385 (402) TWh

during 2022.

In Central Western Europe (Germany, France, Austria, Switzerland, Belgium, and the Netherlands),

power consumption in 2022 was 1,318 (1,366) TWh, according to preliminary statistics.

At the end of 2022, the Nordic hydro reservoir levels were at 79 TWh, which is 5 TWh below the long-

term average and 6 TWh higher than in the previous year.

In 2022, the average system spot price in Nord Pool was EUR 136 (62) per MWh. The average area

price in Finland was EUR 154 (72) per MWh, in the SE3 area in Sweden (Stockholm) EUR 129 (66) per

MWh, and in the SE2 area in Sweden (Sundsvall) EUR 62 (43) per MWh. In Germany, the average spot

price during 2022 was EUR 235 (97) per MWh.

At the end of February 2023, the Nordic system electricity forward price on Nasdaq Commodities for the

remainder of 2023 was around EUR 86 per MWh and for 2024 around EUR 79 per MWh. The Nordic

hydro reservoirs were at 59 TWh, which is about 2 TWh below the long-term average and 4 TWh higher

than one year earlier. The German electricity forward price for the remainder of 2023 was around EUR

149 per MWh and for 2024 around EUR 153 per MWh.

European commodity markets

In 2022, gas demand in Central Western Europe was 1,867 (2,225) TWh.

The steep reduction in the Russian pipeline gas flows to Europe pushed European gas prices to

unprecedented levels amid high volatility. The average gas front-month price (TTF) for full-year 2022 was

EUR 133 (48) per MWh. The 2023 forward price increased from EUR 45 per MWh at the beginning of the

year to EUR 88 per MWh at the end of the year.

In the EUA (EU Allowance) markets, the price decreased from EUR 85 per tonne at the beginning of

the year of 2022 to EUR 84 per tonne at the end of the year. The average EUA price for full-year 2022

was EUR 81 per tonne.

The forward quotation for coal (ICE Rotterdam) for 2023 increased from USD 90 per tonne at the

beginning of the year to USD 185 per tonne at the end of the year.

At the end of February 2023, the TTF forward price for gas for the remainder of 2023 was EUR 53 per

MWh. The forward quotation for EUAs for 2023 was at the level of EUR 97 per tonne. The forward price

for coal (ICE Rotterdam) for the remainder of 2023 was USD 160 per tonne.

Power consumption

TWh

2022

2021

2020

Nordic countries

385

402

392

Average prices

2022

2021

2020

Spot price for power in Nord Pool power exchange, EUR/MWh

135.9

62.3

10.9

Spot price for power in Finland, EUR/MWh

154.0

72.3

28.0

Spot price for power in Sweden, SE3, Stockholm, EUR/MWh

129.2

66.0

21.2

Spot price for power in Sweden, SE2, Sundsvall, EUR/MWh

61.9

42.6

14.4

Spot price for power in Germany, EUR/MWh

235.4

96.8

30.4

CO

2

, (ETS EUA next Dec), EUR/tonne CO

2

81

54

25

Coal (ICE Rotterdam front month), USD/tonne

279

117

50

Oil (Brent front month), USD/bbl

99

71

43

Gas (TTF front month), EUR/MWh

133

47

9

Hydro reservoir

TWh

31 Dec 2022

31 Dec 2021

31 Dec 2020

Nordic hydro reservoir level

79

73

105

Nordic hydro reservoir level, long-term average

84

84

84

8

Nordic water reservoirs, energy content, TWh

Export/import Nordic area

TWh (+ = import to, - = export from Nordic area)

2022

2021

2020

Export/import between Nordic area and Continental Europe+Baltics

-35

-29

-24

Export/import between Nordic area and Russia

4

9

3

Total

-31

-20

-21

Regulatory environment

EU ETS revision finalised

On 18 December, the EU institutions reached a provisional agreement on the revision of the EU

emissions trading directive (ETS). The revision will raise the ambition of the ETS and enlarge its scope

significantly. The ETS emissions reduction target will be increased from 43% to 62% by 2030 compared to

2005 and the operation of the market stability reserve (MSR), the mechanism to balance the supply-

demand of allowances, will be enhanced. The Commission will assess, and by end of 2026, will report on

the possibility to include the municipal waste incineration sector in the ETS from 2028 onwards. Starting in

2027, a new emissions trading system (ETS2) will be established for private and public road transport and

heating of buildings.

According to analyst assessments of the impact of the agreed reform, ETS will move from oversupply to

significant tightness towards the end of the decade and beyond.

The revised ETS directive is largely in line with Fortum’s priorities, as Fortum has been calling for an

increased ambition, strengthening of the MSR, inclusion of waste incineration to the ETS and enlarging

the scope of ETS to heating of buildings.

EU power market design developing

The review of the European power market design represents the last major legislative file on climate and

energy matters to be initiated by the Commission under the von der Leyen term. The consultation with

stakeholders was launched with some delay at the end of January 2022 and was closed on 13 February

with possible subsequent delay on the issue of the legislative proposal. In the face of a political push for

more radical changes in the key market design principles including questioning of the marginal pricing,

Fortum has cautioned against solving the current energy crisis through structural and untested changes to

the market design and has stressed its preference for an evolutionary rather than a revolutionary

approach.

The legislative proposal should be substantiated based on a thorough and robust impact assessment.

Fortum recommends that a system needs’

analysis be conducted as a way to determine the necessary

level of firmness, variability and flexibility.

EMIR review started

When the energy crisis escalated in the summer of 2022, it also hit the energy commodity derivatives’

markets with the risk of a systemic default payment effect on utilities. As a response, the Commission

adopted a set of temporary measures to notably extend the range of collaterals and to introduce a circuit

breaker mechanism for the power derivatives’ exchanges to enable the suspe

nsion of trading if/when

prices or transactions become too erratic. On 7 December, the Commission issued a revision of the EMIR

(European Market Infrastructure Regulation) legislation with the view to improve the regulation by making

structural changes to this core EU financial legislation and making some of the temporary measures

permanent. Whilst welcome and needed, Fortum sees the revised proposal still insufficiently equipped to

protect the power sector from systemic failure risks if a margining crisis similar to the one in August 2022

were to occur again.

National measures to support electricity consumers and related

political discussion

Following the unprecedentedly high retail electricity prices in the summer of 2022, measures to support

electricity consumers became a heavy political debate. Governments in Finland and Sweden agreed on

several support measures to help consumers manage their electricity bills. The agreed Finnish measures

include, e.g., reduced VAT and improvements in social support schemes. Proposals under discussion are

temporary lump reimbursement of bills and prolonging of invoice payments. In Sweden, it was decided

that Svenska Kraftnät’s bottleneck income would be redistributed to compensate households and

companies for higher energy bills. There is a growing pressure to lower VAT and electricity tax but the

government has not yet made any further decisions. At the same time, electricity retail companies have

voluntarily introduced new electricity products and contracts with lower fixed prices.

While Fortum supports addressing the concerns of electricity customers, the company prefers

measures that do not distort competition amongst electricity market actors nor favour network owners

over retailers or vice-versa. Any kind of a retail price cap would be difficult to implement without extensive

government support for retailers. There is no net effect for retail companies from the governmental

support measures, but required changes in the billing systems are time-consuming.

Windfall taxation in Finland for 2023

On 29 December, following a short public consultation process, the Finnish Government presented a draft

windfall tax proposal (HE 320/2022 vp). The objective of the proposal is to implement the EU regulation

2022/1854 on revenue cap and solidarity contribution through a temporary national windfall tax on the

electricity sector to tax the extraordinary profits generated in the energy crisis and to redistribute the

means to consumers to support their high energy bills. While Fortum agrees with the objective of the

proposal, the company finds the proposed taxation model problematic in many ways. The model deviates

fundamentally from the EU’s revenue cap model and is much more stringent compared to the EU

regulation as it deviates in scope, tax basis and application time, and hence puts the Finnish electricity

sector in a disadvantageous position especially compared to Sweden which will implement the EU

revenue cap in line with the EU regulation.

9

The tax applies to companies in the electricity sector within electricity generation, wholesale and partly

retail sales in Finland. According to the proposal, the tax would be 30% of the companies’ net profits

generated from the aforementioned electricity operations in Finland exceeding a 10% return on equity in

the fiscal year 2023. The Finnish corporate income tax is 20%; consequently, the total nominal tax rate

would be 50% on net profits generated in the scope of the defined windfall tax. Based on the

Government’s latest estimates, it would cum

ulatively bring in temporary tax revenues of EUR 0.3-0.4

billion from industry participants during 2023. The Finnish Parliament adopted the legislation on temporary

windfall tax on 27 February 2023. The tax becomes payable in 2024.

Fortum’s electricity ge

neration in Finland accounts for approximately one third of total Finnish electricity

generation. Approximately 40% of Fortum’s Nordic electricity generation and approximately 30% of its

electricity customers are in Finland.

Revenue cap in Sweden to become effective 1 March 2023

The Swedish Government has presented a legislative proposal to implement the EU revenue cap

legislation with effect from 1 March to 30 June 2023, in accordance with the EU regulation. The revenue

cap is set at a power price of 180 EUR/MWh, as specified by the EU. Only realised revenues are

proposed to be subject to the cap, meaning that hedges and other financial contracts can be subtracted

from the realised spot prices. The Swedish Government estimates that the revenue cap will bring in a

modest EUR 28 million in additional tax revenue.

Status of implementing the Swedish Governmental programme on

nuclear and hydro

As communicated both in the governmental agreement and declaration, in January the Swedish

Government has presented a legislative proposal to remove the barriers for new nuclear in the Swedish

Environmental Act. The current legislation limits new nuclear to a maximum of 10 reactors at the three

already existing nuclear sites. The new legislation will enable both large-scale nuclear and small modular

reactors (SMRs) to be located at new sites. The proposed legislation will become effective on 1 March

2024.

In order to better safeguard existing hydropower plants the Swedish Government has decided to pause

the ongoing re-permitting process for one year. The time period will be used to analyse the consequences

for the power system and to adjust the re-permitting process to safeguard the value of hydropower and

ensure that the total production loss from the re-permitting process stays below 1.5 TWh, as specified in

the so-called national plan for hydropower. Fortum owns and operates power plants in several of the

rivers that are being handled early in this process. These plants will enter into court processes for updated

permits at a later stage due to the time-out and the related production losses may be lower than initially

estimated.

Segment reviews

Business model

The Fortum Board of Directors resolved on Fortum’s new strategy at the beginning of March, 2023

,

including a new business structure and

operating model. The business segments below describe Fortum’s

organisational structure in 2022 and changes in it during the year.

Fortum’s core operation are located in the Nordics and consist of

CO

₂

-free power generation, electricity

sales, district heating as well as well as smart solutions to improve resource efficiency. Fortum is one of

the largest power generators and the largest electricity retailer in the Nordic countries. The company’s role

is to ensure security of supply and a fast and reliable transition to a carbon-neutral economy by providing

customers and societies with clean energy and sustainable solutions.

In 2022, Fortum’s organisation consisted of four business divisions: Generation, City Solutions

,

Consumer Solutions and Russia.

At the end of 2022, Fortum completed the divestment of Uniper to the German State in line with an

agreement in principle signed on 21 September 2022. As a consequence of the September agreement,

Fortum lost control of Uniper and deconsolidated the business in the third quarter of 2022. The divested

businesses included all operations in Fortum’s Uniper segment.

At the end of 2022, Fortum employed a diverse team of approximately 7,700 energy-sector

professionals.

Generation

Generation is responsible for Nordic power generation. The segment comprises CO

2

-free nuclear, hydro

and wind power generation, as well as power portfolio optimisation, trading, market intelligence, thermal

power and global nuclear services. Due to the deconsolidation of Uniper, OKG is reported as an

associated company instead of the earlier proportionate consolidation (



Note 6

).

The Generation segment’s total power generation in the Nordic countries decreased due to lower

hydropower volumes. This was caused by lower inflow in the segment’

s power generation areas and

lower hydro reservoir levels during the year. The production volumes for nuclear were stable and

remained almost at the same level as in 2021. CO

2

-free generation accounted for 99% of the total power

generation.

The achieved power price in the Generation segment increased by EUR 17.1 per MWh, up by 40%.

The achieved power price increased due to the very successful physical and financial optimisation and

higher spot prices. While the spot power price increased by 97% in the segme

nt’s power generation

areas, the positive result effect of the higher achieved power price was dampened by the fairly high hedge

levels and a hedge price below the level of the spot price. During most of the year, the achieved power

price was also negatively impacted by the significant price difference in Sweden between the high system

10

price and the lower SE2-area spot price (Sundsvall). This situation eased during the fourth quarter. Due to

low liquidity on the exchange for the SE2-area price products, the hedge ratio in SE2-area was lower than

the system price hedge ratios and, consequently, negatively affected the achieved power price.

Comparable operating profit increased by 42%. The increase was mainly related to the higher achieved

power price, partly offset by lower hydro volumes.

Operating profit was affected by EUR -197 (-57) million of items affecting comparability, mainly related

to the fair value change of non-hedge-accounted derivatives (



Note 6

).

Comparable share of profits of associates and joint ventures totalled EUR -49 (0) million, including the

share of profits of EUR -36 million from OKG (



Note 6

and



Note 18

).

On 1 February, Fortum and Uniper launched a joint organisation for the Nordic hydro and physical

trading

operations. Fortum took responsibility for Uniper’s hydropower asset management in Sweden and

the physical trading optimisation and dispatch activities in the Nordics. After the decision to fully divest its

ownership in Uniper, it was agreed to discontinue all strategic cooperation and to pursue development as

two separate companies as of 1 December 2022. In hydropower, the discontinuation of the cooperation

meant that some 160 Fortum employees re-joined Uniper in Sweden. In hydrogen, the development

portfolio was divided between the two companies. The joint venture with Perstorp, Project Air, continues

with Uniper.

On 3 March, Fortum announced its decision to apply for a new operating licence for both units at the

nuclear power plant in Loviisa, Finland, until the end of 2050. On 16 February 2023, the Finnish

Government granted a new operating licence for both units at Fortum’s Loviisa nuclear power plant until

the end of 2050. Over the course of the new licence period, the plant is expected to generate up to 170

terawatt hours of CO

2

-free electricity. Investments related to the continuation of operations and lifetime

extension will amount to an estimated EUR 1 billion until 2050. Over the past five years, Fortum has

already invested approximately EUR 300 million in refurbishing the Loviisa power plant. The Loviisa

power plant is the first nuclear power plant in Finland. The power plant has two units: unit 1 started

operating in February 1977, and unit 2 in November 1980.

On 12 March, electricity generation of

TVO’s third Olkiluoto nuclear power plant unit (OL3) in Finland

started. In June, the start of regular electricity generation was postponed from September to December. In

October, damages were detected in the feedwater pumps located in OL3’s turbine islan

d. On 22

December, TVO announced that the investigation into the damage in Olkiluoto 3’s feedwater pumps was

mainly completed and the electricity test production continued on 27 December. In January 2023,

production was again discontinued for a month for planned inspections of the impellers of the feedwater

pumps and the next test production period started in February. According to TVO, regular electricity

production is expected to start in April 2023. The total capacity of OL3 is 1,600 MW and once completed,

it will produce approximately 14% of Finland’s total electricity consumption (



Note 29

).

On 9 June, Fortum announced that it had, together with Gasgrid Finland, signed a Letter of Intent for

Finland’s first floating LNG terminal vessel FSRU, Exemplar, to be placed at Fortum’s Inkoo port. Located

on the south coast of Finland, Inkoo provides an optimal deep-water port at close proximity to the

pipelines distributing gas mainly to industrial end-users in the Baltic region. Gasgrid Finland is leasing the

floating LNG terminal vessel for a duration of 10 years and the capacity is sufficient for the gas needs of

both Finland and Estonia. On 28 December, the floating LNG terminal vessel Exemplar arrived to Inkoo.

Implemented under the leadership of Gasgrid Finland, the LNG floating terminal project will secure the

supply of gas to industry, energy production and households and will safeguard Finland’s security of

supply from the winter of 2023 onwards. This solution also replaces the earlier Russian gas supplies

through the Imatra entry point that were stopped in May.

In the third quarter of 2022, Fortum offered the Meri-Pori coal condensing power plant for peak-load

reserve capacity until October 2023. On 16 September, the Finnish Energy Authority announced that

Meri-Pori was not chosen to the reserve in the tendering process, so Fortum started preparing it for

commercial use to help maintain security of supply in Finland during the ongoing energy crisis. In October,

the power plant underwent a thorough annual outage to ensure availability of its full capacity of 560 MW if

needed. Deployment of actual electricity generation depends on the situation in the power market, and,

since December Meri-Pori has participated in the spot market. The Meri-Pori plant is Finla

nd’s last coal

-

fired condensing plant. It was commissioned in 1994 and has been in the peak-load reserve system

between June 2017 and June 2022.

On 17 October, Fortum announced that the company has started a two-year feasibility study to explore

prerequisites for new nuclear in Finland and Sweden. Fortum will examine commercial, technological and

societal, including political, legal and regulatory, conditions both for small modular reactors (SMRs) and

conventional large reactors. Ventures in the nuclear industry will most likely involve partnership

constellations and the feasibility study will also explore the potential for service business offerings for new

projects in Europe and hydrogen for industrial applications. Fortum has also announced the exploration of

potential cooperation and collaboration opportunities regarding nuclear with the Finnish energy company

Helen, the French Electricité de France (EDF) and the Swedish Kärnfull Next AB. Any potential

investment decisions will be made at a later stage.

On 22 November, Fortum signed an agreement with Westinghouse Electric Company for the design,

licensing, and supply of a new fuel type for the Loviisa power plant. The new fuel type is based on British

Nuclear Fuel Limited’s fuel that previously was supplie

d to the Loviisa power plant in 2001-2007 and used

in parallel with the fuel supplied by the Russian TVEL in the early 2000s. Taking the new fuel into use is a

multi-year project also requiring regulatory approvals. The fuel agreement with the Russian TVEL is valid

until the end of the plant’s current operating licences, i.e. 2027 and 2030.

Power generation by source

TWh

2022

2021

Change

22/21

Hydropower, Nordic

19.1

23.3

-18%

Nuclear power, Nordic

23.4

23.5

0%

Thermal power, Nordic

0.3

0.0

6515%

Total

42.9

46.8

-8%

Nordic sales volume

TWh

2022

2021

Change

22/21

Nordic sales volume

50.9

54.1

-6%

of which Nordic power sales volume

41.1

45.3

-9%

Achieved power price

EUR/MWh

2022

2021

Change

22/21

Generation's Nordic achieved power price

59.9

42.8

40%

11

Nord Pool, power price, 2018

–

2022, EUR/MWh

City Solutions

City Solutions is responsible for sustainable solutions for urban areas. The segment comprises heating,

cooling, waste-to-energy, and other circular economy solutions, as well as solar power generation,

services and development of new biomass-based businesses. The business operations are located in the

Nordics, Poland and India.

EUR million

2022

2021

Change

22/21

Reported

Sales

1,282

1,302

-2%

- heat sales

505

612

-17%

- power sales

252

205

23%

- waste treatment sales

1)

237

250

-5%

- other sales

2)

288

236

22%

Operating profit

719

2,671

-73%

Share of profits of associates and joint ventures

14

42

-67%

Capital expenditure and gross investments in shares

159

162

-2%

Number of employees

1,691

1,766

-4%

EUR million

2022

2021

Change

22/21

Comparable

EBITDA

177

317

-44%

Operating profit

28

135

-79%

Share of profits of associates and joint ventures

14

42

-67%

Return on net assets, %

2.3

6.1

-62%

Net assets (at period-end)

1,760

2,456

-28%

1) Waste treatment sales comprise gate fees and environmental construction services.

2) Other sales comprise mainly operation, maintenance and other services, and the sales of recycled products and fuel sales.

Heat sales volumes decreased by 24%, mainly due to structural changes following the divestment of the

company Fortum Oslo Varme. Warmer weather conditions in all the heating areas also negatively affected

the volumes. The power sales volumes decreased by 45%, mainly due to the divestments of the Baltic

district heating business and the 250-MW Pavagada II and 250-MW Rajasthan solar plants in India as

ict heating company Fortum Oslo

Varme. The power sales volumes were further impacted by lower power sales in Finland due to higher

natural gas and CO

emission allowance prices that resulted in a change of fuel mix and lower produced

power volumes.

Comparable operating profit decreased by 79%, or EUR 107 million, mainly as a result of clearly higher

fossil fuel, pellet and CO

emission allowance prices as well as lower metal prices. The negative effect

was partly offset by higher power and district heating sales prices. Comparable operating profit was also

negatively affected by structural changes from the divestments of ownership in Fortum Oslo Varme, the

Baltic district heating business and the 250-MW Pavagada II and 250-MW Rajasthan solar plants in India,

the effects of which were partly offset by the tax-exempt sales gain of EUR 5 million from the divestment

of the 250-MW Rajasthan solar plant in India. The profits from the Rajasthan solar park divestment were

recognised in comparable operating profit and

-exempt sales gain

a tax-exempt sales gain of EUR 5

million

was recorded in 2022.

Operating profit was affected by EUR 690 (2,536) million of items affecting comparability, mainly related

to the tax-exempt capital gain of EUR 638 million from the divestment of Fortum Oslo Varme and the fair

value change of non-hedge-accounted derivatives. The comparison period includes a capital gain of EUR

2.4 billion from the sale of Stockholm Exergi Holding AB and a EUR 254 million capital gain from the sale

of the district heating business in the Baltics (

).

Comparable share of profits of associates and joint ventures totalled EUR 14 (42) million. The

c

ownership was divested in September 2021 (

and

).

On 4 February, Fortum announced that it had won the right from Solar Energy Corporation of India

(SECI) to build two solar power plants with a total capacity of 600 MW in Karnataka, India. On 16 March,

Fortum participated in another solar auction in India and won the right from Gujarat Urja Vikas Nigam

Limited (GUVNL) to build a 200-MW solar plant in Gujarat. These projects are planned to be developed

together with a partner and are expected to be commissioned by 2024.

On 3 March, Fortum announced that it decided to discontinue the strategic assessment of its Polish

district heating business. Fortum is evaluating alternatives for further decarbonisation of these assets in

-based capacity in Poland was 0.5

GW.

collaboration to heat homes,

services and businesses with sustainable waste heat from the new data centre in the Helsinki

second largest in Finland, f

area includes about 900 km of underground pipes that transfer heat to approximately 250,000 users.

d by climate-friendly waste

heat.

On 19 May, Fortum concluded the sale of its 50% ownership in the district heating company Fortum

Oslo Varme AS in Norway to a consortium of institutional investors of Hafslund Eco, Infranode and

HitecVision. The total consideration of the sale amounted to approximately EUR 1 billion on a cash and

debt-free basis; as part of the transaction, Fortum deconsolidated a related EUR 0.2 billion shareholder

loan from the City of Oslo. Fortum recorded a tax-exempt capital gain of EUR 638 million in the City

In July, Fortum and GIG (Green Investment Group, a specialist green investor within Macquarie Asset

Management), agreed to invest in a new waste-to-energy plant in Glasgow, Scotland, through a 50/50

joint venture. When fully commissioned, the plant will have an annual processing capacity of 350,000

tonnes of waste. The plant will have a power generation capacity of 45 MWe gross, corresponding to the

average annual electricity consumption of approximately 90,000 homes.

12

Heat sales by country

TWh

2022

2021

Change

22/21

Finland

2.8

3.1

-10%

Poland

3.5

3.8

-8%

Norway

0.8

1.8

-56%

Other countries

0.4

1.3

-62%

Total

7.6

10.0

-24%

Power sales by country

TWh

2022

2021

Change

22/21

Finland

0.9

1.3

-31%

Poland

0.8

0.7

14%

Other countries

0.1

1.3

-92%

Total

1.8

3.3

-45%

Consumer Solutions

Consumer Solutions is responsible for the electricity and gas retail businesses in the Nordics, Poland, and

Spain, including the customer service and invoicing businesses. Fortum is the largest electricity retail

business in the Nordics, with approximately 2.2 million customers across different brands in Finland,

Sweden, Norway, Poland and Spain. The business provides electricity as well as related value-added and

digital services.

EUR million

2022

2021

Change

22/21

Reported

Sales

4,578

2,622

75%

- power sales

4,026

2,253

79%

- gas sales

392

225

74%

- other sales

161

144

12%

Operating profit

-149

495

-130%

Capital expenditure and gross investments in shares

71

68

4%

Number of employees

1,179

1,176

0%

EUR million

2022

2021

Change

22/21

Comparable

EBITDA

173

123

41%

Operating profit

97

52

87%

Net assets (at period-end)

1,365

1,125

21%

The electricity sales volume decreased by 6%, due to warmer weather in the Nordics compared to the

clearly colder temperatures in the first and the fourth quarters of 2021. The gas sales volume decreased

by 20% as a consequence of higher than normal temperatures in Poland and the unprecedentedly high

gas prices that continued to lower demand and overall energy consumption. The total sales revenue

increased by 75%, driven by significantly higher electricity and gas prices in the Nordics and Poland.

Comparable operating profit increased by 87%, mainly due to higher electricity and gas sales margins

and positive one-offs from gas storage sales. The positive effect was partly offset by higher costs and

lower sales of value-added services. The result in the fourth quarter of 2021 was clearly negative due to

higher electricity purchase costs and negative margins.

Customer activity with Fortum’s customer service centres remained at a higher level throughout the

year. In order to meet the higher customer demand, additional resources were assigned to handle the

increased number of contacts. The overall customer satisfaction and recommendation rates continued to

improve during the yea

r, ensuring the business’ competitiveness.

To help support its customers to manage in the exceptional market situation of unprecedentedly high

and volatile power prices, Fortum continued to expand the range of its product portfolio to meet its

customers’ needs. Fortum also offers advice on electricity

conservation and encourages smart

consumption and moving consumption away from peak-hours to support the energy system as a whole.

Support in more actively managing invoices and more flexible payment plans are also available.

Operating profit was affected by EUR -246 (443) million of items affecting comparability, due to the fair

value change of non-hedge-accounted derivatives (



Note 6

).

On 3 March, Fortum announced that it had decided to discontinue the strategic review of the electricity

retail business Consumer Solutions and is continuing to develop the business as part of the Group.

Sales volumes

TWh

2022

2021

Change

22/21

Electricity

29.6

31.5

-6%

Gas

4.8

6.0

-20%

Number of customers

Thousands

2022

2021

Change

22/21

Electricity

2,130

2,120

0%

E-mobility

70

70

0%

Gas

40

50

-20%

Total

2,240

2,230

0%

Russia

The Russia segment comprises power and heat generation and sales in Russia. The segment includes

Fortum’s fully owned power plants, its joint ventures for renewable power generation and the joint

ventures for power and heat sales, as well as Fortum’s more than 29% holding in TGC

-1. These joint

ventures and the associated company are accounted for using the equity method.

13

EUR million

2022

2021

Change

22/21

Reported

Sales

1,031

906

14%

- power sales

856

761

12%

- heat sales

156

137

14%

- other sales

19

8

138%

Operating profit

-690

227

-404%

Share of profits of associates and joint ventures

-443

62

-815%

Capital expenditure and gross investments in shares

62

83

-25%

Number of employees

2,724

2,627

4%

EUR million

2022

2021

Change

22/21

Comparable

EBITDA

411

404

2%

Operating profit

260

261

0%

Share of profits of associates and joint ventures

30

62

-52%

Return on net assets, %

11.3

12.9

-12%

Net assets (at period-end)

1,690

2,508

-33%

Following

Russia’s

attack on Ukraine, Fortum decided in May 2022 to exit its Russia operations. A

divestment process is ongoing. Due to existing Western sanctions on Russia and Russia’s counter

-

sanctions, the Group’s Russian operations are subject to significant foreign exch

ange transfer restrictions,

which limit the access to cash flows and the ability to transfer funds, including potential dividend

distributions, out of Russia. Fortum has stopped all new investment projects in Russia and monetary

transfers to Russia and is not providing any new financing to its Russian subsidiaries.

Power generation volumes remained unchanged. Heat production volumes decreased due to the

Argayash CHP plant divestment and the warmer weather in Chelyabinsk and Tyumen in the first half of

year.

Sales increased by 14% due to the stronger Russian rouble and higher power prices, partly offset by

expiry of the CSA payments of the Nyagan 1 production unit and the divestment of the Argayash CHP

plant. The effect of the change in the Russian rouble exchange rate was EUR 160 million.

Comparable operating profit was at the level of the previous year. The negative effect from the CSA

expiry for Nyagan 1 was partly offset by the EUR 40 million effect of the change in the Russian rouble

exchange rate, higher power prices and lower depreciation following impairments recognised in the first

quarter. The comparison period includes a EUR 17 million positive effect from the sale of the 116-MW

CSA-backed solar power project to the Fortum-RDIF joint venture.

Operating profit was negatively affected by impairments of EUR 905 million related to intangible assets

and property, plant and equipment for the Russia segment.

Comparable share of profits of associates and joint ventures totalled EUR 30 (62) million. The share of

profits of associates and joint ventures was impacted by impairments of EUR 475 million related to

Fortum’s ownership in TGC

-1 and joint ventures (



Note 6

and



Note 18

).

On 18 January, Fortum announced that a 1.3 GW portfolio of wind projects was to be transferred to a

new joint venture. However, this wind portfolio is now part of the assets and operations that are subject to

the ongoing divestment process following Fortum’s decision for a controlled exit from Russia as a result of

the Russia-

Ukraine war. Fortum’s ownership interest in the 1.3 GW portfolio is p

resented in other non-

current assets and in interest-bearing liabilities.

On 3 May, following Russia’s attack and the war in Ukraine and consequential geopolitical tensions,

uncertainties and risks, Fortum announced pre-tax impairments related to the comp

any’s Russian

operations recorded in its first-quarter 2022 results. On 7 February 2023, Fortum announced it would

record further impairments in the fourth quarter of 2022 results. Total Russian (pre-tax) impairments for

the year 2022 amount to approximately EUR 1.7 billion.

For further information, see the section ‘

Fortum in Russia

’,



Note 7

and



Note 19

.

TWh

2022

2021

Change

22/21

Russian power generation

28.6

28.6

0%

Russian heat production

15.7

17.1

-8%

EUR million

2022

2021

Change

22/21

Sales

128,102

106,127

21%

Comparable operating profit

-4,747

1,107

529%

Operating profit

-16,402

-4,913

-234%

Share of profits of associates and joint ventures

71

23

209%

Net profit from discontinued operations

-11,302

-4,121

-174%

Net profit from discontinued operations, attributable to the owners

of the parent

-3,428

-3,246

-6%

Net cash from/used in operating activities

-10,870

3,851

382%

Number of employees

N/A

11,494

N/A

On 21 September 2022, Fortum, the German Government and Uniper signed an agreement in principle

according to which Fortum fully divests shares in Uniper SE to the German State and the German State

takes full control of Uniper. This resulted in Fortum losing control of Uniper and the deconsolidation of

Uniper in the third quarter of 2022. On 21 December, Fortum announced that the company had concluded

the sale of its ownership in Uniper SE to the German State. Fortum received the total consideration of the

share transaction of approximately EUR 0.5 billion and Uniper repaid the shareholder loan of EUR 4

billion granted by Fortum.

For further information on the transaction, see ‘

Uniper divestment

’ and on the deconsolidation of

Uniper, see



Note 3

.

EUR million

2022

2021

Capital expenditure

Intangible assets

88

68

Property, plant and equipment

437

375

Total

525

443

Gross investments in shares

Subsidiaries

0

210

Associated companies and joint ventures

14

39

Other investments

19

31

Total

33

281

14

In 2022, capital expenditures and investments in shares totalled EUR 558 (724) million. Capital

expenditures were EUR 525 (443) million (



Note 3

and



Note 6

).

Fortum expects to start, or has started, power and heat production capacity of new power plants and

expects to upgrade its existing plants as follows:

Type

Electricity

capacity

MW

Heat

capacity

MW

Supply

starts/

started

Generation

Pjelax-Böle and Kristinestad Norr, Finland

Wind

380

Q2/2024

Generation

On 3 March 2021, Fortum announced a substantial investment in dam safety in Sweden for an extensive

rebuild of the over 100-year-old Forshuvud hydropower plant. Fortum is investing more than SEK 450

million (approximately EUR 44 million) during 2021

–

2025. This investment guarantees safe operation of a

power plant as a supplier of renewable electricity and balancing power for more weather-dependent types

of power.

On 22 December 2021, Fortum announced an investment decision to construct the 380-MW Pjelax-

Böle and Kristinestad Norr wind parks in Närpes and Kristinestad in Finland in partnership with the Finnish

energy company Helen Ltd. Construction started in January 2022, and the wind parks are expected to be

fully operational in the second quarter of 2024 at the latest. Fortum has a 60% majority and Helen a 40%

minority ownership in the project; Fortum will consolidate the investment on its balance sheet. The total

capital expenditure of the projec

t is approximately EUR 360 million, of which Fortum’s share is

approximately EUR 216 million.

City Solutions

In June 2021, Fortum announced the divestment of the 250-MW Pavagada II and the 250-MW Rajasthan

solar power plants in India to Actis. The parties also signed an agreement targeting potential further

investments in solar power plants in India. The total consideration for the divestment on a cash and debt-

free basis, including the effect of deconsolidation of the net debt, amounted to approximately EUR 280

million. The sale of the 250-MW Pavagada II solar plant was concluded in October 2021, the first phase of

the Rajasthan divestment in November 2021 and the second phase in May 2022.

On 16 May, Fortum concluded the sale of its 50% ownership in the district heating company Fortum

Oslo Varme AS in Norway to a consortium of institutional investors of Hafslund Eco, Infranode and

HitecVision. The signing of the transaction was announced on 22 March. The total consideration of the

sale amounted to approximately EUR 1 billion on a cash and debt-free basis; as part of the transaction,

Fortum deconsolidated a related EUR 0.2 billion shareholder loan from the City of Oslo. Fortum recorded

a tax-exempt capital gain of EUR 638 million in the City Solutions segment

’s 2022 results.

In July, Fortum and GIG (Green Investment Group, a specialist green investor within Macquarie Asset

Management), agreed to invest in a new waste-to-energy plant in Glasgow, Scotland, through a 50/50

joint venture. When fully commissioned, the South Clyde Waste-to-Energy plant will have an annual

processing capacity of 350,000 tonnes of waste per year. The plant will have a power generation capacity

of 45 MWe gross, corresponding to the average annual electricity consumption of approximately 90,000

homes.

On 7 December, Fortum announced that the construction work and the gradual deployment tests of the

company’s new battery material recycling facility in Finland was completed according to plan. In June

2021, Fortum made an investment decision to expand its lithium-ion battery recycling capacity by building

a hydrometallurgical plant in Harjavalta. The commercial operations will begin after the commissioning

period in the second quarter of 2023. The investment of approximately EUR 27 million will increase

Fortum’s hydrometallurgical recycling capacity and enable the production of battery chemicals.

Other Operations

On 1 September, Fortum divested its e-mobility business Plugsurfing to Fleetcor Technologies, Inc., a

leading global business payments company. The transaction price was approximately EUR 75 million on a

cash and debt-free basis and Fortum recorded a tax-exempt capital gain of EUR 61 million in Other

Operations’ 2022 results.

On 18 August, Fortum closed the sale of its 30% ownership in Recharge AS (Recharge), a public

charging point operator (CPO) for electric vehicles, to Infracapital, the infrastructure equity investment arm

of M&G Plc. The transaction was originally announced on 10 June. After the transaction, Infracapital owns

100% of Recharge, which is the largest charging network in the Nordic region with more than 4,600

connectors at 830 locations. The transaction price was EUR 85 million and Fortum recorded a tax-exempt

capital gain of EUR 77 million in Other Operations’ 2022 re

sults.

Russia

Due to the ongoing Russia-Ukraine war and the current geopolitical situation, Fortum has stopped all new

investment projects in Russia.

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 clean energy solutions.

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 decarbonisation, flexibility, clean gas or 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 2022

, Fortum’s R&D expenditure was EUR

55 (54) million, or 0.6% (0.8%) of sales.

2022

2021

2020

Change

22/21

R&D expenditure, EUR million

55

54

56

2%

R&D expenditure, % of sales

0.6

0.8

0.1

As of 1 September, the head of Fortum's Russia division, Alexander Chuvaev, stepped down from his

position as member of Fortum’s Executive Management team. Mr Chuvaev continues in his position as

Head of the Russia division and reports to the President and CEO, Markus Rauramo.

On 16 December, Fortum announced that as part of the company’s ongoing strategy process,

Bernhard

Günther,

who has served as CFO since February 2021 and was Fortum’s lead in the joint project to

explore a potential integration of Uniper into Fortum, asked to step down as CFO. Tiina Tuomela, CFO of

Uniper, will return to Fortum and assume the CFO position and become a member of the Executive

15

Management Team latest in the beginning of April 2023. Bernhard Günther will remain CFO and a

member of

Fortum’s Executive Management team until Tiina Tuomela joins.

Annual General Meeting 2022

On 28 March, the Annual General Meeting of Fortum Corporation (AGM) was held at the company

headquarters in Espoo, Finland, under special arrangements. The AGM adopted the Financial Statements

and the Consolidated Financial Statements for the financial period 1 January−31 December 2021 and

discharged from liability all the persons who had served as members of the Board of Directors and as

President and CEO during the year 2021.

The AGM resolved that a dividend of EUR 1.14 per share be paid for the financial year that ended on

31 December 2021. The dividend was paid on 6 April 2022.

Further the AGM approved the Remuneration Report for the company’s governing bodies for 2

021. The

resolution was advisory.

The AGM approved the annual fees for the Chair, Deputy Chair and other members of the Board of

Directors as follows:

•

for the Chair EUR 88,800 per year,

•

for the Deputy Chair EUR 63,300 per year,

•

for a Member EUR 43,100 per year, and

•

for the Chair of the Audit and Risk Committee: EUR 63,300 per year, provided that he/she does not

simultaneously act as Chair or Deputy Chair of the Board of Directors.

In addition fixed fees were approved for the Committee work as follows:

•

for a Member of the Audit and Risk Committee EUR 3,000 per year,

•

for the Chair of the Nomination and Remuneration Committee EUR 5,000 per year,

•

for a Member of the Nomination and Remuneration Committee EUR 2,000 per year,

•

for the Chair of any additional Committee established by a Board decision EUR 5,000 per year, and

•

for a Member of any additional Committee established by a Board decision EUR 2,000 per year.

The meeting fee payable to a Board member, also for Committee meetings will be EUR 800 for each

meeting, or EUR 1,600 if the member travels to the meeting outside his/her country of residence. When a

member participates in the meeting via remote connection, or for the decisions that are confirmed without

convening a meeting, the meeting fee will be EUR 800. The travel expenses of Board members are

compensated in accordance with the company’s travel policy. The annual fee for the Board work of the

Board members will be paid in company shares and in cash in such a way that approximately 40% of the

amount of the annual fee will be payable in shares acquired on behalf and in the name of the Board

members, and the remainder in cash. The company will pay the costs and the transfer tax related to the

purchase of the company shares. The shares will be acquired on behalf and in the name of the Board

members within two weeks following the publication of the company’s first

-quarter 2022 interim report. If

share purchases cannot be carried out within the aforementioned schedule due to a reason related to the

company or a Board member, the shares will be acquired later, or the annual fee will be paid fully in cash.

The meeting fees and the fixed fees for the Committee work will be paid fully in cash.

The AGM resolved that the Board of Directors will consist of nine members. Veli-Matti Reinikkala was

elected as Chair and Anja McAlister as Deputy Chair. Luisa Delgado, Essimari Kairisto, Teppo Paavola,

Philipp Rösler and Annette Stube were re-elected as members. Ralf Christian and Kimmo Viertola were

elected as new members.

In addition, Deloitte Oy was re-

elected as the auditor. The auditor’s fee is paid pursuant to an invoice

approved by the company.

The AGM authorised the Board of Directors to decide on the repurchase and disposal of the company's

own shares, up to 20,000,000 shares, which corresponded to approximately 2.25 per cent of all the

shares in the company on 28 March 2022. Only the unrestricted equity of the company can be used to

repurchase own shares on the basis of the authorisation. These authorisations cancelled the

authorisations resolved by the AGM 2021 and will be effective until the next Annual General Meeting and

in any event for no longer than a period of 18 months. This authorisation has not been used by 1 March

2023.

The AGM authorised the Board of Directors to decide on contributions in the total maximum amount of

EUR 500,000 for charitable or similar purposes, and to decide on the recipients, purposes and other terms

of the contributions. The authorisation will be effective until the next Annual General Meeting. By 1 March

2023, EUR 209,000 of this authorisation has been used.

Board decisions

At its meeting held after the Annual General Meeting, Fortum’s Board of Directors elected, among its

members, Veli-Matti Reinikkala as Chair and Luisa Delgado, Anja McAlister, and Kimmo Viertola as

members of the Nomination and Remuneration Committee. Furthermore, the Board elected Essimari

Kairisto as Chair and Teppo Paavola, Philipp Rösler, Annette Stube, and Ralf Christian as members of

the Audit and Risk Committee.

Shareholders’ Nomination Board

On 15 September, Maija Strandberg, Senior Ministerial Adviser, Financial Affairs, Prime Minister’s Office,

Ownership Steering Department (Chair), Risto Murto, President and CEO, Varma Mutual Pension

Insurance Company, Jouko Pölönen, President and CEO, Ilmarinen Mutual Pension Insurance Company,

and Veli-Matti Reinikkala, Chair of Fortum's Board of Directors were appointed to Fortum Shareholders'

Nomination Board. Elo Mutual Pension Insurance Company did not exercise its right to appoint a

representative, and therefore the right was transferred to Ilmarinen Mutual Pension Insurance Company.

Extraordinary General Meeting 2022

On 23 November, the Extraordinary General Meeting (EGM) of Fortum Corporation was held at the

Helsinki House of Culture, Finland.

The EGM resolved in accordance with the proposal of the Board of Directors, on a directed share issue

without payment to the Finnish State-owned holding company Solidium Oy. In accordance with the

resolution, Solidium was entitled to subscribe up to 8,970,000 new ordinary registered shares in Fortum,

which corresponds to approximately 1% of all shares outstanding in Fortum. As a consequence, the

shares under control of the State of Finland increased from 50.76% to 51.26%.

On 25 November, the 8,970,000 new shares issued by the company were registered with the Finnish

trade register. The total amount of shares outstanding in the company after the registration of the new

shares is 897,264,465. The new shares carry full shareholder rights, including the right to dividend, as of

the registration date.

Other major events during the reporting period

On 30 September, Fortum’s Board of

Directors decided to launch the savings period for year 2023 under

its Employee Share Savings (ESS) programme. The ESS programme was established in October 2019

and the Board of Directors decides separately on the annual launch of each individual savings period. The

total amount of all savings for the 2023 savings period may not exceed EUR 6 million. Due to the

restrictions regarding management incentives put in place by the Finnish State in the Solidium bridge

financing facility, Fortum assessed and concluded that Fortum’s Executive Management team will not

participate in the 2023 savings period of the ESS programme.

16

On 29 December, the Finnish Government published its law proposal (HE 320/2022 vp) for a temporary

windfall tax in the electricity sector

. The law intends to implement EU’s Council Regulation 2022/1854 on

revenue cap and solidarity contribution as an emergency intervention to address high energy prices. This

model deviates from the models proposed in other European countries. The tax applies to companies in

the electricity sector within electricity generation, wholesale and partly retail sales in Finland. Pursuant to

the law, the tax is 30% of the companies’ net profits generated from the above listed electricity operations

in Finland exceeding a 10% return on equity in the fiscal year 2023. The temporary windfall tax was

approved by the Finnish Parliament on 27 February 2023 and the tax becomes payable in 2024. Fortum

has assessed the law’s financial impacts on the company’s comparable effective income tax rate. For

more information, see ‘

Outlook

’.

Fortum in Russia

Russia’s attack

war in Ukraine and its decision to use energy as a weapon fundamentally changed the

geopolitical situation and operating environment for energy companies in Europe, increasing and

materialising uncertainties and risks for Fortum. Throughout the crisis Fortum has focused on ensuring a

secure energy supply to customers and managing the adverse effects of the crisis on the company’s

stakeholders. The company complies with all applicable laws and regulations, including sanctions, and

prepares for various scenar

ios. Further information on risks is also in the section ‘

Risk management

’.

Pursuing a controlled exit from Russia

Soon after the war broke out, Fortum announced that it had stopped all new investment projects in Russia

and would not provide any new financing to its Russian subsidiaries. In May, Fortum announced that it is

preparing a controlled exit from the Russian market, with potential divestments of its Russian operations

as the preferred path. Completing the exit is likely to take additional time, and there still are significant

uncertainties

–

including regulatory approvals

–

related to the ongoing divestment process.

Governance of Fortum Russia division

Fortum’s Russian operations are functioning on a “stand

-

alone” basis with e.g. separated IT

-systems.

Governance has been segregated to support the planned exit phase simultaneously ensuring compliance

with applicable laws and regulations, including sanctions. Since spring 2022, there are no parent company

representatives on the boards of the Russian s

ubsidiaries and the head of Fortum’s Russia division has

stepped down from the Fortum Executive Management team. However, he continues to report to the

Group CEO.

Due to existing sanctions imposed by Russia, the Group’s Russian operations are subject to s

ignificant

foreign exchange transfer restrictions, which limit the ability to transfer funds including potential dividend

distributions, out of Russia.

Fuel supply and sourcing from Russia

Soon after the war broke out, Fortum started taking measures to secure fuel supplies for its power plants

outside of Russia. Fortum no longer buys coal, pellets, biomass, oil or gas from Russia for its power

plants. Fortum has also stopped electricity imports from Russia. However, Fortum buys nuclear fuel for its

Loviisa nuclear power plant in Finland from the Russian TVEL, as it is not possible to quickly change

suppliers due to e.g. the required certification and permitting processes. The current supply contract is

valid until the end of the current operating licences in 2027 (Loviisa 1) and 2030 (Loviisa 2). To diversify

the company’s fuel strategy, improve security of supply and ensure reliable electricity production at the

Loviisa power plant, Fortum signed an agreement with Westinghouse Electric Company in November for

the design, licensing and supply of a new fuel type for the Loviisa power plant. Taking the new fuel into

use is a multi-year project also requiring regulatory approvals.

Fortum’s operations and assets in Russia

Fortum’s Russia segment comprises its sub

sidiary PAO Fortum, including shares in joint ventures and

Fortum’s shareholding in PAO TGC

-1 (ownership of more than 29%). Fortum has seven power plants in

Russia, mainly natural gas-fired power plants in the Urals and Western Siberia. Six of the plants produce

both electricity and heat for the market, while one plant produces only electricity. At the end of 2022, total

power generation capacity amounted to 4.7 gigawatts (GW) and heat production capacity to 7.6 GW. In

2022, PAO Fortum generated 28.6 terawatt-hours (TWh) of electricity and produced 15.7 TWh of heat.

Fortum’s Russia segment is also active in developing renewable power generation in Russia. The

segment’s wind and solar portfolio comprises 1.3 GW of operational CSA

-backed (Capacity Supply

Agreements) capacities.

Fortum has approximately 2,700 employees in Russia.

Total impairment charges in 2022 for the Russia cash-generating unit (CGU) amount to EUR 1,697

million (pre-tax), including EUR 905 million impairment of intangible assets and property, plant and

equipment, EUR 475 million impairment of participations in associates and joint ventures, EUR 145 million

expected credit losses on Russian deposits and receivables, as well as EUR 171 million write down of

other shares (



Note 19

).

Outlook

In the near term, the ongoing disruption of the energy sector is impacted by geopolitical tensions, the

general negative economic outlook with high inflation and interest rates, tightening regulations and volatile

commodity markets. In addition, in the short-term price elasticity to counter high electricity prices has an

impact on power consumption.

In the long-term, electricity is expected to continue to gain a significantly higher share of total energy

consumption. The electricity demand growth rate will largely be determined by classic drivers, such as

macroeconomic and demographic development, but also increasingly by decarbonisation of energy

intensive industrial, transport and heating sectors through direct electrification and green hydrogen.

Hedging

At the end of 2022, approximately 75% of the Generation segment’s estimated Nordic power sales

volume was hedged at EUR 58 per MWh for 2023 and approximately 45% at EUR 42 per MWh for 2024.

The reported hedge ratios are based on the hedges and power generation forecasts of the Generation

segment.

The reported hedge ratios may vary significantly, depending on Fortum’s actions on the electricity

derivatives markets. Hedges are mainly financial contracts, most of which are electricity derivatives

quoted on Nasdaq Commodities and traded either on Nasdaq Commodities or with bilateral

counterparties. As an additional liquidity risk mitigation measure, Fortum has reduced its exposure on the

Nasdaq Commodities exchange and increased the share of bilateral agreements.

Capital expenditure

Fortum estimates its capital expenditure, including maintenance but excluding acquisitions and the Russia

segment, to be approximately EUR 700 million in 2023, of which the share of maintenance capital

expenditure is estimated to be approximately EUR 300 million, well below the level of depreciation.

17

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 generation portfolio, as well

as currency fluctuations. Excluding the potential effects from changes in the power generation mix

(currently approximately 45 TWh), a EUR 1 per MWh change

in the Generation segment’s achieved

Nordic power price will result in an approximately EUR 45 million change in the segment’s annual

comparable operating profit. The achieved power price also includes the results of optimisation of

Fortum’s hydro and nuc

lear generation, as well as operations in the physical and financial commodity

markets.

Income taxation

In 2023, considering the temporary windfall tax law in Finland, the comparable effective income tax rate

for Fortum is estimated to be in the range of 21

−

24% and excluding the windfall tax in Finland, in the

range of 20−22%. In 2024, the comparable effective income tax rate for Fortum is estimated to be in the

range of 19−21%. Fortum’s comparable effective tax rate is impacted by the weight of the profit

in different

jurisdictions and differences in standard nominal tax rates in these jurisdictions. The tax rate guidance

excludes items affecting comparability.

Events after the balance sheet date

On 16 February 2023, the Finnish Government granted a new op

erating license for both units at Fortum’s

Loviisa nuclear power plant until the end of 2050. Over the course of the new licence period, the plant is

expected to generate up to 170 terawatt hours of CO2-free electricity. Investments related to the

continuation of operations and lifetime extension will amount to an estimated EUR 1 billion until 2050.

Over the past five years, Fortum has already invested approximately EUR 300 million in refurbishing the

Loviisa power plant. The Loviisa power plant is the first nuclear power plant in Finland. The power plant

has two units: unit 1 started operating in February 1977, and unit 2 in November 1980.

At the beginning of March 2023, the Fortum Board of Directors resolved on Fortum’s new strategy.

Fortum’s strategic pri

orities are to deliver reliable clean energy and drive decarbonisation in industries in

the Nordics. The strategy includes new financial and sustainability targets:

•

Updated financial guidance to ensure credit rating of at least BBB and optimal financial flexibility for

future growth: long-term financial net debt-to-comparable EBITDA of 2.0

–

2.5 times.

•

Disciplined growth in clean energy with capital expenditure of up to EUR 1.5 billion during 2023

–

2025.

Investment hurdles of project WACC + 150

–

400 basis points will be applied and evaluated against the

company’s climate and biodiversity targets. Investment decisions will also be evaluated against the

company’s climate and biodiversity targets.

•

Renewed dividend policy with payout ratio of 60

–

90% of comparable E

PS. Fortum’s Board of Directors

proposes a dividend of EUR 0.91 per share for the year 2022 corresponding to a pay-out of 75% based

on comparable EPS for continuing operations of EUR 1.21 (excluding Russian operations).

•

Fortum has brought forward its target to reach carbon neutrality to 2030 (Scopes 1, 2, 3) and will exit all

coal already by the end of 2027. To reach carbon neutrality, Fortum is committed to setting emission

reduction targets based on the climate science (SBTi 1.5°C), assuming Russia exit. To measure

progress, mid-point targets have been set for specific emissions at below 20 g CO2/kWh for total energy

production and at below 10 g CO2/kWh for power generation by 2028.

•

Fortum is also committing to an ambitious biodiversity target to have no net loss of biodiversity

(excluding any aquatic impacts) from existing and new operations (Scopes 1, 2) from 2030 onwards. In

addition, the company will reduce its negative dynamic terrestrial impacts in upstream Scope 3 by 50%

by 2030 (base-year 2021). Fortum will continue local initiatives, especially in hydropower production,

and is committed to develop a science-

based methodology to assess the company’s aquatic impacts

during 2023.

•

Fortum is already taking steps to reach the environmental targets and examples of these include the

Loviisa nuclear plant lifetime extension, increasing the use on hydro power and the ongoing

decarbonisation projects in district heating.

At the beginning of March 2023, the Fortum Board of Directors resolved on revising the financial segment

reporting to match the new business structure and strategy. As of the beginning of 2023, Fortum will

report its financial performance in the following reporting segments:

•

The Generation segment will include the Hydro Generation, Nuclear Generation, Corporate Customers

and Markets and Renewables and Decarbonisation business units.

•

The Consumer Solutions segment includes the Consumer Solutions business unit.

•

The Other segment includes the Circular Solutions business unit, Innovation and Venturing activities,

enabling functions and corporate management.

Fortum will continue to consolidate and report its Russian operations as a separate segment for the time

being; however, Fortum will continue to assess the basis for consolidation in the coming quarters. Fortum

is committed to exiting the Russian market and a divestment is being pursued.

Fortum will publish restated quarterly segment financials for 2022 before publication of the first quarter

2023 results on 11 May 2023.

18

Sustainability

Sustainability at Fortum

Introduction

This section covers Fortum’s non

-financial reporting in accordance with the Finnish Accounting Act

1336/1997, Securities Market Act 746/2012 and Limited Liability Companies Act 624/2006. It also includes

disclosures prepared in accordance with the EU Taxonomy Regulation Delegated Act of 6 July 2021 and

Complementary Climate Delegated Act of 15 July 2022.

In this report, selected sustainability key performance indicators for continuing operations and

continuing operations excluding Russia are disclosed. Comparative figures and information for the year

2021 have been restated to exclude Uniper as discontinued operations. Comparatives for 2020 have not

been restated. Selected key performance indicators for discontinued operations are presented in separate

tables.

Fortum

Group’s business model is described in



Note 6

.

Material non-financial aspects

Fortum’s non

-financial reporting includes information on the four mandatory aspects defined in the Finnish

Accounting Act. These are: environmental matters, social and personnel matters, respect for human

rights, and prevention of corruption and bribery.

Fortum assessed its sustainability priorities in 2021 with a comprehensive materiality analysis, based

on internal and external stakeholder surveys, and an extensive desktop review. The desktop review

analysed, e.g., regulations

, expectations of capital markets, peers’ material

sustainability topics, media

coverage, and connections between the material topics and the UN Sustainable Development Goals

(SDGs). In 2022, Fortum updated its materiality analysis based on a new desktop review and new

stakeholder data. Based on the mater

iality analysis, Fortum’s sustainability priority areas are

:

Climate and resources

Personnel and society

Governance

Fortum’s

sustainability performance is monitored and disclosed in interim and annual reporting. Fortum

publishes an annual Sustainability Report with more extensive information on Fortum’s sustainability

performance.

Sustainability targets

The Fortum Board of Directors resolved on Fortum’s new strategy at the beginning of March, 2023. As

p

art of this, Fortum’s Sustainability targets have now been updated.

A summary of Fortum’s new

strategy and key sustainability targets can be found in



Note 39

Events after the balance sheet date.

In 2020, as part of the joint strategy with Uniper, Fortum aligned its climate targets with the goals of the

Paris Agreement to be committed to carbon neutrality by 2050 at the latest. The target covered direct CO2

emissions (Scope 1) and indirect CO

emissions (Scope 2 and 3). Fortum’s roadmap to reduce em

issions

in Europe was also defined. Fortum committed to at least a 50% reduction in CO

emissions (Scope 1 and

2) in its European generation by 2030 (compared to base-year 2019) and to carbon neutrality (Scope 1

and 2) by 2035 at the latest. In December 2021, Fortum also committed to reduce Scope 3 greenhouse

gas emissions by 35% by 2035 at the latest (compared to base year 2021).

In

2022, Fortum’s CO

-eq emissions, including all Scope 1, 2 and 3, totalled 30.2 million tonnes,

compared to 31.7 million tonnes in 2021. Major changes in emissions were due to the divestment in

Baltics operations and Argayash power plant in Russia in 2021, as well as emission reduction in Scope 3

emissions related to purchased goods and services and gas sales.

Fortum’s direct CO

emissions (Scope 1) and indirect CO

emissions (Scope 2) in Europe totalled 2.2

million tonnes, which remained at a same level as in 2021.

In 2022, Fo

rtum’s Scope 3 greenhouse gas emissions totalled 13.2 million CO

-eq tonnes, compared to

13.8 million CO

-eq tonnes in 2021.

Group emission reduction targets set in 2020 and 2021 are part of 2022 reporting and performance

against the climate targets are presented in the table below.

Climate target

Scope

2022

2021

Base-year

Base-year

emissions

Change

compared to

base year %

In 2022,

Fortum’s target was to develop a science

-based strategy to measure and enhance the

biodiversity impacts of the Group’s operations and the new developments. Milestones achieved are

described in the

chapter ‘Water and biodiversity’

.

Fortum’s safety targets

are zero severe occupational accidents, Total Recordable Injury Frequency

(TRIF) for own personnel and contractors, <1.0 by the end of 2025, and Severity rate per TRI (number of

lost days divided by number of Total Recordable Injuries), for own personnel

and contractors, ≤11 in

2022. In 2022, Fortum's target for sickness-related absences was 2.8%.

The new Safety eLearning training for all Fortum employees was launched in the second quarter

of 2022, followed by the Safety Leadership Programme 2022 for Executives, launched in the third quarter

of 2022. These will be followed by the Management Safety and Security Leadership Programme starting

in

2023. Fortum’s goal for the completion rate of the t

rainings

–

Safety eLearning and Safety Leadership

Programme for Executives

–

was 85% in 2022, which was achieved with a completion rate of 91.2% and

96.3%, respectively.

Fortum is a supporter of the Task Force on Climate-related Financial Disclosures (TCFD). Fortum has a

long-standing focus on mitigating climate change and adopted the reporting recommendations of the

TCFD starting from the financial year 2019.

Fortum’s Climate Lobbying Review was first published in December 2021 and updated in December

20

22. The Review is publicly disclosed on Fortum’s website. A summary of the review is also published as

a part of Fortum’s Sustainability

Report. In December 2022, Fortum also published its Lobbying

Guidelines.

19

Group sustainability performance for continuing operations

2022

2021

Climate and resources

Total GHG emissions, Scope 1-3, million CO

2

-eq tonnes

30.2

31.7

Total GHG emissions, Scope 1-3, excl. Russia, million CO

2

-eq tonnes

10.9

11.0

Direct Scope 1 GHG emissions, million CO

2

-eq tonnes

17.0

17.9

Direct Scope 1 GHG emissions, excl. Russia, million CO

2

-eq tonnes

2.2

2.2

Indirect location-based Scope 2 GHG emissions, million CO

2

-eq tonnes

0.04

0.05

Indirect location-based Scope 2 GHG emissions, excl. Russia, million CO

2

-eq

tonnes

0.03

0.05

Scope 3 GHG emissions, million CO

2

-eq tonnes

13.2

13.8

Scope 3 GHG emissions, excl. Russia, million CO

2

-eq tonnes

8.7

8.7

Specific CO

2

emissions from total energy production, gCO

2

/kWh

184

175

Specific CO

2

emissions from total energy production, excl. Russia, gCO

2

/kWh

45

39

Asset availability of power generation plants, %

90.3

90.3

Major environmental incidents

1)

, no.

2

-

Personnel and society

Total Recordable Injury Frequency (TRIF), own personnel and contractors

2.7

3.1

Severity rate per TRI

2)

, own personnel and contractors

12.0

13.1

Severe occupational accidents, no.

2

2

Safety eLearning

3)

, %

91.2

-

Safety Leadership Programme for Executives

4)

, %

96.3

-

Sickness-related absences, %

3.2

2.9

1) Number of environmental incidents that resulted in significant harm to the environment (ground, water, air) or an environmental non-

compliance with legal or regulatory requirements.

2) Number of lost days divided by number of Total Recordable Injuries (TRI).

3) Completion rate. Training launched in the second quarter of 2022.

4) Completion rate. Training launched in the third quarter of 2022.

Fortum’s goal is to achieve excellent financial performance in strategically selected core areas through

strong competence and responsible ways of operating. Fortum’s long

-term financial targets until 31

December 2022 were financial net debt/comparable EBITDA below 2x, and two different hurdle rates for

new investments (WACC +100 BPS for green investments and WACC +200 BPS for other investments).

Fortum’s objective is to have a solid investment grade rating of at least BBB to preserve financial flexibility

and good access to capital markets. The Fortum Board of Directors resolved on Fortum’s new strategy at

the beginning of March, 2023. A summary of Fortum’s new strategy and key sustainability targets can be

found in



Events after the balance sheet date.

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.

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. Fortum’s approach to taxation and the principles that steer the tax management are presented in

the

Fortum’s Tax Principles disclosed on Fortum’s website. Fortum publishes its tax footprint annua

lly

and, as a member of the B Team endorses

the B Team’s Responsible Tax Principles

.

Fortum is included in several sustainability indices and has been assessed by many sustainability

ratings. The list is published on Fortum’s website. Fortum’s sustainabili

ty reporting covers functions under

Fortum’s operational control, including subsidiaries in all its operating countries, unless otherwise stated

.

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, including climate-related risks, are reported to Fortum Executive Management and the

Audit and Risk Committee as part of the annual review of material risks and uncertainties for Fortum.

Fortum’s 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. As

such, Fortum is well positioned to capture opportunities resulting from the energy transition, aimed at

curbing climate change. The energy transition requires not only renewables but increasingly also energy

storage and other flexible solutions to provide security of supply and to decarbonise industry,

transportation, heating and cooling. Building on our strengths, our future will be driven by CO

-free power

generation, sustainably transforming our own operations to become carbon neutral and engaging

customers and society to decarbonise.

As

sustainability is an integral part of Fortum’s

strategy, the highest decision making on sustainability and

climate-related matters falls within the duties of the members of the Board of Directors, who share joint

responsibility in these matters.

Fortum Executive Management decides on the sustainability approach and Group-level sustainability

targets that guide annual planning. The Group’s performance targets, including sustainability and climate

-

related targets, are approved by Fortum’s Board of Directors. Fortum’s line management is responsible for

the

implementation of Fortum’s policies and instructions and for day

-to-day sustainability management

and improvement plans.

Fortum’s short

-term incentive (STI) programme, applicable to all employees, includes safety as one

element. In the 2022 STI programme, the safety target contains the following elements: severity rate per

Total Recordable Injuries (TRI) of own employees and contractors combined, the execution rate of Safety

Leadership Training, and the execution rate of safety eLearning.

Fortum’s

long-term incentive (LTI) programmes includes a climate-related metric. In the 2021

–

2023 LTI

plan, the target is

linked to the reduction of Fortum’s coal

-based power generation capacity in line with

Fortum’s coal

-exit path, with a minimum level requiring exceeding the communicated ambition level. In the

2022

–

2024 LTI plan is related to the reduction of the absolute CO

emissions in the European fossil fleet,

based on a fossil fleet review addressing the Group’s European generation portfolio and a pathway

developed

to reach Fortum Group’s 2030 and 2035 climate targets. Targets of both LTI plans were

adjusted in early 2023 due to the divestment of Uniper. In the 2023

–

2025 LTI plan, the ESG target is

linked to emission reduction targets based on the climate science (SBTi 1.5°C) and related to emissions in

Europe, and Fortum’s reputation index development among key stakeholders. The relative TSR measured

against a peer group of European utilities remains as a measure in the plan.

Sustainability management at Fortum is strategy-driven and based on

the company’s

Values, Code of

Conduct, Supplier Code of Conduct, sustainability-related policies, and other Group policies and their

specifying instructions. The Code of Conduct establishes the basic principles of conduct that everyone

must follow. The Code defines how we treat each other, do business, and engage with the world. The

Supplier Code of Conduct, based on the ten principles of the UN Global Compact, outlines the

requirements for Fortum’s suppliers and business partne

rs.

Fortum follows and respects 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). Fortum

also recognises in its operations the UN Guiding Principles on Business and Human Rights, the OECD

Guidelines for Multinational Enterprises, the International Chamber of Commerce’s anti

-bribery and anti-

20

corruption guidelines, and the Bettercoal initiative’s Code on responsible coal mining. Fortum is a

participant of the UN Global Compact initiative and the UN Caring for Climate initiative.

Business ethics

Zero tolerance for corruption and bribery is highlighted in Fortum’s Code of Conduct and Supplier Code of

Conduct. In addition, separate instructions and guidelines have been created to address various topics,

including but not limited to anti-bribery, compliance management, safeguarding company assets, conflict

of interest, anti-

money laundering, economic sanctions and competition law. Fortum’s Board

of Directors

has approved the company’s Code of Conduct and Supplier Code of Conduct

.

The Codes of Conduct are regularly reviewed in order to ensure compliance with evolving company and

regulatory requirements. The latest revision of Fortum’s Code of Condu

ct and Supplier Code of Conduct

took place in 2021.The Code of Conduct online training is mandatory for all employees. In addition,

relevant individuals are regularly trained in policies and systems that help to prevent corruption.

Internal and external reporting channels are offered for reporting suspicions of misconduct. The

channels are described in the Code of Conduct and accessible on the company’s internal and external

webpages. Suspected misconduct and measures related to ethical business practices and compliance

with regulations are regularly monitored and assessed by Fortum’s Audit and Risk Committee

.

No new cases of corruption or bribery were confirmed in Fortum’s operations in 2022. One case was

under investigation at year-end.

Climate and resources

Fortum’s key performance indicators for climate and resources are related to CO

2

emissions, security of

supply, and major environmental incidents.

Fortum’s Sustainability Policy

and the Minimum Requirements for EHS Management steer

environmental management. Operational-level activities follow the requirements set forth in the ISO 14001

environmental management standard, and 100% of Fortum’s power and heat production worldwide has

ISO 14001 certification.

Energy

Fortum’s power generation in the Nordic countries is mainly based on CO

2

-free hydro and nuclear power.

A minor share of Fortum’s power generation is currently based on solar and wind. Fortum has also

generation of district heating and cooling in Finland and in Poland. In Europe, heat is mainly produced at

energy-efficient combined heat and power (CHP) plants. In addition, Fortum offers industrial and

infrastructure solutions, e.g., waste-to-energy, as well as energy sales. In the Russian operations, Fortum

has mainly natural gas-fired generation.

In 2022, Fortum’s power generation was

72.8 (78.0) TWh and heat and steam production 20.9 (24.9)

TWh. 59

% of Fortum’s total power generation was CO

2

-free. In Europe, 97% of the power generation was

CO

2

-

free. The figures for power and heat generation and capacities also include figures from Fortum’s

share in associated companies and joint ventures that sell their production to the owners at cost.

Fortum uses various fuels, such as natural gas (69%), uranium (23%), coal and lignite (4%), waste-

derived fuels (3%), and biomass fuels (1%), to produce electricity, heat, and steam. Percentage shares

are based on the energy content of the fuel.

In 2022, Fortum’s coal

-based capacity totalled 0.7 GW and generation 1.2 TWh. The share of coal of

Fortum’s revenues was

3% and the share of fossil fuels of generation-based revenues was 12%.

In 2022, Fortum’s

coal-based power generation, excluding Russia, was 1.1 TWh. Russia exited coal on

1 November 2022. The share of coal of Fortum’s revenues, excluding Russia, was 4% and the share of

fossil fuels of generation-based revenues was 6%.

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.

In 2022, the asset availability of Fortum’

s gas-fired and coal-fired power plants was, on average, 90.3

(90.3

)%. The asset availability of Fortum’s power generation includes planned outages in addition to

unplanned technical unavailability.

Climate and greenhouse gas emissions

Fortum has committed to carbon neutrality by 2050 at the latest, in line with the goals of the Paris

Agreement. Fortum’s priority is to transform its own operations to carbon neutral by continuously

strengthening and growing in CO

2

-free power generation and by decarbonising its carbon-emitting energy

production fleet.

In

2022, Fortum’s direct CO

2

emissions were 16.9 (17.8) Mt. 87% of CO

2

emissions originated from

Russian power and heat production. Of the total CO

2

emissions, 1.6 (1.5) Mt were within the EU and UK

emissions

trading system (ETS). The estimate for Fortum’s free emission allowances in 2022 is

approximately 0.2 (0.2) Mt.

Fortum’s direct CO

2

emissions, Scope 1 (million tonnes, Mt)

2022

2021

2020

Fortum's greenhouse gas emissions are defined and reported according to the Greenhouse Gas (GHG)

Protocol guidelines. In 2022, Fortum’s direct

Scope 1 GHG emissions were 17.0 (17.9) million CO

2

-eq

tonnes, indirect market-based Scope 2 GHG emissions 0.03 (0.04) million CO

2

-eq

tonnes, and indirect

location-based Scope 2 GHG emissions 0.04 (0.05) million CO

2

-eq

tonnes.

In 2022, Scope 3 GHG emissions were estimated to be about 13.2 (13.8) million CO

2

-eq

tonnes. The

Group’s Scope 3 emissions originate from the procurement of fuels, transportation and distribution,

electricity retail to customers, use of sold products, purchased goods and services, and from capital

goods, i.e., investments.

Fortum’s

Scope 1 GHG emissions accounted for about 56% of total GHG emissions, Scope 2 GHG

emissions accounted for about 0%, and Scope 3 GHG emissions accounted for about 44%.

In 2022, F

ortum’s specific CO

2

emissions from total energy production were 184 (175) gCO

2

/kWh.

Specific CO

2

emissions from power generation were 180 gCO

2

/kWh and excluding Russia 25.4

gCO

2

/kWh.

Major environmental incidents

In 2022, the definition of major environmental incidents was revised. The figure now includes

environmental incidents that resulted in significant harm to the environment (ground, water, air) and

environmental non-compliances with legal or regulatory requirements. In 2022, there were two major

environmental incidents: a breach of minimum discharge at the Untra hydropower plant in Sweden and a

landfill water leakage caused by over floating of the pool in Valkeakoski, Recycling and Waste Finland.

21

Water and biodiversity

Fortum uses large volumes of water in its power plants, district heating networks and other production

operations. In most cases, power plants do not consume water

–

the water is discharged back to the

same water system from where it was withdrawn. In 2022, Fortum withdrew a total of 1,760 (1,930) million

m

3

of water in production operations; 95% of this amount was used as cooling water.

Fortum has carried out voluntary and licence-related biodiversity measures for years to prevent

negative impacts and where possible to implement biodiversity measures for improvement, as outlined in

its Biodiversity

Manual and Action Plan, publicly disclosed on Fortum’s website

.

At the start of 2022, Fortum committed to developing a science-based strategy to measure impacts on

biodiversity and to work towards enhancing biodiversity in its operations and supply chain. The work

conducted follows the publicly available principles of the Science Based Targets for Nature (SBTN)

framework. Using the internationally recognised Global Biodiversity Score® tool, Fortum has mapped its

own and its value chain’s dependencies and i

mpacts on biodiversity and ecosystem services to define its

biodiversity footprint. The aquatic assessment for hydropower is pending, due to developments in

methodology, so it is therefore not currently included in the overall footprint.

Based on the analy

sis, Fortum’s main biodiversity impacts are related to the impacts from its GHG

emissions, land use and fuel procurement. Fortum has set targets to reduce its GHG emissions, which will

also play a key role in Fortum’s efforts to reduce its impacts on biodi

versity. Concrete targets and

business-specific measures will be proposed in 2023.

Personnel and society

Fortum’s key performance indicators for personnel and society are related to operational and occupational

safety and to employee health and wellbeing. In addition Fortum annually measures its reputation and

customer satisfaction with the One Fortum Survey.

Personnel

Fortum places a significant emphasis on an open and trusting corporate culture and highlights systematic,

two-way feedback on employee performance and engagement. Diversity and equal opportunity are seen

as contributing to competitiveness and innovation.

Fortum

’s

Values and Code of Conduct form the foundation for all daily work. The People Policy and

Leadership Principles guide personnel-related matters.

Fortum’s operations are mainly based in the Nordic countries, Russia, and Poland. The total number of

employees at the end of 2022 was 7,712.

Group personnel statistics for continuing operations

2022

2021

2020

Number of employees, 31 December

7,712

19,140

19,933

Number of employees, 31 December, excl. Uniper

7,712

7,646

8,182

Average number of employees

7,826

8,045

17,304

Total amount of employee benefits, EUR million

504

496

1,195

Departure turnover, % (of permanent employees)

19.1

18.9

7.4

Permanent employees, %

97.2

97.6

94.8

Full-time employees, %

98.7

98.8

98.2

Female employees, %

31.3

31.2

27.0

Females in management, %

31.0

29.0

27.0

Occupational safety

For Fortum, excellence in safety and caring both about its own employees and contractors is the

foundation of the company’s business and an absolute prerequisite for efficient and interruption

-free

production.

Fortum

’s work is steered by

the Sustainability Policy, the Minimum Requirements for EHS

Management, and more detailed EHS manuals. A certified ISO 45001 safety management system covers

100% of Fortum’s power and heat production worldwide

.

Fortum’s safety targets for 2022 included Uniper and were measured

as:

•

Zero severe occupational accidents

•

Total Recordable Injury Frequency (TRIF), for own personnel and contractors; the ambitious goal is

<1.0 by the end of 2025

•

Severity rate per TRI (i.e., number of lost days divided by the number of Total Recordable Injuries) for

own personnel and contractors: ≤11

.

In 2022 Fortum launched the Safety Culture Programme, which once completed will include trainings,

webinars and workshops addressing all organisational levels:

•

New Safety eLearning training for all Fortum employees, launched in the second quarter of 2022

•

Safety Leadership Programme 2022 for Executives, including ten workshops for 132 Fortum

Executives, launched in the third quarter of 2022

•

Safety Culture Programme will continue with Management Safety and Security Leadership Programme

in 2023.

In 2022, Fortum’s TRIF (Total Recordable Injury Frequency) for own personnel and contractors was 2.7

(3.1). The severity rate per TRI for own personnel and contractors was 12.0 (13.1), which did not meet the

set target. Fortum’s LTIF (Lost Time Injury Frequency) for own personnel and contractors was 1.6 (2.2).

Fortum strives for zero severe occupational accidents. In 2022, there were 2 (2) severe occupational

accidents in the op

erations, one of them resulted in fatality. A Fortum employee at a customer’s

power

plant in Rwanda fell from a height of 7 meters when installing barricading around floor grating that had

been removed. Corrective actions, including, e.g., improvements in the permit to work process and

clarifications in the authorities to issue and follow orders, have been implemented.

Personnel wellbeing

Fortum’s goal regarding workplace wellbeing activities is to promote the health and occupational safety of

employees and the functionality of the work community. Employees have access to a wide range of

services, from medical check-ups to exercise and coaching programmes that also address stress

management and mental wellbeing.

In 2022, the company’s efforts concentrated o

n supporting mental wellbeing in the exceptional

conditions of the geopolitical situation and the prolonged Covid-19 pandemic. The wellbeing services

highlighted mental wellbeing, resilience, stress and physical health. Managers were supported in leading

e

mployees’ wellbeing during the challenging period. Examples of measures taken to support mental

wellbeing include providing the opportunity for personal online meetings with a mental wellbeing

professional. Wellbeing coaching sessions for individuals and teams were widely offered. Also different

events and activities were organised to raise awareness of mental wellbeing and the services available.

According to an employee survey, 94% of respondents feel that they are managing the mental demands

of their own work role.

An inclusive culture where everyone feels safe, included and is treated equally also promotes wellbeing

of personnel. In 2022 Inclusive Leadership -trainings were provided for managers to enhance their

knowledge and understanding of Diversity, Equity and Inclusion.

22

Year 2022 started with a worsened Covid-19 pandemic situation due to new variants and measures

such as remote work, face masks, travel restrictions and physical distance were taken to safeguard

personnel from the pandemic. When the pandemic situation eased during the spring, a hybrid work model

in which the work week is divided between office and remote work days was applied when pandemic

situation allowed. Several measures to support hybrid and remote working were continued and improved;

examples include wellbeing and ergonomics instructions for hybrid work as well as cloud-based IT

solutions and HR processes that support flexible, mobile work arrangements. Both on-site and virtual

wellbeing services and events were offered to employees.

In 2022, the pandemic situation began to reflect in sickness-related absences more than in the previous

pandemic years; the sickness-related absence rate increased to 3.2 (2.9).

Society

Reputation and customer satisfaction

Fortum’s performance regardi

ng reputation and customer satisfaction is monitored annually through the

One Fortum Survey. In 2022, the combined reputation index of all stakeholder groups based on the One

Fortum Survey decreased to 63 points (71), on a scale of 0

–100. Fortum’s overall

reputation weakened

among all stakeholder groups, but the declines were mainly driven by stakeholder views in Finland.

Depending on the business area, the customer satisfaction index (CSI) varied between 60 and 83 points

(58

–

83), on a scale of 0

–

100.

In 2022, gas and power prices across Europe reached all-time highs. In the exceptional market

situation, Fortum continued to help its customers by expanding its product portfolio, offering tips on saving

electricity, encouraging smart consumption and moving consumption away from peak-hours, supporting

its customers more actively in managing their invoices, and offering more flexible payment plans.

Supply chain

Fortum expects its business partners to act responsibly and to comply with the requirements set forth in

the Code of Conduct and Supplier Code of Conduct. Fortum assesses the performance of its business

partners with supplier qualification and supplier audits and a Know Your Counterparty process, which was

established in the beginning of 2022. In 2022, Fortum conducted five on-site and one remote supplier

audit in China, India and Thailand. The Covid-19 pandemic and local restrictions continued to challenge

possibilities to conduct on-site supplier audits. Fortum is a member of the Bettercoal initiative and uses

the Bettercoal tools to improve sustainability in the coal supply chain. Fortum supports and participates in

the development of the Solar Stewardship Initiative (SSI) together with other industry actors and

organisations. Through the SSI, the sector is striving to establish the mechanisms to increase the

traceability and sustainability of solar products, components and raw materials.

Human rights

Fortum follows and respects internationally recognised human rights, which are included in the key human

rights treaties. Respect for human rights is expressed in Fortum’s Code of Conduct and Supplier Code of

Conduct. The UN Guiding Principles on Business and Human Rights are taken into account in own

operations and in supply chain management. Fortum’s

approach to human rights due diligence is

described in the EU Taxonomy section.

Fortum conducts a human rights assessment 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

2022 two new country assessments were made.

Corporate citizenship

Fortum continued to steer its support to society and cooperation with local communities through its

Corporate Social Responsibility (CSR) programme. The

programme’s focus areas, aligned with the

company’s strategic targets, are Climate, People, and Material Revolution. Steering of CSR activities is

concentrated to a Fortum-wide Steering Group.

In 2022, Fortum continued to support charity organisations in order to help its local communities, and it

launched a volunteering program for employees. In addition, Fortum engages in collaboration with

universities through different research and development projects. In 2022, Fortum’s support for activities

promoting the common good totalled EUR 2.3 (1.8) million. In addition, the grants awarded by Fortum and

Neste Foundation (earlier Fortum Foundation), not part of Fortum, totalled EUR 783,136 (701,250).

Discontinued operations (Uniper)

The following tables present selected key performance indicators for discontinued operations:

2022

1)

2021

Climate and resources

Total GHG emissions, Scope 1-3, million CO

2

-eq tonnes

145.8

158.1

Direct Scope 1 CO

2

emissions, million tonnes

41.2

51.0

Indirect location-based Scope 2 GHG emissions, million CO

2

-eq tonnes

0.7

0.6

Scope 3 GHG emissions, million CO

2

-eq tonnes

89.5

106.3

Scope 3 GHG emissions caused by the use of fossil fuels sold both to end-users

and resellers, million CO

2

-eq tonnes

67.4

78.1

Specific CO

2

emissions from total energy production, gCO

2

/kWh

454

428

Asset availability of power generation plants

2)

, %

70.3

78.0

Major environmental incidents

3)

, no.

0

-

Power generation

4)

, TWh

-

110

Heat and steam production

4)

, TWh

-

8.4

CO

2

-free share of total power generation, %

20.7

23.5

Power and heat production covered by a certified ISO 14001 environmental

management system worldwide, %

100

100

Personnel and society

Total Recordable Injury Frequency (TRIF), own personnel and contractors

1.6

1.5

Severity rate per TRI

5)

, own personnel and contractors

19.9

18.7

Severe occupational accidents, no.

1

1

Sickness-related absences, %

5.0

4.1

Number of employees, 30 September/31 December

11,209

11,494

Power and heat production covered by a certified ISO 45001 safety management

system worldwide, %

100

100

Direct CO

2

emissions (million tonnes, Mt)

2022

1)

2021

Total emissions

41.2

50.9

Emissions subject to ETS

19.0

27.5

Free emission allowances

-

0.3

Emissions not subject to ETS in Europe

0.03

0.05

Emissions in Russia

22.1

23.4

23

EU taxonomy

Introduction

The EU Taxonomy Regulation is a classification system for defining economic activities that can be

considered as environmentally sustainable. The regulation provides specific key performance indicators

(KPIs) that entities are required to report for their environmentally sustainable economic activities. The EU

Taxonomy Regulation establishes six environmental objectives, two of which, the climate change

mitigation (CCM) and climate change adaptation (CCA) criteria, were published on 4 June 2021 in the

Climate Delegated Act. Inclusion of the Complementary Climate Delegated Act on nuclear and gas energy

activities was approved on 5 July 2022. The Commission is expected to adopt the Delegated Act for the

other four objectives in 2023.

Fortum’s disclosure has

been prepared in accordance with the EU Taxonomy Regulation Delegated Act

of 6 July 2021 and the Complementary Climate Delegated Act of 15 July 2022. For the financial year

ending 31 December 2022, Fortum reports the proportion of Taxonomy aligned activities, Taxonomy

eligible (not aligned) activities and Taxonomy non-eligible activities in relation to the three KPIs (Sales,

Operating expenses and Capital expenditure) and the plan (Capital expenditure plan) that aims either to

expand Fortum’s Taxonomy

-aligned economic activities or to upgrade Taxonomy-eligible economic

activities to render them Taxonomy-aligned within a period of five years. The reporting scope includes

continuing operations from Fortum’s subsidiaries consolidated to the Group as of 31 Decem

ber 2022.

Analysis of economic activities

Analysis of eligible economic activities

In 2022, Fortum classifies its economic activities to aligned, eligible (not aligned) and non-eligible

corresponding to economic activities described in the Climate Delegated Act and Complementary

Delegated Act. Eligibility of Fortum’s business operations were evaluated according to the descriptions of

economic activities listed in Annex I (CCM) and Annex II (CCA) and the related NACE codes

(Nomenclature of Economic Activities, European statistical classification of economic activities) provided

in these descriptions. The evaluation was performed either at power plant or business unit level, reflecting

the nature of the operations.

Analysis of aligned economic activities

An eligible activity is considered to be aligned if it complies with the technical criteria of contributing

substantially to one of the six environmental objectives, if it does not significantly harm the other

environmental objectives (do no significant harm, DNSH, criteria), and if it is carried out in compliance with

the minimum safeguards (MS) relating to human rights and fundamental labour rights. Fortum assessed

climate change mitigation to be the most relevant objective against which the eligibility and alignment of

economic activities was evaluated. The compliance with the criteria set out in Article 3 of Regulation (EU)

2020/852 and the associated technical screening criteria included in the delegated acts referred to in point

(a) of the most material eligible activities were assessed as described below.

Description of the method used for the substantial contribution criteria, DNSHs and the

minimum safeguards

Sustainability management at Fortum is strategy-driven and based on our Values, Code of Conduct,

Supplier Code of Conduct, Sustainability Policy, other sustainability-related group policies, as well as their

specifying instructions. When analysing substantial contribution and DNSHs criteria, Fortum relies

specifically on its Minimum Requirements for EHS Management, Sustainability policy, Biodiversity Manual

and Group Risk Policy. Fortum is committed to a high level of environmental and safety management,

complies with all regulations, and has license to operate each site. In

terms of sales, 100% of Fortum’s

electricity and heat production operations at the end of 2022 were ISO 14001 environmentally certified.

In order to assess

the alignment of its activities, Fortum’s relevant business units verified their

economic activitie

s’ compliance with the substantial contribution and DNSHs criteria under Annex I

-

climate change mitigation. Substantial contribution criteria are specific to each economic activity and

compliance was assessed on a system, facility or installation level, as appropriate. DNSHs criteria can be

generic or economic activity specific. Compliance with each DNSHs were assessed on a most material

level reflecting the nature of the economic activity.

Fortum has own and co-owned nuclear power plants in Finland and Sweden. The most important task

of nuclear power operations is to produce electricity safely, reliably, and competitively, in the short- and

long-term, while complying with the principles of nuclear and radiation safety, waste management safety,

and nuclear material control. Compliance with all of these requirements are oversighted by national

authorities in Finland and Sweden. These authorities are also responsible for national transpositions of

EU Directives and

regulations. Fortum’s own

and co-owned existing nuclear power plants have done, or

are planning to start, modification of existing nuclear installations for the purposes of lifetime extension.

Lifetime extension projects are always subject to national authorities approval and comprehensive

environmental and safety assessment.

DNSH Climate change adaptation

The management of climate-

related risks is integrated into Fortum’s respective risk management

framework and follows the same governance and processes as other material risks and uncertainties.

Ri

sks are identified and assessed annually through an enterprise risk management framework. Fortum’s

taxonomy relevant entities are required to take into account physical climate risks. Entities must also

understand their assets’ resilience towards different

acute and chronic physical climate-related risks within

different Intergovernmental Panel on Climate Change (IPCC) climate scenarios, and create adaptation

plans for the most material risks. Fortum is a supporter of the Task Force on Climate-related Financial

Disclosures (TCFD) and physical climate-

related risks are reported accordingly in Fortum’s TCFD report

in Sustainability 2022 report. Fortum’s climate

-related risks are also described in the Risk management

section of Financial statements and operating and financial review 2022.

DNSH Sustainable use and protection of water and marine resources

Fortum manages and uses major water resources in most of its operating countries and is committed to

responsible water management. Fortum’s responsibility for w

ater use is related not only to volume and

availability, but also to water quality and to the aquatic habitat. Consequently, all production sites under

Fortum’s operational control are included in the annual reporting scope for water use metrics and water

stress assessment. Fortum

’s

water management guarantees that the operational sites comply with

national regulations and have a license to operate. Fortum also carries out water-related measures

locally, where relevant, in order to take into consideration the needs of other water users. Collaboration

with local communities, municipalities, authorities, and research institutes is important in the

implementation of these measures. Fortum’s electricity generation from hydropower in Finland and

Sweden are under the control of the water authorities in the frame of the Water Framework Directive

(WFD), and national transposition and timeline of WFD is considered in this DNSH review.

DNSH Transition to a circular economy

Fortum takes into account the life-cycle and resource efficiency of its products and projects. Durability and

recyclability of equipment and components are included in procurement processes. Fortum aims for

24

utilisation and recovery of its own by-products and waste. Minimising the amount of waste and the

efficient management of end-

of life equipment and components is expected from Fortum’s operating sites.

In addition to conventional industrial waste, Fortum’s fully owned and co

-owned nuclear power plants in

Finland and Sweden generate radioactive waste. All plants take full financial and safe execution

responsibility over radioactive waste originated from the operations and decommissioning; and optimise

and develop treatment processes to minimise the amount of waste stored. All low-, intermediate- and

high-level radioactive waste are treated and stored on site, or in the special storage site located in the

same country where the waste is generated.

DNSH Pollution prevention and control

Fortum’s chemical management ensures compliance with local regulati

ons, existing permits and that

operations do not do any significant harm with substances used, covering the substances listed in Annex I

Appendix C. Fulfilling the requirements set by Fortum and the legislation in the respective country, proper

management of chemicals in the whole chain from purchasing to disposal, minimise risks relating to

handling of chemicals, and limit and continuously reduce the use of hazardous chemicals, where possible

substituting to less harmful to health and environment, is ensured.

Fortum continuously aims to mitigate its environmental impact by utilising best practices and best

available technologies. Minimum Requirements for EHS Management ensure compliance with permit

conditions, regular monitoring and reporting of emissions to air, water and ground; and risk mitigation to

prevent any cross-media effects.

The nuclear power operations’ radioactive discharges to air, water bodies and ground comply with

individual license conditions. Both discharges and impacts on environment are strictly monitored by

national authorities in their role for national oversight of radiation plants. Spent fuel and radioactive waste

is safely and responsibly managed, including an adequate storage capacity.

DNSH Protection and restoration of biodiversity and ecosystems

Fortum’s biodiversity management is an integral part of the environmental management system covering

all operations. Biodiversity management, defined in the Biodiversity manual, ensures compliance with

biodiversity-related requirements set by local regulations; and that necessary steps are taken whenever

feasible to avoid, mitigate, or address potential impacts. The Biodiversity manual requires that special

consideration is needed for sites that are close to protected areas and threatened habitats, or where any

known population of threatened or protected species might be affected.

Minimum Safeguards

Fortum’s compliance with the Minimum Safeguards is based on Group level human rights due diligence

system with relevant policies and processes in place covering the relevant human rights and labor rights.

Fortum's commitment to respect human rights and to act with due diligence is in line with the United

Nations Guiding Principles on Business and Humans Rights (UNGPs) and Organisation for Economic Co-

operation and Development (OECD) Guidelines for Multinational Enterprises, and are included in the

Fortum Code of Conduct, Supplier Code of Conduct and Sustainability Policy. Fortum has implemented

due diligence processes for taxation, anti-corruption and bribery, as well as fair competition.

Requirements for human rights, labour rights as well as for anti-corruption and fair competition are

included in our procurement processes. Group level commitment, policies, instructions and guidelines

apply to all of Fortum’s activities in all operating countries.

EU taxonomy KPIs for continuing operations

The table below presents the proportions of aligned, eligible (not aligned) and non-eligible activities of

sales, operating expenses, and capital expenditure under the Climate Delegated Act, Annex I and

Complementary Climate Delegated Act, Annex I

for Fortum Group’s continuing ope

rations for the financial

year ending 31 December 2022.

EUR million

Sales

Operating

expenses

Capital expenditure

A.1 Environmentally sustainable activities (Taxonomy-

aligned)

3,905

44%

-129

51%

285

51%

A.2 Taxonomy-eligible but not environmentally

sustainable activities (not Taxonomy-aligned)

1,185

13%

-37

15%

93

17%

A. Total Taxonomy-eligible activities

5,089

58%

-166

66%

378

68%

B. Taxonomy-non-eligible activities

3,715

42%

-86

34%

175

32%

Total (A+B)

8,804

100%

-252

100%

553

100%

EU taxonomy KPIs for continuing operations excluding Russia

Fortum is pursuing a controlled exit from the Russian market with potential divestments of its Russian

operations as the preferred path, and in 2022 financial statements Fortum provides additional KPIs for

Russia and continuing operations excluding Russia.

The table below presents EU taxonomy KPIs for Russia.

EUR million

Sales

Operating

expenses

Capital expenditure

A.1 Environmentally sustainable activities (Taxonomy-

aligned)

-

0%

-

0%

-

0%

A.2 Taxonomy-eligible but not environmentally

sustainable activities (not Taxonomy-aligned)

983

95%

-30

82%

51

84%

A. Total Taxonomy-eligible activities

983

95%

-30

82%

51

84%

B. Taxonomy-non-eligible activities

48

5%

-6

18%

9

16%

Total (A+B)

1,031

100%

-36

100%

61

100%

The table below presents EU taxonomy KPIs for continuing operations excluding Russia.

EUR million

Sales

Operating

expenses

Capital expenditure

A.1 Environmentally sustainable activities (Taxonomy-

aligned)

3,905

50%

-129

60%

285

58%

A.2 Taxonomy-eligible but not environmentally

sustainable activities (not Taxonomy-aligned)

201

3%

-7

3%

42

8%

A. Total Taxonomy-eligible activities

4,106

53%

-136

63%

327

66%

B. Taxonomy-non-eligible activities

3,668

47%

-79

37%

166

34%

Total (A+B)

7,774

100%

-215

100%

493

100%

25

Aligned economic activities (A.1)

In terms of sales, 44%, in terms of operating expenses, 51%, and in terms of capital expenditure, 51%, of

Fortum’s economic activities are taxonomy aligned

(A.1).

The most significant aligned activities are electricity generation from hydropower with an installed

capacity of 4.6 GW (35% of total capacity) and electricity generation from nuclear energy in existing

installations with an installed capacity of 2.8 GW (21% of total capacity).

Electricity generation from nuclear and hydropower sales KPI includes revenue from co-owned assets

that are operated under the Mankala model. In the Mankala model, the co-owned power company sells

the produced electricity to its shareholders at cost in proportion to their ownership.

Eligible (not aligned) economic activities (A.2)

In terms of sales, 13%, in terms of operating expenses, 15%, and in terms of capital expenditure, 17%, of

Fortum’s economic activities are taxonomy eligible

(not aligned) (A.2).

The most significant eligible (not aligned) economic activities are electricity generation and high-

efficiency co-generation of heat/cool and power from fossil gaseous fuels (natural gas) with an installed

capacity of 4.6 GW (35% of total capacity) in Russia. Fortum has announced that it is preparing for a

controlled exit from Russia. Therefore, Fortum has not assessed compliance with DNSH criteria for

Russian eligible assets.

The most material eligible activities are reported on separate lines under the topic A.2 Taxonomy-

Eligible but not environmentally sustainable activities. The other eligible activities include non-material

operations that do not comply with either technical screening or at least one of the DNSHs; or operations

for which the compliance with the criteria has not been assessed during 2022. These activities are related,

for example, to hydrogen, plastics recycling and operations sold in 2022. The assessments will be

finalised during 2023.

Non-eligible economic activities (B)

Non-eligible economic activity does not correspond to any activity description provided in the Climate

Delegated Act or the Complementary Delegated Act. Fortum’s non

-eligible activities include electricity

wholesale (Consumer Solutions segment), electricity and commodities trading, coal-based power and

heat generation, engineering services related to non-renewable assets, as well as administrative

overheads. In addition, Fortum has economic activities that are currently not covered by the EU

Taxonomy, such as waste-to-energy and circular economy activities.

Sales KPI

Economic activities

Code

EURm

% of total

CCM

DNSH

3)

MS

A. Taxonomy-eligible activities

A.1 Environmentally sustainable activities (Taxonomy-aligned)

Electricity generation from wind power

4.3

0

0%

0%

Yes

Yes

Electricity generation from hydropower

4.5

1,607

18%

93%

Yes

Yes

District heating/cooling distribution

4.15

102

1%

99%

Yes

Yes

Construction and safe operation of new nuclear power plants (T)

4.27

45

1%

100%

Yes

Yes

Electricity generation from nuclear energy in existing installations (T)

4.28

2,016

23%

100%

Yes

Yes

Material recovery from non-hazardous waste

5.9

83

1%

100%

Yes

Yes

Other

1)

53

1%

63%

Yes

Yes

A.1 Total

3,905

44%

A.2 Taxonomy-eligible but not environmentally sustainable

activities (not Taxonomy-aligned)

Manufacture of batteries (E)

3.4

2

0%

Electricity generation from wind power

4.3

15

0%

Electricity generation from hydropower

4.5

121

1%

District heating/cooling distribution

4.15

1

0%

Electricity generation from fossil gaseous fuels (T)

4.29

287

3%

High-efficiency co-generation of heat/cool and power from fossil

gaseous fuels (T)

4.30

679

8%

Production of heat/cool from fossil gaseous fuels in an efficient

district heating and cooling system (T)

4.31

1

0%

Other

2)

78

1%

A.2 Total

1,185

13%

A. Total Taxonomy-eligible activities

5,089

58%

B. Taxonomy-non-eligible activities

3,715

42%

Total (A+B)

8,804

100%

1) Includes economic activities 4.24, 4.25.

2) Includes economic activities 3.10, 3.17, 4.1, 4.20, 4.24, 4.25, 5.10, 5.11, 6.15, 8.2.

3) Includes Climate change adaption, Water and marine resources, Circular economy, Pollution, Biodiversity and ecosystems.

(E) = Enabling activity: an activity that contributes to the climate goals by directly enabling other sustainable operations.

(T) = Transitional activity: an activity that supports the transition to a climate-neutral economy and there is no technologically and

economically feasible low-carbon alternative.

26

Operating expenses KPI

Economic activities

Code

EURm

% of total

CCM

DNSH

3)

MS

A. Taxonomy-eligible activities

A.1 Environmentally sustainable activities (Taxonomy-aligned)

Electricity generation from wind power

4.3

0

0%

1%

Yes

Yes

Electricity generation from hydropower

4.5

-70

28%

99%

Yes

Yes

District heating/cooling distribution

4.15

-13

5%

91%

Yes

Yes

Construction and safe operation of new nuclear power plants (T)

4.27

-

0%

0%

Yes

Yes

Electricity generation from nuclear energy in existing installations (T)

4.28

-40

16%

100%

Yes

Yes

Material recovery from non-hazardous waste

5.9

-4

2%

100%

Yes

Yes

Other

1)

-2

1%

79%

Yes

Yes

A.1 Total

-129

51%

A.2 Taxonomy-eligible but not environmentally sustainable

activities (not Taxonomy-aligned)

Manufacture of batteries (E)

3.4

-1

0%

Electricity generation from wind power

4.3

0

0%

Electricity generation from hydropower

4.5

-1

0%

District heating/cooling distribution

4.15

-1

1%

Electricity generation from fossil gaseous fuels (T)

4.29

-12

5%

High-efficiency co-generation of heat/cool and power from fossil

gaseous fuels (T)

4.30

-18

7%

Production of heat/cool from fossil gaseous fuels in an efficient

district heating and cooling system (T)

4.31

0

0%

Other

2)

-3

1%

A.2 Total

-37

15%

A. Total Taxonomy-eligible activities

-166

66%

B. Taxonomy-non-eligible activities

-86

34%

Total (A+B)

-252

100%

1) Includes economic activities 4.24, 4.25.

2) Includes economic activities 3.10, 3.17, 4.1, 4.20, 4.24, 4.25, 5.10, 5.11, 6.15, 8.2.

3) Includes Climate change adaption, Water and marine resources, Circular economy, Pollution, Biodiversity and ecosystems.

(E) = Enabling activity: an activity that contributes to the climate goals by directly enabling other sustainable operations.

(T) = Transitional activity: an activity that supports the transition to a climate-neutral economy and there is no technologically and

economically feasible low-carbon alternative.

Capital expenditure KPI

Economic activities

Code

EURm

% of total

CCM

DNSH

3)

MS

A. Taxonomy-eligible activities

A.1 Environmentally sustainable activities (Taxonomy-aligned)

Electricity generation from wind power

4.3

101

18%

96%

Yes

Yes

Electricity generation from hydropower

4.5

98

18%

99%

Yes

Yes

District heating/cooling distribution

4.15

28

5%

54%

Yes

Yes

Construction and safe operation of new nuclear power plants (T)

4.27

-

0%

0%

Yes

Yes

Electricity generation from nuclear energy in existing installations (T)

4.28

34

6%

100%

Yes

Yes

Material recovery from non-hazardous waste

5.9

5

1%

100%

Yes

Yes

Other

1)

20

4%

100%

Yes

Yes

A.1 Total

285

51%

A.2 Taxonomy-eligible but not environmentally sustainable

activities (not Taxonomy-aligned)

Manufacture of batteries (E)

3.4

26

5%

Electricity generation from wind power

4.3

4

1%

Electricity generation from hydropower

4.5

0

0%

District heating/cooling distribution

4.15

23

4%

Electricity generation from fossil gaseous fuels (T)

4.29

0

0%

High-efficiency co-generation of heat/cool and power from fossil

gaseous fuels (T)

4.30

33

6%

Production of heat/cool from fossil gaseous fuels in an efficient

district heating and cooling system (T)

4.31

-

0%

Other

2)

7

1%

A.2 Total

93

17%

A. Total Taxonomy-eligible activities

378

68%

B. Taxonomy-non-eligible activities

175

32%

Total (A+B)

553

100%

1) Includes economic activities 4.24, 4.25.

2) Includes economic activities 3.10, 3.17, 4.1, 4.20, 4.24, 4.25, 5.10, 5.11, 6.15, 8.2.

3) Includes Climate change adaption, Water and marine resources, Circular economy, Pollution, Biodiversity and ecosystems.

(E) = Enabling activity: an activity that contributes to the climate goals by directly enabling other sustainable operations.

(T) = Transitional activity: an activity that supports the transition to a climate-neutral economy and there is no technologically and

economically feasible low-carbon alternative.

27

Transitional activities (Nuclear and Natural gas)

Transitional activity is an activity that supports the transition to a climate-neutral economy and there is no

technologically and economically feasible low-

carbon alternative. Fortum’s transitional activities are mainly

concentrating on electricity generation from new or existing nuclear installations and power generation

from fossil gaseous fuels (natural gas). Power generation from fossil gaseous fuels mainly relates to

Fortum’s Russian activities.

Fortum does not have non-eligible economic activities related to nuclear or

natural gas.

Nuclear and fossil gas related activities

Nuclear energy related activities

4.26 Pre-commercial stages of advanced technologies to produce energy from nuclear processes with

minimal waste from the fuel cycle

No

4.27 Construction and safe operation of new nuclear power plants

Yes

4.28 Electricity generation from nuclear energy in existing installations

Yes

Fossil gas related activities

4.29 Electricity generation from fossil gaseous fuels

Yes

4.30 High-efficiency co-generation of heat/cool and power from fossil gaseous fuels

Yes

4.31 Production of heat/cool from fossil gaseous fuels in an efficient district heating and cooling system

Yes

Aligned economic activities (A.1)

The table below presents Fortum’s aligned economic activities

for the financial year ending 31 December

2022 for continuing operations. All of these activities relate to climate change mitigation (CCM) substantial

contribution criteria.

Taxonomy-aligned economic activities

(denominator and numerator)

Sales

Operating expenses

Capital expenditure

Economic activities

EURm

% deno-

minator

1)

% nume-

rator

2)

EURm

% deno-

minator

1)

% nume-

rator

2)

EURm

% deno-

minator

1)

% nume-

rator

2)

4.27 Construction and safe operation of new

nuclear

power plants

45

1%

1%

-

-

-

-

-

-

4.28 Electricity generation from nuclear

energy in

existing installations

2,016

23%

52%

-40

16%

31%

34

6%

12%

Other taxonomy-aligned economic activities

1,844

21%

47%

-89

35%

69%

251

45%

88%

Total

3,905

44%

100%

-129

51%

100%

285

51%

100%

Eligible economic activities (A.2)

The table below presents Fortum’s eligible but not taxonomy

-aligned economic activities for the financial

year ending 31 December 2022 for continuing operations. All of these activities relate to climate change

mitigation (CCM) substantial contribution criteria.

Taxonomy-eligible but not taxonomy-aligned

economic activities

Sales

Operating

expenses

Capital expenditure

Economic activities

EURm

% of total

EURm

% of

total

EURm

% of total

4.29 Electricity generation from fossil gaseous fuels

287

3%

-12

5%

0

0%

4.30 High-efficiency co-generation of heat/cool and power

from fossil gaseous fuels

679

8%

-18

7%

33

6%

4.31 Production of heat/cool from fossil gaseous fuels in

an efficient district heating and cooling system

1

0%

0

0%

-

0%

Other taxonomy-eligible but not taxonomy-aligned

economic activities

217

2%

-7

3%

60

11%

Total

1,185

13%

-37

15%

93

17%

Capital expenditure plan

Capital expenditure plan refers to significant future capital investments approved by management that aim

either to expand Fortum’s taxonomy

-aligned economic activities, or to upgrade taxonomy-eligible

economic activities to render them taxonomy-aligned within a period of five years.

Total planned capital expenditure meeting the above definition amounts to EUR 0.7 billion at 31

December 2022 and is expected to be incurred over the next 5 years, with the exception of the Loviisa

lifetime extension for which

10 years’ capital expenditure is included in the reported capital expenditure

plan due to the long-term nature of the investment. Planned capital expenditure includes the Pjelax wind

project, Loviisa nuclear power plant lifetime extension and projects increasing production at existing hydro

plants, as well as district heating/cooling decarbonisation investments. The majority of the projects

included in the capital expenditure plan will be completed during the next four years, but the Loviisa

lifetime extension project will continue until 2050.

Operating expenses related to the 2022 capital expenditure plan projects are not material.

28

Definitions, reconciliations and basis of calculation

Sales

Sales is based on the sales reported on Fortum’s consolidated income statement (



Note

6

). Sales

exclude discontinued operations. Breakdown of sales:

EUR million

A.1 Taxonomy-

aligned

Total

Power sales

3,654

6,947

Heat sales

148

683

Other

103

1,175

Total

3,905

8,804

Operating expenses

Operating expenses consist of direct non-capitalised costs that are necessary to ensure the continued

and effective functioning of property, plant and equipment. These expenses include repairs and

maintenance, building servicing, short-term rentals and similar costs, as well as other direct expenditures

relating to the day-to-day servicing of these assets. Operating expenses exclude discontinued operations.

Breakdown of operating expenses:

EUR million

A.1 Taxonomy-

aligned

Total

Repairs and maintenance

-73

-146

Short-term rentals and other property costs

-37

-70

Other

-19

-35

Total

-129

-252

Capital expenditure

Capital expenditure consists of additions to property, plant and equipment, intangible assets, right-of-use

assets, as well as additions through business combinations. Capital expenditure excludes discontinued

operations as information on discontinued operations up to the date of disposal is not readily available.

Breakdown of capital expenditure:

EUR million

Note

A.1 Taxonomy-

aligned

Total

Additions to intangible assets

16

2

88

Additions to property, plant and equipment

17

278

437

Additions to right-of-use assets

33

4

28

Total

285

553

Basis of calculation

The financial data used for calculating the EU taxonomy KPIs has been retrieved from Fortum’s financial

systems and is based on the same data and Group accounting principles (see notes to the consolidated

financial statements for details) as Fortum’s conso

lidated financial statements for the year ending 31

December 2022. The reporting scope includes continuing operations only. Appropriate controls have been

implemented to eliminate the risk of double counting. Financial data has been allocated to aligned and

eligible economic activities as follows:

•

Majority of electricity sales has been allocated to aligned and eligible activities based on production

volume. Electricity generation from nuclear and hydropower sales KPIs include revenue from co-owned

assets that are operated under the Mankala model. In the Mankala model, the co-owned power

company sells the produced electricity to its shareholders at cost in proportion to their ownership.

•

Other sales and operating expenses data is available in the source systems at the cost centre-level

corresponding to individual sites. These cost centres have been allocated to aligned and eligible

economic activities.

•

Each significant capital expenditure investment project has been allocated to aligned and eligible

economic activities.

29

Risk management

Risk management framework and objectives

The Group Risk Policy provides a risk management framework for Fortum, the purpose of which is to

support business in managing risks effectively and to ensure compliance with relevant regulations. The

Group Risk Policy describes the main features of Fortum’s risk management systems which consists of

principles, processes and responsibilities for managing risks which, if materialise, may have a material

negative impact on Fortum’s current or future business operations, reputation, employees, the

environment or third parties.

The risk management systems have been designed to support Fortum’s Board of Directors, Audit and

Risk Committee, Fo

rtum’s Executive Management as well as the operative business in fulfilling their

duties in relation to risk management. The objectives of the risk management systems are to:

•

Support Fortum’s Board of Directors and Fortum Executive Management (FEM) in the

development of

the Group strategy,

•

Support business in strategy execution,

•

Support business in achieving agreed targets within acceptable risk levels so that

Fortum’s ability

to

meet financial commitments is not compromised,

•

Ensure the understanding of

Fortum’s

material risks and uncertainties,

•

Support the prevention of accidents that can have a severe effect on the health and safety of employees

or

third parties, and incidents that can have a material impact on Fortum’s assets, reputati

on or the

environment.

Risk management organisation

Fortum’s Board of Directors approves the Group Risk Policy, and the President and CEO approves

Fortum’s risk management instructions including an instruction for enterprise risk management which sets

minimum requirements for managing risks in all categories. In addition, there are specific risk instructions

covering commodity market risks, counterparty and credit risks and liquidity risks applicable for all of

Fortum. Fortum’s Divisions and Corporate Funct

ions issue risk manuals and guidelines, as needed, which

detail how the Group Risk Policy and relevant risk management instructions are implemented within their

organisations.

Corporate risk policy structure

Risk Governance

The main principle is that risks are managed at source, meaning that each manager is responsible for

managing risks that arise within their business operations. For each risk, risk owners are assigned to

ensure that appropriate mitigation actions are taken to respond to the risk.

Fortum’s 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 Group’s material

risks and uncertainties. Corporate Risk, an independent control function headed by the Chief Risk Officer

(CRO) reporting to the CFO, provides instructions, methods and tools which support the business in

running an efficient risk management process. Corporate Risk is responsible for assessing and reporting

on the maturity of risk management in the organisation and for monitoring and reporting of Fortum’s

material risk exposures to FEM, the ARC and the Board of Directors.

30

Principle of continuous improvement

The risk management framework is developed in accordance with the principle of continuous

improvement, aiming at an optimised and continuously developing risk management process. The

maturity level of risk management in the organisation is evaluated annually, and Corporate Risk

determines goals for the development of risk management based on the results of the assessment.

In accordance with Fortum's values, the importance of risk management is raised by increasing the

personnel's risk awareness and highlighting the positive features of risk-aware decision-making. Risk

management at Fortum is continuously supporting and improving the application of Fortum’s values in

decision-making.

Risk management process

Fortum's risk management process consists of four main sub-processes; identification, assessment,

response and control. The risk management process is linked to strategy development, target setting and

long-term forecasting and is an integrated part of operational and business management including

investment processes and project management.

The risk management process is designed to support effective risk management and to ensure that

risks are regularly monitored and followed-up. Identification is regularly carried out according to a

structured process which includes analysis of root causes of the risk and consequences if the risk

materialises. Risks are assessed in terms of impact and likelihood. Impact is assessed not only in

monetary terms in relation to forecasted earnings and / or cash flows, but also in terms of impact to health

and safety, the environment and Fortum’s reputation, where relevant. Risk responses can be to accept,

avoid, mitigate or transfer the risk. Risk control processes and procedures, which include validating,

monitoring, aggregating and reporting risks, are designed to ensure compliance with relevant external

regulations and recommendations, as well as with internal policies, instructions, manuals and guidelines.

This includes controls to ensure that risk exposures remain within approved limits and mandates which

are defined for financial risks.

Risk factors

2022 has been an exceptional year with a number of identified risks fully or partly realising as a result of

the escalation of the war in the Ukraine, the most significant of these being the use of energy as a weapon

by Russia resulting in the current energy crisis with high commodity prices and potential risk to European

security of supply. For Fortum, the impacts have been dramatic.

•

The curtailment of Russian pipeline gas supply to Germany caused extreme losses for Uniper when

replacement gas was procured at elevated prices in order to cover committed sales to customers. The

unprecedented losses in Uniper led to the agreement with the German State to sell our shares in the

distressed subsidiary. On 21 December, Fortum announced that it had completed the sale of its

ownership in Uniper SE to the German State. The total loss from the Uniper divestment in the legal

Fortum entity owning the Uniper shares was slightly below EUR 6 billion. For more information on the

agreement and competition of the transaction, please see the “Uniper divestment” section of the

“Financial performance and position”

•

The Ukraine conflict has impacted the ability of Fortum to operate and own Russian assets. As a result,

Fortum is not making any further investments in Russia and does not provide any new financing to its

Russian subsidiaries. The company is pursuing a controlled exit from the Russian market with a

divestment of its Russian operations as the preferred path.

•

The high and volatile commodity prices led to increasing margining requirements toward clearing

houses. In order to mitigate the related liquidity risk, Fortum signed a bridge financing arrangement with

Solidium, fully owned by the Finnish State, in the third quarter of 2022. With the arrangement, Fortum

ensured access to sufficient liquidity resources if Nordic power prices − and, with it, collateral

requirements

–

would have risen significantly again. For more information on the agreement, see

‘Solidium's bridge financing loan to Fortum and directed share issue without payment to Solidium‘ in the

“Financial performance and position”

.

Fortum continues to be exposed to a number of financial, operational, strategic and sustainability-related

risks both directly and indirectly through its subsidiaries, associated companies, and joint ventures. The

associated companies and joint ventures have their own risk management systems. The principal

associated companies and joint ventures are Teollisuuden Voima Oyj, Forsmarks Kraftgrupp AB, OKG AB

and Kemijoki Oy. For more information about these indirect risk exposures, please see each respective

company’s annual report.

Fortum is also exposed to physical climate risks and transition risks. The

identified physical risks are generally found in the operational risk category, whereas transition risks are

generally part of the strategic risk category.

31

Strategic risks

The Fortum Board of Directors resolved on Fortum’s new strategy at the beginning of March, 2023,

including a new business structure and operating model.

A summary of Fortum’s new strategy can be

found in the section ‘Events after the balance sheet date’ Th

e main strategic risks are that energy policy,

regulation, technology or the business environment develop in ways that have not been foreseen and

prepared for. Future energy market, regulation and climate scenarios as well as scenarios for how the

current geopolitical situation develops, including the impact of these to Fortum's existing and potential new

businesses, are regularly updated.

Risks which could hinder Fortum in executing its strategy are assessed and reported as part of regular

strategy reviews.

Business Environment

Fortum operates in a global business environment, with main operational focus in the Nordic countries,

and is therefore exposed to political and other risks which affect the macroeconomic development and

consumer behaviour in the markets where Fortum operates.

The current geopolitical situation has raised a risk that the war could escalate outside of the Ukraine.

Although unlikely, there is a concrete risk of escalation to our core markets including Finland and Sweden,

the consequences of which are difficult to envisage. For example, it would cause an increase in the risk of

sabotage or even direct attacks towards Fortum’s or national critical energy facilities or infrastructure. In

an extreme scenario, this might lead to a situation where the state of Finland or Sweden would call for an

emergency act to take control over the energy sector, which would mean that Fortum would lose

operational control of its business for an unknown period.

The current geopolitical uncertainty has intensified the trend of nationalistic policies and protectionism

which may lead to further trade restrictions or sanctions which in turn could affect demand for Fortum’s

products and services, production capabilities, asset values and access to financing. Fortum continuously

monitors how the business environment develops in its operating countries in order to be able to react

quickly to market shifts and changes in consumer behaviour.

Investment and acquisition risks

Fortum is continuously assessing its’ busines

s portfolio and evaluates opportunities for acquisitions,

investments and divestments. Even if Fortum is able to identify candidates for acquisition, divestment or

investment, it may be difficult to complete transactions. Lack of competition and potential restrictions on

sale of certain assets by foreign owners or other restrictions may make it difficult to complete divestments

or may result in lower than expected value received. Financial constraints, competition for acquisitions or

greenfield investments could limit Fortum's ability to grow or could raise the prices and make them less

attractive to Fortum.

Fortum is not making any further investments in Russia and existing contracts will not be renewed when

they expire. The company is also pursuing a controlled exit from the Russian market with a divestment of

its Russian operations as the preferred path. In addition, Fortum does not provide any new financing to its

Russian subsidiaries. The divestment process has progressed and is still ongoing, but any major

divestment in the Russian energy sector requires an approval by the Russian Government Commission

and the President. Completing the exit is therefore likely to take further time and there still are significant

uncertainties

–

including regulatory approvals

–

related to the ongoing divestment process.

If the

divestment cannot be finalised or would be severely delayed, it might limit Fortum’s access to capital

markets, or the transaction may materialise at a lower valuation of the business or, in extreme case,

expropriation of Fortum’s Russian assets. Due to the increasingly complex operating environment and

prolonged uncertainty regarding Fortum’s Russian operations, Fortum has recorded total impairment

charges in 2022 in the amount of approximately EUR 1.7 billion. The remaining value of the Russian net

assets after the impairments totals approximately EUR 1.7 billion.

Risks related to acquisitions, divestments and investments are managed as part of the investment

process. The Investment Manual includes requirements for risk identification, assessment and action

plans for mitigating identified risks before investment decisions are made. It also sets requirements to

follow-up risks in projects. 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.

Energy and climate policy and regulation risks

The energy sector is heavily influenced by national and EU-level energy and climate policies and

regulations. 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 markets. The overall complexity

and possible regulatory changes in the various operating countries pose a risk if Fortum is not able to

identify, anticipate and manage those changes efficiently.

Fortum maintains an active dialogue with different bodies and stakeholders involved in the development

of laws, policies and regulations in order to manage these risks and to proactively contribute to the

32

development of the energy and climate policy and regulatory framework in line with Fortum’s strategic

objectives.

EU and Nordics

Fortum has to manage risks related to both EU regulation and national regulation in the countries where

we operate. Key risks related to the future development of energy and climate policies policy and

regulatory framework development are listed below.

•

The Russian invasion of Ukraine drove commodity prices to new record levels and further increased

price volatility. As a consequence, the EU and its member states are taking action with temporary

market interventions (e.g. price caps and windfall taxation). If becoming permanent, these market

interventions may pose a risk to business performance.

In addition, Fortum sees risks related

uncoordinated national measures aiming to tackle high energy prices and national security of supply. It

is also possible that various short-term crisis measures will impact negatively on the longer-term power

market reform which is about to start in the EU early 2023.

•

Fortum believes that reaching the established (EU and national) decarbonisation targets requires that all

CO

2

free energy production technologies are treated equally in legislation, and that there is political

acceptance for them. While we see that there is currently a broader acceptance for nuclear, especially

in the Nordics, there is still a risk that some technologies are preferred for reasons other than for their

CO

2

footprint for example in financing schemes, leading to uneven situation between different

production forms.

•

Growing acceptability issues relating to various energy forms and energy technologies create

uncertainty and risks for planned investments. Increasing sustainability requirements, e.g., in the context

of upcoming EU Nature Restoration Regulation, could have unforeseen negative consequences for the

energy system, in particular for hydro and wind power and power grids. In the context of EU Sustainable

Finance Taxonomy, the inclusion of Fortum’s core technologies such as hydro and nuclear power in the

scope of the regulation is an encouraging signal to ensure access to the capital markets and future

investments. However, the regulation is still not finalised and the remaining criteria expected to be

published in 2023, might cause further hurdles for aligning Fortum’s assets.

•

National climate policies or steering mechanisms that exceed or are overlapping the EU climate targets

risk diluting the EU emissions trading system (ETS) and creating inefficiencies based on uncoordinated

national non- market-based carbon reduction mechanisms. In addition, a lower carbon price may lead to

decreased profitability of carbon-free assets.

•

National investment schemes and selective support systems for new renewable energy production may

lower the profitability of incumbent electricity production and lead to market distortions because of

increased grid costs since producers pay a large part of total grid costs. Fortum may suffer also from

lower electricity prices since, all else equal, production that otherwise would not be profitable will come

online. There is also a risk that the lack of Nordic power grid capacity buildout continues to keep high or

even increases price area differences and lowers our earnings and asset values in low price areas.

•

Tightening emission standards, restrictions or taxation of waste incineration and increasing tax burden

on heating fuels can also

negatively impact Fortum’s targeted earnings in the future

.

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

Fortum’s 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. Among

the more significant risks are those arising from the established and enforced foreign exchange

restrictions, which could effectively prevent Fortum from repatriating profits or liquidating assets, and

changes in tax regulations or enforcement mechanisms, which could substantially reduce or eliminate any

revenues derived from operations and significantly reduce the value of assets related to such operations.

The imposition of any further sanctions may have a direct and indirect impact on the business

environment and may negatively affect the operations and value of certain investments in Russia. Fortum

actively monitors the situation in order to ensure continued compliance with prevailing rules and

applicable sanctions laws.

Energy policy-related risks in Russia are linked to the development of the whole energy sector which to

a large extent is regulated. Regulated sectors are inherently exposed to a risk of regulatory changes

which could affect Fortum’s operations.

For comments on the geopolitical uncertainty due to Russia’s invasion on Ukraine, imposed sanctions

and possible future sa

nctions and counter sanctions and their possible impacts on Fortum Group’s

Russian business and assets, please see



Note 2

.

Technology risks

Fortum’s strategy may include investing in new or not yet commercially viable technologies, such as

hydrogen production, which will support the transition towards a future low-carbon economy as well as

developing renewable energy concepts and innovative solutions for its customers. There are risks

inherent in investing in new technologies including if and when these will become economically viable and

protecting intellectual property rights. Technology risks are managed by assessing and monitoring the

viability of new technology throughout the development cycle and selectively developing and investing in

projects together with our partners.

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 aspects.

Changes in laws, regulations and the business environment, including the views of our main stakeholder,

can pose a risk if not identified and managed effectively. 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 in order to identify the most material issues for our

stakeholders, engages with non-governmental organisations and has defined internal policies and

instructions on how to conduct business.

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 aims to comply

with all relevant laws, rules and regulations, but the ability to operate in certain countries may be affected

by future changes to local laws and regulations.

Since Fortum trades financial instruments, it is exposed to risks arising from the implementation and

amendment of financial market regulations and directives, such as the European Market Infrastructure

Regulation (EMIR) and the Regulation on Energy Market Integrity and Transparency (REMIT).

Fortum’s operations in a va

riety of jurisdictions expose Fortum to various legal risks. These mainly

comprise risks arising from threatened or pending legal proceedings regarding contract and price

adjustments in connection with long- term supply or sales contracts, licensing matters, liabilities arising

from acquired companies as well as supplier disputes or disputes related to investment agreements.

Fortum systematically identifies, assesses, mitigates and reports compliance risks, including risks

related to business ethics, as part of the compliance management and risk management processes.

Effective internal controls are a key mitigating activity and have been implemented to prevent the

possibilities of unauthorised activities or non-compliance with relevant policies and instructions.

33

Furthermore, continuous training and communication play a key role in increasing the awareness and

ensuring the understanding of the importance of business ethics and compliance in the organisation.

Regular trainings include mandatory e-learnings to ensure coverage throughout the organisation.

Fortum’s Code of Conduct and Supplier Code of Conduct stress the importance of business ethics for

all employees, contractors and partners. Zero tolerance for corruption and bribery is highlighted in the

Code of Conduct and Supplier Code of Conduct. In addition, separate instructions and guidelines have

been created to address e.g., anti-bribery, compliance management, safeguarding company assets,

conflict of interest, anti-money laundering, economic sanctions and competition law. Regarding economic

sanctions, Fortum has, with internal and external experts, developed monitoring to follow applicable

sanction regimes (EU, US, UK and UN) and relevant internal controls have been integrated to business

processes to ensure compliance. Fortum has procedures for anti-corruption including prevention,

oversight, reporting and enforcement based on the requirements prescribed in international legislation.

The Supplier Code of Conduct, which is based on the ten principles of the United Nations Global

Compact, define sustainability, business ethic, human rights and environmental requirements for suppliers

of goods and services.

Environmental, health and safety and social risks

Operating power and heat generation plants and circular economy services, involves the usage, storage

and transportation of fuels and materials, including hazardous waste, which 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

(ISO 45001), applies to risks related to occupational health and safety and how to operate in emergency

situations.

Environmental, health and safety (EHS) risks, as well as social and human rights risks related to the

supply chain, are evaluated through counterparty risk assessments, country risk assessments, supplier

qualifications as well as internal and external audits.

EHS and social risks are evaluated for all investments. Environmental risks and liabilities in relation to

past actions have been assessed and, where necessary, provisions have been made for future remedial

costs. Mitigating climate change, adapting to it and driving the transition to a lower-carbon economy is an

integral part of Fortum’s strategy. Managem

ent of climate-related transition and physical risks are

discussed in detail under the heading Climate-related risks.

Tax risk

Tax risk refers to the risk associated with unclarities, errors, failure in controls or disagreements in the

interpretation of applicable tax laws and tax authority guidance, changes in operations, long-term

profitability or changes in tax laws or fiscal policies in one or multiple countries which could result in

increased charges or financial loss. Fortum operates in a number of countries and is therefore exposed to

these events in multiple countries. These risks may materialise through a tax authority-initiated process

followed by a legal process in one or multiple jurisdictions with a court confirming valid interpretation of

local or EU law or tax treaties. In case multiple countries are involved, it may result in a mutual agreement

process defining the final stand in the case. A legal process may result in a tax assessment of

deductibility, income recognition or applicable tax rate on withholding in a business transaction. Risk may

materialise also by a revaluation of tax-related assets, so called deferred tax assets, and liabilities due to

changes in operations or tax law. The risks may equally realise through national or EU fiscal policies that

are drafted without considering the impacts. Tax burden may be out of the set objective and result in

unexpectedly high taxes.

Mitigating actions targeting tax predictability for the business operations in all our operating countries. In

order to do so, Fortum has, in line with its commitment to responsible tax management principles, specific

published tax principles approved by the Board of Directors and tax governance guidance setting the

frame for tax management. As concrete risk mitigation actions, Fortum targets to simplify legal structures,

move towards digital solutions in data management and compliance, seek strategic clearance from tax

authorities, improve transparency towards stakeholders, participate in developing responsible regulation

by contributing to public hearings and clarify accountabilities and responsibilities of duties.

Financial risks

Commodity market and fuel risks

Fortum’s business is exposed to fluctuations in prices and availability of commodities used in the

production, transmission and sale of energy products. The main exposure is toward electricity prices and

volumes, prices and volumes of emission allowances, and prices and availability of fuels. Fortum hedges

its exposure to commodity market risks in order to improve predictability of future result by reducing

volatility in earnings while ensuring cash flow risk is at an acceptable level. For further information on

hedge ratios, sensitivities and outstanding derivatives contracts, see



Note 4

.

Electricity price and volume risks

Fortum is exposed to electricity market price movements and volume changes mainly through its power

and heat generation.

In the Nordics and Poland, market prices and the amount of profitable production exhibit significant

variation due to weather conditions, outage patterns in production and transmission lines, CO

2

allowance

prices, fuel prices, as well as the amount of electricity demand. Electricity price risks in the Nordics and

Poland are mainly hedged by entering electricity and gas derivatives contracts on exchanges such as

Nasdaq Commodities, ICE, the European Energy Exchange and TGE (Towarowa Giełda Energii S.A. i.e.,

Polish commodity exchange) as well as directly with counterparties active in the energy markets. The

ability to efficiently implement hedging strategies is dependent on a well-functioning and liquid derivatives

market. During 2022, the energy crisis resulted in peaking energy prices and extreme volatility which

escalated the trend of decreasing liquidity of especially Nordic electricity derivatives traded on Nasdaq

Commodities. Alternatives, including the use of OTC derivative contracts and correlated products 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 and capacity prices are the main source of market risk. Capacity from newer units

is sold under capacity supply agreements where the price is set by the Russian Federation to ensure the

return on investments. Capacity from old units has been sold until 2025 via capacity supply auctions

which have already been conducted. Electricity price exposure is partly mitigated through regulated fixed-

price bilateral agreements, but the majority of electricity sales is exposed to spot price risk. In the short-

term, electricity prices and volumes are mainly impacted by changes in industrial demand, gas prices and

weather-driven demand changes.

Emission and environmental value risks

The EU has an emissions trading scheme in place to reduce the amount of CO

2

emissions. In addition to

the emissions trading schemes, 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

34

these schemes. There is currently no trading scheme in Russia for emissions or other environmental

values.

The main factors influencing the prices of CO

2

emission allowances and other environmental values are

political decisions, and the supply and demand balance. Fortum hedges its exposure to these prices and

volumes through the use of CO

2

derivatives and environmental certificates.

Fuel prices 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, waste and various biomass-based fuels. 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 curtailments/fuel purchase

constraints in countries experiencing political or social unrest. For fuels that are sourced on local or

regional markets, such as biofuels, 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. The exposure to fuel

price risk is mitigated through fixed-price physical delivery contracts as well as derivative contracts. Due to

the current geopolitical situation, there is an increasing risk related to especially nuclear fuel imports from

Russia. Fortum continues to monitor the situation closely and prepares adapted mitigation measures to

minimise the negative impacts to Fortum.

The main fuel source for heat and power generation in Russia is natural gas, which is partially

regulated, limiting the price risk exposure. Long-term gas supply contracts are concluded with gas

suppliers to ensure gas availability for power plants.

Liquidity and refinancing risks

Fortum's business is exposed to liquidity and refinancing risks primarily through the need to finance

business operations, including margining and collaterals issued for hedging activities. Higher and more

volatile commodity prices increase the net margining payments toward clearing houses and clearing

banks which are mainly settled in cash. Fortum mitigates this risk by entering into OTC derivatives

contracts directly with bilateral counterparties without margining requirements. The exposure to margining

requirements is continuously assessed and monitored so that adequate liquidity is available to cover

expected future cash collateral required for margining.

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. The credit risk of cash positions has been mitigated by

diversifying the deposits to high-credit quality financial institutions and issuers of corporate debt.

At the beginning of August, both S&P Global Ratings and Fitch rating agenc

ies affirmed Fortum’s BBB

rating with Negative Outlook. Following the announcement in September that Fortum would fully divest

Uniper to the German State, the rating agencies commented that the divestment of the Uniper stake was

regarded as credit positive

for Fortum as it improves the company’s financial and risk profile. The rating

agencies are expected to update their ratings after the completion of the transaction and now that Fortum

has published its new strategy. A lowering of credit ratings, in particular to below investment grade level

(BB+ or below) could trigger counterparties’ rights to demand additional cash or non

-cash collateral. That

may affect the access to the capital markets and increase the cost of new financing.

Fortum is targeting to have a solid investment grade rating of at least BBB.

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 is exposed to cash flow risk from changes in interest rates

mainly from interest- bearing liabilities and derivatives on a fixed- and floating rate basis. Fortum manages

the interest rate exposure through a duration mandate of the loan portfolio, excluding leasing liabilities and

provisions, and a cash flow at risk limit. Fortum uses different types of financing contracts and interest rate

derivative contracts to manage the interest rate exposure and evaluates and develops the strategies in

order to find an optimal balance between risk and financing cost.

Fortum has cash flows, assets and liabilities in currencies other than EUR and is therefore exposed to

fluctuations in exchange rates. 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 translation exposure is toward EUR/Russian Rouble (RUB) and EUR/Swedish Krona (SEK)

arising from Fortum's extensive operations in Russia and Sweden. Fluctuations of the RUB and SEK

against the EUR could have an adverse effect on future results and equity when consolidating and

translating results and net assets in Russian and Swedish affiliates into euros. Translation exposures in

Fortum are generally not hedged as the majority of these assets are considered to be long-term strategic

holdings.

Transaction exposure arises mainly from physical and financial trading of commodities, existing and

new investments, external and internal financing and shareholder loans within Fortum. Fortum hedges

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. An exception is the Generation segment’s hedging

of power sales in Sweden where the currency component is not hedged.

A centralised treasury function coordinates currency risk management and executes external hedges

consisting of currency derivative contracts which are matched against the underlying future cash flow

according to maturity. Derivatives are used exclusively to hedge existing foreign exchange risks, not for

proprietary trading.

Counterparty and 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.

Following increasing geopolitical tensions, counterparties of Fortum could become subject to sanctions,

which may impact current or future business relations. Fortum actively monitors the situation in order to

ensure continued compliance with prevailing rules and applicable sanctions laws.

Credit risk exposures related to hedging arise through physical delivery contracts and financial

derivative instruments. These credit risk exposures are volatile and include both the replacement risk and

the settlement risk. Exchange-traded derivatives are cleared through central clearing parties (CCPs) or

through clearing banks, while OTC derivative contracts are concluded directly with a number of different

counterparties including energy wholesalers and retailers, utilities, trading companies, industrial end-users

and financial institutions active in the financial and energy markets. In order to mitigate the liquidity risk

from increased margining requirements toward CCPs, the share of hedges with OTC counterparties

without margining requirements has increased. Consequently, credit exposure from hedges with OTC

counterparties has increased. In general, due to Fortum’s net short position in Nordic power hedges the

credit exposure tends to increase with the value of hedges if Nordic power prices decrease.

Due to the Group’s 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. Fortum also has exposure to

the Russian financial sector in terms of deposits by Fortum’s Russian subsidiaries with financial

institutions in Russia as well as to banks that provide guarantees for suppliers and contracting parties.

Credit risk exposures relating to customers and suppliers are spread across a wide range of industrial

counterparties, energy companies, government and municipal entities, utilities, small businesses, housing

35

associations and private individuals over a range of geographic regions. The risk of credit losses in the

electricity and heat sales business in Russia is deemed higher than in Fortum’s other operating countries.

Fortum has routines and processes to identify, assess and control exposure. Credit checks are

performed before entering or renewing commercial obligations and exposure limits are set for larger

individual counterparties as well as for counterparty groups. 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 contract 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.

People and Process Risks

People risks include an inability to attract and retain the right competences, risks due to the loss of special

skills and risks due to errors on the part of employees who have not been sufficiently trained or who are

not sufficiently qualified.

In order to reduce people risks, Fortum invests in the development and distribution of skills and

succession planning. In addition, the existing compensation system for employees is regularly reviewed

and adjusted.

Process risks are mainly caused by design failures or human errors. Mitigation includes digitalisation,

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 have been

developed using reference frameworks such as COBIT and ITIL. Business continuity plans are in place for

business-critical processes.

Property, plant and equipment

Operational events at power and heat generation, fuel handling and recycling and waste facilities can lead to

environmental and physical damages, business interruption, clean-up costs and third-party liabilities.

Property, plant and equipment risks are primarily managed through condition monitoring and maintenance

planning. In addition, Fortum's industrial assets are covered by insurance policies for property damage and

business interruption risks which mitigates the impact of internal and external events, should they occur.

Hydro power

Fortum has a large number of hydro power plants and dams in the Nordics. A dam breach is a serious

accident with the threat of significant damage downstream. A long-term programme is in place for

improving the surveillance of the condition of dams, and for securing the discharge capacity in extreme

flood situations. 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 programme in

place that covers Finnish and Swedish dam failure liabilities up to SEK 10,000 million (approximately EUR

1 billion).

Nuclear power

Fortum owns and operates the Loviisa nuclear power plant and has minority interests in one Finnish and

two Swedish operational nuclear power companies. Fortum also has a minority interest in the terminated

Fennovoima project. Any severe accident or nuclear release in nuclear power plants could lead to high

costs, environmental damages and third-party liabilities. Both in Finland and Sweden, 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) and the Swedish Radiation Safety Authority (SSM) in

Sweden.

Owners of nuclear facilities in Finland and Sweden have statutory liabilities for damages resulting from

accidents occurring in those nuclear facilities and for accidents involving any radioactive substance

connected to the operation of those facilities. Third-party liability related to nuclear accidents is strictly

under the plant operator’s responsibility and must be covered by insurance or other financial cover. In

Sweden and Finland, legislation requires that operators of nuclear power plants need to have a liability

insurance or other financial cover in the amount equivalent to EUR 1.2 billion per site.

In both Finland and Sweden, the future costs of the final disposal of spent fuel, the management of low

and intermediate-level radioactive waste and the decommissioning of the radioactive part of the nuclear

power plant are provided for by a state-established fund to which nuclear power plant operators

contribute. Contributions to these funds should be sufficient to fully cover expected costs for handling all

the produced radioactive waste, but the possibility exists that future costs could exceed currently

estimated fund provisions. If this were to occur, Fortum would be responsible for any such excess costs in

relation to its share of operations and assets.

The current geopolitical situation has raised a new risk of nuclear fuel shortage in the Loviisa power

plant. In order to mitigate this risk, Fortum has signed an agreement with Westinghouse Electric Company

to have a parallel supplier for the current Russian supplier of nuclear fuel, but until the new fuels are

approved by the Authority and delivered to site, a possibility exists for a limited period of fuel shortage.

Asset project risks

Fortum’s business activities involve construction, modernisation, maintenance and decommissioning of

power plants and other energy industry facilities. There is a risk that construction costs exceed planned

costs or that construction delays occur as a result of regulatory or permit issues or failure of key suppliers,

being unable to obtain permits. Asset projects also face environmental, health and safety risks. Asset

project risks may realise both for Fortum’s own assets projects, or projects carried ou

t through joint

ventures or associated companies.

Managing asset project risk is an integral part of every project. Project managers are responsible for

ensuring that project-related risks which may lead to delays, increased costs, negative impacts to the

environment or which could jeopardise the health and safety of personnel and contractors are identified

and assessed, and that actions are taken to minimise such risks.

The most significant asset project risk is the Olkiluoto 3 project delay risk. 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.

Olkiluoto 3 (OL3), currently under test production phase, was procured as a fixed-price turnkey project

from a consortium 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.

According to the latest schedule regular electricity production starts earliest in April 2023.

The risk related to the planned completion refers to a situation in which commercial use cannot be

launched as planned, which leads to additional costs of electricity for Fortum. During 2022, several risk

management measures related to the OL3 project have been executed to improve TVO’s readiness to

start the regular electricity production the OL3 plant. For more information about these measures, please

see TVO’s annual report

.

36

Cyber and information security risks

Fortum’s business operations and customer

-related services are dependent on well-functioning IT,

communications 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 operating critical infrastructure,

including power stations, hedging decisions, serving customers and in internal and external

communication and reporting.

Like all operators of critical infrastructure, Fortum is increasingly exposed to cyber security risks,

including risks related to information and operational technology systems, digitalisation and privacy. Also,

physical attacks against Fortum’s assets are possible and can have m

aterial impacts. Due to the ongoing

war in the Ukraine, the overall probability of cyber and other security risks has increased. Therefore, crisis

management rehearsals have been kept to improve business resilience.

The focus in 2022 has been on improving OT cyber security capabilities to be able to improve resilience

of the operations and production. There are cyber security instructions and procedures in place which set

requirements for managing and mitigating cyber security risks. Security-related regulation is increasing

and is therefore being monitored by a special program.

Climate-related risks

Mitigating climate change, adapting to it and driving the transition to a lower-carbon economy is an

integral part of Fortum’s strategy. As a result, Fortum has

committed to ambitious climate targets.

Management of climate-

related risks is integrated into Fortum’s risk management framework and

follows the same governance and processes as for other material risk and uncertainties. Risks are

regularly identified and assessed through a structured process. Risk owners are assigned for managing

the risks which are regularly reported and followed-up in various management teams and expert forums.

There is a specific review of the key climate-related risks by a group of experts from selected functions.

These risks are reported to FEM and the ARC as part of the annual review of material risks and

uncertainties for Fortum.

Climate-related risks are divided into two categories in accordance with the TCFD (Task Force on

Climate-related Financial Disclosures) recommendations: transition risks and physical risks. The identified

physical risks are generally found in the operational risk category, whereas transition risks are generally

part of the strategic risk category.

See



Note 2

on how climate-

related matters are reflected in Fortum’s consolidated financial

statements.

Transition risks

Fortum’s strategy is to a large extent built on taking advantage of the opportunities associated with the

transition to a low-carbon economy and successfully mitigating the risks. The transition to a low-carbon

economy poses a number of strategic and operative risks related to changes in energy and climate policy

and regulation, technology development and the business environment in which Fortum operates. Climate

change may impact external market conditions which, in turn, can impact Fortum’s financial and operative

performance. Supply, demand and the prices achieved for Fortum’s products can be affected by a wide

range of factors including political developments and consumer preferences for low-carbon energy.

Additionally, Fortum’s brand and reputation can be negatively impacted by changes in stakeholder

perception about Fortum’s ability to deliver on its strategy.

The key risks related to climate policy and regulation include national climate policies or steering

mechanisms that exceed EU targets for greenhouse gas reduction, renewable energy production and

energy efficiency. This can lead to overlapping or inefficient mechanisms, such as diluting the EU

emissions trading system (ETS), tighter restrictions on incineration and burning of various fuels, and a

more regulated electricity market. Fortum favours clear criteria for capacity remuneration in case such

mechanisms are implemented. Additionally, increased demand flexibility is needed to cope with the

expected increase in intermittent renewable production.

The transition to a low-carbon economy also poses risks if there emerge new, disruptive technologies

that create cheap sources of flexibility or storage in the energy market. Additionally, if there is an

accelerated decline in the cost of renewable energy, it could decrease the value of existing conventional

power and heat generation assets. Fortum continuously monitors technology developments and

selectively invests in innovative technologies.

In the context of the EU Sustainable Finance taxonomy, the inclusion of Fortum’s core technologies

such as hydro and nuclear power in the scope of regulation is an encouraging signal to ensure access to

capital markets and future investments. However, the regulation is still not finalised and the remaining

criteria expected to be published in 2023 might cause further hurdles for aligning Fortum’s assets.

Additionally, there is a risk of increasing activity by NGOs which could affect key stakeholder perception.

In order to mitigate these risks, Fortum focuses on the sustainability impacts of strategy and business

decisions, communicating transparently about strategy implementation to key stakeholders, ensuring a

broad base of investors and flexibility in financing.

Physical risks

Fortum’s entities are required to identify and assess their assets’ resilience towards different acute and

chronic physical climate-related risks within different Intergovernmental Panel on Climate Change (IPCC)

climate scenarios and create adaptation plans for the most material risks. For example, climate change

scenarios are considered in long-term dam safety investments so that extreme flooding situations can be

managed. Fortum is a supporter of the Task Force on Climate-related Financial Disclosures (TCFD) and

physical climate-

related risks are reported accordingly in Fortum’s TCFD report in Sustainability 2022

report.

Fortum’s operations and assets are exposed to external ev

ents, the frequency and magnitude of which

may increase as a result of climate change. Changes in precipitation, inflows and temperatures and

extreme weather events may affect power production as well as bioenergy supply and availability. Intense

storms with, for example, flash floods could increase the risk of dam breaches as well as causing local

damages and production outages. Warmer weather may also lead to a need for new cooling or process

water sources and extreme warm and dry summer periods could result in forest fires which potentially

damage assets or lead to grid outages restricting power supply. Fortum adapts its operations to the

changing climate and takes it into consideration in production and maintenance planning and in evaluating

growth and investment projects.

Climate change may affect the demand and supply of energy products due to changing weather

patterns. This could lead to, e.g., lower and more volatile electricity and gas prices which negatively affect

the revenues of power generation assets. Warmer weather may also impact the demand for heating to a

larger extent than currently expected.

37

Fortum share and shareholders

Fortum Corporation’s shares have been listed on Nasdaq Helsinki since 18

December 1998. The trading

code is FORTUM. 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 key figures

EUR

2022

2021

2020

Earnings per share, total Fortum

-2.72

0.83

2.05

Earnings per share, continuing operations

1.14

4.49

N/A

Comparable earnings per share, total Fortum

-1.11

2.00

1.67

Comparable earnings per share, continuing operations

1.74

1.23

N/A

Comparable earnings per share, continuing operations excl. Russia

1.21

0.96

N/A

Cash flow per share, total Fortum

-9.86

5.60

2.88

Cash flow per share, continuing operations

2.37

1.26

N/A

Equity per share

8.55

13.66

14.58

Dividend per share

0.91

1)

1.14

1.12

Payout ratio, %

2)

79.8

1)

137.3

54.6

Payout ratio excl. Russia, %

75.0

1)

N/A

N/A

Dividend yield, %

5.9

1)

4.2

5.7

1) Board of Directors

proposal for the planned Annual General Meeting 13 April 2023.

2) Payout ratio for 2022 is calculated based on earnings per share from continuing operations.

For full set of share key figures, see the section

in the Financial Statements.

Fortum’s share price has depreciated approximately 6% during the last five years, while Dow Jones

European Utility Index has increased 23%. During the same period Nasdaq Helsinki Cap index has

increased 19%. During 2022 Fortum’s share price depreciated approximately 42%, while Dow Jones

European Utility index decreased approximately 11% and Nasdaq Helsinki Cap index decreased

approximately 16%.

In 2022, a total of 560.8 million (2021: 351.5) Fortum Corporation shares, totalling EUR 8,500 million,

were traded on Nasdaq Helsinki. The highest quotation of Fortum Corporation shares during 2022 was

EUR 27.18, the lowest EUR 8.86, and the volume-weighted average EUR 15.18. The closing quotation on

the last trading day of the year 2022 was EUR 15.54 (2021: 26.99). Fortum

’

s market capitalisation,

calculated using the closing quotation of the last trading day of the year, was EUR 13,943 million (2021:

23,975).

In addition to the Nasdaq Helsinki, Fortum shares were traded on several alternative market places, for

example at Cboe and Turquoise, and on the OTC market. During 2022, approximately 74% (2021: 70%)

of Fortum’s shares were traded on markets other than the Nasdaq Helsinki Ltd.

Fortum Corporation has one class of shares. By the end of 2022, a total of 897,264,465 shares (2021:

888,294,465) 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 2022

Fortum Corporation’s share capital, paid

in its entirety and entered in the trade register, was EUR 3,046,185,953.00.

On 6 September 2022, Fortum announced that it had agreed with the Finnish State on a EUR 2.35

billion bridge financing arrangement. On 26 September 2022, Fortum announced to draw the first tranche

of the liquidity facility, EUR 350 million. As a condition in the agreement following the first draw down, the

Finnish State-owned holding company, Solidium Oy, was entitled to subscribe 8,970,000 new ordinary

registered shares in Fortum in a directed share issue, without payment. The share issue to Solidium Oy

was resolved in the Extraordinary General Meeting on 23 November 2022 and the new shares were

registered with the Finnish trade register on 25 November 2022. The new shares carry full shareholder

rights, including the right to dividend, as of the registration date. The total amount of shares outstanding in

the company after the registration of the new shares is 897,264,465. As a consequence, the shares under

the control of the State of Finland has increased from 50.76% to 51.26%.

At the end of 2022 the Finnish State owned 51.26%

of the company’s shares. The Finnish Parliament has

authorised the Governme

nt 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 26.8% (2021: 25.8%).

Shareholders, 31 December 2022

Shareholders

No. of shares

Holding %

Finnish State

459,902,988

51.26

Ilmarinen Mutual Pension Insurance Company

17,662,000

1.97

Varma Mutual Pension Insurance Company

14,565,407

1.62

Elo Mutual Pension Insurance Company

9,042,000

1.01

The Finnish Social Insurance Institution

6,430,896

0.72

Kurikan Kaupunki

6,203,500

0.69

The State Pension Fund

2,700,000

0.30

Nordea Fennia Fund

2,137,603

0.24

OP-Finland

2,095,453

0.23

Danske Invest Finnish Equity Fund

1,813,412

0.20

Nordea Pro Finland Fund

1,550,842

0.17

OP-Henkivakuutus Ltd.

1,535,852

0.17

Evli Finland Fund

1,155,000

0.13

Seligson & Co OMX Helsinki 25 Exchange Traded Fund (ETF)

1,075,206

0.12

Nominee registrations and direct foreign ownership

240,321,127

26.78

Other

129,073,179

14.39

Total

897,264,465

100.00

38

By shareholder category

% of total amount

of shares

Finnish shareholders

Corporations

1.57

Financial and insurance institutions

2.05

General government

57.82

Non-profit organisations

0.98

Households

10.80

Non-Finnish shareholders

26.78

Total

100.00

Breakdown of share ownership, 31 December 2022

Number of shares owned

No. of

shareholders

% of

shareholders

No. of shares

% of total

amount of

shares

1-100

85,476

44.30

3,660,263

0.41

101-500

65,228

33.80

16,639,128

1.85

501-1,000

20,642

10.70

15,190,625

1.69

1,001-10,000

20,511

10.63

52,930,044

5.90

10,001-100,000

1,019

0.53

21,628,248

2.41

100,001-1,000,000

66

0.03

19,143,203

2.13

1,000,001-10,000,000

12

0.01

36,806,781

4.10

over 10,000,000

3

0.00

492,130,395

54.85

192,957

100.00

658,128,687

73.35

In the joint book-entry account and in special accounts on 31

December

596

0.00

Nominee registrations

239,135,182

26.60

Total

897,264,465

100.00

Management shareholding 31 December 2022

At the end of 2022, the President and CEO and other members of the Fortum Executive Management

owned a total of 197,210 shares (2021: 224,369) representing approximately 0.02% (2021: 0.03%) 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 10

.

Authorisations from the Annual General Meeting 2022

In 2022, 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 20,000,000 shares, which correspond

ed to approximately

2.25% of all the shares in the company on 28 March 2022. Only the unrestricted equity of the company can be

used to repurchase own shares on the basis of the authorisation. These authorisations are effective until the

next Annual General Meeting and, in any event, for a period no longer than 18 months. This authorisation

has not been used as per 1 March 2023.

Dividend policy

The dividend policy ensures that shareholders receive a fair remuneration for their entrusted capital,

supported by the company’s long

-term strategy. At the beginning of March 2023, the Fortum Board of

Directors resolved on Fortum’s new strategy including

a new dividend policy. The renewed dividend policy

–

a payout ratio of 60-90% of comparable EPS

–

reflects the potential earnings fluctuations of Fortum’s

power generation portfolio. For additional information, see



Note 39

.

For the year 2022, Fortum’s Bo

ard

of Directors proposes a dividend of EUR 0.91 per share which corresponds to 75% of the Group

’

s

comparable EPS of EUR 1.21 from continuing operations excluding impact from the Russian operations.

The Board proposes that the dividend is paid in two instalments, in the second and fourth quarter of 2023.

Dividend distribution proposal

The distributable funds of Fortum Corporation as at 31 December 2022 amounted to EUR 6,291,275,608,

including the profit for the financial period 2022 of EUR 1,542,734,239

. 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 that a dividend of EUR 0.91 per share be paid for the financial year

2022. The dividend will be paid in two instalments.

Based on the number of shares registered as at 1 March 2023, the total amount of dividend would be

EUR 816,510,663. The Board of Directors proposes that the remaining part of the distributable funds be

retained in the shareholders’ equity.

The first dividend instalment of EUR 0.46 per share would be paid to shareholders who on the record

date of the first dividend instalment 17 April 2023 are recorded in

the Company’s shareholders’ register

held by Euroclear Finland Oy. The Board of Directors proposes that the first dividend instalment be paid

on 24 April 2023.

The second dividend instalment of EUR 0.45 per share would be paid to the shareholders who on the

record date of the second dividend instalment 2 October 2023 are recorded in the Company’s

shareholders’ register held by Euroclear Finland Oy. The Board of Directors proposes that the second

dividend instalment be paid on 10 October 2023.

The Board of Directors further proposes that the Annual General Meeting be authorised to resolve, if

necessary, on a new record date and date of payment for the second dividend instalment, should the

rules of Euroclear Finland Oy or statutes applicable to the Finnish book-entry system be amended or

should other rules binding upon the Company so require.

The Annual General Meeting is planned to take place on 13 April 2023

39

Market capitalisation, EUR billion

Total shareholder return, EUR

40

FINANCIAL STATEMENTS

Consolidated financial statements

Fortum’s consolidated income statement and consolidated cash flow statement were modified in 2022 to

include Uniper segment as discontinued operations. As required by IFRS, comparatives for 2021 were

restated. Consolidated balance sheet at 31 December 2021 included Uniper. For further information, see



Note 1

Significant accounting policies,



Note 2

Critical accounting estimates and judgements and



Note 3

Acquisitions, disposals, assets held for sale and discontinued operations.

Consolidated income statement

EUR million

Note

2022

2021

Comparable operating profit

1,871

1,429

Operating profit

1,277

4,325

Profit before income tax

455

4,332

Net profit for the year from continuing operations

1,011

4,008

Attributable to:

Net profit for the year from discontinued operations

-11,302

-4,121

Attributable to:

Net profit for the year, total Fortum

-10,290

-114

Attributable to:

Earnings per share for profit attributable to the equity owners of the

company (EUR per share)

As Fortum currently has no dilutive instruments outstanding, diluted earnings per share is the same as

basic earnings per share.

EUR million

Note

2022

2021

Comparable operating profit

1,871

1,429

Operating profit

1,277

4,325

See



Definitions and reconciliations of key figures

41

Consolidated statement of

comprehensive income

EUR million

Note

2022

2021

Net profit for the year, total Fortum

-10,290

-114

Other comprehensive income

Items that may be reclassified to profit or loss in subsequent periods:

Cash flow hedges

Fair value gains/losses

-2,594

-1,231

Transfers to income statement

1,102

119

Transfers to inventory/property, plant and equipment

1

1

Deferred taxes

292

223

Net investment hedges

Fair value gains/losses

37

-5

Deferred taxes

-7

1

Exchange differences on translating foreign operations

4.3

-82

97

Share of other comprehensive income of associates and joint ventures

18

41

8

Other changes

-

-13

-1,209

-799

Items that will not be reclassified to profit or loss in subsequent periods:

Remeasurement of investments

-15

-7

Actuarial gains/losses on defined benefit plans

31

50

22

Actuarial gains/losses on defined benefit plans in associates and joint ventures

7

30

42

45

Other comprehensive income/expense for the period from continuing

operations, net of deferred taxes

-1,168

-754

Other comprehensive income/expense for the period from discontinued

operations, net of deferred taxes

701

357

Total comprehensive income/expense for the period

-10,757

-510

Total comprehensive income/expense for total Fortum attributable to:

Owners of the parent

-3,337

185

Non-controlling interests

-7,420

-695

-10,757

-510

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

are 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 commodity sales price for future transactions, where hedge accounting is applied.

When commodity market price is higher (lower) than the hedging price, the impact on equity is negative

(positive).

Exchange differences on translating foreign operations include translation differences from translation of

foreign entities, mainly SEK and RUB.

42

Consolidated balance sheet

EUR million

Note

31 Dec 2022

31 Dec 2021

ASSETS

Non-current assets

Intangible assets

16

657

2,167

Property, plant and equipment and right-of-use assets

17

7,266

19,049

Participations in associates and joint ventures

18

1,249

2,461

Shares in Nuclear Waste Funds

29

966

3,515

Other non-current assets

20

628

570

Deferred tax assets

28

933

2,149

Derivative financial instruments

14, 15

343

17,096

Long-term interest-bearing receivables

21

624

2,392

Total non-current assets

12,668

49,399

Current assets

Inventories

22

465

2,275

Derivative financial instruments

14, 15

1,486

65,392

Short-term interest-bearing receivables

21

660

715

Income tax receivables

28

71

161

Margin receivables

27

2,607

9,163

Trade and other receivables

23

1,767

14,856

Liquid funds

24

3,919

7,592

Total current assets

10,975

100,155

Assets held for sale

3

-

108

Total assets

23,642

149,661

EUR million

Note

31 Dec 2022

31 Dec 2021

EQUITY

Equity attributable to owners of the parent

Share capital

25

3,046

3,046

Share premium

73

73

Retained earnings

6,467

10,062

Other equity components

-1,916

-1,050

Total

7,670

12,131

Non-controlling interests

26

67

1,534

Total equity

7,737

13,665

LIABILITIES

Non-current liabilities

Interest-bearing liabilities

27

3,658

8,701

Derivative financial instruments

14, 15

756

16,657

Deferred tax liabilities

28

152

827

Nuclear provisions

29

966

3,891

Other provisions

30

118

4,108

Pension obligations, net

31

13

1,190

Other non-current liabilities

32

121

397

Total non-current liabilities

5,784

35,771

Current liabilities

Interest-bearing liabilities

27

4,127

8,519

Derivative financial instruments

14, 15

3,973

71,947

Other provisions

30

13

2,299

Margin liabilities

27

352

985

Trade and other payables

33

1,657

16,477

Total current liabilities

10,122

100,226

Total liabilities

15,905

135,997

Total equity and liabilities

23,642

149,661

43

Consolidated statement of changes in total equity

Share

capital

Share

premium

Retained

earnings

Other equity

components

Owners

of the

parent

Non-

controlling

interests

Total

equity

EUR million

Note

Retained

earnings

Translation

of foreign

operations

Cash

flow

hedges

Other

OCI

items

OCI items

associates

and joint

ventures

Total equity 1 January 2022

3,046

73

12,830

-2,768

-1,138

34

54

12,131

1,534

13,665

IS

Net profit for the year, total Fortum

-2,416

-2,416

-7,874

-10,290

Translation differences

-112

40

1

-5

-75

-6

-82

Other comprehensive income

209

-1,189

-146

45

-1,082

-4

-1,086

OCI related to discontinued operations

-152

105

284

-1

236

465

701

Total comprehensive income for the year

-2,208

-264

-1,044

139

39

-3,337

-7,420

-10,757

Cash dividend

13

-1,013

-1,013

-23

-1,036

Disposal of subsidiary companies

16

16

6,104

6,119

Transactions with non-controlling interests

-127

-127

-122

-249

Other

1

1

-6

-5

BS

Total equity 31 December 2022

3,046

73

9,499

-3,031

-2,182

172

93

7,670

67

7,737

Total equity 1 January 2021

3,046

73

13,097

-2,948

-158

-175

18

12,953

2,624

15,577

IS

Net profit for the year, total Fortum

739

739

-852

-114

Translation differences

77

2

2

81

16

97

Other comprehensive income

-887

11

38

-838

-13

-851

OCI related to discontinued operations

103

-94

196

-1

204

154

357

Total comprehensive income for the year

739

180

-980

209

37

185

-695

-510

Cash dividend

13

-995

-995

-171

-1,166

Transactions with non-controlling interests

-15

-15

-221

-236

Other

3

3

-3

0

BS

Total equity 31 December 2021

3,046

73

12,830

-2,768

-1,138

34

54

12,131

1,534

13,665

Translation differences

Translation of financial information from subsidiaries in foreign currency is done using the average rate for the income statement and the end rate for the balance sheet. The exchange rate differences arising from

translation (mainly related to SEK and RUB) to EUR are recognised in equity.

For information regarding exchange rates used, see



Note 1

Significant accounting policies. For information about translation exposure see



Note 4.3

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 mainly relates to fair valuation of commodity derivatives, such as futures and forwards, hedging commodity sales price of

future transactions, where hedge accounting is applied. When commodity market price is higher (lower) than the hedging price, the impact on equity is negative (positive).

Cash dividends

A dividend for 2021 of EUR 1.14 per share, amounting to a total of EUR 1,013 million, was decided in the Annual General Meeting on 28 March 2022. The dividend was paid on 6 April 2022. See



Note 13

Earnings and

dividend per share.

Share capital

On 6 September 2022, Fortum announced that it had agreed with the Finnish State on a EUR 2.35 billion bridge financing arrangement. On 26 September 2022, Fortum announced to draw the first tranche of the liquidity

facility, EUR 350 million. As a condition in the agreement following the first draw down, the Finnish State-owned holding company, Solidium Oy, was entitled to subscribe 8,970,000 new ordinary registered shares in

Fortum in a directed share issue, without payment. The share issue to Solidium Oy was resolved in the Extraordinary General Meeting on 23 November 2022 and the new shares were registered with the Finnish trade

register on 25 November 2022. The new shares carry full shareholder rights, including the right to dividend, as of the registration date. The total amount of shares outstanding in the company after the registration of the

new shares is 897,264,465. As a consequence, the shares under the control of the State of Finland has increased from 50.76% to 51.26%.

44

Consolidated cash flow statement

EUR million

Note

2022

2021

Cash flow from operating activities

IS

Net profit from continuing operations

1,011

4,008

Adjustments:

Income tax expense

-556

325

Finance costs - net

193

161

Share of profit/loss of associates and joint ventures

629

-168

Depreciation and amortisation

566

587

Operating profit before depreciations (EBITDA)

1,842

4,913

Items affecting comparability

593

-2,897

Comparable EBITDA

2,436

2,016

Non-cash and other items

153

-74

Interest received

84

25

Interest paid

-201

-147

Dividends received

18

72

Income taxes paid

-167

-279

Funds from operations

2,322

1,613

Change in working capital

-219

-494

Net cash from operating activities, continuing operations

2,104

1,119

Cash flow from investing activities, continuing operations

Capital expenditures

16, 17

-534

-470

Acquisitions of shares

1)

3

-35

-282

Proceeds from sales of property, plant and equipment

4

2

Divestments of shares and capital returns

1,156

3,816

Shareholder loans to associated companies and joint ventures

50

-33

Change in margin receivables

-1,311

-1,000

Change in other interest-bearing receivables and other

2)

2,134

-2,545

Net cash from/used in investing activities, continuing operations

1,464

-512

EUR million

Note

2022

2021

Cash flow before financing activities, continuing operations

3,568

608

Cash flow from financing activities, continuing operations

Proceeds from long-term liabilities

2,421

2,809

Payments of long-term liabilities

-5,888

-2,153

Change in short-term liabilities

-170

1,844

Dividends paid to the owners of the parent

13

-1,013

-995

Dividends paid to non-controlling interests

-19

-14

Change in margin liabilities

150

63

Other financing items

-168

50

Net cash from/used in financing activities, continuing operations

-4,686

1,603

Net increase(+)/decrease(-) in liquid funds, continuing operations

-1,119

2,211

Cash flow from discontinued operations

Net cash from/used in operating activities, discontinued operations

-10,870

3,851

Net cash from/used in investing activities, discontinued operations

3)

-2,450

-5,215

Net cash from/used in financing activities, discontinued operations

10,757

4,409

Net increase(+)/decrease(-) in liquid funds, discontinued operations

-2,563

3,045

Cash flow, total Fortum

Total net cash from/used in operating activities

-8,767

4,970

Total net cash from/used in investing activities

-985

-5,727

Total net cash from/used in financing activities

6,070

6,013

Net increase(+)/decrease(-) in liquid, total Fortum

-3,682

5,256

Liquid funds 1 January

7,592

2,308

Foreign exchange differences and expected credit loss allowance in liquid funds

7

29

Liquid funds 31 December

23

3,919

7,592

1) In 2022, acquisition of additional shares in Uniper are presented in cash flow from financing activities to better reflect the requirements of

IAS 7 Statement of cash flows. In 2021 acquisition of additional shares in Uniper were presented in cash flow from investing activities.

Comparatives have not been restated.

2) In 2021 Fortum granted Uniper a shareholder loan of EUR 4,000 million of which EUR 2,500 million was drawn in 2021 and EUR 1,500

million in 2022. In December 2022, as part of the closing of the Uniper transaction, the EUR 4,000 million shareholder loan was fully repaid

to Fortum.

3) The consideration received for the Uniper shares, EUR 498 million, is presented in cash flow from discontinued operations in 2022.

45

Change in financial net debt

EUR million

Note

Continuing

operations

1)

2022

Fortum

total

2)

2021

Financial net debt 1 January

789

7,023

Uniper's net financial position in Uniper’s Annual report

1,969

-

Internal shareholder loans to Uniper and OKG

2,764

-

Reversal of purchase price allocation

-187

-

Uniper impact total on Financial net debt, 1 January

4,546

-

Net cash flow:

Comparable EBITDA

2,436

3,817

Non-cash and other items

153

1,506

Paid net financial costs and dividends received

-99

-3

Income taxes paid

-167

-493

Change in working capital

-219

144

Capital expenditures

-534

-1,178

Acquisitions

-35

-294

Divestments and proceeds from sale of property, plant and equipment

1,160

3,883

Change in interest-bearing receivables

2,183

-174

Dividends to the owners of the parent

-1,013

-995

Dividends to non-controlling interests

-19

-171

Other financing activities

-168

43

Net cash flow ('-' increase in financial net debt)

3,679

6,084

Consideration received for Uniper shares

498

-

Foreign exchange rate differences and other changes

-74

-150

Financial net debt 31 December

27

1,084

789

1) Items included in Net cash flow for 2022 are based on continuing operations.

2) Items included in Net cash flow for 2021 are based on continuing and discontinued operations (total) as the balance sheet has not been

restated.

46

Notes to the consolidated financial

statements