Fortum OYJ

Financial statements and

operating and financial

review 2023

Fortum Oyj

Business ID: 1463611-4

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

Table of contents

OPERATING AND FINANCIAL REVIEW

Financial performance and position

Sustainability

Risk management

Fortum share and shareholders

FINANCIAL STATEMENTS

Consolidated financial statements

Consolidated income statement

Consolidated statement of comprehensive

income

Consolidated balance sheet

Consolidated statement of changes in total equity

Consolidated cash flow statement

Notes to the consolidated financial

statements

1 Material accounting policies

2 Critical accounting estimates and judgements

3 Acquisitions, disposals and discontinued

operations

4 Financial risk management

5 Capital risk management

6 Segment reporting

7 Comparable operating profit and comparable

net profit

8 Other expenses

9 Materials and services

10 Employee benefits and Board remuneration

11 Finance costs

–

net

12 Income tax expense

13 Earnings and dividend per share

14 Financial assets and liabilities by categories

15 Financial assets and liabilities by fair value

hierarchy

16 Intangible assets

17 Property, plant and equipment and right-of-

use assets

18 Participations in associated companies and

joint ventures

19 Impairment testing

20 Other non-current assets

100

21 Interest-bearing receivables

100

22 Inventories

101

23 Trade and other receivables

101

24 Liquid funds

102

25 Share capital

103

26 Interest-bearing liabilities

103

27 Income taxes on the balance sheet

106

28 Nuclear-related assets and liabilities

109

29 Other provisions

111

30 Pension obligations

112

31 Other non-current liabilities

115

32 Trade and other payables

115

33 Leases

115

34 Capital and other commitments

116

35 Pledged assets and contingent liabilities

117

36 Legal actions and official proceedings

118

37 Related party transactions

119

38 Events after the balance sheet date

120

39 Group companies by segment

121

Key figures

Financial key figures

123

Share key figures

124

Sustainability key figures

124

Segment key figures

125

Definitions and reconciliations of key figures

126

Parent company financial statements

Income statement

132

Balance sheet

133

Cash flow statement

134

Notes

135

Signatures for the operating and financial

review and financial statements

142

Auditor’s report

143

Auditor’s assurance report of ESEF financial

statements

148

Operating and financial

review

Financial performance and

position

A year of transformation and stabilising business operations

IFRS restatement relating to discontinued operations

Control over Fortum’s Russian operations was lost on 25 April 2023 following

the Russian

Presidential decree No. 302. Consequently, in 2023 Fortum’s Russia segment was deconsolidated,

and classified as discontinued operations. Fortum has not had access to financial or non-financial

information from the Russia segment since the first quarter 2023 reporting, and therefore

information for the deconsolidation is based on the 31 March 2023 balance sheet. As required by

IFRS, comparatives for 2022 were restated. Comparatives for 2021 have not been restated.

Discontinued operations in 2022 also include Fortum

’s former subsidiary Uniper and its

consolidated group companies. 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 and Uniper

was deconsolidated at 30 September 2022. 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

Key figures, continuing operations

EUR million or as indicated

2023

2022

2021

Change

23/22

Reported

Sales

6,711

7,774

6,422

-14%

Operating profit

1,662

1,967

4,325

-16%

- of sales %

24.8

25.3

67.4

Share of profit of associates and joint ventures

-185

168

132%

Profit before income tax

1,583

1,564

4,332

- of sales %

23.6

20.1

67.5

Net profit

1,515

2,084

4,008

-27%

Net profit (after non-controlling interests)

1,514

2,080

3,985

-27%

Earnings per share, EUR

1.68

2.34

4.49

-28%

Net cash from operating activities

1,710

1,717

1,119

EUR million or as indicated

2023

2022

2021

Change

23/22

Comparable

EBITDA

1,903

2,025

2,016

-6%

Operating profit

1,544

1,611

1,429

-4%

Share of profit of associates and joint ventures

-40

104

118%

Net profit (after non-controlling interests)

1,150

1,076

1,091

Earnings per share, EUR

1.28

1.21

1.23

Key figures, total of continuing and discontinued operations

EUR million or as indicated

2023

2022

2021

Change

23/22

Reported

Net profit (after non-controlling interests)

-2,069

-2,416

739

14%

Earnings per share, EUR

-2.31

-2.72

0.83

15%

Net cash from operating activities

1,819

-8,767

4,970

121%

Comparable

Net profit (after non-controlling interests)

1,184

-988

1,778

220%

Earnings per share, EUR

1.32

-1.11

2.00

219%

EUR million or as indicated

2023

2022

2021

Change

23/22

Shareholders’ equity per share, EUR

9.40

8.55

13.66

10%

Financial net debt (at end of period)

942

1,084

789

-13%

Financial net debt, at end of period, excl. Russia

N/A

1,127

Financial net debt/comparable EBITDA, excl. Russia

0.5

0.6

N/A

Financial net debt/comparable EBITDA, total

N/A

0.4

0.2

Return on shareholders' equity, %

-25.5

-96.2

-0.8

Equity-to-assets ratio, %

See



Definitions and reconciliations of key figures

Year 2023 was characterised by a downward trend for gas and power prices in Europe. In the

autumn, the Nordic weather realised milder than normal, however, turned cold and dry in the fourth

quarter. The cold breeze, together with below normal wind conditions, led to a rapidly decreasing

water reservoir balance; consequently Nordic spot prices recovered by the end of the year from the

lower levels seen in the previous quarter.

In our 2023 financial results, the Generation segment’s strong performance was the

key earnings

driver throughout the year. The segment benefitted from high power prices in the Nordics and good

physical optimisation supported by high price volatility, posting an all-time high comparable operating

profit of EUR 1,679 million and an achieved power price of 63.1 euro per MWh for the full year.

During 2023, we successfully regained our financial strength, driven by solid earnings and cash

flow. At the end of the year, our leverage was at 0.5 times, and we had undrawn credit facilities and

liquid funds of EUR 7.5 billion. In May, we successfully returned to the fixed income market by

issuing two bonds totalling EUR 1.15 billion. To finance future potential investments in clean energy,

we prepared the Green Finance Framework which was published in January 2024.

Based on the strong Group results in 2023, Fortum's Board of Directors is proposing to the

Annual General Meeting a dividend of EUR 1.15 per share, corresponding to a 90% payout of

comparable EPS.

Overall, after a period of unprecedented turbulence, 2023 was a year of stabilising and

transforming our operations. In March, we announced our new strategy and purpose with a Nordic

focus along with new financial and environmental targets.

One of our strategic priorities is to deliver reliable and clean energy. To ensure long-term

productivity and security of supply, we announced several projects in 2023 that enhance our best-

in-class operations, such as the Loviisa nuclear power plant lifetime extension until 2050 and

upgrades of the hydro power plants, for example Untra in Sweden. A hugely important event was

the start of commercial power generation of the Olkiluoto 3 nuclear power unit, of which Fortum

owns 25%. The construction of our Pjelax 380-MW wind farm, which is Finland's third largest,

progressed on time and within budget. Testing of power generation has started, and the wind farm

will be commissioned in the second quarter of 2024. The acquisition of Telge Energi, one of the 10

largest clean energy providers in Sweden, is a very good fit with our consumer business, and it

increases our consumer and enterprise customer base by 150,000. During the winter months,

Finland’s last coal

-fired condensing plant, Meri-Pori, has operated on a commercial basis to support

security of supply in the Nordic power market, but it will be transferred to production reserve for

emergency situations in March 2024.

Our second strategic priority is to drive decarbonisation in industries. Our aim is to offer clean and

stab

le power supply for our customers’ decarbonisation needs and to actively develop projects to

enable growth longer term to build new clean energy production in partnership with strategic

customers. In the scope of our nuclear feasibility study, we have partnered up and are exploring

potential cooperation opportunities with both technology suppliers as well as energy customers. The

support for nuclear power in Finland and Sweden is at a record high at the moment, and we are

engaging with both governments to discuss how the conditions for potential new nuclear could be

improved. During the year, we made a 225-million-euro investment decision related to the Espoo

Clean Heat programme and began the groundworks of the heat pump plant in Kirkkonummi. As part

of a unique collaboration project with Microsoft, we will capture sustainable waste heat from their

new data centres for use in our district heating. We also saw progress in our strategic target to build

a strong power purchase agreement (PPA) portfolio by signeingpower supply contracts with various

industrial customers; these contracts support decarbonisation of industries while also lowering risks

and contributing to stabilisation of earnings and cash flow from our outright power generation.

With our third strategic priority to transform and develop, we launched a new operating model and

business structure, appointed a new leadership team, completed a reorganisation and set up new core

governance processes. We are continuing to develop our culture and leadership to enable efficient

strategy execution. As Fortum is a much smaller company than it was a year ago, we need to adjust to

fit the new structure and purpose; therefore, we launched an efficiency improvement programme with

the target to gradually lower annual fixed costs by EUR 100 million until the end of 2025. To reach the

target, actions unfortunately also include personnel reductions. We are also addressing turnaround

actions for underperforming businesses as well as a rescoping of our focus areas.

Geopolitical tensions remained high during the year and,

unfortunately, Russia’s attack on

Ukraine and the full-blown war continued. In the second quarter, we closed the books on our

operations in Russia for good. Due to the Russian authorities’ unlawful seizure of our assets in

Russia, we lost control of our operations, impaired them in full and deconsolidated the Russia

segment. As Russia’s actions are a crude vi

olation of the international investment protection treaties

and deprive Fortum of its shareholder rights, we have sent notices of dispute to Russia and the

consequent arbitration proceedings are expected to be initiated in early 2024.

In the second half of 2023

, uncertainty in Fortum’s operating environment increased further.

Economic softness is widespread, with elevated inflation and interest rates that dampen the

investment sentiment across all sectors. One decisive factor for investments is abundant subsidies

available for non-economic decarbonisation projects, which seems to steer investments outside

Finland and the Nordics. As economic weakness is forecasted to continue in 2024, we will navigate

the uncertainty through our phased strategy execution. In the near term, we will sharpen our focus

and ensure optimisation of existing operations, especially our generation portfolio, as well as

manage business risks. At the same time, we are building preparedness for the electrification and

growth phase longer term. As one of the largest energy companies in the Nordics, we are in a

unique position. The Nordic power market as well as our power generation are already almost fully

decarbonised and clean with hardly any fossil production to be replaced. Together with our

customers, we are preparing for the growth phase and are ready to pave the way for

decarbonisation of other industries as well once demand picks up again.

The developments in the Nordic power market following the winter of 2022

–

23 crisis show that

high price volatility and even extreme price peaks have become the new normal. The main reason

is the increasing share of intermittent wind power and lower share of firm and flexible capacity in the

Nordic energy system. While the market works as it was designed to, the volatility was extreme as

the spot price was negative during 11 days in 2023 and reached a daily average of up to 900 euros

per megawatt hour on the harshest cold spell day in January 2024. An expectation of future rare

price peaks, however, will not be a sufficient incentive for merchant investments in new firm or

flexible capacity. On the contrary, induced fears could deter investments into electrification for

decarbonisation. It is evident that additional measures, such as capacity mechanisms or other

investment incentives, are needed to ensure security of electricity supply and to encourage

investments into industrial decarbonisation.

Changes in the reporting structure

Fortum reorganised its operating structure at the end of March 2023. The target of the new

organisation is the successful implementation of the company’s new vision and strategy. The new

organisation consists of the following business units: Corporate Customers and Markets, Nuclear

Generation, Hydro Generation, Renewables and Decarbonisation, Consumer Solutions, and

Circular Solutions.

Fortum revised its financial segment reporting to reflect the new business structure and strategy.

From 2023, Fortum reports its financial performance in the following reportable segments:

•

The Generation segment includes the Corporate Customers and Markets, Nuclear Generation,

Hydro Generation, and Renewables and Decarbonisation business units.

•

The Consumer Solutions segment includes the Consumer Solutions business unit.

•

The Other Operations segment includes the Circular Solutions business unit, innovation and

venturing activities, enabling functions and corporate management.

On 17 April 2023, Fortum published restated segment information for the year 2022 for the new

reportable segments.

Following the Presidential decree (No. 302), dated 25 April 2023, the Russian authorities seized

control of Fortum’s assets in Russia. Based on the control assessment,

Fortum lost control of its

Russian operations and the Russia segment was consequently deconsolidated on 25 April 2023

and reported as discontinued operations in 2023. On 11 May, to reflect the deconsolidation of the

Russian operations, Fortum published the restated comparative consolidated income statement,

consolidated statement of other comprehensive income, consolidated cash flow statement and

certain quarterly key ratios for the year 2022 and for the first quarter of 2023. The consolidated

balance sheet was not restated.

Following the signing of the agreement in principle with the German Government to divest Uniper,

Uniper was deconsolidated and reclassified as discontinued operations in the third quarter of 2022.

The transaction was completed in December 2022.

Fortum’s strategy

At the beginning of February 2024, the Fortum Board of Directors resolved on clarifications to

Fortum’s strategy,

see



Events after the balance sheet date.

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

Fortum’s strategic priorities are to deliver reliable clean energy and drive decarbonisation in

industries in the Nordics.

The financial and environmental targets were as follows:

•

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

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

–

2.5 times.

•

Disciplined growth in clean energy with revised capital expenditure of up to EUR 1.0 billion during

2023

–

2025 (revised on 2 November 2023 from up to EUR 1.5 billion).

•

Investment hurdles of project WACC + 150

–

400 basis points will be applied and evaluated

gainst the company’s climate and biodiversity targets.

•

Dividend policy with a payout ratio of 60

–

90% of comparable EPS.

•

Tightened environmental and decarbonisation ambitions with updated targets to reach carbon

neutrality already by 2030, exit coal by the end of 2027, target for specific emissions, and

commitment to SBTi (1.5°C) and biodiversity targets.

On 2 November 2023, Fortum initiated an efficiency programme to manage uncertainty in the

operating environment, to improve profitability and secure cash flows. With the efficiency

programme, Fortum targets to reduce its annual fixed costs by EUR 100 million gradually until the

end of 2025. The reduction of EUR 100 million corresponds to some 10% of the Group’s fixed costs

for the year 2022. The efficiency programme includes strategic prioritisation and assessment of

allocated resources as well as turnaround actions for underperforming businesses. Reaching the

programme’s targets is expected to require personnel reductions.

Financial results

Sales by segment

EUR million

2023

2022

Change

23/22

Generation

4,420

4,465

-1%

Consumer Solutions

3,766

4,578

-18%

Other Operations

548

589

-7%

Netting of Nord Pool transactions

-1,510

-2,312

Eliminations

-514

454

Total continuing operations

6,711

7,774

-14%

1) Sales and purchases with Nord Pool Spot are netted at the Group level on an hourly basis and posted either as revenue or cost depending

on whether Fortum is a net seller or net buyer during any particular hour.

Comparable EBITDA by segment

EUR million

2023

2022

Change

23/22

Generation

1,874

1,876

Consumer Solutions

108

173

-38%

Other Operations

-80

-23

-248%

Total continuing operations

1,903

2,025

-6%

Comparable operating profit by segment

EUR million

2023

2022

Change

23/22

Generation

1,679

1,629

Consumer Solutions

-61%

Other Operations

-173

-116

-49%

Total continuing operations

1,544

1,611

-4%

Operating profit by segment

EUR million

2023

2022

Change

23/22

Generation

2,058

2,128

-3%

Consumer Solutions

-215

-149

-44%

Other Operations

-181

-13

-1,292%

Total continuing operations

1,662

1,967

-16%

For further information see



Note 6

Sales decreased to EUR 6,711 (7,774) million, mainly due to lower electricity prices.

Comparable operating profit was EUR 1,544 (1,611) million. The earnings improvement of the

Generation segment was offset by the negative effects from the lower results in the Consumer

Solutions and Other Operations segments.

Operating profit for the period was impacted by EUR 118 (356) million of items affecting

comparability, mainly related to changes in fair values of non-hedge-accounted derivatives. In the

comparison period 2022, items affecting comparability included tax-exempt capital gains of EUR

638 million for the divestment of Fortum Oslo Varme, EUR 138 million from the divestments of the

Recharge and Plugsurfing businesses and EUR -376 million related to changes in fair values of

non-hedge-accounted derivatives (



Note 7

Comparable share of profits of associates and joint ventures was EUR 7 (-40) million (



Note 18

The share of profits of associates and joint ventures amounted to EUR 59 (-185) million, including

effects from nuclear waste-related provisions and nuclear waste funds in co-owned nuclear

companies of EUR 50 (-191) million.

Finance costs

–

net amounted to EUR -138 (-218) million. Finance costs

–

net includes interest

expenses on borrowings of EUR 286 (202) million and interest income on loan receivables and

deposits of EUR 153 (46) million. In 2023, the interest expenses relating to the bridge financing loan

provided by the Finnish state-owned holding company Solidium were EUR 41 (26) million.

Comparable finance costs

–

net amounted to EUR -137 (-170) million (



Note 11

Income taxes for the period totalled EUR -69 tax expense (520 tax income) million. In 2023, income

taxes included EUR 225 million relating to the one-time positive tax impacts, mainly recognised in

Ireland and in the Netherlands, due to the impairment of the Russian assets. In 2022, the income tax

expense included EUR 746 million relating to a one-time tax impact realised in Ireland mainly due to

the Uniper divestment. The comparable effective income tax rate was 19.1% (21.9%) (



Note 12

Net profit was EUR 1,515 (2,084) million and comparable net profit was EUR 1,150 (1,076)

million. Comparable net profit is adjusted for items affecting comparability, adjustments to the share

of profit of associates and joint ventures, finance costs

–

net, income tax expenses and non-

controlling interests (



Note 7.2

Earnings per share for continuing operations were EUR 1.68 (2.34). Comparable earnings per

share for continuing operations were EUR 1.28 (1.21) (



Note 7

and



Note 13

Financial position and cash flow

EUR million

2023

2022

Change

23/22

Interest expense

-269

-200

-35%

Interest income

165

120%

Other financial expenses - net

-34

-93

63%

IS Finance costs - net

-138

-218

37%

Financial net debt

942

1,084

-13%

Cash flow

Net cash from operating activities was impacted by the strong comparable EBITDA and positive

change in working capital, partly offset by higher paid income taxes. Net cash from operating

activities, EUR 1,710 million, remained on the same level as in the comparison period.

Net cash from investing activities, EUR 1,433 (1,818) million, was positively impacted by the

significant decrease in margin receivables of EUR 2,024 (increase 1,311) million. Capital

expenditure amounted to EUR 576 (479) million. Divestment of shares and capital returns in the

2022 comparison period, EUR 1,156 million, mainly include the divestment of the 50% ownership in

the district heating company Fortum Oslo Varme AS in Norway. The comparison period also

includes the EUR 1,500 million payment to Uniper from Fortum’s granted shareholder loan. In

December 2022, when Fortum sold its ownership in Uniper and the transaction was closed, Uniper

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

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

operations in 2022.

Net cash used in financing activities was EUR -2,640 (-4,684) million. The net repayments in

interest-bearing liabilities were EUR 1,622 (3,634) million, while the change in margin liabilities was

EUR -221 (150) million. The first dividend instalment of EUR 413 million was paid on 24 April 2023

(1,013) and the second instalment of EUR 404 million was paid on 10 October 2023.

Liquid funds increased by EUR 503 (decrease 1,148) million.

Cash flow from discontinued operations in 2023 include Russia-related cash flows from 1.1.-

31.3.2023 netted with liquid funds of EUR 284 million lost through the seizure of the Russian assets.

Liquid funds at the beginning of the period, EUR 3,919 million, included liquid funds of EUR 247

million held by the Russia segment.

For further details, see the ‘Financing’ section below.

Assets

At the end of 2023, total assets amounted to EUR 18,739 (23,642) million. The change from

December 2022 was mainly related to the deconsolidation of the Russian assets during April 2023,

lower fair values of derivative financial instruments, and reduced margin receivables. At the end of

2023, net margin receivables amounted to EUR 459 (2,255) million.

Equity

Total equity amounted to EUR 8,499 (7,737) million. Equity attributable to owners of the parent

company totalled EUR 8,438 (7,670) million. Equity was negatively impacted by the net loss for the

year of EUR -2,069 million and the dividend of EUR 817 million approved by the Annual General

Meeting in April 2023. In addition to the profit from continuing operations for the year, the net loss

for the year includes the full write-down of the Russian assets of EUR 1.7 billion, and EUR 1.9

billion negative cumulative translation differences previously recognised in equity. These cumulative

translation differences were recycled from equity to the income statement, due to the

deconsolidation according to IFRS, and did not impact total equity. Equity was positively impacted

by the fair valuation of cash flow hedges of EUR 1,860 million.

A dividend for 2022 of EUR 0.91 per share, amounting to a total of EUR 817 million, was

approved by the Annual General Meeting on 13 April 2023. The first dividend instalment of EUR

0.46 per share, totalling EUR 413 million, was paid on 24 April 2023. The second dividend

instalment of EUR 0.45, amounting to a total of EUR 404 million, was paid on 10 October 2023.

Financing

In 2023, commodity prices trended down and the extreme volatility decreased. Due to the declining

prices and the consequent release of cash collaterals in combination with the financing measures

taken during 2023, the Group’s financial position is very solid. At the end of December, the ratio for

financial net-debt-to comparable EBITDA for continuing operations was very low, at 0.5 times.

At the end of 2023, financial net debt was EUR 942 (1,084) million. Fortum’s total interest

-bearing

liabilities were EUR 5,909 (7,785) million and liquid funds amounted to EUR 4,183 (3,919) million.

The first dividend instalment, EUR 413 million, was paid on 24 April 2023 and the second

instalment, EUR 404 million, on 10 October 2023.

In January 2023, Fortum repaid the drawn amount EUR 600 million of its Liquidity revolving credit

facility and a EUR 1,000 million maturing bond was repaid in February 2023. In March 2023, Fortum

repaid the drawn amount of EUR 350 million and cancelled the entire EUR 2,350 million Finnish State

bridge loan facility.

In May 2023, Fortum successfully returned to the fixed income markets by issuing a dual-tranche

bond with a five-year tranche of EUR 500 million carrying a fixed coupon of 4% and a ten-year

tranche of EUR 650 million carrying a fixed coupon of 4.5%. Consequently, Fortum repaid the final

drawn amount of EUR 500 million of its Liquidity revolving credit facility in May and the SEK 1,000

million bond in June.

In June 2023, Fortum cancelled EUR 2,100 million of the total EUR 3,100 million Liquidity

revolving credit facility, and the six-month extension option was used for the remaining facility of

EUR 1,000 million with new maturity in December 2023. Fortum renewed its maturing drawn bullet

loan of EUR 500 million to a new maturity date in February 2025. At the end of June, the remaining

parent company guarantee facility of approximately EUR 1 billion granted to Uniper was released.

In December 2023, the Liquidity revolving credit facility of EUR 1,000 million matured, as Fortum

did not use the six-month extension option. Additionally, a one-

year borrowers’ extension option

was agreed on for the EUR 500 million bullet loan.

Current loans, including EUR 717 million of the current portion of long-term loans, amounted to

EUR 1,316 million. Short-term loans, EUR 599 million, include EUR 418 million of collateral

arrangements and use of commercial paper programmes of EUR 174 million (



Note 26

The

nuclear waste fund loans amounted to EUR 951 million (



Note 26

At the end of 2023, Fortum had undrawn committed credit facilities of EUR 3,200 million,

including the Core revolving credit facility of EUR 2,400 million (maturity in June 2025 with a

maximum two-year extension option by the lenders) and the bilateral EUR 800 million revolving

credit facility (maturity in June 2025 with a one-year extension option by the lender). In addition,

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

On 9 March 2023

, S&P Global Ratings affirmed Fortum’s current BBB long

-term credit rating and

revised the outlook from negative to stable.

On 21 March 2023,

Fitch Ratings affirmed Fortum’s long

-term credit rating at BBB and revised

the outlook from negative to stable.

Change in financial net debt during 2023, EUR million

Operating environment

European power markets

In Continental Europe, the autumn was milder than normal, which helped the gas and power

markets to continue on the downward development that characterised the whole year 2023. In the

Nordics, however, on a yearly level, the average temperature was only slightly above normal levels,

and in the fourth quarter, the weather turned cold and dry. This, together with below normal wind

conditions, led to a rapidly decreasing reservoir balance; Nordic spot prices consequently recovered

by the end of the year from the lower levels seen previously during the year.

According to preliminary statistics, power consumption in the Nordic countries was 386 (386) TWh.

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

Netherlands), power consumption in 2023 was 1,272 (1,322) TWh according to preliminary

statistics. Power demand in Continental Europe continued to be clearly below the five-year average,

affected by energy conservation measures and mild winters.

At the end of 2023, the Nordic hydro reservoirs were at 77 TWh, which is 7 TWh below the long-

term average and 2 TWh lower than in the previous year.

For 2023, the average system spot price in Nord Pool was EUR 56 (136) per MWh. The average

area price in Finland was EUR 56 (154) per MWh, in the SE3 area in Sweden (Stockholm) EUR 52

(129) per MWh, and in the SE2 area in Sweden (Sundsvall) EUR 40 (62) per MWh. In Germany, the

average spot price during 2023 was EUR 95 (235) per MWh.

In early February, the Nordic system electricity forward price on Nasdaq Commodities for the

remainder of 2024 was around EUR 45 per MWh and for 2025 around EUR 41 per MWh. The

Nordic water reservoirs were at 63 TWh, which is about 9 TWh below the long-term average and 5

TWh lower than one year earlier. The German electricity forward price for the remainder of 2024

was around EUR 74 per MWh and for 2025 around EUR 81 per MWh.

European commodity markets

Gas demand in Central Western Europe was 1,715 (1,867) TWh in 2023. The Central Western

European gas storage levels increased from 532 TWh at the beginning of the year to 559 TWh at

the end of the year, which is 27 TWh higher than one year ago and 101 TWh higher than the five-

year average (2018

–

2022).

The average gas front-month price (TTF) for 2023 was EUR 41 (133) per MWh. The 2024

forward price decreased from EUR 78 per MWh at the beginning of the year to EUR 34 per MWh at

the end of the year.

The EUA (EU Allowance) price decreased from EUR 86 per tonne at the beginning of the year to

EUR 80 per tonne at the end of the year. The average EUA price for full-year 2023 was EUR 85 per

tonne.

The forward quotation for coal (ICE Rotterdam) for 2024 decreased from USD 173 per tonne at

the beginning of the year to USD 98 per tonne at the end of the year.

In early February, the TTF forward price for gas for the remainder of 2024 was EUR 31 per MWh.

The forward quotation for EUAs for 2024 was at the level of EUR 63 per tonne. The forward price

for coal (ICE Rotterdam) for the remainder of 2024 was USD 95 per tonne.

Power consumption

TWh

2023

2022

2021

Nordic countries

386

402

Average prices

2023

2022

2021

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

56.4

135.9

62.3

Spot price for power in Finland, EUR/MWh

56.5

154.0

72.3

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

51.7

129.2

66.0

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

40.0

61.9

42.6

Spot price for power in Germany, EUR/MWh

95.2

235.4

96.8

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

Coal (ICE Rotterdam front month), USD/tonne

125

279

117

Oil (Brent front month), USD/bbl

Gas (TTF front month), EUR/MWh

133

Hydro reservoir

TWh

31 Dec 2023

31 Dec 2022

31 Dec 2021

Nordic hydro reservoir level

Nordic hydro reservoir level, long-term average

Nordic water reservoirs, energy content, TWh

Export/import Nordic area

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

2023

2022

2021

Export/import between Nordic area and Continental Europe+Baltics

-41

-35

-29

Export/import between Nordic area and Russia

Total

-41

-31

-20

Regulatory environment

EU institutions reached an agreement on the revised EU electricity

market design

On 13 December 2023, the European Council and the Parliament reached a final agreement on the

European market design legislation at a record speed of nine months of negotiations. The revised

market design framework is putting forth a large array of de-risking instruments ranging from state-

backed power purchase agreements, two-way contracts for difference (CfD) or equivalent, capacity

remuneration mechanisms (CRMs) to other forms of support including targeted investment aid to

counter-balance the volatility of energy prices. Fortum welcomes the revised framework which is

expected to facilitate clean energy investments needed for the energy transition whilst providing

more predictable prices to electricity consumers.

The majority of the provisions contained in this regulation will be applicable six months after its

entry into force.

Agreement reached on the decarbonised gas market package

In December 2023, the European Parliament and the Council reached a final agreement on the

hydrogen and decarbonised gas market package which establishes internal market rules and

enables conditions for renewable and natural gas, including hydrogen.

A general definition for low-carbon hydrogen is introduced, but the detailed methodology for

calculating the emission reduction will not be presented until 2025. Until this secondary

legislation is available, labelling or certifying low-carbon hydrogen in particular based on nuclear

power will not be possible, and public funding instruments will not be available for projects

producing low-carbon hydrogen, thus leaving mainly renewable fuels of non-biogenic origin

(RFNBO) eligible for public funding.

The official endorsement of the regulation is expected in March 2024, and it will enter into force

six months after the official publication.

Nature restoration regulation trilogues finalised

In November 2023, the European Parliament and Council reached a provisional political agreement

on the EU nature restoration regulation. The regulation combines an overarching restoration

objective for the long-

term recovery of nature in the EU’s land and

sea areas with binding

restoration targets for specific habitats and species. EU countries will be obliged to submit National

Restoration Plans to the Commission on how they will deliver on the targets.

The impacts of the regulation on Fortum’s hydro powe

r assets will depend on the national

implementation.

Swedish nuclear waste fund fees to be recalculated

On 21 December 2023, the Swedish Government decided on the nuclear waste fund fees for a

one-year period covering 2024 instead of the earlier three-year period.

Swedish roadmap for new nuclear investments published

On 16 November 2023, the Swedish Government published its roadmap for new nuclear. The aim

is to promote investments to provide long-term predictability especially through credit guarantees

totalling EUR 35 billion and a long-term risk-sharing model between the Swedish state and

companies. According to the roadmap, new nuclear capacity equivalent to two large-scale reactors

(totalling 2,500 MW) shall be commissioned by 2035 and new capacity equivalent to ten reactors by

2045. A specific nuclear coordinator from the energy industry has been appointed to identify

needed actions and to summon all relevant stakeholders.

Segment reviews

Business model

Fortum reorganised its operating structure at the end of March 2023, and has three business

reporting segments: Generation, Consumer Solutions and Other Operations. The target of the new

organisation is successful implementation of the company’s new purpose and strategy. The new

business

structure mirrors the key value drivers in Fortum’s clean generation portfolio, strong sales

and trading capabilities as well as customer orientation.

Generation segment

The Generation segment consists of the Hydro Generation, Nuclear Generation, Corporate

Customers and Markets and Renewables and Decarbonisation business units.

Hydro Generation

The Hydro Generation business unit is responsible for operating, maintaining and developing

Fortum’s 4.7 gigawatt (GW) hydropower assets. The unit’s key value driver

s include safe operations

and the ability to optimise and increase the assets’ flexibility and availability.

Nuclear Generation

The Nuclear Generation business unit operates, maintains and develops Fortum’s fully

-owned 1.0

GW Loviisa nuclear power plant,

and it manages Fortum’s ownership in the co

-owned nuclear

assets in Finland and Sweden with a share of 2.2 GW. The business has significant in-house

engineering competencies and it also offers expert services that cover the whole lifecycle of nuclear

power plants, from newbuilds to decommissioning and final disposal of nuclear waste.

Corporate Customers and Markets

The Corporate Customers and Markets business unit is responsible for hedging and value creation

in both physical and financial power markets, l

ocking in revenues for Fortum’s power generation

and managing the supply for the Consumer Solutions unit. The unit also serves as the customer

interface for large industrial customers and thereby pursues long-term value through power demand

creation in the Nordic market.

Renewables and Decarbonisation

The Renewables and Decarbonisation business unit is responsible for onshore wind and solar power

business through project development and execution. The unit is also responsible for Fortum’s district

heating and cooling business and the decarbonisation of heat production assets. Furthermore, the

business unit explores projects in clean hydrogen in the Nordics.

Consumer Solutions segment

The Consumer Solutions segment includes the Consumer Solutions business unit, which is

responsible for offering energy solutions to consumers and small and medium-sized enterprises

predominantly in the Nordics and Poland, including customer service and invoicing services. With

its over 2 million customers, Fortum is the largest energy solutions provider in the Nordics.

Other Operations segment

The Other Operations segment includes the Circular Solutions business comprising the recycling

and waste business, turbine and generator services and biobased solutions. These businesses are

not in the core of Fortum’s new strategy. In August 2023, Fortum announced that it had decided to

assess strategic options, including potential divestments, of its Circular Solutions businesses. In

addition Other Operations include innovation and venturing activities, enabling functions and

corporate management. Fortum’s enabling functions are Finance, Sustainability and Corporate

Relations, People and Procurement, Legal & Compliance, and Transformation and IT.

Generation

Generation is responsible for power generation mainly in the Nordics. The segment comprises CO

free hydro, nuclear, wind and solar power generation, as well as district heating and cooling, and

decarbonisation of heat production assets. The Generation segment is responsible for hedging and

value creation both in physical and financial power markets and is a customer interface for industrial

and municipal customers to drive decarbonisation of industries and provide clean energy at scale.

Furthermore, the business develops capabilities and projects in renewables and nuclear and

explores clean hydrogen.

EUR million

2023

2022

Change

23/22

Reported

Sales

4,420

4,465

-1%

- power sales

3,889

3,802

of which Nordic outright power sales

2,799

2,461

14%

- heat sales

481

499

-4%

- waste treatment sales

-63%

- other sales

144

-70%

Operating profit

2,058

2,128

-3%

Share of profits of associates and joint ventures

-178

133%

Capital expenditure and gross investments in shares

454

316

44%

Number of employees

1,758

1,660

EUR million

2023

2022

Change

23/22

Comparable

EBITDA

1,874

1,876

Operating profit

1,679

1,629

Share of profits of associates and joint ventures

-34

121%

Return on net assets, %

24.2

23.2

Net assets (at period-end)

7,263

6,597

10%

1) Nordic outright power sales includes hydro and nuclear generation. It does not include CHP and condensing power generation, minorities,

customer business or other purchases.

2) Power plants are often built jointly with other power producers, and owners purchase electricity at cost including interest cost and

production taxes. The share of profit/loss is mainly IFRS adjustments (e.g. accounting for nuclear-related assets and liabilities) and

depreciations on fair-value adjustments from historical acquisitions (



Note 18

The Generation segment’s total power generation increased compared to 2022. Nuclear generation

increased due to commissioning and power generation of TVO’s third Olkiluoto power plant unit

OL3. Hydro generation increased, mainly due to higher water inflow compared to the second half of

2022. The segment’s overall operational performance and load factor for nuclear generation

remained at a good level. CO

-free generation accounted for 98% of total power generation. Power

and heat generation of CHP and condensing power declined due to warmer weather during the

year. Structural changes following the divestment of the 50% ownership in the district heating

company Fortum Oslo Varme AS in Norway in 2022 also had a negative impact.

The achieved power price increased by EUR 3.2 per MWh, up by 5%, and was all time high at

EUR 63.1 per MWh. The main reason for the increase in the achieved power price was the higher

hedge price, the effect of which was partly offset by the lower result from physical optimisation. In

2022 the physical optimisation was exceptionally high mainly due to extremely high volatility and

higher power prices. While the spot power price decreased by 59% in the Generation segment’s

power generation areas, the negative result effect from the lower spot price on the achieved power

price was more than offset by the fairly high hedge levels and the higher hedge price.

The 3% improvement in the comparable operating profit derived from the higher achieved power

price, higher hydro volumes and lower depreciations due to the lifetime extension of the Loviisa

nuclear power plant (



Note 6

). This was partly offset by lower generation of condensing power

(Meri-Pori) as well as higher costs related to co-owned production companies. The renewables and

decarbonisation businesses were clearly loss-making. The result of the district heating business

was negatively impacted by higher power prices, higher fuel and CO

emission allowance prices,

partly offset by lower fixed costs. The comparison period of 2022 also included approximately EUR

36 million from the divested Norwegian district heating operations and tax-exempt sales gain of

EUR 9 million from the divestment of the 250-MW Rajasthan solar plant in India (



Note 6

Operating profit was affected by EUR 380 (499) million of items affecting comparability, related to

the fair value change of non-hedge-accounted derivatives. In 2022, items affecting comparability

included tax-exempt capital gains of EUR 638 million for the divestment of Fortum Oslo Varme and

EUR -130 million related to changes in fair values of non-hedge-accounted derivatives. (



Note 6

Comparable share of profits of associates and joint ventures totalled EUR 7 (-34) million (



Note 6

and



Note 18

), impacted by inflation adjustments in Swedish nuclear waste-related provisions in

co-owned nuclear companies.

On 16 February 2023, the Finnish Government granted a new operating licence for both units at

Fortum’s Loviisa nuclear power plant until the en

d of 2050. On 21 December, Fortum submitted a

statement to the Ministry of Economic Affairs and Employment on the procurement arrangements of

fresh nuclear fuel, as stipulated by the new operating license. Over the course of the new licence

period, the plant is expected to generate up to 170 terawatt hours of CO

-free electricity.

Investments related to the continuation of operations and lifetime extension will amount to an

estimated EUR 1 billion during 2023

–

2050. Over the past five years, Fortum has already invested

approximately EUR 200 million in refurbishing the Loviisa power plant. In November 2022, Fortum

and Westinghouse Electric Company signed an agreement for the design and supply of a new fuel

type for the Loviisa power plant. In addition to Westinghouse, Fortum is exploring the capabilities of

an alternative western fuel supplier to develop a compatible fuel type for the Loviisa nuclear power

plant to secure the fuel supply.

On 30 March 2023, Fortum received the licence from the Finnish Government to operate the final

disposal facility for low- and intermediate-level radioactive waste until the end of 2090. The facility,

operational since 1998, is located 110 metres underground on the Loviisa nuclear power plant site.

The spent fuel generated at th

e Loviisa power plant will eventually be deposited in Posiva’s final

disposal facility for spent nuclear fuel, jointly owned by Fortum and Teollisuuden Voima (TVO).

On 16 April 2023

, after a test generation phase, regular electricity generation of TVO’s th

ird

Olkiluoto nuclear power plant unit (OL3) in Finland started and the commercial operation of the

plant began on 1 May.

The total capacity of OL3 is approximately 1,600 MW (Fortum’s share is

approximately 400 MW), and it will produce approximately 14% of

Finland’s total electricity

consumption.

In 2023, Fortum’s annual share of OL3 regular electricity generation was

approximately 2.6 TWh. On 10 October, TVO announced that the company had initiated an

environmental impact assessment (EIA) procedure concerning the possible operating licence

extension and potential power uprating of the Olkiluoto 1 (OL1) and Olkiluoto 2 (OL2) plant units. At

the moment, the plant units are licensed until 2038.

In October 2022, Fortum 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. The feasibility study will also explore the potential for service business

offerings for new projects in Europe and hydrogen for industrial applications. Potential ventures in

the nuclear industry will most likely involve partnership constellations. In late 2022 and during 2023,

Fortum announced the exploration of potential cooperation opportunities regarding nuclear with the

Finnish energy company Helen, the French Electricité de France (EDF), the Swedish Kärnfull Next

AB, the British Rolls-Royce SMR, the Finland-based stainless steel company Outokumpu, the

Korea Hydro & Nuclear Power Co. (KHNP), the American Westinghouse Electric Company and the

Swedish Studsvik. Any potential investment decisions would be made at a later stage.

On 5 June 2023, Fortum and the steel company SSAB announced the launch of a joint commercial

feasibility study and technical Front End Engineering Design (FEED) study to explore the possibilities

of producing hydrogen-reduced fossil-free sponge iron in Raahe, Finland. In October, SSAB and

Fortum jointly concluded that it is not possible to find a commercial arrangement that would work for

both parties given the existing preconditions. The FEED study was consequently concluded.

On 15 June 2023, Fortum announced the start of the design of a small-scale hydrogen pilot plant

in Loviisa, Finland, piloted for industrial customer use.

On 20 June 2023, Fortum announced that it is starting to develop an 80 MW industrial-scale solar

power project in Virolahti. The project is Fortum

’

s first solar power development project in Finland. On

25 August, the company announced it is investigating the possibility of a 90-MW solar park in

Havdhem, in southern Gotland. In line with its strategy, Fortum is exploring possibilities for growth in

renewable power in the Nordics. The permit processes for a solar park in Finland and Sweden take 1

–

3 years; after a possible investment decision, the construction is expected to take about a year.

On 21 June 2023, Fortum announced that it had decided to invest approximately EUR 225 million

during 2023

–

2027 in projects within the Espoo Clean Heat programme to drive decarbonisation and

build sustainable waste heat solutions in the Helsinki metropolitan area. The total capital

expenditure of the Espoo Clean Heat programme amounts to approximately EUR 300 million.

During 2023, EUR 31 million of these investments materialised.

For further details, see the ‘Capital

expenditures’ section.

On 29 September 2023, Fortum announced that it will invest over SEK 700 million (over EUR 60

million) during 2023

–

2030 to modernise Untra, one of Sweden

’

s oldest hydropower plants. For

further details, see the ‘Capital expenditures’ section.

On 5 October 2023, Fortum announced that it had signed a 13-year fixed price Power Purchase

Agreement (PPA) with the Norwegian aluminium and renewable energy company Hydro Energi AS

for the delivery of 0.44 TWh of electricity per annum in Sweden. The power is sourced from

Fortum’s electricity portfolio in the SE2

(Sundsvall) price area in central Sweden. The contract

period is 2024

–

2036.

On 30 October 2023, Fortum announced that it had signed an agreement

with Finland’s

National

Emergency Supply Agency, Huoltovarmuuskeskus (NESA) under which NESA reserves the

production of the Meri-Pori coal condensing power plant for severe disruptions and emergencies to

guarantee security of supply in the electricity system in Finland. The agreement period is from 1

March 2024 until 31 December 2026. Over the coming winter months, the Meri-Pori power plant will

operate on a commercial basis to support security of supply in the Nordic power market.

Power generation by source

TWh

2023

2022

Change

23/22

Hydropower, Nordic

20.9

19.1

Nuclear power, Nordic

24.8

23.4

Wind power, Nordic

0.1

100%

CHP and condensing power

1.0

1.5

-33%

Total

46.8

44.1

1) CHP and condensing power generation in Finland, Poland and Norway. Norwegian district heating company Fortum Oslo Varme is

included in the comparison figures for 2022. The 50% ownership in Fortum Oslo Varme was divested in 2022.

Nordic sales volume

TWh

2023

2022

Change

23/22

Power sales volume, Nordic

62.6

51.7

21%

of which Nordic outright power sales volume

44.4

41.1

Power sales volume, Other

0.6

3.1

-81%

Heat sales volume, Nordic

2.1

3.1

-32%

Heat sales volume, Other

3.4

3.5

-3%

1) The Nordic outright power sales volume includes hydro and nuclear generation. It does not include CHP and condensing power

generation, minorities, customer business or other purchases.

Achieved power price

EUR/MWh

2023

2022

Change

23/22

Generation

’

s Nordic achieved power price

63.1

59.9

Generation’s Nordic achieved power price includes hydro and nuclear generation.

It does not include thermal generation, minorities,

customer business or other purchases.

Nord Pool, power price, 2019

–

2023, EUR/MWh

Consumer Solutions

Consumer Solutions is responsible for offering energy solutions to consumers including small- and

medium-sized enterprises predominantly in the Nordics and Poland. Fortum is the largest energy

solutions provider across different brands in the Nordics, with over two million customers. The business

provides electricity, as well as related value-added and digital services, mainly to retail customers.

EUR million

2023

2022

Change

23/22

Reported

Sales

3,766

4,578

-18%

- power sales

3,219

4,026

-20%

- gas sales

422

392

- other sales

125

161

-22%

Operating profit

-215

-149

-44%

Capital expenditure and gross investments in shares

103

45%

Number of employees

1,281

1,179

EUR million

2023

2022

Change

23/22

Comparable

EBITDA

108

173

-38%

Operating profit

-61%

Return on net assets, %

4.5

9.1

-51%

Net assets (at period-end)

838

1,365

-39%

The electricity sales volume increased by 11% and the gas sales volume in Poland increased by

8% in 2023. As electricity and gas prices declined consumption patterns normalised during the

third and fourth quarter, and consumers less actively targeted consumption to off-peak hours.

Total sales revenue decreased by 18%, mainly due to lower average electricity and gas prices in

Nordics and Poland.

Comparable operating profit decreased by EUR 59 million and was EUR 38 million, mainly due to

lower sales margins partly offset by higher gas sales margins and lower fixed costs. The lower

electricity sales margins were mainly the result of losses due to customer outflow in certain hedged

customer contracts in very volatile and high-price market conditions, especially during the first half

of the year. The regulated Polish power price cap for 2023 set for end users by the Polish

Government also had a negative impact on comparable operating profit.

Compared to the end of 2022, the number of customers increased by approximately 140,000,

mainly due to the acquisition of Telge Energi AB.

Especially during the first half of the year, Fortum continued to develop its product portfolio to

meet its customers’ needs and to help support them in managing the exceptional market situation of

unprecedentedly high and volatile power prices. Fortum continues to offer advice on electricity

conservation and encourages smart consumption, such as shifting consumption away from peak-

hours to support the energy system. Fortum also offers support to customers on how to more

actively manage invoices and provides flexible payment plans.

On 31 August 2023, Fortum completed the acquisition of the Swedish electricity solutions

provider Telge Energi AB from Telge AB. The total consideration for the entire shareholding in

Telge Energi on a cash and debt-free basis was approximately SEK 450 million (EUR 39 million).

The transaction was originally announced on 7 June.

Sales volumes

TWh

2023

2022

Change

23/22

Electricity

33.0

29.6

11%

Gas

5.2

4.8

1) Not including wholesale volumes.

Number of customers

Thousands

2023

2022

Change

23/22

Electricity

2,290

2,130

E-mobility

-14%

Gas

Total

2,380

2,240

1) Rounded to the nearest 10,000.

2) Measured as quarterly paying customers.

Other Operations

The Other Operations segment includes the Circular Solutions business, which is responsible for

operating, maintaining and developing Fortum’s recycling and waste assets, as well as turbine and

generator services and biobased solutions. The Other Operations segment also comprises

innovation and venturing activities, enabling functions and corporate management.

EUR million

2023

2022

Change

23/22

Reported

Sales

548

589

-7%

- power sales

-63%

- heat sales

11%

- waste treatment sales

226

219

- other sales

281

318

-12%

Operating profit

-181

-13

-1,292%

Share of profits of associates and joint ventures

-7

100%

Capital expenditure and gross investments in shares

107

111

-4%

Number of employees

2,186

2,149

EUR million

2023

2022

Change

23/22

Comparable

EBITDA

-80

-23

-248%

Operating profit

-173

-116

-49%

Share of profit/loss of associates and joint ventures

-7

100%

Comparable operating profit decreased by EUR 57 million and amounted to EUR -173 million,

mainly due to lower results in the recycling and waste and battery businesses, including higher

costs largely arising from the expansion of the battery recycling business, write-downs of certain IT

projects, development costs for the new operating model and higher costs in enabling functions.

The comparison period included structural changes in the Circular Solutions business and one-time

positive impacts from changes in pension

fund arrangements in Sweden affecting the Group’s

enabling functions.

On 4 August 2023, Fortum announced that the company had decided to assess strategic options,

including potential divestments of its Circular Solutions businesses, as a result of the continuous

review of its business portfolio. In March 2023 when Fortum launched its new strategy, it was

communicated that the Circular Solutions businesses are not in the core of the strategy. The

Circular Solutions businesses are responsible for operating, m

aintaining and developing Fortum’s

recycling and waste assets, as well as turbine and generator services and biobased solutions. For

further details, see the ‘Capital expenditures’ section.

Discontinued operations (Russia and Uniper)

EUR million

2023

2022

Change

23/22

Sales

287

129,126

-100%

Comparable operating profit

-4,487

102%

Operating profit

-3,521

-17,091

79%

Net profit from discontinued operations

-3,582

-12,374

71%

Net profit from discontinued operations, attributable to the owners

of the parent

-3,583

-4,496

20%

Net cash from/used in operating activities

109

-10,484

101%

On 25 April 2023

, Fortum’s subsidiary PAO Fortum (Fortum JSC) was put under asset management

based on a Russian

Presidential decree that introduced a “temporary” asset management to assets

owned by certain foreign entities in Russia. On 26 April 2023, PAO Fortum announced that this

caused a replacement of the company’s CEO, and the Russian State Property Management,

Rosimushchestvo, seized control of Fortum’s assets in Russia and deprived Fortum of its

shareholder rights. Fortum no longer has control of its Russian operations and the Russia segment

was deconsolidated in 2023. Further, Fortum recorded impairments of EUR 1.7 billion (full book

value) and deconsolidation-related negative cumulated foreign exchange translation differences of

EUR 1.9 billion.

The impairments of EUR 1.7 billion negatively impacted the Group equity. However, the negative

cumulative translation differences of EUR 1.9 billion were only reclassified within equity and

recycled through the income statement as required by IFRS, having no impact on equity.

In order to protect its legal position and shareholder interests, Fortum will seek compensation

through arbitration, in particular for the value of its shares in PAO Fortum and its investments in

Russia, and has sent notices of dispute due to the Russian Federation’s violations of its investment

treaty obligations under the Bilateral Investment Treaties that the Russian Federation has

concluded with the Netherlands and Sweden. These notices of dispute are the first step required in

arbitration proceedings, which are expected to be initiated in early 2024.

The Uniper segment is included in the comparison figures for 2022, as it was deconsolidated and

reclassified as discontinued operations in September 2022 following the signing of the agreement in

principle with the German Government to divest Uniper. The transaction was completed in

December 2022. For further information see



Note 1,



Note 2,



Note 3

and



Note 19

Capital expenditures, divestments and investments in

EUR million

2023

2022

Change

23/22

Capital expenditure

Intangible assets

11%

Property, plant and equipment

520

384

35%

Total

611

467

31%

Gross investments in shares

Subsidiaries

100%

Associated companies and joint ventures

20%

Other investments

Total

83%

In 2023, capital expenditures and investments in shares totalled EUR 664 (496) million. Capital

expenditures were EUR 611 (467) 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

Heat

capacity

Supply

starts/

started

Generation

Pjelax-Böle and Kristinestad Norr, Finland

Wind

380

Q2/2024

Loviisa, Finland

Nuclear

Lifetime extension

Espoo and Kirkkonummi, Finland

Waste heat utilisation

360

Q4/2025

Untra, Sweden

Hydro

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

approximately SEK 650 million (approximately EUR 59 million) during 2021

–

2025. This investment

guarantees safe operation of the 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 farm in Närpes and Kristinestad in Finland in partnership with the

Finnish energy company Helen Ltd. Construction started in January 2022, and the wind farm is

expected to be fully operational in the second quarter of 2024 at the latest. The construction project is

progressing according to plan, and the testing of power generation at the wind farm started in October

2023. Fortum has a 60% majority and Helen a 40% minority ownership in the project; Fortum

consolidates the investment on its balance sheet. The total capital expenditure of the project is

approximately EUR 360 million, of which Fortum’s share is appro

ximately EUR 216 million.

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

-free electricity.

Investments related to the continuation of operations and lifetime extension will amount to an

estimated EUR 1 billion during 2023

–

2050. Over the past five years, Fortum has already invested

approximately EUR 200 million in refurbishing the Loviisa power plant. The Loviisa power plant is

the first nuclear power plant in Finland and has two units: unit 1 started operating in February 1977,

and unit 2 in November 1980.

On 21 June 2023, Fortum announced that it had decided to invest approximately EUR 225 million

during 2023

–

2027 in projects within the Espoo Clean Heat programme to drive decarbonisation and

build sustainable waste heat solutions in the Helsinki metropolitan area. The total capital

expenditure of the Espoo Clean Heat programme amounts to approximately EUR 300 million.

During 2023, EUR 31 million of these investments materialised. Fortum’s district heat in Finland will

be coal-free already in 2025 and carbon-neutral before 2030. In March 2022, Fortum and Microsoft

announced cooperation on waste heat. A significant part of the programme’s targets can be

achieved by utilising waste heat from Microsoft’s planned large

-scale data centres that will be built

in Espoo and Kirkkonummi. The investment includes building heat pump plants on the Espoo and

Kirkkonummi sites for waste heat recovery and approximately 15 km of new or upgraded district

heating main pipeline. Construction of Fortum’s sustainable heat solutions on the Kirkkonummi site

began in September 2023. Heat production with air-to-water heat pumps and electric boilers at the

sites in Kirkkonummi and Espoo is expected to start in the heating season of 2025

–

2026. The

district heat production capacity is expected to be approximately 180 MW per site, producing a total

of approximately 1.4 TWh annually by utilising Microsoft Kirkkonummi and Espoo data centres’

waste heat, air-to-water heat pumps and electric boilers.

On 29 September 2023, Fortum announced that it will invest over SEK 700 million (over EUR 60

million) during 2023

–

2030 to modernise Untra, one of Sweden's oldest hydropower plants. After the

modernisation, the power plant will have an output of 48 MW. The renovation will involve the

replacement of three turbine units and a significant restructuring of the power plant, all aimed to

ensure Untra's ability to provide flexibility to the power system and to supply fossil-free electricity to

Sweden. With the advanced turbine technology, the annual electricity production will increase from

270 GWh to approximately 300 GWh. Of the total investment, approximately half is classified as

growth capital expenditure. Approximately EUR 15 million of the investment is already included in

Fortum’s committed growth capital expenditure of EUR 800 million

for the years 2023

–

2025.

Consumer Solutions

On 7 June 2023, Fortum announced that the company had agreed to acquire the entire

shareholding in the Swedish electricity solutions provider Telge Energi AB on a cash and debt-free

basis for approximately SEK 450 million (EUR 39 million) from Telge AB. The acquisition supports

Fortum’s strategic priorities and further strengthens its leading position in providing clean electricity

solutions to consumer and enterprise customers in the Nordics. Telge Energi is among the 10

largest clean electricity retailers in Sweden, with a portfolio of approximately 150,000 customer

contracts. In 2022, Telge Energi delivered 1.8 TWh of electricity, the total of which was clean

energy, with an EBITDA of SEK 23 million (approximately EUR 2 million). The transaction, which

required approvals from the municipal government and the local government council of Södertälje,

as well as clearance by the European Commission, was completed on 31 August 2023.

Other Operations

In July 2022, 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. The plant will

have a power generation gross capacity of 45 MWe, corresponding to the average annual electricity

consumption of approximately 90,000 homes.

In June 2021, Fortum made an investment decision to expand its lithium-ion battery recycling

capacity by building a hydrometallurgical plant in Harjavalta. The investment of approximately EUR

30 million increased Fortum’s hydrometallurgical recycling capacity an

d enabled the production of

battery chemicals. In December 2022, Fortum announced that the construction work and the

gradual deployment tests of the company’s new battery material recycling facility in Finland were

completed according to plan. On 27 April 2023, Fortum announced that the hydrometallurgical

battery recycling facility had started commercial operations.

On 4 August 2023, Fortum announced that the company had decided to assess strategic options,

including potential divestments of its Circular Solutions businesses, as a result of the continuous

review of its business portfolio. In March 2023 when Fortum launched its new strategy, it was

communicated that the Circular Solutions businesses are not in the core of the strategy. The

Circular Solutions

businesses are responsible for operating, maintaining and developing Fortum’s

recycling and waste assets, as well as turbine and generator services and biobased solutions. In

2023, these business operations employed approximately 1,200 people mainly in the Nordics

(Finland, Sweden and Denmark), and its comparable EBITDA was approximately EUR 40 million.

At the end of 2023, the net assets of the Circular Solutions businesses were approximately EUR

700 million. Fortum expects the strategic assessment to take approximately one year.

Research and development

Decarbonisation 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 utilisation and application development.

To accelerate innovation and the commercialisation of new offerings, Fortum strengthens its in-house

innovation and venturing efforts and builds partnerships with leading global suppliers, technology and

service companies, as well as research institutions and universities. Fortum makes direct and indirect

investments in start-ups that have promising new innovations focused on decarbonisation, flexibility, or

accelerate the transition towards a sustainable 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 2023

, Fortum’s R&D expenditure

was EUR 56 (55) million, or 0.8% (0.7%) of sales.

2023

2022

2021

Change

23/22

R&D expenditure, EUR million

R&D expenditure, % of sales

0.8

0.7

0.8

Changes in Group management

On 2 March 2023

, Fortum announced a reorganisation of the Group’s operating model to drive the

execution of the Group’s new

strategy. The new business structure and revised Fortum Leadership

Team (earlier Fortum Executive Management) became effective at the end of March.

Fortum Leadership Team as per 31 March 2023:

•

Markus Rauramo, President and CEO

•

Mikael Lemström, Executive Vice President, Hydro Generation

•

Petra Lundström, Executive Vice President, Nuclear Generation

•

Peter Strannegård, Executive Vice President, Renewables and Decarbonisation

•

Simon-Erik Ollus, Executive Vice President, Corporate Customers and Markets

•

Mikael Rönnblad, Executive Vice President, Consumer Solutions

•

Tiina Tuomela, CFO

•

Nebahat Albayrak, Executive Vice President, Sustainability and Corporate Relations

•

Eveliina Dahl, Executive Vice President, People and Procurement

•

Nora Steiner-Forsberg, Executive Vice President, Legal, General Counsel

•

Bernhard Günther, Chief Transformation Officer (CTO), Transformation and IT

Remuneration and share-based incentive plan for 2023

–

2025

In March 2023, Fortum’s Board of Directors approved the company’s new strategy, op

erating model

and Fortum Leadership Team (FLT). The Board also decided to commence the 2023

–

2025 long-

term incentive (LTI) plan and resolved on the maximum share allocations for the President and

CEO and other FLT members. Additionally, the President and CEO was authorised to decide on the

LTI participants below the FLT level and their maximum share allocations in accordance with the

nomination guideline approved by the Board.

In 2023, due to the reorganisation of Fortum operating structure, businesses and enabling functions,

the timeline for the LTI allocations deviated from the normal annual timeline. The first phase was

completed at the end of August, and the allocation process was finalised by the end of November.

The maximum number of shares granted (gross) to the President and CEO is 110,000. Due to the

management remuneration restrictions in the Solidium bridge financing facility from 2022, the

maximum share allocation is pro-rated and amounts to 73,370 shares for the President and CEO.

Respectively, the maximum number of shares granted (gross) to the other FLT members is 232,000

shares and the pro-rated number is 154,744 shares. The total number of shares granted in the

2023

–

2025 LTI plan will be available once all nominations are completed.

The outcome of the 2023

–

2025 LTI plan shall be confirmed in spring 2026.

More information about share-based incentive plans, including the Renumeration reports, can be

found on Fortum’s website at



www.fortum.com/governance

Authorisations of the Board

Fortum’s Annual General Meeting (AGM) 2023 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 corresponds

to approximately 2.23% of all the shares in the company. Only the unrestricted equity of the

company can be used to repurchase own shares on the basis of the authorisation. These

authorisations cancelled the authorisation resolved by the AGM of 2022 and will be effective until

the next AGM and, in any event, no longer than for a period of 18 months. These authorisations

have not been used as of 6 February 2024.

In addition, the AGM authorised the Board of Directors to decide on contributions of a maximum

of EUR 500,000 for charitable or similar purposes. In addition, in the total maximum amount of EUR

1,000,000 for incidental emergency relief or similar purposes as needed, and to decide on the

recipients, purposes and other terms of the contributions. The authorisation will be effective until the

next AGM. As of 6 February 2024, EUR 18,000 of the authorisation for charitable or similar

purposes and EUR 200,000 for incidental emergency relief have been used.

Annual General Meeting 2023

On 13 April, the 2023 Annual General Meeting of Fortum Corporation was held at Messukeskus in

Helsinki, Finland. The Annual General Meeting adopted the Financial Statements and the

Consolidated Financial Statements for the financial period 1 January

–

31 December 2022 and

resolved to discharge from liability for the financial year 2022 all the persons who had served as

members of the Board of Directors and as President and CEO during the year 2022.

The AGM resolved that a dividend of EUR 0.91 per share will be distributed for the financial year

that ended on 31 December 2022 and that the dividend will be paid in two instalments. The first

dividend instalment of EUR 0.46 per share was paid to the shareholders on 24 April 2023. The

second dividend instalment of EUR 0.45 per share was paid on 10 October 2023.

The Annual General Meeting resolv

ed to reject the remuneration report for the Company’s

governing bodies for 2022. The resolution made was advisory. After the Annual General Meeting,

the Board of Directors reassessed the implementation of the remuneration restrictions set forth in

the Bridge financing arrangement with the Finnish State last autumn and decided on the long-term

share incentive plans that the results of all years will be measured, but no shares can be earned in

2022 and 2023. Fortum supplemented the 2022 remuneration report and published the update for

the report on the company's website on 4 May 2023.

The Annual General Meeting 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 the Committee meetings, is EUR 800 for

each meeting, or EUR 1,600 in case 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 is 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 is paid in company shares and in cash in such a way

that approximately 40% of the amount of the annual fee is 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 were be acquired on

behalf and in the name of the Board members following the publication of the company’s first

quarter 2023 Interim Report.

The AGM resolved that the Board of Directors will consist of ten members, and the following

persons were elected to the Board of Directors for a term ending at the end of the Annual General

Meeting 2024: Mikael Silvennoinen as Chair, Essimari Kairisto as Deputy Chair, and Ralf Christian,

Luisa Delgado, Jonas Gustavsson, Marita Niemelä, Teppo Paavola, Maija Strandberg, Johan

Söderström and Vesa-Pekka Takala as 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 resolved on amendments to A

rticles 12, 15 and 16 of the Company’s Articles of Association.

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 corresponds to approximately 2.23 per cent

of all the shares in the company. Only the unrestricted equity of the company can be used to

repurchase own shares on the basis of the authorisation. These authorisations will be effective until

the next Annual General Meeting and, in any event, no longer than for a period of 18 months.

The AGM resolved to authorise the Board of Directors to decide on contributions of a total

maximum amount of EUR 500,000 for charitable or similar purposes, and, in addition, to a total

maximum amount of EUR 1,000,000 for incidental emergency relief or similar purposes as needed,

and to decide on the recipients, purposes and other terms of the contributions. The authorisations

will be effective until the next Annual General Meeting.

Other major events during the reporting period

On 10 November 2023

, Fortum’s Board of Directors decided to launch the savings period for the

year 2024 under its Employee Share Savings (ESS) programme. The terms and conditions of the

savings programme are the same as in previous programmes. The total amount of all savings for

the 2024 savings period may not exceed EUR 6 million.

On 20 December 2023, the Board of Directors decided to commence the 2024

–

2026 long-term

incentive (LTI) plan for key employees and executives. The 2024

–

2026 LTI plan is part of Fortum's

ongoing LTI programme and follows the same principles as the previous plan. The performance

measures for the LTI plan support the execution of Fortum’s strategic priorities to deliver clean

energy reliably, drive decarbonisation in industries and to transform and develop. The measures are

also in line with the company’s ambitious environmental targets. The relative Total Shareholder

Return (TSR) is measured relative to the peer group comprising selected European utility

companies. The other performance measures are based on the increase in the share of long-term

customer power purchasing agreements (PPA) as part of hedging, and the ESG measures are

based on the development of a pipeline of renewable energy for future optionality, and emission

reduction targets aligned with SBTi. The rewards related to the 2024

–

2026 LTI plan will be paid in

the spring 2027, assuming that the performance targets are achieved. The 2024

–

2026 LTI plan will

comprise a maximum amount of approximately 110 participants, including the members of the

Fortum Leadership Team. The Board of Directors also decided to commence the 2024

–

2026

restricted share (RS) plan as a supplement to the LTI programme and reserve shares that

potentially will be delivered in the spring 2027. The maximum number of shares of the plan that may

be delivered as a reward is expected to be approximately 1,100,000 shares for the 2024

–

2026 LTI

plan and 110,000 shares for the 2024

–

2026 RS plan.

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 2023, approximately 70% of the Ge

neration segment’s estimated Nordic power sales

volume was hedged at EUR 47 per MWh for 2024 (at the end of the third quarter of 2023: 65% at

EUR 47 per MWh) and approximately 40% at EUR 43 per MWh for 2025 (at the end of the third

quarter of 2023: 30% at EUR 43 per MWh).

At the end of 2023, for the rolling 10-year period of 2024

–

2033, approximately 15% of the

Generation segment’s estimated Nordic power sales volume was hedged. These hedges relate to

Fortum’s new strategic target of hedged share of rolling

10-year outright generation volume more

than 20% by end of 2026.

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 o

n 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 mainly been hedging

with bilateral agreements, and the exposure on the Nasdaq Commodities exchange has been

clearly lower during the past year.

Capital expenditure

Fortum’s estimat

es its capital expenditure, including maintenance but excluding acquisitions, to be

approximately EUR 550 million in 2024, of which the share of maintenance capital expenditure is

estimated to be approximately EUR 300 million, below the level of depreciation. For 2024

–

2026,

Fortum’s capital expenditure is expected to be approximately EUR 1.7 billion (excluding acquisition)

of which growth capital expenditure is expected to be EUR 800 million and annual maintenance

capital expenditure EUR 300 million. Of the growth capital expenditure of EUR 800 million, EUR

300 million is uncommitted.

Generation

The Generation segment’s achieved Nordic power price typically depends on factors such as hedge

ratios, hedge prices, spot prices, availability and u

tilisation 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

ordic 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 nuclear generation, as well as operations

in the physical and financial commodity

markets. Historically, the optimisation margin included in the achieved power price has been in the

range of EUR 1

–

3 per MWh. Due to the increased price volatility, Fortum updated in the third quarter

of 2023 the estimated optimisation margin and expects it to be in the range of EUR 6

–

8 per MWh,

depending on the overall market conditions, level of volatility and electricity prices.

Income taxation

The comparable effective income tax rate for Fortum is estimated to be in the range of 18

–

20% for

2024

–2026. 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 26 January 2024, Fortum announced that as part of the efficiency programme launched in

November 2023, Fortum’s Consumer Solutions business unit and the IT unit are conducting change

negotiations on possible redundancies. In total, the negotiations concern some 1,080 employees in

Finland, Sweden, Norway, and the IT unit in Poland. According to a preliminary estimate, change

negotiations could result in the redundancies of a maximum of 130 job positions.

At the beginning of February 2024, the Fortum Board of Directors resolved on clarifications to

Fortum’s strategy

. As the operating environment shows increased uncertainty, reduced visibility and

postponement of industrial investments, the company has specified its business portfolio, clarified

capital allocation and set new strategic targets with measurable key performance indicators (KPIs).

Fortum’s renewed strategy, launched in March 2023, with focus on the Nordics remains unchanged,

as well as its strategic priorities to ‘deliver reliable clean energy’, ‘drive decarbonisation in

industries’, and ‘transform and develop’. The company’s financial and environmental targets are

also unaltered.

The financial and environmental targets are as follows:

•

To ensure the current rating of BBB, Financial net debt-to-Comparable EBITDA can be a

maximum of 2.0-2.5 times.

•

For the period of 2024-

2026, Fortum’s capital expenditure is expected to be approximately EUR

1.7 billion (excluding acquisition) of which growth capital expenditure is expected to be EUR 800

million and annual maintenance capital expenditure EUR 300 million.

•

To ensure required returns for any potential new investments, Fortum continues to be selective

and applies earlier set investment criteria; project based WACC + 150-400 investment hurdles

depending on technology or investment project, as well as environmental targets.

•

Fortum’s dividend policy –

a payout ratio of 60-90% of comparable EPS

–

remains unchanged.

The payout ratio will be used so that the upper end of the range of the pay-out ratio is applied in

situations with a strong balance sheet and low investments, while the lower end of the range

would be applied with high leverage and/or significant investments and high capital expenditure.

•

Tightened environmental and decarbonisation ambitions with updated targets to reach carbon

neutrality already by 2030, exit coal by the end of 2027, target for specific emissions, and

commitment to SBTi (1.5°C) and biodiversity targets.

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 2020/852.

The results discussed in this report comprise the continuing operations of the Fortum Group. The

Russia segment was deconsolidated and reclassified as discontinued operations in April 2023.

Comparative information for 2022 has been restated accordingly. See



Note 1

and



Note 2

Fortum Group’s business model is described in



Note 6

Reporting scope

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 highlights the importance of decarbonisation and climate change mitigation, while at the

same time the necessity to secure reliable and affordable energy for all. Fortum also gives balanced

consideration in its operations to the promotion of energy efficiency and a circular economy, as well

as its impacts on personnel and societies.

Fortum’s sustainability performance is monitored and disclosed in interim and annual reports. In

addition, 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 part of this, Fortum’s Sustainability targets

were updated.

Fortum’s posi

tion as a leading Nordic clean energy company is now complemented by

considerably enhanced environmental targets with the aim to be a leader in sustainability. Fortum

has set a target to reach carbon neutrality (Scopes 1, 2, 3) by 2030 and will exit all coal-based

generation by the end of 2027. To measure the progress, mid-point targets have also been set for

specific emissions: below 20 g CO

/kWh for total energy production and below 10 g CO

/kWh for

power generation by 2028.

Further, Fortum has committed 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. During 2023 Fortum participated in developing the aquatic segment of the GBS

tool

used in the biodiversity footprint assessment and also assessed other potential tools to measure

hydropower’s aquatic biodiversity impacts.

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 to implement local initiatives, especially in hydropower production, and is committed to

participate in the development of a science-based methodology to assess the aquatic impacts of

hydropower.

Emission reduction targets and performance for continuing operations

Group emission reduction targets set in 2023 are part of 2023 reporting, and performance against

the climate targets are presented in the table below.

Climate target

Indicator

2023

Base year 2022

Change

compared to

base-year %

Carbon neutrality by 2030 at the

latest

Total Scope 1, 2 and 3

emissions, million tonnes CO

14.4

11.8

Exit all coal generation by the

end of 2027

Coal-based capacity, GW

1.3

1.4

Coal-based power generation

capacity, GW

0.7

Coal-based heat production

capacity, GW

0.6

Coal-based power and heat

production, TWh

1.9

2.9

-34

Coal-based power generation,

TWh

0.6

1.2

-50

Coal-based heat production,

TWh

1.2

1.7

-29

Coal share of Fortum’s

revenues, %

-25

Specific emissions of below 20

g CO

/kWh for total energy

production by 2028

Specific emissions for total

energy production, g CO

/kWh

-29

Specific emissions of below 10

g CO

/kWh for power

generation by 2028

Specific emissions for power

generation, g CO

/kWh

-36

In 2023, Fortum’s CO

-eq emissions, including all Scope 1, 2 and 3, totalled 14.4 million tonnes,

compared to 11.8 million tonnes in 2022. Major changes in emissions were due to the increase of

indirect Scope 3 emissions related to electricity retail to customers and to the decrease of direct

Scope 1 emissions.

Fortum’s direct CO

emissions (Scope 1) and indirect CO

emissions (Scope 2) totalled 1.7 million

tonnes, which decreased by 23% compared to 2022.

In 2023, Fortum’s Scope 3 greenhouse gas emissions totalled

12.7 million CO

-eq tonnes,

compared to 9.5 million CO

-eq tonnes in 2022, i.e. increasing 34%.

Safety targets

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 prereq

uisite for efficient and interruption-

free production.

Fortum’s safety targets for 2023:

•

Total Recordable Injury Frequency (TRIF), for own personnel and contractors, <1.0 by the end

of 2030

•

No severe or fatal injuries

•

95% execution rate for the Management Safety and Security Leadership Programme

•

60% execution rate for Safety improvement plans

The 2023 safety targets included participation in the Management Safety and Security Leadership

Programme as well as identification and completion of key safety actions to improve safety culture.

In 2023, the completion rates of planned Management Safety and Security Leadership Programme

and Safety improvement plans were 100% and 78%, respectively.

The sickness-related absences target for year 2023 was 3.0%.

Group sustainability performance for continuing operations

2023

2022

Climate and resources

Total GHG emissions, Scope 1

–

3, million CO

-eq tonnes

14.4

11.8

Direct Scope 1 GHG emissions, million CO

-eq tonnes

1.6

2.2

Indirect location-based Scope 2 GHG emissions, million CO

-eq tonnes

0.06

0.03

Scope 3 GHG emissions, million CO

-eq tonnes

12.7

9.5

Specific CO

emissions from total energy production, gCO

/kWh

Major environmental incidents

, no.

Personnel and society

Total Recordable Injury Frequency (TRIF)

, own personnel and contractors

5.0

4.0

Lost Time Injury Frequency (LTIF)

, own personnel and contractors

3.9

2.3

Severe occupational accidents, no.

Safety improvement plan

, %

Management Safety and Security Leadership Programme

, %

100

Sickness-related absences, %

3.1

3.4

1) Comparative figures and information for year 2022 have been restated to exclude Russia as discontinued operations. In 2022, 83% of

Fortum’s direct CO

emissions and 62% of the total GHG emissions originated from Russian power and heat production.

In addition,

change in GHG inventory calculation principles resulted in 0.8 CO

-eq tonnes change in 2022 Scope 3 emissions.

2) 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.

3) Total Recordable Injury Frequency, injuries per million working hours.

4) Lost Time Injury Frequency, injuries per million working hours.

5) Completion rate.

According to Fortum’s new strategy, the strategic priorities are to deliver reliable clean energy and

drive decarbonisation in industries in the Nordics. The strategy includes new financial targets:

•

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

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

–

2.5 times.

•

Disciplined growth in clean energy with revised capital expenditure of up to EUR 1.0 billion during

2023

–

2025 (previously up to EUR 1.5 billion). Investment hurdles of project WACC +150

–

400

basis points will be applied

and evaluated against the company’s climate and biodiversity targets.

Fortum is also committed to setting near- and long-term company-wide emission reduction targets

in line with climate science with the Science Based Targets initiative (SBTi)

. Fortum’s cl

imate

targets will be revisited and aligned to correspond to the SBTi Net-zero Standard during the target-

setting process. Fortum’s transition will include the exit from coal and emissions reduction in the

company’s own operations as well as influencing it

s electricity sales footprint through product

selection and electricity purchases.

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, procur

ements 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 Fortum’s Tax Principles on Fortum’s website. Fortum publishes its

tax footprint annually and, as a member of The B Team (global non-profit initiative advocating for

economic systems change), endorses T

he B Team’s Responsible Tax Principles.

In 2023, Fortum participated in the

“Energy for a Just Transition” collaboration facilitated by

Business for Social Responsibility (BSR) in partnership with The B Team, to identify and address

the impacts of a green energy transition on people and communities.

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 sustainability reporting covers functions

under Fortum’s operational control, including subsidiaries in all its operating count

ries, unless

otherwise stated.

Sustainability risks and opportunities

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 the Fortum Leadership

Team, the Audit and Risk Committee and the Board of Directors 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.

Sustainability governance and policies

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.

The Fortum Leadership Team (FLT) decides on the sustainability approach and Group-level

sustainability targets that guide annual planning.

Fortum’s Tech

nology and Investment Committee

(TIC) assesses and makes recommendations to the Board on the management’s proposals

pertaining to Fortum’s sustainability targets and performance.

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.

The 2023 STI programme’s safety targets were related to participation in the

Management Safety and Security Leadership Programme, as well as the identification and

completion of key safety actions to improve safety culture. The 2023 STI programme also included

a customer satisfaction target to highlight the importance of customer centricity. More information

about STI programme targets can be found from the Remuneration report.

ortum’s long

-term incentive (LTI) programme, applicable to top management and other key

employees, includes Environmental, Social and Governance (ESG) measures. In the 2021

–

2023

LTI plan, the set ESG measure

was 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. Due to the divestment of Uniper in 2022, the ESG measure was

adjusted in early 2023 in such a way that the original measure was evaluated regarding the period

2021

–

2022,

and Fortum’s reputation index among key stakeholders in Finland, Sweden and

Norway was set as a measure for the year 2023. In the 2022

–

2024 LTI plan, the ESG measure was

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. Due to the divestment of Uniper in 2022

, the

ESG measure was revised in early 2023. The revised climate target for 2022

–

2024 for Fortum is

related to the reduction of the absolute CO

emissions in Europe, i.e., including also Fortum

Recycling and Waste. In the 2023

–

2025 LTI plan, the ESG measure is linked to emission reduction

targets based on the climate science (SBTi 1.5°C) and related to emissions in Europe, and to

Fortum’s reputation index development among key stakeholders

. The relative Total Shareholder

Return (TSR) measured against a peer group of European utilities has remained as a measure in

the 2021

–

2023, 2022

–

2024 and 2023

–

2025 LTI plans. More information about LTI measures can

be found from the Remuneration report.

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 is committed to act with due care, to respect and to comply with the human and labour

rights defined in 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-corruption guide

lines, 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.

Fortum’s Climate Lobbying Review was first published in 2021 and updated in 2022

and 2023.

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

Business

Ethics Guidelines for Lobbying.

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 Code of Conduct was reviewed in 2023 and will be

launched in 2024. The latest revision of the Supplier Code of Conduct took place in 2021. Training

is a fundamental part of Fortum’s compliance management. 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 Codes 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.

One suspected case of corruption, which was under investigation at year-end 2022, was

confirmed in 2023.

Climate and resources

Fortum’s key performance indicators for climate and resources are related to CO

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

1400

1 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

-free hydro and nuclear

power. Fortum has also generation of district heating and cooling in Finland and in Poland. 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 2023, Fortum’s power generation was

47.0 (44.2) TWh and heat and steam production 4.3

(5.3) TWh. 98

% of Fortum’s total power generation was CO

-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 uranium 78% (73%), coal 9% (12%), waste-derived fuels 8%

(9%), biomass fuels 3% (4%), and natural gas 2% (1%), to produce electricity, heat and steam.

Percentage shares are based on the energy content of the fuel. Due to the Russia segment

deconsolidation, Fortum’s power generation in 2022 decreased from 72.8 TWh to 44.2 TWh (

-39%),

and heat and steam production from 20.9 TWh to 5.3 TWh (-75%).

In 2023, Fortum’s coal

-based power generation capacity totalled 0.7 GW and generation 0.6

TWh. Coal-based heat production capacity totalled 0.6 GW and production 1.2 TWh. The share of

coal of Fortum’s revenues was

3% (4%).

The share of fossil fuels of Fortum’s revenues was 11%

including fossil-based production and gas trading. The share of fossil fuels of

Fortum’s

production-

based revenues was 5% (6%).

Fortum follows the availability of different energy production forms (hydro, nuclear and wind

power; heating and cooling; circular solutions) as the measure of security of supply. As the

measurement differs depending on the production form, setting one Key Performance Indicator

(KPI) is not possible. Fortum’s energy production is mainly based on nuclear and hydro power

production. In 2023, the load factor of the Loviisa nuclear power plant was 91.06%.

Climate and greenhouse gas emissions

Fortum has committed to carbon neutrality by 2030 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

-free power generation and by decarbonising its carbon-emitting

energy production fleet.

Fortum’s transition will include the exit from coal and emission

s reduction in

the company’s own operations as well as influencing its electricity sales f

ootprint through product

selection and electricity purchases.

In 2023, Fortum’s direct CO

emissions were 1.6 (2.1) Mt. Of the total CO

emissions, 1.1 (1.6) Mt

were within the EU emissions trading system (ETS). The estimate for Fortum’s free emission

allowances in 2023 is approximately 0.2 (0.2) Mt.

Fortum’s direct CO

emissions (million tonnes, Mt, continuing

operations)

2023

2022

2021

Total emissions

1.6

2.1

17.8

Emissions subject to ETS

1.1

1.6

1.5

Free emission allowances

0.2

Emissions not subject to ETS in Europe

0.5

0.7

1) The total emissions comparison figure for 2022 has been restated and is excluding Russia.

Fortum's greenhouse gas emissions are defined and reported according to the Greenhouse Gas

(GHG) Protocol guidelines. In 2023

, Fortum’s direct Scope 1 GHG emissions were

1.6 (2.2) million

-eq

tonnes, indirect market-based Scope 2 GHG emissions 0.04 (0.03) million CO

-eq

tonnes,

and indirect location-based Scope 2 GHG emissions 0.06 (0.03) million CO

-eq

tonnes.

In 2023, Scope 3 GHG emissions were about 12.7 (9.5) million CO

-eq tonnes. The Group's

Scope 3 emissions originate from the upstream and downstream activities in supply chain:

purchased goods and services; capital goods, i.e. investments; procurement of fuels; electricity and

heat retail to customers; transportation and distribution; and from processing and use of sold

products (natural gas). Fortum reports Scope 3 greenhouse gas emissions in accordance with the

requirements of the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting

standard. Based on our Scope 3 assessment, all other Scope 3 categories have been classified as

not relevant.

Fortum’s Scope 1 GHG emissions accounted for about 11% of total GHG emissions, Scope 2 GHG

emissions accounted for less than 1%, and Scope 3 GHG emissions accounted for about 88%.

In 2023, Fortum’s specific CO

emissions for total energy production were 32 (45) gCO

/kWh and

specific CO

emissions for power generation were 16 (25) gCO

/kWh.

Fortum has a long-standing focus on mitigating climate change and has adopted the reporting

recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) starting from

the financial year 2019.

Major environmental incidents

The definition of major environmental incidents includes environmental incidents that resulted in

significant harm to the environment (ground, water, air) and environmental non-compliances with legal

or regulatory requirements. In 2023, there were 2 (2) major environmental incidents: low water flow

due to low water level in the fish-holding tanks caused the death of salmon and broodstock salmon in

the hydropower plants in Ljusnefors and in Forshaga, Sweden. Both incidents have been investigated

in line with Fortum’s investigation procedure and corrective actions have been determined.

Water

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 2023, Fortum withdrew a total of 1,460 (1,440)

million m

of water in production operations; 98% of this amount was used as cooling water.

Biodiversity

Fortum has assessed its impacts on and dependencies related to biodiversity using the

internationally recognised Global Biodiversity Score (GBS

) tool. Based on the Biodiversity

Footprint Assessment, Fortum’s main biodiversity impacts (excluding hydropower’s aquatic impacts)

are related to GHG emissions, land use and fuel procurement.

Fortum’s biodiversity targets were published in March 2023

; at the same time, the company also

committed to developing a science-

based methodology to assess the company’s aquatic impacts

that are currently not included in the biodiversity footprint. During 2023 Fortum participated in

developing the aquatic segment of the GBS

tool and also assessed other potential tools to

measure hydropower’s aquatic biodiversity impacts. The work will continue in 2024.

Reduction of the company’s GHG emissions is a key lever to reduce negative impacts on

biodiversity and to reach biodiversity targets. Assessment of biodiversity impacts is also included as

part of the company’s investment assessment procedure, and new company

-level guidelines, such

as guidelines for ecologically sustainable forest management, are being developed.

In 2023 Fortum continued to carry out voluntary and license-related biodiversity measures to

prevent negative impacts and, where possible, implement biodiversity improvement measures, as

outlined in its Biodiversity Manual and Action Plan, publicly disclosed o

n Fortum’s website.

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 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 c

ountries and Poland.

Group personnel statistics for continuing operations

2023

2022

2021

Number of employees, 31 December

5,225

7,712

19,140

Number of employees, 31 December, excl. discontinued operations

N/A

4,988

7,646

Average number of employees

5,205

5,120

8,045

Total amount of employee benefits, EUR million

436

432

496

Departure turnover, % (of permanent employees)

11.9

21.7

18.9

Permanent employees, %

97.1

97.8

97.6

Full-time employees, %

97.8

98.0

98.8

Female employees, %

36.2

35.2

31.2

Females in management

, %

40.8

34.5

29.0

1) Definition changed from 2022. The 2023 definition of management includes CEO, Fortum Leadership Team and one level down if in a

supervisor position. The 2022 and 2021 definition included CEO and three levels down if in a supervisor position.

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.

The 2023 safety targets included participation in the Management Safety and Security Leadership

Programme as well as identification and completion of key safety actions to improve safety culture.

In 2023, the completion rates of the planned Management Safety and Security Leadership

Programme and Safety improvement plans were 100% and 78%, respectively. The Management

Safety and Security Leadership Programme will continue in 2024.

In 2023

, Fortum’s TRIF (Total Recordable Injury Frequency) for own personnel and contractors

was 5.0

(4.0). Fortum’s LTIF (Lost Time Injury Frequency) for own personnel and contractors was

3.9 (2.3).

Fortum strives for zero severe occupational accidents. In 2023, there were 0 (2) severe

occupational accidents in the operations.

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. Fortum has run a global employee

wellbeing programme for seven years. Employees have access to a wide range of services, from

medical check-ups to exercise and coaching programmes.

In 2023, the wellbeing services highlighted mental wellbeing, resilience, stress management,

power of community and working together. Managers were supported in leading employees’

wellbeing and discussing wellbeing together with team members. Other examples of measures

taken to support mental wellbeing include providing employees the opportunity for personal online

meetings with a mental wellbeing professional and offering wellbeing coaching sessions for

individuals and teams. According to the latest employee survey, conducted in November 2023, the

health and wellbeing score was 7.7, which is in line with the relevant energy and utility benchmark

score. Mental wellbeing score was 7.4, which is slightly below the industry benchmark of 7.5.

An inclusive culture where everyone feels safe, included and equally treated also promotes the

wellbeing of personnel. In 2023 Fortum continued to provide training and information on Diversity,

Equity and Inclusion (DEI)

for managers and all employees, and measured employees’ perceptions

of the DEI culture at Fortum.

During the renewal of Fortum’s o

rganisation in 2023, special attention

was paid to the composition and diversity of leadership teams in terms of gender and nationality

which resulted in significant increase of females in top management.

In 2023, Fortum continued to apply a hybrid work model in which the work week is divided

between office and remote workdays. Several measures to support hybrid and remote working were

continued and improved, taking into account the feedback received from employees.

The sickness-related absence rate in 2023 was 3.1 (3.4).

Society

Reputation and customer satisfaction

Fortum’s performance regarding reputation and customer satisfaction is monitored annually through

the One Fortum Survey. In 2023, the combined reputation index of all stakeholder groups based on

the One Fortum Survey increased to 65 points (63), on a scale of 0

–

100. The positive development

was mainly driven by the regained position among the Finnish stakeholders. Depending on the

business area, the Customer Satisfaction Index (CSI) varied between 52 and 83 points (60

–

83), on

a scale of 0

–

100.

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. In 2023, Fortum conducted seven on-site audits in China. Fortum is a member of the

Bettercoal initiative and uses the Bettercoal tools to improve sustainability in the coal supply chain.

In 2023, Fortum continued to support and participate 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. Fortu

m’s approach for human

rights due diligence is based on the UN Guiding Principles on Business and Human Rights and

follows the six steps outlined in the OECD Guidelines for Multinational Enterprises. Fortum’s

approach to human rights due diligence is described

on Fortum’s website

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 2023, five new country assessments were made.

Corporate citizenship

Fortum continued to steer its support to society and to cooperate with local communities through its

Corporate Social Responsibility (CSR) programme. The programme’s focus areas, aligned with the

company’s former strategic targets, are Climate,

People, and Material Revolution. Fortum is

reviewing the programme priorities to align with the new strategy and changes in the operating

environment. Steering of CSR activities is concentrated to a Fortum-wide Steering Group.

In 2023, Fortum supported the work of charity organisations on humanitarian crises relief. The

support was targeted to support children in the areas of natural disaster or conflict. Fortum also

continued to support its local communities. In addition, Fortum engages in collaboration with

universities through different research and development projects. In 2023, Fortum’s support for

activities promoting the common good totalled EUR 3.5 (1.5) million. In addition, the grants

awarded by Fortum and Neste Foundation (earlier Fortum Foundation), not part of Fortum,

totalled EUR 704,720 (783,136).

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 natural gas energy activities was approved on 5 July 2022 and the Environmental

Delegated Act for the four new objectives in June 2023. The four new environmental objectives are

Water and Marine Resources (WTR), Circular Economy (CE), Pollution Prevention and Control (PPC)

and Biodiversity and Ecosystems (BIO). As required by the Environmental Delegated Act, the eligibility

of economic activities was assessed in 2023; alignment assessment will be performed in 2024.

Fortum’s disclosures are prepared in accordance with the EU Taxonomy Regulation and

implementing delegated acts. For the financial year ending 31 December 2023, Fortum reports the

proportion of Taxonomy-aligned activities, Taxonomy-eligible (not aligned) activities and Taxonomy-

non-eligible activities in relation to the three KPIs (Turnover, Operating expenses and Capital

expenditure)

and the plan (Capital expenditure plan) that aims either to expand Fortum’s Tax

onomy-

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

at 31 December 2023.

Analysis of economic activities

Analysis of eligible economic activities

In 2023, 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

Climate Delegated Act. In 2023, eligibility (not alignment) is assessed also for economic activities

described in the Environmental Delegated Act.

Eligibility of Fortum’s business operations w

evaluated according to the descriptions of economic activities listed in the Climate Delegated Act

(Annex I

–

CCM and Annex II

–

CCA), the Environmental Delegated Act (Annex I

–

WTR, Annex II

–

CE, Annex III

–

PPC, Annex IV

–

BIO) 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 recognised economic activities under CCM, CE and PPC. In 2023, alignment of

economic activities was evaluated under CCM.

The alignment of Fortum’s most material eligible

economic activities is based on interpretations and assumptions as described below

Application method for substantial contribution criteria, DNSHs and 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 Sustainability Policy, Minimum Requirements for EHS Management,

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 2023 were

ISO 14001 environmentally certified.

In order to assess the alignment of its activities, Fortum’s relevant business units verified their

economic activities’ compliance with the substantial contribution and DNSHs criteria under Annex I

CCM. 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 its own as well as co-owned nuclear power plants in Finland and Sweden. Operations

in these plants relate to EU Taxonomy economic activities Construction and safe operation of new

nuclear power plants (CCM 4.27) and Electricity generation from nuclear energy in existing

installations (CCM 4.28). 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 complies with nuclear-related national regulation, which is considered to be the

basis for the EU Taxonomy alignment criteria.

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

group risk management

framework and follows the same governance and processes as other material risks and

uncertainties. Risks 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’s climate

-related

risks are described in



Risk management

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 water 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 tha

t 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). 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 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 regulations, 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 given 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 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 for human

rights due diligence is based on the UN Guiding Principles on Business and Human Rights and

follows the six steps outlined in the OECD Guidelines for Multinational Enterprises.

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 has implemented due diligence processes for environment, taxation, anti-corruption and

bribery, as well as fair competition. Requirements for human rights, labour rights as well as for

environment, 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

The following tables present the proportions of aligned, eligible (not aligned) and non-eligible

activities of turnover, operating expenses, and capital expenditure under the EU Taxonomy

Regulation for the Fortum Group.

Turnover KPI

EUR million

2023

2022

A.1 Environmentally sustainable activities (Taxonomy-aligned)

2,915

43%

2,561

33%

A.2 Taxonomy-eligible but not environmentally sustainable activities

(not Taxonomy-aligned)

457

244

A. Total Taxonomy-eligible activities

3,372

50%

2,805

36%

B. Taxonomy-non-eligible activities

3,339

50%

4,969

64%

Total (A+B)

6,711

100%

7,774

100%

Operating expenses KPI

EUR million

2023

2022

A.1 Environmentally sustainable activities (Taxonomy-aligned)

-124

56%

-125

58%

A.2 Taxonomy-eligible but not environmentally sustainable activities

(not Taxonomy-aligned)

-47

21%

-11

A. Total Taxonomy-eligible activities

-171

77%

-136

63%

B. Taxonomy-non-eligible activities

-51

23%

-80

37%

Total (A+B)

-222

100%

-215

100%

Capital expenditure KPI

EUR million

2023

2022

A.1 Environmentally sustainable activities (Taxonomy-aligned)

424

64%

280

51%

A.2 Taxonomy-eligible but not environmentally sustainable activities

(not Taxonomy-aligned)

12%

18%

A. Total Taxonomy-eligible activities

506

76%

378

68%

B. Taxonomy-non-eligible activities

160

24%

175

32%

Total (A+B)

667

100%

553

100%

Changes in reporting from 2022

Comparative information for 2022 has been restated following the classification of the Russia segment

as discontinued operations in 2023 (



Note

)

The Turnover and Operating expenses KPIs have been

restated in 2022 to exclude Russian activities; whereas,

Russian activities’ capital expenditure in 2022

is included in the Capital expenditure KPI. The Russia segment included eligible economic activities in

2022, mainly Electricity generation from fossil gaseous fuels (CCM 4.29) and High-efficiency co-

generation of heat/cool and power from fossil gaseous fuels (CCM 4.30).

In addition, the 2022 turnover for Electricity generation from nuclear energy in existing

installations (CCM 4.28), Electricity generation from hydropower (CCM 4.5) and Construction and

safe operation of new nuclear power plants (CCM 4.27) activities has been adjusted to include

outright production hedges for which the Generation segment is not the external counterparty.

These hedges were previously presented in non-eligible activities. The adjustment was made for

the turnover of the aforementioned economic activities to better align with the Nordic outright power

sales.

As explained above, the EU Taxonomy was expanded in 2023 to include four new environmental

objectives. Consequently, in 2023 Fortum presents new eligible activities in the EU Taxonomy KPI

tables: Treatment of hazardous waste (PPC 2.2), Sorting and material recovery of non-hazardous

waste (CE 2.7), Demolition and wrecking of buildings and other structures (CE 3.3), Remediation of

contaminated sites and areas (PPC 2.4), Provision of IT/OT data-driven solutions (CE 4.1), and

Depollution and dismantling of end-of-life products (CE 2.6). Material recovery from non-hazardous

waste (CCM 5.9) that was presented as aligned activity in the 2022 tables is now included under the

broader activity of Sorting and material recovery of non-hazardous waste (CE 2.7) as the economic

activity in question better fits this new category.

Reconciliation of changes is presented in the following tables:

Reconciliation of 2022 Turnover KPI

EUR million

2022

reported

Russia

deconso-

lidation

Reallo-

cation

New

environ-

mental

objectives

2022

restated

A.1 Environmentally sustainable activities (Taxonomy-aligned)

3,905

-1,262

-83

2,561

A.2 Taxonomy-eligible but not environmentally sustainable

activities (not Taxonomy-aligned)

1,185

-983

-40

244

A. Total Taxonomy-eligible activities

5,089

-983

-1,303

2,805

B. Taxonomy-non-eligible activities

3,715

-48

1,303

4,969

Total (A+B)

8,804

-1,031

7,774

Reconciliation of 2022 Operating expenses KPI

EUR million

2022

reported

Russia

deconso-

lidation

New

environ-

mental

objectives

2022

restated

A.1 Environmentally sustainable activities (Taxonomy-aligned)

-129

-125

A.2 Taxonomy-eligible but not environmentally sustainable

activities (not Taxonomy-aligned)

-37

-4

-11

A. Total Taxonomy-eligible activities

-166

-136

B. Taxonomy-non-eligible activities

-86

-80

Total (A+B)

-252

-215

Reconciliation of 2022 Capital expenditure KPI

EUR million

2022

reported

New

environ-

mental

objectives

2022

restated

A.1 Environmentally sustainable activities (Taxonomy-aligned)

285

-5

280

A.2 Taxonomy-eligible but not environmentally sustainable

activities (not Taxonomy-aligned)

A. Total Taxonomy-eligible activities

378

B. Taxonomy-non-eligible activities

175

Total (A+B)

553

Turnover, Operating expenses and Capital expenditure KPI disclosure tables have been updated to

the latest template provided by the EU. In addition, as required by the EU, supplementing tables are

provided for each KPI to present further information on those economic activities that contribute

substantially to multiple environmental objectives. Sorting and material recovery of non-hazardous

waste (CE 2.7) included in the main table includes Material recovery from non-hazardous waste

(CCM 5.9).

Aligned economic activities (A.1)

In terms of turnover, 43% (2022: 33%), in terms of operating expenses, 56% (2022: 58%), and in

terms of capital expenditure, 64% (2022: 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 4.7 GW (50% of total capacity) (2022: 4.6 GW, 54% of total capacity excluding Russia) and

electricity generation from nuclear energy with an installed capacity of 3.2 GW (35% of total capacity)

(2022: 2.8 GW, 33% of total capacity excluding Russia). There have been no significant changes in

Fortum’s aligned economic activities from 2022

. Electricity generation from nuclear energy increased

in com

parison to 2022 due to the commissioning of TVO’s Olkiluoto 3 power plant unit.

Eligible (not aligned) economic activities (A.2)

In terms of turnover, 7% (2022: 3%), in terms of operating expenses, 21% (2022: 5%), and in terms

of capital expenditure, 12% (2022: 18%),

of Fortum’s

economic activities are Taxonomy-eligible (not

aligned) (A.2).

The most significant eligible (not aligned) economic activities are treatment of hazardous waste

and sorting and material recovery of non-hazardous waste. As explained above, these economic

activities are in 2023 included as eligible (not aligned) economic activities due to the new

environmental objectives introduced in 2023 to the EU Taxonomy Regulation. Alignment

assessment for these new environmental objectives will be performed in 2024.

Non-eligible economic activities (B)

A non-eligible economic activity does not correspond to any economic activity description provided in

the EU Taxonomy R

egulation. Fortum’s non

-eligible activities include electricity retail (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.

Turnover KPI

2023

Substantial contribution criteria

DNSH criteria (“Does Not Significantly Harm”)

Economic activities

Code

Turnover EUR

million

Proportion of

Turnover 2023

Climate change

mitigation

Climate change

adaptation

Water

Pollution

Circular

economy

Biodiversity

Climate change

mitigation

Climate change

adaptation

Water

Pollution

Circular

economy

Biodiversity

Minimum

safeguards

Proportion of

Taxonomy-

aligned (A.1.) or

-eligible (A.2.)

turnover 2022

Category enab-

ling activity

Category trans-

itional activity

A. Taxonomy-eligible activities

A.1 Environmentally sustainable activities (Taxonomy-aligned)

Electricity generation from wind power

CCM4.3

N/EL

Electricity generation from hydropower

CCM4.5

1,349

20%

N/EL

14%

District heating/cooling distribution

CCM4.15

116

N/EL

Construction and safe operation of new nuclear power plants

CCM4.27

143

N/EL

Electricity generation from nuclear energy in existing installations

CCM4.28

1,240

18%

N/EL

17%

Other

N/EL

A.1 Total

2,915

43%

33%

Of which enabling

Of which transitional

1,383

21%

17%

A.2 Taxonomy-eligible but not environmentally sustainable activities (not

Taxonomy-aligned)

Manufacture of batteries

CCM3.4

N/EL

Electricity generation from wind power

CCM4.3

N/EL

Electricity generation from hydropower

CCM4.5

N/EL

High-efficiency co-generation of heat/cool and power from fossil gaseous fuels

CCM4.30

N/EL

Production of heat/cool from fossil gaseous fuels in an efficient district heating and

cooling system

CCM4.31

N/EL

Treatment of hazardous waste

PPC2.2

201

N/EL

Sorting and material recovery of non-hazardous waste

CE2.7, CCM5.9

N/EL

Other

A.2 Total

457

A. Total Taxonomy-eligible activities

3,372

50%

46%

B. Taxonomy-non-eligible activities

3,339

50%

Total (A+B)

6,711

100%

–

Taxonomy-eligible and Taxonomy-aligned activity with the relevant objective, EL

–

Taxonomy-eligible activity for the relevant objective, N/EL

–

Taxonomy-non-eligible activity for the relevant objective

1) Includes economic activities CCM4.24, CCM4.25.

2) Includes economic activities CCM3.10, CCM4.1, CCM4.20, CCM4.25, CCM5.10, CCM6.15, PPC2.4, PPC2.6, CE3.3, CE4.1.

The proportion of turnover for activities contributing substantially to several objectives is presented in the following table:

Proportion of turnover / Total turnover

Taxonomy-aligned

per objective

Taxonomy-eligible

per objective

CCM

CCA

WTR

PPC

BIO

Operating expenses KPI

2023

Substantial contribution criteria

DNSH criteria (“Does Not Significantly Harm”)

Economic activities

Code

OpEx EUR

million

Proportion of

OpEx 2023

Climate change

mitigation

Climate change

adaptation

Water

Pollution

Circular

economy

Biodiversity

Climate change

mitigation

Climate change

adaptation

Water

Pollution

Circular

economy

Biodiversity

Minimum

safeguards

Proportion of

Taxonomy-

aligned (A.1.) or

-eligible (A.2.)

OpEx 2022

Category enab-

ling activity

Category trans-

itional activity

A. Taxonomy-eligible activities

A.1 Environmentally sustainable activities (Taxonomy-aligned)

Electricity generation from wind power

CCM4.3

-1

N/EL

Electricity generation from hydropower

CCM4.5

-66

30%

N/EL

32%

District heating/cooling distribution

CCM4.15

-17

N/EL

Construction and safe operation of new nuclear power plants

CCM4.27

N/EL

Electricity generation from nuclear energy in existing installations

CCM4.28

-38

17%

N/EL

19%

Other

-2

N/EL

A.1 Total

-124

56%

58%

Of which enabling

Of which transitional

-38

17%

19%

A.2 Taxonomy-eligible but not environmentally sustainable activities (not

Taxonomy-aligned)

Manufacture of batteries

CCM3.4

-2

N/EL

Electricity generation from wind power

CCM4.3

N/EL

Electricity generation from hydropower

CCM4.5

N/EL

High-efficiency co-generation of heat/cool and power from fossil gaseous fuels

CCM4.30

N/EL

Production of heat/cool from fossil gaseous fuels in an efficient district heating and

cooling system

CCM4.31

N/EL

Treatment of hazardous waste

PPC2.2

-36

16%

N/EL

Sorting and material recovery of non-hazardous waste

CE2.7, CCM5.9

-6

N/EL

Other

-1

A.2 Total

-47

21%

16%

A. Total Taxonomy-eligible activities

-171

77%

58%

16%

B. Taxonomy-non-eligible activities

-51

23%

Total (A+B)

-222

100%

–

Taxonomy-eligible and Taxonomy-aligned activity with the relevant objective, EL

–

Taxonomy-eligible activity for the relevant objective, N/EL

–

Taxonomy-non-eligible activity for the relevant objective

1) Includes economic activities CCM4.24, CCM4.25.

2) Includes economic activities CCM3.10, CCM4.1, CCM4.20, CCM4.25, CCM5.10, CCM6.15, PPC2.4, PPC2.6, CE3.3, CE4.1.

The proportion of operating expenses for activities contributing substantially to several objectives is presented in the following table:

Proportion of operating expenses / Total

operating expenses

Taxonomy-aligned

per objective

Taxonomy-eligible

per objective

CCM

CCA

WTR

PPC

BIO

Capital expenditure KPI

2023

Substantial contribution criteria

DNSH criteria (“Does Not Significantly Harm”)

Economic activities

Code

CapEx EUR

million

Proportion of

CapEx 2023

Climate change

mitigation

Climate change

adaptation

Water

Pollution

Circular

economy

Biodiversity

Climate change

mitigation

Climate change

adaptation

Water

Pollution

Circular

economy

Biodiversity

Minimum

safeguards

Proportion of

Taxonomy-

aligned (A.1.) or

eligible (A.2.)

CapEx 2022

Category enab-

ling activity

Category trans-

itional activity

A. Taxonomy-eligible activities

A.1 Environmentally sustainable activities (Taxonomy-aligned)

Electricity generation from wind power

CCM4.3

224

34%

N/EL

18%

Electricity generation from hydropower

CCM4.5

107

16%

N/EL

18%

District heating/cooling distribution

CCM4.15

N/EL

Construction and safe operation of new nuclear power plants

CCM4.27

N/EL

Electricity generation from nuclear energy in existing installations

CCM4.28

N/EL

Other

N/EL

A.1 Total

424

64%

51%

Of which enabling

Of which transitional

A.2 Taxonomy-eligible but not environmentally sustainable activities (not

Taxonomy-aligned)

Manufacture of batteries

CCM3.4

N/EL

Electricity generation from wind power

CCM4.3

N/EL

Electricity generation from hydropower

CCM4.5

N/EL

High-efficiency co-generation of heat/cool and power from fossil gaseous fuels

CCM4.30

N/EL

Production of heat/cool from fossil gaseous fuels in an efficient district heating and

cooling system

CCM4.31

N/EL

Treatment of hazardous waste

PPC2.2

N/EL

Sorting and material recovery of non-hazardous waste

CE2.7. CCM5.9

N/EL

Other

A.2 Total

12%

18%

A. Total Taxonomy-eligible activities

506

76%

66%

B. Taxonomy-non-eligible activities

160

24%

Total (A+B)

667

100%

–

Taxonomy-eligible and Taxonomy-aligned activity with the relevant objective, EL

–

Taxonomy-eligible activity for the relevant objective, N/EL

–

Taxonomy-non-eligible activity for the relevant objective

1) Includes economic activities CCM4.24, CCM4.25.

2) Includes economic activities CCM3.10, CCM4.1, CCM4.20, CCM4.25, CCM5.10, CCM6.15, PPC2.4, PPC2.6, CE3.3, CE4.1.

The proportion of capital expenditure for activities contributing substantially to several objectives is presented in the following table:

Proportion of capital expenditure / Total

capital expenditure

Taxonomy-aligned

per objective

Taxonomy-eligible

per objective

CCM

CCA

WTR

PPC

BIO

Transitional activities (Nuclear and Natural gas)

A transitional activity is an activity that supports the transition to a climate-neutral economy where

there is no technologically and economically feasible low-

carbon alternative. Fortum’s transitional

activities are mainly concentrating on electricity generation from new and existing nuclear installations.

Fortum does not have non-eligible economic activities related to nuclear or natural gas, hence

Template 5 Taxonomy non-eligible economic activities (Complementary Climate Delegated Act, Annex

III) is not presented below.

As described in

‘

Changes in reporting from 2022

’

section above, comparative information for

2022 has been restated following the classification of the Russia segment as discontinued

operations in 2023.

Nuclear and fossil gas related activities

Nuclear energy related activities

The undertaking carries out, funds or has exposures to research, development, demonstration and

deployment of innovative electricity generation facilities that produce energy from nuclear processes with

minimal waste from the fuel cycle.

The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear

installations to produce electricity or process heat, including for the purposes of district heating or industrial

processes such as hydrogen production, as well as their safety upgrades, using best available technologies.

Yes

The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that

produce electricity or process heat, including for the purposes of district heating or industrial processes such

as hydrogen production from nuclear energy, as well as their safety upgrades.

Yes

Fossil gas related activities

The undertaking carries out, funds or has exposures to construction or operation of electricity generation

facilities that produce electricity using fossil gaseous fuels.

The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of

combined heat/cool and power generation facilities using fossil gaseous fuels.

Yes

The undertaking carries out, funds or has exposures to construction, refurbishment and operation of heat

generation facilities that produce heat/cool using fossil gaseous fuels.

Yes

Aligned economic activities (A.1)

Turnover KPI

Taxonomy-aligned economic activities (denominator)

Amount and proportion 2023

Amount and proportion 2022

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

Economic activities

EUR million

Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.27 of Annexes I and II to

Delegated Regulation 2021/2139 in the denominator of the turnover KPI

143

Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.28 of Annexes I and II to

Delegated Regulation 2021/2139 in the denominator of the turnover KPI

1,240

18%

1,240

18%

1,285

17%

1,285

17%

Amount and proportion of other taxonomy-aligned economic activities not referred to in rows above in

the denominator of the turnover KPI

1,532

23%

1,532

23%

1,247

16%

1,247

16%

Total

2,915

43%

2,915

43%

2,561

33%

2,561

33%

Taxonomy-aligned economic activities (numerator)

Amount and proportion 2023

Amount and proportion 2022

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

Economic activities

EUR million

Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.27 of Annexes I and II to

Delegated Regulation 2021/2139 in the numerator of the turnover KPI

143

Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.28 of Annexes I and II to

Delegated Regulation 2021/2139 in the numerator of the turnover KPI

1,240

43%

1,240

43%

1,285

50%

1,285

50%

Amount and proportion of other taxonomy-aligned economic activities not referred to in rows above in the

numerator of the turnover KPI

1,532

53%

1,532

53%

1,247

49%

1,247

49%

Total

2,915

100%

2,915

100%

2,561

100%

2,561

100%

Operating expenses KPI

Taxonomy-aligned economic activities (denominator)

Amount and proportion 2023

Amount and proportion 2022

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

Economic activities

EUR million

Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.27 of Annexes I and II to

Delegated Regulation 2021/2139 in the denominator of the operating expenses KPI

Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.28 of Annexes I and II to

Delegated Regulation 2021/2139 in the denominator of the operating expenses KPI

-38

17%

-38

17%

-40

19%

-40

19%

Amount and proportion of other taxonomy-aligned economic activities not referred to in rows above in

the denominator of the operating expenses KPI

-86

39%

-86

39%

-85

40%

-85

40%

Total

-124

56%

-124

56%

-125

58%

-125

58%

Taxonomy-aligned economic activities (numerator)

Amount and proportion 2023

Amount and proportion 2022

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

Economic activities

EUR million

Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.27 of Annexes I and II to

Delegated Regulation 2021/2139 in the numerator of the operating expenses KPI

Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.28 of Annexes I and II to

Delegated Regulation 2021/2139 in the numerator of the operating expenses KPI

-38

30%

-38

30%

-40

32%

-40

32%

Amount and proportion of other taxonomy-aligned economic activities not referred to in rows above in the

numerator of the operating expenses KPI

-86

70%

-86

70%

-85

68%

-85

68%

Total

-124

100%

-124

100%

-125

100%

-125

100%

Capital expenditure KPI

Taxonomy-aligned economic activities (denominator)

Amount and proportion 2023

Amount and proportion 2022

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

Economic activities

EUR million

Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.27 of Annexes I and II to

Delegated Regulation 2021/2139 in the denominator of the capital expenditure KPI

Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.28 of Annexes I and II to

Delegated Regulation 2021/2139 in the denominator of the capital expenditure KPI

Amount and proportion of other taxonomy-aligned economic activities not referred to in rows above in

the denominator of the capital expenditure KPI

402

60%

402

60%

246

45%

246

45%

Total

424

64%

424

64%

280

51%

280

51%

Taxonomy-aligned economic activities (numerator)

Amount and proportion 2023

Amount and proportion 2022

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

Economic activities

EUR million

Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.27 of Annexes I and II to

Delegated Regulation 2021/2139 in the numerator of the capital expenditure KPI

Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.28 of Annexes I and II to

Delegated Regulation 2021/2139 in the numerator of the capital expenditure KPI

12%

Amount and proportion of other taxonomy-aligned economic activities not referred to in rows above in the

numerator of the capital expenditure KPI

402

95%

402

95%

246

88%

246

88%

Total

424

100%

424

100%

280

100%

280

100%

Eligible economic activities (A.2)

Turnover KPI

Taxonomy-eligible but not taxonomy-aligned economic activities

Amount and proportion 2023

Amount and proportion 2022

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

Economic activities

EUR million

Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section

4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the turnover KPI

Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section

4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the turnover KPI

Amount and proportion of other taxonomy-eligible but not taxonomy-aligned economic activities not referred to

in rows above in the denominator of the turnover KPI

432

229

Total

457

244

Operating expenses KPI

Taxonomy-eligible but not taxonomy-aligned economic activities

Amount and proportion 2023

Amount and proportion 2022

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

Economic activities

EUR million

Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section

4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the operating expenses KPI

Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section

4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the operating expenses KPI

Amount and proportion of other taxonomy-eligible but not taxonomy-aligned economic activities not referred to

in rows above in the denominator of the operating expenses KPI

-46

21%

-46

21%

-10

Total

-47

21%

-47

21%

-11

Capital expenditure KPI

Taxonomy-eligible but not taxonomy-aligned economic activities

Amount and proportion 2023

Amount and proportion 2022

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

CCM + CCA

Climate change

mitigation (CCM)

Climate change

adaptation (CCA)

Economic activities

EUR million

Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section

4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the capital expenditure KPI

Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section

4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the capital expenditure KPI

Amount and proportion of other taxonomy-eligible but not taxonomy-aligned economic activities not referred to

in rows above in the denominator of the capital expenditure KPI

12%

Total

12%

18%

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 1.0 billion at 31

December 2023 (2022: 0.7) and is expected to be incurred over the next five years, with the

exception of the Loviisa lifetime extension for which ten

years’ capital expenditure is included in the

reported capital expenditure plan due to the long-term nature of the investment. Planned capital

expenditure at 31 December 2023 mainly includes Loviisa nuclear power plant lifetime extension;

Espoo Clean Heat project, programme to drive decarbonisation and build sustainable waste heat

solutions in the Helsinki metropolitan area; projects increasing production at existing hydro plants;

and the Pjelax wind project. 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. Increase in planned capital expenditure from 2022 is mainly due to increases in capital

expenditure estimates for the Loviisa lifetime extension, Espoo Clean Heat projects, and hydro

projects; partly offset by decrease in investments in the Pjelax wind project as planned costs have

been realised. The Pjelax project is expected to be completed by the second quarter of 2024.

Operating expenses related to the 2023 Capital expenditure plan projects are not material (2022:

not material).

Definitions, reconciliations and basis of calculation

Turnover

The term ‘turnover’ used in these EU

Taxonomy disclosures refers to sales, the term Fortum uses

elsewhere in the annual report. Turnover is based on the sales reported on For

tum’s consolidated

income statement (



Note

). Turnover exclude discontinued operations. Breakdown of turnover:

2023

2022

EUR million

A.1 Taxonomy-

aligned

Total

A.1 Taxonomy-

aligned

Total

Power

2,729

5,193

2,393

6,090

Heat

173

512

148

527

Other

1,006

1,156

Total

2,915

6,711

2,561

7,774

Increase in Taxonomy-aligned turnover from 2022 is mainly due to increases in hydro and nuclear

power generation, as well as higher achieved power price. Hydro generation increased mainly due

to higher water inflow in the second half; and nuclear generation increased due to the

commissioning of and power generation from TVO’s Olkilu

oto 3 power plant unit. The main reason

for the increase in the achieved power price was the higher hedge price, the effect of which was

partly offset by lower result from physical optimisation.

Electricity generation from nuclear and hydropower turnover 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.

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:

2023

2022

EUR million

A.1 Taxonomy-

aligned

Total

A.1 Taxonomy-

aligned

Total

Repairs and maintenance

-66

-127

-71

-126

Short-term rentals and other property costs

-40

-61

-37

-58

Other

-17

-34

-17

-32

Total

-124

-222

-125

-215

There have been no material changes in Taxonomy-aligned operating expenses from 2022.

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 in 2023 as information on discontinued operations up to the date of

disposal is not readily available. 2022 comparative capital expenditure includes Russian activities.

Breakdown of capital expenditure:

2023

2022

EUR million

Note

A.1 Taxonomy-

aligned

Total

A.1 Taxonomy-

aligned

Total

Additions to intangible assets

Additions to property, plant and equipment

417

523

274

437

Additions to right-of-use assets

Additions through business combinations

Total

424

667

280

553

Increase in Taxonomy-aligned capital expenditure from 2022 is mainly due to planned investments

in the Pjelax wind project. Pjelax wind farm is expected to be fully operational in the second quarter

of 2024 at the latest.

Basis of calculation

The financial data used for calculating the EU T

axonomy KPIs has been retrieved from Fortum’s

financial systems and is based on the same data and Group accounting principles as Fortum’s

consolidated financial statements for the year ending 31 December 2023 (see notes to the

consolidated financial statements for details). 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 project has been allocated to aligned and eligible economic

activities.

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 Gro

up 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, Fortum’s Leadership Team 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 Leadership Team (FLT) in the development of

the Group strategy,

•

Support Fortum in strategy execution,

•

Support Fortum in achieving agreed targets within the defined risk appetite so that

Fortum’s ability

to meet financial commitments and maintain a strong investment grade rating of at least BBB is

not compromised,

•

Ensure the understanding of

Fortum’s

material risks and uncertainties, and

•

Support the prevention of

accidents, incidents and adverse impacts of Fortum’s operations

employees or third parties (including health and safety, human and labour rights), the

environment, Fortum’s assets or reputation.

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

Business Units and Enabling Functions 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 G

roup Risk Policy and the

Group’s material risks and uncertainties. Corporate Risk, an independent control function headed

by the Vice President, Risk 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

FLT Risk Committee, FLT, the

ARC and the Board of Directors.

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 and capital allocation,

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 risk appetite thresholds, limits and mandates which are defined for financial risks. These

risk appetite thresholds includes liquidity, market, and credit risk thresholds as well as balance

sheet metrics.

Risk factors

2023 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 energy crisis with high commodity prices and

potential risk to European security of supply. For Fortum, the impacts have been dramatic.

The Ukraine conflict has impacted the ability of Fortum to operate and own Russian assets. As a

result of the Presidential decree (No. 302) issued by Russia on 25 April 2023 and the seizure of

Fortum’s Russian assets, the company lost control of its Russian operations. Consequently, the

Russia segment was deconsolidated and reclassified as discontinued operations in April 2023. In

order to protect its legal position and shareholder interests, Fortum will seek compensation through

arbitration, in particular for the value of its shares in PAO Fortum and its investments in Russia, and

has sent notices of dispute due to the Russian Federation’s

violations of its investment treaty

obligations under the Bilateral Investment Treaties that the Russian Federation has concluded with

the Netherlands and Sweden. These notices of dispute are the first step required in arbitration

proceedings, which are expected to be initiated in early 2024.

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.

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. The 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, although unlikely, the war in the Ukraine

could escalate further 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’ business 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.

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 EU-level and national energy and climate policies and

regulations. Fortum’s strategy has been developed based on scen

arios 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 policymakers and legislators involved in the

development of laws, policies and regulations in order to manage these risks and to proactively

contribute to the 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 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 have introduced

temporary market interventions (e.g. price caps and windfall taxation) and have for example

relaxed the state aid rules. In addition, Fortum sees risks related to uncoordinated national

measures aiming to tackle high energy prices and national security of supply. The focus should be

on the gradual ending of measures and market interventions established during the crisis.

•

Fortum believes that reaching the established (EU and national) decarbonisation targets requires

that all CO

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

footprint for example in financing schemes, leading to an 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 the 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

the EU Taxonomy Regulation, the initial inclusion of Fortum’s core technologies such as hydro

and nuclear power in the scope of the legislation was a positive development to ensure access to

capital markets and future investments. However, the criteria for these technologies remains

ambiguous and stricter than for other clean or renewable technologies. The European

Commission will assess the need for a revision for the Taxonomy regulation in 2024, which might

lead to updates to the criteria in the upcoming years. The revision process poses both risks and

opportunities. On one hand it can improve the criteria of Fortum’s key technologies or include new

economic activities in the scope, but on the other, it might lead to another politicised debate on,

for example, nuclear power’s status as transitional activity as well as increased NGO activity.

•

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 ear

nings 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.

Technology risks

Fortum’s strategy may include investing in new or not yet commercia

lly 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 variety 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.

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

ethics, 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 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 in

tegral part of Fortum’s strategy. Management 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. It equally relates to challenges

and risks with 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 unexpected and not in

line with the set objective.

Mitigating actions are seeking 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, 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 and manage data management and compliance, seek strategic

clearance from tax authorities, improve transparency towards key 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

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,

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 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 2023, the liquidity of Nordic electricity derivatives traded on Nasdaq Commodities

improved slightly compared to the low levels of 2022.

Alternatives, including the use of OTC derivative contracts and correlated products are used to

mitigatederivates market liquidity 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, cov

ering

both Finland and Sweden, and the currency component of these hedges in the Swedish entity is

currently not hedged.

Emission and environmental value risks

The EU has an emissions trading scheme in place to reduce the amount of CO

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 these schemes.

The main factors influencing the prices of CO

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

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 uranium, coal, waste-derived fuels, biomass fuels, and natural gas.

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 from political, social or labour 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.

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. Trading

derivative financial instruments exposes the Group to a liquidity risk associated with having to

provide financial collaterals like cash or bank guarantees. Trading over-the-counter also exposes

the Group to liquidity risk in case of a counterparty default. A default could trigger a termination

payment in cases where the net market value of the bilateral contracts is positive for the

counterparty. 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 and termination payments is

continuously assessed and monitored so that adequate liquidity is available to cover expected

future cash collateral required for margining. There are strict limits in place which ensure that there

is sufficient liquid funds and credit lines available to cover margining requirements, termination

payments, working capital changes as well as contingent collaterals in extreme market scenarios.

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.

Fortum is targeting to have a solid investment grade rating of at least BBB. 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.

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/Swedish Krona (SEK) arising from Fortum's

extensive operations in Sweden. Fluctuations of the SEK against the EUR could have an adverse

effect on future results and equity when consolidating and translating results and net assets in

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.

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.

ue to Fortum’s net short position in Nordic power hedges

, 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.

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 associations and private individuals over a range of geographic regions.

Fortum has routines and processes to identify, assess and control credit 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, risk of failure in cultural renewal 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. Risk management of the IT systems 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. Togeth

er 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 billion (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 is a minority-shareholder in

Voimaosakeyhtiö SF, which is a co-owner 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) in Finland 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 str

ictly 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 out 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.

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 energy production, 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 technology (IT) and operational technology (OT) systems,

digitalisation and privacy. Also, physical threats like sab

otage against Fortum’s assets are possible

and can have material impacts. Due to the ongoing war in Ukraine, the overall probability of cyber

and other security risks remains elevated.

The focus in 2023 has been on improving preparedness and resiliency, covering cyber, physical

security and organizational (management) aspects. Evolving security landscape is continuously

monitored in cooperation with relevant authorities. Fortum is preparing for EU level security

legislation which will be implemented during 2024/2025.

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 FLT 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 re

flected 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 exter

nal 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.

Additionally, there is a risk of increasing activity by NGOs which could affect key stakeholder

perception. In order to mitigate this risk, 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 events, the frequency and magnitude o

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 could 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.

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

2023

2022

2021

Earnings per share, total Fortum

-2.31

-2.72

0.83

Earnings per share, continuing operations

1.68

2.34

4.49

Comparable earnings per share, total Fortum

1.32

-1.11

2.00

Comparable earnings per share, continuing operations

1.28

1.21

1.23

Comparable earnings per share, continuing operations excl. Russia

N/A

0.96

Cash flow per share, total Fortum

2.03

-9.86

5.60

Cash flow per share, continuing operations

1.91

1.93

1.26

Equity per share

9.40

8.55

13.66

Dividend per share

1.15

0.91

1.14

Payout ratio, %

137

Dividend yield, %

8.8

5.9

4.2

Board of Directors’ proposal for the planned Annual General Meeti

ng 25 March 2024.

2) Payout ratio is calculated based on comparable earnings per share from 2022 onwards. Payout ratio for 2023 and 2022 is calculated

based on comparable earnings per share from continuing operations.

For full set of share key figures, see the section



Key figures

in the Financial Statements.

Share price performance and volumes

Fortum’s share price has depreciated approximately 32% during the last five years, while Dow

Jones European Utility Index has increased 38%. During the same period Nasdaq Helsinki Cap

index has increased 22%. During 2023

Fortum’s share price depreciated approximately 16%, while

Dow Jones European Utility index increased approximately 9% and Nasdaq Helsinki Cap index

decreased approximately 5%.

In 2023, a total of 412.3 million (2022: 560.8) Fortum Corporation shares, totalling EUR 5,337

million, were traded on Nasdaq Helsinki. The highest quotation of Fortum Corporation shares during

2023 was EUR 16.18, the lowest EUR 10.25, and the volume-weighted average EUR 12.94. The

closing quotation on the last trading da

y of the year 2023 was EUR 13.06 (2022: 15.54). Fortum’s

market capitalisation, calculated using the closing quotation of the last trading day of the year, was

EUR 11,718 million (2022: 13,943).

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 2023, approximately

78% (2022: 74%) of Fortum’s shares were traded on markets other than the Nasdaq Helsinki Ltd.

Share capital

Fortum Corporation has one class of shares. By the end of 2023, a total of 897,264,465 shares

(2022: 897,264,465) 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 2023 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 increased from 50.76% to 51.26%.

Shareholders

At the end of 2023 the Finnish State owned 51.26% of the company’s shares. The Finnish Parliament

has authorised the Government to reduce the Finnish State’s

holding in Fortum Corporation to no less

than 50.1% of the share capital and voting rights.

The proportion of nominee registrations and direct foreign shareholders was 22.9% (2022: 26.8%).

Shareholders, 31 December 2023

Shareholders

No. of shares

Holding %

Finnish State

459,902,988

51.26

Ilmarinen Mutual Pension Insurance Company

20,048,221

2.23

Varma Mutual Pension Insurance Company

15,677,853

1.75

Elo Mutual Pension Insurance Company

11,785,000

1.31

The Finnish Social Insurance Institution

6,430,896

0.72

Kurikan Kaupunki

6,203,500

0.69

The State Pension Fund

5,700,000

0.64

Nordea Fennia Fund

2,441,987

0.27

OP-Henkivakuutus Ltd.

2,381,629

0.27

Evli Finland Select Fund

1,842,000

0.21

Nordea Pro Finland Fund

1,725,933

0.19

Seligson & Co OMX Helsinki 25 Exchange Traded Fund (ETF)

1,369,000

0.15

Säästöpankki Kotimaa Mutual Fund

1,337,017

0.15

Nordea Bank Abp

1,270,274

0.14

Nominee registrations and direct foreign ownership

205,782,619

22.93

Other

153,365,548

17.09

Total

897,264,465

100.00

By shareholder category

% of total amount

of shares

Finnish shareholders

Corporations

2.01

Financial and insurance institutions

2.44

General government

58.87

Non-profit organisations

1.00

Households

12.75

Non-Finnish shareholders

22.93

Total

100.00

Breakdown of share ownership, 31 December 2023

Number of shares owned

No. of

share-

holders

of share-

holders

No. of shares

% of total

amount of

–

100

92,300

42.31

4,033,155

0.45

101

–

500

75,951

34.82

19,563,062

2.18

501

–

1,000

24,370

11.17

18,037,040

2.01

1,001

–

10,000

24,230

11.11

62,486,714

6.96

10,001

–

100,000

1,211

0.56

26,068,326

2.91

100,001

–

1,000,000

0.03

20,943,297

2.33

1,000,001

–

10,000,000

0.01

34,144,428

3.81

over 10,000,000

0.00

507,414,062

56.55

218,149

100.00

692,690,084

77.20

In the joint book-entry account and in special accounts on 31

December

596

0.00

Nominee registrations

204,573,785

22.80

Total

897,264,465

100.00

Management shareholding 31 December 2023

At the end of 2023, the President and CEO and other members of the Fortum Executive

Management owned a total of 223,463 shares (2022: 197,210) representing approximately 0.02%

(2022: 0.02%) of the total shares in the company.

A full description of the shareholdings and interests in long-term incentive schemes of the President

and CEO and other members of the Fortum Executive Management is shown in



Note

Authorisations from the Annual General Meeting 2023

In 2023, 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

corresponded to approximately 2.23% of all the shares in the company. 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 6 February 2024.

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

–

a payout ratio of

60-90% of comparable EPS. At the beginning of February 2024 the Fortum Board of Directors

resolved on clarifications to the dividend policy; the payout ratio will be used so that the upper end

of the range of the pay-out ratio is applied in situations with a strong balance sheet and low

investments, while the lower end of the range would be applied with high leverage and/or significant

investments and high capital expenditure.

Dividend distribution proposal

The distributable funds of Fortum Corporation as at 31 December 2023 amounted to EUR

7,397,637,631, including the profit for the financial period 2023 of EUR 1,922,872,686. 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 1.15 per share be paid for the financial

year 2023. The dividend will be paid in two instalments.

Based on the number of shares registered as at 6 February 2024, the total amount of dividend

would be EUR 1,031,854,135. 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 0.58 per share would be paid to shareholders who on the

record date of the first dividen

d instalment 27 March 2024 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 5 April 2024.

The second dividend instalment of EUR 0.57 per share would be paid to the shareholders who on

the record date of the second dividend instalment 2 October 2024 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 9 October 2024.

The Board of Directors further proposes that the General Meeting authorise the Board of

Directors 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 25 March 2024

Share quotations, index 100 = quote on 2 January 2019

Market capitalisation, EUR billion

Total shareholder return, EUR

FINANCIAL STATEMENTS

Consolidated financial

statements

Fortum’s consolidated income statement and consolidated cash flow statement include

the Russia

segment as discontinued operations in 2023 and 2022, and the Uniper segment as discontinued

operations in 2022. As required by IFRS, comparative information for 2022 has been restated

following the classification of the Russia segment as discontinued operations in 2023. For further

information, see



Note 1

Material accounting policies,



Note 2

Critical accounting estimates and

judgements and



Note 3

Acquisitions, disposals and discontinued operations.

Consolidated income statement

EUR million

Note

2023

2022

Sales

6,711

7,774

Other income

Materials and services

-3,808

-4,853

Employee benefits

-436

-432

Depreciation and amortisation

6, 16, 17

-359

-415

Other expenses

-595

-538

Comparable operating profit

1,544

1,611

Items affecting comparability

6, 7

118

356

Operating profit

1,662

1,967

Share of profit of associates and joint ventures

6, 18

-185

Interest expense

-269

-200

Interest income

165

Other financial items - net

-34

-93

Finance costs - net

-138

-218

Profit before income tax

1,583

1,564

Income tax expense

-69

520

Net profit for the year from continuing operations

1,515

2,084

Attributable to:

Owners of the parent

1,514

2,080

Non-controlling interests

Net profit for the year from discontinued operations

-3,582

-12,374

Attributable to:

Owners of the parent

-3,583

-4,496

Non-controlling interests

-7,878

Net profit for the year, total Fortum

-2,067

-10,290

Attributable to:

Owners of the parent

-2,069

-2,416

Non-controlling interests

-7,874

Earnings per share for profit attributable to the equity

owners of the company (EUR per share)

Basic, continuing operations

1.68

2.34

Basic, discontinued operations

-3.99

-5.07

Basic, total Fortum

-2.31

-2.72

As Fortum currently has no dilutive instruments outstanding, diluted earnings per share is the same

as basic earnings per share.

EUR million

Note

2023

2022

Comparable operating profit

1,544

1,611

Impairment charges and reversals

Capital gains and other related items

785

Changes in fair values of derivatives hedging future cash

flow

111

-376

Other

-52

Items affecting comparability

6, 7

118

356

Operating profit

1,662

1,967

See



Definitions and reconciliations of key figures

Consolidated statement of

comprehensive income

EUR million

Note

2023

2022

Net profit for the year, total Fortum

-2,067

-10,290

Other comprehensive income

Items that may be reclassified to profit or loss in

subsequent periods:

Cash flow hedges

Fair value gains/losses

2,185

-2,601

Transfers to income statement

150

1,102

Transfers to inventory/property, plant and equipment

-3

Deferred taxes

-473

294

Net investment hedges

Fair value gains/losses

-16

Deferred taxes

-4

Exchange differences on translating foreign operations

4.3

-43

-312

Share of other comprehensive income of associates and joint

ventures

-17

1,788

-1,461

Items that will not be reclassified to profit or loss in

subsequent periods:

Remeasurement of investments

-15

Actuarial gains/losses on defined benefit plans

-9

Actuarial gains/losses on defined benefit plans in associates and

joint ventures

-3

-11

Other comprehensive income/expense from continuing

operations, net of deferred taxes

1,777

-1,419

Recycling of translation differences including net investment

hedges related to Russia

1,940

Other comprehensive income/expense from discontinued

operations, net of deferred taxes

-69

953

Total comprehensive income/expense

1,581

-10,757

Total comprehensive income/expense for total Fortum

attributable to:

Owners of the parent

1,580

-3,337

Non-controlling interests

-7,420

1,581

-10,757

1) The deconsolidation of Russian operations in 2023 resulted in the recycling of EUR 1.9 billion negative cumulative translation differences

from equity to the income statement. The recycling did not have any impact on total equity.

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, NOK and PLN.

Consolidated balance sheet

EUR million

Note

31 Dec 2023

31 Dec 2022

ASSETS

Non-current assets

Intangible assets

643

657

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

6,612

7,266

Participations in associates and joint ventures

1,059

1,249

Share in the State Nuclear Waste Management Fund

1,058

966

Other non-current assets

201

628

Deferred tax assets

958

933

Derivative financial instruments

14, 15

216

343

Long-term interest-bearing receivables

644

624

Total non-current assets

11,392

12,668

Current assets

Inventories

452

465

Derivative financial instruments

14, 15

389

1,486

Short-term interest-bearing receivables

389

660

Income tax receivables

Margin receivables

590

2,607

Trade and other receivables

1,286

1,767

Liquid funds

4,183

3,919

Total current assets

7,347

10,975

Total assets

18,739

23,642

EUR million

Note

31 Dec 2023

31 Dec 2022

EQUITY

Equity attributable to owners of the parent

Share capital

3,046

Share premium

Retained earnings

5,592

6,467

Other equity components

-273

-1,916

Total

8,438

7,670

Non-controlling interests

Total equity

8,499

7,737

LIABILITIES

Non-current liabilities

Interest-bearing liabilities

4,573

3,658

Derivative financial instruments

14, 15

216

756

Deferred tax liabilities

428

152

Nuclear provisions

1,058

966

Other provisions

125

118

Pension obligations, net

Other non-current liabilities

122

121

Total non-current liabilities

6,532

5,784

Current liabilities

Interest-bearing liabilities

1,337

4,127

Derivative financial instruments

14, 15

1,057

3,973

Other provisions

Margin liabilities

131

352

Trade and other payables

1,181

1,657

Total current liabilities

3,708

10,122

Total liabilities

10,240

15,905

Total equity and liabilities

18,739

23,642

Consolidated statement of changes in total equity

capital

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 2023

3,046

9,499

-3,031

-2,182

172

7,670

7,737

Net profit for the year, total Fortum

-2,069

-2,067

Translation differences

-36

-6

-43

Translation differences, recycled to Income statement

2,106

-166

1,940

Other comprehensive income

1,860

-21

-19

1,820

OCI related to discontinued operations

-63

-9

-68

-2

-69

Total comprehensive income for the year

-2,069

2,006

1,844

-186

-14

1,580

1,581

Cash dividend

-817

Deconsolidation of subsidiary companies

-22

Transactions with non-controlling interests

Other

Total equity 31 December 2023

3,046

6,618

-1,026

-337

-14

8,438

8,499

Total equity 1 January 2022

3,046

12,830

-2,768

-1,138

12,131

1,534

13,665

Net profit for the year, total Fortum

-2,416

-7,874

-10,290

Translation differences

-340

-4

-304

-9

-312

Other comprehensive income

209

-1,196

-160

-1,102

-4

-1,107

OCI related to discontinued operations

112

298

-1

485

468

953

Total comprehensive income for the year

-2,208

-264

-1,044

139

-3,337

-7,420

-10,757

Cash dividend

-1,013

-23

-1,036

Deconsolidation of subsidiary companies

6,104

6,119

Transactions with non-controlling interests

-127

-122

-249

Other

-6

-5

Total equity 31 December 2022

3,046

9,499

-3,031

-2,182

172

7,670

7,737

1) Of which EUR -1,940 million is related to the recycling of the negative cumulative translation differences and related net investment hedges from Russian operations, to the income statement.

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 to EUR are recognised in equity (related to continuing

operations mainly SEK, NOK and PLN).

For information regarding exchange rates used, see



Note 1

Material accounting policies. For

information about translation exposure see



Note 4.3

Interest rate risk and currency risk.

Equity impact from recycling of cumulative translation difference and

related hedges relating to Russia

The deconsolidation of Russian operations in April 2023 resulted in the recycling of EUR 1.9 billion

negative cumulative translation differences from translation of foreign operations from equity to the

income statement. The recycling did not have any impact on total equity. The cumulative translation

differences are due to the significant weakening of the Russian rouble since the acquisition of the

Russian operations in 2008.

EUR million

Retained

earnings

Translation

of foreign

operations

Other

OCI

items

Owners

of the

parent

Impact included in Net profit for the year

-1,940

Impact to other equity items

2,106

-166

1,940

Total equity impact

-1,940

2,106

-166

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 2022 of EUR 0.91 per share, amounting to a total of EUR 817 million, was decided in

the Annual General Meeting on 13 April 2023. The dividend was paid in two instalments. The first

dividend instalment of EUR 0.46 per share was paid on 24 April 2023, amounting to a total of EUR

413 million. The second dividend instalment of EUR 0.45 was paid on 10 October 2023, amounting

to a total of EUR 404 million. See



Note 13

Earnings and dividend per share.

Consolidated cash flow statement

EUR million

Note

2023

2022

Cash flow from operating activities

Net profit from continuing operations

1,515

2,084

Adjustments:

Income tax expense

-520

Finance costs - net

138

218

Share of profit/loss of associates and joint ventures

-59

185

Depreciation and amortisation

359

415

Operating profit before depreciations (EBITDA)

2,021

2,381

Items affecting comparability

-118

-356

Comparable EBITDA

1,903

2,025

Non-cash and other items

129

157

Interest received

153

Interest paid

-228

-213

Dividends received

Income taxes paid

-454

-164

Funds from operations

1,519

1,918

Change in working capital

191

-200

Net cash from operating activities, continuing operations

1,710

1,717

Cash flow from investing activities, continuing operations

Capital expenditures

16, 17

-576

-479

Acquisitions of shares

-53

-29

Proceeds from sales of property, plant and equipment

Divestments of shares and capital returns

1,156

Shareholder loans to associated companies and joint ventures

-30

Change in margin receivables

2,024

-1,311

Change in other interest-bearing receivables and other

2,429

Net cash from/used in investing activities, continuing

operations

1,433

1,818

EUR million

Note

2023

2022

Cash flow before financing activities, continuing operations

3,143

3,536

Cash flow from financing activities, continuing operations

Proceeds from long-term liabilities

1,755

2,421

Payments of long-term liabilities

-1,620

-5,885

Change in short-term liabilities

-1,757

-170

Dividends paid to the owners of the parent

-817

-1,013

Dividends paid to non-controlling interests

-19

Change in margin liabilities

-221

150

Other financing items

-168

Net cash from/used in financing activities, continuing

operations

-2,640

-4,684

Net increase(+)/decrease(-) in liquid funds, continuing

operations

503

-1,148

Cash flow from discontinued operations

Net cash from/used in operating activities, discontinued operations

109

-10,484

Net cash from/used in investing activities, discontinued operations

-333

-2,789

Net cash from/used in financing activities, discontinued operations

10,739

Net increase(+)/decrease(-) in liquid funds, discontinued

operations

-202

-2,534

Cash flow, total Fortum

Total net cash from/used in operating activities

1,819

-8,767

Total net cash from/used in investing activities

1,095

-970

Total net cash from/used in financing activities

-2,614

6,055

Net increase(+)/decrease(-) in liquid, total Fortum

301

-3,682

Liquid funds 1 January

3,919

7,592

Foreign exchange differences and expected credit loss

allowance in liquid funds

-36

Liquid funds 31 December

4,183

3,919

1) 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.

2) Cash flow from investing activities for discontinued operations in 2023 includes Russia related cash flows netted with liquid funds of EUR

284 million lost through the seizure of the Russian assets. The consideration received for the Uniper shares, EUR 498 million, is presented

in cash flow from discontinued operations in 2022.

Change in financial net debt

EUR million	Note	2023	2022
Financial net debt 1 January		1,084	789
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
Financial net debt excl. Uniper 1 January		1,084	5,335
Russia impact on Financial net debt 1 January		43	296
Financial net debt excl. Russia and Uniper 1 January		1,127	5,631
Net cash flow:
Comparable EBITDA		1,903	2,025
Non-cash and other items		129	157
Paid net financial costs and dividends received		-59	-100
Income taxes paid		-454	-164
Change in working capital		191	-200
Capital expenditures		-576	-479
Acquisitions		-53	-29
Divestments and proceeds from sale of property, plant and equipment		17	1,159
Change in interest-bearing receivables		22	2,478
Dividends to the owners of the parent		-817	-1,013
Dividends to non-controlling interests		0	-19
Other financing activities		19	-168
Net cash flow ('-' increase in financial net debt)		322	3,647
Consideration received for Uniper shares		-	498
Foreign exchange rate differences and other changes 1)		137	-359
Financial net debt 31 December	26	942	1,127

1) The comparison period 2022 includes EUR 210 million deconsolidated debt from the divestment of Fortum Oslo Varme in 2022.

Additional cash flow information

Non-cash and other items

Non-cash and other items EUR 129 million (2022: 157) mainly relate to realised foreign exchange

gains and losses EUR 186 million (2022: 208), change in liability to return emission rights

EUR

‑

million (2022: 57) and paid commitment fee for Solidium bridge loan facility

EUR

‑

39 million (2022:

0).

Change in working capital

EUR million	2023	2022
Change in interest-free receivables, decrease(+)/increase(-)	348	-352
Change in inventories, decrease(+)/increase(-)	-14	-182
Change in interest-free liabilities, decrease(-)/increase(+)	-143	334
CF Total	191	-200

Capital expenditure in cash flow

EUR million	Note	2023	2022
Capital expenditure	16, 17	611	467
Change in not yet paid investments, decrease(+)/increase(-)		-16	16
Capitalised borrowing costs		-20	-4
CF Total		576	479

Acquisition of shares in cash flow

Acquisition of shares, net of cash acquired, amounted to EUR 53 million (2022: 29). In 2023 Fortum

acquired the Swedish electricity solutions provider Telge Energi AB. For further information see



Note 3

Acquisitions, disposals and discontinued operations.

Divestment of shares in cash flow

EUR million	Note	2023	2022
Proceeds from sales of subsidiaries, net of cash disposed	3	1	1,070
Proceeds from sales and capital returns of associates and joint
ventures	3, 18	0	86
Proceeds from sales of other investments	3	3	0
CF Total		5	1,156

There were no material divestments during 2023. During 2022 Fortum completed the divestment of

the 50% ownership in the district heating company Fortum Oslo Varme AS in Norway, the e-mobility

business Plugsurfing and the 30% stake in the public charging operator Recharge AS. For further

information, see



Note 3

Acquisitions, disposals and discontinued operations.

On 21 December 2022 Fortum completed the divestment of Uniper. The consideration of the

share transaction of EUR 498 million is presented in the cash flow from discontinued operations.

Notes to the consolidated

financial statements

1 Material accounting policies

1.1 Basic information

Fortum Corporation (the company) is a Finnish public limited liability company domiciled in Espoo,

Finland. Fortum’s shares are traded on Nasdaq Helsinki.

Fortum is a Nordic energy company. Our

purpose is to power a world where people, businesses and nature thrive together. We are one of the

cleanest energy producers in Europe and our actions are guided by our ambitious environmental

targets. We generate and deliver clean energy reliably and help industries to decarbonise their

processes and grow. Our core operations in the Nordics comprise of efficient, CO

-free power

generation as well as reliable supply of electricity and district heat to private and business customers.

These financial statements were approved by the Board of Directors on 6 February 2024. The

Financial Statements are also published in accordance with the European Single Electronic Format

(ESEF) reporting requirement. The audit firm, Deloitte Oy, has provided an independent auditor’s

reasonable assurance report on Fortum’s ESEF Financial S

tatements in accordance with ISAE

3000 (Revised). The ESEF report is available at



www.fortum.com/about-us/investors/reports-and-presentations

1.2 Basis of preparation

The consolidated financial statements of Fortum Group for the year ended 31 December 2023 have

been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC

Interpretations as adopted by the European Union. The notes to the consolidated financial

statements also comply with the supplementing requirements of the Finnish accounting and

company legislation.

The consolidated financial statements have been prepared under the historical cost convention,

except for financial assets and financial liabilities (including derivative instruments) that are valued

at fair value through profit and loss or other comprehensive income.

The figures in the consolidated financial statements have been rounded and consequently the sum

of individual figures may deviate from the sum presented. Key figures have been calculated using

exact figures. Unless otherwise indicated, all amounts are presented in millions of euro (EUR million).

The following symbols show which amounts in the notes reconcile to the items in the income

statement, balance sheet and cash flow statement:

= Income statement

= Balance sheet

= Cash flow

1.3 Principles for consolidation

These consolidated financial statements comprise of the parent company, subsidiaries, joint

ventures and associated companies.

Fortum Group was formed in 1998 by using the pooling-of-interests method for consolidating

Fortum Power and Heat Oy and Fortum Oil and Gas Oy (the latter demerged to Fortum Oil Oy and

Fortum Heat and Gas Oy 1 May 2004). In 2005 Fortum Oil Oy (current Neste Oyj) was separated

from Fortum by distributing 85% of its shares to Fortum’s shareholders and by selling the remaining

15%. This means that the acquisition cost of Fortum Power and Heat Oy and Fortum Heat and Gas

Oy has been eliminated against the share capital of the companies. The difference has been

entered as a decrease in shareholders’ equity.

1.3.1 Subsidiaries

Subsidiaries are defined as companies over which Fortum has control. Control exists when Fortum

is exposed to, or has rights to, variable returns from its involvement with the entity and has the

ability to affect those returns through its power over the entity. See



Note 3

Acquisitions, disposals

and discontinued operations.

Intercompany transactions, balances and unrealised gains on transactions between Group

companies are eliminated. Unrealised losses are also eliminated unless the transaction provides

evidence of an impairment of the asset transferred.

Whe

re necessary, subsidiaries’ accounting policies have been changed to ensure consistency

with the policies the Group has adopted.

Fortum Group subsidiaries are disclosed in



Note 39

Group companies by segment. Group

holding % for companies owned via subsidiaries is based on the Fortum Corporation ownership %

in the direct subsidiary times the ownership % of the direct subsidiary in the indirect subsidiary /

associate / joint venture.

1.3.2 Associates

Associated companies are entities over which the Group has significant influence but not control,

generally accompanying a shareholding of between 20% and 50% of the voting rights. The Group’s

interests in associated companies are accounted for using the equity method of accounting. See



Note 18

Participations in associated companies and joint ventures.

1.3.3 Joint ventures

Joint ventures are arrangements in which the Group has joint control. Joint ventures are accounted

for using the equity method of accounting. See



Note 18

Participations in associated companies

and joint ventures.

1.4 Measures for performance

According to the ESMA Guidelines on Alternative Performance Measures, an Alternative

Performance Measure (APM) is understood as a financial measure of historical or future financial

performance, financial position, or cash flows, other than a financial measure defined or specified in

the applicable financial reporting framework.

Fortum uses APMs, such as Comparable operating profit and Comparable EBITDA in the financial

target setting and forecasting, management's follow-up of financial performance of segments and the

Group, as well as for the allocation of resources in the Group's performance management process.

Items affecting comparability are excluded from Comparable operating profit and Comparable EBITDA

and disclosed separately in Fortum's consolidated income statement to support the transparency of

underlying business performance when comparing results between periods.

Items classified as Items affecting comparability include accounting effects from valuation

according to IFRS not arising from the performance of business operations. Such items include fair

value changes of financial derivatives hedging future cash flows where hedge accounting is not

applied and fair value changes of physical contracts accounted for as derivatives according to

IFRS 9, Financial Instruments.

Further, business performance of operations cannot be compared from one period to another

without adjusting for one-time items relating to capital gains and other related items, such as

transaction costs arising from acquisitions; impacts from acquisition accounting; significant

impairments and reversals of impairments as well as other miscellaneous non-operating items,

such as restructuring and cost management expenses. Such items are also treated as Items

affecting comparability.

According to IFRS 3, Business Combinations, transaction costs related to the acquisitions of

subsidiary shares are recognised in the consolidated income statement. Such costs are presented

in Capital gains and other within Items affecting comparability.

To provide additional financial performance indicators to support meaningful comparison of

financials for Fortum's strategic businesses, Fortum introduced in 2022 the following APMs:

‘Comparable EBITDA from continuing operations excl. Russia’, ‘Comparable o

perating 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’.

Following the deconsolidation of Russia in 2023, these APMs,

with the exception of ‘Financial net debt/comparable EBITDA excl. Russia’, are no longer presented.

See



Note 7

Comparable operating profit and comparable net profit. Definitions are presented in

the section



Definitions and reconciliations of key figures.

Fortum’s l

ong-term financial target for capital structure is financial net debt-to-comparable

EBITDA of 2.0

–

2.5 times. See



Note 5

Capital risk management.

1.5 Foreign currency transactions and translation

1.5.1 Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the

currency of the primary economic environment in which the entity operates (the functional

currency). The consolidated financial statements are presented in euros, which is the company’s

functional and presentation currency.

1.5.2 Transactions and balances

Transactions denominated in foreign currencies are translated using the exchange rate at the date

of transaction. Receivables and liabilities denominated in foreign currencies outstanding on the

balance sheet date are translated using the balance sheet date exchange rate. Exchange rate

differences are recognised in the consolidated income statement. Net exchange differences relating

to financing components are recognised in the consolidated income statement, except when

deferred to equity as qualifying cash flow hedges. Translation differences on financial assets

through other comprehensive income are included in Other equity components in equity.

1.5.3 Group companies

Income statement and cash flow statement of subsidiaries, whose functional currencies are not

euro, are translated into euro using the average exchange rates; whereas the balance sheets of

such subsidiaries are translated into euro using the closing exchange rates on the balance sheet

date. On consolidation, exchange rate differences arising from the translation of net investment in

foreign entities, as well as borrowings and other currency instruments designated as hedges for

such investments, are taken to equity. When a foreign operation is sold, such exchange differences

are recognised in the consolidated income statement as part of the gain or loss on sale. Goodwill

and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and

liabilities of the foreign entity and translated at closing rate.

The balance sheet date rate is based on the exchange rate published by the European Central

Bank for the closing date. The average exchange rate is calculated as an average of daily closing

rates from the European Central Bank. The European Central Bank stopped publishing rouble

(RUB) rates from 2 March 2022. From 2 March 2022, the daily spot rate at 17:15 EET from the

market has been used. RUB rate is no longer presented in 2023 due to the deconsolidation of the

Russia segment.

Key exchange rates used in consolidated financial statements

	Average rate		Balance sheet date rate
	2023	2022	31 Dec 2023	31 Dec 2022
Norway (NOK)	11.4248	10.1026	11.2405	10.5138
Poland (PLN)	4.5420	4.6861	4.3395	4.6808
Russia (RUB)	N/A	73.6173	N/A	77.8998
Sweden (SEK)	11.4788	10.6296	11.0960	11.1218

1.5.4 Associates and joint ventures

Associates and joint ventures, whose measurement and reporting currencies are not euro, are

translated into the Group reporting currency using the same principles as for subsidiaries.

1.6 Other material accounting policies

Fortum describes other material accounting policies in conjunction with the relevant disclosure

information. The table below lists material accounting policies and the financial statement note

where they are presented, as well as the relevant IFRS standard.

Accounting policy	Note	IFRS standard
Subsidiaries	3. Acquisitions, disposals and discontinued	IFRS 3, IFRS 10
	operations
Discontinued operations	3. Acquisitions, disposals and discontinued	IFRS 5
	operations
Financial instruments	4. Financial risk management	IAS 32, IFRS 7, IFRS 9, IFRS 13
	14. Financial assets and liabilities by
	categories
	15. Financial assets and liabilities by fair
	value hierarchy
Segment reporting	6. Segment reporting	IFRS 8, IFRS 15
Revenue recognition	6. Segment reporting	IFRS 15
	23. Trade and other receivables
Share-based payments	10. Employee benefits and Board	IFRS 2
	remuneration
Earnings per share	13. Earnings and dividend per share	IAS 33
Other shares and participations	14. Financial assets and liabilities by	IAS 32, IAS 36, IFRS 9
	categories
	20. Other non-current assets
Fair value measurement	15. Financial assets and liabilities by fair	IFRS 13
	value hierarchy
Intangible assets	16. Intangible assets	IAS 38
Tangible assets	17. Property, plant and equipment and	IAS 16
	Right-of-use Assets
Joint arrangements	18. Participations in associated companies	IFRS 11, IAS 28, IFRS 12
	and joint ventures
Investments in associates	18. Participations in associated companies	IAS 28, IFRS 12
	and joint ventures
Impairment testing	19. Impairment testing	IAS 36
Inventories	22. Inventories	IAS 2
Trade receivables	23. Trade and other receivables	IFRS 9
Liquid funds	24. Liquid funds	IAS 7
Borrowings	26. Interest-bearing liabilities	IFRS 9
Income taxes	27. Income taxes on the balance sheet	IAS 12
Decommissioning obligation	28. Nuclear related assets and liabilities	IFRIC 5
Provisions	29. Other provisions	IAS 37
Pensions and similar obligations	30. Pension obligations	IAS 19
Leases	33. Leases	IFRS 16
Contingent liabilities	35. Pledged assets and contingent liabilities	IAS 37
Events after the balance sheet date	38. Events after the balance sheet date	IAS 1

1.7 Changes in reporting from 2022

1.7.1 Reportable segments

In March 2023, Fortum announced the reorganisation of its business structure. From 2023, the

business units are classified into the following reportable segments under IFRS: the Generation

segment, the Consumer Solutions segment, and the Other Operations segment. Segment

comparatives for 2022 were restated and a separate stock exchange release with restated

comparatives was issued on 17 April 2023. See also



Note 6

Segment reporting.

1.7.2 Discontinued operations

Russia in 2023

Control over

Fortum’s Russian operations was lost on 25 April 2023 following the Russian

Presidential decree No. 302, which enables the authorities to introduce temporary asset

management to assets owned by certain foreign entities in Russia, and the subsequent nomination

of the new external CEO to PAO Fortum. Consequently, in 2023 Fortum’s Russia segment was

deconsolidated, and classified as discontinued operations as required by IFRS 5 Non-current

assets held for sale and discontinued operations. Fortum has not had access to financial or non-

financial information from the Russia segment since the first quarter 2023 reporting, and therefore

information for the deconsolidation is based on the 31 March 2023 balance sheet.

Comparatives for 2022 were restated and a separate stock exchange release with restated

comparatives was issued on 11 May 2023. See also



Note 2

Critical accounting estimates and

judgements and



Note 3.3

Discontinued operations. The deconsolidation in 2023 resulted in EUR 3.6

billion one-time, non-cash negative effect. The amount consists of the full write-down of the Russian

assets of EUR 1.7 billion, and EUR 1.9 billion negative cumulative translation differences previously

recognised in equity. These cumulative translation differences are recycled from equity to profit and

loss on deconsolidation according to IFRS. The recycling did not have any impact on total equity.

Uniper in 2022

Discontinued operations in 2022 also include Fortum’s former subsidi

ary Uniper SE and its

consolidated group companies. 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 and Uniper

was deconsolidated at 30 September 2022. The transaction was completed on 21 December 2022.

On deconsolidation of Uniper at 30 September 2022, Fortum recorded EUR 28.0 billion one-time,

non-

cash positive effect. The amount consists of the net effect from the deconsolidation of Uniper’s

assets, liabilities and non-controlling interest, and the book value of Uniper-related goodwill and

other fair value adjustments made on acquisition; as well as certain items previously recognised in

other comprehensive income, mainly foreign exchange differences, that are reclassified to profit and

loss on disposal. See also



Note 3.3

Discontinued operations.

1.8 New accounting standards, amendments and interpretations

New accounting standards, amendments and interpretations effective from 1 January 2023 did not

have a material impact on Fortum's consolidated financial statements.

At the balance sheet date 31 December 2023, Fortum Group has applied the amendments to IAS

12 Income Taxes International Tax Reform

–

Pillar Two Model Rules. The amendments introduce a

temporary exception to IAS 12 for the treatment of deferred taxes, under which the company does

not recognise or disclose deferred tax assets and liabilities related to Pillar Two income taxes. See



Note 12

Income tax expense.

New accounting standards, amendments and interpretations issued by the balance sheet date

and effective from 1 January 2024, or later,

are not expected to have a material impact on Fortum’s

consolidated financial statements.

2 Critical accounting estimates and judgements

The preparation of IFRS consolidated financial statements requires management to make estimates

and assumptions that affect the reported amounts of assets and liabilities, the disclosure of

contingent assets and liabilities existing at the balance sheet date, as well as the reported amounts

of revenues and expenses during the reporting period.

Estimates and judgements are continually evaluated and are based on historical experience and

other factors, including expectations of future events that are believed to be reasonable under the

circumstances based on, for instance, the analysis of energy policy and the regulatory environment.

These factors can affect the carrying amounts of assets and liabilities, the amount and timing of

earnings recognition, as well as cash flows.

The table below lists the areas where management’s accounting estimates and judgements are

most critical to reported results and financial position; as well as where to find more information on

the areas of critical accounting estimate and judgement.

Critical accounting estimates and judgements	Note
Judgement used in determining the valuation of certain financial	14. Financial assets and liabilities by categories
instruments	15. Financial assets and liabilities by fair value
	hierarchy
Assumptions used when determining loss of control on disposal of	2. Critical accounting estimates and judgments
subsidiaries	3. Acquisitions, disposals and discontinued
	operations
Assigned values and useful lives determined for intangible assets	16. Intangible assets
and property, plant and equipment acquired in a business	17. Property, plant and equipment and right-of-use
combination	assets
Assumptions related to impairment testing of property, plant and	16. Intangible assets
equipment and intangible assets as well as associated companies	17. Property, plant and equipment and right-of-use
and joint ventures	assets
	18. Participations in associated companies and joint
	ventures
	19. Impairment testing
Judgement used when assessing the nature of Fortum's interest in	18. Participations in associated companies and joint
its investees, when considering the classification of Fortum's joint	ventures
arrangements, as well as commitments arising from these
arrangements
Estimates used for the recognition and measurement of deferred tax 27. Income taxes on the balance sheet
assets
Assumptions made to determine long-term cash flow forecasts of	28. Nuclear related assets and liabilities
estimated costs for provision related to nuclear production
Assumptions made when estimating provisions	29. Other provisions
Assumptions used to determine future pension obligations	30. Pension obligations

2.1 Russia’s invasion of Ukraine

Russia’s attack on Ukraine in February 2022 has severely impacted Fortum’s

current and future

businesses. The main impacts on Fortum’s 2023 financials include the events that led to the

deconsolidation of Fortum’s Russia segment in 2023

, as well as the divestment of Uniper to the

German State in 2022.

2.1.1 Deconsolidation of Russia segment in 2023

On 25 April 2023, Fortum’s subsidiary PAO Fortum (Fortum JSC) was put under asset management

in accordance with a Russian Presidential decree No. 302 which introduced a ‘temporary’ asset

management to assets owned by certain foreign entities in Russia. On 26 April 2023, this caused

the forced replacement of the company’s CEO and the Russian authorities seized control of

Fortum’s assets in Russia. The decree and the subsequent forced nomination of the external CEO

to PAO Fortum triggered a control assessment as required by IFRS 10 Consolidated financial

statements. Based on the assessment, Fortum’s rights are no longer substantive as it does not

have practical ability to use control over its Russian operations, and that the Russian State is in

practice able to approve or reject the most important decisions in relation to these operations.

Consequently, control was lost on 25 April 2023 and the Russia segment was deconsolidated in

2023. See also



Note 3.3

Discontinued operations.

2.1.2 Uniper divestment to the German State in 2022

Following the war in Ukraine, particularly the Uniper segment’s business and financial risk

profiles significantly deteriorated in 2022, mainly due to Russian gas curtailments and commodity

price volatility, which significantly increased margining requirements and liquidity needs. In July

2022, Fortum and Uniper reached out to the German Government to agree on a long-term

solution for Uniper.

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

principle allowing the German State to take full control of Uniper. This final Uniper agreement in

principle 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 2022, 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 transaction was completed on 21 December 2022.

Under the agreement, Uniper issued new

ordinary registered shares, which the German State subscribed at a nominal value of EUR 1.70 per

share. At completion of the equity capital increase, the German State bought all of Fortum‘s

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

billion; and Uniper repaid the EUR 4 billion shareholder loan. Out of 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), was released at the end of June 2023.

The signing of the agreement in principle with the German Government on 21 September 2022

triggered a control assessment as required by IFRS 10 Consolidated financial statements.

Management concluded that Fortum’s rights are no longer substantive as it does not have practical

ability to use control over Uniper. The loss of control was impacted by the signing of the agreement

in principle and the significant financial support to Uniper through the KfW Bank’s bridge financing.

In the judgement of the management, the overall effect of that financing, combined with the

agreement in principle, was such that the German Government was in practice subsequently able to

approve or reject the most important decisions in relation to the business of Uniper. Consequently,

control was assessed to have been lost and Uniper was deconsolidated at 30 September 2022. In

addition, Uniper was presented as discontinued operations in accordance with IFRS 5 Non-current

assets held for sale and discontinued operations as management was committed to fully disposing

of Uniper SE’s shares, and Uniper had been a separate reporta

ble segment and a significant

component of Fortum Group. See also



Note 1

Material accounting policies.

2.1.3 Deferred tax asset

Deferred tax assets at 31 December 2023 include EUR 829 million (2022: EUR 706 million)

recognised in 2023 and 2022 relating to one-time tax impacts realised in Ireland, which resulted in

increased deferred tax assets on tax loss carry forward. The deferred tax asset mainly relates to

impacts caused by the Uniper divestment and Russia deconsolidation, and the utilisation is subject

to future taxable income in Ireland. See



Note 27

Income taxes on the balance sheet.

2.2 Macroeconomic environment

The volatility in the commodity markets continued in 2023. The ongoing disruption of the energy

sector is expected to continue in near term due to geopolitical tensions and the general negative

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

commodity markets. The market volatility increases the estimation uncertainty and management

judgement especially for the cash flows and discount rates applied in impairment testing of non-

current assets, discounting of the provisions and obligations as well as valuation of deferred tax

assets and expected credit losses.

Fortum’s liquidity and refinancing risks are primarily related to the need to finance its business

operations, including margining payments and collaterals issued to enable hedging of commodity

market risk exposures. Higher and more volatile commodity prices increase the net margining

payments toward clearing houses and clearing banks. Fortum mitigates this risk by entering into

over-the-counter (OTC) derivatives contracts directly with bilateral counterparties without margining

requirements. Consequently, credit exposure from hedges with OTC counterparties has increased.

2.3 Climate-related matters

Fortum’s power generation in the Nordic countries is mainly ba

sed on CO

-free hydro and nuclear

power. A minor share of Fortum’s power generation is currently based on solar and wind. Fortum

also has generation of district heating and cooling in Finland and Poland. 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.

Main climate-related risks facing Fortum include transition risks, such as changes in legislation,

changes in technology, impact on supply or demand, and reputation; as well as physical risks, such

as those arising from extreme weather conditions or changes in long-term weather patterns. For

instance, floods will impact the optimal operation of hydro power plants. Fortum is systematically

reducing risks related to dam safety through long-term investments to secure the discharge capacity

in extreme flood situations. Legislation risk relates to both EU and national climate-related policies

and regulation, such as the treatment of nuclear, as there is a risk that some technologies are

preferred for reasons other than their CO

footprint. Further, increasing sustainability requirements,

e.g., in the context of the EU Nature Restoration Regulation, could have unforeseen negative

consequences for the energy system, in particular for hydro and wind power and power grids.

The impacts of climate change are reflected in the consolidated financial statements generally

when specific actions, such as new investments to transition to CO

-free production or to tackle

climate change have been approved; or when climate-related risks have materialised.

The following financial statement items are most relevant when considering the impact of climate-

related matters:

•

Impairm

ent testing: approved actions towards Fortum’s climate risks and targets are reflected in

the assumptions used in the impairment testing, as appropriate. See



Note 19

Impairment

testing.

•

Property, plant and equipment: economic lives and book values of property, plant and equipment

reflect approved actions towards Fortum’s climate

-related risks and targets. See



Note 17

Property, plant and equipment.

•

Nuclear provisions include future costs for decommissioning nuclear power plants, and the

appropriate treatment of spent fuel. See



Note 28

Nuclear-related assets and liabilities.

For accounting treatment applied to emission allowances, see



Note 22

Inventories.

3 Acquisitions, disposals and discontinued operations

ACCOUNTING POLICIES

SUBSIDIARIES

Acquisition of subsidiaries are accounted for using the acquisition method. The consideration

transferred is measured as the aggregate of acquisition date fair values of assets transferred and

liabilities assumed. Identifiable assets acquired and liabilities assumed are measured initially at

acquisition date fair values, irrespective of the extent of any minority interest. The excess of the cost

of acquisition over the fair value of the identifiable net assets acquired is recorded as goodwill.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group

and are no longer consolidated from the date that control ceases. See



Note 1.3

Principles for

consolidation.

DISCONTINUED OPERATIONS

A discontinued operation is a component of the Group that has been disposed of or is classified as

held for sale, and that represents a separate major line of business or geographical area of

operations or is part of a single co-ordinated plan to dispose of such a line of business or area of

operations. The results of discontinued operations are presented separately in the consolidated

income statement.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS: ASSUMPTIONS

REGARDING LOSS OF CONTROL

Fortum reassesses if it controls its subsidiaries if facts and circumstances indicate that there are

changes to the three elements of control: power over the investee, exposure or rights to variable

returns, or the ability to use power over to affect the amount of returns. Therefore, the date on

which control over a subsidiary is lost may require management judgment. With regards to the

deconsolidation of the Russia segment, management has used judgment in concluding that the

Russian Presidential decree issued on 25 April 2023 resulted in loss of control. With regards to

Uniper deconsolidation, management has used judgment in concluding that the signing of the

agreement with the German Government on 21 September 2022 resulted in loss of control. See

also



Note 2

Critical accounting estimates and judgements.

3.1 Acquisitions

EUR million	2023	2022
Gross investments in shares in subsidiary companies	22	0
Gross investments in shares in associated companies and joint ventures	12	10
Gross investments in other shares	19	19
Total	53	29

Acquisitions during 2023

On 31 August 2023, Fortum acquired the Swedish electricity solutions provider Telge Energi AB

from Telge AB. The total consideration for the entire shareholding in Telge Energi on a cash and

debt-free basis was approximately SEK 450 million (EUR 39 million). The purchase price, net of

cash acquired and other adjustments, was EUR 22 million. Telge Energi AB is included in the

Consumer Solutions segment.

3.2 Disposals

EUR million	2023	2022
Gross divestments of shares in subsidiary companies	1	1,279
Gross divestments of shares in associated companies and joint ventures	0	86
Gross divestments of other investments	3	0
Total	4	1,365

3.2.1 Disposals of subsidiary companies

Disposals during 2023

There were no material disposals in 2023.

Control over Fortum’s Russian operations was lost on 25 April 2023 following the Russian

Presidential decree No. 302. Consequently, in 2023 Fortum’s Russia segment was deconsolidated,

and classified as discontinued operations. Fortum has not had access to financial or non-financial

information from the Russia segment since the first quarter 2023 reporting, and therefore

information for the deconsolidation is based on the 31 March 2023 balance sheet. See



Note 3.3

Discontinued operations.

Disposals during 2022

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

principle allowing the German State to take full control of Uniper and Uniper was deconsolidated.

On 21 December 2022, the transaction was completed and Fortum received the total consideration

of the share transaction of EUR 498 million and Uniper repaid the EUR 4 billion shareholder loan.

The consideration received for the shares is presented in the cash flow from discontinued

operations. See also



Note 1

Material accounting policies,



Note 2

Critical accounting estimates

and judgements and



Note 3.3

Discontinued operations.

On 1 September 2022, Fortum announced that it had concluded the sale of 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 millio

n in the Other Operations’ 2022 results.

On 19 May 2022, Fortum announced that it had 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; and as part of the transaction, Fortum

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

a tax-exempt capital gain of EUR 638 million in

the Generation segment’s

2022 results. In 2022,

Fortum Oslo Varme AS was part of the City Solutions segment (see



Note 6

Segment reporting).

In May 2022, the second phase of the Rajasthan divestment was concluded and a tax-exempt

sales gain of EUR 5 million was recorded in comparable operating profit in the Generation

(previously

City Solutions) segment’s

2022 results.

Divestments of shares in subsidiaries - Impact on financial position

The table below does not include the impact of deconsolidation of Russia and Uniper, which is

presented separately in



Note 3.3.2

Impact from the deconsolidation of Russia and Uniper.

EUR million	2023	2022
Gross divestments of shares in subsidiary companies	1	1,279
Intangible assets and property, plant and equipment	0	797
Other non-current and current assets	0	592
Liquid funds	0	44
Interest-bearing loans	0	-206
Other liabilities and provisions	0	-816
Net assets divested	0	411
Reclassified to participations in associates and joint ventures	-	-
Result from transaction	1	702

3.2.2 Other disposals

On 18 August 2022, Fortum concluded the sale of its 30% ownership in Recharge AS, a public

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

of M&G Plc. The transaction price was approximately EUR 85 million. Fortum recorded a tax-

exempt capital gain of EUR 77 million in Other Operations’ 2022 results.

3.3 Discontinued operations

The Russia segment is classified as discontinued operations in 2023, and the Uniper segment was

classified as discontinued operations in 2022. See also



Note 1

Material accounting policies and



Note 2

Critical accounting estimates and judgments. Financial performance and cash flow

information for the discontinued operations is presented until 31 March 2023 for the Russia

segment, and until 30 September 2022 for the Uniper segment.

3.3.1 Financial performance

The result from discontinued operations is disclosed on one line on the face of the consolidated

income statement. The following table presents breakdown of income statement information for

discontinued operations. Discontinued operations include the Russia segment in 2023 and 2022; as

well as the Uniper segment in 2022. The deconsolidation of Russian operations in 2023 resulted in

EUR 3.6 billion one-time, non-cash negative effect. The deconsolidation of Uniper in 2022 resulted

in EUR 28.0 billion one-time, mainly non-cash positive effect. The effects of eliminations from

internal sales and purchases have been included in the discontinued operations. The net financial

costs are based on the historical financial costs in the separate companies.

EUR million	2023	2022
Sales	287	129,126
Other income	6	22,535
Materials and services	-148	-132,778
Employee benefits	-20	-781
Depreciation and amortisation	-23	-724
Other expenses	-15	-21,865
Comparable operating profit	86	-4,487
Deconsolidation effect	-3,608	27,966
Items affecting comparability	0	-40,570
Operating profit	-3,521	-17,091
Share of profit/loss of associates and joint ventures	26	-372
Finance costs - net	-88	-1,028
Profit before income tax	-3,584	-18,491
Income tax expense	2	6,117
Net profit from discontinued operations	-3,582	-12,374
Attributable to:
Owners of the parent 1)	-3,583	-4,496

Non-controlling interests	1	-7,878
Earnings per share, discontinued operations, EUR	-3.99	-5.07
Comparable net profit from discontinued operations	34	-2,064
Comparable earnings per share, discontinued operations, EUR	0.04	-2.32

1) Non-controlling interest is not calculated on the Deconsolidation effect

as the deconsolidation effect is calculated based on Fortum’s share

Russia’s and Uniper’s net assets

3.3.2 Impact from the deconsolidation of Russia and Uniper

Russia

The deconsolidation of Russian operations in 2023 resulted in EUR 3.6 billion one-time, non-cash

negative effect. The amount consists of the full write-down of the Russian assets of EUR 1.7 billion,

and EUR 1.9 billion negative cumulative translation differences previously recognised in equity.

These cumulative translation differences are recycled from equity to profit and loss on

deconsolidation according to IFRS. The recycling did not have any impact on total equity.

Fortum has not had access to financial or non-financial information from the Russia segment

since the first quarter 2023 reporting, and therefore information for the deconsolidation is based on

the 31 March 2023 balance sheet.

EUR million	31 Mar 2023
Intangible assets	18
Property, plant and equipment and right-of-use assets	896
Participations in associates and joint ventures	221
Interest-bearing receivables	33
Other non-current and current assets	594
Liquid funds	284
Non-controlling interests	-22
Interest-bearing liabilities	-178
Other liabilities	-161
Net assets deconsolidated	1,685
Items recycled to Income statement	-1,922
Deconsolidation effect (negative)	-3,608

Uniper

On deconsolidation of Uniper at 30 September 2022, Fortum recorded EUR 28.0 billion one-time,

mainly non-cash positive effect that is included in 2022 in net profit from discontinued operations in

the consolidated income statement. The amount consists of the net effect from the consideration

received for the shares, EUR 498 million; Uniper’s negative net assets divested resultin

g in a

positive impact to the deconsolidation effect of EUR 26 658 million; as well as certain items

previously recognised in other comprehensive income, EUR 810 million, mainly foreign exchange

differences, that are reclassified to Income statement on disposal.

EUR million	30 Sep 2022
Net assets divested	-26,658
Consideration received for the shares	498
Items recycled to Income statement	810
Deconsolidation effect	27,966

Fortum’s total pre

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

net effect from the investments in Uniper shares during 2018

–

2022 of approximately EUR 7.2

billion, the sales proceeds of EUR 0.5 billion received and dividends of approximately EUR 0.9

billion received during the Uniper ownership.

3.3.3 Cash flow information

In the cash flow statement, the net cash flows attributable to the operating, investing and financing

activities of the discontinued operations are disclosed separately. The table below shows the

Russia segment in 2023 and 2022; as well as the Uniper segment in 2022.

The Russian operations were deconsolidated due to loss of control as opposed to sale (see



Note 2

Critical accounting estimates and judgements), i.e. no consideration has been received for

the Russian operations. Cash flow from investing activities for discontinued operations in 2023

includes Russia related cash flows netted with liquid funds of EUR 284 million lost through the

seizure of the Russian assets.

The consideration received for the shares of Uniper, EUR 498 million, is presented in net cash

from/used in investing activities of the discontinued operations. Net cash from/used in investing

activities in 2022 is presented net of liquid funds due to the deconsolidation of Uniper. Liquid funds

of Uniper were EUR 2,248 million at 30 September 2022.

EUR million	2023	2022
Net cash from/used in operating activities	109	-10,484
Net cash from/used in investing activities	-333	-2,789
Net cash from/used in financing activities	21	10,739
Total net decrease/increase in liquid funds	-202	-2,534

4 Financial risk management

Fortum's risk management framework, objectives, organisation and processes as well as a

description of strategic, sustainability, financial and operational risks can be found in the Risk

management section of the Operating and financial review (OFR).

4.1 Commodity market and fuel risks

Fortum’s business is exposed to fluctuations in prices and availability of commodities used in the

production, transmission and sales of energy products. The main exposure is toward electricity

prices and volumes, prices of emissions, and price and availability of fuels. Fortum hedges its

exposure to commodity market risks in order to improve the predictability of the future result by

reducing volatility in earnings while ensuring cash flow risk is at an acceptable level.

Risk management for commodity hedging activities is based on general standards in the industry

and involves the segregation of duties, as well as daily calculation, monitoring and reporting of

results, positions and risks. Controls are in place to ensure exposures are kept within approved

limits and mandates. Hedging involves the use of derivative financial instruments, as well as fixed-

price physical delivery contracts.

4.1.1 Electricity price and volume risk

The exposure to Nordic electricity prices and normal volume fluctuations (e.g. due to weather-driven

demand and supply changes) is the largest commodity market risk exposure for Fortum in terms of

impact to earnings. The exposure arising from outright power production (hydro and nuclear

production assets) is mainly hedged by entering into electricity derivatives contracts on exchanges

such as Nasdaq Commodities or the European Energy Exchange, as well as directly with

counterparties active in the energy and financial markets. The main objective of hedging is to

reduce the effect of electricity price volatility in earnings while ensuring the cash flow risk is at an

acceptable level, and to increase the predictability of future results. The Generation segment’s

hedging strategies cover several years in the short- to medium-term. These hedging strategies are

executed within approved mandates and are continuously evaluated as electricity and other

commodity market prices, the hydrological balance and other relevant parameters change.

The Generation segment

’s hedging for power sales is performed in EUR on a Nordic level

covering both Finland and Sweden. The currency component of these hedges in the Swedish entity

is currently not hedged. Generation segment’s sensitivity to the Nordic electricity market price

dependent on the hedge level for a given time period. As per 31 December 2023, approximately

70% of the Generation segment's estimated Nordic power sales volume was hedged for the

calendar year 2024 with a price of 47 EUR/MWh and approximately 41% for the calendar year 2025

with a price of 43 EUR/MWh.

4.1.2 Commodity derivatives

The table below discloses Fortum Group's commodity derivatives for which hedge accounting

according to IFRS 9 is applied. The fair values represent the values disclosed on the balance sheet.

See also



Note 14

Financial assets and liabilities by categories for accounting principles and



Note 15

Financial assets and liabilities by fair value hierarchy for basis of fair value estimations.

Commodity derivatives subject to hedge accounting 2023

	Volume, TWh				Fair value, EUR million
	Under	1 – 5	Over
	1 year	years	5 years	Total	Positive	Negative	Net
Electricity derivatives	23	18	1	42	439	869	-430
Gas derivatives	3	1	-	4	24	117	-94
Netting against commodity
exchanges 1)					-153	-153	-
Total					309	833	-524

1) Receivables and liabilities against commodity exchanges arising from standard derivative contracts with same delivery period are netted.

Commodity derivatives subject to hedge accounting 2022

	Volume, TWh				Fair value, EUR million
	Under	1 – 5	Over 5
	1 year	years	years	Total	Positive	Negative	Net
Electricity derivatives	18	27	1	47	1,376	4,302	-2,926
Netting against commodity
exchanges 1)					-546	-546	-
Total	18	27	1	47	830	3,756	-2,926

1) Receivables and liabilities against commodity exchanges arising from standard derivative contracts with same delivery period are netted.

4.1.3 Sensitivity arising from electricity derivatives

The table below presents how a 1 EUR/MWh change in the electricity forward and futures

quotations for the period Fortum has derivatives would impact Fortum’s profit before income tax and

equity. Hedge accounting is applied to most of the hedging strategies using financial commodity

derivatives, with impact of the market price changes of derivatives recognised in equity.

Impacts are calculated based on the electricity position as of 31 December. Positions are actively

managed in the day-to-day business operations and therefore the sensitivities vary from time to

time. Sensitivity analysis includes only the market risks arising from derivatives i.e. the underlying

physical electricity sales and purchases are not included.

Sensitivity is calculated with the assumption that electricity forward and futures quotations would

change 1 EUR/MWh for the period Fortum has derivatives. Different price change assumptions can

be used to assess the impact on sensitivity analysis analogously, relative to 1 EUR/MWh change

presented in the table below.

Sensitivity analysis

+/- 1 EUR/MWh change in electricity forward and futures quotations, EUR million	Effect	2023	2022
Effect on profit before income tax	-/+	1	2
Effect on equity	-/+	42	47

4.2 Liquidity and refinancing risk

Fortum's business is exposed to liquidity and refinancing risks primarily through the need to finance

the Group’s business operations including margining and collaterals issued for hedging activities.

Trading derivative financial instruments exposes the Group to a liquidity risk associated with having

to provide financial collaterals like cash or bank guarantees.

A downgrade in Fortum’s rating,

especially to below investment grade, could trigger counterparties’ right to de

mand additional

collateral, which would need to be provided via cash or bank guarantees.

The derivative instruments used by the Group are traded via exchanges and over-the-counter

with selected counterparties based on bilateral agreements. Trading through exchanges requires

the exchange of cash (margining payments) with a clearing house or clearing bank to cover market

risk in the case of a member default and the subsequent close-out of its portfolio. Trading over-the-

counter also exposes the Group to liquidity risk in case of a counterparty default. A default could

trigger a termination payment in cases where the net market value of the bilateral contracts is

positive for the counterparty. Margin receivables from commodity hedging and foreign exchange

and interest rate derivatives under Credit Support Annex agreements at balance sheet date were

EUR 590 million (2022: 2,607) and margin liabilities EUR 131 million (2022: 352).

The exposure to margining requirements, termination payments, working capital needs and

contingent collateral outflows is continuously assessed and monitored so that adequate liquidity is

available to cover expected future cash collateral required for margining. There are strict limits in place

which ensure that there is sufficient liquid funds and credit lines available to cover margining

requirements and termination payments also in extreme market scenarios.

Liquidity and refinancing risks are managed through a combination of cash positions and

committed credit and other guarantee facility agreements with the core banks. The maturity profile

of loans is monitored to ensure that there is at all times access to adequate liquidity for investments,

loan maturities and margining required for commodity trading and hedging activities. Stable maturity

profile and interest rate risk profile are reducing the refinancing risk both in terms of availability and

average price of loan portfolio.

Fortum’s business is capital intensive and it has a diversified loan portfolio. Long

-term

financing is primarily raised by issuing bonds under Fortum Corporation’s Euro Medium Term

Note programme (EMTN), as well as through bilateral and syndicated loan facilities from a variety

of different financial institutions.

In Fortum, financing is primarily raised on parent company level and funds are distributed

internally through various internal financing arrangements.

On 31 December 2023, 90% (2022: 89%) of the

Group’s total external loans was raised by the

parent company Fortum Corporation, and remaining 10% by other subsidiaries (2022: 11%).

At the end of 2023, financial net debt was EUR 942 million (2022: 1,084).

On 31 December 2023, loan maturities for the coming twelve-month period amounted to

EUR 1,316 million (2022: 4,108) which include EUR 717 million loans from financial institutions and

EUR 174 million commercial paper debt. Maturities in 2023 also include EUR 418 million loans with

no contractual due date.

At the end of the reporting period, the Group’s liquid funds totalled EUR 4,183 million (2022: 3,919).

Maturity of loans

EUR million	2023
2024	1,316
2025	509
2026	747
2027	17
2028	520
2029 and later	2,682
Total	5,791

For more information on loans, see



Note 26

Interest-bearing liabilities.

Liquid funds, major credit lines and debt programmes 2023

EUR million
Liquid funds			4,183
		Available	Drawn
Committed credit lines	Total facility	amount	amount
Fortum Corporation, EUR 2,400 million syndicated credit facility	2,400	2,400	-
Fortum Corporation, EUR 800 million bilateral credit facility	800	800	-
Fortum Corporation, bilateral overdraft facilities	100	100	-

Total 1)	3,300	3,300	-

1) Additionally, Fortum has uncommitted commercial paper programmes in Finland and Sweden, uncommitted margin facility and

uncommitted EMTN programme. From the commercial paper programmes EUR 174 million, from the margin facility EUR 376 million and

from the EMTN programme EUR 2,750 million bonds were outstanding at the end of the reporting period.

Liquid funds, major credit lines and debt programmes 2022

EUR million

Liquid funds 1)			3,919
		Available	Drawn
Committed credit lines	Total facility	amount	amount
Fortum Corporation, EUR 5,500 million syndicated credit facility	5,500	4,400	1,100
Fortum Corporation, EUR 800 million bilateral credit facility	800	800	-
Fortum Corporation, EUR 2,350 million Finnish State bridge financing	2,350	2,000	350
Fortum Corporation, bilateral overdraft facilities	100	100	-

Total 2)	8,750	7,300	1,450

1) In 2022, liquid funds included EUR 247 million relating to Russian operations.

2) Additionally, Fortum has uncommitted commercial paper programmes in Finland and Sweden, uncommitted margin facility and

uncommitted EMTN programme. From the commercial paper programmes EUR 475 million, from the margin facility EUR 527 million and

from the EMTN programme EUR 2,690 million bonds were outstanding at the end of the reporting period.

Maturity analysis of financial liabilities and derivatives

Interest-bearing loans and lease liabilities are the contractual undiscounted cash flows including

principal and interest payments. Trade payables equal the carrying amount as these are due within

12 months. For gross settled derivatives, the contractual nominal amounts are presented below and

for net settled interest rate swaps the net cash outflows are presented in the same table.

	2023				2022
	Under	1 – 5	Over		Under	1 – 5	Over
EUR million	1 year	years	5 years	Total	1 year	years	5 years	Total
Non-derivatives
Interest-bearing loans, principal and interest
payments	1,149	2,676	3,149	6,974	4,290	1,831	2,254	8,374
Lease liabilities	21	55	56	131	18	53	57	128
Trade payables	488	-	-	488	720	-	-	720
Total non-derivatives	1,657	2,731	3,205	7,593	5,028	1,884	2,311	9,222
Derivatives
Foreign exchange derivatives and cross
currency swaps
Cash inflow (-)	-5,910	-376	-	-6,286	-10,541	-247	-	-10,788
Cash outflow	6,142	387	-	6,529	10,503	245	-	10,748
Interest rate swap liabilities (net settled)	36	51	0	87	20	98	15	133
Commodity derivatives
Cash inflow (-)	-1,819	-395	-12	-2,226	-2,720	-2,279	-31	-5,029
Cash outflow	3,392	606	15	4,013	5,499	4,557	35	10,090
Total derivatives	1,842	273	2	2,117	2,761	2,373	19	5,153

Commodity derivatives traded through exchanges require financial collaterals (like cash or

securities). Fortum has a collateral arrangement to the Nordic Power Exchange to cover initial

margin payments of commodity derivatives. Margin receivables are cash/securities posted to

exchange to cover clearing house’s market risk (

initial margin) against a default of a member and

negative mark to market values of futures settled through the exchange between counterparties

(variation margin) reducing the counterparty risk versus bilateral trades. These cash collaterals are

constantly fluctuating according to commodity market movements, i.e. if the prices will

increase/decrease, the negative/positive fair value of the commodity derivatives traded through

exchanges need to be covered immediately by posting/receiving cash collateral. Margin receivables

(cash paid) from hedging activities at balance sheet date were EUR 590 million (2022: 2,607) and

margin liabilities (cash received) EUR 131 million (2022: 352).

4.3 Interest rate risk and currency risk

4.3.1 Interest rate risk

Fortum is exposed to cash flow risk from changes in interest rates mainly from interest-bearing

liabilities, liquid funds and derivatives on a fixed- and floating rate basis.

Fortum manages the interest rate exposure through a duration target of the gross loan portfolio

(excluding lease liabilities and provisions), and cash flow at risk limit of the net loan portfolio. 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.

On 31 December 2023,

the duration of Fortum’s loan portfolio (including derivatives)

was 1.8

years (2022: 1.2). Approximately 66% (2022: 77%) of the loan portfolio was on a floating rate basis,

or fixed rate loans maturing within the next 12-month period. The flow risk, measured as 1%

increase in the yield curve in all the tenors and currencies for Fortum’s net loan portfolio for the

coming 12 months, was EUR 15 million positive (2022: 10 negative).

Hedge accounting is used for majority of interest rate derivatives which Fortum is using to

manage loan portfolio. Mainly fair value hedge accounting is applied and thus changes in interest

rates could have only minor impact in consolidated income statement or hedging reserve as the

offsetting fair value of bonds is also recognised to consolidated income statement. The impact of

+1%/ -1% interest rate change from interest rate derivatives was EUR +9 / -10 million to equity

(2022: +11 / -12) and there was no significant impact to consolidated income statement.

The average interest rate for the total loan portfolio, including derivatives in finance costs, was

4.3% at the balance sheet date (2022, excluding Russia: 3.7%). The average interest rate of EUR

loans was 4.0% (2022: 3.1%). The average interest rate for the liquid funds was 3.9% at the

balance sheet date (2022: 1.7%).

There has been ongoing reform of certain floating interest benchmark rates to alternative risk free

rates (ARR) due to the IBOR (Interbank Offered Rates) transition. Fortum Group has interest rate

derivatives in EUR and SEK and sees that the IBOR transition will not have significant impact on

the value and effectiveness of these derivatives.

4.3.2 Currency risk

Fortum’s policy is to hedge major transaction exposures on a local level in the

reporting currency of

each legal entity in order to avoid exchange differences in the consolidated income statement. An

exception is Generation segment’s hedging of power sales in Sweden where the currency

component is not hedged. Derivatives are used to hedge existing foreign exchange risks, not for

proprietary trading.

Treasury transaction exposure

	2023			2022
	Net			Net
EUR million	Position	Hedge	Open	Position	Hedge	Open
RUB	-	-	-	869	-	869
SEK	4,877	-4,879	-2	-669	679	10
PLN	543	-541	1	531	-529	2
NOK	522	-521	1	751	-745	5
USD	-83	83	0	-993	993	0
Other	1	6	6	4	-	4
Total	5,859	-5,853	6	492	398	890

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 or estimated 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).

Transaction exposures arise mainly from physical and financial trading of commodities, existing

and new investments, external and internal financing and shareholder loans. Contracted cash flow

exposures are hedged to reduce volatility in future cash flows. These hedges normally consist of

currency derivative contracts, which are matched against the underlying future cash flow according

to maturity. Fortum has currency cash flow hedges both with and without hedge accounting

treatment under IFRS. Those currency cash flow hedges for which hedge accounting is not applied

are mainly hedging commodity derivatives and create volatility in operating profit. There was no

significant ineffectiveness arising from cash flow hedges in 2023.

As of 31 December 2023, had EUR been 5% weaker/stronger on closing date, then the impact

from loans, receivables and derivatives to consolidated income statement would have been

EUR -17/+17 million (2022: -26/+26) and group's equity EUR -3/+3 million (2022: +3/-3). Income

statement sensitivity resulted from cash flows in SEK and NOK, and equity sensitivity from cash

flows in PLN, SEK and USD.

Translation exposure position includes net investments in foreign subsidiaries and associated

companies. Translation exposures in Fortum are generally not hedged as the majority of these

assets are considered to be long-term strategic holdings. In Fortum, this means mainly entities

operating in Sweden and Norway, whose base currency is not euro.

Exchange differences arising from the translation of the net investment in foreign entities are

taken to equity. The net effect of exchange differences on equity attributable to equity holders

mainly from SEK, NOK and PLN was EUR -43 million (2022: -304). Part of this translation exposure

has been hedged and the notional amount of foreign currency hedges were EUR 137 million

(2022: 2,813). The foreign currency hedge result amounted to EUR -16 million (2022: 41). There

was no significant ineffectiveness arising from net investment hedges. For total translation

differences see



Consolidated statement of changes in total equity

Interest rate and currency derivatives by instrument 2023

	Notional amount				Fair value
	Remaining lifetimes
	Under	1 – 5	Over		Posi-	Nega-
EUR million	1 year	years	5 years	Total	tive	tive	Net
Hedge accounting
Foreign exchange derivatives	168	124	-	292	3	15	-12
Interest rate swaps	100	1,300	1,575	2,975	114	83	31
Cross currency swaps	47	73	-	120	3	0	2
Non-hedge accounting
Foreign exchange derivatives	5,689	151	-	5,840	8	234	-226
Interest rate swaps	-	14	-	14	1	-	1
Cross currency swaps	-	24	-	24	1	-	1
Total	6,004	1,686	1,575	9,265	129	333	-204
Of which long-term					115	95	21
Short-term					14	238	-224

Interest rate and currency derivatives by instrument 2022

		Notional amount				Fair value
		Remaining lifetimes
	Under	1 – 5	Over 5		Posi-	Nega-
EUR million	1 year	years	years	Total	tive	tive	Net
Hedge accounting
Foreign exchange derivatives	3,056	108	-	3,163	25	3	22
Interest rate swaps	740	825	1,350	2,915	112	120	-9
Cross currency swaps	-	76	-	76	3	-	3
Non-hedge accounting
Foreign exchange derivatives	8,445	36	-	8,481	93	51	42
Interest rate swaps	18	13	-	31	2	-	2
Cross currency swaps	-	24	-	24	1	-	1
Total	12,259	1,081	1,350	14,690	235	175	61
Of which long-term					119	121	-1
Short-term					116	54	62

4.4 Credit risk

Fortum is exposed to counterparty risk whenever there is a contractual arrangement with an

external counterparty.

Credit risk exposures relating to financial derivative instruments are often volatile 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 over-the-counter (OTC) derivative

contracts are concluded directly with a number of different counterparties, including energy

wholesalers and retailers, utilities, trading companies, energy companies, industrial end-users and

financial institutions active in the financial and energy markets.

Due to Fortum’s net short position in

Nordic power hedges credit exposure tends to increase with the value of hedges if Nordic power

prices decrease. Currency and interest rate derivative counterparties are limited to investment

grade banks and financial institutions. International Swaps and Derivatives Association (ISDA)

Master agreements, which include netting clauses and in some cases Credit Support Annex

agreements, are in place with most of these counterparties. The majority of commodity derivative

counterparties have investment-grade or comparable ratings. Master agreements, such as those

published by ISDA and European Federation of Energy Traders (EFET), which include netting

clauses, are in place with the majority of the counterparties.

Due to the financing needs and management of liquidity, Fortum has counterparty credit

exposure towards a number of banks and financial institutions in the form of deposits and towards

corporate issuers of commercial papers, mainly in the Nordic market. The majority of the exposure

is towards Fortum’s key relationship banks, which are highly creditworthy institutio

ns. Investments

in commercial papers were all with investment grade issuers at 31 December 2023.

Credit risk relating to customers, suppliers and trading partners is spread across a wide range of

industrial counterparties, energy companies, government and municipal entities, utilities, small

businesses, housing associations and private individuals over a range of geographic regions. The

majority of exposure is in the form of derivative fair values and trade receivables from the sale of

electricity, gas and heat in the Nordic and Polish market.

4.4.1 Credit quality of major financial assets

Fortum recognises loss allowance for expected credit losses (ECL) on financial assets classified to

amortised cost category at each reporting date. The impairment model is applied to financial assets

such as trade receivables, deposits, commercial papers, and loan and other interest-bearing

receivables. See



Note 23

Trade and other receivables for details on expected credit losses

recognised for trade receivables.

Expected credit loss is calculated on an individual counterparty basis for deposits, commercial

papers and loan and other interest-bearing receivables. No impairment loss is recognised on cash

in bank accounts since expected credit loss is immaterial due to low risk of default. The risk of

default is evaluated at each reporting date based on credit ratings to determine if credit risk has

increased significantly. The value of collateral and other measures taken to reduce credit risk (e.g.

credit default insurance) is included in the calculation of expected credit losses in the “loss given

default” ratio.

A financial asset with an investment-grade rating is assumed to have low credit risk. A change of

credit rating from investment to non-investment grade constitutes a significant increase in credit risk. If

the credit risk on the financial asset has not increased significantly since the initial recognition, loss

allowance equals to 12 month ECL. If the credit risk on the financial asset has increased significantly

since initial recognition, loss allowance equals to the lifetime expected credit losses.

The loss allowance for interest-bearing receivables totalled EUR 1 million on 31 December 2023

(2022: 117), with the change in loss allowance mainly resulting from the deconsolidation of Russian

operations in April 2023. Amounts for interest-bearing receivables including bank deposits and

derivative financial instruments recognised as assets are presented by counterparties in the

following table.

For derivative financial instruments the counterparty credit risk has been taken into account when

determining fair value. The impact of credit risk is measured on a counterparty basis through credit

value adjustment (CVA) method applying similar inputs and assumptions to which are used in the

measurement of ECL. See also



Note 15

Financial assets and liabilities by fair value hierarchy for

basis of fair value estimations.

All counterparties for currency and interest rate derivatives and the majority of counterparties for

bank deposits have an external rating from S&P Global Ratings, Fitch and/or Moody’s credit

agencies. For counterparties rated by more than one rating agency, the lowest rating is used to

determine if it is investment grade.

In the commodity derivatives and commercial paper market, there are a number of counterparties

not rated by S&P Global Ratings,

Fitch or Moody’s. For these counterparties, Fortum assigns an

internal rating. The internal rating categories that are considered to be comparable to investment

grade have similar financial metrics or display historical default rates which correspond to

nvestment grade companies rated by S&P Global Ratings, Fitch or Moody’s.

Credit quality of major financial assets

	2023		2022
	Carrying	of which	Carrying	of which
EUR million	amount	past due	amount	past due
Receivables with investment grade or comparable rating
Deposits, commercial papers and cash in bank accounts	4,122	-	3,602	-
Fair values of interest rate and currency derivatives	129	-	235	-
Fair values of commodity derivatives on exchanges	135	-	394	-
Fair values of OTC commodity derivatives	301	-	879	-
Total receivables with investment grade or comparable rating	4,688	-	5,110	-
Receivables with non-investment grade or comparable rating
Deposits, commercial papers and cash in bank accounts	-	-	247	-
Fair values of OTC commodity derivatives	39	-	321	-
Loan and other interest bearing receivables	-	-	39	-
Total receivables with non-investment grade or comparable rating	39	-	607	-

Other receivables 1)
Loan receivables from associates and joint ventures	644	-	592	-
Restricted cash	13	-	27	-
Cash in other bank accounts	62	-	70	-
Other receivables	-	-	3	-
Total other receivables	719	-	692	-
Total	5,446	-	6,409	-

1) Other receivables include financial assets which have not been divided to investment-grade and non-investment grade or comparable

ratings.

4.4.2 Financial instruments subject to master netting agreements

The following tables present the recognised financial instruments that are offset, or subject to

enforceable master netting arrangements and other similar agreements but not offset. The column

'net amount' shows the impact on the Group's balance sheet if all netting rights were exercised.

Netting agreements for financial assets and liabilities 2023

		Gross	Net amounts	Conditional
		amount	presented	netting	Financial
		netted on	on the	amount	collateral
	Gross	the balance	balance	(netting	received

EUR million	amount	sheet 1)	sheet	agreements)	/pledged	Net amount
Financial assets
Interest-rate and currency derivatives	129	-	129	80	42	7
Commodity derivatives	990	514	476	343	4	129
Trade receivables	1,120	-	1,120			1,120
Total	2,238	514	1,725	423	46	1,255
EUR million
Financial liabilities
Interest-rate and currency derivatives	333	-	333	80	176	76
Commodity derivatives	1,454	514	940	343		597
Trade payables	488	-	488			488
Total	2,274	514	1,760	423	176	1,161

1) Receivables and liabilities from electricity and other commodity exchanges arising against standard derivative contracts with same delivery

period are netted.

Netting agreements for financial assets and liabilities 2022

		Gross	Net amounts	Conditional
		amount	presented	netting	Financial
		netted on	on the	amount	collateral
	Gross	the balance	balance	(netting	received

EUR million	amount	sheet 1)	sheet	agreements)	/pledged	Net amount
Financial assets
Interest-rate and currency derivatives	235	-	235	124	64	48
Commodity derivatives	3,349	1,755	1,594	957	5	632
Trade receivables	1,625	-	1,625	-	-	1,625
Total	5,209	1,755	3,455	1,080	69	2,305
EUR million
Financial liabilities
Interest-rate and currency derivatives	175	-	175	124	40	11
Commodity derivatives	6,309	1,755	4,554	957	-	3,598
Trade payables	720	-	720	-	-	720
Total	7,203	1,755	5,449	1,080	40	4,329

1) Receivables and liabilities from electricity and other commodity exchanges arising against standard derivative contracts with same delivery

period are netted.

5 Capital risk management

At the beginning of February 2024, the Fortum Board of Directors resolved on clarifications to

Fortum’s strategy, see



Note 38

Events after the balance sheet date.

Fortum’s long

-term financial targets before these clarifications were:

•

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 billion during 2023

–

2025 (revised on 2 November 2023 from up to EUR 1.5 billion)

•

Investment hurdles of project WACC + 150

–

400 basis points

•

Dividend policy with payout ratio of 60

–

90% of comparable EPS

On 2 November 2023, Fortum initiated an efficiency programme targeting to reduce annual fixed

costs by EUR 100 million gradually until the end of 2025.

Comparable EBITDA is defined as an alternative performance measure and used as a component

in the capital structure target

’

Financial net debt-to-Comparable EBITDA

’

On 9 March 2023, S&P Global Ratings (S&P) affirmed

Fortum’s current long

-term credit rating at

BBB, and revised the outlook from negative to stable. According to S&P the stable outlook reflects

the rating agency’s assumption that Fortum's cash flow from power generation will remain

significant, but volatile in 2023 and 2024, with electricity prices above historical levels. The rating

agency assesses that Fortum has a strong position in the Nordics with an already very low emission

profile that supports the business risk profile. It believes that the price risk over time will be reduced

by driving decarbonisation of industrial customers and by signing various long-term power supply

agreements. In addition, S&P assesses that Fortum’s financial risk position is strong with a

headroom that provides good financial flexibility due to very low leverage and good liquidity.

On 21 March 2023, Fitch Ratings (Fitch) affirmed Fortum’s current long

-term credit rating at BBB

and has revised the outlook from negative to stable. According to Fitch, the change in outlook

mainl

y reflects the positive impact of the Uniper exit for Fortum's credit profile and the company’s

commitment to maintain an adequate capital structure with high scrutiny in capex allocation

prioritising profitability over growth. Fitch assesses that the company is well positioned to benefit

from the strong fundamentals for clean power generation.

Fortum remains committed to maintain a credit rating of at least BBB to preserve financial

flexibility and good access to capital markets.

Financial net debt/comparable EBITDA ratio

		Continuing
		operations
EUR million	Note	2023	2022
+Interest-bearing liabilities		5,909	7,785
- BS Liquid funds		4,183	3,919
- Collateral arrangement		325	527
- BS Margin receivables		590	2,607
+ BS Margin liabilities		131	352
+/- Net margin liabilities/receivables		-459	-2,255
Financial net debt	26	942	1,084
- Interest bearing liabilities, Russia		-	204
+ Liquid funds, Russia		-	247
Financial net debt, excluding Russia		-	1,127
IS Operating profit		1,662	1,967
+ IS Depreciation and amortisation		359	415
EBITDA		2,021	2,381
- IS Items affecting comparability		-118	-356
Comparable EBITDA from continuing operations		1,903	2,025
Comparable EBITDA Russia		-	411
Comparable EBITDA (as presented in the consolidated financial statements
2022)		-	2,436
Financial net debt/comparable EBITDA, excl. Russia		0.5	0.6
Financial net debt/comparable EBITDA (as presented in the consolidated
financial statements 2022)		-	0.4

See



Note 7

Comparable operating profit and comparable net profit for details on items affecting

comparability, and



Note 26

Interest-bearing liabilities, including further details of the financing and

liquidity status and see



Definitions and reconciliations of key figures

6 Segment reporting

MATERIAL ACCOUNTING POLICIES

REVENUE RECOGNITION

Fortum's operations comprise the provision of electricity, heating and cooling, gas and waste

management services. Revenue streams can be divided into five groups: power sales to wholesale

markets, power sales to retail customers, heating sales, gas sales and waste treatment sales.

Revenue is recognised when goods are transferred or services are performed, i.e. when a

performance obligation is satisfied and control of the good or service underlying the particular

performance obligations is transferred to the customer. Revenue is shown at the price that Fortum

expects to be entitled to and it is presented net of rebates, discounts, value-added tax and selective

taxes, such as electricity tax. Revenues include effects from physically settled contracts for which

own use exemption cannot be used according to IFRS 9, see



Note 7

Comparable operating profit

and comparable net profit. Accounting policies for the different revenue streams are described below.

POWER SALES TO WHOLESALE MARKETS AND INDUSTRIAL CUSTOMERS

Physical electricity trades to wholesale markets are made at a spot price and thus there are no

variable elements. Electricity sales are recognised on delivery. Fortum is also selling power to

industrial customers and municipalities through bilateral contracts. These contracts can include

fixed price components that are recognised in line with the customer’s actual consumption profile,

when the nature of the performance obligation is to deliver power instead of standing-ready to

deliver power. When Fortum is acting as an agent in electricity trade by granting access to Nord

Pool power trading system, Fortum presents the bilateral trades between Fortum and the

customer on a net basis and only the service fee is recorded as revenue.

Revenues are also generated from sale of green certificates. These include mostly Guarantees

of Origin certificates, which are received free of charge for renewable energy production.

Undelivered certificates are presented in inventories and revenue is recognized when the

certificate is transferred to the customer.

POWER SALES TO RETAIL CUSTOMERS

Fortum’s contracts with consumer and business customers cover electricity sales, while the

distribution service is delivered by the transmission company operating the local network. There is

only one performance obligation, which is to stand-ready to supply electricity to the customer. The

transaction price generally includes both a fixed monthly charge and a variable fee based on the

volume of electricity supplied. As Fortum’s promise is to stand ready to deliver electricity, the fixed

and variable components are recognised based on the fees chargeable from the customer. If

automated meter reading is not available, electricity consumption between the last meter reading

and the end of the month is estimated.

HEAT SALES

In many areas the district heating service covers both the distribution and sale of heat. Fortum is

usually responsible for delivering the whole service, even when heat is being produced by a third

party, and is acting as a principal for heat sales as well. There is only one performance obligation,

which is to stand-ready to supply heat to the customer. The fees charged from the customer

generally comprise a fixed monthly charge and a variable fee based on the volume of heat supplied.

As Fortum’s promise is to stand ready to deliver heat, the fixed and variable components are

recognised based on the fees chargeable from the customer. In Poland there are also areas where

Fortum operates only the heat production facilities while some third party is responsible for the

distribution of heat. In these areas the performance obligation is to supply heat and revenue is

recognised based on the volume of heat that Fortum is entitled to charge from the customer.

GAS SALES

Revenues are generated from sales of gas via traded markets, as well as to retail customers, and

include hedges settled through physical delivery, which are recognised when delivery takes place

and control is transferred to the customer. Contracts generally contain one performance obligation

for which the entire transaction price is recognised.

For physically settled transactions that are in the scope of IFRS 15, revenue is recognised based

on contract prices, as these reflect the economic character of the transactions and the contractually

agreed consideration amounts. If IFRS 15 provides for a different method, for example when

constraint on variable considerations is applicable, contract prices are adjusted accordingly.

Gas contracts can also include fixed price components that are recognised in line with the

customer’s actual consumption profile, when the nature of the performance obligation is to deliver

gas instead of standing-ready to deliver gas.

WASTE TREATMENT SALES

Majority of revenue from waste management services arises from fees charged for receiving waste

from customers (i.e. gate fees). The fee is usually determined based on the volume of waste received,

there are no variable elements in pricing. Fortum is required to treat the waste and this performance

obligation is satisfied when treatment has been performed. Transportation of the waste forms another

performance obligation. Fees for waste treatment and transportation services are separately agreed in

the contract and correspond to the price that would be charged for these services separately.

Revenue for transportation service is recognised when the service has been provided.

Waste treatment sales include also various types of soil and landfill site projects, which mostly take

place at customer sites. Fees charged are invoiced based on payment schedules agreed with the

customer. The customer obtains the benefit of the construction work simultaneously when the

construction work proceeds, and therefore project revenues are recognised over time. Progress of the

construction is best measured either through costs incurred, or the completed area of the construction

site.

NETTING AND INTER-SEGMENT TRANSACTIONS

Generation segment sells electricity production to Nord Pool and Consumer Solutions segment buys

its electricity from Nord Pool. For these segments eliminations of sales include eliminations of sales

and purchases with Nord Pool that are netted at Group level on an hourly basis and posted either as

revenue or cost depending on if Fortum is a net seller or net buyer during any particular hour.

Intersegment sales, expenses and results for the different business segments are affected by

intragroup deliveries, which are eliminated on consolidation. Inter-segment transactions are based on

commercial terms.

6.1 Business and segment structure

Fortum discloses segment information in a manner consistent with internal reporting to Fortum’s

Board of Directors and Fortum Leadership Team, led by the President and CEO. Fortum segments

are based on the type of business operation.

In March 2023, Fortum announced the reorganisation of its business structure. From 2023, the

new business units are: Hydro Generation, Nuclear Generation, Renewables and Decarbonisation,

Corporate Customers and Markets, Consumer Solutions and Circular Solutions. The business units

are classified into the following reportable segments under IFRS:

•

The Generation segment includes 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 Operations segment includes the Circular Solutions business unit, Innovation and

Venturing activities, enabling functions and corporate management.

Description of reportable segments:

Segment comparatives for 2022 were restated and a separate stock exchange release with restated

comparatives was issued on 17 April 2023.

Russia segment was classified as discontinued operations in April 2023. Comparatives for 2022

were restated and a separate stock exchange release with restated comparatives was issued on 11

May 2023. See also



Note 1

Material accounting policies and



Note 3.3

Discontinued operations.

6.2 Definitions for segment information

Fortum’s segment information discloses the financial measurements used in financial target setting

and forecasting, management’s follow up of financial performance and allocation of resources in the

Group’s performance management process. See



Note 1.4

Measures for performance.

Segment reporting is based on the same accounting policies as Fortum Group.

6.3 Segment information

Consolidated income statement

		Generation 1)		Consumer Solutions		Other Operations		Total continuing operations
EUR million	Note	2023	2022	2023	2022	2023	2022	2023	2022
Power sales 1)		3,889	3,802	3,219	4,026	9	24	7,117	7,852
Heat sales		481	499	-	-	31	28	512	527
Gas sales		-	-	422	392	-	-	422	392
Waste treatment sales		7	19	-	-	226	219	234	238
Other sales		43	144	125	161	281	318	450	623
Sales		4,420	4,465	3,766	4,578	548	589	8,734	9,632
Internal eliminations		-394	585	-20	-30	-99	-101	-514	454
Netting of Nord Pool transactions 2)								-1,510	-2,312
IS External sales		4,026	5,049	3,745	4,549	449	488	6,711	7,774
Comparable EBITDA		1,874	1,876	108	173	-80	-23	1,903	2,025
IS Depreciation and amortisation		-195	-247	-70	-75	-93	-92	-359	-415
IS Comparable operating profit		1,679	1,629	38	97	-173	-116	1,544	1,611
Impairment charges and reversals		-	-	-	-	-	0	-	0
Capital gains and other related items		2	648	1	0	1	137	4	785
Changes in fair values of derivatives hedging future cash flow		366	-130	-254	-246	-	-	111	-376
Other		12	-19	-	-	-9	-33	3	-52
IS Items affecting comparability	6, 7	380	499	-253	-246	-8	103	118	356
IS Operating profit		2,058	2,128	-215	-149	-181	-13	1,662	1,967
Comparable share of profit/loss of associates and joint ventures		7	-34	-	-	0	-7	7	-40
IS Share of profit/loss of associates and joint ventures	18	59	-178	-	-	0	-7	59	-185

1) Sales, both internal and external, include effects from realised hedging contracts. Effect on sales can be negative or positive depending on the average contract price and the realised spot price. Power sales in Fortum contains realised result from commodity derivatives, which have not had

hedge accounting status under IFRS 9, but have been considered operatively as hedges.

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

Gross investments / divestments

		Generation		Consumer Solutions		Other Operations		Total continuing operations
EUR million	Note	2023	2022	2023	2022	2023	2022	2023	2022
Gross investments in shares	3	5	2	22	0	26	26	53	29
Capital expenditure	16, 17	450	314	81	71	81	85	611	467
Gross divestments of shares	3	0	1,212	0	0	4	152	4	1,365

Segment assets and liabilities

		Generation		Consumer Solutions		Other Operations		Russia	Total
EUR million	Note	2023	2022	2023	2022	2023	2022	2022	2023	2022
Non-interest-bearing assets		6,864	6,599	1,311	1,801	1,094	1,073	1,614	9,269	11,087
BS Participations in associates and joint ventures	18	1,000	987	-	-	59	51	211	1,059	1,249
Eliminations									-105	-332
Total segment assets		7,864	7,585	1,311	1,801	1,153	1,124	1,825	10,223	12,004
Interest-bearing receivables	21								1,033	1,284
BS Deferred tax assets	27								958	933
Other assets									2,342	5,502
BS Liquid funds	24								4,183	3,919
BS Total assets									18,739	23,642
Segment liabilities		601	988	472	436	313	350	134	1,387	1,908
Eliminations									-105	-332
Total segment liabilities									1,282	1,576
BS Deferred tax liabilities	27								428	152
Other liabilities									2,621	6,392
Total liabilities included in capital employed									4,331	8,120
Interest-bearing liabilities	26								5,909	7,785
BS Total equity									8,499	7,737
BS Total equity and liabilities									18,739	23,642

Comparable operating profit including comparable share of profit of associates and joint ventures and Comparable return on net assets

		Generation		Consumer Solutions
EUR million	Note	2023	2022	2023	2022
Comparable operating profit		1,679	1,629	38	97
Comparable share of profit/loss of associates and joint ventures	7, 18	7	-34	-	-
Comparable operating profit including comparable share of profit of associates and joint ventures		1,686	1,595	38	97
Segment assets at the end of the year		7,864	7,585	1,311	1,801
Segment liabilities at the end of the year		601	988	472	436
Comparable net assets		7,263	6,597	838	1,365
Comparable net assets average 1)		6,959	6,873	847	1,068
Comparable return on net assets, %		24.2	23.2	4.5	9.1

1) Average net assets are calculated using the opening balance of the financial

year and each quarter’s closing value.

Employees

	Generation		Consumer Solutions		Other Operations		Total continuing operations		Discontinued operations		Total
	2023	2022	2023	2022	2023	2022	2023	2022	2023	2022	2023	2022
Number of employees 31 December	1,758	1,660	1,281	1,179	2,186	2,149	5,225	4,988	-	2,724	5,225	7,712
Average number of employees	1,735	1,838	1,232	1,177	2,237	2,106	5,205	5,120	838	11,429	6,042	16,549

6.4 Group-wide disclosures

The Group’s operating segments operate mainly in the Nordic

countries and Poland. The

Group’s

domicile is Finland.

The table below presents sales by geographical area based on customer location. Capital

expenditure, assets and personnel are reported where assets and personnel are located.

Participations in associates and joint ventures are not presented by location since these companies

may have business in several geographical areas.

Due to the large number of customers and the variety of business activities, there is no individual

customer whose business volume is material to Fortum’s total business volume.

Sales by geographical area based on customer location

EUR million	2023	2022
Nordics	4,957	6,426
Poland	1,437	1,101
Other	316	247
IS Total	6,711	7,774

Nordic power production is not presented by country since Nordic power production is mainly sold

through Nord Pool.

Capital expenditure by country

EUR million	2023	2022
Finland	371	258
Sweden	137	116
Norway	19	38
Poland	67	44
Other	17	12
Total	611	467

Non-current assets by country

EUR million	2023	2022
Finland	3,280	3,074
Sweden	3,918	3,815
Norway	370	407
Poland	591	518
Russia	-	1,211
Other and eliminations	154	146
Total	8,314	9,173

Non-current assets include intangible assets, property, plant and equipment and right-of-use assets

as well as participations in associates and joint ventures.

Number of employees on 31 December by country

	2023	2022
Finland	2,682	2,529
Sweden	1,038	914
Norway	350	395
Poland	717	635
Russia	-	2,724
Other	438	515
Total	5,225	7,712

7 Comparable operating profit and comparable net profit

7.1 Reconciliation of operating profit to comparable operating profit

Fortum uses Alternative performance measures (APMs) in the financial target setting and

forecasting, management’s follow up of financial performance of segments and the Group as well

as allocation of resources in the Group’s performance management process.

The business

performance of the operations cannot be compared from one period to another without adjusting for

items affecting comparability and therefore they are excluded from Comparable operating profit and

Comparable EBITDA. Definitions are presented in the section



Definitions and reconciliations of

key figures

Reconciliation of operating profit to comparable operating profit 2023

				Changes in
				fair values of
				derivatives
		Impairment	Capital gains	hedging
		charges and	and other	future cash
EUR million	Unadjusted	reversals	related items	flow	Other	Reported
Sales	6,716	-	-	-5	-	6,711
Other income	397	-	-4	-361	0	32
Materials and services	-3,606	-	-	-190	-12	-3,808
Employee benefits	-436	-	-	-	-	-436
Depreciation and amortisation	-359	-	-	-	-	-359
Other expenses	-1,049	-	0	444	9	-595
IS Comparable operating profit		-	-4	-111	-3	1,544
IS Items affecting comparability		-	4	111	3	118
IS Operating profit	1,662					1,662

Reconciliation of operating profit to comparable operating profit 2022

				Changes in
				fair values of
				derivatives
		Impairment	Capital gains	hedging
		charges and	and other	future cash
EUR million	Unadjusted	reversals	related items	flow	Other	Reported
Sales	7,797	-	-	-23	-	7,774
Other income	707	-	-785	153	-1	74
Materials and services	-5,079	-	-	206	20	-4,853
Employee benefits	-432	-	-	-	-	-432
Depreciation and amortisation	-415	0	-	-	-	-415
Other expenses	-612	-	-	40	33	-538
IS Comparable operating profit		0	-785	376	52	1,611
IS Items affecting comparability		0	785	-376	-52	356
IS Operating profit	1,967					1,967

Impairment charges and reversals

Impairment charges and reversals of previously recognised impairments are adjusted from

depreciation and amortisation and presented in items affecting comparability. Comparative

information for 2022 was restated following the classification of Russia segment as discontinued

operations in April 2023. See



Note 19

Impairment testing.

Capital gains and other related items

Capital gains and other related items include capital gains and transaction costs from acquisitions,

which are adjusted from other income and other expenses, respectively.

Capital gains and other related items in 2022 includes EUR 638 million gain from the sale of the

50% ownership in the district heating company Fortum Oslo Varme AS in Norway, EUR 77 million

gain from the sale of the 30% ownership in the public charging point operator for electric vehicles

Recharge AS, as well as EUR 61 million gain from the sale of the e-mobility business Plugsurfing.

See



Note 3.2

Disposals.

Changes in fair values of derivatives hedging future cash flow

Unrealised changes in the fair values of financial derivative instruments hedging future cash flows

that do not qualify for hedge accounting and physical contracts that are treated as derivatives are

recognised in items affecting comparability. For additional information, see



Note 14

Financial

assets and liabilities by categories.

Impacts from settlement of physical contracts that have been treated as derivatives are adjusted

to sales and materials and services to reflect the contract pricing as opposed to market pricing.

Adjustments are needed to improve the understanding of the financial performance when

comparing results from one period to another.

7.2 Reconciliation from operating profit to comparable net profit

EUR million	Note	2023	2022
IS Operating profit		1,662	1,967
IS Items affecting comparability	6, 7.1	-118	-356
IS Comparable operating profit		1,544	1,611
IS Share of profit/loss of associates and joint ventures		59	-185
Adjustments to share of profit/loss of associates and joint ventures	18	-52	145
Comparable share of profit/loss of associates and joint ventures		7	-40
IS Finance costs - net		-138	-218
Adjustments to finance costs - net	11	2	48
Comparable finance costs - net		-137	-170
Comparable profit before income tax		1,415	1,400
IS Income tax expense		-69	520
Adjustments to income tax expense		-201	-836
Comparable income tax expense		-269	-316
IS Non-controlling interests		-1	-4
Adjustments to non-controlling interests		5	-5
Comparable non-controlling interests		4	-9
Comparable net profit from continuing operations		1,150	1,076
Comparable net profit from discontinued operations	3.4	34	-2,064
Comparable net profit, total Fortum		1,184	-988
Comparable earnings per share, continuing operations, EUR	13	1.28	1.21
Comparable earnings per share, discontinued operations, EUR	3.4	0.04	-2.32
Comparable earnings per share, total Fortum, EUR	13	1.32	-1.11

Comparable share of profit/loss of associates and joint ventures

Share of profit/loss of associates and joint ventures is adjusted for significant items, similar to

adjustments made to arriving at comparable net profit.

Comparable finance costs - net

Finance costs

–

net are adjusted for e.g. nuclear-related items recognised in other financial items -

net, fair value changes on financial items, as well as impairment charges and reversals of

previously recorded impairment charges on financial items.

Comparable income tax expense

Income tax expense is adjusted for tax impacts on items affecting comparability, adjustments to

finance costs

–

net, tax rate changes and other onetime adjustments. In 2023, adjustments to

income tax expense included EUR 225 million relating to one-time tax impacts mainly recognised in

Ireland and in the Netherlands, due to the impairment of the Russian assets. In 2022, adjustments

to income tax expense included EUR 746 million relating to onetime tax impact realised in Ireland

mainly due to the Uniper divestment. See



Note 27

Income taxes on the balance sheet.

See also



Definitions and reconciliations of key figures

8 Other expenses

EUR million	2023	2022
Operation and maintenance costs	111	110
IT and telecommunication costs	104	108
Other	381	321
IS Total	595	538

The major components recorded in other expenses are the external operation and maintenance

costs of power and heat plants. Other includes expenses relating to properties and other operative

expenses.

Auditors’ fees

EUR million	2023	2022
Audit fees	2.3	2.7
Audit-related assignments	0.4	0.3
Tax assignments	0.1	-
Other assignments	0.1	-
Total	2.8	3.0

Deloitte Oy is the appointed auditor until the next Annual General Meeting in 2024.

Audit fees include fees for the audit of the consolidated financial statements, review of interim

reports, as well as fees for the audit of Fortum Corporation and its subsidiaries. Audit-related

assignments include fees for assurance of sustainability reporting, and other assurance and

associated services related to the audit. Other assignments consist of advisory services.

9 Materials and services

EUR million	2023	2022
Materials	3,083	4,251
Materials purchased from associated companies and joint ventures	603	422
Other	122	180
IS Total	3,808	4,853

Materials consists mainly of purchased electricity for retail sales and heat production as well as

fuels used for power and heat production. Electricity purchase from Nord Pool is netted at Group

level on an hourly basis and posted either as revenue or cost depending on if Fortum is a net seller

or net buyer during any particular hour. See



Note 6

Segment Reporting.

Materials purchased from associates and joint ventures consist of nuclear and hydropower

purchased at production cost (including interest costs and production taxes) and purchased steam.

Taxes related to nuclear and hydro production are included in taxes paid through purchases from

associates and joint ventures. See



Note 37

Related party transactions.

10 Employee benefits and Board remuneration

EUR million	2023	2022
Wages and salaries	324	334
Pensions
Defined contribution plans	47	14
Defined benefit plans	3	10
Social security costs	37	50
Share-based incentives	6	7
Other employee costs	19	17
IS Total	436	432

The compensation package for Fortum’s employees consists of salaries, fringe

benefits, short-term

incentives, profit sharing paid to the Personnel Fund (in Finland) and long-term incentives.

For further information on pensions see



Note 30

Pension obligations.

10.1 Short-term incentives

Short-term incentive (STI) programme is des

igned to support the achievement of the Group’s

financial and other relevant targets on an annual basis. As a main principle, all employees are

covered by the programme or alternatively by a business specific arrangement.

The Board of Directors determines annually the performance criteria and award levels for the

Fortum Leadership Team (FLT). They can vary from year to year to reflect business priorities. The

target incentive potential is 20% and the maximum incentive potential is 40% of the annual base

salary. The Board of Directors assesses the performance of the President and CEO and the

members of the Fortum Leadership Team on a regular basis.

Awards for other employees are based on a combination of Group, unit and individual or team

targets. The targets are set in annual performance discussions held at the beginning of each year.

Awards under the STI programme are paid fully in cash.

10.2 Long-term incentives

The purpose of long-term incentive programmes is to support the delivery of sustainable long-term

performance, align the interests of management with those of shareholders, and support in

committing and retaining key individuals.

LTI programme provides participants with the opportunity to earn company shares. Under the LTI

programme, and subject to the decision of the Board of Directors, a new LTI plan commences

annually. The Board of Directors approves participation of the Fortum Leadership Team members in

each annually commencing LTI plan. Subject to a decision by the Board of Directors, the President

and CEO is authorised to decide on individual participants and potential maximum awards for other

participants than the Fortum Leadership Team in accordance with the nomination guidelines

approved by the Board of Directors. Participation in the LTI plan precludes the individual from being

a member in the Fortum Personnel Fund.

Each LTI plan begins with a three-year earnings period, during which participants may earn share

rights if the performance criteria set by the Board of Directors are fulfilled. If the minimum

performance criteria are not met, no shares will be awarded. If performance is exceptionally good

and the targets approved by the Board of Directors are achieved, the combined gross value of all

variable compensation cannot exceed 120% of the

person’s annual salary in any calendar

year.

After the earnings period has ended and the relevant taxes and other employment-related

expenses have been deducted, participants are paid the net balance in the form of shares.

The share awards are not subject to a lock-up period. However, Fortum Leadership Team

members aggregate ownership of Fortum shares has to be greater than or equal to their annual

salary. Those members whose aggregate ownership of Fortum shares does not yet fulfil the

shareholding requirement are required to retain at least 50% of the shares received until the

required level of shareholding is met.

The Restricted share programme is supplementing the current LTI programme. The Restricted

share programme is following the main terms and conditions of the general LTI programme with the

exception that the allocated shares will be delivered after the three-year plan period independent of

performance measures, subject to continued employment. The Restricted share programme is

designated for special purposes defined by the Board of Directors, such as retention.

The Board of Directors has the right to revise the targets set in the incentive plans, deviate from

the payment based on achievement of the set earnings criteria, or to discontinue any ongoing

incentive plan.

The share plans under the LTI arrangement are accounted for as partly equity- and partly cash-

settled arrangements. The earned reward that the participants receive in shares is accounted for as

an equity-settled transaction. For participants receiving cash only, the total arrangement is

accounted for as cash-settled transaction. The reward is recognised as an expense during the

earnings period with a corresponding increase in equity for the transactions settled in shares, and a

corresponding increase in the liabilities for transactions settled in cash. The social charges related

to the arrangement payable by the employer are accrued as a liability. The liabilities for share-

based plans including social charges at the end of the year 2023 was EUR 9 million (2022: 12),

including EUR 8 million (2022: 10) recorded in equity.

At year end 2023, approximately 120 key employees are participants in at least one of the

ongoing LTI plans.

Shares granted

The following table presents changes in the number of share awards:

Number of shares	2023	2022
1 January	1,396,189	1,818,093
Granted	781,214	594,400
Settled	-86,287	-240,867
Expired or forfeited	-632,305	-775,437
Outstanding 31 December	1,458,811	1,396,189

Expired or forfeited shares include the impact from the remuneration restrictions of Fortum

Leadership Team members according to the terms of the Solidium bridge financing facility with the

Finnish state as well as the impact of FLT members voluntarily waiving the shares not subject to

those restrictions.

10.3 Employee Share Savings programme

The purpose of Fortum's Employee Share Savings (ESS) programme is to motivate employees to

invest in Fortum shares and retain ownership in the company.

The programme consists of annually commencing savings periods and the annual launch of each

period is separately resolved by the Board of Directors. The participants of the programme will invest a

part of their monthly salary in Fortum shares, and based on this investment they will, as a gross

reward, be granted one matching share for each two purchased savings shares after approximately

three years from the beginning of the respective savings period. The prerequisites for receiving

matching shares are that the participant holds the purchased savings shares until the end of the

holding period, and that his or her employment has not ended before the end of the holding period.

Each plan consists of one-year savings period followed by two-year holding period. Shares are

purchased with the accumulated savings at the market price quarterly after the release of Fortum’s

interim reports. The programme is accounted for as an equity-settled transaction, and the cost

related to matching shares is recognised as expense during the vesting period.

10.4 Fortum Personnel Fund

The Fortum Personnel Fund (for employees in Finland only) has been in operation since 2000. The

Board of Directors determines the criteria for the fund’s annual profit

-sharing bonus. Members of the

personnel fund are the permanent and fixed-term employees of the Group.

The profit-sharing received by the fund is distributed equally between the members. Each

employee’s share is divided into a tied amount and an amount available for withdrawal. It is po

ssible

to transfer a maximum of 15% of capital from the tied amount to the amount available for withdrawal

each year.

The fund’s latest financial

year ended at 30 April 2023 and the fund then had a total of 2,611

members (2022: 2,553). In 2023 Fortum did not make any payment (2022: EUR 4.3 million) to the

personnel fund as an annual profit-sharing bonus based on the financial results of 2022. The

combined amount of members’ shares in the fund was EUR 16 million (2022: 20).

10.5 The President and CEO and the Fortum Leadership Team

remuneration

In the end of 2023 Fortum Leadership Team consists of eleven members, including the President

and CEO. The following table presents the total remuneration of the President and CEO and the

FLT and takes into account the changes in FLT during the year. The expenses are shown on

accrual basis.

On 6 September 2022, Fortum announced that it had agreed with the Finnish State on a bridge

financing arrangement. In accordance with the Solidium bridge financing facility with the Finnish

State, Fortum Leadership Team members will not be paid any short- or long-term incentives that

are accumulated in 2022 and 2023, nor can they participate in 2023 ESS plan. In addition, FLT

members have also voluntarily waived the shares that are not subject to restrictions of the bridge

financing facility and that are scheduled for delivery in spring 2024. However, costs for these plans

are accrued over the vesting period.

Management remuneration

	2023		2022
	Markus		Markus
	Rauramo,		Rauramo,
	President	Other FLT	President	Other FLT
EUR thousand	and CEO	members	and CEO 2)	members 2)
Salaries and fringe benefits 1)	1,613	3,369	1,549	3,447
Short-term incentives	-	-	-	100
Long-term incentives	798	1,134	816	756
Pensions (statutory)	280	619	271	591
Pensions (voluntary)	315	830	315	717
Social security expenses	58	194	53	221
Total	3,064	6,146	3,004	5,831

1) In 2022 separate project awards were paid to certain FLT members in August.

2) In 2022 in addition to the information provided in the above table, compensation for the membership in the Supervisory Board of Uniper SE

for the President and CEO Markus Rauramo was EUR 157 thousand and for other FLT members EUR 157 thousand.

The annual defined contribution for the President and CEO Markus Rauramo's supplementary

pension arrangement is 20% of the annual fixed compensation. The annual fixed compensation

consists of base salary and fringe benefits. The President and CEO's retirement age is determined

n accordance with the Finnish Employees’ Pension Act. In case his

managing director service

agreement is terminated before the retirement age, the President and CEO is entitled to retain the

funds that have accrued in the pension arrangement up to that time.

Retirement age of other members of FLT is typically determined in accordance with the local

legislation. Additionally, for three members the retirement age is 63. According to Group policy, all

new supplementary pension arrangements are defined contribution plans. In general Fortum

Leadership Team members have supplementary defined contribution pension plan, except two

members who are in the Fortum Pension Fund (defined benefit plan). The pension premium for

supplementary defined contribution plan for FLT members is 20% of the annual base salary. In the

end of 2023, a pension liability of EUR 270 thousand was recognised on the balance sheet related

to the defined benefit plans.

In the event that Fortum decides to give notice of termination to the President and CEO, he is

entitled to the salary for the notice period (6 months) and a severance pay equal to 6

months’

salary. For other FLT members, the notice period for both parties is 6 months, and in case the

company terminates the contract, members are usually entitled to the salary for the notice period

and a severance pay equal to 6 months’ salary.

Number of shares delivered to the management

The following table shows the number of shares delivered to the President and CEO and other FLT

members under the LTI arrangements. FLT members whose aggregate ownership of Fortum

shares does not yet fulfil the shareholding requirement are required to retain at least 50% of the

shares received until the required level of shareholding is met.

		2023 1) 2)	2022
FLT members at 31 December 2023
Markus Rauramo, CEO		-	12,661
Nebahat Albayrak		2,677	-
Eveliina Dahl		-	1,127
Bernhard Günther		-	-
Mikael Lemström	Member of FLT from 31 March 2023	-	N/A
Petra Lundström	Member of FLT from 31 March 2023	-	N/A
Simon-Erik Ollus		-	1,847
Mikael Rönnblad		-	4,112
Nora Steiner-Forsberg		-	716
Peter Strannegård	Member of FLT from 31 March 2023		N/A
Tiina Tuomela	Member of FLT from 1 April 2023	-	N/A
Former FLT members
Alexander Chuvaev	Member of FLT until 1 September 2022	N/A	16,034
Per Langer	Member of FLT until 30 March 2023	-	3,102
Total		2,677	39,599

1) Shares (net) were delivered based on participation in the restricted share plan (RSP) 2020

–

2022 and on the executive agreement.

2) In addition, with regard to the 2020 ESS plan, 628 matching shares were delivered to FLT members.

10.6 Board of Directors and management shareholding

On 31 December 2023, the members of the Board of Directors owned a total of 30,334 shares (2022:

15,370), which corresponds to 0.00% (2022: 0.00%) of the company’s shares and voting rights.

Number of shares held by members of the Board of Directors

	2023	2022
Board members at 31 December 2023
Mikael Silvennoinen, Chair	9,497	N/A
Essimari Kairisto, Deputy Chair	2,872	985
Ralf Christian	2,270	985
Luisa Delgado	2,270	985
Jonas Gustavsson	1,285	N/A
Marita Niemelä	1,285	N/A
Teppo Paavola	7,000	985
Maija Strandberg	1,285	N/A
Johan Söderström	1,285	N/A
Vesa-Pekka Takala	1,285	N/A
Former Board members
Anja McAlister	N/A	1,446
Veli-Matti Reinikkala	N/A	7,029
Philipp Rösler	N/A	985
Annette Stube	N/A	985
Kimmo Viertola	N/A	985
Total	30,334	15,370

The President and CEO and other members of the FEM owned a total of 223,463 (2022: 197,210),

which corresponds to approximately 0.02% (2022:

0.02%) of the company’s shares and voting rights.

Number of shares held by members of the Fortum Leadership Team

	2023	2022
FLT members at 31 December 2023
Markus Rauramo	115,162	112,739
Nebahat Albayrak	3,438	555
Eveliina Dahl	2,859	2,554
Bernhard Günther	767	555
Mikael Lemström	15,021	N/A
Petra Lundström	13,617	N/A
Simon-Erik Ollus	6,838	6,462
Mikael Rönnblad	20,685	20,619
Nora Steiner-Forsberg	1,615	1,461
Peter Strannegård	3,292	N/A
Tiina Tuomela	40,169	N/A
Former FEM members
Per Langer	N/A	52,265
Total	223,463	197,210

10.7 Board remuneration

The Board of Directors comprises five to ten members who are elected at the Annual General

Meeting for a one-year term of office, which expires at the end of the first Annual General Meeting

following the election. The Board of Directors consists of ten members at the end of 2023.

The Annual General meeting confirms the yearly compensation for the Board of Directors. Board

members are not offered any long-term incentive benefits or participation in other incentive

schemes. There are no pension arrangements for the Board members. Social security costs in 2023

were EUR 39 thousand (2022: 0).

Fees for the Board of Directors

EUR thousand	2023	2022
Annual fee for the Board work
Chair	88.8	88.8
Deputy Chair	63.3	63.3
Chair of the Audit and Risk Committee 1)	63.3	63.3
Members	43.1	43.1
Fixed fee for the Committee work
Member of the Audit and Risk Committee	3.0	3.0
Chair of the Nomination and Remuneration Committee	5.0	5.0
Member of the Nomination and Remuneration Committee	2.0	2.0
Chair of any additional Committee established by a Board decision	5.0	5.0
Member of any additional Committee established by a Board
decision	2.0	2.0

1) If not simultaneously Chair or Deputy Chair of the Board.

Every member of the Board of Directors receives a fixed annual fee for the Board work and a meeting

fee for each meeting attended. The annual fee for the Board work is paid in company shares and in

cash in such a way that approximately 40% of the amount of the annual fee is payable in shares

acquired on behalf and in the name of the Board members, and the remainder in cash. The company

pays the costs and the transfer tax related to the purchase of the company shares.

A meeting fee of EUR 800 is paid for Board and Committee meetings, or EUR 1,600 in case 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. Fees for the Committee work and the meeting fees are

paid fully in cash.

The travel expenses of Board members are compensated in accor

dance with the company’s

travel policy.

The Board of Directors established a new permanent board committee for technology and

investment-related matters in 2023.

Compensation for the Board of Directors

EUR thousand		2023	2022
Board members at 31 December 2023
Mikael Silvennoinen	Chair from 13 April 2023, Chair of the Nomination and	125	N/A
	Remuneration Committee and the temporary Russia
	Committee
Essimari Kairisto	Deputy Chair from 13 April 2023, Chair of the Audit and Risk	107	135
	Committee
Ralf Christian	Member of the Board from 28 March 2022, Chair of the	87	90
	Technology and Investment Committee
Luisa Delgado		73	102
Jonas Gustavsson	Member of the Board from 13 April 2023	69	N/A
Marita Niemelä	Member of the Board from 13 April 2023	59	N/A
Teppo Paavola		78	117
Maija Strandberg	Member of the Board from 13 April 2023	78	N/A
Johan Söderström	Member of the Board from 13 April 2023	57	N/A
Vesa-Pekka Takala	Member of the Board from 13 April 2023	67	N/A
Former Board members
Anja McAlister	Deputy Chair until 13 April 2023	5	122
Veli-Matti Reinikkala	Chair until 13 April 2023	10	181
Philipp Rösler	Member of the Board until 13 April 2023	4	101
Annette Stube	Member of the Board until 13 April 2023	11	105
Kimmo Viertola	Member of the Board until 13 April 2023	6	86
Total		836	1,039

11 Finance costs

–

net

EUR million	Note	2023	2022
Interest expense
Borrowings		-286	-202
Leasing and other interest expenses		-2	-2
Capitalised borrowing costs	17	20	4
IS Total		-269	-200
Interest income
Loan receivables and deposits		153	46
Leasing and other interest income		12	30
IS Total		165	75
Other financial items - net
Return from nuclear fund, nuclear fund adjustment and unwinding of nuclear
provisions	28	1	-71
Fair value changes, impairments and reversals		-3	-3
Unwinding of discounts on other provisions and pension obligations	29, 30	0	10
Other financial expenses and income		-33	-29
IS Total		-34	-93
IS Finance costs - net		-138	-218
EUR million		2023	2022
IS Finance costs - net		-138	-218
Adjustments to finance costs - net
Return from nuclear fund, nuclear fund adjustment and unwinding of nuclear
provisions		-1	71
Fair value changes, impairments, reversals and other adjustments		3	-23
Comparable finance costs - net		-137	-170

See



Definitions and reconciliations of key figures

Interest expenses on borrowings totalled EUR 286 million (2022: 202) including interest expenses

on loans of EUR 246 million (2022: 187), and EUR 40 million (2022: 15) interest cost

–

net from

derivatives hedging the loan portfolio. Interest expenses on loans includes EUR 41 million (2022:

26) relating to the Finnish State bridge financing recognised in 2023.

Interest income on loan receivables and deposits, EUR 153 million (2022: 46), includes EUR 133

million (2022: 2) from deposits and cash, and EUR 21 million (2022: 44) interest income from

shareholder loan receivables and other loan receivables.

Return from nuclear fund, nuclear fund adjustment and unwinding of nuclear provisions relate to

the Loviisa nuclear plant. Unwinding of nuclear provisions was EUR -63 million (2022: -39). For

additional information see



Note 28

Nuclear-related assets and liabilities.

Other financial expenses and income, EUR 33 million (2022: 29), include EUR 26 million costs

relating to financing arrangements of which EUR 15 million (2022: 23) related to the Finnish State

bridge financing.

Interest rate and currency derivatives in finance costs

–

net

EUR million	2023	2022
Interest rate and cross currency swaps
Interest expenses on borrowings	-7	13
Exchange rate difference from derivatives	-1	-16
Rate difference in fair value gains and losses on financial instruments 1)	40	-65
Total fair value change of interest rate derivatives in finance costs - net	31	-68
Foreign exchange derivatives
Interest expenses on borrowings	-33	-28
Exchange rate difference from derivatives	-156	56
Rate difference in fair value gains and losses on financial instruments	5	-5
Total fair value change of currency derivatives in finance costs - net	-184	23
Total	-153	-45

1) Fair value gains and losses on financial instruments include fair value change of hedging derivatives in fair value hedge relationship to

EUR 41 million (2022: -66).

12 Income tax expense

12.1 Profit before tax by country

EUR million	2023	2022
Finland	934	272
Sweden	652	583
Poland	-66	-209
Ireland	-51	754
Netherlands	160	205
Other	-45	-42
IS Total	1,583	1,564

Profit before tax by country represents the respective countries’ part of total

profit before tax for

Fortum Group according to IFRS, based on the same accounting principles as consolidated

financial statements. This means that the respective country profits include items such as share of

profits from associates and joint ventures, effects of accounting for derivatives under IFRS

standards and other group level consolidation adjustments, which are not included in taxable profits

in the local subsidiaries.

12.2 Major components of income tax expense by country

EUR million	2023	2022
Current taxes
Finland	-157	-206
Sweden	-122	-120
Poland	-6	-8
Ireland	0	11
Netherlands	-2	-5
Other	-6	-22
Total	-293	-351
Deferred taxes
Finland	-13	168
Sweden	-3	-53
Poland	35	49
Ireland	163	704
Netherlands	36	-12
Other 1)	32	8
Total	249	864
Adjustments recognised for current tax of prior periods
Finland	-8	0
Sweden	0	8
Poland	-18	1
Ireland	-	0
Netherlands	1	-
Other	0	-2
Total	-25	7
IS Income tax expense	-69	520

1) Includes tax rate differential on interest on group internal loan treated as equity.

12.3 Income tax rate reconciliation

The table below explains the difference between the theoretical enacted tax rate in Finland

compared to the tax rate in the consolidated income statement.

EUR million	2023	%	2022	%
Profit before tax	1,583		1,564
Tax calculated at nominal Finnish tax rate	-317	-20.0	-313	20.0
Differences in tax rates in other jurisdictions	-16	-1.0	63	-4.0
Tax exempt capital gains	1	0.0	117	-7.5
Other items impacting comparable tax expense	225	14.2	744	-47.6
Tax exempt income and other non-deductible expenses	10	0.6	-2	0.1
Share of profit of associates and joint ventures	12	0.8	-38	2.4
Tax effects of changes in value and non-recognition of deferred
taxes	-5	-0.3	-41	2.6
Other items	20	1.2	-14	0.9
Adjustments recognised for taxes of prior periods	2	0.2	4	-0.3
IS Income tax expense	-69	4.3	520	-33.3

Key tax indicators:

•

The weighted average applicable income tax rate for 2023 is 21.0% (2022: 19.9%).

•

The effective income tax rate in the income statement for 2023 is 4.3% (2022: -33.3%).

•

The comparable effective income tax rate for 2023 is 19.1% (2022: 21.9%).

See



Note 7

Comparable operating profit and comparable net profit and



Definitions and

reconciliations of key figures

The major items affecting the effective income tax rate are as follows:

•

Other items in the table above include EUR 23 million related to the tax rate differential on interest

on group internal loan treated as equity, being interest income in Ireland at 12.5% and the

corresponding interest expense taxable at 20% in Finland. The item decreased the rate by 1.5%

(2022: 0.0%) while total other items decreased the rate by 1.2%.

•

Other items impacting comparable tax expense in the table above are mainly realised in Ireland

and the Netherlands as a consequence of write down of Russia related loans leading to increase

of deferred tax asset on tax loss carry forward in Ireland. These items decreased the rate by

14.2% (2022: 47.6%).

12.4 Pillar Two model rules

The Group is within the scope of the OECD Pillar Two model rules for global minimum tax. Pillar

Two legislation was enacted in Finland, the jurisdiction in which domicile of Fortum Oyj and will

come into effect from 1 January 2024. This legislation was also enacted or substantially enacted as

of 2024 in the following Fortum

’s

operative countries: Sweden, the Netherlands, Ireland, Denmark,

Belgium, the United Kingdom, Switzerland, France, Germany and Norway.

Since the Pillar Two legislation was not effective at the reporting date, the Group has no related

current tax exposure for the year 2023.

Under the legislation, the Group is liable to pay a top-up tax for the difference between its so

called GloBE effective tax rate per jurisdiction calculated based on Pillar Two rules and the defined

15% minimum rate, if the Safe Harbour rules included in Pillar Two legislation are not met.

The Group is assessing its exposure to the global minimum tax under Pillar Two rules in the

future. This assessment indicates that a majority of the operations are under Safe Harbour rules

except potentially one or two jurisdictions. Nevertheless, based on the current analysis for 2024, the

Group is not expected to be exposed to paying Pillar Two income taxes due to the application of

some specific adjustments in the Pillar Two legislation.

Pillar Two legislation is still subject to further amendments and clarifications during 2024 and

onwards. Therefore, the certainty of impacts from the new regulation cannot yet be assessed with

sufficient certainty. The Group will follow guidance and instructions on this new regulation and seek

for tax authority confirmation where possible in line with the tax principles.

13 Earnings and dividend per share

ACCOUNTING POLICIES

EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net profit attributable to the owners of the

parent company by the weighted average number of ordinary shares in issue during the year,

excluding ordinary shares purchased by the Group and held as treasury shares.

DIVIDENDS

Dividends proposed by the Board of Directors are not recognised in the financial statements until

they have been approved by the company's shareholders at the Annual General Meeting.

13.1 Earnings per share

Earnings per share, basic

	2023	2022
IS Profit attributable to owners of the parent, continuing operations (EUR
million)	1,514	2,080
IS Profit attributable to owners of the parent, total Fortum (EUR million)	-2,069	-2,416
Weighted average number of shares (thousand)	897,264	889,204
Basic earnings per share, continuing operations (EUR )	1.68	2.34
Basic earnings per share, total Fortum (EUR )	-2.31	-2.72

As Fortum currently has no dilutive instruments outstanding, diluted earnings per share is the same

as basic earnings per share.

Comparable earnings per share

	2023	2022
Comparable net profit, continuing (EUR million)	1,150	1,076
Comparable net profit, total Fortum (EUR million)	1,184	-988
Weighted average number of shares (thousand)	897,264	889,204
Comparable earnings per share, continuing operations (EUR )	1.28	1.21
Comparable earnings per share, total Fortum (EUR )	1.32	-1.11

See



Definitions and reconciliations of key figures

13.2 Dividend per share

The Board of Directors proposes that a dividend of EUR 1.15 per share be paid for the financial

year 2023. The dividend will be paid in two instalments. Based on the number of shares registered

as at 6 February 2024, the total amount of dividend would be EUR 1,032 million. These Financial

statements do not reflect this dividend.

A dividend for 2022 of EUR 0.91 per share, amounting to a total of EUR 817 million, was decided

in the Annual General Meeting on 13 April 2023. The dividend was paid in two instalments. The first

dividend instalment of EUR 0.46 per share was paid on 24 April 2023, amounting to a total of EUR

413 million. The second dividend instalment of EUR 0.45, amounting to a total of EUR 404 million,

was paid on 10 October 2023.

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.

14 Financial assets and liabilities by categories

ACCOUNTING POLICIES

FINANCIAL ASSETS

Fortum classifies its financial assets in the following categories according to IFRS 9: financial

assets at amortised cost, financial assets at fair value through profit or loss and financial assets at

fair value through other comprehensive income. The classification is made at initial recognition

and depends on the financial asset's contractual cash flow characteristics and the Group's

business model for managing them.

In order for the financial asset to be classified and measured at amortised cost or fair value

through other comprehensive income, it needs to give rise to cash flows that are solely payments

of the principal and interest on the principal amount outstanding (SPPI). This assessment is

referred to as the SPPI test and is performed at an instrument level. When the SPPI criteria is not

met, financial assets are classified to fair value through profit or loss category.

Financial assets are presented as non-current assets unless they are held for trading, expected

to be realised within 12 months at the closing date or they have a maturity of under 12 months at

closing date. These are classified as current assets.

FINANCIAL ASSETS AT AMORTISED COST

Fortum measures financial assets at amortised cost when the financial asset is included in the

held-to-collect business model with fixed or determinable payments that are payments of amount

outstanding or interest on it. They arise when the Group provides money, goods or services

directly to a debtor. Financial assets at amortised cost include non-derivative financial assets with

fixed or determinable payments that are not quoted in an active market.

Financial assets at amortised cost are subject to impairment using expected credit loss (ECL)

model. Gains and losses from derecognition of the asset are recognised in profit and loss.

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at fair value through profit or loss include financial assets held for trading in the

short term, financial assets designated upon initial recognition irrevocably as fair value through

profit or loss and financial assets mandatorily recognised at fair value through profit or loss

according to IFRS 9. Derivatives are classified as held for trading unless they are designated as

effective hedging instruments.

Gains and losses arising from changes in the fair value are included in the income statement in

the period in which they arise.

FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Other equity investments designated at fair value through other comprehensive income are not

subject to impairment assessment and accumulated reserves are not recycled to profit or loss

upon derecognition. Dividends received are recognised in profit and loss.

DERECOGNITION

Fortum derecognises financial assets when the rights to receive cash flows from the assets

have expired or when it has substantially transferred the risks and rewards of the assets outside

of the Group.

IMPAIRMENT

Fortum recognises an allowance for expected credit losses (ECL) according to IFRS 9 for financial

assets measured at amortised cost. See further information on ECL in



Note 4.4.1

Credit quality

of major financial assets and in



Note 23

Trade and other receivables.

Financial assets measured at fair value through profit or loss are not included in ECL

assessment as they are already measured at fair value. A financial asset is written-off when there

is no reasonable expectation of recovering the contractual cash flows.

FINANCIAL LIABILITIES

All financial liabilities are recognised initially at fair value. In the case of loans and borrowings and

payables, incurred transaction costs are deducted. In subsequent periods, all financial liabilities,

except derivatives and financial liabilities which the Group has at initial recognition irrevocably

designated at fair value through profit or loss, are stated at amortised cost; any difference between

proceeds (net of transaction costs) and the redemption value is recognised as interest cost over

the period of the borrowing using the effective interest rate method.

Derivative financial instruments entered into by the Group, that are not designated as hedging

instruments are classified as liabilities at fair value through profit and loss. Amortisation of the

effective interest rate and gains and losses of liabilities are recognised in the income statement.

Group’s financial liabilities include trade and other payables, loans and borrowings and

derivative financial instruments. Borrowings or portion of borrowings being hedged with a fair

value hedge are recognised at fair value through profit or loss. Derecognition of financial liabilities

takes place when the Group has fulfilled the contractual obligations.

ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Within the ordinary course of business, the Group routinely enters into sale and purchase

transactions for commodities. Contracts that were entered into and continue to be held for the

purpose of receipt or delivery of the commodity in accordance with the Group's expected sale,

purchase or usage requirements are not within the scope of IFRS 9 ("own use exemption").

Physical contracts to buy or sell a non-financial item, which are fair valued using the fair value

option to off-set accounting mismatch, or where own use exemption or hedge accounting cannot

be applied are fair valued through the income statement.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and

are subsequently remeasured at their fair value. Gains and losses resulting from the initial fair value

measurement of a derivative (“day one” gains and losses) are eliminated against the corresponding

derivative asset or liability, if the initial fair value is determined based on valuation model with input

parameters that are unobservable from active markets. For derivatives whose initial fair value is

evidenced by a quoted price in an active market for an identical contract or based on a valuation

technique that uses only data from observable markets, gains and losses from the initial

measurement are accounted for similarly to gains or losses on the subsequent measurement.

The method of recognising the resulting gain or loss on the subsequent measurement depends

on whether the derivative is designated as a hedging instrument eligible for hedge accounting, and

if so, the nature of the item being hedged. The Group designates certain derivatives as either: (1)

hedges of highly probable forecast transactions (cash flow hedges); (2) hedges of the fair value of

recognised assets or liabilities, or unrecognised firm commitments (fair value hedge); or (3)

hedges of net investments in foreign operations.

The Group documents at the inception of the transaction the relationship between hedging

instruments and hedged items, whether the hedged item is one or several risk components

separately or in aggregation, as well as its risk management objective and strategy for undertaking

various hedge transactions. When applying hedge accounting the Group also documents its

assessment, of whether the derivatives that are used in hedging transactions are meeting the

hedge accounting effectiveness criteria: (1) there is an economic relationship between the hedged

item and the hedging instrument, (2) the effect of credit risk does not dominate the value changes

that result from that economic relationship; and (3) the hedge ratio of the hedging relationship is

the same as applied in the risk management. The Group also documents its assessment, both at

hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging

transactions are highly effective by assessing the prospective capacity of the derivatives in

offsetting changes in fair values or cash flows of hedged items. Hedge accounting is discontinued

only when the hedging relationship ceases to meet the hedge effectiveness criteria.

CASH FLOW HEDGE

The effective portion of changes in the fair value of derivatives that are designated and qualify as

cash flow hedges are recognised in equity. Gain or loss relating to the ineffective portion is

recognised immediately in the income statement. Amounts accumulated in equity are recycled in

the income statement in the periods when the hedged item will affect profit and loss (e.g. when the

forecasted sale that is hedged takes place). However, when the forecast transaction that is

hedged results in the recognition of a non-financial asset (e.g. inventory) or a liability, the gains

and losses previously deferred in equity are transferred from equity and included in the initial

measurement of the cost of the asset or liability. When a hedge no longer meets the criteria for

hedge accounting, any cumulative gain or loss existing in equity is recognised in the income

statement when the forecast transaction is ultimately also recognised in the income statement.

When a forecasted transaction is no longer expected to occur, the cumulative gain or loss that

was reported in equity is immediately recognised in the income statement.

Fortum hedges its exposure to commodity market risks and applies hedge accounting by risk

components. Hedge accounting is applied to Nordic electricity price risk, where the Nordic area

priced physical electricity delivery is commonly divided into three risk components: (1) system

price risk, (2) electricity price area difference risk (EPAD) and (3) currency risk. For each of these

separate risk components there are specific derivative contracts available, which each are being

effective hedges for the associated risk components.

In addition, hedge accounting is applied to certain derivative contracts hedging gas price risk.

These are physically settled fixed-price forward and futures contracts, for which the own-use

exemption cannot be applied (failed own-use contracts), where the contract constitutes an

effective hedge of cash flows of the gas volumes to be delivered (“all

in one” hedge).

FAIR VALUE HEDGE

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are

recorded in the income statement, together with any changes in the fair value of the hedged asset

or liability that are attributable to the hedged risk.

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying

amount of a hedged item for which the effective interest method is used is amortised to profit or

loss for the periods until maturity of the hedged item.

NET INVESTMENT HEDGING IN FOREIGN OPERATIONS

Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges.

Any gain or loss on the hedging instrument relating to the effective portion of the hedge is

recognised in equity; the gain or loss relating to the ineffective portion is recognised immediately in

the income statement. Gains and losses accumulated in equity are included in the income

statement when the foreign operation is disposed of.

DERIVATIVES THAT DO NOT QUALIFY FOR HEDGE ACCOUNTING

Certain derivative instruments representing economic hedging relationship do not qualify for

hedge accounting. Unrealised fair value changes of non-hedge accounted commodity derivatives

hedging future cash flow and physical contracts that are accounted for as derivatives within the

scope of IFRS 9 are recognised in items affecting comparability in the income statement. Gains

and losses on interest rate and currency derivative instruments are recognised in finance costs

–

net with corresponding hedge items.

Financial assets and liabilities in the following tables are split into categories in accordance with

IFRS 9. The categories are further divided into classes which are the basis for valuing a respective

asset or liability. Further information can be found in the Notes mentioned in the table.

Financial assets by category 2023

						Fair value
						through other
						comprehensive
		Amortised cost	Fair value through profit or loss			income
						Net investment
			Hedge accounting,	Non-hedge	Other	and Cash flow	Lease	Total
EUR million	Note		fair value hedges	accounting	financial assets	hedges	receivables	financial assets
Financial instruments in non-current assets
Other non-current assets	20	78			123			201
Derivative financial instruments	4
Commodity derivatives				42		59		101
Interest rate and currency derivatives			92	2		21		115
Long-term interest-bearing receivables	21	644						644
Total financial instruments in non-current assets		722	92	45	123	80	-	1,061
Financial instruments in current assets
Derivative financial instruments	4
Commodity derivatives				124		251		375
Interest rate and currency derivatives				7		7		14
Trade receivables	23	1,120						1,120
Other receivables	23	167						167
Short-term interest-bearing receivables	21	64			325			389
Liquid funds	24	4,183			-			4,183
Total financial instruments in current assets		5,534	-	131	325	257	-	6,247
Total		6,256	92	176	448	337	-	7,309

Financial assets by category 2022

						Fair value
						through other
						comprehensive
		Amortised cost	Fair value through profit or loss			income
						Net investment
			Hedge accounting,	Non-hedge	Other	and Cash flow	Lease	Total
EUR million	Note		fair value hedges	accounting	financial assets	hedges	receivables	financial assets
Financial instruments in non-current assets
Other non-current assets	20	85			543			628
Derivative financial instruments	4
Commodity derivatives				170		54		224
Interest rate and currency derivatives			84	3		33		119
Long-term interest-bearing receivables	21	593			31		0	624
Total financial instruments in non-current assets		677	84	174	574	86	0	1,595
Financial instruments in current assets
Derivative financial instruments	4
Commodity derivatives				594		776		1,370
Interest rate and currency derivatives			1	92		23		116
Trade receivables	23	1,625						1,625
Other receivables	23	142						142
Short-term interest-bearing receivables	21	122			535		3	660
Liquid funds	24	3,919			-			3,919
Total financial instruments in current assets		5,808	1	687	535	799	3	7,832
Total		6,486	84	860	1,109	885	3	9,427

Financial liabilities by category 2023

						Fair value
						through other
						comprehensive
		Amortised cost	Fair value through profit or loss			income
			Hedge			Net investment
			accounting,	Non-hedge	Other financial	and Cash flow		Total financial
EUR million	Note		fair value hedges	accounting	liabilities	hedges	Lease liabilities	liabilities
Financial instruments in non-current liabilities
Interest-bearing liabilities	26	3,502	973 1)				97	4,573
Derivative financial instruments	4
Commodity derivatives				49		73		121
Interest rate and currency derivatives			83	2		10		95
Total financial instruments in non-current liabilities		3,502	1,056	50		83	97	4,789
Financial instruments in current liabilities
Interest-bearing liabilities	26	941			376		21	1,337
Derivative financial instruments	4
Commodity derivatives				58		761		819
Interest rate and currency derivatives				232		6		238
Trade payables	32	488						488
Other liabilities	32	213						213
Total financial instruments in current liabilities		1,641	-	290	376	767	21	3,093
Total		5,143	1,056	340	376	849	118	7,882

1) Fair valued part of bond in fair value hedge relationship.

Financial liabilities by category 2022

						Fair value
						through other
						comprehensive
		Amortised cost	Fair value through profit or loss			income
			Hedge			Net investment
			accounting,	Non-hedge	Other financial	and Cash flow		Total financial
EUR million	Note		fair value hedges	accounting	liabilities	hedges	Lease liabilities	liabilities
Financial instruments in non-current liabilities
Interest-bearing liabilities	26	2,978	580 1)				100	3,658
Derivative financial instruments	4
Commodity derivatives				245		390		635
Interest rate and currency derivatives			119	-		2		121
Total financial instruments in non-current liabilities		2,978	699	245		392	100	4,413
Financial instruments in current liabilities
Interest-bearing liabilities	26	3,581			527		19	4,127
Derivative financial instruments	4
Commodity derivatives				553		3,366		3,919
Interest rate and currency derivatives			2	51		1		54
Trade payables	32	720						720
Other liabilities	32	185						185
Total financial instruments in current liabilities		4,486	2	604	527	3,367	19	9,005
Total		7,463	701	849	527	3,759	119	13,419

1) Fair valued part of bond in fair value hedge relationship.

15 Financial assets and liabilities by fair value hierarchy

ACCOUNTING POLICIES

Fair value measurements are classified using a fair value hierarchy i.e. Level 1, Level 2 and Level

3 that reflects the significance of the inputs used in making the measurements.

FAIR VALUES UNDER LEVEL 1 MEASUREMENT HIERARCHY

The fair value of financial assets and liabilities classified as Level 1 is based on unadjusted quoted

prices in active markets at the closing date. Level 1 consist e.g. commodity derivatives traded in

active markets.

FAIR VALUES UNDER LEVEL 2 MEASUREMENT HIERARCHY

The fair value of financial assets and liabilities classified as Level 2 is based on observable input

parameters, which are other than quoted prices.

The fair value of financial instruments traded in active markets in Level 2 is calculated using prices

derived from quoted market prices at the closing date. Known calculation techniques, such as

estimated discounted cash flows, are used to determine fair value of interest rate and currency

financial instruments. The fair value of interest-rate swaps is calculated as the present value of the

estimated future cash flows. The fair value of forward foreign exchange contracts is determined using

forward exchange market rates at the closing date. Fair values of options are determined by using

option valuation models. The fair value of financial liabilities is estimated by discounting the future

contractual cash flows at the current market interest rate that is available to the Group for similar

financial instruments. The counterparty credit risk has been taken into account when determining fair

value. The credit risk is determined based on a portfolio valuation in a bilateral approach.

The Group bases the calculation on existing market conditions at each closing date. Financial

instruments used in Fortum are standardised products that are either cleared via exchanges or

widely traded in the market. Credit risk from trading commodity derivatives is mitigated by clearing

trades through exchanges or by limiting trades to OTC counterparties considered to be

creditworthy, or secured by credit worthy guarantees. Financial derivatives are traded with credit

worthy financial institutions with investment grade ratings.

FAIR VALUES UNDER LEVEL 3 MEASUREMENT HIERARCHY

The fair value of financial assets and liabilities classified as Level 3 is based on unobservable

input parameters.

Level 3 consist mainly investments in unlisted shares classified as other investments for which

the fair value can't be reliably measured and derivative financial instrument for which the fair value

has been determined using valuation techniques with unobservable inputs. The input parameters

of Level 3 of the fair value hierarchy for equity investments are specified taking into account

economic developments and available industry and corporate data. The counterparty credit risk

has been adjusted when determining the fair value.

Financial assets

		Level 1		Level 2		Level 3		Netting 1)		Total
EUR million	Note	2023	2022	2023	2022	2023	2022	2023	2022	2023	2022
In non-current assets
Other investments 2)	20					123	543			123	543
Derivative financial instruments
Commodity derivatives	4
Hedge accounting				59	54					59	54
Non-hedge accounting		10	85	14	58	20	57	-1	-30	42	170
Interest rate and currency derivatives	4
Hedge accounting				113	116					113	116
Non-hedge accounting				2	3					2	3
Interest-bearing receivables							31				31
Total in non-current assets		10	85	188	231	143	631	-1	-30	339	917
In current assets
Derivative financial instruments
Commodity derivatives	4
Hedge accounting		200	781	160	542			-110	-546	251	777
Non-hedge accounting		408	1,129	33	252	4	9	-320	-796	124	594
Interest rate and currency derivatives	4
Hedge accounting				7	23					7	23
Non-hedge accounting				7	92					7	92
Interest-bearing receivables 3)		325	527				7			325	535
Total in current assets		933	2,437	206	909	4	16	-430	-1,342	714	2,021
Total		943	2,522	394	1,140	147	648	-431	-1,372	1,053	2,938

1) Receivables and liabilities from electricity and other commodity standard derivative contracts against exchanges with same delivery period are netted.

2) Other investments includes shares in unlisted companies. The comparison period 31 December 2022 also includes 1.3 GW portfolio of wind projects located in Russia.

3) Interest-bearing receivables, Level 1, include collateral arrangement covering margin requirement.

Financial liabilities

		Level 1		Level 2		Level 3		Netting 1)		Total
EUR million	Note	2023	2022	2023	2022	2023	2022	2023	2022	2023	2022
In non-current liabilities
Interest-bearing liabilities 2)	26			973	580					973	580
Derivative financial instruments
Commodity derivatives	4
Hedge accounting		14		58	390					73	390
Non-hedge accounting		11	38	30	234	9	4	-1	-30	49	246
Interest rate and currency derivatives	4
Hedge accounting				93	121					93	121
Non-hedge accounting				2	0					2	0
Total in non-current liabilities		26	38	1,156	1,324	9	4	-1	-30	1,189	1,336
In current liabilities
Interest-bearing liabilities	26			376	527					376	527
Derivative financial instruments
Commodity derivatives	4
Hedge accounting		606	2,672	264	1,240			-110	-546	761	3,366
Non-hedge accounting		238	883	138	465	2	1	-320	-796	58	553
Interest rate and currency derivatives	4
Hedge accounting				6	3					6	3
Non-hedge accounting				232	51					232	51
Total in current liabilities		844	3,555	1,016	2,286	2	1	-430	-1,342	1,432	4,500
Total		870	3,593	2,172	3,610	11	5	-431	-1,372	2,621	5,836

1) Receivables and liabilities from standard electricity and other commodity derivative contracts against exchanges with same delivery period are netted.

2) Fair valued part of bonds when hedge accounting is applied (fair value hedge).

At the end of December 2023, the net fair value of commodity derivatives was EUR -464 million,

including assets of EUR 476 million and liabilities of EUR 940 million (EUR -2,960 million in

December 2022, including assets of EUR 1,594 million and liabilities of EUR 4,554 million). The

change from December 2022 mainly relates to impacts from decreased commodity market prices

and maturity of contracts.

Net fair value amount of interest rate and currency derivatives was EUR -204 million, including

assets EUR 129 million and liabilities EUR 333 million. Fortum has cash collateral agreements with

some counterparties. At the end of December 2023, Fortum had received EUR 42 million and paid

EUR 176 million from foreign exchange and interest rate derivatives under Credit Support Annex

agreements.

There were no transfers in or out of level 3 during 2023. In 2022, Russian 1.3 GW portfolio of

wind projects and Uniper’s fair valued long

-term gas supply contracts accounted for as derivatives

were transferred into level 3. Gains and losses of level 3 items in consolidated income statement

are presented mainly in items affecting comparability. See



Not

Comparable operating profit

and comparable net profit.

Changes in fair value hierarchy Level 3

	2023		2022
EUR million	Assets	Liabilities	Assets	Liabilities
Opening balance 1 January	648	5	673	344
Purchases and additions	17	-	21	-
Sales and disposals	-4	-	118	-
Settlements and realised gains/losses in
income statement	-13	-1	-112	-28
Unrealised gains/losses in income
statement	-67	7	-2,130	293
Transfers into level 3	-	-	4,101	-
Gains/losses in OCI	-	-	-3	-
Deconsolidation of subsidiary companies 1)	-433	-	-2,020	-604
Carrying amount at 31 December	147	11	648	5

1) Deconsolidation of Russian operations in April 2023 and Uniper in September 2022.

16 Intangible assets

ACCOUNTING POLICIES

Intangible assets, except goodwill, are stated at historical cost less accumulated amortisation and

impairment losses; and amortised on a straight-line basis over their expected useful lives.

The assets’ residual values and useful lives are reviewed, and a

djusted if appropriate, at each

closing date. An asset’s carrying amount is written down to its recoverable amount if the asset’s

carrying amount is greater than its estimated recoverable amount. See further information on the

impairment testing in



Note 19

Impairment testing.

GOODWILL

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's

share of net identifiable assets of the acquired subsidiary, associate or joint venture at the date of

acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets and tested

annually for impairment. Goodwill on acquisition of associates and joint ventures is included in

investments in associates and joint ventures and is tested for impairment as part of the overall

balance. Goodwill is carried at cost less accumulated impairment losses. Impairment losses on

goodwill are not reversed. Gains and losses on disposal of an entity include the carrying amount

of goodwill relating to the entity sold.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are recognised as expense as incurred and included in other

expenses in the consolidated income statement. If development costs are expected to generate

future income, they are capitalised as intangible assets and depreciated over the period of the

income streams.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS:

ASSIGNED VALUES AND USEFUL LIVES IN ACQUISITIONS

In an acquisition acquired intangible and tangible assets are fair valued and their remaining useful

lives are determined. Management believes that the assigned values and useful lives, as well as the

underlying assumptions, are reasonable. Different assumptions and assigned lives could have a

significant impact on the reported amounts.

The Group has significant carrying values in property, plant and equipment, intangible assets and

participations in associated companies and joint ventures which are tested for impairment

according to the accounting policy. See further information on the impairment testing in



Note 19

Impairment testing.

	Goodwill		Contract-based		Other		Total
EUR million	2023	2022	2023	2022	2023	2022	2023	2022
Cost 1 January	417	1,021	-	1,334	929	1,586	1,346	3,941
Translation differences and other
adjustments	-11	10	-	-5	-28	-96	-39	-91
Acquisition of subsidiary companies	11	-	-	-	14	-	25	-
Capital expenditure	-	1	-	-	92	125	92	126
Disposals	-	-	-	-	-16	-71	-16	-71
Deconsolidation of subsidiary companies 1)	-167	-615	-	-1,329	-43	-664	-210	-2,608
Reclassifications	-	-	-	-	14	48	14	48
Cost 31 December	249	417	-	-	962	929	1,212	1,346
Accumulated depreciation 1 January	167	-	-	820	521	955	689	1,775
Translation differences and other
adjustments	-	-	-	-6	-17	-85	-17	-91
Disposals	-	-	-	-	-15	-71	-15	-71
Deconsolidation of subsidiary companies 1)	-167	-	-	-830	-25	-447	-192	-1,277
Reclassifications	-	-	-	-	-	34	-	34
Depreciation for the year	-	-	-	14	105	130	105	144
Impairment charges 2)	-	167	-	1	-	6	-	174
Accumulated depreciation 31 December	-	167	-	-	569	521	569	689
BS Carrying amount 31 December	249	250	-	-	393	408	643	657

1) See



Note 3

Acquisitions, disposals and discontinued operations.

2) Impairment charges in 2022 for Russia amounted to EUR 169 million. See



Note 19

Impairment testing.

Changes during the year include Russia until 31 March 2023 and Uniper until 30 September 2022.

Goodwill in groups of cash-generating units

Goodwill is allocated to operating segments corresponding to groups of cash-generating units that

benefit from the synergies of the acquired goodwill. In March 2023, Fortum announced the

reorganisation of its business structure and updated its reportable segments and cash-generating

units accordingly. See



Note

Segment reporting.

EUR million	2023	2022
Consumer Solutions	214	214
Recycling and Waste	35	35
Total	249	250

Other intangible assets

Other intangible assets include customer contracts, and costs for software products and software

licenses.

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

ACCOUNTING POLICIES

Property, plant and equipment mainly include power and heat production-related buildings,

structures and machinery, waterfall rights, and other buildings and machinery.

Property, plant and equipment are stated at historical cost less accumulated depreciation and

impairment losses on the consolidated balance sheet. Historical cost includes expenditure that is

directly attributable to the acquisition of an item. Borrowing costs are included in the cost of

qualified assets. Additionally, the cost of an item of property, plant and equipment includes the

estimated cost of its dismantlement, removal or restoration when there is a contractual obligation

towards a third party, or a legal obligation.

Acquired assets on the acquisition of a new subsidiary are stated at their fair values at the date

of acquisition.

See



Note 29

Other provisions for information about asset retirement obligations,



Note 28

Nuclear-related assets and liabilities, for information about provisions for decommissioning nuclear

power plants and



Note 33

Leases, for information about right-of-use assets.

Land, water areas and waterfall rights are not depreciated since they have indefinite useful lives.

Depreciation on other assets is calculated using the straight-line method to allocate their cost to

their residual values over their estimated useful lives, as follows:

Hydro power plant buildings, structures and machinery	40 – 50 years
Thermal power plant buildings, structures and machinery	25 years
Nuclear power plant buildings, structures and machinery	25 years
CHP power plant buildings, structures and machinery	15 – 25 years
Recycling and waste treatment facility buildings, structures and machinery	15 – 40 years
Solar and Wind power plant structures and machinery	25 years
District heating network	30 – 40 years
Other buildings and structures	20 – 40 years
Other tangible assets	20 – 40 years
Other machinery and equipment	3 – 20 years
Other non-current investments	5 – 10 years

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset,

as appropriate, only when it is probable that future economic benefits associated with the item will

flow to the Group and the cost of the item can be measured reliably. All other repairs and

maintenance expenses are charged to the income statement during the financial period in which

they are incurred.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each

closing date. A

n asset’s carrying amount is written down to its recoverable amount if the asset’s

carrying amount is greater than its estimated recoverable amount. See further information on the

impairment testing in



Note 19

Impairment testing.

BORROWING COSTS

Borrowing costs directly attributable to the construction of qualifying assets are added to the cost

of those assets. Qualifying assets are assets that take a substantial time to get ready for their

intended use or sale.

CLIMATE-RELATED MATTERS

Economic lives and book values of property, plant and equipment reflect approved actions

towards Fortum’s climate

-related targets. Moreover, additions to property, plant and equipment

include capital expenditure incurred towards Fortum’s climate

-related targets, such as the phase

out of all coal-based power generation by the end of 2027; as well as maintenance-related capital

expenditure to protect Fortum’s assets towards climate

-related risk, such as investments in

hydropower plant dam safety.

Fortum has coal-fired power generation in Meri-Pori power plant, Finland; Suomenoja CHP,

Finland; and Zabrze and Czestochowa CHP, Poland. With regards to coal exit, Fortum is investing

approximately EUR 300 million during 2023

–

2027 in projects within the Espoo Clean Heat

programme to drive decarbonisation and build sustainable waste heat solutions in the Helsinki

metropolitan area, of which EUR 31 million

was capitalised in 2023. Fortum’s district heat in

Finland will be produced coal-free already in 2025 and be carbon-neutral before 2030. Also, the

economic life and book value of the Meri-

Pori power plant reflect Fortum’s coal exit plans

With regards to investments in hydropower plant dam safety, Fortum is investing, for example,

approximately SEK 650 million (approximately EUR 59 million) in dam safety in Sweden for an

extensive rebuild of the over 100-year-old Forshuvud hydropower plan during 2021

–

2025; as well

as over SEK 700 million (over EUR 60 million) during 2023

–

2030 to modernise Untra, one of

Sweden's oldest hydropower plants. In 2023, total of EUR 103 million (2022: 93) was capitalised

relating to hydro production, mainly maintenance, legislation and productivity investments.

							Advances paid and
	Land and waterfall rights		Buildings and structures		Machinery, equipment and other		construction in progress		Total
EUR million	2023	2022	2023	2022	2023	2022	2023	2022	2023	2022
Cost 1 January	2,429	4,371	3,406	10,574	7,525	32,996	513	1,172	13,872	49,113
Translation differences and other adjustments	7	-275	-37	422	-120	588	-	-166	-150	569
Acquisition of subsidiary companies	-	8	-	8	-	-	-	6	-	21
Capital expenditure 1)	6	4	9	13	10	49	515	758	539	824
Additions to right-of-use assets	3	6	13	29	10	12	-	-	27	47
Decreases in right-of-use assets	-	-	-2	-18	-1	-12	-	-	-4	-30
Nuclear asset retirement cost	-	-	-	-	10	-9	-	-	10	-9
Disposals	-7	-4	-19	-35	-42	-149	-3	-3	-69	-190
Deconsolidation of subsidiary companies 2)	-6	-1,680	-895	-7,645	-1,850	-26,086	-49	-1,033	-2,800	-36,444
Reclassifications	-	-	151	58	326	135	-491	-222	-13	-28
Cost 31 December	2,433	2,429	2,626	3,406	5,868	7,525	485	513	11,413	13,872
Accumulated depreciation 1 January	5	279	1,989	6,164	4,612	23,460	-	162	6,606	30,064
Translation differences and other adjustments	-	-7	-31	199	-91	63	-	-4	-122	252
Acquisition of subsidiary companies	-	-	-	1	-	-	-	-	-	1
Disposals	-	-	-18	-33	-40	-100	-3	-1	-61	-134
Deconsolidation of subsidiary companies 2)	-	-275	-564	-5,089	-1,334	-20,589	-1	-164	-1,900	-26,116
Decreases in right-of-use assets	-	-	-	-5	-	-10	-	-	-	-15
Depreciation for the year	2	11	71	316	194	666	9	-	277	994
Impairment charges 3)	-	1	-	518	-	1,050	-	5	-	1,574
Reclassifications	-	-3	-	-83	-	72	-	-	-	-14
Accumulated depreciation 31 December	7	5	1,447	1,989	3,341	4,612	5	-	4,800	6,606
BS Carrying amount 31 December	2,425	2,424	1,179	1,417	2,527	2,913	481	513	6,612	7,266

1) Includes EUR 3 million (2022: 51) of other asset retirement costs.

2) See



Note 3

Acquisitions, disposals and discontinued operations.

3) Impairment charges in 2022 for Russia amounted to EUR 735 million. See



Note 19

Impairment testing.

Changes during the year include Russia until 31 March 2023 and Uniper until 30 September 2022.

Property, plant and equipment that are subject to restrictions in the form of real estate mortgages amount to EUR 163 million (2022: 167). See



Note 35

Pledged assets and contingent liabilities.

Borrowing costs of EUR 20 million relating to continuing operations were capitalised in 2023 (2022: 4). The interest rate used for capitalising borrowing costs varied from 2% to 8% (2022: 2%-10%). For

constructions financed by the Group, a uniform rate may be used based on interest rates of financial liabilities, including leases.

Property, plant and equipment includes right-of-use assets from leases in which Fortum acts as the lessee. See



Note 33

Leases.

18 Participations in associated companies and joint

ventures

ACCOUNTING POLICIES

The Group’s interests in associated companies and joint

ventures are accounted for using the

equity method of accounting. Assets acquired and liabilities assumed in the investment in

associates or joint ventures are measured initially at their fair values at the acquisition date. The

excess of the cost of acquisition o

ver the fair value of the Group’s share of the identifiable net

assets acquired is recorded as goodwill.

The Group’s share of its associates or joint ventures post

-acquisition profits or losses after tax,

and the expenses related to the adjustments to the fair values of the assets and liabilities

assumed are recognised in the income statement. The cumulative post-acquisition movements

are adjusted against the carrying amount of the investment. The Group’s share of post

-acquisition

adjustments to associates

or joint ventures equity that has not been recognised in the associate’s

or joint venture’s income statement, is recognised directly in Group’s shareholder’s equity, and

against the carrying amount of the investment.

When the Group’s share of losses in an

associate or a joint venture equals or exceeds its

interest in the associate or joint venture, including any other unsecured receivables, the Group

does not recognise further losses, unless it has incurred obligations or made payments on behalf

of the associate or joint venture.

Material unrealised gains on transactions between the Group and its associates or joint

ventures are eliminated to the extent of the Group’s interest in the associate or joint venture.

Material unrealised losses are also eliminated, unless the transaction provides evidence of an

impairment of the asset transferred. Accounting policies of associates or joint ventures have been

changed where necessary to ensure consistency with the policies adopted by the Group.

If more recent information is not available, the share of the profit of certain associated or joint

venture companies is included in the consolidated accounts based on the latest available information.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Management is required to make

significant judgements when assessing the nature of Fortum’s

interest in its investees and when considering the classification of Fortum’s joint arrangements. In

the classification, emphasis has been put on decision making, legal structure, financing and risks

of the arrangements.

Management judgement is required when testing the carrying amounts for participations in

associated companies and joint ventures for impairment. See



Note 19

Impairment testing for

more information.

18.1 Principal associated companies and joint ventures

	Forsmarks
	Kraftgrupp AB	Kemijoki Oy	OKG AB	TVO Oyj
Nature of the relationship	Co-owned	Co-owned	Co-owned	Co-owned
	nuclear	hydro	nuclear	nuclear
	company	company	company	company
Classification	Associated	Associated	Associated	Joint venture
	company	company	company
Segment	Generation	Generation	Generation	Generation
Domicile	Sweden	Finland	Sweden	Finland
Ownership interest, % 1)	26	58	46	26
Votes, %	26	28	46	26

1) Kemijoki and TVO have different series of shares. The ownership interest varies due to the changes in equity assigned to the different

share series. In 2023 there were no changes in the ownership interests in Kemijoki and TVO.

Shareholdings in power production companies

Power plants are often built jointly with other power producers. Under the consortium agreements,

each owner is entitled to electricity in proportion to its share of ownership, or other agreements, and

each owner is liable for an equivalent portion of costs. The production companies are not profit

making, since the owners purchase electricity at production cost, including interest cost and production

taxes. The share of profit of these companies is mainly IFRS adjustments (e.g. accounting for nuclear-

related assets and liabilities) and depreciations on fair value adjustments from historical acquisitions

since the companies are not profit making under local accounting principles.

Fortum has material shareholdings in such power production companies (mainly nuclear and

hydro) that are consolidated using equity method either as associated companies (Forsmarks

Kraftgrupp AB, Kemijoki Oy and OKG) or as joint venture (Teollisuuden Voima Oyj (TVO)).

In Sweden, nuclear production company shareholdings are 25.5% ownership of the shares in

Forsmarks Kraftgrupp AB and 45.5% ownership of the shares in OKG AB. Excluding non-controlling

interests in the subsidiaries, Fortum’s participation in the companies are 22.2% and 43.4%

respectively, which reflects the share of electricity produced that Fortum can sell further to the

market. The minority part of the electricity purchased is invoiced further to each minority owner

according to their respective shareholding and treated as pass-through.

In Finland, Fortum has an ownership in power production company TVO that has two series of

shares which entitle the shareholders to electricity produced in the different power plants owned by

TVO. Shares in series A entitle to electricity produced in nuclear power plants Olkiluoto 1 and 2 and

Fortum owns 26.6% of these shares. Series B entitles to electricity produced in Olkiluoto 3 and

Fortum’s ownership in this share series is

25.0%.

See also



Note 28

Nuclear-related assets and liabilities.

The most significant hydro production company shareholding is 63.8% of the hydro shares and

26.7% of the monetary shares in Kemijoki Oy. Each owner of hydro shares is entitled to the

hydropower production in proportion to its hydro shareholding.

Summarised financial information of the principal associated companies in

2023

	Forsmarks
EUR million	Kraftgrupp AB	Kemijoki Oy	OKG AB
Balance sheet	31 Dec 2022	31 Dec 2022	31 Dec 2022
Non-current assets	1,907	497	811
Current assets	1,345	12	165
Non-current liabilities	3,108	312	892
Current liabilities	113	145	71
Equity	31	52	13
Attributable to the owners of the parent	31	52	13
	1 Jan 2022 -	1 Jan 2022 -	1 Jan 2022 -
Statement of comprehensive income	31 Dec 2022	31 Dec 2022	31 Dec 2022
Sales	596	69	298
Profit or loss	0	1	1
Attributable to the owners of the parent	0	1	1
Total comprehensive income	0	1	1
Attributable to the owners of the parent	0	1	1
Reconciliation to carrying amount in Fortum Group
Group's interest in the equity of the associate 1 January	8	30	6
Reclassification
Change in share of profit and OCI items	0	0	0
Group's interest in the equity of the associate
31 December	8	30	6
Fair values on acquisitions and different accounting
principles 1)	91	147	-6
Carrying amount 31 December	99	176	0

1) Impact of different accounting principles include mainly IFRS adjustments for nuclear-related assets and liabilities, capitalised borrowing

costs and fair value adjustment for the acquired assets and liabilities. Fortum records its share of nuclear-related assets and liabilities in its

nuclear associated companies according to equity method. The basis for recognition is similar as for Loviisa power plant, see accounting

principles in



Note 28

Nuclear-related assets and liabilities.

Summarised financial information of the principal associated companies in

2022

	Forsmarks
EUR million	Kraftgrupp AB	Kemijoki Oy	OKG AB
Balance sheet	31 Dec 2021	31 Dec 2021	31 Dec 2021
Non-current assets	2,393	489	825
Current assets	525	5	184
Non-current liabilities	2,783	289	920
Current liabilities	105	154	76
Equity	31	52	13
Attributable to the owners of the parent	31	52	13
	1 Jan 2021 -	1 Jan 2021 -	1 Jan 2021 -
Statement of comprehensive income	31 Dec 2021	31 Dec 2021	31 Dec 2021
Sales	594	50	312
Profit or loss	0	1	2
Attributable to the owners of the parent	0	1	2
Total comprehensive income	0	1	2
Attributable to the owners of the parent	0	1	2
Reconciliation to carrying amount in Fortum Group
Group's interest in the equity of the associate 1 January	12	30	-
Reclassification	-4	-	6
Change in share of profit and OCI items	-	-1	0
Group's interest in the equity of the associate
31 December	8	30	6
Fair values on acquisitions and different accounting
principles 1)	77	148	-6
Carrying amount 31 December	85	178	0

Summarised financial information of the principal joint ventures

	2023	2022
EUR million	TVO Oyj	TVO Oyj
Balance sheet	30 Sep 2023	31 Dec 2022
Non-current assets	8,375	8,308
Current assets	916	863
of which cash and cash equivalents	313	353
Non-current liabilities	6,472	6,517
of which non-current interest-bearing liabilities	5,223	5,223
Current liabilities	579	437
of which current financial liabilities	300	259
Equity	2,241	2,218
Attributable to the shareholders of the company	2,241	2,218
	1 Jan 2023 -	1 Jan 2022 -
Statement of comprehensive income	30 Sep 2023	31 Dec 2022
Sales	587	358
Depreciation and amortisation	-116	-47
Interest income	26	6
Interest expense	-104	-81
Income tax expense or income	0	0
Profit or loss	67	-48
Other comprehensive income	-16	212
Total comprehensive income	51	164
Attributable to the shareholders of the company	51	164
Reconciliation to carrying amount in Fortum Group
Group's interest in the equity of the joint venture at 1 January	564	523
Change in share of profit and OCI items	8	41
Group's interest in the equity of the joint venture 31 December	572	564
Fair values on acquisitions and different accounting principles 1)	-18	-9
Carrying amount 31 December	554	556

1) Impact of different accounting principles include mainly IFRS adjustments for nuclear-related assets and liabilities and capitalised borrowing

costs. Fortum records its share of nuclear-related assets and liabilities in its nuclear associated companies according to equity method. The

basis for recognition is similar as for Loviisa power plant, see accounting principles in



Note 28

Nuclear-related assets and liabilities.

18.2 Participations in and share of profits from associated companies

and joint ventures

Participations in associated companies and joint ventures on the balance

sheet

EUR million	2023	2022
Principal associates	276	262
Principal joint ventures	554	556
Other associates	51	158
Other joint ventures	179	273
BS Total	1,059	1,249

Changes in participation during the year

	2023		2022
	Associated	Joint	Associated	Joint
EUR million	companies	ventures	companies	ventures
Opening balance 1 January	421	828	1,435	1,026
Investments	-	12	5	9
Share of profit of associates and joint ventures	24	61	-542	-16
Dividend income received	-1	-15	-21	-16
Divestments and capital returns	-	-	-15	-13
Deconsolidation of subsidiary companies 1)	-105	-116	-527	-109
Reclassifications	-7	-	70	-137
OCI items in associates and joint ventures	-2	-17	1	40
Translation differences and other adjustments	-4	-19	14	45
Carrying amount at 31 December	326	733	421	828

1) See



Note 3

Acquisitions, disposals, assets held for sale and discontinued operations.

Changes during the year include Russia until 31 March 2023 and Uniper until 30 September 2022.

In 2023 Deconsolidation of subsidiary companies include EUR -221 million related to Russia. In

2022 Deconsolidation of subsidiary companies and Reclassifications included EUR -671 million

related to Uniper.

For information about investments and divestments of shares in associated companies and joint

ventures, see



Note 3

Acquisitions, disposals and discontinued operations.

Share of profit of associates and joint ventures

EUR million	2023	2022
Principal associates
Forsmarks Kraftgrupp AB	17	-78
Kemijoki Oy	-1	-1
OKG AB	7	-99
Principal associates, total	23	-178
Principal joint ventures
TVO Oyj	25	-13
Principal joint ventures, total	25	-13
Other associates	1	-6
Other joint ventures	9	13
IS Total	59	-185

Comparable share of profit of associates and joint ventures

EUR million	2023	2022
IS Share of profit/loss of associates and joint ventures	59	-185
Adjustments to share of profit/loss of associates and joint ventures	-52	145
Comparable share of profit/loss of associates and joint ventures	7	-40

Share of profits from associated companies and joint ventures increased mainly due to the

improved nuclear fund returns and updates for the nuclear decommissioning costs mainly due to

inflation in Sweden. There are no unrecognised share of losses of associated companies and joint

ventures.

19 Impairment testing

ACCOUNTING POLICIES

The carrying values of goodwill, other intangible assets, property, plant and equipment, right-of-

use assets, and non-financial investments are reviewed regularly for indication of impairment.

Indications of impairment are business-specific and are thus analysed separately by each

segment; and include risks, such as changes in electricity and fuel prices, regulatory/political

risks relating to energy taxes, price regulations, limitations to the lifetime of assets as well as

climate-related transition risks and physical risks.

Impairment testing is performed if there is an indication of impairment; and the asset is

written down to its recoverable amount if its carrying amount is greater than the estimated

coverable amount.

In addition, goodwill and other intangible assets that have an

indefinite useful life, and as

such are not subject to amortisation, are tested annually for impairment, even if there is no

indication of impairment. Impairment testing is performed and documented annually in

connection with the long-term forecasting

process.

Annual impairment testing is performed on a cash-generating unit level. Fortum defines cash-

generating unit as the smallest group of assets that generate cash flows that are independent of

the cash flows generated by other assets.

Goodwill is allocated to cash-generating units that benefit from the synergies of the acquired

goodwill.

Fortum generally uses value in use or fair value less cost of disposal to establish the

recoverable amount of cash-generating units. Value in use is determined by discounting future

cash flows expected to be derived from the use of assets. Fair value less cost of disposal

represent the market approach and is determined with a discounted cash flow model, where the

assumptions on cash flows and discount rate are reflecting the market expectations. The

carrying amount of the cash generating units comprises net operating assets, including goodwill

and fair value adjustments arising from

acquisitions.

Non-financial assets, other than goodwill, that have been impaired in the past are reviewed for

possible reversal of

impairment at each reporting date.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS: ASSUMPTIONS

RELATED TO IMPAIRMENT TESTING

Impairment testing is forward-looking and requires management to make certain assumptions.

The recoverable amounts of cash-generating units are determined by discounted cash flow

models. The estimated future cash flows are based on the most recent, long-term forecast in local

currency, and / or long-term assumptions approved by management. Cash flows cover an explicit

forecast period of six years. The explicit forecast period is longer than five years as significant

assets used by the business, such as power plants, have useful lives exceeding 20 years.

The period covered by cash flows is related to the useful lives of the assets being reviewed for

impairment. Cash flow projections beyond the explicit forecast period are estimated by

extrapolating projections using a steady or declining growth rate. The growth rate used to

extrapolate the cash flow projections until the end of assets' useful lives is in line with the

assumed inflation, taking into consideration market outlook forecast.

In measuring value in use cash flows related to future investments, such as new plants, are

excluded. However, if the projects have been started, the cashflows, including the cash outflows

for the investment, are included.

Preparation of these cash flow estimates requires management to make assumptions relating to

future expectations including the impacts of climate change. Assumptions vary depending on the

business the tested assets are in. Approved

actions towards Fortum’s climate targets are reflected

in the assumptions used in the impairment testing.

The discount rates reflect current assessments of the time value of money and relevant market

risk premiums specific to each cash generating unit, reflecting risks and uncertainties for which the

future cashflow estimates have not been adjusted.

Key assumptions used in impairment testing are presented below, as well as the basis for

determining the value of each assumption. Assumptions are based on internal and external data

that are consistent with observable market information, when applicable.

Key assumptions	Basis for determining the value for key assumptions
Power market development	Historical analysis and prospective forecasting
Regulation framework	Current market setup and regulation as well as expected development based on
	info given by regulators
Utilisation of power plants and	Past experience, technical assessment and forecasted market development
treatment facilities
Forecasted maintenance investments	Past experience, technical assessment and planned maintenance work
and refurbishments
Discount rate	Mostly market based information

Annual impairment testing

Annual impairment testing was performed as at 31 December 2023. The recoverable amounts of

the cash generating units were greater than their carrying values and therefore no impairments

were booked.

Fortum generally uses value in use to establish the recoverable amount of cash generating units

and this approach was applied in the impairment testing of Consumer Solutions, Heating and

Cooling Finland and Recycling and Waste cash generating units, whereas in Heating and Cooling

Poland the recoverable amount is defined using the fair value less cost of disposal approach.

Heating and Cooling Finland impairment testing includes the cash flows for Espoo Clean Heat

project for which the investment decision was made in June 2023. Espoo Clean Heat drives

decarbonisation and builds sustainable waste heat solutions in the Helsinki metropolitan area with a

target of coal-free district heat production by 2025 and carbon-neutrality before 2030. As part of a

collaboration project with Microsoft, Fortum will capture sustainable waste heat from their new data

centres and use in our district heating.

Fortum has two CHP plants in Poland; Czestochowa CHP plant that

uses coal and biomass as

an energy source and a multi-fuel Zabrze CHP plant that uses refuse-derived fuel (RDF) and coal.

Fortum targets to exit coal generation by the end of 2027. The detailed coal exit path for the Polish

energy generation has not been decided upon and thus the value in use cannot be defined.

100

Recoverable amount is defined based on fair value approach reflecting external market view and

Poland’s current country

-level target of coal generation exit.

See allocation of goodwill to cash-generating units in



Note 16

Intangible assets. See also



Note 2

Critical accounting estimates and judgements.

The pre-tax discount rates used in impairment testing by cash generating units were as follows:

Discount rate %	2023	2022
Consumer Solutions	10.8	7.6-9.8
Heating and Cooling Finland	7.9	N/A
Heating and Cooling Poland	12.1	N/A
Recycling and Waste	9.3	N/A

The Group has considered the sensitivity of key assumptions as part of the impairment testing for

goodwill and indefinite-lived intangible assets. When doing this, any consequential effect of the

change on the other variables has also been considered. The calculations are most sensitive to

changes in estimated future EBITDA levels, and changes in discount rate. Management estimates

that no reasonably possible change in the discount rate used, or in future earnings would cause the

carrying amount to exceed its recoverable amount.

Impairment of the Russian assets in discontinued operations

Fortum’s Russian assets were written down in two stages in 2022 and 2023 following the war in

Ukraine, the consequential geopolitical tensions and seizure of the Russian assets.

As a result of the Presidential decree (No. 302) issued by Russia on 25 April 2023 and the

seizure of Fortum’s Russian assets, the company lost control of its Russian operations. Following

the loss of control, the remaining Russian

assets were fully written down in Fortum’s 2023

financials, resulting in a loss of EUR 1.7 billion in discontinued operations.

Total impairment charges in 2022 for the Russia cash generating unit amounted to EUR 1.7 million.

See also



Note 2

Critical accounting estimates and judgements.

20 Other non-current assets

EUR million	2023	2022
Other investments	123	543
Interest-free receivables	78	85
BS Total	201	628

Other investments includes shares in unlisted companies. The comparison period 31 December

2022 also includes 1.3 GW portfolio of wind projects located in Russia.

Interest-free receivables mainly include prepaid expenses.

21 Interest-bearing receivables

EUR million	2023	2022
Interest-bearing receivables	1,033	1,281
Finance lease receivables	-	3
Total	1,033	1,284

	2023		2022
	Carrying	Fair	Carrying	Fair
EUR million	amount	value 1)	amount	value
Long-term loan receivables from associates and joint ventures	644	670	593	612
Other long-term interest-bearing receivables	0	-	31	31
Total long-term interest-bearing receivables	644	670	624	643
Collateral arrangement	325	325	527	527
Other short-term interest-bearing receivables	64	64	130	130
Total short-term interest-bearing receivables	389	389	657	657
Total	1,033	1,059	1,281	1,301

1) Fair values do not include accrued interest.

Changes in interest-bearing receivables from 31 December 2022 include EUR 33 million from the

deconsolidation of Russian operations in April 2023.

Long-term interest-bearing receivables include receivables from associated companies and joint

ventures of EUR 644 million (2022: 593). These receivables include EUR 546 million from Swedish

nuclear companies, Forsmarks Kraftgrupp AB and OKG AB (2022: 498), which are mainly funded

with shareholder loans, pro-rata to each sh

areholder’s ownership.

Other short-term interest-bearing receivables include EUR 51 million collateral for default fund. In

2023 the cash

collateral in Nasdaq default fund was replaced by securities included in Fortum’s

collateral arrangement to the Nordic Power Exchange. See



Note 26

Interest-bearing liabilities.

101

22 Inventories

ACCOUNTING POLICIES

Inventories are stated at the lower of cost and net realisable value being the estimated selling

price for the end product, less applicable variable selling expenses and other production costs.

Cost is generally determined using the weighted average cost method.

EMISSION ALLOWANCES AND GREEN CERTIFICATES

Inventories include CO

emission allowances for covering emissions caused by power and heat

production and green certificates. Green certificates arise from national quota obligations schemes

to support renewable energy production and schemes to prove the origin of electricity production.

Fortum receives the green certificates for the renewable energy generation in Generation

segment, but also has quota obligations arising from the retail electricity sales in Consumer

Solutions segment to return electricity certificates. CO

emission allowances and green certificates

received free of charge are accounted at nominal value. Purchases of CO

emissions allowances

and green certificates

meeting the IFRS 9 “own use”

-criteria, are accounted for at contracted

purchase price. Purchases of CO

emission allowances and green certificates, which have failed

o meet the “own use” –

criteria, and are thus accounted for as derivatives and are recognised at

market price applicable at the time of delivery.

emission costs and green certificate quota obligations are settled by returning the emission

allowances and green certificates. The obligation for these are presented in Other payables, see



Note 32

Trade and other payables. To the extent that the Group already holds CO2 allowances and

green certificates, the obligation is measured at the carrying amount of those. Any deficit to cover the

settlement obligation is valued at the current market value of CO2 allowances and green certificates.

The emission and quota obligation costs are recognised in the consolidated income statement

within materials and services.

EUR million	2023	2022
Raw materials and supplies	256	298
Emission rights and green certificates	83	112
Other	114	55
BS Total	452	465

Raw materials and supplies mainly consist of fuels consumed in the production process, or in the

rendering of services; and include, in particular, uranium, nuclear fuel rods and coal. Other mainly

consists of work in progress and finished goods.

23 Trade and other receivables

ACCOUNTING POLICIES

Trade receivables include revenue based on an estimate of electricity, gas, heat and cooling

already delivered but not yet measured and not yet invoiced.

Impairment losses for trade receivables are calculated according to the expected credit loss

(ECL) model. Loss allowances on trade receivables are measured at an amount equal to lifetime

expected credit losses.

An allowance is made on the balance sheet for the expected future credit losses and remains

on the balance sheet until it is written off as a credit loss or reversed. Allowances may remain on

the balance sheet for several years pending the outcome of collection processes and court

proceedings. Write-off policies differ by country depending on local legislation and assessment of

recovery possibilities. For large trade receivables, ECL is calculated for the individual customer

based on the estimated probability of default and expected recovery rate for the customer. These

estimates are derived from available market data when possible, or based on the customer’s

rating. Adjustments are made if there are indications of decreased creditworthiness, e.g. based on

payment behaviour. ECL for trade receivables from small customers are calculated on portfolio

basis by country and business segment. The credit loss allowances are based on historical

analysis of losses when possible, or on average default rates for customers based on externally

available information. These rates are adjusted if there are any forward-looking indicators showing

changes in expected credit losses. Trade receivables overdue more than 180 days are generally

considered to be credit-impaired and allowances are made for the full amount, adjusted for

expected recovery rates.

EUR million	2023	2022
Trade receivables	1,120	1,625
Accrued income and prepaid expenses	72	30
Other	95	112
BS Total	1,286	1,767

Change in trade receivables from 31 December 2022 includes impact from the deconsolidation of

Russian operations in April 2023. Other category includes mainly other current interest free receivables.

102

Trade receivables

Ageing analysis of trade receivables

		2023			2022
		Expected	Expected		Expected	Expected
		credit	credit		credit	credit
		loss	loss rate,		loss	loss rate,
EUR million	Gross allowance		%	Gross allowance		%
Not past due	1,066	12	1	1,541	3	-
Past due 1-30 days	56	2	4	70	3	4
Past due 31-90 days	6	2	33	9	2	22
Past due 91-180 days	3	3	100	6	3	50
Past due more than 181 days	33	25	76	77	67	87
Total	1,164	44	4	1,703	78	5

Changes in expected credit loss allowance

EUR million	2023	2022
1 January	78	198
Expected credit loss allowance recognised during the year	14	78
Deconsolidation of subsidiary companies	-38	-168
Write-offs	-2	-39
Translation differences and other changes	-7	9
31 December	44	78

Trade receivables by currency (Gross)

EUR million	2023	2022
EUR	401	461
SEK	257	406
NOK	215	456
PLN	278	207
RUB	-	163
Other	13	10
Total	1,164	1,703

Trade receivables are arising from a large number of customers mainly in EUR, PLN and SEK

mitigating the concentration of risk.

For further information regarding credit risk management and credit risks, see



Counterparty

and credit risks

in the Operating and financial review and



Note 4.4

Credit risk.

24 Liquid funds

ACCOUNTING POLICIES

Cash and cash equivalents in Liquid funds include cash in hand, deposits held at call with banks

and other short-term, highly liquid investments with original maturities of three months or less.

Cash and cash equivalents, deposits and commercial papers are measured at amortised cost.

Drawn amount of bank overdrafts are shown within borrowings in current liabilities on the

balance sheet. Trading-related cash collaterals are included in margin receivables and otherwise

restricted cash is treated as short-term interest-bearing receivables.

EUR million	2023	2022
Cash at bank and in hand	2,087	2,673
Deposits and securities with maturity under 3 months	2,096	1,098
Cash and cash equivalents	4,183	3,771
Deposits and commercial papers with maturity more than 3 months but less than 12 months	-	147
BS Total	4,183	3,919

Changes in liquid funds from 31 December 2022 include EUR 284 million from the deconsolidation

of Russian operations in April 2023.

At the end of the reporting period, the Group’s liquid funds totalled

EUR 4,183 million (2022:

3,919). Liquid funds totalling EUR 4,122 million (2022: 3,600) are placed with counterparties that

have an investment grade credit rating.

The average interest rate for the liquid funds was 3.9% at the balance sheet date (2022: 1.7%).

At the end of the reporting period, Fortum had undrawn committed credit facilities of EUR 3,200

million, including the Core revolving credit facility of EUR 2,400 million (maturity in June 2025 with

max. 2 years extension option by the lenders) and the EUR 800 million bilateral revolving credit

facility (maturity in June 2025 with 1 year extension option by the lender). In addition, Fortum has

EUR 100 million committed overdraft limits that are valid until further

For further information regarding credit risk management and credit risks, see



Note 4.4

Credit risk.

103

25 Share capital

	2023		2022
	Number of		Number of
EUR million	shares	Share capital	shares	Share capital
Registered shares at 1 January	897,264,465	3,046	888,294,465	3,046
Share issue to Solidium Oy	-	-	8,970,000	-
Registered shares at 31 December	897,264,465	3,046	897,264,465	3,046

Fortum Corporation has one class of shares. By the end of 2023, a total of 897,264,465 shares had

been issued. Each share entitles the holder to one vote at the Annual General Meeting. All shares

entitle holders to an equal dividend. At the end of 2023 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 Finnish State increased from 50.76% to 51.26%.

Fortum Co

rporation’s shares are listed on Nasdaq Helsinki. The trading code is FORTUM. Fortum

Corporation’s shares are in the Finnish book entry system maintained by Euroclear Finland Ltd.

Details on the President and CEO and other members of the Fortum Leadership

Team’s

shareholdings is presented in



Note 10

Employee benefits and Board remuneration.

25.1 Authorisations from the Annual General Meeting 2023

In 2023, the Annual General Meeting decided to authorise the Board of Directors to decide on the

repurchase an

d disposal of the company’s own shares up to a maximum number of 20,000,000

shares, which corresponded to approximately 2.23% of all the shares in the company. 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. These authorisations had not been used as per

6 February 2024.

25.2 Convertible bond loans and bonds with warrants

Fortum Corporation has not issued any convertible bonds or bonds with attached warrants, which

would entitle the bearer to subscribe for Fortum shares. The Board of Directors of Fortum

Corporation has no unused authorisations from the General Meeting of shareholders to issue

convertible bond loans or bonds with warrants or increase the company’s share capital.

26 Interest-bearing liabilities

Financial net debt

EUR million	2023	2022
+ Interest-bearing liabilities	5,909	7,785
- BS Liquid funds	4,183	3,919
- Collateral arrangement	325	527
- BS Margin receivables	590	2,607
+ BS Margin liabilities	131	352
+/- Net margin liabilities/receivables	-459	-2,255
Financial net debt	942	1,084

Interest-bearing liabilities of EUR 5,909

million includes Fortum’s collateral arrangement to the

Nordic Power Exchange totalling EUR 376 million (2022: 527). Equalling amount is included in

short-term interest-bearing receivables of which collateral relating to margin requirement EUR 325

million (2022: 527) is netted from the Financial net debt in the Collateral arrangement row. However

the collateral for default fund EUR 51 million is not netted from the Financial net debt. See



Note 21

Interest-bearing receivables.

Financial net debt excluding Russia at 31 December 2022 was EUR 1,127 million.

Interest-bearing liabilities

EUR million	2023	2022
Non-current loans	4,475	3,558
Current loans	1,316	4,108
Total loans	5,791	7,666
Non-current lease liabilities	97	100
Current lease liabilities	21	19
Total lease liabilities	118	119
Total	5,909	7,785

EUR million	2023	2022
Bonds	2,736	1,545
Loans from financial institutions	589	980
Reborrowing from the Finnish State Nuclear Waste Management Fund	951	918
Lease liabilities	97	100
Other long-term interest-bearing liabilities	200	115
BS Total long-term interest-bearing liabilities	4,573	3,658
Current portion of long-term bonds	0	1,090
Current portion of loans from financial institutions	717	539
Commercial paper liabilities	174	475
Current portion of lease liabilities	21	19
Collateral arrangement liability	376	527
Other short-term interest-bearing liabilities	50	1,477
BS Total short-term interest-bearing liabilities	1,337	4,127
Total	5,909	7,785

104

Loans

			Repricing
	Effective	Carrying				Fair	Carrying	Fair
	interest	amount	Under	1 – 5	Over	value	amount	value
EUR million	rate, %	2023	1 year	years	5 years	2023 4)	2022	2022
Bonds	3.0	2,736	-	1,234	1,502	2,729	2,634	2,569
Loans from financial institutions	5.3	1,306	1,306	-	-	1,314	1,519	1,545
Reborrowing from the Finnish
State Nuclear Waste
Management Fund 1)	4.3	951	951	-	-	952	918	938
Other long-term loans	5.8	200	166	-	34	199	115	126

Total long-term loans 2)	3.9	5,192	2,423	1,234	1,536	5,194	5,187	5,178
Collateral arrangement liability	2.8	376	376	-	-	376	527	527
Commercial paper liabilities	4.4	174	174	-	-	174	475	475
Other short-term loans	3.9	50	50	-	-	50	1,477	1,477
Total short-term loans	3.4	599	599	-	-	599	2,479	2,479
Total 3)	3.9	5,791	3,022	1,234	1,536	5,793	7,666	7,657

1) The reborrowing from the Finnish State Nuclear Waste Management Fund includes the part relating to Loviisa nuclear power plant as well

as borrowing done through TVO.

2) Includes current portion of long-term loans of EUR 717 million (2022: 1,629).

3) The average interest rate on loans and derivatives was 4.3% (2022, excluding Russia: 3.7%).

4) Fair values do not include accrued interest.

Changes in interest-bearing liabilities from 31 December 2022 include EUR 178 million from the

deconsolidation of Russian operations in April 2023.

In January 2023, Fortum repaid the drawn amount EUR 600 million of its Liquidity revolving credit

facility. In February 2023, EUR 1,000 million maturing bond was repaid. In March 2023, Fortum

repaid the drawn amount of EUR 350 million and cancelled the entire EUR 2,350 million Finnish

State bridge loan facility. Nuclear waste fund loans are in total EUR 951 million after the drawdown

of EUR 33 million.

In May 2023, Fortum issued a dual-tranche bond with a five-year tranche of EUR 500 million and

a ten-year tranche of EUR 650 million. Fortum repaid the final drawn amount of EUR 500 million of

its Liquidity revolving credit facility in May 2023 and the SEK 1,000 million bond in June 2023.

In June 2023, Fortum cancelled EUR 2,100 million of the total EUR 3,100 million Liquidity revolving

credit facility, and the six-month extension option was used for the remaining facility of EUR 1,000

million with new maturity in December 2023 with a six-month extension option by Fortum.

In June 2023, Fortum renewed its maturing drawn bullet loan of EUR 500 million with a new

maturity date in February 2025. Undrawn bilateral revolving credit facility of EUR 800 million

maturing in December 2023 was renewed with new maturity date in June 2025 with a one-year

extension option by the lender.

In December 2023, the Liquidity revolving credit facility of EUR 1,000 million matured, as Fortum

did not use the six-month extension option. Additionally, for the EUR 500 million bullet loan a one-

year borrowers’ extension option was agreed

Current loans, EUR 1,316 million (2022: 4,108), include the current portion of long-term loans,

EUR 717 million (2022: 1,629), and short-term loans EUR 599 million (2022: 2,479).

Current portion of long-term loans, EUR 717 million, consist of maturing loans from financial

institutions.

Short-term loans, EUR 599 million, include EUR 418 million collateral arrangements and use of

commercial paper programmes of EUR 174 million.

The average interest rate for the portfolio of EUR loans was 4.0% at the balance sheet date

(2022: 3.1%). The average interest rate on total loans and derivatives was 4.3% at the balance

sheet date (2022, excluding Russia: 3.7%).

For more information, see



Note 4

Financial risk management,



Note 33

Leases,



Note 35

Pledged assets and contingent liabilities and



Note 37

Related party transactions.

105

Reconciliation of interest-bearing liabilities

					Non-cash changes
					Valuation
		Deconsolidation of			differences/
		subsidiary	Cash flow from	Non-cash collateral	Change in
EUR million	1 Jan 2023	companies	financing activities 1)	arrangement	consolidation	Lease liabilities	31 Dec 2023
Bonds	2,634		58		43		2,736
Reborrowing from the Finnish State Nuclear Waste Management Fund	918		33				951
Financial and other interest-bearing liabilities	4,113	-173	-1,705	-152	22		2,105
Lease liabilities	119	-5	-20			23	118
Total	7,785	-178	-1,634	-152	65	23	5,909

					Non-cash changes
EUR million	1 Jan 2022	Deconsolidation of subsidiary companies	Cash flow from financing activities 1)	Non-cash collateral arrangement	Valuation differences/ Change in consolidation	Lease liabilities	31 Dec 2022
Bonds	3,705		-1,000		-71		2,634
Reborrowing from the Finnish State Nuclear Waste Management Fund	1,165		-247				918
Financial and other interest-bearing liabilities	11,274	-19,723	9,672	-21	2,910		4,113
Lease liabilities	1,075	-874	-104			22	119
Total	17,220	-20,597	8,320	-21	2,840	22	7,785

1) Repayments and borrowings from continuing and discontinued operations.

Bond issues

						Carrying
					Nominal	amount
	Interest	Interest	Effective		value	EUR
Issued/Maturity	basis	rate, %	interest, %	Currency	million	million
Fortum Corporation EUR 8,000 million EMTN Programme 1)
2019/2026	Fixed	1.625	1.638	EUR	750	730
2023/2028	Fixed	4.000	4.078	EUR	500	504
2019/2029	Fixed	2.125	2.247	EUR	750	742
2023/2033	Fixed	4.500	4.537	EUR	650	663
2013/2043	Fixed	3.500	3.719	EUR	100	97
Total carrying amount 31 December 2023						2,736

1) EMTN = Euro Medium Term Note

106

27 Income taxes on the balance sheet

ACCOUNTING POLICIES

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit

as reported in the consolidated income statement, because of items of income or expense that are

taxable or deductible in other

years and items that are never taxable or deductible. The Group’

liability for current tax is calculated using tax rates that have been enacted or substantively

enacted by the end of the reporting period.

Deferred tax is provided in full, using the balance sheet approach on temporary differences

arising between the tax bases of assets and liabilities and their carrying amounts in the

consolidated financial statements. However, if the deferred tax arises from initial recognition of an

asset or liability in a transaction other than a business combination that at the time of the

transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred

tax is determined using tax rates (and laws) that have been enacted or substantially enacted by

the closing date and are expected to apply when the related deferred tax asset is realised or the

deferred tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be

available against which the temporary differences can be utilised. Deferred tax assets are set off

against deferred tax liabilities if they relate to income taxes levied by the same taxation authority.

Deferred tax is provided on temporary differences arising from investments in subsidiaries,

associates and joint ventures, except where the timing of the reversal of the temporary difference

is controlled by the Group, and it is probable that the temporary difference will not be reversed in

the foreseeable future.

The Group recognises liabilities for anticipated tax dispute issues based on estimates of whether

additional taxes will be due. No provision will be recognised in the financial statements if Fortum

considers the claims unjustifiable. Therefore, if taxes regarding ongoing tax disputes have to be paid

before final court decisions, they are booked as a receivable. Where the final outcome of these

matters is different from the amounts that were initially recorded, such differences will impact the

income tax and deferred tax provisions in the period in which such determination is made.

The Group applies the mandatory exception to the recognition and disclosure of deferred taxes

arising from the jurisdictional implementation of the Pillar Two model rules.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS: ASSUMPTIONS AND

ESTIMATES REGARDING FUTURE TAX CONSEQUENCES

Fortum has deferred tax assets and liabilities which are expected to be realised through the

income statement over the extended periods of time in the future. In calculating the deferred tax

items, Fortum is required to make certain assumptions and estimates regarding the future tax

consequences attributable to differences between the carrying amounts of assets and liabilities as

recorded in the financial statements and their tax basis.

Assumptions made include the expectation that future operating performance for subsidiaries will

be consistent with historical levels of operating results, recoverability periods for tax loss carry-

forwards will not change, and that existing tax laws and rates will remain unchanged into foreseeable

future. Fortum believes that it has prudent assumptions in developing its deferred tax balances.

Fortum continually evaluates the probability of utilising deferred tax assets and considers

various factors that, in addition to the actual and planned earnings of the past, take into account

medium-term and long-term planning. The basis for recognising deferred tax assets is an estimate

by management of the extent to which it is probable that there will be sufficient taxable profit in the

foreseeable future against which the unused tax losses, tax credits and deductible temporary

differences can be offset.

Assumptions and estimates regarding main uncertain tax positions are supported by external

legal counsel or expert opinion.

If the actual final

outcome (regarding tax disputes) would differ negatively from management’s

estimates with 10%, the Group would need to increase the income tax liability by EUR 4 million at

31 December 2023.

27.1 Deferred taxes on the balance sheet

		2023			2022
EUR million	1 Jan	Change	31 Dec	1 Jan	Change	31 Dec
BS Deferred tax assets	933	24	958	2,149	-1,215	933
BS Deferred tax liabilities	-152	-276	-428	-827	676	-152
Net deferred taxes	782	-252	530	1,321	-539	782

Deferred tax assets are recognised to the extent it is probable that future taxable profit will be

available against which the unused tax losses, unused tax credits and deductible temporary

differences can be utilised in the relevant jurisdictions. As of 31 December 2023, Fortum has

recognised deferred tax assets of EUR 958 million (2022: EUR 933 million).

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to

offset current tax assets against current tax liabilities and when the deferred income taxes relate to

the same fiscal authority.

107

Movement in deferred tax assets and liabilities 2023

		Property, plant and				Tax losses and
		equipment and			Derivative financial	interest carry-
EUR million	Intangible assets	right-of-use assets	Pension obligations	Provisions	instruments	forward	Other	Net deferred taxes
1 January 2023	-54	-530	-3	-19	589	753	46	782
Charged to income statement	0	7	0	9	-15	202	64	266
Charged to other comprehensive income	-	-	2	-	-475	-	-	-474
Exchange rate differences, reclassifications and other changes	-6	10	0	-1	-9	-39	-6	-51
Acquisitions and disposals 1)	-2	61	-1	-2	0	0	-51	6
31 December 2023	-61	-452	-2	-12	90	915	52	530

1) Disposals of subsidiary companies in 2023 included EUR 10 million from the deconsolidation of Russian operations in April 2023. See



Note 3.3

Discontinued operations.

Movement in deferred tax assets and liabilities 2022

		Property, plant and				Tax losses and
		equipment and			Derivative financial	interest carry-
EUR million	Intangible assets	right-of-use assets	Pension obligations	Provisions	instruments	forward	Other	Net deferred taxes
1 January 2022	-200	-1,551	268	1,658	1,476	146	-476	1,321
Charged to income statement	-15	275	-16	5,869	29	704	213	7,061
Charged to other comprehensive income	-	-	-33	-	248	-	-	215
Exchange rate differences, reclassifications and other changes	5	-85	-144	-38	-39	-9	40	-269
Disposals 1)	156	830	-77	-7,509	-1,126	-89	269	-7,546
31 December 2022	-54	-530	-3	-19	589	753	46	782

1) Disposals of subsidiary companies in 2022 included EUR 7 595 million from the deconsolidation of Uniper as of 30 September 2022. See



Note 3.3

Discontinued operations.

Changes during the year include Russia until 31 March 2023 and Uniper until 30 September 2022. Charges to income statement regarding Russia is presented in the results from discontinued operations. See



Note 3.3

Discontinued operations.

Net change in deferred taxes during the year 2023 is mainly due to decrease in deferred tax assets related to derivatives caused by high commodity market prices in 2022 and price decrease in 2023. The increase in

deferred tax assets on tax loss carry forward is mainly in Ireland and caused by Russia related impairments. Fortum has prepared a comprehensive forecast to assess the future profitability of the Irish legal entity holding

the loss carried forward, and has relied on this estimate to support the value of the deferred tax asset of EUR 829 million at 31 December 2023.

108

Expiry of tax losses and interest carried forward and recognised deferred tax

assets

	2023		2022
	Tax	Deferred	Tax	Deferred
EUR million	losses	tax asset	losses	tax asset
Tax losses carried forward without expiration date 1)	6,724	852	5,836	749
Tax losses carried forward with expiration date	12	2	9	2
Total	6,735	855	5,844	751
Interest carried forward without expiration date	97	24	-	-
Interest carried forward with expiration date	175	36	9	2
Total	272	61	10	2

1) Majority relates to Ireland.

Deferred tax assets are recognised for tax losses carried forward and interest carried forward to the

extent that realisation of the related tax benefit through future profits is probable. The increase in tax

losses carried forward is mainly in Ireland related to impacts caused by Russia related impairments.

The increase in interest carried forwards is mainly due to increase in interest rates on loans as well

as Russia related impairments.

Unrecognised deferred tax

The amount of temporary differences, tax losses carried forward, interest carried forward, and tax

credits for which no deferred tax asset was recognised due to uncertainty of utilisation:

EUR million	2023	2022
Temporary differences	1,129	280
Tax losses carried forward	140	108
Interest carried forward	97	-
Tax credits	5	5
Total	1,371	393

The increase of unrecognised amount in temporary differences was mainly caused by following

transactions: in Finland EUR 475 million was related to the write down of Russian shares and in the

Netherlands EUR 650 million was due to Russia related loan impairments. The increase of

unrecognised amount in interest carried forward is mainly due to Russia related loan impairments in

the Netherlands.

Deferred tax liabilities were not recognised on temporary differences of EUR 23 million (2022:

476) relating to investments in subsidiaries as Fortum can control the reversal effect, and it is

probable that temporary differences will not be reversed in the foreseeable future. The decrease in

temporary differences was mainly related to deconsolidation of Russian operations in April 2023.

27.2 Income tax receivables

EUR million	2023	2022
Belgium	36	36
Other	23	35
BS Total	59	71

Income tax receivable in Belgium relates to ongoing tax disputes on income tax assessments for

the year 2008. See



Note 36

Legal actions and official proceedings.

Other income tax receivables reflect corporate income taxes paid mainly in relation to the

financial year, as well as payments according to received tax audit assessments in relation to

previous years.

109

28 Nuclear-related assets and liabilities

ACCOUNTING POLICIES

Fortum owns Loviisa nuclear power plant in Finland. In Fortum's consolidated balance sheet,

Share in the State Nuclear Waste Management Fund and the Nuclear provisions relate to Loviisa

nuclear power plant. Fortum’s share in the State Nuclear Waste Managem

ent Fund is accounted

for according to IFRIC 5, Rights to interests arising from decommissioning, restoration and

environmental rehabilitation funds which states that the fund assets are measured at the lower of

fair value or the value of the related liabilities since Fortum does not have control or joint control

over the State Nuclear Waste Management Fund. The Nuclear Waste Management Fund is

managed by governmental authorities. The related provisions are the provision for

decommissioning and the provision for disposal of spent fuel.

The fair values of the provisions are calculated according to IAS 37 by discounting the separate

future cash flows, which are based on estimated future costs and actions already taken. The initial

net present value of the provision for decommissioning (at the time of commissioning the nuclear

power plant) has been included in the investment cost and is depreciated over the estimated

operating time of the nuclear power plant. Changes in the technical plans etc., which have an

impact on the future cash flow of the estimated costs for decommissioning, are accounted for by

discounting the additional costs to the current point in time. The increased asset retirement cost

due to the increased provision for decommissioning is added to property, plant and equipment and

depreciated over the remaining estimated operating time of the nuclear power plant. For power

plant units taken from use the increase is recognised immediately in the income statement.

The provision for spent fuel covers the future disposal costs for fuel used until the end of the

accounting period. Costs for disposal of spent fuel are expensed during the operating time based

on fuel usage. The impact of the possible changes in the estimated future cash flow for related

costs is recognised immediately in the income statement based on the accumulated amount of

fuel used until the end of the accounting period. The related interest costs due to unwinding of the

provision is recognised in other financial items - net.

The interest income and possible fair valuation effects on the State Nuclear Waste Management

Fund assets are presented in other financial items - net.

Fortum's actual share of the State Nuclear Waste Management Fund, related to Loviisa nuclear

power plant, is higher than the carrying value of the Fund on the balance sheet. The legal nuclear

liability should, according to the Finnish Nuclear Energy Act, be fully covered by payments and

guarantees to the State Nuclear Waste Management Fund. The legal liability is not discounted

while the provisions are, and since the future cash flow is spread over a very long time horison,

the difference between the legal liability and the provisions are material.

The annual fee to the Fund is based on changes in the legal liability, the return generated in the

State Nuclear Waste Management Fund and incurred costs of taken actions.

Fortum also has minority interests in other nuclear power companies, i.e. Teollisuuden Voima

Oyj (TVO) in Finland and OKG Aktiebolag (OKG) and Forsmarks Kraftgrupp AB (Forsmark) in

Sweden. The minority shareholdings are classified as associated companies and joint ventures

and are consolidated with equity method. Both the Finnish and the Swedish companies are non-

profit making, i.e. electricity production is invoiced to the owners at cost according to local GAAP.

Accounting policies of the associates regarding nuclear-related assets and liabilities have been

changed where necessary to ensure consistency with the policies adopted by the Group.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS: ASSUMPTIONS MADE

WHEN ESTIMATING PROVISIONS RELATED TO NUCLEAR PRODUCTION

The provision for future obligations for nuclear waste management including decommissioning of

Fortum's nuclear power plants and related spent fuel is based on long-term cash flow forecasts of

estimated future costs. The main assumptions are technical plans, timing, cost estimates and discount

rate. The technical plans, timing and cost estimates are approved by governmental authorities.

Any changes in the assumed discount rate would affect the provision. If the discount rate used

would be lowered, the provision would increase. For the power plants where the actual Share of

the State Nuclear Waste Management Fund is higher than the provision an increase in provisions

would be offset by an increase in the recorded share of Fortum's part of the State Nuclear Waste

Management Fund on the balance sheet. The total effect on the income statement would be

positive since the decommissioning part of the provision is treated as an asset retirement

obligation. This situation will prevail as long as the actual Share of the State Nuclear Waste

Management Fund is higher than recognised in the balance sheet and IFRS is limiting the carrying

value of the assets to the amount of the provision since Fortum does not have control or joint

control over the fund.

Both in Finland and in Sweden nuclear operators are legally obligated for the decommissioning of

the plants and the disposal of spent fuel (nuclear waste management). In both countries the nuclear

operators are obligated to secure the funding of nuclear waste management by paying to

government operated nuclear waste funds. The nuclear operators also have to give securities to

guarantee that sufficient funds exist to cover future expenses of decommissioning of the power plant

and the disposal of spent fuel.

28.1 Nuclear-related assets and liabilities for consolidated nuclear

power plants

EUR million	2023	2022
Carrying values on the balance sheet
BS Nuclear provisions	1,058	966
BS Fortum's share in the State Nuclear Waste Management Fund	1,058	966
Fortum's share of the fair value of the net assets in the State Nuclear Waste Management Fund	1,197	1,148
Share of fund not recognised on the balance sheet	139	182

Nuclear provision and fund accounted according to IFRS

Nuclear provisions include the provision for decommissioning and the provision for disposal of spent

fuel. The carrying value of the nuclear provisions, calculated according to IAS 37, increased by EUR

92 million compared to 31 December 2022, totalling EUR 1,058 million at 31 December 2023. The

change is mainly due to the Loviisa lifetime extension and updates in Posiva’s project budget.

110

Fortum's share of the State Nuclear Waste Management Fund is from an IFRS perspective

overfunded by EUR 139 million, since Fortum's share of the Fund on 31 December 2023 was EUR

1,197 million and the carrying value on the balance sheet was EUR 1,058 million. The Fund on

Fortum's balance sheet can at maximum be equal to the amount of the provisions according to

IFRS. As long as the Fund is overfunded from an IFRS perspective, the other financial items - net,

is adjusted positively if the provisions increase more than the Fund, and negatively if the provision

decreases below the actual value of the fund.

Legal liability for Loviisa nuclear power plant

The legal liability on 31 December 2023, decided by the Ministry of Economic Affairs and

Employment in December 2023, was EUR 1,253 million.

The legal liability is based on a cost estimate, which is updated every year; and a technical plan,

which is updated every three years. The legal liability is determined by assuming that the

decommissioning would start at the beginning of the year following the assessment year and

discounting is not applied in determining the amount.

Fortum’s share in the Finnish Nuclear Waste

Management Fund

According to Nuclear Energy Act, Fortum is obligated to contribute funds in full to the State Nuclear

Waste Management Fund to cover the legal liability. Fortum contributes funds to the Finnish State

Nuclear Waste Management Fund based on the yearly funding obligation target decided by the

governmental authorities in connection with the decision of size of the legal liability. The current

funding obligation target decided in December 2023 is EUR 1,253 million.

Nuclear provisions

EUR million	2023	2022
1 January	966	3,891
Increase in provisions	69	40
Provision used	-41	-145
Provision reversed	-	-16
Unwinding of discount	63	65
Exchange rate differences	-	-173
Disposal of subsidiary companies 1)	-	-2,696
BS 31 December	1,058	966
BS Fortum's share in the State Nuclear Waste Management Fund	1,058	966

1) See



Note 3

Acquisitions, disposals and discontinued operations.

Borrowing from the State Nuclear Waste Management Fund

Participants in the Finnish State Nuclear Waste Management Fund are allowed to borrow from the

fund according to certain rules. Fortum uses the right to borrow back and has pledged shares in

Kemijoki Oy as security for the loans. The loans are renewed yearly. See



Note 26

Interest-bearing

liabilities and



Note 35

Pledged assets and contingent liabilities.

28.2 Nuclear power plants in associated companies and joint ventures

OKG, Forsmark and TVO are non-profit making companies, i.e. electricity production is invoiced to

the owners at cost. Invoiced cost is accounted for according to local GAAP. In addition to the

invoiced electricity production cost, Fortum makes IFRS adjustments to comply with Fortum's

accounting principles. These adjustments include also Fortum's share of the companies' nuclear

waste funds and nuclear provisions.

The tables below present the 100% figures relating to nuclear funds and provisions for the

companies as well as Fortum's net share.

TVO's total nuclear related assets and liabilities (100%)

EUR million	2023	2022
Carrying values in TVO with Fortum assumptions
Nuclear provisions	1,614	1,620
TVO's share of the State Nuclear Waste Management Fund	1,199	1,157
Net amount	-415	-463
of which Fortum's net share consolidated with equity method	-104	-116
TVO's legal liability and actual share of the State Nuclear Waste Management Fund
Liability for nuclear waste management according to the Nuclear Energy Act	1,918	1,840
Share in the State Nuclear Waste Management Fund	1,458	1,436
Share of the fund not recognised on the balance sheet	259	279

TVO's legal liability, provision and share of the fund are based on the same principles as described

above for Loviisa nuclear power plant. The liabilities and shares in the Fund are calculated and

recorded separately for OL1/OL2 plant units and OL3 plant unit, as the corresponding total cost

estimates are prepared separately. Commercial operation for OL3 started on 1 May 2023. This meant,

among other things, that capitalisation of project costs was stopped and amortisation was started.

The difference between TVO's share in the State Nuclear Waste Management Fund and the

carrying value of the TVO's share in the Fund is due to IFRIC 5, which requires that the carrying

amount of the share in the State Nuclear Waste Management Fund is the lower of fair value or the

value of the related liability. On 31 December 2023 the OL1/OL2 plant units' share in the Fund is

higher than the provision according to IFRS. The OL3 plant unit's share in the Fund is on the other

hand lower than the provision according to IFRS. TVO's share of the Finnish State Nuclear Waste

Management Fund is from an IFRS perspective overfunded by EUR 259 million (of which Fortum's

share is EUR 69 million), since TVO's share of the Fund on 31 December 2023 was EUR 1,458

million and the carrying value on the consolidated balance sheet with Fortum assumptions was

EUR 1,199 million.

Participants in the Finnish State Nuclear Waste Management Fund are allowed to borrow from

the fund according to certain rules. Fortum is using the right to reborrow funds through TVO based

on its ownership. See more information in



Note 26

Interest-bearing liabilities.

111

OKG’s and Forsmark’s total nuclear

related assets and liabilities (100%)

EUR million	2023	2022
OKG's and Forsmark's nuclear-related assets and liabilities with Fortum assumptions
Nuclear provisions	5,001	4,641
Share in the State Nuclear Waste Management Fund	3,506	3,200
Net amount	-1,495	-1,441
of which Fortum's net share consolidated with equity method	-472	-456

In Sweden, Svensk Kärnbränslehantering AB (SKB), a company owned by the nuclear operators,

takes care of all nuclear waste management-related activities on behalf of nuclear operators.

SKB receives its funding from the Swedish Nuclear Waste Fund, which in turn is financed by the

nuclear operators.

Nuclear waste fees and guarantees are normally updated every three years by governmental

decision after a proposal from the Swedish Radiation Safety Authority (SSM). The proposal is

based on cost estimates done by SKB and the license holders. An updated technical plan for

nuclear waste management was decided by SKB in December 2022. In January 2022, the Swedish

government decided the waste fees and guarantees for 2022

–

2023. In December 2023, the

Swedish Government decided on nuclear waste fees and guarantees in accordance with the

proposal from the National Debt Office, but for the year 2024 only. Nuclear waste fees paid by

licensees with a unit/units that are still in operation are currently based on future costs with the

assumed lifetime of 50 years for each unit of a nuclear power plant. The fee is calculated in relation

to the energy delivered and set as an amount of öre (1 öre = SEK 0.01) per kWh delivered.

Nuclear-related guarantees

In addition to nuclear waste fees nuclear power companies provide guarantees for any uncovered

liability and unexpected events.

For more information regarding Fortum's guarantees given on behalf of nuclear companies, see



Note 35

Pledged assets and contingent liabilities.

29 Other provisions

ACCOUNTING POLICIES

Provisions are recognised when the Group has a present legal or constructive obligation to a third

party as a result of past events, it is probable that an outflow of resources will be required to settle

the obligation and the amount can be reliably estimated.

Provisions are measured at the present value of the expenditures expected to be required to

settle the obligation at the reporting date using a discount rate that reflects current market

assessment of the time value of money. When risk is not covered in the estimated cash flows, the

discount rate also includes the risks specific to the obligation.

Increase in the provision due to the passage of time and changes in provisions due to changes

in discount rates are recognised as interest expense in the consolidated income statement.

Changes in provisions, except for changes in asset retirement obligations, are recognised in the

consolidated income statement.

ASSET RETIREMENT OBLIGATIONS

Asset retirement obligations for the decommissioning or dismantling of property, plant and equipment

are recognised either when there is a contractual obligation towards a third party or a legal obligation.

The obligation is generally based on detailed cost estimates validated by external experts.

The asset retirement obligation is recognised as part of the cost of an item of property, plant and

equipment when the asset is put in service. Costs are depreciated over the remainder of the asset's

useful life. Changes in asset retirement obligations are recognised in property, plant and equipment

on the consolidated balance sheet; unless the item of property, plant and equipment has already

been fully depreciated when changes are recognised in the consolidated income statement.

ENVIRONMENTAL PROVISIONS

Environmental provisions are recognised based on the current interpretation of environmental

laws and regulations when it is probable that a present obligation has arisen, and the amount of

such liability can be reliably estimated. The obligation is generally based on detailed cost

estimates validated by external experts.

112

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS: ASSUMPTIONS MADE

WHEN ESTIMATING PROVISIONS

Provisions for present obligations require management judgment in determining whether it is

probable that an outflow of economic benefits will be required to settle the obligation. Estimation is

required in determining the value of the obligation as the amount recognised as a provision is

based on the best estimate of unavoidable costs required to settle the obligation at the end of the

reporting period. When estimating unavoidable costs, management may be required to consider a

range of possible outcomes and their associated probabilities, risks and uncertainties surrounding

the events and circumstances, as well as making assumptions of the timing of payment.

Estimation is also required in determining the rate used to discount provisions to present value.

Changes in estimates of timing or amounts of costs required to settle the obligation may become

necessary as time passes and/or more accurate information becomes available.

		Environmental
	Asset	remediation and
EUR million	retirement	similar	Other	Total
1 January 2023	19	41	70	130
Increase in provisions	3	4	13	20
Provisions used	-	-4	-1	-5
Unused provisions reversed	-	-	-6	-6
Exchange rate differences and other changes	-	-4	-	-3
Deconsolidation of subsidiary companies	-	-9	-	-9
31 December 2023	23	28	76	127
BS Of which current provisions	-	-	2	2
BS Of which non-current provisions	23	28	75	125

Provisions for asset retirement obligations consist of obligations for conventional and renewable

energy power plants. The majority of the provision is estimated to be used within 5

–

10 years.

Environmental provisions mainly include provisions for redevelopment and water protection

measures, the rehabilitation of contaminated sites, and other environmental improvement

measures. The majority of the provision is estimated to be used within 10

–

15 years.

For provisions for decommissioning, and provision for disposal of spent fuel for nuclear

production, see



Note 28

Nuclear-related assets and liabilities.

30 Pension obligations

ACCOUNTING POLICIES

The Group companies have various pension schemes in accordance with the local conditions and

practices in the countries in which they operate. The schemes are generally funded through

payments to insurance companies or pension fund. The Group has both defined benefit and

defined contribution plans.

For defined benefit plans, pension costs are assessed using the projected unit credit method.

The cost of providing pensions is charged to the income statement as to spread the service cost

over the service lives of employees. Current and past service cost, as well as gains or losses from

settlements are reported under personnel costs. The net interest is reported in financial items.

The defined benefit obligation is calculated annually on the balance sheet date and is

measured as the present value of the estimated future cash flows using interest rates of high-

quality corporate bonds, or similar, that have terms to maturity approximating to the terms of the

related pension liability. The plan assets for pensions are valued at market value. The net liability

recognised on the balance sheet is the defined benefit obligation at the closing date less the fair

value of plan assets.

Any net asset position that might arise from offsetting the present value of the defined benefit

obligations against the corresponding fair value of plan assets is recognised taking into account

the applicable asset restrictions. Such an asset position is reported in Other non-current assets on

the balance sheet.

In the case of a plan amendment, curtailment or settlement (each a "plan event") occurring in a

defined benefit plan during an annual reporting period, the current service cost and the net interest

on the net liability or asset are remeasured for the remainder of the reporting period after the plan

event. The actuarial assumptions applicable as of the date of the plan event are to be used as the

basis for such remeasurement. When the benefits of a plan are changed, or when a plan is curtailed,

the resulting change in the present value of the defined benefit obligation that relates to past service,

or the gain or loss related to a curtailment is recognised immediately in profit or loss. Gains or losses

on settlements of defined benefit plans are recognised when the settlement occurs.

Remeasurements of the net defined benefit liability or asset include actuarial gains and losses

that may arise especially from differences between estimated and actual variations in underlying

assumptions about demographic and financial variables; and, additionally, from developments in

these assumptions as of each reporting date. Additionally included is the difference between the

actual return on plan assets and the interest income on plan assets contained in the net interest

result, as well as any change in the effect of the asset ceiling, excluding amounts already included

in net interest. Remeasurement results and related deferred taxes are recognised in full in the

period in which they occur and are reported in other comprehensive income.

The Group's contributions to defined contribution plans are charged to the income statement in

the period to which the contributions relate.

113

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS:

ASSUMPTIONS USED TO DETERMINE FUTURE PENSION OBLIGATIONS

The present value of the pension obligations is based on actuarial calculations that use several

assumptions. Any changes in these assumptions will impact the carrying amount of pension

obligations.

Fortum’s pension arrangements

Finland

The statutory pension benefits (as determined in Employee’s Pension Act /TyEL) in Finland provide

the employees’ pension coverage for old age, disability and death of a

family provider. The benefits

are insured with an insurance company, and determined to be defined contribution plans.

In addition, the Group has historical old-age and survivor pension benefits with the Fortum Pension

Fund covering a limited number of people. The Fortum Pension Fund is a closed fund managed by a

Board, consisting of both employers' and employees' representatives. The promised benefit is defined

in the rules of the Fund, mostly at a maximum of 66% of the salary basis. The salary basis is an

average of the ten last years' salaries, which are indexed by a common salary index to the accounting

year. After retirement the benefits payable are indexed yearly with the TyEL-index.

The Fund is operating under the regulation from the Financial Supervisory Authority (FSA). The

liability has to be fully covered according to the regulations. The national benefit obligation related

to the defined benefit plans is calculated so that the promised benefit is fully funded until retirement.

Other countries

As o

f December 2023, there were no material defined benefit pension arrangements in Fortum’s

other operating countries.

Main risks relating to defined benefit plans

Typical risk factors for defined benefit plans are changes in discount rates, risks related to other

actuarial assumptions, as well as investment and volatility risks.

Change in discount rate

The discount rate used to calculate the defined benefit obligation (according to IFRS) depends on the

value of corporate bond yields as at the reporting date. A decrease in yields increases the benefit

obligation that is often only partially offset by an increase in the value of fixed income holdings.

Risk related to other actuarial assumptions

Assumptions for future inflation, salary levels and mortality are used for actuarial calculations.

Should the actual outcome differ from these assumptions, the liability may change.

Investment and volatility risk

Pension plan assets are allocated to different asset classes based on the statutory legislation or

investment strategy of the corresponding pension plan. Depending on the pension plan, underlying

investment management plans are updated on a regular basis. If the return of the fund’s assets is

not enough to cover the raise in liability and benefit payments over the financial year, the employer

has to fund the deficit with contributions, unless the fund has sufficient covering.

Movement in the net defined benefit liability

	Defined benefit		Fair value		Net defined benefit
	obligation		of plan assets		asset(-)/liability(+)
EUR million	2023	2022	2023	2022	2023	2022
1 January	267	4,437	-280	-3,290	-14	1,146
Included in consolidated income statement 1)
Current service cost	1	49	-	-	2	50
Past service cost	-	1	-	-	-	1
Settlements	-2	-138	3	2	1	-136
Net interest	9	44	-10	-34	-1	10
	9	-44	-7	-32	2	-76
Included in OCI
Remeasurement gains(-)/losses(+)	7	-1,513	1	905	9	-608
Actuarial gains/losses arising from changes in
financial assumptions	2	-1,517	-	-	2	-1,517
Actuarial gains/losses arising from experience
adjustments	5	4	-	-	5	4
Return on plan assets (excluding amounts
included in net interest expense)	-	-	1	905	1	905
Exchange rate differences and other changes	-3	-22	2	35	-1	12
	4	-1,536	4	940	7	-596
Other
Contributions paid by/to the employer	-	-	-2	11	-2	11
Benefits paid	-15	-81	15	78	0	-2
Acquisitions of subsidiary companies	1	1	-2	-	-1	1
Deconsolidation of subsidiary companies 2)	-3	-2,511	-	2,012	-3	-499
31 December	263	267	-273	-280	-9	-13
Present value of funded defined obligation					263	263
Fair value of plan assets					-273	-280
Funded status					-10	-17
Present value of unfunded obligation					0	4
Net liability arising from defined benefit obligation					-9	-13
Pension assets included in other non-current
assets on the balance sheet					20	27
BS Pension obligations on the balance sheet					10	13

1) Net interest is presented in financial items in the income statement. The rest of costs related to defined benefit plans are included in staff

costs (row defined benefits plans in the staff cost specification in



Note 10

Employee benefits and Board remuneration). In 2022 part of

settlements were netted with defined contribution plans costs in income statement.

2) See



Note 3

Acquisitions, disposals and discontinued operations.

In 2023 changes during the year include Russia until 31 March 2023 and in 2022 Uniper until 30

September 2022.

Contributions expected to be paid during 2024 total EUR 2 million.

114

Fair value of plan assets

		2023			2022
EUR million	Quoted	Unquoted	Total	Quoted	Unquoted	Total
Equity instruments	79	5	85	88	7	94
Debt instruments	104	40	144	105	40	145
Cash and cash equivalents	-	18	18	-	18	18
Real estate	-	12	12	-	12	12
Other assets	0	12	12	-	11	11
Total	184	89	273	193	88	280

A specification of plan assets has not been available for pension plans financed through an

insurance company. In these cases, the fair value of plan assets has been included in other assets.

The actual return on plan assets totalled EUR 9 million (2022: -12).

Amounts recognised on the balance sheet by country 2023

		Other
EUR million	Finland	countries	Total
Present value of funded obligations	207	56	263
Fair value of plan assets	-220	-53	-273
Deficit(+)/surplus(-)	-13	3	-10
Present value of unfunded obligations	-	0	0
Net asset(-)/liability(+) on the balance sheet	-13	3	-9
Pension asset included in non-current assets	14	6	20
BS Pension obligations on the balance sheet	1	9	10

Amounts recognised on the balance sheet by country 2022

		Other
EUR million	Finland	countries	Total
Present value of funded obligations	205	58	263
Fair value of plan assets	-225	-56	-280
Deficit(+)/surplus(-)	-19	2	-17
Present value of unfunded obligations	-	4	4
Net asset(-)/liability(+) on the balance sheet	-19	6	-13
Pension asset included in non-current assets	21	6	27
BS Pension obligations on the balance sheet	1	12	13

The principal actuarial assumptions used in Finland

% 2023		2022
Discount rate	3.30	3.80
Future salary increases	2.40	2.70
Future pension increases	2.40	2.80
Rate of inflation	2.20	2.60

The discount rate in Finland is based on high quality European corporate bonds with maturity that

best reflects the estimated term of the defined benefit pension plans.

The discount, inflation, salary growth and pension growth rates, as well as mortality are the key

assumptions when calculating defined benefit obligations. Changes in the key actuarial assumptions

would lead to the following changes in the present value of the defined benefit obligations:

Sensitivity of defined benefit obligation to changes in assumptions

	Impact to the pension obligation
Change in the assumption	increase(+)/decrease(-)
0.5% increase in discount rate	-5.8%
0.5% decrease in discount rate	6.5%
0.5% increase in benefit	5.9%
0.5% decrease in benefit	-5.4%
0.5% increase in salary growth rate	0.3%
0.5% decrease in salary growth rate	-0.3%
10% increase in mortality	-3.7%
10% decrease in mortality	3.7%

A 10% decrease in mortality would result in higher life expectancy of beneficiaries, depending of the

age of each individual beneficiary. At the end of 2023, the life expectancy of a 63-year-old male

retiree would increase by approximately one year, if mortality were to decrease by 10%.

The sensitivities indicated are computed based on the same methods and assumptions used to

determine the present value of the defined benefit obligations. If one of the actuarial assumptions is

changed for the purpose of computing the sensitivity of results to changes in that assumption, all

other actuarial assumptions are included in the computation unchanged. Potential correlation

effects between the individual actuarial assumptions are not taken into account when computing

sensitivities. When considering sensitivities, it must be noted that the change in the present value of

the defined benefit obligations resulting from changing multiple actuarial assumptions

simultaneously is not necessarily equivalent to the cumulative effect of the individual sensitivities.

Maturity profile of the undiscounted defined benefit obligation on 31 December

2023

	Future benefit
EUR million	payments
Maturity under 1 year	15
Maturity between 1 and 5 years	62
Maturity between 5 and 10 years	73
Maturity between 10 and 20 years	127
Maturity between 20 and 30 years	78
Maturity over 30 years	38

The weighted average duration of defined benefit obligation at 31 December 2023 is 16 years.

115

31 Other non-current liabilities

EUR million	2023	2022
Connection fees	70	70
Other	53	51
BS Total	122	121

Connection fees include refundable fees paid by the customer when connected to district heating

network in Finland. Connection fees were refundable until 2013.

32 Trade and other payables

EUR million	2023	2022
Trade payables	488	720
Accrued expenses and deferred income
Accrued personnel expenses	102	109
Accrued interest expenses	97	59
Contract liabilities	25	24
Other accrued expenses and deferred income	143	201
Other liabilities
VAT-liability	51	37
Current tax liability	44	261
Advances received	20	27
Liability to return emission rights 1)	70	99
Electricity certificate payables	34	40
Other	108	80
BS Total	1,181	1,657

1) For additional information see



Note 22

Inventories.

Change in trade and other payables from 31 December 2022 includes impact from the

deconsolidation of Russian operations in April 2023.

The management considers that the amount of trade and other payables approximates fair value.

33 Leases

ACCOUNTING POLICIES

LESSEE ACCOUNTING

The Group leases mainly office buildings and land areas. The Group recognises all leases, with

the exception of short-term (i.e. lease term less than 12 months) and low value leases as right-of-

use assets with a corresponding lease liability at the date at which the leased asset is available for

use by the Group.

Right-of-use assets and lease liabilities are initially recognised on the consolidated balance

sheet at future fixed lease payments over the lease term. Lease payments are discounted to

present value. Right-of-use assets are depreciated on a straight-line basis over the lease term, or

the useful life of the leased asset if shorter; and reviewed periodically for indication of impairment.

When the future lease payments are revised due to changes in index-linked considerations or

the lease term changes, the right-of-use asset and the corresponding lease liability is remeasured.

Any differences arising on reassessments are recognised in the consolidated income statement.

Interest expense on lease liabilities is presented within Interest expense in the consolidated

income statement. In the consolidated cash flow statement, the principal portion of the lease

payment is presented under Payments of long-term liabilities, and the interest portion as Interest

paid under Funds from operations. Variable lease payments, as well as costs for leases not

capitalised due to exemptions in the standard, are expensed to consolidated income statement.

116

Amounts recognised in consolidated financial statements

Lessee

EUR million	2023	2022
In consolidated income statement
Depreciation, of which	-19	-20
Land	-2	-2
Buildings and structures	-11	-12
Machinery and equipment	-6	-7
Interest expense on lease liabilities	-2	-2
Expense relating to short-term leases within Other expenses	-6	0
On consolidated balance sheet
Additions to right-of-use assets, of which	27	47
Land	4	6
Buildings and structures	13	29
Machinery and equipment	10	12
Disposal of subsidiary companies, of which 1)	-4	-508
Land	-3	-40
Buildings and structures	-1	-403
Machinery and equipment	0	-64
Carrying amount of right-of-use assets, of which	122	122
Land	53	55
Buildings and structures	54	55
Machinery and equipment	15	12
Lease liabilities	118	119
In consolidated cash flow statement
Cash outflow for leases	-21	-21

1) See



Note 3

Acquisitions, disposals and discontinued operations

Maturity of undiscounted lease liabilities

EUR million	2023
Due within one year	21
Due after one year and within five years	55
Due after five years	56
Total	131

See



Note 4

Financial risk management,



Note 17

Property, plant and equipment and right-of-use

assets, and



Note 26

Interest-bearing liabilities for more information.

34 Capital and other commitments

Capital and other commitments are contractual or regulatory obligations that are not recognised as

liabilities on the consolidated balance sheet, or disclosed as contingent liabilities.

34.1 Capital commitments

At 31 December 2023, Fortum had EUR 292 million (2022: 441) capital commitments for the

acquisition of property, plant and equipment and intangible assets. The decrease in capital

commitments is mainly due to the deconsolidation of Fortum’s Russian operations.

34.2 Other commitments to associates and joint ventures

Teollisuuden Voima Oyj (TVO) built Olkiluoto 3, the nuclear power plant funded through external

loans, share issues and shareholder loans according to shareholders' agreement between the owners

of TVO. At end of December 2023, Fortum had EUR 232 million (2022: 232) outstanding receivables

regarding Olkiluoto 3, and was until 31 December 2023 committed to providing at maximum EUR 100

million additional funding. TVO shareholder loan is classified as participation in joint ventures. For

more information, see



Note 28

Nuclear-related assets and liabilities.

Fortum has formed a joint venture with Green Investment Group to build the South Clyde waste-

to-energy plant in Glasgow, Scotland. At 31 December 2023, Fortum had an outstanding

commitment of EUR 40 million (2022: 54) to the joint venture, which is funded by external loans,

share issues and shareholder loans.

34.3 Other commitments

In June 2018, the Swedish Parliamen

t approved the legislation regarding Sweden’s national

strategy for implementation of the EU’s Water Framework Directive. The largest hydro companies

created a common hydro-power fund to finance large parts of the environmental actions needed.

The fund will have a total financial cap of SEK 10 billion to be paid over a 20-year period, and the

largest operators will contribute to the fund proportionately based on their respective market share

of hydro-power production. Fortum's share is 23% of the funds' total financing.

In May 2022, Fennovoima announced that it had terminated the contract for the delivery of the

nuclear power plant with RAOS Project Oy and withdrew the construction license application.

Currently, Fortum is financing certain costs of Voimaosakeyhtiö SF.

117

35 Pledged assets and contingent liabilities

ACCOUNTING POLICIES

PLEDGED ASSETS

Pledged assets are given to a lender as security for a loan, trading or other commitment. If the

borrower or trading party is unable to make the agreed payments, the lender can use the

pledged assets to mitigate its losses. Pledged assets at Fortum mostly consist of securities,

collaterals and real estate mortgages.

CONTINGENT LIABILITIES

A contingent liability is disclosed when there is a possible obligation that arises from past events

and whose existence is only confirmed by one or more doubtful future events; or when there is an

obligation that is not recognised as a liability or provision because it is not probable that an outflow

of resources will be required, or the amount of the obligation cannot be reliably estimated.

35.1 Pledged assets

For debt

Fortum has pledged shares in Kemijoki as a security for the reborrowing from the Finnish State

Nuclear Waste Management Fund for the Loviisa nuclear power plant part, amounting to EUR 718

million (31 Dec 2022: 689).

Real estate mortgages total EUR 41 million (2022: 41).

For other commitments

Pledges assets include securities of EUR 325 million (2022: 527) to the Nordic Power Exchange

(Nasdaq Commodities), margin receivables of EUR 590 million (2022: 2,607) and restricted cash of

EUR 13 million (2022: 27). Margin receivables of EUR 590 million consist of cash collaterals for

trading in commodities exchanges, as well as foreign exchange and interest rate derivatives under

Credit Support Annex agreements.

Fortum has pledged real estate mortgages in Pyhäkoski hydro plant as security to the Ministry of

Economic Affairs and Employment amounting to EUR 122 million (2022: 126). These are given as a

security for the uncovered part of the legal liability and unexpected events relating to future costs for

decommissioning and disposal of spent fuel in Loviisa nuclear power plant. According to the

Nuclear Energy Act, Fortum is obligated to contribute the funds in full to the State Nuclear Waste

Management Fund to cover the legal liability. Any uncovered legal liability relates to periodising of

the payments to the fund. The size of the securities given is updated yearly in the second quarter

based on the decisions regarding the legal liabilities and the funding target which are determined at

the end of the previous year. See



Note 28

Nuclear-related assets and liabilities.

On behalf of others

Pledged assets on behalf of others consist of restricted cash of EUR 51 million (2022: 96) posted as

collateral toward Nasdaq Clearing AB covering Fortum’s required contribution

to the Commodity

Market Default Fund (default fund). The default fund is a mutualized fund whereby all participants

on the Nordic power exchange (OMX Nasdaq Commodities) post collateral in relation to their

exposure on the market in order to cover potential defaults by members which may cause losses

exceeding the members' own collateral. See



Note 21

Interest bearing receivables.

35.2 Contingent liabilities

In relation to divestment of shareholdings, Fortum has entered into indemnification agreements,

which cover the customary representations and warranties, as well as environmental damage and

tax contingencies. Any obligations that may exist are covered in the first instance by provisions of

the companies sold before Fortum itself is required to make any payments. Moreover, the Fortum

Group has commitments under which it assumes joint and several liability arising from its interests

in non-corporate commercial partnerships and consortia in which it participates.

Fortum's 100% owned subsidiary Fortum Heat and Gas Oy has a contingent liability, based on

the Finnish Companies Act's (734/1978) Chapter 14a Paragraph 6, with Neste Oyj following the

demerger of Fortum Oil and Gas Oy in 2004.

In 2021 Fortum signed an EUR 8 billion credit facility agreement with Uniper comprising tranches

for both a shareholder loan and a parent company guarantee. The shareholder loan, EUR 4 billion,

was repaid on 21 December 2022 on completion of the transaction to sell Uniper to the German

State. Out of 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 parent company

guarantee facility, approximately EUR 1.0 billion, was released at the end of June 2023.

35.3 Guarantees relating to Nuclear operations

With respect to the activities of the Swedish nuclear power plants, the companies of the Swedish

nuclear units have issued guarantees for OKG and Forsmark to governmental authorities in

accordance with the Swedish law. There are two types of guarantees given. The Financing Amount

is given to cover Fortum's share of the uncovered part in the Nuclear Waste Fund, assuming no

further production and that no further nuclear waste fees are paid in. The uncovered amount is

calculated by the authorities and is based on the difference between the expected costs and the

funds to cover these costs at the time of the calculation. The Supplementary Amount constitutes a

guarantee for deficits that can arise as a result of unplanned events. The amounts for the

guarantees are normally updated every third year by governmental decision. In addition, the

licensees are responsible for all costs related to the disposal of low-level radioactive waste.

118

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 relating to nuclear

cidents is strictly under the plant operator’s responsibility.

In Finland, as the operator of the Loviisa power plant, Fortum has a statutory liability insurance

policy of approximately EUR 1.2 billion.

In Sweden, the operator of a nuclear power plant in operation is required to have a liability

insurance or other financial cover in the amount equivalent to EUR 1.2 billion per site.

The necessary insurances for the nuclear power plants have been purchased. Similar insurance

policies are in place also for the operators where Fortum has minority interest.

The guarantee given on behalf of Teollisuuden Voima Oyj to the Ministry of Economic Affairs and

Employment amounts to EUR 142 million (2022: 136). The guarantee covers the unpaid legal

liability due to periodisation as well as risks for unexpected future costs.

For information regarding nuclear-related assets and liabilities see



Note 28

Nuclear-related

assets and liabilities.

36 Legal actions and official proceedings

Various routine court actions, arbitration proceedings, tax and regulatory investigations and

proceedings are currently pending against entities of the Group, and further actions or proceedings

may be instituted or asserted in the future.

Environmental liability litigation in Sweden

Fortum is party to an ongoing environmental liability litigation in Sweden concerning barrels of mercury

placed in the Baltic Sea outside Sundsvall during the 1950s and 1960s. On 2 June 2023, the Court of

Appeal, contrary to the Land and Environment Court, ruled that Fortum shall compensate a third party

for the costs of a related environmental investigation. Fortum has requested for a leave to appeal to

the Supreme Court. Fortum has not at any time had any involvement in producing mercury, or placing

the mercury waste in the sea. At the time, a company called Stockholms superfosfat fabriks was

operating the industrial activities. In 1985, these industrial activities, including all rights and obligations

thereof, were transferred from Stockholms superfosfat fabriks AB to the third party. In 1995,

Stockholms superfosfat fabriks AB was sold to an external party, only then ending up in the Fortum

Group (and name changed to Fortum Ljunga Kraft AB).

The current litigation is concerning the liability for the environmental investigation into the extent

of required environmental measures. The County Administrative Board has in parallel an ongoing

errand on the environmental liability for the barrels. In this process, the County Administrative Board

will first make a decision on which company shall carry out the environmental investigations and

only thereafter it may decide on the liability for the environmental measures. At this point in time, it

is not possible to estimate either the cost of the full environmental investigations, or the cost of

potential environmental measures required.

Fennovoima’s H

anhikivi nuclear power plant project

RAOS Project Oy and JSC Rusatom Energy International and Fennovoima Oy are engaged in

International Chamber of Commerce (ICC) arbitration proceedings regarding Fennovoima's EPC

Contract for the Hanhikivi nuclear power plant project. RAOS Project Oy has requested also Fortum

and certain other parties to be joined in these proceedings. Fortum disputes the existence of any

contractual relation, obligation, or arbitration agreement between Fortum and RAOS Project Oy.

Therefore, Fortum is of the opinion that an arbitral tribunal has no jurisdiction to decide any claims

against Fortum. As Fortum is not a party to the agreement under dispute, it considers the request to

be completely unfounded and strongly opposes it.

119

Tax cases

On 29 June 2022, the Antwerp Court of First Instance, Belgium, ruled in favour of Fortum on the

company’s income tax assessments in Belgium for the years 2009–

2012. The decision concerned

Fortum’s Belgian financing company, Fortum EIF NV, which financed Fortum’s Swedish subsidiary,

Fortum 1 AB, in the acquisition of Russian operations in 2008, later operating as PAO Fortum. The

Belgian tax authorities argued that Fortum EIF should not benefit from the notional interest deduction

regime in Belgium. In accordance with the court ruling, Belgian tax authorities in 2022 refunded

Fortum the paid taxes amounting to EUR 78 million. These taxes had been recognised on the balance

sheet as income tax receivable. The Belgian tax authorities also refunded the related interest

amounting to EUR 27 million, which was recognised in the consolidated income statement in 2022.

Considering Fortum’s income tax assessment in Belgium for the year

2008, on 16 June 2020, the

Court of Appeal of Ghent ruled in favour of Fortum, and in September 2020 the Belgian tax authorities

filed an appeal to the Supreme Court. The appeal is still pending. The additional taxes claimed for

2008 amount to EUR 36 million and have been recognised as income tax receivable.

37 Related party transactions

37.1 The Finnish State and companies owned by the Finnish State

At the end of 2023, the Finnish State owned 51.26%

of the company’s shares (2022: 51.26%).

On 30 October 2023, Fortum announced that an agreement have been signed with the National

Emergency Supply Agency (NESA). Under this agreement, NESA reserves the production of the

Meri-Pori power plant for severe disruption and emergencies to guarantee security of supply in the

electricity system in Finland. The agreement period is 1 March 2024 until 31 December 2026.

In March 2023, Fortum repaid EUR 350 million of the Solidium bridge loan and cancelled the

entire EUR 2,350 million bridge loan facility. Total interest expenses and fees relating to the bridge

loan facility amounting to EUR 105 million (2023: 56 and 2022: 49) were recognised in Finance

costs - net.

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. The bridge loan facility is linked to the six-

month Euribor; the margin for the first six months was 10% and for the following six months 12%.

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. As a consequence, the proportion of

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

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.

All transactions between Fortum and other companies owned by the Finnish State are on arm’s

length basis.

37.2 Board of Directors and Fortum Leadership Team

The key management personnel of the Fortum Group are the members of Fortum Leadership Team

and the Board of Directors.

Fortum has not been involved in any material transactions with members of the Board of

Directors or Fortum Leadership Team. No loans exist to any member of the Board of Directors or

Fortum Leadership Team at 31 December 2023.

The total compensation (including pension benefits and social costs) for the key management

personnel for 2023 was EUR 10 million (2022: 10). See



Note 10

Employee benefits and Board

remuneration for further information on the Board of Directors and Fortum Leadership Team

remuneration and shareholdings.

37.3 Associated companies and joint ventures

In the ordinary course of business, Fortum engages in transactions with associated companies, joint

ventures, and other related parties. These transactions are on the same commercial terms as they

120

would be with third parties, except for some associates and joint ventures, as noted below.

Fortum owns shareholdings in associated companies and joint ventures which own hydro and

nuclear power plants. Under consortium agreements, each owner is entitled to electricity in proportion

to its share of ownership, or based on other agreement. In turn, each owner is liable for an equivalent

portion of costs, regardless of output. These associated companies and joint ventures are not profit

making since the owners purchase electricity at production cost, including interest costs and

production taxes. See



Note 18

Participations in associated companies and joint ventures.

37.4 Balances and transactions with related parties

Transactions with associates and joint ventures

	Associated
	companies		Joint ventures		Total
EUR million	2023	2022	2023	2022	2023	2022
Sales	2	2	9	72	12	74
Purchases	314	284	288	154	602	438
Other income	-	-	-3	4	-3	4
Interest income on loan receivables	13	10	-3	2	10	12

Balances with associates and joint ventures

	Associated
	companies		Joint ventures		Total
EUR million	2023	2022	2023	2022	2023	2022
Receivables
Long-term interest-bearing loan receivables	551	505	93	88	644	593
Trade and other receivables	3	12	27	75	30	87
Liabilities
Long- and short-term loan payables	7	-	232	229	239	229
Trade and other payables	15	3	57	50	72	53

See also



Note 28

Nuclear-related assets and liabilities and



Note 35

Pledged assets and

contingent liabilities for details on commitments related to associates and joint ventures.

37.5 Pension funds

At 31 December 2023, Fortum has a pension fund in Finland, which is a stand-alone legal entity

managing pension assets related to part of the pension coverage in Finland. In 2023, there were no

contribution to these pension plans (2022: 11 net income, including a termination fee for the

Swedish pension fund, partly offset by contributions paid). See



Note 30

Pension obligations.

The assets in the pension fund in Finland include Fortum shares representing 0.04% (2022:

0.04%) of the company’s outstanding shares. The loan granted by Fortum’s Finnish pension fund

has been secured by real estate mortgages of EUR 41 million (2022: 41). See



Note 35

Pledged

assets and contingent liabilities.

38 Events after the balance sheet date

On 26 January 2024, Fortum announced that as part of the efficiency programme launched in

November 2023, Fortum

’s

Consumer Solutions business unit and the IT unit are conducting change

negotiations on possible redundancies. In total, the negotiations concern some 1,080 employees in

Finland, Sweden, Norway, and the IT unit in Poland. According to a preliminary estimate, change

negotiations could result in the redundancies of a maximum of 130 job positions

At the beginning of February 2024, the Fortum Board of Directors resolved on clarifications to

Fortum’s st

rategy. As the operating environment shows increased uncertainty, reduced visibility and

postponement of industrial investments, the company has specified its business portfolio, clarified

capital allocation and set new strategic targets with measurable key performance indicators (KPIs).

Fortum’s renewed strategy, launched in March 2023, with focus on the Nordics remains unchanged,

as well as its strategic priorities to ‘deliver reliable clean energy’, ‘drive decarbonisation in

industries’, and ‘transform and develop’. The company’s financial and environmental targets are

also unaltered.

The financial and environmental targets are as follows:

•

To ensure the current rating of BBB, Financial net debt-to-Comparable EBITDA can be a

maximum of 2.0-2.5 times.

•

For the period of 2024-

2026, Fortum’s capital expenditure is expected to be approximately EUR

1.7 billion (excluding acquisition) of which growth capital expenditure is expected to be EUR 800

million and annual maintenance capital expenditure EUR 300 million.

•

To ensure required returns for any potential new investments, Fortum continues to be selective

and applies earlier set investment criteria; project based WACC + 150-400 investment hurdles

depending on technology or investment project, as well as environmental targets.

•

Fortum’s dividend policy

- a payout ratio of 60-90% of comparable EPS - remains unchanged. The

payout ratio will be used so that the upper end of the range of the pay-out ratio is applied in

situations with a strong balance sheet and low investments, while the lower end of the range

would be applied with high leverage and/or significant investments and high capital expenditure.

•

Tightened environmental and decarbonisation ambitions with updated targets to reach carbon

neutrality already by 2030, exit coal by the end of 2027, target for specific emissions, and

commitment to SBTi (1.5°C) and biodiversity targets.

121

39 Group companies by segment

G = Generation

1) Shares held by the parent company

CS = Consumer Solutions

O = Other Operations

Group holding % for companies owned via subsidiaries is based on the Fortum Corporation

ownership % in the direct subsidiary times the ownership % of the direct subsidiary in the indirect

subsidiary/associate/joint venture as of 31 December 2023.

Subsidiaries by segment

Entity Name	Domicile	Segment	Group holding, %
Brändskogen Vindkraft Ab Oy	Finland	G	100.0
Ekopartnerit Turku Oy	Finland	O	51.0
EX-KE Oy	Finland	CS	100.0
Fortum Alku Oy	Finland	O	100.0
Fortum Asiakaspalvelu Oy	Finland	CS	100.0
Fortum Assets Oy	Finland	O	100.0
Fortum Battery Recycling Oy	Finland	O	100.0
Fortum Bio Oy	Finland	O	100.0
Fortum Clean Oy	Finland	O	100.0 1)
Fortum Heat and Gas Oy	Finland	G, O	100.0 1)
Fortum Kasvu Oy	Finland	O	100.0
Fortum Markets Oy	Finland	CS	100.0
Fortum Norm Oy	Finland	O	100.0 1)
Fortum Power and Heat Holding Oy	Finland	G	100.0
Fortum Power and Heat Oy	Finland	G, O	100.0 1)
Fortum Real Estate Oy	Finland	O	100.0 1)
Fortum Renewables Oy	Finland	G	100.0
Fortum RES Oy	Finland	O	100.0
Fortum TwoGether Oy	Finland	O	100.0 1)
Fortum Waste Solutions Oy	Finland	O	100.0 1)
Frosart Oy	Finland	G	100.0
Kalax Solkraft Ab/Oy	Finland	G	100.0
Katajamäen Tuulivoima Oy	Finland	G	100.0
Kemiönsaaren Aurinkovoima Oy	Finland	G	100.0
Koixi Oy	Finland	G	100.0
Koillis-Pohjan Energiantuotanto Oy	Finland	G	100.0
Korvenniityn Aurinkovoima Oy	Finland	G	100.0
Lamminnevan Tuulivoima Oy	Finland	G	100.0
Lautamäen Tuulivoima Oy	Finland	G	100.0
Marttilan Aurinkovoima Oy	Finland	G	100.0
Molpe Vindkraft Ab/Oy	Finland	G	100.0
Närpes Vindkraft Ab/Oy	Finland	G	100.0
Norrsarvlax Solkraft Ab/Oy	Finland	G	100.0
Oy Pauken Ab	Finland	O	100.0
Oy Tersil Ab	Finland	O	100.0
Oy Tertrade Ab	Finland	O	100.0
Penkkisuon Tuulivoima Oy	Finland	G	100.0
Pjelax Vindkraft Ab/Oy	Finland	G	60.0

Entity Name	Domicile	Segment	Group holding, %
Pohpus Oy	Finland	G	100.0
Poikel Vindkraft Ab/Oy	Finland	G	100.0
Santalan Aurinkovoima Oy	Finland	G	100.0
Tarvasjoen Aurinkovoima Oy	Finland	G	100.0
TGS Finland Oy	Finland	O	100.0
Trepus Oy	Finland	G	100.0
Virolahden Aurinkovoima Oy	Finland	G	100.0
Barry Danmark ApS	Denmark	O	100.0
Fortum Waste Solutions A/S	Denmark	O	100.0
Fortum CFS Eesti OU	Estonia	O	100.0
Fortum France S.A.S	France	G	100.0
Fortum Batterie Recycling GmbH	Germany	O	100.0
Fortum Service Deutschland GmbH	Germany	G, O	100.0
MAWAL Energie GmbH	Germany	O	100.0
SALWAL Energie GmbH	Germany	O	100.0
TGS Germany GmbH	Germany	O	100.0
Fortum Insurance Limited	Guernsey	O	100.0
Fortum India Private Limited	India	G	100.0 1)
Solar One Energy Private Limited	India	G	100.0
SolarXL Alpha Energy Private Limited	India	G	100.0
SolarXL Beta Energy Private Limited	India	G	100.0
SolarXL Delta Energy Private Limited	India	G	100.0
SolarXL Gamma Energy Private Limited	India	G	100.0
SolarXL Zeta Energy Private Limited	India	G	100.0
PT Fortum Energy Solution	Indonesia	O	95.0
Fortum eNext Ireland Ltd	Ireland	G	100.0
Fortum Finance Ireland Designated Activity Company	Ireland	O, G	100.0 1)
Fortum P&H Ireland Limited	Ireland	O	100.0
Fortum Participation Limited	Ireland	O	100.0
Fortum 2 B.V.	Netherlands	O	100.0
Fortum 3 B.V.	Netherlands	G	100.0
Fortum Energy Holding B.V.	Netherlands	O	100.0 1)
Fortum H&C B.V.	Netherlands	G	100.0
Fortum Holding B.V.	Netherlands	CS, G, O	100.0 1)
Fortum Power Holding B.V.	Netherlands	O	100.0
Fortum Russia B.V.	Netherlands	O	100.0
Fortum SAR B.V.	Netherlands	G	100.0
Fortum Star B.V.	Netherlands	G	100.0
PolarSolar B.V.	Netherlands	G	100.0
Fortum CS AS	Norway	CS	100.0
Fortum Forvaltning AS	Norway	O, G	100.0
Fortum Hedging AS	Norway	G	100.0
Fortum Kundesenter AS	Norway	CS	100.0
Fortum Plastics Recycling Norway AS	Norway	O	100.0
Fortum Strøm AS	Norway	CS	100.0
Fortum Waste Solutions Norway AS	Norway	O	100.0
NorgesEnergi AS	Norway	CS	100.0
Tellier Service AS	Norway	CS	100.0
Fortum Marketing and Sales Polska S.A.	Poland	CS	100.0
Fortum Network Częstochowa Sp. z o.o.	Poland	G	100.0
Fortum Network Płock Sp. z o.o.	Poland	G	100.0
Fortum Network Wrocław Sp. z o.o.	Poland	G	100.0

122

Entity Name	Domicile	Segment	Group holding, %
Fortum Power and Heat Polska Sp. z o.o.	Poland	G, CS	100.0
Fortum Service Poland Sp. z o.o.	Poland	O	100.0
Fortum Silesia SA	Poland	G	100.0
Fortum Sprzedaż Sp. z o.o.	Poland	CS	100.0
Escandinava de Electricidad S.L.U	Spain	CS	100.0
Alvret Solpark AB	Sweden	G	100.0
Bankälla Solpark AB	Sweden	G	100.0
Bergsveden Solpark AB	Sweden	G	100.0
Blybergs Kraftaktiebolag	Sweden	G	66.7
Borgvik Vindkraft AB	Sweden	G	100.0
Brännälven Kraft AB	Sweden	G	67.0
Fortum 1 AB	Sweden	O	100.0
Fortum Energy AB	Sweden	CS	100.0
Fortum Fastigheter AB	Sweden	O	100.0
Fortum Förnyelsebar Sverige 2 AB	Sweden	G	100.0
Fortum Förnyelsebar Sverige 3 AB	Sweden	G	100.0
Fortum Förnyelsebar Sverige 4 AB	Sweden	G	100.0
Fortum Förnyelsebar Sverige 5 AB	Sweden	G	100.0
Fortum Förnyelsebar Sverige 6 AB	Sweden	G	100.0
Fortum Förnyelsebar Sverige 7 AB	Sweden	G	100.0
Fortum Förnyelsebar Sverige 8 AB	Sweden	G	100.0
Fortum Förnyelsebar Sverige 9 AB	Sweden	G	100.0
Fortum Förnyelsebar Sverige 10 AB	Sweden	G	100.0
Fortum Grön AB	Sweden	O	100.0
Fortum Markets AB	Sweden	CS	100.0
Fortum Mockfors Kraft AB	Sweden	G	100.0
Fortum Power AB	Sweden	O	100.0 1)
Fortum Produktionsnät AB	Sweden	G	100.0
Fortum Sverige AB	Sweden	G, O	100.0
Fortum Sweden AB	Sweden	O	100.0 1)
Fortum Vindkraft Sverige 3 AB	Sweden	G	100.0
Fortum Vindkraft Sverige 4 AB	Sweden	G	100.0
Fortum Vindkraft Sverige 8 AB	Sweden	G	100.0
Fortum Waste Solutions AB	Sweden	O	100.0
Fortum Waste Solutions Holding AB	Sweden	O	100.0
Klinthögen Vindkraft AB	Sweden	G	100.0
Klöverkullen Vindkraft AB	Sweden	G	100.0
Mellansvensk Kraftgrupp Aktiebolag	Sweden	G	86.9
Nya Bullerforsen Kraft AB	Sweden	G	65.9
Oreälvens Kraftaktiebolag	Sweden	G	65.0
Sävar Vindkraft AB	Sweden	G	100.0
Telge Energi Aktiebolag	Sweden	CS	100.0
TGS Sweden AB	Sweden	O	100.0
Uddeholm Kraft Aktiebolag	Sweden	G	100.0
Värmlandskraft-OKG-delägarna Aktiebolag	Sweden	G	73.3
Fortum Energy Limited	United Kingdom	O	100.0
Fortum O&M (UK) Limited	United Kingdom	O	100.0
Fortum Ratcliffe Limited	United Kingdom	O	100.0
IVO Energy Limited	United Kingdom	G	100.0
Valo Ventures I LP Fund	USA	O	99.0

Associated companies and joint ventures by segment

			Group
Entity Name	Country	Segment	holding %
Battery Intelligence Oy	Finland	O	32.9
Chempolis Oy	Finland	O	37.4
Kemijoki Oy	Finland	G	28.2
Posiva Oy	Finland	G	40.0
Puro.earth Oy	Finland	O	16.6
Sallila Energia Oy	Finland	O	46.0
Teollisuuden Voima Oyj	Finland	G	25.8
Turun Seudun Energiantuotanto Oy	Finland	G	53.5
Turun Seudun Kaukolämpö Oy	Finland	G	30.0
Wello Oy	Finland	O	16.2 1)
Assam Bio Refinery Private Limited	India	G	40.3
Fortum Charge & Drive India Private Limited	India	G	59.0
India Sun B.V.	Netherlands	G	43.8
Nordic Wind B.V.	Netherlands	G	20.0
Yustek Holding B.V.	Netherlands	O	50.0
Fortum Nordkraft Vind DA	Norway	G	50.0
Linnvasselv Kraftlag SA	Norway	G	50.0
Blåsjön Kraft AB	Sweden	G	50.0
Forsmarks Kraftgrupp Aktiebolag	Sweden	G	25.5
Horrmundsvalla Kraftaktiebolag	Sweden	G	50.0
OKG Aktiebolag	Sweden	G	45.5
Stensjön Kraft AB	Sweden	G	50.0
Tåsans Kraftaktiebolag	Sweden	G	40.0
Väsa Kraftaktiebolag	Sweden	G	50.0
Vattenkraftens Miljöfond Sverige AB	Sweden	G	22.7
Ångefallen Kraft AB	Sweden	G	50.0
South Clyde Energy Recovery Holdings Limited	United Kingdom	O	50.0

Deconsolidated Russian companies, consolidated earlier as

subsidiaries

Entity Name
Fortum Wind Energy Joint Stock Company
Fortum-New Generation 3 Limited Liability Company
Fortum-New Generation 5 Limited Liability Company
Joint Stock Company Chelyabenergoremont
LLC Bugulchanskaya Solar power station
PAO Fortum Russia
Ural Heat Networks Company Joint Stock Company
Ylyanovsk Wind Farm	LLC

Deconsolidated Russian companies, consolidated earlier as associated

companies or joint ventures

Entity Name

Fortum-New Generation 4 Limited Liability Company

TGC1 Territorial Generating Company 1

Ural energy retail LLC

123

Key figures

Financial key figures

For information of Alternative Performance Measures used by Fortum, see



Definitions and

reconciliations of key figures

and



Note 1

Material accounting policies.

Fortum’s consolidated income statement and consolidated cash flow statement include the

Russia segment as discontinued operations in 2023 and 2022, and the Uniper segment as

discontinued operations in 2022. As required by IFRS, comparatives for 2022 were restated. For

further information, see



Note 1

Material accounting policies,



Note 2

Critical accounting estimates

and judgements and



Note 3

Acquisitions, disposals and discontinued operations.

Key figures, continuing operations

EUR million or as indicated

2023

2022

Change

23/22 %

Income statement

Reported

Sales

6,711

7,774

-14

EBITDA

2,021

2,381

-15

Operating profit

1,662

1,967

-16

- of sales %

24.8

25.3

Share of profit/loss of associates and joint ventures

-185

132

Profit before income tax

1,583

1,564

- of sales %

23.6

20.1

Net profit for the year

1,515

2,084

-27

Net profit for the year attributable to owners of the parent

1,514

2,080

-27

Comparable

EBITDA

1,903

2,025

-6

Operating profit

1,544

1,611

-4

Share of profit/loss of associates and joint ventures

-40

118

Net profit for the year attributable to owners of the parent

1,150

1,076

Cash flow, key ratios and other data

Capital expenditure and gross investments in shares

664

496

- of sales %

9.9

6.4

Capital expenditure

611

467

Net cash from operating activities

1,710

1,717

Financial net debt/comparable EBITDA

0.5

0.6

Research and development expenditure

- of sales %

0.8

0.7

Average number of employees

5,205

5,120

Key figures, total of continuing and discontinued operations

EUR million or as indicated

2023

2022

Change

23/22 %

Income statement

Reported

Net profit for the year attributable to owners of the parent

-2,069

-2,416

Comparable

Net profit for the year attributable to owners of the parent

1,184

-988

220

Financial position and cash flow

Capital employed

14,408

15,522

Financial net debt

942

1,084

-13

Financial net debt, excl. Russia

N/A

1,127

Net cash from operating activities

1,819

-8,767

121

Key ratios

Return on shareholders' equity, %

-25.5

-96.2

Interest coverage

-16.8

-75.5

Interest coverage including capitalised borrowing costs

-19.7

-72.2

Gearing, %

Equity-to-assets ratio, %

Financial net debt/comparable EBITDA excl. Russia

0.5

0.6

Financial net debt/comparable EBITDA

N/A

0.4

Other data

Dividends

1,032

817

Average number of employees

6,042

16,549

Board of Directors’ proposal for the planned Annual General Meeting

on 25 March 2024.

See



Definitions and reconciliations of key figures

124

Share key figures

EUR or as indicated

2023

2022

Change

23/22 %

Data per share

Earnings per share, total Fortum

-2.31

-2.72

Earnings per share, continuing operations

1.68

2.34

-28

Earnings per share, discontinued operations

-3.99

-5.07

Comparable earnings per share, total Fortum

1.32

-1.11

219

Comparable earnings per share, continuing operations

1.28

1.21

Comparable earnings per share, discontinued operations

0.04

-2.32

102

Cash flow per share, total Fortum

2.03

-9.86

121

Cash flow per share, continuing operations

1.91

1.93

-1

Cash flow per share, discontinued operations

0.12

-11.79

101

Equity per share

9.40

8.55

Dividend per share

1.15

0.91

Payout ratio, %

Dividend yield, %

8.8

5.9

Price/earnings ratio (P/E)

7.8

6.6

Share prices

At the end of the period

13.06

15.54

Average

12.94

15.18

Lowest

10.25

8.86

Highest

16.18

27.18

Other data

Market capitalisation at the end of the period, EUR million

11,718

13,943

Trading volumes

Number of shares, 1,000 shares

412,322

560,775

In relation to weighted average number of shares, %

46.0

63.1

Average number of shares, 1,000 shares

897,264

889,204

Diluted adjusted average number of shares, 1,000 shares

897,264

889,204

Number of registered shares, 1,000 shares

897,264

Board of Directors’ proposal for the planned Annual General Meeting

on 25 March 2024.

2) Payout ratio is calculated based on comparable earnings per share from 2022 onwards. Payout ratio is calculated based on comparable

earnings per share from continuing operations.

3) Price/earnings ratio is calculated based on earnings per share from continuing operations.

4) Trading volumes in the table represent volumes traded on Nasdaq Helsinki. In addition to the Nasdaq Helsinki, Fortum shares were traded

on several alternative market places, for example at Cboe and Turquoise, and on the OTC market. During 2023, approximately 78% (2022:

74%) of Fortum’s shares were traded on markets other than the Nasdaq Helsinki

Ltd.

See



Definitions and reconciliations of key figures

Sustainability key figures

2023

2022

Change

23/22 %

Total GHG emissions, Scope 1-3, million CO

-eq tonnes

14.4

11.8

Direct Scope 1 GHG emissions, million CO

-eq tonnes

1.6

2.2

-27

Indirect location-based Scope 2 GHG emissions, million CO

-eq tonnes

0.06

0.03

100

Scope 3 GHG emissions, million CO

-eq tonnes

12.7

9.5

Specific CO

emissions from total energy production, gCO

/kWh

-29

The share of coal of Fortum’s revenues, %

-25

The share of fossil fuels of Fortum’s revenues, %

Total Recordable Injury Frequency (TRIF), own personnel and contractors

5.0

4.0

1) Comparative figures and information for year 2022 have been restated to exclude Russia as discontinued operations. In 2022, 83% of

Fortum’s direct CO

emissions and 62% of the total GHG emissions originated from Russian power and heat production.

In addition,

change in GHG inventory calculation principles resulted in 0.8 CO

-eq tonnes change in 2022 Scope 3 emissions.

Turnover KPI

2023

2022

A.1 Environmentally sustainable activities (Taxonomy-aligned)

43%

33%

A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-

aligned)

A. Total Taxonomy-eligible activities

50%

36%

Operating expenses KPI

2023

2022

A.1 Environmentally sustainable activities (Taxonomy-aligned)

56%

58%

A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-

aligned)

21%

A. Total Taxonomy-eligible activities

77%

63%

Capital expenditure KPI

2023

2022

A.1 Environmentally sustainable activities (Taxonomy-aligned)

64%

51%

A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-

aligned)

12%

18%

A. Total Taxonomy-eligible activities

76%

68%

125

Segment key figures

Sales by segment

EUR million

2023

2022

Generation

4,420

4,465

- of which internal

394

-585

Consumer Solutions

3,766

4,578

- of which internal

Other Operations

548

589

- of which internal

101

Eliminations and Netting of Nord Pool transactions

-2,024

-1,858

Total continuing operations

6,711

7,774

Comparable operating profit by segment

EUR million

2023

2022

Generation

1,679

1,629

Consumer Solutions

Other Operations

-173

-116

Total continuing operations

1,544

1,611

Impairment charges and reversals

Capital gains and other related items

785

Changes in fair values of derivatives hedging future cash flow

111

-376

Other

-52

Operating profit, continuing operations

1,662

1,967

Comparable EBITDA by segment

EUR million

2023

2022

Generation

1,874

1,876

Consumer Solutions

108

173

Other Operations

-80

-23

Total continuing operations

1,903

2,025

Depreciation and amortisation by segment

EUR million

2023

2022

Generation

195

247

Consumer Solutions

Other Operations

Total continuing operations

359

415

Comparable share of profit of associates and joint ventures by segment

EUR million

2023

2022

Generation

-34

Other Operations

-7

Total continuing operations

-40

Share of profit of associates and joint ventures by segment

EUR million

2023

2022

Generation

-178

Other Operations

-7

Total continuing operations

-185

Capital expenditure by segment

EUR million

2023

2022

Generation

450

314

Consumer Solutions

Other Operations

Total continuing operations

611

467

Gross investments in shares by segment

EUR million

2023

2022

Generation

Consumer Solutions

Other Operations

Total continuing operations

Gross divestments of shares by segment

EUR million

2023

2022

Generation

1,212

Consumer Solutions

Other Operations

152

Total continuing operations

1,365

Comparable net assets by segment

EUR million

2023

2022

Generation

7,263

6,597

Consumer Solutions

838

1,365

Other Operations

840

775

Total continuing operations

8,941

8,737

Comparable return on net assets by segment

2023

2022

Generation

24.2

23.2

Consumer Solutions

4.5

9.1

Average number of employees

2023

2022

Generation

1,735

1,838

Consumer Solutions

1,232

1,177

Other Operations

2,237

2,106

Total continuing operations

5,205

5,120

126

Definitions and reconciliations of key figures

Alternative performance measures

Business

performance

Definition

Reason to use the measure

Reference to

reconciliation

Comparable

EBITDA

Operating profit + depreciations and

amortisations - items affecting

comparability

Comparable EBITDA is representing

the underlying cash flow generated by

the total Group and segments. Used as

a component in the capital structure

target of Financial net debt to

Comparable EBITDA.

Note 5 Capital

risk management

Comparable

operating profit

Operating profit - items affecting

comparability

Comparable operating profit is used in

financial target setting and forecasting,

management's follow up of financial

performance and allocation of

resources in the group's performance

management process.

Income statement

Items affecting

comparability

Impairment charges and reversals +

capital gains and other related items +

changes in fair values of derivatives

hedging future cash flow + other

Component used in calculating

comparable operating profit and

comparable EBITDA.

Income statement

Impairment

charges and

reversals

Impairment charges and related

provisions (mainly dismantling), as well

as the reversal of previously recorded

impairment charges. Impairment

charges are adjusted from depreciation

and amortisation, and reversals from

other income.

Component used in calculating

comparable operating profit and

comparable EBITDA.

Income statement

Capital gains

and other

related items

Capital gains and transaction costs

from acquisitions, which are adjusted

from other income and other expenses

respectively. Profits are reported in

comparable operating profit, if this

reflects the business model.

Component used in calculating

comparable operating profit and

comparable EBITDA.

Income statement

Changes in

fair values of

derivatives

hedging future

cash flow

Effects from financial derivatives

hedging future cash-flows where

hedge accounting is not applied or own

use exemption cannot be used

according to IFRS 9 and are adjusted

from other income or expenses to

sales and materials and services

respectively when calculating Fortum's

alternative performance measures.

Component used in calculating

comparable operating profit and

comparable EBITDA.

Income statement

Business

performance

Definition

Reason to use the measure

Reference to

reconciliation

Other

Restructuring and cost management

expenses, and other miscellaneous

non-operating items, which are

adjusted mainly from materials and

services or other expenses.

Component used in calculating

comparable operating profit and

comparable EBITDA.

Income statement

Comparable

share of

profit/loss of

associates and

joint ventures

Share of profit/loss of associates and

joint ventures +/- significant

adjustments for share of profit /loss in

associates and joint ventures.

Component used in calculating

comparable net profit and comparable

return on net assets.

Note 7

Comparable

operating profit

and comparable

net profit

Comparable

finance-costs -

net

Finance costs

–

net +/- return from

nuclear funds, nuclear fund adjustment

and unwinding of nuclear provisions +/-

fair value changes on financial items

+/- impairment charges and reversals

of previously recorded impairment

charges on financial items and other

onetime adjustments.

Component used in calculating

comparable net profit.

Note 7

Comparable

operating profit

and comparable

net profit

Comparable

profit before

income tax

Comparable operating profit +/-

comparable share of profit/loss of

associates and joint ventures +/-

comparable finance costs

–

net.

Subtotal in comparable net profit

calculation.

Note 7

Comparable

operating profit

and comparable

net profit

Comparable

income tax

expense

Income tax expense excluding taxes

on items affecting comparability,

adjustments to finance costs

–

net, tax

rate changes and other onetime

adjustments.

Component used in calculating

comparable net profit.

Note 7

Comparable

operating profit

and comparable

net profit

Comparable

net profit

Comparable operating profit +/-

comparable share of profit/loss of

associates and joint ventures +/-

comparable finance costs - net +/-

comparable income tax expense +/-

comparable non-controlling interests.

Comparable net profit is used to provide

additional financial performance

indicators to support meaningful

comparison of underlying net

profitability between periods.

Note 7

Comparable

operating profit

and comparable

net profit

127

Business

performance

Definition

Reason to use the measure

Reference to

reconciliation

Comparable

earnings per

Comparable net profit

Comparable earnings per share is used

to provide additional financial

performance indicators to support

meaningful comparison of underlying

net profitability between periods.

Note 7

Comparable

operating profit

and

comparable net

profit

Average number of shares during the

period

Comparable

return on net

assets, %

Comparable operating profit +

comparable share of profit/loss in

associates and joint ventures

x 100

Comparable return on net assets is

used in financial target setting and

forecasting, management's follow up of

financial performance and allocation of

resources in the group's performance

management process.

Note 6

Segment

reporting

Comparable net assets average

Adjustment for

Share of

profit/loss in

associates and

joint ventures

Adjustment for material items affecting

comparability.

Share of profit/loss in associates and

joint ventures is included in profit

component in the comparable return on

net assets calculation and the

adjustments are done based on similar

components as in Items affecting

comparability.

Note 6

Segment

reporting

Comparable

net assets

Non-interest-bearing assets - non-

interest-bearing liabilities - provisions

(non-interest-bearing assets and

liabilities do not include finance related

items, tax and deferred tax and assets

and liabilities from fair valuations of

derivatives used for hedging future

cash flows).

Comparable net assets is a component

in Comparable return on net assets

calculation where return on capital

allocated directly to the businesses is

measured.

Note 6

Segment

reporting

Capital

structure

Definition

Reason to use the measure

Reference to

reconciliation

Financial net

debt /

comparable

EBITDA

Financial net debt

Financial net debt to comparable

EBITDA is Fortum's long-term financial

target for capital structure.

Note 5 Capital

risk

management

Comparable EBITDA

Financial net

debt

Interest-bearing liabilities - liquid funds

- securities in interest-bearing

receivables +/- net margin

liabilities/receivables

Financial net debt is used in the follow-

up of the indebtedness of the group and

it is a component in the capital structure

target of Financial net debt to

Comparable EBITDA.

Note 26

Interest-bearing

liabilities

Capital

employed

Total assets - total non-interest bearing

liabilities

Capital employed is the book value of

the invested capital and it was used as

a component when calculating the

Return of capital employed in the group.

Note 6

Segment

reporting

Alternative performance measures excluding Russia

Capital

structure

Definition

Reason to use the measure

Reference to

reconciliation

Financial net

debt/comparable

EBITDA excl.

Russia

Financial net debt, excl. Russia

Financial net debt/comparable EBITDA

excluding Russia is an additional

financial performance indicator to

support meaningful comparison of the

capital structure for Fortum's strategic

businesses.

Note 5 Capital

risk

management

Comparable EBITDA from continuing

operations excl. Russia

Financial net

debt excl.

Russia

Financial net debt - Interest-bearing

liabilities, Russia + Liquid funds,

Russia

Financial net debt excluding Russia is

an additional financial performance

indicator to support meaningful

comparison in the follow-up of the

indebtedness of the group and it is a

component in the calculation of

Financial net debt to Comparable

EBITDA excluding Russia.

Note 5 Capital

risk

management

See



Note 1.4

Measures for performance and



Note 7

Comparable operating profit and

comparable net profit.

128

Other key figures

Share based key figures

Earnings per

share (EPS)

Profit for the period - non-controlling interests

Average number of shares during the period

Cash flow per

Net cash from operating activities

Average number of shares during the period

Equity per share

Shareholders' equity

Number of shares at the end of the period

Payout ratio, %

Dividend per share

x 100

Comparable earnings per share

Dividend yield, %

Dividend per share

x 100

Share price at the end of the period

Price/earnings

(P/E) ratio

Share price at the end of the period

Earnings per share

Average share

price

Amount traded in euros during the period

Number of shares traded during the period

Market

capitalisation

Number of shares at the end of the period x share price at the end of the period

Trading volumes

Number of shares traded during the period in relation to the weighted average number of shares

during the period

Other key figures

EBITDA

Operating profit + depreciations and amortisations

Funds from

operations (FFO)

Net cash from operating activities before change in working capital

Capital expenditure

Capitalised investments in property, plant and equipment and intangible assets including

maintenance, productivity, growth and investments required by legislation including borrowing

costs capitalised during the construction period. Maintenance investments expand the lifetime of

an existing asset, maintain usage/availability and/or maintains reliability. Productivity investments

improve productivity in an existing asset. Growth investments' purpose is to build new assets

and/or to increase customer base within existing businesses. Legislation investments are done at

certain point of time due to legal requirements.

Gross investments in

Investments in subsidiary shares, shares in associated companies and joint ventures and other

investments. Investments in subsidiary shares are net of liquid funds and grossed with interest-

bearing liabilities and other items included in financial net debt in the acquired company.

Return on

shareholders' equity

(ROE), %

Profit for the year

x 100

Total equity average

Gearing, %

Financial net debt

x 100

Total equity including non-controlling interests

Equity-to-assets

ratio, %

Total equity including non-controlling interests

x 100

Total assets

Interest coverage

Operating profit

Net interest expenses

Interest coverage

including capitalised

borrowing costs

Operating profit

Net interest expenses - capitalised borrowing costs

Average number of

employees

Average of the number of employees at the end of each calendar month during the period and at

the end of the previous period

129

Tax key figures

Effective income tax rate,%

Income tax expense

x 100

Profit before income tax

Comparable effective income

tax rate, %

Comparable income tax

x 100

Comparable profit before income tax

excluding comparable share of profit/loss

from associated companies and joint ventures

Weighted average applicable

income tax rate

Sum of the proportionately weighted share of profits before taxes of

each of the group’s

operating country multiplied by an applicable nominal tax rate of the respective

countries.

Sustainability key figures

Total GHG emissions (Scope

1-3), million CO

-eq tonnes

Sum of Fortum's Scope 1, 2 and 3 GHG emissions

Direct Scope 1 GHG

emissions, million CO

-eq

tonnes

Direct GHG emissions from sources owned or controlled by Fortum

Indirect location-based Scope 2

GHG emissions, million CO

-eq

tonnes

Indirect emissions from the generation of purchased or acquired electricity, steam, heat

and cooling consumed by Fortum

Scope 3 GHG emissions,

million CO

-eq tonnes

All indirect GHG emissions (not included in Scope 2 GHG emissions) that occur in

Fortum's value chain, including both upstream and downstream emissions. Scope 3

GHG emissions can be broken down into Scope 3 categories (1-15).

Specific CO

emissions from

total energy production,

gCO2/kWh

Direct CO2 emissions from energy production / produced energy (i.e. power and heat)

The share of coal of Fortum’s

revenues, %

Sum of power and heat revenue from coal and coal trading revenue / total revenue

The share of fossil fuels of

Fortum’s revenues, %

Sum of power and heat revenue from fossil fuels and gas trading revenue / total

revenue

Total Recordable Injury

Frequency (TRIF), own

personnel and contractors

Injuries per million working hours

EU Taxonomy Turnover KPI

Taxonomy-aligned or Taxonomy-eligible (not aligned) sales / total sales x 100.

Turnover is based on the sales reported on Fortum’s consolidated income statement.

EU Taxonomy Operating

expenses KPI

Taxonomy-aligned or Taxonomy-eligible (not aligned) operating expenses / total

operating expenses x 100. 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.

EU Taxonomy Capital

expenditure KPI

Taxonomy-aligned or Taxonomy-eligible (not aligned) capital expenditure / total capital

expenditure x 100. Capital expenditure consists of additions to property, plant and

equipment, intangible assets, right-of-use assets, as well as additions through business

combinations.

EU Taxonomy Capital

expenditure plan

The 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

130

Reconciliations of alternative performance measures

Comparable EBITDA

EUR million

Note

2023

2022

Operating profit

1,662

1,967

Depreciation and amortisation

359

415

EBITDA

2,021

2,381

Items affecting comparability

-118

-356

Comparable EBITDA

1,903

2,025

Comparable operating profit

EUR million

Note

2023

2022

Operating profit

1,662

1,967

Items affecting comparability

-118

-356

Comparable operating profit

1,544

1,611

Items affecting comparability

EUR million

Note

2023

2022

Impairment charges and reversals

Capital gains and other related items

785

Changes in fair values of derivatives hedging future cash flow

111

-376

Other

-52

Items affecting comparability

118

356

Comparable net profit

EUR million

Note

2023

2022

Net profit

1,515

2,084

Items affecting comparability

-118

-356

- Adjustments to share of profit/loss of associates and joint ventures

-52

145

- Adjustments to finance costs - net

- Adjustments to income tax expenses

-201

-836

Non-controlling interests

-1

-4

- Adjustments to non-controlling interests

-5

Comparable net profit

1,150

1,076

Comparable net profit from discontinued operations

-2,064

Comparable net profit, total Fortum

1,184

-988

Comparable earnings per share

Note

2023

2022

Comparable net profit from continuing operations, EUR million

1,150

1,076

Average number of shares during the period, 1 000 shares

897,264

889,204

Comparable earnings per share from continuing operations, EUR

1.28

1.21

Comparable net profit from discontinued operations, EUR million

-2,064

Average number of shares during the period, 1 000 shares

897,264

889,204

Comparable earnings per share from discontinued operations, EUR

0.04

-2.32

Comparable net profit, total Fortum, EUR million

1,184

-988

Average number of shares during the period, 1 000 shares

897,264

889,204

Comparable earnings per share, total Fortum, EUR

1.32

-1.11

Financial net debt

EUR million

Note

31 Dec 2023

31 Dec 2022

+ Interest-bearing liabilities

5,909

7,785

Liquid funds

4,183

3,919

- Collateral arrangement

325

527

Margin receivables

590

2,607

Margin liabilities

131

352

+/- Net margin liabilities/receivables

-459

-2,255

Financial net debt

942

1,084

Financial net debt/comparable EBITDA

EUR million

Note

Continuing

operations

2023

2022

+ Interest-bearing liabilities

5,909

7,785

Liquid funds

4,183

3,919

- Collateral arrangement

325

527

Margin receivables

590

2,607

Margin liabilities

131

352

+/- Net margin liabilities/receivables

-459

-2,255

Financial net debt

942

1,084

- Interest-bearing liabilities, Russia

204

+ Liquid funds, Russia

247

Financial net debt excl. Russia

1,127

Operating profit

1,662

1,967

Depreciation and amortisation

359

415

EBITDA

2,021

2,381

Items affecting comparability

-118

-356

Comparable EBITDA

1,903

2,025

- Comparable EBITDA, Russia

411

Comparable EBITDA from continuing operations excl. Russia

2,436

Financial net debt/comparable EBITDA, excl. Russia

0.5

0.6

Financial net debt/comparable EBITDA

0.4

131

Reconciliation of alternative performance measures

excluding Russia

Financial net debt/comparable EBITDA excl. Russia

EUR million

2022

Financial net debt

1,084

- Interest-bearing liabilities, Russia

204

+ Liquid funds, Russia

247

Financial net debt excl. Russia

1,127

Comparable EBITDA from continuing operations excl. Russia

2,025

Financial net debt/comparable EBITDA excl. Russia

0.6

Interest-bearing liabilities excl. Russia

EUR million

31 Dec 2022

Interest-bearing liabilities

7,785

- Interest-bearing liabilities, Russia

204

Interest-bearing liabilities excl. Russia

7,581

Liquid funds excl. Russia

EUR million

31 Dec 2022

Liquid funds

3,919

- Liquid funds, Russia

247

Liquid funds excl. Russia

3,672

132

Parent company financial

statements, Finnish

GAAP (FAS)

Income statement

EUR

Note

2023

2022

Sales

144,713,777

150,270,878

Other income

13,055,373

25,066,880

Employee benefits

-53,437,342

-58,824,730

Depreciation, amortisation and write-downs

-15,988,129

-10,984,728

Other expenses

-141,545,828

-148,946,872

Operating loss

-53,202,149

-43,418,572

Financial income and expenses

1,808,907,989

1,629,174,418

Profit before appropriations and income tax

1,755,705,840

1,585,755,846

Appropriations

509,100

-1,023,551

Group contributions received

204,740,000

24,013,000

Profit before income tax

1,960,954,941

1,608,745,295

Income tax expense

-38,082,254

-66,011,056

Profit for the year

1,922,872,686

1,542,734,239

1) Taxable profits transferred from Finnish subsidiaries.

133

Balance sheet

EUR

Note

31 Dec 2023

31 Dec 2022

ASSETS

Non-current assets

Intangible assets

16,581,368

29,993,944

Property, plant and equipment

3,266,489

5,350,975

Shares in Group companies

13,865,677,978

14,232,843,131

Interest-bearing receivables from Group companies

5,731,846,207

12,060,281,161

Interest-bearing receivables from associated companies

1,592,410

Other non-current assets

209,997

Derivative financial instruments

13, 14

131,679,649

123,889,406

Deferred tax assets

1,588,824

649,741

Total non-current assets

19,750,850,516

26,454,810,764

Current assets

Other current receivables from Group companies

239,602,839

51,234,101

Other current receivables from associated companies

62,012

140,737

Derivative financial instruments

13, 14

335,380,705

145,296,548

Other current receivables

197,233,137

50,446,974

Cash and cash equivalents

4,131,705,497

3,603,509,216

Total current assets

4,903,984,190

3,850,627,576

Total assets

24,654,834,706

30,305,438,341

EUR

Note

31 Dec 2023

31 Dec 2022

EQUITY

Shareholders' equity

Share capital

3,046,185,953

Share premium

2,821,690,902

Hedging reserve

13,698,987

23,685,963

Retained earnings

5,474,764,945

4,748,541,369

Profit for the year

1,922,872,686

1,542,734,239

Total equity

13,279,213,474

12,182,838,426

Accumulated appropriations

1,424,346

1,933,447

Provisions for liabilities and charges

486,167

LIABILITIES

Non-current liabilities

External interest-bearing liabilities

11, 13, 14

4,043,889,936

3,037,907,935

Interest-bearing liabilities to Group companies

5,609,325,007

10,741,043,062

Interest-bearing liabilities to associated companies

232,341,184

228,962,461

Derivative financial instruments

13, 14

99,107,901

130,472,330

Other non-current liabilities

6,820,284

16,274,932

Total non-current liabilities

9,991,484,313

14,154,660,720

Current liabilities

External interest-bearing liabilities

933,853,860

3,558,361,054

Trade and other payables to Group companies

31,494,526

41,408,137

Trade and other payables to associated companies

14,761,450

1,239,200

Derivative financial instruments

13, 14

261,688,391

178,618,112

Trade and other payables

140,428,178

186,379,244

Total current liabilities

1,382,226,406

3,966,005,747

Total liabilities

11,373,710,719

18,120,666,468

Total equity and liabilities

24,654,834,706

30,305,438,341

134

Cash flow statement

EUR 1,000

2023

2022

Cash flow from operating activities

Profit for the year

1,922,873

1,542,734

Adjustments:

Income tax expense

38,082

66,011

Group contributions

-204,740

-24,013

Finance costs - net

-1,808,908

-1,629,174

Depreciation, amortisation, write-downs and appropriations

15,479

12,008

Operating profit before depreciation (EBITDA)

-37,214

-32,434

Non-cash flow items

513

-395

Interest and other financial income received

535,091

102,767

Interest and other financial expenses paid

-476,789

-149,150

Dividends received

2,666,297

2,899,861

Group contributions received

24,013

235,685

Realised foreign exchange gains and losses

-153,406

386,715

Income taxes paid

-101,571

-804

Funds from operations

2,456,935

3,442,245

Other short-term receivables increase(-)/decrease(+)

2,832

-883

Other short-term payables increase(+)/decrease(-)

-32,077

9,424

Change in working capital

-29,245

8,541

Net cash from operating activities

2,427,690

3,450,786

Cash flow from investing activities

Capital expenditures

167

-7,465

Acquisition of shares and capital contributions in subsidiaries

-500,070

-2,660,412

Acquisition of other shares

-48

Proceeds from sales of shares

594

3,006,437

Proceeds from sales of property, plant and equipment

Change in interest-bearing receivables and other non-current assets

6,193,527

-4,921,996

Net cash used in investing activities

5,694,287

-4,583,431

Cash flow before financing activities

8,121,977

-1,132,645

EUR 1,000

2023

2022

Cash flow from financing activities

Proceeds from long-term liabilities

1,675,026

2,400,059

Payment of long-term liabilities

-1,601,857

-5,860,140

Change in cashpool liabilities

-5,131,718

5,173,574

Change in short-term liabilities

-1,718,510

-204,716

Dividends paid

-816,722

-1,012,830

Net cash from financing activities

-7,593,781

495,947

Net increase(+)/decrease(-) in liquid funds

528,196

-636,698

Liquid funds at the beginning of the year

3,603,509

4,240,207

Liquid funds at the end of the year

4,131,705

3,603,509

135

Notes to the Parent Company

Financial Statements, FAS

1 Accounting policies and principles

The financial statements of Fortum Oyj for the year ended 31 December 2023 are prepared in

accordance with Finnish Accounting Standards (FAS).

1.1 Sales

Sales include sales revenue from actual operations and exchange rate differences on trade

receivables, less discounts and indirect taxes such as value added tax.

1.2 Other income

Other income includes gains on the sales of property, plant and equipment and shareholdings, as

well as all other operating income not related to the sales of products or services, such as rents.

1.3 Foreign currency items and derivative instruments

Transactions denominated in foreign currencies have been valued using the exchange rate at the

date of the transaction. Receivables and liabilities denominated in foreign currencies outstanding on

the balance sheet date have been valued using the exchange rate quoted on the balance sheet

date. Exchange rate differences have been entered in the financial net in the income statement.

Fortum Oyj enters into derivative contracts mainly for hedging foreign exchange and interest rate

exposures in Fortum Group.

Fortum Oyj applies IFRS 9 Financial Instruments standard for derivative instruments and hedge

accounting in statutory financial statements. Accounting principles on financial derivatives, see



Note 4

Financial risk management,



Note 14

Financial assets and liabilities by categories and



Note 15

Financial assets and liabilities by fair value hierarchy in the Consolidated financial

statements.

1.4 Income taxes

Income taxes presented in the income statement consist of accrued taxes for the financial year and

tax adjustments for prior years.

1.5 Shares in group companies

The balance sheet value of shares in group companies consists of historical costs less write-downs.

If the estimated future cash flows generated by a non-current asset are expected to be permanently

lower than the carrying amount, an adjustment to the value is made to write-down the difference as

an expense. If the basis for the write-down can no longer be justified at the balance sheet date, it is

reversed.

1.6 Intangible assets and property, plant and equipment

The balance sheet value of intangible assets and property, plant and equipment consists of

historical costs less depreciation and possible write-downs. Intangible assets and property, plant

and equipment are depreciated using straight-line depreciation based on the expected useful life of

the asset.

The depreciation is based on the following expected useful lives:

Machinery and equipment

–

5 years

Intangible assets

–

10 years

1.7 Pension expenses

Pension obligations are covered through a compulsory pension insurance policy or pension fund.

Costs for pension fund are recorded in the income statement based on contributions paid pursuant

to the Finnish pension laws and regulations.

1.8 Long-term incentive programmes

Costs related to the long-term incentive plans are accrued over the earnings period and the related

liability is booked to the balance sheet.

1.9 Provisions

Foreseeable future expenses and losses that have no corresponding revenue to which Fortum is

committed or obliged to settle, and whose monetary value can be reasonably assessed, are entered

as expenses in the income statement and included as provisions on the balance sheet.

2 Sales by market area

EUR 1,000

2023

2022

Finland

74,785

72,501

Other countries

69,929

77,770

Total

144,714

150,271

3 Other income

EUR 1,000

2023

2022

Rental and other income

13,055

25,067

Total

13,055

25,067

136

4 Employee benefits

EUR 1,000

2023

2022

Personnel expenses

Wages, salaries and remunerations

39,832

46,185

Indirect employee costs

Pension costs

8,048

7,906

Other indirect employee costs

1,527

1,593

Other personnel expenses

4,030

3,140

Total

53,437

58,825

2023

2022

EUR 1,000

Markus

Rauramo,

President

and CEO

Markus

Rauramo,

President

and CEO

Compensation for the President and CEO

Salaries and fringe benefits

1,613

1,549

Long-term incentives

798

816

Pensions (statutory)

280

271

Pensions (voluntary)

315

Social security expenses

Total

3,064

3,004

EUR 1,000

2023

2022

Compensation for the Board of Directors

836

1,039

The compensation above is presented on accrual basis. Paid salaries and remunerations for the

President and CEO Markus Rauramo were EUR 1,617 thousand (2022: 2,384).

On 6 September 2022, Fortum announced that it had agreed with the Finnish State on a bridge

financing arrangement. In accordance with the Solidium bridge financing facility with the Finnish State,

Fortum Leadership Team members will not be paid any short- or long-term incentives that are

accumulated in 2022 and 2023, nor can they participate in 2023 ESS plan. In addition, FLT members

have also voluntarily waived the shares that are not subject to restrictions of the bridge financing facility

and that are scheduled for delivery in spring 2024. However, costs for these plans are accrued over the

vesting period.

For the President and CEO Markus Rauramo the retirement age is determined in accordance with

the Finnish Employees’ Pension Act. The pension obligations are covered through insurance company.

Board members are not in an employment relationship or service contract with Fortum, and they are

not given the opportunity to participate in Fortum’s STI or LTI programme, nor does Fortum have a

pension plan that they can opt to take part in. The compensation of the board members is not tied to the

sustainability performance of the Group.

See



Note 10

Employee benefits and Board remuneration and



Note 30

Pension obligations in

the

Consolidated financial statements.

2023

2022

Average number of employees

459

410

5 Auditor's fees

EUR 1,000

2023

2022

Audit fees

338

794

Audit-related assignments

241

Tax assignments

Total

637

879

Deloitte Oy is the appointed auditor until the next Annual General Meeting, to be held in 2024. Audit

fees include fees for the audit of the consolidated financial statements, review of the interim reports

as well as the fees for the audit of Fortum Oyj. Audit-related assignments include fees for assurance

of sustainability reporting and other assurance and associated services related to the audit.

6 Financial income and expenses

EUR 1,000

2023

2022

Dividend income from group companies

2,666,297

2,899,861

Interest and other financial income from group companies

436,139

103,408

Interest and other financial income from associated companies

Loss/Gain on sale of shares to other group companies

-15,240

2,902,283

Write-downs of participations in group companies

-856,963

-4,500,000

Interest and other financial income

133,942

1,526

Exchange rate differences

-28,700

385,052

Changes in fair values of derivatives

-6,734

-685

Interest and other financial expenses to group companies

-313,595

-40,130

Interest and other financial expenses

-206,303

-122,150

Total

1,808,908

1,629,174

Interest income

559,086

97,653

Interest expenses

-504,798

-165,300

Interest costs - net

54,287

-67,647

Gain on sales of shares to other group companies of EUR 2,902 million in 2022 related to internal

restructurings in Swedish subsidiaries.

Due to the loss of control of the Russian operations in April, Fortum Oyj wrote down shares in

subsidiaries amounting to EUR 857 million. Due to the divestment of Uniper shares, Fortum Oyj

wrote down shares in subsidiaries amounting to EUR 4,500 million in 2022.

137

7 Income tax expense

EUR 1,000

2023

2022

Taxes on regular business operations

-2,866

61,208

Taxes on group contributions

40,948

4,803

Total

38,082

66,011

Current taxes for the period

41,514

65,628

Current taxes for prior periods

-61

Changes in deferred tax

-3,506

444

Total

38,082

66,011

8 Non-current assets

Intangible assets

EUR 1,000

Total

Cost 1 January 2023

64,156

Additions

8,248

Disposals

-20,557

Cost 31 December 2023

51,847

Accumulated depreciation 1 January 2023

34,170

Disposals

-13,693

Depreciation for the year

14,795

Accumulated depreciation 31 December 2023

35,272

Carrying amount 31 December 2023

16,575

Carrying amount 31 December 2022

29,986

Property, plant and equipment

EUR 1,000

Machinery

and

equipment

Advances

paid and

con-

struction

progress

Total

Cost 1 January 2023

9,904

3,472

13,376

Additions and transfers between categories

2,290

870

3,158

Disposals

-180

-3,955

-4,136

Cost 31 December 2023

12,014

386

12,398

Accumulated depreciation 1 January 2023

8,025

Disposals

-84

Depreciation for the year

1,191

Accumulated depreciation 31 December 2023

9,132

Carrying amount 31 December 2023

2,882

386

3,266

Carrying amount 31 December 2022

1,879

3,472

5,351

Investments

EUR 1,000

in Group

companies

Partici-

pation in

associated

companies

Re-

ceivables

from Group

companies

Re-

ceivables

from

associated

companies

Other

non-

current

assets

Total

Cost 1 January 2023

19,877,853

5,656

12,060,281

16,868

8,192

31,968,851

Additions

505,631

Disposals

-15,833

-6,328,435

-6,344,268

Cost 31 December 2023

20,367,651

5,656

5,731,846

16,868

8,192

26,130,214

Accumulated write-downs

1 January 2023

5,645,010

5,656

15,276

7,982

5,673,925

Impairment charges

856,963

1,592

858,555

Accumulated write-

downs 31 December 2023

6,501,973

5,656

16,868

7,982

6,532,480

Carrying amount 31 December 2023

13,865,678

5,731,846

210

19,597,735

Carrying amount 31 December 2022

14,232,843

12,060,281

1,592

210

26,294,927

1) Additions regarding shares mainly comprise capital contributions.

9 Other current receivables

EUR 1,000

2023

2022

Other current receivables from group companies

Trade receivables

14,564

18,862

Group contribution and other receivables

204,740

24,013

Accrued income and prepaid expenses

20,299

8,359

Total

239,603

51,234

Other current receivables

Trade receivables

-2,778

589

Other receivables

176,673

40,146

Accrued income and prepaid expenses

23,338

9,712

Total

197,233

50,447

See



Note 4.2

Liquidity and refinancing risk in the Consolidated financial statements.

138

10 Changes in shareholders' equity

EUR 1,000

capital

premium

Hedging

reserve

Retained

earnings

Total

1 January 2023

3,046,186

2,821,691

23,686

6,291,276

12,182,838

Cash dividend

-816,511

Change in hedging reserve

-9,987

Profit for the year

1,922,873

31 December 2023

3,046,186

2,821,691

13,699

7,397,638

13,279,213

1 January 2022

3,046,186

2,821,691

-13,279

5,761,197

11,615,794

Cash dividend

-1,012,656

Change in hedging reserve

36,966

Profit for the year

1,542,734

31 December 2022

3,046,186

2,821,691

23,686

6,291,276

12,182,838

EUR 1,000

2023

2022

Distributable funds

Retained earnings 31 December

7,397,638

6,291,276

Total

7,397,638

6,291,276

11 Interest-bearing liabilities

EUR 1,000

2023

2022

External interest-bearing loans

Bonds

2,735,958

1,544,821

Loans from financial institutions

589,142

803,703

Other long-term interest-bearing loans

718,790

689,384

Total long-term interest-bearing loans

4,043,890

3,037,908

Current portion of long-term bonds

1,089,647

Current portion of loans from financial institutions

716,869

516,849

Other short-term interest-bearing loans

216,985

1,951,865

Total short-term interest-bearing loans

933,854

3,558,361

Total

4,977,744

6,596,269

Maturity of external interest-bearing loans

EUR 1,000

2023

2024

933,854

2025

508,915

2026

746,999

2027

16,869

2028

520,473

2029 and later

2,250,634

Total

4,977,744

See



Note 4.2

Liquidity and refinancing risk and



Note 26

Interest-bearing liabilities in the

Consolidated financial statements.

External interest-bearing loans due after five years

EUR 1,000

2023

2022

Bonds

1,502,223

734,765

Other long-term loans

748,410

735,813

Total

2,250,633

1,470,578

1) Excludes loans to Group and associated companies.

Other interest-bearing loans due after five years

EUR 1,000

2023

2022

Interest-bearing loans to associated companies

232,341

228,962

Total

232,341

228,962

Non-discounted cash flows of interest-bearing loans and their maturities, see



Note 13

Financial

derivatives.

12 Trade and other payables

EUR 1,000

2023

2022

Trade and other payables to group companies

Trade payables

1,411

4,828

Deposits from group companies and other liabilities

29,494

29,429

Accruals and deferred income

590

7,151

Total

31,495

41,408

Trade and other payables to associated companies

Accruals and deferred income

14,761

1,239

Total

14,761

1,239

Trade and other payables

Trade payables

26,939

22,014

Other liabilities

4,543

4,193

Accruals and deferred income

108,946

160,172

Total

140,428

186,379

139

13 Financial derivatives

Interest rate and currency derivatives by instrument 2023

Notional amount

Fair value

Remaining lifetimes

EUR 1,000

Under 1

year

–

5 years

Over

5 years

Total

Positive

Negative

Net

Hedge accounting

Foreign exchange derivatives

248,273

248,364

496,637

18,185

18,042

143

Interest rate swaps

100,000

1,300,000

1,575,000

2,975,000

113,982

83,107

30,876

Cross currency swaps

46,957

73,304

120,261

2,739

385

2,354

Non-hedge accounting

Foreign exchange derivatives

16,216,063

497,166

16,713,229

330,209

259,263

70,947

Interest rate swaps

13,518

820

Cross currency swaps

23,656

1,125

Total

16,611,293

2,156,008

1,575,000

20,342,301

467,060

360,796

106,264

Of which long-term

131,680

99,108

32,572

Short-term

335,381

261,688

73,692

Interest rate and currency derivatives by instrument 2022

Notional amount

Fair value

Remaining lifetimes

EUR 1,000

Under 1

year

–

5 years

Over

5 years

Total

Positive

Negative

Net

Hedge accounting

Foreign exchange derivatives

3,323,927

215,003

3,538,930

27,455

12,494

14,961

Interest rate swaps

739,914

825,000

1,350,000

2,914,914

111,748

120,462

-8,714

Cross currency swaps

75,638

2,616

Non-hedge accounting

Foreign exchange derivatives

19,270,706

343,403

19,614,110

124,498

176,135

-51,636

Interest rate swaps

17,983

13,487

31,470

1,687

Cross currency swaps

23,656

1,181

Total

23,352,530

1,496,188

1,350,000

26,198,717

269,186

309,090

-39,904

Of which long-term

123,889

130,472

-6,583

Short-term

145,297

178,618

-33,322

Maturity analysis of financial liabilities and derivatives

Interest-bearing loans and lease liabilities are the contractual undiscounted cash flows including

principal and interest payments. Trade payables equal the carrying amount as these are due within

12 months. For gross settled derivatives, the contractual nominal amounts are presented below and

for net settled interest rate swaps the net cash outflows are presented in the table.

2023

2022

EUR 1,000

Under

1 year

–

5 years

Over 5

years

Total

Under

1 year

–

5 years

Over 5

years

Total

Non-derivatives

Interest-bearing loans,

principal and interest

payments

1,144,177

2,249,103

2,861,359

6,254,639

3,768,717

1,812,840

2,114,899

7,696,457

Lease liabilities

4,565

11,106

15,671

4,292

13,482

17,775

Trade payables

26,939

22,014

Total non-derivatives

1,175,681

2,260,209

2,861,359

6,297,250

3,795,023

1,826,322

2,114,899

7,736,246

Derivatives

Foreign exchange

derivatives and cross

currency swaps

Cash inflow (-)

-16,838,106

-862,173

-17,700,279

-21,546,512

-662,393

-22,208,905

Cash outflow

16,763,336

858,836

17,622,172

21,588,251

662,024

22,250,275

Interest rate swap

liabilities (net settled)

36,493

50,963

-283

87,172

20,282

97,618

14,600

132,500

Total derivatives

-38,277

47,626

-283

9,065

62,022

97,248

14,600

173,870

Interest-bearing loans include loans from the State Nuclear Waste Management Fund and

Teollisuuden Voima Oyj of EUR 951 million (2022: 918). These loans are renewed every

three years and the related interest payments are calculated for ten years in the table above.

140

14 Derivatives and liabilities by fair value hierarchy

Fair value measurements are classified using a fair value hierarchy, i.e. Level 1, Level 2 and Level

3 that reflects the significance of the inputs used in making the measurements. For further

information see accounting principles in the consolidated financial statements



Note 15

Financial

assets and liabilities by fair value hierarchy.

Derivatives at fair value in financial assets

Level 1

Level 2

Level 3

Total

EUR 1,000

2023

2022

2023

2022

2023

2022

2023

2022

In non-current assets

Derivative financial

instruments

Interest rate and currency

derivatives

Hedge accounting

122,444

118,061

122,444

118,061

Non-hedge accounting

9,235

5,829

9,235

5,829

In current assets

Derivative financial

instruments

Interest rate and currency

derivatives

Hedge accounting

12,462

23,759

12,462

23,759

Non-hedge accounting

322,919

121,538

322,919

121,538

Total

467,060

269,187

467,060

269,187

Derivatives and liabilities at fair value in financial liabilities

Level 1

Level 2

Level 3

Total

EUR 1,000

2023

2022

2023

2022

2023

2022

2023

2022

In non-current liabilities

Interest-bearing liabilities

973,343

580,256

973,343

580,256

Derivative financial

instruments

Interest rate and currency

derivatives

Hedge accounting

92,961

122,810

92,961

122,810

Non-hedge accounting

6,147

7,662

6,147

7,662

In current liabilities

Derivative financial

instruments

Interest rate and currency

derivatives

Hedge accounting

8,573

10,146

8,573

10,146

Non-hedge accounting

253,116

168,472

253,116

168,472

Total

1,334,139

889,346

1,334,139

889,346

1) Fair valued part of bond in the fair value hedge relationship.

Net fair value amount of interest rate and currency derivatives was EUR 106 million (2022: -40),

including assets EUR 467 million (2022: 269) and liabilities, EUR 361 million (2022: 309). Fortum

Corporation has cash collaterals based on Credit Support Annex agreements with some

counterparties. At the end of December 2023, Fortum had received EUR 42 million and paid EUR

176 million from foreign exchange and interest rate derivatives under Credit Support Annex

agreements.

15 Contingent liabilities and other commitments

EUR 1,000

2023

2022

On own behalf

Other contingent liabilities

982

1,339

On behalf of group companies

Guarantees

924,061

1,037,997

On behalf of associated companies

Guarantees

1,076,389

1,160,536

On behalf of others

Guarantees

937,559

Total

2,001,432

3,137,431

In 2021 Fortum signed an EUR 8 billion credit facility agreement with Uniper comprising tranches

for both a shareholder loan and a parent company guarantee. The shareholder loan, EUR 4 billion,

was repaid on 21 December 2022 on completion of the transaction to sell Uniper to the German

State. Out of the EUR 4.0 billion parent company guarantee facility that Fortum Oyj had granted to

Uniper, a total of EUR 3.0 billion was released by year-end 2022. The remaining, approximately

EUR 1.0 billion, was released at the end of June 2023.

Operating lease commitments

EUR 1,000

2023

2022

Due within one year

6,022

5,946

Due after one year and within five years

14,468

17,979

Total

20,490

23,925

16 Related party transactions

At the end of 2023, the Finnish State owned 51.26%

of the company’s shares (2022: 51.26%). 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. 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%.

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,

141

including the right to dividend, as of the registration date. As a consequence, the proportion of

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

In March 2023, Fortum repaid EUR 350 million of the Solidium bridge loan and cancelled the

entire EUR 2,350 million bridge loan facility. Total interest expenses and fees relating to the bridge

loan facility amounting to EUR 105 million (2023: 56 and 2022: 49) were recognised in Financial

expenses.

See also



Note 37

Related party transactions in the Consolidated financial statements.

Investments in group companies, associated companies and other

holdings

No. of shares

Holding %

units

Investments in group companies

Fortum Waste Solutions Oy

Finland

3,520,800

100.00

Fortum Heat and Gas Oy

Finland

2,000,000

100.00

Fortum Clean Oy

Finland

100

100.00

Fortum Norm Oy

Finland

250

100.00

Fortum Power and Heat Oy

Finland

91,197,543

100.00

Fortum Real Estate Oy

Finland

2,000,000

100.00

Fortum TwoGether Oy

Finland

100

100.00

Fortum Holding B.V.

Netherlands

61,062

100.00

Fortum Energy Holding B.V.

Netherlands

100

100.00

Fortum India Private Ltd

India

0.10

Fortum Finance Ireland Designated Activity Company

Ireland

992,557

100.00

Fortum Sweden AB

Sweden

500,000

50.00

Fortum Power AB

Sweden

100

100.00

Investments in associated companies

Wello Oy

Finland

1,100,000

16.25

Other holdings

AW-Energy Oy

Finland

2,854,688

3.43

Clic Innovation Oy

Finland

100

3.40

East Office of Finnish Industries Oy

Finland

5.88

Green Industry Park Oy

Finland

19.00

Prototype Carbon Fund

USA

N/A

17 Events after the balance sheet date

On 26 January 2024, Fortum announced that as part of the efficiency programme launched in

November 2023, Fortum’s Consumer Solutions business unit and the IT

unit are conducting change

negotiations on possible redundancies. In total, the negotiations concern some 1,080 employees in

Finland, Sweden, Norway, and the IT unit in Poland. According to a preliminary estimate, change

negotiations could result in the redundancies of a maximum of 130 job positions.

142

Signatures for the operating and financial review and

financial statements

Espoo, 6 February 2024

Mikael Silvennoinen

Essimari Kairisto

Ralf Christian

Luisa Delgado

Jonas Gustavsson

Marita Niemelä

Teppo Paavola

Maija Strandberg

Johan Söderström

Vesa-Pekka Takala

Markus Rauramo

President and CEO

he auditor’s note

Our

auditor’s report has been issued today.

Espoo, 6 February 2024

Deloitte Oy

Audit Firm

Jukka Vattulainen

Authorised Public Accountant (KHT)

143

Auditor’s report

(Translation of the Finnish original)

To the Annual General Meeting of Fortum Oyj

Report on the Audit of the

Financial Statements

Opinion

We have audited the financial statements of Fortum Oyj (business identity code 1463611-4) for the

year ended 31 December, 2023. The financial statements comprise the consolidated income

statement, consolidated statement of comprehensive income, consolidated balance sheet,

consolidated statement of changes in total equity, consolidated cash flow statement and notes to

the consolidated financial statements, including material accounting policies, as well as the parent

company’s income statement, balance sheet

, cash flow statement and notes to the financial

statements.

In our opinion

•

the consolidated financial statements give a true and fair view of the group’s financial position,

financial performance and cash flows in accordance with IFRS Accounting Standards as adopted

by the EU,

•

the financial statements give a true and fair view of the parent company’s financial performance

and financial position in accordance with the laws and regulations governing the preparation of

financial statements in Finland and comply with statutory requirements.

Our opinion is consistent with the additional report submitted to the Audit Committee.

Basis for Opinion

We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities

under good auditi

ng practice are further described in the Auditor’s Responsibilities for the Audit of

the Financial Statements section of our report.

We are independent of the parent company and of the group companies in accordance with the

ethical requirements that are applicable in Finland and are relevant to our audit, and we have

fulfilled our other ethical responsibilities in accordance with these requirements.

In our best knowledge and understanding, the non-audit services that we have provided to the

parent company and group companies are in compliance with laws and regulations applicable in

Finland regarding these services, and we have not provided any prohibited non-audit services

referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we have provided

have been disclosed in note 8 to the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in

our audit of the financial statements of the current period. These matters were addressed in the

context of our audit of the financial statements as a whole, and in forming our opinion thereon, and

we do not provide a separate opinion on these matters.

We have also addressed the risk of management override of internal controls. This includes

consideration of whether there was evidence of management bias that represented a risk of

material misstatement due to fraud.

144

Key audit matter

How our audit addressed the key audit matter

Discontinued operations

–

Russia

Refer to Notes 1, 2, 3 and 19

•

Control over Fortum’s Russian operations was lost on 25 April 2023 following the Russian Presidential decree No.

302. The decree triggered a control assessment as required by IFRS 10 Consolidated financial statements. Based

on the assessment, Fortum’s righ

ts are no longer substantive as it does not have practical ability to use control

over its Russian operations. Consequently, in 2023 Fortum’s Russia segment was deconsolidated, and classified

as discontinued operations as required by IFRS 5 Noncurrent assets held for sale and discontinued operations.

•

The deconsolidation of Russian operations in 2023 resulted in EUR 3.6 billion one-time, non-cash negative effect.

The amount consists of the full write-down of the Russian assets of EUR 1.7 billion, and EUR 1.9 billion negative

cumulative translation differences previously recognised in equity. These cumulative translation differences are

recycled from equity to profit and loss on deconsolidation according to IFRS. Comparative financial information for

2022 were restated for income statement and cash flow statement, so that on the comparative information for

2022 considers Fortum’s continuing operations, without dis

continued operations. The consolidated balance sheet

at 31 December 2022 included Russia segment.

•

The accounting treatment for discontinued operations is a key audit matter, because the accounting treatment for

changes in the group structure and the classification of discontinued operations and businesses for sale in

accordance with IFRS 5 involves management judgment and the changes have a material impact on the financial

statements.

Our audit procedures have consisted e.g. the following amongst others:

•

We gain an understanding of the group's accounting principles related to

discontinued operations.

•

Regarding the discontinued operations, we evaluated how management has

applied accounting principles and assumptions related to accounting practices in

accordance with IFRS 10 Consolidated Financial Statements standard and IFRS 5

Non-current assets held for sale and discontinued operations standard.

•

Regarding deconsolidation, we tested the impairment determined by management

and the effect of the transaction on the income statement and balance sheet

based on the transaction which occurred.

•

We evaluated the appropriate presentation of discontinued operations in the

financial statements in accordance with the IFRS 5 Non-current assets held for

sale and discontinued operations standard.

Fair value measurements of derivatives and hedge accounting

Refer to Notes 4, 7, 14 and 15

•

In Fortum’s consolidated financial statements total derivative assets amounts to EUR 605 million (

EUR 1,829

million) and total derivative liabilities amounts to EUR 1,273 million (EUR 4,729 million). The net effect of changes

in fair values of derivatives hedging future cash flow amounts to EUR 111 million (EUR -376 million) in items

affecting comparability in the consolidated income statement and the cash flow hedges in other equity components

amount to EUR -337 million (EUR -2,182 million).

•

Fair value measurement of derivatives and hedge accounting is a key audit matter because the fair value and

changes in fair values of derivative financial instruments may have significant impacts on Fortum´s financial

statements. Fortum's business is exposed to fluctuations in prices and volume of commodities used in the

production and sales of energy products. The main exposure is toward energy prices. Electricity price risk is

hedged by entering into electricity derivative contracts. Fortum uses derivative instruments to reduce the effect of

electricity price volatility.

•

Our audit procedures included the assessment of Fortum's internal controls related

to derivative transactions, hedging activities and the determination of fair values.

•

We have assessed the appropriateness of the valuation models used by Fortum,

including the assumptions used in the models. We have validated model input data

with observable external information.

•

We have conducted audit procedures regarding the existence and completeness

of open derivative contracts.

•

We have assessed the appropriateness of accounting application according to the

requirements of IFRS 9.

•

We have assessed the appropriate presentation of derivatives in the consolidated

financial statements.

145

Key audit matter

How our audit addressed the key audit matter

Valuation of property, plant and equipment and goodwill

Refer to Notes 1, 2, 16, 17 and 19.

•

The consolidated balance sheet includes property, plant and equipment and goodwill amounting to EUR 6,861 million

(EUR 7,516 million).

•

At the end of each reporting period management has to assess whether there is any indication that assets may be

impaired. If any such indication exists, the recoverable amount of the asset is estimated. Goodwill is subject to an

annual impairment test.

•

The main assumptions used in the valuation of energy and heat production property, plant and equipment and

goodwill relate to the estimated future operating cash flows and the discount rates that are used in calculating the

present value.

•

The potential indicators for impairment are among other things changes in electricity and fuel prices, changes in the

projected impacts of climate-change, changes in regulatory/political risks relating to energy taxes, and price

regulations, limitations to the lifetime of assets as well as climate-related transition risks and physical risks.

Furthermore, the geopolitical situat

ion have had further negative impacts to the valuation of Fortum’s Russia

operations.

•

The assumptions used in the valuation of the balances in question require substantial management judgment, and

thus this is a key audit matter.

•

We have evaluated the process of how management has assessed the indicators for

potential impairment. We have performed audit procedures on impairment models.

•

We have obtained entity’s impairment testing documentation for goodwill and energy

production assets and tested and evaluated the rationale of key assumptions applied

by management on a sample basis, including commodity price forecasts, profit and

cash flow forecasts, terminal values, foreign exchange rates and the selection of

discount rates.

•

We have compared, that the forecasts used in the impairment testing calculations

are based on forecasts approved by management.

•

We challenged management’s assumptions and judgments with reference to

historical data and, where applicable, external benchmarks.

•

We assessed the models used in the impairment testing and carried out our testing

for the sensitivity calculations.

•

We have assessed management’s assessment of climate change impact to Fortum’s

business and how this has been taken into account in determining the cashflows

used in impairment testing.

•

We assessed the adequacy of related disclosures in the financial statements.

Shares in Nuclear Waste Funds and Nuclear provisions

Refer to Notes 2 and 28.

•

Fortum’s balance sheet includes Nuclear related

provisions amounting to EUR 1 058 million (EUR 966 million) and

Fortum’s share of the Nuclear Waste Management Fund amounting to EUR 1 058 million (EUR 966

million).

•

Fortum's nuclear related provisions and the related part of the Nuclear Waste Management Fund are both presented

separately in the balance sheet as disclosed in note 28.

•

Fortum’s share in the State Nuclear Waste Management Fund is accounted for according to IFRIC 5, Rights to

interests arising from decommissioning, restoration and environmental rehabilitation funds which states that the fund

assets are measured at the lower of fair value or the value of the related liabilities since Fortum does not have control

or joint control over the State Nuclear Waste Management Fund. The Nuclear Waste Management Fund is managed

by governmental authorities. The related provisions are the provision for decommissioning and the provision for

disposal of spent fuel.

•

The provision for future obligations for nuclear waste management including decommissioning of Fortum's nuclear

power plants and related spent fuel is based on long-term cash flow forecasts of estimated future costs. The main

assumptions are technical plans, timing, cost estimates and discount rate. The technical plans, timing and cost

estimates are approved by governmental authorities.

•

The accounting treatment for nuclear decommissioning is complex and requires application of special accounting

practice and management judgment when forming estimates for the basis of accounting such as technical plans,

timing, cost estimates and discount rate and thus this is a key audit matter.

•

We have assessed Fortum’s accounting manual and principles for Nuclear

Decommissioning Accounting, whether they are in line with IFRS accounting

principles.

•

We have assessed the assumptions and judgments made and adopted by

management in the accounting for the nuclear waste provisions, and that the share

in nuclear waste management fund is based on the confirmation submitted by

authorities.

•

We assessed the adequacy of related disclosures in the financial statements.

146

Responsibilities of the Board of Directors and the President and CEO

for the Financial Statements

The Board of Directors and the President and CEO are responsible for the preparation of consolidated

financial statements that give a true and fair view in accordance with IFRS Accounting Standards as

adopted by the EU, and of financial statements that give a true and fair view in accordance with the

laws and regulations governing the preparation of financial statements in Finland and comply with

statutory requirements. The Board of Directors and the President and CEO are also responsible for

such internal control as they determine is necessary to enable the preparation of financial statements

that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Board of Directors and the President and CEO are

esponsible for assessing the parent company’s and the group’s ability to continue as a going concern,

disclosing, as applicable, matters relating to going concern and using the going concern basis of

accounting. The financial statements are prepared using the going concern basis of accounting unless

there is an intention to liquidate the parent company or the group or cease operations, or there is no

realistic alternative but to do so.

Auditor’s responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a

whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s

report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a

guarantee that an audit conducted in accordance with good auditing practice will always detect a

material misstatement when it exists. Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they could reasonably be expected to

influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with good auditing practice, we exercise professional judgment

and maintain professional skepticism throughout the audit. We also:

•

Identify and assess the risks of material misstatement of the financial statements, whether due to

fraud or error, design and perform audit procedures responsive to those risks, and obtain audit

evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not

detecting a material misstatement resulting from fraud is higher than for one resulting from error,

as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override

of internal control.

•

Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opi

nion on the effectiveness of the parent company’s or the group’s internal control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

•

Conclude on the

appropriateness of the Board of Directors’ and the President and CEO use of the

going concern basis of accounting and based on the audit evidence obtained, whether a material

uncertainty exists related to events or conditions that may cast significant doubt on the parent

company’s or the group’s ability to continue as a going concern. If we conclude that a material

uncertainty exists, we are required to draw attention in our auditor’s report to the related

disclosures in the financial statements or, if such disclosures are inadequate, to modify our

opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s

report. However, future events or conditions may cause the parent company or the group to cease

to continue as a going concern.

•

Evaluate the overall presentation, structure and content of the financial statements, including the

disclosures, and whether the financial statements represent the underlying transactions and

events so that the financial statements give a true and fair view.

•

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or

business activities within the group to express an opinion on the consolidated financial

statements. We are responsible for the direction, supervision and

performance of the group audit.

We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned

scope and timing of the audit and significant audit findings, including any significant deficiencies in

internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with

relevant ethical requirements regarding independence, and communicate with them all relationships

and other matters that may reasonably be thought to bear on our independence, and where

applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those

matters that were of most significance in the audit of the financial statements of the current period

and are therefore the key audit matters. We describe these matters in our auditor’s report unless

law or regulation precludes public disclosure about the matter or when, in extremely rare

circumstances, we determine that a matter should not be communicated in our report because the

adverse consequences of doing so would reasonably be expected to outweigh the public interest

benefits of such communication.

147

Other Reporting Requirements

Information on our audit engagement

We were first appointed as auditors by the Annual General Meeting on 16.3.2006, and our

appointment represents a total period of uninterrupted engagement of 18 years.

Other Information

The Board of Directors and the President and CEO are responsible for the other information. The

other information comprises the Operating and Financial Review and the information included in the

Financials, but does not include the financial statements and our auditor´s report thereon. We have

obtained the Operating and Financial Review prior to the date of this auditor’s report, and the

Financials is expected to be made available to us after that date.

Our opinion on the financial statements does not cover the other information.

In connection with our audit of the financial statements, our responsibility is to read the other

information identified above and, in doing so, consider whether the other information is materially

inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise

appears to be materially misstated. With respect to Operating and Financial Review, our

responsibility also includes considering whether the Operating and Financial Review has been

prepared in accordance with the applicable laws and regulations.

In our opinion, the information in the Operating and Financial Review is consistent with the

information in the financial statements and the Operating and Financial Review has been prepared

in accordance with the applicable laws and regulations.

If, based on the work we have performed on the other information that we obtained prior to the

date of this auditor´s report, we conclude that there is a material misstatement of this other

information, we are required to report that fact. We have nothing to report in this regard.

Other opinions

We support that the financial statements should be adopted. The proposal by the Board of Directors

regarding the use of the profit shown on the balance sheet is in compliance with the Limited Liability

Companies Act. We support that the Board of Directors of the parent company and the President

and CEO should be discharged from liability for the financial period audited by us.

Espoo, 6 February 2024

Deloitte Oy

Audit Firm

Jukka Vattulainen

Authorised Public Accountant (KHT)

148

Auditor’s assurance

report of ESEF financial

statements

(Translation of the Finnish Original)

Independent auditor’s report on the ESEF consolidated

financial statements of Fortum Oyj

To the Board of Directors of Fortum Oyj

We have performed a reasonable assurance engagement on whether the iXBRL tagging of the

consolidated financial statements in the ESEF consolidated financial statements (FORTUMOYJ-

2023-12-31-fi.zip) of Fortum Oyj (1463611-4) for the financial year 1 January

–

31 December 2023

has been prepared in accordance with the requirements of Article 4 of Commission Delegated

Regulation (EU) 2018/815 (ESEF RTS).

Responsibilities of the Board of Directors and the Managing Director

The Board of Directors and Managing Director are responsible for the preparation of the report of

the Board of Directors and financial statements (ESEF financial statements) that comply with the

requirements of ESEF RTS. This responsibility includes:

•

preparation of ESEF financial statements in XHTML format in accordance with Article 3 of

ESEF RTS

•

tagging the consolidated financial statements, including disclosures and identifying information, in

the ESEF financial statements with iXBRL tags in accordance with Article 4 of ESEF RTS, and

•

ensuring consistency between ESEF financial statements and audited financial statements

The Board of Directors and the Managing Director are also responsible for such internal control as

they determine is necessary to enable the preparation of ESEF financial statements in accordance

with the requirements of ESEF RTS.

Auditor’s Independence and Quality Control

We are independent of the company in accordance with the ethical requirements that are applicable

in Finland and are relevant to the engagement we have performed, and we have fulfilled our other

ethical responsibilities in accordance with these requirements.

The auditor applies International Standard on Quality Management 1 and, accordingly, an audit

firm shall design, implement, and maintain a system of quality control including policies and

procedures regarding compliance with ethical requirements, professional standards, and applicable

legal and regulatory requirements.

Auditor’s Responsibilities

In accordance with the engagement letter, we express an opinion on whether the tagging of the

consolidated financial statements in the ESEF financial statements has been prepared in all

material respects in accordance with the requirements of Article 4 of ESEF RTS. We conducted a

reasonable assurance engagement in accordance with International Standard on Assurance

Engagements ISAE 3000.

The engagement includes procedures to obtain evidence on:

•

whether the tagging of the consolidated financial statements in the ESEF financial statements has

been prepared in all material respects in accordance with the requirements of Article 4 of ESEF

RTS, and

•

whether the consolidated financial statements, including disclosures and identifying information,

are marked up using the XBRL mark-up language in accordance with Article 4 of ESEF RTS

•

whether the ESEF financial statements are consistent with the audited financial statements.

The nature, timing and extent of

the procedures selected depend on the auditor’s judgment. This

includes the assessment of risk of material departures from the requirements set out in ESEF RTS,

whether due to fraud or error.

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

our opinion.

Opinion

In our opinion, the tagging of the consolidated financial statements in the ESEF financial statements

(FORTUMOYJ-2023-12-31-fi.zip) of Fortum Oyj for the financial year 1 January

–

31 December

2023 has been prepared in all material respects in accordance with the requirements of Article 4 of

ESEF RTS.

Our audit opinion on the consolidated financial statements of Fortum Oyj for the financial year

1 January

–

31 December 2023 has been expressed in our auditor’s report dated 6 February 2024.

In this report, we do not express an audit opinion or any other assurance conclusion on the

consolidated financial statements.

Espoo, 9 February 2024

Deloitte Oy

Audit Firm

Jukka Vattulainen

Authorised Public Accountant (KHT)