Fortum Oyj

Timo Karttinen - Interim President and CEO

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Yes. Thank you, Timo Karttinen here, welcome everybody to this 2014 and the last quarter results conference call.

I hope that you all have material with us that we have published in our Web pages I will follow that material through the presentation and then as customary we have time for questions-and-answers. Starting from Page 3 on our results, our sales were down a bit during the year a bit more than 500 million during the whole year more than half of that more than 300 million is explained that during the year we sold Finnish and Norwegian distribution activities which [Audio Gap] distribution segment sales.

And during the last quarter the growth was roughly 100 million which is net all explained by the drop in the distribution sales. And moving over to comparable EBITDA, we were on roughly same level last quarter and 100 million below for the year.

Operating profit was on a higher level both quarter and the whole year including of course the operative results but also the sales gains we achieved during the year. Comparable operating profit slightly up during the last quarter which I think is specifically good result in this a bit challenging market conditions and also during the whole year only 50 million down.

Earnings per share for the last quarter €0.64 and for the whole year €3.55 all-in-all. If we from this €3.55 take away the results contribution from the divestment of Finnish and Norwegian grids roughly €2.10 we arrive at €1.45 which then is the EPS contribution coming from all other operations we had during the year and also from those smaller efficiency programs like divestments.

Net cash from operating activities continued to be on a good level, I will come back to cash flow figures later on. And then this good EPS levels led to a dividend proposal from our Board of Directors of €1.1 per share plus an additional extra dividend €0.20 per share all-in-all €1.30 and this extra dividend really is based on successful completion of our efficiency program and all the divestments that we completed during the year 2014.

Now then turning to the next Page 4 a summary of the year all-in-all strong results as I said, closing a challenging year from market conditions point of view. During the year, we among other things divested Finnish and Norwegian distribution activities, we continued and we do continue as we speak the preparations of the Swedish distribution fleet.

And then also as you know in December we signed the protocol to restructure our TGC-1 ownership with a currently owned 30% minority and our target there is to get 75% plus ownership share in the hydro business of TGC-1 and that process is ongoing now exactly as we have told so the detailed structuring and the financial details are now being discussed during the winter and the spring. Nyagan 3 in Russia we completed during the latter part of the year and we have now commissioned it closer to the capacity supply mechanism from 1st of January this year.

Then of course it was very unfortunately for all of us that our CEO Tapio Kuula was forced on an earlier retirement and disability pension starting 1st of February now this year and obviously after that then the Board of Directors has started a search for a new CEO. And then Board of Directors will come back with more information on this process as they are ready to do that.

Turning the Page to 5, market conditions in Nordic countries power consumption declined somewhat during '14 compared to '13 that was really down to warmer weather industrial consumption remained more or less the same. Hydro reservoirs were slightly below but there was the year-end, last year and now in the beginning of this year they are very close to the reverence level.

And then also Nordic system spot prices and area prices continue to be on a lower level ’14 than ’13. In the European business environment in carbon market, there was a lot of discussion and a lot of development long-term goals 2030 targets that is important, but what is also important for us right now is the discussion around the market stability reserve in the EU ETS system and that is now being debated and also ultimately decided on EU level during the first half of this year, this obviously is important for the short-term or medium-term development of the carbon market and carbon prices.

Also the European commission has started to develop a reverence market model for possible capacity markets or capacity remuneration mechanisms I think this is very important because if there would be such mechanisms it’s important that they would be harmonized on a European level, it’s important that they would be market-based, there would be cross-border trading possibilities and also that this kind of mechanisms would treat capacity whether it’s different type of capacity or different age of capacity they would treat them equal. Of course what happened during latter part of the year and impacted many industries was the commodity price decline and especially the oil price crashed if you will during the late 2014.

In Russia the consumption of electricity in the areas where we operate was roughly flat ’14 compared to ’13 and also in ruble terms the spot power prices in our areas where flat between the years. Russian economy was of course hit during the year and especially also visible ruble exchange rate was hit during the year by oil price declines and by also the sanctions evolved during the year.

Turning the Page to 6 water reservoirs asset, we’re currently very close to the levels year ago and also close to reverence levels. And also on Page 7 wholesale prices for electricity on the Nordic market, we can see that the forward prices are currently fairly flat for the coming few years and then increasing slowly after that.

Price levels are also now lower than what they have been previously and I think it’s easy to say that some of the explanations for these lower prices are the low commodity price levels, also the low economic development and seasonally and more locally also weather, it has been fairly warm start of the winter at least up till now. Moving onto Page 8 and fuel, CO2 prices, first we can see the dramatic drop in the oil price than it is important to note that the oil price has very small limited impact on the power prices, Nordic power prices, and also very limited impact on the if any impact over the power prices and also a very small impact on our own cost levels.

So this is of course impacting many things but not directly our pricing or cost. Coal prices have also dropped now they dropped at the very end of last year and during first week of this year, but the drop then has been still a lot less than the oil price.

CO2 prices on a somewhat increasing trend from somewhere 2013 once again as I said, now the political decisions on a EU level and regarding the market stability reserve are really important on the question so that how do they continue from here. Gas prices also lower and more volatile but likewise the gas prices they have only limited impact whether it’s to the pricing or to our cost levels here.

Then on the Page 9, price development in the Nordic and Russia, electricity prices year-on-year last quarter in the spot system price level in the Nordic dropped 14%. The whole year price level was 29.6.

And for our achieved power price that also dropped 13% last quarter year-on-year to the level 41.9, our whole year averaged price here in the Nordic areas was 41.4 and there was also a drop of €5. Then looking at the Russian prices in rubles as I said they were flat, in the yearly comparison and then when we look at our achieved power prices in Russia in euro terms there is visible the drop.

In Euro numbers which is then coming from the deteriorating exchange rate of the ruble. Turning to Page 10, last quarter segments combined all-in-all last quarter was €13 million better than the corresponding quarter year before and even we can see that it was really the power and technology segment which make the improvements.

It’s also important to note that even if here it would seem that Russia declined a lot, one needs to remember that in 2013 last quarter comparison numbers there was all-in-all €78 million compensation from provisioned reversals and compensation so if you take that away then it's clear that we did improve also in Russia. And I will come back to this segment numbers later in the presentation.

Likewise Page 11, and the whole year we were roughly 50 million below in whole year numbers flat and otherwise and even you can see that Russia could improve in euro terms despite the lowering exchange rate and despite all this compensations in the 2013 numbers. And then also that the net drop really is coming from the lower result level in the distribution segment and that is then in turn mainly explained by the fact that we during the year sold Finnish and Norwegian businesses so we just have smaller business there underlying and generating the profits.

Also there was some impact from the warmer weather during 2014. Then moving over to financials Page 13, comparable and reported operating profit.

There really the main point is that during last quarter 2014 our reported operating profit was 2,013 million higher than the comparable operating profit and the difference coming from the successful divestments that we made. And the whole year reported operating profit was more than 2 billion higher than comparable, there as well the difference is coming from the successful divestments and the bulk of that is coming from the distribution in Finland that we divested during the spring.

Then moving to Page 14 on power and technology segment, the quarter four last year we made all-in-all 69 million higher compared operating profit than same period last year for 2013. We had more than 2 terawatt hours 2.1 terawatt hours higher hydro production and 0.9 terawatt hours higher nuclear production last quarter '14 compared to '13.

Then of course the lower spot prices and lower achieved price was contributing negatively to the quarterly results. Likewise on a whole year basis we achieved 18 million higher compared to operating profit '14 compared to '13, all-in-all we had 4.3 terawatt hours higher flexible hydro production and also our nuclear production volumes in most of our units were upon a good level actually in Olkiluoto and Forsmark yearly record levels then on the other hand one has to note that Oskarshamn was still lower than the others and the Oskarshamn 2 unit was down and out during the whole of 2014 and continues to still to be in an outage.

And likewise of course the whole year basis the lower spot prices and achieved prices contributed negatively in the segment. Then the next page on heat, electricity sales and solutions, last quarter we improved all-in-all €7 million compared to year before that was really due to our new investments more efficient new combined heat and power capacity, lower fuel costs and then also better performance in our electricity sales unit.

Heat sales volumes were lower during the quarter and also during the whole year partly because of the divestments we have made also in this segment both during '14 and also right at the end of '13 still impacted the '13 last quarter comparison numbers. And then on the other hand as you may remember we had a very start of -- a very warm start of the year '14 a year ago.

On yearly basis the comparable operating profit decreased €5 million during '14 compared to '13. And as we note here we have been on a slow increasing trend in the customer numbers in our electricity sales unit and now we have exceeded 1.3 million customers all-in-all in our Nordic operations that’s a very good achievement.

Then turning the Page to Russia, starting from the note in the middle of the page repeating that when you look at the 2013 comparison numbers the last quarter '13 includes all-in-all 78 million and the whole year '13 88 million of this CSA provision reversals and compensations bearing in mind that. And then also bearing in mind that during the last quarter 2014, the deteriorating Russian ruble exchange rate affected the result negatively by 20 million and whole year 34 million, so it's clear to see that the underlying performance in the Russian division improved during the year and also during the last quarter and the improvement was really down to many facts.

Of course one thing is that we have Nyagan 1 and 2 units during 2014 so we had more capacity supply income but then also we could achieve better electricity spreads and heat spreads and we could improve our all internal efficiency during the year. So all-in-all I feel that good results also from Russian division in it what one can say that fairly challenging overall market conditions.

Distribution segment the volumes so the underlying business in Sweden last quarter last year was on the same level as year before. Of course once again during the year we divested the Finnish and Norwegian grids and during the last quarter and during the whole of the year this is really the main explanation why the comparable operating profits are down ’14 compared to ’13 and just repeating I said earlier we are continuing according to our plans the divestment process in the Swedish distribution business.

Then turning the page to income statement a Page 18, sales a bit down as it explained especially the last quarter by less business in the distribution segment comparable operating profit slightly up in the last quarter 50 million down whole year, operating profit on a higher level including both the operational results of the sales gains, financial expenses continue to go down as they really shoot as pay down and have paid down our debt as we have gone, income tax expense our tax rate 2014 was 18.8% when we take away the impact from these non-taxable sales gains and the profits from associates that have already been taxed there and once again this then leads to our EPS during the quarter €0.64 and €3.55 during the whole of the year. Then, cash flow statement, Page 19, operating profit before depreciations and once again on a higher level with the impact from the divestments that impact we take away on the second row.

Then the third row financial items and foreign exchange gains and losses that has now turned positive for the last quarter and also for the whole of the year and there really the positive contribution is coming from the positive euro cash flow that we achieve when euro appreciates against Swedish krona or Russian ruble and then we roll over these our group internal loans to our operative companies in these countries. Change in working capital was now negative this is due to higher inventories for instance more field inventories that we really didn’t get to burn before the year-end as it was fairly more in start of the winter and then also more customer receivables but this is really explainable by these seasonal factors and nothing out of the ordinary.

So these factors really read to total net cash flow from operating activities increasing €50 million for the quarter and €200 million for the whole of the year and the increase really coming from this foreign exchange gains and losses otherwise more flat development. And all-in-all cash flow before financing activity is in a very strong level the whole year almost 4.6 billion.

Then, turning the page to key ratios, comparable EBITDA down 100 million under level of 1.87 billion, interest-bearing net debt down 3.5 billion during the year to the level of €4.2 billion so a very significant decrease and these of course leaves our comparable net debt-to-EBITDA ratio current at 2.3 and we would be at 2.0 if we take away the Värme financing that Värme is to pay back to us during this year. So all-in-all this means that we have a strong balance sheet and good situation to look at any opportunities that would be in the marketplace.

Once again the reminder is that our target for our current balance sheet is to be around three in this comparable net debt-to-EBITDA. Then with the numbers return on capital employed and return of shareholders’ equity, equity both on a higher level once again having a significant contribution from these successful divestment activities during the year.

Liquidity continues to beat, good committed credit lines more than 2 billion and 2.7 billion of liquids funds at year-end. Our debt maturity profile Page 21, a bit more than 1 billion of debt maturing during the year that started as you know and have seen we have paid down our debt last year and it has matured and of course everything else equal that is what we will continue to do not really needing more financing of course before we then would do any larger acquisitions or other things.

Average interest rate in our debt portfolio 3.7 at year-end and a bit more fixed than floating in at the year-end as well. Our efficiency program, once again we completed that successfully and finalized during the year ’14 that was reported in more detail in the Capital Markets Day in November and I would especially here underline this a bit more than 800 million of divestments that we succeeded to do during this program and like a lot of that during year ’14.

Then moving onto outlook, we continue to expect that electricity consumption would be on a slow increasing trend of course it is then so that the actual annual changes too depend also on the economic cycle and on the temperatures especially here in the Nordic area where there is quite a lot of temperature dependent heating demand. In Russia we have the Russian ruble 18.2 billion run rate operating profit target that we keep intact as it has been but of course now it is so that with the volatile ruble exchange rate also the Euro amount of those profits will be volatile during the year.

Key drivers and risks, those drivers impacting wholesale price and electricity prices and volumes as we have noted before availabilities, fuel prices, demand and supply, but then also of course noting that as you have seen and we have seen currency movements important currencies for us are Swedish krona and Russian ruble. Political decisions like EU decisions about emissions trading and always national decisions about taxation so they also important drivers of our overall profitability.

Page 25, our CapEx estimate, we estimate that during 2015 we would be having roughly 0.9 billion CapEx including then also Swedish distribution CapEx forecast. Hedging the starting year we have hedged roughly 50% with an average price of €40 and 2016 roughly 10% at an average price of €39.

We continue also to guide as before that our effective tax rates should be between 19% and 21%. Last year as you may remember the power plant tax or the so called windfall tax that was revolved in the end and then you also may remember that there was in that Swedish government budget proposal there was an increase in the nuclear tax then that budget was actually not approved, so with the current budget there is not one but of course then there is ongoing discussions with and how this might go low and so therefore we highlight it there anyway, but once again it’s not currently, in the current budget that tax increase is not effective.

Then turning to the last Page 25, as a reminder so we have also today sent out invitation to our Annual General Meeting that will be held 31st of March 2 PM local time here in Helsinki and then also that our Board of Directors has proposed to pay a dividend of €1.1 plus and extra dividend of €0.20 for the year 2014 and here you can see also the dividend related dates that our planned for this streak. So with this thank you for your interest and now I turn over to questions-and-answers.

First one related to the CapEx number, the 900 million you’re guiding for 2015 and I was just surprised that it’s still that high, can you maybe help us with a more detailed breakdown what relates to the Swedish networks what’s related to Russia and what relates to the other activities? And also if you can what is actually really development or growth CapEx and what is more maintenance on the existing assets?

And the second question, can you help us to understand your thought process behind the special dividends why it’s exactly €0.20 and not €0.10 and not €0.30, is there any relationship to the disposal proceeds i.e. should we expect you to pay an even higher amount for the coming Swedish network disposal or what’s yes just generally what’s the thought process behind your special dividend of 0.20 cents?

Thank you.

Okay. Thanks for the questions, first the CapEx breakdown.

So now if I remember correctly we guide that we have roughly 200 million of the Russian investment program CapEx outstanding in euro terms at the start of the year and that relates to these two Chelyabinsk units that are under construction which are those last units in our original investment program for the CSA units, so that is obviously included there. And then of course all our other maintenance CapEx and I think that we also guide there that our maintenance CapEx excluding distribution would be somewhere 300 million-350 million level and below depreciation.

So those numbers we give there. Unfortunately I don't have a breakdown of what the Swedish distribution investment would be but of course that is also investment heavy activity so it's not an insignificant part of this 900 million also but that's the information available currently.

Okay. So basically if I can just follow-up because there seems to be still quite some gap, so there is some additional growth CapEx included in the €900 million number, you said it's before M&A but it suggests that there is some headroom for organic growth projects in that 900 million?

That is correct, so there is some of course we have plans also what on top of the -- just the maintenance CapEx, so improving productivity or even investing something new in some places which on the whole is small but then included in this number. So those all are there and we have really tried to give a headline figure which would then correspond to wheel out then a big acquisition so something else so this would be corresponding to what we see, then about the dividend.

So sorry as I said in the beginning so the EPS breakdown, so if you will the 1.45 coming from everything else than the distribution divestments, so of course just taking our dividend policy and the numbers there, so that supports something which is between 1.1 and 1.2. Then we also say that really the additional dividend fees is based on the successful efficiency program and the divestments we have done.

So it's all the divestments we have done and this is really now the proposal for from last year to this year's AGM I would not want to and I will not certainly now guide based on this anything so that what one should expect or not expect for instance in a year's time other than repeating this stable, sustainable and overtime increasing dividend that is really our target and continues to be our target also in the future.

Two questions, assuming you got a good price for Sweden which obviously seems likely given that Macquarie pulled out of the bidding process because prices were getting a little bit too high for them. Could you give us some more clarity on what you are going to spend the balance sheet headroom and beyond simply saying the same region and the same type of business and tied in with that also any color on your future investment profile in India?

And then on Russia just one small question on your 18.2 billion target does that include any of the TGC-1 consolidation as a result of potential increase in your stake there I am presuming not but I just want to clarify? Thanks.

Okay, thanks if I start on the 18.2 billion, so of course the 18.2 billion has been there for several years so to start with that included and that includes all we have but that has been said historically also TGC-1 I think of course we are now in the phase of preparing and agreeing the details and then we need to run it through. So I think that it would be better to assume that there would be more contribution during next year from TGC-1 and less this year also in the actuals.

So all-in-all this 18.2 is really based on what we have today. But of course in the future then everything that we have in our balance sheet like in current terms of course we have the TGC-1 minority ownership in our current balance sheet, so all those contributions are calculated in.

Then about the Swedish distribution, so I said we're in the process we have taken our time and prepared carefully and this is where we're today and I am at least confident that we continue to have a good position in the process. Unfortunately maybe to put it that way but really our guidance is that we will unfortunately to your question so we will use the headroom we have right now then also post if and when we divest the Swedish distribution so we will use that for our long-term profitable growth and our strategy in those areas where we are both in terms of technologies, hydropower.

In some cases nuclear power and in the heating, compact heat and power starting from the areas where we are then also as we have indicated looking for instance we indicated EU electricity market that could offer some opportunities in the neighboring areas so that is really target and that is what we do and continue to do also in the future. All-in-all that may take some time but we are really focused to make good results and make value adding growth then as we do that.

Okay. And then on the India bid?

Yes, as you know we have two small solar power plants currently in India where we have been discussing about that what I think is a long-term trend is that solar not only in rooftops but then also more industrial scale so that will be more and more important part of the electricity system long-term. Not necessarily right now it is fairly dark already now here in Helsinki or Espoo where we speak but in many places in the world and India has been a good place for us to study and develop and make our own R&D in that respect development meaning that we really know how the panels work and all that stuff.

And we might do a bit more of that, and I mean a bit I might target this that long-term we would be doing more solar investments and whether then the solar investments would be in India or somewhere else I hope that in long-term both. But the focus is really on solar as I think that long-term solar is going to be an important part of the future electricity system.

Two on my side if I may, first, concerning the replacement, the search and replacement of Tapio, what has the appointment committee externalized at this stage is there like a known timeline for a definite disposition and as you’re looking for internal or external candidate is there a preference here but basically what has been communicated on that matter? That will be number one.

And number two, can you give us a little bit more color on the development in Sweden now that there is a new government alliance, in particular what are the implications for Fortum in terms of taxation and nuclear residual life compared to what you gave at the 3Q stage?

If I start with Tapio color, so of course once again I’d say that was unfortunate news that he was forced to retire earlier and when that was announced so at the same time then also our Board of Directors announced that they have started a search for a new CEO and they just did in that brief announcement noted that there will be both internal and external candidates in the process. That announcement did not give any guideline or timeline for the process but I think of course it’s obvious and the Board knows that making the good process but making it as soon as possible my guess is that would be on their focus as well.

But that is the information that is available of that and it is as I said it is a Board, run and run by the Chairman of the Board, the process. Then about development in Sweden in general as you may know some of you do know so then the budget proposal of the government of Sweden the government that was formed after the elections in September so that proposal was rejected in a Swedish Parliament which led to a many crisis if you will and our question how would it go and first there was a discussion or announcement that there would be new elections but then actually during Christmas time there were political negotiations and this is of course now based on newspaper news but there were political discussions and then they reach agreement between the government and the main opposition alliance parties that were formally in the government so that they will cooperate on certain areas of that which one area is energy policy and if they are important the energy matters to an energy commission.

So that is really where the status is right now we have not yet seen what concrete would come out of this agreement between the minority government and the opposition and what might come out of this energy commission so this is the information available currently.

Two questions for me please, first of all you mentioned that your Capital Markets Day that speaks at 100 basis points increase in Russian bond deals, you’d expect to around a 6% increase your CSA contract revenues in 2015, could you just give some indication of how much you expect your CSA contract to increase this year please? And then the second question is actually also in relation in something you said at your Capital Markets Day which is that we shouldn’t expect a special dividend and then you have had a chance to sort of deploy your surplus CapEx surplus capital, so I am just wondering what’s changed in the last two or three months please?

Yes, first on the CSA, so the formal procedure is so that actually if it is 7th or 8th now on February, so the market council which is the body therein Russia so they’re to decide then based on the facts what is the level of rate to be used in the CSA, yearly CSA, so that information is still not out but should be out fairly soon, so that is still pending. That’s one thing and then the other thing of course that in the end as we have also said is that naturally it is the Board who decides the dividend proposal the AGM ultimately deciding the dividend and also according to our dividend policy, so the Board is looking for our balance sheet strength and our feel to CapEx when deciding the yearly dividend proposal.

And I feel myself that this is a good balance there in that discussion and in that proposal.

First question please related to yesterday’s news on the German nuclear tax at the European quarter 30, it looks likely that ECJ would not consider the German nuclear tax as state aid and I wonder if this makes you wonder whether the Finnish could contemplate again the possibility to implement a nuclear tax in Finland? And second question on Swedish distribution, I wonder if you can communicate to us the RAB under the numerous ideology for your Swedish distribution assets?

Thank you.

Yes, about the nuclear tax or let’s say the Finnish government, so one thing there is I think fairly to see, we’ re going to also have elections and new government actually I think it is, is it five or six weeks now when we have the elections here in Finland. So it’s highly unlikely that current government would take up new initiatives and then we will really need to go through the elections and see the new government then of course the government program as a whole which always is important for us and the energy policy in particular.

So that is the situation, I am not wanting to speculate anything more about that but of course then at normal so we participate and as we have done throughout the years. So of course we do participate in the discussions and try to give our views on how to develop.

So what was the second question? Yes, then yes distribution, so as regulated asset base numbers I don’t believe that they would be public.

We have not published those. I think it’s also quite evident that now as we have been preparing and looking at the divestment so of course we would not want to out of that process, outside of that process so we wouldn’t want to communicate any parameters.

So of course we want to run that process the best way possible to really reach our primary target which is the best price.

I was just wondering if there would be any impact of Russia increasing power export to Nordic area it’s been a kind of pre-2011 level for December and January and if you could see any impacts of that for Fortum generation in Nordic area that profitability? And also if you could develop on the 0.5% growth level for demand in Nordic area where that’s coming from and from what level since it decreased last year?

Thank you.

The Russian export all-in-all has been on a lower level couple of years now than historically and now of course some increase there but not that big and if you think that the total consumption on a yearly level in the Nordic market is somewhere let's say 380 terawatt hours of course depending on the year and the temperature, so it's not significant amount or significant change. Then all-in-all this change or growth number I said so we see that there is still a trend growth even if slow trend growth admitting that this 0.5 as a number is fairly exact but we say that on average approximately.

But the point is really is that we see that electricity is an efficient way of using energy and we also think that longer-term share of electricity the total energy consumption will and should increase and for instance electric vehicles or some other things like data storage and others with there have been investments also in the Nordic area, so they are some examples, but all-in-all also the household consumption and the service industry consumption has continued a trend wise growth, so those are really the components.

I have three quick questions, the first is I would be grateful if you could just confirm that the gearing target post the still regulated disposal is the three times net debt EBITDA? I would be also grateful if you can provide a bit more detail on what the potential capital commitment would be to the Finnish new nuclear project in which you might take a minority stake?

And then finally the EU carbon policy debate if you can maybe just provide with us what you think are the less important events to come over the next few months?

Okay. The first one, so this net debt-to-EBITDA around three so this is for current balance sheet and what we have said is that we understand that if and when we have sold all the distribution so the part of the regulated has gone -- we still carry some regulated parts in the heat business and also once again reminder so this capacity payments in Russia also by type regulated income.

But still we have also said that most likely we understand that we might need to carry a bit stronger balance sheet after the divestment of the distribution in Sweden, we have not given a figure but also in the capital markets there we indicated that when we divest that might be a good time to come back to that question, so that's the first question. Then about this Finish nuclear Fennovoima project that we -- when we told about the TGC-1 restructuring and our target to get 75% of the hydro we said that if and when we complete that then we also ready to participate in Fennovoima with maximum 15% ownership.

And of course in our commitment there would be overtime over many years and over the construction period but I think the size of that commitment could be roughly 200 million or a bit over 200 million but once again over many years to come, so that's the second question. And then really the CO2 and the carbon policy, so this environmental committee of the European Parliament will discuss and vote about this market stability reserve on 23rd and 4th of February, if I remember the dates correct and that is of course important because they are the main committee responsible for this handling, of course what estimates have come out of that is that there would be support in that committee to the changes proposed and the changes are that the stability reserve would start earlier and that also this back loaded 900 million emissions trading certificate so that they could be included in the stability reserve.

So these are the two questions real questions there that are open. And in the people if we think about environmental committee of course they don't decide about this but they vote and then after that if and when that would be positive so then that goes to the discussion between the council i.e.

member states and the Parliament. And then it's for that process to reach an agreement of what the final decision would be -- we expect and also based on what that has come out from Brussels is that the target would be to reach a decision and agreement during the first half of this year of course then after it after that would be implemented but of course the most important point would be to reach a concrete decision, what are the details of the markets stability reserve.

I have several questions. First of all when do you expect negotiations to be finalized with TGC-1 and could you elaborate a bit on the connection between those negations in that deal and the Fennovoima investment why they are hanging together?

And I’d also like to know how much more difficult you’re finding it in doing business in and with Russia because of the current geopolitical situation? And finally why was Fortum not interested in the Fennovoima project before this, what has changed that now makes you interested in it?

Thank you.

Okay, thanks. First of about the TGC-1 timeline so I said, we announced that the protocol that we start the detailing of the restructuring in December and now we are in that work.

We are doing that as fast as we can. Of course there are details both in the process and then also as we indicated in December also financial details to be agreed yet.

So we are really doing that as soon as is convenient for us and for our partners but we don’t have a definite communicated timeline for that. But definitely we are working on that and focused on that.

Then regarding the Fennovoima, as we said they are part of the package for us. We have good competence of nuclear and we have also a good competence of Russian nuclear from our Mobisan facility so I think also that our competence would be welcomed and needed in the Fennovoima project and from our point of view as we have said so this is really a package and our package starts from the TGC-1 restructuring.

Then all-in-all this doing business in Russia so our operative business in Russia is working and it has been working before. So once again I said so Russian economy has slowed down and of course with all likelihood it will contract now at least during the first half of this year, so that impact is normal everybody who is doing business in the country.

But that doesn’t mean that we would see that it’s more difficult in any other way to do business in Russia right now compared to before. And I think also this TGC-1 protocol that we announced is a sign that we still see that we can do things and we can also develop overtime develop and do new things so also that is a sign that we have not seen it in any particular way more difficult for our operative day-to-day business businesses in Russia.

And then once again about the last question about Fennovoima. Fennovoima for us is a part of this package where the other side of the package is TGC-1 restructuring and that is also what we communicated in December.

Two quick ones, firstly on Russia, can you discuss the decided capacity tariffs for the old capacity as far as I understand those have been decided so what is the impact on Fortum in 2015? And then secondly, the hydropower volumes in the fourth quarter were pretty strong so is that a reflection of that strong, I mean a lot of range in the fourth quarter and how would you comment on your current research at the moment going forward, how depleted are you at the moment?

Okay. First on the Russia, so these CCS, competitive capacity selection that is all the old capacity, so they are less important for us and that becomes actually less and less as we go as we get more of this new capacity and CAs up and running.

So on average those capacity prices I think that the option turned out to be on somewhat lower level 2015 compared to 2014 but then on the other hand I said it is a minor contribution and still a big majority of our old capacity as in earlier years was selected in the system. So that is really the situation.

And then about our hydropower production, yes, we were really happy of both the volumes and the flexibility in our hydropower including the fourth quarter. We are not giving guidance or estimates of what is our reservoir levels or our volumes during the quarter so that we have not commented on.

Two actually firstly, on Russia obviously you stick to the 18.2 billion target for the time being given that the two units in share have been -- will come on stream during the first half, would it be fair to assume that it’s between the 8.2 billion you roughly reached in ’14 and the 18.2 that there should be a roughly linear trend in the second half then once you’ve reached the full capacity? And secondly when it comes to the hedging levels, hedging for 2016 is roughly I mean you give only broad terms I guess unchanged versus the numbers you showed after Q3 would it be the correct reading of that you expect prices to go higher going forward?

Thanks.

Okay first about the Russia, so the 18.2 billion is really a run rate level and that is something that we have said consistently, so meaning that once we have completed all these CSA capacities meaning these two Chelyabinsk units, so of course then we earn the full set of CSA payments and of course then we also in that level so it’s not necessarily a yearly result but it’s a run rate that we achieved during this year that’s one thing. Then another thing is that we don’t any guidance of how this might ramp-up linearly or no going forward.

One thing also is of course just to remember is that Nyagan 3 got ready just now 1st of January, so in the last quarter or the four ’14 results Nyagan 3 was not in at but now we have started as normal we have started to earn capacity payments there as well. Then about the hedging 2016, yes, obviously the 10% what we give or we give sort of 10 or 15 or 20 so we round the percentages so obviously some things always happen, but then they’re within those roundings.

Our basic position right now is not that whether we would be expecting a lot of upside short-term or not but as we have said so hedging for us is always we take a holistic view when decide the directions and the holistic view is about our profitability our hedging our cash levels our CapEx going forward and obviously also our market view so where the prices are compared to what is our price forecast. I think that we have been now fairly successful and really successful with the average hedge prices.

Everybody today would like to have higher percentages with these prices but that always how it is with the benefit of hindsight. What we have also been successful with is with the open capacity to capture really as volatility and use the flexibility in our hydro and all these things we continue to do in the future and of course this is also the basis of how we see and how we develop our hedging book going forward.

I am from Generali Investments Europe and not from Fortum. And could you please update us on the development of the OL3 plant please?

And also do you still confirm your commitment to the single A current rating or in case of large M&A you’re disposed to go to high triple B or to mid triple B? Thank you very much.

Yes, the Olkiluoto 3 plant if I am correct what you asked about so the current communication from the plant supplier is that the construction should be ready end ’16 roughly and then the plant should be by end of ’18, it should be in normal commercial use. So that is the current communication from the currently key supplier.

And then about the rating, as we have said also before so what we’re targeting and what we’re committed to preserve is a good name in the credit market so that we have access when we need and we have access in good terms. All-in-all of course now we have lived quite special times in many ways.

Rate has been very low but also as we have divested and are also divesting, so we have gotten a lot of cash in but of course going forward and according to our strategy our target is to return to more normal in debt less levels where naturally we would also want to a need to rollover our debt as we go. And that is really the basis why we want to preserve a good credit name.

We have not fixed ourselves to any specific credit rating in the history but obviously I said we want to be on a good credit level so that we can access capital on good terms when we need.

Okay, so you wouldn’t mind going to high triple B?

I said I am not commenting on any specific ratings but we want to have this is that we want have good access on good terms.

Just very quickly a follow-up question on the carbon market reform, some utilities believe that the vote in the environment committee on the 23rd-24th Feb is certain to sale through given that the industry committee only defeated the proposals very narrowly. And A are you in the same camp and my second question on that is even if the proposals go through, so the 900 million go into the reserve and we have got an early adoption of the MSR in 2017, do you actually believe that this will make the market tight enough to lead to higher CO2 prices?

As I indicated before, so the reports or the information would suggest that there would be support in this environmental committee. But also as said the committee is not deciding really of course that's an important point because they need to pass it on for the further discussion and decision between the Parliament and the Council and I believe and I expect that to happen but as said also it's only this final process then after the environmental committee that will be decisive on what are really-really the details, that’s one thing.

Then another thing is that I don't want to start to speculate about the detail, so if this or that would happen so what would be the actual price level. I think this would be important to happen and the basic thing is that the carbon market and the CO2 price needs a more long-term credibility and then of course if you look at the alternative if that wouldn't happen, so then it will be and there could be other measures than the carbon market which would bring about the price for CO2.

And all for one I believe that this would be the most efficient and best and transparent way if and when only the market is corrected so if you will so that it really works as a market, now the supply is constant and it's not reacting to the market that at all, so it's not really in that way working well as a market currently.

Okay, thanks a lot for listening and questions. And once again just a reminder about our Annual General Meeting, so hopefully we see as many of you as possible on the last day of March 2 PM here in Helsinki.

Thank you very much.