Fortum Oyj

Pekka Lundmark - President and CEO Timo Karttinen - CFO Sophie Jolie - Head, IR

Anne Azzola - Morgan Stanley Andreas Thielen - MainFirst Deborah Wilkens - Goldman Sachs James Brand - Deutsche Bank Ingo Becker - Kepler Lueder Schumacher - Societe Generale Jakob Magnussen - DanskeBank

Thank you very much, operator. In addition to CFO Timo Karttinen and I, with me here in Espoo, Sophie Jolly, Head of Investor Relations at Fortum.

A few comments first from me about the first weeks in the Company. As, I started on the 7th of September so [Indiscernible] very preliminary findings and I was here only for three weeks of this third quarter.

But it has been very interesting, I've been visiting several of our units, our power plants in Finland, Sweden and Russia, talking to a lot of people, asking more questions than providing answers at this stage. And it's really clear that as we all know that to the energy market this in a very challenging situation at the moment, not only because prices are low, but also the overall transition, including all the new technologies that are coming in is nearly going to play a major role in the years to come.

And we will have some very important decisions ahead and I would shed some light on which direction we are taking off, from which direction we will be looking for the answers rather than providing all the answers today. If we look at the first page or actually page 4, I believe is in the presentation, which is the mega trend slide of course.

As we know, the energy sector is responsible for two-thirds of global emissions in the world and that puts us on a clearly on the driver seat in combating climate change. And we feel that in general, the energy business is at a pretty important turning point at the moment.

The way we would like to see it, that we would take is that we would let the markets work, have courage on the market mechanisms and create a structure for the markets where CO2 would have a high enough price and we would gradually be able to get rid of subsidies for any forms of energy and then we would just implement the market work. I know this is a lot to say and it will certainly take time to get there, but that's the direction that we should take and it is actually encouraging now that we have seen that also China and Brazil lately have announced, at least their intention to consider Emission Trading Schemes, because the alternative is much more challenging.

The risk is that unless we take the market driven goods, then we end up in a growing, more complex scheme where more and more subsidies are needed, not only for renewables, but also for more traditional generation forms. But it's not only about climate change and CO2, there's a lot of other change forces in the world as well.

I came from the machine building industry and I saw there a tremendous stride towards resource efficiency, which actually as an energy company creates a lot of opportunities for offering new types of services to industrial customers who want to improve their resource efficiency, but also as part of the urbanization trend that is going on in the world to offer new types of services for customers, either consumers or communities in growing urban areas of the world in a way adding more value in terms of the basic electricity, heating and cooling that we are today doing. New technologies will help quite a lot in this and of course the technology development in solar and wind is quite fast.

We know that the cost of solar panels has dropped 70% in the last five years and that development will continue, also the cost of wind power will continue to go down. But in addition to these, two obvious developments, digitalization will offer a lot of new opportunities when we need to manage complex systems of decentralized generation, energy storage and new types of consumer services that take advantage of the fluctuations on the market in more or less real time.

So there is a lot more we can do there as well. So overall, the energy market is in a pretty fundamental transformation and we believe that there are a lot of new ways to create value in the future.

The utility of the future will not necessarily be the same as the utility of yesterday. We are if we then turn to the next page, we are currently in pretty intense strategic planning in order to decide our future direction after that divestments of the distribution networks in Finland, Sweden and Norway.

And I'm not as I said, going to give any definitive answers or even lesser decisions today, but just as a general direction, we are looking at three things specifically. Number one, we will decide or are looking for the best way to increase investments in renewables.

And we know that renewables, which in our definition includes hydro, solar, wind and bio-energy and potentially in longer-term future also things like wave energy that we are studying, that we will need to and we want to increase our investments in these categories. But I want to emphasize this that we are looking for the best way, because obviously we need to then decide on the technologies, we need to decide on the geographical scope and we need to decide our ambition level in terms of the system scope that we provide, is it narrow or are we looking for wider system concepts and higher levels of added value in the services that we provide.

These are all kinds of things that we are considering as part of this general initiative where we want to find a way to increase investment in renewables, so that's number one. Number two, going back to the changing needs of modern consumers, changing needs of urban areas and changing needs of industrial customers, we are looking for ways to grow faster in modern energy services, adding more value, as I said earlier on top of the basic electricity and heating and sometimes cooling that we offer.

That's number two. And number three, which is probably not a surprise to anyone, we all know that we have after the divestments a strong balance sheet, and obviously we are looking for opportunities and keeping our eyes open for opportunities as the restructuring of the energy industry proceeds.

Why we are doing all this and knowing that the current price environment is very challenging, it's of course extremely important that we do everything we can to further increase the productivity of our existing fleet to keep it competitive in the current environment. We have already done a lot, but there is still more we can do.

So this about future direction, this planning continues in the coming weeks. I will not promise a definite deadline today and there may not be one big announcement that okay, now we have all the answers.

It may also come in steps. We will obviously shed more light on the strategy the latest as part of the Q4 result announcement.

But there may be individual cases of news already before that, let's see. Then if we turn to the next page, which is page 6, I will ask Timo to go through the results in more detail, but just a couple of highlights from there.

Our third quarter sales were €661 million compared to €861 million last year, and comparable operating profit for the continuing operations was also significantly down from €147 million last year to this year €79 million. On top of this, and obviously we have the write-down of the Oskarshamn nuclear power plant, which also Timo will explain in more detail how that is affecting our accounting.

As to the first three quarters of the year, we are €500 million down on sales, 2.495 and continuing operations comparable operating profit is €150 million down we have so far year-to-date made €565 million versus €715 million last year. Next page summarizes basically the reasons already mentioned, Oskarshamn unit 1 and 2, where the effect is €710 million in profit after tax.

And as to the continuous operations, of course and the comparable operating profit by far the biggest reason is the continued pressure on electricity prices where the largest, biggest single reason is really exceptional hydrological conditions during the quarter with the late snow melt created pressure on prices, particularly in Sweden and Norway. The area price in Finland was slightly higher because Finland is to a much lesser extent dependent on the hydrological situation.

A compensation or a factor that works to the other direction obviously of course then the record high of hydro production, but overall the higher production volumes did not compensate the negative effects of lower prices. Another highlights of the quarter, of course was in the beginning of August, the decision to participate in the Finland government -- nuclear power plant project in Finland with a 6.6% share.

And then continuing to Russia from there, we announced today that we are delaying the estimated time when we expect to achieve the targeted operating profit, RUB18.2 billion by two years to three years. We had said earlier that we would achieve run rate RUB18.2 billion by the end of this year when the investment program will be finalized.

We are now in the current, in the final stages of getting the last two units in Chelyabinsk commissioned and we expect that to start operating around year-end. So we are completing the program, but the cost of the very weak the situation in the Russian economy, GDP going down by 4% at the moment, demand has been low, electricity prices have been low and that has affected the profit generation possibilities.

But as such nothing has changed for us there, we still keep that target. But now it seems that it will take two years to three years more to achieve it.

Then still on Russia, we also said today that the discussions about the potential restructuring of TGC-1 will continue. There was a break in those discussions for natural reasons, because we had a CEO change, but we have agreed that we will continue the discussions.

I want to emphasize that this is for us, a purely pragmatic and commercial decision and I believe that it is so also for the other side. If a solution that is good for both parties cannot be achieved, then there will be no deal, there is no kind of absolute need on either side to do it, we will do it if it is good for us, if it's not good, we will not do it, but we have a great, we have a very good contact with the other parties over there and we have agreed that we will continue in good faith and see where we end up.

There is no specific timeline or estimate as to the outcome of the discussions. So that's where we are today on that project.

Then if we turn to the next page, page 8, just a summary of the market conditions, very tough Nordic system spot price is in the quarter €19 or megawatt hour lower than in Q3 in 2014, but big difference is in the area prices, Finland was €8 lower and Sweden €18 lower than last year. Couple of comments on the European business environment and the private carbon market, the market stability reserve will become operational in January 2019 and we obviously support the Commission's plans when it comes to tightening the Emission Trading Scheme.

We've been objective hopefully at some time to create carbon prices that would start steering investments. We would be welcoming even tougher measures than currently being implemented, let's see if this will be enough, but of course, with the current carbon prices, they don't have any effect at all when it comes to investment decisions.

So this is one of the key things that needs to be changed if we want to make, create a market-based system that incentivize these investments into the decarburization of the energy system. In Russia, power consumption was on the same level as in Q3, 2014.

This was also the case for the Nordic countries, the same level as in Q3, 2014. And whereas we saw price collapse in the Nordic market compared to last year, in Russia, in ruble terms, the price was 10% lower than last year.

On page 9, you're just seeing graphical form of the hydrological development and there you see that it was specifically during Q3, when this high flow took place. In the beginning of Q3, we were actually under the reference level, now we are clearly above the reference level and this was the biggest single reason to the extremely low prices that you can see then on the next page, on page 10.

There was even couple of occasions during the quarter where that spot price multiples, spot price dropped under €10. Since then it has recovered somewhat.

Page 11, all the commodities continue on the low level coal price obviously having a big correlation with power prices and CO2 as well. And once again the CO2 prices in the current level do not steer investments, they should be more than double compared to where they are today so that it won't have a real effect.

Page 12, in graphical format, the price development. The first spot price, €31.8 year ago and now €13.3, so 58% drop in spot prices, and our achieved price is also dropped about 35% or €44.2 to €28.7.

And in Russia, in price area one, the euro denominated achieved price drop by 11%. So there was a drop there as well, but significantly lower than in Nordics.

Page 13, there is EBIT, which first quarter-on-quarter earlier in the third quarter year-over-year, €147 million last year, Power and Technology down €65 million, because mainly because of our exclusive [Indiscernible] price, heat electricity sales in the solutions minus 9 because of warmer weather and low electricity prices that affect also this segment, also approximately on the same level. So that gives the end result of €79 million, and year-to-date profits have been €115 million to €565 million.

Power and Technology being the reason there, Russia operating profit actually €30 million higher than last year. So then, Timo, if you continue then into more details on the financials.

Thanks, Pekka. And good afternoon, everybody, Timo Karttinen here.

Let's turn to a bit more on the numbers starting from the page 16 where we have the comparable and reported operating profit, and this time focusing on this third quarter and the differences there with our comparable operating profit is plus €79 million and the reported is minus €682 million. So there is all in all €761 million difference the reported operating profit being lower and this is more than explained by the €784 million negative booking on the operating profit line related to the early quarter decision of the Oskarshamn one and two power plants.

And if we turn to page 17, we have more in detail about this. Oskarshamn, this is an the impact and we have been also in the notes of our interim release, we have no fix, where we have these numbers and a bit more explanation and then we have also note 17, that is giving a bit more information about the nuclear related assets and liabilities.

And as we write there also in the note 6, so on the last day of the third quarter, 30 of September, the OKG AB's Board, the OKG AB is the company that holds these nuclear reactors where we are a minority owner. The Board there decided to invite an extraordinary shareholders meeting to decide on the early closure.

And this shareholders meeting took place on the 14 of October. And resulting from these decisions I said, then booking of these number, we book a €784 million negative impact on the operating profit line and this impact is coming from two pieces, mainly coming from write down of asset values of these one and two units and this is €564 million, and then €220 million, which is provision for future investments and cost, because there will over the years, as the process goes on, we will still need to invest something there to these two units and of course, we'll be running cost there, so that we can put them into a safe decommissioning mode according to planning.

And these €220 million is then also the past year, which will in the future have a cash impact to us as it happens there at Oskarshamn. Than secondly, we have €104 million net of tax impact on the share of profit from associates line and this is because the OKG AB is doing their accounts on the local Swedish accounting and then we are, at the order, we are making the IFRS adjustments and here we make the negative adjustments related to the capitalized borrowing costs and the asset retirement obligations related to these units one and two there.

And then thirdly, of course, we make the negative booking on the operating profit line, €784 million. So we correspondingly book then a positive effect on the tax line, €173 million and this then result to the net of €710 million impact to our net profit.

And as you may remember, we said on 30th of September we said that we are expecting approximately €700 million, so this is very close to that. And these €710 million then translates to a negative impact of €0.80 to our EPS.

So then moving on to page 18, Power and Technology operating results during the third quarter, comparable operating profit was €65 million down compared to last year to the level of €102 million. We had clearly low power prices as Pekka already explained, €28.7 during the third quarter, over €15 per megawatt hour down from year ago.

The Nordic spot price, very low levels €13, Sweden €15.5 and Finland, a bit lower, €30, so Finnish area price was higher. We had record high hydro volumes during the quarter as well.

So we produced 2.5 terawatt hours more hydro during third quarter this year compared to last year. Then on the other hand, we had 0.3 terawatt hours' lower nuclear production and 0.5 terawatt hours' lower thermal production compared to same period last year.

During the first three quarters this year, our comparable operating profit here in the Power and Technology segment was €182 million lower than last year at the level of €419 million. All in all, during the first three quarters we produced 3 terawatt hours more hydro than a year ago, 0.2 terawatt hours less nuclear, and 0.6 terawatt hours less thermal than year ago.

And during the whole of the year, our achieved power prices have been on a clearly lower level than last year, €32.6 million this year compared to €41.1 million last year. Here it's good to know and good to remember, that all this year has been quite exceptional weather conditions, we had a very mild winter, actually, second in the row.

So warm first quarter and then very raining and snowing second quarter. And as explained then also quite a big part of that snow came to the high altitudes in Sweden and Norway, and was now melting then during the third quarter and causing the large inflows, and then consequently low power prices.

Then moving on to page 19, Heat, Electricity Sales and Solutions, here our comparable operating profit during the quarter, minus €13 million and €9 million lower than same period last year, mainly impacted here also by the lower cheap power price from the power sales from our combined heat and power plants. So of course this is a heat segment, so we produce here electricity as well in the CHP power plant.

So therefore the wholesale power price level is significant to the profitability in this segment as well. The first three quarters as a whole, our comparable operating profit is on a last year's level.

The lower power prices are compensated by lower fuel prices on the cost side. And in the retail electricity sales side, we have continued the slow, but quite steady increase in our customer numbers and also our sales margins there have been on a fairly okay level.

Yet it's good to remember that on top of the exceptional weather situation, so third quarter usually is the weakest quarter of the year for heating businesses because the volumes are low, very low heat consumption and then there is quite a lot of maintenance work etcetera ongoing and this is clearly impacting both the Heat, Electricity Sales and Solutions segment and they're likewise also impacting the Russian segment. Next page 20 because also in Russia, we have quite a lot of the combined heat and power, CHP production.

But in Russia, all-in-all, our third quarter was probably a zero profit quarter. Our results there were impacted negatively by lower electricity prices as explained already by Pekka compared to last year and also marginally by the weaker ruble to euro; we managed marginally to improve our ruble results during the quarter compared to last year.

All-in-all the first three quarters saw our comparable operating profit, in euro terms at €132 million, so improvement of €30 million, despite though the fact that the euro reported results are €54 million negatively impacted by the weaker Russian ruble to euro compared to last year's levels. On the other hand, then, this year's results, they include €32 million of this CSA provision releases from the Nyagan 3 power plant from first quarter.

And here we have roughly a €100 million worth of investments less for these two Chelyabinsk power plant to be completed by the end of this year, and then after when we have completed those, we have completed the investment program that we committed ourselves to when we originally made the acquisition of Fortum. Turning on to page 21, and discontinued operations, our Distribution segment, we have no business left there during the third quarter, as the divestment of the Swedish grid was completed and closed during the second quarter.

So no financial impact, you'll see the financial impacts from previous quarters and then also sales gain here on the page 21, sales gain that we achieved from the divestment of the Swedish grid. Then moving on to page 22 and our income statement.

I said our sales down €200 million to the level of €661 million during the quarter. Out of this €200 million, roughly €120 million is coming from the power segment, so Nordic power prices, and roughly €50 million in euro terms is coming from lower euro-denominated sales and this is obviously then coming from the lower Russian ruble exchange rates as compared to euro.

Then all in all, our comparable operating profit was €79 million. Items affecting comparability, I think €761 million minus including once again that the €784 million impact from the Oskarshamn [indiscernible].

So all in all our operating profit minus €682 million. Share of profit of associates during the quarter, minus €95 million including a minus €104 million negative impact from the Oskarshamn as I explained earlier.

So this leads us to profit before taxes, minus €818 million, and then this positive income tax booking of €160 million, where which includes the €173 million positive income tax effect from the [indiscernible] booked in the operating profit line related to the Oskarshamn decision. So all in all net profit for Fortum during the quarter, minus €659 million, and leading to minus €0.74 for EPS, including then €0.80 minus from the Oskarshamn decision and during the first three quarters in the continuing operations, EPS minus €0.28 and that would be then plus €0.52 excluding the minus €0.08 from the Oskarshamm decision.

Looking at Fortum, total for three quarters, our EPS is €4, €0.64 including of course the impact of the sales gain of the Swedish distribution grid. Turning to page 23, and cash flow statement.

Our funds from operations, €161 million this year third quarter compared to €210 million last year. Change in working capital, minus €10 million, so we arrive at cash from operating activities during the quarter €151 million.

We used all-in-all cash in our investing activities, €69 million during the quarter. So this leads us with a cash flow before financing activities during the quarter, €82 million and during the first three quarters, €7.35 billion.

Once again, of course then including the cash impact from the Swedish divestment. Key ratios, page 24, comparable EBITDA for the continuing operations down a bit more than €200 million at €1.24 billion.

Comparable EBITDA for total Fortum including then of course the impact also from the distribution activities during the quarters when we had those, €1.5 billion during the last 12 months. Interest bearing net debt at the end of the period, minus €1.9 billion, obviously meaning that that we had net cash flow, €1.9 billion at the end of the quarter and this means that we have been improving more than €6 billion in the interest bearing net debt or reducing that more than €6 billion during the three quarters of the year.

And this -- comparable net debt to EBITDA for total Fortum at minus 1.3%, and if we would take away the rest of the financing that we still have the [indiscernible] Varme, which is a bit less than €200 million and that's what they are going to pay back during this quarter. By the end of the year, we would be at minus €1.4 million.

And as you may remember so our target is on a sort of normal balance sheet situation to be around 2.5% comparable net debt to EBITDA. Return on capital employed, 26% for the last 12 months and 20% for last calendar year, obviously both numbers impacted by the sales gains mainly coming from the distribution activities.

At the end of the quarter, liquid funds roughly €8 billion and committed credit lines a bit over €2 billion. Still on the debt portfolio, and interest rate, page 25.

Our total interest-bearing debt at the end of the quarter, €6.1 billion, €670 million down during the quarter. Average interest rate at 4%.

Our external debt portfolio is mainly euros and Swedish Kronor, and for that the average interest rate was 22.8%. Then we finance our Russian operations partly by internal ruble [indiscernible] that convert from this euro and external financing.

And of course for this financing, including then the hedging of the currencies was 13.8% at the end of the quarter, and then these together gives roughly 4% for the whole portfolio. As you can see from the picture, we have very little debt maturing during the rest of this year, we have roughly 800 million debt maturing during 2016 and the big part of that will be maturing during the first half.

And with this I'll turn over back to Pekka for the outlook.

Thank you, Timo. Briefly the main points about the outlook before we take questions.

We continue to expect that the average electricity demand in our markets will come -- in the Nordic markets will continue to grow 0.5% in the coming years with the structural change that the consumer demand is growing on the industrial demand will most likely go slightly down, but the combination of these two is 0.5% for year. I already mentioned that Russia, the target of 18.2 billion has been delayed by two years to three years, but it continues to be our target.

And the key drivers and risks are well, no, nothing near their economic political taxation of course playing an important role. Currency-wise the Swedish Kronor and Russian Ruble being our most important currencies in addition of Euro.

And then of course the market demand and supply balance, hydrological situation, emission carbon prices, fuel costs, coal gas biomass and power plant availability affects our profit -- our research and development. Next page, we're now guiding €600 million CapEx excluding potential acquisitions this year.

This has been changed, we are squeezing the CapEx now because of the tight market situation, the previous guidance was 800 million. So this is CapEx into that existing, ongoing projects and including the maintenance CapEx of the existing fleet.

Hedging range for the remainder of the year, we've had hedged about 65% for the rest of 2016, at the level of €36 per megawatt hour, and in 2016 we've hedged 35% at 34 and 2017, 15% at the level of 33. Taxation, we guide the effective tax rate, the corporate tax for the group to be 19% to 21% approximately on the same level of last year, but an important note on top of that is that the Swedish Parliament decided that the proposed nuclear capacity tax to be increased by 17%.

It is worth noting that the combination of low electricity prices and all the time increasing taxation in Sweden is making the market conditions or general operating conditions very tough and this was of course one of the reasons why the majority owner wanted to shut down the Oskarshamn 1 and 2 units. This 15 million effect that we get from the 17% tax increase is deductible on corporate taxation.

So we will not get the full effect at the corporate level. So now operator, back to you for questions and answers.

Two if I may. Number one, I'd like to come back to the direction you've pointed for the new Fortum, could you please comment, I understand this is difficult for you two months only in the job, but whether this concern, the strategic access that has been defined by the previous CEO?

Looking at core business in hydro, nuclear, CHP in core geography, Nordic area, Russia, Eastern Europe and inroads into India, or are you allowing yourself to take a broader perspective both in terms of geographies [indiscernible] and business model? And second is that, are you really at the beginning of your reflection at this stage or as has been -- reflection that has been validated at the Board level and you're already in an implementation mode with full-year '15 being about more concrete announcement as opposed to a definition of the strategy?

So that would be my first question. And my second question would be to come back to the situation of Oskarshamm unit 1 and 2.

So have you had discussion with your partner E. ON to potentially buy back their participation given your different view on the future of those two units?

And if so, is that part of the reinvestment opportunities in your pipeline? If this is not the case, do you have any legal means as a minority partner to protect yourself and potentially ask for sort of financial compensation around this decision?

Okay. So I take the first question and then I ask Timo to take the Oskarshamm question.

Obviously, what I just said about the future direction of the things that we're looking at, obviously, that has been validated by the Board. I would not communicate this as a major deviation from the old strategy, I would say that this is a further development of the strategy as a natural outcome of the decisions to divest the distribution networks, because obviously our priority is now to put the balance sheet into work in a good way in order to make sure that we will have good dividend capacity also in the future.

The current core countries will most likely to continue to be core countries also in the future. I do not see any reasons to deliberately drop any one of that is being core countries.

It is not part of the question that we would especially when it comes to renewables that we would add a country or two, no decisions have been made, but we are definitely looking at careful diversification of the geographical portfolio as well. But the current core countries will most likely continue to be core countries also in the future.

Okay. Then as it relates to Oskarshamn and the 1 and 2 units there, of course we know during the year we are back there as we're in the Board and together we represent that these and of course the Board has discussed the operating situation there.

I'm not going to get into details of what other discussions we may or may not have. Obviously we have thought over this and we have thought carefully about alternative ways to go forward.

Now what is the fact that these decisions now have been made there in the shareholders meeting and my belief is that this is then what is then going to happen for these two units over time. As it comes to the last part of the question, so to put it quite simple and short, E.

ON as the majority owner, has the possibility and right to make the decision there. We of course, as we announced earlier, we think that we would have prepared another route to go forward, but this is now the decision and this is how we live by.

Operator, we're ready to take the next question.

Also two questions. Firstly, from your comments on the power price developments, looking at the spot prices and at the same time on the forward prices, would you say it's fair to conclude that spot prices pushing down forward prices as well in the Nordic region, so there should be a recovery?

And then secondly again on Russia, I was under the impression that most of the improvement will come towards the 18.2 billion target will come from the capacity payments on the new units. So as they are developing or being released on schedule, I just wonder what has really changed in the background in your thinking on the Russian development?

Okay. Yes.

First about the spot prices. So of course its best that everybody makes their own analysis and we are not sort of publishing our own forecast or analysis about the price development in the Nordic market or elsewhere.

But I think it's or at least when I look at the prices, for me it seems to be so that's the forward curve is moving up and down with the spot prices, and I guess that's pretty similar also in other commodity markets. So to what extent that happens and how much and how far, I think that's best for everybody to look at those prices, but that kind of thing most likely is there at the markets and of course now looking at the sort of the market situation.

So there are these trend wise commodity price developments, that's one thing, but then on the other hand, we also have to, when we this behind us and we have very much precipitation and lot of hydro during the summer, which our more of hydrology and weather related and would be reverting to the norm at some point of time. So that I think what's the reason everybody needs to make their own judgments out of that.

And what comes to Russia, you're absolutely correct that the CSA payments will start when the capacity is commissioned, but there are two reasons behind this change. The first one is the weak economy because there are also parts in our revenue streams that come from electricity sales and market prices and heat sales in Russia.

And these two components are clearly affected by the weak economy in the country, that's first part. The second part, which affects this is, which we also had in the release, but there is now a regulation draft submitted to the Russian government with decision anticipated probably during 2015, where the CSA payment period would be extended from 10 years to 15 years.

This change would have a neutral net present value effect. But it would mean that for each year, the amount of CSA payments that would be received would be lower.

So we have kind of preempted also this decision in this updated guidance.

And if I add one more thing, so of course, related to the general economic development and the commodity price development also outside Russia. So the gas price inside Russia has not developed the way we have thought and what was also early otherwise communicated in Russia, so meaning that if we add new and more power plants, so when the gas price is higher, we had better margins and then higher gas price, domestically in Russia would give us better net result, but the gas price has not been increasing that much lately in Russia, that's one thing.

And then the other thing which is very short, sort of a short-term thing, but as we said now we have the Chelyabinsk unit, they have -- the completion of the unit has been pushed towards the end of the year and there is always, as we have said, a ramp-up time scheduled for these power plants. So therefore, it takes some while before they are in full operation and we enjoy the full benefits.

But as such this is the most short-term of these effects.

Could I just add for clarification, one thing, would you be prepared in the original RUB18.2 billion targets, to give a very rough idea how the split between CSA payments and the rest is just without being more specific, just to get an idea on that? And equally either on the 10 years or the 15 years whatever you deem more suitable.

That is unfortunately something that we did not disclose the exact composition of the traffic between CSA and then electricity and heat sales.

I was hoping you might expand on the fourth point you made in terms of the opportunities you see in terms of the productivity improvements? And maybe also if you could give us some range for you estimate the marginal cash cost to be for the nuclear fleet?

If I comment operational improvement, we are not publishing a numbered target because of the plans are in the making, but there is a business improvement potential, but unfortunately at this stage it would be premature to put a number on that target.

Sorry, what was the second part of the question?

If you could maybe discuss the marginal cash cost, you estimate for the nuclear output?

Okay, that we haven't discussed and that we haven't disclosed. So sorry, we will not do that today either.

Three questions if I may. Firstly, on Russia, you mentioned that one of the considerations that you take into account when you've issued the new guidance is the CSA payment potentially being spread over 15 years rather than 10.

Just to be clear, are you saying that if that does come through and the CSA payment spread over 15 years rather than 10 years, you'd still expect to hit the original guidance in two years to three years [indiscernible]? Second question, two questions around kind of [indiscernible].

The second question, I was wondering whether you'd had any discussions with the Swedish government around nuclear decommissioning costs? Obviously there's been a lot of hooha in Germany around imminent closures and one of the concerns is I guess that the Swedish government follow a similar path.

So I'd be interest in what discussions you have with them? And thirdly, I was wondering whether you'd assessed the carrying value of the assets, the other nuclear associates that you have other than OKG?

Obviously there are necessarily the changes to what it cost you to do that for the other nuclear associates, but I was wondering whether you've gone through that process?

Okay. I'll take the first question and then I would ask Timo to take the two other questions.

The simple answer to your first question is, yes, we would expect this target level to be achieved two years to three years assuming that the 15-year CSA payment period would be effected.

Yes. And then related to the first about the nuclear decommissioning cost.

So I think that there is a process, a repeating process both in Finland and in Sweden where these nuclear liabilities are determined and updated. So that's the process where we live by.

And we have those values of the liabilities that come out of that discussion or that alternative process, we have also those in our note 17. And that is the process where these Swedish nuclear provisions are also based.

So we haven't had any specific or special discussions now with the Swedish government or any authorities there, right now, related to the decommissioning cost, but rather there is a process that is deeply rooted in the history and is ongoing, that's one thing. And then on the other hand, I think the short answer is of course, yes, related to, so we look at all our assets and all our important assets also in a process wise as we report and definitely always as we then go through the year and then prepare the yearly reporting.

So in a normal order, we look at both our nuclear ownerships and other important assets and power plants and assets, their values in our books compared to the future and the market. So that is what we do and that is what we also normally do.

Thank you. Good afternoon.

I had a question on Russia, sorry that I again asking this, just I wanted to maybe finally clarify one thing because you've been talking about the Russian economy, Russian demand, gas, oil prices being somewhat different than your top four. Can you confirm that you expect you reach your RUB18.2 billion guidance if -- as you answered already, the CSA stretch from 10 years to 15 years.

And if the economy and the commodity prices remain exactly at the level they are right now, so the only swing factor -- so meaning there's no external factor that you're relying on? Secondly, you talked about the changing role of the utility and the changing utility landscape, but I think most of us certainly agree with your analysis.

And you've been talking about how Fortum could add value in this and get closer to the customer at value-added services and so on. We have seen many utilities particularly struggling with that, an adding value there and finding their place, maybe it's a bit early stage, I guess, then we would have to wait until February, but maybe you can already have a comment on why you think that Fortum in particular could be in a better place and may be in a better shape than some other utilities that had a similarity about -- weren't really able to bring that very far?

I recognize very well the challenge that you're referring to, and we are of course studying the different roots that the different utilities have taken. But as you correctly pointed out, it's very early stage, so I would not like to get into this discussion as of quite yet.

But I'd say one thing only and that is that we are -- when you look at our position already today and when we talk about new value-added services, they are really in many markets, things that we can build on top of the combined heat and power offerings that we have already today offering to our customers in Finland, Sweden often in joint ventures like where the Swedish -- in Stockholm with the City of Stockholm and in the Baltic countries and in Poland, where we are today operating. So we are talking about quite natural value-added services that we can add on top of the current portfolio that we can offer to also our existing customers that we have today.

But this is a very complicated area as you pointed out, and I do not want to get into more details at this stage. Then when we talk about Russia, I mean, the way you formulated the question if you say that if the GDP development continues as it is today, well it's minus 4% today, so if that's the way it continues, then nobody knows where the demand will go and where the commodity prices will be, etcetera.

So that I'm not able to confirm. But I can say that in that guidance, we are not assuming any kind of major recovery in the Russian economy, we are assuming a -- in a way, a consensus scenario for the economy, which is that many people seem to be believing that the worse situation is now over, and now we will first see a lower rate of decline and then perhaps some modest growth in the late last year after that.

I mean this would be probably the most common scenario that analysts would today say about the Russian economy. So that's what we have in the background for this two years to three years.

Yes, good afternoon. Two questions please, first one is the 6.6% stake in Fennovoima, how does this fit in with your aim to take a market-driven route or the areas you highlighted for the future direction of Fortum?

Do you believe that new nuclear really is what the market wants at the moment and is prepared to pay for? And the second question is, you mentioned that your priority is to put the balance sheet to work.

Do you have a target gearing level in mind? Where do you see the most efficient balance sheet structure in this market environment?

We have said that we have a target 2.5 times EBITDA as net debt, that's what we have published as a leverage target, but we have not published a specific gearing target. Then when you -- the question about Fennovoima and nuclear in general, of course this varies quite a lot between countries, but when we look at the scenario in Finland, and of course, that's a very long-term investment.

Nobody knows where the power prices will be in the late 2020s and 2030s, and then in the coming 60 years, which will be the lifetime of the plant. But in the scenarios that we have built, assuming that we want to decarbonize the energy system, it is quite hard to see in this time horizon that that could be done without nuclear.

So nuclear will have a role as the base load provider together with hydro and other renewables. That's what we have in our models and that is the reason why we are seeing that nuclear will continue to be a part of that part of the energy system in Finland.

When it comes to our decision, there is an additional aspect also, in addition to the pure financial investment, which is only 6.6%. We have a lot of unique nuclear expertise in Finland, which is really in the short supply in the world and also in our country, and the fact that there will be a new project in our country will give us a very good opportunity to sell that expertise to this new project on commercial terms.

This is of course an unrelated question from the investment decision, but the investment decision enabled this process to get started, and that opens then up for us a possibility to sell commercial services to the project which sales have actually already been started. So there are these two aspects to our decision.

Yes, very shortly. Firstly, on CapEx, you have given thankfully a new target for the current year.

Assuming that there are some final payments for new capacities, could you give a rough indication where you see CapEx in your current structure, 2016 and beyond? And secondly, in the interim report you mentioned an order for Nures, I Just wonder if that's anything meaningful and anything worthwhile talking about?

If I take the Nures question and then Timo will take the CapEx question. I mean Nures is a specific technology that we have developed, which is a technology that enables cleaning of radioactive water.

And the order that we have received for the purposes of Fukushima wash, a new one in a series of orders that we have received in the last three years, I think it was clearly the largest so far. We have not disclosed numbers when it comes to that order, but it is a highly profitable business for us.

The next question will be that how much other potential there would be for that in the world, of course, we all hope that the reason what we saw in Fukushima will not lead to any new orders. But there are over 400 nuclear reactors in use in the world at the moment and there will be quite a lot of decommissioning in the future.

And we believe that this technology will be needed in decommissioning of nuclear power plant. So that's why we do believe that this will give us technology and service sales opportunities in several parts of the world in the future.

And then related to our CapEx levels going forward, we also mentioned in our interim release as before. So we estimate for this year, the maintenance CapEx to be around €350 million and I would think that with our current lead that's the level where it's going to continue also to be when we go forward to next year etcetera.

All-in-all, of course, we want to mind and run a tight ship about our CapEx and our cost as well in this tight pricing environment and then of course on the other hand, we are looking at ways to invest and ways to grow in the light what Pekka explained already in the beginning. So all-in-all what our CapEx is going to be and how and when, that's dependent quite a lot on the investment decisions we are going to make.

But then when we look at more of our running CapEx, then it's safe to start from this €330 million and €350 million, and then on top of that, we do what we see best for the future growth.

Operator, we will allow still one question.

Thank you. Given that just said that you would look to increase investments in renewables, does that rule out that you would potentially look to build another nuclear reactor in Finland, especially in the light that TVO walked away from the Olkiluoto 4 decision.

Could you take over that building prospect maybe?

Well, the fact that TVO did not apply for a building permit within the stipulated time schedule means that there isn't anything that somebody could just like that takeover. When it comes to the future of nuclear then in Finland, after the Fennovoima project that is too early to speculate the lifetime of the reactors in Loviisa will end in 2027 and 2030 and we will have plenty of time before that to look at where the market is going and how much demand there will be.

So this question is not on top of our list at the moment.

If I still expand a bit on the previous thing, the CapEx going forward, so of course we have some projects like the Polish power plant Zabrze etcetera that we have decided and that will run over a couple of years and that will be on top of this pure maintenance CapEx, €300 million and €350 million. So naturally those things will run into 2016 and some of those into 2017.

So that kind of tale will always be there. But on top of that, of course, any other things that I mentioned.

Thank you, everybody for participating and if you still have questions, the IR department is here, we're happy to take your calls or mails and we're now from Helsinki.

Thanks a lot. Bye.