Fortum plans to increase its hydro portfolio by 60% through the restructuring of TGC-1 – Subject to successful restructuring, Fortum ready to take a minority stake in the Finnish Fennovoima nuclear project


Fortum and Gazprom Energoholding have signed a protocol to start a
restructuring process of their ownership of TGC-1, a Territorial Generating
Company in Russia. TGC-1 owns and operates hydro power and thermal power plants
in North-West Russia as well as heat distribution networks in St. Petersburg.
Currently Gazprom Energoholding owns 51.8% of the TGC-1 shares and Fortum

As part of the restructuring, Fortum will establish a joint venture together
with Rosatom to own the hydro assets of TGC-1, while Gazprom Energoholding
continues with the heat and thermal power businesses of TGC-1. By utilising its
present stake in TGC-1, Fortum would obtain a 75-plus-percent ownership in the
new hydro power company. Rosatom would have a 25-minus-percent minority holding
in the new hydro power company.

Fortum, Gazprom Energoholding and Rosatom have signed a protocol to start the
restructuring process. The parties shall agree on the detailed structure,
practical arrangements and final commercial terms of the transactions. The new
company will be consolidated to Fortum Group as a subsidiary.

Provided that Fortum obtains a 75-plus-percent ownership in TGC-1 hydro
assets, Fortum would be ready to participate with a minority stake (max 15%) in
the Finnish Fennovoima nuclear power project on the same terms and conditions
as the other Finnish companies currently participating in the project.

“These transactions strengthen the cooperation between energy sector companies
in Finland and Russia and also with our long-term partner, Fortum,” says Mr.
Sergey Kirienko, CEO of Rosatom.

“Restructuring of TGC-1 assets will increase Fortum’s total hydro power
generation by 60% to 34 TWh, which clearly demonstrates Fortum’s strong
commitment to CO2-free production. As we already have more than five decades
of experience in working in Russia and with Russian partners, increasing our
volume of hydro power in Russia is a natural step for us”, says Tapio Kuula,
President and CEO of Fortum Corporation.

“Fennovoima’s nuclear project is important for Finland. While Fortum’s
participation and competencies are extremely valuable for the project, it will
also provide Fortum with possibilities to grow in the area of nuclear expert
services”, says Mr. Kuula.

TGC-1 is a major Territorial Generating Company in terms of installed capacity
operating in the North-West Russia. TGC-1 generates electricity and heat in 54
power plants in St. Petersburg, Leningrad oblast, Karelia and Kola regions and
supplies heat mainly in the St. Petersburg area.

TGC-1 owns and operates a fleet of 40 hydro power plants with a total capacity
of approx. 3,000 MW. Hydro power generation accounts for 41% (12-13 TWh) of the
company's total electricity generation. In addition, the company owns 14
thermal plants with a total electricity capacity of 4,300 MW (with a production
of 17 TWh/a) and has a total heat capacity of 16,500 MW (29 TWh/a). The shares
of TGC-1 are listed on the Moscow Exchange (MOEX).

In 2013, the IFRS consolidated net sales of TGC-1 amounted to approximately EUR
1,400 million, EBITDA to approximately EUR 340 million and operating profit to
approximately EUR 200 million. Total assets of the company were approximately
EUR 2,600 million and number of employees amounted to approximately 7,600 at
the end of 2013. IFRS figures have been calculated at the currency exchange
rates on 30 September 2014.

Fortum Corporation
Helena Aatinen
Senior Vice President, Corporate Communications
+358 10 452 0480

Further information:
Tapio Kuula, President and CEO, Fortum Corporation, tel. +358 10 45 24112
Kari Kautinen, SVP, Corporate Strategy and Mergers & Acquisitions, tel. +358 10
453 2174
Communications: Helena Aatinen, SVP, Corporate Communications, tel. +358 10 45
Investor Relations: Sophie Jolly, VP, Investor Relations, tel. +358 10 45 32552

Key media

Background information to journalists:

Fortum in Russia
Fortum produces and sells electricity and heat in the developed industrial areas of the Urals and in the oil and gas producing regions of Western Siberia in Russia. Electricity is sold on the wholesale market and heat on the local markets.

Fortum has approximately 4,200 employees in Russia and has had diverse business relations with the country for more than five decades.

Currently, prior to the announced restructuring, Fortum has a 29.5% holding in TGC-1, which is an associated company and is accounted for using the equity method.

The Russian operations carry an important role in Fortum's strategy and the company's goal is to achieve solid earnings growth in the segment. At the end of the third quarter of 2014, the last 12 month (LTM) sales by Fortum’s Russian business were approximately EUR 1.1 billion (~20% of Fortum’s sales) and the LTM's comparable operating profit was EUR 212 million (~16% of Fortum’s comparable operating profit). At the end of September 2014, Russia’s share of Fortum’s net assets was about 25% (EUR 3,670 million, calculated at the currency exchange rates on 30 September 2014).

TGC-1 Key figures in 2013 (IFRS)
Net sales   approx. EUR 1,404  million
EBITDA  approx. EUR 339  million
EBIT  approx. EUR 199  million
Total assets approx. EUR 2,610  million
Net debt  approx. EUR 653  million

Fortum’s purpose is to create energy that improves life for present and future
generations. Catering to the versatile needs of our customers, we generate,
distribute and sell electricity and heat, and offer related expert services.
Our operations focus on the Nordic and Baltic countries, Russia and Poland. In
2013, Fortum’s sales totalled EUR 6.1 billion and comparable operating profit
was EUR 1.6 billion. We employ approximately 8,800 people. Fortum’s shares are
traded on the NASDAQ OMX Helsinki.