Financials 2017 – Reader's guide

This report consists of the operating and financial review and the consolidated financial statements of Fortum Group, including the parent company financial statements. Other parts of Fortum's reporting entity include CEO letter, corporate governance statement, remuneration statement as well as tax footprint, which are published on Fortum's webpage. Sustainability reporting is an integrated part of Fortum's annual reporting and additional information on sustainability operations can be found on Forum's website in sustainability section.

Operating and financial review This section includes description of Fortum's financial performance during 2017. Here you will also find a description of the risk management as well as information on sustainability and Fortum share performance.	Consolidated financial statements Primary statements include Fortum's consolidated income statement, statement of comprehensive income, balance sheet, statement of changes in total equity and cash flow statement.	Notes The notes to the consolidated financial statements are grouped to six sections based on their nature. Use the note number list on the right side of the notes pages to navigate in the financial statements.	Notes are grouped to the following sections: 1–2 Basis of preparation These notes describe the basis of preparing the consolidated financial statements and consist of the accounting policies and critical accounting estimates and judgements. 3–4 Risks In the Risks section you will find notes that disclose how Fortum manages financial risks and capital risks. 5–13 Income statement
Key figures 2008–2017 Key figures consist of financial key figures, share key figures and operational key figures for 2008–2017. The financial key figures derive mainly from the primary statements. Segment key figures include information on segments.	Parent company financial statements Here you can read the parent company financial statements including the primary statements, cash flow and notes to the financial statements.	Proposal for the use of profit shown on the balance sheet The Board of Directors proposal for the dividend in 2017 is disclosed in this section.	These notes provide supporting information for the income statement. 14–32 Balance sheet These notes provide supporting information for the balance sheet. 33–36 Off balance sheet items The notes in this section provide information on items that are not included in the balance sheet. 37–40 Group structure and related parties This section includes information on events after balance sheet date, acquisitions and disposals, related party transactions and
Auditor's report This section includes the audit report issued by Fortum Oyj's auditor, Deloitte Oy.	Operational key figures and quarterly financial information Look here for volume related key figures for 2008–2017 and quarterly financial information for the years 2016 and 2017.	Investor information Here you will find information on Fortum's Annual General Meeting, dividend payment, basic share information as well as details of the financial information available to shareholders in 2018.	the subsidiaries of Fortum group. The following symbols show which amounts in the notes reconcile to the items in income statement, balance sheet and cash flow statement. IS = Income statement BS = Balance sheet CF = Cash flow

Financials 2017

Reader's guide 1

	Operating and financial review	3
	Financial performance and position	3
	Sustainability 20
	Risk management 25
	Fortum share and shareholders 30
	Consolidated financial statements 33
	Consolidated income statement 33
	Consolidated statement of comprehensive income 34
	Consolidated balance sheet 35
	Consolidated statement of changes in total equity 36
	Consolidated cash flow statement	37
	Notes to the consolidated financial statements 39
1	Accounting policies 39
2	Critical accounting estimates and judgements 44
3	Financial risk management 44
4	Capital risk management	51
5	Segment reporting 52
6	Items affecting comparability	57
7	Fair value changes of derivatives and
	underlying items in income statement 58
8	Other income and other expenses 58
9	Materials and services 59
10	Employee benefits 59
11	Finance costs - net 64

12	Income tax expense 65
13	Earnings and dividend per share 66
14	Financial assets and liabilities by categories	67
15	Financial assets and liabilities by fair value hierarchy	71
16	Intangible assets	74
17	Property, plant and equipment	77
18	Participations in associated companies and joint ventures	81
19	Other non-current assets 85
20	Interest-bearing receivables 86
21	Inventories 86
22	Trade and other receivables	87
23	Liquid funds 88
24	Share capital 88
25	Non-controlling interests89
26	Interest-bearing liabilities 89
27	Income taxes in balance sheet	91
28	Nuclear related assets and liabilities 93
29	Other provisions 96
30	Pension obligations 98
31	Other non-current liabilities 102
32	Trade and other payables 102
33	Lease commitments 102
34	Capital commitments 103
35	Pledged assets and contingent liabilities 103
36	Legal actions and official proceedings 105
37	Events after the balance sheet date	107
38	Acquisitions and disposals	107
39	Related party transactions	111
40	Subsidiaries by segment on 31 December 2017 112

Key figures 2008–2017 114
Financial key figures	114
Share key figures	116
Segment key figures 117
Definitions of key figures	123

Parent company financial statements	125
Income statement	125
Balance sheet	125
Cash flow statement	126
Notes to the parent company financial statements	127

Proposal for the use of the profit shown on

the balance sheet 134
Auditor's report 135
Operational key figures 139
Quarterly financial information 142
Investor information 144

Financial performance and position

Strong results and efficient strategy implementation.

Key financial ratios 1)

	2017	2016	2015
Return on capital employed, %	7.1	4.0	22.7
Comparable net debt/EBITDA	0.8	0.0	-1.7

1) Key financial ratios are based on total Fortum, including discontinued operations. See Definitions of key figures.

Key figures

EUR million	2017	2016	2015	Change 17/16
Sales
IS Continuing operations	4,520	3,632	3,459	24%
Discontinued operations	-	-	274
Total Fortum	4,520	3,632	3,702	24%
Comparable EBITDA
IS Continuing operations	1,275	1,015	1,102	26%
Discontinued operations	-	-	163
Total Fortum	1,275	1,015	1,265	26%
Comparable operating profit
IS Continuing operations	811	644	808	26%
Discontinued operations	-	-	114
Total Fortum	811	644	922	26%
Operating Profit
IS Continuing operations	1,158	633	-150	83%
- of sales %	25.6	17.4	-4.3
Discontinued operations	-	-	4,395
Total Fortum	1,158	633	4,245	83%
- of sales %	25.6	17.4	114.7
Share of profits from associates and joint ventures
IS Continuing operations	148	131	20	13%
Discontinued operations	-	-	0
Total Fortum	148	131	20	13%

EUR million	2017	2016	2015	Change 17/16
Profit before income tax
IS Continuing operations	1,111	595	-305	87%
- of sales %	24.6	16.4	-8.8
Discontinued operations	-	-	4,393
Total Fortum	1,111	595	4,088	87%
- of sales %	24.6	16.4	110.4
Earnings per share, EUR
IS Continuing operations	0.98	0.56	-0.26	75%
Discontinued operations	-	-	4.92
Total Fortum	0.98	0.56	4.66	75%
CF Net cash from operating activities,
continuing operations	993	621	1,228	60%
Shareholders' equity per share, EUR	14.69	15.15	15.53	-3%
Interest-bearing net debt
(at end of period) *	988	-48	-2,195	2,158%
Return on shareholders' equity total
Fortum, %	6.6	3.7	33.4
Equity-to-assets ratio, %	61	62	61

* Net cash in 2015 and 2016

We are satisfied with the progress of our strategy implementation during the year. Following the earlier Ekokem and Hafslund transactions, we announced the bid for Uniper towards the end of 2017. By investing in Uniper, Fortum continues the capital redeployment to enable a more efficient use of our balance sheet. The offer period commenced in November. At the end of the initial acceptance period in mid-January 2018, 46.93% of Uniper's shares had been tendered to our offer, including E.ON's 46.65% shareholding. Uniper shareholders who have not yet accepted our offer still have a chance to do so within the additional acceptance period.

Uniper's and Fortum's businesses complement each other well. Together Fortum and Uniper have a good strategic mix of assets – both clean and secure – as well as the expertise required to successfully and affordably drive Europe's transition towards a low-carbon energy system. We aim to take an active role in driving European energy transition. We see plenty of opportunities for co-operation with Uniper to add value for all stakeholders, and we have entered into talks with Uniper to formalise the relationship between our companies after the transaction is finalised. We truly see our investment as a win-win for all involved.

Proposal for the use of the profit shown on the balance sheet Notes information

Financial performance and position Sustainability Risk management Fortum share and shareholders

The Hafslund restructuring was concluded in the fourth quarter and the new business structure is in place. Together with our new colleagues from Hafslund, we have updated the strategies for both our Consumer Solutions and City Solutions divisions. We have now set the path forward and will be working together on implementing the strategy. We target annual synergies of EUR 15–20 million by the end of 2020.

In line with our strategy, we are not only focusing on taking part in the European power sector consolidation, we are also investing in new renewable generation and targeting a gigawattscale portfolio of wind and solar power. In January 2018 we commissioned Russia's first industrial wind power site with a capacity of 35 MW. In addition, we have recently started the implementation of other wind power plants in the Nordics and Russia and invested in solar power in Russia, and commissioned our largest solar power plant in India.

In the fourth quarter our performance improvement was broadbased, with comparable operating profit increasing in all operative segments. The Generation, City Solutions and Russia segments continued to perform well, while the Consumer Solutions segment continues to be under pressure due to the tight competitive situation. The acquisitions of Ekokem and Hafslund are already impacting our results positively, further strengthened by our continued Fortum-wide focus on efficiency. We have now reached the targeted EUR 100 million savings in fixed costs announced in 2016. The cost savings have enabled us to invest in new ventures for the future. Going forward we will continue to focus on cost efficiency and investment prioritisation.

Sustainability and safety continue to be very important for us at Fortum. 2017 was a challenging year in terms of occupational safety. We did not reach our targets for lost workday injury frequency, especially for contractors. This was a clear disappointment, even though we succeeded in reducing the number of severe accidents to only one. We continue to be committed to keeping our promise to provide a safe workplace for all. In 2017, our CO2 emissions decreased slightly. Our specific emissions remained at the same level as the previous year and continue to be at a low level compared to other European power producers.

As the strategy implementation and capital redeployment continues, our dividend payment capability will be further strengthened. Fortum's Board of Directors is proposing an unchanged dividend of EUR 1.10 per share for the calendar year 2017. Our ambition is to pay a stable, sustainable and over time increasing dividend now and in the future, and given the prevailing market conditions, our goal is to avoid a temporary dividend cut.

Uniper investment

In September 2017, Fortum announced it had signed a transaction agreement with E.ON under which E.ON had the right to decide to tender its 46.65% shareholding in Uniper SE into Fortum's public takeover offer. In November, Fortum launched a voluntary public takeover offer to all Uniper shareholders at a total value of EUR 22 per share implying a premium of 36% to the price prior to intense market speculation on a potential transaction at the end of May. The offer is subject to competition and regulatory approvals. Already in October 2017, Fortum received approval from the US competition authorities. Fortum expects to finalise the transaction in mid-2018.

The investment in Uniper delivers on Fortum's previously announced capital redeployment strategy and investment criteria. Uniper's businesses are well aligned with Fortum's core competencies, are close to Fortum's home markets and are highly cash generative. Fortum expects the investment to deliver an attractive return that will support the company in accelerating the development and implementation of sustainable energy technologies, without sacrificing a competitive dividend.

The offer will be financed with existing cash resources and committed credit facilities, with Barclays Bank PLC originally underwriting 100% of the credit facilities, including ongoing liquidity requirements. In October the credit facilities were syndicated to selected relationship banks of Fortum. Dividends received from the stake in Uniper will contribute to a stable and sustainable dividend for Fortum's shareholders. Fortum will account for Uniper as an associated company unless control according to IFRS is attained; as such, EBITDA and cash flow contribution, as well as the EPS effect on Fortum's results, will

depend on the final outcome of the offer. As a result of this transaction, Fortum's leverage will rise above our given guidance for net debt/EBITDA level of around 2.5x. Over time however, Fortum expects its cash generation in combination with the dividend from Uniper to reduce this level towards the stated target.

In January 2018, Fortum announced that shareholders representing 46.93% of the shares in Uniper had accepted the offer during the initial acceptance period, including E.ON. Uniper shareholders who have not tendered their shares to the offer within the initial acceptance period can still tender during the additional acceptance period that began on 20 January 2018 and ending on 2 February 2018. Fortum expects to publish the total amount of shares tendered on 7 February 2018.

Hafslund transaction

On 26 April 2017, Fortum and the City of Oslo entered into an agreement to restructure their ownership in Hafslund ASA, one of the largest listed power groups in the Nordic region. On 4 August 2017, Fortum concluded the restructuring of the ownership in Hafslund. Fortum sold its 34.1% stake in Hafslund ASA to the City of Oslo, acquired 100% of Hafslund Markets AS and 50.0% of Hafslund Varme AS (renamed as Fortum Oslo Varme AS) including the City of Oslo's waste-to-energy company Klemetsrudanlegget AS (renamed as Fortum Oslo Varme KEA AS), and 10% of Hafslund Produksjon Holding AS.

The total debt-free price of the acquisitions was EUR 940 million. The combined net cash investment of the transactions, including the dividend received in May 2017, was EUR 230 million. Fortum booked a one-time tax-free sales gain in its 2017 results, totalling EUR 324 million, which corresponds to EUR 0.36 earnings per share. Transaction costs of EUR 4 million for the acquisitions were included in Items affecting comparability. The acquired businesses were consolidated into Fortum Group from 1 August 2017.

Reorganisation of operations

As of 1 March 2017, the City Solutions division was divided into two separate divisions: City Solutions and Consumer Solutions, reported as separate segments. City Solutions comprises heating and cooling, waste-to-energy, biomass and other circular economy solutions. Consumer Solutions comprises electricity and gas retail businesses in the Nordics and in Poland, including the customer service, invoicing and collection business. (Nordic customer services previously reported under the Other segment). Comparison figures in accordance with the new organisational structure were published on 11 April 2017.

Comparability of information presented in tables

Following the divestment of the Swedish distribution business, Distribution segment is treated as discontinued operations in 2015. Financial results discussed in this operating and financial review are for the continuing operations of Fortum Group unless otherwise stated.

In addition, as of 2014, presented figures have been rounded and consequently the sum of individual figures may deviate from the sum presented. Figures in brackets refer to the comparison period unless otherwise stated.

Return on capital employed total Fortum, %

Return on capital employed, %

Target %, revised in 2016

Operating profit and comparable operating profit, EUR million

Operating profit

Comparable operating profit

Return on shareholders' equity total Fortum, %

Earnings per share total Fortum, EUR

Financial results

Sales by segment

EUR million	2017		2016 Change 17/16
Generation	1,677	1,657	1%
City Solutions	1,015	782	30%
Consumer Solutions	1,097	668	64%
Russia	1,101	896	23%
Other	102	92	11%
Netting of Nord Pool
transactions 1)	-367	-384
Eliminations	-103	-79
IS Total	4,520	3,632	24%

1) Sales and purchases with Nord Pool are netted at the Group level on an hourly basis and posted either as revenue or cost depending on whether Fortum is a net seller or net buyer during any particular hour.

Comparable EBITDA by segment

EUR million	2017		2016 Change 17/16
Generation	603	527	14%
City Solutions	262	186	41%
Consumer Solutions	57	55	4%
Russia	438	312	40%
Other	-83	-64	-30%
IS Total	1,275	1,015	26%

Comparable operating profit by segment

EUR million	2017		2016 Change 17/16
Generation	478	417	15%
City Solutions	98	64	53%
Consumer Solutions	41	48	-15%
Russia	296	191	55%
Other	-102	-77	-32%
IS Total	811	644	26%

Operating profit by segment

EUR million	2017		2016 Change 17/16
Generation	501	338	48%
City Solutions	102	86	19%
Consumer Solutions	39	59	-34%
Russia	295	226	31%
Other	221	-77	387%
IS Total	1,158	633	83%

For further information see Note 5 Segment reporting.

In 2017, sales were EUR 4,520 (3,632) million. The increase was mainly due to the strengthening Russian rouble and the consolidation of Ekokem, Hafslund and DUON. Comparable EBITDA totalled EUR 1,275 (1,015) million. Comparable operating profit totalled EUR 811 (644) million. Comparable operating profit was positively impacted by the consolidation of Hafslund, higher achieved power prices, lower real estate and capacity taxes in Swedish nuclear and hydro power plants and by improved result in the Russian operations. Operating profit totalled EUR 1,158 (633) million. Fortum's operating profit for the period was impacted by items affecting comparability of EUR 347 (-11) million, including updated provisions, sales gains, transaction costs and the IFRS accounting treatment (IAS 39) of derivatives mainly used for hedging, as well as nuclear fund adjustments ( Note 5). The sales gains include a one-time tax-free sales gain of EUR 324 million from the divestment of the 34.1% stake in Hafslund ASA ( Note 38).

In 2017, Fortum reached the targeted EUR 100 million savings in fixed costs announced in 2016. At the same time, the cost spend has been shifted to businesses under development and new ventures.

The share of profit from associates and joint ventures was EUR 148 (131) million, of which Hafslund represented EUR 39 (51) million, TGC-1 EUR 32 (38) million and Fortum Värme EUR 66 (66) million. The share of profit from Hafslund is based on the company's published fourth-quarter 2016 and January–June 2017 interim reports. The share of profit from TGC-1 is based on the company's published fourth-quarter 2016 and January-September

2017 interim reports ( Note 18). Due to the restructuring of Hafslund and the divestment of Fortum's 34.1% share in the company, Fortum will no longer have share of profits from Hafslund ASA.

Net finance costs amounted to EUR 195 (169) million, including costs relating to financing arrangements for the Uniper transaction.

Profit before income taxes was EUR 1,111 (595) million.

Taxes for the period totalled EUR 229 (90) million. The effective income tax rate according to the income statement was 20.6% (15.2%). The comparable effective income tax rate, excluding the impact of the share of profit from associated companies and joint ventures as well as non-taxable capital gains and other major one-time income tax effects, was 18.8% (20.0%) ( Note 12).

The profit for the period was EUR 882 (504) million. Earnings per share were EUR 0.98 (0.56), of which EUR -0.14 per share was related to a Swedish income tax case and EUR 0.38 (-0.02) per share was related to items affecting comparability ( Note 6 and Note 36).

Cash flow

In 2017, net cash from operating activities increased by EUR 372 million to EUR 993 (621) million, due to a EUR 260 million increase in comparable EBITDA, a EUR 193 million decrease in realised foreign exchange gains and losses, a EUR 133 million decrease in income taxes paid and a EUR 183 decrease in working capital compared to the previous year. The foreign exchange gains and losses of EUR -83 (110) million relate to the rollover of foreign exchange contract hedging loans to Russian and Swedish subsidiaries. In June 2016, Fortum paid income taxes in Sweden totalling EUR 127 million regarding an ongoing tax dispute. The change in working capital in 2017 was EUR 81 (-102) million. The biggest impact was the effect of the daily cash settlements for futures in Nasdaq OMX Commodities Europe

( Additional cash flow information).

Investments excluding acquisitions increased by EUR 58 million to EUR 657 (599) million compared to the previous year. Acquisition of shares amounted to EUR 972 (695) million mainly

Financial performance and position Sustainability Risk management Fortum share and shareholders

Financial position and cash flow

EUR million	2017		2016 Change 17/16
Interest expense	-164	-169	3%
Interest income	32	30	7%
Fair value gains and losses on financial instruments	-12	-2	-500%
Other financial expenses - net	-50	-29	-72%
IS Finance costs - net	-195	-169	-15%

Interest-bearing liabilities	4,885	5,107	-4%
Less: Liquid funds	3,897	5,155	-24%
Interest-bearing net debt	988	-48	2,158%

due to the Hafslund transaction in 2017 and the acquisitions of Ekokem and Polish DUON in 2016. Divestment of shares, mainly the Hafslund transaction, amounted to EUR 741 million (39). Net cash used in investing activities decreased to EUR 807 (1,701) million including the increase in cash collaterals of EUR -3 (-359) million given as trading collaterals to commodity exchanges.

Cash flow before financing activities was EUR 187 (-1,080) million, mainly impacted by the Hafslund transaction.

In 2017, Fortum paid dividends totalling EUR 977 (977) million. Payments of long-term liabilities totalled EUR 543 (934) million, including the repayment of bonds of EUR 343 million and other loan repayments of EUR 200 million. The net decrease in liquid funds was EUR 1,241 (3,064) million.

Assets and capital employed

At the end of the reporting period, total assets amounted to EUR 21,753 (21,964) million, a decrease of EUR 211 million. Liquid funds at the end of the period amounted to EUR 3,897 (5,155) million. Capital employed decreased by EUR 477 million and was EUR 18,172 (18,649) million.

Equity

Equity attributable to owners of the parent company totalled EUR 13,048 (13,459) million.

The decrease in equity attributable to owners of the parent company was EUR 411 million, mainly due to the net profit for the period of EUR 866 million, translation differences of EUR -369 million and the dividend payment of EUR 977 million.

Financing

Net debt increased by EUR 1,036 million to EUR 988 (-48) million.

At the end of the reporting period, the Group's liquid funds totalled EUR 3,897 (5,155) million. Liquid funds include cash and bank deposits held by PAO Fortum amounting to EUR 246 (105) million. In addition to liquid funds, Fortum's undrawn committed credit facilities totalled EUR 1.8 billion ( Note 23), excluding

Change in net debt during 2017, EUR million

At the end of 2016 Fortum was in net cash position, see Financial position and cash flow table above.

committed credit facilities of EUR 12.0 billion for Fortum's offer for Uniper shares.

Net financial expenses totalled EUR 195 (169) million, of which net interest expenses were EUR 132 (139) million. Net financial expenses include costs relating to financing arrangements of the Uniper transaction.

In September 2017, Standard & Poor's and Fitch Ratings placed both Fortum's long-term and short-term credit ratings on credit watch negative on possible adverse impacts of the planned Uniper investment. In January 2018, Standard & Poor's downgraded Fortum's long-term credit rating from BBB+ to BBB with a Negative Outlook due to the Uniper investment. The short-term rating was affirmed at level A-2. Fitch Ratings rates Fortum's long-term credit rating at level BBB+ and the short-term rating at level F2.

Interest-bearing net debt, EUR million

Interest-bearing net debt

Interest-bearing net debt without Värme financing

Comparable net debt/EBITDA total Fortum
Comparable net debt/EBITDA without Värme financing
Target, comparable net debt/EBITDA

2000 2003 2016 2017 Reference level

Source: Nord Pool

Key figures

At the end of 2017, the comparable net debt to EBITDA ratio was 0.8 (0.0).

Gearing was 7% (0%) and the equity-to-assets ratio 61% (62%). Equity per share was EUR 14.69 (15.15). Return on capital employed improved to 7.1% (4.0%). Fortum targets a long-term Return on capital employed of at least 10%.

Market conditions

Nordic countries

According to preliminary statistics, electricity consumption in the Nordic countries was 392 (390) terawatt-hours (TWh) in 2017.

At the beginning of 2017, the Nordic water reservoirs were at 75 TWh, which is 8 TWh below the long-term average and 23 TWh lower compared to the previous year. At the end of 2017, the reservoirs were 86 TWh, which is 3 TWh above the longterm average and 11 TWh higher compared to the previous year. Precipitation in the Nordics, was clearly above the normal level both in the fourth quarter and during the full year 2017.

The average system spot price in Nord Pool for the year 2017 was EUR 29.4 (26.9) per MWh, and the average area price in Finland was EUR 33.2 (32.4) per MWh and EUR 31.2 (29.2) per MWh in Sweden

(SE3, Stockholm). The main driver for the price increase was the clearly higher marginal cost of coal condensing power, which has contributed to stronger continental prices and increased exports from the Nordics.

In Germany, the average spot price in 2017 increased to EUR 34.2 (29.0) per MWh.

The market price of CO2 emission allowances (EUA) increased from EUR 6.5 per tonne at the beginning of the year to EUR 8.2 per tonne at the end of 2017.

Russia

Fortum operates both in the Tyumen and Khanty-Mansiysk area of Western Siberia, where industrial production is dominated by the oil and gas industries, and in the Chelyabinsk area of the Urals, which is dominated by the metal industry. The Russian market is divided in two price zones and Fortum operates in the First Price Zone.

Russian electricity consumption in 2017 was 1,035 (1,027) TWh and the corresponding figure for the First Price Zone was 799 (787) TWh.

In 2017, the average electricity spot price, excluding capacity price, was unchanged at RUB 1,204 (1,204) per MWh in the First Price Zone.

Power consumption

TWh	2017	2016	2015
Nordic countries	392	390	381
Russia	1,035	1,027	1,007
Tyumen	95	94	93
Chelyabinsk	33	35	35
Russia Urals area	261	259	258

Average prices

TWh	2017	2016	2015
Spot price for power in Nord Pool power exchange, EUR/MWh	29.4	26.9	21.0
Spot price for power in Finland, EUR/MWh	33.2	32.4	29.7
Spot price for power in Sweden, SE3, Stockholm, EUR/MWh	31.2	29.2	22.0
Spot price for power in Sweden, SE2, Sundsvall, EUR/MWh	30.8	29.0	21.2
Spot price for power in European and Urals part of Russia, RUB/MWh 1)	1,204	1,204	1,154
Average capacity price, tRUB/MW/month	535	481	359
Spot price for power in Germany, EUR/MWh	34.2	29.0	31.6
Average regulated gas price in Urals region, RUB/1,000 m3	3,685	3,614	3,488
Average capacity price for old capacity, tRUB/MW/month 2)	148	140	149
Average capacity price for new capacity, tRUB/MW/month 2)	899	815	641
Spot price for power (market price), Urals hub, RUB/MWh 1)	1,041	1,054	1,047
CO2, (ETS EUA), EUR/tonne CO2	6	5	8
Coal (ICE Rotterdam), USD/tonne	84	59	57
Oil (Brent Crude), USD/bbl	55	45	54

1) Excluding capacity tariff.

2) Capacity prices paid only for the capacity available at the time.

Water reservoirs

TWh	31 Dec 2017	31 Dec 2016	31 Dec 2015
Nordic water reservoirs level	86	75	98
Nordic water reservoirs level, long-term average	83	83	83

Export/import

TWh (+ = import to, - = export from Nordic area)	2017	2016	2015
Export/import between Nordic area and Continental Europe+Baltics	-15	-10	-18
Export/import between Nordic area and Russia	6	6	4
Export/import Nordic area, total	-9	-4	-14

European business environment and carbon market

Revision of the EU ETS approved

After two and a half years of legislative processing the revision of the EU Emissions Trading Scheme (ETS) for the period 2021–2030 was adopted in December. The new rules will increase the annual emission reduction target of the ETS from the current 1.74% to 2.2%. From the carbon market balance and pricing perspective the essential improvement is the strengthening of the Market Stability Reserve (MSR), including a temporary doubling of the intake rate from 12% to 24% during 2019–2023 and cancellation of allowances from the reserve from 2023 onwards. In addition, the new directive includes a provision for voluntary cancellation of allowances from the market.

However, the agreed setup is not yet in line with the Paris Climate Agreement and meets only the lower end of the EU 2050 goal to reduce emissions by 80–95% by 2050.

Swedish hydropower legislation

In June, the Swedish Government released a proposal on revision of hydro legislation including changes in the Environmental Act. This is a follow-up of the Swedish energy agreement done in summer 2016 and includes adjustments to meet requirements based on the EU Water Framework Directive. The aim is to mitigate environmental impacts and facilitate more efficient power production. According to the proposal, environmental permits for hydropower should be revised during a 20-year period in accordance with a national plan for prioritisation. The Ministry of Environment aims to have the revised legislation in place in March 2018.

Fortum emphasises the need to reform the Swedish system for hydro management. However, the proposal fails in ensuring a fair balance between environmental improvements and power production and a reasonable level of legal certainty.

The energy agreement requires hydro power companies to carry the full cost of environmental improvements. The largest hydro power companies are planning a joint fund in order to

Proposal for the use of the profit shown on the balance sheet Notes information

Financial performance and position Sustainability Risk management Fortum share and shareholders

secure financing for the improvements. The fund is expected to be in operation from July 2018 provided that the revision of hydro legislation has been completed.

Swedish nuclear waste fund fee approved

In December, the Swedish Government decided on the waste fund fees for the period 2018–2020. The fees are based on a new structure with a calculated lifetime of 50 years and on parts of the funds capital being invested in shares.

Swedish nuclear and hydro taxes adopted

In May, the Swedish Parliament adopted the proposed changes of nuclear and hydropower taxation in accordance with the energy agreement from June 2016. Starting from 1 July 2017, the tax on installed effect in nuclear reactors decreased by 90%, from SEK 14,770/MW/month to SEK 1,500/MW/month, and on 1 January 2018 the tax was abolished. The hydropower real-estate tax will be reduced from 2.8% to 0.5% in four steps by 2020.

Development of Nordic energy cooperation

Development of regional energy cooperation in the Nordic context moved forward in 2017. Following the June 2017 report by independent investigator Jorma Ollila, the Nordic energy ministers discussed the report in their annual meeting in November. They agreed on next-step actions to implement these proposals, including a proposal to establish a Nordic electricity market forum comprising various actors in the sector to discuss topics particularly related to development of the Nordic regional power market.

Segment reviews

Generation

The Generation segment comprises power production in the Nordics including nuclear, hydro and thermal power production, powerportfolio optimisation, trading and industrial intelligence, and nuclear services globally.

			Change
EUR million	2017	2016	17/16
Sales	1,677	1,657	1%
- power sales	1,649	1,635	1%
of which Nordic power sales 1)	1,342	1,339	0%
- other sales	28	22	27%
Comparable EBITDA	603	527	14%
Comparable operating profit	478	417	15%
Operating profit	501	338	48%
Share of profits from associates and joint ventures 2)	-1	-34	97%
Comparable net assets
(at period-end)	5,672	5,815	-2%
Comparable return on net assets, %	8.4	6.9	22%
Capital expenditure and gross
investments in shares	264	203	30%
Number of employees	1,035	979	6%

1) The Nordic power sales income and volume includes hydro and nuclear generation, excluding minorities. It does not include thermal generation, minorities, customer business or other purchases.

2) Power plants are often built jointly with other power producers, and owners purchase electricity at cost including interest cost and production taxes. The share of profit/loss is mainly IFRS adjustments (e.g. accounting for nuclear-related assets and liabilities) and depreciations on fair-value adjustments from historical acquisitions ( Note 18).

In 2017, the Generation segment's total power generation in the Nordic countries was 44.2 (45.3) TWh. CO2-free production accounted for 99% (99%) of the total production.

Comparable EBITDA increased to EUR 603 (527) million. Comparable operating profit improved to EUR 478 (417) million. The increase was mainly related to the higher achieved power price, and lower real-estate and capacity taxes in Swedish hydro and nuclear power plants, and was partly offset by lower nuclear production volumes resulting from the closure of Oskarshamn 1 and lower nuclear availability.

Operating profit clearly increased to EUR 501 (338) million and was positively affected by EUR 23 (-79) million of the IFRS accounting treatment (IAS 39) of derivatives mainly used for hedging Fortum's power production, updated provisions, and by nuclear fund adjustments ( Note 5).

The share of profits from associated companies and joint ventures totalled EUR -1 (-34) million ( Note 18).

The Nordic power price achieved in the Generation segment was EUR 31.8 (31.0) per MWh, EUR 0.8 per MWh higher than in 2016. The average system spot price of electricity in Nord Pool was EUR 29.4 (26.9) per MWh. The average area price in Finland was EUR 33.2 (32.4) per MWh and in Sweden (SE3, Stockholm) EUR 31.2 (29.2) per MWh.

Power generation by source

TWh	2017	2016	Change 17/16

Hydro power, Nordic	20.7	20.7	0%
Nuclear power, Nordic	23.0	24.1	-5%
Thermal power, Nordic	0.5	0.5	0%
Total in the Nordic countries	44.2	45.3	-2%

Nordic sales volume

TWh	2017	2016	Change 17/16
Nordic sales volume	51.8	52.4	-1%
of which Nordic Power sales volume 1)	42.2	43.2	-2%

1) The Nordic power sales income and volume includes hydro and nuclear generation, excluding minorities. It does not include thermal generation, minorities, customer business or other purchases.

Sales price

EUR/MWh	2017	2016	Change 17/16
Generation's Nordic power price 2)	31.8	31.0	3%

2) Generation's Nordic power price includes hydro and nuclear generation, excluding minorities. It does not include thermal generation, minorities, customer business or other purchases.

Generation segment's power generation in the Nordic area by source, TWh

Generation segment's power generation by area, TWh

UK Sweden Finland

City Solutions

City Solutions develops sustainable city solutions into a growing business for Fortum. The segment comprises heating and cooling, waste-to-energy, biomass and other circular economy solutions. The business operations are located in the Nordics, the Baltic countries and Poland. The segment also includes Fortum's 50% holding in Fortum Värme, which is a joint venture and is accounted for using the equity method.

EUR million	2017	2016	Change 17/16
Sales	1,015	782	30%
- heat sales	523	448	17%
- power sales	121	122	-1%
- other sales	370	212	75%
Comparable EBITDA	262	186	41%
Comparable operating profit	98	64	53%
Operating profit	102	86	19%
Share of profits from associates and joint ventures	80	76	5%
Comparable net assets
(at period-end)	3,728	2,873	30%
Comparable return on net assets, %	5.5	5.9	-7%
Capital expenditure and gross
investments in shares	556	807	-31%
Number of employees	1,907	1,701	12%

In April 2017, Ekokem was rebranded to Fortum. The rebranded Ekokem forms City Solutions' Recycling and Waste Solutions unit.

On 4 August 2017, Fortum concluded the restructuring of its ownership in Hafslund. Fortum's 50% ownership in Fortum Oslo Varme (the combined company of Hafslund's Heat business area and Fortum Oslo Varme KEA has been consolidated as a subsidiary to Fortum in the results of City Solutions as of 1 August 2017.

Heat sales volumes amounted to 10.0 (8.7) TWh. Power sales volumes from CHP production totalled 2.6 (2.8) TWh, of which Fortum Oslo Varme's share was 0.7 TWh.

Sales increased to EUR 1,015 (782) million, mainly as a consequence of the consolidation of Ekokem and Fortum Oslo Varme.

Nord Pool, power price, 2013–2017, EUR/MWh

Source: Nord Pool, Fortum

Comparable EBITDA increased and totalled EUR 262 (186) million. Comparable operating profit improved to EUR 98 (64) million. The consolidation of Fortum Oslo Varme had a positive effect of EUR 29 million on the comparable EBITDA and EUR 15 million on the comparable operating profit. In addition, the consolidation of Ekokem, improved power prices and fuel mix contributed positively to the results.

Operating profit totalled EUR 102 (86) million, including EUR 4 (22) of items affecting comparability ( Note 5).

The share of profits from associated companies and joint ventures totalled EUR 80 (76) million, including the share of profit from Fortum Värme ( Note 18).

Heat sales by country

TWh	2017	2016	Change 17/16
Finland	3.9	3.6	8%
Poland	3.7	3.6	3%
Other countries	2.5	1.5	67%
Total	10.0	8.7	15%

Power sales by country

			Change
TWh	2017	2016	17/16
Finland	1.5	1.5	0%
Poland	0.4	0.7	-43%
Other countries	0.7	0.6	17%
Total	2.6	2.8	-7%

Consumer Solutions

Consumer Solutions comprises electricity and gas retail businesses in the Nordics and Poland, including the customer service, invoicing and debt collection business. Fortum is the largest electricity retail business in the Nordics, with approximately 2.5 million customers across different brands in Finland, Sweden, Norway and Poland. The business provides electricity and related value-added products as well as new digital customer solutions.

EUR million	2017	2016	Change 17/16
Sales	1,097	668	64%
- power sales	862	528	63%
- other sales	235	139	69%
Comparable EBITDA	57	55	4%
Comparable operating profit	41	48	-15%
Operating profit	39	59	-34%
Comparable net assets (at period-end)	638	154	314%
Capital expenditure and gross investments in shares	493	120	311%
Number of employees	1,543	961	61%

On 4 August 2017, Fortum concluded the restructuring of its ownership in Hafslund. Hafslund Markets has been consolidated into the results of Consumer Solutions as of 1 August 2017

Electricity and gas sales volumes totalled 24.4 (14.8) TWh. The total customer base at the end of the period was 2.49 (1.36) million.

Sales increased to EUR 1,097 (668) million, mainly due to the consolidation of Polish DUON and Hafslund.

Comparable EBITDA amounted to EUR 57 (55) million and comparable operating profit was EUR 41 (48) million. The consolidation of Hafslund had a positive effect of EUR 22 million on the comparable EBITDA and EUR 13 million on the comparable operating profit. The result improvement was offset by the lower average margin in electricity and gas products and higher costs arising from the increased focus and spend on the development of new digital services. The renegotiated invoicing service agreements for external distribution companies also had a negative impact on the results.

Operating profit declined to EUR 39 (59) million affected by sales gains and the IFRS accounting treatment (IAS 39) of derivatives, mainly used for hedging, EUR -2 (11) million ( Note 5).

Sales volumes

TWh	2017	2016	Change 17/16
Electricity	20.5	12.3	67%
Gas *	4.0	2.5	60%

* Not including wholesale volumes.

Number of customers

Thousands *	2017	2016	Change 17/16
Electricity	2,470	1,350	83%
Gas	20	10	100%
Total	2,490	1,360	83%

* Rounded to the nearest 10,000.

Russia

The Russia segment comprises power and heat generation and sales in Russia. The segment also includes Fortum's over 29% holding in TGC-1, which is an associated company and is accounted for using the equity method.

			Change
EUR million	2017	2016	17/16
Sales	1,101	896	23%
- power sales	837	691	21%
- heat sales	258	199	30%
- other sales	6	6	0%
Comparable EBITDA	438	312	40%
Comparable operating profit	296	191	55%
Operating profit	295	226	31%
Share of profits from associates and
joint ventures	31	38	-18%
Comparable net assets
(at period-end)	3,161	3,284	-4%
Comparable return on net assets, %	10.1	8.0	26%
Capital expenditure and gross
investments in shares	277	201	38%
Number of employees	3,495	3,745	-7%

After the completion of the multi-year investment programme in March 2016, Fortum's total capacity in Russia amounts to 4,794 MW, including 35 MW of solar power acquired at the end of 2017. The generation capacity built after the year 2007 amounts to 2,333 MW. Under the Russian Capacity Supply Agreement (CSA – "new capacity") this capacity entitles Fortum to guaranteed payments for approximately ten years after the commissioning of each new unit. The received capacity payments vary depending on age, location, type and size of the plant, as well as on seasonality and availability. The CSA payments can also vary somewhat on an annual basis, as they are linked to Russian Government long-term bonds with eight to ten years maturity. Electricity sales, TWh Sales increased to EUR 1,101 (896) million, mainly supported

In March 2017, the System Administrator of the wholesale market published its annual data which is the basis for the CSA payment calculation. These components comprise among others the weighted average cost of capital (WACC), the consumer price index (CPI) and re-examination of earnings from the electricity-only (spot) market (done every three and six years after commissioning of a unit). Fortum's CSA payment for 2017 was revised upwards to compensate for lower earnings from the electricity-only market. In addition, certain power plants were entitled to higher CSA payments when entering into the sevento-ten year time period of generation. The increase of the CSA payment was somewhat offset by lower Government bond rates and consumer price index (CPI).

Fortum's Russian capacity generation, totalling 2,461 MW, was allowed to participate in the Competitive Capacity Selection (CCS – "old capacity") for 2017. All Fortum plants offered in the auction were selected. Fortum has obtained forced mode status for 195 MW of its capacity, i.e. it receives higher-rate capacity payments.

In 2017, the Russia segment's power sales volumes amounted to 30.5 (29.5) TWh and heat sales volumes totalled 19.8 (20.7) TWh. The power volumes increased due to commissioning of the Chelyabinsk GRES unit 3.

by the strengthening of the Russian rouble, higher received CSA payments, the change in the heat supply scheme in Tyumen and commissioning of the Chelyabinsk GRES unit 3.

The Russia segment's comparable EBITDA was EUR 438 (312) million and the comparable operating profit was EUR 296 (191) million. The Russian rouble had a positive effect of EUR 31 million. The commissioning of the new unit, higher received CSA payments, higher power volumes, as well as improved bad-debt collections also affected the results positively.

Operating profit was EUR 295 (226) million, including sales gains of EUR 0 (35) million ( Note 5).

The share of profits from associated companies and joint ventures totalled EUR 31 (38) million ( Note 18).

Key electricity, capacity and gas prices for Fortum Russia

	2017	2016	Change 17/16
Electricity spot price (market price), Urals hub, RUB/MWh	1,041	1,054	-1%
Average regulated gas price, Urals region, RUB/1,000 m3	3,685	3,614	2%
Average capacity price for CCS "old capacity", tRUB/MW/month 1)	148	140	6%
Average capacity price for CSA "new capacity", tRUB/MW/month 1)	899	815	10%
Average capacity price, tRUB/MW/ month	535	481	11%
Achieved power price for Fortum in Russia, RUB/MWh	1,813	1,734	5%
Achieved power price for Fortum in Russia, EUR/MWh 2)	27.5	23.5	17%

1) Capacity prices paid for the capacity volumes, excluding unplanned outages, repairs and own consumption.

2) Translated using average exchange rate.

Financial performance and position Sustainability Risk management Fortum share and shareholders

Capital expenditure, divestments and investments in shares

EUR million	2017	2016
Capital expenditure
Intangible assets	18	3
Property, plant and equipment	672	588
Total	690	591

Gross investments in shares
Subsidiaries	982	813
Associated companies	135	17
Available for sale financial assets	8	14
Total	1,125	844

	Type	Electricity capacity MW	Heat capacity MW	Supply starts
Generation
Loviisa, Finland	Nuclear	6		2018
Hydro plants in Sweden and Finland	Hydro	~12		2018
City Solutions
Zabrze, Poland	CHP	75	145	2018
Russia
Ulyanovsk				1 Jan
	Wind	35		2018
Ulyanovsk	Wind	50 1)		H1 2019
Other
Solberg, Sweden	Wind	75 2)		Q1 2018
Ånstadblåheia,
Norway	Wind	50		2018
Sørfjord, Norway	Wind	97		2019
Karnataka, India	Solar	100		Q4 2017

Generation

Through its interest in Teollisuuden Voima Oyj (TVO), Fortum is participating in the building of Olkiluoto 3 (OL3), a 1,600-MW nuclear power plant unit in Finland. The plant's start of regular electricity production is expected to take place in May 2019, according to the plant supplier AREVA-Siemens Consortium.

Olkiluoto 3 is funded through external loans, share issues and shareholder loans according to shareholder agreements between the owners and TVO. As a 25% shareholder in Olkiluoto 3, Fortum has committed to funding of the project pro rata. At the end of December 2017, Fortum's shareholder loans to TVO amounted to EUR 145 million and the outstanding commitment for was EUR 88 million ( Note 20).

City Solutions

On 30 March 2017, the final decision regarding the minority redemption process of Ekokem Oyj shares was made by the arbitration court, bringing Fortum's ownership to 100%.

Consumer Solutions

In May 2017, Fortum agreed to sell 100% of its shares in the Polish gas infrastructure company DUON Dystrybucja S.A. to Infracapital,

Capital expenditure and gross investments in shares, EUR million

Investments in shares Capital expenditures

Capital expenditure by country, EUR million

the infrastructure investment arm of M&G Investments. DUON Dystrybucja S.A. is transporting grid gas and LNG in Poland. The company was acquired as part of the acquisition of the electricity and gas sales company Grupa DUON S.A. (currently Fortum Markets Polska S.A.) in 2016. The divestment was concluded on 28 July 2017. The sale had a minor positive impact on Fortum's 2017 results.

Russia

On 27 April 2017, Fortum and RUSNANO, a Russian state-owned development company, signed a 50/50 investment partnership (joint venture) in order to secure the possibility of a Russian Capacity Supply Agreement (CSA) wind portfolio. In June, 1,000 MW of the bids of the Fortum-RUSNANO wind investment fund were selected in the Russian renewable energy auction. The bids were for projects to be commissioned during 2018–2022 with a price corresponding to approximately EUR 115–135 per MWh. The projects will be covered by CSA for a period of 15 years. The investment decisions will be made on a case-by-case basis within the total mandate of the wind investment fund. Fortum's equity stake in the wind investment fund totals a maximum of RUB 15 billion (currently approximately EUR 220 million). The amount is to be invested over time (approx. 5 years), subject to separate investment decisions. The investment fund has selected Vestas as the supplier of wind turbines in Russia. In October 2017,

Financial performance and position Sustainability Risk management Fortum share and shareholders

the wind investment fund made an investment decision on the first 50-MW wind farm. The wind farm is expected to start production during the first half of 2019.

In November 2017, Fortum completed the replacement investment at the Chelyabinsk GRES power plant. The new combined-cycle gas turbine (CCGT) unit with 247.5 MW of electricity generation capacity and 174 MW of heat capacity started commercial operation. The new turbine replaces the previous eight turbine generators in the power plant. This unit is not within the scope of the previously completed larger investment programme and consequently receives Competitive Capacity Selection (CCS) payments. Fortum's Chelyabinsk GRES site has electricity generation capacity of 742 MW and heat production capacity of 988 MW.

On 30 November 2017, Fortum signed an agreement to acquire three solar power companies from Hevel Group, Russia's largest integrated solar power company. The transaction was closed in December 2017. All three power plants are operational with a total capacity of 35 MW. The plants will receive Capacity Supply Agreement (CSA) payments for approximately 15 years after commissioning at an average CSA price corresponding to approximately EUR 430/MWh. The plants were commissioned in 2016 and 2017. Hevel Group will provide operation and maintenance services for all three power plants.

Other

In January 2017, Fortum finalised the acquisition of three wind power projects from the Norwegian company Nordkraft. The transaction consists of the Nygårdsfjellet wind farm, which is already operational, as well as the fully-permitted Ånstadblåheia and Sørfjord projects. The wind farms are expected to be commissioned in 2018 and 2019. When built, the total installed capacity of the three wind farms will be approximately 170 MW. On 29 September 2017, Fortum announced the decision to invest in the Sørfjord wind farm in northern Norway. The Sørfjord wind park will have 23 wind turbines with a total capacity of 97 megawatts. The wind turbines for Sørfjord will be delivered by Siemens Gamesa Renewable Energy.

In March 2017, Fortum commissioned the 70-MW solar plant at Bhadla solar park in Rajasthan, India and in December 2017

Fortum commissioned the 100-MW solar plant at Pavagada solar park in Karnataka, India. Fortum won a reverse auction for the projects in 2016. The power plants will operate based on a Power Purchase Agreement (PPA), with a fixed tariff for 25 years. The Power Purchase Agreements have been made with National Thermal Power Corporation Limited (NTPC), India's largest power utility.

Research and development

Sustainability is at the core of Fortum's strategy and, alongside Fortum's current businesses, the company is carefully exploring and developing new sources of growth within renewable energy production.

Fortum's goal is to be at the forefront of energy technology and application development. To accelerate innovation and the commercialisation of new offerings, Fortum is strengthening its in-house innovation and digitalisation efforts and building partnerships with leading global suppliers, promising technology and service companies, and research institutions. Fortum makes direct and indirect investments in start-ups that have promising new innovations focused on connectivity, have disruptive potential and accelerate the transition towards a circular economy. Fortum also invests in technologies that support better utilisation of the current asset base and that can create new markets and products for Fortum. The company is continuously looking for emerging clean energy solutions and for solutions that increase resource and system efficiency.

The Group reports its R&D expenditure on a yearly basis. In 2017, Fortum's R&D expenditure was EUR 53 (52) million, or 1.2% (1.4%) of sales.

EUR million	2017	2016	2015	Change 17/16
R&D expenditure, EUR million	53	52	47	2%
R&D expenditure, % of sales	1.2	1.4	1.4

Changes in Fortum's Management

On 8 February 2017, Markus Rauramo, Executive Vice President, City Solutions, was appointed Chief Financial Officer of the

company as of 1 March 2017 following Timo Karttinen's resignation from his CFO duties. At the same time, Per Langer, Senior Vice President, Technology and New Ventures, was appointed Executive Vice President, City Solutions, also as of 1 March 2017.

On 20 March 2017, Mikael Rönnblad, M.Sc. (Econ.), was appointed Executive Vice President, Consumer Solutions, and member of Fortum's Executive Management. Rönnblad started in his position on 15 May 2017.

On 31 October 2017, Matti Ruotsala, Deputy CEO, retired from the company.

On 9 November 2017, Fortum announced that Tapio Kuula, member of the Board of Directors and former President and CEO had passed away after a long illness. On 15 November 2017, Fortum's Shareholders' Nomination Board evaluated and confirmed the Board of Directors' ability to function with seven members until the Annual General Meeting 2018.

Annual General Meeting 2017

Fortum Corporation's Annual General Meeting, which was held in Helsinki on 4 April 2017, adopted the financial statements of the parent company and the Group for the financial period 1 January–31 December 2016, and discharged the members of Fortum's Board of Directors and the President and CEO from liability for the year 2016.

The Annual General Meeting decided to pay a dividend of EUR 1.10 per share for the financial year that ended on 31 December 2016. The record date for the dividend payment was 6 April 2017, and the dividend payment date was 13 April 2017.

The Annual General Meeting confirmed the remuneration of EUR 75,000 per year to the Chairman, EUR 57,000 per year to the Deputy Chairman, EUR 40,000 per year to each member of the Board, as well as EUR 57,000 per year to the Board member acting as the Chairman of the Audit and Risk Committee if he or she is not at the same time acting as Chairman or Deputy Chairman of the Board. In addition, a EUR 600 meeting fee is paid for Board meetings as well as for committee meetings. The meeting fee is doubled for Board members who live outside Finland in Europe and tripled for members living outside Europe. For Board members

Proposal for the use of the profit shown on the balance sheet Notes information

Financial performance and position Sustainability Risk management Fortum share and shareholders

living in Finland, the fee for each Board and Board Committee meeting is doubled for meetings held outside Finland and tripled for meetings outside Europe. For Board and Committee meetings held as a telephone conference, the basic meeting fee is paid to all members. No fee is paid for decisions made without a separate meeting.

The Annual General Meeting also confirmed the number of members in the Board of Directors to be eight. Ms Sari Baldauf was re-elected as Chairman, Mr Matti Lievonen was elected as a new member and Deputy Chairman, Mr Heinz-Werner Binzel, Ms Eva Hamilton, Mr Kim Ignatius, Mr Tapio Kuula and Mr Veli-Matti Reinikkala were re-elected as members, and Ms Anja McAlister was elected as a new member.

In addition, Authorised Public Accountant Deloitte & Touche Ltd (Deloitte Ltd as of 1 June 2017) was re-elected as auditor, with Authorised Public Accountant Ms Reeta Virolainen as the principal auditor. The auditor's fee is paid pursuant to an invoice approved by the company.

The Annual General Meeting authorised the Board of Directors to decide on the repurchase and disposal of the company's own shares up to a maximum number of 20,000,000 shares, which corresponds to approximately 2.25 per cent of all the shares in the company. It was also decided that own shares could be repurchased or disposed of in connection with acquisitions, investments or other business transactions, or be retained or cancelled. The repurchases or disposals could not be made for the purposes of the company's incentive and remuneration schemes. The authorisation cancelled the authorisation resolved by the Annual General Meeting of 2016 and it will be effective until the next Annual General Meeting and, in any event, for a period of no longer than 18 months.

At the meeting held after the Annual General Meeting, Fortum's Board of Directors elected from among its members to the Nomination and Remuneration Committee Matti Lievonen as Chairman and Sari Baldauf, Eva Hamilton, and Tapio Kuula as members. Furthermore, the Board elected to the Audit and Risk Committee Kim Ignatius as Chairman and Heinz-Werner Binzel, Anja McAlister and Veli-Matti Reinikkala as members.

Shareholders Nomination Board

On 9 October 2017, Pekka Timonen (Chairman), Director General of the Ministry of Economic Affairs and Employment, Timo Ritakallio, President and CEO, Ilmarinen Mutual Pension Insurance Company, and Elli Aaltonen, Director General, The Social Insurance Institution of Finland KELA, were appointed to Fortum's Shareholders' Nomination Board. In addition, Sari Baldauf, Chairman of Fortum's Board of Directors, is a member of the Shareholders' Nomination Board.

Other events during the reporting period

On 19 December 2017, Fortum announced that the Board of Directors has decided to commence the 2018–2020 long-term incentive (LTI) plan for key employees and executives. The 2018–2020 LTI plan is part of Fortum's ongoing LTI programme and follows the same principles as the previous plan. The performance measures applied to the 2018–2020 LTI plan will be based on cumulative Earnings Per Share over three years and Total Shareholder Return measured relative to the European Utilities Group, both with an equal weight of 50%. The 2018–2020 LTI plan will comprise approximately 110 participants, including the members of Fortum Executive Management. The maximum number of shares that may potentially be delivered as a reward under the 2018–2020 LTI plan, based on the currently prevailing price of Fortum's share, is expected not to exceed 700,000 shares.

Events after the balance sheet date

On 8 January 2018, E.ON SE announced that it had decided to tender its 170,720,340 Uniper SE shares (corresponding to 46.65% of shares and voting rights) into Fortum's public takeover offer.

On 19 January 2018, Fortum announced that 46.93% of the share capital and the voting rights in Uniper were tendered during the initial acceptance period of Fortum's voluntary public takeover offer for the outstanding shares of Uniper corresponding to 171,736,647 shares. The initial acceptance period ended on 16 January 2018 and the additional acceptance period resumed on 20 January 2018 and will end on 2 February 2018.

Key drivers and risks

Fortum's financial results are exposed to a number of economic, strategic, political, financial and operational risks.

One of the key factors influencing Fortum's business performance is the wholesale price of electricity in the Nordic region. The key drivers behind the wholesale price development in the Nordic region are the supply-demand balance, the prices of fuel and CO2 emission allowances, and the hydrological situation.

The world economy has recently been growing at an increasing pace. The overall economic growth impacts commodity and CO2 emission allowance prices, which has an effect on the Nordic wholesale price of electricity. In Fortum's Russian business, the key drivers are economic growth, the rouble exchange rate, regulation around the heat business, and the further development of the electricity and capacity markets. In all regions, fuel prices and power plant availability also impact profitability. In addition, increased volatility in exchange rates due to financial turbulence could have both translation and transaction effects on Fortum's financials, especially through the Russian rouble and Swedish krona.

In the Nordic countries, the regulatory and fiscal environment for the energy and environmental management sectors has also added risks for companies. The main strategic risk is that the regulatory and market environment develops in a way that we have not been able to foresee and prepare for. In response to these uncertainties, Fortum has analysed and assessed a number of future energy market and regulation scenarios, including the impact of these on different generation forms and technologies. As a result, Fortum's strategy was renewed in 2016 to include broadening the base of revenues and diversification into new businesses, technologies and markets. The environmental management business is based on the framework and opportunities created by environmental regulation. Being able to respond to customer needs created by the tightening regulation is a key success factor.

For further details on Fortum's risks and risk management, see the Risk management section of the Operating and financial review and Note 3 Financial risk management.

Proposal for the use of the profit shown on the balance sheet Notes information

Financial performance and position Sustainability Risk management Fortum share and shareholders

Outlook

Nordic market

Electricity is expected to continue to gain a higher share of total energy consumption. Electricity demand in the Nordic countries is expected to grow by approximately 0.5% on average, while the growth rate for the next few years will largely be determined by macroeconomic developments in Europe, and especially in the Nordic countries.

The price of oil and coal in 2017, was on a clearly higher level compared to the previous year. The price of CO2 emission allowances (EUA) also increased during the fourth quarter of 2017. The price of electricity for the upcoming 12 months decreased in the Nordics due to a stronger hydrological balance but increased in Germany due to higher fuel prices.

Late in January 2018, the forward quotation for coal (ICE Rotterdam) for the remainder of 2018 was around USD 88 per tonne and the market price for CO2 emission allowances for 2018 around EUR 8.90 per tonne. The Nordic system electricity forward price at Nasdaq Commodities for the remainder of 2018 was around EUR 27 per MWh and for 2019 around EUR 26 per MWh. In Germany, the electricity forward price for the remainder of 2018 and 2019 was around EUR 35 per MWh. Nordic water reservoirs were about 2 TWh below the long-term average, and were 7 TWh higher than a year earlier.

Generation

The Generation segment's achieved Nordic power price typically depends on such factors as hedge ratios, hedge prices, spot prices, availability and utilisation of Fortum's flexible production portfolio, and currency fluctuations. Excluding the potential effects from changes in the power generation mix, a 1 EUR/MWh change in the Generation segment's Nordic power sales achieved price will result in an approximately EUR 45 million change in Fortum's annual comparable operating profit. Achieved power price includes also the results of optimization of Fortum's hydro and nuclear

production as well as operations in the physical and financial commodity markets.

As a result of the nuclear stress tests in the EU, the Swedish Radiation Safety Authority (SSM) has decided on new regulations for Swedish nuclear reactors. For the operators, this means that safety investments should be in place no later than 2020.

The process to review the Swedish nuclear waste fees is done in a three-year cycle. The Swedish Nuclear Fuel and Waste Management Co (SKB) has updated the new technical plan including earlier shut down of some nuclear plants for the SSM to review. The final decision on the new nuclear waste fees for years 2018–2020 was made by the Swedish Government in December 2017 and was in line with SSM's proposal to the Government. On 25 October 2017, the Swedish Parliament decided on changes in the legal framework impacting calculations of nuclear waste fees and the investment of the nuclear waste fund. In the revised legal framework the assumed operating time for calculating the waste fee is 50 years, as opposed to the previous assumption of 40 years. The fund is now also allowed to invest in other financial instruments in addition to bonds. Based on these changes the annual waste fees for Fortum will increase by approximately EUR 8 million.

On 3 July 2017, Fortum announced the decision by the Administrative Court in Stockholm, Sweden, related to Fortum Sverige AB's hydro production-related real-estate tax assessments for the years 2009–2014. The Court decided in Fortum's favour. The disputed amount for the five years was a total of SEK 508 million (EUR 52 million). Fortum will book the tax income (subject to income tax) only after the legal decision has entered into force. Hydropower plants have been subject to a real-estate tax rate that has resulted in an approximately 12 times higher real-estate tax per kWh compared to any other production, due to different tax rates and different valuation factors. The tax authority has appealed the decision.

In October 2016, the Swedish Energy Agency presented a concrete proposal on how to increase the production of renewable electricity by 18 TWh in 2020–2030 within the electricity certificate system, as part of the Energy Agreement. In April 2017, the Swedish Government decided that the increase will be carried out in a linear manner.

In September 2016, the Swedish Government presented the budget proposal for the coming years. One of the key elements was the proposal that the taxation of different energy production forms should be more equal, and the tax burden of nuclear and hydro should be taken to the level of other production technologies. The budget states that the nuclear capacity tax will be reduced to 1,500 SEK/MW per month from 1 July 2017 and abolished on 1 January 2018. As a result, the tax for Fortum decreased by EUR 32 million due to the tax decrease and by another EUR 5 million due to the premature closure of Oskarshamn 1 in the middle of the year. In 2017, the capacity tax was EUR 52 million. In 2018, there is no capacity tax. As stated in the Government's budget, the hydropower real-estate tax will decrease from 2.8% to 0.5%; the tax will be reduced in four steps: in January 2017 to 2.2%; in January 2018 to 1.6%; in January 2019 to 1.0%; and in January 2020 to 0.5%. In 2017, the tax for Fortum decreased by EUR 20 million to EUR 95 million. In addition to the decrease in the tax rate, the hydropower realestate tax values, which are linked to electricity prices, will be updated in 2019. The real-estate tax values are updated every six years. With the current low electricity prices, the tax values in 2019 would be clearly lower than today. The process for renewing existing hydro permits will also be reformed.

In 2015, the Swedish OKG AB decided to permanently discontinue electricity production at Oskarshamn's nuclear plant units 1 and 2. Unit 1 was shut down on 17 June 2017, approximately 2 weeks earlier than planned, and unit 2 has been out of operation since June 2013. The closing processes for both units are estimated to take several years.

Proposal for the use of the profit shown on the balance sheet Notes information

Financial performance and position Sustainability Risk management Fortum share and shareholders

City Solutions

In City Solutions, stable growth, cash flow and earnings are achieved through investments in new plants and through acquisitions. Fuel cost, availability, flexibility and efficiency as well as gate fees are key drivers in profitability, but also the power supply/demand balance, electricity price and the weather affect profitability.

In May 2016, the Finnish Government decided to increase the tax on heating fuels by EUR 90 million annually from 2017 onwards. The negative impact on Fortum is estimated to be approximately EUR 5 million per year.

The development of acquired business operations of Fortum Oslo Varme is estimated to require integration-related one-time costs and increased investments over the coming years. The realisation of cost synergies are estimated to gradually start materialising from 2019 onwards with targeted annual synergies of EUR 5–10 million expected to be achieved by the end of 2020.

Consumer Solutions

After the acquisition of Hafslund Markets in August, a new business strategy for Consumer Solutions, was approved by the Fortum Board of Directors in December. The strategic objective is to establish Consumer Solutions as the leading consumer business in the Nordics, with a customer-centric multi-brand structure.

Competition in the Nordic electricity retail market is expected to remain challenging, with continued pressure on sales margins and increasing customer churn. To counter the market challenges and create a solid foundation for competitive operations, Consumer Solutions will increase its resources and cost spend on developing new digital services for consumers.

The combined Hafslund Markets and Fortum Markets business, while largely complementary, have identified synergy potential, in terms of both revenue and costs. The short-term priority will be on achieving identified revenue synergies by leveraging established best practices and providing additional products and services to the whole customer base. The realisation of cost synergies will

start materialising once the integration of Hafslund Markets is completed, expected from 2019, with cost synergy realisation gradually increasing over the coming years, and targeted annual synergies of approximately EUR 10 million to be achieved by the end of 2020.

Russia

The Russia segment's new capacity generation built after 2007 under the Russian Capacity Supply Agreement (CSA) has been a key driver for earnings growth in Russia, as it receives considerably higher capacity payments than the old capacity. Fortum will receive guaranteed capacity payments for a period of approximately 10 years from the commissioning of a plant. The received CSA payment will vary depending on the age, location, size and type of the plants, as well as on seasonality and availability. CSA payments can vary somewhat annually because they are linked to Russian Government long-term bonds with 8 to 10 years maturity. In addition, the regulator will review the earnings from the electricityonly market three and six years after the commissioning of a unit and could revise the CSA payments accordingly. Furthermore, the level of the CSA payments increases starting from the seventh year of the 10-year period.

In June 2017, 1,000 MW of the bids of the 50/50-owned Fortum-RUSNANO wind investment fund were selected in the Russian wind auction. The bids are for projects to be commissioned during the years 2018–2022 with a price corresponding to approximately EUR 115–135 per MWh. The projects will be covered by CSA for a period of 15 years.

The long-term Competitive Capacity Selection (CCS) for the years 2017–2019 was held at the end of 2015, the CCS for the year 2020 in September 2016, and the CCS for the year 2021 in September 2017. All Fortum plants offered in the auction were selected. Fortum also obtained forced mode status, i.e. it receives payments for the capacity at a higher rate for some of the "old capacity". For the years 2017–2019, forced mode status was obtained for 195 MW; for the year 2020, 175 MW, and for the year 2021, 105 MW.

In December 2017, Fortum acquired three solar power companies from Hevel Group, Russia's largest integrated solar power company. All three power plants are operational and will receive CSA payments for approximately 15 years after commissioning at an average CSA price corresponding to approximately EUR 430/MWh. The plants were commissioned in 2016 and 2017.

Fortum's Ulyanovsk wind farm is listed in the registry of capacity as of January 2018. The 35 MW power plant is Russia's first industrial wind park. It will receive CSA payments for a guaranteed period of 15 years.

The Russian gas price increased by 3.9% in July 2017 and the increase of the annual average gas price for 2017 was 2.0%.

Capital expenditure and divestments

Fortum currently estimates its capital expenditure, including maintenance but excluding acquisitions, to be in the range of EUR 600–700 million in 2018 most of which is related to hydro and CHP capacity as well as new investments in renewables. The maintenance capital expenditure in 2018 is estimated at approximately EUR 300 million, well below the level of depreciation.

Financial performance and position Sustainability Risk management Fortum share and shareholders

Taxation

The effective corporate income tax rate for Fortum in 2018 is estimated to be 19–21%, excluding the impact of the share of profits of associated companies and joint ventures, non-taxable capital gains, and a Swedish income tax case.

On 11 May 2017, the Administrative Court in Stockholm, Sweden, gave its decisions related to Fortum's income tax assessments for the year 2013. The Court's decisions were not in Fortum's favour. Fortum has appealed the decisions. If the decisions remain in force despite the appeal, the negative impact on the net profit would be approximately EUR 28 million (approximately SEK 273 million). Fortum has not made a provision for this, as, based on legal analysis, the EU Commission's view and supporting legal opinions, the cases should be ruled in Fortum's favour. The assessments concern the loans given in 2013 by Fortum's Dutch financing company to Fortum's subsidiaries in Sweden. The interest income for these loans was taxed in the Netherlands. The Swedish tax authority considers just over a half of the interest relating to each loan as deductible, i.e. deriving from business needs. The rest of the interest is seen as non-deductible. The decisions are based on the changes in the Swedish tax regulation in 2013.

On 30 June 2017, the Court of Appeal in Stockholm, Sweden, ruled against Fortum related to Fortum's income tax assessments in Sweden for the years 2009–2012. Due to the decision of the Court of Appeal, Fortum booked a tax cost of 1,175 MSEK (EUR 123 million) in the second-quarter 2017 results. The booking did not have any cash flow effect for Fortum, as the additional taxes and interest have already been paid in 2016. The case concerns Fortum's right to deduct intra-group interest expenses in Sweden in the years 2009– 2012. Fortum restructured its operations and reallocated loans in 2004–2005 to secure future operations. Fortum does not agree with the Court's decision and had applied for the right to appeal from the Supreme Administrative Court.

Hedging

At the end of 2017, approximately 70% of Generation's estimated Nordic power sales volume was hedged at EUR 28 per MWh for 2018, and approximately 40% at EUR 25 per MWh for 2019.

The reported hedge ratios may vary significantly, depending on Fortum's actions on the electricity derivatives markets. Hedges are mainly financial contracts, most of them electricity derivatives quoted on Nasdaq Commodities.

Key figures 2008–2017 Parent company financial statements

Proposal for the use of the profit shown on the balance sheet Notes information

Financial performance and position

Sustainability Risk management Fortum share and shareholders

Sustainability

Business model

Fortum's business activities cover the production and sales of electricity and heat, waste-to-energy and circular economy solutions as well as energy-sector expert services and various consumer solutions. Fortum is the third largest power generator and the largest electricity retailer in the Nordic countries. Globally, the company is one of the leading heat producers. As two thirds of Fortum's power production is hydro and nuclear, it is also among the lowest-emitting generators in Europe.

Fortum's ambition is to increase its CO2-free power generation. The company also has generation capacity based on fossil fuels, located mainly in Russia, and it has worked to increase its efficiency and reduce its specific emissions. Fortum is focusing on increasing its solar and wind power capacity heavily over the coming years.

With core operations in 10 countries, Fortum employs a diverse team of close to 9,000 energy-sector professionals. Fortum has 128 hydro power plants as well as 26 CHP (combined heat and power), condensing and nuclear power plants. Globally, the company supplies heat in 22 cities and towns and has five main waste treatment facilities. Fortum's key markets are the Nordic and Baltic countries, Russia, Poland and India.

Sustainability approach

Fortum strives for balanced management of economic, social and environmental responsibility in the company's operations, emphasising the following focus areas:

Economic responsibility	Social responsibility	Environmental responsibility
Economic benefits to our stakeholders	Operational and occupational safety	Energy and resource efficiency
Long-term value and growth	Secure energy supply for customers	Reduction of environmental impacts
Sustainable supply chain	Personnel wellbeing	Climate-benign energy production and systems
Customer satisfaction Business ethics and	compliance	Solutions for sustainable cities

The Group-level sustainability targets are linked to the main sustainability focus areas and emphasise Fortum's role in society. They measure not only environmental and safety targets, but also Fortum's reputation, customer satisfaction, employee wellbeing, and the security of power and heat production. Targets are set annually and are based on continuous operational improvement.

The achievement of the sustainability targets is monitored in monthly, quarterly and annual reporting. Fortum publishes a yearly Sustainability Report with additional information on the company's sustainability performance.

Group sustainability targets and performance

	Target	2017	2016
Economic responsibility
Reputation index, based on One
Fortum Survey	70.7	72.3	72.5
	Level
Customer satisfaction index (CSI),	"good",
based on One Fortum Survey	70–74	64–76	67–79
Environmental responsibility
Specific CO2 emissions from total
energy production as a five-year
average, g/kWh	<200	188	188
Energy-efficiency improvement
by 2020, base-line year 2012,
GWh/a	>1,400	1,502	1,372
Major EHS incidents, no.	≤21	20	22
Social responsibility
Energy availability of CHP plants, %	>95.0	96.1	97.4
Total recordable injury frequency
(TRIF), own personnel	≤2.5	1.8	1.9
Lost workday injury frequency
(LWIF), own personnel	≤1.0	1.2	1.0
Lost workday injury frequency
(LWIF), contractors	≤3.5	4.2	3.0
Severe occupational accidents, no.	≤5	1	5
Quality of investigation process of
occupational accidents, major EHS		Level
incidents and near misses	Level 1.0	0.75	-
Sickness-related absences, %	≤2.3	2.2 *	2.3 *

* Excluding DUON and Hafslund

Fortum is listed on the Nasdaq Helsinki exchange and is included in the STOXX Global ESG Leaders, OMX GES Sustainability Finland, ECPI® and Euronext Vigeo Eurozone 120 indices. Fortum is also ranked in category A- in the annual CDP (formerly the Carbon Disclosure Project) rating 2017, and it has received a Prime Status (B-) rating by the German oekom research AG.

Fortum's sustainability reporting covers all functions under Fortum's operational control, including subsidiaries in all countries of operation. Sustainability information relating to Hafslund Markets' and Fortum Oslo Varme's operations is included in Fortum's reporting as of August 2017. The figures for power and heat generation, capacities and investments include also figures from Fortum's share in associated companies and joint ventures that sell their production to the owners on cost basis. The Meri-Pori power plant is included fully in sustainability figures as Fortum has the environmental permit.

Sustainability risks

Fortum's operations are exposed to risks, which if materialised can have adverse effects on the environment and the safety and security of employees, contractors and neighbouring societies. Key sustainability risks are presented in the Risk management part in the Operating and financial review. Climate change and the need for decarbonisation and resource efficiency is changing energy industry in a profound way and these changes also create new business opportunities for Fortum.

Sustainability governance and policies

Sustainability management at Fortum is strategy-driven and is based on the company's Values, the Code of Conduct, the Supplier Code of Conduct, the Sustainability Policy and other Group policies and their specifying instructions. As sustainability is an integral part of Fortum's strategy, the highest decision making of these issues falls on the duties of the Board of Directors, who share joint responsibility on sustainability matters.

Fortum Executive Management decides on the sustainability approach and Group-level sustainability targets that guide annual planning. The targets are ultimately approved by Fortum's Board of Directors. Fortum's line management is responsible for the implementation of the Group's policies and instructions and for day-to-day sustainability management. Realisation of the safety targets is a part of Fortum's short-term incentive system.

Fortum is a participant of the UN Global Compact initiative and the UN Caring for Climate initiative. Fortum respects and supports the International Bill of Human Rights, the United Nations Convention on the Rights of the Child, and the core conventions of the International Labour Organisation (ILO). Additionally, Fortum recognises in its operations the UN Guiding Principles on Business and Human Rights, the statutes of the OECD Guidelines for Multinational Enterprises, the International Chamber of Commerce's anti-bribery and anti-corruption guidelines, and the Bettercoal initiative's Code on responsible coal mining.

Business ethics

The Fortum Code of Conduct and Fortum Supplier Code of Conduct define how we treat others, engage in business, safeguard corporate assets, and how Fortum expects suppliers and business partners to operate. Fortum's Board of Directors is responsible for the company's mission and Values and has approved the Fortum Code of Conduct. Fortum has zero tolerance for corruption and fraud and does not award donations to political parties or political activities, religious organisations, authorities, municipalities or local administrations.

In addition to internal reporting channels, Fortum employees and partners can report suspicions of misconduct confidentially to the Fortum Head of Internal Audit via the "raise-a-concern channel" on Fortum's internal and external web pages.

Suspected misconduct and measures related to ethical business practices and compliance with regulations are regularly reported to the Audit and Risk Committee.

No cases of suspected corruption or bribery related to Fortum's operations were reported in 2017.

Fortum's main internal policies and instructions guiding sustainability

			Social responsibility
	Economic	Environmental	Social and		Anti-corruption
	responsibility	responsibility	employee matters	Human rights	and bribery
Values	x	x	x	x	x
Code of Conduct	x	x	x	x	x
Supplier Code of Conduct	x	x	x	x	x
Disclosure Policy	x		x
Group Risk Policy	x	x	x	x	x
Sustainability Policy (including environmental,
and health and safety policies)	x	x	x	x	x
Minimum Requirements for EHS Management		x	x	x
Biodiversity Manual		x
Group Manual for Sustainability Assessment		x	x	x	x
Human Resources Policy			x	x
Leadership Principles			x	x
Accounting Manual	x	x	x
Investment Manual	x	x	x		x
Group Instructions for Anti-Bribery	x		x		x
Group Instructions for Safeguarding Assets	x		x		x
Group Instructions for Conflicts of Interest	x		x		x
Anti-Money-Laundering Manual	x		x		x
Compliance Guidelines for Competition Law	x		x		x
Security Guidelines		x	x	x
Policy for Sponsoring and Donations	x		x	x	x
Group Instructions for Compliance
Management	x	x	x	x	x

Proposal for the use of the profit shown on the balance sheet Notes information

Financial performance and position Sustainability

Risk management Fortum share and shareholders

Economic responsibility

Fortum's goal is to achieve excellent financial performance in strategically selected core areas through strong competence and responsible ways of operating. Fortum measures financial performance with return on capital employed (target: at least 10%) and capital structure (target: comparable net debt/EBITDA around 2.5).

Fortum is a significant economic actor in its operating countries. The most significant direct monetary flows of Fortum's operations come from revenue from customers, procurements of goods and services from suppliers, compensation to lenders, dividends to shareholders, growth and maintenance investments, employee wages and salaries, and taxes paid. In 2017, investments in CO2-free production were EUR 375 (270) million.

Fortum supports social development and wellbeing in its operating countries by e.g. paying taxes. The tax benefits Fortum produces to society include not only corporate income taxes but also several other taxes. In 2017, Fortum's taxes borne were EUR 445 (365) million. Fortum publishes its tax footprint annually.

Targets for reputation and customer satisfaction are monitored annually. In the One Fortum Survey in 2017 company reputation among key stakeholders was 72.3 (72.5) points (on a scale of 1–100) and exceeded the target of 70.7 points. The stakeholder groups selected for the One Fortum Survey differ between the years 2016 and 2017. The reference value for the 2017 target-setting (70.7) is the reputation index (69.7) given by the same stakeholder groups in 2016. The Group target (70–74 points) for customer satisfaction was achieved among all business areas, but not in retail electricity sales. The Recycling and Waste Solutions unit was not part of the One Fortum survey in 2017.

Fortum's total purchasing volume in 2017 was EUR 3.2 (2.5) billion and Fortum had about 16,000 suppliers of goods and services. Fortum expects its business partners to act responsibly and to comply with the Fortum Code of Conduct and the Fortum Supplier Code of Conduct. Fortum assesses the performance of its business partners with supplier qualification and supplier audits. In 2017, Fortum audited a total of 11 (13) suppliers in China, India, Russia, Slovenia, Estonia and Finland. Most of the non-compliances identified in the audits in 2017 were related to occupational safety, working hours and remuneration.

Environmental responsibility

Fortum's Group-level environmental targets are related to CO2 emissions, energy efficiency, and major environmental, health and safety (EHS) incidents.

The Group Sustainability Policy together with the Minimum Requirements for EHS Management steer Fortum's environmental management. Investments, acquisitions and divestments are assessed based on the sustainability assessment criteria defined in the Group's Investment Manual. Operational-level activities follow the requirements set forth in the ISO 14001 environmental management standard, and 99.8% (99.9%) of Fortum's power and heat production worldwide has ISO 14001 certification.

Circular economy

Fortum's aim is to promote resource efficiency improvements and the transition towards a more extensive circular economy. Resource efficiency and maximising the added value of waste and biomass are key priorities in the environmental approach, as defined in the Group Sustainability Policy.

In 2017, Fortum received a total of 1.2 million tonnes of nonhazardous waste and 640,000 tonnes of hazardous waste from customers. As much of the waste stream as possible is recycled, recovered or reused. Waste that is unsuitable for recycling or reuse as a material is incinerated in Fortum's waste-to-energy plants in the Nordic countries and Lithuania.

Sustainable energy production

Fortum's energy production is primarily based on carbon dioxidefree hydropower and nuclear power and on energy-efficient combined heat and power (CHP). In line with the strategy, Fortum is targeting a gigawatt-scale solar and wind portfolio.

In 2017, Fortum's power generation was 73.2 (73.1) TWh and heat production 28.6 (27.8) TWh. 61% (62%) of the total power generation was CO2-free. In the EU area, 96% (96%) of the power generation was CO2-free. In 2017, Fortum built and acquired 294 MW of renewable, carbon-free production.

The main fuels that Fortum uses to produce electricity and heat are natural gas, nuclear fuel, coal, waste-derived fuels and biomass fuels. The most significant fuel was natural gas, which accounted for 62% (62%) of the total fuel consumption. The next highest fuel use was uranium 21% (23%). Coal accounted for 10% (10%) of the total fuel use, and waste-derived fuels and biomass fuels 3% (2%) and 3% (3%), respectively. Russia accounted for 99% of the use of natural gas and 51% of the use of coal.

Climate change mitigation

Fortum expects the concern about climate change to increase the demand for low-carbon production and energy-efficient solutions and products. Fortum aims to mitigate climate change by investing in CO2-free energy production and by improving energy and resource efficiency. Fortum is also adapting its operations to climate change in production planning and in the assessment of growth projects and investments.

In 2017, Fortum's direct CO2 emissions were 18.3 (18.6) Mt. 84% (83%) of CO2 emissions originated from Russian power plants. Direct CO2 emissions decreased due to the reduction in condensing power production. Of the total CO2 emissions, 2.3 (2.7) Mt were within the EU's emissions trading scheme (ETS). The estimate for Fortum's free emission allowances is 1.0 (1.0) Mt.

Fortum's direct CO2 emissions

Fortum's total CO2 emissions (million tonnes, Mt)	2017	2016	2015
Total emissions	18.3	18.6	19.2
Emissions subject to ETS	2.3	2.7	2.1
Free emissions allowances	1.0	1.0	1.3
Emissions in Russia	15.4	15.5	17.0

Fortum's specific carbon dioxide emissions from total energy production remained at the same level and were 184 (184) g/kWh. The specific CO2 emissions from total energy production as a fiveyear average were at 188 (188) g/kWh, which is better than Fortum's Group target of 200 g/kWh.

Financial performance and position Sustainability

Risk management Fortum share and shareholders

Specific carbon dioxide emissions of total energy production in 2015–2017

g/kWh

Annual specific emissions
Specific emissions (5-year average)
Target (5-year average)

Fortum has had a Group target to achieve annual energy improvements of more than 1,400 GWh by 2020 compared to 2012. This target was reached (1,502 GWh/a) by the end of 2017.

Decreasing environmental impact

Emissions into air

Fortum's activities cause various emissions to air. In addition to carbon dioxide (CO2) emissions, these include flue-gas emissions such as sulphur dioxide (SO2), nitrogen oxide (NOx) and particle emissions. All power plants operate in compliance with their air emission limits.

Fortum's flue-gas emissions into air

1,000 tonnes	2017	2016	2015
Sulphur dioxide emissions	18.8	22.5	19.9
Nitrogen oxide emissions	27.5	26.0	26.8
Particle emissions	15.8	16.8	17.8

Water withdrawal

Fortum uses large volumes of water at various types of power plants and in district heat networks. In most cases, power plants do not consume water – the water is discharged back to the same water system from where it was withdrawn. Fortum withdrew a total of 2,100 (2,100) million m3 of water in power and heat production; 94% of this amount was used as cooling water.

Radioactive waste

In 2017, 23.4 (19.6) tonnes of spent nuclear fuel was removed from Loviisa power plant's reactors in Finland. High-level radioactive spent fuel is stored in an interim storage at the Loviisa power plant site. The final disposal of the high-level radioactive waste is scheduled to begin at Olkiluoto in Eurajoki in the first half of the 2020s.

Biodiversity

Fortum's main impacts on biodiversity are related to hydropower production. Fuel procurement and flue-gas emissions may also have a negative impact on biodiversity. On the other hand, increasing CO2-free production mitigates the biodiversity loss caused by climate change. Fortum's Biodiversity Manual, revised in 2017, defines the company's approach in biodiversity management.

Environmental incidents

Fortum's target is fewer than 21 major EHS incidents annually. Major EHS incidents are monitored, reported and investigated, and corrective actions are implemented. In 2017, there were 20 (22) major EHS (environmental, health and safety) incidents in Fortum's operations. There were 10 (11) environmental incidents, out of which eight were spills. Fortum paid fines totalling RUB 8,000 (EUR 121) for the permit violation involving exceeding the wastewater emission limit in Russia. The major EHS incidents did not have significant environmental impacts.

Social responsibility

Fortum's social responsibility targets are related to the secure supply of electricity and heat for customers, operational and occupational safety as well as employee wellbeing.

Employees

The Group Human Resources Policy is based on the company's Values, Leadership Principles and Code of Conduct. The HR Policy guides the daily work in the company, and the implementation of the policy is followed up regularly through the employee engagement survey, the annual performance and development discussions, as well as other feedback practices.

Fortum's operations are mainly based in the Nordic countries, Russia, Poland and the Baltic Rim area. The total number of employees at the end of 2017 was 8,785 (8,108). The number of employees increased mainly due to the acquisition of Hafslund.

Group employee statistics

	2017	2016	2015
Number of employees, 31 December	8,785	8,108	7,835
Average number of employees	8,507	7,994	8,009
Total amount of employee benefits, EUR million	423	334	351
Departure turnover, %	10.5	13.0	8.6
Permanent employees, %	95.2	96.1	96.0
Full-time employees, % (of permanent employees)	98.1	98.5	98.3
Female employees, %	32	29	29
Females in management, %	29	25	33

Number of employees by country, 31 December 2017

Number of employees, 31 December

Occupational safety

For Fortum, excellence in safety is the foundation of the company's business and an absolute prerequisite for efficient and interruptionfree production. Fortum strives to be a safe workplace for the employees and for the contractors and service providers who work for the company. The Group Sustainability Policy, the Minimum Requirements for EHS Management and more detailed Grouplevel EHS manuals steer the work. A certified OHSAS 18001 safety management system covers 98.4% (99.9%) of Fortum's power and heat production worldwide.

2017 was a challenging year in terms of occupational safety. Only the total recordable incident frequency (TRIF) for own employees and the number of severe accidents met the set target level.

The TRIF for Fortum employees was 1.8 (1.9) per one million working hours, which is better than the target (≤ 2.5). The lostworkday injury frequency (LWIF) for own personnel was 1.2 (1.0), which did not meet the set target level (≤1.0).

The lost workday injury frequency (LWIF) for contractors continues to be Fortum's main challenge. The LWIF for contractors per million working hours was 4.2 (3.0), and Fortum did not achieve the target of ≤3.5. The same challenge applies to the combined LWIF (own employees and contractors): the result was 2.4 (1.8), exceeding the target of 1.9.

In 2018, Fortum will implement new tools to assess contractor safety performance as part of the supplier qualification process and will also evaluate their safety practices in a more systematic manner during work. Fortum will also introduce external safety training for both the management level and key individuals leading safety work as well as the most challenging business areas.

In 2017, as in 2016, there were no accidents leading to a fatality in the company's operations.

Open leadership, personnel development and wellbeing In late 2017, Fortum launched the company's revised Values and new Leadership Principles. The Open Leadership framework supports cooperation across units and aims to create an environment that fosters innovation, flexibility and agility.

ForCare, Fortum's programme for overall wellbeing at work, aims to promote health, safety, employee work capacity and work community functionality. As part of ForCare, the Energise Your Day wellbeing programme was launched in several new operating countries in 2017. The percentage of sickness-related absences excluding DUON and Hafslund was 2.2 (2.3), which is better than the target level of ≤2.3. The percentage of sickness-related absences for Hafslund was 3.0.

Respect for human rights

Fortum's goal is to operate in accordance with the UN Guiding Principles on Business and Human Rights, and to apply these principles in own operations as well as in country and partner risk assessments and supplier audits.

A sustainability assessment, including a human rights evaluation, is carried out for investment projects – especially in new operating areas – and also for new countries where Fortum plans to expand the sales of products and services. In 2017, 15 (28) of these assessments were made.

In 2017, there were no grievances related to human rights filed through Fortum's formal grievance channels, nor were there any grievances carried over from the previous year.

Society

An uninterrupted and reliable energy supply is critical for society to function. With planned preventive maintenance and condition monitoring, Fortum ensures that the power plants operate reliably to produce the electricity and heat customers need. The energy availability of the company's CHP plants in 2017 was, on average, 96.1%; the target was above 95%.

Fortum's operations impact the local communities where the power plants are located, and the company engages in many kinds of collaboration with local stakeholders. Fortum's Policy for Sponsoring and Donations was revised in late 2017. According to the policy Fortum's sponsoring will focus on wellbeing of children and youth, renewable energy projects, R&D and innovations supporting Fortum's strategy, recycling, recovery and reutilization. The company also does significant collaboration with different research and development projects, particularly with Nordic universities. In 2017, Fortum's support for activities promoting the common good totalled about EUR 4.9 (2.9) million. The grants awarded by Fortum Foundation were about EUR 696,000 (675,000). Fortum Foundation is not part of Fortum Group.

Risk management

Sustainability Fortum share and shareholders

Risk management

Risk management framework and objectives

Fortum's Risk Management framework is comprised of the Group Risk Policy and supporting documents. The Group Risk Policy includes an overview of Fortum's risk management systems consisting of the general principles of risk management and the main features of the risk management process. The objective of the risk management systems are to;

support the development of the Group strategy,
support strategy execution,
support the achievement of agreed targets within acceptable risk levels so that the Group's ability to meet financial commitments is not compromised,
ensure the understanding of material risks and uncertainties affecting Fortum, and
support the prevention of accidents that can have a severe effect on the health and safety of employees or third parties, and from incidents that can have a material impact on Fortum's assets, reputation or the environment.

Risk management organisation

The main principle is that risks are managed at source meaning that each Division, Development Unit and Corporate Function Head is responsible for managing risks that arise within their business operations. However, in order to take advantage of synergies, certain risks are managed centrally. For example, Group Treasury is responsible for managing financial risks and cyber and information security risks are managed by Corporate Security. The Audit and Risk Committee (ARC) is responsible for monitoring the efficiency of the company's risk management systems and for annually reviewing the Group Risk Policy and the material risks and uncertainties. Corporate Risk Management, a function headed by the Chief Risk Officer (CRO) reporting to the CFO, provides instructions and tools which support the Group in running an efficient risk management process. Corporate Risk Management is responsible for assessing and reporting maturity of

risk management in Divisions, Development Units and Corporate Functions and for providing independent monitoring and reporting of material risk exposures to Group Management, the ARC and the Board of Directors. Risk control functions and controllers in the business monitor and report risks to the CRO.

Risk management process

Fortum's risk management process is designed to support the achievement of agreed targets by ensuring that risk management activities are consistent with the general principles of risk

management and that risks are monitored and followed-up in a prudent manner. The main features of risk management process consist of event identification, risk assessment, risk response and risk control. Identification is carried out according to a structured process and risks are assessed in terms of impact and likelihood according to a Group-common methodology. Impact is assessed not only in monetary terms, but also in terms of health and safety, the environment and reputation. Risk owners, responsible for implementing actions to respond to the risk, are defined by the business and operational management. Risk responses can be to avoid, mitigate, transfer or absorb the risk. Risk control processes, which include monitoring and reporting of risks, are designed to support compliance with approved instructions, manuals and guidelines and to ensure that risk exposures remain within approved limits and mandates.

Fortum's Board of Directors annually approves the Group Risk Policy and the CEO annually approves Group Risk Instruction

Corporate Risk Policy Structure

Financial performance and position Risk management

Sustainability Fortum share and shareholders

covering commodity market risks, counterparty credit risks, and operational risks. Fortum also has other Group policies and instructions covering e.g. compliance, sustainability, treasury and cyber and information security risks which are aligned with the Group Risk Policy. Risk mandates or limits are defined for commodity market risks, counterparty credit risks and financial risks.

Risk factors

Strategic risks

The main strategic risk is that the regulatory and market environment develops in way that we have not been able to foresee and prepare for. Future energy market and regulation scenarios, including the impact of these to Fortum's business, are continuously assessed and analysed. It is part of Fortum's strategy

Fortum Risk Map

to, in the long-term, broaden the base of revenues and diversify into new businesses, technologies and markets.

Risks which could hinder Fortum in executing this strategy are continuously assessed, monitored and reported as part of the strategy work. These risks include an inability to identify and carry out successful investments and acquisitions with the related project and integration risks, inability to manage and respond to changes in energy policy and the regulatory environment, and inability to manage and respond to changes in technology.

Investment and acquisition risks

Fortum's strategy includes growth of operations in new businesses, technologies and geographies, and any future investment or acquisition, including partnerships, entails risk such as:

increased overall operating complexity and requirements for management, personnel and other resources,
the need to understand the value drivers and their uncertainties in investments or potential acquisition targets,
the need to understand and manage new markets with different cultural and compliance requirements,
the need to understand and manage risks related to sustainability and safety issues.

These risks are managed as part of the investment process which includes requirements for risk identification and assessment and action plans before investment decisions are made, and also sets requirements to follow-up risks in projects and acquisitions.

Energy policy and regulation risks

The energy business is heavily influenced by national and EUlevel energy policies and regulations, and Fortum's strategy has been developed based on scenarios of the future development of the regulatory environment in both existing and potential new businesses and market areas. The overall complexity and possible regulatory changes in Fortum's various operating countries pose a risk if we are not able to anticipate, identify and manage those changes efficiently.

Fortum maintains an active dialogue with the bodies involved in the development of laws and regulations in order to manage these risks and proactively contribute to the development of the energy policy and regulatory framework.

Nordic/EU

Fortum's strategy in the power sector is based on a market-driven development, which would mean more interconnections and competition supported by increasing policy harmonization. Even if the Nordic power market has a long tradition of harmonization, national policies vary considerably when it comes to e.g. taxation, permitting, subsidies and market model meaning that we have to manage risks related to both EU regulation and national regulation. Potential risks related to the future energy and climate policy framework include;

The development towards integrated, flexible and dynamic power market hampered by increasing policy costs and uncoordinated national mechanisms,
Overlapping national carbon policies diluting the EU ETS and carbon price despite the ETS reform,
Increasing cost burden for hydro power in Finland, driven by fish obligations, grid costs and real estate taxation and unbalanced implementation of the EU Water Framework directive in Sweden, potentially leading to lower production volumes,
Sustainability requirements for forest biomass leading to reduced availability and increasing costs,
Implementation of national waste incineration taxes or other measures due to opposition to incineration hampers the competitiveness of waste-to-energy,
Substantial retroactive changes and/or discontinuation of prevailing CHP support schemes in Baltic countries and Poland or deteriorating competitiveness of CHP due to fuel tax increases,
Emergence of windfall tax discussions following possible positive electricity and carbon price development.

Key figures Parent company financial statements

Proposal for the use of the profit shown on the balance sheet Notes information

Financial performance and position Risk management

2008–2017

Sustainability Fortum share and shareholders

The inter-linkage of these issues as well as national measures such as taxation create uncertainty and changes in policies in one area could undermine the effects of policy changes in other areas.

Russia

Russia is exposed to political, economic and social uncertainties and risks resulting from changes in regulation, legislation, economic and social upheaval and other similar factors. The current economic sanctions may be enlarged and/or extended having direct and indirect impacts on the business environment. The main policy-related risks in Russia are linked to the development of the whole energy sector, part of which, like the wholesale power market, is liberalised while other parts, like gas, heat, and retail electricity, are not. The wholesale power market deregulation in Russia has been implemented to a large extent according to original plans. However, regulated sectors are inherently always exposed to a risk of regulatory changes which could affect Fortum's operations.

Technology risks

Fortum's strategy includes developing or acquiring new technologies, as well as digitalizing the business. Fortum's R&D and innovation activities focus on the development of the energy system towards a future solar economy. Fortum is, for example, developing circular economy, bio-economy and other renewable energy concepts as well as innovative solutions for its customers. New technologies expose Fortum to risks related to intellectual property rights, data privacy and viability of technologies. Technology risks are managed primarily through developing a diversified portfolio of projects consisting of different technologies.

Sustainability risks

Corporate social responsibility and sustainable development are integral parts of Fortum's strategy. Fortum gives balanced consideration to economic, environmental and social responsibility. Changes to laws, regulations and the business environment can pose a risk if not identified and managed effectively and the same applies to changes in views of our main stakeholders. In order to identify and manage these risks, Fortum endorses a number of international voluntary charters, standards and guidelines in the area of sustainability, conducts stakeholder surveys annually and has defined internal policies and instructions on how to conduct business. Corporate Functions, Divisions and Development units identify and assess sustainability risks related to their operations and define mitigation measures annually. Corporate Sustainability executes oversight as part of the Group's risk management process.

Environmental, health and safety and social risks

Operating power and heat generation plants, circular economy services and waste management involves use, storage and transportation of fuels and materials that can have adverse effects on the environment and expose personnel, contractors and third parties to safety risks. Assessment of environmental risks and preparedness to operate in exceptional and emergency situations follows legislative requirements as well as the requirements in the environmental management standard (ISO 14001). The same approach, based on the requirements in the operational health and safety standard (OHSAS 18001), applies to risks related to occupational health and safety and actions in emergency situations.

Environmental, health and safety (EHS) risks as well as social risks related to Fortum's supply chain are evaluated through supplier qualification, internal and external audits and risk assessments including partner and country risk assessment. Corrective and preventive actions are implemented when necessary. EHS related risks together with social risks arising in investments are evaluated in accordance with Fortum's Investment manual. Environmental risks and liabilities in relation to past actions have been assessed and provisions have been made for future remedial costs.

Fortum's operations are exposed to physical risks caused by climate change, including changes in weather patterns that could alter energy demand and, for instance, hydropower production volumes. Higher precipitation and temperatures may affect hydropower production, dam safety, and also bioenergy supply

and availability. Fortum adapts its operations to the changing climate and takes it into consideration, for example, in production and maintenance planning and in evaluating growth and investment projects.

Tax risk

Fortum operates in a number of countries and is therefore exposed to changes in taxation and how tax authorities interpret tax laws. Changes in the international fiscal environment have created a tax environment that is leading to new or increased taxes and new interpretations of existing tax laws which has decreased the predictability and visibility around how our operations are taxed.

Fortum's tax policy aims to identify simple and cost-efficient solutions to manage taxes in a sustainable manner. Fortum's tax policy is based on a principle that tax is a consequence of business and that compliance with tax rules and legislation and transparency result in a correct tax contribution. This policy leaves no room for artificial or other aggressive solutions. Fortum is continuously following the development of tax related issues and their impact on the Group and maintains an active dialogue with tax authorities in unclear cases. Tax-related issues are communicated openly both internally and externally and Fortum's tax footprint is published annually.

Business ethics and compliance risks

Fortum's operations are subject to laws, rules and regulations set forth by the relevant authorities, exchanges, and other regulatory bodies in all markets in which Fortum operates. Fortum's ability to operate in certain countries may be affected by future changes to local laws and regulations.

Fortum Code of Conduct enhances the understanding of the importance of business ethics for all Fortum employees, contractors and partners. Prevention of corruption is one of the Code of Conduct's focus areas. Fortum has procedures for anti-corruption including prevention, oversight, reporting and enforcement based on the requirements prescribed in international legislation. Fortum's supplier code of conduct sets

Proposal for the use of the profit shown on the balance sheet Notes information

Financial performance and position Risk management

Sustainability Fortum share and shareholders

sustainability requirements for suppliers of goods and services. The Supplier Code of Conduct is based on the principles of the United Nations Global Compact and is divided into four sections: business principles including anti-corruption, human rights, labour standards and environment.

Fortum systematically identifies, assesses, mitigates and reports compliance risks including risks related to sustainability and business ethics. Internal controls are implemented to prevent the possibilities of unauthorised activities or non-compliance with Group policies and instructions.

Financial & commodity market risks

Commodity market and fuel risks

Fortum's business is exposed to fluctuations in prices and availability of commodities used in the production and sales of energy products. The main exposure is toward electricity prices and volumes, prices of emissions and prices and availability of fuels. Fortum hedges its exposure to commodity market risks in accordance with annually approved Hedging Guidelines, Strategies and Mandates. For further information on hedge ratios, exposures, sensitivities and outstanding derivatives contracts, see Note 3 Financial risk management.

Electricity price and volume risks

In competitive markets, such as in the Nordic region, the wholesale price of electricity is determined as the balance between supply and demand. The short-term factors affecting electricity prices and volumes on the Nordic market include hydrological conditions, temperature, CO2 allowance prices, fuel prices, economic development and the import/export situation.

Electricity price risks are hedged by entering into electricity derivatives contracts, primarily on the Nasdaq Commodities power exchange. Hedging strategies are continuously evaluated as electricity and other commodity market prices, the hydrological balance and other relevant parameters change. Hedging of the Generation segment's power sales is performed in EUR on a Nordic level covering both Finland and Sweden, and the currency

component of these hedges in the Swedish entity is currently not hedged. In Russia, electricity prices and capacity sales are the main sources of market risk. The electricity price is highly correlated with the gas price and exposure is mitigated through the use of fixed-price bilateral agreements. In India, the electricity price received from solar production are fixed through long term powerpurchasing agreements.

Emission and environmental value risks

The European Union has established an emissions trading scheme to reduce the amount of CO2 emissions. In addition to the emissions trading scheme, there are other trading schemes in environmental values in place in Sweden, Norway and Poland. Part of Fortum's power and heat generation is subject to requirements of these schemes. There is currently no trading scheme in Russia for emissions or other environmental values.

The main factor influencing the prices of CO2 allowances and other environmental values is the supply and demand balance. Fortum hedges its exposure to these prices and volumes through the use of CO2 futures and environmental certificates.

Fuel price and volume risks

Power and heat generation requires use of fuels that are purchased on global or local markets. The main fuels used by Fortum are natural gas, uranium, coal, various biomass-based fuels and waste. The main risk factor for fuels that are traded on global markets such as coal and natural gas, is the uncertainty in price. Prices are largely affected by demand and supply imbalances that can be caused by, for example, increased demand growth in developing countries, natural disasters or supply constraints in countries experiencing political or social unrest. For fuels traded on local markets, such as bio-fuels, the volume risk in terms of availability of the raw material of appropriate quality is more significant as there may be a limited number of suppliers. Due to the sanctions and economic development in Russia, the risks related to imported fuels from Russia have increased.

In the Nordic market, exposure to fuel prices is limited due to Fortum's flexible generation capacity which allows for switching

between different fuels according to prevailing market conditions. In some cases, the fuel price risk can be transferred to the customer. The remaining exposure to fuel price risk is mitigated through fixed-price physical delivery contracts or derivative contracts. The main fuel source for heat and power generation in Russia is natural gas. Natural gas prices are partially regulated, so the price risk exposure is limited.

Liquidity and refinancing risks

Fortum's business is capital intensive and there is a regular need to raise financing. Fortum maintains a diversified financing structure in terms of debt maturity profile, debt instruments and geographical markets. Liquidity and refinancing risks are managed through a combination of cash positions and committed credit facility agreements with its core banks. The credit risk of cash positions has been mitigated by diversifying the deposits to highcredit quality financial institutions and issuers of corporate debt. In relation to the offer for Uniper shares, Fortum has commitments from 10 relationship banks to provide credit facilities at the request of Fortum in an aggregate amount of up to EUR 12,000 million.

Currency and interest rate risks

Fortum's debt portfolio consists of interest-bearing liabilities and derivatives on a fixed- and floating-rate basis with differing maturity profiles. Fortum manages the duration of the debt portfolio through use of different types of financing contracts and interest rate derivative contracts such as interest rate swaps.

Fortum's currency exposures are divided into transaction exposures (foreign exchange exposures relating to contracted cash flows and balance sheet items where changes in exchange rates will have an impact on earnings and cash flows) and translation exposure (foreign exchange exposure that arises when profits and balance sheets in foreign entities are consolidated at the Group level). The main principle is that material transaction exposures should be hedged while translation exposures are not hedged, or are hedged selectively. An exception is the Generation segment's hedging of power sales in Sweden where the currency component is currently not hedged. The main translation exposures toward the

Key figures 2008–2017 Parent company financial statements

Proposal for the use of the profit shown on the balance sheet Notes information

Financial performance and position Risk management

Sustainability Fortum share and shareholders

EUR/RUB, EUR/SEK and EUR/NOK are monitored continuously. Changes in these currency rates affect Fortum's profit level and equity when translating results and net assets to euros.

Counterparty risks

Fortum is exposed to counterparty risk whenever there is a contractual arrangement with an external counterparty including customers, suppliers, partners, banks, clearing houses and trading counterparties.

Credit risk exposures relating to financial derivative instruments are often volatile. The majority of commodity derivatives are cleared through exchanges such as Nasdaq OMX commodities. The trend toward more use of futures contracts instead of forward contracts is decreasing the credit exposure toward clearing houses. Derivatives contracts are also entered into directly with external counterparties and such contracts are limited to high-credit-quality counterparties active on the financial or commodity markets.

Due to the financing needs and management of liquidity, Fortum has counterparty credit exposure to a number of banks and financial institutions. The majority of the exposure is toward Fortum's key relationship banks, which are highly creditworthy institutions, but also includes exposure to the Russian financial sector in terms of deposits with financial institutions as well as to banks that provide guarantees for suppliers and contracting parties. Deposits in Russia have been concentrated to the most creditworthy state-owned or controlled banks.

Credit risk exposures relating to customers is spread across a wide range of industrial counterparties, small businesses and private individuals over a range of geographic regions. The majority of exposure is to the Nordic market, Poland and Russia. The risk of non-payment in the electricity and heat sales business in Russia is higher than in the Nordic market. In order to manage counterparty credit risk, Fortum has routines and processes to identify, assess and control exposure. Credit checks are performed before entering into commercial obligations and exposure limits are set for larger individual counterparties. Creditworthiness is monitored through the use of internal and external sources so that mitigating actions

can be taken when needed. Mitigating actions include demanding collateral, such as guarantees, managing payment terms and contract length, and the use of netting agreements.

Operational risks

Operational risks are defined as the negative effects resulting from inadequate or failed internal processes, systems or equipment, or from external events. Process-related risks are assessed and controls for the most relevant risks are defined and implemented as part of the internal controls framework. Equipment and system risks are primarily managed through monitoring and maintenance planning. In addition, all Fortum's industrial assets are covered by a Group Master Policy covering property damage and business interruption risks which mitigates the impact of internal and external events.

Operational risks at production facilities

Combined heat and power (CHP) and recycling and waste

CHP production and the recycling and waste business involve the use, storage and transportation of fuels and waste (including hazardous waste). Leakage and contamination of the surrounding environment could lead to clean-up costs and third-party liabilities. An explosion or fire at a facility could cause damages to the plant or third-parties and lead to possible business interruption. These risks are mitigated by condition monitoring, preventive maintenance and other operational improvements as well as competence development of personnel operating the plants. Requirements for waste are clearly specified and samples are tested for selected incoming waste deliveries. Risks in large CHP projects are mitigated through contract structures and insurance coverage.

Hydro power

Operational events at hydro power generation facilities can lead to physical damages, business interruptions, and third- party liabilities. A long-term program is in place for improving the surveillance of the condition of dams and for securing the discharge capacity in extreme flood situations. In Sweden, thirdparty liabilities from dam failures are strictly the plant owner's

responsibility. Together with other hydro power producers, Fortum has a shared dam liability insurance program in place that covers Swedish dam failure liabilities up to SEK 10,000 million.

Nuclear power

Fortum owns the Loviisa nuclear power plant, and has minority interests in two Finnish and two Swedish nuclear power companies. At the Loviisa power plant, the assessment and improvement of nuclear safety is a continuous process performed under the supervision of the Radiation and Nuclear Safety Authority of Finland (STUK).

Third-party liability relating to nuclear accidents is strictly the plant operator's responsibility and must be covered by insurance. As the operator of the Loviisa power plant, Fortum has a statutory liability insurance policy of 600M SDR (Special Drawing Right) and the same type of insurance policies are in place for the operators where Fortum has a minority interest.

Cyber and information security risks

Fortum's business operations are dependent on well-functioning IT and information management systems and processes. Due to the nature of the business, large amounts of data are processed, often in real-time, and used for decision-making and in internal and external communication and reporting. Securing information and availability of the systems are essential for Fortum. Cyber security risks, including risks related to information, industrial control systems (ICS), digitalization and privacy, are managed centrally by Corporate Security. Group instructions and procedures set requirements for managing and mitigating cyber security risks.

General Data Protection Regulation will become applicable on 25th of May 2018. The regulation contains a number of requirements related to processing personal data. Therefore, Fortum has established a Group-wide program to ensure the fulfilment of the requirements.

IT functions in the business, support functions and outsourcing partners are responsible for identifying and mitigating operational IT security related risks as well as managing IT security incidents. IT functions are also responsible for IT service continuity.

Financial performance and position

Sustainability Risk management

Fortum share and shareholders

Fortum Corporation's shares have been listed on Nasdaq Helsinki since 18 December 1998. The trading code is FORTUM (until 25 January 2017: FUM1V). Fortum Corporation's shares are in the Finnish book entry system maintained by Euroclear Finland Ltd which also maintains the official share register of Fortum Corporation.

Share key figures

EUR	2017	2016	2015
Earnings per share
Continuing operations	0.98	0.56	-0.26
Discontinued operations	-	-	4.92
Total Fortum	0.98	0.56	4.66
Cash flow per share total Fortum	1.12	0.7	1.55
Cash flow per share, continuing operations	1.12	0.7	1.38
Equity per share	14.69	15.15	15.53
Dividend per share	1.10 1)	1.10	1.10
Extra dividend per share	-	-	-
Payout ratio, %	112.2 1)	196.4	23.6
Dividend yield, %	6.7 1)	7.5	7.9

1) Board of Directors' proposal for the Annual General Meeting 28 March 2018.

For full set of share Key figures 2008–2017, see the section Key figures in the Financial Statements.

Market capitalisation, EUR billion

Shareholders value, share price performance and volumes

Fortum's mission is to deliver excellent value to its shareholders. Fortum's share price has appreciated approximately 15% during the last five years, while Dow Jones European Utility Index has increased 11%. During the same period Nasdaq Helsinki Cap index has increased 67%. During 2017 Fortum's share price appreciated approximately 13%, while Dow Jones European Utility index increased 7% and Nasdaq Helsinki Cap index increased 5%.

In 2017, a total of 582.9 million (2016: 611.6) Fortum Corporation shares, totalling EUR 8,906 million, were traded on the Nasdaq Helsinki. The highest quotation of Fortum Corporation shares during 2017 was EUR 18.94, the lowest EUR 12.69, and the volume-weighted average EUR 15.28. The closing quotation on the last trading day of the year 2017 was EUR 16.50 (2016: 14.57). Fortum's market capitalisation, calculated using the closing quotation of the last trading day of the year, was EUR 14,658 million (2016: 12,944).

In addition to the Nasdaq Helsinki, Fortum shares were traded on several alternative market places, for example at Boat, Cboe and Turquoise, and on the OTC market as well. In 2017, approximately 61% (2016: 63%) of Fortum's shares were traded on markets other than the Nasdaq Helsinki Ltd.

Share quotations, index 100 = quote on 2 January 2013

Share capital

Fortum has one class of shares. By the end of 2017 a total of 888,367,045 shares had been issued. Each share entitles the holder to one vote at the Annual General Meeting. All shares entitle holders to an equal dividend. At the end of 2017 Fortum Corporation's share capital, paid in its entirety and entered in the trade register, was EUR 3,046,185,953.00.

Sustainability Risk management

Financial performance and position Fortum share and shareholders

Shareholders

At the end of 2017, the Finnish State owned 50.76% of the company's shares. The Finnish Parliament has authorised the Government to reduce the Finnish State's holding in Fortum Corporation to no less than 50.1% of the share capital and voting rights.

The proportion of nominee registrations and direct foreign shareholders was 30.6 % (2016: 28.1%).

Shareholders, 31 December 2017

Shareholders	No. of shares	Holding %
Finnish State	450,932,988	50.76
The Finnish Social Insurance Institution	7,030,896	0.79
Ilmarinen Mutual Pension Insurance Company	6,220,000	0.70
Kurikan Kaupunki	6,203,500	0.70
The State Pension Fund	4,600,000	0.52
Elo Mutual Pension Insurance Company	4,000,000	0.45
Varma Mutual Pension Insurance Company	3,050,167	0.34
The Local Government Pensions Institution	2,568,955	0.29
Nordea Suomi Pro fund	2,545,929	0.29
Schweizerische Nationalbank	1,977,723	0.22
Danske Invest Suomi Osakeyhtiö fund	1,239,436	0.14
Society of Swedish Literature in Finland	1,156,375	0.13
Etera Mutual Pension Insurance Company	1,132,142	0.13
Seligson & Co OMX 25 fund	905,751	0.10
Nominee registrations and direct foreign ownership 1)	269,923,008	30.38
Other shareholders in total	124,880,175	14.06
Total number of shares	888,367,045	100.00

1) Excluding Schweizerische Nationalbank.

By shareholder category	% of total amount of shares
Finnish shareholders
Corporations	1.27
Financial and insurance institutions	1.19
General government	55.08
Non-profit organisations	1.42
Households	10.21
Non-Finnish shareholders	30.83
Total	100.00

Breakdown of share ownership, 31 December 2017

	No. of	% of		% of total amount of
Number of shares owned	shareholders	shareholders	No. of shares	shares
1–100	36,689	28.83	2,002,060	0.22
101–500	49,757	39.09	13,304,536	1.50
501–1,000	19,695	15.47	14,551,606	1.64
1,001–10,000	20,023	15.73	52,398,992	5.90
10,001–100,000	1,035	0.81	22,764,187	2.56
100,001–1,000,000	74	0.06	23,013,521	2.59
1,000,001–10,000,000	12	0.01	41,725,123	4.70
over 10,000,000	1	0.00	450,932,988	50.76
	127,286	100.00	620,693,013	69.87
In the joint book-entry account and in special accounts on 31 December			73,276	0.01
Nominee registrations			267,600,756	30.12
Total			888,367,045	100.00

Management interests 31 December 2017

At the end of 2017, the President and CEO and other members of the Fortum Management Team owned 200,667 shares (2016: 315,653) representing approximately 0.02% (2016: 0.04%) of the total shares in the company.

A full description of the shareholdings and interests in long-term incentive schemes of the President and CEO and other members of the Fortum Executive Management Team is shown in Note 10 Employee benefits.

Authorisations from the Annual General Meeting 2017

In 2017, the Annual General Meeting decided to authorise the Board of Directors to decide on the repurchase and disposal of the company's own shares up to a maximum number of 20,000,000 shares, which corresponds to approximately 2.25% of all the shares in the company. The authorisation is effective for a period of 18 months from the resolution of the General Meeting. The authorisation had not been used by the end of 2017.

Dividend policy

The dividend policy ensures that shareholders receive a fair remuneration for their entrusted capital, supported by the company's long-term strategy that aims at increasing earnings per share and thereby the dividend. When proposing the dividend, the Board of Directors looks at a range of factors, including the macro environment, balance sheet strength as well as future investment plans. Fortum Corporation's target is to pay a stable, sustainable and over time increasing dividend, in the range of 50–80% of earnings per share, excluding one-off items.

Dividend distribution proposal

The distributable funds of Fortum Corporation as at 31 December 2017 amounted to EUR 5,170,240,554.04 including the profit of the financial period 2017 of EUR 932,525,770.24. The company's liquidity is good and the dividend proposed by the Board of Directors will not compromise the company's liquidity.

The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 1.10 per share be paid for 2017.

Based on the number of registered shares as at 1 February 2018 the total amount of dividend proposed to be paid is EUR 977,203,749.50. The Board of Directors proposes that the remaining part of the distributable funds will be retained in shareholders' equity.

The Annual General Meeting will be held on 28 March 2018 at 11:00 EET at Finlandia Hall in Helsinki.

Total shareholder return, EUR

Earnings per share total Fortum, EUR

Dividend per share, EUR

The dividend for 2017 represents the Board of Directors' proposal for the Annual General Meeting in March 2018. Fortum paid extra dividend of EUR 0.20 per share for the financial year that ended 31 Dec 2014.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Income statement	Statement of comprehensive income			Balance sheet	Statement of changes in total equity	Cash flow statement

Consolidated income statement

EUR million	Note	2017	2016
Sales	5	4,520	3,632
Other income	8	55	34
Materials and services	9	-2,301	-1,830
Employee benefits	10	-423	-334
Depreciation and amortisation	5, 16, 17	-464	-373
Other expenses	8	-576	-485
Comparable operating profit	5	811	644
Items affecting comparability	6	347	-11
Operating profit	5	1,158	633
Share of profit of associates and joint ventures	5, 18	148	131
Interest expense		-164	-169
Interest income		32	30
Fair value gains and losses on financial instruments	7	-12	-2
Other financial expenses - net		-50	-29
Finance costs - net	11	-195	-169
Profit before income tax		1,111	595
Income tax expense	12	-229	-90
Profit for the period		882	504

Attributable to:
Owners of the parent		866	496
Non-controlling interests		16	8
		882	504

Earnings per share for profit attributable to the equity
owners of the company (EUR per share) 1)	13
Basic		0.98	0.56

1) As Fortum currently has no dilutive instruments outstanding, diluted earnings per share is the same as basic earnings per share.

EUR million	Note	2017	2016
Comparable operating profit		811	644
Impairment charges		6	27
Capital gains and other		326	38
Changes in fair values of derivatives hedging future cash flow	7	14	-65
Nuclear fund adjustment	5	1	-11
Items affecting comparability	5, 6	347	-11
Operating profit		1,158	633

Comparable operating profit, EUR million

Consolidated statement of comprehensive income

EUR million	Note	2017	2016
Profit for the period		882	504	Components of Consolidated statement of comprehensive income (OCI) are items of income and
				expense that are recognized in equity and not recognized in the consolidated income statement. They
Other comprehensive income				include unrealized items, such as fair value gains and losses on financial instruments hedging future
				cash flows. These items will be realized in the Consolidated income statement when the underlying hedged items is recognized. OCI also includes gains and losses on fair valuation on available for sale
Items that may be reclassified to profit or loss in subsequent periods:				financial assets, actuarial gains and losses from defined benefit plans, items on comprehensive income in associated companies and translation differences.
Cash flow hedges
Fair value gains/losses in the period		22	-142
Transfers to income statement		76	-85
Transfers to inventory/fixed assets		-4	-10
Deferred taxes		-19	51	Fair valuation of cash flow hedges mainly relates to electricity prices in future cash flows. When electricity price
Net investment hedges				is higher (lower) than the hedging price, the impact on equity is negative (positive).
Fair value gains/losses in the period		23	-2
Deferred taxes		-5	0
Exchange differences on translating foreign operations	3.6	-372	342	Translation differences from translation of foreign entities, mainly RUB and SEK.
Share of other comprehensive income of associates and joint ventures	18	-10	-9
Other changes		-2	0
		-291	145

Items that will not be reclassified to profit or loss in subsequent periods:
Actuarial gains/losses on defined benefit plans	30	-13	-7
Actuarial gains/losses on defined benefit plans in associates and
joint ventures	30	6	12
		-7	5

Other comprehensive income for the period, net of deferred taxes		-298	150
Total comprehensive income for the year		584	654

Total comprehensive income attributable to:
Owners of the parent		571	639
Non-controlling interests		13	15
		584	654

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Income statement	Statement of comprehensive income			Balance sheet	Statement of changes in total equity	Cash flow statement

Consolidated balance sheet

EUR million	Note	31 Dec 2017	31 Dec 2016
ASSETS
Non-current assets
Intangible assets	16	1,064	467
Property, plant and equipment	17	10,510	9,930
Participations in associates and joint ventures	18	1,900	2,112
Share in State Nuclear Waste Management Fund	28	858	830
Other non-current assets	19	140	113
Deferred tax assets	27	73	66
Derivative financial instruments	3	281	415
Long-term interest-bearing receivables	20	1,010	985
Total non-current assets		15,835	14,918

Current assets
Inventories	21	216	233
Derivative financial instruments	3	240	130
Short-term interest-bearing receivables	20	395	395
Income tax receivables	27	172	290
Trade and other receivables	22	997	844
Deposits and securities (maturity over three months)		715	3,475
Cash and cash equivalents		3,182	1,679
Liquid funds	23	3,897	5,155
Total current assets		5,918	7,046

Total assets		21,753	21,964

EUR million	Note	31 Dec 2017	31 Dec 2016
EQUITY
Equity attributable to owners of the parent
Share capital	24	3,046	3,046
Share premium		73	73
Retained earnings		9,875	10,369
Other equity components		54	-29
Total		13,048	13,459
Non-controlling interests	25	239	84
Total equity		13,287	13,542
LIABILITIES
Non-current liabilities
Interest-bearing liabilities	26	4,119	4,468
Derivative financial instruments	3	214	262
Deferred tax liabilities	27	819	616
Nuclear provisions	28	858	830
Other provisions	29	100	116
Pension obligations	30	102	76
Other non-current liabilities	31	175	179
Total non-current liabilities		6,388	6,546
Current liabilities
Interest-bearing liabilities	26	766	639
Derivative financial instruments	3	200	396
Trade and other payables	32	1,112	841
Total current liabilities		2,078	1,876
Total liabilities		8,466	8,422
Total equity and liabilities		21,753	21,964

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Income statement	Statement of comprehensive income			Balance sheet	Statement of changes in total equity	Cash flow statement

Consolidated statement of changes in total equity

		Share capital	Share premium	Retained earnings			Other equity components		Owners of the parent	Non controlling interests	Total equity
EUR million	Note			Retained earnings and other funds	Translation of foreign operations	Cash flow hedges	Other OCI items	OCI items associated companies and joint ventures
BS Total equity 31 December 2016		3,046	73	12,186	-1,817	-115	58	27	13,459	84	13,542
Net profit for the period				866					866	16	882
Translation differences					-369	1	1	-1	-369	-3	-372
Other comprehensive income				-9		74	11	-2	73	0	74
Total comprehensive income for the period				857	-369	75	11	-3	571	13	584
Cash dividend	13			-977					-977	-2	-979
Other				-4					-4	145	141
BS Total equity 31 December 2017		3,046	73	12,062	-2,187	-40	70	24	13,048	239	13,287
Total equity 31 December 2015		3,046	73	12,663	-2,156	74	67	27	13,794	69	13,863
Net profit for the period				496					496	8	504
Translation differences					339	-2	1	-3	335	7	342
Other comprehensive income				1		-186	-10	3	-192		-192
Total comprehensive income for the period				497	339	-188	-9	0	639	15	654
Cash dividend	13			-977					-977		-977
Other				3					3	-1	2
BS Total equity 31 December 2016		3,046	73	12,186	-1,817	-115	58	27	13,459	84	13,542

Translation differences

Translation of financial information from subsidiaries in foreign currency is done using average rate for the income statement and end rate for the balance sheet. The exchange rate differences occurring from translation to EUR are booked to equity. Translation differences impacted equity attributable to owners of the parent company with EUR -369 million during 2017 (2016: 335). Translation differences are mainly related to RUB and SEK. Part of this translation exposure has been hedged and the foreign currency hedge result, amounting to EUR 28 million (2016: 5), is included in the other OCI items.

For information regarding exchange rates used, see Note 1 Accounting policies. For information about translation exposure see Note 3.6 Interest rate risk and currency risk.

Cash flow hedges

The impact on equity attributable to owners of the parent from fair valuation of cash flow hedges, EUR 75 million (2016: -188), mainly relates to cash flow hedges hedging electricity price for future transactions. When electricity price is lower/higher than the hedging price, the impact on equity is positive/negative.

Non-controlling interests

Non-controlling interests have increased with EUR 155 million during 2017 mainly due to the acquisition of Fortum Oslo Varme AS which is consolidated as a subsidiary with 50% non-controlling interest. See also Note 38 Acquisitions and disposals.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Income statement	Statement of comprehensive income			Balance sheet	Statement of changes in total equity	Cash flow statement

Consolidated cash flow statement

EUR million Note	2017	2016
Cash flow from operating activities
Profit for the period from continuing operations	882	504
Adjustments:
Income tax expenses	229	90
Finance costs - net	195	169
Share of profit of associates and joint ventures	-148	-131
Depreciation and amortisation	464	373
Operating profit before depreciations (EBITDA)	1,623	1,006
Items affecting comparability	-347	11
Net release of CSA provision	0	-2
Comparable EBITDA	1,275	1,015
Non-cash flow items	-76	-49
Interest received	35	39
Interest paid	-187	-214
Dividends received	58	54
Realised foreign exchange gains and losses	-83	110
Income taxes paid	-83	-216
Other items	-28	-18
Funds from operations	912	723
Change in working capital	81	-102
Net cash from operating activities	993	621
Cash flow from investing activities
Capital expenditures 5, 16, 17	-657	-599
Acquisitions of shares	-972	-695
Proceeds from sales of fixed assets	8	10
Divestments of shares	741	39
Shareholder loans to associated companies and joint ventures	43	-117
Change in cash collaterals	-3	-359
Change in other interest-bearing receivables	34	20
Net cash used in investing activities	-807	-1,701

EUR million	Note	2017	2016
Cash flow before financing activities		187	-1,080

Cash flow from financing activities
Proceeds from long-term liabilities		35	32
Payments of long-term liabilities		-543	-934
Change in short-term liabilities		68	-97
Dividends paid to the owners of the parent	13	-977	-977
Other financing items		-12	-8
Net cash used in financing activities		-1,428	-1,984
Total net increase(+)/decrease(-) in liquid funds		-1,241	-3,064

Liquid funds at the beginning of the year		5,155	8,202
Foreign exchange differences in liquid funds		-16	18
Liquid funds at the end of the period	23	3,897	5,155

Realised foreign exchange gains and losses relate mainly to financing of Fortum's Russian and Swedish subsidiaries and the fact that the Group's main external financing currency is EUR. The foreign exchange gains and losses arise from rollover of foreign exchange contracts hedging these internal loans as major part of the forwards are entered into with short maturities i.e. less than twelve months.

Capital expenditures in cash flow do not include not yet paid investments. Capitalised borrowing costs are presented in interest paid.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Income statement	Statement of comprehensive income			Balance sheet	Statement of changes in total equity	Cash flow statement

Change in net debt

EUR million	2017	2016
Net debt 1 January	-48	-2,195
Foreign exchange rate differences	-15	-70
Comparable EBITDA	1,275	1,015
Non-cash flow items	-76	-49
Paid net financial costs	-199	-29
Income taxes paid	-83	-216
Change in working capital	81	-102
Capital expenditures	-657	-599
Acquisitions	-972	-695
Divestments	749	49
Shareholder loans to associated companies	43	-117
Change in other interest-bearing receivables	31	-340
Dividends	-977	-977
Other financing activities	-17	-8
Net cash flow (- increase in net debt)	-802	-2,065
Fair value change of bonds, amortised cost valuation,
acquired debt and other	248	152
Net debt 31 December	988	-48

Additional cash flow information

Change in working capital

EUR million	2017	2016
Change in settlements for futures, decrease(+)/increase(-)	141	-138
Change in interest-free receivables, decrease(+)/increase(-)	-94	92
Change in inventories, decrease(+)/increase(-)	19	14
Change in interest-free liabilities, decrease(-)/increase(+)	15	-70
CF Total	81	-102

In Fortum's cash flow statement the daily cash settlements for futures are shown as change in working capital whereas the changes in cash collaterals for forwards are included in cash flow from investing activities. In the end of 2016 Nasdaq's market making for forwards ended and the trading moved from forwards with cash collaterals to futures with daily cash settlements. The cash collaterals are included in the short-term interest-bearing receivables, see Note 20 Interest-bearing receivables.

Capital expenditure in cash flow

EUR million	Note	2017	2016
Capital expenditure	5, 16, 17	690	591
Change in not yet paid investments, decrease(+)/increase(-)		-17	24
Capitalised borrowing costs		-16	-16
CF Total		657	599

Capital expenditures for intangible assets and property, plant and equipment were in 2017 EUR 690 million (2016: 591). Capital expenditure in cash flow in 2017 EUR 657 million (2016: 599) is including payments related to capital expenditure made in previous year i.e. change in trade payables related to investments EUR -17 million (2016: 24) and excluding capitalised borrowing costs EUR -16 million (2016: -16), which are presented in interest paid.

See also information about the investments by segments and countries in Note 5 Segment reporting and the investment projects by segment in Note 17.2 Capital expenditure.

Acquisition of shares in cash flow

Acquisition of shares, net of cash acquired, amounted to EUR 972 million during 2017 (2016: 695). Acquisition of shares during 2017 include mainly the acquisition of subsidiary shares in Hafslund Markets AS and Hafslund Varme AS (renamed as Fortum Oslo Varme AS) including the City of Oslo's waste-to-energy company Klemetsrudanlegget AS (renamed as Fortum Oslo Varme KEA AS) as well as associated company shares in Hafslund Produksjon Holding AS. During 2017 Fortum also acquired 100% of the shares in three Norwergian wind park companies, Russian solar power companies and other smaller companies. Fortum also invested in the wind investment fund owned 50/50 by Fortum and RUSNANO. For further information see Note 38 Acquisitions and disposals.

Divestment of shares in cash flow

EUR million	Note	2017	2016
Proceeds from sales of subsidiaries, net of cash disposed	38	54	6
Proceeds from sales of associates and joint ventures	18, 38	687	34
CF Total		741	39

Proceeds from sales of subsidiaries during 2017 include mainly the sale of the Polish gas infrastructure company DUON Dystrybucja S.A. that was acquired as part of the acquisition of the electricity and gas sales company Grupa DUON S.A. (currently Fortum Markets Polska S.A.) in 2016. Proceeds from sales of associated companies and joint ventures during 2017 include the sale of Fortum's 34.1% stake in Hafslund ASA. For further information see Note 38 Acquisitions and disposals.

Key figures 2008–2017 Notes

Parent company financial statements Proposal for the use of the profit shown on the balance sheet

Auditor's report

Operational key figures Quarterly financial information Investor information

Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

1 Accounting Policies

1.1 Basic information

Fortum Corporation (the Company) is a Finnish public limited liability company with its domicile in Espoo, Finland. Fortum's shares are traded on Nasdaq Helsinki.

The operations of Fortum Corporation and its subsidiaries (together the Fortum Group) focus on the Nordic and Baltic countries, Russia and Poland. Fortum's activities cover generation and sale of electricity, generation, distribution and sale of heat, and energy-related expert services.

These financial statements were approved by the Board of Directors on 1 February 2018.

1.2 Basis of preparation

The consolidated financial statements of the Fortum Group have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC Interpretations as adopted by the European Union. The financial statements also comply with Finnish accounting principles and corporate legislation.

The consolidated financial statements have been prepared under the historical cost convention, except for available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments) at fair value through profit and loss and items hedged at fair value.

1.2.1 Income statement presentation

In the Consolidated income statement Comparable operating profit-key figure is presented to better reflect the Group's business performance when comparing results for the current period with previous periods.

Items affecting comparability are disclosed as a separate line item. The following items are included in "Items affecting comparability":

impairment charges and related provisions (mainly dismantling);
capital gains, transaction costs and other;
effects from fair valuations of derivatives hedging future cash flows which do not obtain hedge accounting status according to IAS 39. The major part of Fortum's cash flow hedges obtain hedge accounting where fair value changes are recorded in equity;
effects from accounting of Fortum's part of the State Nuclear Waste Management Fund where the assets cannot exceed the related liabilities according to IFRIC 5. Comparable operating profit is used for financial target setting, follow up and allocation of resources

in the Group's performance management.

1.2.2 Classification of current and non-current assets and liabilities

An asset or a liability is classified as current when it is expected to be realised in the normal operating cycle or within twelve months after the balance sheet date or it is classified as financial assets or liabilities held at fair value through profit or loss. Liquid funds are classified as current assets.

All other assets and liabilities are classified as non-current assets and liabilities.

1.3 Principles for consolidation

The consolidated financial statements comprise of the parent company, subsidiaries, joint ventures and associated companies.

The Fortum Group was formed in 1998 by using the pooling-of-interests method for consolidating Fortum Power and Heat Oy and Fortum Oil and Gas Oy (the latter demerged to Fortum Oil Oy and Fortum Heat and Gas Oy 1 May 2004). In 2005 Fortum Oil Oy (current Neste Oyj) was separated from Fortum by distributing 85% of its shares to Fortum's shareholders and by selling the remaining 15%. This means that the acquisition cost of Fortum Power and Heat Oy and Fortum Heat and Gas Oy has been eliminated against the share capital of the companies. The difference has been entered as a decrease in shareholders' equity.

1.3.1 Subsidiaries

Subsidiaries are defined as companies in which Fortum has control. Control exists when Fortum is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The acquisition method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the aggregate of fair value of the assets given and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, subsidiaries' accounting policies have been changed to ensure consistency with the policies the Group has adopted.

Operating and financial review Consolidated financial statements

Notes

Key figures 2008–2017

information

Associated companies are entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. The Group's interests in associated companies are accounted for using the equity method of accounting. Joint ventures are arrangements in which the Group has joint control. Joint ventures are accounted for

1.3.3 Joint ventures

31 December 2017.

1.3.2 Associates

using the equity method of accounting.

1.3.4 Non-controlling interests

Non-controlling interests in subsidiaries are identified separately from the equity of the owners of the parent company. The non-controlling interests are initially measured at the non-controlling interests' proportionate share of the fair value of the acquiree's identifiable net assets. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity.

1.4 Foreign currency transactions and translation

1.4.1 Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in euros, which is the Company's functional and presentation currency.

1.4.2 Transactions and balances

Transactions denominated in foreign currencies are translated using the exchange rate at the date of the transaction. Receivables and liabilities denominated in foreign currencies outstanding on the closing date are translated using the exchange rate quoted on the closing date. Exchange rate differences have been entered in the income statement. Net conversion differences relating to financing are entered under financial income or expenses, except when deferred in equity as qualifying cash flow hedges. Translation differences on available-for-sale financial assets are included in Other equity components section of the equity.

1.4.3 Group companies

The income statements of subsidiaries, whose measurement and reporting currencies are not euros, are translated into the Group reporting currency using the average exchange rates for the year based on the month-end exchange rates, whereas the balance sheets of such subsidiaries are translated using the exchange rates on the balance sheet date. On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to equity. When a foreign operation is sold, such exchange differences are recognised in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

The balance sheet date rate is based on the exchange rate published by the European Central Bank for the closing date. The average exchange rate is calculated as an average of each month's ending rate from the European Central Bank during the year and the ending rate of the previous year.

The key exchange rates applied in the Fortum Group accounts

			Average rate	Balance sheet date rate
	Currency	2017	2016	31 Dec 2017	31 Dec 2016
Sweden	SEK	9,6392	9.4496	9,8438	9.5525
Norway	NOK	9,3497	9.2888	9,8403	9.0863
Poland	PLN	4,2556	4.3659	4,1770	4.4103
Russia	RUB	66,0349	73.8756	69,3920	64.3000

1.4.4 Associates and joint ventures

The Group's interests in associated companies and joint ventures are accounted for by the equity method. Associates and joint ventures, whose measurement and reporting currencies are not euro, are translated into the Group reporting currency using the same principles as for subsidiaries, see 1.4.3 Group companies.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
	Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

1.5 Other accounting policies

Fortum describes the other accounting principles in conjunction with the relevant note information. The table below lists the significant accounting policies and the note where they are presented as well as the relevant IFRS standard.

Accounting principle	Note		IFRS standard
Segment reporting		5 Segment reporting	IFRS 8
Revenue recognition	5	Segment reporting and	IAS 18
	22	Trade and other receivables
Government grants		17 Property, plant and equipment	IAS 20
Share-based payments		10 Employee benefits	IFRS 2
Income taxes		27 Income taxes in balance sheet	IAS 12
Joint arrangements		18 Participations in associated companies and joint ventures	IFRS 11, IAS 28, IFRS 12
Investments in associates		18 Participations in associated companies and joint ventures	IAS 28, IFRS 12
Other shares and participations		14 Financial assets and liabilities by categories	IAS 32, IAS 36, IAS 39
Intangible assets		16 Intangible assets	IAS 38
Tangible assets		17 Property, plant and equipment	IAS 16, IAS 36, IAS 40
Leases		33 Lease commitments	IAS 17
Inventories		21 Inventories	IAS 2
Earnings per share		13 Earnings and dividend per share	IAS 33
Pensions and similar obligations		30 Pension obligations	IAS 19
Decommissioning obligation		28 Nuclear related assets and liabilities	IFRIC 5
Provisions		29 Other provisions	IAS 37
Contingent liabilities		35 Pledged assets and contingent liabilities	IAS 37
Financial instruments	14	Financial assets and liabilities by categories and	IAS 32, IAS 39,
	15	Financial assets and liabilities by fair value hierarchy	IFRS 7
Liquid funds		23 Liquid funds	IAS 7
Borrowings		26 Interest-bearing liabilities	IAS 39

1.6 New accounting principles

1.6.1 New IFRS standards adopted from 1 Jan 2017

Fortum has adopted the following new or amended standards on 1 January 2017:

Narrow-scope yearly amendments
Nature of change	The amendments primarily remove inconsistencies, provide additional guidance and clarify wording of standards. There are separate transitional provisions for each standard.
Date of adoption	1 January 2017
Impact	In connection to the disclosure initiative project, IAS 7 was amended to require additional disclosures on the movement of liabilities. Fortum presents a reconciliation of
	liabilities arising from financing activities in Note 26. Impacts of the other amendments are not material in Fortum's financial statements.

1.6.2 Adoption of new IFRS standards from 1 Jan 2018 or later

Fortum will apply the following new or amended standards and interpretations starting

from 1 January 2018 or later:

	IFRS 15 Revenue from Contracts with Customers
Nature of change	New standard. The standard focuses on revenue recognition models and will replace IAS 11 and IAS 18.
Date of adoption	1 January 2018
Impact	Fortum has completed the analysis of the significant business areas and has not identified any material changes from IFRS 15 implementation. Analysis includes the following main steps:
	• Identification and assessment of the main revenue streams, • Determining key areas of potential differences between old and new revenue recognition principles and
	• Reviewing a sample of contracts.
	The conclusions requiring the greatest degree of management judgement are as follows:
	• Electricity sales to wholesale market: Physical electricity trades to Nord Pool or other wholesale markets are made either during the same day or day before the delivery and the duration of the contract is thus very short. The transaction price is the spot price and there are no variable elements. Electricity sales continue to be recognized upon delivery and hence there are no changes identified compared to the current recognition principles.

• District heating: In many areas the district heating service covers both the distribution and sale of heat. Even if heat is produced by a third party, Fortum is usually responsible for delivering the whole service and is acting as a principal for the heat sales as well. Fortum has concluded that the distribution and sale of heat are not separate performance obligations and are both covered by the promise to stand-ready to supply heat to the customer. Also the fees charged for connecting the end customer to the district heat network are part of the same performance obligation. The fees charged from the customer generally comprise a fixed monthly charge and a variable component that is determined based on the volume of heat supplied. In accordance to the IFRS 15 principles, the fixed charge and the variable heat volume charge are allocated and recognised in line with the fees chargeable from the customer. In Russia, Baltics and Poland there are also areas, where Fortum operates only the heat production facilities while some third party is responsible for the distribution of heat. In these areas the performance obligation is to supply heat. There are no changes identified compared to the current revenue recognition principles.

Waste management services: Majority of the revenues from waste management services arises from the fees charged for receiving the waste from customers (i.e. gate fees). The fee is usually determined based on the volume of waste received and there are no variable elements in the pricing. Fortum is required to treat the waste and this performance obligation is satisfied when the treatment is performed. Transportation of the waste form another performance obligation, which is recognized once the service is performed. There are no changes identified to the current practices.
Electricity sales to retail customers: Fortum's contracts with the consumer and business customers cover the electricity sales, while the distribution service is delivered by the transmission company operating the local network. There is only one performance obligation, which is to stand-ready to supply electricity to the customer. The transaction price generally includes both a fixed monthly fee and a variable fee that depends on the volume of electricity supplied. As with the district heating business, the fixed and variable components are to be recognized as revenue based on the fees chargeable from the customer.

IFRS 15 will change the treatment of sales commission costs for obtaining new customers, which are currently mostly expensed. In the future the sales commissions shall be capitalized as intangible assets and depreciated over the expected contract term. Implementation of IFRS 15 will thus impact the timing and classification of expenses, but the impact to Fortum Comparable operating profit is not expected to be material.

Further details on the impact will be disclosed in the Q1/2018 interim report. Fortum will use the transition relief for not to restate the comparative information at the date of initial application.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
	Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

Nature of change	New standard. The standard has new requirements for the classification and measurement of financial assets and liabilities and hedge accounting and it will replace
	IAS 39. Additionally, it introduces a new impairment model for expected credit losses.
Date of adoption	1 January 2018
Impact	Fortum is finalising the implementation and testing phase including model validations, process and system updates and preparation of the new disclosures including possible opening balance sheet adjustments. The interpretations taken are: • Classification and measurement of financial assets - Most financial assets will be classified under "Held-to-Collect" business model and accounted for as amortised cost when they meet the SPPI criteria. TVO shareholder loan meets the criteria for equity investment and it will be reclassified. • Fortum's commodity derivative hedging will benefit from the possibility to apply hedge accounting for one or several risk components separately or in aggregation. In the Nordic area Fortum considers system and electricity price area differential (EPAD) products perfect hedges for corresponding electricity price risk components. This will reduce the volatility in Fortum's profit and loss currently recognized as items affecting comparability. Vast majority of the non-hedge accounted electricity derivatives in December will qualify for hedge accounting under IFRS 9. • Implementation of expected credit loss ("ECL") model is completed. Fortum has implemented counterparty specific ECL models to be used on individual contract basis for deposits, shareholder loans and trade receivables with large customers whereas portfolio models will be used for trade receivables with consumers and small business customers. Fortum has prepared analysis based on historical data, which indicates no material impacts. Actual impacts will fluctuate due to seasonality of the business.

initial application.

IFRS 16 Leases Nature of change New standard regarding lease accounting that will replace IAS 17. The new lease standard will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance lease is removed. Date of adoption 1 January 2019 Impact Currently under IAS 17, lessees recognize leases either as operating leases or finance leases. The new standard no longer distinguishes between operating and finance leases from a lessees point of view, and most right-of-use assets are recognized in the balance sheet. For lessors, there are no significant changes. In brief, IFRS 16 requirements contain the following: • A lessee shall recognize all leases, except for short-term and low value leases, in the balance sheet. • For lessees, both the value of the right-of-use asset and the corresponding liability shall be recognized in the balance sheet. IFRS 16 is effective for financial periods starting on 1 January 2019 or later. The European Union endorsed the use of the standard on 31 October 2017. Currently, Fortum has mainly operating leases with varying lease terms and prolongation rights. The majority of the operating leases are for the use of land and office buildings. Total future lease obligations amounted to EUR 160 million at the end of the reporting period (Dec 31 2016: 74). Hence, the impacts of the standard to the consolidated financial statements are not expected to be material. The IFRS 16 analysis is on-going and will be completed during 2018. Analysis include:

Reviewing current lease contracts reported as operating lease commitments
Going through supplier lists and identifying potential lease arrangements
Determining incremental borrowing rates
Calculation of accounting impacts.

No major issues have been identified so far. Fortum plans to apply the modified retrospective method, which means the comparative figures will not be restated.

39 40

Parent company financial statements Proposal for the use of the profit shown on the balance sheet

Auditor's report

Operational key figures Quarterly financial information Investor information

Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

2 Critical accounting estimates and judgements

The preparation of IFRS consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities existing at the balance sheet date as well as the reported amounts of revenues and expenses during the reporting period.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results and timing may differ from these estimates.

The table below is listing the areas where management's accounting estimates and judgements are most critical to reported results and financial position. The table is also showing where to find more information about above-mentioned estimates and judgements.

Critical accounting estimates and judgements	Note
Assigned values and useful lives determined for intangible assets and property, plant and equipment acquired in a business combination	16 Intangible assets
Assumptions related to impairment testing of property, plant and equipment and intangible assets as well as associated companies and joint ventures	16 Intangible assets
Judgement used when assessing the nature of Fortum's interest in its investees and when considering the classification of Fortum's joint arrangements as well as commitments arising from these arrangements	18 Participations in associated companies and joint ventures
Assumptions and estimates regarding future tax consequences	27 Income taxes in balance sheet 36 Legal actions and official proceedings
Assumptions made to determine long-term cash flow forecasts of estimated costs for provision related to nuclear production	28 Nuclear related assets and liabilities
Assumptions made when estimating provisions	29 Other provisions
Assumptions used to determine future pension obligations	30 Pension obligations

3 Financial risk management

Risk management objectives, principles and framework including governance, organisation and processes as well as description of risks i.e. strategic, financial and operational risks are described in the Risk management part in the Operating and financial review (OFR).

3.1 Commodity market risks

Fortum's business is exposed to fluctuations in prices and volume of commodities used in the production and sales of energy products. The main exposure is toward electricity prices and volumes, prices of emissions and prices and availability of fuels. Fortum hedges its exposure to commodity market risks in accordance with annually approved Hedging Guidelines, Strategies and Mandates.

3.2 Electricity price and volume risk

Electricity price risk is hedged by entering into electricity derivatives contracts, primarily on the Nordic power exchange, Nasdaq Commodities. The main objective of hedging is to reduce the effect of electricity price volatility on earnings. Hedging strategies cover several years in the short to medium term and are executed within approved mandates. These hedging strategies are continuously evaluated as electricity and other commodity market prices, the hydrological balance and other relevant parameters change. Hedging of the Generation segment's power sales is performed in EUR on a Nordic level covering both Finland and Sweden, and the currency component of these hedges in the Swedish entity is currently not hedged.

In Russia, electricity prices and capacity sales are the main sources of market risk. The electricity price is highly correlated with the gas price and prices are fixed through bilateral agreements limiting exposure.

Fortum's sensitivity to electricity market price is dependent on the hedge level for a given time period. As per 31 December 2017, approximately 70% of the Generation segment's estimated Nordic power sales volume was hedged for the calendar year 2018 and approximately 40% for the calendar year 2019. Assuming no changes in generation volumes, hedge ratios or cost structure a 1 EUR/MWh change in the market price of electricity would affect Fortum's 2018 comparable operating profit by approximately EUR 14 million and for 2019 by approximately EUR 27 million. The volume used in this sensitivity analysis is 45 TWh which includes the electricity generation sold to the spot market in Sweden and Finland in the Generation segment without minority owner's shares of electricity or other pass-through sales, and excluding the volume of Fortum's coal-condensing generation. This volume is heavily dependent on price level, the hydrological situation, the length of annual maintenance periods and availability of power plants. Sensitivity is calculated only for electricity market price movements. Hydrological conditions, temperature, CO2 allowance prices, fuel prices and the import/export situation all affect the electricity price on short-term basis and effects of individual factors cannot be separated.

3.2.1 Sensitivity arising from financial instruments according to IFRS 7

Sensitivity analysis shows the sensitivity arising from financial electricity derivatives as defined in IFRS 7. These derivatives are used for hedging purposes within Fortum. Sensitivities are calculated based on 31 December 2017 (31 December 2016) position. Positions are actively managed in the day-to-day business operations and therefore the sensitivities vary from time to time. Sensitivity analysis includes only the market risks arising from derivatives i.e. the underlying physical electricity sales and purchases are not included. Sensitivity is calculated with the assumption that electricity forward quotations in Nasdaq OMX Commodities Europe and in EEX would change 1 EUR/MWh for the period Fortum has derivatives.

Sensitivity according to IFRS 7

+/- 1 EUR/MWh change in electricity forward quotations, EUR million	Effect	2017	2016
Effect on Profit before income tax	-/+	22	18
Effect on Equity	-/+	28	27

3.2.2 Electricity derivatives

The tables below disclose the Group's electricity derivatives used mainly for hedging electricity price risk. The fair values represent the values disclosed in the balance sheet.

See also Note 14 Financial assets and liabilities by categories for accounting principles and basis for fair value estimations and Note 7 Fair value changes of derivatives and underlying items in income statement.

Electricity derivatives by instrument 2017

		Volume, TWh		Fair value, EUR million
	Under 1 year	1–5 years	Over 5 years	Total		Positive Negative	Net
Electricity derivatives	26	24	0	50	360	519	-159
Total					360	519	-159
Netting against
electricity exchanges 1)					-234	-234	0
Total					126	285	-159

Electricity derivatives by instrument 2016

		Volume, TWh		Fair value, EUR million
	Under 1 year	1–5 years	Over 5 years	Total		Positive Negative	Net
Electricity derivatives	24	21	0	45	491	711	-220
Total					491	711	-220
Netting against electricity exchanges 1)					-335	-335	0
Total					156	376	-220

1) Receivables and liabilities against electricity exchanges arising from standard derivative contracts with same delivery period are netted.

Maturity analysis of commodity derivatives

Amounts in the table are fair values.

		2017			2016
EUR million	Under 1 year	1–5 years	Over 5 years	Total	Under 1 year	1–5 years	Over 5 years	Total
Electricity derivatives,
liabilities	162	123	0	285	238	136	2	376
Electricity derivatives, assets	90	35	0	126	88	67	1	156
Other commodity derivatives,
liabilities	13	3	0	16	18	3	0	21
Other commodity derivatives,
assets	36	6	0	43	18	4	0	22

3.3 Fuel price risks

Exposure to fuel prices is limited due to Fortum's flexible generation capacity, which allows for switching between different fuels according to prevailing market conditions. In some cases, the fuel price risk can be transferred to the customer. The remaining exposure to fuel price risk is mitigated through fixedprice physical delivery contracts or derivative contracts, such as coal, gas and oil derivatives included in the table above as part of "Other commodity derivatives".

3.4 Emission allowance price and volume risk

Part of Fortum's power and heat generation is subject to requirements of emission trading schemes. Fortum hedges its exposure to these prices and volumes through the use of CO2 futures. Most of these CO2 futures are own use contracts valued at cost and some are treated as derivatives in the accounts included in the table above as part of "Other commodity derivatives".

3.5 Liquidity and refinancing risk

Fortum's business is capital intensive and the Group has a diversified loan portfolio mainly consisting of long-term financing denominated in EUR and SEK. Long-term financing is primarily raised by issuing bonds under Fortum's Euro Medium Term Note programme as well as through bilateral and syndicated loan facilities from a variety of different financial institutions.

Financing is primarily raised on parent company level and distributed internally through various internal financing arrangements. For example Fortum's Russian operations are mainly financed via intra group internal long-term RUB denominated loans. The internal RUB loan receivables are hedged via external forward contracts offsetting the currency exposure for the internal lender. On 31 December 2017, 90% (2016: 96%) of the Group's total external financing was raised by the parent company Fortum Corporation.

On 31 December 2017, the total interest-bearing debt was EUR 4,885 million (2016: 5,107) and the interest-bearing net debt was EUR 988 million (2016: -48).

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation	Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

Fortum manages liquidity and refinancing risks through a combination of cash positions and committed credit facility agreements with its core banks. The Group shall at all times have access to cash, marketable securities and unused committed credit facilities including overdrafts, to cover all loans maturing within the next twelve-month period. However, cash/marketable securities and unused committed credit facilities shall always amount to at least EUR 500 million.

On 31 December 2017, loan maturities for the coming twelve-month period amounted to EUR 766 million (2016: 639). Liquid funds amounted to EUR 3,897 million (2016: 5,155) and the total amount of committed and undrawn credit facilities amounted to EUR 1,800 million (2016: 1,963), excluding committed credit facilities for Fortum's offer for Uniper shares. In relation to offer for Uniper shares Fortum Corporation had commitments from 10 relationship banks to provide credit facilities at the request of Fortum in an aggregate amount of up to EUR 12,000 million.

Maturity of interest-bearing liabilities

EUR million	2017
2018	766
2019	812
2020	71
2021	538
2022	1,068
2023 and later	1,630
Total	4,885

1) In addition Fortum has received EUR 113 million based on Credit Support Annex agreements with several counterparties. This amount has been booked as a short-term liability.

Liquid funds, major credit lines and debt programmes 2017

		Drawn	Available
EUR million	Total facility	amount	amount
Liquid funds
Cash and cash equivalents			3,182
Deposits and securities over 3 months			715
Total			3,897
of which in Russia (PAO Fortum)			246

Committed credit lines
EUR 1,750 million syndicated credit facility	1,750	-	1,750
Bilateral overdraft facilities	50	-	50
Total 1)	1,800	0	1,800

Debt programmes (uncommitted)
Fortum Corporation, CP programme EUR 500 million	500	-	500
Fortum Corporation, CP programme SEK 5,000 million	508	-	508
Fortum Corporation, EMTN programme EUR 8,000 million	8,000	2,943	5,057
Total	9,008	2,943	6,065

1) Excluding committed credit facilities for Fortum's offer for Uniper shares

Liquid funds, major credit lines and debt programmes 2016

		Drawn	Available
EUR million	Total facility	amount	amount
Liquid funds
Cash and cash equivalents			1,679
Deposits and securities over 3 months			3,475
Total			5,155
of which in Russia (PAO Fortum)			105

Committed credit lines
EUR 1,750 million syndicated credit facility	1,750	-	1,750
Bilateral overdraft facilities	213	-	213
Total	1,963	-	1,963

Debt programmes (uncommitted)
Fortum Corporation, CP programme EUR 500 million	500	-	500
Fortum Corporation, CP programme SEK 5,000 million	523	-	523
Fortum Corporation, EMTN programme EUR 8,000 million	8,000	3,329	4,671
Total	9,023	3,329	5,694

Liquid funds amounted to EUR 3,897 million (2016: 5,155), including PAO Fortum's bank deposits amounting to EUR 231 million (2016: 103). See also Note 23 Liquid funds.

Maturity analysis of interest-bearing liabilities and derivatives

Amounts disclosed below are non-discounted expected cash flows (future interest payments and amortisations) of interest-bearing liabilities and interest rate and currency derivatives.

		2017			2016
EUR million	Under 1 year	1–5 years	Over 5 years	Total	Under 1 year	1–5 years	Over 5 years	Total
Interest-bearing liabilities	895	2,723	1,869	5,487	765	2,307	2,601	5,673
Interest rate and currency derivatives liabilities	3,210	1,005	4	4,219	2,255	1,119	20	3,394
Interest rate and currency derivatives recievables	-3,319	-1,092	-1	-4,413	-2,131	-1,291	-27	-3,449
Total	785	2,636	1,871	5,293	889	2,136	2,594	5,619

Interest-bearing liabilities include loans from the State Nuclear Waste Management Fund and Teollisuuden Voima Oyj of EUR 1,129 million (2016: 1,094). These loans are renewed yearly and the related interest payments are calculated for ten years in the table above.

For further information regarding loans from the State Nuclear Waste Management Fund and Teollisuuden Voima Oyj, see Note 28 Nuclear related assets and liabilities.

3.6 Interest rate risk and currency risk

3.6.1 Interest rate risk

Fortum risk policy states that the average duration of the debt portfolio shall always be kept within a range of 12 and 36 months and that the flow risk i.e. changes in interest rates shall not affect the net interest payments of the Group by more than EUR 50 million for the next rolling 12-month period. Within these mandates, strategies are evaluated and developed in order to find an optimal balance between risk and financing cost.

On 31 December 2017, the average duration of the debt portfolio (including derivatives) was 1.5 years (2016: 1.7). Approximately 65% (2016: 59%) of the debt portfolio was on a floating rate basis or fixed rate loans maturing within the next 12-month period. The effect of one percentage point change in interest rates on the present value of the debt portfolio was EUR 71 million on 31 December 2017 (2016: 87). The flow risk, measured as the difference between the base case net interest cost estimate and the worst-case scenario estimate for Fortum's debt portfolio for the coming 12 months, was EUR 4 million (2016: 3).

The average interest rate for the portfolio consisting mainly of EUR and SEK loans was 2.4% at the balance sheet date (2016: 2.1%). Part of the external loans EUR 773 million (2016: 805) have been swapped to RUB and the average interest cost for these loans, including cost for hedging the RUB, was 9,5% at the balance sheet date (2016: 11.4%). The average interest rate on loans and derivatives on 31 December 2017 was 3.6% (2016: 3.5%). Average cumulative interest rate on loans and derivatives for 2017 was 3.6% (2016: 3.5%).

The average interest rate on deposits and securities excluding Russian deposits on 31 December 2017 was -0.27% (2016: -0.01%). Liquid funds held by PAO Fortum amounted to EUR 246 million (2016: 105) and the average interest rate for this portfolio was 6.1% at the balance sheet date.

3.6.2 Currency risk

Fortum's policy is to hedge major transaction exposures on a local level in the reporting currency of each legal entity in order to avoid exchange differences in the profit and loss statement. These exposures are mainly hedged with forward contracts. An exception is the Generation segment's hedging of power sales in Sweden where the currency component is currently not hedged.

Translation exposures in the Fortum Group are generally not hedged as the majority of these assets are considered to be long-term strategic holdings. In Fortum this means largely entities operating in Sweden, Russia, Norway and Poland, whose base currency is not euro.

The currency risk relating to transaction exposures is measured using Value-at-Risk (VaR) for a one-day period at 95% confidence level. Translation exposures relating to net investments in foreign entities are measured using a five-day period at 95% confidence level. The limit for transaction exposure is VaR EUR 5 million. On 31 December 2017 the open transaction, excluding Generation segment's EURSEK exposure and translation exposures were EUR 13 million (2016: 2) and EUR 8,212 million (2016: 7,213) respectively. The VaR for the transaction exposure was EUR 0 million (2016: 0) and VaR for the translation exposure was EUR 98 million (2016: 96).

Group Treasury's transaction exposure

		2017			2016
EUR million	Net position	Hedge		Open Net position	Hedge	Open
RUB	589	-589	0	677	-677	0
SEK	277	-264	13	532	-531	1
PLN	310	-310	0	226	-226	0
NOK	451	-451	0	-72	72	0
INR	117	-117	0	116	-116	0
USD	-118	118	0	-98	98	0
Other	-41	41	0	-20	20	0
Total	1,585	-1,572	13	1,361	-1,359	2

Transaction exposure is defined as already contracted or forecasted foreign exchange dependent items and cash flows. Transaction exposure is divided into balance sheet exposure and cash flow exposure. Balance sheet exposure reflects currency denominated assets and liabilities for example loans, deposits and accounts receivable/payable in currencies other than the company's base currency. Cash flow exposure reflects future forecasted or contracted currency flows in foreign currency deriving from business activities such as sales, purchases or investments. Net conversion differences from transaction

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation	Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

exposure are entered under financial income or expense when related to financial items or when related to accounts receivable/payable entered under items included in operating profit. Conversion differences related to qualifying cash flow hedges are deferred to equity.

Fortum's policy is to hedge balance sheet exposures in order to avoid exchange rate differences in the income statement. The Group's balance sheet exposure mainly relates to financing of non-euro subsidiaries and the fact that the Group's main external financing currency is EUR. For derivatives hedging this balance exposure Fortum does not apply hedge accounting, because they have a natural hedge in the income statement.

Contracted cash flow exposures shall be hedged to reduce volatility in future cash flows. These hedges normally consist of currency derivative contracts, which are matched against the underlying future cash flow according to maturity. Fortum has currency cash flow hedges both with and without hedge accounting treatment under IFRS. Those currency cash flow hedges, which do not qualify for hedge accounting are mainly hedging electricity derivatives. Unrealised hedges create volatility in the operating profit.

Group Treasury's translation exposure

		2017			2016
EUR million	Net Investment	Hedge	Open	Net Investment	Hedge	Open
RUB	2,673	-173	2,500	2,603	-132	2,471
SEK	4,769	-1,087	3,682	4,747	-837	3,910
NOK	1,600	-	1,600	410	-	410
PLN	294	-	294	282	-	282
Other	136	-	136	141	-	141
Total	9,472	-1,260	8,212	8,183	-970	7,213

Translation exposure position includes net investments in foreign subsidiaries and associated companies. On consolidation, exchange differences arising from the translation of the net investment in foreign entities are taken to equity. The net effect of exchange differences on equity attributable to equity holders mainly from RUB and SEK was EUR -369 million in 2017 (2016: 335). Part of this translation exposure has been hedged and the foreign currency hedge result amounted to EUR 28 million in 2017 (2016: 5).

Interest rate and currency derivatives by instrument

	2017 Notional amount Remaining lifetimes				2017 Fair value			2016 Fair value
EUR million	Under 1 year	1–5 years	Over 5 years	Total	Positive	Negative	Net	Positive	Negative	Net
Forward foreign exchange contracts	2,864	266		3,130	56	19	37	26	130	-103
Interest rate swaps	305	3,421	102	3,827	205	90	115	269	127	142
Interest rate and currency swaps	311	580		892	92	3	89	71	5	66
Total	3,480	4,267	102	7,849	353	112	241	366	261	105
Of which long-term					238	88	151	343	121	222
Of which short-term					114	24	90	23	140	-117

3.7 Credit risk

Fortum is exposed to credit risk whenever there is a contractual obligation with an external counterparty.

Credit risk exposures relating to financial derivative instruments are often volatile. Although the majority of commodity derivatives are cleared through exchanges, derivatives contracts are also entered into directly with external counterparties. Such contracts are limited to high-credit-quality counterparties active on the financial or commodity markets. Currency and interest rate derivative counterparties are limited to investment grade banks and financial institutions. ISDA Master agreements, which include netting clauses and in some cases Credit Support Annex agreements, are in place with most of these counterparties. Commodity derivative counterparties are limited to those considered to be creditworthy. Master agreements, such as ISDA, FEMA and EFET, which include netting clauses, are in place with the majority of the counterparties.

Due to the financing needs and management of liquidity, Fortum has counterparty credit exposure toward a number of banks and financial institutions. This includes exposure to the Russian financial sector in terms of deposits with financial institutions as well as to banks that provide guarantees for suppliers and contracting parties. Deposits in Russia have been concentrated to the most creditworthy state-owned or controlled banks. Limits with banks and financial institutions are monitored so that exposures can be adjusted as ratings or the financial situation changes, and Fortum is following the development of economic sanctions against Russia as part of the monitoring process.

Credit risk relating to customers is spread across a wide range of industrial counterparties, small businesses and private individuals over a range of geographic regions. The majority of exposure is to the Nordic market, Poland and Russia. The risk of non-payment in the electricity and heat sales business in Russia is higher than in the Nordic market.

3.7.1 Credit quality of major financial assets

Amounts disclosed below are presented by counterparties for interest-bearing receivables including bank deposits and derivative financial instruments recognised as assets.

	2017 Carrying	of which	2016 Carrying	of which
EUR million	amount	past due	amount	past due
Investment grade receivables
Deposits, commercial papers and cash in bank
accounts	3,348	-	4,663	-
Fair values of interest rate and currency derivatives	353	-	366	-
Fair values of electricity and other commodity
derivatives	56	-	5	-
Total investment grade receivables	3,757	-	5,034	-

Energy exchange receivables Fair value of derivatives on Nasdaq OMX
Commodities Europe	37	-	61	-
Fair value of derivatives on European Energy
Exchange AG	2	-	1	-
Fair value of derivatives on the Polish Power
Exchange	13	-	0	-
Total energy exchange receivables	52	-	62	-

Associated companies and joint venture
receivables
Loan receivables	864	-	886	-
Finance lease receivable	41	-	0	-
Fair values of electricity and other commodity derivatives	9	-	14	-
Total associated companies and joint venture
receivables	914	-	900	-

Other receivables
Investments in commercial papers	249	-	275	-
Russian deposits with non-investment grade banks	141	-	103	-
Restricted cash mainly given as collateral for
commodity exchanges	363	-	360	-
Receivable from SIBUR related to divested shares of
OOO Tobolsk CHP	102	-	131	-
Loan and other interest bearing receivables	35	-	3	-
Fair values of electricity and other commodity derivatives	51	-	96	-
Total other receivables	941	-	968	-

Total	5,664	-	6,964	-

Operating and financial review	Consolidated	financial statements	Notes	Key figures 2008–2017	Parent company financial statements	Proposal for the use of the profit shown on the balance sheet	Auditor's report	Operational key figures Quarterly financial information	Investor information
Basis of preparation		Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

The following tables indicate how bank deposits, commercial papers and fair values of derivatives are distributed by rating class.

Deposits and Securities

2017	2016

-	-
324	995
2,835	3,437
189	231
3,348	4,663

141	103
-	-
-	-
141	103

Counterparties without external credit rating from Standard & Poor's and/or

Moody's
Government or municipality	-	-
Fortum Rating 5 – Lowest Risk	249	275
Fortum Rating 4 – Low Risk	-	-
Fortum Rating 3 – Normal Risk	-	-
Fortum Rating 2 – High Risk	-	-
Fortum Rating 1 – Highest Risk	-	-
No rating	-	-
Total non-rated counterparties	249	275

Total	3,738	5,040

In addition, cash in other bank accounts totalled EUR 159 million on 31 December 2017 (2016: 115). See Note 23 Liquid funds

Interest rate and currency derivatives

	2017		2016
		Netted		Netted
EUR million	Receivables		amount 1) Receivables	amount 1)
Counterparties with external credit rating from Standard & Poor's and/or Moody's Investment grade ratings
AAA	-	-	-	-
AA+/AA/AA-	51	30	11	-
A+/A/A-	292	100	259	76
BBB+/BBB/BBB-	10	9	96	31
Total investment grade ratings	353	140	366	107
Total associated companies and joint ventures	0	0	0	0
Counterparties without external credit rating from Standard & Poor's and/or Moody's	-	-	0	0
Total	353	140	366	107

1) The netted amount includes the cash received in accordance with Credit Support Annex agreements EUR 113 million (2016: 135).

Electricity, coal, gas and oil derivatives and CO2 emission allowances treated as derivatives

	2017		2016
EUR million	Receivables	Netted	amount Receivables	Netted amount
Counterparties with external credit rating from Standard & Poor's and/or Moody's Investment grade ratings
AAA	-	-	-	-
AA+/AA/AA-	1	1	0	0
A+/A/A-	53	53	4	3
BBB+/BBB/BBB-	2	1	1	0
Total investment grade ratings	56	55	5	3
Non-investment grade ratings
BB+/BB/BB-	1	0	1	0
B+/B/B-	0	0	-	-
Below B-	-	-	-	-
Total non-investment grade ratings	1	0	1	0
Total associated companies and joint ventures	9	0	14	7

	2017		2016
EUR million	Receivables	Netted	amount Receivables	Netted amount
Counterparties without external credit rating from Standard & Poor's and/or Moody's
Government or municipality	0	0	0	0
Fortum Rating 5 – Lowest risk	15	10	34	28
Fortum Rating 4 – Low risk	19	12	39	29
Fortum Rating 3 – Normal risk	16	12	22	19
Fortum Rating 2 – High risk	0	0	0	0
Fortum Rating 1 – Highest risk	-	-	0	0
No rating	1	1	0	0
Total non-rated counterparties	51	35	95	77

Total	117	90	115	87

For derivatives, the receivable is the sum of the positive fair values, i.e. the gross amount. Netted amount includes negative fair values where a valid netting agreement is in place with the counterparty. When the netted amount is less than zero, it is not included. In cases where a parent company guarantee is in place, the exposure is shown on the issuer of the guarantee.

All counterparties for currency and interest rate derivatives and the majority of counterparties for bank deposits have an external rating from Standard & Poor's and/or Moody's credit agencies. The above rating scale is for Standard & Poor's rating categories. For those counterparties only rated by Moody's, the rating has been translated to the equivalent Standard and Poor's rating category. For counterparties rated by both Standard & Poor's and Moody's, the lower of the two ratings is used.

In the commodity derivatives and commercial paper market, there are a number of counterparties not rated by Standard & Poor's or Moody's. For these counterparties, Fortum assigns an internal rating. The internal rating is based on external credit ratings from other credit agencies. The rating from Bisnode is used for Nordic counterparties and for other counterparties the rating from Dun & Bradstreet is used. Governments and municipal companies are typically not rated, and are shown separately. This rating category does not include companies owned by governments or municipalities. Counterparties that have not been assigned a rating by the above listed credit agencies are in the "No rating" category.

4 Capital risk management

Financial targets give guidance on Fortum's view of the company's long-term value creation potential, its growth strategy and business activities. The long-term over-the-cycle financial targets (published in Feb 2016) are Return on capital employed, ROCE at least 10% and Comparable net debt to EBITDA around 2.5 times.

In November 2016 the strategy execution plan was detailed in order to enable profit growth and improved cash flow. According to that detailed plan the redeployment of cash and the execution of Fortum's strategy will take place in two phases, and a significant part of the redeployment was targeted to take place during 2016–2017. The goal for the first phase is to maximise cash flow through redeployment and the goal for the second phase is to secure Fortum's longer-term competitiveness.

Following the earlier Ekokem and Hafslund transactions in September 2017 Fortum announced that it has signed a transaction agreement under which E.ON had the right to decide to tender its 46.65% shareholding in Uniper SE into Fortum's public takeover offer.

The investment in Uniper delivers on Fortum's previously announced capital redeployment strategy and investment criteria. The offer will be financed with existing cash resources and committed credit facilities. Fortum has received as of 16 January 2018 in the offer 46.93% including E.ON's shares in Uniper which corresponds to a commitment of billion 3.78 euro. As a result of this transaction, Fortum's leverage will rise above our given guidance for net debt/EBITDA level of around 2.5x. Over time however, Fortum expects its cash generation in combination with the dividend from Uniper to reduce this level towards the stated target.

Net debt/EBITDA ratios

EUR million Note		2017	2016
Interest-bearing liabilities	26	4,885	5,107
BS Less: Liquid funds	23	3,897	5,155
Net debt		988	-48

Operating profit		1,158	633
Add: Depreciation and amortisation		464	373
EBITDA		1,623	1,006
Less: Items affecting comparability		347	-11
Less: Net release of CSA provision		-	2
Comparable EBITDA		1,275	1,015

Comparable net debt/EBITDA		0.8	0.0

Parent company financial statements Proposal for the use of the profit shown on the balance sheet

Auditor's report

Operational key figures Quarterly financial information Investor information

Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

5 Segment reporting

ACCOUNTING POLICIES

REVENUE RECOGNITION

Revenue comprises the fair value consideration received or receivable at the time of delivery of products and/or upon fulfilment of services. Revenue is shown net of rebates, discounts, value-added tax and selective taxes such as electricity tax. Revenue is recognised as follows:

SALE OF ELECTRICITY, HEAT, COOLING AND RECYCLED MATERIALS

Sale of electricity, heat and cooling as well as sale of recycled materials is recognised at the time of delivery. The sale to industrial and commercial customers and to end-customers is recognised based on the value of the volume supplied, including an estimated value of the volume supplied to customers between the date of their last meter reading and year-end.

Physical energy sales and purchase contracts are accounted for on accrual basis based on expected purchase, sale and usage requirements.

CONNECTION FEES

Fees paid by the customer when connected to the gas, heat or cooling network are recognised as income to the extent that the fee does not cover future commitments. If the connection fee is linked to the contractual agreement with the customer, the income is recognised over the period of the agreement with the customer.

Fees paid by the customer when connected to district heating network in Finland were refundable until 2013. These connection fees have not been recognised in the income statement and are included in other liabilities in the balance sheet.

SALE OF WASTE TREATMENT SERVICES

Revenue from waste treatment services is recognised over time, when the underlying treatment is performed.

CONTRACT REVENUE

Contract revenue is recognised under the percentage of completion method to determine the appropriate amount to recognise as revenue and expenses in a given period. The stage of completion is measured by reference to the contract costs incurred up to the closing date as a percentage of total estimated costs for each contract.

NETTING AND INTER-SEGMENT TRANSACTIONS

Generation segment sells its production to Nord Pool and Consumer Solutions buys its electricity from Nord Pool. Eliminations of sales include eliminations of sales and purchases with Nord Pool that are netted on group level on an hourly basis and posted either as revenue or cost depending on if Fortum is a net seller or net buyer during any particular hour. Inter-segment sales, expenses and results for the different business segments are affected by intra-group deliveries, which are eliminated on consolidation. Inter-segment transactions are based on commercial terms.

5.1 Fortum's business structure

Fortum has reorganised its operating structure as of 1 March 2017. The City Solutions division was divided into two divisions: City Solutions and Consumer Solutions. City Solutions comprises heating and cooling, waste-to-energy, biomass and other circular economy solutions. Consumer Solutions comprises electricity sales in the Nordics, electricity sales and gas sales in Poland, as well as Nordic customer services (previously reported under the Other segment). The business divisions are: Generation, City Solutions, Consumer Solutions, Russia, and Other, which includes the two development units, M&A and Solar & Wind Development, Technology and New Ventures as well as corporate functions.

5.2 Segment structure in Fortum

Fortum discloses segment information in a manner consistent with internal reporting to Fortum,s Board of Directors and to Fortum Executive Management led by the President and CEO. Fortum has segments based on type of business operations, combined with one segment based on geographical area. Fortum,s reportable segments under IFRS are the business divisions Generation, City Solutions, Consumer Solutions and Russia. Fortum has restated its 2016 comparison segment reporting figures in accordance with the new organisation structure. The restated and previously communicated quarterly information for 2016 were published on 11 April 2017 and can be found in the Interim reports section in Fortum's webpage.

5.3 Definitions for segment information

Fortum's segment information discloses the financial measurements used in financial target setting and forecasting, management,s follow up of financial performance and allocation of resources in the group,s performance management process. These measurements, such as Comparable operating profit and Comparable return on net assets, have been used consistently since 2005.

Items affecting comparability are disclosed separately in Fortum,s income statement to support the understanding of business performance when comparing results between periods. Items classified as

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

Items affecting comparability include accounting effects from valuation according to IFRS that are not arising from the performance of the business operations. Such items include fair valuation of financial derivatives hedging future cash-flows where hedge accounting is not applied according to IAS 39 and effects from the accounting of Fortum,s part of the Finnish Nuclear Waste Fund where the asset in the balance sheet cannot exceed the related provisions according to IFRIC interpretation 5.

The business performance of the operations cannot be compared from one period to another without adjusting for one-time items relating to capital gains, major impairment related items and transaction costs arising from acquisitions. Therefore such items have also been treated as Items affecting comparability. From 2016 onwards transaction costs arising from acquisitions of subsidiary shares are included in capital gains and other within items affecting comparability. According to IFRS 3 transaction costs related to the acquisitions of subsidiary shares are recognised in the income statement.

Consolidation by segment is based on the same principles as for the Group as a whole. See definition of the segment information in Definition of financial key figures.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation	Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

5.4 Segment information

Income statement

		Generation 1)		City Solutions 1)		Consumer Solutions		Russia	Other		Total
EUR million Note	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016
External sales	1,662	1,643	996	780	1,094	666	1,101	896	35	31	4,888	4,016
Internal sales	15	15	19	1	3	2	0	0	67	61	103	79
Netting of Nord Pool transactions 2)											-367	-384
Eliminations 2)											-103	-79
IS Sales	1,677	1,657	1,015	782	1,097	668	1,101	896	102	92	4,520	3,632
Comparable EBITDA	603	527	262	186	57	55	438	312	-83	-64	1,275	1,015
Net release of CSA provision							0	2			0	2
IS Depreciation and amortisation	-125	-110	-163	-121	-16	-7	-142	-123	-18	-13	-464	-373
IS Comparable operating profit	478	417	98	64	41	48	296	191	-102	-77	811	644
Impairment charges 6	6	27	0	0	0	0	0	0	0	0	6	27
Capital gains and other 6	1	1	1	0	2	0	0	35	322	2	326	38
Changes in fair values of derivatives hedging future cash-flow 6, 7	15	-96	3	22	-4	11	0	0	0	-2	14	-65
Nuclear fund adjustment 6, 28	1	-11									1	-11
IS Items affecting comparability 6	23	-79	4	22	-2	11	0	35	322	0	347	-11
IS Operating profit	501	338	102	86	39	59	295	226	221	-77	1,158	633
IS Share of profit of associated companies and joint ventures 18, 28	-1	-34	80	76	0	0	31	38	38	51	148	131
IS Finance costs - net											-195	-169
IS Income taxes											-229	-90
IS Profit for the year											882	504

1) Sales, both internal and external, include effects from realised hedging contracts. Effect on sales can be negative or positive depending on the average contract price and realised spot price.

2) Netting and eliminations include eliminations of internal sales and netting of Nord Pool transactions. Sales and purchases with Nord Pool, EUR -367 million, are netted on Group level on an hourly basis and posted either as revenue or cost depending on if Fortum is a net seller or net buyer during any particular hour.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

Assets and liabilities

		Generation City Solutions		Consumer Solutions			Russia		Other		Total
EUR million Note	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016
Non-interest-bearing assets	6,097	6,206	3,517	2,672	923	348	2,812	2,967	452	240	13,801	12,432
BS Participations in associated companies and joint ventures 18, 28	785	711	611	573	0	0	472	436	32	392	1,900	2,112
Eliminations											-19	-18
Total segment assets	6,882	6,917	4,128	3,245	923	348	3,284	3,402	483	632	15,682	14,526
Interest-bearing receivables 20											1,406	1,380
BS Deferred tax assets 27											73	66
Other assets											696	838
BS Liquid funds											3,897	5,155
Total assets											21,753	21,964

Segment liabilities	1,210	1,102	400	371	285	194	124	119	207	117	2,227	1,903
Eliminations											-19	-18
Total segment liabilities											2,208	1,885
BS Deferred tax liabilities 27											819	616
Other liabilities											554	814
Total liabilities included in capital employed											3,581	3,315
Interest-bearing liabilities 26											4,885	5,107
BS Total equity											13,287	13,542
Total equity and liabilities											21,753	21,964

Investments/Divestments

		Generation		City Solutions			Consumer Solutions		Russia		Other	Total
EUR million	Note	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016
Gross investments in shares	18, 38	90	7	386	698	486	117	125	0	39	22	1,125	844
Capital expenditure	16, 17	174	196	170	109	7	3	152	201	187	83	690	591
of which capitalised borrowing costs		3	3	2	1	0	0	7	10	4	2	16	16
Gross divestments of shares	38	0	0	0	33	55	1	0	127	687	0	742	161

Comparable return on net assets

	Comparable net assets by segments, EUR million		Comparable return on net assets, %
	2017	2016	2017	2016
Generation	5,672	5,815	8.4	6.9
City Solutions	3,728	2,873	5.5	5.9
Consumer Solutions	638	154	11.7	44.3
Russia	3,161	3,284	10.1	8.0
Other	276	514	-13.3	-6.1

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation	Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

Employees

	Generation		City Solutions		Consumer Solutions		Russia		Other		Total
	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016
Number of employees 31 Dec	1,035	979	1,907	1,701	1,543	961	3,495	3,745	805	722	8,785	8,108
Average number of employees	1,036	1,064	1,807	1,529	1,180	877	3,710	3,814	774	711	8,507	7,994

5.5 Group-wide disclosures

The Group,s operating segments operate mainly in the Nordic countries, Russia, Poland and other parts of the Baltic Rim area. Generation operates mainly in Finland and Sweden, Consumer Solutions operates mainly in Nordic countries and Poland, whereas City Solutions operates in all of these geographical areas except Russia. Other countries are mainly Estonia, Latvia, Lithuania and India. The home country is Finland.

The information below is disclosing sales by product area as well as sales by the country in which the customer is located. Assets, capital expenditure and personnel are reported where the assets and personnel are located. Participations in associates and joint ventures are not divided by location since the companies concerned can have business in several geographical areas.

External sales by product area

EUR million	2017	2016
Power sales excluding indirect taxes	3,089	2,587
Heating sales	782	648
Other sales	649	398
IS Total	4,520	3,632

Heating sales include sale of delivered heat and transmission of heat.

Due to the large number of customers and the variety of its business activities, there is no individual customer whose business volume is material compared with Fortum,s total business volume.

Sales by market area based on customer location

EUR million	2017	2016
Nordic	2,827	2,258
Russia	1,102	899
Poland	452	355
Other countries	139	120
IS Total	4,520	3,632

The Nordic power production is not split by countries since Nordic power production is mainly sold through Nord Pool.

Capital expenditure by location

EUR million	2017	2016
Finland	179	173
Sweden	104	91
Norway	46	11
Russia	152	201
Poland	92	59
Other countries	115	56
Total	690	591

Segment assets by location

EUR million	2017	2016
Finland	3,882	3,958
Sweden	4,304	4,341
Norway	1,533	27
Russia	2,812	2,967
Poland	559	513
Other countries and eliminations	692	608
Non-interest bearing assets	13,781	12,414
BS Participations in associates and joint ventures	1,900	2,112
Total	15,682	14,526

Number of employees on 31 December by location

	2017	2016
Finland	2,165	2,029
Sweden	968	724
Norway	654	43
Russia	3,494	3,745
Poland	827	894
Other countries	677	673
Total	8,785	8,108

6 Items affecting comparability Fair value changes on derivatives

EUR million	2017	2016
Impairment charges	6	27
Capital gains and other	326	38
Changes in fair values of derivatives hedging future cash flow	14	-65
Nuclear fund adjustments	1	-11
IS Total	347	-11

Items affecting comparability are not included in Comparable operating profit. Comparable operating profit is presented to better reflect the Group,s business performance when comparing results for the current period with previous periods. Items affecting comparability are disclosed separately in Fortum,s income statement as it is deemed necessary for the purposes of understanding the financial performance when comparing the results.

Impairment charges and capital gains

EUR million	Segment	Country	2017	2016
Impairment charges
Reversal of provision for early closure of units 1 and 2 in OKG AB	Generation	Sweden		22
Reversal of dismantling provision for the Finnish coal-fired power plant Inkoo Generation		Finland	6	5
Total			6	27

Capital gains and other
Hafslund ASA, associated company	Other	Norway	324
Transaction costs from Hafslund acquisition	Other	Norway	-4
OOO Tobolsk CHP, subsidiary	Russia	Russia		35
AS Eesti Gaas, joint venture	City Solutions	Estonia		11
Transaction costs from Ekokem acquisition	City Solutions	Finland		-12
Other non-recurring items			6	4
Total			326	38

Changes in the fair values of financial derivative instruments hedging future cash flows that do not qualify for hedge accounting are recognised in items affecting comparability. This is done to improve the understanding of the financial performance when comparing results from one period to another.

Nuclear waste management fund adjustment

Nuclear fund adjustment includes effects from the accounting principle of Fortum,s part of the State Nuclear Waste Management Fund where the assets in the balance sheet cannot exceed the nuclear related provisions according to IFRIC 5. As long as the Fund is overfunded from an IFRS perspective, the effects to the operating profit from this adjustment will be positive if the provisions increase more than the Fund and negative if actual value of the fund increases more than the provisions.

For more information regarding disposals of shares, see Note 38 Acquisitions and disposals. For more information regarding fair value changes of derivatives, see Note 7 Fair value changes of derivatives and underlying items in income statement.

For more information regarding nuclear waste management, see Note 28 Nuclear related assets and liabilities.

Key figures 2008–2017 Notes

Parent company financial statements Proposal for the use of the profit shown on the balance sheet

Auditor's report

Operational key figures Quarterly financial information Investor information

Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

7 Fair value changes of derivatives and underlying items in income statement

Fair value changes in operating profit presented below are arising from financial derivatives hedging future cash flows where hedge accounting is not applied according to IAS 39 and the ineffectiveness from cash flow hedges.

Fair value changes of currency derivatives in net financial expenses are arising mainly from balance sheet hedges without hedge accounting status according to IAS 39, because they are natural hedges of loans and receivables. Fair value change of interest rate hedges without hedge accounting is EUR -7 million (2016: -9). The net effect of fair value changes of hedging derivative and hedged bonds are EUR 0 million (2016: 0).

EUR million	2017	2016
In operating profit
Fair value changes from derivatives not getting hedge accounting status
Electricity derivatives	-20	-43
Currency derivatives	-1	2
Other commodity derivatives	25	-2
Ineffectiveness from cash flow hedges	11	-23
Total effect in operating profit	14	-65

In finance costs
Exchange gains and losses on loans and receivables 1)	-51	143
Fair value changes of derivatives not getting hedge accounting status
Cross currency interest rate derivatives 1)	6	12
Foreign currency derivatives 1)	47	-156
Rate difference on forward contracts	-4	7
Currency derivatives	49	-137
Interest rate derivatives	-7	-9
Fair value change of hedging derivatives in fair value hedge
relationship	-31	11
Fair value change of hedged items in fair value hedge relationship	31	-11
Total 2)	42	-146
Total effect in finance costs	-10	-3
Total effect on profit before income tax	4	-68

8 Other income and other expenses

ACCOUNTING POLICIES

OTHER INCOME

Revenue from activities outside normal operations is reported in other income. This includes recurring items such as rental income and non-recurring items such as insurance compensation.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are recognised as expense as incurred and included in other expenses in the income statement. If development costs will generate future income, they are capitalised as intangible assets and depreciated over the period of the income streams.

8.1 Other income

EUR million	2017	2016
Rental income	6	11
Insurance compensation	2	2
Other items	45	22
IS Total	55	34

8.2 Other expenses

EUR million	2017	2016
Operation and maintenance costs	125	94
Property taxes	115	145
IT and telecommunication costs	60	51
Other items	276	195
IS Total	576	485

The major components recorded in other expenses are the external operation and maintenance costs of power and heat plants. Property taxes include taxes relating to directly owned hydropower production EUR 81 million (2016: 118). Other items includes expenses relating to properties and other operative expenses.

1) Exchange gains and losses on loans, receivables and derivatives totalling EUR 2 million (2016: -1).

2) Including fair value gains and losses on financial instruments and exchange gains and losses on derivatives EUR -12 million (2016: -2). See also Note 11 Finance costs - net.

Principal auditor's fees

EUR million	2017	2016
Audit fees	1.4	1.3
Audit related assignments	0.2	0.2
Tax assignments	0.0	0.0
Other assignments	1.0	0.0
Total	2.6	1.5

Deloitte Oy is the appointed auditor until the next Annual General Meeting, to be held in 2018. Audit fees include fees for the audit of the consolidated financial statements, review of the interim reports as well as the fees for the audit of Fortum Corporation and its subsidiaries. Audit related assignments include fees for assurance of sustainability reporting and other assurance and associated services related to the audit. Tax assignments include fees for tax advice services. Other assignments consist of advisory services.

9 Materials and services

EUR million	2017	2016
Materials	1,769	1,216
Materials purchased from associated companies and joint ventures	431	540
Transmission costs	39	38
External services	63	37
IS Total	2,301	1,830

Materials consists mainly of coal, gas and nuclear fuels used for producing power and heat.

Materials purchased from associated companies consist of nuclear and hydropower purchased at production cost (including interest costs and production taxes) and purchased steam.

Total materials and services include production taxes EUR 109 million (2016: 141), of which nuclear related capacity and property taxes EUR 48 million (2016: 81) and hydro power related property taxes EUR 14 million (2016: 15). Taxes related to nuclear and hydro production are included in taxes paid through purchases from associated companies.

See Note 18 Participations in associated companies and joint ventures.

10 Employee benefits

EUR million	2017	2016
Wages and salaries	312	248
Pensions
Defined contribution plans	32	25
Defined benefit plans	8	4
Social security costs	44	38
Share-based incentives	4	2
Other employee costs	23	17
IS Total	423	334

The compensation package for Fortum employees consists of salaries, fringe benefits, short-term incentives, profit sharing paid to the Personnel Fund and share-based long-term incentives.

The remuneration policy is determined by the Board of Directors. The Nomination and Remuneration Committee of the Board of Directors discusses, assesses and makes recommendations and proposals to the Board of Directors on the remuneration policy, remuneration of the President and CEO and the Fortum Executive Management and company-wide incentive arrangements for senior management and key personnel as well as monitors these plans annually. Additionally, the Committee contributes to the Group,s nomination issues by proposing to the Board of Directors any nominations regarding the members of Fortum Executive Management.

For further information on pensions see Note 30 Pension obligations.

10.1 Short-term incentives (STI)

Fortum's STI programme is designed to support the achievement of the company's financial and other relevant targets on an annual basis. All employees are covered by the programme or alternatively by a business specific or a comparable local variable pay arrangement.

The Board of Directors determines the performance criteria and award levels for the Fortum Executive Management. The awards are based on the achievement of divisional targets, Group financial performance as well as individual targets. The target incentive opportunity is 20% and the maximum incentive opportunity is 40% of the annual base salary. The Board of Directors assesses the performance of the President and CEO and the members of the Fortum Executive Management on a regular basis.

Awards for other employees are based on a combination of Group, divisional, functional and personal targets. The targets are set in annual performance discussions held at the beginning of the year. Awards under the STI programme are paid solely in cash.

10.2 Share-based long-term incentives (LTI)

The purpose of Fortum's share-based long-term incentive programme is to support the delivery of sustainable, long-term performance, align the interests of management with those of shareholders and assist in committing and retaining key individuals.

Fortum's LTI programme provides participants with the opportunity to earn company shares. Under the LTI programme and subject to the decision of the Board of Directors, a new LTI plan commences annually. The Board of Directors approves participation of the Fortum Executive Management members in each annually commencing LTI plan. Subject to a decision by the Board of Directors the President and CEO is authorised to decide on individual participants and potential maximum awards for other participants than the Fortum Executive Management in accordance with the nomination guidelines approved by the Board of Directors. Participation in the LTI plan precludes the individual from being a member in the Fortum Personnel Fund.

Each LTI plan begins with a three-year earnings period, during which participants may earn share rights if the performance criteria set by the Board of Directors are fulfilled. If the minimum performance criteria are not exceeded, no shares will be awarded. If performance is exceptionally good and the targets approved by the Board of Directors are achieved, the combined gross value of all variable compensation cannot exceed 120% of the person's annual salary in any calendar year. After the earnings period has ended and the relevant taxes and other employment-related expenses have been deducted, participants are paid the net balance in the form of shares.

For LTI plans commencing in 2013 onwards, any shares awarded to Fortum Executive Management members are subject to a three-year lock-up period. Subject to a decision by the Board of Directors, the lock-up period can be reduced to one year for those Fortum Executive Management members whose aggregate ownership of Fortum shares is greater than or equal to their annual salary. For other participants the lock-up period is one year. For LTI plans commencing prior to 2013, the lock-up period is three years for all participants. If the value of the shares decreases or increases during the lock-up or retention period, the participant will carry the potential loss or gain. For LTI plans commencing in 2017 and beyond, the share awards will not be subject to a minimum lock-up period. However, Fortum Executive Management members whose aggregate ownership of Fortum shares does not yet fulfil the shareholding requirement are required to retain at least 50% of the shares received until the required level of shareholding is met.

The Board of Directors has the right to revise the targets set in the incentive plans or decide to deviate from the payment based on achievement of the set earnings criteria or to discontinue any ongoing incentive plan.

Long-term incentive programme ¹

The share plans under the LTI arrangement are accounted for as partly cash- and partly equity-settled arrangements. The portion of the earned reward that the participants receive in shares is accounted for as an equity settled transaction, and the portion of the earned reward settled in cash covering the tax and other charges, is accounted for as cash settled transaction. For participants receiving cash only, the total arrangement is accounted for as cash-settled transaction. The reward is recognised as an expense during the earnings period with a corresponding increase in the liabilities and for the transactions settled in shares in the equity. The social charges related to the arrangement payable by the employer are accrued as a liability. The LTI liability including social charges at the end of the year 2017 was EUR 18 million (2016: 19), including EUR 4 million (2016: 5) recorded in equity.

At present, approximately 120 key employees are participants in at least one of the six on-going annual LTI plans (plans 2012–2017, 2013–2018, 2014–2019, 2015–2020, 2016–2021 and 2017–2019).

Shares granted

EUR million	Plan 2014–2019	Plan 2013–2018	Plan 2012–2017
Grant date		13 Feb 2017 12 Feb 2016 13 Feb 2015
Grant price, EUR	14.28	12.18	19.96

Number of shares granted	92,321	152,200	126,515
Number of shares subsequently forfeited or
released from lock-up and other changes	-13,464	-140,916	-52,217
Number of shares under lock-up at the end of the year 2017	78,857	11,284	74,298

In addition to the shares granted above, share rights have been granted to participants that will receive cash payments instead of shares after the lock-up period. The gross amount of share rights outstanding at the end of the year 2017 for plan 2014–2019 was 76,922, for plan 2013–2018 was 32,066 and for plan 2012–2017 89,111 share rights.

10.3 Fortum Personnel Fund

The Fortum Personnel Fund (for employees in Finland only) has been in operation since year 2000. The Board of Directors determines the criteria for the fund,s annual profit-sharing bonus. Persons included in Fortum,s long-term incentive schemes are not eligible to be members of this fund. Members of the personnel fund are the permanent and fixed-term employees of the Group. The membership of employees joining the company starts at the beginning of the next month after the employment relationship has been ongoing for five months. An employee is entitled to make withdrawals right from the beginning of the membership. The membership in the fund terminates when the member has received his/her share of the fund in full.

The profit-sharing received by the fund is distributed equally between the members. Each employee,s share is divided into a tied amount and an amount available for withdrawal. It is possible to transfer a maximum of 15% of capital from the tied amount to the amount available for withdrawal each year.

The amount available for withdrawal (maximum 15% of the tied amount) is decided each year by the council of the fund and it is paid to members who want to exercise their withdrawal rights.

The fund,s latest financial year ended at 30 April 2017 and the fund then had a total of 2,320 members (2016: 2,112). At the end of April 2017 Fortum contributed EUR 2.8 million (2016: 0.6) to the personnel fund as an annual profit-sharing bonus based on the financial results of 2016. The combined amount of members, shares in the fund was EUR 21 million (2016: 20).

The contribution to the personnel fund is expensed as it is earned.

10.4 The President and CEO and the Fortum Executive Management remuneration The Fortum Executive Management (FEM) consists of ten members, including the President and CEO. The following table presents the total remuneration of the President and CEO and the FEM and takes into account the changes in FEM during the year. The expenses are shown on accrual basis.

Management remuneration

	2017		2016
EUR thousand	Pekka Lundmark, President and CEO	Other FEM members	Pekka Lundmark, President and CEO	Other FEM members
Salaries and fringe benefits	998	3,387	982	3,581
Performance bonuses 1)	187	589	248	925
Share-based incentives 1)	334	1,030	433	886
Pensions (statutory)	231	665	209	683
Pensions (voluntary)	229	712	356	769
Social security expenses	41	257	73	331
Total	2,019	6,640	2,299	7,174

1) Based on estimated amounts.

The annual contribution for the President and CEO Pekka Lundmark,s pension arrangement is 25% of the annual salary. The annual salary consists of base salary and fringe benefits. The President and CEO,s retirement age is 63. In case his assignment is terminated before the retirement age, the President and CEO is entitled to retain the benefits accrued in the arrangement.

For the other members of the FEM the retirement age varies between 60 and 65. According to group policy all new supplementary pension arrangements are defined contribution plans. For the members of the FEM that have defined contribution arrangements, the maximum pension premium percentage can be 25% of the annual salary. Members, who have joined Fortum prior 1 January 2009, are participating in defined benefit pension arrangements, where the benefit is 60–66% of the final pensionable salary with the pension provided by an insurance company or Fortum,s Pension Fund.

A pension liability of EUR 693 thousand (2016: 2,070) related to the defined benefit plans for FEM members has been recognised in the balance sheet. The additional pension arrangement for the President and CEO is a defined contribution pension plan and thus no liability has been recognised in the balance sheet.

In the event that Fortum decides to give notice of termination to the President and CEO, he is entitled to the salary for the notice period (6 months) and a severance pay equal to 12 months' salary. Other FEM members' termination compensation is equal to 6 to 12 months' salary.

Number of shares delivered to the management

The table below shows the number of shares delivered during 2017 and 2016 to the President and CEO and other FEM members under the LTI arrangements. Shares delivered under the plans are subject to a lock-up period under which they cannot be sold or transferred to a third party.

	2017 3)	2016 4)
FEM members at 31 December 2017
Pekka Lundmark, CEO	4,463	-
Alexander Chuvaev 1)	15,480	27,897
Kari Kautinen	2,274	4,014
Per Langer	2,358	4,677
Risto Penttinen (member of FEM from 1 April 2016) 2)	1,793	-
Markus Rauramo	4,185	7,383
Arto Räty (member of FEM from 1 April 2016)	-	-
Mikael Rönnblad (member of FEM from 15 May 2017)	-	N/A
Sirpa-Helena Sormunen	1,777	-
Tiina Tuomela	2,563	3,902
Former FEM members
Helena Aatinen (member of FEM until 31 March 2016)	N/A	3,188
Mikael Frisk (member of the FEM until 31 March 2016)	N/A	5,028
Esa Hyvärinen (member of FEM until 31 March 2016)	N/A	3,053
Timo Karttinen (member of FEM until 28 February 2017)	3,626	6,399
Matti Ruotsala (member of FEM until 31 October 2017)	4,176	7,443
Total	42,695	72,984

1) Due to local legislation, share rights will be paid in cash instead of shares after the three-year lock-up period.

2) Shares delivered before the term in the Fortum Executive Management are not disclosed.

3) Share delivery based on share plan 2014–2019.

4) Share delivery based on share plan 2013–2018.

10.5 Board of Directors and management shareholding

On 31 December 2017, the members of the Board of Directors owned a total of 9,200 shares (2016: 208,940), which corresponds to 0.00% (2016: 0.02%) of the company's shares and voting rights.

Number of shares held by members of the Board of Directors

	2017	2016
Board members at 31 December 2017
Sari Baldauf, Chairman	2,300	2,300
Matti Lievonen, Deputy Chairman	1,500	N/A
Heinz-Werner Binzel	-	-
Eva Hamilton	-	40
Kim Ignatius	2,400	2,400
Anja McAlister	-	N/A
Veli-Matti Reinikkala	3,000	3,000
Former Board members
Tapio Kuula	N/A	201,200
Total	9,200	208,940

The President and CEO and other members of the FEM owned a total of 200,667 shares (2016: 315,653) which corresponds to approximately 0.02% (2016: 0.04%) of the company,s shares and voting rights.

Operating and financial review	Consolidated	financial statements	Notes	Key figures 2008–2017	Parent company financial statements	Proposal for the use of the profit shown on the balance sheet	Auditor's report	Operational key figures Quarterly financial information	Investor information
Basis of preparation		Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

Number of shares held by members of the Fortum Executive Management Team

	2017	2016
FEM members at 31 December 2017
Pekka Lundmark	60,713	56,250
Alexander Chuvaev	14,713	14,713
Kari Kautinen	30,720	29,246
Per Langer	31,570	29,212
Risto Penttinen	10,588	8,795
Markus Rauramo	32,032	27,847
Arto Räty	-	-
Mikael Rönnblad	-	N/A
Sirpa-Helena Sormunen	4,777	3,000
Tiina Tuomela	15,554	12,991
Former FEM member
Timo Karttinen	N/A	87,090
Matti Ruotsala	N/A	46,509
Total	200,667	315,653

10.6 Board remuneration

The Board of Directors comprises five to eight members who are elected at the Annual General Meeting for a one-year term of office, which expires at the end of the first Annual General Meeting following the election. At the end of 2017 the Board of Directors consists of seven members.

The Annual General meeting confirms the yearly compensation for the Board of Directors. Board members are not offered any long-term incentive benefits or participation in other incentive schemes. There are no pension arrangements for the Board members. Social security costs EUR 14 thousand (2016: 25) have been recorded for the fees in accordance with local legislation in respective countries.

Fees for the Board of Directors

EUR thousand	2017	2016
Chairman	75	75
Deputy Chairman	57	57
Chairman of the Audit and Risk Committee 1)	57	57
Members	40	40

1) If not Chairman or Deputy Chairman simultaneously.

Every member of the Board of Directors receives a fixed yearly fee and additional fees for each meeting attended. A meeting fee of EUR 600 is paid for board and committee meetings. For board members living outside Finland in Europe, the meeting fee is EUR 1,200; for board members living outside Europe, the meeting fee is EUR 1,800. For board and committee meetings held as a telephone conference, the meeting fee is paid as EUR 600 to all members. No fee is paid for decisions made without a separate meeting.

Board members are entitled to travel expense compensation in accordance with the company's travel policy.

Compensation for the Board of Directors

EUR thousand	2017	2016
Board members at 31 December 2017
Sari Baldauf, Chairman	84	87
Matti Lievonen, Deputy Chairman from 4 April 2017	49	N/A
Heinz-Werner Binzel	57	61
Eva Hamilton	54	56
Kim Ignatius, Chairman of the Audit and Risk Committee	67	70
Anja McAlister (member of the board from 4 April 2017)	47	N/A
Veli-Matti Reinikkala (member of the board from 5 April 2016)	58	44
Former Board members
Minoo Akhtarzand (member of the board until 4 April 2017)	16	61
Tapio Kuula (member of the board until 7 November 2017)	43	52
Petteri Taalas (member of board until 5 April 2016)	N/A	17
Jyrki Talvitie (member of the board until 4 April 2017)	17	70
Total	492	518

11 Finance costs - net

EUR million	Note	2017	2016
Interest expense
Borrowings		-170	-181
Other interest expense		-10	-4
Capitalised borrowing costs	17	16	16
Total		-164	-169

Interest income
Loan receivables and deposits		28	29
Other interest income		3	1
Total		32	30

Fair value gains and losses on financial instruments	7
Fair value change of interest rate derivatives not getting hedge
accounting status		-7	-9
Fair value change of hedging derivatives in fair value hedge
relationship		-31	11
Fair value change of hedged items in fair value hedge relationship		31	-11
Rate difference on forward contracts		-4	7
Total		-12	-2

Exchange gains and losses
Loans and receivables	7	-51	143
Cross currency interest rate derivatives	7	6	12
Foreign currency derivatives	7	47	-156
Interest income on share of State Nuclear Waste Management Fund	28	6	8
Unwinding of discount on nuclear provisions	28	-45	-40
Unwinding of discount on other provisions	29, 30	-3	-2
Other financial income		14	12
Other financial expenses		-25	-6
Total		-50	-29
IS Finance costs - net		-195	-169

Interest expenses include interest expenses on interest-bearing loans, interest on interest rate and currency swaps and forward points on forward foreign exchange contracts hedging loans and receivables. Other interest expenses for 2017 include the interest expense of SEK 69 million (EUR 7 million) relating to the Swedish income tax assessment for 2009–2012. See Note 36 Legal actions and official proceedings.

Interest income includes EUR 12 million (2016: 15) from shareholders, loans in Finnish and Swedish nuclear companies, and EUR 10 million (2016: 12) from deposits and commercial papers.

Fair value gains and losses on financial instruments include change in clean price of interest rate and cross currency swaps not getting hedge accounting and fair value changes of interest rate derivatives in hedge relationship and hedged items. Accrued interest on these derivatives is entered in interest expenses of borrowings. Fair value gains and losses include also rate difference from forward contracts hedging loans and receivables without hedge accounting.

Exchange gains and losses includes exchange rate differences arising from valuation of foreign currency loans and receivables and exchange rate differences from forward foreign exchange contracts and interest rate and currency swaps.

Other financial income includes EUR 14 million from SIBUR receivable (2016:12). Other financial expenses includes EUR 16 million financial cost related to financing commitment for Uniper acquisition.

Fair value changes on interest rate and currency derivatives

EUR million	2017	2016
Interest rate and cross currency swaps
Interest expenses on borrowings	21	16
Exchange rate difference from derivatives	6	12
Rate difference in fair value gains and losses on financial instruments 1)	-38	2
Total fair value change of interest rate derivatives in finance costs - net	-11	30

Forward foreign exchange contracts
Interest expenses on borrowings	-68	-62
Exchange rate difference from derivatives	47	-156
Rate difference in fair value gains and losses on financial instruments	-4	7
Total fair value change of currency derivatives in finance costs - net	-25	-211
Total fair value change of interest and currency derivatives in finance costs - net	-36	-181

1) Fair value gains and losses on financial instruments include fair value changes from interest rate swaps not getting hedge accounting amounting to EUR -7 million (2016: -9) and fair value change of hedging derivatives in fair value hedge relationship EUR -31 million (2016: 11), totalling EUR -38 million (2016: 2).

12 Income tax expense

12.1 Profit before tax

EUR million	2017	2016
Finnish companies	76	59
Swedish companies	240	46
Russian companies	269	202
Other companies	526	289
IS Total	1,111	595

Profit before tax split by country represents the respective countries' part of the profit before tax for Fortum Group according to International Financial Reporting Standards (IFRS), i.e. based on the same accounting principles as for the Consolidated Financial Statements. This means that the respective country profits include such items as for example share of profits from associates and effects of accounting for nuclear provisions, which are not included in taxable profits in the local subsidiaries.

12.2 Major components of income tax expense by major countries

EUR million	2017	2016
Current taxes
Finnish companies	-15	-14
Swedish companies	2	-1
Russian companies	-11	-2
Other companies	-34	-24
Total	-58	-42
Deferred taxes
Finnish companies	11	0
Swedish companies	-34	10
Russian companies	-43	-36
Other companies	24	-17
Total	-42	-42
Adjustments recognised for current tax of prior periods
Finnish companies	-13	-6
Swedish companies 1)	-115	0
Russian companies	0	0
Other companies	-1	0
Total	-129	-6
IS Income tax expense	-229	-90

1) Income tax expense 2017 from the unfavourable decisions in the Administrative

Court of Appeal in Sweden relating to the income tax assessments for 2009–2012.

12.3 Income tax rate

The table below explains the difference between the theoretical enacted tax rate in Finland compared to the tax rate in the consolidated income statement.

EUR million	2017	%	2016	%
Profit before tax	1,111		595
Tax calculated at nominal Finnish tax rate	-222	20.0	-119	20.0
Tax rate changes	6	-0.6	0	0.0
Differences in tax rates and regulations	5	-0.4	16	-2.7
Income not subject to tax	0	0.0	0	0.0
Tax exempt capital gains	77	-6.9	4	-0.7
Expenses not deductible for tax purposes	-3	0.3	-5	0.8
Share of profit of associated companies and joint ventures	33	-2.9	30	-5.0
Taxes related to dividend distributions	-10	0.9	-8	1.4
Changes in tax valuation allowance related to not
recognised tax losses	-2	0.2	-6	1.0
Other items	3	-0.3	0	0.0
Adjustments recognised for taxes of prior periods	-117	10.5	-2	0.3
IS Income tax expense	-229	20.6	-90	15.2

Key tax indicators:

The weighted average applicable income tax rate for 2017 is 21.7% (2016: 20.2%)
The effective income tax rate in the income statement for 2017 is 20.6% (2016: 15.2%)
The comparable effective income tax rate (excluding the share of profits from associates, joint ventures as well as tax exempt capital gains, tax rate changes and other major one-time income tax effects) for 2017 is 18.8% (2016: 20.0%).

See Definitions of key figures.

The major items affecting the effective income tax rate are as follows:

The one-time tax-free capital gain (EUR 324 million) in Norway 2017 from the restructuring of the ownership in Hafslund reduced the effective income tax rate with 6.9%. Share of profit of associated companies and joint ventures during 2017 reduced the effective income tax rate with 2.9%. Fortum has booked a tax cost of EUR 115 million because of the unfavourable decisions from the Administrative Court of Appeal in Sweden relating to the income tax assessments for 2009–2012. This increased the effective income tax rate with 10.4%.

Effective income tax rate and total tax rate are impacted by gains or losses on sale of shares. In many countries like in Finland, Sweden, Netherlands and Norway income on capital gains and losses is treated as tax exempt. The purpose of this is to tax the operative income of the company and avoid taxing the

same income twice in case of the sale of the shares. Taxation of capital gains or losses is in line with the taxation of dividend income.

Fortum has had several tax audits ongoing during 2017. Based on these and earlier audits Fortum has received income tax assessments in Sweden for the years 2013–2015 and Belgium for the years 2008–2012. Fortum has appealed all assessments received. Based on legal analysis, no provision has been accounted for in the financial statements related to Sweden 2013–2015 and Belgium 2008–2012 tax audits.

For further information regarding the ongoing tax appeals see Note 36 Legal actions and official proceedings.

During 2017 entities primarily in Russia and Sweden used a portion of the deferred tax asset relating to tax loss carry forwards.

Fortum has a material deferred tax liability owing to its investments in non-current assets. These assets are depreciated more rapidly for tax than for accounting purposes resulting in lower current tax payments at the start of an asset,s lifetime and higher tax payments at the end of its lifetime. This difference results in a deferred tax liability.

12.4 Total taxes

Taxes borne indicate different taxes that Fortum pays for the period. In 2017 Fortum's taxes borne were EUR 445 million (2016: 365). Taxes borne include corporate income taxes (excluding deferred taxes), production taxes, employment taxes, taxes on property and cost of indirect taxes. Production taxes include also taxes, on production and on property, paid through purchased electricity from associated companies.

The total tax rate indicates the burden on taxes borne by Fortum from its profit before these taxes. The total tax rate and total comparable tax rate (excluding the share of profits from associates and joint ventures and tax exempt capital gains) for 2017 is 32.5% and 48.1% (2016: 40.0% and 47.5%). In addition, Fortum administers and collects different taxes on behalf of governments and authorities. Such taxes include VAT, and excise taxes on power consumed by customers, payroll taxes and withholding taxes. The amount of taxes collected by Fortum was EUR 521 million (2016: 376).

See also Note 27 Income taxes in the balance sheet and Note 9 Materials and services.

13 Earnings and dividend per share

ACCOUNTING POLICIES

EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net profit attributable to the owners of the parent company by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Group and held as treasury shares.

Diluted earnings per share is calculated adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. For the warrants and stock options a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Fortum share) based on the monetary value of the subscription rights attached to outstanding stock options.

The number of shares calculated as above is deducted from the number of shares that would have been issued assuming the exercise of the stock options. The incremental shares obtained through the assumed exercise of the options and warrants are added to the weighted average number of shares outstanding.

Options and warrants have a dilutive effect only when the average market price of ordinary shares during the period exceeds the exercise price of the options or warrants. Previously reported earnings per share are not retroactively adjusted to reflect changes in price of ordinary shares.

DIVIDENDS

Dividends proposed by the Board of Directors are not recognised in the financial statements until they have been approved by the Company's shareholders at the Annual General Meeting.

13.1 Earnings per share

Earnings per share, basic

	2017	2016
IS Profit attributable to owners of the parent (EUR million)	866	496
Weighted average number of shares (thousand)	888,367	888,367

Basic earnings per share (EUR)	0.98	0.56

As Fortum currently has no dilutive instruments outstanding, diluted earnings per share is the same as basic earnings per share.

Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

13.2 Dividend per share

Dividends proposed by the Board of Directors are not recognised in the financial statements until they have been approved by the Company's shareholders at the Annual General Meeting.

A dividend in respect of 2017 of EUR 1.10 per share, amounting to a total dividend of EUR 977 million based on the amount of shares registered as at 1 February 2018, is to be proposed at the Annual General Meeting on 28 March 2018. These Financial statements do not reflect this dividend.

A dividend for 2016 of EUR 1.10 per share, amounting to a total of EUR 977 million, was decided in the Annual General Meeting on 4 April 2017. The dividend was paid on 13 April 2017.

A dividend for 2015 of EUR 1.10 per share, amounting to a total of EUR 977 million, was decided in the Annual General Meeting on 5 April 2016. The dividend was paid on 14 April 2016.

14 Financial assets and liabilities by categories

ACCOUNTING POLICIES

FINANCIAL ASSETS

The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date.

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the closing date.

LOANS AND RECEIVABLES

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor. They are included in non-current assets, except for maturities under 12 months after the closing date. These are classified as current assets.

AVAILABLE-FOR-SALE FINANCIAL ASSETS

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless there is an intention to dispose of the investment within 12 months of the closing date.

Purchases and sales of investments are recognised on the trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans are carried at amortised cost using the effective interest method. Gains and losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are included in the income statement in the period in which they arise. Gains and

Proposal for the use of the profit shown on the balance sheet

Auditor's report

Operational key figures Quarterly financial information Investor information

Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

losses arising from changes in the fair value of securities classified as available-for-sale are recognised in equity. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the income statement.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer's specific circumstances.

The Group assesses at each closing date whether there is objective evidence that a financial asset or a group of financial assets is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the income statement.

ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Within the ordinary course of business the Group routinely enters into sale and purchase transactions for commodities. The majority of these transactions take the form of contracts that were entered into and continue to be held for the purpose of receipt or delivery of the commodity in accordance with the Group's expected sale, purchase or usage requirements. Such contracts are not within the scope of IAS 39. All other net-settled commodity contracts are measured at fair value with gains and losses taken to the income statement.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either: 1) hedges of highly probable forecast transactions (cash flow hedges); 2) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or 3) hedges of net investments in foreign operations. The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. Derivatives are divided into non-current and current based on maturity. Only for those electricity derivatives, which have cash flows in different years, the fair values are split between non-current and current assets or liabilities.

CASH FLOW HEDGE

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss (for instance when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory) or a liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. When a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity is recognised in the income statement when the forecast transaction is ultimately also recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately recognised in the income statement.

FAIR VALUE HEDGE

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to profit or loss for the period to maturity.

NET INVESTMENT HEDGING IN FOREIGN OPERATIONS

Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in equity; the gain or loss relating to the ineffective portion is recognised immediately in the income statement. Gains and losses accumulated in equity are included in the income statement when the foreign operation is disposed of.

DERIVATIVES THAT DO NOT QUALIFY FOR HEDGE ACCOUNTING

Certain derivative instruments hedging future cash flows do not qualify for hedge accounting. Fair value changes of these financial derivative instruments are recognised in items affecting comparability in the income statement.

Financial assets and liabilities in the tables below are split into categories in accordance with IAS 39. The categories are further split into classes which are the basis for valuing a respective asset or liability. Further information can be found in the Notes mentioned in the table.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
	Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

Financial assets by categories 2017

			Loans and receivables Financial assets at fair value through profit and loss
EUR million	Note	Amortised cost	Hedge accounting, fair value hedges	Non-hedge accounting	Fair value recognised in equity, cash flow hedges	Available-for-sale financial assets	Finance lease	Total financial assets
Financial instruments in non-current assets
Other non-current assets	19	74				65		140
Derivative financial instruments	3
Electricity derivatives				35	0			35
Interest rate and currency derivatives			140	85	13			238
Other commodity future and forward contracts				7				7
Long-term interest-bearing receivables	20	969					41	1,010
Financial instruments in current assets
Derivative financial instruments	3
Electricity derivatives				69	21			90
Interest rate and currency derivatives				29	85			114
Other commodity future and forward				36	0			36
contracts
Trade receivables	22	638						638
Other short-term interest-bearing receivables	20	395						395
Liquid funds	23	1,928				1,968		3,897
Total		4,004	140	261	119	2,033	41	6,600

Financial assets by categories 2016

			Loans and receivables Financial assets at fair value through profit and loss
			Hedge accounting, fair		Fair value recognised in	Available-for-sale		Total financial
EUR million	Note	Amortised cost	value hedges	Non-hedge accounting	equity, cash flow hedges	financial assets	Finance lease	assets
Financial instruments in non-current assets
Other non-current assets	19	55				58		113
Derivative financial instruments	3
Electricity derivatives				67	1			68
Interest rate and currency derivatives			179	103	61			343
Other commodity future and forward				5				5
contracts
Long-term interest-bearing receivables	20	985						985
Financial instruments in current assets
Derivative financial instruments	3
Electricity derivatives				88	0			88
Interest rate and currency derivatives				7	16			23
Other commodity future and forward				18	0			18
contracts
Trade receivables	22	562						562
Other short-term interest-bearing receivables	20	395						395
Liquid funds	23	1,444				3,711		5,155
Total		3,441	179	288	78	3,769	0	7,755

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
	Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

Financial liabilities by categories 2017

		Financial liabilities at fair value through profit and loss			Other financial liabilities
EUR million	Note	Hedge accounting, fair value hedges	Non-hedge accounting	Fair value recognised in equity, cash flow hedges	Amortised costs	Fair value	Total financial liabilities
Financial instruments in non-current liabilities
Interest-bearing liabilities	26				3,082	1,037 1)	4,119
Derivative financial instruments	3
Electricity derivatives			100	23			123
Interest rate and currency derivatives		26	43	19			88
Other commodity future and forward contracts			3				3

Financial instruments in current liabilities
Interest-bearing liabilities	26				766		766
Derivative financial instruments	3
Electricity derivatives			131	31			162
Interest rate and currency derivatives			12	12			24
Other commodity future and forward contracts			13	0			13
Trade payables	32				318		318
Other liabilities	32				208		208
Total		26	302	85	4,374	1,037	5,824

Financial liabilities by categories 2016

		Financial liabilities at fair value through profit and loss			Other financial liabilities
EUR million	Note	Hedge accounting, fair value hedges	Non-hedge accounting	Fair value recognised in equity, cash flow hedges	Amortised costs	Fair value	Total financial liabilities
Financial instruments in non-current liabilities
Interest-bearing liabilities	26				3,188	1,280 1)	4,468
Derivative financial instruments	3
Electricity derivatives			90	48			138
Interest rate and currency derivatives		32	51	38			121
Other commodity future and forward contracts			3				3
Financial instruments in current liabilities
Interest-bearing liabilities	26				639		639
Derivative financial instruments	3
Electricity derivatives			155	83			238
Interest rate and currency derivatives			130	10			140
Other commodity future and forward contracts			18	0			18
Trade payables	32				323		323
Other liabilities	32				86		86
Total		32	447	179	4,236	1,280	6,174

1) Fair valued part of bond in fair value hedge relationship.

Key figures 2008–2017 Notes

Parent company financial statements Proposal for the use of the profit shown on the balance sheet

Auditor's report

Operational key figures Quarterly financial information Investor information

Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

15 Financial assets and liabilities by fair value hierarchy

ACCOUNTING POLICIES

Fair value measurements are classified using a fair value hierarchy i.e. Level 1, Level 2 and Level 3 that reflects the significance of the inputs used in making the measurements.

FAIR VALUES UNDER LEVEL 1 MEASUREMENT HIERARCHY

The fair value of some commodity derivatives traded in active markets (such as publicly traded electricity options, coal, gas and oil futures) are market quotes at the closing date.

FAIR VALUES UNDER LEVEL 2 MEASUREMENT HIERARCHY

The fair value of financial instruments including electricity derivatives traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the closing date. Known calculation techniques, such as estimated discounted cash flows, are used to determine fair value of interest rate and currency financial instruments. The fair value of interestrate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the closing date. Fair values of options are determined by using option valuation models. The fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. In fair valuation, credit spread has not been adjusted, as quoted market prices of the instruments used are believed to be consistent with the objective of a fair value measurement.

The Group bases the calculation on existing market conditions at each closing date. Financial instruments used in Fortum are standardised products that are either cleared via exchanges or widely traded in the market. Commodity derivatives are generally cleared through exchanges such as for example Nasdaq Commodities Europe and financial derivatives done with creditworthy financial institutions with investment grade ratings.

FAIR VALUES UNDER LEVEL 3 MEASUREMENT HIERARCHY

Investments in unlisted shares classified as Available-for-sale financial assets, for which the fair value cannot be reliably determined. These assets are measured at cost less any impairments.

OTHER MEASUREMENTS

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

Financial assets

		Level 1		Level 2			Level 3	Netting 2)		Total
EUR million	Note	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016
In non-current assets
Available-for-sale financial assets 1)	19	0	0			65	58			65	58
Derivative financial instruments	3
Electricity derivatives
Hedge accounting				5	4			-5	-3	0	1
Non-hedge accounting		0	0	66	98			-30	-31	35	67
Interest rate and currency derivatives
Hedge accounting				153	240					153	240
Non-hedge accounting				85	103					85	103
Other commodity future and forward contracts
Non-hedge accounting		8	7					-1	-2	7	5
In current assets
Derivative financial instruments	3
Electricity derivatives
Hedge accounting				28	9			-7	-9	21	0
Non-hedge accounting		8	0	253	381			-192	-293	69	88
Interest rate and currency derivatives
Hedge accounting				85	16					85	16
Non-hedge accounting				29	7					29	7
Other commodity future and forward contracts
Non-hedge accounting		186	106	1	2			-151	-90	36	18
Total		202	113	705	860	65	58	-386	-428	586	603

1) Available-for-sale financial assets, i.e. shares which are not classified as associated companies or joint ventures, consists mainly of shares in unlisted companies of EUR 65 million (Dec 31 2016: 58), for which the fair value cannot be reliably determined. This includes EUR 25 million (Dec 31 2016: 18) from Fortum's shareholding in Fennovoima. These assets are measured at cost less any impairments.

Available-for-sale financial assets include listed shares at fair value of EUR 0 million (2016: 0). The cumulative fair value change booked in Fortum's equity was EUR -3 million (2016: -3).

2) Receivables and liabilities against electricity and other commodity exchanges arising from standard derivative contracts with same delivery period are netted.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

Financial liabilities

			Level 1	Level 2			Level 3		Netting 2)	Total
EUR million	Note	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016
In non-current liabilities
Interest-bearing liabilities	26			1,037 1)	1,280 1)					1,037	1,280
Derivative financial instruments	3
Electricity derivatives
Hedge accounting				28	51			-5	-3	23	48
Non-hedge accounting				131	121			-30	-31	100	90
Interest rate and currency derivatives
Hedge accounting				45	70					45	70
Non-hedge accounting				43	51					43	51
Other commodity future and forward contracts
Non-hedge accounting		3	5	1				-1	-2	3	3
In current liabilities
Derivative financial instruments	3
Electricity derivatives
Hedge accounting				39	92			-7	-9	31	83
Non-hedge accounting		7	0	315	448			-192	-293	131	155
Interest rate and currency derivatives
Hedge accounting				12	10					12	10
Non-hedge accounting				12	130					12	130
Other commodity future and forward contracts
Non-hedge accounting		160	106	4	2			-151	-90	13	18
Total		170	111	1,667	2,255	0	0	-386	-428	1,451	1,938

1) Fair valued part of bonds in fair value hedge relationship.

2) Receivables and liabilities against electricity and other commodity exchanges arising from standard derivative contracts with same delivery period are netted.

Net fair value amount of interest rate and currency derivatives is EUR 241 million, including assets EUR 353 million and liabilities EUR 112 million. Fortum has cash collaterals based on Credit Support Annex agreements with some counterparties. At the end of December 2017 Fortum had received EUR 113 million from Credit Support Annex agreements. The received cash has been booked as short-term liability.

Key figures 2008–2017 Notes

Parent company financial statements Proposal for the use of the profit shown on the balance sheet

Auditor's report

Operational key figures Quarterly financial information

Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

16 Intangible assets

ACCOUNTING POLICIES

Intangible assets, except goodwill, are stated at the historical cost less accumulated amortisation and impairment losses. They are amortised on a straight-line method over their expected useful lives.

COMPUTER SOFTWARE

Acquired computer software licences are capitalised on the basis of the costs incurred when bringing the software into use. Costs associated with developing or maintaining computer software are recognised as an expense as incurred. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include the software development employee costs and an appropriate portion of relevant overheads. Computer software costs recognised as assets are amortised over their estimated useful lives (three to five years).

TRADEMARKS AND LICENSES

Trademarks and licences are shown at historical cost less accumulated amortisation and impairment losses, as applicable. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licences over their estimated useful lives (15–20 years).

CONTRACTUAL CUSTOMER RELATIONSHIPS

Contractual customer relationships acquired in a business combination are recognised at fair value on acquisition date. The contractual customer relations have a finite useful life and are carried at costs less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected duration of the customer relationship.

GOODWILL

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of net identifiable assets of the acquired subsidiary, associate or joint venture at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets and tested yearly for impairment. Goodwill on acquisition of associates and joint ventures is included in investments in associates and joint ventures and is tested for impairment as part of the overall balance. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity sold.

EMISSION ALLOWANCES

The Group accounts for emission allowances based on currently valid IFRS standards where purchased emission allowances are accounted for as intangible assets at cost, whereas emission allowances received free of charge are accounted for at nominal value. For CO2 emissions from power and heat production, a provision is recognized. CO2 emission costs is settled by returning emission allowances. To the extent that the Group already holds allowances to cover emission costs, the provision is measured at the carrying amount of those allowances. Any shortfall of allowances held over the obligation is valued at the current market value of allowances. The emission cost is recognised in the income statement within materials and services. The sales gains and losses of emission allowances not used for covering the obligation from CO2 emissions, are reported in other income.

IMPAIRMENT TESTING OF NON-FINANCIAL ASSETS

The individual assets' carrying values are reviewed continuously to determine whether there is any indication of impairment. An asset's carrying amount is written down immediately to its recoverable amount if it is greater than the estimated recoverable amount.

In addition, impairment needs are assessed and documented once a year in connection with the long-term forecasting process. Indications for impairment are analysed separately by each division as they are different for each business and include risks such as changes in electricity and fuel prices, regulatory/political changes relating to energy taxes and price regulations etc. Impairment testing needs to be performed if any of the impairment indications exists. Assets that have an indefinite useful life and goodwill, are not subject to amortisation and are tested annually for impairment.

Value in use is determined by discounting the future cash flows expected to be derived from an asset. If it's not possible to estimate the cash flows generated by an individual asset, the impairment testing is performed on a cash-generating unit level. Fortum defines the cash-generating unit as the smallest business area where the tested assets generate cash flows that are independent of the cash flows generated by other assets in other business areas. Goodwill is allocated to the cash-generating unit or lowest level of groups of cash-generating units that benefit from the synergies of the acquired goodwill. Cash flow projections are based on the most recent long-term forecast that has been approved by management and the Board of Directors. Cash flows arising from future investments such as new plants are excluded unless projects have been started. The cash outflow needed to complete the started projects is included.

Non-financial assets other than goodwill that suffered an impairment charge are reviewed for possible reversal of the impairment at each reporting date.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS:

ASSIGNED VALUES AND USEFUL LIVES IN ACQUISITIONS

In an acquisition acquired intangible and tangible assets are fair valued and their remaining useful lives are determined. Management believes that the assigned values and useful lives, as well as the underlying assumptions, are reasonable. Different assumptions and assigned lives could have a significant impact on the reported amounts.

ASSUMPTIONS RELATED TO IMPAIRMENT TESTING

The Group has significant carrying values in property, plant and equipment, intangible assets and participations in associated companies and joint ventures which are tested for impairment according to the accounting policy described in the notes. The recoverable amounts of cash-generating units have been determined based on value in use calculations. These calculations are based on estimated future cash flows from most recent approved long-term forecast. Preparation of these estimates requires management to make assumptions relating to future expectations. Assumptions vary depending on the business the tested assets are in. For power and heat generation business the main assumptions relate to the estimated future operating cash flows and the discount rates that are used in calculating the present value.

Estimates are also made in an acquisition when determining the fair values and remaining useful lives of acquired intangible and tangible assets.

	Goodwill			Other intangible assets	Total
EUR million	2017	2016	2017	2016	2017	2016
Cost 1 January	353	152	386	332	739	485
Translation differences and other adjustments	-27	39	-20	-1	-47	37
Acquisition of subsidiary companies	286	163	381	59	667	221
Capital expenditure	0	0	18	3	18	3
Disposals	0	0	-14	-11	-14	-11
Sale of subsidiary companies	0	0	-2	0	-2	0
Reclassifications	0	0	15	4	15	4
Cost 31 December	613	353	764	386	1,377	739

Accumulated depreciation 1 January	0	0	273	262	273	262
Translation differences and other adjustments	0	0	-6	-2	-6	-2
Acquisition of subsidiary companies	0	0	30	5	30	5
Disposals	0	0	-14	-11	-14	-11
Sale of subsidiary companies	0	0	-1	0	-1	0
Reclassifications	0	0	2	0	2	0
Depreciation for the period	0	0	30	19	30	19
Accumulated depreciation 31 December	0	0	313	273	313	273
BS Carrying amount 31 December	613	353	451	113	1,064	467

Total goodwill in the balance sheet as of 31 December 2017 amounted to EUR 613 million (2016: 353).

Goodwill arising from acquisitions of Hafslund Markets Group and Fortum Oslo Varme Group increase the amount of goodwill by EUR 285 million. The acquisitions enable scale benefits and combination of competences that support Fortum's strategic growth and cash flow ambitions in the Nordic retail electricity and district heating markets and will also enhance the development of new and greener technologies and services. Hafslund Markets is integrated in Consumer Solutions segment and Fortum Oslo Varme in City Solutions segment. The purchase price allocation is still preliminary and also the allocation of goodwill to separate cash generating units is still on-going.

During 2017 Fortum finalised the purchase price allocation for the Waste Solutions Oy Group (formerly Ekokem Corporation) acquired in 2016. The acquisition supports Fortum's vision and strategy of creating solutions for sustainable cities in the whole City Solutions division and as a result, the goodwill from this acquisition is allocated to the City Solutions segment level.

See more information on the acquisitions in Note 38 Acquisitions and disposals.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation	Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

Group of cash-generating units	Goodwill EUR million
Consumer Solutions	228
City Solutions	208
Russia	177
Total carrying amount 31 December 2017	613

The main items in other intangible assets are customer contracts, costs for software products and software licenses, bought emission rights and emission rights received free of charge, which are recognised to the lower of fair value and historical cost.

16.1 Impairment testing

The impairment testing of the allocated goodwill in 2017 is described below.

Key assumptions used in impairment testing are presented below as well as the basis for determining the value of each assumption. Assumptions are based on internal and external data that are consistent with observable market information, when applicable. The assumptions are determined by management as part of the long-term forecasting process for the Fortum Group.

Key assumptions	Basis for determining the value for key assumptions
Power market development, recycling and waste solutions market development	Historical analysis and prospective forecasting
Regulation framework	Current market setup and prospective forecasting (e.g. CSA mechanism in Russia)
Utilisation of power plants and treatment facilities	Past experience, technical assessment and forecasted market development
Forecasted maintenance investments	Past experience, technical assessment and planned maintenance work
Discount rate	Mostly market based information

The cash flows used in determining the value in use for each cash generating unit are based on the most recent long-term forecasts and are determined in local currency. The period covered by cash flows is related to the useful lives of the assets being reviewed for impairment. The growth rate used to extrapolate the cash flow projections until the end of assets, useful lives is in line with the assumed inflation. In Russia the generation capacity built after 2007 under the Russian Government,s Capacity Supply Agreements receives guaranteed capacity payments for a period of 10 years.

The discount rate takes into account the risk profile of the country in which the cash flows are generated. There have not been any major changes in the discount rate components or in the methods used to determine them. The long-term pre-tax discount rate used were: City Solutions 7.4%, Consumer Solutions 7.7% and Russia 11.1%.

The net operating assets of the CGUs and group of CGUs with allocated goodwill are tested yearly for possible impairment. The tested net operating assets include both the goodwill and fair value adjustments arising from the acquisitions. As of 31 December 2017, the recoverable values were greater than their carrying values and therefore no impairments were booked.

The Group has considered the sensitivity of key assumptions as part of the impairment testing. When doing this any consequential effect of the change on the other variables has also been considered. The calculations are most sensitive to changes in estimated future EBITDA levels and changes in discount rate.

Management estimates that a reasonably possible change in the discount rate used or in future earnings would not cause the carrying amount to exceed its recoverable amount in any of the tested units.

Based on the sensitivity analysis done, if the estimated future EBITDA were 10% lower than management,s estimates or pre-tax discount rate applied was 10% higher than the one used, the Group would not need to recognise impairment losses for tested items.

Parent company financial statements Proposal for the use of the profit shown on the balance sheet

Auditor's report

Operational key figures Quarterly financial information Investor information

Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

17 Property, plant and equipment

ACCOUNTING POLICIES

Property, plant and equipment comprise mainly power and heat producing buildings and machinery buildings, waterfall rights, district heating network and buildings and machinery as well as landfill sites and treatment areas used in waste treatment operations. Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses as applicable in the consolidated balance sheet. Historical cost includes expenditure that is directly attributable to the acquisition of an item and capitalized borrowing costs. Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Acquired assets on the acquisition of a new subsidiary are stated at their fair values at the date of acquisition.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance expenses are charged to the income statement during the financial period in which they are incurred.

Additionally the cost of an item of property, plant and equipment includes the estimated cost of its dismantlement, removal or restoration.

See Note 29 Other provisions for information about asset retirement obligations and Note 28, Nuclear related assets and liabilities, for information about provisions for decommissioning nuclear power plants.

Land, water areas and waterfall rights are not depreciated since they have indefinite useful lives. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

Hydro power plant buildings, structures and machinery	40–50 years
Thermal power plant buildings, structures and machinery	25 years
Nuclear power plant buildings, structures and machinery	25 years
CHP power plant buildings, structures and machinery	15–25 years
Substation buildings, structures and machinery	30–40 years
Solar and Wind power plant structures and machinery	25 years
District heating network	30–40 years
Other buildings and structures	20–40 years
Other tangible assets	20–40 years
Other machinery and equipment	3–20 years
Other non-current investments	5–10 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each closing date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. See further information on the impairment testing in Note 16.

GOVERNMENT GRANTS

Grants from the government are recognised at their fair value when there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to the purchase of property, plant and equipment are deducted from the acquisition cost of the asset and are recognised as income by reducing the depreciation charge of the asset they relate to.

BORROWING COSTS

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

JOINT OPERATIONS

Fortum owns, through its subsidiary Fortum Power and Heat Oy, the coal condensing power plant Meri-Pori in Finland. Teollisuuden Voima Oyj (TVO) has the contractual right to participate in the plant with 45.45%. The capacity and production is divided between Fortum and TVO. Each owner can decide when and how much capacity to use for production. Both Fortum and TVO purchase fuel and emission rights independently. Since Fortum and TVO are sharing control of the power plant, Meri-Pori is accounted for as a joint operation. Fortum is accounting for its part of the investment, i.e. 54.55%. Fortum is also entitled to part of the electricity TVO produces in Meri-Pori through its shareholding of 26.58% of TVO C-series shares.

For further information regarding Fortum's shareholding in TVO, see Note 18 Participations in associated companies and joint ventures.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation	Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

			Buildings, plants Land and waterfall rights and structures		Machinery and equipment			Other tangible assets		Advances paid and construction in progress	Total
EUR million	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016
Cost 1 January	2,765	2,859	3,621	3,146	7,147	5,614	135	136	824	755	14,492	12,510
Translation differences and other adjustments	-89	-104	-154	146	-237	325	-2	-2	-18	66	-500	430
Acquisition of subsidiary companies	15	3	161	211	900	954	0	0	32	9	1,109	1,178
Capital expenditure	2	1	15	38	139	24	0	0	516	526	672	588
Nuclear asset retirement cost	0	0	0	0	-6	-6	0	0	0	0	-6	-6
Disposals	-1	-1	-21	-17	-40	-41	-1	0	1	-4	-62	-63
Sale of subsidiary companies	0	0	-49	-46	-14	-92	0	0	-2	-2	-65	-140
Reclassifications	3	7	232	142	445	371	31	1	-726	-525	-15	-4
Cost 31 December	2,694	2,765	3,805	3,621	8,335	7,147	163	135	627	824	15,623	14,492
Accumulated depreciation 1 January	0	0	1,550	1,367	2,898	2,319	114	113	0	0	4,562	3,799
Translation differences and other adjustments	0	0	-38	21	-72	62	-2	-2	0	0	-112	82
Acquisition of subsidiary companies	0	0	52	97	244	333	0	0	0	0	297	430
Disposals	0	0	-17	-14	-36	-40	-1	-2	0	0	-54	-56
Sale of subsidiary companies	0	0	-9	-20	-3	-28	0	0	0	0	-12	-48
Depreciation for the period	0	0	112	102	317	246	4	7	1	0	434	355
Reclassifications	0	0	-21	-3	1	5	18	-2	0	0	-2	0
Accumulated depreciation 31 December	0	0	1,629	1,550	3,349	2,898	133	114	1	0	5,113	4,562

BS Carrying amount 31 December	2,694	2,764	2,175	2,071	4,986	4,249	29	21	626	824	10,510	9,930

The increase of property, plant and equipment arises mainly from the acquisition of Fortum Oslo Varme Group in City Solutions segment in August 2017. The increase was offset by the translation differences in SEK and RUB.

See Note 38 Acquisitions and disposals for additional information on the acquisition of Hafslund Markets Group and Fortum Oslo Varme Group.

Property, plant and equipment that are subject to restrictions in the form of real estate mortgages amount to EUR 318 million (2016: 236). See Note 35 Pledged assets and contingent liabilities.

17.1 Capitalised borrowing costs

	Buildings, plants and structures			Machinery and equipment	in progress	Advances paid and construction	Total
EUR million	2017	2016	2017	2016	2017	2016	2017	2016
1 January	55	43	162	132	41	41	258	217
Translation differences and other adjustments	-3	9	-11	28	-1	6	-16	43
Increases / disposals	0	0	10	6	6	10	16	16
Sale of subsidiary companies	0	-1	0	-6	0	0	0	-7
Reclassification	10	5	22	9	-34	-16	-3	-2
Depreciation	-2	-2	-8	-7	0	0	-10	-9
31 December	59	55	175	162	12	41	245	258

Borrowing costs of EUR 16 million were capitalised in 2017 (2016: 16). The interest rate used for capitalisation varied between 2%–12% (2016: 2%–13%).

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation	Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

17.2 Capital expenditure 1)

	Finland		Sweden		Russia		Poland		Norway		Other countries		Total
EUR million	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016
Generation
Hydropower	24	29	62	74									87	103
Nuclear power	84	90											84	90
Fossil-based electricity		1											0	1
Other renewable-based electricity				1									0	1
Other	3	2											3	2
Total Generation	111	122	62	75									174	196
City Solutions
Fossil-based heat	2	7					3	14			0	0	6	21
Fossil-based electricity							0	1			0		0	1
Renewable, of which	23	17	1	2			72	29	13		4	2	112	50
waste	17	9	1	2			72	29	13		3	1	106	42
biofuels	6	8									0	0	7	8
other	0	0											0	0
District heat network	11	9					13	12			8	6	32	27
Other	4	5	10				1	0			3	4	19	9
Total City Solutions	41	38	11	2	0	0	90	56	13	0	15	12	170	109
Consumer Solutions
Other	2		2	0			1	2	2	0			7	3
Total Consumer Solutions	2	0	2	0	0	0	1	2	2	0	0	0	7	3
Russia
Fossil-based electricity					81	168							81	168
Fossil-based heat					18	17							18	17
Renewable-based electricity, wind					53	15							53	15
Total Russia					152	201							152	201
Other
Renewable-based electricity, wind			22	11					24				45	11
Renewable-based electricity, solar											99	43	99	43
Other	25	13	7	3					7	11	3	1	42	29
Total Other	25	13	28	14					31	11	102	44	187	83
Total	179	173	104	91	152	201	92	59	46	11	115	56	690	591
Of which investments in CO2 free production	115	127	84	85	53	15	0	0	24	0	99	43	375	270

1) Includes capital expenditure to both intangible assets and property, plant and equipment.

Fortum classifies investments in four main categories, EUR million

2017

17.2.1 Generation

In Finland, Fortum invested EUR 84 million (2016: 90) into the Loviisa nuclear power plant. Fortum invested additionally EUR 88 million (2016: 103) into hydro production, mainly maintenance, legislation and productivity investments. The biggest of these were Långströmmen dam safety EUR 9 million in Sweden and Imatra dam safety EUR 9 million in Finland. Investments in CO2 free production were EUR 171 million (2016: 193).

17.2.2 City Solutions

Growth investments in City Solutions totalled EUR 107 million (2016: 66) in year 2017. Maintenance, legislation and productivity investments totalled EUR 62 million (2016: 42). This amount consists mainly of investments in district heat networks and plants as well as the maintenance of existing CHP plants and measures defined by legal requirements. The largest investment project in 2017 was the new CHP plant in Zabrze, Poland. Investments in CO2 free production were EUR 7 million (2016: 8).

17.2.3 Consumer solutions

Investments in Consumer solutions totalled EUR 7 million (2016: 3). The amount consists mainly of new product development costs.

17.2.4 Russia

Growth investments in Russia totalled EUR 96 million (2016: 152). The largest growth investments were into the wind power farm in Ulyanovsk and Chelyabinsk GRES 3. Additionally, EUR 56 million (2016: 49) was invested in maintenance, legislation and productivity projects. Investments in CO2 free production were EUR 53 million (2016:15).

17.2.5 Other

Other Division,s investments contain solar investments in India EUR 99 million (2016: 43) and investments in wind power production EUR 45 million (2016:11). Wind investments contain Solberg wind park in Sweden, as well as Anstadblåheia and Sorfjord wind parks in Norway. Other Division invested also in Charge and Drive EUR 13 million (2016: 12), mainly charging poles in Norway. Investments in CO2 free production were EUR 144 million (2016:54).

18 Participations in associated companies and joint ventures

ACCOUNTING POLICIES

The Group's interests in associated companies and jointly controlled entities are accounted for using the equity method of accounting. Assets acquired and liabilities assumed in the investment in associates or joint ventures are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the associate or joint venture acquired, the difference is recognised directly in the income statement.

The Group's share of its associates or joint ventures post-acquisition profits or losses after tax and the expenses related to the adjustments to the fair values of the assets and liabilities assumed are recognised in the income statement. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. The Group's share of post-acquisition adjustments to associates or joint ventures equity that has not been recognised in the associates or joint ventures income statement, is recognised directly in Group's shareholder's equity and against the carrying amount of the investment.

When the Group's share of losses in an associate or a joint venture equals or exceeds its interest in the associate or joint venture, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture.

Unrealised gains on transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group's interest in the associate or joint venture. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates or joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.

If more recent information is not available, the share of the profit of certain associated or joint venture companies is included in the consolidated accounts based on the latest available information.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Management is required to make significant judgements when assessing the nature of Fortum's interest in its investees and when considering the classification of Fortum's joint arrangements. In the classification, emphasis has been put on decision-making, legal structure and financing of the arrangements.

Management judgement is required when testing the carrying amounts for participations in associated companies and joint ventures for impairment. See Note 16 Property, plant and equipment for more information.

18.1 Principal associated companies and joint ventures

	OKG AB	Forsmarks Kraftgrupp AB	Kemijoki Oy	TGC-1	TVO	Fortum Värme
				Holding		Holding
	Power	Power	Power	in energy	Power	in power
Nature of the	production	production	production	company	production	and heat
relationship	company	company	company	(listed)	company	company
	Associated	Associated	Associated	Associated	Joint venture	Joint venture
Classification	company	company	company	company
Segment	Generation	Generation	Generation	Russia		Generation City Solutions
Domicile	Sweden	Sweden	Finland	Russia	Finland	Sweden

Ownership interest, % 1)	46	26	59	29	26	50
Votes, %	46	26	28	29	26	50

1) Kemijoki and TVO have different series of shares. The ownership interest varies due to the changes in equity assigned to the different share series. The ownership interests for 2016 for Kemijoki Oy and TVO were 60% and 26% respectively.

Shareholdings in power production companies

Power plants are often built jointly with other power producers. Under the consortium agreements, each owner is entitled to electricity in proportion to its share of ownership or other agreements and each owner is liable for an equivalent portion of costs. The production companies are not profit making, since the owners purchase electricity at production cost including interest cost and production taxes. The share of profit of these companies is mainly IFRS adjustments (e.g. accounting for nuclear related assets and liabilities) and depreciations on fair value adjustments from historical acquisitions since the companies are not profit making under local accounting principles.

Fortum has material shareholdings in such power production companies (mainly nuclear and hydro) that are consolidated using equity method either as associated companies (OKG AB, Forsmarks Kraftgrupp AB and Kemijoki Oy) or in some cases as joint ventures (Teollisuuden Voima Oyj (TVO)).

In Sweden nuclear production company shareholdings are 45.5% ownership of the shares in OKG AB and 25.5% ownership of the shares in Forsmarks Kraftgrupp AB. Excluding non-controlling interests in the subsidiaries, Fortum's participation in the companies are 43.4% and 22.2% respectively, which reflects the share of electricity produced that Fortum can sell further to the market. The minority part of the electricity purchased is invoiced further to each minority owner according to their respective shareholding and treated as pass-through. OKG AB and Forsmarks Kraftgrupp AB are accounted for as associated companies as Fortum has a representation on the Board of Directors and it participates in policy-making processes of the companies.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation	Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

In Finland Fortum has an ownership in power production company TVO that has three series of shares which entitle the shareholders to electricity produced in the different power plants owned by TVO.

Shares in series A entitle to electricity produced in nuclear power plants Olkiluoto 1 and 2 and Fortum owns 26.6% of these shares. Series B entitles to electricity in the nuclear power plant presently being built, Olkiluoto 3, and Fortum's ownership in this share series is 25%. Series C entitles to electricity produced in TVO's share of the coal condensing power plant Meri-Pori, and Fortum's ownership in this share series is 26.6%. The Meri-Pori power plant is accounted for as a joint operation in Fortum.

See also Associated companies in Note 36 Legal actions and official proceedings and Joint operations in the accounting principles in Note 17 Property, plant and equipment.

The most significant hydro production company shareholding is 63.8% of the hydro shares and 28.27% of the monetary shares in Kemijoki Oy. Each owner of hydro shares is entitled to the hydropower production in proportion to its hydro shareholding. Since Fortum has a representation on the Board of Directors and it participates in the policy-making processes, Kemijoki Oy is accounted for as an associated company.

Other shareholdings accounted for using the equity method

In Sweden Fortum has a 50% ownership in AB Fortum Värme Holding samägt med Stockholms stad (Fortum Värme) that is co-owned with the City of Stockholm through Stockholms Stadshus AB. Fortum Värme produces district heating, district cooling and electricity and supplies heat and cooling to customers in the Stockholm area.

Fortum owns shareholdings in listed companies such as Territorial Generating Company 1 (TGC-1). The shareholding in TGC-1 is accounted for as an associated company as Fortum has representatives in the Board of Directors of the company. The share of profit of TGC-1 is accounted for based on previous quarter information since updated interim information is not normally available.

In August 2017 Fortum sold its 34.1% stake in Hafslund ASA to the City of Oslo in connection with the restructuring of the ownership in Hafslund. Hafslund ASA was accounted for as an associated company and the share of profits is accounted for according to the latest quarter information available.

Summarised financial information of the principal associated companies

Impact of different accounting principles presented in the tables below on the line Fair values on acquisitions and different accounting principles include mainly IFRS adjustments for Nuclear liabilities and assets and capitalised borrowing costs in Swedish associates. Fortum records its share of nuclear related assets and liabilities in its nuclear associated companies according to equity method. The basis for recognition is similar as for Loviisa power plant, see accounting principles in Note 28 Nuclear related assets and liabilities.

2017

EUR million	OKG AB	Forsmarks Kraftgrupp	AB Kemijoki Oy	Hafslund ASA 2)
Balance sheet		31 Dec 2016 31 Dec 2016 31 Dec 2016 30 Jun 2017 30 Sept 2017			TGC-1
Non-current assets	628	2,367	465	2,329	1,938
Current assets	428	466	12	325	312
Non-current liabilities	961	2,599	264	1,091	420
Current liabilities	82	198	144	585	168
Equity	13	36	69	978	1,663
Attributable to NCI	0	0	0	0	123
Attributable to the owners of the parent	13	36	69	978	1,540
Statement of comprehensive income	1 Jan 2016– 31 Dec 2016	1 Jan 2016– 31 Dec 2016	1 Jan 2016– 31 Dec 2016	1 Oct 2016– 30 June 2017	1 Oct 2016– 30 Sept 2017
Revenue	430	756	55	1,240	1,289
Profit or loss from continuing operations	1	0	-10	118	81
Other comprehensive income	0	0	0	-12	1
Total comprehensive income	1	0	-10	105	82
Attributable to NCI	0	0	0	0	-1
Attributable to the owners of the parent	1	0	-10	105	83
Reconciliation to carrying amount in the Fortum group
Group's interest in the equity of the associate at 1 January 2017	6	10	48	349	471
Change in share of profit and from OCI items	0	0	-6	36	32
Dividends received	0	0	0	-23	-5
Divestments	0	0	0	-363	0
Translation differences and other adjustments	0	-1	0	1	-44
Group's interest in the equity of the associate at 31 December 2017	6	9	41	0	454
Fair values on acquisitions and different accounting principles	16	92	157	0	-25
Carrying amount at 31 December 2017	22	101	197	0	429
Market value for listed shares 1)					196

1) The market quotation for the TGC-1 share is affected by the low liquidity of the TGC-1 shares in the Russian stock exchanges. During 2017 trading volumes of TGC-1 shares in relation to the number of shares of the company were approximately 10% (2016: 12%).

2) Divested in August 2017, see also Note 38 Acquisition and disposals.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation	Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

2016

EUR million	OKG AB	Forsmarks Kraftgrupp	AB Kemijoki Oy	Hafslund ASA	TGC-1
Balance sheet				31 Dec 2015 31 Dec 2015 31 Dec 2015 30 Sept 2016 30 Sept 2016
Non-current assets	645	2,361	465	2,442	2,113
Current assets	448	440	9	303	332
Non-current liabilities	611	2,578	306	1,254	382
Current liabilities	469	186	88	468	332
Equity	13	37	80	1,023	1,732
Attributable to NCI	0	0	0	0	134
Attributable to the owners of the parent	13	37	80	1,022	1,598
Statement of comprehensive income	1 Jan 2015– 31 Dec 2015	1 Jan 2015– 31 Dec 2015	1 Jan 2015– 31 Dec 2015	1 Oct 2015– 30 Sept 2016	1 Oct 2015– 30 Sept 2016
Revenue	1,987	695	60	1,393	1,032
Profit or loss from continuing operations	1	1	-3	154	116
Other comprehensive income	0	0	0	13	-2
Total comprehensive income	1	1	-3	167	114
Attributable to NCI	0	0	0	0	-3
Attributable to the owners of the
parent	1	1	-3	167	117
Reconciliation to carrying amount in the Fortum group
Group's interest in the equity of the associate at 1 January 2016	6	10	46	297	347
Change in share of profit and from OCI
items	0	0	-1	56	33
Dividends received	0	0	0	-21	-4
Translation differences and other
adjustments	0	0	3	16	95
Group's interest in the equity of the associate at 31 December 2016	6	10	48	349	471
Fair values on acquisitions and different accounting principles	8	90	158	8	-34
Carrying amount at 31 December 2016	14	100	206	356	436
Market value for listed shares				693	265

Summarised financial information of the principal joint ventures in 2017 and 2016
	2017		2016
EUR million	TVO	Fortum Värme	TVO	Fortum Värme
Balance sheet			30 Sept 2017 31 Dec 2017 30 Sept 2016 31 Dec 2016
Non-current assets	6,900	2,642	7,098	2,692
Current assets	606	266	413	271
of which cash and cash equivalents	192	15	129	13
Non-current liabilities	5,159	1,461	5,280	1,488
of which non-current interest-bearing liabilities	4,186	1,071	4,318	1,105
Current liabilities	673	230	659	298
of which current financial liabilities	484	112	466	164
Equity 1)	1,674	1,216	1,573	1,176
Attributable to NCI	0	0	0	0
Attributable to the shareholders of the company	1,674	1,216	1,573	1,176
Statement of comprehensive income	1 Oct 2016– 30 Sept 2017	1 Jan 2017– 31 Dec 2017	1 Oct 2015– 30 Sept 2016	1 Jan 2016– 31 Dec 2016
Revenue	343	689	322	699
Depreciation and amortisation	-56	-139	-54	-125
Interest income	14	0	17	0
Interest expense	-46	-17	-44	-13
Income tax expense or income	0	-35	0	-33
Profit or loss from continuing operations	-4	125	-23	124
Other comprehensive income	9	-7	-27	4
Total comprehensive income	5	118	-51	128
Attributable to NCI	0	0	0	0
Attributable to the shareholders of the company	5	117	-51	128
Reconciliation to carrying amount in the Fortum group
Group's interest in the equity of the joint venture
at 1 January	279	588	294	567
Change in share of profit and from OCI items	0	59	-14	64
Dividends received	0	-21	0	-21
Translation differences and other adjustments	0	-18	0	-21
Group's interest in the equity of the joint venture at 31 December	280	608	279	588
Fair values on acquisitions and different accounting principles 2)	-11	-75	-6	-81
Carrying amount at 31 December	269	533	274	507

1) The equity of TVO includes subordinated loans of EUR 579 million (2016: 479). Fortum has given part of these loans, pro rata to the ownership.

2) Impact of different accounting principles include mainly IFRS adjustments for Nuclear liabilities and assets and capitalised borrowing costs. Fortum records its share of nuclear related assets and liabilities in its nuclear associated companies according to equity method. The basis for recognition is similar as for Loviisa power plant, see accounting principles in Note 28 Nuclear related assets and liabilities.

Operating and financial review	Consolidated	financial statements	Notes	Key figures 2008–2017	Parent company financial statements	Proposal for the use of the profit shown on the balance sheet	Auditor's report	Operational key figures Quarterly financial information	Investor information
Basis of preparation		Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

18.2 Participations and shares of profits in associated companies and joint ventures

Participations in associated companies and joint ventures in the balance sheet

EUR million	2017	2016
Principal associates	749	1,111
Principal joint ventures	802	781
Other associates	121	42
Other joint ventures	229	178
BS Carrying amount 31 December	1,900	2,112

Changes in participation during the year

	Joint ventures	Associated companies	Joint ventures	Associated companies
EUR million	2017	2017	2016	2016
Historical cost
1 January	636	864	558	800
Translation differences and other adjustments	-8	-30	-8	64
Acquisitions	52	83	17	0
Reclassifications	-81	-1	83	-1
Divestments	0	-236	-14	0
Historical cost 31 December	598	680	636	864

Equity adjustments
1 January	324	289	388	213
Translation differences and other adjustments	-13	-18	-16	41
Share of profits of associates and joint ventures	75	73	69	62
Reclassifications	81	1	-83	1
Divestments	0	-128	-8	0
Dividends received	-29	-29	-28	-26
OCI items associated companies and joint ventures	-5	2	1	-2
Equity adjustments 31 December	432	190	324	289

Carrying amount at 31 December	1,031	870	959	1,153

For information about investments and divestments of shares in associated companies, see Note 38 Acquisitions and disposals.

Share of profit of associates and joint ventures

	2016

	-30
	6
	-3
	51
	38
	62

	66
	-7
	59
	0
12	10
148	131
	2017 8 2 -9 39 32 73 66 -4 63 0

The unrecognized share of losses of associated companies and joint ventures (for the reporting period and cumulatively) is zero.

Share of profits from Teollisuuden Voima Oyj, Forsmarks Kraftgrupp AB and OKG AB includes EUR 13 million (2016: -30) arising from accounting of nuclear related assets and liabilities.

18.3 Transactions and balances

Associated company transactions

EUR million	2017	2016
Sales to associated companies	1	1
Interest on associated company loan receivables	12	14
Purchases from associated companies	319	385

Purchases from joint ventures include mainly purchases of nuclear and hydro power at production cost including interest costs and production taxes.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation	Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

Associated company balances

EUR million	2017	2016
Receivables from associated companies
Long-term interest-bearing loan receivables	656	704
Trade receivables	1	1
Other receivables	1	0

Liabilities to associated companies
Long-term loan payables	2	5
Trade payables	0	1

For more info about receivables from associated companies, see Note 20 Interest-bearing receivables.

Joint venture transactions

EUR million	2017	2016
Sales to joint ventures	109	104
Interest income on joint venture loan receivables	1	2
Purchases from joint ventures	153	151

Purchases from joint ventures include mainly purchases of nuclear and hydro power at production cost including interest costs and production taxes.

Joint venture balances

EUR million	2017	2016
Receivables from joint ventures
Long-term interest-bearing loan receivables	208	182
Finance lease receivable from joint ventures	41	-
Trade receivables	23	19
Other receivables	17	16

Liabilities to joint ventures
Long-term loan payables	285	273
Trade payables	19	6
Other payables	7	6

For more info about receivables from joint ventures, see Note 20 Interest-bearing receivables.

19 Other non-current assets

EUR million	2017	2016
Available-for-sale financial assets	65	58
Other	74	55
BS Total	140	113

Available-for-sale financial assets, i.e. shares which are not classified as associated companies or joint ventures, consist mainly of shares in unlisted companies of EUR 65 million (2016: 58), for which the fair value can not be reliably determined. These assets are measured at cost less possible impairment.

Fortum decided in 2015 to participate in the Fennovoima nuclear power project in Finland with a 6.6% share. The participation is carried out through Voimaosakeyhtiö SF and the book value of the shares is EUR 25 million (2016: 18). The indirect investment in Fennovoima is classified as Available-for-sale financial assets, measured at cost, since fair value cannot be reliably determined.

20 Interest-bearing receivables

EUR million	Carrying amount 2017	Fair value 2017	Carrying amount 2016	Fair value 2016
Long-term loan receivables from associated companies	656	689	704	744
Long-term loan receivables from joint ventures	208	229	182	206
Finance lease receivables from joint ventures	41	41	-	-
Other long-term interest-bearing receivables	106	111	99	99
BS Total long-term interest-bearing receivables	1,010	1,071	985	1,049
Other short-term interest-bearing receivables	395	395	395	395
Total short-term interest-bearing receivables	395	395	395	395
Total	1,406	1,466	1,380	1,444

Long-term loan receivables include receivables from associated companies and joint ventures EUR 864 million (Dec 31 2016: 886). These receivables include EUR 638 million (Dec 31 2016: 686) from Swedish nuclear companies, OKG AB and Forsmarks Kraftgrupp AB, which are mainly funded with shareholder loans, pro rata each shareholder's ownership.

Teollisuuden Voima Oyj (TVO) is building Olkiluoto 3, the nuclear power plant, which is funded through external loans, share issues and shareholder loans according to shareholders' agreement between the owners of TVO. At end of December 2017 Fortum has EUR 145 million (2016: 120) outstanding receivables regarding Olkiluoto 3 and is additionally committed to provide at maximum EUR 88 million, of which 38 million is the Fortum share of a new shareholder loan commitment totalling EUR 150 million signed by all TVO shareholders in December 2017.

Finance leases relate to heat pipelines in Tyumen area, which are leased to newly established joint venture YUSTEK.

Interest-bearing receivables includes also EUR 102 million (2016: 131) from SIBUR, a Russian gas processing and petrochemicals company regarding divested shares of OOO Tobolsk CHP.

Short-term interest-bearing receivables include EUR 363 million (2016: 360) restricted cash mainly given as collateral for commodity exchanges. The new European Market Infrastructure Regulation (EMIR) came into force in 2016 requiring fully-backed guarantees.

For further information regarding credit risk management, see Note 3.7 Credit risk.

Interest-bearing receivables

			Repricing
EUR million	Effective interest rate, %	Carrying amount 2017	Under 1 year	1–5 years	Over 5 years	Fair value 2017	Carrying amount 2016	Fair value 2016
Long-term loan receivables	2.8	1,010	835	59		116 1,071	985	1,049
Short-term receivables	0.5	395	395	-	-	395	395	395
Total interest bearing receivables	2.1	1,406	1,231	59		116 1,466	1,380	1,444

21 Inventories

ACCOUNTING POLICIES

Inventories mainly consist of fuels consumed in the production process or in the rendering of services. Inventories are stated at the lower of cost and net realisable value being the estimated selling price for the end product, less applicable variable selling expenses and other production costs. Cost is determined using the first-in, first-out (FIFO) method.

Inventories which are acquired primarily for the purpose of trading are stated at fair value less selling expenses.

EUR million	2017	2016
Nuclear fuel	83	91
Coal	45	51
Oil	7	7
Biofuels	3	3
Materials and spare parts	54	67
Other inventories	25	12
BS Total	216	233

Write downs in inventories amounted to EUR 0 million (2016: 1).

22 Trade and other receivables

ACCOUNTING POLICIES

Trade receivables include revenue based on an estimate of electricity, heat and cooling already delivered but not yet measured and not yet invoiced.

EUR million	2017	2016
Trade receivables	743	562
Accrued interest income	1	1
Accrued income and prepaid expenses	29	31
Other receivables	224	249
BS Total	997	844

The management considers that the carrying amount of trade and other receivables approximates their fair value.

22.1 Trade receivables

Ageing analysis of trade receivables

	2017		2016
EUR million	Gross	Impaired	Gross	Impaired
Not past due	632	2	471	2
Past due 1–90 days	90	4	85	5
Past due 91–180 days	19	3	15	5
Past due more than 181 days	68	57	85	80
Total	809	66	655	93

Impairment losses recognised in the income statement were EUR 9 million (2016: 28), of which EUR 8 million (2016: 24) are impairment losses recognised in the PAO Fortum Group. Impairment losses were offset by recovery of previously impaired trade receivables EUR 25 million (2016: 3), of which EUR 24 million (2016: 3) are recognised in the PAO Fortum Group. On 31 December 2017, trade receivables of EUR 66 million (2016: 93) are impaired and provided for, of which EUR 50 million (2016: 79) refers to the PAO Fortum Group.

Trade receivables by currency (Gross)

EUR million	2017	2016
EUR	206	251
SEK	137	97
RUB	207	215
NOK	177	11
PLN	69	71
Other	13	10
Total	809	655

Trade receivables are arising from a large number of customers mainly in EUR, SEK, RUB and NOK mitigating the concentration of risk.

For further information regarding credit risk management and credit risks, see Counterparty risks in the Operating and financial review and Note 3.7 Credit risk.

38 39 40

Parent company financial statements Proposal for the use of the profit shown on the balance sheet

Auditor's report

Operational key figures Quarterly financial information Investor information

Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

23 Liquid funds

ACCOUNTING POLICIES

Cash and cash equivalents in Liquid funds include cash in hand, deposits held at call with banks and other short-term, highly liquid investments with maturities of three months or less. Deposits and securities with maturity more than 3 months include fixed term deposits and commercial papers with maturity more than three months but less than twelve months. Deposits and securities are classified as available-for-sale financial assets.

Bank overdrafts are shown within borrowings in current liabilities in the balance sheet. Cash collaterals or otherwise restricted cash are treated as short-term interest-bearing receivables.

EUR million	2017	2016
Cash at bank and in hand	1,928	1,444
Deposits and securities with maturity under 3 months	1,253	235
Cash and cash equivalents	3,182	1,679
Deposits and securities with maturity more than 3 months	715	3,475
BS Total	3,897	5,155

Liquid funds consists of deposits and cash in bank accounts amounting to EUR 3,540 million and commercial papers EUR 357 million. The average interest rate on deposits and securities excl. Russian deposits on 31 December 2017 was -0.27% (2016: -0.01%). Liquid funds held by PAO Fortum amounted to EUR 246 million (2016: 105), of which EUR 231 million (2016: 103) was held as bank deposits. The average interest rate for this portfolio was 6.1% at the balance sheet date.

Liquid funds totalling EUR 3,348 million (2016: 4,663) are placed with counterparties that have an investment grade rating. In addition, EUR 549 million (2016: 377) have been placed with counterparties separately reviewed and approved by the Group's credit control department.

The committed and undrawn credit facilities amounted to EUR 1,800 million (2016: 1,963), excluding committed credit facilities for Fortum's offer for Uniper shares. In relation to offer for Uniper shares Fortum has commitments from 10 relationship banks to provide credit facilities at the request of Fortum in an aggregate amount of up to EUR 12,000 million.

For further information regarding credit risk management and credit risks, see Note 3.7 Credit risk.

24 Share capital

	2017		2016
EUR million	Number of shares	Share capital	Number of shares	Share capital
Registered shares at 1 January	888,367,045		3,046 888,367,045	3,046
Registered shares at 31 December	888,367,045		3,046 888,367,045	3,046

Fortum Corporation has one class of shares. By the end of 2017, a total of 888,367,045 shares had been issued. Each share entitles the holder to one vote at the Annual General Meeting. All shares entitle holders to an equal dividend. At the end of 2017 Fortum Corporation's share capital, paid in its entirety and entered in the trade register, was EUR 3,046,185,953.00.

Fortum Corporation's shares are listed on Nasdaq Helsinki. The trading code is FORTUM (FUM1V before 25 January 2017). Fortum Corporation's shares are in the Finnish book entry system maintained by Euroclear Finland Ltd.

Details on the President and CEO and other members of the Fortum Executive Management Team's shareholdings and interest in the equity incentive schemes is presented in Note 10 Employee benefits.

24.1 Authorisations from the Annual General Meeting 2017

On 4 April 2017, the Annual General Meeting decided to authorise the Board of Directors to decide on the repurchase and disposal of the company's own shares up to a maximum number of 20,000,000 shares, which corresponds to approximately 2.25% of all the shares in the company. The authorisation is effective for a period of 18 months from the resolution of the General Meeting. The authorisation had not been used by the end of 2017.

24.2 Convertible bond loans and bonds with warrants

Fortum Corporation has not issued any convertible bonds or bonds with attached warrants, which would entitle the bearer to subscribe for Fortum shares. The Board of Directors of Fortum Corporation has no unused authorisations from the General Meeting of shareholders to issue convertible bond loans or bonds with warrants or increase the company's share capital.

25 Non-controlling interests

Principal non-controlling interests

EUR million		2017	2016
PAO Fortum Group	Russia	37	37
AS Fortum Tartu Group	Estonia	34	30
Fortum Oslo Varme AS Group	Norway	150	-
Other		18	17
BS Total		239	84

26 Interest-bearing liabilities

ACCOUNTING POLICIES

Borrowings are recognised initially at fair value less transaction costs incurred. In subsequent periods, they are stated at amortised cost; any difference between proceeds (net of transaction costs) and the redemption value is recognised as interest cost over the period of the borrowing using the effective interest method. Borrowings or portion of borrowings being hedged with a fair value hedge are recognised at fair value.

Net debt

EUR million	2017	2016
Interest-bearing liabilities	4,885	5,107
Liquid funds	3,897	5,155
Net debt	988	-48

Net debt is calculated as interest-bearing liabilities less liquid funds without deducting interest-bearing receivables amounting to EUR 1,406 million (Dec 31 2016: 1,380). Interest-bearing receivables mainly consist of shareholder loans to partly owned nuclear companies regarded long-term financing. For more information see Note 20 Interest-bearing receivables.

Interest-bearing debt

EUR million	2017	2016
Bonds	2,521	2,986
Loans from financial institutions	155	247
Reborrowing from the Finnish State Nuclear Waste Management Fund	1,129	1,094
Other long-term interest-bearing debt	314	140
BS Total long-term interest-bearing debt	4,119	4,468
Current portion of long-term bonds	422	343
Current portion of loans from financial institutions	129	145
Current portion of other long-term interest-bearing debt	10	11
Other short-term interest-bearing debt	206	140
BS Total short-term interest bearing debt	766	639
Total interest-bearing debt	4,885	5,107

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation	Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

Interest-bearing debt

			Repricing
EUR million	Effective interest rate, %	Carrying amount 2017	Under 1 year	1–5 years	Over 5 years	Fair value 2017	Carrying amount 2016	Fair value 2016
Bonds	3.3	2,943	523	2,323	97	3,143	3,329	3,609
Loans from financial institutions	4.8	283	283	-	-	303	393	425
Reborrowing from the Finnish State Nuclear Waste Management Fund	0.5	1,129	-	-	1,129	1,192	1,094	1,156
Other long-term interest-bearing debt 1)	3.4	324	223	-	102	373	151	157
Total long-term interest-bearing debt 2)	2.7	4,679	1,029	2,323	1,327	5,011	4,967	5,348
Other short-term interest-bearing debt	1.2	206	206	-	-	207	140	140
Total short-term interest-bearing debt	1.2	206	206	-	-	207	140	140
Total interest-bearing debt 3)	2.6	4,885	1,235	2,323	1,327	5,218	5,107	5,488

1) Includes loans from Finnish pension institutions EUR 48 million (2016: 58) and other loans EUR 276 million (2016: 93).

2) Including current portion of long-term debt.

3) The average interest rate on loans and derivatives on 31 December 2017 was 3.6% (2016: 3.5%).

				Non-cash changes
EUR million	31 Dec 2016	Cash flow from financing activities 1)	Acqui sitions	Exchange rate differences	Fair value changes and amortised cost	31 Dec 2017
Bonds	3,329	-343		-16	-27	2,943
Loans from financial institutions	393	-144	42	-8		283
Reborrowing from the Finnish State Nuclear Waste Management Fund	1,094	35				1,129
Other interest-bearing debt	291	13	233	-8		530
Total interest-bearing debt	5,107	-439	275	-31	-27	4,885

Reconciliation of interest-bearing liabilities

1) Repayments and borrowings.

The interest-bearing debt decreased in 2017 by EUR 222 million to EUR 4,885 million (2016: 5,107). The amount of short-term financing increased with EUR 66 million, and at the end of the year the amount of short-term financing EUR 206 million (2016: 140) included 113 million (2016: 135) from Credit Support Annex agreements.

During the first quarter of 2017 Fortum increased the amount of reborrowing from the Finnish State Nuclear Waste Management Fund and TVO by EUR 35 million to EUR 1,129 million. In March Fortum repaid two SEK bonds equivalent to EUR 290 million (SEK 2,750 million). During the second quarter Fortum repaid a NOK bond equivalent to EUR 53 million (NOK 500 million) and a bilateral SEK loan to NIB equivalent to EUR 78 million (SEK 750 million). A shareholder loan was given by the City of Oslo to Fortum Oslo Varme AS as a part of the whole Hafslund restructuring amounting to EUR 213 million (NOK 2,000 million). Fortum Oslo Varme is financed on pro rata basis.

The average interest rate for the portfolio consisting mainly of EUR and SEK loans was 2.4% at the balance sheet date (2016: 2.1%). Part of the external loans EUR 773 million (2016: 805) have been swapped to RUB and the average interest cost for these loans including cost for hedging the RUB was 9.5% at the balance sheet date (2016: 11.4%). The average interest rate on total loans and derivatives at the balance sheet date was 3.6% (2016: 3.5%).

For more information please see Note 3 Financial risk management and Note 35 Pledged assets and contingent liabilities.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation	Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

26.1 Bond issues

Issued/Maturity	Interest basis	Interest rate, %	Effective interest, %	Currency		Nominal value, million Carrying amount, EUR million
Fortum Corporation EUR 8,000 million EMTN
Programme 1)
2009/2019	Fixed	6.000	6.095	EUR	750	749
2011/2021	Fixed	4.000	4.123	EUR	500	517
2012/2022	Fixed	2.250	2.344	EUR	1,000	1,057
2013/2018	Fixed	2.750	2.855	SEK	1,150	117
2013/2018	Floating	Stibor 3M+1.0		SEK	3,000	305
2013/2023	Floating	Stibor 3M+1.13		SEK	1,000	102
2013/2043	Fixed	3.500	3.719	EUR	100	97
Total outstanding carrying amount 31 December 2017						2,943

1) EMTN = Euro Medium Term Note

27 Income taxes in balance sheet

ACCOUNTING POLICIES

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement, because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is provided in full, using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the closing date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax assets are set off against deferred tax liabilities if they relate to income taxes levied by the same taxation authority.

Deferred tax is provided on temporary differences arising from investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Group, and it is probable that the temporary difference will not be reversed in the foreseeable future.

The Group recognises liabilities for anticipated tax dispute issues based on estimates of whether additional taxes will be due. No provision will be recognised in the financial statements if Fortum

considers the claims unjustifiable. Therefore, if taxes regarding ongoing tax disputes have to be paid before final court decisions, they will be booked as a receivable. Where the final outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS:

ASSUMPTIONS AND ESTIMATES REGARDING FUTURE TAX CONSEQUENCES

Fortum has deferred tax assets and liabilities which are expected to be realised through the income statement over the extended periods of time in the future. In calculating the deferred tax items, Fortum is required to make certain assumptions and estimates regarding the future tax consequences attributable to differences between the carrying amounts of assets and liabilities as recorded in the financial statements and their tax basis.

Assumptions made include the expectation that future operating performance for subsidiaries will be consistent with historical levels of operating results, recoverability periods for tax loss carry-forwards will not change, and that existing tax laws and rates will remain unchanged into foreseeable future. Fortum believes that it has prudent assumptions in developing its deferred tax balances.

Assumptions and estimates regarding uncertain tax positions are supported by external legal counsel or expert opinion.

If the actual final outcome (regarding tax disputes) would differ negatively from management's estimates with 10%, the Group would need to increase the income tax liability by EUR 19 million as of 31 December 2017. For additional information regarding tax disputes, see Note 36 Legal actions and official proceedings.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation	Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

27.1 Deferred income taxes in the balance sheet

		2017			2016
EUR million		1 Jan Change	31 Dec		1 Jan Change	31 Dec
BS Deferred tax assets	66	7	73	80	-14	66
BS Deferred tax liabilities	-616	-203	-819	-483	-133	-616
Net deferred taxes	-550	-197	-747	-404	-146	-550

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.

Movement in deferred tax assets and liabilities 2017

		Property, plant and	Pension		Derivative financial	Tax losses and tax credits
EUR million	Intangible assets	equipment	obligations	Provisions	instruments	carry-forward	Other	Net deferred taxes
1 Jan 2017	-12	-717	14	20	36	100	8	-550
Charged to income statement	7	-38	1	-10	16	8	-26	-42
Charged to other comprehensive income	0	0	3	0	-18	0	0	-15
Exchange rate differences,
reclassifications and other changes	2	29	1	-2	1	-2	-6	22
Acquisitions and disposals	-98	-79	2	0	0	10	4	-161
31 Dec 2017	-101	-806	21	7	35	116	-20	-747

Retained earnings when distributed as dividends are subject to withholding tax (Russia) or distribution tax (Estonia). Provision has been made for these taxes only to extent that it is expected that these earnings will be remitted in the foreseeable future. At the end of the year deferred income tax liabilities of EUR 28 million (2016: 19) have been recognised for the withholding tax and other taxes that would be payable on the distributions.

Deferred tax assets and liabilities from acquisitions and disposals in 2017 are mainly related to restructuring of the ownership in Hafslund together with the City of Oslo, acquisition of Solar power plants in Russia and wind power companies in Norway. In addition, the deferred tax asset relating to tax loss carry forwards increased net in 2017 mainly because of the additional taxable losses in the Netherlands partly offset by the usage of losses carry forwards in Russia.

Movement in deferred tax assets and liabilities 2016

		Property, plant and	Pension		Derivative financial	Tax losses and tax credits
EUR million	Intangible assets	equipment	obligations	Provisions	instruments	carry-forward	Other	Net deferred taxes
1 Jan 2016	0	-551	11	14	-42	146	18	-404
Charged to income statement		-9	2	-3	27	-49	-11	-42
Charged to other comprehensive income			2		49			51
Exchange rate differences,
reclassifications and other changes		-40			2	3	-6	-40
Acquisitions and disposals	-12	-118		9			6	-115
31 Dec 2016	-12	-717	14	20	36	100	8	-550

Deferred tax assets and liabilities from acquisitions and disposals in 2016 are mainly related to acquisition of Ekokem and Duon and disposal of Tobolsk. In addition, legal entities, primarily in Russia and Sweden used a portion of the deferred tax asset relating to tax loss carry forwards.

Key figures 2008–2017 Parent company

financial statements

Proposal for the use of the profit shown on the balance sheet

Auditor's report Operational key figures Quarterly financial information

Investor information

Operating and financial review Consolidated financial statements

Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

Deferred income tax assets recognised for tax loss carry-forwards

Deferred income tax assets are recognised for tax loss carry-forward to the extent that realisation of the related tax benefit through future profits is probable. The recognised tax assets relate to losses carryforward with no expiration date and partly with expiry date as described below.

Notes

	2017		2016
EUR million	Tax losses	Deferred tax asset	Tax losses	Deferred tax asset
Losses without expiration date	413	90	352	79
Losses with expiration date	103	26	108	22
Total	516	116	460	100

Deferred tax assets of EUR 20 million (2016: 56) have not been recognised in the consolidated financial statements, because the realisation is not probable. The major part of the unrecognised tax asset relates to loss carry-forwards that are unlikely to be used in the foreseeable future.

Tax loss carry-forwards increased in 2017 mainly because of the additional taxable losses in Netherlands and decreased mainly because of use of losses carry forwards in Russia.

27.2 Income tax receivables

	2017	2016
Sweden	28	124
Belgium	114	114
Other	30	52
Total income tax receivables	172	290

Income tax receivables reflect payments of corporate income tax done in relation to the year 2017 as well as payments according to received tax audit assessments in relation to previous years.

Fortum received in June 2017 an unfavourable decisions from the Administrative Court of Appeal in Sweden relating to the income tax assessments for 2009–2012 and has booked a tax cost of EUR 115 million and interest cost of EUR 7 million. Consequently, the income tax receivable decreased by the corresponding amount. Fortum has in previous years received income tax assessments in Sweden for the year 2013. The additional taxes for 2013 have been paid in July 2017, in total 273 MSEK (EUR 28 million) and based on supporting legal opinion booked as an income tax receivable.

In Belgium, Fortum has in previous years received income tax assessments for the years 2008–2012. The additional taxes have been paid during prior years, in total EUR 114 million and based on supporting legal opinions booked as an income tax receivable. Legal procedures in Finland concerning 2007–2011 transfer pricing audit have been closed to Fortum's benefit.

See Note 36 Legal actions and official proceedings.

28 Nuclear related assets and liabilities

ACCOUNTING POLICIES

Fortum owns Loviisa nuclear power plant in Finland. In Fortum's consolidated balance sheet, Share in the State Nuclear Waste Management Fund and the Nuclear provisions relate to Loviisa nuclear power plant. Fortum's nuclear related provisions and the related part of the State Nuclear Waste Management Fund are both presented separately in the balance sheet. Fortum's share in the State Nuclear Waste Management Fund is accounted for according to IFRIC 5, Rights to interests arising from decommissioning, restoration and environmental rehabilitation funds which states that the fund assets are measured at the lower of fair value or the value of the related liabilities since Fortum does not have control or joint control over the State Nuclear Waste Management Fund. The Nuclear Waste Management Fund is managed by governmental authorities. The related provisions are the provision for decommissioning and the provision for disposal of spent fuel.

The fair values of the provisions are calculated according to IAS 37 by discounting the separate future cash flows, which are based on estimated future costs and actions already taken. The initial net present value of the provision for decommissioning (at the time of commissioning the nuclear power plant) has been included in the investment cost and is depreciated over the estimated operating time of the nuclear power plant. Changes in the technical plans etc., which have an impact on the future cash flow of the estimated costs for decommissioning, are accounted for by discounting the additional costs to the current point in time. The increased asset retirement cost due to the increased provision is added to property, plant and equipment and depreciated over the remaining estimated operating time of the nuclear power plant. For power plant units taken from use the increase is taken to income statement.

The provision for spent fuel covers the future disposal costs for fuel used until the end of the accounting period. Costs for disposal of spent fuel are expensed during the operating time based on fuel usage. The impact of the possible changes in the estimated future cash flow for related costs is recognised immediately in the income statement based on the accumulated amount of fuel used until the end of the accounting period. The related interest costs due to unwinding of the provision is recognised in the corresponding period.

The timing factor is taken into account by recognising the interest expense related to discounting the nuclear provisions. The interest on the State Nuclear Waste Management Fund assets is presented as financial income.

Fortum's actual share of the State Nuclear Waste Management Fund, related to Loviisa nuclear power plant, is higher than the carrying value of the Fund in the balance sheet. The legal nuclear liability should, according to the Finnish Nuclear Energy Act, be fully covered by payments and guarantees to the State Nuclear Waste Management Fund. The legal liability is not discounted while the provisions are, and since

Operating and financial review	Consolidated	financial statements	Notes	Key figures 2008–2017	Parent company financial statements	Proposal for the use of the profit shown on the balance sheet	Auditor's report	Operational key figures Quarterly financial information	Investor information
Basis of preparation		Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

the future cash flow is spread over 100 years, the difference between the legal liability and the provisions are material.

The annual fee to the Fund is based on changes in the legal liability, the interest income generated in the State Nuclear Waste Management Fund and incurred costs of taken actions.

Fortum also has minority interests in nuclear power companies, i.e. Teollisuuden Voima Oyj (TVO) in Finland and OKG Aktiebolag (OKG) and Forsmarks Kraftgrupp AB (Forsmark) in Sweden. The minority shareholdings are classified as associated companies and joint ventures and are consolidated with equity method. Both the Finnish and the Swedish companies are non-profit making, i.e. electricity production is invoiced to the owners at cost including depreciations, interest costs and production taxes accounted for according to local GAAP. Accounting policies of the associates regarding nuclear assets and liabilities have been changed where necessary to ensure consistency with the policies adopted by the Group.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS:

ASSUMPTIONS MADE WHEN ESTIMATING PROVISIONS RELATED TO NUCLEAR PRODUCTION

The provision for future obligations for nuclear waste management including decommissioning of Fortum's nuclear power plant and related spent fuel is based on long-term cash flow forecasts of estimated future costs. The main assumptions are technical plans, timing, cost estimates and discount rate. The technical plans, timing and cost estimates are approved by governmental authorities.

Any changes in the assumed discount rate would affect the provision. If the discount rate used would be lowered, the provision would increase. Fortum has contributed cash to the State Nuclear Waste Management Fund based on a non-discounted legal liability, which leads to that the increase in provision would be offset by an increase in the recorded share of Fortum's part of the State Nuclear Waste Management Fund in the balance sheet. The total effect on the income statement would be positive since the decommissioning part of the provision is treated as an asset retirement obligation. This situation will prevail as long as the legal obligation to contribute cash to the State Nuclear Waste Management Fund is based on a non-discounted liability and IFRS is limiting the carrying value of the assets to the amount of the provision since Fortum does not have control or joint control over the fund.

Based on the Nuclear Energy Act in Finland, Fortum has a legal obligation to fully fund the legal liability decided by the governmental authorities, for decommissioning of the power plant and disposal of spent fuel through the State Nuclear Waste Management Fund.

Both in Finland and in Sweden nuclear operators are legally obligated for the decommissioning of the plants and the disposal of spent fuel (nuclear waste management). In both countries the nuclear operators are obligated to secure the funding of nuclear waste management by paying to government operated nuclear waste funds. The nuclear operators also have to give securities to guarantee that sufficient funds exist to cover future expenses of decommissioning of the power plant and disposal of spent fuel.

28.1 Nuclear related assets and liabilities for 100% owned nuclear power plant, Loviisa

EUR million	2017	2016
Carrying values in the balance sheet
BS Nuclear provisions	858	830
BS Fortum's share of the State Nuclear Waste Management Fund	858	830

Legal liability and actual share of the State Nuclear Waste Management Fund
Liability for nuclear waste management according to the Nuclear Energy Act	1,161	1,141
Funding obligation target	1,153	1,125
Fortum's share of the State Nuclear Waste Management Fund	1,125	1,094
Share of the fund not recognised in the balance sheet	267	264

Legal liability for Loviisa nuclear power plant

The legal liability on 31 December 2017, decided by the Ministry of Economic Affairs and Employment in December 2017, was EUR 1,161 million.

The legal liability is based on a cost estimate, which is done every year, and a technical plan, which is made every third year. The current technical plan was updated in 2016. Following the update of the technical plan in 2016, the liability increased due to updated cost estimates related to interim and final storage of spent fuel. The legal liability is determined by assuming that the decommissioning would start at the beginning of the year following the assessment year.

Fortum's share in the State Nuclear Waste Management Fund

According to Nuclear Energy Act, Fortum is obligated to contribute funds in full to the State Nuclear Waste Management Fund to cover the legal liability. Fortum contributes funds to the Finnish State Nuclear Waste Management Fund based on the yearly funding obligation target decided by the governmental authorities in December in connection with the decision of size of the legal liability. The current funding obligation target decided in December 2017 is EUR 1,153 million.

Nuclear provisions

EUR million	2017	2016
BS 1 January	830	810
Additional provisions	4	6
Used during the year	-21	-20
Unwinding of discount	45	34
BS 31 December	858	830
Fortum's share in the State Nuclear Waste Management Fund	858	830

Nuclear provision and fund accounted according to IFRS

Nuclear provisions include the provision for decommissioning and the provision for disposal of spent fuel. The carrying value of the nuclear provisions, calculated according to IAS 37, increased by EUR 28 million compared to 31 December 2016, totalling EUR 858 million on 31 December 2017. The provisions are based on the same cash flows for future costs as the legal liability, but the legal liability is not discounted to net present value.

The carrying value of the Fund in the balance sheet cannot exceed the carrying value of the nuclear provisions according to IFRIC Interpretation 5. The Fund is from an IFRS perspective overfunded with EUR 267 million, since Fortum's share of the Fund on 31 December 2017 was EUR 1,125 million and the carrying value in the balance sheet was EUR 858 million.

Fortum's share of the Finnish Nuclear Waste Management Fund in Fortum's balance sheet can in maximum be equal to the amount of the provisions according to IFRS. As long as the Fund is overfunded from an IFRS perspective, the effects to operating profit from this adjustment will be positive if the provisions increase more than the Fund and negative if actual value of the fund increases more than the provisions. This accounting effect is not included in Comparable operating profit in Fortum financial reporting. For more information see Note 6 Items affecting comparability.

Borrowing from the State Nuclear Waste Management Fund

Participants in the Finnish State Nuclear Waste Management Fund are allowed to borrow from the fund according to certain rules. Fortum uses the right to borrow back and has pledged shares in Kemijoki Oy as security for the loans. The loans are renewed yearly. See Note 26 Interest-bearing liabilities and Note 35 Pledged assets and contingent liabilities.

28.2 Nuclear power plants in associated companies and joint ventures

OKG, Forsmark and TVO are non-profit making companies, i.e. electricity production is invoiced to the owners at cost including depreciations, interest costs and production taxes. Invoiced cost is accounted for according to local GAAP. In addition to the invoiced electricity production cost, Fortum makes IFRS adjustments to comply with Fortum's accounting principles. These adjustments include also Fortum's share of the companies' nuclear waste funds and nuclear provisions.

The tables below present the 100% figures relating to nuclear funds and provisions for the companies as well as Fortum's net share.

TVO's total nuclear related assets and liabilities (100%)

2017	2016

953	955
953	955

0	0


1,482	1,450
1,437	1,380
484	425

TVO's legal liability and contribution to the fund are based on same principles as described above for Loviisa nuclear power plant.

TVO's share of the Finnish State Nuclear Waste Management Fund is from an IFRS perspective overfunded with EUR 484 million (of which Fortum's share EUR 129 million), since TVO's share of the Fund on 31 December 2017 was EUR 1,437 million and the carrying value in the balance sheet was EUR 953 million.

Participants in the Finnish State Nuclear Waste Management Fund are allowed to borrow from the fund according to certain rules. Fortum is using the right to reborrow funds through TVO based on its ownership. See more information in Note 26 Interest-bearing liabilities.

OKG's and Forsmark's total nuclear related assets and liabilities (100%)

EUR million	2017	2016
OKG's and Forsmark's nuclear related assets and liabilities 1)
Nuclear provisions	3,398	3,297
Share in the State Nuclear Waste Management Fund	3,105	3,068
Net amount	-293	-229

of which Fortum's net share consolidated with equity method	-114	-106

1) Accounted for according to Fortum's accounting principles. Companies' statutory financial statements are not prepared according to IFRS.

In Sweden Svensk Kärnbränslehantering AB (SKB), a company owned by the nuclear operators, takes care of all nuclear waste management related activities on behalf of nuclear operators. SKB receives its funding from the Swedish State Nuclear Waste Management Fund, which in turn is financed by the nuclear operators.

In addition to nuclear waste fees nuclear power companies provide guarantees for any uncovered liability and unexpected events.

For more information regarding Fortum's guarantees given on behalf of nuclear associated companies, see Note 35 Pledged assets and contingent liabilities.

Nuclear waste fees and guarantees are updated every third year by governmental decision after a proposal from Swedish Radiation Safety Authority (SSM). The proposal is based on cost estimates done by SKB. Currently the fees and guarantees are decided for years 2015–2017. A new technical plan for nuclear waste management has been decided by SKB during 2016. During 2017 SKB has submitted the cost estimates based on the revised technical plan to SSM, after which the Swedish government has decided the waste fees and guarantees for years 2018–2020. Nuclear waste fees are currently based on future costs with the assumed lifetime of 50 years (40 years in previous decision) for each unit of a nuclear power plant.

29 Other provisions

ACCOUNTING POLICIES

Provisions for environmental obligations, asset retirement obligations, restructuring costs and legal claims are recognised when the Group has a present legal or constructive obligation as a result of past events to a third party, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as interest expense.

ENVIRONMENTAL PROVISIONS

Environmental provisions are recognised, based on current interpretation of environmental laws and regulations, when it is probable that a present obligation has arisen and the amount of such liability can be reliably estimated. Environmental expenditures resulting from the remediation of an existing condition caused by past operations, and which do contribute to current or future revenues, are expensed as incurred.

Environmental provisions include provisions for obligations to cover landfills and clean-up obligations for contaminated land areas. Provisions are determined based on the surface area of the landfill site, remaining land area to be landscaped or otherwise cleaned-up, and the unit cost of conducting the coverage and clean-up activities in the future.

Environmental provisions are also booked for aftercare and monitoring obligations arising from landfill permit holder's requirement to take into account potential danger to health or the environment posed by a landfill site for a period of at least 30 (up to 60) years after the coverage. The aftercare and monitoring provision is determined on the basis of estimated costs and estimated number of years of filling the landfill.

ASSET RETIREMENT OBLIGATIONS

Asset retirement obligation is recognised either when there is a contractual obligation towards a third party or a legal obligation and the obligation amount can be estimated reliably. Obligating event is e.g. when a plant is built on a leased land with an obligation to dismantle and remove the asset in the future or when a legal obligation towards Fortum changes. The asset retirement obligation is recognised as part of the cost of an item of property, plant and equipment when the asset is put in service. The costs will be depreciated over the remainder of the asset's useful life.

Investor information

RESTRUCTURING PROVISIONS

A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity. Restructuring provisions comprise mainly employee termination payments and lease termination costs.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

ASSUMPTIONS MADE WHEN ESTIMATING PROVISIONS

Provisions for present obligations require management to assess the best estimate of the expenditure needed to settle the present obligation at the end of the reporting period. The actual amount and timing of the expenditure might differ from estimates made.

		2017		2016
EUR million	Environ mental	Other	Total	Environ mental	Other	Total
1 January	47	82	129	2	96	98
Acquisitions	0	7	7	44	4	48
Provisions for the period	0	31	31	1	14	15
Provisions used	0	-35	-35	0	-25	-25
Provisions reversed	0	-10	-10	0	-9	-9
Exchange rate difference and other charges	-4	4	0	0	2	2
31 December	43	79	122	47	82	129

Of which current provisions 1)	0	22	22	1	11	13
BS Of which non-current provisions	43	57	100	46	70	116

1) Included in trade and other payables in the balance sheet, see Note 32 Trade and other payables.

Environmental provisions include mainly provisions for obligations to cover and monitor landfills as well as to clean contaminated land areas. Main part of the provisions are estimated to be used within 10–15 years. The increase in environmental provisions in 2016 is mainly arising from the acquisition of Ekokem (see Note 38 Acquisitions and disposals).

Dismantling provision for the Finnish coal fired power plant Inkoo is included in Other provisions. Regarding provisions for decommissioning and provision for disposal of spent fuel for nuclear production, see Note 28 Nuclear related assets and liabilities.

39 40

Key figures 2008–2017 Notes

Parent company financial statements Proposal for the use of the profit shown on the balance sheet

Auditor's report

Operational key figures Quarterly financial information

Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

30 Pension obligations

ACCOUNTING POLICIES

The Group companies have various pension schemes in accordance with the local conditions and practises in the countries in which they operate. The schemes are generally funded through payments to insurance companies or the Group's pension funds as determined by periodic actuarial calculations. The Group has both defined benefit and defined contribution plans.

The Group's contributions to defined contribution plans are charged to the income statement in the period to which the contributions relate.

For defined benefit plans, pension costs are assessed using the projected unit credit method. The cost of providing pensions is charged to the income statement as to spread the service cost over the service lives of employees. The net interest is presented in financial items and the rest of the income statement effect as pension cost.

The defined benefit obligation is calculated annually on the balance sheet date and is measured as the present value of the estimated future cash flows using interest rates of high-quality corporate bonds that have terms to maturity approximating to the terms of the related pension liability. In countries where there is no deep market in such bonds, market yields on government bonds are used instead. The plan assets for pensions are valued at market value. The liability recognised in the balance sheet is the defined benefit obligation at the closing date less the fair value of plan assets. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss related to a curtailment is recognised immediately in profit or loss. Gains or losses on settlements of defined benefits plans are recognised when the settlement occurs.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

ASSUMPTIONS USED TO DETERMINE FUTURE PENSION OBLIGATIONS

The present value of the pension obligations is based on actuarial calculations that use several assumptions. Any changes in these assumptions will impact the carrying amount of pension obligations.

Fortum's pension arrangements

Finland

In Finland statutory pension benefits (as determined in Employee's Pension Act /TyEL) provide the employees pension coverage for old age, disability and death of a family provider. The benefits are insured with an insurance company and determined to be defined contribution plans.

In addition the Group has additional old-age and survivors pension benefits arranged with the Fortum Pension Fund. The Fortum Pension Fund is a closed fund managed by a Board, consisting of both employers' and employees' representatives. The Fund is operating under regulation from Financial Supervisory Authority (FSA). The liability has to be fully covered according to the regulations. The national benefit obligation related to the defined benefit plans is calculated so that the promised benefit is fully funded until retirement. After retirement the benefits payable are indexed yearly with TyEL-index. The promised benefit is defined in the rules of the Fund, mostly 66% at a maximum of the salary basis. The salary basis is an average of the ten last years' salaries, which are indexed with a common salary index to the accounting year.

Sweden

In Sweden the Group operates several defined benefit and defined contribution plans like the general ITP-pension plan and the PA-KL and PA-KFS plans that are eligible for employees within companies formerly owned by municipalities. The defined benefit plans are fully funded and have partly been financed through Fortum's own pension fund and partly through insurance premiums. The pension arrangements comprise normal retirement pension, complementary retirement pensions, survivors' pension and disability pension. The most significant pension plan is the ITP-plan for white-collar employees in permanent employment (or temporary employees after a certain waiting period), who fulfil the age conditions. To qualify for a full pension the employee must have a projected period of pensionable service, from the date of entry until retirement age, of at least 30 years.

The Swedish pension fund is managed by a Board, consisting of both employers' and employees' representatives. The fund is operating under regulation from Swedish Financial Supervisory Authority and the County Administrative Board and governed by Swedish law (no. 1967:531). The fund constitutes a security for the employers' defined benefit pension plan liability and the fund has no obligations in relation to pension payments. The employer must have a credit insurance from PRI Pensionsgaranti Mutual Insurance Company for the liability. The liability does not have to be fully covered by the fund according to the regulations.

The part of the ITP multiemployer pension plan that is secured by paying pension premiums to Alecta, in Fortum's case the collective family pension, is accounted for as a defined contribution plan due to that there is no consistent and reliable basis to allocate assets or liabilities to the participating entities within the ITP insurance. The reason for this is that it is not possible to determine from the terms of the plan to which extent a surplus or a deficit will affect future contributions.

Norway

Group companies operate both defined contribution and defined benefit plans. Some defined benefit schemes offer benefits common for municipalities in Norway and some are private pension schemes. Benefits include old age pensions, disability pension and survivor's pension, including pension benefits from the National Insurance Scheme (Folketrygden). The schemes are fully funded within the rules set out in the Norwegian insurance legislation.

The majority of the defined benefit plans are closed, either private plans or public plans, that are operated by the Hafslund and Infratek,s Pension Fund. The Group has also a closed public defined benefit plan operated by Oslo Pensjonsforsikring AS. In addition, the Group has defined benefit plans with various insurance companies.

Pension arrangements in other countries

Pension arrangements in Russia include payments made to the state pension fund. These arrangements are treated as defined contribution plans. The Russian (in addition to the defined contribution plans) and Polish companies participate in certain defined benefit plans, defined by collective agreements, which are unfunded and where the company meets the benefit payment obligation as it falls due. The benefits provided under these arrangements include, in addition to pension payments, one-time benefits paid in case of employee mortality or disability as well as lump sum payments for anniversary and financial support to honoured workers and pensioners.

In other countries the pension arrangements are done in accordance with the local legislation and practice, mostly being defined contribution plans.

Main risks relating to defined benefit plans – Finland and Sweden

Overall risks

Finland – If the return of the fund's assets is not enough to cover the raise in liability and benefit payments over the financial year then the employer funds the deficit with contributions unless the fund has sufficient equity.

Sweden – As the pension fund is separated from the funding companies Fortum is not obliged to make additional contributions to the pension fund in any case of deficit. However if the assets decrease to a level lower than the liability according to Swedish GAAP, Fortum's credit insurance cost from PRI will increase.

Change in discount rate

Finland – The discount rate which is used to calculate the defined benefit obligation (according to IFRS) depends on the value of corporate bond yields as at reporting date. A decrease in yields increases the benefit obligation that is offset by increase in the value of fixed income holdings.

Investment and volatility risk

Finland – The pension fund's board accepts yearly an Investment Plan, which is based on an external asset-liability analysis. The assets are allocated to stocks and stock funds, fixed income instruments and real estate. The investments are diversified into different asset classes and to different asset managers taking into account the regulation of the Financial Supervisory Authority. The real estate investments consist mainly of the Fortum headquarters, rented by Fortum Corporation.

Sweden – The pension fund operation is regulated by law and supervised by central administrative authorities (Finansinspektionen and the County Administrative Board). The pension fund board decides yearly on a policy for asset allocation and a risk management model that stipulates a maximum acceptable market value decrease of the assets. The major assets are fixed income instruments, stock index funds and cash.

Risks relating to assumptions used

Actuarial calculations use assumptions for future inflation and salary levels and longevity. Should the actual outcome differ from these assumptions, this might lead to higher liability.

Movement in the net defined benefit liability

	obligation	Defined benefit	assets	Fair value of plan	Net defined benefit asset(-)/ liability(+)
EUR million	2017	2016	2017	2016	2017	2016
Balance at 1 January	452	448	-378	-384	74	64
Included in profit or loss
Current service cost	6	8			7	9
Past service cost 1)	0	-4			0	-4
Settlements	-3	-6	5	5	2	-1
Net interest 2)	9	11	-7	-9	2	2
	12	9	-2	-3	10	6
Included in OCI
Remeasurement gains(-)/losses(+)	10	15	7	-5	17	10
Actuarial gains/losses arising from changes in financial assumptions	16	28			16	28
Actuarial gains/losses arising from experience adjustments	-6	-12			-6	-12
Return on plan assets (excluding amounts included in net interest expense)			7	-5	7	-5
Exchange rate differences	-5	-4	4	4	-1	0
	5	11	11	-1	16	10
Other
Contributions paid by the employer			-3	-1	-3	-1
Benefits paid	-18	-16	14	12	-3	-4
Acquisitions of subsidiary companies	50	0	-43	0	7	0
Balance at 31 December	501	452	-401	-378	101	74
Present value of funded defined obligation					497	447
Fair value of plan assets					-401	-378
Funded status					96	70
Present value of unfunded obligation 3)					4	5
Net liability arising from defined benefit obligation					101	74

Pension assets included in other non-current assets in the balance sheet					2	1
BS Pension obligations in the balance sheet					102	76

1) In 2016 including EUR -6 million from the pension reform in Finland.

2) Net interest is presented among financial items in income statement, the rest of costs related to defined benefit plans are included in staff costs (row defined benefits plans in the staff cost specification in Note 10 Employee benefits).

3) The unfunded obligation relates to arrangements in Russia and Poland.

At the end of 2017 a total of 985 (2016: 864) Fortum employees are included in defined benefit plans providing pension benefits. During 2017 pensions or related benefits were paid to a total of 3,160 (2016: 2,865) persons.

Contributions expected to be paid during year 2018 are EUR 4 million.

Fair value of plan assets

EUR million	2017	2016
Equity instruments	126	120
Debt instruments	156	140
Cash and cash equivalents	48	26
Real estate, of which EUR 42 million (2016: 66) occupied by the Group	47	69
Investment funds	1	-
Company's own ordinary shares	5	4
Other assets	18	19
Total	401	378

When the pension plan has been financed through an insurance company, a specification of the plan assets has not been available. In these cases the fair value of plan assets has been included in other assets.

The actual return on plan assets in Finland, Sweden and Norway totalled EUR 0 million (2016: 14).

Amounts recognised in the balance sheet by country 2017

EUR million	Finland		Sweden Norway	Other countries	Total
Present value of funded obligations	295	141	61	0	497
Fair value of plan assets	-245	-105	-51	0	-401
Deficit(+)/surplus(-)	50	36	10	0	96
Present value of unfunded obligations				4	4
Net asset(-)/liability(+) in the balance sheet	50	36	10	4	101
Pension asset included in non-current assets	0	1	1	0	2
BS Pension obligations in the balance sheet	50	37	11	4	102

Operating and financial review	Consolidated	financial statements	Notes	Key figures 2008–2017	Parent company financial statements	Proposal for the use of the profit shown on the balance sheet		Auditor's report	Operational key figures Quarterly financial information	Investor information
Basis of preparation Risks		Income statement		Balance sheet	Off balance sheet items	Group structure and related parties

Amounts recognised in the balance sheet by country 2016

				Other
EUR million	Finland	Sweden	Norway	countries	Total
Present value of funded obligations	308	130	9	0	447
Fair value of plan assets	-262	-110	-6	0	-378
Deficit(+)/surplus(-)	46	20	3	0	70
Present value of unfunded obligations				5	5
Net asset(-)/liability(+) in the balance sheet	46	20	3	5	74
Pension asset included in non-current assets	0	1	1	0	1
BS Pension obligations in the balance sheet	46	21	4	5	76

The principal actuarial assumptions used

		2017			2016
%	Finland	Sweden	Norway	Finland	Sweden	Norway
Discount rate	1.50	2.40	2.30	1.50	2.80	2.10
Future salary increases	2.90	2.80	2.50	1.90	3.00	2.25
Future pension increases	2.00	2.80	1.34	2.00	1.70	1.27
Rate of inflation	1.70	1.80	1.50	1.70	1.70	1.75

The discount rate in Finland is based on high quality European corporate bonds with maturity that best reflects the estimated term of the defined benefit pension plans. The discount rate in Sweden is based on yields on Swedish covered bonds with maturity that best reflects the estimated term of the defined benefit pension plans. The covered bonds in Sweden are considered high quality bonds as they are secured with assets.

The life expectancy is the expected number of years of life remaining at a given age

Longevity at age 65	Finland	Sweden	Norway
45– male	22	23	23
45– female	27	25	26
65– male	21	22	22
65– female	25	24	25

The discount, inflation and salary growth rates used are the key assumptions used when calculating defined benefit obligations. Effects of 0.5 percentage point change in the rates to the defined benefit obligation on 31 December 2017, holding all other assumptions stable, are presented in the table below.

Sensitivity of defined benefit obligation to changes in assumptions

	Impact to the pension obligation increase(+)/ decrease(-)
Change in the assumption	Finland	Sweden	Norway
0.5% increase in discount rate	-7%	-10%	-6%
0.5% decrease in discount rate	8%	12%	7%
0.5% increase in benefit	1%	10%	5%
0.5% decrease in benefit	-1%	-9%	-6%
0.5% increase in salary growth rate	6%	2%	3%
0.5% decrease in salary growth rate	-6%	-3%	-3%

The methods used in preparing the sensitivity analysis did not change compared to the previous period. Change in mortality basis so that life expectancy increases by one year would increase the net liability in Finland, Sweden and Norway with EUR 17 million (19%).

Maturity profile of the undiscounted defined benefit obligation for Finland, Sweden and Norway as of 31 December 2017

EUR million	Future benefit payments
Maturity under 1 year	17
Maturity between 1 and 5 years	73
Maturity between 5 and 10 years	90
Maturity between 10 and 20 years	171
Maturity between 20 and 30 years	133
Maturity over 30 years	98

The weighted average duration of defined benefit obligation in Finland, Sweden and Norway at the end of year 2017 is 17 years.

31 Other non-current liabilities

EUR million	2017	2016
Connection fees	109	109
Other liabilities	66	70
BS Total	175	179

Connection fees are refundable connection fees to the district heating network in Finland.

32 Trade and other payables

EUR million	2017	2016
Trade payables	318	323
Accrued expenses and deferred income
Accrued personnel expenses	97	61
Accrued interest expenses	113	132
Other accrued expenses and deferred income	174	130
Other liabilities
VAT-liability	43	43
Current tax liability	25	20
Energy taxes	15	14
Advances received	98	19
Current provisions 1)	22	13
Other liabilities	209	86
BS Total	1,112	841

1) See also Note 29 Other provisions.

The management considers that the amount of trade and other payables approximates fair value.

33 Lease commitments

ACCOUNTING POLICIES

OPERATING LEASES

Leases of property, plant and equipment, where the Group does not have substantially all of the risks and rewards of ownership are classified as operating leases. Payments made under operating leases are recognised in the income statement as costs on a straight-line basis over the lease term.

Payments received under operating leases where the Group leases out fixed assets are recognised as other income in the income statement.

FINANCE LEASES

Leases of property, plant and equipment, where the Group has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the commencement of the lease term at the lower of the fair value of the leased property and the present value of the minimum lease payments determined at the inception of the lease.

33.1 Leases as a lessor

Operating leases

The operating rental income recognised in income statement was EUR 6 million (2016: 5).

Finance leases

Finance leases relate to heat pipelines in Tyumen area, which are leased to newly established joint venture YUSTEK. See additional information in Note 38 Acquisitions and disposals.

Maturity of future minimum lease payments

	2017	2016	2017	2016	2017	2016
EUR million		Gross investment in finance lease arrangements		Unearned interest income		Present value of minimum lease payments
Due within 1 year	1	-	4	-	-3	-
Due in 1 to 5 years	21	-	21	-	0	-
Due in more than 5 years	167	-	123	-	44	-
Total	189	-	148	-	41	-

The present value of minimum lease payments is included in interest-bearing receivables in the balance sheet, see Note 20 Interest-bearing receivables.

33.2 Leases as lessee

Operating leases

Fortum leases mainly land and office buildings under various non-cancellable operating leases, some of which contain renewal options. The future costs for non-cancellable operating lease contracts are stated below. Lease rental expenses amounting to EUR 33 million (2016: 15) are included in the income statement in other expenses.

Future minimum lease payments on operating leases

EUR million	2017	2016
Not later than 1 year	23	16
Later than 1 year and not later than 5 years	72	31
Later than 5 years	65	27
Total	160	74

Increase in operating lease commitments arises mainly from the lease agreement relating to the new head office in Espoo.

Finance leases

Fortum does not have material finance lease arrangements where the Group is acting as a lessee.

34 Capital commitments

EUR million	2017	2016
Property, plant and equipment	362	467

Capital commitments are capital expenditures contracted for at the balance sheet date but not recognised in the financial statements. The decrease in capital commitments compared to previous year comes mainly from progressing of the automation investment in Loviisa nuclear power plant and India solar investments, partly offset by increased wind power investments in Norway.

For more information regarding capital expenditure, see Note 17 Property, plant and equipment.

Other commitments

On 26 September 2017, Fortum announced it had signed a transaction agreement with E.ON under which E.ON has the right to tender its 46.65% shareholding in Uniper in early 2018. In November 2017 Fortum launched a voluntary public takeover offer to all Uniper shareholders at a total value of EUR 22 per share (in total approximately EUR 8 billion).

On 19 January 2018, Fortum announced that the number of shares tendered during the initial acceptance period of Fortum's voluntary public takeover offer for the outstanding shares of Uniper totalled 171,736,647 shares. This corresponds to approximately 46.93% of the share capital and the voting rights of Uniper. The initial acceptance period ended on 16 January 2018 and the additional acceptance period resumed on 20 January 2018 and will end on 2 February 2018. The value of the tendered shares from the initial acceptance period is EUR 3.78 billion based on the total value of EUR 22 per share.

Fortum has committed to provide a maximum of EUR 93 million (Dec 31 2016: 100) to Voimaosakeyhtiö SF, for its participation in the Fennovoima nuclear power project in Finland. Furthermore, Fortum's remaining direct commitment regarding the construction of a waste-to-energy combined heat and power plant (CHP) in Kaunas, Lithuania is EUR 15 million at maximum at the end of 2017. The investment is made through Kauno Kogeneracinė Jėgainė (KKJ), a joint venture owned together with Lietuvos Energija.

For information regarding shareholder loan commitments related to associated companies and joint ventures, see Note 20 Interest bearing receivables.

35 Pledged assets and contingent liabilities

ACCOUNTING POLICIES

CONTINGENT LIABILITIES

A contingent liability is disclosed when there is a possible obligation that arises from past events and whose existence is only confirmed by one or more doubtful future events or when there is an obligation that is not recognised as a liability or provision because it is not probable that an outflow of resources will be required or the amount of the obligation cannot be reliably estimated.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
	Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

EUR million	2017	2016
Pledged assets on own behalf
For debt
Pledges	300	291
Real estate mortages	177	137
For other commitments
Pledges	346	379
Real estate mortages	141	99
Contingent liabilities on own behalf
Other contingent liabilities	161	205
On behalf of associated companies and joint ventures
Guarantees	598	603

35.1 Pledged assets for debt

Finnish participants in the State Nuclear Waste Management Fund are allowed to borrow from the fund. Fortum has pledged shares in Kemijoki Oy as a security. The value of the pledged shares was EUR 269 million on 31 December 2017 (2016: 269).

Fortum Tartu in Estonia (60% owned by Fortum) has given real estate mortgages for a value of EUR 96 million (2016: 96) as a security for an external loan. Real estate mortgages have also been given for loan from Fortum's pension fund for EUR 41 million (2016: 41).

Property of the Russian solar plants of EUR 41 million was mortgaged for loans (2016: 0). Regarding the relevant interest-bearing liabilities, see Note 26 Interest-bearing liabilities.

35.2 Pledged assets for other commitments

Pledges also include restricted cash given as trading collateral of EUR 346 million (2016: 345) for trading of electricity and CO2 emission allowances in Nasdaq Commodities Europe, in Intercontinental Exchange (ICE), European Energy Exchange (EEX) and Polish Power Exchange (TGE). See also Note 20 Interest-bearing receivables.

Fortum has given real estate mortgages in power plants in Finland, total value of EUR 141 million in December 2017 (2016: 99), as a security to the Finnish State Nuclear Waste Management Fund for the uncovered part of the legal liability and unexpected events relating to future costs for decommissioning and disposal of spent fuel in Loviisa nuclear power plant. According to the Nuclear Energy Act, Fortum is obligated to contribute the funds in full to the State Nuclear Waste Management Fund to cover the legal liability. Any uncovered legal liability relates to periodising of the payments to the fund. The size of the securities given is updated yearly in Q2 based on the decisions regarding the legal liabilities and the funding target which take place around year-end every year. Due to the yearly update, the amount of real estate mortgages given as a security increased by EUR 42 million.

See also Note 28 Nuclear related assets and liabilities.

35.3 Contingencies on own behalf

Fortum owns the coal condensing power plant Meri-Pori in Finland. Teollisuuden Voima Oyj (TVO) has the contractual right to participate in the plant with 45.45%. Based on the participation agreement Fortum has to give a guarantee to TVO against breach in contract. The amount of the guarantee is set to EUR 125 million (2016: 125).

35.4 Contingencies on behalf of associated companies

Guarantees and other contingent liabilities on behalf of associated companies and joint ventures mainly consist of guarantees relating to Fortum's associated nuclear companies Teollisuuden Voima Oyj (TVO), Forsmarks Kraftgrupp AB (FKA) and OKG AB (OKG). The guarantees are given in proportion to Fortum's respective ownership in each of these companies.

According to law, nuclear companies operating in Finland and Sweden shall give securities to the Finnish State Nuclear Waste Management Fund and the Swedish Nuclear Waste Fund respectively, to guarantee that sufficient funds exist to cover future expenses of decommissioning of the power plant and disposal of spent fuel. In Finland, Fortum has given a guarantee on behalf of TVO to the Finnish State Nuclear Waste Management Fund to cover Fortum's part of TVO's uncovered part of the legal liability and for unexpected events. The amount of guarantees is updated every year in June based on the legal liability decided in December the previous year. Due to the yearly update, the amount of guarantees given were EUR 50 million (2016: 38). The guarantee covers the unpaid legal liability due to periodisation as well as risks for unexpected future costs.

In Sweden, Fortum has given guarantees on behalf of FKA and OKG to the Swedish Nuclear Waste Fund to cover Fortum's part of FKA's and OKG's liability. Guarantees for the period of 2015–2017 has been given on behalf of Forsmarks Kraftgrupp AB and OKG AB amounting to SEK 5,393 million (EUR 548 million) at 31 December 2017 (2016: EUR 565 million). There are two types of guarantees given on behalf of Forsmark Kraftgrupp AB and OKG AB. The Financing Amount is given to compensate for the current deficit in the Nuclear Waste Fund, assuming that no further nuclear waste fees are paid in. This deficit is calculated as the difference between the expected costs and the funds to cover these costs at the time of the calculation. The Supplementary Amount constitutes a guarantee for deficits that can arise as a result of unplanned events. The Financing Amount given by Fortum on behalf of Forsmark Kraftgrupp AB and OKG AB was SEK 3,843 million (EUR 391 million) and the Supplementary Amount was SEK 1,550 million (EUR 157 million) at 31 December 2017.

38 39 40

Investor information

Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

36 Legal actions and official proceedings

36.1 Group companies

Tax cases in Finland

No tax cases with material impact in Finland.

Tax cases in Sweden

Cases related to Swedish interest deductions

Fortum received income tax assessments in Sweden for the years 2009, 2010, 2011 and 2012 in December 2011, December 2012, December 2013 and October 2014, respectively. According to the tax authorities, Fortum would have to pay additional income taxes for the years 2009, 2010, 2011 and 2012 for the reallocation of loans between the Swedish subsidiaries in 2004–2005. In June 2017 the Administrative Court of Appeal in Stockholm, Sweden announced its decision relating to the income tax assessments for 2009–2012. The decisions were unfavourable to Fortum. Fortum disagrees with the interpretation of the Administrative Court of Appeal and has applied for the right to appeal from the Supreme Administrative Court. Due to the unfavourable decisions from the Administrative Court of Appeal, Fortum has booked a tax cost of SEK 1,106 million (EUR 115 million) and interest expense of SEK 69 million (EUR 7 million), in total SEK 1,175 million (EUR 122 million) in the second quarter 2017 results. The additional taxes and interest for 2009–2012 have already been paid in June 2016. Fortum has filed a request to initiate a mutual agreement procedure between Sweden and the Netherlands for the year 2012.

In addition Fortum has received income tax assessments in Sweden for the years 2013, 2014 and 2015 in December 2015, December 2016 and October 2017, respectively. The assessments concerns the loans given in 2013, 2014 and 2015 by Fortum's Dutch financing company to Fortum's subsidiaries in Sweden. The interest income for these loans was taxed in the Netherlands. The tax authorities considers just over a half of the interest relating to each loan as deductible, i.e. deriving from business needs. The rest of the interest is seen as non-deductible. The decision is based on the changes in the Swedish tax regulation in 2013. Fortum considers that the claims are unjustifiable and has appealed the decisions. In May 2017 the Administrative Court in Stockholm, Sweden, announced its decisions relating to the income tax assessment for the year 2013. The decisions were unfavourable to Fortum. Fortum disagrees with the argumentation of the court and has filed an appeal to the Administrative Court of Appeal in Stockholm in July 2017. The cases regarding the year 2014 and the year 2015 are pending before the Administrative Court. In December 2017, the Swedish tax authorities withdrew a part of their claims with respect to the years 2013 and 2015. Therefore, the additional tax claimed by the tax authorities for the year 2013 is currently SEK 239 million (EUR 24 million) and for the year 2015 SEK 186 million (EUR 19 million). For the year 2015 the adjusted amount was confirmed in a new tax assessment ("Obligatoriskt

omprövningsbeslut") issued by the Swedish tax authorities in December 2017. The adjusted amount of additional tax for the year 2013 still needs to be confirmed by the Administrative Court of Appeal, as the additional tax according to the decision of Administrative Court from May 2017 was SEK 273 million (EUR 28 million).

Based on legal analysis supporting legal opinions, no provision has been recognized in the financial statements for the Swedish tax cases regarding the year 2013, 2014 and 2015. If the amounts of additional tax claimed by the tax authority remain final despite the appeals processes, the impact on net profit would be SEK 239 million (EUR 24 million) for the year 2013, SEK 282 million (EUR 29 million) for the year 2014 and SEK 186 million (EUR 19 million) for the year 2015. The additional taxes and interest for 2013, in total SEK 282 million (EUR 29 million) have been paid in accordance with the decision from the Administrative Court in July 2017 and based on the legal opinion booked as receivables.

Cases relating to the Swedish hydro real estate tax

Fortum Sverige AB has received a favourable decision from the Administrative Court in Stockholm in June 2017 relating to the Swedish hydro real estate tax. According to the decision, the increased property tax on hydro power generated electricity comprises unlawful state aid (i.e. the tax law is in conflict with EU legislation) and the property tax shall be set as 0.5 percent of the tax assessment value. The decision relates to the years 2009–2014 and the disputed amount for the five years totalled SEK 508 million tax, SEK 12 million interest (EUR 52 million tax, EUR 1 million interest). The amount has been repaid to Fortum in July 2017 and it has been booked in other current liabilities, not yet as income. The tax authorities has appealed the decision and the case is pending before the Administrative Court of Appeal.

Tax cases in Belgium

Fortum has received income tax assessments in Belgium for the years 2008, 2009, 2010 and 2011. The tax authorities disagree with the tax treatment of Fortum EIF NV. Fortum finds the tax authorities' interpretation not to be based on the local regulation and has appealed the decisions. The court of First instance in Antwerpen rejected Fortum's appeal for the years 2008 and 2009 in June 2014. Fortum found the decision unjustifiable and appealed to the Court of Appeal.

In January 2016 Fortum received a favourable decision from the Court of Appeal in which the Court disagreed with the tax authorities' interpretation and the tax assessment for 2008 was nullified. The tax authorities disagreed with the decision and filed an appeal to Hof van Cassatie (Supreme Court) in March 2016. Fortum's appeals concerning 2009–2011 are still pending and Fortum expects the remaining years to follow the final decision for 2008. Based on legal analysis and a supporting legal opinion, no provision has been accounted for in the financial statements. The amount of additional tax claimed is approximately EUR 36 million for the year 2008, approximately EUR 27 million for the year 2009, approximately EUR 15 million for the year 2010 and approximately EUR 21 million for the year 2011. The tax has already been paid.

In November 2015 Fortum received an income tax assessment from the Belgian tax authorities for the year 2012. The tax authorities disagree with the tax treatment of Fortum Project Finance NV. Fortum finds the tax authorities' interpretation not to be based on the local regulation and has filed an objection against the tax adjustment. In line with treatment of the cases concerning 2008–2011, no provision has been accounted for in the financial statements. The amount of additional tax claimed is approximately EUR 15 million for the year 2012. The tax has already been paid.

For critical accounting estimates regarding uncertain tax positions, see Note 27 Income taxes in balance sheet. See also Note 12 Income tax expense.

In addition to the litigations described above, some Group companies are involved in other routine tax and other disputes incidental to their normal conduct of business. Based on the information currently available, management does not consider the liabilities arising out of such litigations likely to be material to the Group's financial position.

36.2 Associated companies

In Finland, Fortum is participating in the country's fifth nuclear power plant unit, Olkiluoto 3 (OL3), through the shareholding in Teollisuuden Voima Oyj (TVO) with an approximately 25% share representing some 400 MW in capacity. Most of the construction work for the plant unit have been completed. The installation of the electrical systems, the instrumentation and control system (I&C), and mechanical systems is still in progress.

In April 2016 TVO submitted to the Ministry of Economic Affairs and Employment (TEM) an application for an operating license. The simulator training for operating personnel commenced in February 2017. The cold functional testing to ensure the integrity of the primary circuit was completed in July. The hot functional testing phase started in December. In the hot functional tests which will take several months, the OL3 plant systems are tested as a whole, but without the fuel.The first phase of the turbine plant commissioning is completed. The de-preservation that started at the turbine plant in January 2017 has been completed, and the plant is ready for the hot functional testing.

OL3 was procured as a fixed-price turnkey project from a consortium (Supplier) formed by AREVA GmbH, AREVA NP SAS and Siemens AG. As stipulated in the plant contract, the consortium companies have joint and several liability for the contractual obligations. In accordance with the Supplier's schedule, updated in October 2017, regular electricity production in the unit was to commence in May 2019. The Supplier's schedule review for the project completion had reached a phase where the Supplier confirmed the main milestones. According to the Supplier, the first connection to the grid takes place in December 2018, and the start of regular electricity production will take place in May 2019. According to the Supplier's plant ramp-up program the unit will produce 2–4 TWh of electricity, at varying power levels, during the period of time between the first connection to the grid and the start of regular electricity production.

In December 2008 the OL3 Supplier initiated the International Chamber of Commerce (ICC) arbitration proceedings and submitted a claim concerning the delay and the ensuing costs incurred at the Olkiluoto 3 project. The Supplier has submitted claims to the ICC for an aggregate amount of approximately EUR 3.59 billion, which includes a total amount of approximately EUR 1.58 billion in penalty interest (calculated up to 30 June 2017) and payments allegedly delayed by TVO under the Plant Contract, as well as approximately EUR 132 million of alleged loss of profit.

In 2012, TVO submitted a counter-claim and defence in the matter. In July 2015, TVO updated its quantification estimate of its costs and losses to the amount of approximately EUR 2.6 billion until December 2018, which according to the schedule submitted by the OL3 supplier in September 2014 was the estimated start of regular electricity production of OL3.

In November 2016, the ICC Tribunal made a final and binding partial award. In the partial award, the ICC Tribunal addressed the early period of the project (time schedule, licensing and licencability, and system design). This comprised many of the facts and matters that TVO relies upon in its main claims against the supplier, as well as certain key matters that the supplier relies upon in its claims against TVO. In doing so, the partial award finally resolved the great majority of these facts and matters in favour of TVO, and conversely rejected the great majority of the supplier's contentions in this regard. The partial award did not take a position on the claimed monetary amounts.

The ICC Tribunal made another final and binding partial award in July 2017. This partial award addresses the preparation, submittal, review, and approval of design and licensing documents on the project. This comprises the key facts and matters that the supplier relies upon in its main claims against TVO, as well as certain matters that TVO relies upon in its claims against the Supplier. In doing so, the partial award has finally resolved the great majority of these facts and matters in favour of TVO. Conversely, it has also rejected the great majority of the Supplier's contentions in this regard. Although the partial award did not take a position on the claimed monetary amounts, it has conclusively rejected the analytical method used by the Supplier to support its principal monetary claims against TVO.

The parties received a final and binding partial award also in November 2017. This partial award addresses the execution and construction works and the overall project management of the OL3 EPR project. This comprises many facts and matters that TVO relies upon in its main claim against the Supplier, as well as certain matters that the Supplier relies upon in its claims against TVO. The partial award finally resolves many of the facts and matters concerning the execution of the construction works in favour of TVO and notably defers many of the issues raised by TVO including the Supplier's project management for determination in a subsequent award.

The arbitration proceeding is still going on and it now proceeds towards the final award where the Tribunal will declare liabilities to pay compensation.

In 2016, Areva announced a restructuring of its business. The restructuring plan involved a transfer of the operations of Areva NP to a company called NEW NP, the majority owner of which is going to be EDF. The transaction was completed at the end of 2017, and thereafter 75.5 percent of the shares of New NP were transferred to EDF. New NP was renamed Framatome as of January 2018. OL3 EPR project and the means required to complete the project, as well as certain other liabilities will remain within AREVA NP and AREVA GmbH, within the scope of AREVA SA. In January 2017, the EU Commission made a decision

Operating and financial review	Consolidated	financial statements	Notes	Key figures 2008–2017	Parent company financial statements	shown on the balance sheet	Proposal for the use of the profit	Auditor's report	Operational key figures Quarterly financial information	Investor information
Basis of preparation		Risks	Income statement		Balance sheet	Off balance sheet items	Group structure and related parties

on the state aid, and in May 2017, the Commission accepted the merger. In September 2017, TVO filed an appeal to the General Court of the European Union of the Commission decision on French state aid to the AREVA Group. TVO requires that the restructuring of the French nuclear industry will not compromise the completion of the OL3 EPR project within the Supplier's schedule and that all liabilities of the plant contract are respected.

37 Events after the balance sheet date

On 8 January 2018, E.ON SE announced that it had decided to tender its 170,720,340 Uniper SE shares (corresponding to 46.65% of shares and voting rights) into Fortum's public takeover offer. Furthermore, E.ON announced that the members of the E.ON Board of Management who have until now held Uniper shares privately will also tender all of their shares to Fortum under the voluntary public takeover offer.

38 Acquisitions and disposals

38.1 Acquisitions

EUR million	2017	2016
Gross investments in shares in subsidiary companies	982	813
Gross investments in shares in associated companies and joint ventures	135	17
Gross investments in available for sale financial assets	8	14
Gross investments in shares	1,125	844

Uniper investment

38.1.1 Acquisitions of subsidiary companies 2017

In January 2017 Fortum completed the acquisition of 100% of the shares in three wind power companies from the Norwegian company Nordkraft. The transaction consists of the Nygårdsfjellet wind farm, which is already operational, as well as the fully-permitted Ånstadblåheia and Sørfjord projects. Fortum has started the construction of the Ånstadblåheia and Sørfjord projects, expected to be commissioned in 2018 and 2019. When built the installed capacity of the three wind farms would total approximately 170 MW.

Fortum started a redemption process for the remaining shares of Ekokem Corporation (renamed as Fortum Waste Solution Oy) in October 2016. The process was finalized in March 2017 after which Fortum owns 100% of the shares in the company.

On 4 August Fortum concluded the restructuring of the ownership in Hafslund together with the City of Oslo. Fortum sold its 34.1% stake in Hafslund ASA to the City of Oslo. Fortum acquired 100% of Hafslund Markets AS, 50% of Hafslund Varme AS (renamed as Fortum Oslo Varme AS) including the City of Oslo's waste-to-energy company Klemetsrudanlegget AS (renamed as Fortum Oslo Varme KEA AS) and 10% of Hafslund Produksjon Holding AS. The total debt-free price of the acquisition was approximately EUR 940 million.

The combined net cash investment of the transactions, including the dividend received in May 2017, was approximately EUR 230 million.

Hafslund Markets and Fortum Oslo Varme are consolidated into Fortum Group from 1 August 2017. Hafslund Markets is consolidated as a part of the Consumer Solutions segment. Fortum has operational responsibility of Fortum Oslo Varme, which is consolidated as a subsidiary with 50% non-controlling interest into the results of City Solutions segment. Hafslund Produksjon Holding is treated as an

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

associated company and reported in the Generation segment. The initial goodwill from the purchase price allocations, prepared based on the 31 July balance sheets, is EUR 215 million for Hafslund Markets and EUR 69 million for Fortum Oslo Varme respectively. The initial purchase price allocation is still preliminary as all valuation effects, especially regarding the provisions, have not been finalised.

The impact from Hafslund acquisition on 2017 sales in the Consumer Solutions segment was EUR 344 million, comparable operating profit EUR 13 million and comparable EBITDA EUR 22 million. The impact on 2017 sales in the City Solutions segment was EUR 56 million, comparable operating profit EUR 15 million and comparable EBITDA EUR 29 million.

EUR million	Hafslund Markets AS	Fortum Oslo Varme AS	Other	Fortum total
Consideration paid in cash	589	152	70	811
Unpaid consideration	0	0	9	9
Total consideration	589	152	79	820
Fair value of the acquired assets	374	84	77	535
Translation difference	1	0	2	2
Goodwill	215	69	1	286

In December 2017 Fortum acquired three solar power companies from Hevel Group. The Pleshanovskaya (10 MW) and Grachevskaya (10 MW) solar power plants are located in the Orenburg region and the Bugulchanskaya (15 MW) solar power plant in the Republic of Bashkortostan. All three power plants are operational and will receive capacity Supply Agreement (CSA) payments for approximately 15 years after commissioning at an average CSA price corresponding to approximately EUR 430/MWh. The plants were commissioned in 2016 and 2017.

		Hafslund Markets AS			Fortum Oslo Varme AS		Fortum total 1)
EUR million	Acquired book values	Allocated fair value	Total fair value	Acquired book values	Allocated fair value	Total fair value	Acquired book values	Allocated fair value	Total fair value
Fair value of the acquired net identifiable assets
Cash and cash equivalents	158		158	37		37	201		201
Intangible assets	12	284	296	0		0	17	334	352
Property, plant and equipment	5		5	526	207	733	604	208	811
Other assets	179		179	21		21	206		206
Deferred tax liabilities	-19	-68	-88	-21	-50	-71	-46	-129	-175
Other non-interest bearing liabilities	-176		-176	-39		-39	-217		-217
Interest-bearing liabilities	0		0	-445		-445	-489		-489
Net identifiable assets	158	216	374	79	157	237	275	413	688
Non-controlling interests	0	0	0	51	102	153	51	102	153
Total	158	216	374	29	55	84	225	310	535

1) Including acquired book values and allocated fair values from the acquisition of Norwegian wind park companies, Russian solar power companies as well as other smaller acquisitions.

EUR million	Hafslund Markets AS	Fortum Oslo Varme AS	Other	Fortum total
Gross investment
Purchase consideration settled
in cash	589	152	70	811
Cash and cash equivalents in
acquired subsidiaries	158	37	6	201
Translation difference	1	0	2	3
Cash outflow in acquisition	432	116	65	613
Unpaid consideration			9	9
Interest-bearing debt in acquired
subsidiaries		445	44	489
of which loans given by Fortum		-213		-213
Transaction adjustments to debt-like
items	54	26	0	80
Translation difference	0	1	2	4
Total gross investment in acquired
subsidiaries	486	375	121	982

38.1.2 Acquisitions of subsidiary companies 2016

The acquisition of approximately 81% of the shares in the Nordic circular economy company Ekokem Corporation (renamed as Fortum Waste Solutions Oy) was finalised on 31 August 2016. The debt and cash-free purchase price for 100% of the company was approximately EUR 680 million. Fortum also made a tender offer valid until end of September to the remaining shareholders at the same price of 165 EUR per share. By the end of December Fortum's total shareholding was 98.2%.

The initial purchase price allocation as of 31 August 2016 was finalised during 2017. No material changes were made to the initial purchase price allocation.

Fortum Waste Solutions Oy is fully consolidated into Fortum Group from the end of August 2016 and has been integrated as a business area into the City Solutions segment. The comparative numbers in the financial statement include the income statement effect of Fortum Waste Solutions from 1 September 2016 onwards. The consolidated sales for 2017 included in the City Solutions segment was EUR 293 million (Sept to Dec 2016: 105), comparable operating profit EUR 24 million (Sept to Dec 2016: 7) and comparable EBITDA EUR 74 million (Sept to Dec 2016: 26).

On 8 January 2016, Fortum made a public tender offer in Poland to purchase all shares in Grupa DUON S.A. (renamed as Fortum Markets Polska S.A.), an electricity and gas sales company listed on the Warsaw Stock Exchange. During the subscription period that ended on 26 February 2016 Fortum received subscriptions from shareholders representing altogether 93.35% shares in the company at the offered price PLN 3.85 per share. The remaining shares were purchased from shareholders under the mandatory squeeze-out procedure at the same price per share. In April Fortum obtained 100% of shares in Fortum Markets Polska S.A. and in June the company was delisted.

This financial statement includes the income statement effect of Grupa Duon S.A. group from 1 April 2016 onwards. The consolidated sales for 2017 included in the Consumer Solutions segment was EUR 266 million (April–Dec 2016: 155), comparable operating profit EUR 0 million (April–Dec 2016: 4) and comparable EBITDA EUR 4 million (April-Dec 2016: 8).

The initial purchase price allocation as of 31 March 2016 was finalised during 2017. No material changes were made compared to the information disclosed in the consolidated financial statements for 2016.

Other acquisitions include the shares of Info24 AB and Turebergs Recycling AB. On 1 April 2016 Fortum acquired 100% of the shares in the Swedish IT company Info24, a company specialised in the development of business solutions within the IoT, Internet of Things. On 21 December 2016 Fortum acquired 100% of the shares in Turebergs Recycling AB, a Swedish company with main business in environmental construction, recycling and processing of bottom ash from waste-to-energy plants.

EUR million	Fortum Waste Solutions Oy	Fortum Markets Polska S.A.	Other	Fortum total
Consideration paid in cash	570	106	15	691
Unpaid consideration	10		3	13
Total consideration	580	106	17	703
Fair value of the acquired assets	440	86	17	543
Translation difference	0	2	0	2
Goodwill	141	22	0	163

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation Risks Income statement Balance sheet Off balance sheet items Group structure and related parties

		Fortum Waste Solutions Oy			Fortum Markets Polska S.A.		Fortum total 1)
EUR million	Acquired book values	Allocated fair value	Total fair value	Acquired book values	Allocated fair value	Total fair value	Acquired book values	Allocated fair value	Total fair value
Fair value of the acquired net identifiable assets
Cash and cash equivalents	17		17	8		8	26		26
Tangible and intangible assets	315	387	702	49	34	83	366	438	804
Other assets	67		67	37		37	108		108
Deferred tax liabilities	-34	-77	-112	-1	-7	-7	-35	-88	-123
Other non-interest bearing liabilities	-117		-117	-16		-16	-135		-135
Interest-bearing liabilities	-117		-117	-19		-19	-136		-136
Net identifiable assets	131	309	441	58	28	86	194	351	545
Non-controlling interests	1		1	1		1	2		2
Total	131	309	440	58	28	86	192	351	543

1) Including acquired book values and allocated fair values from the acquisition of Info24 AB and Turebergs Recycling AB.

EUR million	Fortum Waste Solutions Oy	Fortum Markets Polska S.A.	Other	Fortum total
Gross investment
Purchase consideration settled in cash	570	106	15	691
Cash and cash equivalents in acquired
subsidiaries	17	8	1	26
Cash outflow in acquisition	553	98	14	664
Unpaid consideration	10		3	13
Interest-bearing debt in acquired
subsidiaries	117	19	0	136
Total gross investment in acquired
subsidiaries	680	117	17	813

38.1.3 Other acquisitions

In April 2017, Fortum and RUSNANO, a Russian state-owned development company, signed a 50/50 investment partnership in order to secure the possibility of a Russian Capacity Supply Agreement (CSA) wind portfolio in Russia. The wind investment fund 50/50 owned by Fortum and RUSNANO was awarded 1,000 MW wind capacity in Russian wind CSA auction in June 2017. The investments decisions will be made on a case-by-case basis within the total mandate of the wind investment fund. Fortum's equity stake in the wind investment fund totals a maximum of RUB 15 billion (currently approximately EUR 220 million). The amount is invested over time (within approximately 5 years) as it is subject to positive investment decisions. During 2017 Fortum invested EUR 43 million in the fund.

In October 2017 Fortum and SUENKO established a joint venture, JSC Ural-Siberian Heat and Power Company (YUSTEK), for the heat supply in Tyumen, Russia. Fortum will continue as CHP owner and selling heat to YUSTEK.

38.2 Disposals

EUR million	2017	2016
Gross divestments of shares in subsidiary companies	55	127
Gross divestments of shares in associated companies and joint ventures	687	34
Gross divestments of shares	742	161

38.2.1 Disposals of subsidiary companies

In May 2017, Fortum agreed to sell 100% of its shares in the Polish gas infrastructure company DUON Dystrybucja S.A. to Infracapital, the infrastructure investment arm of M&G Investments. DUON Dystrybucja S.A. is transporting grid gas and LNG in Poland. The company was acquired as part of the acquisition of the electricity and gas sales company Grupa DUON S.A. (currently Fortum Markets Polska S.A.) in 2016. Fortum booked in 2017 a one-time pre-tax sales gain in Consumer Solution segment totalling EUR 2 million.

In November 2017 Fortum sold its 51% stake in the Norwegian electricity sales company Røyken Kraft AS to the minority shareholder Røyken Energiverk AS. The company was acquired as part of the Hafslund Markets AS group in the restructuring of the ownership in Hafslund.

In February 2016 Fortum sold its 100% shareholding in its Russian subsidiary OOO Tobolsk CHP to SIBUR, Russia's largest integrated gas processing and petrochemicals company. OOO Tobolsk CHP owns and operates the combined heat and power (CHP) plant in the city of Tobolsk in Western Siberia. Fortum booked a one-time pre-tax sales gain in Russia segment totalling EUR 35 million.

Divestments of shares in subsidiaries - Impact on financial position

EUR million	2017	2016
Gross divestments of shares in subsidiary companies	55	127
Liquid funds in sold subsidiaries	5	10
Sales price including liquid funds in sold subsidiaries	60	137
Intangible assets and property, plant and equipment	58	92
Other non-current and current assets	6	15
Liquid funds	5	10
Interest-bearing loans	-3	0
Other liabilities and provisions	-7	-15
Net assets divested	59	102
Gain on sale	2	35

38.2.2 Other disposals

On 3 August 2017 Fortum sold its 34.1% stake in Hafslund ASA to the City of Oslo in connection with the restructuring of the ownership in Hafslund. Fortum booked a one-time tax-free sales gain in Other segment in the 2017 results totalling approximately EUR 324 million including transaction costs, corresponding EUR 0.36 earnings per share.

In March 2016 Fortum concluded the divestment of its 51.4% shareholding in the Estonian natural gas import, sales and distribution company AS Eesti Gaas. Fortum sold its shareholding to Trilini Energy OÜ. The sale resulted in a one-time pre-tax sales gain in City Solutions segment totalling EUR 11 million.

39 Related party transactions

39.1 The Finnish State and companies owned by the Finnish State

At the end of 2017, the Finnish State owned 50.76% of the Company's shares. The Finnish Parliament has authorised the Government to reduce the Finnish State's holding in Fortum Corporation to no less than 50.1% of the share capital and voting rights.

All transactions between Fortum and other companies owned by the Finnish State are on arm's length basis.

On 31 August 2016 Fortum finalised the acquisition of Ekokem Corporation with the four biggest owners, representing approximately 81% of the shares. The Finnish State was among the biggest owners with a 34%-shareholding in Ekokem. For more information see Note 38 Acquisitions and disposals.

39.2 Board of Directors and Fortum Executive Management

The key management personnel of the Fortum Group are the members of Fortum Executive Management and the Board of Directors. Fortum has not been involved in any material transactions with members of the Board of Directors or Fortum Executive Management. No loans exist to any member of the Board of Directors or Fortum Executive Management at 31 December 2017. The total compensation (including pension benefits and social costs) for the key management personnel for 2017 was EUR 9 million (2016: 10).

See Note 10 Employee benefits for further information on the Board of Directors and Fortum Executive Management remuneration and shareholdings.

39.3 Associated companies and joint ventures

In the ordinary course of business Fortum engages in transactions on commercial terms with associated companies and other related parties, which are on same terms as they would be for third parties, except for some associates as discussed later in this note.

Fortum owns shareholdings in associated companies and joint ventures which in turn own hydro and nuclear power plants. Under the consortium agreements, each owner is entitled to electricity in proportion to its share of ownership or other agreements. Each owner is liable for an equivalent portion of costs regardless of output. These associated companies are not profit making, since the owners purchase electricity at production cost including interest costs and production taxes.

For further information on transactions and balances with associated companies and joint ventures, see Note 18 Participations in associated companies and joint ventures.

39.4 Pension fund

The Fortum pension funds in Finland and Sweden are stand-alone legal entities which manage pension assets related to the part of the pension coverage in Sweden and Finland. The assets in the pension fund in Finland include Fortum shares representing 0.04% (2016: 0.04%) of the company's outstanding shares. Real estate and premises owned by the Finnish pension fund have been leased to Fortum. Fortum has not paid contributions to the pension funds in 2017 nor in 2016. Real estate mortgages have also been given for loan from Fortum's Finnish pension fund for EUR 41 million (2016: 41).

40 Subsidiaries by segment on 31 December 2017

C = City Solutions 1) New company
CS = Consumer Solutions 2) Shares held by the parent company
G = Generation
R = Russia
O = Other

			Group
Company name	Domicile	Segment	holding, %
Ekopartnerit Turku Oy	Finland	C	51.0
Fortum Asiakaspalvelu Oy	2) Finland	CS	100.0
Fortum Assets Oy	Finland	O	100.0
Fortum C&H Oy	Finland	O	100.0
Fortum Environmental Construction Oy	Finland	C	100.0
Fortum Growth Oy	Finland	O	100.0
Fortum Heat and Gas Oy	2) Finland	C, O	100.0
Fortum Markets Oy	2) Finland	CS	100.0
Fortum Norm Oy	2) Finland	O	100.0
Fortum Power and Heat Holding Oy	Finland	G	100.0
Fortum Power and Heat Oy	2) Finland	C, G, O	100.0
Fortum Real Estate Oy	2) Finland	O	100.0
Fortum Waste Solutions Oy	2) Finland	C	100.0
Kiinteistö Oy Espoon Energiatalo	Finland	O	100.0
Koillis-Pohjan Energiantuotanto Oy	Finland	G	100.0
Kotimaan Energia Oy	1) Finland	CS	100.0
Oy Pauken Ab	Finland	O	100.0
Oy Tersil Ab	Finland	O	100.0
Oy Tertrade Ab	Finland	O	100.0
Vindin Böle Ab/Oy	1) Finland	O	100.0
Vindin Kalax Ab/Oy	1) Finland	O	100.0
Vindin Molpe Ab/Oy	1) Finland	O	100.0
Vindin Pjelax Ab/Oy	1) Finland	O	100.0
Vindin Poikel Norra Ab/Oy	1) Finland	O	100.0
Vindin Pörtom Ab/Oy	1) Finland	O	100.0
Fortum Project Finance N.V.	2) Belgium	O	100.0
Fortum Energi A/S	Denmark	CS	100.0
Fortum Waste Solutions A/S	Denmark	C	100.0
Fortum Waste Solutions OW A/S	Denmark	C	100.0
AS Anne Soojus	Estonia	C	60.0

Company name	Domicile	Segment	Group holding, %
AS Fortum Tartu	Estonia	C	60.0
AS Tartu Joujaam	Estonia	C	60.0
AS Tartu Keskkatlamaja	Estonia	C	60.0
Fortum CFS Eesti OU	Estonia	O	100.0
Fortum Eesti AS	Estonia	C	100.0
Fortum France S.A.S	France	O	100.0
Fortum Deutschland SE	1) Germany	O	100.0
Fortum Service Deutschland GmbH	Germany	C	100.0
Fortum Carlisle Limited	Great Britain	C	100.0
Fortum Energy Ltd	Great Britain	O	100.0
Fortum Glasgow Limited	Great Britain	C	100.0
Fortum O&M(UK) Limited	Great Britain	C	100.0
IVO Energy Limited	Great Britain	G	100.0
Fortum Insurance Ltd	Guernsey	O	100.0
Fortum Amrit Energy Private Limited	India	O	100.0
Fortum FinnSurya Energy Private Limited	India	O	100.0
Fortum India Private Limited	India	O	100.0
Fortum Solar India Private Limited	India	O	100.0
Fortum Finance Ireland Designated Activity Company	2) Ireland	O	100.0
Fortum P&H Ireland Limited	1) Ireland	O	100.0
Fortum Participation Ltd	1) Ireland	O	100.0
Fortum Jelgava, SIA	Latvia	C	100.0
Fortum Latvia SIA	Latvia	C	100.0
UAB Fortum Heat Lietuva	Lithuania	C	100.0
UAB Fortum Klaipeda	Lithuania	C	96.0
UAB Joniskio energija	Lithuania	C	66.2
UAB Svencioniu energija	Lithuania	C	50.0
Fortum Investment SARL	Luxembourg	O	100.0
Fortum Luxembourg SARL	Luxembourg	O	100.0
Fortum Forvaltning AS	Norway	O	100.0
Fortum Markets AS	Norway	CS	100.0
Fortum Oslo Varme AS	1) Norway	C	50.0
Fortum Oslo Varme KEA AS	1) Norway	C	50.0
Fortum Waste Solutions Norway AS	Norway	C	100.0
Fredrikstad EnergiSalg AS	1) Norway	CS	100.0
Hafslund Hedging AS	1) Norway	CS	100.0
Hafslund Kundesenter AS	1) Norway	CS	100.0
Hafslund Marked AS	1) Norway	CS	100.0
Hafslund Strøm AS	1) Norway	CS	100.0

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Basis of preparation	Risks	Income statement		Balance sheet	Off balance sheet items Group structure and related parties

Company name	Domicile	Segment	Group holding, %
Hafslund Tellier AS	1) Norway	CS	100.0
Hallingkraft AS	1) Norway	CS	100.0
Mitt Hjem Norge AS	1) Norway	CS	100.0
NorgesEnergi AS	1) Norway	CS	100.0
Nygårdsfjellet Vindpark AS	1) Norway	O	100.0
Oslo Energi AS	1) Norway	CS	100.0
Solvencia AS	1) Norway	CS	100.0
Sørfjord Vindpark AS	1) Norway	O	100.0
Ånstadblåheia Vindpark AS	1) Norway	O	100.0
AMB Energia Sprzedaż Sp. z o.o.	Poland	CS	100.0
Fortum Customer Services Polska Sp. z o.o.	Poland	CS	100.0
Fortum Marketing and Sales Polska S.A.	Poland	CS	100.0
Fortum Markets Polska S.A.	Poland	CS	100.0
Fortum Network Częstochowa Sp. z o.o.	Poland	C	100.0
Fortum Network Płock Sp. z o.o.	Poland	C	100.0
Fortum Network Wrocław Sp. z o.o.	Poland	C	100.0
Fortum Power and Heat Polska Sp. z o.o.	Poland	C, CS	100.0
Fortum Silesia SA	Poland	C	100.0
Fortum Sprzedaż Sp. z o.o.	Poland	CS	100.0
Rejonowa Spółka Ciepłownicza Sp. z o.o.	Poland	C	100.0
Chelyabinsk Energoremont	Russia	R	100.0
Fortum New Generation LLC	1) Russia	R	98.2
LLC Pleshanovskaya Solar power station	1) Russia	R	98.2
LLC Bugulchanskaya Solar power station	1) Russia	R	98.2
LLC Grachevskaya Solar power station	1) Russia	R	98.2
PAO Fortum	Russia	R	98.2
Ural Heat Networks Company Joint Stock Company	Russia	R	98.2
Escandinava de Electricidad S.L.U	1) Spain	CS	100.0
Blybergs Kraftaktiebolag	Sweden	G	66.7
Brännälven Kraft AB	Sweden	G	67.0
Bullerforsens Kraft Aktiebolag	Sweden	G	88.0
Energibolaget i Sverige Holding AB	1) Sweden	CS	100.0
Energikundservice Sverige AB	Sweden	CS	100.0
Fortum 1 AB	Sweden	R	100.0
Fortum Fastigheter AB	Sweden	O	100.0
Fortum Markets AB	Sweden	CS	100.0

			Group
Company name Fortum Produktionsnät AB	Domicile Sweden	Segment G	holding, % 100.0
Fortum Sweden AB	2) Sweden	O	100.0
Fortum Sverige AB	Sweden	C, G, O	100.0
Fortum Waste Solutions AB	Sweden	C	100.0
Fortum Waste Solutions Holding AB	Sweden	C	100.0
Fortum Vind Norr AB	Sweden	O	100.0
Göta Energi AB	1) Sweden	CS	100.0
Hafslund Energi AB	1) Sweden	CS	100.0
Mellansvensk Kraftgrupp Aktiebolag	Sweden	G	86.9
Nordgroup Waste Management AB	Sweden	C	100.0
Oreälvens Kraftaktiebolag	Sweden	G	65.0
SverigesEnergi Elförsäljning AB	1) Sweden	CS	100.0
Tellier Service AB	1) Sweden	CS	100.0
Turebergs Recycling AB	Sweden	C	100.0
Uddeholm Kraft Aktiebolag	Sweden	G	100.0
VG Power Tools AB	1) Sweden	C	100.0
VG Power Turbo AB	1) Sweden	C	100.0
Värmlandskraft-OKG-delägarna Aktiebolag	Sweden	G	73.3
FB Generation Services B.V.	The Netherlands	O	100.0
Fortum 2 B.V.	The Netherlands	O	100.0
Fortum 3 B.V.	The Netherlands	O	100.0
Fortum Charge & Drive B.V.	The Netherlands	O	100.0
Fortum Finance B.V.	The Netherlands	O	100.0
Fortum Holding B.V.	2) The Netherlands	C, G, O	100.0
Fortum Hydro B.V.	The Netherlands	O	100.0
Fortum India B.V.	The Netherlands	O	100.0
Fortum Power Holding B.V.	The Netherlands	O	100.0
Fortum Russia B.V.	The Netherlands	R	100.0
Fortum Russia Holding B.V.	The Netherlands	O	100.0
Fortum SAR B.V.	The Netherlands	O	100.0
Fortum Star B.V.	The Netherlands	O	100.0
Fortum Sun B.V.	The Netherlands	O	100.0
Fortum Wave Power B.V.	The Netherlands	O	100.0
PolarSolar B.V.	The Netherlands	O	100.0
RPH Investment B.V.	The Netherlands	R	100.0

Financial key figures

Comparability of information presented in tables and graphs

Fortum announced the sale of Swedish Distribution business in March 2015. After the divestment of the Swedish Distribution business Fortum has no electricity distribution operations and therefore Distribution segment was treated as discontinued operations in 2015, with restatement of year 2014, according to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Investor information

Information in the tables and graphs presented for year 2012 or earlier is not restated due to the adoption of IFRS 10 and IFRS 11. Adoption of standards influences treatment of Fortum's holding in AB Fortum Värme samägt med Stockholms stad (Fortum Värme) in the consolidated financial statements. From 1 January 2014 onwards Fortum Värme is treated as a joint venture and thus consolidated with equity method. Before the change the company was consolidated as a subsidiary with 50% minority interest.

											Change
EUR million or as indicated	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	17/16, %
Income statement
Sales total Fortum	5,636	5,435	6,296	6,161	6,159	5,309	4,751	3,702	3,632	4,520	24
Sales continuing operations							4,088	3,459	3,632	4,520	24
EBITDA total Fortum 1)	2,478	2,292	2,271	3,008	2,538	2,129	3,954	4,640	1,006	1,623	61
EBITDA continuing operations							1,673	196	1,006	1,623	61
Comparable EBITDA total Fortum	2,360	2,398	2,396	2,374	2,416	1,975	1,873	1,265	1,015	1,275	26
Comparable EBITDA continuing operations							1,457	1,102	1,015	1,275	26
Operating profit total Fortum	1,963	1,782	1,708	2,402	1,874	1,508	3,428	4,245	633	1,158	83
- of sales %	34.8	32.8	27.1	39.0	30.4	28.4	72.2	114.7	17.4	25.6
Operating profit continuing operations							1,296	-150	633	1,158	83
- of sales %							31.7	-4.3	17.4	25.6
Comparable operating profit total Fortum	1,845	1,888	1,833	1,802	1,752	1,403	1,351	922	644	811	26
Comparable operating profit continuing operations							1,085	808	644	811	26
Profit before income tax total Fortum	1,850	1,636	1,615	2,228	1,586	1,398	3,360	4,088	595	1,111	87
- of sales %	32.8	30.1	25.7	36.2	25.8	26.3	70.7	110.4	16.4	24.6
Profit before income tax continuing operations							1,232	-305	595	1,111	87
- of sales %							30.1	-8.8	16.4	24.6
Profit for the period total Fortum	1,596	1,351	1,354	1,862	1,512	1,212	3,161	4,142	504	882	75
- of which attributable to owners of the parent	1,542	1,312	1,300	1,769	1,416	1,204	3,154	4,138	496	866	75
Profit for the period continuing operations							1,089	-228	504	882	75
- of which attributable to owners of the parent							1,081	-231	496	866	75

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Financial key figures	Share key figures		Segment key figures	Definitions of key figures

											Change
EUR million or as indicated Financial position and cash flow	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	17/16, %
Capital employed total Fortum	15,911	15,350	16,124	17,931	19,420	19,183	17,918	19,870	18,649	18,172	-3
Interest-bearing net debt	6,179	5,969	6,826	7,023	7,814	7,793	4,217	-2,195	-48	988	2,158
Interest-bearing net debt without Värme financing						6,658	3,664	N/A	N/A	N/A
Capital expenditure and gross investments in shares total Fortum	2,624	929	1,249	1,482	1,574	1,020	843	669	1,435	1,815	26
- of sales %	46.6	17.1	19.8	24.1	25.6	19.2	17.7	18.1	39.5	40.2
Capital expenditure and gross investments in shares continuing operations							695	625	1,435	1,815	26
Capital expenditure total Fortum	1,108	862	1,222	1,408	1,558	1,005	774	626	591	690	17
Capital expenditure continuing operations							626	582	591	690	17
Net cash from operating activities total Fortum	2,002	2,264	1,437	1,613	1,382	1,548	1,762	1,381	621	993	60
Net cash from operating activities continuing operations							1,406	1,228	621	993	60

Key ratios
Return on capital employed total Fortum, %	15.0	12.1	11.6	14.8	10.2	9.0	19.5	22.7	4.0	7.1
Return on shareholders' equity total Fortum, %	18.7	16.0	15.7	19.7	14.6	12.0	30.0	33.4	3.7	6.6
Interest coverage total Fortum	9.4	12.4	13.7	10.5	7.6	6.7	19.9	27.6	4.6	8.7
Interest coverage including capitalised borrowing costs total Fortum	8.6	10.3	10.0	8.5	5.7	5.3	15.7	21.5	4.1	7.8
Funds from operations/interest-bearing net debt total Fortum, %	34.1	37.6	20.5	21.5	19.9	18.8	42.9	-59.7	-1,503.4	83.9
Funds from operations/interest-bearing net debt without Värme financing
total Fortum, %						22.1	49.3	N/A	N/A	N/A
Gearing, %	73	70	78	69	73	77	39	-16	0	7
Comparable net debt/EBITDA total Fortum	2.6	2.5	2.8	3.0	3.2	3.9	2.3	-1.7	0.0	0.8
Comparable net debt/EBITDA without Värme financing						3.4	2.0	N/A	N/A	N/A
Equity-to-assets ratio, %	41	43	40	44	43	43	51	61	62	61

Other data
Dividends	888	888	888	888	888	977	1,155	977	977	977 2)	0
Research and development expenditure	27	30	30	38	41	49	41	47	52	53	2
- of sales %	0.5	0.5	0.5	0.6	0.7	0.9	1.0	1.4	1.4	1.2
Average number of employees total Fortum	14,077	13,278	11,156	11,010	10,600	9,532	8,821	8,193	7,994	8,507
Average number of employees continuing operations							8,329	8,009	7,994	8,507

1) EBITDA is defined as Operating profit + Depreciation and amortisation.

2) Board of Directors' proposal for the planned Annual General Meeting on 28 March 2018.

See Definitions of key figures.

Financial key figures Share key figures Segment key figures Definitions of key figures

Share key figures

											Change
EUR million or as indicated Data per share	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	17/16 %
Earnings per share total Fortum	1.74	1.48	1.46	1.99	1.59	1.36	3.55	4.66	0.56	0.98	75
Earnings per share continuing operations							1.22	-0.26	0.56	0.98	75
Earnings per share discontinued operations	-	-	-	-	-	-	2.33	4.92	-	-
Diluted earnings per share total Fortum	1.74	1.48	1.46	1.99	1.59	1.36	3.55	4.66	0.56	0.98	75
Diluted earnings per share continuing operations							1.22	-0.26	0.56	0.98	75
Diluted earnings per share discontinued operations	-	-	-	-	-	-	2.33	4.92	-	-
Cash flow per share total Fortum	2.26	2.55	1.62	1.82	1.56	1.74	1.98	1.55	0.70	1.12	60
Cash flow per share continuing operations							1.38	1.38	0.70	1.12	60
Equity per share	8.96	9.04	9.24	10.84	11.30	11.28	12.23	15.53	15.15	14.69	-3
Dividend per share	1.00	1.00	1.00	1.00	1.00	1.10	1.10	1.10	1.10	1.10 1)	0
Extra dividend							0.20	-	-	-
Payout ratio, %	57.5	67.6	68.5	50.3	62.9	80.9	36.6	23.6	196.4	112.2 1)
Dividend yield, %	6.6	5.3	4.4	6.1	7.1	6.6	7.2	7.9	7.5	6.7 1)
Price/earnings ratio (P/E)	8.8	12.8	15.4	8.3	8.9	12.2	5.1	3.0	26.1	16.8
Share prices
At the end of the period	15.23	18.97	22.53	16.49	14.15	16.63	17.97	13.92	14.57	16.50
Average	24.79	15.91	19.05	19.77	15.66	15.11	17.89	16.29	13.56	15.28
Lowest	12.77	12.60	17.18	15.53	12.81	13.10	15.13	12.92	10.99	12.69
Highest	33.00	19.20	22.69	24.09	19.36	18.18	20.32	21.59	15.74	18.94

Other data
Market capitalisation at the end of the period, EUR million	13,519	16,852	20,015	14,649	12,570	14,774	15,964	12,366	12,944	14,658
Trading volumes 2)
Number of shares, 1,000 shares	628,155	580,899	493,375	524,858	494,765	465,004	454,796	541,858	611,572	582,873
In relation to weighted average number of shares, %	70.8	65.4	55.5	59.1	55.7	52.3	51.2	61.0	68.8	65.6
Number of shares, 1,000 shares	887,638	888,367	888,367	888,367	888,367	888,367	888,367	888,367	888,367	888,367
Number of shares excluding own shares, 1,000 shares	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
Average number of shares, 1,000 shares	887,256	888,230	888,367	888,367	888,367	888,367	888,367	888,367	888,367	888,367
Diluted adjusted average number of shares, 1,000 shares	887,839	888,230	888,367	888,367	888,367	888,367	888,367	888,367	888,367	888,367

1) Board of Directors' proposal for the Annual General Meeting on 28 March 2018.

2) Trading volumes in the table represent volumes traded on Nasdaq Helsinki. In addition to the Nasdaq Helsinki, Fortum shares were traded on several alternative market places, for example at Boat, Cboe and Turquoise, and on the OTC market as well. In 2017, approximately 61% (2016: 63%) of Fortum's shares were traded on markets other than the Nasdaq Helsinki Ltd.

See Definitions of key figures.

Segment key figures

Consolidated

Operating and

Following the acquisition of the Russian company, PAO Fortum, Fortum changed its segment reporting during 2008. Comparison numbers were restated in 2008.

Fortum renewed its business structure as of 1 March 2014. The reorganisation lead to a change in Fortum's external financial reporting structure as previously separately reported segments Heat and Electricity Sales were combined into one segment: Heat, Electricity Sales and Solutions.

Fortum has applied new IFRS 10 Consolidated financial statements and IFRS 11 Joint arrangements from 1 January 2014. The effect of applying the new standards to Fortum Group financial information relates to AB Fortum Värme samägt med Stockholm Stad (Fortum Värme), that is treated as a joint venture and thus consolidated with equity method from 1 January 2014 onwards. Before the change the company was consolidated as a subsidiary with 50% minority interest.

Fortum announced the sale of Swedish Distribution business in March 2015. After the divestment of the Swedish Distribution business Fortum does not have any distribution operations and therefore Distribution segment has been treated as discontinued operations starting from 2015 with restatement of year 2014, according to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Fortum reorganised its operating structure as of 1 April 2016. The business divisions are: Generation (mainly the former Power and Technology); City Solutions (mainly the former Heat, Electricity Sales and Solutions) and Russia. Because of the minor financial impact, the comparable segment information for 2015 was not restated.

As of 1 March 2017, the City Solutions division was divided into two divisions: City Solutions and Consumer Solutions, both reported as separate reporting segments (see Note 5 Segment reporting). Fortum has restated its 2016 comparison segment reporting figures in accordance with the new organisation structure.

Sales by segment, EUR million	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Generation	2,892	2,531	2,702	2,481	2,415	2,252	2,156	1,722	1,657	1,677
- of which internal	0	254	-281	-24	296	69	85	83	15	15
City Solutions						1,516	1,332	1,187	782	1,015
- of which internal						87	34	-13	1	19
Heat	1,466	1,399	1,770	1,737	1,628
- of which internal	0	23	-8	8	18
Consumer Solutions									668	1,097
- of which internal									2	3
Electricity Sales	1,922	1,449	1,798	900	722
- of which internal	177	67	158	95	55
Russia	489	632	804	920	1,030	1,119	1,055	893	896	1,101
- of which internal	-	-	-	-	-	-	0	0	0	0
Other	83	71	51	108	137	63	58	114	92	102
- of which internal	82	-5	169	115	-66	54	44	75	61	67
Distribution	789	800	963	973	1,070	1,064
- of which internal	10	13	18	15	37	19
Eliminations and Netting of Nord Pool transactions	-2,005	-1,447	-1,792	-958	-843	-706	-513	-458	-463	-470
Total for continuing operations	5,636	5,435	6,296	6,161	6,159	5,309	4,088	3,459	3,632	4,520
Discontinued operations							751	274
Eliminations 1)							-89	-31
Total							4,751	3,702	3,632	4,520

1) Sales to and from discontinued operations.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Financial key figures Share key figures Segment key figures Definitions of key figures

Comparable operating profit by segment, EUR million	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Generation	1,528	1,454	1,298	1,201	1,146	859	877	561	417	478
City Solutions						109	104	108	64	98
Heat	250	231	275	278	271
Consumer Solutions									48	41
Electricity Sales	-33	22	11	27	39
Russia	-92	-20	8	74	68	156	161	201	191	296
Other	-56	-61	-66	-73	-92	-54	-57	-63	-77	-102
Distribution	248	262	307	295	320	332
Comparable operating profit	1,845	1,888	1,833	1,802	1,752	1,403	1,085	808	644	811
Impairment charges							0	-918	27	6
Capital gains and other	85	29	93	284	155	61	305	22	38	326
Changes in fair values of derivatives hedging future cash flow									-65	14
Nuclear fund adjustment									-11	1
Other items affecting comparability 1)	33	-135	-218	316	-33	45	-94	-62
Operating profit, continuing operations	1,963	1,782	1,708	2,402	1,874	1,508	1,296	-150	633	1,158
Discontinued operations							2,132	4,395
Operating profit							3,428	4,245	633	1,158

1) Other items affecting comparability comprise Changes in fair values of derivatives hedging future cash flow and Nuclear fund adjustment.

Comparable EBITDA by segment, EUR million	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Generation	1,625	1,547	1,398	1,310	1,260	1,007	998	680	527	603
City Solutions						211	204	209	186	262
Heat	419	393	462	471	481
Consumer Solutions									55	57
Electricity Sales	-26	28	13	29	40
Russia	-25	55	94	148	189	258	304	267	312	438
Other	-46	-51	-56	-66	-83	-49	-49	-53	-64	-83
Distribution	413	426	485	482	529	548
Total for continuing operations	2,360	2,398	2,396	2,374	2,416	1,975	1,457	1,102	1,015	1,275
Discontinued operations							416	163
Total							1,873	1,265	1,015	1,275

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Financial key figures	Share key figures		Segment key figures	Definitions of key figures

Depreciation and amortisation, EUR million	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Generation	97	93	100	109	114	148	121	118	110	125
City Solutions						102	100	101	121	163
Heat	169	162	187	193	210
Consumer Solutions									7	16
Electricity Sales	7	6	2	2	1
Russia	67	75	86	108	121	150	147	117	123	142
Other	10	10	10	7	9	5	8	10	13	18
Distribution	165	164	178	187	209	216
Total for continuing operations	515	510	563	606	664	621	377	346	373	464
Discontinued operations							150	50
Total							526	395	373	464

Share of profit of associates and joint ventures by segment, EUR million	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Generation	26	-35	-25	3	-12	4	-14	-111	-34	-1
City Solutions						91	88	59	76	80
Heat	12	30	31	19	20
Electricity Sales	5	0	1	2	0
Russia	19	20	8	30	27	46	35	32	38	31
Other	48	-4	28	23	-20	32	37	40	51	38
Distribution	16	10	19	14	8	4
Total for continuing operations	126	21	62	91	23	178	146	20	131	148
Discontinued operations							3	0
Total							149	20	131	148

Capital expenditure by segment, EUR million	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Generation	134	96	97	131	190	179	197	187	196	174
City Solutions						123	86	105	109	170
Heat	408	358	304	297	464
Consumer Solutions									3	7
Electricity Sales	3	1	0	5	1
Russia	256	215	599	670	568	435	340	285	201	152
Other	11	4	9	16	11	12	3	6	83	187
Distribution	296	188	213	289	324	255
Total for continuing operations	1,108	862	1,222	1,408	1,558	1,005	626	582	591	690
Discontinued operations							147	44
Total							774	626	591	690

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information

Gross investments in shares by segment, EUR million	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Generation	0	57	25	17	-	2	2	16	7	90
City Solutions						11	37	23	698	386
Heat	23	1	1	32	10
Consumer Solutions									117	486
Russia	1,492	3	-	24	-	0	27	0	0	125
Other	1	1	1	1	6	2	4	4	22	39
Distribution	0	5	0	-	-	0
Total for continuing operations	1,516	67	27	74	16	15	69	43	844	1,125
Discontinued operations							0	0
Total							69	43	844	1,125

Gross divestments of shares by segment, EUR million	2009	2010	2011	2012	2013	2014	2015	2016	2017
Generation	10	0	3	102	79	67	0	0	0
City Solutions					11	446	27	33	0
Heat	1	52	203	269
Consumer Solutions								1	55
Electricity Sales	-	-	16	2
Russia	-	43	23	-	-	0	0	127	0
Other	2	6	0	0	-	2	-	0	687
Distribution	1	46	323	37	52
Total for continuing operations	14	147	568	410	142	515	27	161	742
Discontinued operations						2,681	6,369
Total						3,196	6,395	161	742

Comparable net assets by segment, EUR million	2015	2016	2017
Generation	5,931	5,815	5,672
City Solutions	2,182	2,873	3,728
Consumer Solutions		154	638
Russia	2,561	3,284	3,161
Other	258	514	276
Total for continuing operations	10,932	12,641	13,474

Fortum is disclosing Comparable net assets instead of Net assets from 2016 onwards. Net assets until 2015 are disclosed below.

Financial key figures Share key figures Segment key figures Definitions of key figures

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information

Net assets by segment, EUR million	2008	2009	2010	2011	2012	2013	2014	2015 1)
Generation	5,331	5,494	5,806	6,247	6,389	6,355	6,001	5,913
City Solutions						2,295	2,112	2,170
Heat	3,468	3,787	4,182	4,191	4,286
Electricity Sales	188	125	210	11	51
Russia	2,205	2,260	2,817	3,273	3,848	3,846	2,597	2,561
Other	796	382	29	208	158	295	496	291
Distribution	3,032	3,299	3,683	3,589	3,889	3,745
Total for continuing operations	15,020	15,347	16,727	17,519	18,621	16,537	11,206	10,934
Net assets related to discontinued operations							2,615	-
Total							13,820	10,934

1) Fortum is disclosing Comparable net assets instead of Net assets from 2016 onwards.

Financial key figures Share key figures Segment key figures Definitions of key figures

Comparable return on net assets by segment, %	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Generation	28.0	26.4	22.3	19.9	18.5	13.8	14.2	9.5	6.9	8.4
City Solutions						8.7	8.7	7.9	5.9	5.5
Heat	7.3	7.6	7.7	7.4	7.0
Consumer Solutions									44.3	11.7
Electricity Sales	-15.3	18.6	9.3	33.5	203.1
Russia	-3.8	0.0	0.7	3.5	2.7	5.2	5.6	8.2	8.0	10.1
Distribution 1)	8.2	8.6	9.3	8.6	8.8	8.8	9.3

1) Classified as discontinued operations from 2014 onwards.

Return on net assets by segment, %	2008	2009	2010	2011	2012	2013	2014	2015 1)
Generation	29.6	24.5	19.5	24.6	18.7	14.5	13.6	-8.5
City Solutions						9.7	19.1	7.7
Heat	8.9	7.9	8.4	9.9	8.8
Electricity Sales	-14.0	28.9	38.4	4.2	152.3
Russia	3.7	0.0	2.4	3.5	3.0	5.2	5.6	8.3
Distribution 2)	8.1	8.7	9.7	13.7	9.1	9.3	73.6

1) Fortum is disclosing Comparable net assets instead of Net assets from 2016 onwards.

2) Classified as discontinued operations from 2014 onwards.

Operating and	Consolidated	Notes	Key figures	Parent company	Proposal for the use of the profit	Auditor's	Operational key figures	Investor
financial review	financial statements		2008–2017	financial statements	shown on the balance sheet	report	Quarterly financial information	information
Financial key figures	Share key figures		Segment key figures	Definitions of key figures

Average number of employees	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Generation	3,591	2,068	1,891	1,873	1,896	1,900	1,685	1,389	1,064	1,036
City Solutions						2,051	1,913	1,458	1,529	1,807
Heat	2,422	2,652	2,482	2,682	2,354
Consumer Solutions									877	1,180
Electricity Sales	766	629	538	510	515
Russia	5,566	6,170	4,555	4,436	4,301	4,245	4,196	4,180	3,814	3,710
Other	510	593	592	607	661	550	536	983	711	774
Distribution	1,222	1,166	1,098	902	873	786
Total for continuing operations	14,077	13,278	11,156	11,010	10,600	9,532	8,329	8,009	7,994	8,507
Discontinued operations							492
Total							8,821

Definitions of key figures

Financial key figures Share key figures Segment key figures Definitions of key figures

EBITDA (Earnings before interest, taxes, depreciation and amortisation)	= Operating profit + depreciation and amortisation	Capital expenditure	= Capitalised investments in property, plant and equipment and intangible assets including maintenance, productivity, growth and investments required by legislation including borrowing costs capitalised during the construction period. Maintenance
Comparable EBITDA	= EBITDA - items affecting comparability - net release of CSA provision		investments expand the lifetime of an existing asset, maintain usage/availability and/or maintains reliability. Productivity investments improve productivity in an existing asset. Growth
Items affecting comparability	= Impairment charges + capital gains and other + changes in fair values of derivatives hedging future cash flow + nuclear fund adjustment		investments' purpose is to build new assets and/or to increase customer base within existing businesses. Legislation investments are done at a certain point of time due to legal requirements.
Comparable operating profit	= Operating profit - items affecting comparability	Gross investments in shares	= Investments in subsidiary shares, shares in associated companies and other shares in available-for-sale financial assets. Investments in subsidiary shares are net of cash and grossed
Impairment charges	= Impairment charges and related provisions (mainly dismantling)		with interest-bearing liabilities in the acquired company.
		Return on shareholders' equity,	= Profit for the year x 100
Capital gains and other	= Capital gains, transaction costs from acquisitions and other	%	Total equity average
Changes in fair values of derivatives hedging future cash flow	= Effects from financial derivatives hedging future cash-flows where hedge accounting is not applied according to IAS 39.	Return on capital employed, %	= Profit before taxes + interest and other financial expenses x 100 Capital employed average
Nuclear fund adjustment	= Effects from the accounting of Fortum's part of the Finnish Nuclear Waste Fund where the asset in the balance sheet cannot exceed the related liabilities according to IFRIC interpretation 5.	Comparable return on net assets, %	= Comparable operating profit + share of profit (loss) in associated companies and joint ventures + adjustment for Share of profit of associated companies and joint ventures x 100 Comparable net assets average
Adjustment for Share of profit of associated companies and joint	= Adjustment for IAS 39 effects, major sales gains and impairment charges	Capital employed	= Total assets - non-interest bearing liabilities - deferred tax liabilities - provisions
ventures Funds from operations (FFO)	= Net cash from operating activities before change in working capital	Comparable net assets	= Non-interest bearing assets + interest-bearing assets related to the Nuclear Waste Fund - non-interest bearing liabilities - provisions (non-interest bearing assets and liabilities do not include finance related items, tax and deferred tax and assets and liabilities from fair valuations of derivatives used for hedging future cash flows)

Operating and financial review	Consolidated financial statements	Notes	Key figures 2008–2017	Parent company financial statements	Proposal for the use of the profit shown on the balance sheet	Auditor's report	Operational key figures Quarterly financial information
Financial key figures		Share key figures	Segment key figures	Definitions of key figures
Interest-bearing net debt		= Interest-bearing liabilities - liquid funds			Average share price		= Amount traded in euros during the period Number of shares traded during the period
Gearing, %		= Interest-bearing net debt Total equity		x 100	Market capitalisation	end of the period	= Number of shares at the end of the period x share price at the
Equity-to-assets ratio, %		= Total equity including non-controlling interests Total assets		x 100	Trading volumes		= Number of shares traded during the period in relation to the weighted average number of shares during the period
	Comparable net debt/EBITDA	= Interest-bearing net debt Comparable EBITDA			Effective income tax rate	= Income tax expense	Profit before income tax
Interest coverage		= Operating profit Net interest expenses			Comparable effective income tax rate		= Income tax expense - effects from tax rate changes and major one time income tax effects
Interest coverage including capitalised borrowing costs		= Operating profit	Net interest expenses - capitalised borrowing costs			gains and losses	Profit before income tax decreased by profits from associated companies and joint ventures as well as tax exempt capital
	Average number of employees		Based on monthly average for the whole period		Taxes borne		= Taxes that a company is obliged to pay to a government, directly or indirectly, on that company's own behalf in respect
Earnings per share (EPS)		= Profit for the period - non-controlling interests	Average number of shares during the period				of an accounting period. Taxes borne include corporate income taxes (excluding deferred taxes), production taxes, employment taxes, taxes on property and cost of indirect
Cash flow per share		= Net cash from operating activities	Average number of shares during the period				taxes. Production taxes include also taxes paid through electricity purchased from associated companies.
Equity per share		= Shareholders' equity	Number of shares at the end of the period		Total tax rate	= Taxes borne profit	Profit before income tax increased by taxes borne in operating
Payout ratio, %		= Dividend per share Earnings per share		x 100	Comparable total tax rate	= Taxes borne	Profit before income tax increased by taxes borne in operating profit and decreased by profits from associated companies
Dividend yield, %		= Dividend per share Share price at the end of the period		x 100	Weighted average applicable		and joint ventures and by tax exempt capital gains or losses = Sum of the proportionately weighted share of profits before
Price/earnings (P/E) ratio		= Share price at the end of the period Earnings per share			income tax rate		taxes of each group operating country multiplied with an applicable nominal tax rate of the respective countries.

Parent company financial statements, Finnish GAAP (FAS)

Income statement

EUR million	Note	2017	2016
Sales	2	73	70
Other income	3	6	8
Employee costs	4	-32	-31
Depreciation, amortisation and write-downs	8	-6	-6
Other expenses		-79	-67
Operating profit		-38	-26
Financial income and expenses	6	823	675
Profit before appropriations		785	649
Group contributions 1)		157	145
Profit before income tax		943	794
Income tax expense	7	-10	-14
Profit for the period		933	780

1) Taxable profits transferred from Finnish subsidiaries.

Balance sheet

EUR million	Note	31 Dec 2017	31 Dec 2016
ASSETS
Non-current assets
Intangible assets	8	10	9
Property, plant and equipment	8	21	7
Shares in Group companies	8	16,725	16,379
Participations in associated companies	8	2	6
Interest-bearing receivables from Group
companies	8	212	717
Interest-bearing receivables from associated
companies	8	15	15
Other non-current assets	8	0	0
Derivative financial instruments	13, 14	242	344
Deferred tax assets		0	6
Total non-current assets		17,226	17,484
Current assets
Other current receivables from Group companies	9	173	155
Other current receivables from associated
companies	9	0	0
Derivative financial instruments	13, 14	132	127
Other current receivables	9	14	45

EUR million	Note	31 Dec 2017	31 Dec 2016
Deposits and securities (maturity over three months)		714	3,473
Cash and cash equivalents		2,792	1,463
Liquid funds		3,506	4,935
Total current assets		3,825	5,263
Total assets		21,052	22,746

EQUITY
Shareholders' equity	10
Share capital		3,046	3,046
Share premium		2,822	2,822
Hedging reserve		-11	-23
Retained earnings		4,249	4,447
Profit for the period		933	780
Total shareholders' equity		11,038	11,072

Provisions for liabilities and charges		0	1

LIABILITIES
Non-current liabilities
External interest-bearing liabilities	11, 13, 14	3,448	4,018
Interest-bearing liabilities to Group companies		3,290	2,323
Interest-bearing liabilities to associated companies	11	285	273
Derivative financial instruments	13, 14	94	124
Other non-current liabilities		44	61
Total non-current liabilities		7,160	6,799

Current liabilities
External interest-bearing liabilities	11	657	617
Trade and other payables to Group companies	12	1,991	4,002
Trade and other payables to associated companies	12	4	6
Derivative financial instruments	13, 14	102	149
Trade and other payables	12	100	101
Total current liabilities		2,854	4,875
Total liabilities		10,014	11,674
Total equity and liabilities		21,052	22,746

Cash flow statement

EUR million	2017	2016
Cash flow from operating activities
Profit for the period	933	780
Adjustments:
Income tax expense	10	14
Group contributions	-157	-145
Finance costs - net	-823	-675
Depreciations, amortisation and write-downs	6	6
Operating profit before depreciations (EBITDA)	-32	-20
Non-cash flow items and divesting activities	0	8
Interest and other financial income	6	21
Interest and other financial expenses paid	-101	-88
Dividend income	944	756
Group contribution received	145	447
Realised foreign exchange gains and losses	-28	113
Income taxes paid	23	-46
Funds from operations	957	1,191
Other short-term receivables increase(-)/decrease(+)	-12	-1
Other short-term payables increase(+)/decrease(-)	12	-6
Change in working capital	0	-7
Net cash from operating activities	958	1,184

Cash flow from investing activities
Capital expenditures	-15	-5
Acquisition of shares and capital contributions in subsidiaries	-380	-583
Acquisition of other shares	0	0
Proceeds from sales of fixed assets	0	2
Change in interest-bearing receivables and other non-current assets	504	-5
Net cash used in investing activities	109	-591
Cash flow before financing activities	1,067	593

EUR million	2017	2016
Cash flow from financing activities
Proceeds from long-term liabilities	35	27
Payment of long-term liabilities	-482	-811
Change in cashpool liabilities	967	-3,940
Change in short-term liabilities	-2,038	2,398
Dividends paid	-977	-976
Net cash used in financing activities	-2,496	-3,302

Net increase(+)/decrease(-) in liquid funds	-1,429	-2,710

Liquid funds at the beginning of the period	4,935	7,645
Liquid funds at the end of the period	3,506	4,935

Notes to the parent company financial statements, FAS

1 Accounting policies and principles

The financial statements of Fortum Oyj are prepared in accordance with Finnish Accounting Standards (FAS).

1.1 Sales

Sales include sales revenue from actual operations and exchange rate differences on trade receivables, less discounts and indirect taxes such as value added tax.

1.2 Other income

Other income includes gains on the sales of property, plant and equipment and shareholdings, as well as all other operating income not related to the sales of products or services, such as rents.

1.3 Foreign currency items and derivative instruments

Transactions denominated in foreign currencies have been valued using the exchange rate at the date of the transaction. Receivables and liabilities denominated in foreign currencies outstanding on the balance sheet date have been valued using the exchange rate quoted on the balance sheet date. Exchange rate differences have been entered in the financial net in the income statement.

Fortum Oyj enters into derivative contracts mainly for hedging foreign exchange and interest rate exposures in Fortum Group.

Accounting principles of financial derivatives, see Note 3 Financial risk management, Note 14 Financial assets and liabilities by categories and Note 15 Financial assets and liabilities by fair value hierarchy in the Consolidated financial statements.

1.4 Income taxes

Income taxes presented in the income statement consist of accrued taxes for the financial year and tax adjustments for prior years.

1.5 Shares in group companies

The balance sheet value of shares in group companies consists of historical costs less write-downs. If the estimated future cash flows generated by a non-current asset are expected to be permanently lower than the balance of the carrying amount, an adjustment to the value must be made to write-down the difference as an expense. If the basis for the write-down can no longer be justified at the balance sheet date, it must be reversed.

1.6 Property, plant and equipment and depreciation

The balance sheet value of property, plant and equipment consists of historical costs less depreciation and possible impairments. Property, plant and equipment are depreciated using straight-line depreciation based on the expected useful life of the asset.

The depreciation is based on the following expected useful lives:

Buildings and structures	15–40 years
Machinery and equipment	3–15 years
Other intangible assets	5–10 years

1.7 Pension expenses

Statutory pension obligations are covered through a compulsory pension insurance policy or Group's own pension fund. Costs for pension fund are recorded in the income statement based on contributions paid pursuant to the Finnish pension laws and regulations.

1.8 Long-term incentive schemes

Costs related to the Fortum long-term incentive plans are accrued over the earnings period and the related liability is booked to the balance sheet.

1.9 Provisions

Foreseeable future expenses and losses that have no corresponding revenue to which Fortum is committed or obliged to settle, and whose monetary value can be reasonably assessed, are entered as expenses in the income statement and included as provisions in the balance sheet.

1.10 Presentation of the primary statements and notes

Information presented in the notes is given separately for Fortum Group companies and for associated companies of the Group.

2 Sales by market area

EUR million	2017	2016
Finland	46	43
Other countries	27	28
Total	73	70

3 Other income

EUR million	2017	2016
Rental and other income	6	8
Total	6	8

4 Employee costs

EUR million	2017	2016
Personnel expenses
Wages, salaries and remunerations	25	24
Indirect employee costs
Pension costs	5	5
Other indirect employee costs	1	1
Other personnel expenses	1	1
Total	32	31

	2017	2016
EUR thousand	Pekka Lundmark, President and CEO	Pekka Lundmark, President and CEO
Compensation for the President and CEO
Salaries and fringe benefits	998	982
Performance bonuses 1)	187	248
Share-based incentives 1)	334	433
Pensions (statutory)	231	209
Pensions (voluntary)	229	356
Social security expenses	41	73
Total	2,019	2,299

1) Based on estimated amounts.

EUR thousand	2017	2016
Compensation for the Board of Directors	492	518

The compensation above is presented on accrual basis. Paid salaries and remunerations for the President and CEO Pekka Lundmark were EUR 1,405 thousand (2016: 1,012).

For the President and CEO Pekka Lundmark the retirement age of old-age pension is 63. The pension obligations are covered through insurance company.

Board members are not in an employment relationship or service contract with Fortum, and they are not given the opportunity to participate in Fortum's STI or LTI programme, nor does Fortum have a pension plan that they can opt to take part in. The compensation of the board members is not tied to the sustainability performance of the Group.

See Note 10 Employee benefits and Note 30 Pension obligations in the Consolidated financial statements.

	2017	2016
Average number of employees	258	272

5 Auditor's fees

EUR thousand	2017	2016
Audit fees	295	188
Audit related assignments	64	61
Tax assignments	0	0
Other assignments	81	0
Total	440	249

Deloitte Oy is the appointed auditor until the next Annual General Meeting, to be held in 2018. Audit fees include fees for the audit of the consolidated financial statements, review of the interim reports as well as the fees for the audit of Fortum Oyj. Audit related assignments include fees for assurance of sustainability reporting and other assurance and associated services related to the audit. Tax assignments include fees for tax advice services. Other assignments consist of advisory services.

6 Financial income and expenses

EUR million	2017	2016
Dividend income from group companies	944	756
Dividend income from associated companies and other companies	0	0
Interest and other financial income from group companies	12	8
Write-downs of participations in group companies	-35	-4
Write-downs of participations in associated companies	-3	-
Write-downs on loan receivables	-1	-
Interest and other financial income	0	3
Exchange rate differences	22	41
Changes in fair values of derivatives	-16	-11
Interest and other financial expenses to group companies	-1	0
Interest and other financial expenses	-99	-116
Total	823	675

Interest income	13	11
Interest expenses	-81	-113
Interest net	-68	-102

Write-downs of participations in group companies are related to shares in Fortum Heat and Gas Oy due to received dividend payments.

7 Income tax expense

EUR million	2017	2016
Taxes on regular business operations	-21	-15
Taxes on group contributions	31	29
Total	10	14

Current taxes for the period	6	9
Current taxes for prior periods	0	7
Changes in deferred tax	3	-1
Total	10	14

8 Non-current assets

Intangible assets

EUR million	Intangible assets total
Cost 1 January 2017	47
Additions	0
Disposals	-8
Cost 31 December 2017	39

Accumulated depreciation 1 January 2017	39
Disposals	-13
Depreciation for the period	4
Accumulated depreciation 31 December 2017	30

Carrying amount 31 December 2017	10
Carrying amount 31 December 2016	9

Property, plant and equipment

	Buildings and	Machinery and	Advances paid and construction in
EUR million	structures	equipment	progress	Total
Cost 1 January 2017	1	9	4	14
Additions and transfers between
categories		1	14	15
Disposals		-2	0	-2
Cost 31 December 2017	1	7	18	27

Accumulated depreciation
1 January 2017	1	6	0	7
Disposals		-2		-2
Depreciation for the period	0	1		1
Accumulated depreciation
31 December 2017	1	5	0	6

Carrying amount 31 December 2017	0	2	18	21
Carrying amount 31 December 2016	0	2	4	7

Investments

EUR million	Shares in Group companies	Participation in associated companies	Receivables from Group companies	Receivables from associated companies	Other non-current assets	Total
1 January 2017	17,467	6	717	15	8	18,213
Additions 1)	380			1	0	382
Disposals			-506			-506
31 December 2017	17,847	6	212	16	8	18,089
Accumulated write-downs 1 January 2017	-1,088	0	0	0	-7	-1,095
Impairment charges	-35	-3		-1	-1	-40
Accumulated write-downs 31 December 2017 2)	-1,123	-3	0	-1	-8	-1,135
Carrying amount 31 December 2017	16,725	2	212	15	0	16,954

1) Additions regarding shares comprise acquisitions of shares and capital contributions and reclassification between other noncurrent assets and shares in Group companies.

2) Write-downs of participations in group companies are related to shares in Fortum Heat and Gas Oy due to received dividend payments.

10 Changes in shareholders' equity

	Share	Share	Hedging	Retained
EUR million	capital	premium	reserve	earnings	Total
Total equity 31 December 2016	3,046	2,822	-23	5,226	11,072
Cash dividend				-977	-977
Change in hedging reserve			11		11
Profit for the period				933	933
Total equity 31 December 2017	3,046	2,822	-11	5,182	11,038

Total equity 31 December 2015	3,046	2,822	-31	5,424	11,261
Cash dividend				-977	-977
Change in hedging reserve			8		8
Profit for the period				780	780
Total equity 31 December 2016	3,046	2,822	-23	5,226	11,072

EUR million	2017	2016
Distributable funds
Retained earnings 31 December	5,182	5,226
Hedging reserve	-11	-23
Distributable funds 31 December	5,170	5,204

9 Other current receivables

EUR million	2017	2016
Other current receivables from group companies
Trade receivables	9	10
Group contribution and other receivables	157	145
Accrued income and prepaid expenses	6	0
Total	173	155

Other current receivables from associated companies
Accrued income and prepaid expenses	0	0
Total	0	0

Other current receivables
Trade receivables	0	0
Other receivables	0	0
Accrued income and prepaid expenses	14	44
Total	14	45

See Note 3.5 Liquidity and refinancing risk in the Consolidated financial statement

11 Interest-bearing liabilities

EUR million	2017	2016
External interest-bearing liabilities 1)
Bonds	2,521	2,986
Loans from financial institutions	82	210
Other long-term interest-bearing debt	844	822
Total long-term interest-bearing debt	3,448	4,018
Current portion of long-term bonds	422	343
Current portion of loans from financial institutions	122	139
Other short-term interest-bearing debt	114	135
Total short-term interest-bearing debt	657	617
Total external interest-bearing debt	4,105	4,635

Maturity of external interest-bearing liabilities 1)

EUR million	2017
2018	657
2019	792
2020	28
2021	528
2022	1,057
2023 and later	1,042
Total	4,105

See Note 3.5 Liquidity and refinancing risk and Note 26 Interest-bearing liabilities in the Consolidated financial statements.

EUR million	2017	2016
External interest-bearing liabilities due after five years 1)
Bonds	198	1,282
Other long-term liabilities	844	821
Total	1,042	2,102

EUR million	2017	2016
Other interest-bearing liabilities due after five years
Interest-bearing liabilities to associated companies	285	273
Total	285	273

1) Does not include liabilities to group and associated companies.

Non-discounted cash flows of interest-bearing liabilities and their maturities, see Note 13 Financial derivatives.

12 Trade and other payables

EUR million	2017	2016
Trade and other payables to group companies
Trade payables	3	0
Deposits from group companies and other liabities	1,987	4,002
Accruals and deferred income	0	0
Total	1,991	4,002

Trade and other payables to associated companies
Accruals and deferred income	4	6
Total	4	6

Trade and other payables
Trade payables	21	6
Other liabilities	2	4
Accruals and deferred income	76	91
Total	100	101

13 Financial derivatives

Interest rate and currency derivatives by instrument 2017

		Notional amount			Fair value
		Remaining lifetimes
	Under 1	1–5	Over
EUR million	year	years	5 years	Total		Positive Negative	Net
Forward foreign exchange
contracts	7,790	517		8,307	77	104	-27
Interest rate swaps	305	3,421	102	3,827	205	90	115
Interest rate and currency
swaps	311	580		892	92	3	89
Total	8,406	4,518	102	13,025	373	196	177
Of which long-term					242	94	148
Short-term					132	102	29

Interest rate and currency derivatives by instrument 2016

		Notional amount			Fair value
	Under 1	Remaining lifetimes 1–5	Over
EUR million	year	years	5 years	Total		Positive Negative	Net
Forward foreign exchange
contracts	6,369	252		6,621	131	141	-11
Interest rate swaps	259	2,718	1,105	4,081	269	127	142
Interest rate and currency
swaps	29	798		827	71	5	66
Total	6,657	3,767	1,105	11,529	471	273	198
Of which long-term					344	124	220
Short-term					127	149	-22

Maturity analysis of interest-bearing liabilities and derivatives

Amounts disclosed below are non-discounted expected cash flows (future interest payments and amortisations) of interest-bearing liabilities and interest rate and currency derivatives.

	2017 2016
EUR million	Under 1 year	1–5 years	Over 5 years	Total	Under 1 year	1–5 years	Over 5 years	Total
Interest-bearing liabilities	2,752	2,613	1,509	6,875	6,047	2,239	2,491	10,777
Interest rate and currency derivates liabilities	8,132	1,256	4	9,392	6,669	1,234	20	7,924
Interest rate and currency derivates receivables	-8,191	-1,341	-1	-9,534	-6,650	-1,404	-27	-8,080
Total	2,693	2,529	1,511	6,733	6,067	2,069	2,485	10,621

14 Derivatives and liabilities by fair value hierarchy

Fair value measurements are classified using a fair value hierarchy i.e. Level 1, Level 2 and Level 3 that reflects the significance of the inputs used in making the measurements. For further information look accounting principles in Fortum consolidated accounts Note 15 Financial assets and liabilities by fair value hierarchy.

Derivatives in financial assets

	Level 1		Level 2		Level 3		Total
EUR million	2017	2016	2017	2016	2017	2016	2017	2016
In non-current assets
Derivative financial instruments
Interest rate and currency derivatives
Hedge accounting			154	240			154	240
Non-hedge accounting			87	103			87	103

In current assets
Derivative financial instruments
Interest rate and currency derivatives
Hedge accounting			88	17			88	17
Non-hedge accounting			44	110			44	110
Total	-	-	373	471	-	-	373	471

Derivatives and liabilities at fair value in financial liabilities

		Level 1	Level 2			Level 3	Total
EUR million	2017	2016	2017	2016	2017	2016	2017	2016
In non-current liabilities
Interest-bearing liabilities 1)				1,037 1,280				1,037 1,280
Derivative financial instruments
Interest rate and currency derivatives
Hedge accounting			47	72			47	72
Non-hedge accounting			47	52			47	52
In current liabilities
Derivative financial instruments
Interest rate and currency derivatives
Hedge accounting			14	12			14	12
Non-hedge accounting			88	137			88	137
Total	-		- 1,233 1,554		-		- 1,233 1,554

1) Fair valued part of bond in the fair value hedge relationship.

Operating and

Net fair value amount of interest rate and currency derivatives is EUR 177 million (2016: 198), including assets EUR 373 million (2016: 471) and liabilities EUR 196 million (2016: 273). Fortum Corporation has cash collaterals based on Credit Support Annex agreements with some counterparties. At the end of December 2017 Fortum Corporation had received EUR 113 million (2016: 135) from Credit Support Annex agreements. The received cash has been booked as a short-term interest-bearing liability.

15 Contingent liabilities

EUR million	2017	2016
On own behalf
Other contingent liabilities	2	2

On behalf of group companies
Guarantees	221	135

On behalf of associated companies
Guarantees on behalf of Swedish associated companies	548	565
Contingent liabilities total	771	702

Operating leases

EUR million	2017	2016
Operating lease commitments
Due within a year	7	2
Due after one year and within five years	28	2
Due after 5 years	18	-
Total	54	5

Increase in operating lease commitments arises mainly from the lease agreement relating to the new head office in Espoo.

16 Related party transactions

See Note 39 Related party transactions in the Consolidated financial statements.

Investments in group companies, associated companies and other holdings

		No. of shares units	Holding %
Investments in group companies
Fortum Waste Solutions Oy	Finland	3,520,800	100.00
Fortum Asiakaspalvelu Oy	Finland	10,010	100.00
Fortum Heat and Gas Oy	Finland	2,000,000	100.00
Fortum Markets Oy	Finland	24,039	100.00
Fortum Norm Oy	Finland	250	100.00
Fortum Power and Heat Oy	Finland	91,197,543	100.00
Fortum Real Estate Oy	Finland	2,000,000	100.00
Fortum Project Finance N.V.	Belgium	727,820	99.99
Fortum India Private Ltd	India	1	0.10
Fortum Finance Ireland Designated
Activity Company	Ireland	25,000	100.00
Fortum Investment S.A.R.L.	Luxembourg	990	0.45
Fortum Sweden AB	Sweden	1,000	100.00
Fortum Holding B.V.	The Netherlands	61,062	100.00
Investments in associated companies
AW-Energy Oy	Finland	806	13.60
Wello Oy	Finland	1,508	16.18
Other holdings
Clic Innovation Oy	Finland	100	3.80
East Office of Finnish Industries Oy	Finland	1	5.88
Prototype Carbon Fund	USA	N/A

Proposal for the use of the profit shown on the balance sheet

The distributable funds of Fortum Oyj as at 31 December 2017 amounted to EUR 5,170,240,554.04 including the profit of the financial period 2017 of EUR 932,525,770.24. The company's liquidity is good and the dividend proposed by the Board of Directors will not compromise the company's liquidity.

The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 1.10 per share be paid for 2017.

Based on the number of registered shares as at 1 February 2018 the total amount of dividend proposed to be paid is EUR 977,203,749.50. The Board of Directors proposes, that the remaining part of the distributable funds be retained in the shareholders' equity.

Signatures for the operating and financial review and the financial statements

Espoo, 1 February 2018

Sari Baldauf

Kim Ignatius

Matti Lievonen

Heinz-Werner Binzel Veli-Matti Reinikkala

Eva Hamilton

Anja McAlister

Pekka Lundmark President and CEO

Auditor's report

To the Annual General Meeting of Fortum Oyj

Report on the Audit of Financial Statements

Opinion

We have audited the financial statements of Fortum Oyj (business identity code 1463611-4) for the year ended 31 December, 2017. The financial statements comprise the consolidated balance sheet, consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in total equity, consolidated cash flow statement and notes to the consolidated financial statements, including a summary of significant accounting policies, as well as the parent company's balance sheet, income statement, cash flow statement and notes to the financial statements.

In our opinion

the consolidated financial statements give a true and fair view of the group's financial position and financial performance and cash flows in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU,
the financial statements give a true and fair view of the parent company's financial performance and financial position in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements.

Our opinion is consistent with the additional report submitted to the Audit Committee.

Basis for opinion

We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor's Responsibilities for the Audit of Financial Statements section of our report.

We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

In our best knowledge and understanding, the non-audit services that we have provided to the parent company and group companies are in compliance with laws and regulations applicable in Finland regarding these services, and we have not provided any prohibited non-audit services referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we have provided have been disclosed in note 8 to the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have also addressed the risk of management override of internal controls. This includes consideration of whether there was evidence of management bias that represented a risk of material misstatement due to fraud.

Valuation of fixed assets and goodwill Refer to Notes 2, 16 and 17.

The consolidated balance sheet includes property, plant and equipment amounting to EUR 10,510 million and goodwill amounting to EUR 613 million.
The main assumptions used in the valuation of energy production property, plant and equipment and goodwill relate to the estimated future operating cash flows and the discount rates.
In acquisition the assumptions relates to determining the fair values and remaining useful lives of acquired intangible and tangible assets.
The potential indicators for impairment are among other things changes in electricity and fuel prices, regulatory/political changes relating to energy taxes and price regulations.
The assumptions used in the valuation of the balances in question require management judgment.
This matter is a significant risk of material misstatement referred to in EU Regulation No 537/241, point (c) of Article 10(2).

Key audit matter How our audit addressed the key audit matter

We have evaluated the process how management has assessed the indicators for potential impairment. We have performed audit procedures on impairment models relating to material cash generating units.
We obtained entity's impairment testing documentation for goodwill and energy production assets when tested and evaluated the rationale of key assumptions applied by management, including commodity price forecasts, profit and cash flow forecasts, terminal values, foreign exchange rates and the selection of discount rates.
We have compared, that the forecasts used in the impairment testing calculations are based on long term forecast approved by management.
We challenged management's assumptions and judgments with reference to historical data and, where applicable, external benchmarks.
We assessed the models used in the impairment testing and carried out our testing for the sensitivity calculations.
We assessed the adequacy of related disclosures in the financial statements.

Key audit matter How our audit addressed the key audit matter

Fair value measurement of derivatives and hedge accounting

Refer to Notes 3, 6, 7, 14 and 15.
In Fortum's consolidated financial statements total derivative assets amounts to EUR 521 million and total derivative liabilities amounts to EUR 414 million. The net effect of changes in fair values of derivatives hedging future cash flow amounts to EUR 14 million in items affecting comparability in the consolidated income statement and the cash flow hedges in other equity components amount to EUR 74 million.
The fair value of derivative financial instruments is determined through the application of valuation techniques which often involve management judgment. Fortum's business is exposed to fluctuations in prices and volume of commodities used in the production and sales of energy products. The main exposure is toward energy prices. Electricity price risk is hedged by entering into electricity derivative contracts. Fortum uses hedging instruments to reduce the effect of electricity price volatility.

• Our audit procedures included an assessment of internal controls over the hedge accounting documentation and effectiveness testing, measurement of fair value measures, and evaluating the methodologies, inputs, judgments made and assumptions used by management in determining fair values.

For Fortum's fair valuation models, we evaluated rationale of the models and accounting treatment applied. We compared observable inputs against independent sources and externally available market data.
We have assessed the existence and completeness of outstanding derivative contracts as of 31 December 2017 by requesting confirmations from the counterparties.
We have assessed that financial instruments included in hedge relationships are accounted for in accordance with IAS 39.
We have assessed the adequacy of the presentation for derivative financial instruments and hedge accounting applied in the financial statements.

Associated companies and joint ventures Refer to Notes 2, 18 and 36.

Fortum participates in a number of associated companies and joint ventures with a total carrying amount of EUR 1,900 million in the consolidated financial statements.
The assessment of the recoverable value of the associated companies and joint ventures incorporates significant management judgments and estimates.
The associated companies and joint ventures are joint contractual arrangements, which include several complex accounting, regulatory and legal aspects as described in note 36. These aspects may have significant impact on Fortum's financial reporting.

Key audit matter How our audit addressed the key audit matter

We have reviewed and evaluated the management's process to monitor and control the significant associated companies and joint ventures as well as to follow the related legal cases.
We have assessed and challenged the management judgment and assumptions used determining the recoverable amount for associated companies and joint ventures. We have also evaluated the accuracy of the calculations prepared to quantify the recoverable amount.
We assessed the adequacy of related disclosures in the financial statements.

Nuclear related assets and liabilities Refer to Notes 2 and 28.

Nuclear related assets and liabilities in consolidated balance sheet amount to EUR 858 million.
Fortum's nuclear related provisions and the related part of the Finnish State Nuclear Waste Management Fund are both presented separately as disclosed in note 28.
Fortum's share in the Finnish State Nuclear Waste Management Fund is accounted for according to IFRIC 5 which states that the fund assets are measured at the lower of fair value or the value of the related liabilities.
Due to complexity and materiality, the accounting treatment for nuclear decommissioning is complex and requires application of special accounting practice and management judgment when forming estimates for the basis of accounting such as technical plans, timing, cost estimates and discount rate.

Key audit matter How our audit addressed the key audit matter

We have assessed Fortum's accounting manual and principles for Nuclear Decommissioning Accounting, whether they are in line with IFRS accounting principles.
We have assessed the assumptions and judgments made and adopted by the management in the accounting for the nuclear waste provisions and share in state nuclear waste management fund have been based on current legislation and decisions set by Finnish State Nuclear Waste Management Fund.
We assessed the adequacy of related disclosures in the financial statements.

Responsibilities of the Board of Directors and the President and CEO for the financial statements

The Board of Directors and the President and CEO are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the President and CEO are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Board of Directors and the President and CEO are responsible for assessing the parent company's and the group's ability to continue as going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so.

Auditor's responsibilities in the audit of financial statements

Our objectives are to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company's or the group's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Income taxes

Refer to Notes 2, 12, 27 and 36.

Fortum has several tax assessments ongoing.
The accounting treatment and disclosing of tax cases require management to make judgments and estimates in disclosing and accounting tax contingencies and receivables as described in note 27.
Ongoing tax assessments are lengthy and at various stages from preliminary discussions with tax authorities through to court proceedings, where obtaining the final tax assessments can take a number of years prior to concluding.

Key audit matter How our audit addressed the key audit matter

We performed testing regarding Fortum's tax positions in the significant tax jurisdictions in which Fortum operates.
We assessed the rationale of management's assumptions and challenged the management judgment applied in relation to disclosing and accounting the tax contingencies and receivables of the tax cases. Together with our tax specialist we have also assessed the company's external opinions which have been used to support the management's assumptions.
We assessed the adequacy of related disclosures as well as the accounting treatment in the financial statements.

Key figures 2008–2017

Conclude on the appropriateness of the Board of Directors' and the President and CEO use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company's or the group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Reporting Requirements

Information on our audit engagement

We were first appointed as auditors by the Annual General Meeting on 16.3.2006, and our appointment represents a total period of uninterrupted engagement of 11 years.

Other information

The Board of Directors and the President and CEO are responsible for the other information. The other information comprises the Operational and Financial Review and the information included in the Financials, but does not include the financial statements and our auditor's report thereon. We have obtained the Operating and Financial Review prior to the date of this auditor's report, and the Financials is expected to be made available to us after that date.

Our opinion on the financial statements does not cover the other information.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to Operating and Financial Review, our responsibility also includes considering whether the Operating and Financial Review has been prepared in accordance with the applicable laws and regulations.

In our opinion, the information in the Operating and Financial Review is consistent with the information in the financial statements and the Operating and Financial Review has been prepared in accordance with the applicable laws and regulations.

If, based on the work we have performed on the other information that we obtained prior the date of this auditor's report, we conclude that there is a material misstatement of this information, we are required to report that fact. We have nothing to report in this regard.

Other opinions

We support that the financial statements should be adopted. The proposal by the Board of Directors regarding the use of the profit shown on the balance sheet is in compliance with the Limited Liability Companies Act. We support that the Board of Directors of the parent company and the President and CEO should be discharged from liability for the financial period audited by us.

Espoo, 1 February 2018

Deloitte Oy Audit Firm

Reeta Virolainen Authorised Public Accountant (KHT)

2008–2017

Operational key figures Quarterly financial information

Operational key figures

Note: Operational key figures are unaudited.

Comparability of information presented in tables and graphs

Information in the tables and graphs presented for year 2012 or earlier is not restated due to the adoption of IFRS 10 and IFRS 11. Adoption of standards influences treatment of Fortum's holding in AB Fortum Värme samägt med Stockholms stad (Fortum Värme) in the the consolidated financial statements. From 1 January 2014 onwards Fortum Värme is treated as a joint venture and thus consolidated with equity method. Before the change the company was consolidated as a subsidiary with 50% minority interest.

Generation Fortum's total power and heat generation in EU and Norway, TWh 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Power generation 52.6 49.3 53.7 55.3 53.9 47.4 50.1 50.2 47.5 46.6 Heat generation 25.0 23.2 26.1 22.0 18.5 10.4 8.2 6.4 7.1 8.6 Fortum's total power and heat generation in Russia, TWh 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Power generation 11.6 16.0 16.1 17.4 19.2 20.0 23.3 25.7 25.5 26.3 Heat generation 15.3 25.6 26.0 25.4 24.8 24.2 26.4 25.8 20.7 20.0 Fortum's own power generation by source, total in the Nordic area, TWh 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Hydro and wind power 22.9 22.1 22.0 21.0 25.2 18.1 22.4 25.1 20.8 20.9 Nuclear power 23.7 21.4 22.0 24.9 23.4 23.7 23.8 22.7 24.1 23.0 Thermal power 5.0 4.6 8.3 7.2 3.0 3.4 1.8 1.0 1.4 1.6 Total 51.6 48.1 52.3 53.1 51.6 45.2 48.0 48.8 46.2 45.4 Fortum's own power generation by source, total in the Nordic area, % 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Hydro and wind power 44 46 42 40 49 40 46 51 45 46 Nuclear power 46 44 42 47 45 52 50 47 52 51 Thermal power 10 10 16 13 6 8 4 2 3 3

Total 100 100 100 100 100 100 100 100 100 100

Power generation capacity by segment, MW	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Generation	9,575	9,709	9,728	9,752	9,702	9,475	9,063	8,046	8,039	7,862
Heat	1,213	1,446	1,600	1,670	1,569
City Solutions						793	803	743	760	775
Russia	2,785	2,785	2,785	3,404	3,404	4,250	4,758	4,903	4,482	4,794
Other									53	292
Total	13,573	13,940	14,113	14,826	14,675	14,518	14,624	13,692	13,334	13,722

Heat production capacity by segment, MW	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Generation	250	250	250	250	250	250	0
Heat	10,218	10,284	10,448	10,375	8,785
City Solutions						4,317	3,936	3,915	3,818	4,671
Russia	13,796	13,796	13,796	14,107	13,396	13,466	13,466	12,696	9,920	10,094
Total	24,264	24,330	24,494	24,732	22,431	18,033	17,402	16,611	13,738	14,765

	Finland		Sweden		Russia		Poland		Other		Total
Fortum's power generation capacity by type and area, MW	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016
Hydropower	1,547	1,535	3,125	3,117	0	0	0	0	0	0	4,672	4,652
Nuclear power	1,480	1,472	1,334	1,539	0	0	0	0	0	0	2,814	3,011
Combined heat and power	452	456	9	9	4,760	4,482	186	186	128	109	5,534	5,242
Condensing power	376	376	0	0	0	0	0	0	0	0	376	376
Wind power	0	0	75	38	0	0	0	0	32	0	107	38
Solar power	0	0	0	0	35	0	0	0	185	15	220	15
Total	3,854	3,839	4,543	4,703	4,794	4,482	186	186	345	124	13,722	13,334

	Finland		Sweden		Russia		Poland		Other		Total
Fortum's heat production capacity by area, MW	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016
Heat	1,941	2,024	35	35	10,094	9,920	786	961	1,909	798	14,765	13,738

Operating and financial review	Consolidated financial statements	Key figures 2008–2017	Parent company financial statements		Proposal for the use of the profit shown on the balance sheet			Auditor's report	Operational key figures Quarterly financial information			Investor information
Operational key figures		Quarterly financial information



Sales
	Fortum's total power and heat sales in EU and Norway, EUR million		2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Electricity sales			2,959	2,802	3,110	2,868	2,700	2,462	2,344	1,921	1,893	2,244
Heat sales			1,157	1,095	1,309	1,278	1,201	538	468	423	449	524

	Fortum's total power and heat sales in Russia, EUR million		2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Electricity sales			332	390	505	590	713	822	758	661	691	837
Heat sales			141	219	287	324	300	290	285	228	199	258

	Fortum's total power sales by area, TWh		2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Finland			28.7	26.1	30.7	24.6	21.6	23.4	21.6	22.3	22.8	22.5
Sweden			28.5	26.9	28.3	29.4	30.1	23.3	28.2	29.8	28.8	30.8
Norway											1.5	7.2
Russia			14.8	19.5	18.7	20.2	23.3	25.6	26.5	29.4	29.5	30.5
Other countries			3.0	3.2	3.2	3.6	3.8	4.3	3.8	2.8	2.1	2.9
Total			75.0	75.7	80.9	77.8	78.8	76.6	80.1	84.3	84.7	93.9

	Fortum's total heat sales by area, TWh		2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Finland			10.8	8.0	9.6	8.5	5.8	5.5	3.2	3.1	3.6	3.9
Russia			15.3	25.6	26.8	26.7	26.4	24.1	26.0	25.4	20.7	19.8
Sweden			9.1	9.8	10.9	8.5	8.5	-	-	-	0.1	0.3
Poland			3.6	3.7	4.0	4.3	4.3	4.1	3.4	3.4	3.6	3.7
Other countries			3.4	3.5	3.6	3.4	2.9	3.1	2.8	1.2	1.4	2.2
Total			42.2	50.6	54.9	51.4	47.9	36.8	35.4	33.2	29.4	29.9

Volume of distributed electricity in distribution networks, TWh	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Finland	9.3	9.4	10.0	9.5	9.8	9.5	2.8	-	-	-
Sweden	14.0	14.0	15.2	14.2	14.4	14.1	13.7	6.4	-	-
Norway	2.3	2.3	2.5	2.3	2.4	2.5	1.1	-	-	-
Estonia	0.2	0.2	0.2	0.1	0.0	-	-	-	-	-
Total	25.8	25.9	27.9	26.1	26.6	26.1	17.6	6.4	-	-

2008–2017

Operational key figures Quarterly financial information

Quarterly financial information

Note: Quarterly financial information is unaudited.

Selected data based on quarterly consolidated income statement

EUR million	Q1/2016	Q2/2016	Q3/2016	Q4/2016	2016	Q1/2017	Q2/2017	Q3/2017	Q4/2017	2017
IS Sales	989	768	732	1,143	3,632	1,232	937	919	1,432	4,520
Comparable EBITDA continuing operations	357	209	151	298	1,015	423	219	210	424	1,275
IS Comparable operating profit	275	122	58	188	644	313	109	94	295	811
IS Operating profit	369	67	-6	202	633	389	66	387	315	1,158
IS Share of profit/loss of associates and joint ventures	67	38	11	15	131	59	35	21	34	148
IS Finance costs - net	-47	-44	-44	-34	-169	-36	-52	-58	-49	-195
IS Profit before income tax	390	61	-40	184	595	412	49	351	300	1,111
IS Income tax expense	-59	-4	9	-37	-90	-72	-118	4	-43	-229
IS Profit for the period	331	57	-31	147	504	340	-69	355	257	882
IS Non-controlling interests	-5	-1	0	-3	-8	-5	0	2	-12	-16
IS Profit for the period, owners of the parent	326	57	-31	145	496	335	-70	357	244	866
Earnings per share for profit attributable to the equity owners of the company (EUR per share)
Basic	0.37	0.06	-0.03	0.16	0.56	0.38	-0.08	0.40	0.28	0.98

Sales by quarter, EUR million

Comparable operating profit by quarter,

EUR million

Operational key figures Quarterly financial information

Quarterly sales by segment

EUR million	Q1/2016	Q2/2016	Q3/2016	Q4/2016	2016	Q1/2017	Q2/2017	Q3/2017	Q4/2017	2017
Generation 1)	467	384	371	435	1,657	474	402	367	433	1,677
City Solutions 1)	228	121	116	316	782	290	205	179	341	1,016
Consumer Solutions	175	146	126	221	668	242	164	238	453	1,097
Russia	249	182	175	289	896	349	238	200	314	1,101
Other 1)	24	23	22	24	92	24	24	25	28	101
Netting of Nord Pool transactions 2)	-120	-69	-66	-129	-384	-118	-73	-73	-103	-367
Eliminations	-33	-19	-14	-13	-79	-29	-23	-17	-34	-103
IS Total	989	768	732	1,143	3,632	1,232	937	919	1,432	4,520

1) Sales, both internal and external, includes effects from realised hedging contracts. Effect on sales can be negative or positive depending on the average contract price and realised spot price.

2) Sales and purchases with Nord Pool Spot is netted on Group level on an hourly basis and posted either as revenue or cost depending on if Fortum is a net seller or net buyer during any particular hour.

Quarterly comparable operating profit by segments

EUR million	Q1/2016	Q2/2016	Q3/2016	Q4/2016	2016	Q1/2017	Q2/2017	Q3/2017	Q4/2017	2017
Generation	155	98	77	87	417	136	78	104	160	478
City Solutions	44	-5	-25	50	64	56	1	-20	59	96
Consumer Solutions	14	13	9	13	48	12	6	5	18	41
Russia	79	34	12	66	191	132	53	26	84	296
Other	-16	-18	-16	-27	-77	-24	-28	-21	-26	-99
IS Comparable operating profit	275	122	58	188	644	313	109	94	295	811
Impairment charges	0	0	0	27	27	0	0	0	6	6
Capital gains and other	44	2	-10	2	38	1	1	317	8	326
Changes in fair values of derivatives hedging future cash flow	50	-57	-57	-1	-65	74	-46	-19	5	14
Nuclear fund adjustment	0	0	2	-14	-11	2	4	-5	1	1
IS Operating profit	369	67	-6	202	633	389	66	387	315	1,158

The first and last quarters of the year are usually the strongest quarters for power and heat businesses.

Investor information

Fortum's 2017 reporting entity comprises Online Annual Review, CEO letter, Financials, Corporate Governance Statement and Remuneration Statement as well as Tax footprint.

Annual General Meeting 2018

The Annual General Meeting 2018 of Fortum Corporation will be held on Wednesday, 28 March 2018 at 11.00 EET at Finlandia Hall, address: Mannerheimintie 13 e, Helsinki, Finland. The reception of the registered participants will commence at 9.30 EET.

Payment of dividends

The Board of Directors proposes to the Annual General Meeting that Fortum Corporation pays a dividend of EUR 1.10 per share for 2017, totalling approximately EUR 977 million based on the registered shares as of 1 February 2018. The possible dividend related dates planned for 2018 are:

the ex-dividend date 29 March 2018,
the record date for dividend payment 3 April 2018, and
the dividend payment date 10 April 2018.

Financial information in 2018

Fortum will publish three interim reports in 2018:

January–March interim report on 26 April
January–June half year financial review on 19 July, and
January–September on 24 October.

The reports are published at approximately 9:00 EET in Finnish and English, and are available on Fortum's website at www.fortum.com/investors

Fortum's management hosts regular press conferences, targeted at analysts and the media. Webcasts of these conferences is available online at www.fortum.com/investors. Management also gives interviews on a one-on-one and group basis. Fortum observes closed and silent period of 30 days prior to publishing its results.

Fortum share basics

Listed on Nasdaq Helsinki Trading ticker: FORTUM Number of shares, 2 February 2018: 888,367,045 Sector: Utilities

Fortum's activities in capital markets during 2017

Fortum's Investor Relations activities cover equity and fixed-income markets to ensure full and fair valuation of the Company's shares, access to funding sources and stable bond pricing. The key task of Investor Relations is to provide correct, adequate and up-to-date information regularly and equally to all market participants. By doing this, Investor Relations aims to minimise the investor's risk and reduce the share's volatility. Investors and analysts primarily are met on a regular basis in Europe and North America.

In 2017, Fortum met approximately 200 professional equity investors individually or in group meetings and at investor conferences and maintained regular contact with equity research analysts at investment banks and brokerage firms.

AI Terminal

Fortum Oyj

3217_10-k-afs_2018-02-21_e6b29699-1bab-44bc-9afd-e3ead8bfe6ca.pdf

Financials 2017 – Reader's guide

Financials 2017

Proposal for the use of the profit shown on

Financial performance and position

Key financial ratios 1)

Key figures

Uniper investment

Hafslund transaction

Reorganisation of operations

Comparability of information presented in tables

Operating profit and comparable operating profit, EUR million

Return on shareholders' equity total Fortum, %

Earnings per share total Fortum, EUR

Financial results

Sales by segment

Comparable EBITDA by segment

Comparable operating profit by segment

Operating profit by segment

Cash flow

( Additional cash flow information).

Financial position and cash flow

Assets and capital employed

Equity

Financing

Change in net debt during 2017, EUR million

Key figures

Market conditions

Nordic countries

Russia

Power consumption

Average prices

Water reservoirs

Export/import

European business environment and carbon market

Revision of the EU ETS approved

Swedish hydropower legislation

Swedish nuclear waste fund fee approved

Swedish nuclear and hydro taxes adopted

Development of Nordic energy cooperation

Segment reviews

Generation

Power generation by source

Nordic sales volume

Sales price

Generation segment's power generation in the Nordic area by source, TWh

Generation segment's power generation by area, TWh

City Solutions

Nord Pool, power price, 2013–2017, EUR/MWh

Heat sales by country

Power sales by country

Consumer Solutions

Sales volumes

Number of customers

Russia

Key electricity, capacity and gas prices for Fortum Russia

Capital expenditure, divestments and investments in shares

Generation

City Solutions

Consumer Solutions

Capital expenditure and gross investments in shares, EUR million

Investments in shares Capital expenditures

Capital expenditure by country, EUR million

Russia

Other

Research and development

Changes in Fortum's Management

Annual General Meeting 2017

Shareholders Nomination Board

Other events during the reporting period

Events after the balance sheet date

Key drivers and risks

Nordic market

Generation

City Solutions

Consumer Solutions

Russia

Capital expenditure and divestments