Fortum Corporation

Interim Report January–September 2016

25 October 2016

Fortum Corporation Domicile Espoo Business ID 1463611-4

Low hydro production volumes affected seasonally weak quarter	3
Fortum's President and CEO Pekka Lundmark comments	4
Fortum's new vision, strategic cornerstones and updated financial targets	5
Reorganisation of operations	5
Financial results	6
Financial position and cash flow	8
Market conditions	9
Segment reviews	11
Capital expenditures, divestments and investments in shares	16
Shares and share capital	18
Group personnel	19
Research and development	19
Sustainability	19
Changes in Fortum's Management	21
Annual General Meeting 2016	22
Outlook	23
Dividend payment	27

Tables to the interim report

Condensed consolidated income statement	29
Condensed consolidated balance sheet	31
Condensed consolidated statement of changes in total equity	32
Condensed consolidated cash flow statement	33
Change in net debt and key ratios	35
Notes to the condensed consolidated interim financial statements	37
Definition of key figures	56
Market conditions and achieved power prices	58
Fortum's production and sales volumes	59

Fortum implemented ESMA's (European Securities and Markets Authority) new guidelines regarding Alternative Performance Measures ("APM") in the first quarter of 2016. Fortum has defined and presented its APM in a consistent and comprehensive manner since 2005 and therefore the implementation had only a limited effect on the disclosures. For more information, see the first quarter 2016 interim report.

Financial results discussed in this interim report are for the continuing operations of Fortum Group. The Distribution segment was classified as discontinued operations in 2015 upon the divestment of the Swedish distribution operations.

Figures in brackets refer to the comparison period, i.e. the same period last year, unless otherwise stated.

Low hydro production volumes affected seasonally weak quarter

July−September 2016, continuing operations

Comparable operating profit EUR 58 (79) million, -27%
Operating profit EUR -6 (-682) million, of which EUR -65 (-761) million relates to items affecting comparability. In the corresponding period of 2015, the negative impact was mainly due to the decision on the early closing of two nuclear units in Sweden
Earnings per share EUR -0.03 (-0.74), of which EUR -0.06 (-0.78) related to items affecting comparability. In the corresponding period of 2015, EUR -0.80 per share related to the decision on the early closure of two nuclear units in Sweden
Cash flow from operating activities totalled EUR 101 (151) million
Fortum's Ekokem acquisition was finalised

January−September 2016, continuing operations

Comparable operating profit EUR 455 (565) million, -19%
Operating profit EUR 430 (-188) million, of which EUR -25 (-752) million relates to items affecting comparability. In the corresponding period of 2015, the negative impact was mainly due to the decision on the early closing of two nuclear units in Sweden
Earnings per share EUR 0.40 (-0.28), of which EUR -0.03 (-0.77) related to items affecting comparability. In the corresponding period of 2015, EUR -0.80 per share related to the decision on the early closure of two nuclear units in Sweden
Cash flow from operating activities totalled EUR 471 (896) million
Fortum completed its multi-year investment programme in Russia
Fortum's business structure was reorganised and the new Executive Management Team took place as of 1 April 2016
Fortum acquired Grupa DUON and Ekokem

Summary of outlook

Fortum continues to expect the annual electricity demand to grow in the Nordic countries by approximately 0.5% on average
The Generation segment's Nordic generation hedges: approximately 80% hedged at EUR 29 per MWh for the rest of 2016; and for 2017, approximately 50% hedged at EUR 28 per MWh; and for 2018 approximately 30% hedged at EUR 25 per MWh.
Operating profit level (EBIT) for the Russia segment, RUB 18.2 billion, is targeted to be reached during 2017-2018. The euro-denominated result level will be volatile, due to currency translation effects

Key financial ratios*	2015	LTM
Return on capital employed, %	22.7	3.2
Comparable net debt/EBITDA	-1.7	-0.1

* Key financial ratios for 2015 are based on total Fortum, including discontinued operations

Key figures	III/16	III/15	I-III/16	I-III/15	2015	LTM
Sales, EUR million	732	661	2,489	2,495	3,459	3,453
Comparable EBITDA, EUR million
continuing operations	151	163	717	787	1,102	1,033
discontinued operations	-	-	-	163	163	-
total Fortum	151	163	717	950	1,265	1,033
Comparable operating profit, EUR million
continuing operations	58	79	455	565	808	698
discontinued operations	-	-	-	114	114	-
total Fortum	58	79	455	678	922	698
Operating profit, EUR million
continuing operations	-6	-682	430	-188	-150	468
discontinued operations	-	-	-	4,395	4,395	-
total Fortum	-6	-682	430	4,207	4,245	468
Share of profits of associates and joint ventures, EUR million
continuing operations	11	-95	116	-15	20	151
discontinued operations	-	-	-	0	0	-
total Fortum	11	-95	116	-15	20	151
Profit before taxes, EUR million
continuing operations	-40	-818	411	-325	-305	431
discontinued operations	-	-	-	4,393	4,393	-
total Fortum	-40	-818	411	4,068	4,088	431
Earnings per share, EUR
continuing operations	-0.03	-0.74	0.40	-0.28	-0.26	0.41
discontinued operations	-	-	-	4.92	4.92	-
total Fortum	-0.03	-0.74	0.40	4.64	4.66	0.41
Net cash from operating activities, EUR million, continuing operations	101	151	471	896	1,228	803
Shareholders' equity per share, EUR			14.75	15.54	15.53
Interest-bearing net debt (at end of period), EUR million			-137	-1,936	-2,195

Fortum's President and CEO Pekka Lundmark:

"The third quarter is always challenging due to the seasonality of our business. This year was no exception. Fortum's results continued to decline mainly due to significantly lower hydro production volumes. The decline was partially offset by strong performance in the Russia segment, a clearly higher achieved power price and higher nuclear volumes compared to the third quarter of 2015.

There are, however, some positive signs on the power market, mainly driven by commodity and emission prices. Forward market prices increased at the very end of the quarter and are now clearly higher than at the end of the second quarter.

Another positive development was the Swedish government's budget proposal in September; it included the timetable for lowering the real-estate tax on hydro assets and for phasing out the nuclear capacity tax over the coming years. We are very pleased with the swift decision and the finalisation of the timetable, which gives regulatory stability to operate the plants and plan the necessary safety investments. This is completely in line with what we have been advocating for; a regulation and taxation policy where the different forms of CO2-free production are treated more equally.

As the investment programme in Russia was completed during the spring, OAO Fortum's new capacity has been the key driver for the earnings growth in the Russia division.

During the quarter, Fortum finalised the acquisition of Ekokem, a leading Nordic circular economy company. The deal marks a very important step in the implementation of our strategy and gives us access to new revenue streams independent on the Nordic power price.

We have continued reducing fixed costs according to earlier announced plan and the progress has been good. Enabled by our strong net cash position, we will carry on our efforts to grow and we are constantly looking for good investment opportunities, as outlined in our strategy."

Fortum's new vision, strategic cornerstones and updated financial targets

In February, Fortum launched its new vision, strategic cornerstones and updated financial targets. The new vision and strategy targets growth and continued profitability with a strong focus on clean energy, customers and shareholder value creation.

The long-term financial target for return on capital employed (ROCE) has been revised to at least 10%, while the target for comparable net debt to EBITDA, around 2.5 times, remained unchanged. The dividend policy also remained unchanged.

Fortum's strategy has four cornerstones: (1) enhance productivity of the current fleet and drive industry transformation, (2) create sustainable solutions for growing cities and urban areas, (3) increase investments in solar and wind power, and (4) build new energy ventures.

Reorganisation of operations

Fortum has reorganised its operating structure as of 1 April 2016. The target of the new organisation is to enable the implementation of the company's new vision and strategy. The new organisation consists of three business divisions: Generation, City Solutions and Russia. In addition, two development units focusing on growing new businesses were established: (1) M&A and Solar & Wind Development, and (2) Technology and New Ventures.

The changes to Fortum's segment reporting were minor and the company continues to have four reporting segments. The segments as of the second quarter of 2016 are: Generation (mainly the former Power and Technology); City Solutions (mainly the former Heat, Electricity Sales and Solutions); Russia; and Other, under which M&A, Solar & Wind Development, and Technology and New Ventures, as well as corporate functions are reported. Some businesses were repositioned due to the reorganisation, but because of the minor financial impact, the comparable segment information for 2015 has not been restated.

Following the divestment of the Swedish distribution business, Fortum no longer has electricity distribution operations. The Distribution segment was reclassified as discontinued operations as of the first quarter of 2015.

The financial results discussed in this interim report are for the continuing operations of Fortum Group.

Financial results

Sales by segment

EUR million	III/16	III/15	I-III/16	I-III/15	2015	LTM
Generation	371	377	1,222	1,282	1,722	1,662
City Solutions	237	185	894	835	1,187	1,246
Russia	175	154	606	627	893	872
Other	29	28	91	86	114	119
Netting of Nord Pool transactions	-66	-57	-255	-240	-336	-351
Eliminations	-15	-26	-69	-95	-122	-96
Total continuing operations	732	661	2,489	2,495	3,459	3,453
Discontinued operations	-	-	-	274	274	-
Eliminations	-	-	-	-31	-31	-
Total Fortum	732	661	2,489	2,738	3,702	3,453

Comparable operating profit by segment

EUR million	III/16	III/15	I-III/16	I-III/15	2015	LTM
Generation	77	102	330	419	561	472
City Solutions	-16	-13	49	55	108	102
Russia	12	0	125	132	201	194
Other	-15	-10	-49	-42	-63	-70
Total continuing operations	58	79	455	565	808	698
Discontinued operations	-	-	-	114	114	-
Total Fortum	58	79	455	678	922	698

Operating profit by segment

EUR million	III/16	III/15	I-III/16	I-III/15	2015	LTM
Generation	18	-651	261	-332	-396	197
City Solutions	-21	-22	60	51	105	114
Russia	12	1	159	134	203	228
Other	-16	-9	-49	-41	-62	-70
Total continuing operations	-6	-682	430	-188	-150	468
Discontinued operations	-	-	-	4,395	4,395	-
Total Fortum	-6	-682	430	4,207	4,245	468

July–September 2016

In the third quarter of 2016, sales increased to EUR 732 (661) million, mainly due to the consolidation of DUON and Ekokem into Fortum Group. Comparable operating profit totalled EUR 58 (79) million and reported operating profit totalled EUR -6 (-682) million. Fortum's operating profit for the period was impacted by items affecting comparability, including sales gains, Ekokem transaction costs and IFRS accounting treatment (IAS 39) of derivatives mainly used for hedging Fortum's power production, as well as nuclear fund adjustments for continuing operations, amounting to EUR -65 (-761) million (Note 4 and 6). The corresponding period of 2015, included an EUR -784 million impact from the decision on the early closure of two nuclear units in Sweden (Note 4 and 6).

The share of profit from associates was EUR 11 (-95) million, of which Hafslund represented EUR 10 (10), TGC-1 EUR 7 (6) and Fortum Värme EUR -4 (-8) million. The share of profit from Hafslund and TGC-1 are based on the companies' published second-quarter 2016 interim reports (Note 14). In the corresponding period of 2015, the decision on the early closure of two nuclear units in Sweden impacted the share of profit from associates by EUR -104 million (Note 6). In addition, for Fortum Värme the corresponding period in 2015 included the paid compensation for refinancing the interest-bearing loans from Fortum (Note 14).

January–September 2016

In January-September 2016, sales was EUR 2,489 (2,495) million. Comparable operating profit totalled EUR 455 (565) million and reported operating profit totalled EUR 430 (-188) million. Fortum's operating profit for the period was impacted by items affecting comparability, including sales gains, Ekokem transaction costs and IFRS accounting treatment (IAS 39) of derivatives mainly used for hedging Fortum's power production, as well as nuclear fund adjustments for continuing operations, amounting to EUR -25 (-752) million (Note 4). The corresponding period of 2015, included a EUR - 784 million impact from the decision on the early closure of two nuclear units in Sweden (Note 4 and 6).

The share of profit from associates was EUR 116 (-15) million, of which Hafslund represented EUR 42 (31), TGC-1 EUR 34 (34) and Fortum Värme EUR 40 (23) million. The share of profit from Hafslund and TGC-1 are based on the companies' published fourth-quarter 2015, and first- and second-quarter 2016 interim reports (Note 14). The corresponding period in 2015 was affected by the decision on the early closure of two nuclear units in Sweden, which impacted the share of profit from associates by EUR -104 million (Note 6). In addition, for Fortum Värme the corresponding period in 2015 was lower mainly due to the paid compensation for refinancing the interest-bearing loans from Fortum.

Net financial expenses were EUR -135 (-123) million and include changes in the fair value of financial instruments of EUR 0 (-14) million. In the corresponding period of 2015, net financial expenses included EUR 38 million compensation from prepayment of loans by Fortum Värme (Note 14).

Profit before taxes was EUR 411 (-325) million. The corresponding period of 2015, was impacted by EUR -888 million due to the decision on the early closing of the two nuclear units in Sweden.

Taxes for the period totalled EUR -54 (80) million. The effective income tax rate according to the income statement was 13.1% (24.5%). 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, was 19.0% (25.6%) (Note 10).

The profit for the period for continuing operations was EUR 357 (-246) million. Earnings per share for continuing operations were EUR 0.40 (-0.28), of which EUR -0.03 (-0.77) per share relates to items affecting comparability. In the corresponding period of 2015, the impact of the decision on the early closing of two nuclear units in Sweden was EUR -0.80 per share.

Financial position and cash flow

Cash flow

In January-September 2016, net cash from operating activities from continuing operations decreased by EUR 425 million to EUR 471 (896) million, mainly due to lower Comparable EBITDA EUR 70 million, higher income taxes paid EUR 136 million, and lower realised foreign exchange gains and losses EUR 137 million. In June, Fortum paid income taxes in Sweden totalling EUR 127 million regarding tax disputes. The appeal process is ongoing and based on legal opinions no provision is made, and the payment is booked as a receivable (Note 22). Realised foreign exchange gains and losses of EUR 112 million relate to the rollover of foreign exchange contract hedging loans to Fortum's Swedish and Russian subsidiaries.

Capital expenditures increased by EUR 20 million to EUR 367 (347) million. Net cash used in investing activities increased to EUR 1,439 (0) million, mainly due to the acquisition of shares of EUR 667 (6) million. Acquisition of shares relates mainly to acquisition of Ekokem and DUON. Increase in other interest-bearing receivables, EUR 376 million, relates mainly to bank deposits, given as trading collaterals to commodity exchanges. In 2015, the change of shareholder loans to associated companies and joint venture, EUR 301 million, includes repayments by Fortum Värme amounting to EUR 376 million.

Cash flow before financing activities is EUR -968 (6,303) million. In 2015, the impact from discontinued operations was EUR 6,457 million.

Fortum paid dividends totalling EUR 977 (1,155) million in April 2016. Payments of long-term and short-term liabilities totalled EUR 962 (919) million including repayment of a EUR 750 million bond and Ekokem loans of EUR 115 million. The total net decrease in liquid funds was EUR 2,887 million (increase 5,318).

Assets and capital employed

Total assets decreased by EUR 1,429 million to EUR 21,338 (22,767 at year-end 2015) million.

Liquid funds at the end of September 2016 were EUR 5,322 (8,202 at year-end 2015) million.

Capital employed was EUR 18,362 (19,870 at year-end 2015) million, a decrease of EUR 1,508 million.

Equity

Equity attributable to owners of the parent company totalled EUR 13,100 (13,794 at year-end 2015) million.

The decrease in equity attributable to owners of the parent company totalled EUR 694 million and was mainly from dividends paid EUR 977 million and the net profit for the period EUR 352 million.

Financing

Fortum was net cash positive at the end of the period. Net cash decreased by EUR 2,058 million to EUR 137 (2,195 at year-end 2015) million.

At the end of September, the Group's liquid funds totalled EUR 5,322 (8,202 at year-end 2015) million. Liquid funds include cash and bank deposits held by OAO Fortum amounting to EUR 110 (76 at year-end 2015) million. In addition to liquid funds, Fortum had access to approximately EUR 2.0 billion of undrawn committed credit facilities (Note 16).

Net financial expenses in January-September were EUR -135 (-123) million, of which net interest expenses were EUR -132 (-156) million. Net financial expenses include changes in the fair value of financial instruments of EUR 0 (-14) million and EUR 38 million compensation from prepayment of loans by Fortum Värme for January-September 2015 .

In June 2016, Fortum signed a EUR 1,750 million syndicated Multicurrency Revolving Facility Agreement. The committed facility will be used for general corporate purposes and replaces the existing credit facility signed in July 2011. The facility has an initial maturity of five years and Fortum may request two one-year extension options.

Fortum's long-term credit ratings were unchanged. Standard & Poor's rating is BBB+ and the shortterm rating A-2. The outlook is stable. Fitch Ratings long-term Issuer Default Rating (IDR) and senior unsecured rating is BBB+ and the short-term IDR is F2 with a stable outlook.

Key figures

For the last twelve months comparable net debt to EBITDA was -0.1 (-1.7 at year-end 2015).

Gearing was -1% (-16% at year-end 2015) and the equity-to-assets ratio 62% (61% at year-end 2015). Equity per share was EUR 14.75 (15.53 at year-end 2015). For the last twelve months return on capital employed totalled 3.2% (22.7% at year-end 2015).

Market conditions

Nordic countries

According to preliminary statistics, electricity consumption in the Nordic countries was 80 (81) terawatt-hours (TWh) during the third quarter of 2016. In January-September 2016, electricity consumption increased by 5 TWh to 283 (278) TWh, mainly due to colder weather during the winter.

At the beginning of 2016, the Nordic water reservoirs were at 98 TWh, which is 15 TWh above the long-term average and 18 TWh higher than a year earlier. By the end of the third quarter 2016, reservoirs were 3 TWh below the long-term average and 12 TWh lower than at the end of September 2015. Reservoir levels have decreased due to below-normal precipitation during 2016.

In the third quarter of 2016, the average system spot price was EUR 25.2 (13.3) per MWh. The average area price in Finland was EUR 31.6 (30.1) per MWh and in Sweden SE3 (Stockholm) EUR 29.6 (15.5) per MWh. The system spot price increased compared to the exceptionally low level in the third quarter of 2015, which was caused by high inflows and late snow melt.

During January-September 2016, the average system spot price was EUR 24.4 (20.7) per MWh, with the area price in Finland at EUR 30.8 (29.3) per MWh and in Sweden SE3 (Stockholm) at EUR 26.7 (21.7) per MWh.

In Germany, the average spot price during the third quarter of 2016 was EUR 28.3 (32.8) per MWh, and during January-September 2016 EUR 26.1 (31.1) per MWh.

The market price of CO2 emission allowances (EUA) was EUR 8.1 per tonne at the beginning of the year. During the third quarter the price fluctuated between EUR 4 and 5 per tonne and ended at EUR 4.9 per tonne at the end of September 2016.

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.

According to preliminary statistics, Russian electricity consumption was 231 (225) TWh during the third quarter of 2016. The corresponding figure in Fortum's operating area in the First price zone (European and Urals part of Russia) was 179 (174) TWh. In January-September 2016, Russian electricity consumption was 740 (731) TWh and the corresponding figure in Fortum's operating area in the First price zone was 567 (561) TWh.

In the third quarter of 2016, the average electricity spot price, excluding capacity price, increased by approximately 10% to RUB (Russian rouble) 1,298 (1,184) per MWh in the First price zone. In January-September 2016, the average electricity spot price, excluding capacity price, increased by approximately 5% to RUB 1,204 (1,146) per MWh in the First price zone.

More detailed information about the market fundamentals is included in the tables at the end of the report (page 58).

European business environment and carbon market

Swedish energy taxation

In June, a broad parliamentary agreement covering long-term energy policies was presented by the government and parts of the opposition. One of the key elements of the agreement was tax reductions for the energy sector. In September, the Swedish government presented a budget proposal for the coming years, including a timetable for the tax reductions. The proposal is subject to the formal decision by the Parliament in spring 2017.

Ratification of the Paris Agreement

The ratification of the global climate agreement adopted in Paris in December 2015 has proceeded more quickly than anticipated and the Agreement will enter into force already on 4 November 2016. The European Union finalised its ratification on 5 October 2016. Currently, 77 parties representing over 60% of global emissions have submitted their ratification.

Commission's summer package

In July, the European Commission released proposals aiming to accelerate Europe's transition to a low-carbon economy. The key elements of the package include binding greenhouse gas reduction targets for member states in the non-ETS sectors (e.g. transport, buildings, agriculture and waste management) in 2021-2030, inclusion of land use and forestry emissions in the 2030 legislative framework, and a European strategy for low emission mobility. The latter relies heavily on electrification of the transport sector while recognising the role of biofuels too. The summer package, together with the 2015 proposal for the amendment of the emissions trading directive, will implement the EU target of a 40% emission reduction by 2030.

Finnish budget proposal 2017

The Finnish budget proposal for 2017 included key energy-related decisions on the increase of fuel taxes, the so-called CHP tax compromise, and the decision to assess how to bring wind power into the scope of the real-estate taxation applicable to power plants. Currently, wind power is subject to a lower tax rate. New tax treatment would be applicable from 2018 onwards. Also, the earlier announced mechanism to offset the indirect costs of the EU Emissions Trading System for energyintensive industries was approved as part of the budget proposals. The Parliament is set to adopt the related budget laws during autumn 2016.

Segment reviews

Generation

Generation is responsible for Nordic power production. The segment comprises nuclear, hydro and thermal power production, portfolio management, and trading and industrial intelligence as well as nuclear services globally.

EUR million	III/16	III/15	I-III/16	I-III/15	2015	LTM
Sales	371	377	1,222	1,282	1,722	1,662
- power sales	367	343	1,206	1,206	1,625	1,625
of which Nordic power sales*	303	326	1,022	1,135	1,526	1,413
- other sales	5	34	16	75	97	38
Comparable EBITDA	104	131	410	506	680	584
Comparable operating profit	77	102	330	419	561	472
Operating profit	18	-651	261	-332	-396	197
Share of profits from associates and joint ventures**	-4	-106	-9	-115	-111	-5
Comparable net assets (at period end)			5,685	5,856	5,931
Comparable return on net assets, %					9.5	8.4
Capital expenditure and gross investments in shares	47	52	124	122	203	205
Number of employees			1,024	1,358	1,341

* 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

** 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 20 in the Consolidated financial statements 2015)

Power generation by source, TWh	III/16	III/15	I-III/16	I-III/15	2015	LTM
Hydro power, Nordic	4.3	6.6	16.5	19.2	25.1	22.4
Nuclear power, Nordic	5.6	5.1	17.8	16.8	22.7	23.7
Thermal power, Nordic	0.1	0.1	0.2	0.2	0.3	0.3
Total	10.0	11.8	34.5	36.2	48.1	46.4

Nordic sales volumes, TWh	III/16	III/15	I-III/16	I-III/15	2015	LTM
Nordic sales volume	11.4	12.2	39.4	37.9	50.5	52.0
of which Nordic power sales volume*	9.6	11.4	33.1	34.8	46.3	44.6

* 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	III/16	III/15	I-III/16	I-III/15	2015	LTM
Generation's Nordic power price*	31.6	28.7	30.9	32.6	33.0	31.7

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

July–September 2016

In the third quarter of 2016, the Generation segment's comparable operating profit was 77 (102) million, EUR 25 million lower than in the corresponding period in 2015. The decline, mainly due to lower hydro volumes, was partly offset by a higher achieved power price, good nuclear availability and a somewhat lower cost base compared to the corresponding period in 2015.

Operating profit of EUR 18 (-651) million was affected by the IFRS accounting treatment (IAS 39) of derivatives, mainly used for hedging Fortum's power production, and by nuclear fund adjustments, amounting to EUR -59 (-753) million (Note 4). The corresponding period in 2015 included EUR -784 million from the decision on the early closure of two nuclear units in Sweden (Note 6).

The share of profits from associated companies and joint ventures totalled EUR -4 (-106) million (Note 14).

Generation's achieved Nordic power price was EUR 31.6 (28.7) per MWh, EUR 2.9 per MWh higher than in the corresponding period in 2015. The system price and all area prices were higher in the third quarter of 2016 compared to the same period in 2015. The average system spot price of electricity in Nord Pool was EUR 25.2 (13.3) per MWh. The average area price in Finland was EUR 31.6 (30.1) per MWh and in Sweden SE3 (Stockholm) EUR 29.6 (15.5) per MWh.

The segment's total power generation in the Nordic countries was 10.0 (11.8) TWh, 1.8 TWh lower than in the corresponding period in 2015, due to lower hydro volumes. Thermal production totalled 0.1 (0.1) TWh in the Nordic countries. CO2-free production amounted to 99% (97%) of total production.

January–September 2016

In January-September 2016, the Generation segment's comparable operating profit was EUR 330 (419) million, i.e. EUR 89 million lower than in the corresponding period in 2015, mainly due to the lower achieved power price and lower hydro volumes.

Operating profit of EUR 261 (-332) million was primarily affected by the IFRS accounting treatment (IAS 39) of derivatives, mainly used for hedging Fortum's power production, and by nuclear fund adjustments, amounting to EUR -69 (-750) million (Note 4). In 2015, the corresponding period included EUR -784 million from the decision on the early closure of two nuclear units in Sweden (Note 6).

The share of profits from associated companies and joint ventures totalled EUR -9 (-115) million (Note 14).

Generation's achieved Nordic power price was EUR 30.9 (32.6) per MWh, EUR 1.7 per MWh lower than in the corresponding period in 2015. The average system spot price of electricity in Nord Pool was EUR 24.4 (20.7) per MWh. The average area price in Finland was EUR 30.8 (29.3) per MWh and in Sweden SE3 (Stockholm) EUR 26.7 (21.7) per MWh.

The segment's total power generation in the Nordic countries was 34.5 (36.2) TWh. Thermal production totalled 0.2 (0.2) TWh. The CO2-free production amounted to 99% (99%) of total production.

City Solutions

City Solutions is responsible for developing sustainable city solutions into a growing business for Fortum. The segment comprises heating and cooling, waste-to-energy, biomass and other circular economy solutions, as well as electricity sales and services. 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	III/16	III/15	I-III/16	I-III/15	2015	LTM
Sales	237	185	894	835	1,187	1,246
- heat sales	50	49	293	293	423	423
- power sales	105	111	442	483	682	641
- other sales	82	25	159	59	83	182
Comparable EBITDA	15	12	133	129	209	213
Comparable operating profit	-16	-13	49	55	108	102
of which electricity sales	8	11	33	35	55	53
Operating profit	-21	-22	60	51	105	114
Share of profits from associates and joint ventures	-2	-6	50	34	59	75
Comparable net assets (at period-end)			2,931	2,067	2,182
Comparable return on net assets, %					7.9	7.6
Capital expenditure and gross investments in shares	716	33	871	67	128	932
Number of employees			2,347	1,440	1,417

In August, Fortum finalised the acquisition of Ekokem Corporation with the four biggest owners who represented approximately 81% of the shares. The transaction was originally announced in May 2016. At the end of the third quarter, minority shareholders representing approximately 17% of the shares had approved Fortum's tender offer, bringing Fortum's total ownership up to approximately 98%.

Ekokem has been integrated as a business area into the City Solutions division and has been consolidated into Fortum Group from the end of August 2016.

July–September 2016

In the third quarter of 2016, sales increased to EUR 237 (185) million, mainly due to the consolidation of DUON and Ekokem. Heat sales volumes of the City Solutions segment amounted to 0.7 (0.6) TWh. Power sales volumes from CHP production totalled 0.3 (0.3) TWh.

Comparable operating profit was EUR -16 (-13) million. The result was burdened by higher sales and marketing costs and lower sales margin in retail sales due to strong competition in the Nordics.

Operating profit of EUR -21 (-22) million was affected mainly by Ekokem transaction costs and IFRS accounting treatment (IAS 39) of derivatives, totalling EUR -5 (-9) million (Note 4). The share of profits from associated companies and joint ventures totalled EUR -2 (-6) million, including mainly the share of profit from Fortum Värme (Note 14).

January–September 2016

In January-September 2016, sales increased to EUR 894 (835) million, mainly due to the consolidation of DUON and Ekokem. Heat sales volumes of the City Solutions segment amounted to 5.4 (5.2) TWh. Power sales volumes from CHP production totalled 1.9 (1.7) TWh during the same period.

Comparable operating profit was EUR 49 (55) million. The result was mainly burdened by an unfavourable fuel mix in the beginning of the year and a lower achieved power price.

Operating profit of EUR 60 (51) million was affected mainly by sales gains, Ekokem transaction costs and IFRS accounting treatment (IAS 39) of derivatives totalling EUR 11 (-5) million (Note 4). The share of profits from associated companies and joint ventures totalled EUR 50 (34) million, including mainly the share of profit from Fortum Värme (Note 14).

Heat sales by country, TWh	III/16	III/15	I-III/16	I-III/15	2015	LTM
Finland	0.4	0.3	2.2	2.1	3.1	3.2
Poland	0.2	0.2	2.2	2.2	3.4	3.4
Other countries	0.1	0.1	0.9	0.8	1.2	1.3
Total	0.7	0.6	5.4	5.2	7.8	8.0

Power sales, TWh	III/16	III/15	I-III/16	I-III/15	2015	LTM
CHP	0.3	0.3	1.9	1.7	2.5	2.7
Electricity Sales	2.0	2.9	8.7	10.3	14.2	12.6
Total	2.4	3.2	10.6	12.0	16.7	15.3

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.

EUR million	III/16	III/15	I-III/16	I-III/15	2015	LTM
Sales	175	154	606	627	893	872
- power sales	157	131	485	479	661	667
- heat sales	17	23	118	147	228	199
- other sales	1	0	3	2	4	5
Comparable EBITDA	43	27	212	186	267	293
Comparable operating profit	12	0	125	132	201	194
Operating profit	12	1	159	134	203	228
Share of profits from associates and joint ventures	7	6	34	34	32	32
Comparable net assets (at period end)			2,916	2,736	2,561
Comparable return on net assets, %					8.2	8.2
Capital expenditure and gross investments in shares	41	84	133	198	285	220
Number of employees			3,732	4,172	4,126

After the completion of the multi-year investment programme in March 2016, Fortum has 2,226 MW of new capacity i.e. generation capacity built after 2007, which under the Russian Government's capacity supply agreement (CSA – "new capacity") receives guaranteed payments for a period of 10 years after the commissioning of each new unit.

The received capacity payments vary depending on the age, location, type and size of the plant, as well as on seasonality and availability. The CSA payments can also vary somewhat annually as they are linked to Russian Government long-term bonds with 8 to 10 years maturity. In June 2016, the System Administrator of the wholesale market published data on the weighted average cost of capital (WACC) and the consumer price index (CPI) for 2015, which was used to calculate the capacity price on CSA in 2016. The CSA payments were revised upwards in the winter of 2016 accordingly to reflect the higher bond rates. In addition, the regulator will review the guaranteed CSA payments by re-examining earnings from the electricity-only market three and six years after the commissioning of a unit, and may revise the CSA payments accordingly.

All of Fortum's capacity generation built prior to 2008 (CCS – "old capacity"), totalling 2,214 MW in September 2016, was allowed to participate in the capacity selection for 2016, and the majority of Fortum's plants were selected. The volume of Fortum's installed capacity not selected in the auction totalled 195 MW (approximately 8.8% of Fortum's total old capacity in Russia), for which Fortum has obtained forced mode status, i.e. it is receiving payments for the capacity.

July–September 2016

In the third quarter of 2016, the Russia segment's power sales volumes amounted to 6.4 (5.9) TWh and heat sales volumes totaled 1.5 (2.8) TWh. The divestment of the Tobolsk CHP plant in February 2016 was the main reason for the decrease in heat sales volumes compared to the third quarter of 2015.

The Russia segment's comparable operating profit was EUR 12 (0) million. The positive effect came from higher received CSA payments following the adjustments of the WACC component in the CSA prices and the commissioning of the new units. The Russian rouble had a positive effect of EUR 4 million.

Operating profit was EUR 12 (1) million.

The share of profits from associated companies and joint ventures totalled EUR 7 (6) million, including the share of TGC-1 (Note 14).

January–September 2016

In January-September 2016, the Russia segment's power sales volumes amounted to 21.6 (20.8) TWh and heat sales volumes totalled 12.9 (16.7) TWh. Electricity volumes increased mainly due to the commissioning of two new units in Chelyabinsk. The divestment of the Tobolsk CHP plant in February 2016 decreased the growth impact in both electricity and heat volumes.

The Russia segment's comparable operating profit was EUR 125 (132) million, including CSA provision releases of EUR 2 (32) million. The positive effect came from higher received CSA payments following the adjustments of the WACC component in the CSA prices and the commissioning of the new units. The Russian rouble had a negative effect of EUR 15 million.

Operating profit was EUR 159 (134) million, including sales gains of EUR 32 (1) million (Note 4).

The share of profits from associated companies and joint ventures totalled EUR 34 (34) million, including the share of TGC-1 (Note 14).

Fortum started receiving capacity payments under the Russian Government's capacity supply agreement (CSA) for Chelyabinsk 2 as of 1 March 2016. Fortum's extensive investment programme in Russia that started in 2008 is now completed, as the final unit of the programme has started its commercial operation.

Key electricity, capacity and gas prices for Fortum Russia	III/16	III/15	I-III/16	I-III/15	2015	LTM
Electricity spot price (market price), Urals hub, RUB/MWh	1,125	1,051	1,052	1,041	1,047	1,055
Average regulated gas price, Urals region, RUB/1000 m3	3,614	3,614	3,614	3,446	3,488	3,614
Average capacity price for CCS "old capacity", tRUB/MW/month*	130	134	136	146	149	142
Average capacity price for CSA "new capacity", tRUB/MW/month*	724	567	777	620	641	759
Average capacity price, tRUB/MW/month	433	319	456	346	359	440
Achieved power price for Fortum in Russia, RUB/MWh	1,796	1,612	1,704	1,556	1,555	1,664
Achieved power price for Fortum in Russia, EUR/MWh**	24.6	22.3	22.5	23.0	22.5	22.1

* Capacity prices paid for the capacity volumes, excluding unplanned outages, repairs and own consumption

** Translated using average exchange rate

Discontinued operations (Distribution)

EUR million	III/16	III/15	I-III/16	I-III/15	2015	LTM
Sales	-	-	-	274	274	-
- distribution network transmission	-	-	-	229	229	-
- regional network transmission	-	-	-	40	40	-
- other sales	-	-	-	7	7	-
Comparable EBITDA	-	-	-	163	163	-
Comparable operating profit	-	-	-	114	114	-
Operating profit	-	-	-	4,395	4,395	-
Capital expenditure and gross investments in shares	-	-	-	44	44	-
Number of employees	-	-	-	-	-	-

The table above includes the Swedish electricity distribution business for January-May 2015.

Fortum has had no distribution business since June 2015 when it completed the divestment of its Swedish electricity distribution business. The transaction concluded the divestment of Fortum's Distribution segment, a process that began in 2013.

Capital expenditures, divestments and investments in shares

Capital expenditures and investments in shares for continuing operations totalled EUR 825 (171) million in the third quarter of 2016. Investments, excluding acquisitions, were EUR 141 (170) million (Note 4).

Capital expenditures and investments in shares for continuing operations totalled EUR 1,172 (391) million in January-September 2016. Investments, excluding acquisitions, were EUR 356 (385) million (Note 4).

Fortum expects to start the supply of power and heat from new power plants and to upgrade existing plants as follows:

	Type	Electricity capacity, MW	Heat capacity, MW	Supply starts
Generation
Hydro refurbishment, Nordic	Hydro	12		2016
Loviisa 1 and 2 refurbishment, Finland	Nuclear	11		2016
City Solutions
Zabrze, Poland	CHP	75	145	2018
Russia
Ulyanovsk	Wind	35		2017
Other
Bhadla, India	Solar	70		2017
Karnataka, India	Solar	100		2017
Blaiken, Sweden	Wind	12		2016
Solberg, Sweden	Wind	75*		2018

* Skellefteå Kraft AB (SKAB is participating in the project with a 50% (37.5 MW) share

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 start of commercial electricity production of the plant is expected to take place in late 2018, according to the plant supplier AREVA-Siemens Consortium. TVO has withdrawn a EUR 300 million shareholder loan from the total EUR 600 million commitments. Fortum's share of the EUR 300 million withdrawal is approximately EUR 75 million. Fortum's remaining commitment for OL3 is EUR 75 million (Note 15).

City Solutions

In February, Fortum agreed to sell its 51.4% shareholding in the Estonian natural gas import, sales and distribution company AS Eesti Gaas. Fortum finalised the transaction in March 2016.

In March, Fortum completed the acquisition of 93.35% of shares in the Polish electricity and gas sales company Grupa DUON S.A. In April, Fortum announced that it had purchased the remaining shares through a mandatory squeeze-out procedure, after which the extraordinary meeting of shareholders of Grupa DUON S.A. decided to delist the company from the Warsaw Stock Exchange.

In May, Fortum signed an agreement with the four biggest owners of Ekokem Corporation, representing approximately 81% of the shares, to acquire their shareholding in the company for approximately EUR 470 million. This would correspond to a debt- and cash-free purchase price of approximately EUR 700 million for 100% of the company, as Fortum made a tender offer to all remaining shareholders at the same price (EUR 165 per share). Fortum obtained the required competition clearances in July. Having reached the necessary ownership thresholds, Fortum will proceed with a minority redemption process. At the end of September 2016, Fortum's total ownership was approximately 98%.

Russia

In February, Fortum sold its 100% shareholding in its Russian subsidiary OOO Tobolsk CHP. OOO Tobolsk CHP owns and operates the combined heat and power plant in the city of Tobolsk in Western Siberia.

Other

In January, Fortum won a reverse auction in India for a 70-MW solar project with a fixed tariff of 4.34 INR/kWh (about 60 EUR/MWh) for 25 years. In April, Fortum signed the Power Purchase Agreement with NTPC, India's largest utility.

In February, Fortum acquired a 75-MW wind farm project. The Solberg site, located in Västernorrland County in northern Sweden, is fully-permitted and construction-ready. In April, Fortum made a final investment decision on the project together with Skellefteå Kraft AB (SKAB), which is participating in the project with a 50% share.

In April, Fortum won the bid in a reverse auction in India for a 100-MW solar project. The solar power plant will be built in Karnataka with a fixed tariff of 4.79 INR/kWh for 25 years.

Shares and share capital

Fortum shares on Nasdaq Helsinki

January-September	No. of shares	Total value	High	Low	Average	Last
2016	traded	EUR	EUR	EUR	1) EUR	EUR
FUM1V	474,656,832	6,311,905,880	15.27	10.99	13.30	14.38

1) Volume weighted average

	September 30, 2016	September 30, 2015
Market capitalisation, EUR million	12,775	11,753
No. of shareholders	134,532	128,682
Finnish State holding, %	50.8	50.8
Nominee registrations and direct foreign shareholders, %	27.7	28.0
Households, %	11.2	10.4
Financial and insurance corporations, %	1.6	2.2
Other Finnish investors, %	8.7	8.6

In addition to the Nasdaq Helsinki, Fortum shares were traded on several alternative market places, for example Boat, BATS Chi-X and Turquoise, and on the OTC market. During January-September 2016, approximately 62% of Fortum's shares were traded on markets other than the Nasdaq Helsinki.

On 30 September 2016, Fortum Corporation's share capital was EUR 3,046,185,953 and the total number of registered shares was 888,367,045. Fortum Corporation did not own its own shares.

On 5 April 2016, 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 per cent 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 has not been used by the end of the third quarter.

Group personnel

Fortum's operations are mainly based in the Nordic countries, Russia and the Baltic Rim area. The total number of employees at the end of September 2016 was 8,185 (7,835 at the end of 2015).

Generation had 1,024 (1,341) employees; City Solutions 2,347 (1,417); Russia 3,732 (4,126); and Other 1,082 (951). Generation's number of employees decreased, mainly due to the reorganisation of the Group; City Solution's increased, mainly due to the acquisition of DUON and Ekokem; and Russia's decreased, due to the divestment of Tobolsk. Also Other increased, due to the reorganisation of the Group.

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 will strengthen its in-house focus on innovation and digitalisation, partner with global leading suppliers, promising technology companies and research institutions, and make direct and indirect investments in start-ups with promising new innovations.

The Group reports its R&D expenditure on a yearly basis. In 2015, Fortum's R&D expenditure was EUR 47 (41) million, or 1.4% (1.0%) of sales.

Sustainability

Fortum strives for balanced management of economic, social and environmental responsibility in the company's operations. Fortum's sustainability targets consist of both Group-level key indicators and division-level indicators.

The Group-level sustainability targets emphasise Fortum's role in society and measure not only environmental and safety targets, but also Fortum's reputation, customer satisfaction, employee wellbeing, and the security of production of power and heat. At the beginning of 2016, the Grouplevel target-setting was changed by taking work well-being, measured as a percentage of sicknessrelated absences, as a new Group target. In terms of specific carbon dioxide emissions (gCO2/kWh), Fortum now focuses on measuring Group-level specific emissions from total energy production.

The achievement of the sustainability targets is monitored in the monthly, quarterly and annual reporting. Sustainability target-setting and follow-up, as well as the approval of Fortum's Sustainability policy, and the review of Fortum's Sustainability Reporting, are included in the working order of the Board of Directors. Complete data on Fortum's sustainability performance is published on Fortum's Sustainability website.

The company is listed on the Nasdaq Helsinki exchange and is included in the STOXX Global ESG Leaders, OMX GES Sustainability Finland, and ECPI® indices. Fortum is also included in the Carbon Disclosure Project's Nordic Climate Index and has received a Prime Status (B-) rating by the German oekom research AG.

Fortum's sustainability targets and performance*

Targets		III/16	I-III/16	Five-year average
Specific CO2 emissions from total energy production (electricity and heat) as a five-year average, g/kWh	< 200	190	178	188
Major EHS incidents, number	≤ 23	4	13	-
Energy availability of CHP plants, %	> 95	96.0	98.0	-
Total recordable injury frequency (TRIF) for own personnel, number	≤ 2.5	1.8	1.6	-
Lost workday injury frequency (LWIF) for own personnel, number	≤ 1.0	0.9	0.9	-
Lost workday injury frequency (LWIF) for contractors, number	≤ 3.0	2.6	2.7	-
Serious occupational accidents, number	≤ 8	4	10	-
Sickness-related absences**, %	≤2.4	1.8	2.3	-

* Targets for reputation, customer satisfaction and energy efficiency are monitored annually. Ekokem and Duon excluded from all sustainability figures.

** Sickness-related absences: excluding September

Economic responsibility

For Fortum, economic responsibility means competitiveness, performance excellence and marketdriven production, which create long-term value for our stakeholders and enable profitable growth. We manage our supply chain in a responsible manner.

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: 10%) and capital structure (target: comparable net debt/EBITDA around 2.5). In addition, as of 1 January 2014, Fortum has used the applicable Global Reporting Initiative (GRI) G4 indicators for reporting economic responsibility.

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 January-September 2016, Fortum audited 6 (7) suppliers in India, Poland, China, Russia and Lithuania. In September, Fortum signed a contract with an external service provider for conducting supplier sustainability audits.

Environmental responsibility

Energy and resource efficiency, climate change mitigation, and reducing environmental impacts are emphasised in Fortum's environmental responsibility. The company's know-how in CO2-free hydro and nuclear power production and in energy-efficient combined heat and power production, investments in solar and wind power, as well as solutions for sustainable cities play a key role in this. Through research and development activities, Fortum creates prerequisites for environmentally benign energy solutions. Fortum's Group-level environmental targets are related to CO2 emissions, energy efficiency, and major environmental, health and safety (EHS) incidents. At the end of September 2016, ISO 14001 certification covered 99.9% of Fortum's power and heat production worldwide.

Fortum's climate target over the next five years is for total specific CO2 emissions from both electricity and heat production in all countries to be below 200 g/kWh. The target is calculated as a five-year average. At the end of September 2016, the total specific CO2 emissions from energy production were at 188 (193) g/kWh, which is better than the target level.

Fortum's total CO2 emissions in January-September 2016 amounted to 12.6 (13.4) million tonnes (Mt), of which 1.6 (1.4) Mt were within the EU's emissions trading scheme (ETS). Fortum's free emissions allowances in 2015 were 1.3 Mt and the estimate for 2016 is 1.1 Mt.

Fortum's total CO2 emissions * (million tonnes, Mt)	III/16	III/15	I-III16	I-III/15	2015	LTM
Total emissions	3.3	3.3	12.6	13.4	19.2	18.3
Emissions subject to ETS	0.3	0.3	1.6	1.4	2.1	2.3
Free emissions allocation					1.3
Emissions in Russia	3.0	3.1	10.9	11.9	17.0	15.9

* Ekokem and Duon excluded from all sustainability figures.

By 2020, Fortum's target is to achieve an energy savings of more than 1,400 GWh annually, compared to 2012. Ongoing projects in 2016 include, among others, hydropower plant refurbishments in Finland and Sweden, a new CHP plant in Zabrze in Poland, wind power projects in Sweden and Russia, and solar projects in India. The projects in 2016 are estimated to result in an annual energy savings of 105 GWh. Fortum's target is fewer than 23 major EHS incidents annually. In January-September 2016, 13 (15) major EHS incidents took place in Fortum's operations: the incidents included eight non-compliances with environmental permits, three fires and two explosion. These incidents did not have significant environmental or financial impacts.

Social responsibility

Fortum's social responsibility emphasises the secure supply of electricity and heat, creating solutions for sustainable cities, operational and occupational safety, as well as ethical business operations and compliance with regulations. At the end of September 2016, OHSAS 18001 certification covered 99.9% of Fortum's power and heat production worldwide.

The average energy availability of Fortum's CHP plants in January-September 2016 was 98.0% (97.0%), which is clearly above the annual target level of 95%.

The total recordable injury frequency (TRIF) for Fortum employees in January-September 2016 was 1.6 (1.7) per one million working hours, which is better than the Group-level frequency target (≤ 2.5). The lost-workday injury frequency for own personnel was 0.9 (1.2) and for contractors 2.7 (3.1), both below the set target levels. The number of serious occupational accidents was 10 (12). Implementation of the agreed actions to improve contractor safety continues with a specific focus on contractor safety and integration of Ekokem and Duon operations. Fortum's target is to eliminate serious injuries by 2020. The percentage of sickness-related absences in January-August 2016 was 2.3, which is below the target level.

Changes in Fortum's Management

In February 2016, Fortum announced that it will reorganise its corporate structure effective 1 April 2016. The target of the new organisation is to enable the implementation of the company's new vision and strategy, which were announced on 3 February 2016. The new organisation comprises three business divisions: Generation, City Solutions, and Russia. In addition, two development units focusing on growing new businesses have been established: M&A and Solar & Wind Development,

and Technology and New Ventures. The new organisation will also have four staff functions: Finance; Legal; Strategy, People and Performance; and Corporate Affairs and Communications.

Fortum's Executive Management Team, as of 1 April 2016:

Pekka Lundmark, President and CEO Matti Ruotsala, Deputy CEO until his planned retirement in summer 2017 Timo Karttinen, CFO Tiina Tuomela, Executive Vice President, Generation Markus Rauramo, Executive Vice President, City Solutions Alexander Chuvaev, Executive Vice President, Russia Per Langer, Senior Vice President, Technology and New Ventures Kari Kautinen, Senior Vice President, M&A and Solar & Wind Development Sirpa-Helena Sormunen, General Counsel Risto Penttinen, Senior Vice President, Strategy, People and Performance Arto Räty, Senior Vice President, Corporate Affairs and Communications

All members of the Executive Management Team report to the President and CEO, except for the General Counsel, who reports to the CFO.

Annual General Meeting 2016

Fortum Corporation's Annual General Meeting, which was held in Helsinki on 5 April 2016, adopted the financial statements of the parent company and the Group for the financial period 1 January - 31 December 2015, and discharged the members of Fortum's Board of Directors as well as the President and CEO and the deputy CEO from liability for the year 2015.

The Annual General Meeting decided to pay a dividend of EUR 1.10 per share for the financial year that ended on 31 December 2015. The record date for the dividend payment was 7 April 2016, and the dividend payment date was 14 April 2016.

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

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 and 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 living in Finland, the fee for each Board and Board Committee meeting will be 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 will be paid to all members. No fee will be paid for decisions made without a separate meeting.

In addition, Authorised Public Accountant Deloitte & Touche Ltd was re-elected as auditor, and the auditor's fee is paid pursuant to an invoice approved by the company.

The Annual General Meeting also authorised the Board of Directors to decide on the repurchase 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 disposed of in connection with acquisitions, investments or other business transactions, or to be retained or cancelled. The disposals could not be made for the purposes of the company's incentive and remuneration schemes.

After the Annual General Meeting, Fortum's Board of Directors elected from among its members to the Nomination and Remuneration Committee Sari Baldauf as Chairman, and Eva Hamilton, Tapio Kuula and Veli-Matti Reinikkala as members.

Furthermore, the Board elected to the Audit and Risk Committee Kim Ignatius as Chairman, and Minoo Akhtarzand, Heinz-Werner Binzel and Jyrki Talvitie as members.

In September 2016, Eero Heliövaara (Chairman), Director General of Finnish Government Ownership Steering Department, Timo Ritakallio, President and CEO, Ilmarinen Mutual Pension Insurance Company and Liisa Hyssälä, Director General, The Social Insurance Institution of Finland KELA, were appointed to Fortum's Shareholders' Nomination Board. In addition, the Chairman of Fortum's Board of Directors Sari Baldauf is a member of the Shareholders' Nomination Board.

Outlook

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 emissions allowances, and the hydrological situation.

The continued uncertainty in the global and European economies has kept the outlook for economic growth unpredictable. The overall economic uncertainty impacts commodity and CO2 emissions allowance prices, and this could maintain downward pressure 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 further development of 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 sector has also added risks for utility companies.

Nordic market

Despite macroeconomic uncertainty, 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.

During January-September 2016, oil and coal prices increased, while the price of CO2 emission allowances (EUA) declined. The price of electricity for the upcoming twelve months appreciated in the Nordic area as well as in Germany, and both are now on higher levels than at the end of the third quarter of 2015.

In mid-October 2016, the quotation for coal (ICE Rotterdam) for the remainder of 2016 was around USD 78 per tonne, and for CO2 emission allowances for 2016 around EUR 6 per tonne. The Nordic system electricity forward price in Nasdaq Commodities for the rest of 2016 was around EUR 37 per MWh and for 2017 around EUR 30 per MWh. In Germany, the electricity forward price for the rest of 2016 was around EUR 37 per MWh and for 2017 around EUR 32 per MWh. Nordic water reservoirs were about 4 TWh below the long-term average and 14 TWh below the corresponding level in 2015.

Generation

The Generation segment's achieved Nordic power price typically depends on such factors as the 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. In addition, the comparable operating profit of the Generation segment will be affected by the possible thermal power generation volumes and its profits.

In Finland, the technical plan and cost estimates for nuclear waste management are updated every third year. The new technical plan was published in 2015 and related cost estimates were updated during the second quarter of 2016. The update had a minor positive impact on Fortum and is included in the result for the second quarter of 2016.

As a result of the nuclear stress tests in the EU, the Swedish nuclear safety authority (SSM) has decided to propose new regulations for Swedish nuclear reactors. The process is ongoing. Fortum emphasises that maintaining a high level of nuclear safety is the highest priority, but considers EUlevel harmonisation of nuclear safety requirements to be of continued importance.

In 2015, the Swedish Government increased the nuclear waste fund fee from approximately 0.022 to approximately 0.04 SEK/kWh for the 2015-2017 period. The estimated impact on Fortum is approximately EUR 25 million annually. 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) will update the new technical plan in January 2017 for SSM to review. The final decision on the new nuclear waste fees will be made by the Swedish Government in December 2017. However, as a result of the decision on early closure of nuclear power plants, the Swedish Radiation Safety Authority, SSM, recalculated the waste fees for the Oskarshamn and Ringhals power plants.

In Sweden, the key political parties (representing 75% of parliament) announced a new framework agreement on energy policy in June 2016. It was decided that: (1) the tax on nuclear thermal effect will be phased out over two years starting in 2017, (2) the regulatory framework for the nuclear waste fund will be reformed in order to enhance yield, (3) the lifetime in the waste fee calculation would possibly be extended from 40 to 50 years, and (4) the third-party liability for nuclear accidents will increase, ratifying a decision made earlier. No date was mentioned for a mandatory nuclear phase out, but a vision of a 100% RES power system by 2040 was stated.

In September the Swedish government presented the budget proposal for the coming years, which included a timetable for the tax reductions in the energy commission agreement. The budget states that the nuclear capacity tax will be reduced to 1500 SEK/MW per month from 1 July 2017 and abolished on 1 January 2018. In 2016, the Swedish nuclear capacity tax for Fortum is estimated to be approximately EUR 84 million. In 2017, the tax is estimated to decrease with approximately EUR 32 million due to the tax decrease and another EUR 5 million due to the premature closure of Oskarshamn 1 in the middle of the year. In 2018, there is no capacity tax.

A decision was also made to decrease the hydropower real-estate tax over a four-year period beginning in 2017, from todays 2.8% to 0.5%. The real-estate tax on hydro will, as stated in the government's budget, 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 2016, the Swedish hydropower real-estate tax is estimated to be approximately EUR 115 million. In 2017, the tax is estimated to decrease with approximately EUR 20 million.

In addition to the decrease in the tax rate, the hydropower real-estate tax values, which are linked to electricity prices, will be updated starting 2019. The real-estate tax values are updated every six years. With the current low electricity prices the tax values in 2019 will be clearly lower than today.

The process for renewing existing hydro permits will also be reformed, primarily in order to safeguard small hydro.

The tax reductions are planned to be financed through a higher electricity consumption tax that will mainly affect households. Electricity-intensive industries will be exempt.

In October, the Swedish Energy Agency is expected to make a concrete proposal on how to increase the production of renewable electricity by 18 TWh in 2020-2030.

The work for increased transmission capacity both within Sweden and to neighbouring countries will continue, as will efforts to promote a well-functioning retail market in the Nordic region.

All the above mentioned decisions are positive and a step in the right direction, as all production forms are more evenly taxed. However, some questions remain regarding deployment of green certificates for the 2020-2030 period. The decisions will not impact the nuclear closures that have already been decided on in Sweden.

OKG AB decided in 2015 to permanently discontinue electricity production at Oskarshamn unit 1 and to start decommissioning after the permission for service operation has been granted by the relevant Swedish authorities. The first two stages of the decommissioning process were approved in June 2016. The date for discontinued production and the start of decommissioning has been set to 30 June 2017. Oskarshamn unit 2, which has been out of operation since June 2013 due to an extensive safety modernisation, will stay out of operation. The closing processes are estimated to take several years.

City Solutions

In May, 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.

Russia

The Russia segment's new capacity generation built after 2007 under the Russian Government's capacity supply agreement (CSA) is a key driver for earnings growth in Russia, as it is expected to bring income from new volumes sold and also to receive considerably higher capacity payments than the old capacity. The regulation related to the time frame (10 vs.15 years) of the calculation of capacity payments was finally approved in June 2016. The decision was made to keep the current 10-year time frame, and Fortum will hence receive guaranteed capacity payments for a period of 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 electricity-only

market three years and six years after the commissioning of a unit and could revise the CSA payments accordingly.

According to rules approved by the Russian Government in 2015, the competitive capacity selection for generation built prior to 2008 (CCS, without capacity supply agreements) takes place annually. At the end of 2015, the CCS for 2016 and the long-term CCS for 2017-2019 were held. In September of 2016, the long-term CCS for 2020 was held. The majority of Fortum's plants were selected. The volume of Fortum's installed "old" capacity not selected in the auction totalled 195 MW (out of 2,214 MW), for which Fortum has obtained forced mode status, i.e. it will receive payments for the capacity.

In 2014, the new heat market model roadmap proposed by the Ministry of Energy was approved by the Russian Government. If implemented, the reform should provide heat market liberalisation by 2020 or, in some specific areas, by 2023. In May 2016, the draft law on the heat reform was submitted by the Russian Government to the state Duma (Parliament). The law still requires the consent of the regional and local authorities before starting the reform in certain pilot regions. The Parliament hearings are expected in the fourth quarter of 2016.

The targeted operating profit (EBIT) level of RUB 18.2 billion in the Russia segment is expected to be reached during 2017-2018. The segment's profits are impacted by changes in power demand, gas prices and other regulatory developments. Economic sanctions, the currency crisis, oil prices and the surge in inflation have impacted overall demand. As a result, gas prices and electricity prices have not developed favourably as expected. Fortum estimates the Russian annual average gas price growth to be 3.6% in 2016 which is lower than the previous estimate of 4.9% because no indexation of gas tariffs is expected during 2016.

The euro-denominated result level will be volatile due to the translation effect. The income statements of non-euro subsidiaries are translated into the Group reporting currency using average exchange rates. The Russia segment's result is also impacted by seasonal volatility caused by the nature of the heat business, with the first and last quarter being clearly the strongest.

In December 2014, Fortum, Gazprom Energoholding LLC and Rosatom State Corporation signed a protocol to start a restructuring process of the ownership of TGC-1 in Russia. The discussions have not yet come to a conclusion. It is not possible to estimate the timetable.

Capital expenditure and divestments

Fortum currently expects its capital expenditure, excluding acquisitions, for its continuing operations in 2016 to be approximately EUR 650 million. The annual maintenance capital expenditure is estimated to be about EUR 300-350 million in 2016, below the level of depreciation.

Taxation

The effective corporate income tax rate for Fortum in 2016 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 non-recurring items.

Hedging

At the end of September 2016, approximately 80% of Generation's estimated Nordic power sales volume was hedged at EUR 29 per MWh for the remainder of 2016. The corresponding figures for the 2017 calendar year were approximately 50% at EUR 28 per MWh, and for the calendar year 2018 approximately 30% at EUR 25 per MWh.

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 Nasdaq Commodities forwards.

Dividend payment

The Annual General Meeting decided to pay a dividend of EUR 1.10 per share for the financial year that ended 31 December 2015.

The record date for the dividend was 7 April 2016, and the dividend payment date was 14 April 2016.

Espoo, 24 October 2016

Fortum Corporation Board of Directors

Further information:

Pekka Lundmark, President and CEO, tel. +358 10 452 4112 Timo Karttinen, CFO, tel. +358 10 453 6555

Investor Relations & Financial Communications, Sophie Jolly, tel. +358 10 453 2552, Rauno Tiihonen, tel. +358 10 453 6150, Marja Mäkinen, tel. +358 10 452 3338, Måns Holmberg, tel. +358 10 452 1111, and [email protected]

Media, Corporate Press Officer, Pauliina Vuosio, tel. + 358 50 453 2383

The condensed interim report has been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, as adopted by the EU. The interim financials have not been audited.

Financial calendar in 2017

Fortum Corporation's Financial Statements Bulletin for 2016 will be published on 2 February 2017, at approximately 9.00 EET.

Fortum's Financial Statements and Operating and Financial Review for 2016 will be published during week 10 at the latest.

Fortum will publish three interim reports in 2017:

January-March on 27 April 2017, at approximately 9.00 EEST
January-June on 20 July 2017, at approximately 9.00 EEST
January-September on 26 October 2017, at approximately 9.00 EEST

Fortum's Annual General Meeting is planned to take place on 4 April 2017 and the possible dividend-related dates planned for 2017 are:

The ex-dividend date 5 April 2017
The record date for dividend payment 6 April 2017
The dividend payment date 13 April 2017

Capital Markets Day in 2016:

Fortum's Capital Markets Day will take place on 16 November 2016 at Fortum HQ, Keilaniementie 1 Espoo. The invitation is available at www.fortum.com/investors.

Distribution:

Nasdaq Helsinki Key media www.fortum.com

More information, including detailed quarterly information, is available on Fortum's website at www.fortum.com/investors

Condensed consolidated income statement

							Last
				Q1-Q3	Q1-Q3		twelve
EUR million	Note	Q3 2016	Q3 2015	2016	2015	2015	months
Continuing operations:
Sales	4, 9	732	661	2,489	2,495	3,459	3,453
Other income		8	10	27	29	38	36
Materials and services		-394	-312	-1,230	-1,108	-1,515	-1,637
Employee benefits		-75	-80	-235	-256	-351	-330
Depreciation and amortisation	4,12,13	-93	-83	-264	-254	-346	-356
Other expenses		-119	-116	-331	-341	-477	-467
Comparable operating profit	4	58	79	455	565	808	698
Items affecting comparability		-65	-761	-25	-752	-958	-231
Operating profit	4	-6	-682	430	-188	-150	468
Share of profit/loss of associates and joint ventures	4, 14	11	-95	116	-15	20	151
Interest expense		-38	-52	-132	-156	-203	-179
Interest income		7	12	23	41	51	33
Fair value gains and losses on financial instruments		-2	-2	0	-14	-18	-4
Other financial expenses - net		-12	0	-26	6	-4	-36
Finance costs - net		-44	-42	-135	-123	-175	-187
Profit before income tax		-40	-818	411	-325	-305	431
Income tax expense	10	9	160	-54	80	78	-56
Profit for the period from continuing operations		-31	-659	357	-246	-228	375
Profit for the period from discontinued operations	7	-	-	-	4,369	4,369	-
Profit for the period		-31	-659	357	4,123	4,142	376
Attributable to:
Owners of the parent		-31	-654	352	4,124	4,138	366
Non-controlling interests		0	-5	6	-1	4	11
		-31	-659	357	4,123	4,142	376
Earnings per share for profit attributable to the equity owners of the company (EUR per share)
Total Fortum		-0.03	-0.74	0.40	4.64	4.66	0.41
Continuing operations		-0.03	-0.74	0.40	-0.28	-0.26	0.41
Discontinued operations	7	-	-	-	4.92	4.92	-

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

							Last
				Q1-Q3	Q1-Q3		twelve
EUR million	Note	Q3 2016	Q3 2015	2016	2015	2015	months
Comparable operating profit		58	79	455	565	808	698
Impairment charges	4	0	-784	0	-799	-918	-119
Capital gains and other	4, 8	-10	14	36	21	22	37
Changes in fair values of derivatives hedging future cash flow	4	-57	5	-64	16	-78	-158
Nuclear fund adjustment	4	2	3	3	9	16	10
Items affecting comparability		-65	-761	-25	-752	-958	-231
Operating profit		-6	-682	430	-188	-150	468

The decision made by the Extraordinary shareholders' meeting of OKG AB in October 2015 to close Oskarshamn nuclear power plant units 1 and 2 in Sweden impacted net result for Q3/2015 attributable to the owners of the parent by EUR -710 million (2015: EUR -729 million). The impact is recognised on several rows of the income statement, but major part is included in Impairment charges, in Items affecting comparability, see Note 6 Impairment charges.

Distribution segment has been treated as discontinued operations according to IFRS 5 in the comparative period 2015. For further information, see Note 7 Discontinued operations.

Fortum Corporation January-September 2016

Condensed consolidated statement of comprehensive income

						Last
			Q1-Q3	Q1-Q3		twelve
EUR million	Q3 2016	Q3 2015	2016	2015	2015	months
Profit for the period	-31	-659	357	4,123	4,142	376
Other comprehensive income

Items that may be reclassified to profit or loss in subsequent periods:
Cash flow hedges
Fair value gains/losses in the period	-58	46	-99	94	124	-69
Transfers to income statement	-29	-13	-77	-40	-48	-85
Transfers to inventory/fixed assets	-1	-2	-8	-5	-6	-9
Deferred taxes	19	-7	39	-11	-14	36
Net investment hedges
Fair value gains/losses in the period	25	36	34	-12	-8	38
Deferred taxes	-5	-8	-7	2	2	-7
Exchange differences on translating foreign operations	-50	-536	78	-104	-191	-9
Share of other comprehensive income of associates and joint
ventures	-2	0	-12	3	3	-12
Other changes	0	0	-1	3	3	-1
	-103	-484	-52	-70	-135	-117
Items that will not be reclassified to profit or loss in subsequent periods:
Actuarial gains/losses on defined benefit plans	-24	43	-23	43	76	10
Actuarial gains/losses on defined benefit plans in associates and joint
ventures	-2	3	7	0	0	7
	-25	46	-16	43	76	17

Other comprehensive income for the period from continuing
operations, net of deferred taxes	-128	-438	-68	-27	-59	-100
Other comprehensive income for the period from discontinued operations, net of deferred taxes	-	-	-	0	0	-
Total comprehensive income for the period	-159	-1,096	290	4,096	4,082	276
Total comprehensive income attributable to
Owners of the parent	-159	-1,086	281	4,097	4,081	265
Non-controlling interests	0	-10	9	-1	1	11
	-159	-1,096	290	4,096	4,082	276

Condensed consolidated balance sheet

		Sept 30	Sept 30	Dec 31
EUR million	Note	2016	2015	2015
ASSETS
Non-current assets
		432
Intangible assets	12		232	222
Property, plant and equipment	13	9,563	8,764	8,710
Participations in associates and joint ventures	4, 14	2,042	1,918	1,959
Share in State Nuclear Waste Management Fund	17	836	798	810
Other non-current assets		105	74	93
Deferred tax assets		66	119	80
Derivative financial instruments	5	467	515	509
Long-term interest-bearing receivables	15	933	943	773
Total non-current assets		14,445	13,362	13,157
Current assets
Inventories		241	258	231
Derivative financial instruments	5	146	374	355
Short-term interest-bearing receivables	15	423	1	0
Income tax receivables		261	181	124
Trade and other receivables		501	392	698
Deposits and securities (maturity over three months)		3,561	5,642	4,913
Cash and cash equivalents		1,762	2,390	3,289
Liquid funds	16	5,322	8,032	8,202
Total current assets		6,894	9,238	9,610

Total assets		21,338	22,599	22,767
EQUITY
Equity attributable to owners of the parent
Share capital		3,046	3,046	3,046
Share premium		73	73	73
Retained earnings		9,965	10,573	10,507
Other equity components		16	114	168
Total		13,100	13,806	13,794
Non-controlling interests		78	67	69
Total equity		13,178	13,873	13,863

LIABILITIES
Non-current liabilities
Interest-bearing liabilities	16	4,515	5,010	4,965
Derivative financial instruments	5	263	258	290
Deferred tax liabilities		561	546	483
Nuclear provisions	17	836	798	810
Other provisions	18	117	13	81
Pension obligations		95	107	65
Other non-current liabilities		170	158	168
Total non-current liabilities		6,556	6,890	6,863

Current liabilities
Interest-bearing liabilities	16	670	1,086	1,042
Derivative financial instruments	5	314	123	121
Trade and other payables		621	627	879
Total current liabilities		1,605	1,836	2,042
Total liabilities		8,161	8,726	8,904

Total equity and liabilities		21,338	22,599	22,767

Condensed 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
			Retained earnings	Translation of foreign operations	Cash flow hedges	Other OCI items	OCI items associated companies and joint ventures
EUR million 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			352					352	6	357
Translation differences				80	-3	1	-3	75	4	78
Other comprehensive income			1		-144	3	-5	-146		-146
Total comprehensive income for the period			353	80	-147	3	-8	281	9	290
Cash dividend			-977					-977		-977
Other			3					3	-1	2
Total equity 30 September 2016	3,046	73	12,041	-2,076	-74	71	19	13,100	78	13,178

Total equity 31 December 2014	3,046	73	9,676	-1,968	19	-5	22	10,864	71	10,935
Net profit for the period			4,124					4,124	-1	4,123
Translation differences				-104	0	0	0	-104	0	-104
Other comprehensive income			1		38	36	2	78		78
Total comprehensive income for the period			4,125	-104	38	36	3	4,097	-1	4,096
Cash dividend			-1,155					-1,155		-1,155
Other			-1					-1	-2	-3
Total equity 30 September 2015	3,046	73	12,645	-2,072	58	31	25	13,806	67	13,873

Total equity 31 December 2014	3,046	73	9,676	-1,968	19	-5	22	10,864	71	10,935
Net profit for the period			4,138					4,138	4	4,142
Translation differences				-189	-1	-1	2	-188	-3	-191
Other comprehensive income			0		55	73	3	132		132
Total comprehensive income for the period			4,139	-189	54	72	5	4,081	1	4,082
Cash dividend			-1,155					-1,155		-1,155
Other			3					3	-2	1
Total equity 31 December 2015	3,046	73	12,663	-2,156	74	67	27	13,794	69	13,863

Translation differences

Translation differences impacted equity attributable to owners of the parent company with EUR 75 million during Q1-Q3 2016 (Q1-Q3 2015: - 104). 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 39 million during Q1-Q3 2016 (Q1-Q3 2015: 2), is included in the other OCI items.

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. For information regarding exchange rates used, see Note 2 Accounting policies.

Cash flow hedges

The impact on equity attributable to owners of the parent from fair valuation of cash flow hedges, EUR -147 million during Q1-Q3 2016 (Q1-Q3 2015: 38), mainly relates to cash flow hedges hedging electricity price for future transactions, where hedge accounting is applied. When electricity price is lower/higher than the hedging price, the impact on equity is positive/negative.

Cash dividends

A dividend for 2015 was decided in the Annual General Meeting on 5 April 2016. See Note 11 Dividend per share.

Condensed consolidated cash flow statement

						Last
			Q1-Q3	Q1-Q3		twelve
EUR million	Q3 2016	Q3 2015	2016	2015	2015	months
Cash flow from operating activities
Profit for the period from continuing operations	-31	-659	357	-246	-228	375
Adjustments:
Income tax expenses	-9	-160	54	-80	-78	56
Finance costs - net	44	42	135	123	175	187
Share of profit of associates and joint ventures	-11	95	-116	15	-20	-151
Depreciation and amortisation	93	83	264	254	346	356
Operating profit before depreciations (EBITDA)	87	-599	694	66	196	824
Items affecting comparability	65	761	25	752	958	231
Net release of CSA provision	0	0	-2	-32	-52	-22
Comparable EBITDA	151	163	717	787	1,102	1,032
Non-cash flow items	-27	1	-61	-17	-15	-59
Transaction costs paid	-12	0	-12	0	0	-12
Interest received	8	10	31	38	52	45
Interest paid	-20	-34	-187	-230	-263	-220
Dividends received	4	3	54	52	52	54
Realised foreign exchange gains and losses	-16	46	112	249	292	155
Other financial items	-3	10	-5	33	43	5
Income taxes paid	-11	-38	-211	-75	-65	-201
Funds from operations	74	161	437	836	1,199	800
Change in working capital	26	-10	34	60	29	3
Net cash from operating activities, continuing operations	101	151	471	896	1,228	803
Net cash from operating activities, discontinued operations	-	-	-	154	154	-
Total net cash from operating activities	101	151	471	1,050	1,381	802

Cash flow from investing activities
Capital expenditures	-124	-138	-367	-347	-527	-547
Acquisitions of shares	-553	-1	-666	-6	-43	-703
Proceeds from sales of fixed assets	1	16	7	26	28	9
Divestments of shares	0	0	39	27	27	39
Shareholder loans to associated companies and joint ventures	-6	53	-74	301	481	106
Change in other interest-bearing receivables	-117	0	-378	-1	-1	-378
Net cash used in investing activities, continuing operations	-798	-69	-1,439	0	-35	-1,474
Net cash from investing activities, discontinued operations	-	-	-	6,303	6,303	-
Total net cash from investing activities	-798	-69	-1,439	6,303	6,268	-1,474
Cash flow before financing activities	-697	82	-968	7,353	7,650	-671

Cash flow from financing activities
Proceeds from long-term liabilities	0	1	27	38	37	26
Payments of long-term liabilities	-90	-717	-899	-881	-956	-974
Change in short-term liabilities	-35	74	-63	-38	-84	-109
Dividends paid to the owners of the parent	0	0	-977	-1,155	-1,155	-977
Other financing items	-2	0	-8	0	-2	-10
Net cash used in financing activities, continuing operations	-127	-641	-1,919	-2,035	-2,160	-2,044
Net cash used in financing activities, discontinued operations	-	-	-	0	0	-
Total net cash used in financing activities	-127	-641	-1,919	-2,035	-2,160	-2,044
Total net increase(+)/decrease(-) in liquid funds	-825	-560	-2,887	5,318	5,490	-2,715
Liquid funds at the beginning of the period	6,150	8,612	8,202	2,766	2,766	8,032
Foreign exchange differences in liquid funds	-2	-20	8	-52	-54	6
Liquid funds at the end of the period	5,322	8,032	5,322	8,032	8,202	5,322

Realised foreign exchange gains and losses

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.

Additional cash flow information for continuing operations

Change in working capital

						Last
			Q1-Q3	Q1-Q3		twelve
EUR million	Q3 2016	Q3 2015	2016	2015	2015	months
Change in interest-free receivables, decrease(+)/increase(-)	35	24	269	199	-121	-51
Change in inventories, decrease(+)/increase(-)	7	8	3	0	24	27
Change in interest-free liabilities, decrease(-)/increase(+)	-15	-42	-239	-139	126	26
Total	26	-10	34	60	29	3

Capital expenditure in cash flow

						Last
			Q1-Q3	Q1-Q3		twelve
EUR million	Q3 2016	Q3 2015	2016	2015	2015	months
Capital expenditure	141	170	356	385	582	553
Change in not yet paid investments, decrease(+)/increase(-)	-14	-21	21	-3	-11	13
Capitalised borrowing costs	-4	-11	-10	-35	-44	-19
Total	124	138	367	347	527	547

Capital expenditures for intangible assets and property, plant and equipment were in Q1-Q3 2016 EUR 356 million (Q1-Q3 2015: 385). Capital expenditure in cash flow in Q1-Q3 2016 EUR 367 million (Q1-Q3 2015: 347) is including payments related to capital expenditure made in previous year i.e. change in trade payables related to investments EUR 21 million (Q1-Q3 2015: -3) and excluding capitalised borrowing costs EUR -10 million (Q1-Q3 2015: -35), which are presented in interest paid.

Acquisition of shares in cash flow

Acquisition of shares, net of cash acquired, amounted to EUR 667 million during Q1-Q3 2016 (Q1-Q3 2015: 6) including mainly shares in Ekokem Oyj of EUR 550 million and Grupa DUON S.A of EUR 98 million. For further information see note 8 Acquisitions and disposals.

Divestment of shares in cash flow

						Last
			Q1-Q3	Q1-Q3		twelve
EUR million	Q3 2016	Q3 2015	2016	2015	2015	months
Proceeds from sales of subsidiaries, net of cash disposed	0	0	6	0	0	6
Proceeds from sales of associates	0	0	34	27	27	34
Total	0	0	39	27	27	39

Gross divestment of shares, EUR 158 million (Q1-Q3 2015: 27), includes not yet received sales price of EUR 121 million (Q1-Q3 2015: 0) relating to divestment of shares in OOO Tobolsk CHP. For further information see Note 15 Interest-bearing receivables.

Change in net debt, total Fortum

						Last
			Q1-Q3	Q1-Q3		twelve
EUR million	Q3 2016	Q3 2015	2016	2015	2015	months
Net debt, beginning of the period	-934	-1,846	-2,195	4,217	4,217	-1,936
Foreign exchange rate differences	-22	-24	-70	54	89	-35
EBITDA	87	-599	694	4,510	4,640	824
Paid net financial costs, taxes and adjustments for non-cash and divestment items	-12	759	-257	-3,563	-3,330	-24
Change in working capital	26	-10	34	103	71	2
Capital expenditures	-124	-138	-367	-413	-592	-546
Acquisitions	-553	-1	-666	-6	-43	-703
Divestments	1	17	47	6,215	6,217	49
Proceeds from the interest-bearing receivables relating to divestments	0	0	0	207	207	0
Shareholder loans to associated companies	-6	53	-74	301	481	106
Change in other interest-bearing receivables	-117	0	-378	-1	-1	-378
Dividends	0	0	-977	-1,155	-1,155	-977
Other financing activities	-2	0	-8	0	-2	-10
Net cash flow (- increase in net debt)	-699	82	-1,953	6,199	6,493	-1,659
Fair value change of bonds, amortised cost valuation, acquired debt and other	120	16	176	-8	-8	176
Net debt, end of the period	-137	-1,936	-137	-1,936	-2,195	-137

Capital structure

Fortum wants to have a prudent and efficient capital structure which at the same time allows the implementation of its strategy. Maintaining a strong balance sheet and the flexibility of the capital structure is a priority. The Group monitors the capital structure based on Comparable net debt to EBITDA ratio. Net debt is calculated as interest-bearing liabilities minus liquid funds without deducting interest-bearing receivables amounting to EUR 1,356 million (Dec 31 2015: 773). EBITDA is calculated by adding back depreciation and amortisation to operating profit, whereas Comparable EBITDA is calculated by deducting items affecting comparability and the net release of CSA provision from EBITDA. Fortum's comparable net debt to EBITDA target is around 2.5.

Comparable Net debt/EBITDA ratio, total Fortum

	Last
EUR million	twelve months	2015
Interest-bearing liabilities	5,185	6,007
Less: Liquid funds	5,322	8,202
Net debt	-137	-2,195

Operating profit	468	4,245
Add: Depreciation and amortisation	356	395
EBITDA	824	4,640
Less: Items affecting comparability	-230	3,323
Less: Net release of CSA provision	21	52
Comparable EBITDA	1,033	1,265

Comparable net debt/EBITDA	-0.1	-1.7

Key ratios

Definition of key figures are presented in Note 25.

				Last
	Sept 30	Sept 30	Dec 31	twelve
	2016	2015	2015	months
Comparable EBITDA total Fortum, EUR million	717	950	1,265	1,033
Comparable EBITDA continuing operations, EUR million	717	787	1,102	1,033
Earnings per share total Fortum (basic) EUR	0.40	4.64	4.66	0.41
Earnings per share continuing operations (basic), EUR	0.40	-0.28	-0.26	0.41
Earnings per share discontinued operations (basic), EUR	-	4.92	4.92	-
Capital employed, EUR million	18,362	19,969	19,870
Interest-bearing net debt, EUR million	-137	-1,936	-2,195
Capital expenditure and gross investments in shares total Fortum, EUR million	1,172	435	669	1,406
Capital expenditure total Fortum, EUR million	356	429	626	553
Capital expenditure and gross investments in shares continuing operations, EUR million	1,172	391	625	1,406
Capital expenditure continuing operations, EUR million	356	385	582	553
Return on capital employed total Fortum, % 1)	3.9	23.5	22.7	3.2
Return on shareholders' equity total Fortum, % 1)	3.6	34.8	33.4	2.8
Comparable net debt / EBITDA total Fortum 1)	-0.1	-1.5	-1.7	-0.1
Interest coverage total Fortum	3.9	36.2	27.6	3.2
Interest coverage including capitalised borrowing costs total Fortum	3.6	27.8	21.5	2.8
Funds from operations/interest-bearing net debt total Fortum, % 1)	-397.1	-60.9	-59.7	-582.3
Gearing, %	-1	-14	-16
Equity per share, EUR	14.75	15.54	15.53
Equity-to-assets ratio, %	62	61	61
Number of employees continuing operations	8,185	7,942	7,835
Average number of employees continuing operations	7,959	8,053	8,009
Average number of shares, 1 000 shares	888,367	888,367	888,367
Diluted adjusted average number of shares, 1 000 shares	888,367	888,367	888,367
Number of registered shares, 1 000 shares	888,367	888,367	888,367

1) Quarterly figures are annualised except items affecting comparability.

Notes to the condensed consolidated interim financial statements

1. Basis of preparation

The condensed interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, as adopted by the EU. The condensed interim financial report should be read in conjunction with the consolidated financial statements for the year ended 31 December 2015.

The figures in the consolidated interim financial statements have been rounded and consequently the sum of individual figures may deviate from the sum presented. Key figures have been calculated using exact figures.

2. Accounting policies

The same accounting policies and presentation have been followed in these condensed interim financial statements as were applied in the preparation of the consolidated financial statements for the year ended 31 December 2015.

The balance sheet date rate is based on exchange rate published by the European Central Bank for the closing date. The average exchange rate is calculated as an average of each months ending rate from the European Central Bank during the year and ending rate previous year. Key exchange rates for Fortum Group applied in the accounts:

Average rate	Jan-Sept	Jan-June	Jan-March	Jan-Dec	Jan-Sept	Jan-June	Jan-March
	2016	2016	2016	2015	2015	2015	2015
Sweden (SEK)	9.3673	9.2813	9.2713	9.3414	9.3656	9.3260	9.3534
Norway (NOK)	9.3614	9.4060	9.5016	8.9953	8.8749	8.6949	8.7883
Poland (PLN)	4.3570	4.3621	4.3289	4.1909	4.1682	4.1521	4.1796
Russia (RUB)	75.8412	77.2497	80.6173	69.0427	67.6327	65.9096	70.9755

Balance sheet date rate	Sept 30	June 30	March 31	Dec 31	Sept 30	June 30	March 31
	2016	2016	2016	2015	2015	2015	2015
Sweden (SEK)	9.6210	9.4242	9.2253	9.1895	9.4083	9.2150	9.2901
Norway (NOK)	8.9865	9.3008	9.4145	9.6030	9.5245	8.7910	8.7035
Poland (PLN)	4.3192	4.4362	4.2576	4.2639	4.2448	4.1911	4.0854
Russia (RUB)	70.5140	71.5200	76.3051	80.6736	73.2416	62.3550	62.4400

3. Critical accounting estimates and judgements

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. 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.

In preparing these interim financial statements, the significant judgements made by management applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2015.

4. Segment information

Fortum has reorganised its operating structure as of 1 April 2016. The segments as of the second quarter 2016 are: Generation (mainly the former Power and Technology); City Solutions (mainly the former Heat, Electricity Sales and Solutions); Russia, and Other, under which the two development units, M&A and Solar & Wind Development, Technology and New Ventures as well as corporate functions, is reported. Because of the minor financial impact, the comparable segment information for 2015 has not been restated. Updated segment information for the first quarter 2016 according to the new organisation can be found in the separate Quarterly information-excel published in connection with this report.

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. For definitions please see Note 25 Definition of key figures.

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 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. Until 2015 Fortum has not made adjustments for impairment charges as there had not been major impairment effects in the segments. In 2015 such items were treated as Items affecting comparability as there were material impacts from impairments during the year. From 2016 onwards transaction costs arising from acquisitions are included in capital gains and other within items affecting comparability. According to IFRS 3 (revised) transaction costs are recognised in the income statement, but Fortum has not had such costs after the implementation of the revised standard in 2009.

Due to the seasonal nature of Fortum's operations the comparable operating profits are usually higher for the first and fourth quarter of the year. Columns labelled as "LTM" or "last twelve months" are presenting figures for twelve months preceding the reporting date.

Distribution operations have been classified as discontinued operations from the first quarter interim report 2015 onwards. As Discontinued operations are disclosed on one line, the segment information presented in this note relates to the continuing operations only and thus excludes discontinued operations. That information is presented in Note 7 Discontinued operations.

37(60)

January-September 2016

Quarter	Generation1)			City Solutions1)		Russia		Other		Total
EUR million		Note Q3 2016 Q3 2015 Q3 2016 Q3 2015 Q3 2016 Q3 2015 Q3 2016 Q3 2015								Q3 2016	Q3 2015
Income statement data by segment
External sales		372	363	239	190	175	154	12	11	797	718
Internal sales		0	14	-2	-5	0	0	17	17	15	26
Netting of Nord Pool transactions 2)										-66	-57
Eliminations 2)										-15	-26
Sales		371	377	237	185	175	154	29	28	732	661
Comparable EBITDA		104	131	15	12	43	27	-11	-7	151	163
Net release of CSA provision	18					0	0			0	0
Depreciation and amortisation		-27	-30	-31	-25	-31	-27	-4	-2	-93	-83
Comparable operating profit		77	102	-16	-13	12	0	-15	-10	58	79
Impairment charges	6	0	-784	0	0	0	0	0	0	0	-784
Capital gains and other	8	0	14	-11	0	0	0	0	0	-10	14
Changes in fair values of derivatives hedging
future cash-flow		-62	14	6	-9	0	1	-1	1	-57	5
Nuclear fund adjustment	17	2	3	0	0	0	0	0	0	2	3
Items affecting comparability		-59	-753	-5	-9	0	1	-1	1	-65	-761
Operating profit		18	-651	-21	-22	12	1	-16	-9	-6	-682
Share of profit/loss of associates and joint ventures	14	-4	-106	-2	-6	7	6	9	11	11	-95
Finance costs - net										-44	-42
Income taxes										9	160
Profit for the period										-31	-659
Investments / divestments by segment
Gross investments in shares		2	0	681	0	0	0	0	0	683	1
Capital expenditure		44	52	35	33	41	84	22	1	141	170
of which capitalised borrowing costs		1	1	0	0	2	10	1	0	4	11
Gross divestments of shares		0	0	0	0	2	0	0	0	2	0

Year-to-date		Generation1)		City Solutions1)		Russia		Other		Total
		Q1-Q3	Q1-Q3	Q1-Q3	Q1-Q3	Q1-Q3	Q1-Q3	Q1-Q3	Q1-Q3	Q1-Q3	Q1-Q3
EUR million	Note	2016	2015	2016	2015	2016	2015	2016	2015	2016	2015
Income statement data by segment
External sales		1,202	1,217	898	840	606	627	37	27	2,744	2,711
Internal sales		20	65	-4	-5	0	0	54	59	69	119
Netting of Nord Pool transactions 2)										-255	-240
Eliminations 2)										-69	-95
Sales		1,222	1,282	894	835	606	627	91	86	2,489	2,495
Comparable EBITDA		410	506	133	129	212	186	-38	-35	717	787
Net release of CSA provision	18					2	32			2	32
Depreciation and amortisation		-80	-87	-84	-73	-89	-86	-11	-7	-264	-254
Comparable operating profit		330	419	49	55	125	132	-49	-42	455	565
Impairment charges	6	0	-799	0	0	0	0	0	0	0	-799
Capital gains and other	8	1	17	1	3	32	1	0	0	36	21
Changes in fair values of derivatives hedging
future cash-flow		-73	22	10	-8	0	1	-1	1	-64	16
Nuclear fund adjustment	17	3	9	0	0	0	0	0	0	3	9
Items affecting comparability		-69	-750	11	-5	34	2	-1	1	-25	-752
Operating profit		261	-332	60	51	159	134	-49	-41	430	-188
Share of profit/loss of associates and joint ventures	14	-9	-115	50	34	34	34	42	32	116	-15
Finance costs - net										-135	-123
Income taxes										-54	80
Profit for the period										357	-246
Investments / divestments by segment
Gross investments in shares		5	5	803	1	0	0	8	0	815	6
Capital expenditure		119	117	68	66	133	198	36	4	356	385
of which capitalised borrowing costs		1	2	1	0	8	33	1	0	10	35
Gross divestments of shares		0	0	34	27	124	0	0	0	158	27

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 for continuing operations and netting of Nord Pool transactions. Sales and purchases with Nord Pool Spot are netted on Group level on an hourly basis and posted either as revenue or cost depending on if Fortum is a net seller or net buyer during any particular hour.

Last twelve months			Generation1)	City Solutions1)		Russia		Other		Total
EUR million	Note	LTM	2015	LTM	2015	LTM	2015	LTM	2015	LTM	2015
Income statement data by segment
External sales		1,624	1,639	1,258	1,200	872	893	49	39	3,804	3,771
Internal sales		38	83	-12	-13	0	0	70	75	95	145
Netting of Nord Pool transactions 2)										-351	-336
Eliminations 2)										-96	-122
Sales		1,662	1,722	1,246	1,187	872	893	119	114	3,453	3,459
Comparable EBITDA		584	680	213	209	293	267	-56	-53	1,032	1,102
Net release of CSA provision	18					22	52			22	52
Depreciation and amortisation		-111	-118	-112	-101	-120	-117	-14	-10	-356	-346
Comparable operating profit		472	561	102	108	194	201	-70	-63	698	808
Impairment charges	6	-116	-915	-3	-3	0	0	0	0	-119	-918
Capital gains and other	8	2	18	1	3	32	1	0	0	37	22
Changes in fair values of derivatives hedging future cash-flow		-171	-76	14	-4	0	1	-1	1	-158	-78
Nuclear fund adjustment	17	10	16							10	16
Items affecting comparability		-277	-958	13	-3	34	2	-1	1	-231	-958
Operating profit		197	-396	114	105	228	203	-70	-62	468	-150
Share of profit of associated companies and joint ventures	14	-5	-111	75	59	32	32	50	40	151	20
Finance costs - net										-187	-175
Income taxes										-56	78
Profit for the period										375	-228
Investments / divestments by segment
Gross investments in shares		16	16	825	23	0	0	12	4	852	43
Capital expenditure		189	187	107	105	220	285	38	6	553	582
of which capitalised borrowing costs		2	3	1	0	16	41	1	0	19	44
Gross divestments of shares		0	0	34	27	124	0	0	0	158	27

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.

January-September 2016

Segment assets and liabilities

		Generation			City Solutions			Russia			Other			Total
	Sept 30	Sept 30	Dec 31	Sept 30	Sept 30	Dec 31	Sept 30	Sept 30	Dec 31	Sept 30	Sept 30	Dec 31	Sept 30	Sept 30	Dec 31
EUR million	2016	2015	2015	2016	2015	2015	2016	2015	2015	2016	2015	2015	2016	2015	2015
Non-interest bearing assets	6,037		6,092 6,391	2,806	1,828	1,929	2,616	2,516	2,347	235	96		135 11,694 10,533 10,802
Participations in associated
companies and joint ventures Eliminations	731	748	758	536	499	559	394	350	316	382	341	346	2,042 -19	1,938	1,979
Total segment assets	6,767		6,840 7,150	3,342	2,328	2,488	3,009	2,866	2,663	617	437		481 13,717 12,445 12,738	-26	-43
Interest-bearing receivables													1,356	944	773
Deferred tax assets													66	119	80
Other assets													878	1,060	974
Liquid funds													5,322	8,032	8,202
Total assets														21,338 22,599 22,767

Segment liabilities	1,082		984 1,219	412	261	306	94	129	102	152	168	222	1,739	1,542	1,849
Eliminations													-19	-26	-43
Total segment liabilities													1,721	1,516	1,806
Deferred tax liabilities													561	546	483
Other liabilities													695	569	608
Total liabilities included in
capital employed													2,976	2,630	2,898
Interest-bearing liabilities													5,185	6,096	6,007
Total equity														13,178 13,873 13,863
Total equity and liabilities														21,338 22,599 22,767
Number of employees	1,024		1,358 1,341	2,347	1,440	1,417	3,732	4,172	4,126	1,082	972	951	8,185	7,942	7,835
Average number of
employees	1,088		1,403 1,389	1,960	1,469	1,458	3,838	4,190	4,180	1,073	990	983	7,959	8,053	8,009

Average number of employees is based on a monthly average for the period in review.

Comparable operating profit including share of profits from associates and joint ventures and Comparable return on net assets

		Generation		City Solutions		Russia		Other
		LTM	Dec 31	LTM	Dec 31	LTM	Dec 31	LTM	Dec 31
EUR million	Note		2015		2015		2015		2015
Comparable operating profit		472	561	102	108	194	201	-70	-63
Share of profit of associated companies and joint ventures	14	-5	-111	75	59	32	32	50	40
Adjustment for Share of profit of associated companies and joint ventures	6	21	112	0	0	0	0	0	0
Comparable operating profit including share of profits from associates
and joint ventures		489	563	176	167	226	233	-20	-23

Segment assets at the end of the period		6,767	7,150	3,342	2,488	3,009	2,663	617	481
Segment liabilities at the end of the period		1,082	1,219	412	306	94	102	152	222
Comparable net assets 1)		5,685	5,931	2,931	2,182	2,916	2,561	465	258
Comparable net assets average 1) 2)		5,828	5,945	2,326	2,124	2,748	2,831	347	269

Comparable return on net assets, %		8.4	9.5	7.6	7.9	8.2	8.2	-5.7	-8.5

1) Since Q1 2016 Fortum is disclosing Comparable net assets instead of Net assets. Net assets disclosed until Q4 2015 are available in the interim reports published earlier and in additional Quarterly information published in connection with this interim report.

2) Average net assets are calculated using the opening balance and end of each quarter values.

5. Financial risk management

The Group has not made any significant changes in policies regarding risk management during the period. Aspects of the Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements for the year ended 31 December 2015.

Fair value hierarchy information

Financial instruments that are measured in the balance sheet at fair value are presented according to following fair value measurement hierarchy:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

Level 3: inputs for the asset or liability that is not based on observable market data (unobservable inputs).

See also accounting policies in the consolidated financial statements 2015, in Note 17 Financial assets and liabilities by fair value hierarchy.

Financial assets

		Level 1	Level 2				Netting 2) Level 3				Total
			Dec			Dec			Dec			Dec			Dec
	Sept 30	Sept 30	31	Sept 30	Sept 30	31	Sept 30	Sept 30	31	Sept 30	Sept 30	31	Sept 30	Sept 30	31
EUR million	2016	2015	2015	2016	2015	2015	2016	2015	2015	2016	2015	2015	2016	2015	2015
In non-current assets
Available for sale financial assets 1)	0	1	1				49	28	42				49	29	43
Derivative financial instruments
Electricity derivatives
Hedge accounting				10	37	40				-9	-8	-9	1	29	30
Non-hedge accounting		1		136	169	175				-47	-63	-70	89	107	105
Interest rate and currency derivatives
Hedge accounting				269	239	254							269	239	254
Non-hedge accounting				106	123	115							106	123	115
Oil and other futures and forward contracts
Non-hedge accounting	13	25	7	1						-12	-9	-2	2	17	5
Total in non-current assets	13	27	8	522	568	584	49	28	42	-68	-80	-81	516	544	552
In current assets
Derivative financial instruments
Electricity derivatives
Hedge accounting				9	93	117				-9	-12	-16	1	81	101
Non-hedge accounting	2		1	174	250	251				-130	-174	-196	46	76	55
Interest rate and currency derivatives
Hedge accounting				27	77	67							27	77	67
Non-hedge accounting				10	111	114							10	111	114
Oil and other futures and forward
contracts Non-hedge accounting	119	52	47	4						-62	-25	-31	61	28	16
Total in current assets	121	52	48	224	531	549	0	0	0	-201	-211	-243	146	374	355
Total	134	79	56	746	1,099 1,133		49	28	42	-269	-291	-324	661	918	907

Financial liabilities

		Level 1			Level 2			Level 3			Netting 2)			Total
			Dec			Dec			Dec			Dec			Dec
	Sept 30	Sept 30	31	Sept 30	Sept 30	31	Sept 30	Sept 30	31	Sept 30	Sept 30	31	Sept 30	Sept 30	31
EUR million	2016	2015	2015	2016	2015	2015	2016	2015	2015	2016	2015	2015	2016	2015	2015
In non-current liabilities
Interest-bearing liabilities 3)				1,302	1,268 1,268								1,302	1,063 1,268
Derivative financial instruments
Electricity derivatives
Hedge accounting				30	12	13				-9	-8	-9	21	4	4
Non-hedge accounting				157	158	192				-47	-64	-70	110	95	122
Interest rate and currency derivatives
Hedge accounting				72	84	93							72	84	93
Non-hedge accounting				54	57	60							54	57	60
Oil and other futures and forward contracts
Non-hedge accounting	16	27	14	2						-12	-9	-2	5	18	12
Total in non-current liabilities	16	27	14	1,617	1,579 1,626		0	0	0	-68	-81	-81	1,564	1,321 1,559
In current liabilities
Derivative financial instruments
Electricity derivatives
Hedge accounting				52	14	18				-9	-12	-16	43	1	1
Non-hedge accounting	2		1	235	213	277				-130	-174	-196	107	40	81
Interest rate and currency derivatives
Hedge accounting				7	7	4							7	7	4
Non-hedge accounting				83	60	28							83	60	28
Oil and other futures and forward contracts
Non-hedge accounting	133	40	37	3						-62	-25	-31	74	15	6
Total in current liabilities	135	40	38	380	294	327	0	0	0	-201	-211	-243	314	123	121
Total	151	67	52	1,997	1,873 1,953		0	0	0	-269	-292	-324	1,878	1,444 1,680

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 49 million (Dec 31 2015: 42), for which the fair value cannot be reliably determined. This includes Fortum's indirect shareholding in Fennovoima of EUR 16 million (Dec 31 2015: 11). These assets are measured at cost less any impairment costs. Available for sale financial assets include listed shares at fair value of EUR 0 million (Dec 31 2015: 1). The cumulative fair value change booked in Fortum's equity was EUR -3 million (Dec 31 2015: -3).

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

3) Fair valued part of bonds when hedge accounting is applied (fair value hedge).

Net fair value amount of interest rate and currency derivatives is EUR 196 million, assets EUR 412 million and liabilities EUR 216 million. Fortum has cash collaterals based on Credit Support Annex agreements with some counterparties. At the end of September 2016 Fortum had received EUR 172 million from Credit Support Annex agreements. The received cash has been booked as short term liability.

Regarding the relevant interest-bearing liabilities, see Note 16 Interest-bearing net debt and Note 21 Pledged assets and contingent liabilities.

6. Impairment charges

There were no impairment charges related to the early closure of Oskarshamn 1 and 2 nuclear units or any other impairment charges during Q1- Q3 2016.

Impairment charges in 2015 in Generation segment, EUR -915 million, consists mainly of the effects from the Swedish nuclear company OKG Aktiebolag (OKG AB) EUR -794 million, dismantling provision for the Finnish coal-fired power plant Inkoo, impairment loss for Fortum's share of the Finnish coal-fired power plant Meri-Pori, as well as EUR -15 million effect of the cancelled Olkiluoto 4 nuclear power project in Finland.

The financial impacts of the decision made in the Extraordinary shareholder's meeting of OKG AB on 14 October 2015 to close early units 1 and 2 in Oskarshamn, Sweden, was recognised in the 2015 third quarter interim report. An additional write-down was recognised based on information received during the fourth quarter. E.ON is the majority owner of OKG and did unilaterally decide on the closing of units.

OKG is a non profit making company and sells produced electricity at production costs to its owners in proportion to the ownership. OKG is funded entirely by its shareholders. Fortum's part of the funding is recognised as long-term interest bearing receivables, which are increased when OKG needs additional funds and decreased when OKG invoices Fortum for the produced electricity.

OKG's impairment charges in Fortum income statement
	Q1-Q3	Q1-Q3		Last twelve
EUR million	2016	2015	2015	months
Comparable operating profit	0	0	0	0
Items affecting comparability - Impairment charges	0	-784	-794	-10
Operating profit	0	-784	-794	-10
Share of profit/loss of associates and joint ventures	0	-104	-116	-12
Profit before income tax	0	-888	-910	-22
Income tax expenses	0	173	175	2
Profit for the period from continuing operations	0	-715	-735	-20
Attributable to:
Owners of the parent	0	-710	-729	-19
Non-controlling interests	0	-5	-5	0

Earnings per share effect of the closing of Oskarshamn 1 and 2 nuclear units in Sweden was EUR -0.80 per share in Q3/2015 (2015: EUR - 0.82).

Items affecting comparability for 2015 included EUR -566 million which mainly relates to write-down of existing assets in OKG and a provision of EUR -228 million, which relates to additional future costs due to the early closure of units 1 and 2 as well as to future committed investments. These future costs and investments will have an impact on Fortum's net cash when they occur. The total amount of EUR -794 million has been netted against the shareholder loans to OKG. Main part of the netted amount has already been invoiced to Fortum, the remaining part will be invoiced when the costs occur.

Share of profit/loss in associates and joint ventures includes the impairment of IFRS adjustments related to units 1 and 2 for OKG in Fortum's consolidated financial statements, mainly related to write-down of asset retirement obligations and capitalised borrowing costs. These adjustments are recognised net of taxes. The asset retirement obligation represents the future costs for decommissioning of the nuclear power plant. 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.

Income tax expenses relates to the items affecting comparability.

7. Discontinued operations

There were no items classified as Discountinued operations during Q1-Q3 2016.

In June 2015 Fortum completed the divestment of the Swedish distribution business. The Finnish and Norwegian electricity distribution operations were divested in 2014. After the divestment of the Swedish Distribution business Fortum does not have any distribution operations left and therefore, in accordance with IFRS 5 Non-current Assets held for Sale and Discontinued operations, Distribution segment was treated as discontinued operations in Fortum's financial reporting for 2015.

Discontinued operations are disclosed on one line, net of tax, in the face of the income statement. In the cash flow statement the net cash flows attributable to the operating, investing and financing activities of the discontinued operations are disclosed separately.

The following tables summarize the impact of discontinued operations on the comparative year 2015 for total Fortum. For additional financial information on the discontinued operations in 2015, see the consolidated financial statements 2015 and interim report for Q1 2015. For information regarding the divestment of the Swedish distribution operations, see Note 8 Acquisitions and disposals.

Results of discontinued operations						Last
			Q1-Q3	Q1-Q3		twelve
EUR million	Q3 2016	Q3 2015	2016	2015	2015	months
Sales	-	-	-	243	243	-
Other income	-	-	-	2	2	-
Materials and services	-	-	-	-34	-34	-
Employee benefits	-	-	-	-14	-14	-
Depreciation and amortisation	-	-	-	-50	-50	-
Other expenses	-	-	-	-34	-34	-
Comparable operating profit	-	-	-	114	114	-
Changes in fair values of derivatives	-	-	-	-1	-1	-
Capital gains 1)	-	-	-	4,282	4,282	-
Operating profit	-	-	-	4,395	4,395	-
Share of profit/loss of associates and joint ventures	-	-	-	0	0	-
Finance costs - net	-	-	-	-1	-1	-
Profit before income tax	-	-	-	4,393	4,393	-
Income tax expenses	-	-	-	-24	-24	-
Profit for the year from discontinued operations attributable to the
owners of the parent	-	-	-	4,369	4,369	-

1) Including tax exempt gain on sale of shares of Swedish Distribution.

					Last
					twelve
Q3 2016	Q3 2015	2016	2015	2015	months
					-
					-
					-
					-
					-
-	-	-	-	-	-
	- - - - -	- - - - -	Q1-Q3 - - - - -	Q1-Q3 163 - 44 6,369 -	163 - 44 6,369 -

Net cash flows from the discontinued operations						Last
			Q1-Q3	Q1-Q3		twelve
EUR million	Q3 2016	Q3 2015	2016	2015	2015	months
Net cash from operating activities	-	-	-	154	154	-
Net cash from investing activities	-	-	-	6,303	6,303	-
Net cash from financing activities	-	-	-	0	0	-
Total net increase in liquid funds	-	-	-	6,457	6,457	-

8. Acquisitions and disposals

Acquisitions

			Q1-Q3	Q1-Q3		Last twelve
EUR million	Q3 2016	Q3 2015	2016	2015	2015	months
Gross investments in shares in subsidiary companies	681	0	801	1	1	801
Gross investments in shares in associated companies	0	0	10	5	27	32
Gross investments in available for sale financial assets	3	1	5	1	15	19
Gross investments in shares, total Fortum	683	1	815	6	43	852

Acquisitions during 2016

On 27 May 2016 Fortum signed an agreement with the four biggest owners of the Nordic circular economy company Ekokem Corporation, representing approximately 81% of the shares, to acquire their shareholding in the company. The acquisition was finalised on 31 August 2016. 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 September Fortum's total shareholding was 98.2%. Fortum has initiated a redemption process for the remaining shares. The debt and cashfree purchase price for 100% of the company will be approximately EUR 700 million. Transaction costs of approximately EUR 12 million (of which transfer tax EUR 9 million) are recognised in the income statement of Q3/2016 as Items affecting comparability (Capital gains and other).

The redemption process for the remaining shares is ongoing and Ekokem is fully consolidated into Fortum Group from the end of August 2016 based on preliminary information. Fortum is currently preparing the purchase price allocation and will finalise it during next 12 months. Additional disclosures will be published in the fourth quarter interim report. Ekokem has been integrated as a business area into the City Solutions division.

On 8 January 2016, Fortum made a public tender offer in Poland to purchase all shares in Grupa DUON 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 Grupa DUON S.A. and in June the company was delisted.

This interim report includes the income statement effect of Grupa Duon S.A. group from 1 April 2016 onwards. The consolidated sales for the third quarter included in the City Solutions segment was EUR 42 million and net profit EUR 0 million (Q1-Q3 2016 sales EUR 89 million and net profit EUR 1 million). The purchase price allocation is based on the balance sheet as of 31 March 2016. The initial goodwill in the acquired group is EUR 22 million and represents the future prospects and growth potential. The initial accounting of the acquisition is still preliminary as all valuation effects have not been finalised, in particular regarding potential obligations.

Other acquisitions include the shares of Info24 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.

	Grupa
EUR million	Duon S.A.	Other
Consideration
Purchase consideration	106	3
Fair value of the acquired assets	86	3
Translation difference	2	0
Goodwill	22	0

		Grupa Duon S.A.
	Acquired book	Allocated	Total fair
Fair value of the acquired net identifiable assets	values	fair values	value
Cash and cash equivalents	8		8
Intangible assets	3	27	31
Property, plant and equipment	46	7	53
Other assets	37		37
Non-interest bearing liabilities	-16	-7	-23
Interest-bearing liabilities	-19		-19
Net identifiable assets	58	28	86
Non-controlling interests	1		1
Total	58	28	86
Gross investment
Purchase consideration settled in cash			106
Cash and cash equivalents in acquired subsidiaries			8
Cash outflow in acquisition			98
Interest-bearing debt in acquired subsidiaries			19
Total gross investment in acquired subsidiaries			117

There were no other material acquisitions during 2016.

Acquisitions during 2015

Fortum has decided to participate in the Fennovoima nuclear power project in Finland with an indirect owning of 6.6% at the commercial date of the power plant, planned to be in operation in 2024. Fortum has in 2015 invested EUR 11 million in Fennovoima, with an indirect ownership of 4.1% at the end of 2015. Participation is carried out through Voimaosakeyhtiö SF. The indirect investment in Fennovoima is classified as Available for sale financial assets.

There were no other material acquisitions during 2015.

Disposals

						Last
			Q1-Q3	Q1-Q3		twelve
EUR million	Q3 2016	Q3 2015	2016	2015	2015	months
Gross divestments of shares in subsidiary companies 1) 2)	2	0	124	6,369	6,369	124
Gross divestments of shares in associated companies	1	0	34	27	27	34
Gross divestments of available for sale financial assets	0	0	0	0	0	0
Gross divestments of shares, total Fortum	3	0	158	6,395	6,395	158

Divestments of shares in subsidiaries - Impact on financial position, total Fortum

						Last
			Q1-Q3	Q1-Q3		twelve
EUR million	Q3 2016	Q3 2015	2016	2015	2015	months
Gross divestments of shares in subsidiary companies 1) 2)	2	0	124	6,369	6,369	124
Proceeds from interest-bearing receivables	0	0	0	207	207	0
Sales price for the shares (net of cash)	2	0	124	6,162	6,162	124
Liquid funds in sold subsidiaries	0	0	9	12	12	9
Sales price including liquid funds in sold subsidiaries	2	0	133	6,174	6,174	133
Intangible assets and property, plant and equipment	2	0	90	2,577	2,577	90
Other non-current and current assets	0	0	14	120	120	14
Liquid funds	0	0	9	12	12	9
Interest-bearing loans	0	0	0	-207	-207	0
Other liabilities and provisions	0	0	-13	-611	-611	-13
Net assets divested	2	0	100	1,891	1,891	100
Gain on sale	0	0	32	4,282	4,282	32

1) In 2015 in addition to the proceeds from shares and repayments of interest-bearing debt in sold subsidiary, totaling approximately EUR 6.4 billion, Swedish distribution business paid group contribution liability net of cash amounting to approximately EUR 0.1 billion as a part of the total consideration of the divestment of Swedish distribution business.

2) There were no additional divestments of shares in subsidiaries during Q3 2016. The change during Q3 is due to changes in RUB exchange rates as the sales price of OOO Tobolsk CHP was in Russian rubles.

Disposals during 2016

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 (corresponding to approximately EUR 0.01 per share) in the first quarter 2016 results.

Fortum sold its 100% shareholding in its Russian subsidiary OOO Tobolsk CHP to SIBUR, Russia's largest integrated gas processing and petrochemicals company in February 2016. 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 32 million (corresponding to approximately EUR 0.03 per share) in its first quarter 2016 results.

There were no other material disposals during 2016.

Disposals during 2015

In March 2015 Fortum signed a binding agreement to sell the Swedish Distribution business to a consortium comprising Swedish national pension funds Första AP-Fonden (12.5%) and Tredje AP-Fonden (20.0%), Swedish mutual insurance and pension savings company Folksam (17.5%) and the international infrastructure investor, Borealis Infrastructure Management Inc. (50%). The divestment was completed on 1 June 2015. The total consideration from the divestment is SEK 60.6 billion on a debt- and cash-free basis corresponding to approximately EUR 6.4 billion. Fortum recognised a one-time sales gain of approximately EUR 4.3 billion corresponding to EUR 4.82 per share. The sales gain was reported as part of the second quarter 2015 results of the discontinued operations. Distribution segment has been presented as discontinued operations since the first quarter of 2015.

In Q1 2015 Fortum sold its 51.4%-shareholding in the associated company AS Võrguteenus Valdus to the Estonian electricity transmission system operator Elering AS.

9. Sales

				Q1-Q3		Last twelve
EUR million	Q3 2016		Q3 2015 Q1-Q3 2016	2015	2015	months
Power sales excluding indirect taxes	566	522	1,866	1,890	2,582	2,558
Heating sales	67	72	410	439	651	622
Other sales	98	68	213	165	226	274
Total for continuing operations	732	661	2,489	2,495	3,459	3,453

10. Income taxes

Taxes for the period totalled EUR -54 (Q1-Q3 2015: 80) million. The effective income tax rate according to the income statement was 13.1% (Q1-Q3 2015: 24.5%). The comparable effective income tax rate, excluding the impact of the share of profit from associated companies and joint ventures as well as tax exempt capital gains, was 19.0% (Q1-Q3 2015: 25.6%).

In June Fortum paid income taxes in Sweden totalling EUR 126 million regarding ongoing tax disputes. Fortum has also paid taxes in Belgium regarding on-going tax disputes. The appeal processes are ongoing and based on legal analysis and legal opinions the payments are booked as a receivable, EUR 236 (31 Dec 2015: 98) million, included in Income tax receivables. For additional information see Note 22 Legal actions and official proceedings.

11. Dividend per share

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.

A dividend for 2014 of EUR 1.10 per share and an extra dividend of EUR 0.20 per share, amounting to a total of EUR 1,155 million, was decided in the Annual General Meeting on 31 March 2015. The dividend and the extra dividend were paid on 14 April 2015.

12. Changes in intangible assets

EUR million	Sept 30 2016	Sept 30 2015	Dec 31 2015
Opening balance	222	276	276
Acquisitions	202	0	1
Capital expenditures	1	7	8
Changes of emission rights	-5	-13	-8
Depreciation and amortisation 1)	-14	-15	-22
Divestments	0	-30	-30
Reclassifications	3	7	14
Translation differences and other adjustments	23	-1	-16
Closing balance	432	232	222

Of which goodwill
	Sept 30	Sept 30	Dec 31
EUR million	2016	2015	2015
Goodwill included in opening balance	152	170	170
Translation differences	21	-2	-18
Acquisitions 2)	162	0	0
Goodwill included in closing balance	336	168	152

1) 2015 includes depreciations related to discontinued operations (see additional information Note 7 Discontinued operations).

2) See additional information in Note 8 Acquisitions and disposals.

13. Changes in property, plant and equipment

	Sept 30	Sept 30	Dec 31
EUR million	2016	2015	2015
Opening balance	8,710	11,195	11,195
Acquisitions	744	1	1
Capital expenditures	355	422	619
Changes of nuclear asset retirement cost	4	0	0
Disposals	-4	-2	-6
Depreciation and amortisation 1)	-250	-288	-416
Divestments	-90	-2,527	-2,533
Reclassifications	-3	-7	-14
Translation differences and other adjustments	98	-29	-135
Closing balance	9,563	8,764	8,710

1) 2015 includes depreciations related to discontinued operations (see additional information Note 7 Discontinued operations) as well as impairment loss recognised in Q4 2015 for Fortum's share of the Finnish coal-fired power plant Meri-Pori.

14. Changes in participations in associates and joint ventures

	Sept 30	Sept 30	Dec 31
EUR million	2016	2015	2015
Opening balance	1,959	2,027	2,027
Acquisitions	9	5	27
Share of profits of associates and joint ventures 1)	116	-15	20
Dividend income received	-54	-52	-52
OCI items associated companies	-8	3	5
Divestments	-22	-23	-26
Translation differences and other adjustments	42	-26	-41
Closing balance	2,042	1,918	1,959

1) In September 2015 including impairment charges of EUR -104 million (Dec 31 2015: -116).

Share of profits from associates and joint ventures

Fortum's share of profit from associates and joint ventures in Q3 2016 was EUR 11 million (Q3 2015: -95), of which Hafslund represented EUR 10 million (Q3 2015: 10), Territorial Generating Company (TGC-1) EUR 7 million (Q3 2015: 6) and Fortum Värme EUR -4 million (Q3 2015: -8). Share of profits from associates and joint ventures in Q3 2015 included impairment charges of EUR -104 million related to the Swedish nuclear associated company OKG AB. For additional information, see Note 6.

According to Fortum Group accounting policies the share of profits from Hafslund and TGC-1 are included in Fortum Group figures based on the previous quarter information since updated interim information is not normally available.

Fortum's share of profit for the period January-September 2016 amounted to EUR 116 million (Q1-Q3 2015: -15), of which Hafslund represented EUR 42 million (Q1-Q3 2015: 31), TGC-1 EUR 34 million (Q1-Q3 2015: 34), and Fortum Värme EUR 40 million (Q1-Q3 2015: 23). Share of profits from associates and joint ventures in Q1-Q3 2015 included impairment charges of EUR -104 million related to the Swedish nuclear associated company OKG AB. For additional information, see Note 6.

Dividends received

During Q1-Q3 2016 Fortum has received EUR 54 million (Q1-Q3 2015: 52) in dividends from associates of which EUR 22 million (Q1-Q3 2015: 21) was received from Fortum Värme and EUR 21 million (Q1-Q3 2015: 19) from Hafslund.

15. Interest-bearing receivables

	Carrying	Fair	Carrying	Fair
	amount	value	amount	value
	Sept 30	Sept 30	Dec 31	Dec 31
EUR million	2016	2016	2015	2015
Long-term loan receivables from associated companies	663	677	601	616
Long-term loan receivables from joint ventures	175	200	172	196
Other long-term interest-bearing receivables	95	95	1	1
Total long-term interest-bearing receivables	933	972	773	813
Short-term interest bearing receivables	423	423	0	0
Total interest-bearing receivables	1,356	1,395	773	813

Long-term loan receivables include receivables from associated companies and joint ventures EUR 838 million (Dec 31 2015: 773). These receivables include EUR 645 million (Dec 31 2015: 582) from Swedish nuclear companies, OKG AB and Forsmarks Kraftgrupp AB, which are mainly funded with shareholder loans, pro rata each shareholder's ownership.

TVO is building Olkiluoto 3, a nuclear power plant, which is funded through external loans, share issues and shareholder loans according to shareholders' agreement between the owners of TVO. At the end of September 2016 Fortum has EUR 120 million (Dec 31 2015: 120) outstanding receivables regarding Olkiluoto 3 and is additionally committed to provide at maximum EUR 75 million.

Interest-bearing receivables includes also EUR 121 million from SIBUR, a Russian gas processing and petrochemicals company regarding divested shares of OOO Tobolsk CHP.

Short-term interest-bearing receivables include EUR 394 million restricted cash mainly given as collateral for commodity exchanges which has increased during 2016 due to new European Market Infrastructure Regulation (EMIR) requiring fully-backed guarantees.

16. Interest-bearing net debt

Net debt
	Sept 30	Sept 30	Dec 31
EUR million	2016	2015	2015
Interest-bearing liabilities	5,185	6,096	6,007
Liquid funds	5,322	8,032	8,202
Net debt	-137	-1,936	-2,195

Net debt is calculated as interest-bearing liabilities less liquid funds without deducting interest-bearing receivables amounting to EUR 1,356 million (Dec 31 2015: 773). Interest-bearing receivables mainly consist of shareholder loans to partly owned nuclear companies regarded long-term financing. For more information see Note 15 Interest-bearing receivables.

Interest-bearing debt	Carrying	Fair	Carrying	Fair
	amount	value	amount	value
	Sept 30	Sept 30	Dec 31	Dec 31
EUR million	2016	2016	2015	2015
Bonds	3,346	3,631	4,094	4,375
Loans from financial institutions	421	460	490	531
Reborrowing from the Finnish State Nuclear Waste Management Fund	1,094	1,147	1,074	1,132
Other long term interest-bearing debt 1)	151	160	145	155
Total long term interest-bearing debt 2)	5,011	5,398	5,803	6,193
Short term interest-bearing debt	174	174	204	204
Total	5,185	5,572	6,007	6,397

1) Including loans from Finnish pension institutions EUR 63 million (Dec 31 2015: 68) and other loans EUR 88 million (Dec 31 2015: 77). 2) Including current portion of long-term debt EUR 496 million (Dec 31 2015: 838).

The reborrowing from the Finnish State Nuclear Waste Management Fund includes the part relating to Loviisa nuclear power plant as well as borrowing done through TVO.

During the first quarter 2016 Fortum increased the amount of reborrowing from the Finnish State Nuclear Waste Management Fund and TVO by EUR 20 million to EUR 1,094 million. During the second quarter Fortum Corparation signed a new EUR 1,750 million syndicated Multicurrency Revolving Facility Agreement at the same time as the previous facility from year 2011 was cancelled. The new commited back-up facility can be used for general corporate purposes with initial maturity of five years and Fortum may request two one-year extension options. In June Fortum repaid a EUR 750 million bond. There have been no major changes in third quarter.

At the end of September 2016, the amount of short term financing included 172 million (Dec 31 2015: 202) from Credit Support Annex agreements. The interest-bearing debt decreased during the third quarter by EUR 31 million from EUR 5,216 million to EUR 5,185 million.

The average interest rate for the portfolio consisting mainly of EUR and SEK loans was 2.0% at the balance sheet date (Dec 31 2015: 2.6%). Part of the external loans, EUR 734 million (Dec 31 2015: 641) have been swapped to RUB and the average interest cost for these loans including cost for hedging the RUB was 11.7% at the balance sheet date (Dec 31 2015: 12.8%). The average interest rate on total loans and derivatives at the balance sheet date was 3.4% (Dec 31 2015: 3.7%).

Maturity of interest-bearing liabilities
	Sept 30
EUR million	2016
2016 1)	210
2017	498
2018	576
2019	803
2020	69
2021 and later	3,029
Total	5,185

1) The cash received as collateral based on Credit Support Annex agreements, amounting to EUR 172 million, has been booked as short-term liability.

January-September 2016

Liquid funds
	Sept 30	Sept 30	Dec 31
EUR million	2016	2015	2015
Deposits and securities with maturity more than 3 months	3,561	5,642	4,913
Cash and cash equivalents	1,762	2,390	3,289
Total	5,322	8,032	8,202

Total liquid funds decreased by EUR 828 million from EUR 6,150 million to EUR 5,322 million during the third quarter.

Liquid funds consist of deposits and cash in bank accounts amounting to EUR 4,627 million and commercial papers EUR 695 million. Deposits and securities include fixed term deposits and commercial papers with maturity more than three months but less than twelve months. The average interest rate on deposits and securities excluding Russian deposits on 30 September 2016 was 0.01% (Dec 31 2015: 0.1%). Liquid funds held by OAO Fortum amounted to EUR 110 million (Dec 31 2015: 76) and the average interest rate for this portfolio was 8.5% at the balance sheet date.

Liquid funds totaling EUR 4,819 million (Dec 31 2015: 7,521) are placed with counterparties that have an investment credit rating. In addition, EUR 503 million (Dec 31 2015: 628) have been placed with counterparties separately reviewed and approved by the Group's credit control department.

17. Nuclear related assets and liabilities

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 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.

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.

17.1 Nuclear related assets and liabilities for 100% owned nuclear power plant, Loviisa

	Sept 30	Sept 30	Dec 31
EUR million	2016	2015	2015
Carrying values in the balance sheet
Nuclear provisions	836	798	810
Fortum's share of the State Nuclear Waste Management Fund	836	798	810

Legal liability and actual share of the State Nuclear Waste Management Fund
Liability for nuclear waste management according to the Nuclear Energy Act	1,094	1,084	1,094
Funding obligation target	1,094	1,074	1,094
Fortum's share of the State Nuclear Waste Management Fund	1,094	1,074	1,083
Share of the fund not recognised in the balance sheet	258	276	273

Legal liability for Loviisa nuclear power plant

The legal liability on 30 September 2016, decided by the Ministry of Employment and Economy in December 2015, was EUR 1,094 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 cost estimates relating to the new nuclear waste management technical plan were completed in Q2 2016. Following the update of the technical plan, the legal liability is currently estimated to increase by approximately EUR 50 million due to updated cost estimates related to interim and final storage of spent fuel. The new technical plan will be decided by the Ministry of Employment and Economy by the end of year 2016. 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 2015 is EUR 1,094 million.

January-September 2016

Nuclear provision and fund accounted for 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 26 million compared to 31 December 2015, totalling EUR 836 million on 30 September 2016. The effects from the new technical plan were included in the Q2/2016 Comparable operating profit. The provisions are based on the same cash flows for future costs as the legal liability according to the new technical plan, but based on the estimated future timing of the expenditures. The main reason for the difference between the carrying value of the provision and the legal liability is the fact that 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 258 million, since Fortum's share of the Fund on 30 September 2016 was EUR 1,094 million and the carrying value in the balance sheet was EUR 836 million.

Fortum's share of the Finnish Nuclear Waste Management Fund in Fortum's balance sheet can at maximum be equal to the amount of the provisions according to IFRS. As long as the Fund is overfunded from an IFRS perspective, the operating profit is adjusted positively if the provisions increase more than the Fund and negatively 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, see Note 4 Segment information.

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 16 Interest-bearing net debt and Note 21 Pledged assets and contingent liabilities).

17.2 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 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%)
	Sept 30	Sept 30	Dec 31
EUR million	2016	2015	2015
Carrying values in TVO's balance sheet
Nuclear provisions	962	954	971
Share of the State Nuclear Waste Management Fund	962	954	971
of which Fortum's net share consolidated with equity method	0	0	0

TVO's legal liability and actual share of the State Nuclear Waste Management Fund
Liability for nuclear waste management according to the Nuclear Energy Act	1,369	1,349	1,369
Share of the State Nuclear Waste Management Fund	1,369	1,345	1,358
Share of the fund not recognised in the balance sheet	407	391	387

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 407 million (of which Fortum's share EUR 108 million), since TVO's share of the Fund on 30 September 2016 was EUR 1,369 million and the carrying value in the balance sheet was EUR 962 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 16 Interest-bearing net debt.

OKG's and Forsmark's total nuclear related assets and liabilities (100%)
EUR million	Sept 30 2016	Sept 30 2015	Dec 31 2015
OKG's and Forsmark's nuclear related assets and liabilities 1)
Nuclear provisions	3,125	3,207	3,210
Share in the State Nuclear Waste Management Fund	2,976	2,859	3,025
Net amount	-149	-348	-185

of which Fortum's net share consolidated with equity method	-61	-121	-71

1) Accounted for according to Fortum's accounting principles. The 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. Fortum's guarantees given on behalf of nuclear associated companies are presented in Note 21 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 done in 2016 and will be decided by SKB during 2016. During 2017 SKB will send the propsal of the new technical plan to SSM, after which the Swedish government will decide the waste fees and guarantees for years 2017-2019. Nuclear waste fees are currently based on future costs with the assumed lifetime of 40 years for each unit of a nuclear power plant. In June 2016 the key political parties announced a new framwork regarding energy policy. According to that the lifetime in waste fee calculation would possibily be extended from 40 to 50 years and the regulatory framework for nuclear waste fund will be reformed in order to enhance yield.

18. Other provisions

		CSA provisions		Other provisions
EUR million	Sept 30 2016	Sept 30 2015	Dec 31 2015	Sept 30 2016	Sept 30 2015	Dec 31 2015
Opening balance	8	56	56	91	26	26
Acquisitions	0	0	0	41	0	0
Increase in the provisions	0	0	0	6	9	84
Provisions used	-7	0	0	-8	-12	-16
Unused provisions reversed	-2	-31	-50	-6	-1	-3
Unwinding of discount	0	1	1	0	0	0
Exchange rate differences	0	2	1	0	-1	-1
Closing balance	0	27	8	124	22	91
Current provisions 1)		27	8	7	9	9
Non-current provisions		0	0	117	13	81

1) Included in trade and other payables in the balance sheet.

Total Other provisions amount to EUR 124 million at the end of Q3 2016 (Dec 31 2015: 98).

Fortum's investment programme in Russia was completed in Q1 2016 when Chelyabinsk GRES 2 unit started its commercial operation and there was no provision for CSA penalties at the end of March 2016. Paid penalties for Chelyabinsk GRES unit 1 and 2 during Q1 2016 amounted to EUR 6 million and the remaining provision of EUR 2 million was reversed to the income statement.

The increase in other provisions during 2015 arises mainly from a dismantling provision for the Finnish coal-fired power plant Inkoo.

19. Operating lease commitments

EUR million	Sept 30 2016	Sept 30 2015	Dec 31 2015
Due within a year	16	12	14
Due after one year and within five years	32	23	23
Due after five years	28	25	24
Total	75	61	60

20. Capital commitments

	Sept 30	Sept 30	Dec 31
EUR million	2016	2015	2015
Property, plant and equipment	490	469	426
Intangible assets	0	2	2
Total	491	471	428

In addition Fortum has committed to provide a maximum of EUR 102 million (Dec 31 2015: 107) to Voimaosakeyhtiö SF, for its participation in the Fennovoima nuclear power project in Finland.

For information regarding commitments related to associated companies and joint ventures, see Note 15 Interest-bearing receivables.

21. Pledged assets and contingent liabilities

	Sept 30	Sept 30	Dec 31
EUR million	2016	2015	2015
Pledged assets on own behalf
For debt
Pledges	687	288	294
Real estate mortgages	137	137	137
For other commitments
Real estate mortgages	99	118	118
Contingent liabilties on own behalf
Other contingent liabilities	174	195	192
Contingent liabilties on behalf of associated companies and joint ventures
Guarantees	599	636	624

Pledged assets for debt

Participants in the Finnish State Nuclear Waste Management Fund are allowed to borrow from the Fund. Fortum has pledged shares in Kemijoki Oy as a security. As of 30 September 2016 the value of the pledged shares amounted to EUR 269 million (Dec 31 2015: 269).

Fortum Tartu in Estonia (60% owned by Fortum) has given real estate mortgages for a value of EUR 96 million (Dec 31 2015: 96) as a security for an external loan. Real estate mortgages have also been given for loans from Fortum's pension fund for EUR 41 million (Dec 31 2015: 41).

Pledges also include bank deposits as trading collateral of EUR 351 million (Dec 31 2015: 6) for trading of electricity, gas and CO² emission allowances in Nasdaq OMX Commodities Europe, Intercontinental Exchange (ICE), European Energy Exchange (EEX) and Polish Power Exchange (TGE) and EUR 25 million (Dec 31 2015: 0) for windfarm construction in Russia.

Regarding the relevant interest-bearing liabilities, see Note 16 Interest-bearing net debt.

Pledged assets for other commitments

Fortum has given real estate mortgages in power plants in Finland, total value of EUR 99 million in September 2016 (Dec 31 2015: 118), 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 decomissioning 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, see more information in Note 17 Nuclear related assets and liabilities. 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.

Contingent liabilities 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 (Dec 31 2015: 125).

Contingent liabilities on behalf of associated companies

Guarantees on behalf of associated companies and joint ventures mainly consist of guarantees relating to Fortum's associated nuclear companies (Teollisuuden Voima Oyj, Forsmarks Kraftgrupp AB and OKG AB). Guarantees for the period of 2015-2017 have been given on behalf of Forsmarks Kraftgrupp AB and OKG AB amounting to SEK 5 393 million (EUR 561 million) at 30 september 2016 (Dec 31 2015: EUR 587 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 400 million) and the Supplementary Amount was SEK 1 550 million (EUR 161 million) at 30 September 2016.

The guarantee given on behalf of Teollisuuden Voima Oyj to the Finnish State Nuclear Waste Management Fund amounted to EUR 38 million at 30 September 2016 (Dec 31 2015: 37). The guarantee covers the unpaid legal liability due to periodisation as well as risks for unexpected future costs.

Fortum has minority shares in legal companies owning nuclear power plants in Finland and Sweden. Fortum consolidates these companies according to equity method meaning that Fortum's share of the assets and liabilities are netted to the balance sheet. For information regarding nuclear related assets and liabilities of Loviisa nuclear power plant as well as Swedish and Finnish nuclear production companies where Fortum has a minority shareholding see Note 17 Nuclear related assets and liabilities.

Other contingent liabilities

Fortum's 100% owned subsidiary Fortum Heat and Gas Oy has a collective contingent liability with Neste Oyj of the in 2004 demerged Fortum Oil and Gas Oy's liabilities based on the Finnish Companies Act's (734/1978) Chapter 14a Paragraph 6.

22. Legal actions and official proceedings

Tax cases in Sweden

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, as well as additional income taxes for the years 2010, 2011 and 2012 for financing of the acquisition of TGC 10 (current OAO Fortum) in 2008. The claims are based on a change in tax regulation as of 2009. Fortum considered the claims unjustifiable and appealed the decisions.

In April 2016 the Administrative Court in Stockholm, Sweden, announced its decisions relating to the income tax assessments for 2009-2012. A part of the decisions were positive. The Court repealed the income assessments relating to the financing of the acquisition of TGC 10 (current OAO Fortum) for the years 2010-2012. However, with respect to the reallocation of the loans between the Swedish subsidiaries in 2004-2005, the Court mainly rejected the appeals of Fortum for the years 2009-2012. Fortum disagrees with the argumentation of the Court in those cases which were ruled in the favor of the Swedish tax authorities. Fortum has therefore in June 2016 filed an appeal to the Court of Appeal in Stockholm in these cases. The decisions of the Administrative Court which were favorable to Fortum have become non-appealable and thus final in July 2016.

In addition Fortum has received income tax assessments in Sweden for the year 2013 in December 2015. 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 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 decision is based on the changes in the Swedish tax regulation in 2013. Fortum considers the claims unjustifiable and has appealed the decisions. The cases are pending before the Administrative Court.

Based on legal analysis supporting legal opinions, no provision has been recognised in this interim report for the above mentioned Swedish tax cases. Fortum's legal view has therefore not changed. If the decisions by the tax authority remain final despite the appeals processes, the impact on net profit would be approximately SEK 389 million (EUR 40 million) for the year 2009, approximately SEK 347 million (EUR 36 million) for the year 2010, approximately SEK 301 million (EUR 31 million) for the year 2011, approximately SEK 69 million (EUR 7 million) for the year 2012 and SEK 273 million (EUR 28 million) for the year 2013. Moreover, for the years 2009-2012 an interest cost would impact the net profit with 69 MSEK (EUR 7 million). The additional taxes and interest for 2009-2012 have already been paid in June 2016, in total 1.175 MSEK (EUR 122 million) and based on the legal opinion booked as a receivable.

Tax cases in Belgium

Fortum has received income tax assessments in Belgium for the years 2008, 2009, 2010 and 2011. 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 favorable 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 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 this interim report. 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. If the tax is repaid to Fortum, Fortum will receive a 7% interest on the amount.

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 this interim report. The amount of additional tax claimed is approximately EUR 15 million for the year 2012. The tax has already been paid.

Tax cases in Finland

Fortum received an income tax assessment in Finland for 2007 in December 2013. Tax authorities claim in the transfer pricing audit, that detailed business decisions are done by Fortum Oyj and therefore re-characterize the equity Fortum has injected to its Belgium subsidiary Fortum Project Finance NV not to be equity, but funds to be available for the subsidiary. Tax authorities' view is that the interest income that Fortum Project Finance NV received from its loans should be taxed in Finland, not Belgium. Fortum considered the claims unjustifiable both for legal grounds and interpretation. Fortum appealed the decision.

The Board of Adjustment of the Large Taxpayers' Office approved Fortum's appeal for the year 2007 on 21 August 2014. The Board of Adjustment's decision is in line with the principle adopted in the Supreme Administrative Court's precedent in June 2014, according to which, under transfer pricing rules, the nature of business cannot be re-characterized for tax purposes, but can only adjust the pricing of goods or services. Despite the new precedent, the Tax Recipients' Legal Services Unit within the tax authorities appealed this decision to the Administrative Court in Helsinki. In May 2016 the Administrative Court announced its decision in the case. The court ruled in Fortum's favour and rejected the appeal of the Tax Recipients' Legal Services Unit. The Tax Recipient's Legal Service Unit has appealed the Administrative Court's decision to the Supreme Administrative Court. Prior to decision on the appeal Supreme Administrative Court has to decide whether it will grant a permit for the appeal. There is no clarity if Supreme Administrative Court will grant the permit for the appeal. If an appeal of the Tax Recipients' Legal Services Unit would be successful in Supreme Administrative Court, the impact on net profit would be approximately EUR 136 million for the year 2007. Based on legal analysis and a supporting legal opinion, no provision has been accounted for in this interim report.

January-September 2016

In December 2014 Fortum Oyj received a non-taxation decision from the large Taxpayers' office for the years 2008-2011 regarding the activities in the Belgian and Dutch financing companies. The decision was given due to the transfer pricing audit carried out in 2013-2014 and was in line with the Board of Adjustment's decision with respect to Fortum for the year 2007. The Tax Recipients' Legal Services Unit has appealed the decisions in February 2015 and the cases are now pending before the Board of Adjustment of the Large Taxpayers' Office. According to the claim of correction, the non-taxation decision of the Large Taxpayers' office should be reversed and the interest income that Fortum Project Finance NV has received from its loans in 2008-2011 should be taxed in Finland, not in Belgium. If the claim of correction of the Tax Recipients' Legal Services Unit would be successful, the negative impact on net profit would be approximately EUR 140 million for the year 2008, EUR 99 million for the year 2009, EUR 76 million for the year 2010 and EUR 90 million for the year 2011. Moreover, Fortum Oyj would be liable to pay penalty interest. In line with the 2007 case Fortum considers the claims unjustifiable. Based on legal analysis and a supporting legal opinion, no provision has been accounted for in this interim report.

Litigations in 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. The civil construction works of the Olkiluoto 3 plant unit have been mainly completed. The installation of the electrical systems, the instrumentation and control system (I&C), and mechanical systems is still in progress. Test runs with the I&C commenced in January 2016. In April TVO submitted to the Ministry of Economic Affairs and Employment (MEAE) an application for an operating licence. The first phase of the turbine plant commissioning is completed. Some of the systems and components will be kept in operation; the rest will be preserved in accordance with a separate plan. According to the schedule updated by the AREVA-Siemens in September 2014, regular electricity production in the unit will commence at the end of 2018.

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's monetary claim, updated in February 2016, is approximately EUR 3.5 billion in total. The sum is based on the supplier's updated analysis of events that occurred through September 2014, with certain claims quantified to 31 December 2014.

In 2012, TVO submitted a counter-claim and defense in the matter. In July 2015, TVO updated its quantification estimate of its costs and losses to amount to approximately EUR 2.6 billion until December 2018, which is the estimated start of the regular electricity production of OL3.

The companies belonging to the Plant Supplier Consortium (AREVA GmbH, AREVA NP SAS and Siemens AG) are jointly and severally liable of the Plant Contract obligations.

The arbitration proceedings may continue for several years and the claimed amounts may change.

In 2016, Areva announced a restructuring of its business including the contemplated state aid connected with the plan. TVO requires that the restructuring respects the completion of the OL3 project within the current schedule and that all liabilities of the plant contract are respected. TVO has sought to obtain more detailed information from Areva on the company's announced restructuring and its impacts on the OL3 project. As TVO has not received such information it has begun legal proceedings at the end of September 2016 before the Commercial Court of Nanterre in France to urgently obtain this information.

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.

23. Related party transactions

Related parties are described in the annual financial statements as of the year ended 31 December 2015. 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 8 Acquisitions and disposals. No other material changes have occurred during 2016.

At the year-end 2015 the Finnish State owned 50.76% of the shares in Fortum. There has been no change in the shareholding during 2016.

Transactions with associated companies and joint ventures

EUR million	Q1-Q3 2016	Q1-Q3 2015	2015
Sales	57	59	81
Purchases	399	370	509
Interest on loan receivables	12	22	27
Other financial income	0	37	37

Associated company and joint ventures balances

EUR million	Sept 30 2016	Sept 30 2015	Dec 31 2015
Long-term interest-bearing loan receivables	838	943	773
Trade receivables	20	21	11
Other receivables	18	21	14

Long-term loan payables	273	318	270
Trade payables	3	2	9
Other payables	4	3	166

24. Events after the balance sheet date

January-September 2016

25. Definition of key figures

EBITDA (Earnings before interest, taxes, depreciation and amortisation)	=	Operating profit + depreciation and amortisation
Comparable EBITDA	=	EBITDA - items affecting comparability - net release of CSA provision
Items affecting comparability	=	Impairment charges + capital gains and other + changes in fair values of derivatives hedging future cash flow + nuclear fund adjustment
Comparable operating profit	=	Operating profit - items affecting comparability
Impairment charges	=	Impairment charges and related provisions (mainly dismantling)
Capital gains and other	=	Capital gains, transaction costs from acquisitions and other
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.
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.
Adjustment for Share of profit of associated companies and joint ventures	=	Adjustment for IAS 39 effects, major sales gains and impairment charges
Funds from operations (FFO)	=	Net cash from operating activities before change in working capital
Capital expenditure	=	Capitalised investments in property, plant and equipment and intangible assets including maintenance, productivity, growth and investments required by legislation including borrowing costs capitalised during the construction period. Maintenance investments expand the lifetime of an existing asset, maintain useage/availability and/or maintains reliability. Productivity investments improve productivity in an existing asset. Growth investments' purpose is to build new assets and/or to increase customer base within existing businesses. Legislation investments are done at certain point of time due to legal requirements.
Gross investments in 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 with interest-bearing liabilities in the acquired company.
Return on shareholders' equity, %	=	Profit for the year Total equity average	x 100
Return on capital employed, %	=	Profit before taxes + interest and other financial expenses Capital employed average	x 100
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
Capital employed	=	Total assets - non-interest bearing liabilities - deferred tax liabilities - provisions

25. Definition of key figures

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)
Interest-bearing net debt	=	Interest-bearing liabilities - liquid funds
Gearing, %	=	Interest-bearing net debt Total equity	x 100
Equity-to-assets ratio, %	=	Total equity including non-controlling interest Total assets	x 100
Comparable net debt / EBITDA	=	Interest-bearing net debt Comparable EBITDA
Interest coverage	=	Operating profit Net interest expenses
Interest coverage including capitalised borrowing costs	=	Operating profit Net interest expenses - capitalised borrowing costs
Earnings per share (EPS)	=	Profit for the period - non-controlling interest Average number of shares during the period
Equity per share	=	Shareholder's equity Number of shares at the end of the period
Effective income tax rate	=	Income tax expense Profit before income tax
Comparable effective income tax rate	=	Income tax expense - effects from tax rate changes Profit before income tax decreased by profits from associated companies and joint ventures as well as tax exempt capital gains or losses
Last twelve months (LTM)	=	Twelve months preceding the reporting date

Fortum Corporation January-September 2016

Market conditions and achieved power prices

Power consumption						Last
			Q1-Q3	Q1-Q3		twelve
TWh	Q3 2016	Q3 2015	2016	2015	2015	months
Nordic countries	80	81	283	278	381	386
Russia	231	225	740	731	1,007	1,016
Tyumen	22	22	69	68	93	94
Chelyabinsk	8	8	25	26	35	35
Russia Urals area	59	59	187	188	258	257

Average prices						Last
			Q1-Q3	Q1-Q3		twelve
	Q3 2016	Q3 2015	2016	2015	2015	months
Spot price for power in Nord Pool power exchange, EUR/MWh	25.2	13.3	24.4	20.7	21.0	23.8
Spot price for power in Finland, EUR/MWh	31.6	30.1	30.8	29.3	29.7	30.7
Spot price for power in Sweden, SE3, Stockholm EUR/MWh	29.6	15.5	26.7	21.7	22.0	25.8
Spot price for power in Sweden, SE2, Sundsvall EUR/MWh	29.5	14.7	26.4	21.0	21.2	25.1
Spot price for power in European and Urals part of Russia, RUB/MWh 1)	1,298	1,184	1,204	1,146	1,154	1,198
Average capacity price, tRUB/MW/month	433	319	456	346	359	440
Spot price for power in Germany, EUR/MWh	28.3	32.8	26.1	31.1	31.6	27.9
Average regulated gas price in Urals region, RUB/1000 m3	3,614	3,614	3,614	3,446	3,488	3,614
Average capacity price for old capacity, tRUB/MW/month 2)	130	134	136	146	149	142
Average capacity price for new capacity, tRUB/MW/month 2)	724	567	777	620	641	759
Spot price for power (market price), Urals hub, RUB/MWh 1)	1,125	1,051	1,052	1,041	1,047	1,055
CO2 , (ETS EUA), EUR/tonne CO2	5	8	5	7	8	6
Coal (ICE Rotterdam), USD/tonne	60	56	51	59	57	51
Oil (Brent Crude), USD/bbl	47	51	43	57	54	44

1) Excluding capacity tariff.

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

Water reservoirs
	Sept 30	Sept 30	Dec 31
TWh	2016	2015	2015
Nordic water reservoirs level	98	110	98
Nordic water reservoirs level, long-term average	101	101	83

Export/import						Last
			Q1-Q3	Q1-Q3		twelve
TWh (+ = import to, - = export from Nordic area)	Q3 2016	Q3 2015	2016	2015	2015	months
Export / import between Nordic area and Continental Europe + Baltics	-2	-5	-8	-14	-18	-12
Export / import between Nordic area and Russia	1	0	4	3	4	5
Export / import Nordic area, Total	-1	-5	-4	-11	-14	-7

Power market liberalisation in Russia						Last
			Q1-Q3	Q1-Q3		twelve
%	Q3 2016	Q3 2015	2016	2015	2015	months
Share of power sold at the liberalised price	80%	81%	81%	83%	83%	81%

Achieved power prices						Last
			Q1-Q3	Q1-Q3		twelve
	Q3 2016	Q3 2015	2016	2015	2015	months
Generation segment's Nordic power price, EUR/MWh	31.6	28.7	30.9	32.6	33.0	31.7
Russia segment's power price, RUB/MWh	1,796	1,612	1,704	1,556	1,555	1,664
Russia segment's power price, EUR/MWh 1)	24.6	22.3	22.5	23.0	22.5	22.1

1) Translated using average exchange rate.

Fortum's production and sales volumes

Power generation			Q1-Q3	Q1-Q3		Last twelve
TWh	Q3 2016	Q3 2015	2016	2015	2015	months
Power generation in the EU	10.3	12.0	36.1	37.7	50.2	48.6
Power generation in Russia	5.5	5.1	18.6	18.2	25.7	26.1
Total	15.8	17.1	54.7	55.9	75.9	74.7

Heat production
			Q1-Q3	Q1-Q3		Last twelve
TWh	Q3 2016	Q3 2015	2016	2015	2015	months
Heat production in the EU	0.9	0.8	4.5	4.4	6.4	6.5
Heat production in Russia	1.5	2.9	12.8	16.8	25.8	21.8
Total	2.4	3.7	17.3	21.2	32.2	28.3

Power generation capacity by segment
	Sept 30	Sept 30	Dec 31
MW	2016	2015	2015
Generation 1)	8,016	8,796	8,046
City Solutions	760	749	743
Russia 2)	4,440	4,667	4,903
Other	45	0	0
Total	13,261	14,211	13,692

1) Excluding 750 MW mothballed capacity of Inkoo power plant of which preparations for permanent dismantling has started in 2015. Capacities includes unit 1 (205 MW) in Oskarshamn that will be taken out of operation at the end of June 2017.

2) Change compared to 2015 is mainly arising from the divestment of Tobolsk CHP of (665 MW) and commissioning the new unit Chelyabinsk 2 (248 MW).

Heat production capacity by segment
	Sept 30	Sept 30	Dec 31
MW	2016	2015	2015
City Solutions	3,884	3,927	3,915
Russia 1)	9,920	12,994	12,696
Total	13,804	16,920	16,611

1) Decrease compared to 2015 is mainly arising from the divestment of Tobolsk CHP (2,585 MW).

Power generation by source in the Nordic area
			Q1-Q3	Q1-Q3		Last twelve
TWh	Q3 2016	Q3 2015	2016	2015	2015	months
Hydro and wind power	4.3	6.6	16.5	19.2	25.1	22.4
Nuclear power	5.6	5.1	17.8	16.8	22.7	23.7
Thermal power	0.1	0.1	0.8	0.6	1.0	1.2
Total	10.0	11.8	35.1	36.7	48.8	47.2

Power generation by source in the Nordic area
			Q1-Q3	Q1-Q3		Last twelve
%	Q3 2016	Q3 2015	2016	2015	2015	months
Hydro and wind power	43	57	47	52	51	46
Nuclear power	56	43	51	46	47	52
Thermal power	1	1	2	2	2	2
Total	100	100	100	100	100	100

Power sales
			Q1-Q3	Q1-Q3		Last twelve
EUR million	Q3 2016	Q3 2015	2016	2015	2015	months
Power sales in the EU and Norway	408	391	1,379	1,411	1,918	1,886
Power sales in Russia	157	131	485	479	661	667
Power sales in other countries	1	0	2	0	3	5
Total	566	522	1,866	1,890	2,582	2,558

Fortum Corporation January-September 2016

Fortum's production and sales volumes

Heat sales
			Q1-Q3	Q1-Q3		Last twelve
EUR million	Q3 2016	Q3 2015	2016	2015	2015	months
Heat sales in the EU	50	49	293	293	423	423
Heat sales in Russia	17	23	118	147	228	199
Total	67	72	410	439	651	622

Power sales by area
			Q1-Q3	Q1-Q3		Last twelve
TWh	Q3 2016	Q3 2015	2016	2015	2015	months
Finland	4.9	5.1	16.9	16.5	22.3	22.7
Sweden	6.0	7.5	21.9	22.6	29.8	29.1
Russia	6.4	5.9	21.6	20.8	29.4	30.2
Other countries	0.7	0.5	2.4	2.0	2.8	3.2
Total	18.0	18.9	62.7	61.9	84.3	85.1

NordPool transactions are calculated as a net amount of hourly sales and purchases at the Group level.

Heat sales by area
			Q1-Q3	Q1-Q3		Last twelve
TWh	Q3 2016	Q3 2015	2016	2015	2015	months
Russia	1.5	2.8	12.9	16.7	25.4	21.6
Finland	0.4	0.3	2.2	2.1	3.1	3.2
Poland	0.2	0.2	2.2	2.2	3.4	3.4
Other countries	0.1	0.1	0.9	0.8	1.2	1.3
Total	2.2	3.5	18.3	21.9	33.2	29.6

AI Terminal

Fortum Oyj

3217_10-q_2016-10-25_e7aa6181-ec45-4e9e-9b86-de59a5a994e2.pdf

Fortum Corporation

Interim Report January–September 2016

Contents

Tables to the interim report

Low hydro production volumes affected seasonally weak quarter

July−September 2016, continuing operations

January−September 2016, continuing operations

Summary of outlook

Fortum's President and CEO Pekka Lundmark:

Fortum's new vision, strategic cornerstones and updated financial targets

Reorganisation of operations

Financial results

Sales by segment

Comparable operating profit by segment

Operating profit by segment

July–September 2016

January–September 2016

Financial position and cash flow

Cash flow

Assets and capital employed

Equity

Financing

Key figures

Market conditions

Nordic countries

Russia

European business environment and carbon market

Swedish energy taxation

Ratification of the Paris Agreement

Commission's summer package

Finnish budget proposal 2017

Segment reviews

Generation

July–September 2016

January–September 2016

City Solutions

July–September 2016

January–September 2016

Russia

July–September 2016

January–September 2016

Discontinued operations (Distribution)

Capital expenditures, divestments and investments in shares

Generation

City Solutions

Russia

Other

Shares and share capital

Fortum shares on Nasdaq Helsinki

Group personnel

Research and development

Sustainability

Fortum's sustainability targets and performance*

Economic responsibility

Environmental responsibility

Social responsibility

Changes in Fortum's Management

Annual General Meeting 2016

Outlook

Key drivers and risks

Nordic market

Generation

City Solutions

Russia

Capital expenditure and divestments

Taxation

Hedging

Dividend payment

Further information:

Financial calendar in 2017

Capital Markets Day in 2016:

Condensed consolidated income statement

Fortum Corporation January-September 2016

Condensed consolidated statement of comprehensive income

Condensed consolidated balance sheet

Condensed consolidated statement of changes in total equity

Translation differences