Market conditions

Nordic countries

The Nordic water reservoir level was well above the long-term average at the beginning of the first quarter of 2012 and remained so throughout the quarter. The milder weather and the above-average water reservoirs kept the Nordic power price clearly below the previous year's level. During most of the quarter, the Nordic price also remained below the continental price resulting in a nearly continuous export of power from the Nordic countries to the continent.

According to preliminary statistics, the Nordic countries consumed 113 (116) terawatt-hours (TWh) of electricity in the first quarter of 2012, i.e. approximately 3% less than the year before. Most of the difference was due to the higher temperatures, even though the industrial consumption was somewhat lower than the year before.

At the beginning of the year, the Nordic water reservoirs were 95 TWh, which is 12 TWh more than the long-term average. At the end of the quarter, the reservoirs were 15 TWh above the long-term average and 36 TWh above the corresponding level in 2011.

During the first quarter, the average system spot price for electricity in Nord Pool was EUR 38.3 (66.2) per megawatt-hour (MWh). The area prices in Finland and Sweden were both above the system price, in Finland at 42.5 (64.8) per MWh and in Sweden (SE3) at 39.1 (65.9) per MWh. The Finnish area price started to deviate from the system price in February, when the import capacity from Sweden was significantly reduced due to a failure in the new Fenno-Skan 2 connection. In addition, in March, maintenance of a transmission network lead to a period of several weeks when the available import capacity from Sweden to Finland was less than half of its maximum level.

In Germany, the average spot price during the first quarter in 2012 was EUR 45.1 (51.9) per MWh.

At the beginning of the year, the market price for CO2 emission allowances was approximately EUR 6.6 per tonne. In the middle of February, the highest quoted price was approximately EUR 9.5 per tonne. At the end of the quarter, CO2 emission allowances closed at approximately EUR 7.1 per tonne.

Russia

According to preliminary statistics, Russia consumed 293 (285) TWh of electricity during the first quarter of 2012. The corresponding figure in Fortum’s operating area in the First price zone (European and Urals part of Russia) was 217 (211) TWh.

OAO Fortum operates in theTyumenand Chelyabinsk areas. In the Tyumen area, where industrial production is dominated by the oil and gas industries, electricity demand in the first quarter of 2012 increased by approximately 0.2% compared to the same period in 2011. In the Chelyabinsk area, which is dominated by the metal industry, electricity demand increased by approximately 0.7% in the first quarter compared to the same period of the previous year. The increase is mainly due to industrial consumption.

The average electricity spot price, excluding capacity price, decreased by 11% to RUB 915 (1,033) per MWh in the First price zone during the first quarter of 2012.

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