Market conditions

Nordic countries

During the second quarter of 2012, the significantly higher water reservoirs combined with the clearly lower price of coal and CO2 emissions allowance (EUA) kept the Nordic electricity price well below the level of the corresponding period the year before. Area prices for Fortum's key areas, Finland and Sweden (SE3), were above the system price. The export of electricity from the Nordic countries to the Continent and Baltic countries was 5 (0) TWh during the quarter due to the high price differences between the markets.

According to preliminary statistics, electricity consumption in the Nordic countries during the second quarter was 86 (85) terawatt-hours (TWh) i.e. some 1% higher than the year before. The increase was attributable to colder weather, even though its impact was partly outweighed by a decrease in the industrial consumption. In January–June, electricity consumption in the Nordic countries was 200 (201) terawatt-hours (TWh), i.e. some 0.5% lower than the year before.

At the beginning of the year, the Nordic water reservoirs were at 95 TWh, i.e.12 TWh more than the long-term average. At the beginning of the second quarter the Nordic water reservoirs were at 56 TWh, i.e.15 TWh more than the long-term average and 36 TWh above the corresponding level in 2011. By the end of the quarter, the reservoirs were 86 TWh, 2 TWh above the long-term average and 3 TWh above the corresponding level in 2011.

During the second quarter, the average system spot price of electricity in Nord Pool was EUR 28.4 (52.3) per megawatt-hour (MWh). The average area prices in Finland were EUR 32.4 (52.0) per MWh and in Sweden (SE3) 29.6 (52.2) per MWh. The hydrological surplus in the hydropower intensive regions and restrictions in the transmission capacity pressed the area prices.

During January–June 2012, the average system spot price was EUR 33.3 (59.2) per MWh. The average area price inFinlandwas EUR 37.5 (58.4) per MWh and in Sweden (SE3) EUR 34.3 (59.0) per MWh. The Fenno-Skan 2 connection between Finland and Sweden was down from 17 February to 25 April, which affected Finnish prices during that period and widened price area differences.

In Germany, the average spot price during the second quarter of 2012 was EUR 40.4 (53.6) per MWh and during January–June 2012 EUR 42.7 (52.7) per MWh.

At the beginning of the year, the market price for CO2 emission allowances was approximately EUR 6.6 per tonne. At the end of the second quarter, CO2 emission allowances closed at approximately EUR 8.3 per tonne. The highest quoted price during January–June was approximately EUR 9.5 per tonne and the lowest EUR 6.2 per tonne.

Russia

OAO Fortum operates in the Tyumen and Chelyabinsk areas. Both in the Tyumen area, where industrial production is dominated by the oil and gas industries, and in the Chelyabinsk area, which is dominated by the metal industry, electricity demand decreased marginally in the second quarter compared to the same period of the previous year.

According to preliminary statistics, Russia consumed 232 (230) TWh of electricity during the second quarter of 2012. The corresponding figure in Fortum’s operating area in the First price zone (European and Urals part of Russia) was 172 (172) TWh.

In January–June, Russia consumed 524 (515) TWh of electricity. The corresponding figure in Fortum’s operating area in the First price zone (European and Urals part of Russia) was 389 (383) TWh.

In the second quarter 2012 the average electricity spot price, excluding capacity price, decreased by 9% to RUB 925 (1,017) per MWh in the First price zone.

In January–June 2012, the average electricity spot price, excluding capacity price, decreased by 10% to RUB 920 (1,025) per MWh in the First price zone.

More detailed information about the market fundamentals is included in the Production and Sales Volumes.