Market conditions

Nordic countries

Exceptionally high annual precipitation volumes inflated the Nordic water reservoirs and depressed the power prices during the third quarter of 2012. Average area prices for Fortum's key areas, Finland and Sweden (SE3), stayed above the system price from August through September.

According to preliminary statistics, electricity consumption in the Nordic countries during the third quarter was 80 (81) terawatt-hours (TWh), i.e. some 1.0 % lower than during the same period in 2011. This was attributable to lower industrial consumption, while non-industrial consumption was fairly flat. In January - September, electricity consumption in the Nordic countries was 280 (282) 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 above the long-term average. At the beginning of the third quarter, the Nordic water reservoirs were at 86 TWh, i.e. 2 TWh above the long-term average and 3 TWh above the corresponding level in 2011. Later-than-average snow melting contributed to water reservoirs during the third quarter. By the end of the quarter, the reservoirs were 109 TWh, 8 TWh above the long-term average and 5 TWh above the corresponding level in 2011.

During the third quarter, the average system spot price of electricity in Nord Pool was EUR 20.8 (36.0) per megawatt-hour (MWh). The average area prices in Finland were EUR 30.9 (43.4) per MWh, and in Sweden (SE3) 23.2 (38.1) per MWh. The hydrological surplus as well as maintenance related and unplanned restrictions in the transmission capacity created differences in area prices, pressuring prices particularly in the hydropower intensive regions. In addition, the spot price in Finland was impacted by the reduced import of electricity from Russia.

During January - September 2012, the average system spot price was EUR 29.2 (51.5) per MWh. The average area price in Finland was EUR 35.3 (53.4) per MWh and in Sweden (SE3) EUR 30.6 (52.1) 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 third quarter of 2012 was EUR 43.5 (49.2) per MWh and during January - September 2012 EUR 43.0 (51.6) per MWh.

At the beginning of the year, the market price for CO2 emission allowances (EUA) was approximately EUR 6.6 per tonne. At the end of the third quarter, CO2 emission allowances closed at approximately EUR 8.0 per tonne. The highest quoted price during January - September 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 increased marginally in the third quarter compared to the same period of the previous year.

According to preliminary statistics, Russia consumed 229 (226) TWh of electricity during the third quarter of 2012. The corresponding figure in Fortum’s operating area in the First price zone (European and Urals part of Russia) was 172 (170) TWh.

In January-September, Russia consumed 753 (741) TWh of electricity. The corresponding figure in Fortum’s operating area in the First price zone (European and Urals part of Russia) was 560 (553) TWh.

In the third quarter of 2012, the average electricity spot price, excluding capacity price, increased by 15 % to RUB 1,143 (993) per MWh in the First price zone.

In January - September 2012, the average electricity spot price, excluding capacity price, decreased by 3 % to RUB 988 (1,014) per MWh in the First price zone.

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