Russia Division in 2011

Fortum’s Russia Division’s activities centre on power and heat generation and sales in Russia. The key driver to achieving positive economic value in the division is the fulfilment of the extensive investment programme, which will have increased Fortum’s electricity production capacity in Russia by ~2,400 megawatts (MW) by the end of 2014.

The Russia Division includes OAO Fortum and Fortum’s share in territorial generating company TGC-1. OAO Fortum currently comprises eight power plants with mainly gas-fired CHP capacity, operating in the oil- and gas-producing area of the Urals and western Siberia. The company also owns and operates trunk heat networks in several cities in Russia. At the end of 2011, Fortum’s share in OAO Fortum was 97,55%, including shares owned by OAO Fortum’s fully-owned subsidiary. The total installed capacity of OAO Fortum and its subsidiaries is approximately 3,400 MW electricity and approximately 14,000 MW heat, with a production of 17.4 terawatt-hours (TWh) electricity and 25.4 TWh heat in 2011.

Electricity is sold on the wholesale market and heat on the local markets.Russia also has an electricity capacity market, in which an electricity producer receives earnings for the production capacity it offers to market use. The purpose of the electricity capacity market is mainly to encourage investments in electricity production.

TGC-1 operates in north-west Russia, adjacent to the Finnish border. Fortum is the company’s second largest owner with a share of slightly over 25%.

Fulfilling the investment programme

Russia Division’s investment programme comprises eight new generation units and is one of the largest of its kind in the Russian power generation in terms of relative increase in the total installed capacity. In 2011, the execution of the investment programme progressed well and according to plan.

In February, the new unit at theTyumen combined heat and power (CHP) plant CHP-1 was taken into commercial operation, followed by new units in Chelyabinsk CHP-3 in June and Tobolsk CHP in October. The volume of the new capacity delivered to the market in accordance with the Capacity Supply Agreements (CSA) exceeds 600 MW, increasing the power supply in one of the hubs of the Russian metals industry, the Chelyabinsk region, and in the oil- and gas-richTyumen region.

In 2012, the aim is to increase Fortum’s new-build capacity in Russia by inaugurating two of the three planned 418-MW units at the greenfield Nyagan Power Plant in Khanty-Mansiysk Autonomous Okrug-Ugra. The plant will be Russia’s most modern and technologically advanced CHP-plant.

Raising heat supply efficiency

As one of the largest global players in the field, Fortum brings world-class expertise and technologies to the Russian heat sector. For example, Fortum’s efforts to modernise the Chelyabinsk and Tyumen heating systems create a solid foundation for delivering even better service to customers.

In November, Fortum commenced operations of stage one of the ambitious district heating project, the Chelyabinsk Heat Ring. The project will increase the efficiency of the heat supply in this city of one million residents in the southern Urals area by some 30%. The project also changes the way heat is delivered to homes and businesses across the city; the heat will be supplied via an encircling pipeline rather than a radial one.

Fortum also installed an automated metering system that ensures transparency between the trunk and district heat networks in Tyumen, which is the second largest heat market for Fortum in Russia. More than 150 stations have been installed to enable the online collection of information about the status of the trunk networks.

Implementation of the EHS action plan continued

In 2011, extensive efforts to improve contractor safety in the Russia Division included training the managers of 28 companies. In addition, preparations for OHSAS 18001 certification, effective communication via the intranet and safety boards were a focus.

Elimination of the asbestos risk is one of the goals of the EHS action plan in Russia. About 340 tonnes of asbestos were removed during the year, and improvements in the procedures for handling and removing asbestos were implemented. An external assessment of asbestos handling was carried out in 2011.

For further information, please refer to the linked pdf below.