#1September 2018 Finland's Transmission System Operator FINGRID Public#2Disclaimer These materials have been prepared based upon information that Fingrid Oyj believes to be reliable. Market data presented is based on the information and belief of Fingrid Oyj's management and has not been independently verified. Certain data in this presentation was obtained from various external data sources and Fingrid Oyj has not verified such data with independent sources. Such data involves risks and uncertainties and is subject to change based on various factors. Fingrid Oyj makes no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in these materials and accordingly, Fingrid Oyj accepts no responsibility or liability (in negligence or otherwise) for the information contained herein. These materials may contain forward-looking statements. These forward- looking statements are based on management's current expectations and beliefs, as well as a number of assumptions concerning future events. These statements are subject to risks, uncertainties, assumptions and other important factors, many of which are outside management's control, that could cause actual results to differ materially from the results discussed in the forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Fingrid Oyj assumes no obligation to, and expressly disclaims any obligation to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The circulation of these materials may, in certain countries, be subject to specific regulation and the person(s) in possession of this presentation should observe such restrictions. Nothing in these materials shall constitute or form part of any legal agreement, or any offer to sell or the solicitation of any offer to buy any securities or notes issued under Fingrid Oyj's commercial paper or medium-term note programs.#3Table of Contents Executive summary Company overview 4 9 Operations Description of operations 27 • Efficiency of operations 37 • Earnings model 44 · Pricing 52 • Capex 58 Operating environment 63 Financials Financial performance 73 • Financing 84 Ratings 91#44922 777 Executive summary TIT サ 30.9.2018#5Fingrid is the sole transmission system operator (TSO) in Finland 5 Fingrid transmits in its own network approximately 75% of electricity transmitted in Finland Fingrid manages cross-border connections between Finland and Sweden, Estonia, Russia and Norway Fingrid continuously ensures power system production and consumption balance in Finland Fingrid Debt Investor Presentation 30.9.2018 FINGRID#6Fingrid's network covers entire Finland 6 14 400 km of power lines 320 km of submarine cable over 49 000 towers 115 substation Fingrid Debt Investor Presentation 30.9.2018 10 reserve power plants > 930 MW reserve FINGRID#7Fingrid has achieved its targets in 2011 - 2017 7 Net profit Return Dividend 2011 MEUR 33 Below regulatory allowed > MEUR 7 2017 MEUR 131 Below regulatory allowed MEUR 174 Efficiency High benchmark study rankings High benchmark study rankings Investments In schedule and budget In schedule and budget Fingrid has a proven track record of continuously executing its defined strategy Fingrid Debt Investor Presentation 30.9.2018 FINGRID#8Key investment considerations 8 * Regulation Ownership Strategic importance Operating leverage Efficiency & Quality Fair, stable and predictable regulatory model The Finnish state owns 53% and Finnish financial institutions 47% Considered as strategically important holding to the Finnish state* Construction and maintenance of the network is outsourced Fingrid is one of the most cost efficient and reliable TSOs worldwide Continuous solid operating profitability Financials Rating Fingrid benefits from AA-/A+ ratings (S&P, Fitch) Source: Prime Minister's Office, Finland. (2016). Government resolution on state-ownership policy. Fingrid provides a solid long-term investment in a stable operating environment Fingrid Debt Investor Presentation 30.9.2018 FINGRID#9Company overview 30.9.2018#10Vision We are a forerunner for electricity network operations . . We are respected and influential in energy matters in Finland and abroad We are a manifestation of professional skill and efficiency We are able to renew ourselves and we boldly embrace change 10 10 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#11Mission Fingrid is Finland's transmission system operator. We secure reliable electricity for our customers and society and shape the clean, market-oriented power system of the future. 11 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#12Our values In all our operations, we are 12 transparent impartial efficient responsible Fingrid Debt Investor Presentation 30.9.2018 FINGRID#13Balanced strategy CUSTOMERS AND SOCIETY We secure reliable electricity and a well-functioning electricity market for society. We offer affordable services that meet our customers' needs. FINANCE We operate cost-effectively and bring value to our owners. INTERNAL PROCESSES Adequacy of the transmission system We carry out investments and maintenance safely and efficiently at the right time. 13 System operation We operate the national grid proactively and reliably. Promoting the electricity market We actively maintain and develop the electricity market. PERSONNEL AND EXPERTISE An open, collaborative, renewing and target-oriented work community. 30.9.2018#14Corporate level strategic choices # Focus on core operations Outstanding execution of our core operations. We do not seek to expand into new businesses or to participate in competitive businesses. Customer oriented We develop our business operations in a customer oriented manner and for the benefit of Finland. World class efficiency We utilize innovatively the best available technologies and the possibilities of digitalization. We maintain the required core competences in-house. We cooperate with the best partners. € Market oriented We trust that well functioning markets produce the best and most innovative solutions in all areas. Integration oriented We actively promote the integration of European and Baltic sea electricity markets taking into account the interests of Finland. W Security and sustainability During the transformation of the power system we maintain the current high level of system operation. Sustainability and safety are in focus in everything we do. 14 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#1515 Strategy implementation - continuous improvement and development initiatives Real time markets Decentralized resources on the markets Data quality and productivity Fingrid into your pocket High quality of operations Lights on in Finland and functioning markets Investments safely and efficiently Continuous improvement Influential culture Fingrid Debt Investor Presentation 30.9.2018 Finnish-Swedish AC connection on track Connecting OL3 Digital substation Implementation of network codes FINGRID#16Fingrid operates in a matrix organisation structure Fingrid Oyj Jukka Ruusunen, President & CEO GRID SERVICES AND ASSET MANAGEMENT POWER SYSTEM OPERATIONS MARKETS FINANCE AND TREASURY ICT HRD COMMUNICATI ON LEGAL AND ADMINISTRATI VE AFFAIRS PLANNING 83% of Fingrid's personnel holds an academic degree Full-time, permanent employees at the end of 2017 Jussi Jyrinsalo Kari Kuusela Reima Päivinen Asta Sihvonen-Punkka 16 Jan Montell Kari Suominen Tiina Miettinen Marina Louhija Jussi Jyrinsalo Customers Finance and business development Adequacy of transmission system System operation Promotion of market functioning Personnel and competence Jan Montell Kari Kuusela Reima Päivinen Asta Sihvonen-Punkka Executive management team is highly regarded in the Finnish business community Tiina Miettinen Fully implemented matrix structure ensures efficient strategy implementation and personnel engagement Fingrid Debt Investor Presentation 30.9.2018 FINGRID#17. Fingrid's business model RESOURCES Personnel and expertise Suppliers and business partners Income and debt financing Electricity from power plants and neighbouring countries Grid transmission lines, substations and reserve power plants Land required for transmission lines; natural resources and materials ICT structures Knowledge capital on electricity, markets and customers BUSINESS PROCESS Adequacy of the transmission system Grid planning • Grid building Grid maintenance SERVICES FOR CUSTOMERS Guarantee-of-origin certificate Management of electricity system operation . Planning of the operation of the electricity system Monitoring and control of the electricity system Managing disturbances and the continuity of the electricity system Electricity transmission Electricity market information Promoting the electricity market Developing market rules to enable a clean electricity system Promoting the regional electricity markets Ensuring the continuity of the electricity market Balance services Information exchange in the retail markets IMPACTS Enabling the transformation of the energy system • • • Reliable electricity for society and industry Promoting Finland's competitiveness Developing the electricity sector and expertise Financial benefits for stakeholders Major grid investments and employment Local changes in land use and the environment and energy losses in electricity transmission#18Responsibility is part of our values, strategy and everything we do Corporate responsibility management is founded on the company's strategy and guided by the company's Code of Conduct 18 Focus on materiality Systematic and Engagement target-oriented approach of the personnel and suppliers We report about responsibility as part of the annual report according to GRI Standards Fingrid Debt Investor Presentation 30.9.2018 FINGRID#19Excellent reliability in the grid 19 Economic losses caused by disturbances minutes / 10 year / connection 8 point 6 4 .....!!..l... 2 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Only 2.2 minutes outage caused by faults in the grid in 2017 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#20For the benefit of customers and society Customer satisfaction: High quality services Customers' trust in Fingrid 20 20 5 4 MO 3 2 1 0 Willing and able to co-operate Services meet Creates cost-effective customer needs solutions Benefits all of society I can recommend Fingrid's way of operating with customers to others Customers' trust in Fingrid (trust KPI) 2015 2016 2017 Trust KPI: Average of customer satisfaction survey questions measuring implementation of the customer strategy and customers' confidence. (scale: 1-poor...5=excellent) The customers' trust survey grade was 3,9 (scale 1-5) in 2017 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#21Network bottlenecks: Functioning electricity market Congestion hours between Finland and Sweden in 2017 27 % Finland 85,5 TWh/a Finland + Sweden 220 TWh/a 21 21 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#22Affordable fees for grid services ENTSO-E comparison on grid service fees European peers 2016 22 22 €/MWh 18 16 14 12 10 8 6 4 2 ... 0 Lowest Average Highest Fingrid 2017 2016 * Source: ENTSO-E Operational targets are centered around cost competitiveness and customer service Fingrid Debt Investor Presentation 30.9.2018 FINGRID#23Legal structure 23 23 Subsidiaries Finextra Oy Peak load capacity and guarantee of origin service and other services not part of the grid service operations Parent company Fingrid Oyj 100 % 33,3 % 100 % Fingrid Datahub Oy 18,8 % Centralized information exchange in the Finnish power market. Market operations to begin in 2019 Associated companies eSett Oy Balance settlement process on behalf of Nordic TSOs Fingrid Debt Investor Presentation 30.9.2018 Nord Pool AS Power market operations for day-ahead and intraday markets FINGRID#24Shares 24 24 19,9% 0,5% 26,4% The Republic of Finland; 53,2% 28,2% 24,9% ■The Republic of Finland ■National Emergency Supply Agency State Pension Fund 0,03% ■Aino Holdingyhtiö Ky ■Mutual Pension Insurance Company Ilmarinen ■ Other The State's minimum shareholding requirement in Fingrid is 50.1% Fingrid Debt Investor Presentation 30.9.2018 FINGRID#25Voting rights 17,2% 0,2% 37,7% The Republic of 11,7 % Finland; 70,9% 25 25 The Republic of Finland ■National Emergency Supply Agency State Pension Fund 0,01% Aino Holdingyhtiö Ky Mutual Pension Insurance Company Ilmarinen ■ Other 33,2% Fingrid's shareholder base is a good balance between private and public sector owners Fingrid Debt Investor Presentation 30.9.2018 FINGRID#26GOLL FINGRID Operations Description of operations 50.03 26 30.9.2018 12.#27Fingrid owns and operates the transmission network in Finland Fingrid transmits in its own network approximately 75 % of electricity transmitted in Finland 2300 MW 320 km 4 pcs HVDC O 11 pcs 2600 M Var SC 400 kV 43 pcs 5200 km 5 pcs 1 pcs SVC -250 MVA 2 000 MVA 1600 km 220 kV 16 pcs 55 pcs 22 000 MVA 14 pcs 2 230 MVA 1 pcs 31,5 MVA Fingrid is a part of ENTSO-E, European Network of Transmission System Operators for Electricity. 110 kV 56 pcs 7300 km 20 kV 27 27 72 pcs 24 pcs 933 MW 4 100 M Var 770 M Var G Fingrid's 400 kV power lines form the backbone of the transmission network in Finland Fingrid Debt Investor Presentation 30.9.2018 FINGRID#28Grid service customer base consists of around 130 entities . Customers comprise mainly of electricity producers, process industry and electricity distribution companies Fingrid is obligated to provide its customers a network connection point Ten largest customers account for 58 percent of grid service income Top 10 customers 2017* Others; Top 10; 58% 42% 8% 14% 7% 7% 4% 3% 2% 3% 5 % 5% 28 ■Caruna ■ UPM EPV ■ Helen ■ Elenia Stora Enso ■Teollisuuden Voima Oyj ■Metsä Group ■ Fortum ■Porvoon Energia ■ Others * based on grid service income Credit quality of customer base is strong Fingrid Debt Investor Presentation 30.9.2018 FINGRID#29Fingrid continuously maintains production and consumption balance • • Fingrid fulfils responsibility to maintain real- time balance in all market conditions Holders of electricity production and loads can submit bids to the balancing market concerning their capacity Fingrid has created a common Nordic balancing market together with other TSOS in the region • Fingrid's core task is to ensure network functionality with automatic 29 29 and manual reserves in imbalance situations FINGRID Fingrid procures the needed amount of reserve capacity to maintain the balance of the power system Fingrid Debt Investor Presentation 30.9.2018#30Fingrid continuously maintains production and consumption balance State of the power system – illustrative example - NORWAY 0 MW RUSSIA Consumption and production in Finland Info Power balance Info Consumption 11,172 MW Production surplus/deficit in Finland 91 MW SWEDEN Surplus/deficit, cumulative 153 MWh Production 9,210 MW ►1,409 MW Hydro power Nuclear Power 2,382 MW Instantaneous freq. measurement 49,89 Hz 2,774 MW Condensing power 10 MW Time deviation 11,60 s 1,200 MW Cogeneration district heating 2,113 MW Cogeneration industry 1,455 MW Electricity price in Finland Info Wind power (partly estimated) 406 MW • Other production (estimate) • Peak load power 70 MW 0 MW 25 MW Elspot area price 31,48 EUR/MWh 613 MW ESTONIA Net import/export 1,962 MW Normal power balance Info 1 MW Fingrid procures the needed amount of reserve capacity to maintain the balance of the power system Fingrid Debt Investor Presentation 30.9.2018 FINGRID 30 50#31Electricity consumption in Finland 31 3 % Consumption Fingrid continuously maintains production and consumption balance Electricity consumption was 85,5 TWh in Finland in 2017. Electricity imports accounted for 20,5 TWh or 24 % of total 22% 23% 0 8% 28 % 6 % 10% ■Forest industry ■Metal industry ■Chemical industry Other industries ■Housing and agriculture ■Services and construction ■Transmission losses consumption Energy-intensive industry is a major consumer in Finland accounting for 47 % of consumption in 2017 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#3232 32 Advanced markets for all time frames Nasdaq NORD POOL FINGRID Statnett SVENSKA KRAFTNÄT Financial market Day-ahead market (Elspot) Intra-day market (Elbas) Regulating power market Reserve market Trading 10 years- one day ahead Auction: Tomorrow Continuous trading: Tomorrow and Real-time present day Products Futures, DS futures, options Annual, quarterly, monthly and weekly Hour Hour Delivery ENERGINET/DK eSett Imbalance power Past-time 1-60 min Imbalance settlement Fingrid Debt Investor Presentation 30.9.2018 FINGRID#3333 33 Fingrid is responsible for the imbalance power settlement after delivery Each party operating in the electricity market is financially responsible for an hourly power balance between its electricity production and consumption Fingrid acts as an open supplier, which balances the power balances of these parties after the actual power production and consumption has taken place A service company eSett is responsible for the financial settlement of imbalances on behalf of Fingrid . eSett is equally owned by TSOs in Finland, Establishment of eSett - a joint service company eSett Oy, the joint company of the three Nordic Transmission System Operators (TSOs) Fingrid, Statnett and Svenska kraftnät launched a joint Nordic Balance Settlement service on the first of May 2017. The new company has the objective of providing balance settlement services to participants of electricity markets in Finland, Norway and Sweden... ...The company aims to lower the entry barriers for the market parties in Finland, Norway and Sweden through equal and shared settlement rules. This will increase competition in the electricity markets in these countries, reduce long-term costs for the market parties and pave the way for the establishment of a Nordic end-user market. Source: www.fingrid.fi Sweden and Norway Imbalance settlement in Finland, Sweden and Norway has been performed by eSett since 1st May 2017 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#34Fingrid owns an assortment of backup power plants • . . • Fingrid owns 939 MW of backup power plants and has right-of-use agreements for further 301 MW. All plants can be activated within minutes Backup power plants are not used to sell energy to market but solely as a reserve for imbalances and disturbances in power system Fingrid's own power plants are included in the regulatory asset base The total capacity of backup power plants comfortably exceeds the capacity of the largest power plant in the network Fingrid's own reserve power plant, total 939 MW Right-of-use agreements for total of 301 MW Vaskiluoto 1x26 MW Elenia diesels 13 x 1 MW Kristiina 2x30 MW Kyröskoski 1x37 MW Vanaja 1x50 MW Huutokoski 6x30 MW Mertaniemi 2x35 MW Tahkoluoto 2x26 MW Olkiluoto 2x50 MW Naantali 2x20 MW Forssa 2x159 MW 2x3 MW Kellosaari 2x59 MW Sopenkorpi 1x13 MW Hinkismäki 1x40 MW Loviisa 1x10 MW Tolkkinen 4x20 MW Kilpilahti 1x27 MW Fingrid's own backup power plants ensure reliable activation of reserves in disturbance situations 34 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#3535 55 Reliability of the Finnish power system The power system has to withstand a fault in any individual component (N-1) Transmission network reliability 100,0000 % • The main reasons for disturbances have been lightning and other weather related 99,9998 % incidents (storms) 99,9996 % • Major part of the disturbances are cleared with automatic reclosure schemes without 99,9994 % any manual switching operations 99,9992 % • The average duration of the connection point outages is usually a couple of minutes per year 99,9990 % The reliability of the Finnish power system is top class Fingrid Debt Investor Presentation 30.9.2018 2005 2007 2009 2011 2013 2015 2017 FINGRID#36Operations Efficiency of operations 36 30.9.2018#37Key efficiency drivers Effectiveness of the management and governance model Outsourced network construction and maintenance Highly centralised operations Increasing degree of digitalisation Fingrid's excellence in ITAMS and ITOMS benchmark studies reflect highly efficient operating model Fingrid Debt Investor Presentation 30.9.2018 FINGRID 37 37#3838 88 • Outsourced grid construction and maintenance • Core feature of Fingrid's operating model is outsourcing Grid construction and maintenance are outsourced Regional maintenance is tendered among external service providers Fingrid has around 60 core suppliers, of which 10 account for around 90 percent of total financial value of procurements Grid construction projects are tendered among prequalified contractors (system of qualification of contractors) Grid maintenance is outsourced High operational efficiency and flexibility are achieved through comprehensive outsourcing capabilities Fingrid Debt Investor Presentation 30.9.2018 FINGRID#3939 39 Fingrid uses qualified suppliers only • . . A defined qualification process* for equipment suppliers, service providers and contractors An evaluation process of new suppliers is done annually Only qualified suppliers in Fingrid's supplier register are invited to bid for outsourced works Sustainability audits are conducted among suppliers Suppliers must comply with Fingrid's Supplier Code of Conduct Hyvinkää – Hikiä transmission line construction site - * In accordance with the EU based public procurement legislation for the sector High operational efficiency and flexibility are achieved through comprehensive outsourcing capabilities Fingrid Debt Investor Presentation 30.9.2018 FINGRID#40Investing in efficient management of information through digitalisation • • Increasing proactivity in calculations, monitoring and maintenance Single source for power system information Improving information access and usability within stakeholders Adding cost aspect to operation and power system components Enhanced business planning through cost operational analytics System utilisation and further development (2016-) For a quick overview of the ELVIS asset management solution see video at: www.youtube.com key in BMM99tIYFBW New ERP provides real-time network condition on map A single asset management based ERP will further strengthen Fingrid's operational excellence 40 40 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#41Fingrid's efficient operations are highly recognized * • • In September 2018 Fingrid's Asset Management retained ISO 55001 Certificate Fingrid has continuously ranked among the best TSOs in the International Transmission Operations and Maintenance Study (ITOMS)* Fingrid ranked among the best TSOs in the International Transmission Asset Management Study (ITAMS) in 2017 Fingrid was "exceptionally efficient" in 2013 in a study done for the Council of European Energy Regulators (CEER) ISO 55001 ISO 55001 is a framework for an asset management system that will help your business to pro-actively manage the lifecycle of your assets, from acquisition to decommission. This system helps you to manage the risks and costs associated with owning assets, in a structured, efficient manner that supports continual improvement and on-going value creation. Benefits of ISO 55001 An asset management system provides a structured, best practice approach to managing the lifecycle of assets. Reduced risks associated with ownership of assets - anything from unnecessary maintenance costs and inefficiency to accident prevention Improved quality assurance for customers/regulators - where assets play a key role in the provision and quality of products and services New business acquisition - stakeholders gain confidence from the knowledge that a strategy is in place to ensure assets meet the necessary safety and performance requirements Source: https://www.bsigroup.com/en-GB/Asset-Management/Getting-started-with-ISO-55001/ Excellent results from international benchmark studies Thirty-one TSOs from around the world participated in the 2015 study 41 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#42Fingrid's overall efficiency is confirmed also by regulators Study done for the Council of European Energy Regulators (CEER) 2013 • Fingrid was "exceptionally efficient" together with four other TSOS frontier consentec economics . Study included 21 European TSOs and performed every four years Comparison of total efficiency: costs in grid construction, maintenance, planning and administration during the past 20 years CEER is organising a new benchmarking study in 2018-2019 42 42 SUMICSID E3GRID 2012 - European TSO Benchmarking Study July 2013 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#43Operations Earnings model 43 30.9.2018#44Regulatory capital and WACC defined by the Energy Authority set the allowed return Total capital invested in transmission network operations Regulatory capital (liabilities and regulatory equity) Main driver is the risk- free rate, i.e. Finland's 10y government bond yield WACC Calculated annually, monitored by the EA in four year periods Allowed return, MEUR 44 II Operating profit (Finnish GAAP) Accounting item and regulatory adjustments Interest expenses are excluded in the regulatory P&L Book depreciations adjusted (returned) Incentives Investment, quality, efficiency, innovation Realized regulatory profit Incentives do not have a major impact on regulatory profit on net basis Fingrid aims to match realized regulatory profit and allowed return on an annual basis Fingrid Debt Investor Presentation 30.9.2018 FINGRID#45Calculation of WACC in the regulatory model 2016-2023 Cost of equity CE=R, +ẞdebt free X (1+ (1-t) x D/E) x (R-R) + LP CE= Finnish 10y bond + 0,4 x (1 + (1-20%) x 50/50) x 5% + 0,6% CE = Finnish 10y bond + 4,2% Parameter Risk-free rate (R) Value to be applied Greater of: a) 10-year average of 10-year Finnish government bond rate b) Average of previous year April-September government bond rate Cost of debt CD= R, + DP CD= Finnish 10y bond + 1,4% WACC (pre tax) WACC = CEX 50/100+ CD x (1- t) x 50/100 WACC. post-tax pre-tax = Finnish 10y bond x 0,9 + 2,66% WACC = Finnish 10y bond x 1,125 + 3,33% Asset beta (ẞdebt free) 0,4 Market risk premium (Rm- R₁) 5,0% Liquidity premium (LP) 0,6% Capital structure (D/E) 50/50 Risk premium of debt (DP) Tax rate (t) 1,4% * 20% * Will be updated by end of 2019 for regulatory period 2020 - 2023 based on Bloomberg's utility sector A-BBB rated companies' fixed income indices 45 The core parameter defining yearly WACC is the yield of the Republic of Finland's 10-year bond Fingrid Debt Investor Presentation 30.9.2018 FINGRID#46The current regulatory model benefits from relatively stable WACC* without capping upside 6,0% WACC, post-tax Finnish government 10 year bond Euribor 6 months 5,0% 4,0% 3,0% 2,0% 1,0% The regulatory model applies the higher of i) 10y average of Finnish Government (FinGov) 10y bond yield or ii) April-September www 0,0% average of 10y FinGov as risk free rate in WACC -1,0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 * 46 46 Regulatory WACC 2007 – 2015 calculated as post-tax basis. From 2016 regulatory model applies pre-tax WACC. Pre-tax WACC for 2019 calendar year 5,36% (5,78% in 2018) Fingrid Debt Investor Presentation 30.9.2018 FINGRID#47Regulatory Regulatory equity liabilities Calculating the allowed return in euros: WACC x Regulatory capital • Allowed return in euros is calculated as follows: R = pre-tax WACC pre-tax x (D+E) E = regulatory amount of equity D = regulatory amount of interest-bearing debt R pre-tax 2018= 5,36% x ~3,000 M€ = ~160 M€ Regulatory capital is equal to the sum of regulatory equity and liabilities The equalisation item in the equity section of balance sheet balances regulatory equity and liabilities with regulatory assets Regulatory assets Calculating regulatory balance sheet Regulatory present value of the electricity network Interest-bearing debt Equity Inventories Trade receivables Other* Equalisation item of regulatory balance sheet Other** *Including regulatory cash 47 Book value Regulatory value **Other is excluded from regulatory capital. Other includes deferred tax liabilities, non-interest bearing debt, provisions for liabilities and charges Fingrid Debt Investor Presentation 30.9.2018 FINGRID#4848 48 Regulatory assets are mainly based on regulatory present value of the electricity network Components in calculation of regulatory assets in regulatory model 2016-2023 Regulatory present value of the electricity network Unit prices of components Investments under construction IT systems Regulatory allowed cash Based on the unit prices of components in the beginning of the regulatory period and component age / maximum age in regulation Prices were updated to replacement value in 2016 based on the unit prices (5Y historical project data) Investments under construction are included in the RAB in book value Value in RAB and regulatory depreciation in book value 10% of regulated turnover Fingrid Debt Investor Presentation 30.9.2018 FINGRID#49Limited contribution from incentives and adjustments to allowed return Incentives in calculation of realized regulatory profit in regulatory model 2016-2023 Investment incentive Quality incentive Efficiency improvement incentive Innovation incentive Promotes reasonable and cost-efficient investments by allowing straight-line depreciations based on the replacement value of the transmission network assets. Components are included in depreciation in replacement value as long as they are utilized Cost for the society from non-delivered electricity caused by disturbances and fast reclosing operation, max +/- 3% of allowed return, benchmarked against 8-year historical average Target: 0%, max +/- 5% of allowed return, benchmarked against 4-year historical average Maximum 1,0 % of turnover is reimbursed in allowed return Adjustments in calculation of realized regulatory profit in regulatory model 2016-2023 Congestion income Inflation adjustment to regulatory depreciation Treated separately from the regulatory allowed return but investments financed with congestion income affect realized regulatory profit through regulatory depreciations Indexed annually with CPI to match current replacement value 49 49 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#50Congestion income Since 1 Jan 2016, congestion income is no longer reported in Fingrid's turnover • Congestion income is used to increase the transmission capacity on cross-border 30 25 25 Congestion income 2017, MEUR 26 26 interconnectors according to the EU regulation In 2017, MEUR 26 of congestion income was accumulated and all of it was used for the Hirvisuo-Pyhänselkä transmission network investment, which promotes the cross-border transmission from northern Sweden Fingrid's realized regulatory profit is affected by congestion income because the financed investments are included in regulatory depreciation but not in book depreciation 20 20 15 10 LO 5 0 Congestion income on 1 Jan Accumulated congestion income Investments matching congestion income Congestion income is used for further developing the cross-border transmission capacity Congestion income on 31 Dec 50 50 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#51Operations Pricing 51 30.9.2018#52Grid service pricing is applied on both consumption and production 42 52 Production FINGRID Input into the main grid Main grid Consumption Output from the main grid Output from the main grid Input into the main grid Distribution network Fingrid Debt Investor Presentation 30.9.2018 Production III Main grid connection point Distribution connection point Consumption FINGRID#53Grid service pricing is applied on both consumption and production 53 Fingrid defines the grid service pricing structure, which is approved by the Energy Authority Pricing EUR/MWh 2019 Consumption, winter period* 8,80 Consumption, other times. 2,50 Output from the grid 0,90 Input into the grid 0,60 Power plant capacity fee 1900 €/MW/a Reactive power fee 1000 €/Mvar/m 5 €/Mvarh Reactive energy fee * Winter period: 1.12.-28.2. on Monday – Friday 09.00 - 21.00 Transmission prices are seasonally adjusted and charged on consumption and use of grid Fingrid Debt Investor Presentation 30.9.2018 FINGRID#54Development of announced grid service pricing in 2007-2019 54 Index (1998-100) 200 180 Around 40% of the annual 160 140 operating cash flow is recovered during Q1 due to seasonally higher +8% 2014 -2% 2015 +7% +14% 2017 2016 +0% 2018 -8% 2019 transmission volumes and tariffs. 120 100 80 60 40 Change of ownership due 20 to EU legislation For December 2014 grid service fees were decreased by 45% to return anticipated excess return recovered Prices adjusted to reflect new regulatory period starting 2016 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 ■Nominal pricing development ■Real pricing development (CPI) The current tariff level allows Fingrid to achieve allowed regulatory return Fingrid Debt Investor Presentation 9.10.2018 FINGRID#55Transmission charges from generation to consumption Source: Entso-e Transmission charges from generation to consumption in Europe 2017 - including EU and ETA countries 55 20 € / MWh ■■330 kV and above ■220-150 kV ■ 132-50 kV Peers with comparable infrastructure to Fingrid 15 10 5 Peers with non-comparable infrastructure to Fingrid IT IS GB SK SE NL LU HU LV PL RO AT PT ES HR DE 8,52 14,2 14,5 15,3 3,12 2,75 5,91 8,52 14,2 14,5 15,3 3,12 7,29 5,80 5,91 14,2 14,5 15,3 0 ■■330 kV and above ■220-150 kV ■132-50 kV 5,13 5,78 7,58 7,07 10,6 10,2 SI BG NO FI BE GR FR EE DK CZ IE 1,73 4,32 5,13 5,78 5,87 7,07 3,48 5,18 10,6 11,3 12,3 1,73 4,32 5,13 5,78 5,87 7,07 5,93 10,6 11,3 12,3 1,73 4,32 LT 12,6 10,6 11,3 11,9 12,6 16,0 6,74 6,94 6,47 7,43 9,41 6,74 6,94 7,36 7,43 9,41 16,4 16,4 6,81 6,07 6,74 6,94 11,3 Fingrid's effectiveness and efficiency enable low charges Fingrid Debt Investor Presentation 30.9.2018 FINGRID#56This is what makes up the consumer price 56 Source Energy Authority: 1.1.2018, consumption 5 000 kWh/year, electricity total price 16,42 cent/kWh 22% 11 % 5 % ၁ 19 % 29 % 14 % ■Regional network transmission and distribution ■ Electricity tax Value added tax Electricity procurement Electricity sale Grid transmission Fingrid's share of consumer price is approximately five percent Fingrid Debt Investor Presentation 30.9.2018 FINGRID#57Operations Capex 55 57 30.9.2018#58Investments are based on 5-25 year grid development plans • • . Grid development plans are prepared at three levels, i.e. European, regional and national Fingrid decides on investments based on customers' needs, transmission system security and network capacity Fingrid's network construction is contracted with fixed price contracts Before network construction commences all environmental and planning permits are in place as Fingrid applies EIA before the investment decision 58 All Fingrid's investment projects have been done in schedule and budget Fingrid Debt Investor Presentation 30.9.2018 FINGRID#59Grid Vision 2030 Historical Iron Lady OHTL will be modernized by 2020 around 135 M€ Huittinen - Forssa 400 kV OHTL by 2030 around 30 M€ Finland's electricity transmission in 2030 Forest Line 400kV Oulu - Petäjävesi 2022 around 100 M€ HVDC link between Sweden and Finland by 2030 around 220 M€ 800 MW Production surplus 1,200 MW Imported FELL LINE Third 400 kV AC interconnection between Sweden and Finland 2025 around 200 M€ Doubling the Lake Line 400kV Nuojua - Huutokoski by 2030 around 100 M€ Reinforcement of Helsinki region network 2025 - 2035 around 60 M€ Extension of the Forest Line 400kV Petäjävesi - Hikiä by 2030 around 60 M€ +800 MW -400MW FennoSkan 1 +800 MW THE NEW KVARKEN 700 MW Total of 33 investments projects to be completed in 2018 Fingrid Debt Investor Presentation COASTA ASTAL LINE RIVER LINE FOREST LINE 700 MW 1400 MW Iron Lady II 2,300 MW Wind power +1,200 MW Nuclear power P1 +1,000 MW +500 MW with smart grid solutions 700MW Deficit in southem Finland FINGRID#60Flexible and long-term investment strategy Note: Click to view National ten year grid development plan in Finland Forssa reserve power plant Yllikkälä Huutokoski B 400 kV Hyvinkää - Hikiä 400 kV Estlink 2 DC connection to Estonia Ulvila - Kristine stad 400 kV Hikiä Forssa 400+110 kV - Hirvisuo Pyhänselkä 400 kV Lieto - Forssa 400+110 kV Hikiä Orimattila 400 kV Reinforcement of Oulujoki region network Forest Line 3rd AC interconnection to Sweden Grid connection of nuclear and wind power Kvarken DC Reinforcement of Helsinki region network Reinforcement of Lake Line 60 60 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 90% of new power lines will be constructed along or next to an existing right of way EIA/Preliminary design Detailed planning and permissions Implementation 400 kV main grid 400 kV under construction main grid base line scenarios Keminmaa Hirvisuo Kvarken DC Pyhäselkä Forest Line Lake Line Tuovila Kristinestad Fingrid has a long-term planning horizon for investments Fingrid Debt Investor Presentation 30.9.2018 Huutokoski Petäjävesi Ulvila Ylikkälä Forssa Hikiä Koria Lieto FINGRID#61199 61 Investments in 2000-2027 300 250 200 M€ 150 O 100 50 50 2000 2001 2002 2003 2004 2005 2006 2007 Completed or in construction 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 ■Planned investments 2019 2020 2021 2022 2023 2024 2025 2026 اااااا 2027 53% Investments in 2018-2027 MEUR 1230 New investments to substations and transmission lines 47% Replacements to Investments are driven by network aging, market development and connecting new production capacity Fingrid Debt Investor Presentation 30.9.2018 FINGRID substations and transmission lines#6262 79 Operating environment 30.9.2018#6363 83 Fingrid's operating environment in three geographical levels DK NO SE FI EE RU LV Europe . Vision: integrated electricity market working on one European grid • • • Strong changes in the generation fleet (nuclear, renewables, gas) Electricity market from Helsinki to Lisbon achieved in 2014 Structural bottlenecks will remain in the grid licensing main obstacle Baltic Sea region RUL Transmission capacity between the Nordic region and Continental Europe will double by 2020 Stronger connection between the Nordic region, Baltic states and Poland Finland Energy and climate strategy 2030 Share of price elastic generation decreases Modest growth in electricity demand Role of cross-border connections increases Fingrid Debt Investor Presentation 30.9.2018 FINGRID#64Towards a highly developed electricity market in Europe • Improving efficiency and competitiveness of the power sector efficient market price cross-border trade efficient dispatching via "the invisible hand" of the markets Delivering benefits for end-users and trust to market players O Contributing to the security of supply . Reaching the 20-20-20 goals of EU: better environment, more renewables 64 Market coupling Electricity market from Helsinki to Lisbon since 2014 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#6565 95 Hydro power is the main energy source in the Nordic region • Significant hydro power generation capacity in Norway and Sweden drive the electricity price in Finland Nuclear power generation is an important base load power generation source in Sweden and Finland Renewable power generation consist of hydro power, biomass fired cogeneration and wind power Hydro power Wind power Biomass Nuclear power Fossil fuels Non-identifiable 1% 2% 10% % 21 % Area in total 406 TWh 1 % 20% 24% 54% 66 TWh 5% 149 TWh 6 % 97% 9% 44% 40% 16% 34% 8 % 2 %1% 1 % 6% 7% 41% 151 TWh 10 TWh 29 TWh 11% 36% 6 % 10% 86% Source: ENTSO-E, Statistical Factsheet 2016 (provisional values as of May 2017) Nordic electricity price is driven by hydrological conditions in Scandinavia Fingrid Debt Investor Presentation 30.9.2018 FINGRID#6666 99 Wind power competitiveness has clearly improved • . First 2000 MW of wind in Finland has been built with incentive from feed-in tariff New Finnish renewable electricity auction scheduled for fall 2018, size (1.4 TWh) corresponds to ~400 MW of new wind Investment decision of first Finnish wind farms with no subsidies has been made in 2018 Most of the planned new onshore wind power projects (>10 GW in total) are located along the west coast where Fingrid is already Nordic wind capacity is expected to nearly double by 2025 Sweden is the biggest 14 000 12 000 wind power producer 10 000 in the Nordics 8.000 MW 6.000 4.000 2 000 0 making significant network investments Installed 2018 Estimated 2025 ■Finland Norway Denmark Sweden Fingrid promotes the development of market based wind power generation in Finland Fingrid Debt Investor Presentation 30.9.2018 FINGRID#67Nordic electricity spot prices started to increase 2011 SYS 47 € 1-6/2018 SYS 39 € Area prices < 25 €/MWh 25-30 €/MWh 2 11 30-35 €/MWh 35-40 €/MWh 40-45 €/MWh 7 45-50 €/MWh 3 > 50 €/MWh Subsidised wind power generation has pushed the wholesale price to an artificially low level Main flow direction (TWh/a) 2 • Producers have cut their capacity in response to low profitability • Electricity consumption in Finland has started to slightly increase after large drop caused by the financial crisis • Olkiluoto 3 nuclear power plant trial runs are expected to start in 2019. Olkiluoto 3 will increase Finnish production capacity roughly by 13% 67 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#68Finland is well-connected in Baltic Sea power market • • 80 68 Finland is a net importer of electricity mainly from Scandinavia Finland is expected to remain as a net importer of electricity even after the 1600 MW nuclear project Olkiluoto 3 is commissioned Cross-border lines between Finland and Sweden have a crucial role of limiting price differentials between the markets Fingrid has established a 24/7 service to ensure continuous specialist availability to solve issues in cross-border connections, and is investing in new transmission capacity between the countries. Nordic system price 42 €/MWh in 1-8/2018 41.8 42.3 Sweden 45.2 42.3 42.3 Finland Norway 41.4 41.9 41.3 42.4 45.2 46.9 D41.2 43.6 47.0 Finland is a net importer of electricity mainly from Scandinavia Fingrid Debt Investor Presentation 30.9.2018 FINGRID#69Cross-border transmission between Finland and Russia • Imports from Russia have stabilized on a lower level Annual electricity export from Russia to Finland TWh 14 Russia now has capacity payment of around 30- 50€/MWh on exports to Finland Decreasing day-ahead market price difference between Finland and Russia • Towards more efficient trade Increased cooperation between power exchanges • 69 69 • Common rules between EU and Russia . Dynamic transmission tariff between Finland and Russia First commercial exports to Russia in 2015 Very small volumes 12 10 8 CO 6 42 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Finland's cross-border transmission with Russia is driven by power market development in EU and Russia Fingrid Debt Investor Presentation 30.9.2018 FINGRID#70The Baltic Sea region* forms a well-developed regional market • In 2017 a single price area between Finland and Sweden existed 68 percent of the time and 9 percent of the time between all the Nordic countries This was caused by very good hydrological situation in Sweden and Norway that decreased the Swedish area price even further Uniformity of spot prices in the Nordic region % of 100% time 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% * Finland, Sweden, Norway, Denmark, Poland, Estonia, Latvia, Lithuania 70 70 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Finland-Sweden ■Nordic countries The availability of cross-border transmission capacity is continuously improved Fingrid Debt Investor Presentation 30.9.2018 FINGRID#71Market structure and business areas in the Baltic Sea area National transmission system operators 71 NORD POOL Finnish industry customers Producers in Nordic region Nordic wholesale market Retailers Retail market Retail customers Finnish electricity distribution companies Power generation is unregulated whereas transmission and distribution are regulated by national authorities Fingrid Debt Investor Presentation 30.9.2018 FINGRID#72Financials Financial performance 72 ACE 30.9.2018#73Main economic drivers of transmission network operations 73 Financial markets Financial expenses Electricity price Cross-border Hydrological Transmission > situation Loss power Temperature Congestion Failures Reserves Land owners Suppliers Clients Grid service revenue Investments Volume X Price Regulatory asset base Х Market integration Expenses WACC Allowed return Finnish government bond yield Personnel Financiers Tax authorities Owners Fingrid Debt Investor Presentation 30.9.2018 FINGRID#74IFRS Turnover breakdown in 2017 74 MEUR 800 +12,7 % MEUR 21: 3% MEUR 9; 1% MEUR 20; 3% 700 600 MEUR 500 214: 32% 400 300 200 MEUR 100 412: 61% 0 Grid service revenue Sales of imbalance power Cross-border transmission income 675 599 ITC income Other operating Turnover 2017 Turnover 2016 income Fingrid Debt Investor Presentation 30.9.2018 FINGRID#75Breakdown of main sources of turnover Grid service revenue • Grid service revenue consists mainly of the unit price for electricity transmission multiplied by electricity consumption and production Sales of imbalance power • Fingrid sells and purchases imbalance power in order to stabilise the hourly power balance of the balance responsible parties • • The net of imbalance power sales and purchases is slightly positive and used to cover reserve costs Imbalance power boosts turnover as well as costs Cross-border transmission income Fingrid offers transmission services on the cross-border connections with Russia available to all electricity market parties. The contractual terms are equal and public. ITC income (Inter TSO Compensation) • Income received for the use of Fingrid's grid by other European TSOs 75 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#76IFRS Cost breakdown 2017 76 MEUR 600 500 400 MEUR 52; 10% MEUR 48; MEUR 29; 10 % 6% MEUR 25; 5% MEUR 97; 19% 300 MEUR 200 186; 37% 100 MEUR 63; 13 % +12,9 % 499 442 0 Purchase of Depreciation imbalance Cost of reserves Cost of Personnel Maintenance loss energy costs management Other Costs 2017 Costs 2016 power Fingrid Debt Investor Presentation 30.9.2018 FINGRID#77Breakdown of main costs Purchase of imbalance power • • Fingrid sells and purchases imbalance power in order to stabilise the hourly power balance of the balance responsible parties The net of imbalance power sales and purchases is slightly positive and used to cover reserve costs Imbalance power boosts turnover as well as costs Depreciation • The level of yearly depreciations are stable thanks to continuous and stable investments Cost of reserves • Fingrid maintains reserve power to balance the frequency of the electricity grid The cost of reserves is recovered in grid network tariff and payments collected in balance services Cost of loss energy • Loss energy is hedged up to four years in advance to ensure stable tariff Personnel costs • 77 Fingrid's personnel costs are moderate thanks to outsourcing model used in most operations Fingrid Debt Investor Presentation 30.9.2018 FINGRID#78IFRS Operating profit in 2017 78 MEUR 800 700 -3,6% 600 500 400 675 300 MEUR 302 46% MEUR 29; 4% MEUR 97; 16% MEUR 62; 8% 200 100 185 192 0 Turnover Raw materials and consumables Employee benefits expenses Depreciation Other operating Operating profit Operating profit expenses 2017 2016 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#79Fingrid Oyj consolidated profit and loss (IFRS) • Turnover has increased because of pricing increases and imbalance power sales treated as external turnover Since 2016, congestion income is no longer presented as turnover in profit and loss statement Employee expenses remain at notably low level due to outsourced operating model TURNOVER IFRS profit and loss 2012 - 2017 in MEUR 2017 2016 2015 2014 2013 2012 675 599 605 572 547 526 Raw materials and consumables used Employee benefits expenses -302 -248 -241 -264 -270 -267 -29 -29 -26 -25 -23 -22 Depreciation -97 -99 -94 -92 -82 -76 Other operating expenses OPERATING PROFIT (EBIT) EBIT-% -62 -30 -82 -48 -58 -66 185 192 163 143 115 95 27% 32 % 27 % 25% 21 % 18 % Finance income and costs -23 -19 -34 -11 -29 -7 PROFIT BEFORE TAXES* 164 174 129 133 87 88 Income taxes -33 -35 -26 -26 3 -21 PROFIT FOR THE PERIOD 131 139 104 106 91 67 Other comprehensive income** -1 6 5 0 -5 CO 6 TOTAL COMPREHENSIVE INCOME 130 145 109 106 86 73 * Includes share of profit of associated companies 79 ** Other comprehensive income consists of cash flow hedges, translation reserves and available-for-sale financial assets. Operating profit stabilized on a solid level Fingrid Debt Investor Presentation 30.9.2018 FINGRID#80Fingrid Oyj consolidated assets (IFRS) Tangible assets stabilized because of stabilized investments in grid assets Tangible assets were on average 77% of total assets IFRS assets 2012 - 2017 in MEUR 2017 2016 2015 2014 2013 2012 Intangible assets 188 185 183 183 181 179 Tangible assets 1 676 1 690 1 677 1 640 1 623 1 485 Investments (associated companies and 10 10 10 11 11 9 available for sale) Receivables 46 40 51 55 60 103 NON-CURRENT ASSETS 1 920 1 925 1922 1 889 1 875 1 776 • Current assets on average 11 % of total assets 00 80 Inventories 14 12 13 13 11 10 Derivative instruments 0 3 3 11 2 4 Trade receivables and other receivables 96 82 70 57 76 88 Financial assets recognised in income statement at fair value 63 58 93 116 195 207 Cash and cash equivalents 20 22 23 63 22 6 CURRENT ASSETS 193 177 203 261 307 316 TOTAL ASSETS 2 113 2 102 2 124 2 151 2 182 2 092 Tangible assets on a stable level thanks to a defined long-term investment plan Fingrid Debt Investor Presentation 30.9.2018 FINGRID#81Fingrid Oyj consolidated liabilities (IFRS) • • • Growth in equity has resulted from low dividend payments in 2010-2015 Current liabilities on average total 17 % of total equity and liabilities Borrowings (current and non-current) totalled on average 56 % of total equity and liabilities Trade payables on average 22 % of current liabilities Share capital and premium Retained earnings Other equity EQUITY Borrowings IFRS liabilities 2012 - 2017 in MEUR 2017 2016 2015 2014 2013 2012 112 112 112 112 112 112 687 654 606 567 542 465 0 0 -6 -12 -12 -7 798 766 711 667 643 570 813 843 907 962 975 1 032 141 146 174 170 160 185 954 989 1 081 1 132 1 136 1 217 269 265 236 263 319 212 8 8 30 17 16 11 84 75 66 72 70 83 361 347 332 352 404 305 2 113 2 102 2 124 2 151 2 182 2 092 Other non-current liabilities NON-CURRENT LIABILITIES Borrowings Derivative instruments Trade payables and other liabilities CURRENT LIABILITIES TOTAL EQUITY AND LIABILITIES 81 Balance sheet has remained stable in 2012-2017 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#8282 20 Fingrid Oyj consolidated cash flow (IFRS) • • Strong operating cash flow Peak investment years behind and now stabilized Cash and cash equivalents reduced to achieve more appropriate capital structure IFRS cash flow 2012 - 2017 in MEUR 2017 2016 2015 2014 2013 2012 Cash flow from operations 273 252 279 227 202 181 Change in working capital -40 -20 -63 -21 -43 -37 Net cash flow from operations 233 232 216 206 159 145 Net cash flow from investments -107 -139 -135 -111 -226 -146 Net cash flow after investments 126 94 80 95 -68 -1 Net borrowings -24 -40 -78 -51 84 22 Dividends paid -98 -90 -65 -82 -13 -11 Net cash flow from financing activities -122 -130 -143 -133 71 11 Net change in cash and cash eqv. 4 -37 -62 -38 3 10 Cash and cash equivalents 1 Jan 80 117 179 217 214 204 Cash and cash equivalents at the end of period 84 80 117 179 217 214 Strong and improving net cash flow after investments Fingrid Debt Investor Presentation 30.9.2018 FINGRID#83N Financials Financing 83 33 30.9.2018#84Financial risk management principles 84 Liquidity risk . Cash, cash equivalents and committed credit facilities cover at least 110 percent of short-term debt Undrawn MEUR 300 revolving credit facility (RCF) until 2022 Continuous cash flow forecasting Credit and counterparty risk Prequalification of suppliers based on predetermined financial criteria Continuous credit risk analysis and monitoring Counterparty credit rating requirements and limits ISDAs in force for derivatives . Refinancing risk Refinancing in any given year less than 30% of total debt Even maturity profile Diversified funding sources Strong credit rating from at least two major rating agencies Market price risk • Derivatives only for hedging purposes Interest rate risk hedging of debt; convergence towards 12 months' average interest re-fixing time Material currency and commodity risk fully hedged Loss power hedging horizon up to 4 years, 12 months fully hedged Fingrid applies a conservative financial policy Fingrid Debt Investor Presentation 30.9.2018 FINGRID#85Fingrid debt programme overview • Long presence in the capital and money markets since 1998 with debt programmes: • • EMTN Programme, MEUR 1,500 since 1998 ECP Programme, MEUR 600 since 1998 CP Programme, MEUR 150 since 1998 MEUR 300 Revolving Credit Facility (RCF) until December 2022 is provided by the dealers. The facility supports the company's liquidity reserve and is undrawn A total of MEUR 50 uncommitted overdraft limits to be used for liquidity management . Long-term bilateral loans provided by the European Investment Bank (EIB) and Nordic Investment Bank (NIB) 95 85 Fingrid's core relationship banks are the dealers of the EMTN Programme BNP PARIBAS Danske Bank ING Nordea SEB CO OP Swedbank Fingrid is a well-established issuer on international private and public debt capital markets Fingrid Debt Investor Presentation 30.9.2018 FINGRID#86Green bond framework established • • Fingrid established a Green Bonds Framework in 2017 that enables the company to acquire financing for green projects Fingrid's Green Bond Framework received a Medium Green** assessment from third party CICERO Fingrid has defined eligible investment projects as those i) reducing losses, ii) connecting renewable power* iii) cross-border projects and/or iv) smart grids Around MEUR 150 in 16 investment projects identified as Green bond eligible investment costs mainly in 2015-2018 Note: Click to view more information of Fingrid's Green Financing 86 * Wind, hydro, solar and bioenergy ** Scale: dark green, medium green, light green, brown Fingrid issued inaugural MEUR 100 green bond in November 2017 Fingrid Debt Investor Presentation 30.9.2018 FINGRID#87480 87 Weighted average debt maturity was 5,4 years • in June 2018 Fingrid aims to maintain a well-distributed debt maturity profile Debt portfolio consists mostly of private placements and a couple of public bonds. 350 300 250 Debt maturity profile as of 30 June 2018 ■Long-term debt ■Short-term debt Total debt by currency 6/2018 3% 9% 88% 200 150 Total debt by source 6/2018 100 3 % 50 ■ EUR ■ SEK ■ NOK 14% 10% 0 0 I..... EMTN 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 ECP Short-term debt* 26% of total MEUR 267** ■EIB Long-term debt 74% of total MEUR 810** NIB 73% Total gross debt MEUR 1077** * Debt maturing in next 12 months ** Presented as notional values and hence, may differ from the published IFRS figures Debt maturity profile is well-distributed Fingrid Debt Investor Presentation 30.9.2018 FINGRID#88Strong IFRS and regulatory capital structure Total shareholders' equity and liabilities IFRS and regulatory capital structure as of 31 December 2017 amount to MEUR 2,113 Regulatory balance sheet amount to around MEUR 3,000 of which 3.500 3.000 approximately MEUR 2,950 is used as 2 500 adjusted capital in calculation of allowed financial result • Grid assets are recognised at fair value for the purposes of the company's regulatory balance sheet 1.500 1.000 Grid assets 88 Borrowings 2 000 Other liabilities Other assets Other liabilities Regulated present value Equity of the grid Borrowings 500 Equalisation item for equity Equity Other capital committed 0 Assets Liabilities IFRS balance sheet to grid operations Assets Liabilities Regulatory balance sheet Equity to total assets ratio is 38 % (IFRS) and 62% (regulatory) Fingrid Debt Investor Presentation 30.9.2018 FINGRID#8989 88 Fingrid targets to distribute substantially all of parent company profit as dividend • • The guiding principle is to distribute substantially all of the parent company profit as dividend MEUR 174 dividend of 2017 parent company FAS net profit Prevailing conditions and investment needs. are always considered before taking decision on dividend to be paid The policy ensures that shareholders receive a reasonable ROI MEUR Net profit and paid dividends in 2009-2017 160 % 200 180 160 140 120 100 80 60 40 140 % 120 % 100% 80 % 60% 40 % . This will enable long-term implementation of the strategy while allowing operative flexibility 20 0 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 Net profit Dividend Dividend % 20 % Dividend policy aims to ensure reasonable return and take company's financial targets into account Fingrid Debt Investor Presentation 30.9.2018 FINGRID#90Ratings 90 90 30.9.2018#91Fingrid aims to maintain high credit ratings = 91 S&P A-1+/AA- Stable Short-term/ Issuer Rating "The upgrade primarily stems from the positive impact on Fingrid's earnings from modifications in the regulatory model for TSOs in Finland. These changes have increased Fingrid's allowed regulatory return, and made it more stable. Thanks to these changes, alongside previous tariff increases and the company's modest capital spending program, Fingrid has seen an improvement in its credit measures, which we believe should be sustainable." S&P Global, 28 October 2016 Fitch F1/AA- Stable Short-term/ Senior Unsecured "The affirmation reflected the good visibility on the company's results until 2023 (the same regulatory model is applied through 2016-2023), the supportive features of the regulatory framework in Finland, and Fingrid's conservative financial structure." Fitch Ratings, 5 December 2017 "Fingrid's issuer rating of 'A+' is the highest that Fitch assigns to a regulated network in Europe, reflecting a very strong business and financial profile." Fitch Ratings, 5 December 2017 Fingrid is committed to maintain credit rating at least at 'A-' level in all circumstances Fingrid Debt Investor Presentation 30.9.2018 FINGRID#9292 86 Key rating factors according to the rating agencies S&P Global 1 Company's excellent business risk profile and significant financial risk profile 2 A "high" likelihood that Finland would provide timely and sufficient extraordinary support to Fingrid the event of financial distress Fitch 1 Fingrid's credit profile benefits from its monopoly position, low business risk and a highly supportive regulatory framework 2 The Stable Outlook reflects Fitch's expectation that, after the peak of investment spending in 2013, leverage will decline to within the guidance for an 'A' rating. Furthermore Fingrid benefits from ample liquidity to meet immediate funding needs Fingrid's low business risk profile and supportive regulatory framework are key credit strengths Fingrid Debt Investor Presentation 30.9.2018 FINGRID#93Thank you! Fingrid Oyj Läkkisepäntie 21 00620 Helsinki PL 530, 00101 Helsinki Puh. 030 395 5000 Fax 030 395 5196 GREAT Best PLACE TO Workplaces 2016 WORK Finland FINGRID