Mikael Lilius, President & CEO Fortum Corporation

Baltic Development Forum Summit

Tallinn, 5 November 2007

Key Note Speech by

Mr. Mikael Lilius

President & CEO of Fortum Corporation

[Check against delivery]

The EU has been a global leader in climate an energy policies, and countries in the Baltic region have supported this development. In many areas, the region is already well on its way to fulfilling EU targets: A regional electricity market has functioned in the Nordic countries for years; use of renewable  energy sources is high on the rise; and district heating infrastructure – allowing very efficient combined production of hear and power – is established. Also new nuclear is considered in several countries in the region. Furthermore, the region is in the heart of the political debate: EU – Russia energy relations is an increasingly important topic EU-wide, but geographically touches particularly the Baltic Rim countries. However, for the Baltic Rim countries to fully leverage the opportunities that their position offers, requires extensive further development both regionally and EU-wide.

First, a consistent and predictable policy framework must be established in order to facilitate investment into new generation. Electricity is an extremely capital intensive sector, avoiding uncertainty is one of the key factors in this respect. Harmonised taxation, auctioning emissions allowances as well as consistently favouring low or no emitting power generation will result in the lowest cost for the societies and the power consumers.

Second, competition must be increased by forming a regional – and ultimately – a single European electricity market, with functioning links with the countries neighbouring the EU. This creates a real win-win situation: it is good for the security of supply, for competition and hence prices, but also for the environment as it allows natural resources to be utilised regionally in the most efficient manner.

Third, active promotion of R&D and innovations is required. The development of carbon capture and storage, CCS, for example, could provide opportunities for the Baltic region. Coal will continue to be an important fuel also in the coming decades world-wide, and the Baltic Rim countries region could take a leading role in demonstrating to the world how CO2 capture, transport and finally storage can be solved. However, the industry’s commitment to R&D is not alone enough; financial support is required from the Member States and the EU, as well.

Energy is no longer a national issue only; creating larger markets with harmonized rules also in this area benefits everyone.