Interim Report January - June 2004

Fortum Corporation STOCK EXCHANGE RELEASE
28.7. 2004 at 9.00 am


Fortum Corporation
Interim Report January - June 2004

A very strong first six months for Fortum
- operating profit hits EUR 1 billion

The first half-year in brief
- Operating profit EUR 1,005 million (+32%), excluding non-
recurring items +22%
- Earnings per share EUR 0.76 (+55%)
- Net debt EUR 5,293 million (EUR -333 million since end of 2003),
gearing decreased to 76%
- Preparations to list the oil businesses continued


Key figures II/04 II/03 I-II/ I-II/ 2003 Last 12
04 03 months
(LTM)
Net sales, EUR 2,830 2,435 5,653 6,028 11,392 11,017
million
Operating profit, EUR 443 286 1,005 761 1,420 1,664
million
- excluding non- 379 272 908 743 1,360 1,525
recurring items, EUR
million
Profit before taxes, 376 216 863 626 1,184 1,421
EUR million
Earnings per share, 0.38 0.17 0.76 0.49 0.91 1.19
EUR
Shareholders’ equity 7.89 7.13 7.55
per share, EUR
Capital employed 12,447 13,077 12,704
(at end of period),
EUR million
Interest-bearing net 5,293 4,502 5,626
debt
(at end of period),
EUR million *)
Investments, EUR 278 761 1,136 653
million
Net cash from 1,043 1,060 1,577
operating activities,
EUR million
Return on capital 16.1 12.1 11.4 13.3
employed, %
Return on 19.4 11.9 12.3 14.7
shareholders’ equity,
% *)
Gearing, % *) 76 60 85
Average number of 13,097 13,272 13,343
employees
Average number of 849,698 845,823 846,831 848,021
shares, 1,000s
*) the figures for the full year 2003 and for January - June 2004
include the impact of the redemption of the preference shares
worth EUR 1.2 billion issued by Fortum Capital Ltd


During the first half of the year, Fortum´s financial performance
improved significantly compared to the first half of 2003. The
operating results throughout the Group in both the power and heat
and the oil businesses were higher than during the corresponding
period last year.

The good results were due to operational efficiency: utilisation
of the flexible power production portfolio, successful hedging,
good availability at production units, a high-value oil product
slate as well as an improved cost structure. In the second
quarter, high oil refining margins and inventory gains had a
positive impact on the results.

Cash flow continued to be at the same good level as last year.
However, the figure for the first half of 2003 included
exceptionally high realised foreign exchange gains arising from
extensive financing restructuring. The balance sheet was further
strengthened and gearing decreased to 76% from the 2003 year end.
At the end of the second quarter, net debt was at the same level
as in the first quarter, despite the dividend payment of EUR 357
million.

Preparations to list the oil businesses continued. Fortum
strengthened its position in the Russian electricity company, OAO
Lenenergo.

The first half of the year was characterised by relatively stable
Nord Pool power prices, although the average was 29% lower than
during the corresponding period in 2003. The international oil
refining reference margin was strong, the average level being 62%
higher than a year ago.

In order to improve the transparency of its financial reporting,
Fortum has adopted a new reporting structure. The number of
reporting segments has been increased from four to seven. The new
segments include the following business units (names of the
business units in brackets after the segment name): Power
Generation (Generation, Portfolio Management and Trading,
Service); Heat (Heat, Värme); Distribution (Distribution); Markets
(Markets); Oil Refining (Oil Refining, Components); Oil Retail
(Oil Retail); Shipping and other Oil (Shipping, other oil
operations including SeverTEK). In addition, the segment Other
includes for example Group administration and shared service
functions.


Net sales and results

April - June
During the second quarter, the Nord Pool electricity price stayed
approximately at the same level as during the first quarter of
2004 and the second quarter of 2003. The international oil
refining reference margin was very strong during the second
quarter, exceeding the level of the first quarter of 2004 and the
second quarter of 2003. The price of crude oil continued to
increase.

Group net sales stood at EUR 2,830 (EUR 2,435 million in April-
June 2003). The increase was mainly attributable to higher prices
and increased volumes for oil products.

Group operating profit totalled EUR 443 (286) million. Operating

profit excluding non-recurring items stood at EUR 379 (272)
million. The net amount of non-recurring items was EUR 64 (14)
million, mainly consisting of inventory gains arising from the
increase in the price of crude oil. The high oil refining margin
had a positive impact on the results of Oil Refining, whereas,
typically for the season, the results for the power and heat
businesses were lower than in the first quarter.

January - June

Group net sales stood at EUR 5,653 million (EUR 6,028 million in
January-June 2003). The main reasons for the decrease were the
lower market prices for electricity, the Group's exit from gas
trading and a weakened US dollar.

Group operating profit totalled EUR 1,005 (761) million. Operating
profit excluding non-recurring items was EUR 908 (743) million.
The net amount of non-recurring items was EUR 97 (18) million,
including a one-time compensation of EUR 29 million from parties
in the new nuclear power unit relating to the existing nuclear
infrastructure, and inventory gains of EUR 59 million (losses of
EUR 14 million) resulting from the increase in the price of crude
oil.

The results for Power Generation were up on the corresponding
period last year, despite lower market prices for electricity.
This was mainly due to Fortum's flexible production portfolio,
successful hedging and internal efficiency improvements.

The results for the Heat segment improved mainly because of a rise
in Fortum Värme's results during the first quarter. This was due
to a better fuel mix and good power plant availability.

The results for Distribution, a regulated business, remained
stable.

Markets experienced a substantial improvement in its results
compared to last year. The main enablers were better risk
management, improved business processes and cost reductions.

The results for Oil Refining reached a record high level due to
strong oil refining margins, higher volumes and a considerable
amount of inventory gains. However, a weaker US dollar than a year
ago had a negative effect on the results. The results were further
boosted by a favourable product slate, competitive feedstocks and
excellent availability at the refineries.

The results for the Oil Retail segment remained at the level of
the corresponding period last year. The sales volumes of traffic
fuels slightly increased, whereas the corresponding margins
slightly decreased.

The Shipping and other Oil segment enjoyed high freight rates,
especially for crude oil, during the first quarter. However, a
weaker US dollar than a year ago had a negative impact on the
results. The start of crude production had a positive impact on
the result.

The Group's profit before taxes was EUR 863 (626) million.

The Group´s net financial expenses were EUR 142 (135) million.
This includes the interest cost attributable to the debt assumed
when redeeming the preference shares issued by Fortum Capital Ltd
as well as approximately EUR 10 million representing the net
present value of the interest rate differential relating to the
prepayment of the private placement bonds issued in the United
States in 1992.

Minority interests accounted for EUR 20 (47) million. The decrease
is mainly due to the redemption of Fortum Capital's preference
shares, accounted for as minority interests before the redemption.
The figure for 2004 is mainly attributable to Fortum Värme
Holding, in which the City of Stockholm has a 50% economic
interest.

Taxes for the period totalled EUR 194 (167) million. The tax rate
according to the income statement was 22.5% (26.7%). Taxes for the
period include a decrease in deferred tax liabilities of EUR 43
million due to the change in the Finnish income tax rate from 29%
to 26% which takes effect from the beginning of the 2005 tax year.
The tax rate would have been 27.4% excluding the above-mentioned
decrease.

Net profit for the period was EUR 649 (412) million. Earnings per
share were EUR 0.76 (0.49). Return on capital employed was 16.1%
(12.1%) and return on shareholders´ equity was 19.4% (11.9%).

POWER AND HEAT SEGMENTS

Fortum's power and heat businesses are divided into four reporting
segments. Power is generated in Fortum's own and partly-owned
power plants by the Power Generation segment and in combined heat
and power (CHP) plants by the Heat segment. Power Generation sells
electricity to the markets through the Nordic electricity
exchange, Nord Pool. Fortum's distribution and regional network
transmissions are reported in the Distribution segment. The
Markets segment buys its electricity through Nord Pool and sells
the electricity to private and business customers. Heat sells
steam and district heat mainly to industrial and municipal
customers as well as real estate companies, and the power it
produces directly to end-customers and to Nord Pool.

Market conditions

According to preliminary statistics, the Nordic countries consumed
200 (198) TWh of electricity during the first half of the year,
which was 1% more than the consumption during the first half of
the previous year.

During the second quarter, the average spot price for electricity
on the Nordic power exchange, Nord Pool, was EUR 29.5 (28.6) per
megawatt-hour. The price was about 3% higher than the
corresponding figure in 2003 and also 3% higher compared to the
first quarter of 2004.

During the first half of 2004, the average spot price for
electricity was EUR 29.1 (40.9), 29% lower than the corresponding
figure in 2003. The prices in the forward market have been
increasing since March.

Poor snow accumulation during winter and an early snow melting
resulted in a short inflow peak in the beginning of May. The spot
price decreased for a few weeks but recovered fast and reached a
higher level than during last winter. During the second quarter,
the water reservoir deficit increased by 2 TWh.

At the beginning of July, the water reservoirs were about 16 TWh
below the average and at the same level as in 2003.

Total power and heat generation figures

Fortum's total power and heat generation figures are presented
below. In addition, the segment reviews include the respective
figures by segment.

Fortum´s own power generation in the Nordic countries during the
first half of the year was 27.4 (26.7) TWh, 14% (14%) of Nordic
electricity consumption.


Fortum's total power II/04 II/03 I-II/04 I-II/03 2003 LTM
and heat generation,
TWh
Power generation 12.6 12.6 28.0 28.2 53.2 53.0
Heat generation 4.7 5.9 14.0 14.8 25.9 25.1


Fortum's own power II/04 II/03 I-II/04 I-II/03 2003 LTM
generation by source,
TWh,
total in the Nordic
countries
Hydropower 3.9 4.3 8.6 8.4 16.9 17.1
Nuclear power 6.5 6.0 13.5 12.7 23.8 24.6
Thermal power 1.8 1.6 5.3 5.6 10.5 10.2
Total 12.2 11.9 27.4 26.7 51.2 51.9


Share of own II/04 II/03 I-II/04 I-II/03 2003 LTM
production, %,
total in the Nordic
countries
Hydropower 32 36 32 31 33 33
Nuclear power 53 50 49 48 46 47
Thermal power 15 14 19 21 21 20
Total 100 100 100 100 100 100


Total electricity and heat sales figures

Fortum's total electricity and heat sales figures are presented
below. In addition, the segment reviews include the respective
figures by segment.

Fortum´s total electricity sales volumes amounted to 31.5 (32.2)
TWh. Sales volumes in the Nordic countries stayed unchanged and
were at 30.7 (30.6) TWh representing approximately 15% (15%) of
Nordic electricity consumption during the first half of the year.

The average price of electricity sold by Fortum in the Nordic
countries during the second quarter was 10% higher than the
corresponding figure last year, and 4% higher compared to the
first quarter of 2004. During the first half-year, the average
price of electricity sold by Fortum in the Nordic countries was 6%
lower than the corresponding figure last year.


Fortum's total II/04 II/03 I-II/04 I-II/03 2003 LTM
electricity and heat
sales, EUR million
Electricity sales 446 428 1,012 1,094 2,038 1,956
Heat sales 158 165 444 433 775 786

Fortum's total II/04 II/03 I-II/04 I-II/03 2003 LTM
electricity sales by
area, TWh
Sweden 5.9 6.4 14.0 15.2 28.3 27.1
Finland 7.1 6.6 15.6 15.1 29.1 29.6
Other countries 0.8 1.2 1.9 1.9 3.6 3.6
Total 13.8 14.2 31.5 32.2 61.0 60.3

Fortum's total heat II/04 II/03 I-II/04 I-II/03 2003 LTM
sales by area, TWh
Sweden 1.6 1.7 5.6 5.7 9.5 9.4
Finland 2.2 2.3 5.7 5.8 10.3 10.2
Other countries 0.7 1.4 1.9 2.2 3.9 3.6
Total 4.5 5.4 13.2 13.7 23.7 23.2

SEGMENT REVIEWS - POWER

Power Generation

The business area comprises power generation and sales in the
Nordic countries and the provision of operation and maintenance
services in the Nordic area and selected international markets.

EUR million II/04 II/03 I-II/04 I-II/03 2003 LTM
Net sales 488 573 1,052 1,533 2,681 2,200
- electricity sales 381 385 851 1,057 1,871 1,665
- other sales 107 188 201 476 810 535
Operating profit 138 116 366 328 603 641
- excluding non- 140 116 344 329 599 614
recurring items
Net assets (at end of 6,188 6,276 6,391
period)
Return on net assets, % 11.7 10.3 9.5 10.2

The segment's power generation during the second quarter amounted
to 11.5 (10.9) TWh in the Nordic countries. The increase is mainly
due to better availability of nuclear power, which compensated for
the lower levels of hydro power generation.

In January - June, the segment's power generation in the Nordic
countries was 24.8 (24.2) TWh, of which about 8.6 (8.4) TWh or 35%
(35%) was hydropower-based, 13.5 (12.7) TWh or 54% (52%) nuclear
power-based and 2.7 (3.1) TWh or 11% (13%) thermal power-based.

Power generation by II/04 II/03 I-II/04 I-II/03 2003 LTM
area, TWh
Sweden 5.8 5.7 12.8 12.7 24.6 24.7
Finland 5.7 5.2 12.0 11.5 22.2 22.7
Other countries 0.3 0.7 0.6 1.5 2.0 1.1
Total 11.8 11.6 25.4 25.7 48.8 48.5

Fortum Service signed a six-year asset management contract in
Scotland.

Heat

The business area comprises heat generation and sales in the
Nordic countries and other parts of the Baltic Rim. Fortum is the
leading heat producer in the region. The segment also generates
power in the combined heat and power plants (CHP) and sells it to
end-customers mainly by long-term contracts as well as to Nord
Pool. In Sweden, Fortum owns the company AB Fortum Värme samägt
med Stockholms stad, in which the City of Stockholm has a 50%
economic interest.

EUR million II/04 II/03 I-II/04 I-II/03 2003 LTM
Net sales 195 182 556 540 964 980
- heat sales 150 143 428 401 728 755
- electricity sales 27 25 90 108 167 149
- other sales 18 14 38 31 69 76
Operating profit 27 22 134 99 173 208
- excluding non- 27 22 134 99 176 211
recurring items
Net assets (at end of 2,393 2,302 2,466
period)
Return on net assets, % 11.0 8.5 7.3 8.7

The segment's heat sales during the second quarter amounted to 4.1
(4.2) TWh, most of which is generated in the Nordic countries.
During the first half of the year, heat sales totalled 12.3 (12.0)
TWh. This shows the significance of the cold seasons - the first
and last quarters of the year - to the heat business.

During the first half of the year, Fortum secured a number of heat
contracts with Finnish business-to-business customers.

In Sweden, the construction of a new waste incineration boiler in
the Högdalen combined heat and power plant as well as the district
heating distribution system investment in Akalla-Upplands Väsby
progressed as planned. Fortum continued to enhance its waste-to-
energy projects in Finland.

Heat sales by area, TWh II/04 II/03 I-II/04 I-II/03 2003 LTM
Sweden 1.6 1.7 5.6 5.7 9.5 9.4
Finland 2.2 2.3 5.7 5.8 10.3 10.2
Other countries 0.3 0.2 1.0 0.5 1.3 1.8
Total 4.1 4.2 12.3 12.0 21.1 21.4

Electricity sales, TWh II/04 II/03 I-II/04 I-II/03 2003 LTM
Total 0.9 0.8 2.7 2.6 4.5 4.6


Distribution

Fortum owns and operates distribution and regional networks and
distributes electricity to a total of 1.4 million customers in
Sweden, Finland, Norway and Estonia.

EUR million II/04 II/03 I-II/04 I-II/03 2003 LTM
Net sales 157 160 363 359 688 692
- distribution network 131 129 305 294 569 580
transmission
- regional network 20 21 45 48 88 85
transmission
- other sales 6 10 13 17 31 27
Operating profit 54 61 141 142 247 246
- excluding non- 54 41 141 121 227 247
recurring items
Net assets (at end of 3,103 3,046 3,129
period)
Return on net assets, % 9.1 9.0 7.9 7.9

During January - June, the volume of distribution and regional
network transmissions totalled 11.6 (11.4) TWh and 9.6 (11.1) TWh
respectively.

Electricity transmissions via the regional distribution network to
customers outside the Group totalled 8.0 (8.3) TWh in Sweden and
1.6 (2.8) TWh in Finland.

The first steps were taken as part of a larger plan to reduce the
risk of outages in western Sweden. Investments in the area have
been doubled.

In Sweden, the first employees to qualify for the new service
function of Customer Service Technician received their
certificates in May. The concept is part of Fortum's overall
customer orientation strategy and is applied in Sweden, Finland
and Norway.

Volume of distributed II/04 II/03 I-II/04 I-II/03 2003 LTM
electricity by area,
TWh
Sweden 2.9 3.2 7.1 7.8 14.2 13.5
Finland 1.2 1.3 3.2 3.3 6.2 6.1
Norway 0.5 0.3 1.2 0.3 1.3 2.2
Other countries 0.0 0.0 0.1 0.0 0.2 0.3
Total 4.6 4.8 11.6 11.4 21.9 22.1

Number of electricity 30.6.2004 30.6.2003 2003
distribution customers by
area, 1,000s
Sweden 860 850 855
Finland 400 395 400
Other countries 115 115 115
Total 1,375 1,360 1,370


Markets

The Markets segment focuses on the retail sale of electricity to a
total of 1.1 million private and business customers as well as to
other electricity retailers in Sweden, Finland and Norway.

EUR million II/04 II/03 I-II/04 I-II/03 2003 LTM
Net sales 303 332 722 890 1,634 1,466
Operating profit 5 12 15 5 35 45
- excluding non- 5 12 15 5 35 45
recurring items
Net assets (at end of 177 124 23
period)
Return on net assets, % 25.2 12.7 55.2 41.8

Oil product sales have been transferred from Markets to the Oil
Retail segment.

Average retail electricity prices on the Nordic market decreased
slightly in the January - March period but recovered during the
April - June period. Retail prices are now marginally below the
levels for the second quarter of 2003. Also Fortum reduced its
retail prices during the spring period.

During the second quarter, the segment's electricity sales
totalled 9.6 (11.0) TWh with sales for the first half of the year
standing at 22.4 (24.5) TWh. The decline was mainly due to a lower
industrial utilisation rate and a warmer winter than the year
before.

In Sweden and in Norway, the competition on the electricity market
was strong, with increasing customer turnover between operators.
Actions were started to improve business processes in Norway.
Fortum launched new products for both its private and business
customers which are based on specific customer expectations. The
new Customer Service Unit, formed in cooperation with Fortum
Distribution at the beginning of the year, has improved customer
relations and increased customer satisfaction.

OIL SEGMENTS

Fortum's oil operations are divided into three reporting segments.
Oil Refining manufactures and sells gasolines, diesel fuels, light
and heavy fuel oils, aviation fuels, base oils, lubricants,
gasoline components and LPG. Oil Retail operates an extensive
retail sales network. The Shipping and other Oil segment has a
tanker fleet for crude oil and product transports, and includes
oil businesses.

Market conditions

During the second quarter, the international refining margin in
north-western Europe (Brent Complex) was USD 6.3 (2.1) /bbl.

During the first half of the year, the international refining
margin was significantly higher than during the corresponding
period last year. The reference margin used by Fortum averaged USD
4.7 (2.9) /bbl. Fortum’s premium margin continued to average USD
2/bbl higher than the international margin.

Crude oil prices remained high throughout the period under review.
The price peaked at the beginning of June at about USD 42/bbl. The

price of Brent crude oil averaged USD 33.7 (28.8) per barrel. In
January-June, inventory gains were EUR 59 million (losses of EUR
14 million).

The refining margins and shipping freights are priced in U.S.
dollars and therefore the weakening of this currency will have an
impact on the profitability of the Oil Refining and Shipping and
other Oil segments.

SEGMENT REVIEWS - OIL

Oil Refining

The activities of Oil Refining cover the refining of oil and
marketing of oil products. The main products are traffic fuels and
heating oils. Fortum is the leading producer of clean traffic
fuels in the Nordic area.

EUR million II/04 II/03 I-II/04 I-II/03 2003 LTM
Net sales 1,635 1,265 2,938 2,962 5,693 5,669
Operating profit 187 51 280 135 281 426
- excluding non- 132 68 215 149 267 333
recurring items
Net assets (at end of 1,111 1,075 1,003
period)
Return on net assets, % 52.2 24.5 26.2 39.8

Fortum refined a total of 6.7 (6.4) million tonnes of crude oil
and other feedstocks. In Finland, oil product sales totalled about
4.1 (3.8) million tonnes. Exports accounted for a total of 2.7
(2.6) million tonnes.

Work on the EUR 500 million investment to increase the sulphur-
free diesel production capacity of the Porvoo refinery continued
as planned during the first half of the year.

Fortum will increase the production of a synthetic type of EHVI
base oil by 30,000 tonnes at the Porvoo refinery. EHVI is used as
a raw material for lubricants. The extended production will
commence in autumn 2005, after which annual production will amount
to some 250,000 tonnes.

In May, Fortum started manufacturing of ETBE (ethyl tertiary butyl
ether), containing bioethanol, at the Porvoo refinery.

The production and sale of ethanol gasoline, which began in autumn
2002, is to continue in Finland for the time being.


Deliveries of oil II/04 II/03 I-II/04 I-II/03 2003 LTM
products produced by
Fortum – by product
group (1,000 t)
Gasoline 1,166 972 2,142 2,060 4,434 4,516
Diesel 1,080 1,110 1,972 1,905 3,886 3,953
Aviation fuel 171 131 322 251 611 682
Light fuel oil 341 296 738 719 1,474 1,493
Heavy fuel oil 229 295 658 682 1,314 1,290
Other 511 446 885 788 1,672 1,769
Total 3,498 3,250 6,717 6,405 13,391 13,703

Deliveries of oil II/04 II/03 I-II/04 I-II/03 2003 LTM
products produced by
Fortum – by area
(1,000 t)
Finland 2,123 1,860 4,063 3,789 7,889 8,163
Other Nordic 617 533 1,065 967 1,921 2,019
countries
Baltic countries and 35 21 58 29 62 91
Russia
USA and Canada 339 133 695 517 1,252 1,430
Other countries 384 703 836 1,103 2,267 2,000
Total 3,498 3,250 6,717 6,405 13,391 13,703


Oil Retail

Oil Retail has a network of service stations and other retail
sales outlets both in Finland and in other countries in the Baltic
Rim. The total number of outlets exceeds 1,000.

EUR million II/04 II/03 I-II/04 I-II/03 2003 LTM
Net sales 566 521 1,097 1,107 2,203 2,193
Operating profit 20 10 26 25 44 45
- excluding non- 14 10 20 24 53 49
recurring items
Net assets (at end of 281 285 329
period)
Return on net assets, % 17.5 16.0 13.8 15.0

During the second quarter, retail sales of main oil products
totalled 910 (903) thousand cubic metres, of which traffic fuels
were 637 (612) thousand cubic metres.

During the first half of the year, retail sales of main oil
products totalled 1,897 (1,908) thousand cubic metres, of which
traffic fuels were 1,245 (1,183) thousand cubic metres.

The number of oil retail outlets at the end of June amounted to
887 (895) in Finland and to 160 (147) in other countries in the
Baltic Rim.

In Finland, Fortum was the first company to start selling sulphur-
free gasoline and diesel (sulphur content less than 10 mg/kg) in
May.

A year ago, Fortum established a joint venture with the Finnish
company, Kesko, to build a nationwide retail chain selling fuel
and everyday consumer goods. At the end of June, there were 25
shops in connection to Fortum's service stations.

Shipping and other Oil

Shipping operates a tanker fleet for crude oil and product
transports. About 50% of the volumes carried are for third party
customers. The focus is on the Baltic Sea, the North Sea and the
North Atlantic. Total capacity is about 1 million dead weight
tonnes. In Russia, Fortum owns an oil field jointly with the
Russian company, Lukoil.

EUR million II/04 II/03 I-II/04 I-II/03 2003 LTM
Net sales 78 87 179 181 308 306
Operating profit 23 19 67 46 79 100
- excluding non- 18 20 63 49 69 83
recurring items
Net assets (at end of 168 139 133
period)
Return on net assets, % 88.7 66.7 56.7 67.4

During the second quarter, deliveries by Shipping were 10.2 (10.2)
million tonnes and during the first half of the year 20.1 (20.4)
million tonnes.

During the first half of the year, the utilisation rate for
Fortum´s crude and oil product fleet was high.

The freight rates remained strong during the second quarter
equalling the previous year's level. However, rates were down on
the first quarter, especially for the crude carriers.

In total, Fortum owns ten tankers and 19 are time-chartered. Eight
tankers carry crude oil and 21 carry a range of oil products.

The fleet renewal with new product tankers proceeded as planned.

During the first half of the year, the average oil production of
SeverTEK totalled approximately 26,000 barrels per day (of which
Fortum’s share was 50%).

Investments and divestments

Investments in fixed assets during the first half of the year
totalled EUR 278 (761) million.

Work on the EUR 500 million investment to increase the sulphur-
free diesel production capacity of the Porvoo refinery continued
as planned during the first half of the year. The estimated cost
for 2004 is somewhat above EUR 100 million. The investment is
expected to be completed by the end of 2006.

Fortum will participate in the new fifth nuclear power plant unit
in Finland with a share of approximately 25%. Thus Fortum´s
investment as an equity share will be EUR 180 million during 2004
- 2009, entitling it to approximately 400 MW of the plant´s
capacity. During the first quarter, Fortum also provided a
shareholders' loan of EUR 45 million.

The final approval for the purchase of shares in the Russian power
company, OAO Lenenergo, agreed in February, was received from the
Russian competition authorities in May. In July 2004, Fortum
agreed on the acquisition of additional shares in OAO Lenenergo.
As a result of the deal, Fortum’s holding in the company’s share
capital will increase to 30.7% and its share of voting rights to
29.6%. This latest share transaction is also subject to the
approval of the Russian competition authorities. After the
completion of the deal, Fortum's investment in Lenenergo shares
will be approximately EUR 150 million.

In April, the consulting company Fortum Teknik & Miljö, was sold
to the Swedish ÅF Group, and the divestment of the Hungarian
engineering company, ETV-Eröterv Rt, was finalised in June.

In June, Fortum and Jacobs Engineering Group Inc., based in
California, USA, concluded a deal that gives Jacobs a 34%
ownership position in Fortum's Neste Engineering operations. Neste
Engineering will continue its operations under the name of Neste
Jacobs Oy.

Financing

Fortum´s net debt decreased by EUR 333 million and stood at EUR
5,293 million (EUR 5,626 million at year end) giving a gearing
ratio of 76% (85% at year end).

The Group's net financing expenses were EUR 142 (135) million. The
amount includes the interest cost attributable to the debt assumed
when redeeming the preference shares issued by Fortum Capital Ltd
as well as approximately EUR 10 million representing the net
present value of the interest rate differential relating to the
prepayment of the private placement bonds issued in the United
States in 1992.

Moody's credit rating was upgraded to Baa1 (stable) on 13 February
2004. Standard & Poor's long-term credit rating for Fortum
Corporation was restated at BBB+ (stable).

Shares and share capital

Based on the share option schemes, a total of 981,004 Fortum
shares were entered into the trade register during the first
quarter.

On 1 July 2004, a total of 59,415 Fortum Corporation shares
subscribed for with the share warrants relating to Fortum
Corporation´s 1999 warrant bond to employees, and a total of
389,000 shares subscribed for with the share warrants relating to
Fortum Corporation´s 1999 management share option scheme, were
entered into the trade register. The increase in the share capital
resulting from these share subscriptions was EUR 1,524,611.00.
After the increase, Fortum Corporation´s share capital is EUR
2,890,890,439.60 and the total number of shares is 850,261,894.

Currently, the Board of Directors has no unused authorisations
from the General Meeting of shareholders to issue convertible
loans or bonds with warrants, issue new shares or acquire the
company´s own shares.

Group personnel

The average number of employees in the Group during the period
from January to June was 13,097 (13,272). The number of employees
at the end of the period was 13,140 (13,969). The reduction is
mainly due to divestments.

Group management

Mr Timo Karttinen was appointed Senior Vice President, Corporate
Development, and member of the Corporate Executive Committee as of
1 July 2004.

Outlook

The key market drivers influencing Fortum´s performance are the
market price of electricity and the international oil refining
margin. Other important market drivers are the price of crude oil,
and the exchange rates of the US dollar and the Swedish krona.
During 2005, emissions trading may become a new key market driver.

During the past five years, the volume of Fortum´s CO2-free power
generation has increased from 30 TWh to 41 TWh. Its share was 78%
of Fortum´s power generation in 2003. With this production
portfolio, Fortum is in a good position with regard to the
possible impacts of emissions trading.

According to general market information, electricity consumption
in the Nordic countries is predicted to increase by about 1% a
year over the next few years. During the second quarter, the
average spot price for electricity was EUR 29.5 (28.6) per
megawatt-hour on the Nordic electricity market. At the beginning
of July, the Nordic water reservoirs were about 16 TWh below the
average and at the same level as one year ago. During the first
part of July, the spot price has been at the level of EUR 28 per
megawatt-hour while the electricity price in the forward market
for the remainder of 2004 has been in the range of EUR 32 - 35 per
megawatt-hour. For the next 12 months, Fortum's hedging level for
electricity sales is approximately 60%.

The oil market fundamentals are developing according to Fortum's
assumptions: the consumption of clean traffic fuels is increasing
and the demand for heavy fuel oil is decreasing, making the
complex refineries even more competitive. In addition, Fortum’s
position along the new export routes for Russian crude oil gives
it a clear advantage. These developments are in line with Fortum's
profitability assumptions for the ongoing Porvoo refinery upgrade
investment and give a good starting point for the future listing
of the oil businesses.

The oil refining reference margin in north-western Europe (Brent
Complex) averaged USD 6.3 (2.1) /bbl during the second quarter.
During the first half of July, the reference margin has averaged
USD 7/bbl. Fortum’s premium margin is expected to remain at the
strong levels of previous years. No major maintenance shutdowns
are planned at the refineries during 2004.

The average price for Brent crude oil was USD 35.3 (26.0) /bbl
during the second quarter. During the first half of July 2004, the
price has been averaging USD 36.7/bbl while the International
Petroleum Exchange’s Brent futures for the remainder of 2004 have
been averaging USD 36.5/bbl. The price of crude oil has an impact
on the results of Oil Refining through inventory gains and losses.

Available tanker freight futures indicate that second-quarter rate
levels will remain unchanged during the third quarter.

The refining margins and shipping freights are exposed to USD
exchange rate volatility and therefore a weakened US dollar will
have a negative impact on the profitability of the oil business.
However, this impact is mitigated because of the forward hedging
policy of the estimated US dollar sales margins.

During the second quarter, the euro exchange rates against the US
dollar and the Swedish crona were on average 1.228 (1.105) and
9.164 (9.186) respectively. At the end of June, the exchange rates
were 1.216 (1.143) and 9.145 (9.249) respectively.

Preparations for listing the oil businesses continued during the
second quarter, aiming at readiness towards the end of the year.
The timing of the planned initial public offering will depend on
market conditions, however.

The third quarter of the year is usually the weakest quarter for
the continuous operations of the power and heat businesses. The
electricity prices in the forward market for the remainder of the
year are somewhat higher than the corresponding forward prices for
the remainder of 2003 in July last year.

The very strong first half-year is evidence of Fortum's
operational efficiency. This, together with the current market
fundamentals and the company's hedging positions further
strengthen management's confidence in 2004 being a good year for
Fortum.

Espoo, 28 July 2004
Fortum Corporation
Board of Directors


The figures have not been audited.

Fortum will adopt the International Financial Reporting Standards
(IFRS/IAS) as of 2005.

Publication of results in 2004:
The Interim Report 1 January - 30 September 2004 will be published
on 21 October 2004


Fortum Corporation
Carola Teir-Lehtinen
Senior Vice President, Corporate Communications


Further information:
Mikael Lilius, President and CEO, tel. +358 10 452 9100
Juha Laaksonen, CFO, tel. +358 10 452 4519


Distribution:
Helsinki Exchanges
Key media


FORTUM GROUP
JANUARY-JUNE 2004

Interim financial statements are unaudited

CONSOLIDATED INCOME STATEMENT

MEUR Q2/04 Q2/03 Q1-Q2/ Q1-Q2/ 2003 Last
04 03 twelve
months

Net sales 2 830 2 435 5 653 6 028 11 392 11 017
Share of profits of
associated companies 17 9 27 20 41 48
Other operating income 33 63 82 76 151 157
Materials and services -1 880 -1 739 -3 753 -4 380 -8 054 -7 427
Personnel expenses -181 -175 -353 -354 -654 -653
Depreciation,
amortisation and
write-downs -131 -134 -252 -267 -538 -523
Other operating expenses -245 -173 -399 -362 -918 -955

Operating profit 443 286 1 005 761 1 420 1 664
Financial income and
expenses -67 -70 -142 -135 -236 -243

Profit before taxes 376 216 863 626 1 184 1 421
Income taxes -47 -60 -194 -167 -325 -352
Minority interests -1 -14 -20 -47 -90 -63
Net profit for the period 328 142 649 412 769 1 006

Earnings per share, EUR 0.38 0.17 0.76 0.49 0.91 1.19
Fully diluted earnings per
share, EUR 0.38 0.16 0.75 0.48 0.90
Average number of shares,
1,000 shares 849 698 845 823 846 831 848 021
Diluted adjusted average
number of shares, 1,000 shares 867 907 855 935 858 732

CONSOLIDATED BALANCE SHEET
MEUR June 30 June 30 Dec 31
2004 2003 2003
ASSETS

Fixed assets and other long-term investments
Intangible assets 138 159 146
Property, plant and equipment 11 550 11 426 11 632
Other long-term investments 1 854 1 705 1 762
Other interest-bearing long-term
investments 693 618 632
Total 14 235 13 908 14 172

Current assets
Inventories 600 539 551
Trade receivables 874 871 951
Short-term receivables 335 511 449
Cash and cash equivalents 196 665 439
Total 2 005 2 586 2 390
Total 16 240 16 494 16 562

SHAREHOLDERS' EQUITY AND LIABILITIES

Shareholders' equity
Share capital 2 889 2 876 2 886
Other equity 3 820 3 151 3 520
Total 6 709 6 027 6 406

Minority interests 250 1 434 232
Provisions for liabilities and char 200 191 207
Deferred tax liabilities 1 850 1 775 1 843
Liabilities
Long term liabilities
Interest-bearing 4 337 3 646 4 840
Interest free 352 335 346
Short term liabilities
Interest-bearing 1 152 1 522 1 225
Interest free 1 390 1 564 1 463
Total 16 240 16 494 16 562

Equity per share, EUR 7.89 7.13 7.55
Number of shares, 1,000 shares 849 813 845 848 848 832

CHANGE IN SHAREHOLDERS' EQUITY
MEUR Jan-June 30 Jan-June 30 Dec 31
2004 2004 2003

Shareholders' equity, 1 January 6 406 5 897 5 897
Stock options exercised 2 - 22
Dividend -359 -264 -264
Translation differencies 11 -18 -18
Net earnings for the period 649 412 769
Total 6 709 6 027 6 406

CASH FLOW STATEMENT
MEUR June 30 June 30 Dec 31
2004 2003 2003

Net cash from operating activities 1 043 1 060 1 577
Capital expenditures -248 -244 -550
Acquisition of shares -30 -503 -570
Proceeds from sales of fixed assets 29 80 142
Proceeds from sales of shares 16 1 219 1 227
Change in other investments -136 -32 -67

Cash flow before financing activities 674 1 580 1 759
Net change in loans -562 -1 204 -399
Dividends paid -359 -264 -264
Other financing items * 2 -40 -1 245

Net cash from financing activities -919 -1 508 -1 908

Net increase (+)/decrease (-) in ca
and marketable securities -245 72 -149

* Includes the redemption of Fortum Capital Ltd preference shares
-1 200 million euros in December 2003

KEY RATIOS June 30 June 30 Dec 31 Last
2004 2003 2003 twelve
months

Capital employed, MEUR 12 447 13 077 12 704
Interest-bearing net debt, MEUR *) 5 293 4 502 5 626
Investments, MEUR 276 761 1 136 653
Return on capital employed, % 16.1 12.1 11.4 13.3
Return on shareholders' equity, % *) 19.4 11.9 12.3 14.7
Interest coverage 7.9 5.4 5.8 7.2
FFO / interest-bearing net debt, % 1) 39.9 41.8 26.1
Gearing, % *) 76 60 85
Equity-to-assets ratio, % 43 45 40
Average number of employees 13 097 13 272 13 343

1) FFO = Funds from operations

*) Figures include the effect of the redemption of Fortum Capital Ltd
preference shares in Dec 31 2003 and June 30 2004.

NET SALES BY SEGMENTS
MEUR Q2/04 Q2/03 Q1-Q2/04 Q1-Q2/03 2003 Last
twelve
months

Power Generation 488 573 1 052 1 533 2 681 2 200
Heat 195 182 556 540 964 980
Distribution 157 160 363 359 688 692
Markets 303 332 722 890 1 634 1 466
Oil Refining 1 635 1 265 2 938 2 962 5 693 5 669
Oil Retail 566 521 1 097 1 107 2 203 2 193
Shipping and other Oil 78 87 179 181 308 306
Other 24 22 45 44 93 94
Eliminations -616 -707 -1 299 -1 588 -2 872 -2 583
Total 2 830 2 435 5 653 6 028 11 392 11 017

OPERATING PROFIT BY SEGMENTS

MEUR Q2/04 Q2/03 Q1-Q2/04 Q1-Q2/03 2003 Last
twelve
months

Power Generation 138 116 366 328 603 641
Heat 27 22 134 99 173 208
Distribution 54 61 141 142 247 246
Markets 5 12 15 5 35 45
Oil Refining 187 51 280 135 281 426
Oil Retail 20 10 26 25 44 45
Shipping and other Oil 23 19 67 46 79 100
Other -11 -5 -24 -19 -42 -47
Total 443 286 1 005 761 1 420 1 664

NON-RECURRING ITEMS IN OPERATING PROFIT BY SEGMENTS

MEUR Q2/04 Q2/03 Q1-Q2/04 Q1-Q2/03 2003 Last
twelve
months

Power Generation -2 - 22 -1 4 27
Heat - - - - -3 -3
Distribution - 20 - 21 20 -1
Markets - - - - - -
Oil Refining 55 -17 65 -14 14 93
Oil Retail 3) 6 - 6 1 -9 -4
Shipping and other Oil 5 -1 4 -3 10 17
Other - 12 - 14 24 10
Total 64 14 97 18 60 139

3) Split between segments corrected in 2003 figures

DEPRECIATION, AMORTISATION AND WRITE-DOWNS BY SEGMENTS

MEUR Q2/04 Q2/03 Q1-Q2/04 Q1-Q2/03 2003 Last
twelve
months

Power Generation 28 29 56 60 116 112
Heat 32 28 61 56 116 121
¨
Distribution 33 38 66 75 143 134
Markets 4 4 8 7 14 15
Oil Refining 19 20 37 39 80 78
Oil Retail 8 7 15 15 41 41
Shipping and other Oil 3 4 5 8 14 11
Other 4 4 4 7 14 11
Total 131 134 252 267 538 523

INVESTMENTS BY SEGMENTS
MEUR Q2/04 Q2/03 Q1-Q2/04 Q1-Q2/03 2003 Last
twelve
months

Power Generation 47 290 62 328 386 120
Heat 27 62 50 76 158 132
Distribution 26 201 40 224 339 155
Markets 0 26 2 26 28 4
Oil Refining 37 21 67 44 97 120
Oil Retail 7 8 11 13 36 34
Shipping and other Oil 24 35 40 41 71 70
Other 2 6 6 9 21 18
Total 170 649 278 761 1 136 653

NET ASSETS BY SEGMENTS
MEUR June 30 June 30 Dec 31
2004 2003 2003

Power Generation 6 188 6 276 6 391
Heat 2 393 2 302 2 466
Distribution 3 103 3 046 3 129
Markets 177 124 23
Oil Refining 1 111 1 075 1 003
Oil Retail 281 285 329
Shipping and other Oil 168 139 133
Other 127 59 45
Eliminations -10 -10 -8
Total 13 538 13 296 13 511

RETURN ON NET ASSETS BY SEGMENTS 3)

% June 30 June 30 June 30 June 30 Dec 31 Dec 31 Last Last
2004 2004*) 2003 2003*) 2003 2003*) twelve twelve
months months*)

Power Generation 11.7 11.0 10.3 10.4 9.5 9.4 10.2 9.8
Heat 11.0 11.0 8.5 8.5 7.3 7.5 8.7 8.8
Distribution 9.1 9.1 9.0 7.7 7.9 7.2 7.9 8.0
Markets 25.2 25.2 12.7 12.7 55.2 55.2 41.8 41.8
Oil Refining 2) 52.2 40.1 24.5 27.0 26.2 24.9 39.8 31.1
Oil Retail 2) 17.5 13.5 16.0 15.4 13.8 16.6 15.0 16.3
Shipping and
other Oil 88.7 83.4 66.7 71.0 56.7 49.5 67.4 55.9

*) Non-recurring items deducted from operating profit
2) December 31 2003*) figures corrected due to corrections in non-recurring
items.
3) Return on net assets, % = Operating profit/average net assets


CONTINGENT LIABILITIES
MEUR June 30 June 30 Dec 31
2004 2003 2003
Contingent liabilities
On own behalf
For debt
Pledges 162 512 149
Real estate mortgages 91 233 91
Company mortgages - - -
Other mortgages - - -
For other commitments
Real estate mortgages 57 54 55
Pledges, company and other mortgages 3 1 -
Sale and leaseback 8 9 8
Other contingent liabilities 79 99 101
Total 400 908 404
On behalf of associated companies
Pledges and real estate mortgages 11 12 12
Guarantees 442 637 562
Other contingent liabilities 182 182 182
Total 635 831 756
On behalf of others
Guarantees 13 23 15
Other contingent liabilities 5 6 7
Total 18 29 22
Total 1 053 1 768 1 182

Operating lease liabilities
Due within a year 54 61 75
Due after a year 93 121 103
Total 147 182 178

Liability for nuclear waste disposal 570 545 570
Share of reserves in the Nuclear Waste
Disposal fund -560 -535 -560
Liabilities in the balance sheet 4) 10 10 10

4) Mortgaged bearer papers as security

In addition to other contingent liabilities a guarantee has been given on
behalf of Gasum Oy, which covers 75% of the natural gas commitments arising
from the natural gas supply agreement between Gasum and OOO Gazexport.


Derivatives

Interest and currency derivates
MEUR
June 30, 2004 June 30, 2003 Dec 31, 2003

6) 7) 8) 6) 7) 8) 6) 7) 8)
Forward rate
agreemenents 218 -1 -1 784 -1 -1 330 - -
Interest rate swaps 4 012 -90 -62 6 015 8 46 4 253 -97 -69
Forward foreign
exchange contracts 5) 7 280 13 9 7 599 57 46 8 396 129 49
Currency swaps 327 1 -2 530 36 10 333 -3 1
Purchased currency
options 1 697 -16 -8 64 7 7 - - -
Written currency
options 1 718 -3 -1 29 1 1 - - -

5) Incl. also contracts used for equity hedging
6) Contract or notional value
7) Fair value
8) Not recognised as an income


Oil futures and forwarded instruments

June 30, 2004 June 30, 2003 Dec 31, 2003

9) 10) 11) 9) 10) 11) 9) 10) 11)
1000 MEUR MEUR 1000 MEUR MEUR 1000 MEUR MEUR
bbl bbl bbl

Sales contracts 16 536 -10 -10 16 589 - - 22 304 -11 -11
Purchase contracts 57 027 17 17 19 241 3 3 37 239 14 14
Purchased options 7 350 -1 -1 400 - - 150 - -
Written options 5 500 1 1 600 - - 600 - -

9) Volume
10) Fair value
11) Not recognised an an income


Electricity derivatives

June 30, 2004 June 30, 2003 Dec 31, 2003

9) 10) 11) 9) 10) 11) 9) 10) 11)
TWh MEUR MEUR TWh MEUR MEUR TWh MEUR MEUR
Sales contracts 70 -382 -189 77 -368 -226 58 -100 -65
Purchase contracts 40 297 100 74 337 195 50 136 101
Purchased options - - - 3 -2 -2 - - -
Written options - - - 7 - - - - -


Natural gas derivatives

9) 10) 11) 9) 10) 11) 9) 10) 11)
Mill. MEUR MEUR Mill. MEUR MEUR Mill. MEUR MEUR
th. th. th.
Sales contracts - - - 3 135 -38 -38 8 - -
Purchase contracts - - - 2 965 38 38 8 - -
Purchased options - - - 980 -5 -5 - - -
Written options - - - 1 039 7 7 - - -

The fair values of derivative contracts subject to public trading are
based on market prices as of the balance sheet date. The fair values
of other derivatives are based on the present value of cash flows
resulting from the contracts, and, in respect of options, on evaluation
models. The amounts also include unsettled closed positions. Derivative
contracts are mainly used to manage the group's currency, interest rate
and price risk.

QUARTERLY NET SALES BY SEGMENTS

MEUR Q2/04 Q1/04 Q4/03 Q3/03 Q2/03 Q1/03

Power Generation 488 564 624 524 573 960
Heat 195 361 292 132 182 358
Distribution 157 206 187 143 160 198
Markets 303 419 422 322 332 558
Oil Refining 1 635 1 303 1 382 1 349 1 265 1 697
Oil Retail 566 531 553 543 521 586
Shipping and other Oil 78 101 65 62 87 94
Other 25 20 25 24 22 22
Eliminations -617 -682 -713 -572 -707 -880
Total 2 830 2 823 2 837 2 527 2 435 3 593

QUARTERLY OPERATING PROFIT BY SEGMENTS

MEUR Q2/04 Q1/04 Q4/03 Q3/03 Q2/03 Q1/03

Power Generation 138 228 193 82 116 212
Heat 27 107 80 -6 22 77
Distribution 54 87 58 47 61 81
Markets 5 10 17 13 12 -7
Oil Refining 187 93 57 89 51 84
Oil Retail 20 6 -2 21 10 15
Shipping and other Oil 23 44 24 9 19 27
Other -11 -13 -7 -16 -5 -14
Total 443 562 420 239 286 475