Financial Statements 2002

A good year for Fortum: major strategic moves and significant increase in earnings
 
 
The year in brief
 
- Pre-tax profit of EUR 1,008 million, 44% up on previous year
-         Earnings per share of EUR 0.79, 39% up on previous year, despite tax charge of EUR 70 million relating to sale of Norwegian E&P assets in the fourth quarter
-         Continued strong net cash from operating activities, EUR 1,351 million
-         Significant structural changes to implement the strategy
-         Good progress of Birka Energi integration, synergy benefits will exceed target
-         Board of Directors proposes a dividend of EUR 0.31 per share (EUR 0.26 in 2001)
 
Key indicators
IV/02
IV/01
2002
2001
 
 
 
 
 
Net sales, EUR million
3,290
2,536
11,148
10,410
Operating profit, EUR million
391
171
1,289
914
Profit before taxes, EUR million
318
119
1,008
702
Earnings per share, EUR
0.22
0.08
0.79
0.57
Equity per share, EUR
 
 
6.97
6.49
Capital employed (at end of period), EUR million
 
 
13,765
11,032
Interest-bearing net debt (at end of period), EUR million
 
 
5,846
3,674
Investments, EUR million
 
 
4,381
713
Net cash from operating activities, EUR million
 
 
1,351
1,145
Cash flow before financing activities, EUR million
 
 
-27
844
Return on capital employed, %
 
 
11.1
8.7
Return on shareholders’ equity, %
 
 
10.5
8.3
Gearing, %
 
 
80
54
Number of employees (at end of period)
 
 
13,670
13,425
Average number of employees
 
 
14,053
14,803
 
 
During the first half of 2002, Fortum implemented its strategic agenda through major restructuring. Key acquisitions as well as several major divestments in non-core areas were concluded in this period. The single most important transaction was the acquisition in February of the remaining 50% of the former Birka Energi AB, renamed Fortum Power and Heat AB, which strengthened Fortum’s market position in the Nordic area. The process to combine the two power and heat businesses started immediately and the new pan-Nordic organisation became effective on 1 July.
 
During the second half of the year, Fortum focused on delivering on the targets set for the Birka Energi transaction. Progress has been good and the synergy benefits will exceed the set target of EUR 100 million. To further restructure the Group in line with the strategic agenda, the agreement on the divestiture of the Norwegian oil exploration and production assets was signed and the power plant engineering business was reorganised. The fourth quarter was characterised by cold weather and high market prices, and the performance of all major businesses was quite satisfying. Fortum continued to concentrate on cash flow and net debt was further decreased. By year-end, the company’s gearing stood at 80%. Taking into account the disposal of the Norwegian E&P assets the pro forma gearing was at the company’s target level, under 70%.
 
In January 2003, Fortum agreed with E.ON AG on a power asset swap. The transactions will substantially strengthen Fortum´s position in its focus area, the Nordic countries and the rest of the Baltic Rim.
 
 
Net sales and results
 
Group net sales stood at EUR 11,148 million (EUR 10,410 million in 2001). The acquisition of the former Birka Energi coupled with higher market prices pushed up the net sales of the Group’s power and heat businesses. The average price of crude oil was slightly up on the previous year, and the net sales of the Group’s oil businesses were at the same level as a year earlier. Towards the end of the year, prices of both oil and electricity increased markedly.
 
 
Net sales by segment
EUR million
2002
2001
Power, Heat and Gas
2,898
2,227
Electricity Distribution
640
473
Fortum Energy Solutions
664
603
Oil Refining and Marketing
7,195
7,223
Oil and Gas Upstream
391
408
Other operations
64
95
Internal invoicing
-704
-619
Group
11,148
10,410
 
 
Group operating profit totalled EUR 1,289 (914) million. The operating profit excluding non-recurring items, EUR 974 (890) million, improved by EUR 84 million on the yearly basis. During the fourth quarter, the improvement in 2002 was EUR 193 million on the corresponding period in 2001. The total amount of non-recurring items was EUR 315 (24) million.
 
Total electricity and heat sales volumes rose but the comparable volumes were down on the previous year mainly due to lower demand for industrial electricity and the exceptionally warm weather conditions during the first three quarters of the year. However, during the last quarter, the electricity volumes rose and there was a significant improvement in the results for the Power, Heat and Gas segment.
 
The comparable volumes of electricity transmitted in local distribution networks increased and the results for Electricity Distribution were clearly up on the previous year.
 
The results for Fortum Energy Solutions improved significantly on the previous year.
 
A restructuring charge of EUR 20 million was included in the fourth quarter results relating to the Birka Energi acquisition.
 
Lower international refining margins affected the results of Oil Refining and Marketing, but the decrease was offset by inventory gains of EUR 57 (-79) million. Deliveries of petroleum products refined by Fortum increased and the performance of the oil retail business improved compared to the corresponding figures in 2001. Shipping’s performance was depressed by low freight rates, which, however, started to increase sharply towards the end of the year. The MTBE plant in Canada was closed for conversion to iso-octane for three months, which had a substantial negative effect on the results of the gasoline component business.
 
Owing to increased production volumes in Norway and the gains from the sale of the Omani oil production interests, the results of Oil and Gas Upstream were somewhat up on the previous year despite lower market prices for gas and the divestiture of the Omani assets.
 
 
Operating profit by segment
EUR mill.
2002
2001
Power, Heat and Gas
560
367
Electricity Distribution
279
135
Fortum Energy Solutions
37
13
Oil Refining and Marketing
259
242
Oil and Gas Upstream
213
196
Other operations
-64
-40
Eliminations
5
1
Group
1,289
914
 
 
Profit before taxes was EUR 1,008 (702) million.
 
The Group´s net financial expenses were EUR 281 (212) million.
 
Minority interests accounted for EUR 73 (83) million of the results for the period. These minority interests were mainly attributable to the preference shares issued by Fortum Capital Ltd in 2000 and to Fortum Värme Holding, in which the City of Stockholm has a 50% economic interest.
 
Taxes for the period totalled EUR 269 (160) million. A tax charge of EUR 70 million incurred in the fourth quarter due to the divestiture of the Norwegian exploration and production assets.
 
Net profit for the period was EUR 666 (459) million. Earnings per share were EUR 0.79 (0.57). Return on capital employed was 11.1% (8.7%) and return on shareholders´ equity was 10.5% (8.3%).
 
As from 1 March 2002, the former Birka Energi has been 100% consolidated into Fortum’s figures. Until then, it had been consolidated using the proportionate method on the basis of 50% ownership.
 
 
Segment reviews
 
Power, Heat and Gas
 
Fortum is the second largest power company in the Nordic countries as well as the leading district heat producer in the region. Fortum owns and manages power and heating plants and has stakes in power and heating plants. Fortum sells electricity and heat generated by these facilities on the Nordic market. Fortum is also active in the gas sector.
 
 
EUR million
IV/02
IV/01
2002
2001
Net sales
979
645
2,898
2,227
- electricity sales
566
318
1,588
1,269
- heat sales
223
141
649
464
- other sales
190
186
661
494
Operating profit
241
114
560
367
- excluding non-recurring items
245
98
469
305
Net assets
 
 
8,642
5,873
Return on net assets, %
 
 
6.9
6.3
 
 
Electricity market prices were low during the first eight months of the year but increased sharply towards the end of the year. The full-year average price of electricity on the Nordic power exchange (Nord Pool) was EUR 26.9 (23.1 in 2001) per megawatt-hour (MWh), about 16% higher than in 2001. The rise in the market price of electricity also led to increases in the electricity retail price. Electricity consumption in the Nordic countries decreased by 1.8% to 386 TWh. In Finland, there was an increase in electricity consumption of approximately 2.6% while in Sweden, there was a 1.4% decrease.
 
Fortum’s electricity sales in the Nordic countries in 2002 amounted to 54.5 (47.1) TWh. Sales in other countries were 4.5 (6.6) TWh. Fortum`s sales represented approximately 14% (12%) of total Nordic electricity consumption in 2002. The average price of electricity sold by Fortum in the Nordic countries was up approximately 10% on the previous year.
 
Fortum´s electricity generating capacity in the Nordic countries was 11,091 (9,149) MW at the end of the year, while its total capacity was 11,347 (10,223) MW. In the Nordic countries Fortum generated 46.5 (41.0) TWh of electricity, or 12% (11%) of the electricity generated in this market. Hydropower accounted for 18.1 (17.0) TWh, or 39% (41%), and nuclear power some 22.0 (18.7) TWh, or 47% (46%), of Fortum’s own power generation, while the share of thermal power was 14% (13%).
 
Fortum’s sales of heat in the Nordic countries were 18.1 (15.6) TWh.
 
Electricity sales by area
TWh
IV/02
IV/01
2002*)
2001*)
Sweden
8.4
5.1
28.0
19.4
Finland
8.0
6.9
26.2
27.6
Other countries
0.5
2.2
4.8
6.7
Total
16.9
14.2
59.0
53.7
 
Heat sales by area
TWh
IV/02
IV/01
2002*)
2001*)
Sweden
3.6
1.6
8.2
4.7
Finland
2.7
3.1
9.8
10.9
Other countries
0.7
0.5
2.4
1.7
Total
7.0
5.2
20.4
17.3
*) includes 100% of Birka Energi’s figures as from March 2002, 50% prior to this
 
During the period from March to December the effect of Birka Energi’s change of ownership on electricity sales and heat volumes was 9.6 TWh and 3.5 TWh respectively.
 
 
Electricity distribution
 
Based on the number of customers, Fortum is the biggest actor in the Nordic distribution market. In Sweden, Finland and Estonia, Fortum owns and operates distribution and regional networks and distributes electricity to a total of 1.3 million customers. Fortum’s market share of electricity distribution is 15% in Finland and 20% in Sweden.
 
EUR million
IV/02
IV/01
2002
2001
Net sales
185
135
640
473
- distribution network transmission
149
105
526
376
- regional network transmission
24
13
80
54
- other sales
12
17
34
43
Operating profit
60
30
279
135
- excluding non-recurring items
59
27
187
120
Net assets
 
 
3,200
2,113
Return on net assets, %
 
 
9.3
6.2
 
The integration of the distribution operations of Swedish Birka Energi and Finnish Uudenmaan Sähköverkko was completed in 2002. In Sweden, the first steps were taken towards the creation of a unified price structure.
 
The volume of distribution and regional network transmissions totalled 21.2 (15.0) TWh and 20.6 (16.7) TWh respectively. Electricity transmissions via the regional distribution network to customers outside the Group totalled 14.3 (8.4) TWh in Sweden and 6.3 (8.2) TWh in Finland.
 
 
Volume of distributed electricity in distribution networks
TWh
IV/02
IV/01
2002*)
2001*)
Sweden
4.9
1.7
14.4
7.7
Finland
1.9
1.3
5.4
4.4
Other countries
0.0
0.8
1.4
2.9
Total
6.8
3.8
21.2
15.0
*) includes 100% of Birka Energi’s figures as from March 2002, 50% prior to this
 
The Birka Energi acquisition accounts for a 6.4 TWh increase in the volumes transmitted via the distribution networks.
 
 
Number of electricity distribution customers by area
 
2002
2001
Sweden*)
890,000
450,000
Finland**)
390,000
280,000
Other countries
20,000
180,000
Total
1,300,00
910,000
*) includes 100% of Birka Energi’s figures in 2002, 50% in 2001
**) acquisition of Uudenmaan Sähköverkko Oy in May 2002
 
 
 
Fortum Energy Solutions (Fortum Service as of 1 January 2003)
 
Fortum Service’s core business is operation and maintenance services for power plants and medium-sized industrial customers. The unit also specialises in combined heat and power technology (CHP) and energy consulting.
 
 
EUR million
IV/02
IV/01
2002
2001
Net sales
214
87
664
603
Operating profit
19
5
37
13
- excluding non-recurring items
2
0
11
-8
Net assets
 
 
96
236
Return on net assets, %
 
 
19.7
5.5
 
During the year, reorganisation of the unit continued. The restructuring of the power plant engineering business was completed and the shares of Fortum Engineering were sold in January 2003 to Enprima, a new company partly owned by Fortum.
 
Following the restructuring of the power plant engineering business, the name of the unit was changed to Fortum Service.
 
The maintenance function expanded its operations to a new customer segment, the chemical industry. Several new maintenance and refurbishment contracts in power plants as well as substation maintenance contracts were secured both in Finland and in Sweden.
 
 
Oil Refining and Marketing
 
Fortum is the biggest refiner in the Nordic countries with a total capacity of some 14 million tonnes per year. Fortum is one of the two biggest suppliers of petroleum products in the Nordic wholesale market. It owns two oil refineries in Finland and a network of service stations and other retail outlets in Finland and the other countries in the Baltic Rim. Fortum also owns and charters tankers and owns oil storage facilities.
 
EUR million
IV/02
IV/01
2002
2001
Net sales
2,002
1,636
7,195
7,223
Operating profit
38
15
259
242
- excluding non-recurring items
44
77
211
317
Net assets
 
 
1,514
1,688
Return on net assets, %
 
 
16.3
14.3
 
The international refining margin in north-western Europe (Brent Complex) was considerably lower than in 2001. The average refining margin for the year was USD 1.0 /bbl (USD 1.9/bbl in 2001). Fortum’s premium margin remained strong at about USD 2.0/bbl above the international reference margin.
 
The price of crude oil fluctuated between USD 20/bbl at the beginning of the year and USD 31/bbl at the end of the year. As a result, inventory gains were EUR 57 (-79) million.
 
In March 2002, a new unit for producing sulphur-free gasoline at the Naantali refinery was commissioned. As a result of the investments made in 2001 and 2002, Fortum’s refineries are now fully converted to production of sulphur-free traffic fuels.
 
In August, Fortum started production of ethanol-based gasoline at the Porvoo refinery.
 
The MTBE production plant in Edmonton, Canada, in which Fortum has a 50% holding, was converted into an iso-octane facility. The plant is the first in the world to begin production of iso-octane after conversion. The first deliveries took place in November. All of the iso-octane production at the plant is sold to the Californian market.
 
The recession in the shipping freight market started in late 2001 and continued into 2002. However, towards the end of the year, there was a significant increase in the freight volumes carried by the safer double-hulled vessels. This trend had a positive impact on Fortum’s shipping business.
 
Fortum’s share of the wholesale market for petroleum products in Finland was about 75% (75% in 2001) or 8.0 (7.8) million tonnes, and its share of the retail market was about 39% (40%) or 3.9 (3.8) million tonnes.
 
Exports from Finland of petroleum products refined by Fortum totalled 5.2 (4.9) million tonnes. Of this, 2.8 million tonnes was motor gasoline and 1.9 million tonnes diesel fuel. Half of the motor gasoline was exported to the European market. Of this, 90% was low-sulphur (sulphur content below 50 ppm) or sulphur-free (sulphur content below 10 ppm). The main markets for sulphur-free gasoline were Germany, the USA and Canada. All diesel exports were low-sulphur or sulphur-free. The main markets for diesel fuel were Sweden, the Netherlands and Germany.
 
 
Deliveries of petroleum products refined by Fortum, by product group
1,000 t
2002
2001
Gasoline
4,595
3,823
Diesel
3,619
3,310
Aviation fuel
586
455
Light fuel oil
1,503
1,713
Heavy fuel oil
1,233
1,201
Other
1,504
1,641
Total
13,040
12,143
 
 
Deliveries of petroleum products refined by Fortum, by area
1,000 t
2002
2001
Finland
7,845
7,484
Other Nordic countries
1,982
1,991
Baltic countries and Russia
41
45
USA and Canada
1,276
682
Other countries
1,896
1,941
Total
13,040
12,143
 
 
Oil and Gas Upstream
 
Oil and gas exploration and production activities in Fortum were subject to major restructuring. In 2002, production operations were restricted exclusively to Norway. Current activities concentrate on north-western Russia.
 
EUR million
IV/02
IV/01
2002
2001
Net sales
127
81
391
 408
Operating profit
56
33
213
196
- excluding non-recurring items
69
33
159
196
Net assets
 
 
934
1,271
Return on net assets, %
 
 
19.4
15.4
 
The average price of North Sea light Brent crude oil was USD 25.0/bbl (USD 24.4/bbl). The average price of crude oil sold by Fortum was USD 25.5/bbl (23.7/bbl), and the corresponding equivalent price of gas was USD 17.6/bbl (19.0/bbl).
 
In 2002, Fortum divested its oil field assets in Oman and signed an agreement to divest its assets in Norway. The production in Oman is not included in the segment’s figures for 2002. Investments in Russian oil and gas fields continued according to plan.
 
In 2002, Fortum’s oil and gas production amounted to 40,800 (40,200) boepd. This was equivalent to an annual output of about 2.0 (2.0) million oil-equivalent tonnes. Natural gas accounted for approximately 28% (18%) of production. The increased natural gas production in Norway offset the fall in output resulting from the divestment in Oman.
 
The start of oil exploration and production in the South Shapkino oil field in Russia is scheduled for late 2003. The reserves of the South Shapkino oil field, which is 50% owned by Fortum and the Russian company Lukoil, have been estimated at 164 million barrels (over 20 million tonnes).
 
 
Fortum Markets
 
The Fortum Markets unit focuses on the retail sale of electricity and oil products as well as related services. The unit has some 1.3 million business and private customers. In 2002, the emphasis was on improving the quality of service through the development of a cost-effective, customer-oriented approach. The provision of competitive products and services to improve customer satisfaction will continue to be a priority.
 
The figures for Fortum Markets are included in the figures for Power, Heat and Gas and for Oil Refining and Marketing. The result of retail sales of electricity was slightly negative.
 
Investments
 
Investments in fixed assets during the year totalled EUR 4.381 (713) million. The increase was due to the acquisition of 50% of the Swedish energy company Birka Energi’s shares. The deal was completed in February 2002. In May, Fortum consolidated its Nordic position further by acquiring the remaining 50% share in the Finnish Elnova Group with its electricity retail sales and distribution businesses.
 
The modernisation and expansion of a CHP-plant in the Stockholm area started in the autumn. The investment will create additional capacity and shift the emphasis of the fuel mix towards recycled fuels (mainly municipal waste). Annually, the new boiler will replace 70,000 tonnes of fuel oil with recycled fuel.
 
Shares were acquired in some small heating companies in the Baltic Rim area.
 
In March, a new unit for producing sulphur-free gasoline at the Naantali refinery was commissioned. At the Porvoo refinery, the first pilot plant for liquefied wood fuel in the Nordic countries began production in May and production of ethanol-based 98-octane gasoline was started in August. Production of the flow-improving additive (FIA) began during the first half of the year.
 
The MTBE production plant in Edmonton, Canada, in which Fortum has a 50% holding, was converted into an iso-octane facility. Production was gradually phased in during the last quarter of the year.
 
The tanker fleet renewal continued, new Neste stations were opened in the Baltic Rim countries and in Russia. The investment to start up oil production in Russia continued according to plan.
 
 
Divestments
 
In line with its strategy, Fortum sold its shares in Fortum Energie GmbH and the Afferde combined heat and power plant in Germany, the Regional Power Generators Limited in the UK, the Thai subsidiary Laem Chabang Power Company Limited, as well as its shareholding in Espoon Sähkö Oyj in Finland.
 
The restructuring of the power plant engineering business was completed in January 2003.
 
In February 2002, Fortum divested its interests in the oil fields in Oman. The deal was completed in June. The Norwegian oil and gas reserves were sold in November. The parties have received all the necessary approvals and the transaction will be finalised in early March 2003.
 
Minor divestments include diesel stations in Sweden, real estate and ships.
 
 
Financing
 
In early 2002, Fortum’s net debt increased substantially following the acquisition of Birka Energi. During the year, however, net debt was reduced considerably. Year-end net debt stood at EUR 5,846 million (EUR 3,674 million in 2001) and gearing was 80% (54%). The Group’s net financing expenses for 2002 were EUR 281 (212) million.
 
In October 2002, Fortum applied to two leading international credit rating agencies for corporate long-term credit ratings. Standard & Poor’s assigned Fortum Oyj a BBB+ (stable) rating while Moody’s rated it Baa2 (positive). At the same time, they confirmed the long-term credit rating of Fortum Power and Heat AB (formerly Birka Energi AB) as BBB+ and Baa1 (stable).
 
Fortum did not conclude any new significant long-term financing arrangements in 2002. A large proportion of the EUR 1.2 billion loan taken out in February 2002 to finance the Birka deal was paid off during the year using proceeds from the disposal of assets and in January 2003, the remaining part of the loan was paid off in full.
 
Group liquidity remained good. Year-end cash and marketable securities totalled EUR 592 million. In addition, the Group had a total of approximately EUR 1,772 million in undrawn credit facilities. Of this, approximately EUR 700 million short-term facilities were signed in December. Also in December, Fortum Oyj concluded agreements for a commercial paper programme worth SEK 5,000 million, which, together with the Finnish programme worth EUR 500 million, will cover the Group’s short-term financing needs.
 
The average interest rate of loans after hedging was 5.2% at year end.
 
 
Shares and share capital
 
A total of 148,380 shares relating to Fortum Corporation’s 1999 bond loan with warrants issued to employees were subscribed for and entered into the trade register between 17 May and 31 December 2002. A total of 3,000 shares relating to Fortum Corporation’s 1999 share option programme for key employees were subscribed for and entered into the trade register between 1 October and 31 December 2002.
 
After the increase, Fortum Corporation´s share capital is EUR 2,875,583,847 and the total number of shares is 845,759,955. Fortum Corporation’s share capital increased by a total of EUR 514,692.
 
A total of 251.2 million shares were traded for a total of EUR 1,475 million during 2002. The highest quotation was EUR 6.52 (3 May), the lowest EUR 4.75 (2 January), and the middle-market quotation EUR 5.87. The closing quotation on 30 December was EUR 6.25.
 
 
Personnel
 
In 2002, the Fortum Group employed an average of 14,053 (14,803) people. The divestment of Transmission Engineering in 2001 together with the major part of the German power businesses in 2002 accounted for most of the decrease. By contrast, the acquisition of the remaining 50% of Birka Energi increased the number of personnel by 1,758. At the end of the year, the number of employees totalled 13,670 (13,425). The number of employees in the parent company Fortum Corporation at year end totalled 310 (340) people.
 
 
Group management
 
Mr Christian Lundberg was appointed to head Fortum Markets and member of the Corporate Executive Committee as of 1 February 2003.
 
 
Events after the period under review
 
On 31 January 2003, Fortum and E.ON AG agreed on an asset swap with an aggregate value of EUR 770 million. The value of assets to be acquired by Fortum is EUR 460 million. The value of assets to be sold is EUR 310 million, leading to a balancing consideration of EUR 150 million. The transactions will substantially strengthen Fortum´s position in its focus area, the Nordic countries and the rest of the Baltic Rim.
 
 
Fortum is to acquire 21.4% of the shares in Hafslund ASA, the second biggest electricity company in Norway with 600,000 electricity sales customers, 550,000 distribution customers and about 3 TWh of hydropower production. In addition, Fortum is to acquire all the shares in Ostfold Energi Nett AS, Ostfold Energi Kraftsalg AS and Ostfold Energi Entreprenor AS with a total of 95,000 electricity sales and distribution customers, and 49% of Fredrikstads Energi AS with 80,000 customers. The Norwegian acquisitions also include some other minority holdings.
 
Fortum will acquire a further 9.5% of the shares in AO Lenenergo, the largest utility company in north-western Russia with some 1.3 million electricity customers and a production capacity of 14 TWh of electricity and 26.3 TWh of heat. As a result, Fortum´s share in Lenenergo will rise to 15.9%.
 
As part of the deal, Fortum will sell its power plants in Burghausen, Germany and Edenderry, Ireland to E.ON. E.ON will also acquire the shares and business of an electricity distribution company in southern Sweden with some 43,000 customers.
 
 
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, the exchange rates of the US dollar and the Swedish krona.
 
According to general market information, electricity consumption in the Nordic countries is predicted to increase by about 1–2% each year over the next couple of years. During 2002, the average spot price for electricity was EUR 26.9 per megawatt-hour on the Nordic electricity market, or 16% higher than the corresponding figure in 2001. In January 2003, the spot price has been averaging EUR 71.7 per megawatt-hour. At the end of January, the hydro reservoirs in the Nordic countries were approximately 25 TWh below average. The 31 January electricity forwards indicated a return to more moderate price levels.
 
The synergy benefits generated by the creation of a pan-Nordic power and heat business following the acquisition of the remaining 50% of the former Birka Energi will exceed the target of EUR 100 million a year as of 2004.
 
The international refining margin in north-western Europe (Brent Complex) was considerably lower than in 2001 and averaged USD 1.0/bbl (USD 1.9/bbl in 2001). During the fourth quarter, it averaged USD 1.9/bbl (USD 0.9/bbl). In January 2003, the international refining margin averaged USD 1.6/bbl. For several years, the international Brent Complex refining margin has averaged USD 1.5 – 2.0/bbl. Management expects Fortum’s premium margin to remain at the strong levels of previous years. During 2003, the refining volumes are expected to be normal with no major maintenance shutdowns planned.
 
The average price for Brent crude oil was USD 25.0/bbl in 2002. In January 2003, the price has been averaging USD 31.3/bbl while the International Petroleum Exchange’s Brent futures for the remainder of 2003 were on average USD 28.4/bbl in January. The price of crude oil has an impact on the results of Oil Refining and Marketing through inventory gains and losses.
 
Due to the divestitures of the oil and gas production assets in Oman and Norway, there will be no own production in the first half of 2003. Preparations for the start of oil production in late 2003 at the South Shapkino oil field in north-western Russia is continuing as planned.
 
In 2002, the average euro exchange rate against the US dollar and the Swedish crona was 0.9419 and 9,1442 respectively. At the end of December, the exchange rates were 1.0487 and 9,1528 respectively.
 
The last few years were characterised by major restructuring. By February 2003, Fortum had agreed on transactions covering strategically important assets worth EUR 6.5 billion euros and divested non-core assets worth EUR 2.5 billion. Fortum will now focus on achieving the targets set, delivering a strong cash flow and controlling the balance sheet.
 
 
Dividend distribution proposal
 
The Group’s non-restricted equity and distributable equity as of 31 December 2002 amounted to EUR 2,810 million. The parent company’s distributable equity as of 31 December 2002 stood at EUR 900 million.
 
The Board of Directors proposes to the Annual General Meeting that Fortum Corporation should pay a dividend of EUR 0.31 per share for 2002, totalling EUR 262.2 million. The Annual General Meeting will be held on 27 March at 3.00 pm at Finland Hall in Helsinki.
 
 
Espoo, 12 February 2003
Fortum Corporation
Board of Directors
 
Further information:
Mikael Lilius, President and CEO, tel. +358 10 452 9100
Juha Laaksonen, CFO, tel. +358 10 452 4519
 
 
The figures have been audited.
 
Distribution:
Helsinki Exchanges
Key media
www.fortum.com
 
Information on the financial statement release, the company’s new reporting structure (segments) as of 2003 and the sensitivity analysis is available on Fortum’s website at: www.fortum.com/investors
 
 
Fortum Corporation
Carola Teir-Lehtinen
Senior Vice President, Corporate Communications