Fortum Corporation - Financial Statements 2005

Fortum Corporation STOCK EXCHANGE RELEASE 3 February 2006 9.00 am


Fortum Corporation - Financial Statements 2005

An outstanding year for Fortum
- Performance improvement in all business segments

The year in brief
- Profit before taxes from continuing operations EUR 1,267 (962) million (+32%)
- Earnings per share EUR 1.01 (0.79) from continuing operations (+28%)
- Successful separation and listing of Neste Oil
- Agreement to acquire E.ON Finland shares from the city of Espoo and E.ON
Nordic
- Significant progress in Russia and Poland
- Proposed total dividend EUR 1.12 per share, of which EUR 0.58 from continuing
operations
- Planned share repurchase program of EUR 1,000 million in the next three years,
of which EUR 500 million proposed for 2006

Key figures IV/05 IV/04 2005 2004

Net sales, EUR million 1,112 1,084 3,877 3,835
Operating profit, EUR million 474 363 1,347 1,195
Comparable operating profit, EUR 460 349 1,334 1,148
million*)
Profit before taxes, EUR million 466 288 1,267 962
Earnings per share, continuing
operations, EUR 0.36 0.21 1.01 0.79
Total earnings per share, EUR**) 0.36 0.39 1.55 1.48
Total net cash from operating
activities, EUR million 424 455 1,404 1,758
Net cash from operating activities,
continuing operations, EUR million 424 243 1,271 1,232
Average number of shares, 1,000s 872,613 852,625

*) Comparable operating profit represents the underlying business performance by
excluding items affecting comparability. These are mainly caused by the
accounting effects from fair valuation of financial derivatives for future cash
flows where hedge accounting is not applied (IAS 39) or non-recurring items.

**) Total earnings per share in 2004 included a EUR 0.05 positive one-time
effect from a change in the Finnish tax rate from 29% to 26%.

Key figures 2005 2004
Balance sheet
Shareholders’ equity per share, EUR 8.17 8.65
Interest-bearing net debt
(at end of period), EUR million 3,158 5,095
Return on capital employed,
continuing operations, % 13.5 11.4
Return on capital employed, % 16.6 15.8
Return on shareholders’ equity, % 18.7 18.2
Gearing, % 43 67


2005 was an outstanding year for Fortum. Both the company’s operating results
and cash flow from operating activities improved. The key financial targets,
ROCE and ROE 12%, were exceeded. The balance sheet was further strengthened as
net debt decreased by EUR 1,937 million compared to year-end 2004, and Fortum’s
gearing stood at 43% at the year end. Net cash from operating activities
(continuing operations) increased to EUR 1,271 (1,232) million.

The comparable operating profits of all segments were higher than in 2004. The
Power Generation, Heat and Markets segments delivered substantially better
comparable operating profits. In Power Generation, the good results were mainly
due to successful hedging and improvement in spot prices. Heat segment was able
to improve its performance mainly due to improved cost efficiency through
improved fuel mix in Värme.

The achieved Nordic Generation power price was EUR 31.2 (29.2), up by 7% from
2004. The average spot price of electricity in Nord Pool, the Nordic power
exchange, was EUR 29.3 (28.9) per megawatt-hour (MWh), which was approximately
1% higher than in 2004.

The separation of the oil businesses and listing of Neste Oil was executed
successfully through a share dividend and a sale of shares in April 2005.

During 2005, Fortum strengthened its position in the Russian electricity
company, OAO Lenenergo and consequently increased its indirect ownership in the
regional power generation company of north-west Russia, Territorial Generation
Company 1 (TGC-1). As part of the major Russian power market reform, the
generation assets of Kolenergo, Lenenergo and Karelenergo are to be merged to
TGC-1. In November, Fortum agreed to acquire 24.83% of the shares in Kolenergo.

Fortum continued to expand its district heating business in Poland. In October,
Fortum signed an agreement to purchase the majority shareholding of MPEC
Wroclaw, the district heating company of the city of Wroclaw in Poland. In
December, Fortum acquired the majority shareholding of the district heating
company of the city of Plock.


Net sales and results

October-December

Group net sales stood at EUR 1,112 (EUR 1,084 million in October-December 2004)
million.

Group operating profit totalled EUR 474 (363) million. Comparable operating
profit increased by EUR 111 million to EUR 460 (349) million.

During the fourth quarter, the average price of electricity in Nord Pool was EUR
32.3 (27.6) per megawatt-hour, or 17% higher than during the corresponding
period in 2004. In Continental Europe, the spot price for electricity has been
higher than in Nord Pool, resulting in exports from the Nordic countries to
Germany.

The comparable operating profit of the Power Generation segment was higher than
last year, mainly due to Fortum's higher achieved Nordic Generation power price,
which increased by 10% to EUR 33.0 (30.1) per megawatt-hour.

The comparable operating profit of the Heat segment was better than last year.
This was mainly due to increased sales to business customers and better fuel mix
due to increased production with waste and bio-fuels.

The Distribution segment's result improvement in the fourth quarter is explained
mainly by a generally lower cost level thanks to efficiency improvements in the
business and by lower grid loss costs.
The Markets segment's operating profit increased from last year. This was mostly
due to increased sales and new product launches. Also costs related to
improvements in the quality of customer service were at a lower level than last
year.

The net amount of non-recurring items was EUR 10 (29) million, mainly consisting
of the gain from the sale of some building rights, reported in the Other
segment. The net amount of other items effecting comparability was EUR 4 (-15)
million, mainly consisting of accounting effects from IAS 39.

Net sales from continuing operations, by segment

EUR million IV/05 IV/04 2005 2004
Power Generation 598 583 2,058 2,084
Heat 325 316 1,063 1,025
Distribution 196 194 707 707
Markets 391 378 1,365 1,387
Other 20 23 91 90
Eliminations -418 -410 -1,407 -1,458
Total 1,112 1,084 3,877 3,835

Comparable operating profit from continuing operations, by segment

EUR million IV/05 IV/04 2005 2004
Power Generation 297 232 854 730
Heat 97 75 253 207
Distribution 76 57 244 240
Markets 8 -1 30 23
Other -18 -14 -47 -52
Total 460 349 1,334 1,148

Operating profit from continuing operations, by segment

EUR million IV/05 IV/04 2005 2004
Power Generation 296 241 825 763
Heat 94 75 269 218
Distribution 76 51 251 234
Markets 11 0 32 34
Other -3 -4 -30 -54
Total 474 363 1,347 1,195


January-December

Group net sales stood at EUR 3,877 million (EUR 3,835 million in 2004). Higher
wholesale prices of electricity had a positive impact, whereas lower power
generation volumes decreased the net sales.

Group reported operating profit totalled EUR 1,347 (1,195) million. The
comparable operating profit stood at EUR 1,334 (1,148) million, an increase of
EUR 186 million over the 2004 figures.

The net amount of non-recurring items was EUR 30 (18) million, mainly consisting
of the gains from the sale of North Transgas Oy and some building rights. The
net amount of other items effecting comparability was EUR -17 (29) million,
mainly consisting of accounting effects from IAS 39.

In January-December, the average Nord Pool spot price was EUR 29.3 (28.9) per
megawatt-hour, or 1% higher than during in 2004.

The comparable operating profit of the Power Generation segment was higher,
mainly due to Fortum's 7% higher achieved Nordic Generation power price of EUR
31.2 (29.2) per megawatt-hour. The positive profit impact from the increased
amount of hydropower generation was offset by a lower amount of thermal power
generation. The low thermal power generation was caused by high CO2 -prices,
high coal and gas prices and good hydrological situation. However, Fortum
maintained the full readiness of its condensing power capacity throughout the
year.

The lost sales margin due to lower thermal generation was partly compensated by
the sale of CO2 emission allowances. The Power Generation segment's full year
comparable operating profit includes approximately EUR 25 million positive
impact from the sale of CO2 emission allowances. The gain on the sale of CO2 -
allowances was booked in the fourth quarter.

Reported operating profit of the Power Generation segment was also higher than
last year. The difference in reported and comparable operating profit was mainly
due to the accounting effects from IAS 39.

The Heat segment's net sales were higher than last year, mainly due to the
acquisitions in Poland. The Heat segment's power sales volume was lower than
last year, mainly due to the pulp and paper industry strike and lock-out in
Finland. Replacement of fossil fuels with bio-fuels and waste, and increased
sales to business customers, increased the comparable operating profit of the
Heat segment. The gain on the sale of the 50% stake in North Transgas Oy lifted
the reported operating profit for the segment.

The Distribution segment's net sales were at the same level as last year. The
segment's comparable operating profit was slightly higher than last year,
despite the EUR 11 million costs from the January storms in Sweden and Norway,
which were booked in the first-quarter earnings. The improvement in comparable
operating profit is explained mainly by the generally lower cost level thanks to
efficiency improvements in the business.

The Markets segment's net sales were slightly lower in 2005 than in 2004, mainly
due to the termination of some large long-term contracts at the end of 2004.
Markets has been able to slightly increase its total sales margin, due to
successful launches of new products and successful procurement of electricity
from Nord Pool. Markets' operations in Norway improved from last year. The
segment's operating profit for the full year 2005 was still affected by the
somewhat higher fixed cost base originating from actions to improve customer
service quality.

Profit before taxes was EUR 1,267 (962) million.

The Group's net financial expenses from continuing operations amounted to EUR
135 (245) million. The decrease in net financial expenses is mainly attributable
to lower net debt following the spin-off of the Oil businesses and positive
changes in the fair values of outstanding derivatives contracts. Net financial
expenses include a positive change of EUR 40 (-6) million in the fair values of
derivatives in accordance with IAS 39.
Net financial expenses in 2005 includes a one-time cost of EUR 15 million, due
to early prepayment of US private placements bonds originally issued in 1991 and
1992.. In 2004 the cost for a similar debt restructuring was EUR 10 million.

The share of profit of associates and joint ventures from continuing operations
was EUR 55 (12) million. The improvement is mainly explained by Hafslund's
increased effect.

Minority interests accounted for EUR 52 (33) million. The minority interests are
mostly attributable to Fortum Värme Holding, in which the City of Stockholm has
a 50% economic interest.

Taxes for the period totalled EUR 331 (259) million. The tax rate according to
the income statement was 26% (27%). In 2004, taxes for the period included a
decrease in deferred tax liabilities of EUR 43 million due to the change in the
Finnish corporate income tax rate from 29% to 26%. EUR 27 million of the
decrease in deferred tax liabilities relates to continuing operations

Total net profit for the period was EUR 1,410 (1,292) million. The net profit
from continuing operations was EUR 936 (703) million. Total Fortum earnings per
share were EUR 1.55 (1.48), and earnings per share from continuing operations
were EUR 1.01 (0.79). In 2004, total earnings per share included a positive
effect of EUR 0.05 from the corporate tax rate change in Finland. Return on
capital employed from continuing operations was 13.5% (11.4%) and return on
shareholders' equity was 18.7% (18.2%).


Market conditions

According to preliminary statistics, the Nordic countries consumed 391 (387)
terawatt-hours (TWh) of electricity in 2005. This is 1% more than in 2004.

During the fourth quarter, the average spot price of electricity in Nord Pool
was EUR 32.3 (27.6) per megawatt-hour or 17% higher than during the
corresponding period in 2004. The corresponding price increase in electricity
sold by Fortum was 10%.

During 2005, the average spot price of electricity in Nord Pool was EUR 29.3
(28.9) per megawatt-hour (MWh), which was approximately 1% higher than in 2004.
The average monthly spot price varied from EUR 23 per megawatt-hour in January
to EUR 34 per megawatt-hour in December.

Starting in 2005, emissions trading has become an important new factor affecting
the wholesale price of electricity. The market price for CO2 emissions
allowances increased from around EUR 7 per tonne at the beginning of the year to
nearly EUR 30 per tonne by mid-July. Since mid-July, the price has remained at a
rather stable level of EUR 20-24 per tonne. At the end of the year, prices were
at the level of EUR 21-23 per tonne.

The emergence of the market for CO2 emissions allowances and a strengthening
hydrological situation have decreased thermal power generation and increased
hydro power generation in the Nordic countries compared to last year. Despite
the high Nordic hydro production, the Nordic water reservoirs have recovered
during the year. At the end of 2005, the Nordic water reservoirs were 7 TWh
above the average and 5 TWh above the corresponding level in 2004.

In Continental Europe, the spot price of electricity has been clearly higher
than in Nord Pool, resulting in exports from the Nordic countries to Germany.

Total power and heat generation figures

Fortum's total power generation during 2005 was 52.3 (55.5) TWh, of which 51.2
(54.4) TWh was in the Nordic countries. Fortum's Nordic generation is 13% (14%)
of the total Nordic electricity consumption.

At year end, Fortum's total power generating capacity was 11,281 (11,373) MW, of
which 11,136 (11,220) MW was in the Nordic countries.

During the past six years, the volume of Fortum’s CO2-free power generation has
increased from 29 TWh to 49 TWh. Its share was 93% (83%) of Fortum's power
generation in 2005.

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

Fortum's total power and heat generation, IV/05 IV/04 2005 2004
TWh
Power generation 14.3 16.0 52.3 55.5
Heat generation 7.6 8.0 25.1 25.4


Fortum's own power generation by source, IV/05 IV/04 2005 2004
TWh, total in the Nordic countries
Hydropower 5.8 6.1 21.2 19.1
Nuclear power 7.0 7.1 25.8 25.8
Thermal power 1.3 2.4 4.2 9.5
Total 14.1 15.6 51.2 54.4


Fortum's own power generation by source, IV/05 IV/04 2005 2004
%, total in the Nordic countries
Hydropower 41 39 42 35
Nuclear power 50 46 50 47
Thermal power 9 15 8 18
Total 100 100 100 100


Total power and heat sales figures

Fortum’s total power sales were 59.7 (62.3) TWh, of which 58.2 (60.7) TWh were
in the Nordic countries. This represented approximately 15% (16%) of the
region’s total consumption. Heat sales in the Nordic countries amounted to 19.4
(20.2) TWh and in other countries to 4.4 (3.6) TWh.

The segments sell their electricity to Nord Pool or external customers and
purchase electricity from Nord Pool or other external sources. In the table
below, Fortum's Nord Pool transactions are calculated as a net amount of hourly
sales and purchases at the Group level.


Fortum's total electricity and heat IV/05 IV/04 2005 2004
sales, EUR million
Electricity sales 575 573 2002 2017
Heat sales 264 256 867 809

Fortum's total electricity sales by area, IV/05 IV/04 2005 2004
TWh
Sweden 8.4 8.1 30.4 27.6
Finland 6.9 8.5 26.0 31.1
Other countries 0.9 1.0 3.3 3.6
Total 16.2 17.6 59.7 62.3

Fortum's total heat sales by area, TWh IV/05 IV/04 2005 2004
Sweden 3.0 3.2 9.5 9.6
Finland 2.9 3.1 9.8 10.5
Other countries 1.3 1.2 4.5 3.7
Total 7.2 7.5 23.8 23.8


SEGMENT REVIEWS

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. The Power Generation segment sells its
production to Nord Pool. The segment includes Generation, Portfolio Management
and Trading (PMT), and Service business units.

EUR million IV/05 IV/04 2005 2004
Net sales 598 583 2,058 2,084
- power sales 487 491 1,682 1,695
- other sales 111 92 376 389
Operating profit 296 241 825 763
Comparable operating profit 297 232 854 730
Net assets (at end of period) 5,954 6,218
Return on net assets, % 14.0 12.1
Comparable return on net assets, % 14.5 11.5

The segment's power generation during the fourth quarter amounted to 12.8 (14.1)
TWh in the Nordic countries.

In 2005, the segment's power generation in the Nordic countries was 47.2 (49.8)
TWh, of which about 21.2 (19.1) TWh or 45% (38%) was hydropower-based, 25.8
(25.8) TWh or 55% (52%) nuclear power-based, and 0.2 (4.9) TWh or 0% (10%)
thermal power-based. The increase in hydro power generation was due to a
strengthened hydrological situation compared to the corresponding period last
year. The decrease in thermal power generation was due to lower power prices
during the first quarter and high fuel and CO2 allowance prices.

At year end, the segment’s power generation capacity totalled 10,003 (10,030)
MW, of which 9,863 (9,890) MW was in the Nordic countries and 140 (140) MW in
other countries.

Power generation by area, TWh IV/05 IV/04 2005 2004
Sweden 7.9 7.7 28.4 25.8
Finland 4.9 6.4 18.8 24.0
Other countries 0.3 0.4 1.1 1.1
Total 13.1 14.5 48.3 50.9

Nordic sales volume, TWh 14.2 15.6 52.6 55.7
of which pass-through sales 1.1 1.2 4.5 4.7


Sales price, EUR/MWh IV/05 IV/04 2005 2004
Nordic Generation power price* 33.0 30.1 31.2 29.2

*) For the Power Generation segment in the Nordic area, excluding pass-through
sales.

Fortum's average achieved Nordic Generation power price (excluding pass-through
items) in the fourth quarter was 10% higher than a year ago, mainly due to
improved hedging prices. In the fourth quarter, the average spot price of power
in Nord Pool was 17% higher than a year ago. During 2005, Fortum's achieved
Nordic Generation power price was 7% higher, the average spot price in Nord Pool
being 1% higher than in 2004. The related sales volume was 13.1 (14.4) TWh in
the fourth quarter and 48.1 (51.0) TWh for the year 2005.

During 2005, Fortum made small capacity increases both in hydro and nuclear
power generation according to its investment plan. Four hydropower plant
refurbishment projects were completed during the year.

Fortum began modernising Loviisa nuclear power plant automation in January 2005.
The project aims at extending the lifetime of the plant. All of the new
automation systems related to this project will be in use by 2014.

Fortum has strengthened its position in Russia. The regional power generation
company of north-west Russia, Territorial Generation Company 1 (TGC-1), started
its operations on the first of October. Fortum is an indirect owner of this
company through its 33.2% ownership of the outstanding voting shares in
Lenenergo. Fortum has three of the total 11 seats on the Board of Directors of
TGC-1. The final ownership structure of TGC-1 will be set up in connection with
the merger of the generation assets of Lenenergo, Karelenergo and Kolenergo into
TGC-1, scheduled for the end of 2006.

Fortum has made an agreement with the Russian companies RAO UES of Russia and
Kes-holding (IES, Integrated Energy Systems), aiming at developing a joint
operating model for improving the competitiveness of the territorial generation
companies. Additionally, Fortum signed a co-operation agreement with Interros, a
leading Russian investment company, concerning future expertise as well as
operation and maintenance services of the wholesale power companies acquired by
Interros.

In August, Fortum Service signed a 15-year operation and maintenance agreement
with Trianel Energie of Germany. The agreement covers the 800-MW combined cycle
gas turbine power plant in Hamm-Uentrop, Germany, which will be ready for
commercial use in September 2007.


Heat

The business area comprises heat generation and sales in the Nordic countries
and other parts of the Baltic Rim. Fortum is a 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. The segment includes the Heat and Värme business units.


EUR million IV/05 IV/04 2005 2004
Net sales 325 316 1,063 1,025
- heat sales 254 247 834 779
- power sales 48 49 145 159
- other sales 23 20 84 87
Operating profit 94 75 269 218
Comparable operating profit 97 75 253 207
Net assets (at end of period) 2,551 2,440
Return on net assets, % 11.6 9.8
Comparable return on net assets, % 11.0 9.3

The segment’s heat sales during the fourth quarter amounted to 6.6 (6.9) TWh and
to 21.7 (21.8) TWh during the whole year. This shows the significance of the
first and last quarters of the year to the heat business.

Power generation at combined heat and power plants (CHP) was 1.3 (1.5) TWh
during the fourth quarter and 4.1 (4.8) TWh during 2005. The decrease was due to
the strike and lock-out in the Finnish paper industry during spring and summer
and also due to the lower thermal generation volumes stemming from higher fuel
and CO2 allowance prices.

In April, Fortum acquired UAB Suomijos Energija, a Lithuanian district heat
company with annual heat sales of 60 GWh and fuel sales 62 GWh. In May, Fortum
continued the restructuring of its gas assets and sold its 50% stake in North
Transgas Oy to OAO Gazprom.

In the fourth quarter, Fortum acquired two new district heating companies in
Poland. In October, Fortum signed an agreement to purchase the majority
shareholding of MPEC Wroclaw, the district heating company of the city of
Wroclaw with annual net sales of EUR 70 million and heat sales of 2,100 GWh. In
November, Fortum signed an acquisition agreement regarding the majority of the
district heating company of the city of Plock. The annual net sales of the
company are around EUR 13 million, with heat sales amounting to 500 GWh.
Following the acquisitions, Fortum is a majority owner in four heating companies
in Poland with aggregate net sales of close to EUR 130 million and annual heat
sales of 3,900 GWh.

The new waste fuel-based combined heat and power plant in Högdalen, Stockholm,
was inaugurated in October 2005.

Heat sales by area, TWh IV/05 IV/04 2005 2004
Sweden 3.0 3.2 9.5 9.6
Finland 2.9 3.1 9.8 10.5
Other countries 0.7 0.6 2.4 1.7
Total 6.6 6.9 21.7 21.8


Power sales, TWh IV/05 IV/04 2005 2004
Total 1.3 1.5 4.1 4.8


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 IV/05 IV/04 2005 2004
Net sales 196 194 707 707
- distribution network 164 162 592 593
transmission
- regional network transmission 22 23 82 83
- other sales 10 9 33 31
Operating profit 76 51 251 234
Comparable operating profit 76 57 244 240
Net assets (at end of period) 3,021 3,091
Return on net assets, % 8.8 8.1
Comparable return on net assets,% 8.6 8.3

During the fourth quarter, the volume of distribution and regional transmissions
totalled 6.6 (6.3) TWh and 5.0 (4.5) TWh, respectively.

For the whole year, the volumes of distribution and regional network
transmissions totalled 23.1 (22.7) TWh and 18.0 (17.8) TWh, respectively.
Electricity transmissions via the regional distribution network to customers
outside the Group totalled 14.8 (14.6) TWh in Sweden and 3.2 (3.2) TWh in
Finland.

The Energy Authority (EMI) in Sweden has performed supervision of 2003 year's
net prices on basis of the Nätnyttomodell. The authority notified 16 companies
in June and two companies in December of over debiting. All of these companies
have filed a complaint.

Fortum has three grid areas that are affected by the supervision of 2003 net
prices. A minor subsidiary of Fortum (Ekerö Energi) received a decision of over
debiting in 2003 and filed a complaint. Decisions on two other Fortum areas are
expected during the first quarter of 2006. Final court decisions on prices in
2003 are expected at during the third quarter of 2007, at the earliest.

In November, EMI published information on those companies that will be
supervised more closely for their 2004 net prices. Based on EMI's decision on
supervision, five Fortum areas exceeded the stipulated charge rate limit.
However, Fortum believes that the charge rate calculation concerning two of its
areas is not in compliance with EMI's own instructions. Fortum has applied for
withdrawal of the supervision decision for these two areas. If Fortum will
receive a decision of over debiting regarding the other three areas selected for
supervision of 2004 net prices, Fortum expects to appeal to court.

As a result of the January storms, a government bill for a functional demand
allowing no outages to exceed 24 hours starting in 2011 was passed by the
Swedish parliament in December. The law calls for compensation to customers for
outages exceeding 12 hours starting already in 2006.

The Fortum Reliability Programme to accelerate the reliability improvements in
electricity distribution networks was kicked off in September. In total, the
Distribution segment will invest around EUR 700 million during the next five
years. Of this amount, around EUR 200 million is for the Nordic-wide plan
especially focusing on upgrading reliability. The first scheduled phase of the
plan is three years long.

Fortum has launched a project to provide an Automatic Meter Management system to
all its Nordic customers. The system will be implemented in phases starting in
2006.


Distribution network transmission IV/05 IV/04 2005 2004
by area, TWh
Sweden 4.1 3.9 14.4 14.2
Finland 1.8 1.8 6.3 6.2
Norway 0.6 0.5 2.2 2.1
Estonia 0.1 0.1 0.2 0.2
Total 6.6 6.3 23.1 22.7

Number of electricity 31 Dec 2005 31 Dec 2004
distribution customers by area,
1,000s
Sweden 860 860
Finland 410 405
Norway 97 93
Estonia 23 22
Total 1,390 1,380


Markets

Markets is responsible for retail sales of electricity to a total of 1.2 million
private and business customers as well as to other electricity retailers in
Sweden, Finland and Norway. Markets buys its electricity through Nord Pool.


EUR million IV/05 IV/04 2005 2004
Net sales 391 378 1,365 1,387
Operating profit 11 0 32 34
Comparable operating profit 8 -1 30 23
Net assets (at end of period) 228 194
Return on net assets, % 17.4 25.3
Comparable return on net assets, 16.4 17.1
%

During the fourth quarter, Markets' electricity sales totalled 10.8 (11.9) TWh
with sales for the full year 2005 amounting to 40.2 (43.5) TWh. The decrease was
due to the termination of some large long-term contracts at the end of 2004.

Retail electricity prices on the Nordic market continued to increase also during
the last quarter of the year. The retail price development has followed the
wholesale price development. The retail prices at the end of the 2005 were at a
higher level compared to the end of 2004.

2005 was a good year with a positive net inflow of customers. The positive
development was based on successful marketing campaigns and new product launches
especially in the first half of the year. New products and services and the
introduction of customer guarantees have improved customer satisfaction.


Capital expenditures and investments in shares

Capital expenditures and investments in shares for continuing operations in 2005
totalled EUR 479 (514) million. Investments excluding acquisitions were EUR 346
(335) million.

During 2005, Fortum increased its ownership in OAO Lenenergo to 33.2% of the
outstanding voting shares as a result of the redemption of Lenenergo's own
shares relating to its reorganisation. Fortum secured four of the total 11 seats
on the Board of Directors of Lenenergo on 30 June.

In November, Fortum agreed to acquire 24.83% of the shares in the Russian
company Kolenergo and will obtain 23.33% of the voting shares of Kolenergo and
its incorporated companies. The transaction is estimated to take place during
the first quarter of 2006 after formal approval of the relevant authorities.

On 20 December, Fortum acquired 48.7 % of the share capital of the Polish
district heating company MPEC Wroclaw, which has annual heat sales of some 2100
GWh. By the end of the year, Fortum's holding in the company increased to 53.7%
of the share capital and 75.7% of the voting rights. Fortum also issued a public
tender offer for all currently publicly-traded shares in the company. In the
final closing of the public tender regarding the outstanding shares of MPEC
Wroclaw on 24 January 2006, Fortum reached over 90 % of the share capital of the
company.

The transfer of 85 % of the shareholding of the Polish district heating company
PEC Plock to Fortum took place on 27 December.

Divestments during 2005 consisted of the sales of North Transgas Oy and some
building rights. The gains on these sales are included in nonrecurring items.


Group restructuring

In April 2005, Neste Oil was successfully separated by distributing 85% of its
shares as dividends to Fortum's shareholders and by selling the remaining 15% of
Neste Oil shares to institutional and individual investors. Neste Oil was
subsequently listed on the Helsinki Stock Exchange on 18 April.


Financing

During the fourth quarter, Fortum’s financial position continued to improve and
net debt decreased by EUR 175 million. At year end, the interest-bearing net
debt stood at EUR 3.158 million (EUR 5.095 million), giving a total reduction in
net debt of EUR 1.937 million for the year. The gearing ratio was 43% (67%).

The Group’s net financial expenses for the fourth quarter were EUR 35 (78)
million and for the full year 2005 EUR 135 (245) million. The decrease in net
financial expenses is mainly attributable to lower net debt following the spin-
off of the oil businesses and positive changes in the fair values of outstanding
derivatives contracts. Net financial expenses for the fourth quarter includes a
positive change in fair values of derivatives of EUR 14 (- 9) million and the
full year 2005 includes a positive EUR 40 (-6) million change in the fair values
of derivatives in accordance with IAS 39.

Net financial expenses in the fourth quarter included a one-time cost of EUR 15
million due to early prepayment of US private placements bonds originally issued
in 1991 and 1992. In 2004 the cost for a similar debt restructuring was EUR 10
million.

At year end, the average interest rate of Fortum’s interest-bearing loans was
4%.

Group liquidity remained good. Year-end cash and marketable securities totalled
EUR 788 million. In addition, the Group had a total of EUR 1.314 million
available for drawings under committed credit facilities, such as the EUR 1.200
million Syndicated Revolving Credit Facility and bilateral overdraft facilities.

Fortum Corporation’s long-term credit rating from Moody’s and Standard and
Poor's was A2 (stable) and A- (stable), respectively.


Shares and share capital

During 2005, a total of 900.1 (478.8) million Fortum shares for a total of EUR
12,487 million were traded. Fortum’s market capitalisation, calculated using the
closing quotation on the last trading day of the year, was EUR 13,864 million.
The highest quotation of Fortum Corporation’s shares on the Helsinki Stock
Exchange in 2005 was EUR 16.90, the lowest EUR 10.45, and the average quotation
EUR 13.87 (10.29). The closing quotation on the last trading day of the year was
EUR 15.84 (13.62).

Relating to the 1999 bond loan with warrants to employees, a total of 0.6
million warrants for a total of EUR 4.4 million were traded during 2005.
Relating to the 1999 management share option scheme, a total of 563 options for
a total of EUR 4.1 million were traded during 2005. Relating to the 2001A share
option scheme for key employees, a total of 3.1 million options for a total of
EUR 35.6 million was traded during 2005. Relating to the 2002A share option
scheme for key employees, a total of 2.3 million options for a total of EUR 20.4
million was traded during 2005.

A total of 8,210,120 (18,251,430) shares subscribed for based on the basis of
the above share option schemes were entered into the trade register in 2005.
After these subscriptions, Fortum Corporation’s share capital is EUR
2,975,999,685 and the total number of registered shares is 875,294,025
(867,083,905). Share capital of Fortum Corporation increased by a total of EUR
27,914,408 (62,054,862). The amount of shares that can still be subscribed for
under the 2001A and 2002A share option schemes is a maximum of 0.5% of Fortum’s
year-end share capital and voting rights.

In addition to the above arrangements, Fortum has two share option programmes,
2001B and 2002B, for key employees. The subscription period for the 2001B option
started on 16 January 2006; the period for the 2002B options will start on 1
October 2006. At the end of 2005, the option schemes covered some 320 persons.
The amount of shares subscribed for under these share option schemes is a
maximum of 1.9% of Fortum’s year-end share capital and voting rights.

On 2 June, the Finnish state sold 62.9 million Fortum shares to Finnish and
international investors. At year end, the Finnish State’s holding in Fortum was
51.5% (59.3%). The proportion of international shareholders increased to 33.2%
(25.2%).

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


Group personnel

In 2005, the Fortum Group employed an average of 10,026 (12,859) people. At year
end, the number of employees totalled 8,955 (13,175), of which xxxxxx 8,769
(12,735) were permanent employees. The decreases are due to the separation of
Neste Oil. The number of employees in the parent company, Fortum Corporation, at
year end totalled 550 (619).


Events after the period under review

The Espoo City Council approved in its meeting on 16 January 2006 the agreement,
according to which Fortum acquires all the 5,351,859 E.ON Finland Oyj shares
held by the City of Espoo, corresponding to 34.2% of the shares and the voting
rights of the company. The agreement was signed on 18 January. The agreed
purchase price was EUR 68 per share, i.e. approximately EUR 364 million in
total. A prerequisite for the transaction to take effect is that the 10,246,565
E.ON Finland shares held by E.ON Nordic have been transferred to Fortum's
ownership.

On 2 February 2006, Fortum and E.ON Nordic signed an agreement on the
acquisition of E.ON Finland shares held by E.ON Nordic, subject to approval by
the Finnish Competition Authority. Fortum will pay around EUR 380 million for
this 65.56% stake in the company. In connection to the transaction, all related
outstanding issues between E.ON and Fortum have been settled. As a consequence,
Fortum will pay E.ON a total compensation of EUR 16 million. Fortum intends to
redeem the remaining 0.2% of shares currently owned by minority shareholders.

Fortum is participating in the fifth Finnish nuclear power plant with a share of
approximately 25%. In January, TVO, the company that is building and owns the
plant, informed that the reactor building civil works and the manufacture of
certain primary components are delayed as compared to the original schedule.
However, TVO still believes that the new power plant will generate power in
2009.

Fortum's affiliate OKG announced in January that it is going to increase the
capacity of the third unit of the Oskarshamn nuclear power plant from the
current 1,200 megawatts to 1,450 megawatts. OKG will implement and fund the
power increase and renovation investments through its own balance sheet, i.e.
the investment will not increase Fortum's capital expenditures. However, Fortum
may support OKG's financing through shareholder loans or guarantees. The
investment will be mainly realised in 2008. Fortum's share of ownership in the
Oskarshamn nuclear power plant entitles the company to a share of over 43% of
the production of the power plant, which Fortum buys at cost price. Fortum's
share of the power increase of the power plant's third unit is slightly over 100
megawatts.

At the end of January, Fortum agreed to sell its 40.67% ownership in Enprima Ltd
to Swedish ÅF Group.

Capital structure

Following the separation of the oil businesses Fortum's balance sheet has
strengthened significantly. At year end, the company's gearing stood at 43%.
Fortum wants to have a prudent and efficient capital structure which at the same
time allows the implementation of its strategy.

The company targets a capital structure where net debt to EBITDA ratio is in the
range of 3.0-3.5. In the medium term, allowing for the implementation of
strategy and the returns of capital announced today, Fortum expects to have a
net debt to EBITDA ratio around 3.0.

The definitions for calculating this target are included in the definitions of
key figures at the end of these statements.


Outlook

The key market driver influencing Fortum's business performance is the Nordic
wholesale price of electricity. Key drivers behind the market price development
are the Nordic hydrological situation, CO2 emissions allowance prices and fuel
prices. The Swedish krona exchange rate also affects Fortum's reported result,
as results generated by Fortum in Sweden are translated into euros.

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.

At the end of January, the Nordic water reservoirs were about 5 TWh above the
average and 0.3 TWh above the corresponding level for 2005. At the end of
January, the market price for emissions allowances for 2006 ranged between EUR
26-27 per tonne of CO2. At the same time, the electricity forward price for 2007
was around EUR 40-41 per megawatt-hour and around EUR 38 per megawatt-hour for
2008.

The first and last quarters of the year are usually the strongest quarters for
the continuous operations of the power and heat businesses.

At the end of January, Fortum had hedged approximately 75% of its Nordic Power
Generation sales volume for the remainder of 2006 at approximately EUR 32 per
megawatt-hour. For the calendar year 2007, Fortum has hedged approximately 40%
of its Nordic Power Generation sales volume at approximately EUR 34 per
megawatt-
hour. These hedge ratios may vary significantly depending on Fortum's actions on
the electricity derivatives markets. Hedge prices are also influenced by changes
in the SEK/EUR exchange rates, as part of the hedges are conducted in SEK.

Fortum's achieved Nordic Generation power price typically depends on e.g., hedge
ratio, hedge price, spot price, optimisation of Fortum's flexible production
portfolio even on hourly basis and currency changes. If Fortum would not hedge
any of its production volumes, a 1 EUR/MWh change would result in around EUR 50
million change in Fortum's operating profit.

Increases in nuclear and hydro power tax have been made in Sweden and Finland in
conjunction with the governments' 2006 budgets. These taxes will be an
additional cost element in nuclear and hydro power generation. Fortum estimates
that its additional generation costs due to these taxes will be approximately
EUR 60 million in 2006.

Following several years of positive development, Fortum's results in 2005 were
outstanding and its financial position improved significantly. With good growth
opportunities and favourable market fundamentals in the Nordic and Baltic Rim
area, Fortum is well positioned also for the future.


Dividend distribution proposal

The Group's distributable equity as of 31 December 2005 amounted to EUR 3,776
million. Parent company's distributable equity as of 31 December 2005 amounted
to EUR 2,561 million.

The Board of Directors proposes to the Annual General Meeting that Fortum
Corporation pay a cash dividend of EUR 1.12 per share for 2005, totalling EUR
980 million based on the number of shares registered as of 31 December 2005. Of
this dividend, EUR 0.58 per share is attributable to the profit from the
continuing operations in 2005, and EUR 0.54 per share to the profit from
discontinued operations.


Proposal to authorise the Board of Directors to decide to repurchase Fortum
shares

The Board of Directors of Fortum Corporation proposes that the Annual General
Meeting of Shareholders on 16 March 2006 authorise the Board of Directors to
decide to repurchase the company’s own shares by using funds available for
distribution of profit. The authorisation is proposed to be valid for one year
from the date of the decision of the Annual General Meeting. The proposal is the
first step in a planned share repurchase programme targeting the repurchase of
Fortum shares by using funds in the maximum amount of EUR 1000 million during
the next three years.

The shares will be repurchased in order to develop the capital structure of the
company.

The maximum amount of shares to be repurchased is 35 million shares. In
addition, the amount of funds used for the repurchases may not exceed EUR 500
million. The proposed maximum amount of shares to be repurchased corresponds to
approximately four per cent of the share capital of the company and the total
voting rights.

The shares will be repurchased through public trading of the securities on the
Helsinki Stock Exchange at the market price of the shares at the time of the
repurchase. Shares repurchased by the company shall be invalidated. The
repurchase of the shares will reduce the company's distributable retained
earnings.

The repurchase will not have a material impact on the division of the ownership
of the shares and the voting rights.


The Annual General Meeting will be held on 16 March at 1:00 pm at the Finlandia
Hall in Helsinki.


Espoo, 2 February 2006
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.


Publication of results in 2006:
Interim Report January - March will be published on 25 April 2006
Interim Report January - June will be published on 19 July 2006
Interim Report January - September will be published on 19 October 2006


Distribution:
Helsinki Stock Exchange
Key media
www.fortum.com

Information on the financial statement release is available on Fortum’s website
at: www.fortum.com/investors


FORTUM GROUP
JANUARY-DECEMBER 2005

Financial Statements are audited

CONDENSED CONSOLIDATED INCOME STATEMENT

MEUR Q4/2005 Q4/2004 2005 2004

Continuing operations:
Sales 1 112 1 084 3 877 3 835
Other income 67 11 101 91
Materials and services -355 -420 -1 325 -1 507
Employee benefit costs -122 -116 -481 -462
Depreciation, amortisation and -102 -106 -407 -388
impairment charges
Other expenses -126 -90 -418 -374
Operating profit 474 363 1 347 1 195
Share of profit of associates and 27 3 55 12
joint ventures
Finance costs-net -35 -78 -135 -245
Profit before income tax 466 288 1 267 962
Income tax expense -125 -96 -331 -259
Profit for the period from continuing 341 192 936 703
operations
Discontinued operations:
Profit for the period from 0 157 474 589
discontinued operations
Profit for the period 341 349 1 410 1 292

Attributable to:
Equity holders of the Company 320 335 1 358 1 259
Minority 21 14 52 33
interest
341 349 1 410 1 292
Earnings per share for profit from
total Fortum Group attributable
to the equity holders of the
company during the year (in €
per share)

Basic 0.36 0.39 1.55 1.48
Diluted 0.36 0.39 1.53 1.46

Earnings per share for profit
from continuing operations
attributable
to the equity holders of the
company during the year (in €
per share)
Basic 0.36 0.21 1.01 0.79
Diluted 0.36 0.21 1.00 0.78

Earnings per share for profit
from discontinued operations
attributable
to the equity holders of the
company during the year (in €
per share)
Basic - 0.18 0.54 0.69
Diluted - 0.18 0.53 0.68

CONDENSED CONSOLIDATED BALANCE SHEET
MEUR Dec 31 Dec 31
2005 2004

ASSETS
Non-current assets
Intangible assets 80 116
Property, plant and equipment 10 176 11 925
Other long-term investments 2 112 2 355
Other long-term receivables 87 90
Long-term interest bearing 620 727
receivables
Total non-current assets 13 075 15 213

Current assets
Inventories 256 654
Trade and other receivables 1 011 1 555
Cash and cash equivalents 788 145
Total current assets 2 055 2 354

Total assets 15 130 17 567

EQUITY
Capital and reserves attributable the
Company's equity holders
Share capital 2 976 2 948
Other equity 4 175 4 552
Total 7 151 7 500
Minority 260 150
interest
Total equity 7 411 7 650

LIABILITIES
Non-current liabilities
Interest-bearing liabilities 3 118 4 450
Deferred tax liabilities 1 512 1 841
Provisions 606 608
Other 435 552
liabilities
Total non-current liabilities 5 671 7 451

Current
liabilities
Interest-bearing liabilities 828 790
Trade and other payables 1 220 1 676
Total current liabilities 2 048 2 466

Total 7 719 9 917
liabilities

Total equity and liabilities 15 130 17 567

CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

MEUR Share Share Other Fair Retai Minor Total
capital premium restr value ned ity
icted and earni
funds other ngs
reser
ves

Total equity at 2 948 62 13 134 4 343 150 7 650
31.12.2004
Stock options 28 8 -11 25
excercised
Translation and -55 -7 -62
other differences
Cash -506 -506
dividend
Share -920 -920
dividend *)
Cash flow -257 3 -254
hedges
Other fair value 6 6
adjustments
Increase in minority 62 62
through business
combinations
Net profit for the 1 358 52 1 410
period
Total equity at 2 976 70 2 -117 4 220 260 7 411
31.12.2005

Total equity at 2 886 36 5 63 3 399 120 6 509
31.12.2003
Stock options 62 26 8 96
excercised
Translation and 24 -2 22
other differences
Cash -357 -357
dividend
Cash flow 67 14 -1 80
hedges
Other fair value 4 4 8
adjustments
Net profit for the 1 259 33 1 292
period
Total equity at 2 948 62 13 134 4 343 150 7 650
31.12.2004

*) The effect from the share dividend on Fortum Group equity is EUR 920
million. In the parent company the effect on retained earnings is EUR 969
million.

CONSOLIDATED CASH FLOW STATEMENT
MEUR 2005 2004

Cash flow from operating activities
Operating profit before depreciations 1 754 1 583
continuing operations
Non-cash flow items and divesting 15 -37
activities
Financial items and realised foreign exchange -107 -181
gains and losses
Taxes -298 -160
Funds form operations continuing operations 1 364 1 205
Change in working capital -93 27
Net cash from operating activities 1 271 1 232
continuing operations
Net cash from operating activities 133 526
discontinued operations
Total net cash from operating activities 1 404 1 758

Cash flow from investing activities
Capital expenditures -346 -335
Acquisition of shares -127 -179
Proceeds from sales of fixed assets 30 60
Proceeds from sales of shares 26 15
Change in other investments 19 -20
Net cash used in investing activities -398 -459
continuing operations
Net cash used in investing activities 1 155 -277
discontinued operations
Total net cash used in investing activities 757 -736

Cash flow before financing activities 2 161 1 022

Cash flow from financing activities
Net change in loans -1 063 -811
Dividends paid to the Company´s equity -506 -357
holders
Other financing items 22 94
Net cash used in financing activities -1 547 -1 074
continuing operations
Net cash used in financing activities 29 -236
discontinued operations *)
Total net cash used in financing activities -1 518 -1 310

Total net increase (+)/decrease (-) in cash
and marketable securities, continuing 643 -288
operations

*) The cash flow from financing activities, discontinued operations in 2004 is
shown as used to repay loans since the Treasury operations
have been centralised for the total Fortum Group.

KEY RATIOS 1)

MEUR Dec Sept June March Dec Sept June
March
31 30 30 31 31 30 30
31
2005 2005 2005 2005 2004 2004 2004
2004

Earnings per share 1.55 1.19 0.99 0.38 1.48 1.09 0.80
0.36
total Fortum
(basic), EUR
Earnings per share 1.01 0.65 0.45 0.28 0.79 0.58 0.45
0.24
continuing
operations (basic),
EUR
Capital employed, 11 357 11 154 10 987 11 891 12 890 12 762 12 447
12 156
MEUR 2)
Capital employed 11 357 10 739
continuing
operations, MEUR
Interest-bearing 3 158 3 333 3 595 4 878 5 095 5 445 5 512
5 526
net debt, MEUR
Capital expenditure
and investments in
shares continuing
operations, 479 213 123 49 514 306 158
57
MEUR
Capital expenditure 346 207 123 49 335 201 128
57
continuing
operations, MEUR
Return on capital 16.6 15.3 16.7 18.2 15.8 15.0 17.0
18.6
employed, %
Return on capital 13.5 11.4
employed continuing
operations, %
Return on 18.7 17.6 19.2 19.5 18.2 18.4 20.9
19.9
shareholders'
equity, %
Net debt / 1.4 2.1
EBITDA
Net debt / EBITDA 1.8 -
continuing
operations
Interest 11.6 0.6 11.3 11.6 8.0 7.8 8.3
7.1
coverage
Funds from 43.2 42.9 44.2 39.3 36.4 33.1 38.2
44.4
operations/interest-
bearing net debt, %
Gearing, % 43 47 53 71 67 77 82
86
Equity per share, 8.17 7.86 7.64 7.67 8.65 8.19 7.77
7.41
EUR
Equity-to-assets 49 47 43 43 44 41 40
38
ratio, %
Average number of 10 026 10 279 11 066 13 135 12 859 13 112 13 097
13 023
employees
Average number of 872 613 872 438 872 316 871 710 852 625 849 823 849 698
849 698
shares, 1 000
shares
Diluted adjusted 887 653 889 157 883 629 883 774 861 772 870 806 867 907
867 344
average number of
shares, 1 000
shares
Number of shares, 875 294 872 981 872 793 871 854 867 084 850 262 849 813
849 813
1 000 shares

1) Key ratios are based on Fortum total numbers including continuing and
discontinued operations if otherwise not stated.
2) Capital employed at March 31 2005 does not represent continuing operations
since 15% of the shares in Neste Oil and the interest-bearing receivable from
Neste Oil are included

SALES BY SEGMENTS
MEUR Q4/05 Q4/04 2005
2004

Power Generation 598 583 2 058 2
084
- of which internal 23 55 97
128
Heat 325 316 1 063 1
025
- of which internal 0 9 12
49
Distribution 196 194 707
707
- of which internal 2 3 8
10
Markets 391 378 1 365 1
387
- of which internal 35 28 101
92
Other 20 23 91
90
- of which internal 13 28 63
93
Eliminations -418 -410 -1 407 -1
458
*)
Sales from continuing 1 112 1 084 3 877 3
835
operations
Sales from discontinued 0 2 108 2 061 7
909
operations
Eliminations 0 -17 -20
-85
Total 1 112 3 175 5 918 11
659

*) Eliminations include sales and purchases with Nordpool that is netted on
Group
level on an hourly basis and posted either as revenue or cost depending on if
Fortum is a net seller or net buyer during any particular hour

OPERATING PROFIT BY SEGMENTS
MEUR Q4/05 Q4/04 2005
2004

Power Generation 296 241 825
763
Heat 94 75 269
218
Distribution 76 51 251
234
Markets 11 0 32
34
Other -3 -4 -30
-54
Operating profit from continuing 474 363 1 347 1
195
operations
Operating profit from 0 183 517
721
discontinued operations
Total 474 546 1 864 1
916
COMPARABLE OPERATING PROFIT BY SEGMENTS, CONTINUING OPERATIONS

MEUR Q4/05 Q4/04 2005
2004

Power Generation 297 232 854
730
Heat 97 75 253
207
Distribution 76 57 244
240
Markets 8 -1 30
23
Other -18 -14 -47
-52
Comparable operating profit from 460 349 1 334 1
148
continuing operations
Non-recurring items 10 29 30
18
Other items effecting 4 -15 -17
29
comparability
Operating profit from continuing 474 363 1 347 1
195
operations
NON-RECURRING ITEMS BY SEGMENTS
MEUR Q4/05 Q4/04 2005
2004

Power Generation -6 18 -3
9
Heat 2 4 14
4
Distribution 0 2 1
2
Markets 0 0 0
0
Other 14 5 18
3
Total 10 29 30
18

OTHER ITEMS EFFECTING COMPARABILITY BY SEGMENTS

MEUR Q4/05 Q4/04 2005
2004

Power Generation 5 -9 -26
24
Heat -5 -4 2
7
Distribution 0 -8 6
-8
Markets 3 1 2
11
Other 1 5 -1
-5
Total 4 -15 -17
29

DEPRECIATION, AMORTISATION AND IMPAIRMENT CHARGES BY SEGMENTS

MEUR Q4/05 Q4/04 2005
2004

Power Generation 29 30 112
104
Heat 31 35 123
124
Distribution 36 34 145
133
Markets 4 4 15
16
Other 2 3 12
11
Total depreciation, amortisation
and impairment charges
from continuing operations 102 106 407
388
Total depreciation, amortisation
and impairment charges from
discontinued operations 0 38 36
139
Total 102 144 443
527

SHARE OF PROFITS IN ASSOCIATES AND JOINT VENTURES BY SEGMENTS

MEUR Q4/05 Q4/04 2005
2004

Power Generation *) 17 -8 23
-18
Heat 3 6 11
15
Distribution 6 5 20
16
Markets 0 0 1
0
Other 1 0 0
-1
Share of profits in associates and 27 3 55
12
joint ventures from continuing
operations

Share of profits in associates and 0 7 -2
36
joint ventures from discontinued
operations
Total 27 10 53
48

*) The main part of the associated companies in Power Generation are power
production companies from which Fortum purchase produced electricity at cost.
The
share of profit according to IFRS also includes depreciations on fair value
adjustments made when acquiring the shareholdings.

INVESTMENTS IN ASSOCIATES AND JOINT VENTURES BY SEGMENTS

MEUR Dec 31 Dec
31
2005
2004

Power Generation 1 259 1
208
Heat 133
128
Distribution 210
196
Markets 8
8
Other 0
0
Investments in associates and joint ventures 1 610 1
540
from continuing operations
Investments in associates and joint ventures 0
140
from discontinued operations
Total 1 610 1
680
CAPITAL EXPENDITURE AND INVESTMENTS IN SHARES BY SEGMENTS

MEUR Q4/05 Q4/04 2005
2004

Power Generation 69 58 129
210
Heat 141 100 212
175
Distribution 50 41 115
106
Markets 3 2 10
6
Other 3 7 13
17
Capital expenditure and investments in 266 208 479
514
shares from continuing
operations
Capital expenditure and investments in shares 0 121 99
316
from discontinuing operations
Total 266 329 578
830

NET ASSETS BY SEGMENTS
MEUR Dec 31 Dec
31

2005
2004
Power Generation 5 954 6
218
Heat 2 551 2
440
Distribution 3 021 3
091
Markets 228
194
Other and Eliminations 139
-43
Net assets from continuing operations 11 893 11
900
Net assets from discontinued operations 0 2
011
Eliminations 0
2
Total 11 893 13
913

RETURN ON NET ASSETS BY SEGMENTS

% Dec 31 Sept 30 June 30 March Dec 31 Sept 30 June 30
March
2005 2005 2005 31 2004 2004 2004
31
2005
2004

Power 14.0 11.7 11.3 14.6 12.1 11.0 12.5
14.0
Generation
Heat 11.6 10.3 14.2 19.3 9.8 8.6 11.8
18.3
Distribution 8.8 8.2 9.1 10.1 8.1 8.3 9.4
11.3
Markets 17.4 15.6 14.6 11.5 25.3 37.9 36.8
77.6

COMPARABLE RETURN ON NET ASSETS BY SEGMENTS

% Dec 31 Sept 30 June 30 March Dec 31 Sept 30 June 30
March
2005 2005 2005 31 2004 2004 2004
31
2005
2004
Power 14.5 12.5 13.2 14.9 11.5 10.5 11.5
13.8
Generation
Heat 11.0 9.3 12.7 18.5 9.3 8.0 11.3
17.8
Distribution 8.6 7.9 8.7 9.4 8.3 8.3 9.0
11.1
Markets 16.4 16.4 15.7 13.5 17.1 26.7 24.5
43.4


Return on net assets is calculated by dividing the sum of operating profit
and share of profit of associated companies and joint ventures with
average net assets.

ASSETS BY SEGMENTS
MEUR Dec 31 Dec 31
2005 2004

Power Generation 6 522 7 108
Heat 2 895 2 742
Distribution 3 448 3 514
Markets 515 375
Other and Eliminations 216 -156
Assets from continuing operations 13 596 13 583
Assets from discontinuing operations 2 756
Eliminations -32
Assets included in Net assets 13 596 16 307
Interest-bearing receivables 620 728
Deferred taxes 18 106
Other assets 108 281
Cash and cash equivalents 788 145
Total assets 15 130 17 567

LIABILITIES BY SEGMENTS
MEUR Dec 31 Dec 31
2005 2004

Power Generation 568 890
Heat 344 302
Distribution 427 423
Markets 287 181
Other and Eliminations 77 -113
Liabilities from continuing operations 1 703 1 683
Liabilities from discontinuing operations 745
Eliminations -34
Liabilities included in Net assets 1 703 2 394
Deferred tax liabilities 1 512 1 841
Other 558 442
Total liabilities included in capital 3 773 4 677
employed
Interest-bearing liabilities 3 946 5 240
Total equity 7 411 7 650
Total equity and liabilities 15 130 17 567


CHANGES IN INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT

MEUR Dec 31 2005 Dec 31 2004
Opening 12 041 11 923
balance
Acquisition of subsidiary companies 171 31
Capital expenditures 346 648
Disposals -31 -152
Depreciation, amortisation and impairment -407 -527
Translation differences -324 118
Closing balance before de-consolidation of 11 796 12 041
Neste Oil
De-consolidation of Neste Oil -1 540
Closing 10 256 12 041
balance

BUSINESS COMBINATIONS

In 20 December 2005, Fortum acquired 57,03 % of the share capital of MPEC
Wroclaw S.A., a district heating distributor in Poland. The acquired
business did not contribute any revenues or net profit to the Group in 2005.


Details of net assets acquired and
goodwill are as follows:
Purchase consideration:
- Cash paid 78
- Direct costs relating to the 1
acquisition
Total purchase consideration 79
Fair value of the acquired net 82
identifiable assets
Translation difference -3
Goodwill 0


The assets and liabilities arising from Fair value Acquiree's
the acquisition are as follows: carrying
amount
Cash and cash equivalents 12 12
Intangible assets 1 1
Property, plant and equipment 146 103
Receivables 18 18
Deferred tax assets 1 1
Non-interest bearing liabilities -17 -17
Interest-bearing liabilities -4 -4
Deferred tax liabilities -13 -4
Net identifiable assets 144 110
Minority interests -62
Fair value of the acquired net 82
identifiable assets

Purchase consideration settled in cash 79
Cash and cash equivalents in 12
subsidiary acquired
Cash outflow on acquisition 67

QUARTERLY SALES BY SEGMENTS

MEUR Q4 Q3 Q2 Q1 Q4 Q3 Q2
Q1
2005 2005 2005 2005 2004 2004 2004
2004

Power Generation 598 450 476 534 583 453 488
560
- of which internal 23 6 13 55 55 11 26
36
Heat 325 147 206 385 316 149 198
361
- of which internal 0 1 -1 12 9 1 3
36
Distribution 196 149 160 202 194 150 157
206
- of which internal 2 2 2 2 3 3 1
3
Markets 391 284 298 392 378 287 303
419
- of which internal 35 19 22 25 28 17 22
25
Other 20 26 22 23 23 22 25
20
- of which internal 13 13 15 22 11 7 9
10
Eliminations -418 -282 -304 -403 -410 -296 -314
-437
Sales from continuing 1 112 774 858 1 133 1 084 765 857 1
129
operations
Sales from discontinued - - - 2 061 2 108 2 091 2 000 1
710
operations
Eliminations - - - -20 -17 -20 -27
-21
Total 1 112 774 858 3 174 3 175 2 836 2 830 2
818
QUARTERLY OPERATING PROFIT BY SEGMENTS

MEUR Q4 Q3 Q2 Q1 Q4 Q3 Q2
Q1
2005 2005 2005 2005 *) 2004 2004 2004
2004

Power Generation 296 181 125 223 241 128 172
222
Heat 94 13 50 112 75 12 27
104
Distribution 76 48 56 71 51 45 55
83
Markets 11 7 8 6 0 13 5
16
Other -3 -9 -12 -6 -4 -21 -11
-18
Operating profit from 474 240 227 406 363 177 248
407
continuing operations
Operating profit from - - 390 127 183 165 223
150
discontinued operations
Total 474 240 617 533 546 342 471
557
*) The accounting treatment of CO2 emission allowances was changed in Q2
according
to the decision of IASB to withdraw the IFRIC 3 Emission rights with
immediate effect.

QUARTERLY COMPARABLE OPERATING PROFIT BY SEGMENTS, CONTINUING OPERATIONS

MEUR Q4 Q3 Q2 Q1 Q4 Q3 Q2
Q1
2005 2005 2005 2005 2004 2004 2004
2004

Power Generation 297 161 172 224 232 135 145
218
Heat 97 12 37 107 75 7 24
101
Distribution 76 47 55 66 57 51 51
81
Markets 8 7 8 7 -1 10 5
9
Other -18 -7 -11 -11 -14 -12 -14
-12
Comparable operating 460 220 261 393 349 191 211
397
profit from
continuing operations
Non-recurring items 10 2 12 6 29 -4 -1
-6
Other items effecting 4 18 -46 7 -15 -10 38
16
comparability
Operating profit from 474 240 227 406 363 177 248
407
continuing operations
QUARTERLY NON-RECURRING ITEMS IN OPERATING BY SEGMENTS

MEUR Q4 Q3 Q2 Q1 Q4 Q3 Q2
Q1
2005 2005 2005 2005 2004 2004 2004
2004

Power Generation -6 3 0 0 18 -2 -1
-6
Heat 2 1 11 0 4 0 0
0
Distribution 0 0 1 0 2 0 0
0
Markets 0 0 0 0 0 0 0
0
Other 14 -2 0 6 5 -2 0
0
Total 10 2 12 6 29 -4 -1
-6

Includes positive one-time effects of change in treatment
of Finnish TEL disability pension liability in Q4 2004.

QUARTERLY OTHER ITEMS EFFECTING COMPARABILITY

MEUR Q4 Q3 Q2 Q1 Q4 Q3 Q2
Q1
2005 2005 2005 2005 2004 2004 2004
2004

Power Generation 5 17 -47 -1 -9 -5 28
10
Heat -5 0 2 5 -4 5 3
3
Distribution 0 1 0 5 -8 -6 4
2
Markets 3 0 0 -1 1 3 0
7
Other 1 0 -1 -1 5 -7 3
-6
Total 4 18 -46 7 -15 -10 38
16

DISCONTINUED OPERATIONS (including eliminations
between Fortum and discontinued operations)

MEUR Q4/05 Q4/04 2005 *)
2004

Sales - 2 108 2 061
7 909
Other income - 14 395
66
Materials and services - -1 610 -1 726
-6 439
Employee benefit costs - -59 -57
-211
Depreciation, amortisation and impairment - -38 -36
-139
charges
Other expenses - -232 -120
-465
Operating profit - 183 517
721
Share of profit of associates and joint - 7 -2
36
ventures
Finance costs-net - 8 -6
-19
Profit before income tax - 198 509
738
Income tax expense - -41 -35
-149
Profit for the year from discontinued - 157 474
589
operations

*) The accounting treatment of CO2 emission allowances was changed in Q2
according to the decision of IASB to withdraw the IFRIC 3 Emission rights
with immediate effect.
Other income includes the capital gain, EUR 390 million,
from the sale of approximately 15% of the shares in Neste
Oil Oyj.

CONTINGENT LIABILITIES
MEUR Dec 31 Dec 31
2005 2004
Contingent liabilities
On own behalf
For debt
Pledges 144 160
Real estate mortgages 49 113
For other commitments
Real estate mortgages 66 59
Other contingent liabilities 94 76
Total 353 408
On behalf of associated companies and joint ventures
Pledges and real estate mortgages 3 12
Guarantees 208 335
Other contingent liabilities 125 182
Total 336 529
On behalf of others
Guarantees 2 3
Other contingent liabilities 3 5
Total 5 8
Total 694 945


Fortum's 100% owned subsidiary Fortum Heat and Gas Oy has a collective
contingent liability with Neste Oil Oyj of the demerged Fortum Oil and Gas Oy's
liabilities based on the Finnish Companies Act's Chapter 14a Paragraph 6.


Operating lease liabilities
Due within a year 17 87
Due after one year and within five years 31 81
Due after five years 9 64
Total 57 232


NUCLEAR RELATED ASSETS AND LIABILITIES
MEUR Dec 31 Dec 31
2005 2004
Liability for nuclear waste management according 618 596
to the Nuclear Energy Act 1)
Fortum´s share of reserves in the -610 -581
Nuclear Waste Fund 2)
Difference covered by real estate 8 15
mortgages 3)


1) The legal liability calculated according to the Nuclear Energy Act in Finland
is EUR 618 (596) million as of 31 December 2005 (and 2004 respectively)
Discounted liability in the balance sheet calculated according
to IAS 37 is EUR 418 (401) million as of 31 December 2005.
The main reason for the difference in liability is that
the legal liability is not allowed to discount to net
present value.

2) Fortum contributes to the Nuclear Waste Fund according to the
legal liability. Fortum´s share of the nuclear waste fund as of 31
December 2005 is EUR 610 (581) million.
The value of the fund asset in the balance sheet is EUR 418 (401)
million as of 31 December 2005 due to IFRIC Interpretation 5, which
states that it can not exceed the carrying value of the related liabilities.

3) At year end there is a difference between the legal liability and Fortum´s
share of the nuclear waste fund due to yearly revised calculation of the
liability.
The difference is due to timing of the annual calculation of
the liability and will be paid during first quarter the following year.
Fortum has given real estate mortgages as security. The
real estate mortgages are included in contingent liabilities.

DERIVATIVES
MEUR Dec 31 Dec
31
2005
2004

Interest and currency derivatives Notional Net fair Notional Net
fair
value value value
value

Interest rate swaps 2 636 11 3 435
-45
Forward foreign exchange contracts 5 297 69 8 176
-32
Interest rate and currency swaps 2 169 3 310
-23
Purchased currency options - - 438
17
Written currency options - - 438
6
Electricity derivatives Volume Net fair Volume Net
fair
value
value
TWh MEUR TWh
MEUR

Sales swaps 84 -463 70
204
Purchase swaps 49 276 42
-53
Purchased options 1 -1 1
-1
Written options 3 2 1
-
Oil derivatives Volume Net fair Volume Net
fair
value
value
1000 bbl MEUR 1000 bbl
MEUR

Sales swaps and futures 90 0 44 588
26
Purchase swaps and futures 571 6 70 258
7
Purchased options - - 4 797
2
Written options - - 6 784
-2

Accounting principles

This report has been prepared in accordance with IFRS. As of 2005 Fortum
is applying International Financial reporting Standards (IFRS).
The most important changes for Fortum
continuing operations are:

- Derivatives are being carried at fair value in the balance sheet. Fair
value changes effects the income statement if hedge accounting is not
applied. (IAS 39)

- Fortum´s part of the Finnish nuclear waste fund and the future
liabilities for spent fuel and decomissioning regarding nuclear
production are disclosed gross in the balance sheet according to IFRIC
Interpretation 5.

- The minority preference shares with option agreement in Nybroviken
Kraft AB Group accounted for as minority interest under Finnish GAAP is
reclassified as interest-bearing liabilities under IFRS.

-The accounting of pension liabilities according to IAS 19 creates a
change to Finnish GAAP, but impacts mainly 2004 since the accounting
treatment of the Finnish TEL´s disability pension component changed during
disability pension component changed during the year.

- The oil operations in Fortum are regarded as discontinued operations as of
March 31, 2005. Discontinued operations are disclosed on one line in
the income statement and shown separately in the cash-flow.
2004 comparison financials are restated.

Fortum has in a press release on April 26, 2005, described the impact of
the transition to IFRS on 2004 financial information. The document also
included restated quarterly information and reconciliations
of equity and net profit between Finnish GAAP and IFRS.
The detailed accounting principles used can be found on the Fortum
website: www.fortum.com/Investors/Financial Information

Emission allowances

As of January 1, 2005 Fortum implemented IFRIC interpretation 3 in
accounting for CO2 emission allowances. In June 2005 the IASB decided to
withdraw IFRIC 3 with immediate effect.
Following this decision, Fortum has changed accounting treatment for emission
allowances retroactively. Fortum accounts for the CO2 allowances
based on currently valid IFRS standards where purchased CO2 emission
allowances are accounted for as intangible assets at cost, whereas CO2
emission allowances received free of charge are accounted for at nominal value.
A provision is recognised to cover the obligation to return emission
allowances and it is measured at its probable settlement amount. This means that
the effect in operating profit will reflect the difference between what has
been emitted and received emission allowances. This difference is
valued at fair value or the value of the purchased allowances.


Definitions of key figures
Comparable operating profit = Operating profit - non-recurring
items -
other items effecting comparability
Non-recurring items = Mainly capital gains
and losses
Other items effecting = Includes effects from financial
comparability derivatives hedging future cash-flows
where
hedge accounting is not applied
according to IAS 39 and effects
from
the accounting of Fortum´s part of
the Finnish Nuclear Waste Fund
where the asset in the balance sheet
cannot exceed the related liabilities
according to IFRIC
interpretation 5.
Return on shareholders' = 100 x Profit for the
equity, % year
Total equity
average
Return on capital employed, % = 100 x Profit before taxes + interest and
other financial expenses
Capital
employed
average
Return on capital employed = 100 x Profit before taxes continuing
continuing operations, % operations + interest and other
financial expenses
continuing operations
Capital employed continuing
operations average
Return on net assets, % = 100 x Operating profit + Share of profit
(loss)
in associated companies and joint
ventures
ventures

Net assets
average
Comparable return on net = 100 x Comparable operating profit + Share
of
assets, % profit (loss) in associated companies
and joint ventures (adjusted
for IAS 39 effects)
Comparable net assets
average
Capital = Total assets - non-interest bearing
employed liabilities - deferred tax
liabilities
-
provisions

Net assets = Non-interest bearing assets +
interest-
bearing assets related to the Nuclear
Waste Fund - non-interest
bearing liabilities -
provisions
(non-interest bearing assets and
liabilities do not include finance
related
items,
tax and deferred tax and assets and
liabilities from fair valuations of
derivatives where hedge
accounting is applied)
Comparable net assets = Net assets adjusted for non-
interest bearing assets and
liabilities
arising from financial derivatives
hedging
future cash-flows where hedge
accounting is not applied
according to IAS 39
Interest-bearing net debt = Interest-bearing liabilities
- cash and cash equivalents
Gearing, % = 100 x Interest-
bearing net
debt
Total
equity
Equity per share, EUR = Shareholder's
equity
Number of shares at
the end of the period
Equity-to-assets ratio, % = 100 x Total equity
including minority
interest
Total
assets
Net debt / = Operating profit + Depreciation,
EBITDA amortisation and impairment charges
Interest-
bearing net
debt
Net debt / EBITDA continuing = Operating profit continuing
operations +
operations Depreciation, amortisation and
impairment charges
continuing operations
Interest-
bearing net
debt
Interest = Operating
coverage profit
Net interest
expenses
Earnings per share (EPS) = Profit for the period
- minority interest
Average number of shares
during the period