Fortum Corporation: Financial Statements 2006

Fortum Corporation Stock Exchange Release 31 January 2007


Fortum Corporation: Financial Statements 2006

Another good year for Fortum
- Fortum's Board proposes a dividend of EUR 1.26

The year in brief
- Comparable operating profit EUR 1,437 (1,334) million, + 8%
- Profit before taxes EUR 1,421 (1,267) million, + 12%
- Earnings per share EUR 1.22 (1.01), + 21%
- Progress in Russia and Poland
- Proposed total dividend EUR 1.26 per share

Key figures, IV/06 IV/05 2006 2005
continuing operations
Sales, EUR million 1,254 1,112 4,491 3,877
Operating profit, EUR million 455 474 1,455 1,347
Comparable operating profit, EUR 440 460 1,437 1,334
million
Profit before taxes, EUR million 448 466 1,421 1,267
Earnings per share, EUR 0.39 0.36 1.22 1.01
Net cash from operating activities, EUR 92 424 1,151 1,271
million
Shareholders’ equity per share, EUR 8.91 8.17
Interest-bearing net debt (at end of 4,345 3,158
period),
EUR million
Average number of shares, 1,000s 881,194 872,613


Key financial ratios, 2006 2005
continuing operations
Return on capital employed, % 13.4 13.5
Return on shareholders’ equity, % 14.4 13.5
Net debt/EBITDA 2.3 1.8

*) Return on equity for continuing operations is calculated based on profit for
the period from continuing operations divided by total equity at the end of the
period. Profit for the period from discontinued operations has been subtracted
from total equity as at 31 December 2005.

The year 2006 was characterised by improving results, progress in strategic
positions in Russia and Poland and acceleration of new power and heat generation
initiatives. In short, 2006 was a good year for Fortum. The company’s operating
results improved and its financial position remained strong. The key financial
targets, ROCE 12% and the new target for ROE, 14%, were exceeded. Fortum’s net
debt to EBITDA stood at 2.3 at the year end. Net cash from operating activities
decreased slightly to EUR 1,151 (1,271) million.

Fortum Power Generation segment's achieved Nordic power price was EUR 37.1
(31.2),
up by 19% from 2005. The average spot price of electricity in Nord Pool, the
Nordic power exchange, was EUR 48.6 (29.3) per megawatt-hour (MWh), which was
approximately 66% higher than in 2005.

During 2006, Fortum initiated several new capacity expansion projects. Ongoing
or
planned investments in new generation capacity include the Olkiluoto 3 nuclear
reactor in Finland, capacity upgrades in Swedish nuclear reactors, two combined
heat and power plants (Suomenoja, Finland and Värtan, Sweden) as well as a new
gas
turbine plant (Inkoo, Finland). The programme will increase the power generation
capacity by approximately 1,500 megawatts (MW) mainly by 2010. The total value
of
Fortum's capacity investment programme, including investments through associated
companies, is approximately EUR 2.8 billion.

E.ON Finland (renamed Fortum Espoo) was acquired and subsequently de-listed.
Fortum Espoo has been fully consolidated from the end of the second quarter
2006,
and all Fortum Espoo's business functions have been integrated into Fortum's
business unit structure.

During 2006, Fortum strengthened its position in the Russian market and
increased
its ownership to slightly over 25% in the regional power generating company of
north-west Russia, Territorial Generating Company No. 1 (TGC-1).

Fortum continued to expand its district heating business in Poland. In December
Fortum announced that it is building a new combined heat and power plant in
Czêstochowa, Poland.

Financial results, continuing operations

October-December

Group sales stood at EUR 1,254 (1,112) million.

Group operating profit totalled EUR 455 (474) million. Comparable operating
profit
decreased by EUR 20 million to EUR 440 (460) million.

During the fourth quarter, the average price of electricity in Nord Pool was EUR
44.6 (32.3) per MWh, or 38% higher than during the corresponding period in 2005.
The Power Generation segment's achieved Nordic power price EUR 37.7 (33.0) per
MWh
was 14% higher.

The comparable operating profit of the Power Generation segment was almost at
the
same level as last year. The positive profit impact from higher achieved Nordic
power price was offset by increased taxes on nuclear capacity and hydro assets
as
well as lower nuclear and hydro power generation volumes. Nuclear power
generation
was lower due to unplanned shut-downs in Swedish nuclear power plants. The lost
volume due to these was approximately 0.6 TWh in the fourth quarter. The weaker
hydrological situation caused lower hydro power generation volumes. Thermal
power
generation increased and thus the Power Generation segment was a net buyer of
CO2
emission allowances.

The comparable operating profit of the Heat segment decreased slightly, being
EUR
95 (97) million. This was mainly due to higher fuel prices and warm weather,
especially in December.

The Distribution segment's comparable operating profit of EUR 77 million in the
fourth quarter was EUR 1 million higher than last year.

The Markets segment recorded an operating loss during the last quarter.
Procurement costs continued to be high. Warm weather led to lower consumption
and
sales volumes. At the same time, the intense retail competition, especially in
Finland, pressed sales margins.


Sales from continuing operations, by segment

EUR million IV/06 IV/05 2006 2005

Power Generation 667 598 2,439 2,058
Heat 381 325 1,268 1,063
Distribution 210 196 753 707
Markets 529 391 1,912 1,365
Other 19 20 78 91
Eliminations -552 -418 -1,959 -1,407
Total 1,254 1,112 4,491 3,877


Comparable operating profit/-loss from continuing operations, by segment

EUR million IV/06 IV/05 2006 2005

Power Generation 289 297 985 854
Heat 95 97 253 253
Distribution 77 76 250 244
Markets -8 8 -4 30
Other -13 -18 -47 -47
Total 440 460 1,437 1,334


Operating profit/-loss from continuing operations, by segment

EUR million IV/06 IV/05 2006 2005

Power Generation 290 296 980 825
Heat 119 94 264 269
Distribution 74 76 252 251
Markets -18 11 -6 32
Other -10 -3 -35 -30
Total 455 474 1,455 1,347

January-December

Group sales stood at EUR 4,491 (3,877) million.

Group reported operating profit totalled EUR 1,455 (1,347) million. The
comparable
operating profit stood at EUR 1,437 (1,334) million.

In January-December, the average Nord Pool spot price was EUR 48.6 (29.3) per
MWh,
or 66% higher than in 2005. Fortum Power Generation's achieved Nordic power
price
was EUR 37.1 (31.2), up by 19% from 2005.

The total power generation volume in the Power Generation segment was higher
than
last year. Nuclear power generation was lower due to unplanned shut-downs in
Swedish nuclear power plants. The lost volume due to these was approximately 1.6
TWh. Hydro generation was 1.4 TWh lower than last year, driven by a weaker
hydrological situation.

The comparable operating profit of the Power Generation segment was EUR 131
million higher than last year despite the negative effect from increased taxes
on
nuclear capacity and hydro property. Compared to the previous year, the effect
of
increased taxes was approximately EUR -65 million in 2006.

The Heat segment's sales were EUR 205 million higher than last year, mainly due
to
increased volumes from new businesses and higher power prices. The Heat
segment's
comparable operating profit was at the same level as last year. The negative
impact of increased fuel prices was partly offset by the use of more waste fuel
in
Sweden.

The Distribution segment's sales were EUR 753 million. This was EUR 46 million
higher than last year, mainly due to the Fortum Espoo integration. The segment's
comparable operating profit of EUR 250 million was EUR 6 million higher than
last
year, mainly due to the Fortum Espoo integration.

The sales of the Markets segment in 2006 were higher than in 2005 mainly due to
the Fortum Espoo integration. Due to the challenging market situation, Markets
recorded an operating loss in 2006 while year 2005 was profitable. Procurement
costs continued to be high and the intense retail price competition, especially
in
Finland, pressed sales margins.

The costs and provisions related to the implementation of a new customer and
billing system affected the operating results of the Markets and Distribution
segments in Sweden.

Profit before taxes was EUR 1,421 (1,267) million.

The Group's net financial expenses amounted to EUR 103 (135) million. The
decrease
is mainly attributable to lower interest rates. Net financial expenses include
fair value gains on financial instruments of EUR 30 (40) million.

The share of profit of associates and joint ventures was EUR 69 (55) million.
The
biggest contributor was Hafslund ASA in Norway. Hafslund ASA is showing the fair
value change in the Renewable Energy Corporation ASA (REC) shareholding through
the income statement, while Fortum is showing the fair value change in equity.
The
fair value change during 2006 booked in Fortum's equity and based on the number
of
shares reported by Hafslund, was approximately EUR 440 million at the end of
December 2006.

Minority interests accounted for EUR 49 (52) million. The minority interests are
mainly attributable to Fortum Värme Holding, in which the City of Stockholm has
a
50% economic interest.

Taxes for the financial year totalled EUR 301 (331) million. The tax rate
according to the income statement was 21.2% (26.1%).

The profit for the financial year was EUR 1,120 (936) million. Fortum's earnings
per share were EUR 1.22 (1.01). Return on capital employed was 13.4% for 2006
(13.5%), and return on shareholders' equity was 14.4% for 2006 (13.5%).


Market conditions

According to preliminary statistics, the Nordic countries consumed 392 (392)
terawatt-hours (TWh) of electricity in 2006. The last half of 2006 was clearly
warmer than normal leading to lower consumption. The last quarter's consumption
was 102 (108) TWh, 6% less than the year before.

The year 2006 started with a 7-TWh surplus in the Nordic water reservoirs
compared
to the long-term average. The hydrological situation weakened during the year
until the autumn. In August, the deficit was at its largest at 30 TWh. Warm
weather and low consumption combined with high precipitation helped to fill the
water reservoirs towards the end of the year. At the end of December, the Nordic
water reservoirs were only 2 TWh below the long-term average and 9 TWh below the
corresponding level in 2005.

During the fourth quarter, the average spot price for power in Nord Pool was EUR
44.6 (32.3) per MWh or 38% higher than in the corresponding period in 2005 and
25%
lower than in the previous quarter. During the fourth quarter, the hydrological
situation strengthened rapidly and the availability of the Swedish nuclear
plants
improved. At the same time, power consumption was lower, driven by clearly
warmer
than usual weather. Both the spot price and the financial market (forwards)
turned
to a steep decline driven by this dramatic shift in market fundamentals.

During 2006, the average spot price for power in Nord Pool was EUR 48.6 (29.3)
per
MWh, or 66% higher than in 2005. The spot price was higher during 2006 due to
the
dry hydrological situation and the unplanned nuclear shut-downs in Sweden.

In Germany, the average spot price for 2006 was slightly higher than in the
Nordic
area and resulted in a net export from the Nordic area to Germany.

During 2006, the average market price for CO2 emissions was EUR 18.5 (17.9)
per tonne, or 3% higher than during the previous year. During the fourth
quarter,
the average market price for 2007 CO2 emissions was EUR 9.7 (22.1) per tonne
CO2,
or 56% lower than during the corresponding period in 2005. During the fourth
quarter, the price declined from EUR 12-13 to EUR 6-7 per tonne CO2. However, at
the end of 2006 the prices of the Kyoto period CO2 emissions (years 2008-2012)
were significantly above the 2007 prices. For example, the 2008 price was about
EUR 17-18 EUR per tonne CO2.

Total power and heat generation figures

Fortum's total power generation during 2006 was 54.7 (52.3) TWh, of which 53.5
(51.2) TWh was in the Nordic countries. This corresponds to 14% (13%) of the
total
Nordic electricity consumption.

At year end, Fortum's total power generating capacity was 10,913 (11,281) MW, of
which 10,768 (11,136) MW was in the Nordic countries. Changes are mainly due to
the divestment of thermal power plants in Finland and Sweden. The Fortum Espoo
integration increased Fortum's combined power and heat production capacity.

The share of CO2-free power generation was 84% (93%) of Fortum's power
generation
in 2006. A preliminary estimate for CO2 emissions from Fortum’s own power plants
in 2006 totals 11.0 million tonnes, 4.5 million tonnes higher than in the
previous
year. The emissions subject to EU's emissions trading scheme rose to about 10.4
million tonnes. The average volume of emission allowances allocated to Fortum's
installations in various countries totals approximately 9 million tonnes per
year
during 2005-2007.

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 IV/06 IV/05 2006 2005
generation, TWh
Power generation 15.4 14.3 54.7 52.3
Heat generation 7.4 7.6 25.8 25.1

Fortum's own power generation by IV/06 IV/05 2006 2005
source, TWh, total in the Nordic
countries
Hydropower 5.6 5.8 19.8 21.2
Nuclear power 6.4 7.0 24.4 25.8
Thermal power 3.1 1.3 9.3 4.2
Total 15.1 14.1 53.5 51.2

Fortum's own power generation by IV/06 IV/05 2006 2005
source, %, total in the Nordic
countries
Hydropower 37 41 37 42
Nuclear power 42 50 46 50
Thermal power 21 9 17 8
Total 100 100 100 100

Total power and heat sales figures

Fortum’s total power sales were 61.6 (59.7) TWh, of which 60.2 (58.2) TWh were
in
the Nordic countries. This represented approximately 15% (15%) of the region’s
total consumption. Heat sales in the Nordic countries amounted to 20.1 (19.4)
TWh
and in other countries to 6.7 (4.4) TWh.

Fortum's total electricity *) and IV/06 IV/05 2006 2005
heat sales, EUR million
Electricity sales 667 575 2,437 2,002
Heat sales 299 264 1,014 867

Fortum's total electricity sales*) IV/06 IV/05 2006 2005
by area, TWh
Sweden 7.9 8.4 28.5 30.4
Finland 8.1 6.9 29.6 26.0
Other countries 0.9 0.9 3.5 3.3
Total 16.9 16.2 61.6 59.7

Fortum's total heat sales by area, IV/06 IV/05 2006 2005
TWh
Sweden 2.6 3.0 9.3 9.5
Finland 3.3 2.9 10.7 9.8
Other countries**) 1.8 1.3 6.8 4.5
Total 7.7 7.2 26.8 23.8

*) Nord Pool transactions are calculated as a net amount of hourly sales and
purchases at the Group level.
**) Including the UK, which is reported in the Power Generation segment, other
sales.

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 the business units Generation, Portfolio
Management and Trading (PMT), and Service.

EUR million IV/06 IV/05 2006 2005

Sales 667 598 2,439 2,058
- power sales 566 487 2,059 1,682
- other sales 101 111 380 376
Operating profit 290 296 980 825
Comparable operating profit 289 297 985 854
Net assets (at period-end) 6,734 5,954
Return on net assets, % 16.1 14.0
Comparable return on net assets, % 16.1 14.5

The segment's power generation during the fourth quarter amounted to 13.0 (12.8)
TWh in the Nordic countries.

In 2006, the segment's power generation in the Nordic countries was 48.3 (47.2)
TWh, of which about 19.8 (21.2) TWh or 41% (45%) was hydropower-based, 24.4
(25.8)
TWh or 51% (55%) nuclear power-based, and 4.1 (0.2) TWh or 8% (0%) thermal
power-
based. The decrease in hydro power generation was due to a weakened hydrological
situation. The decrease in nuclear generation was caused by unplanned shut-downs
in the Swedish nuclear power plants. Thermal power generation increased due to
low
hydro and nuclear volumes and high spot prices.

At year end, the segment’s power generation capacity totalled 9,540 (10,003) MW,
of which 9,400 (9,863) MW was in the Nordic countries and 140 (140) MW in other
countries. Changes are mainly due to thermal power plant divestments in Finland
and Sweden.

Power generation by area, TWh IV/06 IV/05 2006 2005

Sweden 7.4 7.9 27.1 28.4
Finland 5.5 4.9 21.1 18.8
Other countries 0.3 0.3 1.2 1.1
Total 13.2 13.1 49.4 48.3

Nordic sales volume, TWh 14.5 14.2 53.9 52.6
of which pass-through sales 1.2 1.1 4.5 4.5


Sales price, EUR/MWh IV/06 IV/05 2006 2005
Generation's Nordic power price* 37.7 33.0 37.1 31.2

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

Fortum Power Generation's achieved Nordic power price (excluding pass-through
items) in the fourth quarter was 14% higher than a year ago, mainly due to
improved hedging prices and higher spot prices. In the fourth quarter, the
average
spot price of power in Nord Pool was 38% higher than a year ago. During 2006
Power
Generation's achieved Nordic power price was 19% higher, while the average spot
price in Nord Pool being 66% higher than in 2005. The related sales volume was
13.3 (13.1) TWh in the fourth quarter and 49.4 (48.1) TWh for the whole year.

Fortum has strengthened its position in Russia in the regional power generating
company of north-west Russia, Territorial Generating Company No. 1 (TGC-1).

In October, Fortum acquired a 12.5% share of St. Petersburg Generating Company.
This ownership combined with Fortum's previous stake in St. Petersburg
Generating
Company entitled Fortum to a slightly over 25% share of TGC-1. In November 2006,
the merger of the regional generation companies was finalised and TGC-1 was
registered as a legal company. After converting the shares of the regional
generation companies into shares of TGC-1, the largest owners are RAO UES with
approximately 56%, Fortum with slightly over 25% and Interros with approximately
7%.

At the end of October, Fortum also participated in the IPO of the Russian
Wholesale Generating Company No. 5 (WGC-5), which has four production sites
around
Russia. In the IPO, Fortum obtained less than 1% of WGC-5.

The unplanned shut-downs in the Swedish nuclear power plants Forsmark and
Oskarshamn caused a production loss in nuclear power generation of approximately
1.6 TWh to Fortum by the end of December.

Fortum is participating in the fifth Finnish nuclear power unit (Olkiluoto 3)
with
a share of approximately 25%. The supplier (Consortium AREVA-Siemens) has
reported
to TVO, the company that is building and owns the new unit, that the unit will
be
completed at the turn of 2010 - 2011.

In October, Fortum completed the sale of its industrial maintenance business.
Some
900 employees transferred in connection with the deal.

In November, Fortum signed a four-year contract on the operation and maintenance
of a waste-to-energy plant under construction in the UK, near London's Heathrow
Airport. The plant will be ready in summer 2008.

In November, Fortum applied for an additional 20-year operating licence for the
Loviisa nuclear power plant. In December, Fortum made a long-term agreement to
purchase nuclear fuel from Russian TVEL Corporation to Loviisa.

In November, Fortum sold its 154-MW peat-fired power plant in Haapavesi,
Finland.
Fortum sold the equivalent of 1 TWh/a of constant generation capacity in the
Finnish area from November 2006 to the end of March 2011. Fortum leased its
308-MW
share of the Meri-Pori power plant from January 2007 to the end of June 2010.
These transactions were required by the Finnish competition authority for the
realisation of the Fortum Espoo acquisition.

In December, Fortum announced a plan to build a new gas turbine power plant in
Inkoo, Finland. According to the plan, the power plant will be in commercial use
in 2009. The fuel of the power plant will be light fuel oil, and the power
generation output will be about 250 to 300 MW.
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 Nordic
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 business units Värme, operating in Sweden,
and
Heat, operating in other markets.


EUR million IV/06 IV/05 2006 2005

Sales 381 325 1,268 1,063
- heat sales 288 254 976 834
- power sales 68 48 198 145
- other sales 25 23 94 84
Operating profit 119 94 264 269
Comparable operating profit 95 97 253 253
Net assets (at period-end) 3,407 2,551
Return on net assets, % 9.6 11.6
Comparable return on net assets, % 9.2 11.0

The segment’s heat sales during the fourth quarter amounted to 7.2 (6.6) TWh and
to 24.7 (21.7) TWh during the whole year. The volume increase was mainly due to
the acquisitions in Poland and Fortum Espoo. Due to seasonality in district
heating demand, the first and last quarters of the year are most important to
the
segment's results.

Power generation at combined heat and power plants (CHP) was 1.7 (1.3) TWh
during
the fourth quarter and 5.0 (4.1) TWh during 2006. The increase was mainly due to
new volumes from the Fortum Espoo integration.

Heat sales by area, TWh IV/06 IV/05 2006 2005

Sweden 2.5 3.0 9.3 9.5
Finland 3.3 2.9 10.7 9.8
Other countries 1.4 0.7 4.7 2.4
Total 7.2 6.6 24.7 21.7

Power sales, TWh IV/06 IV/05 2006 2005

Total 1.7 1.3 5.0 4.1

In May, Fortum started a project to connect the southern and central parts of
the
district heating systems in Stockholm. This will lead to more efficient use of
heat production capacity in Stockholm. The project will be ready by May 2007 and
the size of the investment is around EUR 20 million.

In May, Fortum Värme applied for an environmental permit for a new bio-fuel
based
CHP plant in Värtan. The new plant is planned to be in operation at the earliest
by late 2009.

Fortum is planning to build a new CHP plant in connection with the current power
plant in Suomenoja, Espoo. The value of the investment is estimated to be
approximately EUR 200 million. The power plant is planned to be ready for
production by the end of 2009. The new power plant will be fuelled by natural
gas.
The electricity production capacity will be approximately 260-300 MW and the
district heating capacity approximately 200-240 MW.

In September, Fortum signed an agreement to sell its CHP plant in Hämeenlinna,
Finland, to Vattenfall. The ownership was transferred to Vattenfall on 24
October.
The sale was required as one of the conditions set by the Finnish competition
authority for the realisation of the Fortum Espoo acquisition.

In December, Fortum announced an investment in a new CHP plant in Czêstochowa,
Poland. The value of the investment is around EUR 95 million. The power plant is
planned to be ready for production by the end of 2009.

Fortum signed an agreement to purchase the heat operations of Vattenfall in
Estonia and Latvia.

During the year, Fortum divested the shares of Sölvesborgs Fjärrvärme AB,
Bromölla
Fjärrvärme AB and Karskär Energi AB in Sweden.

Net assets increased mainly due to the consolidation of Fortum Espoo.

Distribution

Fortum owns and operates distribution and regional networks and distributes
electricity to a total of 1.6 million customers in Sweden, Finland, Norway and
Estonia.

EUR million IV/06 IV/05 2006 2005

Sales 210 196 753 707
- distribution network 179 164 636 592
transmission
- regional network transmission 20 22 80 82
- other sales 11 10 37 33
Operating profit 74 76 252 251
Comparable operating profit 77 76 250 244
Net assets (at period-end) 3,412 3,021
Return on net assets, % 8.4 8.8
Comparable return on net assets,% 8.3 8.6


During the fourth quarter, the volume of distribution and regional transmissions
totalled 7.0 (6.6) TWh and 4.6 (5.0) TWh, respectively.

For the whole year, the volume of distribution and regional network
transmissions
totalled 24.6 (23.1) TWh and 18.1 (18.0) TWh, respectively. Electricity
transmissions via the regional distribution network totalled 15.0 (14.8) TWh in
Sweden and 3.1 (3.2) TWh in Finland.

Volume of distributed electricity IV/06 IV/05 2006 2005
in distribution network, TWh
Sweden 3.8 4.1 14.4 14.4
Finland 2.5 1.8 7.7 6.3
Norway 0.6 0.6 2.3 2.2
Estonia 0.1 0.1 0.2 0.2
Total 7.0 6.6 24.6 23.1


Number of electricity 31 Dec 2006 31 Dec 2005
distribution customers by area,
thousands
Sweden 865 860
Finland 580 410
Norway 97 97
Estonia 23 23
Total 1,565 1,390

The Swedish supervision model (NNM), used by the Energy Markets Inspectorate
(EMI)
to calculate network prices, is contested by the industry. All decisions made by
EMI have been appealed.

The supervision of 2003 distribution tariffs for Fortum (two areas and a minor
subsidiary) is ongoing, and final decisions for Fortum are still pending.
Concerning the supervision of 2004 tariffs (four areas and a minor subsidiary),
there is no communication yet from the authority. In December, EMI informed that
its 2005 tariff supervision will include two of Fortum's distribution areas and
a
minor subsidiary.

The development and implementation of a new customer and billing system in
Sweden
continued to cause additional costs and quality deviations in customer service
for
Distribution.

During 2006, the segment made investments to reduce average customer outage
time.
This programme was initiated in 2005 and is expected to be finished by 2011. By
2011, Fortum will invest EUR 700 million in the Nordic networks. As part of
this,
the EUR 200 million Reliability Investment Programme that was launched in 2005
continued according to plan during 2006

Another important ongoing project is automatic meter management (AMM). All
customers in Sweden will get automatic meters. The roll out of meters will start
in 2007 and the installation will be finalised by the end of 2008. The total
value
of the AMM project in Sweden is estimated at EUR 240 million.


Markets

Markets is responsible for retail sales of electricity to a total of 1.3 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/06 IV/05 2006 2005

Sales 529 391 1,912 1,365
Operating profit/-loss -18 11 -6 32
Comparable operating profit/-loss -8 8 -4 30
Net assets (at period-end) 176 228
Return on net assets, % -1.6 17.4
Comparable return on net assets, -0.8 16.4
%

During the fourth quarter, Markets electricity sales totalled 11.5 (10.8) TWh
with
sales for the whole year amounting to 42.1 (40.2) TWh. The sales in the fourth
quarter were higher than the year before despite the expiring of large sales
contracts in the third quarter of 2005. The increase in sales is mainly due to
the
integration of Fortum Espoo and the higher number of both private and business
customers.

In the fourth quarter, Nordic retail electricity prices were higher than during
the second and third quarters. The retail prices in Sweden and Norway rapidly
follow the forward market prices in Nord Pool, whereas the retail prices in
Finland did not fully follow the forward market price fluctuation.

During the fourth quarter, the sales activities of Fortum Espoo were
successfully
integrated to Fortum Markets.

Markets' customer flow continued to develop positively during 2006.

The development and implementation of the new customer and billing system in
Sweden continued to cause additional costs and quality deviations in customer
service for Markets.


Capital expenditures, investments and divestments of shares

Capital expenditures and investments in shares in 2006 totalled EUR 1,395 (479)
million. Investments excluding acquisitions were EUR 485 (346) million.

In January, Fortum's ownership of Polish MPEC Wroclaw's share capital reached
90.2% and 94.4% of the voting rights. Fortum de-listed Fortum Wroclaw S.A. from
the Warsaw Stock Exchange as of 29 April 2006. Fortum Wroclaw is a district heat
distribution company, whose net sales amounted to approximately EUR 71 million
and
heat sales to approximately 2.1 TWh in 2005.

During 2006, Fortum concluded the acquisition of E.ON Finland (now Fortum
Espoo),
amounting to EUR 766 million. Fortum Espoo was de-listed on 13 September. Fortum
Espoo has been fully consolidated from the end of the second quarter, and it is
included in the appropriate segment figures. The main effects of the
consolidation
are on the Heat, Distribution and Markets segments. During the third quarter,
all
Fortum Espoo business functions were integrated into Fortum's business unit
structure. Fortum expects the integration of Fortum Espoo to bring gradual
annual
synergies of around EUR 15-20 million starting in 2007.

Fortum has fulfilled the conditions set by the Competition Authority for the
realisation of Fortum Espoo acquisition. In October, Fortum finalised the sale
of
its combined heat and power plant in Hämeenlinna, Finland, to Vattenfall. In
November, Fortum sold its 154-MW peat-fired power plant in Haapavesi, Finland,
to
Kanteleen Voima Oy, which is owned by a group of regional energy companies.
Fortum
has also sold the equivalent of 1 TWh/a of constant generation capacity in the
Finnish area from November 2006 to the end of March 2011. Fortum has leased its
308-MW share of the Meri-Pori power plant from January 2007 to the end of June
2010.

Fortum sold its approximately 40% holding in Enprima Oy to the Swedish ÅF Group.
The deal was completed on 24 April 2006.

In September, Fortum announced its intention to sell its industrial maintenance
services business. Some 900 employees were transferred in connection with the
deal. The agreement was signed on 21 September 2006 and closed on 31 October
2006.

In October, Fortum finalised the purchase of approximately 12.5% of St.
Petersburg
Generating Company. The purchase price was approximately EUR 120 million. With
the
acquisition, Fortum's share in the Russian Territorial Generating Company No. 1
increased to slightly over 25%.

At the end of October, Fortum participated in the IPO of the Russian WGC-5,
Wholesale Generating Company number 5, which has four production branches around
Russia. In the IPO, Fortum obtained less than 1% of WGC-5.


Financing

During the fourth quarter, Fortum’s net debt increased by EUR 186 million. At
year
end, the interest-bearing net debt stood at EUR 4,345 million (EUR 3,158
million),
resulting in a total increase in net debt of EUR 1,187 million for the year. The
increase in net debt is primarily linked to the dividend payment in March and
the
Fortum Espoo acquisition in June. Net debt to EBITDA was 2.3 (1.8).

The Group’s net financial expenses for the fourth quarter were EUR 25 (35)
million
and for the full year 2006 EUR 103 (135) million. The decrease is mainly
attributable to lower interest rates. Net financial expenses include fair value
gains on financial instruments of EUR 30 (40) million.

At year end, the average interest rate of Fortum’s interest-bearing loans was
approximately 4.5% per annum.

Group liquidity remained good. Year-end cash and marketable securities totalled
EUR 157 million. In addition, the Group had a total of EUR 1,312 million
available
for drawings under committed credit facilities, such as the EUR 1,200 million
Syndicated Revolving Credit Facility and bilateral overdraft facilities.

In June, Fortum issued a EUR 750-million 10-year Eurobond under its EMTN (Euro
Medium Term Note) programme. The bonds are listed on the Luxembourg Stock
Exchange. The proceeds of the offering were used for general corporate and
refinancing purposes.

Fortum’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 2006, a total of 830.8 (900.1) million Fortum shares for a total of EUR
16,936 million were traded. Fortum’s market capitalisation, calculated using the
closing quotation on the last trading day of the year, was EUR 19,132 million.
The
highest quotation of Fortum Corporation’s shares on the Helsinki Stock Exchange
in
2006 was EUR 23.48, the lowest EUR 15.71, and the average quotation EUR 20.39
(13.87). The closing quotation on the last trading day of the year was EUR 21.56
(15.84).

Relating to the 2001A share option scheme, a total of 1.6 million options for a
total of EUR 25.7 million were traded during 2006. Relating to the 2001B share
option scheme, a total of 5.5 million options for a total of EUR 85.3 million
were
traded during 2006. Relating to the 2002A share option scheme, a total of 0.5
million options for a total of EUR 7.2 million were traded during 2006. Relating
to the 2002B share option scheme, a total of 5.3 million options for a total of
EUR 96.0 million were traded during 2006.

A total of 13,759,621 (8,210,120) shares subscribed on the basis of the above
share option schemes were entered into the trade register in 2006. The Board of
Directors of Fortum Corporation has cancelled a total of 1,660,000 repurchased
Fortum shares (EUR 30,390,150) according to the authorisation given to the Board
of Directors in the Annual General Meeting of Shareholders on 16 March 2006. The
average price for the repurchased own shares was EUR 18.31, the lowest price EUR
17.55 and the highest price EUR 19.15. At the end of 2006, Fortum Corporation
did
not own its own shares.

After registrations and the cancellation, Fortum Corporation’s share capital is
EUR 3,022,782,396 and the total number of registered shares is 887,393,646
(875,294,025) at the end of 2006. Share capital of Fortum Corporation increased
by
a total of EUR 46,782,711 (27,914,408).

At year end the amount of shares that can still be registered for under the
share
option schemes is a maximum of 0.8% (6.883.429 shares) of Fortum’s 2006 year-end
share capital and voting rights.

At year end, the Finnish State’s holding in Fortum was 50.8% (51.5%). The
proportion of foreign shareholders increased to 35.4% (33.2%).

Currently, the Board of Directors has no unused authorisations from the General
Meeting of Shareholders to issue convertible loans or bonds with warrants or to
issue new shares. Currently, the Board of Directors has the authorisation from
the Annual General Meeting of Shareholders on 16 March 2006 to buy Fortum
Corporation’s own shares. The authorisation, amounting to EUR 500 million or 35
million shares, is valid one year from the last year AGM.


Group personnel

In 2006, the Fortum Group employed an average of 8,910 (8,939) people. At year
end, the number of employees totalled 8,134 (8,955), of which 7,681 (8,769) were
permanent employees. The integration of Fortum Espoo increased the total number
of
employees by 336 persons and the acquisition of two Polish companies in late
December 2005 increased the total number of employees by 988 persons. The sale
of
the industrial maintenance business decreased the total number of employees by
some 930 employees. The number of employees in the parent company, Fortum
Corporation, at year end totalled 566 (550).


Events after the period under review

Storms in January, especially in Sweden, have caused approximately EUR 10
million
additional costs for the Distribution segment.

In January, Fortum's subsidiary in Estonia, Fortum Tartu AS announced an
investment in a new CHP plant in the City of Tartu. The size of the investment
is
around EUR 60 million. Fortum owns 60% of the company.


Outlook

The key market driver influencing Fortum's business performance is the Nordic
wholesale price of electricity. Key drivers behind the wholesale 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 4 TWh above the
long-
term average and 1 TWh below the corresponding level of 2006. At the end of
January, the market price for emissions allowances for 2007 was between EUR 2-3
per tonne of CO2 and for 2008 between EUR 15-16 per tonne of CO2. At the same
time, the electricity forward price for the rest of 2007 was around EUR 28-29
per
MWh and around EUR 40-41 per MWh for 2008.

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

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

At the beginning of January, Fortum had hedged approximately 65% of the Power
Generation segment's estimated Nordic Power Generation sales volume for 2007 at
approximately EUR 42 per MWh. The hedge position for 2007 was lowered to a more
neutral level during the fourth quarter of 2006. This was based on Fortum's view
on future power prices at the time. At the beginning of January, Fortum had
hedged
approximately 35% of the Power Generation segment's estimated Nordic sales
volume
at approximately EUR 42 per MWh for the calendar year 2008. 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.

Despite lower hydro and nuclear generation volumes, Fortum's results in 2006
were
good and its financial position is strong. With its flexible and climate-benign
production portfolio, Fortum is well positioned also for 2007.


Dividend distribution proposal

Parent company's distributable equity as of 31 December 2006 amounted to EUR
2,065
million. After the end of the financial period there has been no material
changes
in the financial position of the Company.

The Board of Directors proposes to the Annual General Meeting that Fortum
Corporation pay a cash dividend of EUR 1.26 per share for 2006, totalling EUR
1,119 million based on the number of registered shares as of 30 January 2007. Of
this total dividend, EUR 0.73 per share is in accordance with the Group's
dividend
policy. An additional dividend of EUR 0.53 per share is proposed in order to
steer
Fortum's capital structure towards the agreed target.

The Annual General Meeting will be held on 28 March 2007 at 3:00 pm at the
Kaapelitehdas in Helsinki.

Espoo, 30 January 2007
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 Board of Directors has approved Fortum's 2006 Financial Statements and
Fortum's auditors have issued their audit report on 2006 on 30 January 2007.

Publication of results in 2007:
Interim Report January - March will be published on 24 April 2007
Interim Report January - June will be published on 18 July 2007
Interim Report January - September will be published on 18 October 2007

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 2006
Financial Statements are audited

CONDENSED CONSOLIDATED INCOME STATEMENT
MEUR Q4 2006 Q4 2005 2006 2005

Continuing operations:
Sales 1 254 1 112 4 491 3 877
Other income 56 67 80 101
Materials and services -453 -355 -1 673-1 325
Employee benefit costs -133 -122 -508 -481
Depreciation, amortisation and impairment charges -118 -102 -429 -407
Other expenses -151 -126 -506 -418
Operating profit 455 474 1 455 1 347
Share of profit of associates and joint ventures 18 27 69 55
Interest expense -46 -46 -176 -203
Interest income 12 15 50 46
Fair value gains and losses on financial 6 14 30 40
instruments
Other financial expenses - net 3 -18 -7 -18
Finance costs - net -25 -35 -103 -135
Profit before income tax 448 466 1 421 1 267
Income tax expense -87 -125 -301 -331
Profit for the period from continuing operations 361 341 1 120 936
Discontinued operations:
Profit for the period from discontinued operations - - - 474
Profit for the period 361 341 1 120 1 410

Attributable to:
Equity holders of the Company 338 320 1 071 1 358
Minority interest 23 21 49 52
361 341 1 120 1 410


Earnings per share for profit from total Fortum Group attributable
to the equity holders of the company during the year (in € per share)

Basic 0.39 0.36 1.22 1.55
Diluted 0.38 0.36 1.21 1.53

Earnings per share for profit from continuing operations attributable
to the equity holders of the company during the year (in € per share)

Basic 0.39 0.36 1.22 1.01
Diluted 0.38 0.36 1.21 1.00

Earnings per share for profit from discontinued operations attributable
to the equity holders of the company during the year (in € per share)

Basic - - - 0.54
Diluted - - - 0.53


CONDENSED CONSOLIDATED BALANCE SHEET
MEUR Dec 31 Dec 31
2006 2005
ASSETS
Non-current assets
Intangible assets 96 80
Property, plant and equipment 11 471 10176
Investments in associates and joint ventures 2 197 1 610
Other long-term investments 556 502
Other long-term receivables 103 87
Long-term interest bearing receivables 680 620
Total non-current assets 15 103 13075

Current assets
Inventories 329 256
Trade and other receivables 1 250 1 011
Cash and cash equivalents 157 788
Total current assets 1 736 2 055

Total assets 16 839 15130

EQUITY
Capital and reserves attributable to the
Company's equity holders
Share capital 3 023 2 976
Other equity 4 885 4 175
Total 7 908 7 151
Minority interest 253 260
Total equity 8 161 7 411

LIABILITIES
Non-current liabilities
Interest-bearing liabilities 4 060 3 118
Deferred tax liabilities 1 795 1 512
Provisions 636 606
Other liabilities 619 435
Total non-current liabilities 7 110 5 671

Current liabilities
Interest-bearing liabilities 442 828
Trade and other payables 1 126 1 220
Total current liabilities 1 568 2 048

Total liabilities 8 678 7 719

Total equity and liabilities 16 839 15130


CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

MEUR Share Share Other Fair Treasury Retain Minorit
Total
capital premium restrict value shares ed ty
ed funds and earnings
other
reserves

Total equity at 2 976 70 2 -117 - 4 220 260 7 411
31.12.2005
Translation and other - - - - - 38 6 44
differences
Cash flow hedges - - - 198 - - -1 197
Other fair value - - - 442 - - - 442
adjustments 1)
Total gains and losses not - - - 640 - 38 5 683
recognised in Income statement
Net profit for the - - - - - 1 071 49 1 120
period
Total recognised income - - - 640 - 1 109 54 1 803
for the period
Stock options excercised 47 3 -1 - - - - 49
Cash dividend - - - - - -987 - -987
Repurchase of own shares - - - - -30 - - -30
Change in the recognition - - - -12 - -12 - -24
of shares preformance
arrangement 2)
Changes in minority - - - - - - -61 -61
through business combinations
Total equity at 3 023 73 1 511 -30 4 330 253 8 161
31.12.2006

Total equity at 2 948 62 13 134 - 4 343 150 7 650
31.12.2004
Translation and other - - - - - -55 -7 -62
differences
Cash flow hedges - - - -257 - - 3 -254
Other fair value - - - 6 - - - 6
adjustments
Total gains and losses not - - - -251 - -55 -4 -310
recognised in Income statement
Net profit for the period - - - - - 1 358 52 1 410
Total recognised income - - - -251 1 303 48 1 100
for the period
Stock options excercised 28 8 -11 - - - - 25
Cash dividend - - - - - -506 - -506
Share dividend 3) - - - - - -920 - -920
Changes in minority - - - - - - 62 62
through business combinations
Total equity at 2 976 70 2 -117 - 4 220 260 7 411
31.12.2005

1) Includes the fair value change of Renewable Energy Corporation (REC)
shareholding in Hafslund. See accounting policies.
2) Share performance arrangement has been formally decided to be cash-settled,
which has had an impact on the accounting treatment.
3) In 2005 the effect from the share dividend on Fortum Group equity was EUR
920 million. In the parent company the effect on retained earnings was
EUR 969 million in 2005.


CONSOLIDATED CASH FLOW STATEMENT
MEUR Q4 2006 Q4 2005 2006 2005

Cash flow from operating activities
Operating profit before depreciations continuing 573 576 1 884 1 754
oprations
Non-cash flow items and divesting activities -71 28 -92 15
Financial items and realised foreign exchange gains -116 -45 -89 -107
and losses
Taxes -114 -72 -374 -298
Funds from operations continuing operations 272 487 1 329 1 364
Change in working capital -180 -63 -178 -93
Net cash from operating activities continuing 92 424 1 151 1 271
operations
Net cash from operating activities discontinued - - - 133
operations
Total net cash from operating activities 92 424 1 151 1 404

Cash flow from investing activities
Capital expenditures -188 -139 -485 -346
Acquisition of shares net of cash acquired -144 -120 -899 -127
Proceeds from sales of fixed assets 73 19 83 30
Proceeds from sales of shares 11 0 42 26
Change in other investments -6 -1 -47 19
Net cash used in investing activities continuing -254 -241 -1 306 -398
operations

Net cash used in investing activities discontinued - - - 1 155
Total net cash used in investing activities -254 -241 -1 306 757

Cash flow before financing activities -162 183 -155 2 161

Cash flow from financing activities
Net change in loans -505 -186 492-1 063
Dividends paid to the Company´s equity holders 0 0 -987 -506
Repurchase of own shares 0 - -30 -
Other financing items 21 9 49 22
Net cash used in financing activities continuing -484 -177 -476-1 547
operations
Net cash used in financing activities discontinued - - - 29
operations
Total net cash used in financing activities -484 -177 -476-1 518

Total net increase (+)/decrease (-) in cash
and marketable securities, continuing operations -646 6 -631 643


KEY RATIOS 1)
MEUR Dec Sept June March Dec Sept June March
31 30 30 31 31 30 30 31
2006 2006 2006 2006 2005 2005 2005 2005

Continuing operations:
EBITDA, MEUR 1 884 1 311 979 570 1 754 1 178 837 509

Earnings per share 1.22 0.83 0.64 0.39 1.01 0.65 0.45 0.28
(basic), EUR

Capital employed, MEUR 12 663 12 216 12 121 10 605 11 357 11 154 10 987 10534

Interest-bearing net 4 345 4 159 4 308 3 900 3 158 3 333 3 595 4 878
debt, MEUR
Capital expenditure and 1 395 1 063 935 114 479 213 123 49
gross investments in
shares, MEUR
Capital expenditure, MEUR 485 297 174 71 346 207 123 49

Return on capital 13.4 12.5 14.6 19.4 13.5 11.7 12.4 16.4
employed, % 3)
Return on shareholder's 14.4 13.5
equity, % 2)
Net debt / EBITDA 3) 2.3 2.4 2.2 1.7 1.8 2.1 2.2 2.4

Gearing, % 53 57 60 60 43 47 53 71
Equity per share, EUR 8.91 7.97 7.83 7.11 8.17 7.86 7.64 7.67
Equity-to-assets ratio, % 48 43 43 44 49 47 43 43

Total Fortum:

Earnings per share 1.22 0.83 0.64 0.39 1.55 1.19 0.99 0.38
(basic), EUR
Capital employed, MEUR 12 663 12 216 12 121 10 605 11 357 11 154 10 987 11891
Return on capital 13.4 12.5 14.6 19.4 16.6 15.3 16.7 18.2
employed, % 3)
Return on shareholder's 14.4 13.7 16.3 21.4 18.7 17.6 19.2 19.5
equity, % 3)
Net debt / EBITDA 3) 2.3 2.4 2.2 1.7 1.4 1.5 1.5 1.8
Interest coverage 11.5 10.9 13.7 16.9 11.6 10.6 11.3 11.6
Funds from operations/ 30.6 33.9 36.5 49.6 43.2 42.9 44.2 39.3
interest-bearing net debt,
% 3)

Average number of 8 910 9 085 9 024 8 886 10 026 10 279 11 066 13135
employees
Average number of 881194 880695 880508 880725 872613 872438 872316 871710
shares, 1 000 shares
Diluted adjusted average886929 891217 891451 892406 887653 889157 883629 883774
number of shares,
1 000 shares
Number of registered 887394 883274 882708 881546 875294 872981 872793 871854
shares, 1 000 shares
Number of shares excluding N/A 881614 881048 N/A N/A N/A N/A N/A
treasury shares, 1 000 shares

1) Key ratios in 2005 are based on Fortum total numbers including continuing
and discontinued operations if otherwise not stated.
2) For year 2005 return on equity for continuing operations is calculated based
on Profit for the period from continuing operations divided by Total equity
at the end of the period. Profit for the period from discontinued operations
has been subtracted from Total equity as at 31 December 2005.
3) Quarterly figures are annualised.


SALES BY SEGMENTS
MEUR Q4 2006 Q4 2005 2006 2005

Power Generation 667 598 2 439 2 058
- of which internal 36 23 -133 97
Heat 381 325 1 268 1 063
- of which internal -5 0 -32 12
Distribution 210 196 753 707
- of which internal 2 2 8 8
Markets 529 391 1 912 1 365
- of which internal 43 35 149 101
Other 19 20 78 91
- of which internal 16 13 62 63
Eliminations 1) -552 -418 -1 959-1 407
Sales from continuing operations 1 254 1 112 4 491 3 877
Sales from discontinued operations - - - 2 061
Eliminations - - - -20
Total 1 254 1 112 4 491 5 918

1) 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 2006 Q4 2005 2006 2005

Power Generation 290 296 980 825
Heat 119 94 264 269
Distribution 74 76 252 251
Markets -18 11 -6 32
Other -10 -3 -35 -30
Operating profit from continuing operations 455 474 1 455 1 347
Operating profit from discontinued operations - - - 517
Total 455 474 1 455 1 864


COMPARABLE OPERATING PROFIT BY SEGMENTS, CONTINUING OPERATIONS

MEUR Q4 2006 Q4 2005 2006 2005

Power Generation 289 297 985 854
Heat 95 97 253 253
Distribution 77 76 250 244
Markets -8 8 -4 30
Other -13 -18 -47 -47
Comparable operating profit from continuing operations 440 460 1 437 1 334
Non-recurring items 38 10 61 30
Other items effecting comparability -23 4 -43 -17
Operating profit from continuing operations 455 474 1 455 1 347


NON-RECURRING ITEMS BY SEGMENTS
MEUR Q4 2006 Q4 2005 2006 2005

Power Generation 22 -6 29 -3
Heat 16 2 20 14
Distribution -1 0 2 1
Markets 0 0 0 0
Other 1 14 10 18
Total 38 10 61 30


OTHER ITEMS EFFECTING COMPARABILITY BY SEGMENTS
MEUR Q4 2006 Q4 2005 2006 2005

Power Generation -21 5 -34 -26
Heat 8 -5 -9 2
Distribution -2 0 0 6
Markets -10 3 -2 2
Other 2 1 2 -1
Total -23 4 -43 -17


DEPRECIATION, AMORTISATION AND IMPAIRMENT CHARGES BY SEGMENTS

MEUR Q4 2006 Q4 2005 2006 2005

Power Generation 27 29 108 112
Heat 43 31 144 123
Distribution 39 36 147 145
Markets 5 4 19 15
Other 4 2 11 12
Total depreciation, amortisation and impairment charges
from continuing operations 118 102 429 407
Total depreciation, amortisation and impairment charges from
discontinued operations - - - 36
Total 118 102 429 443


SHARE OF PROFITS IN ASSOCIATES AND JOINT VENTURES BY SEGMENTS

MEUR Q4 2006 Q4 2005 2006 2005

Power Generation 1) 12 17 30 23
Heat 7 3 23 11
Distribution 0 6 15 20
Markets 0 0 1 1
Other -1 1 0 0
Share of profits in associates and joint ventures 18 27 69 55
from operations
Share of profits in associates and joint ventures - - - -2
from discontinued operations
Total 18 27 69 53

1) The main part of the associated companies in Power Generation are power
production companies from which Fortum purchases produced electricity at
production costs including interest costs and income taxes.


INVESTMENTS IN ASSOCIATES AND JOINT VENTURES BY SEGMENTS
MEUR Dec 31 Dec 31
2006 2005

Power Generation 2) 1 752 1 259
Heat 150 133
Distribution 2) 287 210
Markets 8 8
Other 0 0
Total 2 197 1 610

2) Fortums ownership in Lenenergo shares was presented in Power Generation
segment in 2005 and 2006 in Distribution segment as a result of restructuring
of Lenenergo.

CAPITAL EXPENDITURE BY SEGMENTS
MEUR Q4 2006 Q4 2005 2006 2005

Power Generation 33 25 95 83
Heat 74 58 184 124
Distribution 76 50 183 115
Markets 0 3 8 10
Other 5 4 15 14
Capital expenditure from continuing operations 188 140 485 346
Capital expenditure from discontinuing operations - - - 99
Total 188 140 485 445


GROSS INVESTMENTS IN SHARES BY SEGMENTS
MEUR Q4 2006 Q4 2005 2006 2005

Power Generation 141 45 145 47
Heat 3 82 589 87
Distribution 0 0 130 0
Markets 0 0 6 0
Other 0 0 40 0
Gross investments in shares from continuing operations 144 127 910 134
Gross investments in shares from discontinuing - - - -
operations
Total 144 127 910 134


NET ASSETS BY SEGMENTS
MEUR Dec 31 Dec 31
2006 2005

Power Generation 6 734 5 954
Heat 3 407 2 551
Distribution 3 412 3 021
Markets 176 228
Other and Eliminations 85 139
Total 13 814 11893


RETURN ON NET ASSETS BY SEGMENTS
% Dec 31 Dec 31
2006 2005

Power Generation 16.1 14.0
Heat 9.6 11.6
Distribution 8.4 8.8
Markets -1.6 17.4

Power Generation 7 131 6 522
Heat 3 870 2 895
Distribution 3 911 3 448
Markets 618 515
Other and Eliminations 255 216
Assets included in Net assets 15 78513 596
Interest-bearing receivables 693 620
Deferred taxes 5 18
Other assets 199 108
Cash and cash equivalents 157 788

COMPARABLE RETURN ON NET ASSETS BY SEGMENTS
% Dec 31 Dec 31
2006 2005

Power Generation 16.1 14.5
Heat 9.2 11.0
Distribution 8.3 8.6
Markets -0.8 16.4

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. Average net assets are calculated using the opening balance and end of
each quarter values.


ASSETS BY SEGMENTS
MEUR Dec 31 Dec 31
2006 2005

Total assets 16 83915 130


LIABILITIES BY SEGMENTS
MEUR Dec 31 Dec 31
2006 2005

Power Generation 397 568
Heat 463 344
Distribution 499 427
Markets 442 287
Other and Eliminations 170 77
Liabilities included in Net assets 1 971 1 703
Deferred tax liabilities 1 795 1 512
Other 410 558
Total liabilities included in capital employed 4 176 3 773
Interest-bearing liabilities 4 502 3 946
Total equity 8 161 7 411
Total equity and liabilities 16 83915 130


CHANGES IN INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT
MEUR Dec 31 Dec 31
2006 2005

Opening balance 10 25612 041
De-consolidation of Neste Oil - -1 540
Acquisition of subsidiary companies 1 008 171
Capital expenditures 485 346
Purchase of emission rights 9 -
Disposals -78 -31
Depreciation, amortisation and impairment -429 -407
Translation differences 316 -324
Closing balance 11 56710 256

Acquisition of Fortum Espoo Oyj
Fortum acquired 99.8% of the shares of Fortum Espoo Oyj (former E.On Finland
Oyj)
on 26. June 2006. On 13 September 2006 Fortum obtained the title to all minority
shares of Fortum Espoo in the redemption procedure according to the Finnish
Companies Act.
The quotation of Fortum Espoo's share on Helsinki Stock Exchange has ceased on
13 September 2006. Fortum Espoo is consolidated as 100% owned subsidiary
financial statements from the end of June.


Consideration Fortum
EUR million Espoo Group

Purchase consideration:
Cash paid 761
Direct costs relating to the acquisition 5
Total purchase consideration 766
Fair value of the acquired net assets 766
Translation difference 0
Goodwill 0


Fortum Espoo Group
Specification of the acquired net identifiable assets:
Total Allocat Acquir
Value ed Fair ed Book
EUR million Values Value

Cash and cash equivalents 64 64
Intangible assets 13 -28 41
Property, plant and equipment 1 008 696 312
Shares 3 1 2
Inventories 18 18
Receivables 185 23 162
Deferred tax assets 19 18 1
Minorities 0 0
Non-interest bearing liabilities -307 -17 -290
Interest-bearing liabilities -11 -11
Deferred tax liabilities -226 -190 -36
Net identifiable assets 766 503 263
Minority interests 0 0
Fair value of the acquired net identifiable assets 766 503 263

Fortum
Espoo Group

Purchase consideration settled in cash 766
Cash and cash equivalents in subsidiaries acquired 64
Cash outflow on acquisition 702

Interest-bearing debt in subsidiaries acquired 11
Gross investment in subsidiaries acquired 713

QUARTERLY SALES BY SEGMENTS

MEUR Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
2006 2006 2006 2006 2005 2005 2005 2005

Power Generation 667 569 560 643 598 450 476 534
- of which internal 36 -102 -17 -50 23 6 13 55
Heat 381 178 229 480 325 147 206 385
- of which internal -5 -12 -7 -8 0 1 -1 12
Distribution 210 162 162 219 196 149 160 202
- of which internal 2 2 2 2 2 2 2 2
Markets 529 436 400 547 391 284 298 392
- of which internal 43 30 35 41 35 19 22 25
Other 19 19 20 20 20 26 22 23
- of which internal 16 16 15 15 13 13 15 22
Eliminations -552 -418 -423 -566 -418 -282 -304 -403
Sales from continuing 1 254 946 948 1 343 1 112 774 858 1 133
Sales from discontinuing - - - - - - - 2 061
Eliminations - - - - - - - -20
Total 1 254 946 948 1 343 1 112 774 858 3 174

QUARTERLY OPERATING PROFIT BY SEGMENTS

MEUR Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
2006 2006 2006 2006 2005 2005 2005 2005
1)

Power Generation 290 184 222 284 296 181 125 223
Heat 119 -15 41 119 94 13 50 112
Distribution 74 42 55 81 76 48 56 71
Markets -18 6 3 3 11 7 8 6
Other -10 -1 -9 -15 -3 -9 -12 -6
Operating profit from 455 216 312 472 474 240 227 406
continuing operations
Operating profit from - - - - - - 390 127
discontinued operations
Total 455 216 312 472 474 240 617 533

1) The accounting treatment of CO2 emission allowances was changed retroactively
in Q2/2005 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
2006 2006 2006 2006 2005 2005 2005 2005

Power Generation 289 195 208 293 297 161 172 224
Heat 95 -3 35 126 97 12 37 107
Distribution 77 39 53 81 76 47 55 66
Markets -8 2 2 0 8 7 8 7
Other -13 -8 -12 -14 -18 -7 -11 -11
Comparable operating 440 225 286 486 460 220 261 393
profit from continuying
operations
Non-recurring items 38 8 15 0 10 2 12 6
Other items effecting -23 -17 11 -14 4 18 -46 7
effecting comparability
Operating profit from 455 216 312 472 474 240 227 406
continuing operations

QUARTERLY NON-RECURRING ITEMS BY SEGMENTS

MEUR Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
2006 2006 2006 2006 2005 2005 2005 2005

Power Generation 22 1 6 0 -6 3 0 0
Heat 16 -1 4 1 2 1 11 0
Distribution -1 1 2 0 0 0 1 0
Markets 0 0 0 0 0 0 0 0
Other 1 7 3 -1 14 -2 0 6
Total 38 8 15 0 10 2 12 6


QUARTERLY OTHER ITEMS EFFECTING COMPARABILITY

MEUR Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
2006 2006 2006 2006 2005 2005 2005 2005

Power Generation -21 -12 8 -9 5 17 -47 -1
Heat 8 -11 2 -8 -5 0 2 5
Distribution -2 2 0 0 0 1 0 5
Markets -10 4 1 3 3 0 0 -1
Other 2 0 0 0 1 0 -1 -1
Total -23 -17 11 -14 4 18 -46 7


DISCONTINUED OPERATIONS (including eliminations between Fortum and discontinued
operations)

Fortum does not have discontinued operations in the year 2006.

MEUR Q4 Q1-Q4 2005 2)
2005 2005 1)

Sales - 2 061 2 061
Other income - 395 395
Materials and services - -1 726-1 726
Employee benefit costs - -57 -57
Depreciation, amortisation and impairment charges - -36 -36
Other expenses - -120 -120
Operating profit - 517 517
Share of profit of associates and joint ventures - -2 -2
Finance costs-net - -6 -6
Profit before income tax - 509 509
Income tax expense - -35 -35
Profit for the year from discontinued operations - 474 474

1) The accounting treatment of CO2 emission allowances was changed retroactively
in Q2/2005 according to the decision of IASB to withdraw the IFRIC 3 Emission
rights with immediate effect.
2) Other income includes the capital gain, EUR 390 million, from the sale of
approximately 15% of the shares in Neste Oil Oyj in 2005.

PLEDGED ASSETS, CONTINGENT LIABILITIES AND COMMITMENTS

MEUR Dec 31 Dec 31
2006 2005
Pledged assets
On own behalf
For debt
Pledges 176 144
Real estate mortgages 49 49
For other commitments
Real estate mortgages 56 66
On behalf of associated companies and joint ventures
Pledges and real estate mortgages 3 3

Contingent liabilities
On own behalf
Other contingent liabilities 144 94
On behalf of associated companies and joint ventures
Guarantees 213 208
Other contingent liabilities 125 125
On behalf of others
Guarantees 12 2
Other contingent liabilities 1 3


Operating lease commitments
Due within a year 20 17
Due after one year and within five years 38 32
Due after five years 78 76
Total 136 125


Capital commitments 266 81


NUCLEAR RELATED ASSETS AND LIABILITIES
MEUR Dec 31 Dec 31
2006 2005

Liability for nuclear waste management according to the Nuclear E 685 618

Funding Target 2) 649 618
Fortum´s share of reserves in the State Nuclear Waste Management -636 -610
Difference covered by real estate mortgages 4) 13 8

1) The legal liability calculated according to the Nuclear Energy Act in
Finland is EUR 685 (618) million as of 31 December 2006 (and 2005 respectively)
Discounted liability in the balance sheet calculated according to IAS 37 is
EUR 450 (418) million as of 31 December 2006.
The main reason for the difference in liability is that the legal liability is
not discounted to net present value.
2) Funding Target is EUR 649 (618) million as of 31 December 2006 (and 2005
respectively). Funding target needs to be fully paid by the end of March 2007.
The difference between the liability and the funding target must be covered by
a security, which will be given by the end of June 2007.
3) Fortum contributes to the Nuclear Waste Fund according to the funding target.
Fortum´s share of the State Nuclear Waste Management Fund as of 31 December
2006 is EUR 636 (610) million.
The value of the fund asset in the balance sheet is EUR 450 (418) million as of
31 December 2006 due to IFRIC Interpretation 5, which states that it can not
exceed the carrying value of the related liabilities.
4) At year end there is a difference between the funding target and Fortum´s
share of the State Nuclear Waste Management Fund due to yearly revised
calculation of the legal liability and it will be paid during first quarter of
the following year. Fortum has given real estate mortgages as security which
also covers the liability in the balance sheet. The real estate mortgages are
included in pledged assets.


DERIVATIVES
MEUR Dec 31 2006 Dec 31 2005

Notional Net fair Notianal Net
value value value fair

value
Interest and currency derivatives

Interest rate swaps 3 021 3 2 636 11
Forward foreign exchange contracts 5 256 -61 5 297 69
Interest rate and currency swaps 2 575 -76 2 169 3

Electricity derivatives
Volume Net fair Value Net
value fair
value
TWh MEUR Wh MEUR

Sales swaps 134 515 84 -463
Purchase swaps 101 -426 49 276
Purchased options 0 0 1 -1
Written options 3 3 3 2

Oil derivatives
Volume Net fair Value Net
value fair
value
1000 bb MEUR 1000 bb MEUR

Sales swaps and futures 180 0 90 0
Purchase swaps and futures 897 0 571 6

CO2 emission allowance derivatives
Volume Net fair Value Net
value fair
value
ktCO2 MEUR ktCO2 MEUR

Sold 405 0 - -
Bought 418 0 - -

Share derivatives
Notional Net fair Notianal Net
value value value fair
value
Share forwards 1) 24 37 11 14

1) Cash-settled share forwards are used as a hedging instrument for Fortum
Group's
performance share arrangement.


EXCHANGE RATES

The balance sheet date rate is based on exchange rate published by the European
Central Bank for the closing date. The average exchange rate is calculated as
an average of each months ending rate from the European Central Bank during the
year and ending rate previous year.

Key exchange rates for Fortum Group applied in the accounts:

Dec Sept June 30 March March June Sept Dec
31 30 30 31 31 30 30 31
Average rate Currency 2006 2006 2006 2006 2005 2005 2005 2005

Sweden SEK 9.2637 9.3110 9.3329 9.3798 9.0817 9.1563 9.2166 9.2783
Norway NOK 8.0376 7.9753 7.9396 8.0171 8.2306 8.1314 8.0550 8.0240
Poland PLN 3.8965 3.9139 3.8991 3.8569 4.0381 4.1212 4.0600 4.0268

Dec Sept June 30 March March June Sept Dec
31 30 30 31 31 30 30 31
Balance sheet date 2006 2006 2006 2006 2005 2005 2005 2005
rate

Sweden SEK 9.0404 9.2797 9.2385 9.4315 9.1430 9.4259 9.3267 9.3885
Norway NOK 8.2380 8.2350 7.9360 7.9675 8.2060 7.9155 7.8770 7.9850
Poland PLN 3.8310 3.9713 4.0546 3.9425 4.0807 4.3088 3.9185 3.8600

ACCOUNTING POLICIES

The condensed financial statements have been prepared in accordance with
International Accounting Standard (IAS) 34, Interim Financial Reporting.

The accounting policies adopted are consistent with those followed in the
preparation of the Group's annual financial statements for the year
ended 31 December 2006.

Accounting for the share of profits from Hafslund ASA
According to Fortum Group accounting policies the share of profits from
Hafslund has been included in Fortum Group figures based on the previous quarter
information. Hafslund will publish January-December 2006 results on 7 February
2007. Fortum uses previous quarter information since Hafslund's interim reports
are published later than Fortum's interim reports.

When calculating the share of profits in Hafslund, Fortum has in accordance with
Fortum's accounting policies reclassified Hafslund's accounting treatment
for the shareholding in Renewable Energy Corporation (REC). Hafslund has
classified the shareholding in REC as financial assets at fair value through
profit and loss while Fortum has classified the REC shareholding as available
for
sale financial assets with fair value changes recorded directly through equity,
only if Hafslund would divest shares in REC, the cumulative fair value change
would effect Fortum's income statement.

Since REC is listed on the Oslo stock exchange as of 9 May 2006, Fortum is
accounting for the fair value change in REC based on the closing price on the
Oslo stock exchange at each closing date. The amount of shares is based on the
amount published by Hafslund in the previous quarter if other information is not
available. At the end of December 2006 the fair value change during 2006 was
approximately EUR 440 million in Fortum.



Definitions of key figures

Comparable operating = Operating profit - non-recurring items -
profit other items effecting comparability

Non-recurring items = Mainly capital gains and losses

Other items effecting = Includes effects from financial derivatives
comparability 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.

EBITDA (Earnings before = Operating profit continuing operations
interest, taxes, depreciation + Depreciation, amortisation
and amortisation) continuing and impairment charges continuing operations
operations

Return on shareholder's = Profit for the year x 100
equity, % Total equity average

Return on capital = Profit before taxes + interest and other fx 100
employed, % Capital employed average

Return on capital employed Profit before taxes continuing operations x 100
continuing operations, % = financial expenses continuing operations
Capital employed continuing operations average

Return on net assets, % = Operating profit + Share of profit (loss) x 100
Net assets average

Comparable return on net = Comparable operating profit + Share of prox 100
assets, % and joint ventures (adjusted for IAS 39 effects)
Comparable net assets average

Capital employed = Total assets - non-interest bearing 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, % = Interest-bearing net debt x 100
Total equity

Equity per share, EUR = Shareholder's equity
Number of shares excluding treasury shares at
the end of the period

Equity-to-assets = Total equity including minority interest x 100
ratio, % Total assets

Net debt / EBITDA = Interest-bearing net debt
Operating profit + Depreciation, amortisation
and impairment charges

Net debt / EBITDA = Interest-bearing net debt
continuing operations Operating profit continuing operations +
Depreciation, amortisation and
impairment charges continuing operations


Interest coverage = Operating profit
Net interest expenses

Earnings per share (EPS) = Profit for the period - minority interest
Average number of shares during the period

Gross investments in = Investments in subsidiary shares, shares in
shares associated companies and other shares in available
for sale financial assets. Investments in
subsidiary shares are net of cash and grossed
with interest-bearing liabilities in the
acquired company.