Fortum Corporation Financial Statements

Fortum Corporation STOCK EXCHANGE RELEASE
13 February 2003 at 9.15 a.m. 1 (1)


Financial Statements 2002

A good year for Fortum: major strategic moves and significant
increase in earnings


The year in brief

- Pre-tax profit of EUR 1,008 million, 44% up on previous year
- Earnings per share of EUR 0.79, 39% up on previous year,
despite tax charge of EUR 70 million relating to sale of Norwegian
E&P assets in the fourth quarter
- Continued strong net cash from operating activities, EUR 1,351
million
- Significant structural changes to implement the strategy
- Good progress of Birka Energi integration, synergy benefits
will exceed target
- Board of Directors proposes a dividend of EUR 0.31 per share
(EUR 0.26 in 2001)

Key indicators IV/02 IV/01 2002 2001

Net sales, EUR million 3,290 2,536 11,148 10,410
Operating profit, EUR 391 171 1,289 914
million
Profit before taxes, EUR 318 119 1,008 702
million
Earnings per share, EUR 0.22 0.08 0.79 0.57
Equity per share, EUR 6.97 6.49
Capital employed (at end of 13,765 11,032
period), EUR million
Interest-bearing net debt 5,846 3,674
(at end of period), EUR
million
Investments, EUR million 4,381 713
Net cash from operating 1,351 1,145
activities, EUR million
Cash flow before financing -27 844
activities, EUR million
Return on capital employed, 11.1 8.7
%
Return on shareholders’ 10.5 8.3
equity, %
Gearing, % 80 54
Number of employees (at end 13,670 13,425
of period)
Average number of employees 14,053 14,803


During the first half of 2002, Fortum implemented its strategic
agenda through major restructuring. Key acquisitions as well as
several major divestments in non-core areas were concluded in this
period. The single most important transaction was the acquisition
in February of the remaining 50% of the former Birka Energi AB,
renamed Fortum Power and Heat AB, which strengthened Fortum’s
market position in the Nordic area. The process to combine the two
power and heat businesses started immediately and the new pan-
Nordic organisation became effective on 1 July.

During the second half of the year, Fortum focused on delivering
on the targets set for the Birka Energi transaction. Progress has
been good and the synergy benefits will exceed the set target of
EUR 100 million. To further restructure the Group in line with the
strategic agenda, the agreement on the divestiture of the
Norwegian oil exploration and production assets was signed and the
power plant engineering business was reorganised. The fourth
quarter was characterised by cold weather and high market prices,
and the performance of all major businesses was quite satisfying.
Fortum continued to concentrate on cash flow and net debt was
further decreased. By year-end, the company’s gearing stood at
80%. Taking into account the disposal of the Norwegian E&P assets
the pro forma gearing was at the company’s target level, under
70%.

In January 2003, Fortum agreed with E.ON AG on a power asset swap.
The transactions will substantially strengthen Fortum´s position
in its focus area, the Nordic countries and the rest of the Baltic
Rim.


Net sales and results

Group net sales stood at EUR 11,148 million (EUR 10,410 million in
2001). The acquisition of the former Birka Energi coupled with
higher market prices pushed up the net sales of the Group’s power
and heat businesses. The average price of crude oil was slightly
up on the previous year, and the net sales of the Group’s oil
businesses were at the same level as a year earlier. Towards the
end of the year, prices of both oil and electricity increased
markedly.


Net sales by segment
EUR million 2002 2001
Power, Heat and Gas 2,898 2,227
Electricity Distribution 640 473
Fortum Energy Solutions 664 603
Oil Refining and Marketing 7,195 7,223
Oil and Gas Upstream 391 408
Other operations 64 95
Internal invoicing -704 -619
Group 11,148 10,410


Group operating profit totalled EUR 1,289 (914) million. The
operating profit excluding non-recurring items, EUR 974 (890)
million, improved by EUR 84 million on the yearly basis. During
the fourth quarter, the improvement in 2002 was EUR 193 million on
the corresponding period in 2001. The total amount of non-
recurring items was EUR 315 (24) million.

Total electricity and heat sales volumes rose but the comparable
volumes were down on the previous year mainly due to lower demand
for industrial electricity and the exceptionally warm weather
conditions during the first three quarters of the year. However,
during the last quarter, the electricity volumes rose and there
was a significant improvement in the results for the Power, Heat
and Gas segment.

The comparable volumes of electricity transmitted in local
distribution networks increased and the results for Electricity
Distribution were clearly up on the previous year.

The results for Fortum Energy Solutions improved significantly on
the previous year.

A restructuring charge of EUR 20 million was included in the
fourth quarter results relating to the Birka Energi acquisition.

Lower international refining margins affected the results of Oil
Refining and Marketing, but the decrease was offset by inventory
gains of EUR 57 (-79) million. Deliveries of petroleum products
refined by Fortum increased and the performance of the oil retail
business improved compared to the corresponding figures in 2001.
Shipping’s performance was depressed by low freight rates, which,
however, started to increase sharply towards the end of the year.
The MTBE plant in Canada was closed for conversion to iso-octane
for three months, which had a substantial negative effect on the
results of the gasoline component business.

Owing to increased production volumes in Norway and the gains from
the sale of the Omani oil production interests, the results of Oil
and Gas Upstream were somewhat up on the previous year despite
lower market prices for gas and the divestiture of the Omani
assets.


Operating profit by segment
EUR mill. 2002 2001
Power, Heat and Gas 560 367
Electricity Distribution 279 135
Fortum Energy Solutions 37 13
Oil Refining and Marketing 259 242
Oil and Gas Upstream 213 196
Other operations -64 -40
Eliminations 5 1
Group 1,289 914


Profit before taxes was EUR 1,008 (702) million.

The Group´s net financial expenses were EUR 281 (212) million.

Minority interests accounted for EUR 73 (83) million of the
results for the period. These minority interests were mainly
attributable to the preference shares issued by Fortum Capital Ltd
in 2000 and to Fortum Värme Holding, in which the City of
Stockholm has a 50% economic interest.

Taxes for the period totalled EUR 269 (160) million. A tax charge
of EUR 70 million incurred in the fourth quarter due to the
divestiture of the Norwegian exploration and production assets.

Net profit for the period was EUR 666 (459) million. Earnings per
share were EUR 0.79 (0.57). Return on capital employed was 11.1%
(8.7%) and return on shareholders´ equity was 10.5% (8.3%).

As from 1 March 2002, the former Birka Energi has been 100%
consolidated into Fortum’s figures. Until then, it had been
consolidated using the proportionate method on the basis of 50%
ownership.


Segment reviews

Power, Heat and Gas

Fortum is the second largest power company in the Nordic countries
as well as the leading district heat producer in the region.
Fortum owns and manages power and heating plants and has stakes in
power and heating plants. Fortum sells electricity and heat
generated by these facilities on the Nordic market. Fortum is also
active in the gas sector.


EUR million IV/02 IV/01 2002 2001
Net sales 979 645 2,898 2,227
- electricity sales 566 318 1,588 1,269
- heat sales 223 141 649 464
- other sales 190 186 661 494
Operating profit 241 114 560 367
- excluding non-recurring 245 98 469 305
items
Net assets 8,642 5,873
Return on net assets, % 6.9 6.3


Electricity market prices were low during the first eight months
of the year but increased sharply towards the end of the year. The
full-year average price of electricity on the Nordic power
exchange (Nord Pool) was EUR 26.9 (23.1 in 2001) per megawatt-hour
(MWh), about 16% higher than in 2001. The rise in the market price
of electricity also led to increases in the electricity retail
price. Electricity consumption in the Nordic countries decreased
by 1.8% to 386 TWh. In Finland, there was an increase in
electricity consumption of approximately 2.6% while in Sweden,
there was a 1.4% decrease.

Fortum’s electricity sales in the Nordic countries in 2002
amounted to 54.5 (47.1) TWh. Sales in other countries were 4.5
(6.6) TWh. Fortum`s sales represented approximately 14% (12%) of
total Nordic electricity consumption in 2002. The average price of
electricity sold by Fortum in the Nordic countries was up
approximately 10% on the previous year.

Fortum´s electricity generating capacity in the Nordic countries
was 11,091 (9,149) MW at the end of the year, while its total
capacity was 11,347 (10,223) MW. In the Nordic countries Fortum
generated 46.5 (41.0) TWh of electricity, or 12% (11%) of the
electricity generated in this market. Hydropower accounted for
18.1 (17.0) TWh, or 39% (41%), and nuclear power some 22.0 (18.7)
TWh, or 47% (46%), of Fortum’s own power generation, while the
share of thermal power was 14% (13%).

Fortum’s sales of heat in the Nordic countries were 18.1 (15.6)
TWh.

Electricity sales by area
TWh IV/02 IV/01 2002*) 2001*)
Sweden 8.4 5.1 28.0 19.4
Finland 8.0 6.9 26.2 27.6
Other countries 0.5 2.2 4.8 6.7
Total 16.9 14.2 59.0 53.7

Heat sales by area
TWh IV/02 IV/01 2002*) 2001*)
Sweden 3.6 1.6 8.2 4.7
Finland 2.7 3.1 9.8 10.9
Other countries 0.7 0.5 2.4 1.7
Total 7.0 5.2 20.4 17.3
*) includes 100% of Birka Energi’s figures as from March 2002, 50%
prior to this

During the period from March to December the effect of Birka
Energi’s change of ownership on electricity sales and heat volumes
was 9.6 TWh and 3.5 TWh respectively.


Electricity distribution

Based on the number of customers, Fortum is the biggest actor in
the Nordic distribution market. In Sweden, Finland and Estonia,
Fortum owns and operates distribution and regional networks and
distributes electricity to a total of 1.3 million customers.
Fortum’s market share of electricity distribution is 15% in
Finland and 20% in Sweden.

EUR million IV/02 IV/01 2002 2001
Net sales 185 135 640 473
- distribution network 149 105 526 376
transmission
- regional network 24 13 80 54
transmission
- other sales 12 17 34 43

Operating profit 60 30 279 135
- excluding non-recurring 59 27 187 120
items
Net assets 3,200 2,113
Return on net assets, % 9.3 6.2

The integration of the distribution operations of Swedish Birka
Energi and Finnish Uudenmaan Sähköverkko was completed in 2002. In
Sweden, the first steps were taken towards the creation of a
unified price structure.

The volume of distribution and regional network transmissions
totalled 21.2 (15.0) TWh and 20.6 (16.7) TWh respectively.
Electricity transmissions via the regional distribution network to
customers outside the Group totalled 14.3 (8.4) TWh in Sweden and
6.3 (8.2) TWh in Finland.


Volume of distributed electricity in distribution networks
TWh IV/02 IV/01 2002*) 2001*)
Sweden 4.9 1.7 14.4 7.7
Finland 1.9 1.3 5.4 4.4
Other countries 0.0 0.8 1.4 2.9
Total 6.8 3.8 21.2 15.0
*) includes 100% of Birka Energi’s figures as from March 2002, 50%
prior to this

The Birka Energi acquisition accounts for a 6.4 TWh increase in
the volumes transmitted via the distribution networks.


Number of electricity distribution customers by area
2002 2001
Sweden*) 890,000 450,000
Finland**) 390,000 280,000
Other countries 20,000 180,000
Total 1,300,00 910,000
*) includes 100% of Birka Energi’s figures in 2002, 50% in 2001
**) acquisition of Uudenmaan Sähköverkko Oy in May 2002


Fortum Energy Solutions (Fortum Service as of 1 January 2003)

Fortum Service’s core business is operation and maintenance
services for power plants and medium-sized industrial customers.
The unit also specialises in combined heat and power technology
(CHP) and energy consulting.


EUR million IV/02 IV/01 2002 2001
Net sales 214 87 664 603
Operating profit 19 5 37 13
- excluding non-recurring 2 0 11 -8
items
Net assets 96 236
Return on net assets, % 19.7 5.5

During the year, reorganisation of the unit continued. The
restructuring of the power plant engineering business was
completed and the shares of Fortum Engineering were sold in
January 2003 to Enprima, a new company partly owned by Fortum.

Following the restructuring of the power plant engineering
business, the name of the unit was changed to Fortum Service.

The maintenance function expanded its operations to a new customer
segment, the chemical industry. Several new maintenance and
refurbishment contracts in power plants as well as substation
maintenance contracts were secured both in Finland and in Sweden.


Oil Refining and Marketing

Fortum is the biggest refiner in the Nordic countries with a total
capacity of some 14 million tonnes per year. Fortum is one of the
two biggest suppliers of petroleum products in the Nordic
wholesale market. It owns two oil refineries in Finland and a
network of service stations and other retail outlets in Finland
and the other countries in the Baltic Rim. Fortum also owns and
charters tankers and owns oil storage facilities.

EUR million IV/02 IV/01 2002 2001
Net sales 2,002 1,636 7,195 7,223
Operating profit 38 15 259 242
- excluding non-recurring 44 77 211 317
items
Net assets 1,514 1,688
Return on net assets, % 16.3 14.3

The international refining margin in north-western Europe (Brent
Complex) was considerably lower than in 2001. The average refining
margin for the year was USD 1.0 /bbl (USD 1.9/bbl in 2001).
Fortum’s premium margin remained strong at about USD 2.0/bbl above
the international reference margin.

The price of crude oil fluctuated between USD 20/bbl at the
beginning of the year and USD 31/bbl at the end of the year. As a
result, inventory gains were EUR 57 (-79) million.

In March 2002, a new unit for producing sulphur-free gasoline at
the Naantali refinery was commissioned. As a result of the
investments made in 2001 and 2002, Fortum’s refineries are now
fully converted to production of sulphur-free traffic fuels.

In August, Fortum started production of ethanol-based gasoline at
the Porvoo refinery.

The MTBE production plant in Edmonton, Canada, in which Fortum has
a 50% holding, was converted into an iso-octane facility. The
plant is the first in the world to begin production of iso-octane
after conversion. The first deliveries took place in November. All
of the iso-octane production at the plant is sold to the
Californian market.

The recession in the shipping freight market started in late 2001
and continued into 2002. However, towards the end of the year,
there was a significant increase in the freight volumes carried by
the safer double-hulled vessels. This trend had a positive impact
on Fortum’s shipping business.

Fortum’s share of the wholesale market for petroleum products in
Finland was about 75% (75% in 2001) or 8.0 (7.8) million tonnes,
and its share of the retail market was about 39% (40%) or 3.9
(3.8) million tonnes.

Exports from Finland of petroleum products refined by Fortum
totalled 5.2 (4.9) million tonnes. Of this, 2.8 million tonnes was
motor gasoline and 1.9 million tonnes diesel fuel. Half of the
motor gasoline was exported to the European market. Of this, 90%
was low-sulphur (sulphur content below 50 ppm) or sulphur-free
(sulphur content below 10 ppm). The main markets for sulphur-free
gasoline were Germany, the USA and Canada. All diesel exports were
low-sulphur or sulphur-free. The main markets for diesel fuel were
Sweden, the Netherlands and Germany.


Deliveries of petroleum products refined by Fortum, by product
group
1,000 t 2002 2001
Gasoline 4,595 3,823
Diesel 3,619 3,310
Aviation fuel 586 455
Light fuel oil 1,503 1,713
Heavy fuel oil 1,233 1,201
Other 1,504 1,641
Total 13,040 12,143


Deliveries of petroleum products refined by Fortum, by area
1,000 t 2002 2001
Finland 7,845 7,484
Other Nordic countries 1,982 1,991
Baltic countries and 41 45
Russia
USA and Canada 1,276 682
Other countries 1,896 1,941
Total 13,040 12,143


Oil and Gas Upstream

Oil and gas exploration and production activities in Fortum were
subject to major restructuring. In 2002, production operations
were restricted exclusively to Norway. Current activities
concentrate on north-western Russia.

EUR million IV/02 IV/01 2002 2001
Net sales 127 81 391 408
Operating profit 56 33 213 196
- excluding non-recurring 69 33 159 196
items
Net assets 934 1,271
Return on net assets, % 19.4 15.4

The average price of North Sea light Brent crude oil was USD
25.0/bbl (USD 24.4/bbl). The average price of crude oil sold by
Fortum was USD 25.5/bbl (23.7/bbl), and the corresponding
equivalent price of gas was USD 17.6/bbl (19.0/bbl).

In 2002, Fortum divested its oil field assets in Oman and signed
an agreement to divest its assets in Norway. The production in
Oman is not included in the segment’s figures for 2002.
Investments in Russian oil and gas fields continued according to
plan.

In 2002, Fortum’s oil and gas production amounted to 40,800
(40,200) boepd. This was equivalent to an annual output of about
2.0 (2.0) million oil-equivalent tonnes. Natural gas accounted for
approximately 28% (18%) of production. The increased natural gas
production in Norway offset the fall in output resulting from the
divestment in Oman.

The start of oil exploration and production in the South Shapkino
oil field in Russia is scheduled for late 2003. The reserves of
the South Shapkino oil field, which is 50% owned by Fortum and the
Russian company Lukoil, have been estimated at 164 million barrels
(over 20 million tonnes).


Fortum Markets

The Fortum Markets unit focuses on the retail sale of electricity
and oil products as well as related services. The unit has some
1.3 million business and private customers. In 2002, the emphasis
was on improving the quality of service through the development of
a cost-effective, customer-oriented approach. The provision of
competitive products and services to improve customer satisfaction
will continue to be a priority.

The figures for Fortum Markets are included in the figures for
Power, Heat and Gas and for Oil Refining and Marketing. The result
of retail sales of electricity was slightly negative.

Investments

Investments in fixed assets during the year totalled EUR 4.381
(713) million. The increase was due to the acquisition of 50% of
the Swedish energy company Birka Energi’s shares. The deal was
completed in February 2002. In May, Fortum consolidated its Nordic
position further by acquiring the remaining 50% share in the
Finnish Elnova Group with its electricity retail sales and
distribution businesses.

The modernisation and expansion of a CHP-plant in the Stockholm
area started in the autumn. The investment will create additional
capacity and shift the emphasis of the fuel mix towards recycled
fuels (mainly municipal waste). Annually, the new boiler will
replace 70,000 tonnes of fuel oil with recycled fuel.

Shares were acquired in some small heating companies in the Baltic
Rim area.

In March, a new unit for producing sulphur-free gasoline at the
Naantali refinery was commissioned. At the Porvoo refinery, the
first pilot plant for liquefied wood fuel in the Nordic countries
began production in May and production of ethanol-based 98-octane
gasoline was started in August. Production of the flow-improving
additive (FIA) began during the first half of the year.

The MTBE production plant in Edmonton, Canada, in which Fortum has
a 50% holding, was converted into an iso-octane facility.
Production was gradually phased in during the last quarter of the
year.

The tanker fleet renewal continued, new Neste stations were opened
in the Baltic Rim countries and in Russia. The investment to start
up oil production in Russia continued according to plan.


Divestments

In line with its strategy, Fortum sold its shares in Fortum
Energie GmbH and the Afferde combined heat and power plant in
Germany, the Regional Power Generators Limited in the UK, the Thai
subsidiary Laem Chabang Power Company Limited, as well as its
shareholding in Espoon Sähkö Oyj in Finland.

The restructuring of the power plant engineering business was
completed in January 2003.

In February 2002, Fortum divested its interests in the oil fields
in Oman. The deal was completed in June. The Norwegian oil and gas
reserves were sold in November. The parties have received all the
necessary approvals and the transaction will be finalised in early
March 2003.

Minor divestments include diesel stations in Sweden, real estate
and ships.


Financing

In early 2002, Fortum’s net debt increased substantially following
the acquisition of Birka Energi. During the year, however, net
debt was reduced considerably. Year-end net debt stood at EUR
5,846 million (EUR 3,674 million in 2001) and gearing was 80%
(54%). The Group’s net financing expenses for 2002 were EUR 281
(212) million.

In October 2002, Fortum applied to two leading international
credit rating agencies for corporate long-term credit ratings.
Standard & Poor’s assigned Fortum Oyj a BBB+ (stable) rating while
Moody’s rated it Baa2 (positive). At the same time, they confirmed
the long-term credit rating of Fortum Power and Heat AB (formerly
Birka Energi AB) as BBB+ and Baa1 (stable).

Fortum did not conclude any new significant long-term financing
arrangements in 2002. A large proportion of the EUR 1.2 billion
loan taken out in February 2002 to finance the Birka deal was paid
off during the year using proceeds from the disposal of assets and
in January 2003, the remaining part of the loan was paid off in
full.

Group liquidity remained good. Year-end cash and marketable
securities totalled EUR 592 million. In addition, the Group had a
total of approximately EUR 1,772 million in undrawn credit
facilities. Of this, approximately EUR 700 million short-term
facilities were signed in December. Also in December, Fortum Oyj
concluded agreements for a commercial paper programme worth SEK
5,000 million, which, together with the Finnish programme worth
EUR 500 million, will cover the Group’s short-term financing
needs.

The average interest rate of loans after hedging was 5.2% at year
end.


Shares and share capital

A total of 148,380 shares relating to Fortum Corporation’s 1999
bond loan with warrants issued to employees were subscribed for
and entered into the trade register between 17 May and 31 December
2002. A total of 3,000 shares relating to Fortum Corporation’s
1999 share option programme for key employees were subscribed for
and entered into the trade register between 1 October and 31
December 2002.

After the increase, Fortum Corporation´s share capital is EUR
2,875,583,847 and the total number of shares is 845,759,955.
Fortum Corporation’s share capital increased by a total of EUR
514,692.

A total of 251.2 million shares were traded for a total of EUR
1,475 million during 2002. The highest quotation was EUR 6.52 (3
May), the lowest EUR 4.75 (2 January), and the middle-market
quotation EUR 5.87. The closing quotation on 30 December was EUR
6.25.


Personnel

In 2002, the Fortum Group employed an average of 14,053 (14,803)
people. The divestment of Transmission Engineering in 2001
together with the major part of the German power businesses in
2002 accounted for most of the decrease. By contrast, the
acquisition of the remaining 50% of Birka Energi increased the
number of personnel by 1,758. At the end of the year, the number
of employees totalled 13,670 (13,425). The number of employees in
the parent company Fortum Corporation at year end totalled 310
(340) people.


Group management

Mr Christian Lundberg was appointed to head Fortum Markets and
member of the Corporate Executive Committee as of 1 February 2003.


Events after the period under review

On 31 January 2003, Fortum and E.ON AG agreed on an asset swap
with an aggregate value of EUR 770 million. The value of assets to
be acquired by Fortum is EUR 460 million. The value of assets to
be sold is EUR 310 million, leading to a balancing consideration
of EUR 150 million. The transactions will substantially strengthen
Fortum´s position in its focus area, the Nordic countries and the
rest of the Baltic Rim.


Fortum is to acquire 21.4% of the shares in Hafslund ASA, the
second biggest electricity company in Norway with 600,000
electricity sales customers, 550,000 distribution customers and
about 3 TWh of hydropower production. In addition, Fortum is to
acquire all the shares in Ostfold Energi Nett AS, Ostfold Energi
Kraftsalg AS and Ostfold Energi Entreprenor AS with a total of
95,000 electricity sales and distribution customers, and 49% of
Fredrikstads Energi AS with 80,000 customers. The Norwegian
acquisitions also include some other minority holdings.

Fortum will acquire a further 9.5% of the shares in AO Lenenergo,
the largest utility company in north-western Russia with some 1.3
million electricity customers and a production capacity of 14 TWh
of electricity and 26.3 TWh of heat. As a result, Fortum´s share
in Lenenergo will rise to 15.9%.

As part of the deal, Fortum will sell its power plants in
Burghausen, Germany and Edenderry, Ireland to E.ON. E.ON will also
acquire the shares and business of an electricity distribution
company in southern Sweden with some 43,000 customers.


Outlook

The key market drivers influencing Fortum´s performance are the
market price of electricity and the international oil refining
margin. Other important market drivers are the price of crude oil,
the exchange rates of the US dollar and the Swedish krona.

According to general market information, electricity consumption
in the Nordic countries is predicted to increase by about 1–2%
each year over the next couple of years. During 2002, the average
spot price for electricity was EUR 26.9 per megawatt-hour on the
Nordic electricity market, or 16% higher than the corresponding
figure in 2001. In January 2003, the spot price has been averaging
EUR 71.7 per megawatt-hour. At the end of January, the hydro
reservoirs in the Nordic countries were approximately 25 TWh below
average. The 31 January electricity forwards indicated a return to
more moderate price levels.

The synergy benefits generated by the creation of a pan-Nordic
power and heat business following the acquisition of the remaining
50% of the former Birka Energi will exceed the target of EUR 100
million a year as of 2004.

The international refining margin in north-western Europe (Brent
Complex) was considerably lower than in 2001 and averaged USD
1.0/bbl (USD 1.9/bbl in 2001). During the fourth quarter, it
averaged USD 1.9/bbl (USD 0.9/bbl). In January 2003, the
international refining margin averaged USD 1.6/bbl. For several
years, the international Brent Complex refining margin has
averaged USD 1.5 – 2.0/bbl. Management expects Fortum’s premium
margin to remain at the strong levels of previous years. During
2003, the refining volumes are expected to be normal with no major
maintenance shutdowns planned.

The average price for Brent crude oil was USD 25.0/bbl in 2002. In
January 2003, the price has been averaging USD 31.3/bbl while the
International Petroleum Exchange’s Brent futures for the remainder
of 2003 were on average USD 28.4/bbl in January. The price of
crude oil has an impact on the results of Oil Refining and
Marketing through inventory gains and losses.

Due to the divestitures of the oil and gas production assets in
Oman and Norway, there will be no own production in the first half
of 2003. Preparations for the start of oil production in late 2003
at the South Shapkino oil field in north-western Russia is
continuing as planned.

In 2002, the average euro exchange rate against the US dollar and
the Swedish crona was 0.9419 and 9,1442 respectively. At the end
of December, the exchange rates were 1.0487 and 9,1528
respectively.

The last few years were characterised by major restructuring. By
February 2003, Fortum had agreed on transactions covering
strategically important assets worth EUR 6.5 billion euros and
divested non-core assets worth EUR 2.5 billion. Fortum will now
focus on achieving the targets set, delivering a strong cash flow
and controlling the balance sheet.


Dividend distribution proposal

The Group’s non-restricted equity and distributable equity as of
31 December 2002 amounted to EUR 2,810 million. The parent
company’s distributable equity as of 31 December 2002 stood at EUR
900 million.

The Board of Directors proposes to the Annual General Meeting that
Fortum Corporation should pay a dividend of EUR 0.31 per share for
2002, totalling EUR 262.2 million. The Annual General Meeting will
be held on 27 March at 3.00 pm at Finland Hall in Helsinki.


Espoo, 12 February 2003
Fortum Corporation
Board of Directors

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


The figures have been audited.

Distribution:
Helsinki Exchanges
Key media
www.fortum.com

Information on the financial statement release, the company’s new
reporting structure (segments) as of 2003 and the sensitivity
analysis is available on Fortum’s website at:
www.fortum.com/investors


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


FORTUM GROUP
JANUARY-DECEMBER 2002
Audited

CONSOLIDATED INCOME STATEMENT


MEUR Q4/02 Q4/01 2002 2001


Net sales 3 290 2 536 11148 10410
Share of profits of associated
companies 15 9 31 36
Other operating income 34 21 370 203
Depreciation, amortisation and
write-downs -206 -209 -694 -623
Other operating expenses -2742 -2186 -9566 -9112

Operating profit 391 171 1289 914
Financial income and expenses -73 -52 -281 -212

Profit before taxes 318 119 1008 702
Income taxes -111 -33 -269 -160
Minority interests -23 -20 -73 -83

Net profit for the period 184 66 666 459


Earnings per share, EUR 0.22 0.08 0.79 0.57
Fully diluted earnings per share 0.21 0.08 0.78 0.57
Average number of shares, 1,000 shares 845642 798346
Diluted adjusted average number of
shares, 1 000 shares 851482 799308

CONSOLIDATED BALANCE SHEET
Dec 31 Dec 31
MEUR 2002 2001


ASSETS

Fixed assets and other long-term investments 14837 11373
Current assets
Inventories 504 598
Receivables 2027 1721
Cash and cash equivalents 592 602
Total 3123 2921

Total 17960 14294

SHAREHOLDERS' EQUITY AND LIABILITIES

Shareholders' equity
Share capital 2876 2875
Other equity 3020 2610
Total 5896 5485
Minority interests 1432 1270
Provisions for liabilities and charges 133 144
Deferred tax liabilities 1866 1122
Long-term liabilities 4699 3516
Short-term liabilities 3934 2757


Total 17960 14294

Equity per share, EUR 6.97 6.49
Number of shares, 1,000 shares 845776 845609

CASH FLOW STATEMENT
MEUR Dec 31 Dec 31
2002 2001

Net cash from operating activities 1351 1145
Capital expenditures -2420 -708
Proceeds from sales of fixed assets 1009 438
Change in other investments 33 -31

Cash flow before financing activities -27 844

Net change in loans 209 -643
Dividends paid -220 -183
Other financing items 30 147
Net cash from financing activities 19 -679

Net increase (+)/decrease (-) in cash
and marketable securities -8 165


KEY RATIOS
Dec 31 Dec 31
2002 2001
Interest-bearing net debt, MEUR 5846 3674

Investments, MEUR 4381 713
Cash flow from operating activities 1351 1145
Cash flow before financing activities -27 844

Average number of employees 14053 14803

Return on capital employed, % 11.1 8.7
Return on shareholders' equity, % 10.5 8.3
Gearing, % 1) 80 54
Equity-to-assets ratio, % 41 48

1) Gearing is defined as interest-bearing net debt over shareholders'
equity plus minority interest.
This minority interest includes the preference shares amounting to EUR
1.2 billion, carrying fixed income dividend of 6.7 percent, issued by
Fortum Capital Ltd.

NET SALES BY BUSINESS OPERATIONS (SEGMENTS)

MEUR Q4/02 Q4/01 2002 2001

Power, Heat and Gas 979 645 2898 2227
Electricity Distribution 185 135 640 473
Fortum Energy Solutions 214 87 664 603
Oil Refining and Marketing 2002 1636 7195 7223
Oil and Gas Upstream 127 81 391 408
Other operations 19 22 64 95
Eliminations -236 -70 -704 -619

Total 3290 2536 11148 10410

OPERATING PROFIT BY BUSINESS OPERATIONS (SEGMENTS)

MEUR Q4/02 Q4/01 2002 2001

Power, Heat and Gas 241 114 560 367
Electricity Distribution 60 30 279 135
Fortum Energy Solutions 19 5 37 13
Oil Refining and Marketing 38 15 259 242
Oil and Gas Upstream 56 33 213 196
Other operations -27 -24 -64 -40
Eliminations 4 -2 5 1


Total 391 171 1289 914


SIGNIFICANT NON-RECURRING ITEMS IN OPERATING PROFIT
BY BUSINESS OPERATIONS (SEGMENTS)

MEUR Q4/02 Q4/01 2002 2001
Power, Heat and Gas -4 16 91 62
Electricity Distribution 1 3 92 15
Fortum Energy Solutions 17 5 26 21
Oil Refining and Marketing -6 -62 48 -75
Oil and Gas Upstream -13 - 54 -
Other operations and eliminations -7 -1 4 1


Total -12 -39 315 24


DEPRECIATION, AMORTISATION AND WRITE-DOWNS BY BUSINESS OPERATIONS
(SEGMENTS)

MEUR Q4/02 Q4/01 2002 2001
Power, Heat and Gas 64 102 246 232
Electricity Distribution 33 33 147 121
Fortum Energy Solutions 4 4 19 18
Oil Refining and Marketing 53 36 155 140
Oil and Gas Upstream 42 31 112 102
Other operations and eliminations 10 3 15 10


Total 206 209 694 623


INVESTMENTS BY BUSINESS OPERATIONS (SEGMENTS)

MEUR Q4/02 Q4/01 2002 2001

Power, Heat and Gas 93 84 2701 197
Electricity Distribution 62 41 1394 100
Fortum Energy Solutions - 3 27 80
Oil Refining and Marketing 68 62 177 224
Oil and Gas Upstream 34 33 75 90
Other operations and eliminations 4 7 7 22


Total 261 230 4381 713


NET ASSETS BY BUSINESS OPERATIONS (SEGMENTS)
Dec 31 Dec 31
MEUR 2002 2001


Power, Heat and Gas 2) 8642 5873
Electricity Distribution 2) 3200 2113
Fortum Energy Solutions 96 236
Oil Refining and Marketing 1514 1688
Oil and Gas Upstream 934 1271
Other operations and eliminations 83 154


Total 14469 11335

2) Net assets include deferred tax liabilities due to the allocated
goodwill: EUR 502 mill. December 31, 2002, and EUR 175 mill.
December 31, 2001 in Power, Heat and Gas segment; and EUR 344 mill.
December 31, 2002 EUR 240 mill. December 31, 2001 in Electricity
Distribution.


RETURN ON NET ASSETS BY BUSINESS OPERATIONS (SEGMENTS) 3)
Dec 31 Dec 31
% 2002 2001

Power, Heat and Gas 6.9 6.3
Electricity Distribution 9.3 6.2
Fortum Energy Solutions 19.7 5.5
Oil Refining and Marketing 16.3 14.3
Oil and Gas Upstream 19.4 15.4

3) Return on net assets, % = Operating profit/average net assets


CONTINGENT LIABILITIES
Dec 31 Dec 31
MEUR 2002 2001

Contingent liabilities

On own behalf
For debt
Pledges 553 239
Real estate mortgages 237 144
Company mortgages 32 8
Other mortgages 26 52
For other commitments
Pledges 7 -
Real estate mortgages 55 56
Company mortgages 1 3
Other mortgages - 11
Sale and leaseback 15 18
Other contingent liabilities 474 46

Total 1400 993

On behalf of associated companies
Pledges 9 4
Guarantees 345 177
Other contingent liabilities 184 352

Total 538 533

On behalf of others
Guarantees 4 65
Other contingent liabilities 4 4

Total 8 69


Total 1946 1595

Operating lease liabilities
Due within a year 58 80
Due after a year 91 97

Total 149 177

Finance leases have been recognised as assets and liabilities.

Liability for nuclear waste disposal 545 515
Share of reserves in the Nuclear Waste Disposal Fund -535 -505
Liabilities in the balance sheet 4) 10 10

4) Mortgaged bearer papers as security

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

Derivatives Dec 31 Dec 31
2002 2001

Interest and currency Contract Fair Not Contract Fair Not
derivates or value recog- or value recog-
MEUR notional nised notional nised
value as an value as an
income income

Forward rate agreements 2950 -2 -2 5026 -2 -2
Interest rate swaps 6898 21 34 5545 -14 25

Forward foreign exchange
contracts 5) 5626 63 30 4830 -27 -13
Currency swaps 2334 227 60 3180 312 35
Purchased currency options 248 9 11 163 -4 -4
Written currency optionsn 66 1 1 76 - -

5) Incl. also contracts used for equity hedging

Oil futures and forward Volume Fair Not Volume Fair Not
instruments 1000 value recog- 1000 value recog-
bbl MEUR nised bbl MEUR nised
as an as an
income income
MEUR MEUR

Sales contracts 10697 -11 -11 7090 -1 -1
Purchase contracts 12170 13 13 4525 1 1
Purchased options - - - 5400 -1 -1
Written options - - - 900 1 1

Electricity derivatives Volume Fair Not Volume Fair Not
TWh value recog- TWh value recog-
MEUR nised MEUR nised
as an as an
income income
MEUR MEUR

Sales contracts 94 -2065 -1406 72 -65 -34
Purchase contracts 78 1709 1051 69 81 50
Purchased options 2 1 -1 3 -1 -1
Written options 6 3 6 1 2 2


Natural gas derivates Volume Fair Not Volume Fair Not
Mill.th. value recog-Mill.th. value recog-
MEUR nised MEUR nised
as an as an
income income
MEUR MEUR

Sales contracts 4072 127 127 1719 -30 -30
Purchase contracts 3773 -115 -115 1746 31 31
Purchased options 1287 -7 -7 145 1 1
Written options 1335 - - 241 -1 -1

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

QUARTERLY NET SALES BY BUSINESS OPERATIONS (SEGMENTS)

MEUR 2002 Q4/02 Q3/02 Q2/02 Q1/02 2001 Q4/01 Q3/01 Q2/01 Q1/01
Power, Heat
and Gas 2898 979 547 619 753 2227 645 422 475 685
Electricity
Distribution 640 185 138 155 162 473 135 96 105 137
Fortum Energy
Solutions 664 214 159 153 138 603 87 150 197 169
Oil Refining and
Marketing 7195 2002 1821 1812 1560 7223 1636 1863 1772 1952
Oil and Gas
Upstream 391 127 84 107 73 408 81 106 122 99
Other
operations 64 19 15 16 14 95 22 31 20 22
Internal
invoicing -704 -236 -159 -180 -129 -619 -70 -186 -188 -175

Total 11148 3290 2605 2682 2571 10410 2536 2482 2503 2889


QUARTERLY OPERATING PROFIT BY BUSINESS OPERATIONS (SEGMENTS)

MEUR 2002 Q4/02 Q3/02 Q2/02 Q1/02 2001 Q4/01 Q3/01 Q2/01 Q1/01

Power, Heat
and Gas 560 241 22 149 148 367 114 41 49 163
Electricity
Distribution 279 60 34 72 113 135 30 24 25 56
Fortum Energy
Solutions 37 19 7 10 1 13 5 -1 21 -12

Oil Refining and
Marketing 259 38 85 78 58 242 15 78 95 54
Oil and Gas
Upstream 213 56 18 121 18 196 33 46 68 49
Other
operations -64 -27 -18 -8 -11 -40 -24 -2 -9 -5
Eliminations 5 4 1 - - 1 -2 -1 2 2

Total 1289 391 149 422 327 914 171 185 251 307