Stock exchange release

Fortum Corporation Interim Report 1 Janu

23 October 2003, 8:00 EEST

Fortum Corporation STOCK EXCHANGE RELEASE
23 October 2003 at 9.00 a.m. 1 (1)

Fortum Corporation Interim Report 1 January – 30 September 2003 Strong business performance continues - Fortum´s operating profit hits EUR 1 billion January-September in brief - Operating profit excluding non-recurring items up by 71% - Strong cash flow, EUR 1,381 million - Third quarter earnings per share double previous year's figure - Decision to separate and list oil business Key figures III III I-III I-III 2002 Last /03 /02 /03 /02 12 months (LTM) Net sales, EUR million 2527 2605 8555 7858 11148 11845 Operating profit, EUR 239 149 1000 898 1289 1391 million - excluding non-recurring 231 136 974 571 974 1377 items Profit before taxes, EUR 185 75 811 690 1008 1129 million Earnings per share, EUR 0.15 0.07 0.64 0.57 0.79 0.86 Shareholders’ equity per 7.30 6.77 6.97 share, EUR Capital employed 12773 13488 13765 (at end of period), EUR million Interest-bearing net debt 4420 6033 5848 (at end of period), EUR million Investments, EUR million 889 4121 4381 Net cash from operating 1381 977 1351 activities, EUR million Return on capital 10.6 9.6 11.1 11.3 employed, % Return on shareholders’ 10.5 8.7 10.5 10.8 equity, % Gearing, % 58 84 80 Average number of 13594 14333 14053 employees Average number of shares, 845836 845655 845642 845783 1,000s The Group’s financial performance in January-September was strong and cash flow continued to be healthy, based on good operating results and supported by a further decrease in working capital and high foreign exchange gains owing to debt restructuring. Net debt was further reduced to EUR 4,420 million. As a result, gearing decreased to 58%. The various moves to improve performance have contributed to the positive trend in the results. The integration of Birka Energi progressed as planned. The synergy benefits achieved in January- September amounted to EUR 90 million. Fortum took important strategic steps in Norway and in north- western Russia after concluding an agreement with E.ON AG on a swap of power assets. In addition, Fortum acquired further shares in Hafslund in June on the market, thereby increasing its shareholding interest in the company to 34.1%. During the period under review, the key market drivers, the market price of electricity and the international oil refining margin were significantly higher than during the corresponding period in 2002. After the record highs reached around year-end, Nordic power Exchange (Nord Pool) electricity prices decreased, although they remained well in excess of the previous year's levels. Likewise, the international oil refining reference margin, which was very high at the beginning of the year, decreased somewhat but continued on a higher level than a year ago. In September, Fortum decided to commence preparations to separate its oil business into a new company and subsequently to list the new company on the Helsinki stock exchange. Fortum also decided to invest EUR 500 million to upgrade the Porvoo refinery, in order to take advantage of well-established market trends and thereby further improve its competitiveness and profitability. These strategic decisions will enable Fortum to further increase its Nordic utility focus and continue to participate actively in the restructuring of the Nordic power and heat markets. Net sales and results July-September The operating profit for all segments improved compared to the corresponding period last year. Power, Heat and Gas more than doubled its operating profit excluding non-recurring items. Oil Refining and Marketing's results improved by more than 50%. Group operating profit totalled EUR 239 (149) million. The operating profit excluding non-recurring items stood at EUR 231 (136) million, an increase of EUR 95 million compared to the corresponding period in 2002. The net amount of non-recurring items was EUR 8 (13) million. Earnings per share doubled to EUR 0.15 (0.07). During the third quarter, the Nord Pool electricity price and the international oil refining margin both exceeded the levels reached in the corresponding period in 2002. January-September Group net sales stood at EUR 8,555 (7,858) million. The increase was mainly attributable to the higher market price of electricity and petroleum products. Group operating profit totalled EUR 1,000 (898) million. The operating profit excluding non-recurring items stood at EUR 974 (571) million, an increase of EUR 403 million compared to the corresponding period in 2002. Taking into consideration also the impact of discontinuing operations, the improvement of operating profit was EUR 500 million. The net amount of non-recurring items was EUR 26 (327) million. Most of the non-recurring items last year were gains on sales of fixed assets. Electricity and heat sales volumes increased. This, together with higher electricity prices, resulted in a significant improvement in the results of Power, Heat and Gas. Electricity Distribution's results were somewhat lower than previous year due to substantial gains on sales in 2002. However, operating profit excluding non-recurring items was well up on the previous year's figures. The Markets segment tripled its results compared to last year. The international oil refining margins were markedly higher than a year ago, which gave a major boost to Oil Refining and Marketing's results. Shipping enjoyed high freight rates, mainly during the first quarter. The fleet utilisation rate continued to be high as a result of renewed tonnage and specialist knowledge of arctic conditions. The Oil Retail business also performed well. Profit before taxes was EUR 811 (690) million. The Group´s net financial expenses were EUR 189 (208) million. Minority interests accounted for EUR 57 (50) million. These 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 212 (158) million. Net profit for the period was EUR 542 (482) million. Earnings per share were EUR 0.64 (0.57). Return on capital employed was 10.6% (9.6%) and return on shareholders´ equity was 10.5% (8.7%). SEGMENT REVIEWS Power, Heat and Gas The main business area comprises power and heat generation and sales as well as gas operations in the Nordic countries and other parts of the Baltic Rim. Fortum is the second largest power company in the Nordic countries as well as the leading heat producer in the region. The Service business (former Fortum Energy Solutions) is included in this segment as from 1 January 2003. EUR million III III I-III I-III 2002 LTM /03 /02 /03 /02 Net sales 626 694 2558 2410 3644 3792 - electricity sales 337 325 1393 1028 1661 2026 - heat sales 107 114 540 453 686 773 - other sales 182 255 625 929 1297 993 Operating profit 77 28 506 333 617 790 - excluding non- 78 33 508 230 501 779 recurring items Return on net assets, % 7.8 5.5 7.5 9.1 Net assets (at end of 8720 8717 8748 period) According to preliminary estimates, electricity consumption in the Nordic countries decreased by 1% during the third quarter and was 77.6 (78.3) terawatt-hours (TWh). Consumption in Finland was on a par with the previous year's level while in Sweden it fell by about 3% and in Norway it increased by about 1% on the corresponding period last year. In January-September, according to preliminary estimates, electricity consumption in the Nordic countries decreased by 1% and was 275 (277) TWh. Consumption in Finland increased by 4%. In Sweden, consumption was at the same level as last year and in Norway it was down by 4% on the corresponding period last year. During the third quarter the average spot price for electricity on the Nordic power exchange (Nord Pool) was EUR 31.0 (20.1) per megawatt-hour (MWh) and the deficit in water reservoirs remained practically unchanged. The average price of electricity was EUR 37.6 (19.2) per megawatt-hour in January-September. The price level was supported by the prevailing deficit in water reservoirs and lower-than-normal inflows. In January-September, the Nord Pool price increased by 95% compared to last year. The corresponding price increase in electricity sold by Fortum in the Nordic countries was 39%. Power, Heat and Gas strengthened its market position. Sales in the Nordic countries totalled 41.9 (37.8) TWh which accounted for approximately 15% (14%) of total Nordic electricity consumption in January-September. Fortum’s own power generation in the Nordic countries in January- September was 37.1 (32.7) TWh which represented approximately 13% (12%) of total Nordic electricity consumption. The balance between energy sources was significantly different from last year due to low water reservoirs. This illustrates the flexibility of Fortum's flexible production portfolio. In line with its Nordic strategy, Fortum divested its gas retail operations in the UK in June and is in the process of divesting its gas trading operations. Fortum continues to be a shareholder in a number of gas companies in the Nordic area and is involved in various development projects including the North Transgas project. Demand for contract-based maintenance was healthy, and Fortum Service signed several new contracts with industrial customers. Also demand for substation and hydropower services continued to be good. Electricity sales by III III I-III I-III 2002 LTM area /03 /02 /03 /02 TWh Sweden *) 5.5 5.1 20.7 19.6 28.0 29.1 Finland 6.2 6.1 21.2 18.2 26.1 29.1 Other countries 0.4 1.1 2.1 5.2 5.9 2.8 Total 12.1 12.3 44.0 43.0 60.0 61.0 Heat sales by area III III I-III I-III 2002 LTM TWh /03 /02 /03 /02 Sweden *) 0.8 0.7 6.5 4.6 8.2 10.1 Finland 1.6 1.8 7.4 7.1 9.8 10.1 Other countries 0.6 1.1 2.8 3.3 4.5 4.0 Total 3.0 3.6 16.7 15.0 22.5 24.2 *) The effects of Birka Energi’s change of ownership on electricity and heat sales volumes were 2.4 TWh and 1.4 TWh respectively in 2002. Own power generation III III I-III I-III 2002 LTM by source, TWh, /03 /02 03 /02 in the Nordic countries Hydro 3.5 4.4 11.9 14.1 18.1 15.9 Nuclear 4.8 5.0 17.5 15.6 22.0 23.9 Thermal 2.1 0.7 7.7 3.0 6.4 11.1 Total 10.4 10.1 37.1 32.7 46.5 50.9 Share of own III III I-III I-III 2002 LTM production, %, /03 /02 /03 /02 in the Nordic countries Hydro 34 44 32 43 39 31 Nuclear 46 49 47 48 47 47 Thermal 20 7 21 9 14 22 Total 100 100 100 100 100 100 Electricity Distribution Fortum owns and operates distribution and regional networks and distributes electricity to a total of 1.4 million customers in Sweden, Finland, Norway and Estonia. EUR million III III I-III I-III 2002 LTM /03 /02 /03 /02 Net sales 143 138 502 456 640 686 - distribution network 118 110 415 377 526 564 transmission - regional network 19 19 64 56 80 88 transmission - other sales 6 9 23 23 34 34 Operating profit 47 34 189 219 279 249 - excluding 48 34 169 128 187 228 non–recurring items Return on net assets, % 8.0 9.9 9.3 7.9 Net assets (at end of 3106 3117 3199 period) Volume of distributed III III I-III I-III 2002 LTM electricity by area /03 /02 /03 /02 TWh Sweden*) 2.7 2.9 11.0 9.5 14.4 15.9 Finland 1.1 1.1 4.4 3.6 5.4 6.2 Other countries 0.4 0.0 0.7 1.3 1.4 0.8 Total 4.2 4.0 16.1 14.4 21.2 22.9 *)The Birka Energi acquisition accounts for a 1.7 TWh increase in the volume transmitted via the distribution networks in 2002. Number of electricity 30.9.2003 30.9.2002 2002 distribution customers by area, 1,000s Sweden 850 890 890 Finland 395 390 390 Other countries*) 115 20 20 Total 1360 1300 1300 *) Østfold Energi Nett AS with 94,000 customers is included in the figures as of 1 May, 2003. The volumes of distribution and regional network transmissions totalled 16.1 (14.4) TWh and 14.7 (14.3) TWh respectively. Electricity transmissions via the regional distribution network to customers outside the Group totalled 10.8 (9.7) TWh in Sweden and 3.9 (4.5) TWh in Finland. Electricity distribution prices were raised in Sweden and Norway as from 1 October, with an average rise of 5% in Sweden and 6% in Norway. Markets The Markets business unit focuses on the retail sale of electricity and oil products, mainly heating oil, as well as related services to a total of 1.3 million private and business customers. EUR million III III I-III I-III 2002 LTM /03 /02 /03 /02 Net sales 329 286 1,132 862 1280 1550 Operating profit 14 2 22 8 -11 3 - excluding 14 2 22 7 -12 3 non–recurring items Return on net assets, % 41.3 9.1 -11.4 4.6 Net assets (at end of 74 73 55 period) The Markets business unit buys its electricity and oil products at market terms. In Finland, the average retail market prices for private customers were stable whereas in Sweden and Norway they increased towards the end of summer and early autumn. Fortum's retail prices remained unchanged during the third quarter. During the third quarter, electricity sales totalled 7.6 (8.0) TWh and sales of heating oil 0.1 (0.1) million tonnes. In January- September, electricity sales totalled 24.8 (23.6) TWh. The effect on electricity sales volumes of the change in Birka Energi's ownership was 1.9 TWh during the period from January to February 2002. Sales of heating oil amounted to 0.5 (0.5) million tonnes in January-September. The business processes improvement programme launched in the spring contributed to the turnaround in the unit's results. Oil Refining and Marketing The activities of Oil Refining and Marketing cover the production, refining and marketing of oil as well as logistics. The main products are traffic fuels and heating oils. EUR million III III I-III I-III 2002 LTM /03 /02 /03 /02 Net sales 1717 1794 5435 5114 7083 7404 Operating profit 118 76 318 211 253 360 - excluding 104 60 320 157 205 367 non–recurring items Return on net assets, % 28.7 17.6 16.0 24.1 Net assets (at end of 1446 1555 1510 period) The average international refining margin in north-western Europe (Brent Complex) during the third quarter was USD 2.7/bbl (1.3/bbl). In January-September, it averaged USD 2.8/bbl (0.7/bbl). Fortum’s premium margin continued to average about USD 2/bbl above the international reference margin. The price of Brent crude averaged USD 28.4/bbl (26.9/bbl) during the third quarter. In January-September, the average price was USD 28.6/bbl (24.4/bbl). At the end of September, the price of Brent was around USD 27/bbl. The inventory gain during the third quarter was EUR 14 (17) million and EUR -0.4 (47) million in January-September. In January-September, Fortum refined a total of 9.7 (9.9) million tonnes of crude oil and other feedstocks. A total of 5.8 (5.7) million tonnes of petroleum products were sold in Finland. Exports amounted to 3.9 (3.8) million tonnes. During the third quarter, shipping rates remained at a normal level, but were considerably lower than during the first half of the year. The fleet utilisation rate remained high and the fleet renewal programme was continued. In September, a decision was made to sell one crude oil tanker and to divest the offshore loading business. One new product tanker was delivered to Fortum in September. Fortum started production at the South Shapkino oil field in north- western Russia in mid-July. The daily production rates are about 20,000 barrels per day (100%). The planned maximum production rate of 50,000 barrels per day (of which Fortum’s share is 25,000 barrels per day) will be reached by the end of 2004 according to current estimates. Fortum’s share of the exploitable oil reserves in this oil field, which is owned fifty-fifty by Fortum and the Russian company Lukoil, has been estimated at approximately 82 million barrels. Deliveries of petroleum III III I-III I-III 2002 LTM products refined by /03 /02 /03 /02 Fortum – by product group (1,000 t) Gasoline 1075 1247 3135 3390 4595 4340 Diesel 971 783 2876 2626 3619 3869 Aviation fuel 159 172 410 472 586 524 Light fuel oil 362 331 1081 1054 1503 1530 Heavy fuel oil 269 260 951 939 1233 1245 Other 488 424 1276 1039 1504 1741 Total 3324 3217 9729 9520 13040 13249 Deliveries of petroleum III III I-III I-III 2002 LTM products refined by /03 /02 /03 /02 Fortum – by area (1,000 t) Finland 2002 1848 5791 5718 7845 7918 Other Nordic countries 503 529 1470 1457 1982 1995 Baltic countries and 33 9 62 28 41 75 Russia USA and Canada 278 435 795 1022 1276 1049 Other countries 508 396 1611 1295 1896 2212 Total 3324 3217 9729 9520 13040 13249 Business development and restructuring Transactions relating to the swap of power assets between Fortum and E.ON AG were completed by the end of June. Fortum acquired assets in Norway and north-western Russia and sold some non-core assets in Ireland, Germany and southern Sweden. The transaction relating to the shares in the Norwegian company Fredrikstad Energi AS is still waiting for technical conclusion. The disposal of the Norwegian E&P assets was completed in March. The financial impact of the transaction was included in Fortum´s 2002 annual results. In June, Fortum divested its retail gas sales operations in the UK and started a process to divest its gas trading operations. In September, Fortum announced that it will commence preparations to separate its oil business into a new company and to have the new company listed on the Helsinki stock exchange (IPO). The new company will comprise all of Fortum’s existing oil business with its refining, marketing, shipping and oil production activities. This strategic decision will enable Fortum to further increase its Nordic utility focus and to continue to participate actively in the restructuring of the Nordic power and heat markets. It will also improve the competitive position and commercial prospects of the oil business and create two leading Nordic companies with strong competitive positions in their respective markets. Investments and financing The IPO will facilitate a EUR 500 million investment to add sulphur-free diesel production capacity at the Porvoo refinery. While the total production capacity will remain unchanged, the refinery will be able to significantly increase the production of high-margin products utilising more Russian crudes, for example, which are competitively available as Porvoo is adjacent to established Russian crude oil export routes to the Western markets. The annual production of sulphur-free diesel at the refinery will grow by about one million tonnes and will be mainly replacing heavy fuel oil production. Fortum expects to increase its refining margin premium by at least USD 1/bbl and thus achieve an attractive return on investment even using relatively conservative assumptions. The high expected return from the upgrade investment is driven by the Porvoo refinery’s ability to produce more high-margin, environmentally benign products from less expensive crude oil. The demand for these products is rapidly growing in Fortum’s key markets. The investment is expected to be completed by the end of 2006. Investments in fixed assets in January-September totalled EUR 889 (4,121) million. Of this, EUR 520 (3,729) million were acquisitions. At the end of the period, interest-bearing net debt stood at EUR 4,420 (6,033) million. The gearing ratio at the end of September was 58% (80% at the end of 2002). Adjusted gearing (Fortum Capital Ltd's minority interest included in liabilities) was 88% (115% at the end of 2002). Group net financial expenses were EUR 189 (208) million. In February, Fortum Corporation established a bond programme (Medium Term Note Programme) of SEK 7.0 billion for the purpose of enabling the issue of bonds on the Swedish capital markets in Swedish krona and euro. The programme replaces the SEK 7.0 billion programme in the name of Fortum Power and Heat AB. In April, Fortum Corporation signed a EUR 1.2 billion revolving credit facility. This five-year facility is for general corporate purposes and replaces existing syndicated facilities established by various subsidiaries. In July, Fortum Corporation established a bond programme (Euro Medium Term Note Programme) of EUR 4.0 billion in order to enable the issue of bonds on the international capital markets. Shares and shareholdings A total of 137,820 Fortum Corporation shares were subscribed for and entered in the trade register under Fortum Corporation’s 1999 bond loan with warrants to employees and the management stock option scheme. After these increases, Fortum Corporation’s share capital is EUR 2,876,052,435 and the total number of shares is 845,897,775. Currently the Board of Directors has no unused authorisations from the General Meeting of shareholders to issue convertible bond loans or bonds with warrants, issue new shares or acquire the company´s own shares. Group personnel The average number of employees in the Group in January-September was 13,594 (14,333). The reduction is mainly attributable to the combination of the businesses of Birka Energi and Fortum, as well as to the formation of the new associated company Enprima at the beginning of this year. The number of employees at the end of the period was 13,201 (13,670 at the end of 2002). Outlook The key market drivers influencing Fortum´s performance are the market price of electricity and the international oil refining margin. Other important market drivers are the price of crude oil, and the exchange rates of the US dollar and the Swedish krona. During 2005, emission trading may become a new key market driver. During the past five years the volume of Fortum's CO2-free power production has increased from 27 TWh to 41 TWh. Its share was 79% of Fortum`s power generation in 2002. With this production portfolio Fortum is well-positioned when emission trading starts. 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. In January-September 2003, the average spot price for electricity was EUR 37.6 per megawatt-hour on the Nordic electricity market, or 95% higher than the corresponding figure for 2002. Currently the deficit in water reservoirs is 17 TWh and the electricity forwards for the rest of 2003 are in the range of EUR 37-40 per megawatt-hour and EUR 34-42 for the period January-April 2004. 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 continuous operations of the power and heat businesses usually result in a significantly better performance in the first and last quarter of the year than in the second and third quarter. In 2002, the operating profit for discontinuing Oil and Gas Upstream segment was EUR 213 million. During the fourth quarter, the operating profit was EUR 51 million. The international refining margin in north-western Europe (Brent Complex) was considerably higher than in the corresponding period in 2002 and averaged USD 2.8/bbl (0.7/bbl) in January-September. In October 2003, the international refining margin has been averaging USD 1.8/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 as strong as in previous years. No major maintenance shutdowns are planned at the refineries during 2004. The average price for Brent crude oil was USD 28.6/bbl in January- September 2003. On 30 September, it was USD 28.2/bbl. In October 2003, the price has been averaging USD 30.2/bbl. Currently the International Petroleum Exchange’s Brent futures for the remainder of 2003 average USD 28.6/bbl and USD 27.3/bbl for the first half of 2004. The price of crude oil has an impact on the results of Oil Refining and Marketing through inventory gains and losses. Oil production at the South Shapkino oil field in north-western Russia started in mid-July. In late September, the production level was 20,000 bbl/d (Fortum’s 50% share). Production will gradually be increased and full capacity (Fortum´s share 25,000 bbl/d) will be reached by the end of 2004. The operations will be earnings neutral during 2003. The separation and listing of the oil business will allow the new company to take full advantage of market developments and facilitate the upgrade of the Porvoo refinery. These measures will also enable Fortum to further increase its Nordic utility focus and to continue its active participation in the restructuring of the Nordic power and heat markets. During 2003, Fortum's ongoing businesses have been performing well. The company's current position, ongoing performance improvement measures and the market outlook all point to an attractive near future for Fortum. The information contained in the Interim Financial Statements has not been audited. Espoo, 23 October 2003 Fortum Corporation The Board of Directors Fortum Corporation Carola Teir-Lehtinen Senior Vice President, Corporate Communications Distribution: Helsinki Exchanges Key media For further information please contact: Juha Laaksonen, CFO, tel. +358 10 452 4519 FORTUM GROUP JANUARY-SEPTEMBER 2003 Interim financial statements are unaudited CONSOLIDATED INCOME STATEMENT MEUR Q3/03 Q3/02 Q1-Q3/03 Q1-Q3/02 2002 Last 12 months Net sales 2527 2605 8555 7858 11148 11845 Share of profits of associated companies 9 3 29 16 31 44 Other operating income 19 9 95 336 370 129 Depreciation,amortisation and write-downs -128 -165 -395 -488 -694 -601 Other operating expenses -2188 -2303 -7284 -6824 -9566 -10026 Operating profit 239 149 1000 898 1289 1391 Financial income and expenses -54 -74 -189 -208 -281 -262 Profit before taxes 185 75 811 690 1008 1129 Income taxes -45 -9 -212 -158 -269 -323 Minority interests -10 -10 -57 -50 -73 -80 Net profit for the period 130 56 542 482 666 726 Earnings per share, EUR 0.15 0.07 0.64 0.57 0.79 0.86 Fully diluted earnings per share 0.15 0.07 0.63 0.57 0.78 Average number of shares, 1000 shares 845836 845655 845642 845783 Diluted adjusted average number of shares,1000 shares 857249 851169 851482 CONSOLIDATED BALANCE SHEET MEUR Sep 30 2003 Sep 30 02 Dec 31 02 ASSETS Fixed assets and other long-term inve 14189 14819 14837 Current assets Inventories 541 671 504 Receivables 1157 1520 2027 Cash and cash equivalents 277 259 592 Total 1975 2450 3123 Total 16164 17269 17960 SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' equity Share capital 2876 2875 2876 Other equity 3297 2854 3020 Total 6173 5729 5896 Minority interests 1449 1447 1432 Provisions for liabilities and charge 187 95 133 Deferred tax liabilities 1803 1774 1866 Long-term liabilities 3844 5367 4699 Short-term liabilities 2708 2857 3934 Total 16164 17269 17960 Equity per share, EUR 7.30 6.77 6.97 Number of shares, 1,000 shares 845898 845720 845776 CASH FLOW STATEMENT MEUR Sep 30 2003 Sep 30 02 Dec 31 02 Net cash from operating activities 1381 977 1351 Capital expenditures -370 -393 -649 Acquisition of shares -504 -1765 -1771 Proceeds from sales of fixed assets 101 105 120 Proceeds from sales of shares 1221 857 889 Change in other investments -53 15 33 Cash flow before financing activities 1776 -204 -27 Net change in loans -1791 20 209 Dividends paid -264 -220 -220 Other financing items -40 67 30 Net cash from financing activities -2095 -133 19 Net increase (+)/decrease (-) in cash and marketable securities -319 -337 -8 KEY RATIOS Sep30 2003 Sep30 02 Dec31 02 Last 12 months Capital employed, MEUR 12773 13488 13765 Interest-bearing net debt, MEUR 4420 6033 5848 Investments, MEUR 889 4121 4381 1149 Return on capital employed, % 10.6 9.6 11.1 11.3 Return on shareholders' equity, % 10.5 8.7 10.5 10.8 Interest coverage 5.1 4.3 4.7 5.2 FFO / interest-bearing net debt, % 1) 39.5 24.0 28.1 Gearing, % 58 84 80 Adjusted gearing, % 2) 88 121 115 Equity-to-assets ratio, % 47 42 41 Average number of employees 13594 14333 14053 1) FFO = Net cash from operating activities before changes in working capital 2) The minority interest related to the preference shares amounting to EUR 1.2 billion and carrying fixed income dividend of 6.7 percent, issued by Fortum Capital Ltd, is treated as liability. NET SALES BY SEGMENTS MEUR Q3/03 Q3/02 Q1-Q3/03 Q1-Q3/02 2002 Last 12 months Power, Heat and Gas 626 694 2558 2410 3644 3792 Electricity Distribution 143 138 502 456 640 686 Oil Refining and Marketing 1717 1794 5435 5114 7083 7404 Markets 329 286 1132 862 1280 1550 Other Operations 22 15 61 45 64 80 Eliminations -310 -344 -1133 -1100 -1668 -1701 Total 2527 2583 8555 7787 11043 11811 Discontinuing operations*) - 22 - 71 105 34 Total 2527 2605 8555 7858 11148 11845 *) Internal sales excluded OPERATING PROFIT BY SEGMENTS MEUR Q3/03 Q3/02 Q1-Q3/03 Q1-Q3/02 2002 Last 12 months Power, Heat and Gas 77 28 506 333 617 790 Electricity Distribution 47 34 189 219 279 249 Oil Refining and Marketing 118 76 318 211 253 360 Markets 14 2 22 8 -11 3 Other Operations -16 -17 -35 -37 -64 -62 Eliminations -1 1 - 1 - -1 Total 239 124 1000 735 1074 1339 Discontinuing operations - 25 - 163 215 52 Total 239 149 1000 898 1289 1391 NON-RECURRING ITEMS IN OPERATING PROFIT BY SEGMENTS MEUR Q3/03 Q3/02 Q1-Q3/03 Q1-Q3/02 2002 Last 12 months Power, Heat and Gas -1 -5 -2 103 116 11 Electricity Distribution -1 - 20 91 92 21 Oil Refining and Marketing 15 16 -1 54 48 -7 Markets - - - 1 1 - Other Operations -5 2 9 11 4 2 Total 8 13 26 260 261 27 Discontinuing operations - - - 67 54 -13 Total 8 13 26 327 315 14 DEPRECIATION, AMORTISATION AND WRITE-DOWNS BY SEGMENTS MEUR Q3/03 Q3/02 Q1-Q3/03 Q1-Q3/02 2002 Last 12 months Power, Heat and Gas 55 62 171 177 236 230 Electricity Distribution 34 38 110 114 147 143 Oil Refining and Marketing 30 33 91 100 152 143 Markets 5 7 12 19 25 18 Other Operations 4 3 11 9 23 25 Eliminations - - - -2 -1 1 Total 128 143 395 417 582 560 Discontinuing operations - 22 - 71 112 41 Total 128 165 395 488 694 601 INVESTMENTS BY SEGMENTS MEUR Q3/03 Q3/02 Q1-Q3/03 Q1-Q3/02 2002 Last 12 months Power, Heat and Gas 61 59 465 2527 2619 557 Electricity Distribution 17 45 241 1332 1394 303 Oil Refining and Marketing 47 45 143 109 177 211 Markets - 1 26 109 109 26 Other Operations 3 - 14 3 7 18 Total 128 150 889 4080 4306 1115 Discontinuing operations - 15 - 41 75 34 Total 128 165 889 4121 4381 1149 NET ASSETS BY SEGMENTS MEUR Sep 30 2003 Sep 30 02 Dec 31 02 Power, Heat and Gas 3) 8720 8717 8748 Electricity Distribution 3) 3106 3117 3199 Oil Refining and Marketing 1446 1555 1510 Markets 74 73 55 Other Operations 113 144 30 Total 13459 13606 13542 Discontinuing operations - 1002 927 Total 13459 14608 14469 3) Net assets include deferred tax liabilities due to the allocated goodwill: EUR 509 mill. September 30, 2003,and EUR 502 mill. December 31, 2002 in Power, Heat and Gas segment; and EUR 247 mill. September 30, 2003 EUR 344 mill. December 31, 2002 in Electricity Distribution. RETURN ON NET ASSETS BY SEGMENTS 4) % Sep30 Sep30 Sep30 Sep30 Dec31 Dec31 Last 12 Last 12 2003 2003*) 2002 2002*) 2002 2002*) months months*) Power, Heat and Gas 7.8 7.8 5.5 3.8 7.5 6.1 9.1 9.0 Electricity Distribution 8.0 7.2 9.9 5.8 9.3 6.2 7.9 7.3 Oil Refining and Marketing 28.7 28.8 17.6 13.1 16.0 13.0 24.1 24.6 Markets 41.3 41.3 9.1 7.9 -11.4 -12.4 4.6 4.1 4) Return on net assets, % = Operating profit/average net assets *) Non-recurring items deducted from operating profit CONTINGENT LIABILITIES MEUR Sep 30 2003 Sep 30 02 Dec 31 02 Contingent liabilities On own behalf For debt Pledges 525 438 553 Real estate mortgages 237 235 237 Company mortgages - 34 32 Other mortgages - 26 26 For other commitments Real estate mortgages 54 54 55 Pledges, company and other mortgages 1 15 8 Sale and leaseback 9 16 15 Other contingent liabilities 96 527 474 Total 922 1345 1400 On behalf of associated companies Pledges and real estate mortgages 12 17 9 Guarantees 597 277 345 Other contingent liabilities 182 184 184 Total 791 478 538 On behalf of others Guarantees 15 - 4 Other contingent liabilities 5 10 4 Total 20 10 8 Total 1733 1833 1946 Operating lease liabilities Due within a year 55 61 58 Due after a year 108 119 91 Total 163 180 149 Finance leases have been recognised as assets and liabilities. Liability for nuclear waste disposal 545 515 545 Share of reserves in the Nuclear Waste Disposal Fund -535 -505 -535 Liabilities in the balance sheet 5) 10 10 10 5) 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 Sep 30 2003 Dec 31 2002 Interest and currency derivatives Contract Fair Not recogn. Contract Fair Not rec. or value as an or value as an notional income notional income MEUR value value Forward rate agreements 335 - - 2950 -2 -2 Interest rate swaps 5784 9 16 6898 21 34 Forward foreign exchange contracts 6) 7866 -54 33 5626 63 30 Currency swaps 347 13 5 2334 227 60 Purchased currency options 32 4 4 248 9 11 Written currency options 15 - - 66 1 1 Sep 30 2002 Forward rate agreements 4617 -2 -2 Interest rate swaps 6872 15 26 Forward foreign exchange contracts 6) 5530 -31 -9 Currency swaps 2359 271 73 Purchased currency options 278 7 7 Written currency options 75 2 2 6) Incl. also contracts used for equity hedging Oil futures and forward instruments Sep 30 2003 Dec 31 2002 Volume Fair Not recogn. Volume Fair Not rec. value as an value as an income income 1000 bbl MEUR MEUR 1000 bbl MEUR MEUR Sales contracts 11345 -3 -3 10697 -11 -11 Purchase contracts 26398 7 7 12170 13 13 Purchased options 100 - - - - - Written options 100 - - - - - Sep 30 2002 Sales contracts 8391 -7 -7 Purchase contracts 6767 7 7 Purchased options 250 - - Written options 250 - - Electricity derivatives Sep 30 2003 Dec 31 2002 Volume Fair Not recogn. Volume Fair Not rec. value as an value as an income income TWh MEUR MEUR TWh MEUR MEUR Sales contracts 58 -349 -218 94 -2065 -1406 Purchase contracts 57 308 176 78 1709 1051 Purchased options 1 -1 -2 2 1 -1 Written options 3 -4 -3 6 3 6 Sep 30 2002 Sales contracts 82 -207 -154 Purchase contracts 76 216 146 Purchased options 4 1 2 Written options 9 - - Natural gas derivates Sep 30 2003 Dec 31 2002 Volume Fair Not recogn. Volume Fair Not rec. value as an value as an income income Mill.th. MEUR MEUR Mill.th. MEUR MEUR Sales contracts 2543 36 - 4072 127 127 Purchase contracts 2543 -34 - 3773 -115 -115 Purchased options 709 1 - 1287 -7 -7 Written options 709 -3 - 1335 - - Sep 30 2002 Sales contracts 2218 -19 -19 Purchase contracts 2110 23 23 Purchased options 783 -2 -2 Written options 697 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 SEGMENTS MEUR Q3/03 Q2/03 Q1/03 Q4/02 Q3/02 Q2/02 Q1/02 Power, Heat and Gas 626 718 1214 1234 694 783 933 Electricity Distribution 143 160 199 184 138 156 162 Oil Refining and Marketing 1717 1643 2075 1968 1794 1790 1531 Markets 329 327 476 418 286 270 306 Other Operations 22 19 20 19 15 16 14 Eliminations -310 -432 -391 -567 -344 -356 -401 Total 2527 2435 3593 3256 2583 2659 2545 Discontinuing operations - - - 34 22 23 26 Total 2527 2435 3593 3290 2605 2682 2571 QUARTERLY OPERATING PROFIT BY SEGMENTS MEUR Q3/03 Q2/03 Q1/03 Q4/02 Q3/02 Q2/02 Q1/02 Power, Heat and Gas 77 136 293 284 28 156 149 Electricity Distribution 47 61 81 61 34 72 113 Oil Refining and Marketing 118 75 125 42 76 79 57 Markets 14 15 -7 -19 2 4 2 Other Operations -16 -2 -17 -27 -17 -10 -12 Eliminations -1 1 - -1 1 1 -1 Total 239 286 475 340 124 302 308 Discontinuing operations - - - 51 25 120 19 Total 239 286 475 391 149 422 327 SHARES AND SHAREHOLDINGS Number Share of shares capital EUR Share capital on 31 Dec 2002 845 759 955 2 875 583 847 Subscribed under bond loan with warrants 1999 - 20 February 2003 15 600 53 040 - 5 May 2003 27 060 92 004 - 3 September 2003 50 160 170 544 Subscribed under management share option scheme 1999 5 May 2003 45 000 153 000 Share capital on 30 September 2003 845 897 775 2 876 052 435