Stock exchange release

Fortum to acquire City of Oslo?s shares

10 May 2004, 7:30 EEST

10 May 2004 at 8.30 1 ()

Fortum to acquire City of Oslo’s shares in Hafslund - Major step in Nordic power and heat strategy Fortum has agreed to acquire City of Oslo’s 53.7% share of capital in Hafslund ASA for EUR 660 million (NOK 5.4 billion). On 9 May, the Oslo City Board (Byrådet) signed the agreement and recommended it to the City Council (Bystyret) for approval. With Hafslund, Fortum can take a major step in the development of the leading pan- Nordic power and heat company with significant skills and scale in Norway, Sweden and Finland. The acquisition of City of Oslo’s shares will enable Fortum to gain control of Hafslund and is a major step in Fortum’s Nordic power & heat strategy: - Positions Fortum as #1 in Nordic and Norwegian retail - Strengthens Fortum’s #1 market position in Nordic distribution and positions Fortum as #1 in Norwegian distribution - Strengthens Fortum’s #2 position in Nordic power generation - Increases cash flows from stable distribution activities, creates a larger customer base and broader geographic scope - Provides EUR 20 million of annual synergy benefits by 2006 Oslo City Board has approved the agreement and it remains subject to approval by Oslo City Council and that there are no higher offers prior to early July. The transaction is expected to close during the summer after which Fortum will own 87.8% of Hafslund’s capital and will launch a mandatory tender offer to the remaining minority shareholders at the same price. “I am delighted that we can continue to deliver on our pan-Nordic strategy, and that we have reached an agreement with the City board of Oslo. We are an owner with strong industrial competence and financial resources to develop Hafslund’s business in Norway and beyondö, says Mikael Lilius, President and CEO of Fortum. “Hafslund is a fine company with a long history and strong market position. It fits excellently into our strategy. Together we can combine key skills in the two companies in a way that will enhance our competitiveness not only in Norway, but in all Nordic markets. With this transaction we can continue to leverage skills and experience in our Nordic organization to the long term benefit of customers, employees and owners.ö Mikael Lilius concluded. Transaction overview Fortum has agreed to acquire City of Oslo’s 67,524,647 A-shares and 37,342,907 B-shares in Hafslund ASA at a cash price of NOK 53.0 for A-shares and NOK 48.0 for B-shares for a total of EUR 660 million (NOK 5.4 billion). These shares represent 53.7% of Hafslund’s share capital. Fortum’s total acquisition price for 100% of Hafslund will be NOK 45.4 per share (EUR 1.1 billion or NOK 8.9 billion) including the price paid for Fortum’s existing 34.1% holding in Hafslund and the price to be paid to remaining minority shareholders. In addition, Fortum will assume EUR 1.4 billion (NOK 10.9 billion) of net financial debt. The combination of Hafslund and Fortum, and the integration of Fortum’s existing Norwegian assets with Hafslund, will create significant business opportunities and are also expected to generate EUR 20 million of annual synergy benefits by 2006. The synergy benefits are in addition to Hafslund’s own announced efficiency improvement target of approximately EUR 50 million. The synergy benefits will be realised through the sharing of best practices in operation and maintenance, economies of scale (e.g. combined purchasing) and combination of competencies. The transaction is expected to be accretive to Fortum’s earnings in 2006. The Aggregate Value / last twelve months EBITDA as of March 31, 2004 is 9.6x post synergies. Due to Norwegian regulations governing ownership of hydroelectric assets, Fortum will initially through the agreement with City of Oslo and the tender offer acquire shares resulting in an aggregate ownership of 89.9% of Hafslund. The acquisition of the remaining City of Oslo’s shares remains subject to obtaining an exemption from the regulatory concession requirement. If such exemption is not granted, City of Oslo will remain a minority shareholder in the hydroelectricity generation business while Fortum will fully own all the remaining assets and operations of Hafslund. The acquisition will be financed through bank borrowings. Fortum is committed to manage Hafslund in full recognition of its obligations to bondholders and other lenders. Over the medium term, Fortum plans to repay debt incurred in the acquisition by internal cash flows. Hafslund Hafslund is the largest power company in Norway in terms of electricity distribution and sales with 540,000 electricity distribution customer connections and 614,000 retail customers. Hafslund also has 9 hydroelectric generation stations which produce a total of 2.9 TWh in a normal year. For the 12 months ending 31 March 2004, Hafslund had sales of NOK 8.1 billion and operating profit of NOK 727 million. Fortum Fortum is a leading energy company in the Nordic countries and the other parts of the Baltic Rim. Fortum's activities cover the generation, distribution and sale of electricity and heat, the production, refining and marketing of oil, the operation and maintenance of power plants as well as energy-related services. The main products are electricity, heat and steam, traffic fuels and heating oils. Fortum's competitiveness in the power and heat business is based on a pan-Nordic concept which is characterised by a high level of operational efficiency and a broad customer base. As an oil refiner, Fortum is the leading manufacturer of environmentally benign petroleum products. For the 12 months ending 31 March 2004, Fortum's net sales totalled EUR 10.6 billion and operating profit stood at EUR 1.5 billion. Fortum's shares are quoted on the Helsinki Exchanges. Fortum will arrange a press conference in relation to the announcement today at 12 am Finnish time simultaneously at its head office in Keilaniemi, Espoo, and at 11 am CET in Oslo (Teatersalen in Hotel Continental). A teleconference for international analysts and investors will be arranged at 5 pm Finnish time (GMT+2). To listen to the call please dial +44 (0) 1452 569 103. Fortum Corporation Carola Teir-Lehtinen Senior Vice President, Corporate Communications For further information please contact: Mikael Lilius, President & Chief Executive Officer +358 10 452 9100 Juha Laaksonen, Chief Financial Officer +358 10 452 4519 Distribution: Helsinki Exchanges Key media