Stock exchange release

TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS IN 2005

27 April 2005, 09:32 EEST

Fortum Corporation STOCK EXCHANGE RELEASE 27 April 2005

TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS IN 2005

Quarterly restatement of 2004 Income statement, Balance sheet and Cash-flow in
accordance with International Financial Reporting Standards

As from 2005, Fortum will apply the International Financial reporting standards
(IFRS) for the annual report as well as for the interim reports. The annual
report as well as the interim reports will include one comparison year, which
will be restated in accordance with IFRS. The date of transition from Finnish
GAAP (FAS) to IFRS is January 1, 2004. The first interim report under IFRS will
be published May 3, 2005.

Fortum published in the press release on February 3, 2005 and in the financial
statements for 2004, audited information of the impacts of IFRS on the income
statement and certain key ratios. The information below is intended to give
further guidance with restated income statements, balance sheets and cash-flows
and segment information on a quarterly and full year basis.

The IFRS financial information presented below may require adjustments before
its inclusion as comparative information in the Fortum's first set of IFRS
financial statements for the year ended December 31, 2005 due to the ongoing
changes in IFRS which might have an effect on the accounts of the companies
applying IFRS from 2005.

Accounting treatment of the dividend distribution and sale of shares in Neste
Oil Corporation and discontinued operations

On March 31, 2005 the annual general meeting of Fortum decided to distribute
approximately 85% of the shares in Neste Oil as dividend. The remaining shares
were sold during April. In the interim report as of March 31, 2005, Neste Oil
will be deconsolidated. The balance sheet will still include the approximately
15% shareholding in Neste Oil. The shareholding will be classified as available
for sale financial assets and valued at fair value. The initial fair value
adjustment will be recorded directly against equity and in the second quarter
2005, after concluding the transaction in April, the fair value adjustment will
be recognised in the income statement and presented as a gain on sales of shares
included in discontinued operations.

The oil related operations in Fortum as of March 31, 2005 will be treated as
discontinued operations according to IFRS 5 Non-current Assets held for Sale and
Discontinued operations. Discontinued operations will be disclosed on one line
net of tax in the income statement. In the cash-flow statement the net cash-
flows attributable to the operating, investing and financing activities of the
discontinued operations will be disclosed separately. The 2004 comparison
information in this document has, in accordance with IFRS 5, been restated and
presented in the same way as the first quarter 2005 income statement and cash-
flow will be presented. The comparison balance sheets for 2004 comparison still
include the oil operations.

Discontinued operations include mainly the oil operations in Fortum, but for
example financial costs incurred by the separation and effects from intra group
items have also been included. The net financial costs allocated to discontinued
operations are based on the fact that the financing activities and risk
management have been centralised on group level and that intra-group funding has
been based on short-term floating rate. This means that the continuing
operations in Fortum are showing relatively high financial costs for 2004. Total
corporate center costs and other overhead costs as previously presented in
Fortum are included in continuing operations and no future cost reductions have
been assumed.

The information given below should not be regarded as guidance for the IFRS
effects for Neste Oil Group. For information on the IFRS effects in Neste Oil
Group see the published press release issued by Fortum on March 14, 2005.

Presentation format in future interim reports

As from the first quarter 2005 Fortum will include the following additional
information compared with previously presented:
Share of profit of associated companies and joint ventures (income statement)
and Investments in associates and joint ventures (balance sheet) by segment.
Fortum´s associates included in Power Generation comprises mainly of nuclear and
hydro production companies and the shareholdings in Hafslund and Lenenergo. In
Heat the major associated company is Gasum and in Distribution the major
associated company is Fingrid.
Net assets by segment will also be presented gross as assets and liabilities.
Reconciliation to total assets and liabilities is included.

Exemptions elected according to IFRS 1 First-Time Adoption of International
Financial Reporting Standards

In the IFRS transition Fortum has elected to apply exemptions allowed in the
First-Time Adoption standard (IFRS 1). The most important exemption elected is
concerning business combinations that have taken place before the date of
transition to IFRS. Fortum will keep the same classification and recognition of
assets and liabilities as in its FAS financial statements. This means that
acquisitions made before January 1, 2004 are not restated. Impairment tests have
been performed continuously and no impairment charges have been recognised in
the IFRS opening balance sheet.

Fortum has chosen to apply IAS 32 Financial Instruments: Disclosure and
Presentation and IAS 39 Financial Instruments: Recognition and Measurement -
standards regarding financial instruments also for the comparison year 2004.

Effects of the transition to IFRS on Fortum with Oil operations disclosed as
discontinued operations

In the Interim report as of March 31, 2005, the income statement will be
disclosed with the Oil operations as discontinued operations. The following
table describes the impact of the transition to IFRS on the continuing
operations.

The impact on the income statement for the continuing operations is mainly due
to the changes in treatment of employee benefits and the one-time change in the
treatment of the Finnish TEL´s disability pension component from defined benefit
plan in the IFRS opening balance 2004 to defined contribution plan in the IFRS
December 31, 2004 balance sheet. Fortum's continuing operations are applying
hedge accounting for most of the derivatives used to hedge future cash-flows
which reduces the volatility in the income statement. The volatility from fair
valuations of the derivatives will be accounted for in the hedging reserve
included in the equity.

In IFRS share of profits of associated companies and joint ventures is not
included in operating profit but presented directly after operating profit.
Depreciations on fair value adjustments made when acquiring the shareholdings
have been reclassified from Other expenses in FAS to share of profit of
associated companies and joint ventures in IFRS.


FORTUM GROUP                                                               
JANUARY-DECEMBER 2004                                                      
                                                                           
CONSOLIDATED INCOME STATEMENT RESTATED WITH DISCONTINUED OPERATIONS

MEUR                    FAS  Nuclear  Finan-  Leasi  Employ   Other Total    IFRS
                     Dec 31  related    cial     ng      ee    IFRS  IFRS     Dec
                       2004   assets  Instru         Benefi  impact impac      31
                                 and  m-ents             ts       s     t    2004
                             provis-
                                ions
Net sales              3841                0     -6                    -6    3835
Other operating          84                6              1             7      91
income
Materials and         -1507                                             0   -1507
services
Employee benefit       -470                              17      -9     8    -462
costs
Depreciation,          -393        2              3               0     5    -388
amortisation and
impairment charges
Other operating        -401        5              1              21    27    -374
expenses
Operating profit       1154        7       6     -2      18      12    41    1195
Share of profits of      34       -2                            -20   -22      12
associated
companies and joint
ventures
Finance costs - net    -232       -8     -10      1       4       0   -13    -245
Profit before taxes     956       -3      -4     -1      22      -8     6     962
Income taxes           -254                                            -5    -259
Profit for the year     702                                             1     703
Discontinued operations                                                    
Profit for the year     556                                            33     589
from discontinued
operations
Profit for the year    1258                                            34    1292
                                                                           
Attributable to:                                                           
                       1227                                            32    1259
Equity holders of        31                                             2      33
the Company
Minority interest      1258                                            34    1292

The impact of different IFRS issues on the balance sheet as of December 31,
2004, is shown in a separate table included in this document.


Effects of the transition to IFRS on Fortum as previously presented

The total effect of the transition to IFRS on Fortum´s 2004 comparison financial
information includes the effects on the oil operations. The previously published
descriptions of the effects on Fortum including oil operations are enclosed as
an appendix to this document.

The main impacts will result from the changes in the recognition and measurement
principles of financial instruments, the recognition of assets and provisions in
relation to asset retirement obligations and disposal of spent fuel regarding
the nuclear power plants, differences in the classification of leasing
arrangements compared to FAS and from the changes in the accounting for pension
obligations. The following tables were presented in the financial statement 2004
and showed the impact of IFRS on the income statement and certain key ratios for
Fortum including the Oil operations.


FORTUM GROUP                                                              
JANUARY-DECEMBER 2004                                                     
Audited                                                                   
                                                                          
The preliminary impact of the transition to IFRS on the Fortum Group's Income
Statment and key ratios

CONSOLIDATED INCOME STATEMENT    
                                         
MEUR                    FAS Nuclea   Finan-  Leasi  Employ   Other Total     IFRS
                     Dec 31      r     cial     ng      ee    IFRS  IFRS   Dec 31
                       2004 relate   Instru         Benefi   impac impac     2004
                                 d   m-ents             ts      ts     t
                            assets
                               and
                           provis-
                              ions
Net sales             11665                     -6                    -6    11659
Other operating         121              29      6       1            36      157
income
Materials and         -7861                                            0    -7861
services
Employee benefit       -684                             23     -12    11     -673
costs
Depreciation,          -511      2              -3             -15   -16     -527
amortisation and
impairment charges
Other operating        -886      5               9              33    47     -839
expenses
Operating profit       1844      7       29      6      24       6    72     1916
Share of profits         70     -2                             -20   -22       48
of associated
companies and
joint ventures
Finance costs -        -259     -8      -10      7       4       2    -5     -264
net
Profit before          1655     -3       19     13      28     -12    45     1700
taxes
Income taxes           -397                                          -11     -408
Profit for the         1258                                           34     1292
year
Attributable to:                                                          
                       1227                                           32     1259
                         31                                            2       33
                       1258                                           34     1292
                                                                          
*) Share of profits of associated companies and joint ventures is included in
operating profit in FAS
                                                                          
Earnings per share for profit attributable to the equity holders          
of the company during the year (in € per share)
                                                                          
Basic                  1,44                                                  1,48
Diluted                1,42                                                  1,46


KEY RATIOS               FAS  Nuclea  Finan-   Leasi  Employ   Other Total   IFRS
                      Dec 31       r    cial      ng      ee    IFRS  IFRS    Dec
                        2003  relate Instrum-          Benefi  impact impac     31
                                   d    ents              ts       s     t   2003
                              assets
                                 and
                             provis-
                                ions
Capital employed,      12704      39     -55     155       7     -35   111  12815
MEUR
Interest-bearing        5626              98     149              -1   246   5872
net debt, MEUR
Total equity            6638      39    -153       6       7     -28  -129   6509
including minority
interest, MEUR
                         232       1    -101                     -12  -112    120

                                                                            
KEY RATIOS               FAS  Nuclea  Finan-   Leasi  Employ   Other Total   IFRS
                      Dec 31       r    cial      ng      ee    IFRS  IFRS    Dec
                        2004  relate Instrum-          Benefi  impact impac     31
                                   d    ents              ts       s     t   2004
                              assets
                                 and
                             provis-
                                ions
Capital employed,      12697      38      35     118      28     -26   193  12890
MEUR
Interest-bearing        4896              96     102               1   199   5095
net debt, MEUR
Total equity            7655      38     -61      16      28     -26    -5   7650
including minority
interest, MEUR
                         261       1    -100                     -12  -111    150
                                                                            
Return on capital    15,6                                                    15,8
employed, %
Return on            17,6                                                    18,2
shareholders'
equity, %
Gearing, %                64                                                   67


The first quarter interim report 2005 for Fortum will be published on May 3,
2005.

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

Further information:
Mika Paloranta, Vice President, IR, tel. +358 10 452 4138
Susanne Jonsson, Corporate Controller, tel. +358 10 452 4115

Distribution:
Helsinki Stock Exchange
Key Media

Appendix:
Description of the effect of the transition to IFRS on Fortum including the oil
operations




FORTUM GROUP                                                            
TRANSITION FROM FINNISH GAAP (FAS) TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IFRS)
                                                                        
CONSOLIDATED  INCOME STATEMENT                                          
                                                                        
MEUR                       IFRS  IFRS   IFRS   IFRS   FAS    FAS    FAS   FAS
                          Q1-Q4 Q1-Q3  Q1-Q2     Q1 Q1-Q4  Q1-Q3  Q1-Q2    Q1
                           2004  2004   2004   2004  2004   2004   2004  2004
                                                                        
Sales                      3835  2751   1986   1129  3841   2747   1987  1133
Other income                 91    80     82     32    84     69     58    43
Materials and services    -1507 -1087   -786   -446 -1507  -1089   -788  -449
Employee benefit costs     -462  -346   -240   -115  -470   -352   -243  -118
Depreciation,              -388  -282   -192    -93  -393   -286   -195   -94
amortisation and
impairment charges
Other expenses             -374  -284   -195   -100  -401   -296   -202  -101
Operating profit          1 195   832    655    407 1 154    793    617   414
Share of profit of           12     9      8      4    34     22     16     7
associates and joint
ventures
Finance costs-net          -245  -167   -125    -78  -232   -175   -124   -59
Profit before income        962   674    538    333   956    640    509   362
tax
Income tax expense         -259  -163   -131   -111  -254   -153   -123  -118
Profit for the year         703   511    407    222   702    487    386   244
from continuing
operations
Discontinued operations                                                 
Profit for the year         589   432    295    102   556    405    283    96
from discontinued
operations
Profit for the year       1 292   943    702    324 1 258    892    669   340
                                                                        
Attributable to:                                                        
Equity holders of the     1 259   924    680    304 1 227    877    649   321
Company
Minority interest            33    19     22     20    31     15     20    19
                           1292   943    702    324  1258    892    669   340
                                                                        
Earnings per share for                                                  
profit from total
Fortum Group
attributable to the
equity holders of the
company during the year
(in € per share)
Basic                      1,48  1,09   0,80   0,36  1,44   1,03   0,76  0,38
Diluted                    1,46  1,07   0,78   0,35  1,42   1,01   0,75  0,37
                                                                        
Earnings per share for                                                  
profit from continuing
operations attributable
to the equity holders
of the company during
the year (in € per
share)
Basic                      0,79  0,58   0,45   0,24  0,79   0,56   0,43  0,27
Diluted                    0,78  0,57   0,44   0,23  0,78   0,54   0,42  0,26
                                                                        
Earnings per share for                                                  
profit from
discontinued operations
attributable to the
equity holders of the
company during the year
(in € per share)
Basic                      0,69  0,51   0,35   0,12  0,65   0,47   0,33  0,11
Diluted                    0,68  0,50   0,34   0,12  0,64   0,47   0,33  0,11

CONSOLIDATED BALANCE SHEET  
                                              
MEUR               IFRS  IFRS  IFRS  IFRS   IFRS   FAS   FAS   FAS    FAS   FAS
                    Dec  Sept  June  Marc    Jan   Dec  Sept  June   Marc   Jan
                     31    30    30  h 31      1    31    30    30   h 31     1
                   2004  2004  2004  2004   2004  2004  2004  2004   2004  2004
                                                                          
ASSETS                                                                    
Non-current                                                               
assets
Intangible          116   122   143   160    136   112   112   138    156   146
assets
Property, plant   11925 11783 11661 11583  11787 11824 11681 11550  11446 11632
and equipment      
Other long-term    2355  2197  2219  2119   2082  1974  1839  1854   1776  1762
investments
Other long-term      90   103    90   100     91                          
receivables
Long-term           727   758   731   711    670   688   716   693    673   632
interest bearing
receivables
Total non-        15213 14963 14844 14673  14766 14598 14348 14235  14051 14172
current assets   
                                                                          
Current assets                                                            
Inventories         654   701   596   578    548   659   705   600    580   551
Trade and other    1555  1348  1281  1527   1519  1301  1216  1209   1476  1400
receivables
Cash and cash       145   219   194   193    433   146   222   196    203   439
equivalents
Total current      2354  2268  2071  2298   2500  2106  2143  2005   2259  2390
assets
                                                                          
Total assets      17567 17231 16915 16971  17266 16704 16491 16240  16310 16562
                                                                          
EQUITY                                                                      
Capital and                                                               
reserves
attributable the
Company's equity                                                          
holders
Share capital         2     2     2     2      2     2     2     2      2     2
                    948   891   889   889    886   948   891   889    889   886
Hedging reserves    126    13   -80     8     60     0     0     0      0     0
Other equity          4     4     3     3      3     4     4     3      3     3
                    426   058   792   404    443   446   065   820    487   520
Total                 7     6     6     6      6     7     6     6      6     6
                    500   962   601   301    389   394   956   709    376   406
Minority            150   136   140   136    120   261   245   250    245   232
interest
Total equity          7     7     6     6      6     7     7     6      6     6
                    650   098   741   437    509   655   201   959    621   638
                                                                          
LIABILITIES                                                               
Non-current                                                               
liabilities
Interest-bearing   4450  4501  4552  4468   5076  4257  4289  4337   4235  4840
liabilities
Deferred tax       1841  1751  1774  1796   1793  1842  1804  1850   1862  1843
liabilities
Provisions          608   586   560   566    562   237   223   200    210   207
Other               507   509   534   535    520   359   359   352    345   346
liabilities
Total non-         7406  7347  7420  7365   7951  6695  6675  6739   6652  7236
current
liabilities
                                                                          
Current                                                                   
liabilities
Interest-bearing    790     1     1     1      1   785     1     1      1     1
liabilities               163   154   251    230         162   152    245   225
Trade and other       1     1     1     1      1     1     1     1      1     1
payables 1)         721   623   600   918    576   569   453   390    792   463
Total current      2511  2786  2754  3169   2806  2354  2615  2542   3037  2688
liabilities
                                                                          
                                                                          
Total                 9    10    10    10     10     9     9     9      9     9
liabilities         917   133   174   534    757   049   290   281    689   924
                                                                          
Total equity and     17    17    16    16     17    16    16    16     16    16
liabilities         567   231   915   971    266   704   491   240    310   562

1) Dividends to Fortum shareholders, EUR 357 million in 2004, were booked as a
liability at the end of the first quarter. The cash-flow impact was shown in the
second quarter.

CONSOLIDATED CASH FLOW STATEMENT      
                                     
MEUR                     IFRS    IFRS   IFRS   IFRS    FAS     FAS    FAS   FAS
                          Dec    Sept   June  March    Dec    Sept   June  Marc
                           31      30     30     31     31      30     30  h 31
                         2004    2004   2004   2004   2004    2004   2004  2004                                             
Cash flow from                                                                 
operating activities
Operating profit        1 595   1 123    855    504  1 581   1 101    828   515
before depreciations
continuing operations
Non-cash flow items       -49     -51    -54     -1    -15      -6     -8    -2
Financial items and      -181     -57    -15      5   -194     -66    -22     3
realised foreign
exchange gains and
losses
Taxes                    -160    -130    -70    -33   -160    -130    -70   -33
Funds form operations   1 205     885    716    475  1 212     899    728   483
continuing operations
Change in working          27     104     40   -118     22      95     29  -119
capital
Net cash from           1 232     989    756    357   1234     994    757   364
operating activities
continuing operations
Net cash from             526     314    291     96    514     305    286    94
operating activities
discontinued
operations
Total net cash from      1758    1303   1047    453   1748    1299   1043   458
operating activities
                                                                           
Cash flow from                                                                 
investing activities
Capital expenditures     -335    -201   -128    -57   -341    -209   -130   -58
Acquisition of shares    -179    -105    -30          -179    -105    -30      
Proceeds from sales        60      11     11      6     60      11     11     6
of fixed assets
Proceeds from sales        15       9      9      1     15       9      9     1
of shares
Change in other           -20     -88   -139    -45    -19     -86   -140   -46
investments
Net cash used in         -459    -374   -277    -95   -464    -380   -280   -97
investing activities
continuing operations
Net cash used in         -277    -176    -89    -47   -274    -174    -89   -47
investing activities
discontinued
operations
Total net cash used      -736    -550   -366   -142   -738    -554   -369  -144
in investing
activities
                                                                               
Cash flow from                                                                 
financing activities
Net change in loans      -811    -494   -383   -508   -813    -496   -385  -510
Dividends paid to the    -357    -357   -357          -359    -359   -359      
Company´s equity
holders
Other financing items      94       6      0     -2     96       8      2    -2
Net cash used in       -1 074    -845   -740   -510 -1 076    -847   -742  -512
financing activities
continuing operations
Net cash used in         -236    -123   -182    -41   -227    -116   -177   -39
financing activities
discontinued
operations 2)
Total net cash used    -1 310    -968   -922   -551 -1 303    -963   -919  -551
in financing
activities
                                                                               
Total net increase                                                             
(+)/decrease (-) in
cash
and marketable           -288    -215   -241   -240   -293    -218   -245  -237
securities

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

KEY RATIOS 3)
                      IFRS    IFRS   IFRS    IFRS    FAS   FAS      FAS    FAS
                       Dec    Sept   June   March    Dec  Sept     June  March
                        31      30     30      31     31    30       30     31
                      2004    2004   2004    2004   2004  2004     2004   2004

Capital employed,    12890   12762 12 447  12 156  12697 12652   12 447 12 101
MEUR
Interest-bearing      5095    5445   5512    5526   4896  5229     5293   5276
net debt, MEUR
Capital                830     501    276     107    833   507      278    108
expenditure and
investments in
shares, MEUR
Return on capital     15,8    15,0   17,0    18,6   15,6  14,5     16,1   18,6
employed, %
Return on             18,2    18,4   20,9    19,9   17,6  17,1     19,4   20,4
shareholders'
equity, %
Interest coverage      8,0     7,8    8,3     7,1    8,0   7,5      7,9    7,6
Funds from            36,4    33,1   38,2    44,4   37,8  34,4     39,9   46,5
operations/interes
t-bearing net
debt, %
Gearing, %              67      77     82      86     64    73       76     80
Equity-to-assets        44      41     40      38     46    44       43     41
ratio, %
Average number of    12859   13112  13097   13023  12859 13112    13097  13023
employees

3) Key ratios are based on Fortum total numbers including continuing and
discontinued operations

SALES BY SEGMENTS                                                       
MEUR                    IFRS   IFRS    IFRS  IFRS   FAS   FAS      FAS     FAS
                       Q1-Q4  Q1-Q3   Q1-Q2    Q1 Q1-Q4 Q1-Q3    Q1-Q2      Q1
                        2004   2004    2004  2004  2004  2004     2004    2004
                                                        
Power Generation        2084   1501    1048   560  2088  1505     1052     564
- of which internal      128     73      62    36   128    73       62      36
Heat                    1025    709     559   361  1021   701      556     361
- of which internal       49     40      39    36    49    40       39      36
Distribution             707    513     363   206   707   513      363     206
- of which internal       10      7       4     3    10     7        4       3
Markets                 1387   1009     722   419  1387  1009      722     419
- of which internal       92     64      47    25    92    64       47      25
Other                     90     67      45    20    96    67       45      20
- of which internal       93     65      43    19    93    65       43      19
Eliminations 4)        -1458  -1048    -751  -437 -1458     -     -751    -437
                                                         1048
Sales from              3835   2751    1986  1129  3841  2747     1987    1133
continuing
operations
Sales from              7909   5801    3710  1710  7909  5801     3710    1710
discontinued
operations
Eliminations             -85    -68     -48   -21   -85   -58      -44     -20
Total                  11659   8484    5648  2818 11665  8490     5653    2823

4) 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                    IFRS   IFRS    IFRS  IFRS   FAS    FAS    FAS     FAS
                       Q1-Q4  Q1-Q3   Q1-Q2    Q1 Q1-Q4  Q1-Q3  Q1-Q2      Q1
                        2004   2004    2004  2004  2004   2004   2004    2004

Power Generation         763    522     394   222   720   486       365   230
Heat                     218    143     131   104   212   134       127   102
Distribution             234    183     138    83 242,6   185       133    82
Markets                   34     34      21    16    26    26        15    10
Other                    -54    -50   -29,3   -18   -47   -38       -23   -10
Operating profit        1195    832   654,7   407 1153,6  793       617   414
from continuing                                      
operations
Operating profit         721    538     373   150   690   506       361   138
from discontinued
operations
Total                   1916   1370  1027,7   557 1843,6 1299       978   552
                                                      
FAS operating profit is not comparable with previously reported. Share of profit
in associated companies and joint ventures is according to IFRS recorded after
operating profit.
                                                                        
DEPRECIATION, AMORTISATION AND IMPAIRMENT CHARGES BY SEGMENTS

MEUR                 IFRS   IFRS    IFRS    IFRS      FAS    FAS    FAS   FAS
                    Q1-Q4  Q1-Q3   Q1-Q2      Q1    Q1-Q4  Q1-Q3  Q1-Q2    Q1
                     2004   2004    2004    2004     2004   2004   2004  2004

Power Generation      104   74,6      55    27,5      105     76     57    28
Heat                  124   88,7      59    28,3      127     91     60    29
Distribution          133     99      66      33      133     99     66    33
Markets                16     12       8       4       16     12      8     4
Other                  11      8       4               12      8      4 
Depr., amort. and     388  282,3     192    92,8      393    286    195    94
imp. charges from
continuing
operations
Depr., amort. and     139    101      68      32      118     86     57    27
imp. charges from
discontinued
operations
Total                 527  383,3     260   124,8      511    372    252   121
                                                                        
SHARE OF PROFITS IN ASSOCIATES AND JOINT VENTURES BY SEGMENTS           
                                                                        
MEUR                 IFRS   IFRS    IFRS    IFRS      FAS    FAS    FAS   FAS
                    Q1-Q4  Q1-Q3   Q1-Q2      Q1    Q1-Q4  Q1-Q3  Q1-Q2    Q1
                     2004   2004    2004    2004     2004   2004   2004  2004

Power Generation 5)   -18    -10      -8      -5        5      4      1    -2
Heat                   15      9       8       5       14      8      7     5
Distribution           16     11       8       5       16     11      8     5
Markets                 0      0       0       0        0      0      0     0
Other                  -1     -1       0      -1       -1     -1      0    -1
Share of profits       12      9       8       4       34     22     16     7
in ass. from
continuing
operations
Share of profits       36     29      11       3       36     29     11     3
in ass. from
discontinued
operations
Total                  48     38      19       7       70     51     27    10
                                                                        
5) The main part of the associated companies in Power Generation are production
companies from which Fortum purchase produced electricity at cost. The share of 
profit according to IFRS also includes depreciations on fair value adjustments
made when acquiring the shareholdings (in FAS included in Other expenses)

INVESTMENTS IN ASSOCIATES AND JOINT VENTURES BY SEGMENTS                
                                                                        
MEUR                 IFRS   IFRS    IFRS    IFRS      FAS    FAS    FAS   FAS
                    Q1-Q4  Q1-Q3   Q1-Q2      Q1    Q1-Q4  Q1-Q3  Q1-Q2    Q1
                     2004   2004    2004    2004     2004   2004   2004  2004

Power Generation     1208   1196    1156    1084     1282   1269   1226  1154
Heat                  127     92      91      92      115     80     79    80
Distribution          196    193     189     189      196    193    189   189
Markets                 8      7       9      10        8      7      9    10
Other                   0      1       0       0        0      1      0     0
Investments in       1539   1489    1445    1375     1601   1550   1503  1433
associated from
continuing
operations
Investments in        140    134     123     114      140    134    123   114
associates from
discontinued
operations
Total                1679   1623    1568    1489     1741   1684   1626  1547
                                                                        
CAPITAL EXPENDITURE AND INVESTMENTS IN SHARES BY SEGMENTS               
                                                                        
MEUR                 IFRS   IFRS    IFRS    IFRS      FAS    FAS    FAS   FAS
                    Q1-Q4  Q1-Q3   Q1-Q2      Q1    Q1-Q4  Q1-Q3  Q1-Q2    Q1
                     2004   2004    2004    2004     2004   2004   2004  2004

Power Generation      210    152      60      14      210    155     62    15
Heat                  175     75      50      23      181     80     50    23
Distribution          106     65      40      14      106     65     40    14
Markets                 6      4       2       2        6      4      2     2
Other                  17     10       6       4       17     10      6     4
Investments from      514    306     158      57      520    314    160    58
continuing
operations
Investments from      316    195     118      50      313    193    118    50
discontinued
operations
Total                 830    501     276     107      833    507    278   108
                                                                        
NET ASSETS BY SEGMENTS                                                  
MEUR                 IFRS   IFRS    IFRS    IFRS      FAS    FAS    FAS   FAS
                      Dec   Sept    June   March      Dec   Sept   June March
                       31     30      30      31       31     30     30    31

                     2004   2004    2004    2004     2004   2004   2004  2004
Power Generation     6218   6183    6142    6087     6258   6236   6188  6166
Heat                 2440   2362    2323    2373     2502   2424   2393  2445
Distribution         3091   3086    3107    3095     3101   3088   3103  3095
Markets               194    137     177     153      196    139    177   157
Other and             -43     25     126     128       -1     48    120    68
Eliminations
Net assets from     11900  11793   11875   11836    12056  11935  11981 11931
continuing
operations
Net assets from      2011   1963    1799    1808     1765   1708   1557  1534
discontinued
operations
Eliminations            2      1       0      14        0      0      0     0
Total               13913  13757   13674   13658    13821  13643  13538 13465
                                                                        
RETURN ON NET ASSETS  BY SEGMENTS                                       
                                                                        
%                    IFRS   IFRS    IFRS    IFRS      FAS    FAS    FAS   FAS
                      Dec   Sept    June   March      Dec   Sept   June March
                       31     30      30      31       31     30     30    31
                     2004   2004    2004    2004     2004   2004   2004  2004

Power Generation     12,1   11,0    12,5    14,0     11,6   10,5   11,7  14,5
Heat                  9,8    8,6    11,8    18,3      9,2    7,8     11  17,4
Distribution          8,1    8,3     9,4    11,3      8,3    8,4    9,1  11,2
Markets              25,3   37,9    36,8    77,6     18,8     28   25,2  44,4
                                                                        
ASSETS BY SEGMENTS                                                      
MEUR                 IFRS   IFRS    IFRS    IFRS      FAS    FAS    FAS   FAS
                      Dec   Sept    June   March      Dec   Sept   June March
                       31     30      30      31       31     30     30    31
                     2004   2004    2004    2004     2004   2004   2004  2004

Power Generation     7108   7123    7114    6960     6645   6573   6508  6458
Heat                 2742   2589    2560    2644     2769   2607   2574  2668
Distribution         3514   3483    3474    3494     3513   3480   3466  3491
Markets               375    377     452     500      325    282    319   398
Other and            -156   -198    -259    -221      -51    -18     62   -50
Eliminations
Assets from         13583  13374   13341   13377    13201  12924  12929 12965
continuing
operations
Assets from          2756   2775    2538    2495     2523   2528   2324  2258
discontinued
operations
Eliminations          -32    -37     -31     -24      -23    -26    -24   -14
Assets included in  16307  16112   15848   15848    15701  15426  15229 15209
Net assets
Interest bearing      728    758     731     711      688    716    693   673
receivables
Deferred taxes        106     15      32      21      109     32     30    32
Other                 281    127     110     198       60     95     92   193
Cash and cash         145    219     194     193      146    222    196   203
equivalents
Total assets        17567  17231   16915   16971    16704  16491  16240 16310

LIABILITIES BY SEGMENTS                                                  
MEUR                  IFRS   IFRS   IFRS    IFRS      FAS    FAS    FAS    FAS
                       Dec   Sept   June   March      Dec   Sept   June  March
                        31     30     30      31       31     30     30     31
                      2004   2004   2004    2004     2004   2004   2004   2004

Power Generation       890    940    972     873      387    337    320    292
Heat                   302    227    237     271      267    183    181    223
Distribution           423    397    367     399      412    392    363    396
Markets                181    240    275     347      129    143    142    241
Other and             -113   -223   -385    -349      -50    -66    -58   -118
Eliminations
Liabilities from      1683   1581   1466    1541     1145    989    948   1034
continuing
operations
Liabilities from       745    812    739     687      758    820    767    724
discontinued
operations
Eliminations           -34    -38    -31     -38      -23    -26    -24    -14
Liabilities           2394   2355   2174    2190     1880   1783   1691   1744
included in Net
assets
Deferred tax          1841   1751   1774    1796     1842   1804   1850   1862
liabilities
Other 6)               442    363    520     829      285    252    251    603
Total liabilities     4677   4469   4468    4815     4007   3839   3792   4209
included in capital
employed
Interest-bearing      5240   5664   5706    5719     5042   5451   5489   5480
liabilities
Total equity          7650   7098   6741    6437     7655   7201   6959   6621
Total equity and     17567  17231  16915   16971    16704  16491  16240  16310
liabilities
                                                                              
6) Dividends to Fortum shareholders, EUR 357 million in 2004, were booked as a
liability at the end of the first quarter. The cash-flow impact will be shown
in the second quarter.

QUARTERLY NET SALES BY SEGMENTS                                          
                                                                         
MEUR                  IFRS   IFRS    IFRS   IFRS      FAS    FAS     FAS   FAS
                     Q4/04  Q3/04   Q2/04  Q1/04    Q4/04  Q3/04   Q2/04 Q1/04
                                                                            
Power Generation       583    453     488    560      583    453     488   564
- of which internal     55     11      26     36       55     11      26    36
Heat                   317    149     198    361      320    145     195   361
- of which internal      9      1       3     36        9      1       3    36
Distribution           194    150     157    206      194    150     157   206
- of which internal      3      3       1      3        3      3       1     3
Markets                378    287     303    419      378    287     303   419
- of which internal     28     17      22     25       28     17      22    25
Other                   23     22      25     20       29     23      24    20
- of which internal     11      7       9     10       11      7       9    10
Eliminations          -411   -296    -314   -437     -410   -298    -313  -437
Sales from            1084    765     857   1129     1094    760     854  1133
continuing
operations
Sales from            2108   2091    2000   1710     2108   2091    2000  1710
discontinued
operations
Eliminations           -17    -20     -27    -21      -27    -14     -24   -20
Total                 3175   2836    2830   2818     3175   2837    2830  2823
                                                                              
QUARTERLY OPERATING PROFIT BY SEGMENTS                                   
                                                                         
MEUR                  IFRS   IFRS    IFRS   IFRS      FAS    FAS     FAS   FAS
                     Q4/04  Q3/04   Q2/04  Q1/04    Q4/04  Q3/04   Q2/04 Q1/04
                                                                           
Power Generation       241    128     172    222      234    121     135   230
Heat                    75     12      27    104       78      7      25   102
Distribution            51     45      55     83       58     52      51    82
Markets                  0     13       5     16        0     11       5    10
Other                   -4    -21     -11    -18       -9    -15     -13   -10
Operating profit       363    177     248    407      362    175     203   414
from continuing
operations
Operating profit       183    165     223    150      184    145     223   138
from discontinued
operations
Total                  546    342     471    557      545    321     426   552
                                                                              
FAS operating profit is not comparable with previously reported. Share of
profit in associated companies and joint ventures is according to IFRS
recorded after operating profit.
                                                                         
DISCONTINUED OPERATIONS (including eliminations between Fortum and
discontinued operations)

MEUR                  IFRS   IFRS    IFRS   IFRS      FAS    FAS     FAS   FAS
                     Q1-Q4  Q1-Q3   Q1-Q2     Q1    Q1-Q4  Q1-Q3   Q1-Q2    Q1
                      2004   2004    2004   2004     2004   2004    2004  2004
                                                                         
Sales                 7909   5801    3710   1710     7909   5801    3710  1710
Other income            66     52      31     12       37     29      24     6
Materials and        -6439  -4829   -3009  -1444    -6439  -4829   -3009     -
services                                                                  1444
Employee benefit      -211   -152    -106    -52     -214   -159    -110   -54
costs
Depreciation,         -139   -101     -68    -32     -118    -86     -57   -27
amortisation and
impairment charges
Other expenses        -465   -233    -185    -44     -485   -250    -197   -53
Operating profit       721    538     373    150      690    506     361   138
Share of profit of      36     29      11      3       36     29      11     3
associates and
joint ventures
Finance costs-net      -19    -27     -20    -20      -27    -24     -18   -16
Profit before          738    540     364    133      699    511     354   125
income tax
Income tax expense    -149   -108     -69    -31     -143   -106     -71   -29
Profit for the year    589    432     295    102      556    405     283    96
from discontinued
operations

RECONCILIATION OF PROFIT FOR THE PERIOD ATTRIBUTABLE TO THE EQUITY HOLDERS OF
THE COMPANY. FAS TO IFRS
                            Cumulative                       Quarterly       
                          Q1-Q4  Q1-Q3   Q1-Q2      Q1      Q4      Q3     Q2
MEUR                       2004   2004    2004    2004    2004    2004   2004

Net profit according to    1227    877     649     321     350     228    328
FAS
Nuclear related assets       -2      0       1      -1      -2      -1      2
and provisions
   IAS 39 Oil                14     -2       6       3      16      -8      3
   IAS 39 Electricity         8     16      20       3      -8      -4     17
   IAS 39 Treasury          -14     19       1     -26     -33      18     27
  IAS 39 OTH                        -1      -1               1       0     -1
Financial instruments         8     32      26     -20     -24       6     46
Leasing                      10      1      -2      -1       9       3     -1
Employee Benefits            21     22      15       7      -1       7      8
Other IFRS impacts           -5     -8      -9      -2       3       1     -7
Net profit according to    1259    924     680     304     335     244    376
IFRS
                                                                        
RECONCILIATION OF TOTAL EQUITY FAS TO IFRS                              
                                                                        
MEUR                                    Dec 31    Sept    June   March  Jan 1
                                          2004      30      30      31   2004
                                                  2004    2004    2004

Equity according to FAS                   7394    6956    6709    6376   6406
Minority FAS                               261     245     250     245    232
IFRS effects to                           -111    -109    -110    -109   -112
minority
reclassification
NYKAB minority to
interest-bearing
liabilities
Nuclear related assets and provisions       37      39      40      38     39
   IAS 39 Oil                               16      19       8       6      2
   IAS 39 Electricity                      106      27     -60      -5     23
   IAS 39 Treasury                         -21     -34     -40     -56    -14
  IAS 39 OTH                               -61     -63     -63     -59    -62
Financial instruments                       39     -51    -155    -114    -51
Leasing                                     16       7       4       5      6
Employee Benefits                           28      29      22      14      7
Other IFRS impacts                         -14     -18     -19     -18    -18
Equity according to IFRS                  7650    7098    6741    6437   6509

RECONCILIATION OF BALANCE SHEET FAS TO IFRS                              
                                                                         
MEUR                 FAS   Nuclear  Finan-  Leasi  Employ   Other  Total   IFRS
                  Dec 31   related    cial     ng      ee    IFRS   IFRS    Dec
                    2004    assets  Instru-         Benefi   impac  impac     31
                               and   ments             ts      ts      t   2004
                          provisio
                                ns
ASSETS                                                                   
Non-current assets                                                       
Intangible           112                                        4      4    116
assets
Property, plant    11824        35             80             -14    101  11925
and equipment
Other long-term     1974       413      -3     -1      48     -76    381   2355
investments
Other long term receivables             90                            90     90
Long-term            688                       39                     39    727
interest bearing
receivables
Total non-         14598       448      87    118      48     -86    615  15213
current assets
                                                                         
Current assets                                                           
Inventories          659                                       -4     -4    655
Trade and other     1301               255      3              -5    253   1554
receivables
Cash and cash        146                                       -1     -1    145
equivalents
Total current       2106         0     255      3       0     -10    248   2354
assets
                                                                         
Total assets       16704       448     342    121      48     -96    863  17567
                                                                         
EQUITY                                                                   
                                                                         
Capital and reserves attributable the Company's                          
equity holders                                                           
Share capital       2948                                               0   2948
Hedging reserves       0               126                           126    126
Other equity        4446        37     -87     16      28     -14    -20   4426
Total               7394        37      39     16      28     -14    106   7500
Minority             261         1    -100      0             -12   -111    150
interest
Total equity        7655        38     -61     16      28     -26     -5   7650
                                                                         
LIABILITIES                                                              
                                                                         
Non-current liabilities                                                  
Interest-bearing    4257                96     97                    193   4450
liabilities
Deferred tax        1842         9      33      5      11     -59     -1   1841
liabilities
Provisions           237       401                      9     -39    371    608
Other                359               116                     32    148    507
liabilities
Total non-          6695       410     245    102      20     -66    711   7406
current
liabilities
                                                                         
Current liabilities                                                      
Interest-bearing     785                        5                      5    790
liabilities
Trade and other     1569               158     -2              -4    152   1721
payables
Total current       2354         0     158      3       0      -4    157   2511
liabilities
                                                                         
Total               9049       410     403    106      20     -71    868   9917
liabilities
                                                                         
Total equity and   16704       448     342    121      48     -96    863  17567
liabilities

Definitions of key figures in IFRS                                
reporting
                                                                  
Return on       = 100    Profit for the                           
shareholders'     x      year
equity, %
                         Total equity                             
                         average
                                                                  
Return on       = 100    Profit before taxes + interest and other financial
capital           x      expenses
employed, %
                         Capital employed average                 
                                                                  
Return on net   = 100    Operating profit + share of profit (loss) in
assets, %         x      associated companies and joint ventures
                         Net assets                               
                         average
                                                                  
Capital         =        Total assets - non-interest bearing liabilities -
employed                 deferred tax liabilities - provisions
                                                                  
Segment's net   =        Non-interest bearing assets + interest-bearing
assets                   assets related to the Nuclear Waste Fund
                         - non-interest bearing liabilities -     
                         provisions
                         (excluding finance related items, tax and deferred
                         tax and assets and liabilities from fair valuations
                         of derivatives where hedge accounting is applied)
                                                                  
Interest-       =        Interest-bearing liabilities - cash and cash
bearing net              equivalents
debt
                                                                  
Gearing, %      = 100    Interest-bearing net debt                
                  x
                         Total equity                             
                                                                  
Equity-to-      = 100    Total equity                             
assets ratio,     x
%
                         Total assets                             
                                                                  
Interest        =        Operating profit                         
coverage
                         Net interest expenses                    
                                                                  
Earnings per    =        Profit for the                           
share (EPS)              year
                         Adjusted average number of shares during the period

Appendix

DESCRIPTION OF THE EFFECTS OF THE TRANSITION TO IFRS ON FORTUM INCLUDING THE OIL
OPERATIONS

Assets and liabilities related to decommissioning of nuclear power plants and
the disposal of spent fuel

Fortum owns Loviisa nuclear power plant in Finland. The nuclear liability and
Fortum's share in the Nuclear Waste Fund related to the Loviisa power plant are
under FAS presented in the note Contingent liabilities in the financial
statements. The nuclear liability is calculated according to the Nuclear Energy
Act in Finland. That calculation does not take into account the effect of
discounting the future liability. The paid annual fee to the Nuclear Waste Fund
(due to the change in the nuclear liability, the share of profit of the Nuclear
Waste Fund and incurred costs of taken actions) is recorded in the income
statement. The nuclear liability related to Loviisa nuclear power plant is fully
covered in the Nuclear Waste Fund.

Under IFRS, Fortum's part of the Nuclear Waste Fund and the related nuclear
liability are presented gross as non current interest-bearing assets and
provisions. Fortum's share in the Nuclear Waste Fund has been accounted for
according to IFRIC Draft Interpretation D4 which states that the fund assets are
measured at the lower of fair value or the value of the related liabilities
since Fortum does not have control or joint control over the Nuclear Waste Fund.
Both Fortum's share of Nuclear Fund in assets  and the total provisions amount
to EUR 354 million in the opening balance January 1, 2004 and to EUR 401 million
in the closing balance December 31, 2004. The asset and provisions are both
included in the capital employed and the resulting net amount is then equal to
zero (see below for 'Impact on key ratios').

The fair value of the provisions in IFRS is calculated by discounting the future
cash flows, which are based on estimated future costs and actions already taken.
The initial net present value of the provision for decommissioning (at the time
of commissioning the nuclear power plant) has been included in the investment
cost and depreciated over the estimated operating time of the nuclear station.
The provision for spent fuel covers the future disposal costs of fuel used until
the end of the accounting period. Costs for disposal of spent fuel are expensed
during the operating time based on fuel usage.

The timing factor will be taken into consideration by accounting for interest
expense related to discounting the nuclear provisions. The interest on the
Nuclear Waste Fund assets is presented as financial income.

Fortum also has minority shareholdings in the associated nuclear power
production companies Teollisuuden Voima Oy (TVO) in Finland and directly and
indirectly OKG AB and Forsmarks Kraftgrupp AB in Sweden. Similar kinds of
adjustments have been made through accounting of associates.


Financial Instruments

General principles

Derivatives are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently remeasured at their fair value.
The method of recognising the resulting gain or loss depends on whether the
derivative is designated as a hedging instrument, and if so, the nature of the
item being hedged. The Group designates certain derivatives as either: (1)
hedges of highly probable forecast transactions (cash flow hedges); (2) hedges
of the fair value of recognised assets or liabilities or a firm commitment (fair
value hedge); or (3) hedges of net investments in foreign operations.

The effective portion of changes in the fair value of derivatives that are
designated and qualify as cash flow hedges are recognised in equity. The gain or
loss relating to the ineffective portion is recognised immediately in the income
statement. Amounts accumulated in equity are recycled in the income statement in
the periods when the hedged item affects profit or loss, for instance when the
forecast sale that is hedged takes place.

Changes in the fair value of derivatives that are designated and qualify as fair
value hedges are recorded in the income statement, together with any changes in
the fair value of the hedged asset or liability that are attributable to the
hedged risk. If derivatives do not qualify for hedge accounting the change of
fair value is recognised immediately in the income statement.

Electricity commodity derivatives

Electricity derivatives are mainly used to hedge future cash flows of
electricity sales (Power Generation and Heat) to Nord Pool and purchases
(Markets and Distribution) from Nord Pool or other sources. Regarding
electricity commodity derivatives, hedge accounting is applied for most of the
cash flow hedges to decrease the volatility in the income statement however
creating volatility in equity. Forecasted underlying physical electricity
deliveries, i.e. sales or purchases are not recorded until the delivery period.

Total volatility in operating profit caused by electricity derivatives on the
Group level amounted to EUR 12 million in 2004. Some of the contracts for the
years 2004 - 2007 entered into during 2003 and for which hedge accounting was
not applied to caused some volatility, EUR 11 million in 2004, as the changes in
the fair values are recognised in income statement. To a very large extent
contracts entered into during 2004 and onwards will have a hedge accounting
status.

Oil commodity derivatives

Oil derivatives entered into to hedge price risk are economical hedges and they
do not qualify for hedge accounting under IAS 39. All fair value changes, EUR 29
million in 2004, are recognised in the operating profit.

Treasury derivatives (foreign exchange and interest rate derivatives)

Foreign exchange derivatives are used for hedging forecast cash flows of the
sales and purchases, assets and liabilities in the balance sheet and net
investments in foreign operations.

During 2004 hedge accounting was applied to all Oil cash flow hedges and partly
to Power and Heat cash flow hedges (Power Generation and Heat) to decrease the
volatility in operating profit in the income statement. The volatility from
foreign exchange derivatives hedging future cash flows was EUR - 6 million in
operating profit for those hedges for which hedge accounting was not applied
during 2004.

The Group has chosen not to apply hedge accounting for foreign exchange
derivatives hedging balance sheet items. A minor volatility in financial items
is caused by the forward points of these hedges. The cross currency and interest
rate derivatives maturing in 2004-2011 entered into earlier do not qualify for
hedge accounting. A major part of these swaps are maturing during 2005-2006, and
are thus expected to create less volatility in the coming years. However, fair
value hedges of issued bonds in 2003 qualify for hedge accounting. Volatility in
financial items was EUR -10 million during 2004.

Net investments in foreign subsidiaries are hedged according to the approved
Treasury policy. In IFRS, as in FAS, gains and losses on net investment are
recognised in the equity.

Minority preference shares with option agreement

Fortum owns10.1% of the shares in Nybroviken Kraft AB Group (NYKAB) which
represents 52.9% of the votes. NYKAB is consolidated as a subsidiary in Fortum's
consolidated accounts. NYKAB owns hydroelectric power generating assets. Fortum
manages these power assets by agreement and utilises all the power produced.
Fortum is entitled to buy the minority preference shares of NYKAB through option
agreements. According to the option agreements the repurchase may take place in
2007, 2011 or 2015 at a price in accordance with an agreed formula. The minority
interest accounted for in Fortum represents the nominal amount of the minority
preference shares.

According to IAS 32 and 39 the minority interest referring to the preference
shares is classified as an interest-bearing liability and the difference between
the estimated value based on the option formula and the capital amount of the
interest-bearing liability is presented as accrued interest liability. Changes
in the estimated value based on the option formula are accounted for as interest
costs.


Leasing

The classification criteria when considering whether a lease arrangement is an
operating lease or financial lease are different under IFRS than under FAS.

In Fortum this means that some lease arrangements, where Fortum is the lessee
are reclassified to be financial leases. The liabilities of these agreements
that have previously been reported as contingent liabilities are under IFRS
included in the balance sheet. The resulting increase in the interest-bearing
liabilities at year-end 2004 is EUR 102 million. The main part of this amount
relates to Shipping leases.

In some customer contracts in Heat Fortum also acts as a lessor. Fortum has
evaluated customer contracts against the criteria in IFRIC D4 (leasing). A part
of these contracts is classified as financial leases. In the balance sheet the
effect will be seen mainly as a reclassification between interest-bearing
receivables and tangible assets.

Employee benefits

Fortum has various pension plans in accordance with local practices in the
countries where it operates. Under FAS, the Group's pension obligations have
been reported according to local regulations. In IFRS financial statements,
pension obligations are treated in accordance with IAS 19 Employee Benefit and
all accumulated actuarial gains and losses related to defined benefit plans are
recognised in the balance sheet of the transition date as allowed by IFRS 1. The
interest component is included in the pension costs in the income statement.

Major impact from the transition to IFRS is due to the accounting for Finnish
statutory employment pension scheme (TEL), which is in Fortum covered partly in
insurance companies and partly in pension funds.

In the IFRS transition balance sheet January 1, 2004 the impact of the Finnish
pensions covered by pension funds was some EUR 40 million which resulted from
the fact that the fair value of the assets of the Fortum pension funds exceeded
the obligations caused by different pension plans. This has been reported as
other non-current assets. In addition an obligation of some EUR 30 million has
been recognised in the provisions for the future disability pension component
for the plans that are provided by insurance companies.

Due to changes approved by Finnish authorities in December 2004 TEL's disability
pension component is accounted for as a defined contribution plan in the IFRS
balance 31.12.2004 instead of defined benefit plan as in the IFRS transition
balance sheet. This change will have a positive impact of some EUR 20 million
before tax on the period's net profit. The rest of the total change in the
income statement (some EUR 30 million) is due to positive development of the
fair values of pension fund assets.


Other IFRS transition impacts

Other IFRS adjustments include for example:

According to FAS accounting principles costs for major overhauls (mainly in Oil
Refining) are accrued in advance of the shutdown and accounted for as a
provision in the balance sheet. Under IFRS these costs are treated according to
the asset component approach. The costs are capitalised when they occur and
depreciated during the shutdown cycle.

Fortum has elected to keep FAS revaluations net of cumulative depreciations of
certain items of property, plant and equipment as deemed cost of property, plant
and equipment. Adjustments are made retrospectively for depreciations following
the underlying asset.

According to FAS accounting principles connection fees have been recognised as
revenue immediately. In IFRS connection fees regarding cooling will be deferred
and recognised as revenue over the expected customer relationship period.

The difference between the acquisition cost of shares in associated companies
and Fortum 's part of the shareholders’ equity at the time of acquisition, have
been allocated to fixed assets at the time of acquisition to the extent that
their fair value at the time exceeded the book value. In FAS the depreciation of
these fair value adjustments has been presented in Other expenses. According to
IFRS these depreciations, EUR 20 million on an annual basis, have been
reclassified to Share of profit (loss) of associates and joint ventures.

The tax expense reported in the income statement has been affected by a positive
one-time adjustment of EUR 6 million concerning the change in the corporate tax
rate in Finland from 29% to 26% from 2005 onwards.


Impact on certain key ratios

Capital employed

The IFRS adjustments increase the capital employed in Fortum. The changes in
accounting for certain lease agreements are the main reason to the change in the
capital employed being an increase of EUR 111 million in the opening balance and
an increase of EUR 193 million in the closing balance 2004. The provisions for
decommissioning and the provision for spent fuel regarding nuclear power assets
have been included in the capital employed. The financial costs associated with
these provisions have also been included when calculating return on the capital
employed.

Interest-bearing net debt

Net debt increases under IFRS with EUR 246 million in the opening balance and
with EUR 199 million in the closing balance 2004. The increase is mainly due to
the financial leases (oil tankers) which are now included in the balance sheet
and to the reclassification of the minority shareholding in NYKAB to interest-
bearing liability.
According to IFRS the nuclear liabilities and Fortum 's part of the nuclear
waste fund are presented gross in the balance sheet. The fund is fully covered
and the net of Fortum's share of fund assets recorded in the balance sheet and
the related provisions amount to zero so the indebtedness of Fortum is not
effected. Neither the interest-bearing provisions related to the nuclear
obligations nor the interest-bearing non current asset are taken into account
when calculating net debt.

Total equity including minority interest

The net effect of the IFRS adjustments to total equity is is EUR -5 million at
year-end 2004. In the opening balance this effect amounts to EUR -129 million.
The change is mainly due to the changes in fair value of financial instruments
which qualify for hedge accounting.

Key ratios

Return on capital employed and return on equity are slightly improving when
including the 2004 IFRS adjustments to the underlying profit and balance sheet
items. Gearing is increasing from 64% to 67%.