Nordic power market - Fortum

- a leading energy company
in the Nordic area
Presentation for investors
May 2006

Disclaimer
This presentation does not constitute an invitation to
underwrite, subscribe for, or otherwise acquire or
dispose of any Fortum shares.
Past performance is no guide to future performance,
and persons needing advice should consult an
independent financial adviser.
2

• Fortum today
• Nordic power market
• Russia
• Financials / outlook
• Supplementary material
3

Fortum's strategy
4
Fortum focuses on the Nordic and Baltic Rim
markets as a platform for profitable growth
Become the leading
power and heat
company
Become the
energy supplier
of choice
Benchmark business performance

Towards an open European power market
1990's 2000 - 2010 -
EU Directive: Market liberalisation, i.e.,
free choice of supplier
EU Commission Integration of national
power strategy: markets through regional
markets into one European
power market
5
• Market-based development
• Increased competition
• Increased efficiency

A leading Nordic power and heat company
Nr 1 Nr 2
6
Distribution
Power
generation
Heat Electricity sales

Presence in focus market areas
Nordic
Generation 51.2 TWh
Electricity sales 58.2 TWh
Distribution cust. 1.4 mill.
Electricity cust. 1.2 mill.
Heat sales 19.4 TWh
7
Poland
Heat sales 3.9 TWh
Electricity sales 20 GWh
NW Russia
(in associated companies)
Generation ~6 TWh
Heat production ~10 TWh
Baltic countries
Heat sales 1.2 TWh
Distribution cust. 22,000

Operations throughout the entire power and heat
energy chain
Generation
Portfolio Mgmt
& Trading
Service
Heat / Värme
Distribution
Markets
8
• One of Europe’s most efficient generators with an approx. 14%
market share of Nordic consumption
• Best-in-class physical and financial market operations
• Efficient operation and maintenance services for
industry and energy companies
• Nordic leader in district heating with strong industrial cooperation
and a developing presence in the Baltics and
Poland
• Leading Nordic distribution company with 1.4 million
customers in Finland, Sweden, Norway and Estonia
• Wide product offering for 1.2 million business and private
electricity sales customers

Power and heat production in Fortum
Fortum’s Nordic power generation
Other 2%
Peat 1%
Biomass 2%
Coal 3%
9
Hydro power 42%
Nuclear power 50%
51.2 TWh in 2005
Total generation capacity 11,136 MW
Fortum’s Nordic heat production
Biomass
fuels 24%
Other 11%
Waste 6%
Peat 7%
Coal 17%
Heat
pumps,
electricity
16%
Oil 10%
Natural gas 9%
20.6 TWh in 2005
Total production capacity 8,252 MW

Strong dividend growth
Dividend per share
EUR
0.13
1998
Total ~ 2,750 MEUR
0.18 0.23 0.26
1999 2000 2001 2002 2003 2004
10
0.31 0.42
0.58
1.12
0.58 0.54
2005*
* 0.58 from continuing operations
Fortum's aim is to pay a
dividend corresponding to
an average payout ratio of
50% to 60%

Excellent share performance
Share price
Index
500
450
400
350
300
250
200
150
100
50
11
Fortum
Dow Jones 600
0
1/01 1/02 1/03 1/04 1/05 1/06
Market value
EUR billion
3.4
31 Dec
2000
4.0
31 Dec
2001
5.3
31 Dec
2002
6.9
31 Dec
2003
11.8
31 Dec
2004
13.1
31 Mar
2005
-3.3
Neste Oil
as
dividends
17.9
3 May
2006

• Fortum today
• Nordic power market
• Russia
• Financials / outlook
• Supplementary material
12

The wholesale market is liquid and Nordic,
but retail markets are local
Supply wholesale price Demand
Generation
13
Nordic
wholesale
market
(Nordpool)
Industry
Retail
Supply
Local
retail
markets
retail price
Retail
customers
Demand

Still a highly fragmented Nordic power market
others
Helsinki
BKK
E-CO Energi
Norsk Hydro
PVO
Dong Energy
Generation
395 TWh
> 350 companies
29%
E.ON
2005 figures; the effects of the structural changes in Denmark have been taken into account.
14
Fortum
Statkraft
Vattenfall
others
Distribution
14 million customers
>500 companies
51%
Fortum
Vattenfall
E.ON
Dong Energy
Hafslund
Helsinki
SEAS-NVE
BKK Statkraft
Göteborg
others
53%
Retail
14 million customers
~450 companies
Fortum
E.ON
Dong Energy
Vattenfall
Hafslund
Plusenergi
SEAS-NVE
Helsinki
Fjordkraft
Östkraft

New capacity will be needed
Demand and capacity development in
the Nordic market
TWh
500
400
300
200
100
0
2000 2004 2005 2010 2015 2020
Existing/remaining capacity
Committed new capacity
15
• Electricity demand is expected to
increase around 55 TWh by 2020
• Committed plans of new capacity
approx. 20 TWh
• Additionally:
– effect increases in Swedish
nuclear may bring up to 8 TWh
more capacity
– possible closures of current
capacity may take away up to
10 TWh by 2020

New capacity will require an EUR 35+ price
EUR/MWh
60
50
40
30
20
10
0
-94 -96 -98 -00 -02 -04 -06 -08
Source: Nord Pool, Fortum
16
Futures
May 2, 2006
EUR/MWh
80
70
60
50
40
30
20
10
0
Fuel costs, excl. CO 2 costs
Fixed costs
( variation)
Coal Gas Nuclear Hydro Wind
Source: NEA & IEA "Projected Cost of Generating Electricity", 2005 update (average of
European projects); Elforsk: "El från nya anläggningar", 2003.

Spot history and forwards in Europe
Yearly moving average spot price Forwards
EUR/MWh
EUR/MWh
100
90
80
70
60
50
40
30
20
10
0
Source: Reuters, OMEL
17
May 2, 2006
2001 2002 2003 2004 2005 2006 2007 2008 2009
UK
German
Nord Pool
Dutch
Spanish

Nordic market becoming more integrated into
Europe
• In 2005, Nord Pool introduced a
spot market area "KONTEK" to
facilitate market coupling on the
Kontek cable
• NorNed (Norway - The Netherlands)
by 2008
• Estlink (Estonia - Finland) by 2007
• Nordel priority projects enhance
Nordic power market integration
18
Present
Under construction
Planned
Discussed 800
1500
+200
+100
50
60
500
+ 200
550
100
350 1300
1040 2050
+800
1000
630
900
(490)
900
600
+90
1600
1200 300
700 1200600
1000
+300
600
600
600
1000
600
2200
550
200
3800
1000
2500
125
1700
3500
2750 1500
1600
1000
70

Fuel and CO 2 allowance prices
USD / bbl
USD / t
80
70
60
50
40
30
20
10
0
90
80
70
60
50
40
30
20
10
0
Source: , ; market prices May 3, 2006 ; 2006-2008 future quotations
19
Oil price
2004 2005 2006 2007 2008
Coal price
2004 2005 2006 2007
2008
GBP / therm
EUR / tCO 2
120
100
80
60
40
20
0
35
30
25
20
15
10
5
0
Gas price (UK)
2004 2005 2006 2007 2008
CO 2 price
2004 2005 2006 2007 2008

eservoir content (TWh)
120
100
Nordic water reservoirs
80
60
40
20
0
Source: Nord Pool
20
2000 2005 2006 reference level
1 5 9 13 17 21 25 29 33 37 41 45 49 53
week

• Fortum today
• Nordic power market
• Russia
• Financials / outlook
• Supplementary material
21

The large Russian power market is undergoing
major change
• A major need for new
capacity
• Big potential for
efficiency improvement
Source: IEA
22
TWh
2000
1500
1000
500
0
> 4,000
Power generation 2003
US
China
Japan
Russia
India
Germany
Canada
France
UK
Nordic
Brasil

Development of Russian power industry –
a Nordic/Western analogy
Unbundling of businesses
by type of activity
Market liberalisation in
competitive businesses
23
Competitive
businesses:
Regulated
monopolies:
• Generation
•Sales
• Transmission
• Distribution
Pricing model reform – from tariff
regulation to competitive pricing

Key steps in the reform
• "Power industry law" approved
• Restructuring of regional energos (P&H companies)
• Formation of new companies
• Establishment of Russian power exchange (ATS)
• Launch of the free-trade sector of the wholesale market
• Introduction of vested bilateral contracts for a transitional
period to replace the regulated sector of the wholesale market
• Launch of balancing power market
• Competitive market of ancillary services and generating capacity
• Gradual liberalisation of the retail market
24

Reform impacts industry structure
RAO UES restructuring
Regulated monopolies
25
Competitive businesses
State-controlled companies
Privatised companies
Share
of private 0%
ownership

Prices of fuel and electricity in Russia
are currently low
Nuclear
16%
150 TWh
Hydro
17%
156 TWh
Russian power generation
914 TWh in 2003
Source: IEA, RAO UES
Average prices Jan - Oct 2005
26
Oil 3%
Coal 19% 172 TWh
Gas 45%
407 TWh
50
40
30
20
10
0
Electricity price and typical
marginal costs for gas-fired power plant
Electricity price
CO2 cost
Gas cost
Russia Germany
• Price liberalisation of gas is important in setting the electricity price in Russia
• So far, the implicit price cap set by the tariff in the regulated sector has
prevented free price formation in the free-trade sector of the wholesale market

Fortum has a long experience of successful cooperation
1950 1960 1970 1980 1990 2000
Construction of hydro power
plants in Kola area
27
Loviisa NPP construction
Electricity import
Nuclear fuel import
Construction of North-West
CHP in St Petersburg
Lenenergo shareholding
Automation & information system
deliveries to thermal power plants
Permanent presence in Moscow/St Petersburg
Safety improvements
for nuclear power plants

Fortum's strong foothold in NW Russia today
originates from stake in Lenenergo
28
• Largest utility in northwest Russia
• 9 thermal and 6 hydro plants
• Power generation
– capacity ~3,240 MW
– production ~13.4 TWh/a
• Heat generation
– capacity ~13,900 MW
– production ~25.2 TWh/a
• Personnel ~12,500
• Fortum's share of the company
about one third

Kolenergo – northwest Russian power company
Key figures of Kolenergo
Hydro power generation
Hydro power capacity
Share of TGC-1's hydro capacity
Thermal power generation
Thermal power capacity
Heat sales
Electricity sales
Distribution volume
Number of customers
Key financials in 2004
Net sales
Total assets
Interest-bearing debt
Number of employees
3,330
Ownership of Kolenergo:
Fortum 24.8%, RAO UES 49.2% and others 26.0%
Exchange rate EUR/RUB 25.11.2005
*) Owned by Federal Grid Company
29
TWh/a
MW
TWh/a
MW
TWh/a
TWh/a
TWh/a
MEUR
MEUR
MEUR
6.5
1,593
55%
1
335
4
11
11
200,000
248
404
15
Unbundled companies
with the same shareholding
structure as Kolenergo
Kola
Power Generation
Companies
Kola Distribution
Company
Kola Backbone
Networks Company
Electricity
Sale Company
Companies are planned to
be merged with territorial or
interregional companies
Territorial Generating
Company TGC-1
Interregional
Distribution
Company
Interregional
Transmission
Company *)
Electricity sales
company

TGC-1 operating as of 1 October 2005
Installed
capacity MW
Norway
28,300
Denmark
12,700
30
Sweden
33,600
Finland
16,500
Territorial Generating Company TGC-1
• Production capacity ~ 5,750 MW,
of which hydro 2,874 MW
• Third largest territorial generation
company in Russia
• Started operation on 1 October 2005
based on a leasing model
• Transfer of assets into TGC-1's ownership
targeted at the beginning of 2007
• Fortum's calculated share ~26% *)
• Fortum has 3 members of 11 in total
on TGC-1's Board of Directors
*) Direct owners of TGC-1 are initially Lenenergo 63%,
Kolenergo 25%, Karelenergo 12%

• Fortum today
• Nordic power market
• Russia
• Financials / outlook
• Supplementary material
31

A good start to the year
• EUR 486 (393) million comparable operating profit from continuing
operations, up by 24%
• All segments excluding Markets improved their performance
• From continuing operations
– earnings per share EUR 0.39 (0.28), up by 39%
– net cash from operating activities EUR 303 (62) million
• Agreements to acquire E.ON Finland shares from the city of
Espoo and E.ON Nordic
Comparison: I/2005 financial results
32

Development of prices
• 75% increase in Nord Pool system area price to 45.4
EUR/MWh in Q1/2006
• Fortum Power Generation's achieved Nordic power
price increased by 17% to 37.1 EUR/MWh in
Q1/2006
• Increase in CO 2 price to 22-27 EUR/tonne in Q1
33

Comparable operating profit
MEUR I/2006 I/2005 2005 LTM
Power Generation 293 224 854 923
Heat 126 107 253 272
Distribution 81 66 244 259
Markets 0 7 30 23
Other -14 -11 -47 -50
Comparable operating profit 486 393 1 334 1 427
Non-recurring items 0 6 30 24
Other items effecting comparability -14 7 -17 -38
OP from continuing operations 472 406 1 347 1 413
34

Income statement
MEUR I/2006 I/2005 2005 LTM
Sales 1 343 1 133 3 877 4 087
Expenses -871 -727 -2 530 -2 674
Operating profit 472 406 1 347 1 413
Share of profit of associates and joint ventures 35 15 55 75
Financial expenses, net -15 -35 -135 -115
Profit before taxes 492 386 1 267 1 373
Income tax expense -120 -116 -331 -335
Profit for the period from continuing operations 372 270 936 1 038
Profit for the period from discontinued operations 0 84 474 390
Net profit for the period 372 354 1 410 1 428
Of which minority interest 26 25 52 53
EPS, Total Fortum Group (EUR) 0.39 0.38 1.55 1.56
EPS, continuing operations (EUR) 0.39 0.28 1.01 1.12
EPS, discontinued operations (EUR) - 0.10 0.54 0.44
35

Cash flow statement
MEUR I/2006 I/2005 2005
Operating profit before depreciations, continuing operations 570 509 1 754
Non-cash flow items and divesting activities 24 -14 15
Financial items and taxes -110 -205 -405
Funds from operations, continuing operations (FFO) 484 290 1 364
Change in working capital -181 -228 -93
Net cash from operating activities, continuing operations 303 62 1 271
Net cash from operating activities, discontinued operations - 152 133
Total cash from operating activities 303 214 1 404
Capital expenditures -71 -49 -346
Other investing activities -59 4 -52
Investing activities, discontinued operations - -137 1 155
Cash flow before financing activities 173 32 2 161
36

Balance sheet
MEUR Mar 31 Dec 31
2006 2005
Non-current assets 13 106 13 075
Current assets 1 595 2 055
ASSETS 14 701 15 130
Total equity 6 498 7 411
of which minority interest 231 260
Interest-bearing liabilities 4 107 3 946
Non-interest bearing liabilities 4 096 3 773
EQUITY AND LIABILITIES 14 701 15 130
Equity per share (EUR) 7.11 8.17
Net debt, (MEUR) 3 900 3 158
37

€/MWh
52
50
48
46
44
42
40
38
36
34
32
30
28
26
24
Nord Pool year forwards
Q1
38
Year 05
Year 06 Year 07 Year 08 Year 09
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2004 2005 2006
May 3, 2006

Hedging of Power Generation's Nordic sales
Fortum has hedged Power Generation's Nordic sales volume at
the beginning of April 2006:
4-12 / 2006
Calendar year
2007
39
Hedge ratio Hedge price
~ 80 % ~ EUR 33 per MWh
~ 55 % ~ EUR 37 per MWh

Fortum well positioned for 2006 and 2007
• A strong start to the year
• Continued focus on the Nordic and Baltic Rim countries
• Competitive corporate structure, costs and production portfolio
• Strong financial position and cash flow
40
Fortum has the foundations for good performance

• Fortum today
• Nordic power market
• Russia
• Financials / outlook
• Supplementary material
41

Fortum - a listed company
• Leading power and heat company in Nordic
• Founded and listed at the Helsinki Stock Exchange 1998
• More than 50,000 shareholders
• Among the most traded shares in Helsinki stock exchange
30 April 2006
42
Finnish State 51.2%
Households 5.0% Financial and insurance
institutions 2.2%
Other Finnish
investors 7.2%
International
investors 34.4%

Current Fortum Group financial targets
43
• ROE >12%
• ROCE >12%
• Net debt / EBITDA 3.0 - 3.5
• Normal CAPEX

Credit ratings
• Moody's long-term rating A2 (stable outlook)
• Standard & Poor's long-term rating A- (stable outlook)
"Due to the cash outflows, which in 2006 total €2.23 billion, Fortum’s debt is
expected to increase significantly and credit measures are likely to weaken as a
result, thereby markedly reducing rating headroom. Nevertheless, given the
company's very strong financial results in 2005 that led to a low adjusted debtto-total-capital
ratio of 33% at year-end, we expect credit metrics to remain in
line with our previously indicated ratio targets."
Standard & Poor's
44

Funding sources and maturity profile
• Funding and treasury risk
management centralised to
Group Treasury
• Transparent loan portfolio
• Access to all relevant debt
markets
45
Interest bearing loans at the end of March 2006
Average interest rate disclosed at the end of 2005 for the
year 2005 was 4%.
828
355
580
Total 4,107 MEUR
41
542
2006 2007 2008 2009 2010 2011 2012
Bonds Bank loans Other long-term debt Short-term debt
81
33
1,506
2013+

Total equity
MEUR Mar 31 Dec 31 Change
2006 2005
Share capital 2 997 2 976 21
Share premium 72 70 2
Other restricted funds 2 2 0
Fair value and other reserves 1) -378 -117 -261
Retained earnings 2) 3 574 4 220 -646
Minority 231 260 -29
Total equity 6 498 7 411 -913
1) Major part is attributable to fair values of electricity derivatives hedging future cash flows.
Effect is calculated net of deferred taxes. Amounts in equity will be recognised in income
statement when the hedged item e.g., forecasted sale will affect profit and loss.
2) Dividends paid amounted to MEUR 987. Net profit for the period MEUR 346.
46

Heat key figures
EUR million 2005 2004
Net sales 1,063 1,025
Comparable operating profit 253 207
Employees
Production plants
2,385 2,146
CHP plants 23
heat plants and stations abt 700
Fortum's heat and steam sales, TWh, 2005
** including Wroclaw and PEC Plock (acq.2005)
47
0.1
Nr 1
9.5
··
·
· · ·
· · ··· ·
· · ·· · · ·
·
·· ·
1.1
(3.9**)
·· ·
·· ·· ··· · ·· ·
Distribution
Heat
·
· ·
· ·
· · · ··
·
·
· ·
· · ···
··
· ·
·
··
· ··
· ·· · ··
·
· · ·
9.8
·
· ·· ·
· 1. 2
-
· 0.03
·· ·
·
-

Polish power and heat markets
• Population 38 million
• GDP growth around 4.5% in 2004
• Total electricity consumption 130-140
TWh/a
• Polish generation approx. 150 TWh/a
• Number of electricity customers around
15.6 million
• 8 distribution companies
• Energy sector privatisation ongoing in
generation, district heating and distribution
• Size of the heating markets around 165
TWh/a
Source: EIU, Eurelectric/Eurprog; 2004 or 2003 estimates, Fortum
48
Operations of Fortum Heat in Poland
Płock
Existing operations of Fortum Heat
Wrocław Płock

Baltic countries' power and heat markets
• Population 1.3 million (Estonia), 2.3 million
(Latvia) and 3.4 million (Lithuania)
• GDP growth 6.0% (Estonia), 5.5% (Latvia),
6.5% (Lithuania)
• Total electricity consumption; Estonia and
Latvia 6-7 TWh/a, Lithuania 10 TWh/a
• Total generation; Estonia 9-10 TWh/a, Latvia
4-5 TWh/a, Lithuania 18 TWh/a
• Three larger distribution companies in
Estonia, one in Latvia, two in Lithuania
• Privatisation not active in generation or
distribution, privatisation of district heating
started in 2000
• Size of the heating markets around 30 TWh/a
Source: EIU, Eurelectric/Eurprog; 2004 or 2003 estimates
49

Distribution regulation differ country by country
Status
Regulation
principle
Allowed return
50
Finland
New model for
period 2005 - 2007
Rate of return,
ex-post regulation
Maximum allowed rate of
return based on actual
defined cost data
Sweden Norway
New regulatory model is
being applied to 2003 and
2004 tariffs
Yardstick, ex-post regulation,
with benchmarking based on
hypothetical efficient company
Actual operation vs.
fictious network parameters
defines return
Regulation authority has supervised
41 areas for 2003 and 55 areas for
2004 due to claimed overpricing. All
companies that have received a
decision to reimburse customers
have appealed to court.
The regulator has proposed a
model for the next 5-year
period starting in 2007.
Revenue cap, ex-ante
regulation
Maximum annual income limit
based on historical or defined
cost data