Fortum Clarifies Financing

December 12, 2003

The Board of Directors has decided to redeem the preference shares issued by Fortum Corporation's subsidiary, Fortum Capital Limited. The redemption will take place on December 30, 2003. The preference shares, worth EUR 1.2 billion, were issued in connection with the financing arrangements related to the acquisition of Stora Enso power assets in June 2000. Fortum will finance the redemption with debt. All of the preference shares have carried a fixed dividend of 6.7% per annum. The interest rate swap arrangements that Fortum simultaneously entered into has brought Fortum's effective cost of funding below the fixed rate dividend. The proceeds of the bond offering made by Fortum in early November with favourable market terms will be used for the redemption. As a result, a slightly lower level of financing costs will be achieved. The arrangement has been accounted for as a minority interest in Fortum Group's financial statements. In the consolidated income statement and balance sheet, the effect of this minority interest has been approximately EUR -80 million and EUR 1.2 billion respectively. These amounts will be replaced by approximately similar amounts in financial expenses and interest-bearing liabilities. The impact on the balance sheet will materialise as of the redemption date, and the impact on financial expenses as of 2004. Impact on the amount of net debt has already been taken into account in calculating the adjusted gearing ratio disclosed in the Interim Financial Statements. The redemption will improve the return of equity ratio, whereas the return of capital employed will remain unchanged. Fortum expects this transaction to have no effect on its credit ratings.

Fortum Clarifies Financing

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