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Fortum to acquire Oslo’s shares in Hafslund

10 May 2004 – Fortum has agreed to acquire the City of Oslo’s 53.7 per cent share of capital in Hafslund ASA for €660m ($784m).

Together with Hafslund, Fortum will become the leading distribution and retail electricity company, both in the Nordic region and in Norway. It also strengthens Fortum’s number two Nordic position in power generation.

“I am delighted that we can continue to deliver on our pan-Nordic strategy, and that we have reached an agreement with the City board of Oslo. We are an owner with strong industrial competence and financial resources to develop Hafslund’s business in Norway and beyond”, says Mikael Lilius, President and CEO of Fortum.

“Hafslund is a fine company with a long history and strong market position. It fits excellent into our strategy. Together we can combine key skills in a way that will enhance our competitiveness not only in Norway, but in all Nordic markets. With this transaction we can continue to leverage skills and experience in our Nordic organization to the long term benefit of customers, employees and owners”, Mikael Lilius concluded.

The transaction remains subject to approval by Oslo City Council and that there are no higher offers prior to early July. The transaction is expected to close during the summer after which Fortum will launch a mandatory tender offer to the remaining minority shareholders at the same price.

The combination of Hafslund and Fortum, and the integration of Fortum’s existing Norwegian assets with Hafslund, will create significant business opportunities and are also expected to generate €20m of annual synergy benefits by 2006. The synergy benefits will be realised through the sharing of best practices in operation and maintenance, economies of scale (e.g. combined purchasing) and combination of competencies.

Due to Norwegian regulations governing ownership of hydroelectric assets, Fortum will initially through the agreement with City of Oslo and the tender offer acquire shares resulting in an aggregate ownership of 89.9 per cent of Hafslund. The acquisition of the remaining City of Oslo shares remains subject to obtaining an exemption from the regulatory concession requirement. If such exemption is not granted, City of Oslo will remain a minority shareholder in the hydroelectricity generation business while Fortum will fully own all the remaining assets and operations of Hafslund.