Annual Report 2004

PRESIDENT'S REVIEW 5

COMPANY OPERATIONS 6Research 6Engineering 8Planning, Construction and Monitoring of theONKALO Underground Rock Characterisation Facility 11Quality and Environmental Management 11Corporate Communications 12Municipal Cooperation 12

REPORT OF THE BOARD OF DIRECTORS 14Financial year 2004 14Shareholders 14Administrative Bodies 14Personnel 15Result and Financing 15Financial year 2005 15

FINANCIAL STATEMENTS 16Income Statement 16Balance Sheet 17Funds Statement 18Notes to the Financial Statements 19Proposals to the Annual General Meeting 22Auditors’ Report 22

Contents

Photos: Päivi Bourdon and Timo SeppäläPhot

o: Ju

ssi M

attil

a

he final disposal project in Finland is progressing in accordance with the long-term plans. The year under review saw the start of a new phase that has been

many years in preparation: we started constructionwork on the ONKALO underground rockcharacterisation facility at Olkiluoto in themunicipality of Eurajoki.

Local works carried out at the constructionsite preceded excavation of the access tunnelleading to ONKALO. Work started in lateSeptember on excavating the access tunnel leadingto a depth of 500 metres below ground and byyear-end 2004 around 150 metres of the tunnelhad been constructed. In 2008, the tunnel isexpected to be four kilometres long and to extendto a depth of roughly 400 metres. ONKALO willthus pave the way for more detailedcharacterisations of the bedrock in Olkiluoto at adepth at which work on construction of the finalrepository tunnels will commence during the next

President's review

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decade. Since ONKALO might in time be used aspart of the final disposal facility, the Radiation andNuclear Safety Authority (STUK) is closely trackingprogress with the construction of ONKALO.

Besides the construction of ONKALO and theresearch to be carried out there, Posiva is alsopreparing to submit an application in 2012 to buildthe final disposal facility. We are developing spentfuel encapsulation and final disposal technologyto best suit the conditions prevailing deep in theOlkiluoto bedrock. We are working in collaborationwith Swedish nuclear waste management companySKB to develop technical solutions for constructionwork in the next decade.

Two long-term agreements signed withTeollisuuden Voima Oy enhance Posiva’s businessconditions at Olkiluoto. One agreement leasedthe land area required by Posiva on the island ofOlkiluoto, the other covered the joint use of servicesand the built infrastructure at Olkiluoto. Otherwiseactions to develop the company’s operationscontinued. The company’s quality managementsystem was broadened into an activity-basedmanagement system with process descriptions.A start was also made on an employee trainingand development programme.

Working with the municipality of Eurajoki, astart was made on the renovation and conversionof Vuojoki Mansion, rented from the municipality.The plan is that by autumn 2005, the mansion isready for use as a multi-activity centre, housingconference, training and banqueting rooms andhouse offices for Posiva and the VuojokiFoundation.

I express my sincere thanks to Posiva’semployees, shareholders and numerous partnersfor their contribution to the solid progress madeduring 2004. At the same time, I take thisopportunity to thank managing director Veijo

Ryhänen, who left the company at the end of2004, for everything he has done for thecompany since it was established. Under hisleadership, Posiva has grown into a world-class player in the nuclear wastemanagement arena.

Eero Patrakka

Company operations

and the assessment of long-term safety. Researchresults obtained from ONKALO together with othersite information will complement existing modelling.The bases and aims of integrating the researchresults are described in the undergroundcharacterisation and research programme (UCRP).

Most progress has been made with integratinghydrology and geochemistry results. A logicaldescription in line with site knowledge has beenmade of the course of paleohydrological andpaleogeochemical development on the island ofOlkiluoto.

In 2004, Posiva set up its own internationaladvisory group, INAGO (International AdvisoryGroup for Olkiluoto Investigations), to assess theactivities of the VARTU programme. The group’ssix members come from different fields of researchand represent waste management organisationsfrom five different countries. INAGO met twiceduring 2004.

The Radiation and Nuclear Safety Authority(STUK) set up an international assessment groupwhich presented its evaluation of Posiva’s 2003research, development and planning programme.STUK has prepared a list of open questions basedon this evaluation. The issues list is to be consideredat meetings held twice a year.

RESEARCH

OVERVIEW

Site investigations ensuring the safety of Olkiluotocomprise research in many different fields. Theresearch findings must be integrated to provide thebaseline information on which to assessdevelopment of the final disposal solution, facilityplanning and safety. To this end, Posiva set up theVARTU programme in the beginning 2004.

VARTU aims at interlocking research work inthe best possible way to implement ONKALO toserve the further planning of ONKALO in real-time,development of the final disposal solution andtechnical planning. A special interpretation andmodelling team, OMTF (Olkiluoto Modelling TaskForce), has been set up under the aegis of theVARTU programme. OMTF seeks to integrate theresults of the various fields of research and toproduce a shared view of the final disposal site.OMTF coordinates the geological studies,groundwater flow and rock mechanics modellingfor ONKALO. The research results will serve notonly the implementation of ONKALO, but also R&D

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SITE INVESTIGATIONS AT OLKILUOTO

Early 2004 saw the drilling of the first pilot borehole,around 160 metres in length, of the planned tunnelprofile. The pilot borehole was to confirm the resultsof earlier studies made along the tunnel route andto give preliminary information to the ONKALOgrouting and reinforcement engineers. A second122 m long pilot borehole was drilled in ONKALOtowards the end of the year.

In connection with quarrying, a start was madein summer 2004 on a geological survey of thesurfaces excavated. As excavation progressed in thetunnel, studies continued with research to predictthe geological features of the tunnel either on thebasis of the existing model and other research dataor on the information obtained from the pilotborehole. Over 2,500 square metres of tunnel weremapped over a distance of some 150 metres.

During 2004, the geology of Olkiluoto wasstudied from the surface by means of outcropmapping, investigation trenches and drilling.Research sought to ascertain the geologicalstructures in the Olkiluoto area, to specify theexisting bedrock model and to improve geologicalpredictability. Geological mapping of outcropsfocused on the eastern part of Olkiluoto island.

Four new investigation trenches of some 1,200metres in length were made in the Olkiluoto researcharea. Additionally, five new deep boreholes weredrilled, totalling around 1,660 metres in length,

in the area. A borehole drilled earlier was extendedto a depth of 460 metres.

A start was made on a many-year project todepict the future biosphere at Olkiluoto by analysingthe position of the shoreline and the height of theground level in the area at different periods.

The focus of groundwater chemistry studieswas again on determining the regional distributionof local salinity, dissolved gases and studies of thebase line condition of the research area. Researchdata was utilised to update the description of thebasic hydrogeochemical conditions.

Because of the proximity of a Natura site, studieswere made of the soil in the ONKALO area andlocal hydrological phenomena. These studiesassessed the impact of any surface hydrologicalchanges arising from the construction of ONKALO.A summary of the study has been included in thework report.

Groundwater flow modelling seeks to determinedetailed flow conditions in the Olkiluoto bedrock.

LONG-TERM SAFETY ASSESSMENT

Natural and technical release barriers will preventthe radionuclides released from spent nuclear fuelfrom coming into contact with the biosphere. Thisis why performance studies have aimed at analysingthe behaviour of the copper canister and thebentonite clay surrounding it and at studying harmfulprocesses.

Bentonite clay and an intact block of rock willform a safety barrier around the inner nodular castiron canister of the final disposal canister andtightly surrounding external copper canister. Posiva,SKB (Svensk Kärnbränslehantering AB) and NUMO(Nuclear Waste Organisation of Japan) are workingtogether on the development of groutingsubstances producing a low pH. The final reportof the joint-project is to be published in early 2005.Posiva and SKB have also made a full-scale test ofthe gas permeability of the bentonite buffer.

In 2004, Posiva and SKB launched a joint-project on the horizontal disposal concept. Theproject is scheduled to last between 2004 and2007. In the horizontal disposal concept, thecanisters are packed with blocks of bentonite intoperforated steel cylinders and emplaced inapproximately 200 metre long horizontal tunnels.The project seeks to study the suitability andfeasibility of the horizontal emplacement solution.

A plan of the safety case required for theconstruction licence application for the finaldisposal facility was prepared in 2004 and will bepublished in spring 2005. The plan presents therequirements and schedules relating todocumentation of the safety case.

ENGINEERING

Posiva is working closely with SKB on R&D intofinal disposal technology on dozens of jointprojects. Cooperation includes the developmentof final disposal canister design, manufacture andsealing technology, as well as planning of theencapsulation plant. Additionally, various technicalmethods of implementing final disposal have beenexamined in the context of planning the finaldisposal facility.

DESIGN OF THE FINAL DISPOSAL CANISTER

The final disposal canisters feature a cylindricalinner structure of nodular cast iron (insert) and a50 mm copper outer canister. There are threeversions of canister, one for each type of Finnishreactor. The insert and copper canister can bemanufactured with an integrated base. The coppercanister can also be made by extruding or forginga tube, with welded lids at each end. The canisterdesign documentation was updated.

To remain intact for 100,000 years, thecanisters must be corrosion resistant andmechanically strong. Strength is ensured by themethods described in the design documentation,which gives the mechanical design calculationsfor all three canister versions. The canisters mustbe of sufficient strength to tolerate any uneven ordeflecting loading caused if the bentonite clay wereto unevenly absorb water and expand. The canistersmust also be able to withstand loading caused byrock movements or a 3 km thick glacier.

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Radiation at the canister surface is so low itwill not unreasonably hamper canister handlingand transport. Neither will radiation cause anysignificant radiolysis of the groundwater. Thedesign of the insert will keep the spent fuel rodsin a subcritical state even in the event of the emptyspace inside filling with water and if the fuel isfresh.

MANUFACTURING AND SEALINGTECHNOLOGY OF THE FINAL DISPOSALCANISTER

One of the key points for development in canistermanufacturing technology is still to make thecylindrical part of the copper canister from onepiece using several alternative productionmethods. Work on developing manufacturingmethods was continued in Posiva and OutokumpuPoricopper’s TEKES product development projectand in collaboration with SKB. The TEKES projectended in late November 2004. In future, Posivaand SKB will develop manufacturing methods inassociation with component manufacturers.

Work on developing the copper canistermaterial continued with Outokumpu Poricopperby casting a total of ten ingots in three castingseries. Working together with SKB, two canisterswith an integrated base were manufactured bythe pierce and draw method at the Vallourec &Mannesmann Tubes factory in Germany. Forgingtests of the copper canister were continued withSKB. In 2004, a joint project by Posiva and SKBsaw the extrusion of four new copper tubes, witha 50 mm thick wall. The work was carried out byWyman-Gordon in Scotland.

Metso Foundries Jyväskylä cast a pilot of thenodular cast iron insert. The pilot casting wasplanned with SKB. SKB continued similar castingtests at three different foundries in Sweden.

Posiva and Patria Aviation signed anagreement on the development and a trialprogramme for a high-vacuum electronic beamwelding method intended to seal the copper lid.The focus of development at Patria Aviation is tofind welding parameters suitable for sealing thecopper lid. Posiva was also involved in developingSKB’s low-vacuum electronic beam welding andfriction stir welding methods.

A summary report was made of the canisterproduction costs using different productionmethods and routes.

ENCAPSULATION PLANT

Posiva commented on the planningdocumentation of the construction licence materialfor SKB’s encapsulation plant and participated inthe INKA compilation project and project meetingsin respect of this material. Posiva also drew up acomparison of the plans for SKB and Posiva’sencapsulation plants. Points of comparison werethe planning grounds, costs, systems andcomponents plans, as well as instructions andrequirements issued by the authorities.

A report, "A description of the parts of theOlkiluoto final disposal facility at ground level",describing the updated encapsulation plant plan,was written in connection with the planning ofthe final disposal repository.

CONSEPT OF FINAL DISPOSAL

Horizontal disposal would involve considerablyless excavation than vertical disposal, where workwould be done in several stages. Lasting manyyears, the development programme aims atbringing the horizontal disposal concept up tothe same standard as the vertical hole conceptand to demonstrate the drilling of disposal holesand the installation of canisters and bentoniteblocks along horizontal holes.

Disposal tunnel drilling technology is beingdeveloped in the horizontal disposal project. Thefirst 15 metre long pilot borehole was implementedby blind drilling and enlarged by new technology,into a horizontal deposition hole 1.8 metres indiameter in the autumn 2004.

In 2003, Posiva and SKB set up a long-termprogramme to plan the backfill of disposalrepository. After describing alternative substangesfor tunnel backfills and selecting the mostpromising concepts for further development,information about the various concepts wasstudied in details. The selected concepts are amixture of crushed rock and bentonite or naturalswelling clay with in situ compaction oremplacement of precompacted blocks made fromabovementioned materials.

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ENGINEERING OF THE FINAL REPOSITORY

Baseline information in the planning of ONKALOand the final repository will be needed during theconstruction stage. The information can be usedin positioning the rock volume for disposaltunnels, as well as in planning and carrying outexcavation, reinforcement and compacting work.Overall planning work is split up into developmentrelating to rock construction and work supportingplanning of the actual final repository.

In 2004, a start was made on the preliminaryplanning of the final disposal facilities in a bid tofind a more Olkiluoto-focused technical solution.Planning took into account the impact ofTeollisuuden Voima Oy’s (TVO) new nuclear powerplant unit, Olkiluoto 3, on the final repository andits use. Plans between 2004 and 2006 will examineextension of the repository to accommodate ahigher amount of spent fuel and whether a twostorey layout solution is suitable for the bedrockat Olkiluoto. The multi-layered solution can beused for both the vertical and horizontal concepts.The plan scheduled for completion in 2006 ismostly based on the vertical disposal concept.

The repository design will be optimised bythermal analysis.

PLANNING, CONSTRUCTIONAND MONITORING OF THEONKALO UNDERGROUND ROCKCHARACTERISATION FACILITY

Posiva signed an agreement with KalliorakennusOy in respect of the first tunnel contract. Thecontract includes excavation of the access tunneland structures near the main investigation level(417 metres underground), as well as a shaft tothe level of the raise boring (278 metres).Excavation work began in summer 2004 by opencut excavation. Actual work on the tunnel gotunder way in September. Excavation work hasprogressed more slowly than originally envisaged.However, towards the end of the year the rateincreased thanks to new equipment and less needfor grouting. In the initial stages of making thetunnel, the rock was injected or sealed with finegrained cement.

During the work, Posiva and the contractorupdated plans for systems, includingventilation and pumping, during theconstruction period. The access tunnelplanning model was reviewed in line withupdates of the rock model. An additionalconnection to the ventilation shaft wasplanned at 11 metres underground to simplifyconstruction work and the ventilation system.

A separate monitoring programme wasput in place to track any changes resultingfrom the construction of ONKALO. Theprogramme covers the monitoring of rockmechanics, geohydrology, hydrogeochemistry,

the environment andforeign substances.2004, none of thephenomena monitoredwas noticed during theconstruction of ONKALO.

In summer 2004, anew 380 m2 researchbuilding and a 250 m2

storage building weredeployed in the ONKALO area. The researchbuilding houses the field laboratory and researchfacilities for drill core samples. The storagebuilding houses drill core samples.

Besides the research and storage buildings,the year under review saw the completion of adrilling and discharge water system, sedimentationbasins and a pump building to serve tunnelexcavation. A site fence, lighting of the area andthe tunnel engineering building are scheduled forcompletion next.

QUALITY AND ENVIRONMENTALMANAGEMENT

Posiva’s operations are guided by a managementsystem intended to ensure systematic operationsand the achievement of targets in line with thecompany’s strategy. During 2004, the company’smain production and support processes weredescribed in the management system.

During the year, an internal audit carried outat Posiva assessed the function and reliabilityof the management system in relationto targets. Risk management andthe company’s environmentalaspects formed the focusof internal audits.

Photo: Veli-Matti Ämmälä

Quality management of the ONKALO projectfocused on drawing up the quality assuranceprogramme and defining instructions to supportoperations. Further progress was made with thequality assurance of the construction of ONKALOby defining major operations from the long-termsafety perspective. These include preventingharmful substances entering ONKALO, waterleakage management, drilling in the ONKALOarea and the damage zone caused by excavation. Separate quality control instructions wereprepared for these operations.

CORPORATE COMMUNICATIONS

Topics of external communication during 2004included selection of a contractor to constructONKALO, the start of excavation work andprogress made with tunnelling work.

In the autumn, an open doors day was heldat Olkiluoto, when some thousand visitors, mostlyfrom Eurajoki and Rauma, came to look at theconstruction of ONKALO. The construction ofONKALO also featured at an environmental fairin Helsinki.

A host of publication material relating toONKALO was produced during 2004. Besidesbrochures an animation in DVD format, illustratingthe structural engineering and excavation ofONKALO, was made.

The construction of ONKALO and the ensuingchange in Posiva’s operations also led to a renewalof Posiva’s website.

Posiva's information bulletin appearedfour times as a supplement to localnewspapers. The bulletin dealt withpreparations for the construction ofONKALO and the progress ofexcavation work. Publications in theenergy sector also featured articlesabout events taking place at Posiva.

Olkiluoto employees wereinformed about Posiva’s operationsthrough a Posiva website made forTVO’s intranet site, Olkinet.

MUNICIPAL COOPERATION

The municipality of Eurajoki and Posiva’s liaisongroup met four times during 2004. The meetingsdiscussed topical information issues, progresswith the final disposal project and matters relatingto the renovation and planned use of VuojokiMansion.

Funded by Posiva, the municipality of Eurajokiand the EU, work started on the conversion ofVuojoki Mansion and progressed as scheduled.The conversion project is scheduled for completionin September 2005.

Posiva representatives were also involved inmunicipal cooperation arranged by TVO.

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Board of Directors' Report

FINANCIAL YEAR 2004

Posiva progressed in line with targets in 2004. The company’smain line of business is to manage the spent nuclear fueloriginating from the Olkiluoto and Loviisa nuclear powerplants after interim storage on the power plant site and therequired research and development in this context. Thecompany charges its shareholders for the costs of its mainline of business. Besides its main line of business, thecompany also accepts commissions to carry out other expertassignments in the field of nuclear waste management forits shareholders and other customers.

Posiva’s key project is the final disposal of the spentnuclear fuel arisen from the Loviisa and Olkiluoto nuclearpower plants. It has also been agreed to enlarge the finaldisposal facility at some stage in the future to accommodatethe spent nuclear fuel from the new Olkiluoto 3 nuclear powerplant unit currently under construction.

In 2004, work at Posiva addressed construction of theunderground rock characterisation facility, ONKALO, to bebuilt at Olkiluoto in the municipality of Eurajoki, and bedrockinvestigations at Olkiluoto. Posiva was also responsible forthe long-term research, planning and development work ofencapsulation and final disposal required in future decadesand for the safety aspects of final disposal.

Long-term land lease and joint use of infrastructureagreements signed with Teollisuuden Voima Oy in 2004further enhance Posiva’s business conditions whenapproaching the 2010's and the construction of the finaldisposal facility.

Posiva spent some EUR 13.2 million, 57 per cent ofturnover, on R&D in 2004.

SHAREHOLDERS

Posiva’s shareholders and their shares of ownership are:

Teollisuuden Voima Oy (parent company) 60 %Fortum Power and Heat Oy 40 %

ADMINISTRATIVE BODIES

BOARD OF DIRECTORS

Teollisuuden Voima Oy Mauno PaavolaPertti Simola (as of 2 April 2004)Ami Rastas (until 2 April 2004)

Fortum Power and Heat Oy Heikki RaumolinPekka Leskelä

Chairman Pertti Simola(as of 1 September 2004),Mauno Paavola(until 1 September 2004)

Secretary Veijo RyhänenThe Board of Directors convened 13 times.

COMMITTEES APPOINTED BY THE BOARD OF DIRECTORS

Technical committee

Teollisuuden Voima Oy Eero PatrakkaJuho Hakala(as of 11 February 2004)Jukka Kangas(until 11 February 2004)

Fortum Power and Heat Oy Ilpo KallonenJyrki Kohopää

Posiva Oy Veijo RyhänenTimo ÄikäsJussi Palmu

Chairman Eero PatrakkaSecretary Jussi PalmuThe committee convened seven times.

Construction Committee

Teollisuuden Voima Oy Rauno MokkaJuha Riihimäki

Fortum Power and Heat Oy Gustav WallénKauko Silventoinen

Posiva Oy Veijo RyhänenMauri Toivanen

Chairman Rauno MokkaSecretary Mauri ToivanenThe committee convened eight times.

Financial Committee

Teollisuuden Voima Oy Eero PatrakkaTimo Palomäki(as of 11 February 2004)Lasse Bergström(until 11 February 2004)

Fortum Power and Heat Oy Heikki RaumolinPäivi Lehtinen(as of 19 January 2004)Irja Vekkilä(until 19 January 2004)

Posiva Oy Markku KettunenJussi Palmu

Chairman Heikki RaumolinSecretary Jussi PalmuThe committee convened seven times.

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Communication Committee

Teollisuuden Voima Oy Anneli Nikula(as of 22 April 2004)Tellervo Taipale(until 22 April 2004)

Fortum Power and Heat Oy Christian LeisioPosiva Oy Eero Patrakka

(as of 1 January 2005)Veijo Ryhänen(until 31 December 2004)Timo Seppälä

Chairman Christian LeisioSecretary Timo SeppäläThe committee convened six times.

PRESIDENT

Veijo Ryhänen until 31 December 2004Eero Patrakka as of 1 January 2005

MANAGEMENT GROUP

Chairman Veijo RyhänenMembers Markku Kettunen

Administrative ManagerJussi PalmuBusiness Planning ManagerTimo SeppäläCommunications ManagerMauri ToivanenConstruction ManagerVira JuhaniResearch DirectorTimo ÄikäsDirector, Engineering

Secretary Markku KettunenThe Management Group convened 14 times.

AUDITORS

Pekka Nikula, Authorised Public Accountant,appointed by PricewaterhouseCoopers OyRisto Järvinen, Authorised Public Accountant

PERSONNEL

President and Management Group

On 30 December 2004, Posiva’s Board of Directors appointedEero Patrakka as the company’s president effective 1 January2005. Meeting on 25 January 2005, the Board of Directorsappointed a new Management Group: President EeroPatrakka, Vice President Markku Kettunen (administration),Vice President Juhani Vira (research), Vice President TimoÄikäs (engineering), Senior Manager Jussi Palmu (businessplanning) and Senior Manager Timo Seppälä (communications).

Personnel and premises

Posiva had an average of 43 permanent employees and sixfixed-term employees during 2004.

The company has an office in Olkiluoto, in the Municipalityof Eurajoki in temporary premises leased from TeollisuudenVoima Oy. Permanent office facilities will be completed in2005 at Teollisuuden Voima’s central office in Olkiluoto andin Vuojoki Mansion.

RESULT AND FINANCING

The company’s turnover was EUR 23.2 million, with the mainline of business accounting for EUR 22.5 million of this figure.Depreciation of EUR 35,000 was made in accordance withthe maximum depreciation allowed under the BusinessIncome Taxation Act. Fixed assets forming part of nuclearwaste management have been deducted as an annual chargeunder Section 45a of the Business Income Taxation Act.

The financial statements show neither a profit nor a loss.

The company’s financial situation remained good throughoutthe year. Net financial income totalled EUR 88,000.

FINANCIAL YEAR 2005

Company operations are expected to continue largely in linewith those in 2004. We expect turnover to increase, primarilyowing to the construction of the underground rockcharacterisation facility, ONKALO.

Financial statements

INCOME STATEMENT

1.1.–31.12.2004 1.1.–31.12.2003

Turnover 23,235,654.13 18,620,928.87Other operating income 124,458.42 236,391.02Personnel expenses

Salaries and fees 2,331,451.03 1,993,045.53Indirect employee costs

Pension costs 428,531.70 370,377.61Other indirect employee costs 125,458.11 -2,885,440.84 101,399.66 -2,464,822.80

Planned depreciation -35,420.53 -30,790.37Other expenses -20,524,508.45 -16,429,788.22Operating profit -85,257.27 -68,081.50

Financial income and expensesOther financial and interest income

From others 234,431.39 214,134.00Interest and other financial expenses -146,521.30 87,910.09 -144,476.20 69,657.80

Operating profit before appropriations and taxes 2,652.82 1,576.30Income taxes -2,652.82 -1,576.30Profit for the Financial Year 0.00 0.00

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BALANCE SHEET

31.12.2004 31.12.2003

ASSETS

Fixed assetsIntangible assets

Intangible rights 7,684.23 10,649.97Other long-term expenditure 57,350.11 37,154.10Advances 674,125.37 739,159.71 174,895.98 222,700.05

Tangible assetsBuildings 112,851.37 117,553.51Machinery and equipment 28,057.65 140,909.02 36,904.85 154,458.36

InvestmentsShares in other Group companies 2,236.90 2,236.90Other shares and holdings 9,216.70 9,216.70Other loan receivables 6,625,791.24 6,637,244.84 6,895,738.62 6,907,192.22

Current assetsReceivables

CurrentSales receivable 153,524.14 357,075.81Receivables from other Group companies 126,445.02 220,779.44Prepaid expenses and accrued income 428,699.70 708,668.86 343,173.24 921,028.49

Cash in hand and at bank 5,241,396.15 6,107,222.5513,467,378.58 14,312,601.67

LIABILITIES

Shareholders’ equityShare capital 1,682,000.00 1,681,879.26Accumulated losses 0.00 0.00Profit for the financial year 0.00 1,682,000.00 0.00 1,681,879.26

LiabilitiesLong-term

Loans from other Group companies 3,587,608.42 3,733,771.97Other long-term liabilities 2,068,531.03 5,656,139.45 2,152,805.46 5,886,577.43

CurrentAdvances received 311,112.33 839,584.47Trade payables 2,668,658.00 2,422,040.77Loans from other Group companies 1,105,226.34 1,545,945.00Other current liabilities 188,164.97 270,608.67Accrued liabilities and deferred income 1,856,077.49 6,129,239.13 1,665,966.07 6,744,144.98

13,467,378.58 14,312,601.67

FUNDS STATEMENT (EUR 1,000)

2004 2003

Business operationsOperating profit -85 -68Adjustments of operating profit 1) 35 31Change in working capital 2) -402 2 046Interest income 234 214Interest expenses -146 -144Taxes paid -3 -2

Cash flow from business operations -367 2,077

InvestmentsInvestments in fixed assets -538 -239Loans granted 0 -252Withdrawals of loans granted 270 0

Cash flow from investments -268 -491

FinancingWithdrawals of long-term loans 0 252Repayments of long-term loans -231 0

Cash flow from financing -231 252

Change in liquid assets -866 1,838Liquid assets 1.1. 6,107 4,269Liquid assets 31.12. 5,241 6,107

1) Adjustments of operating profitDepreciation and value adjustment 35 31

35 31

2) Change in working capitalIncrease (-) or decrease (+) in non-interest bearing receivables 213 -90Increase (+) or decrease (-) in short-term non-interest bearing liabilities -615 2,136

-402 2,046

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NOTES TO THE FINANCIAL STATEMENTS 31.12.2004

ACCOUNTING PRINCIPLES

Principles and methods, and accruals

Valuation of fixed assetsIntangible rights, other long-term expenditure, and machinery and equipment are capitalised at the direct acquisition cost, less planneddepreciation. Planned depreciation is the maximum depreciation under Business Income Taxation Act. The acquisition costs of fixedassets used for the nuclear waste management as stipulated in Nuclear Energy Act are booked as annual expenses.

Depreciation periods are as follows:Intangible rights Straight-line depreciation over 10 yearsOther long-term expenditure Straight-line depreciation over 10 yearsSoftware Straight-line depreciation over 5 yearsMachinery and equipment 25 % reducing balance rate

Research and development expensesR&D expenses are booked as expenses during the financial year in which they occur.

Consolidated financial statementsSince Posivia Oy is a dormant company and has no impact on the company’s financial results and on the unrestricted equity,no consolidated financial statements have been prepared.

Parent companyPosiva Oy is a subsidiary of the TVO subgroup, which in turn is part of the Pohjolan Voima Group. The parent company of the PohjolanVoima Group is Pohjola Voima Oy, domicile Helsinki. The parent company of the TVO Group is Teollisuuden Voima Oy, domicileHelsinki.

Pohjolan Voima Group’s consolidated financial statements are available for inspection at the Group’s head office at Töölönkatu 4,00100 Helsinki. TVO Group’s consolidated financial statements are available for inspection at the TVO Group’s office at Töölönkatu 4,00100 Helsinki.

NOTES TO INCOME STATEMENT 2004 2003

1. Turnover Income, main line of business 22,533,534.68 17,557,343.30Income, auxiliary line of business, shareholders 114,168.26 188,306.50Income, auxiliary line of business, other companies 587,951.19 875,279.07

23,235,654.13 18,620,928.87

2. Other operating income Rental income 0.00 70.00Sales 0.00 2,015.63Subsidies received 124,458.42 234,305.39

124,458.42 236,391.02

3. Personnel expenses Average number of permanent employeesOffice personnel 40 37Manual workers 3 2Total 43 39

4. Depreciation Depreciation planPlanned depreciation is the maximum depreciation under the Business IncomeTaxation Act. Acquisition costs of fixed assets used for nuclear waste managementare booked as annual expenses (EVL 45 a§).

Planned depreciationOn intangible rights 2,965.74 2,965.84On other long-term expenditure 18,680.45 10,905.16On buildings 4,702.14 4,898.06On machinery and equipment 9,072.20 12,021.31

35,420.53 30,790.37

5. Financial income and expenses

Interest income from long-term investmentsFrom others 171,434.42 169,554.46

Interest income from long-term investments, total 171,434.42 169,554.46

Other interest and financial income 62,996.97 44,579.54Interest income from long-term investments and other interest income, total 234,431.39 214,134.00Interest expenses and other financial expenses

To other Group companies 92,825.73 90,506.12To others 53,695.57 53,970.08

Other interest and financial expenses 146,521.30 144,476.20

Financial income and expenses, total 87,910.09 69,657.80

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NOTES TO BALANCE SHEET

6. Fixed assets

Intangible Intangible Other long-term Advances Intangibles,rights expenditure total

Acquisition cost 1.1.2004 29,657.91 150,577.22 174,895.98 355,131.11Increase 0.00 38,876.46 499,229.39 538,105.85Acquisition cost 31.12.2004 29,657.91 189,453.68 674,125.37 893,236.96Accumulated planned depreciation 1.1. 19,007.94 113,423.12 0.00 132,431.06Depreciation according to plan 1.1.–31.12. 2,965.74 18,680.45 0.00 21,646.19Book value at 31.12.2004 7,684.23 57,350.11 674,125.37 739,159.71

Tangible Buildings Machinery and Tangibles,equipment total

Acquisition cost 1.1.2004 138,183.20 70,179.85 208,363.05Increase 0.00 225.00 225.00Decrease 0.00 0.00 0.00Acquisition cost 31.12.2004 138,183.20 70,404.85 208,588.05Accumulated planned depreciation 1.1. 20,629.69 33,275.00 53,904.69Accumulated depreciation on decrease 0.00 0.00 0.00Depreciation according to plan 1.1.–31.12. 4,702.14 9,072.20 13,774.34Book value 31.12.2004 112,851.37 28,057.65 140,909.02

Investments 2004 2003Shares in other Group companies

Shares in subsidiariesPosivia Oy, Helsinki number of shares 120 / ownership 100 % /share capital EUR 2,522.82, dormant (no consolidated financial statements prepared) 2,236.90 2,236.90

Other shares and holdings 9,216.70 9,216.70Other loan receivables 6,625,791.24 6,895,738.62

6,637,244.84 6,907,192.22

7. Receivables from other Group companiesSales receivable 126,445.02 220,779.44

8. Adjusting entries for assetsAccrued interest income 0.00 95,755.02Prepaid rent 221,170.00 0.00Other accrued income 87,000.00 247,418.22Prepaid expenses 120,529.70 0.00

428,699.70 343,173.24

9. Liabilities to other Group companiesLong-term liabilities 3,587,608.42 3,733,771.97Current liabilities

Advances received 418,962.36 1,173,876.70Trade payables 686,263.98 320,728.94Accrued liabilities and deferred income 0.00 51,339.36

1,105,226.34 1,545,945.00Total 4,692,834.76 5,279,716.97

10. Adjusting entries for liabilitiesInterest liabilities 0.00 29,601.07Salary accruals and indirect employee costs 604,435.00 529,754.00Estimate of expenses not yet charged 1,251,642.49 1,106,611.00

1,856,077.49 1,665,966.0711. Share capital

Share capital at 1.1. 1,681,879.26 1,681,879.26Change in share capital 120.74 0.00Share capital at 31.12. 1,682,000.00 1,681,879.26

PROPOSALS TO THE ANNUAL GENERAL MEETING

The company has no distributable retained profit. The Board of Directors deduces that no dividendcan be paid.

Helsinki, on 11 February 2005

Mauno Paavola Heikki Raumolin

Pekka Leskelä Pertti Simola, Chairman

Eero Patrakka, President

AUDITORS’ REPORT

To the shareholders of Posiva Oy

We have audited the accounts, the financial statements and the management of Posiva Oy for thefinancial year 1 January – 31 December 2004. The financial statements drawn up by the Board of Directorsand the President include the annual report as well as the income statement, the balance sheet and thenotes to the financial statements. On the basis of the audit we have performed, we make this statementon the financial statements and the management of the Company.

The audit has been performed in compliance with good auditing practice. The accounts as well asthe principles followed in drawing up the financial statements, the content and the presentation havebeen examined to a sufficient extent to state that the financial statements are free of material defectsand deficiencies. In the examination of the management, we have examined the legality of the activitiesof the Board of Directors and the President as set out in the Companies’ Act.

We therefore state that the financial statements have been prepared in accordance with the AccountingAct and other legislation governing the preparation of financial statements. The financial statementspresent true and sufficient information about the result of the Company’s activities and its financialstanding, as stipulated in the Accounting Act. The financial statements can be adopted and the membersof the Board of Directors and the President discharged from liability for the financial year audited by us.The proposal of the Board of Directors concerning distribution of dividend is in compliance with theCompanies’ Act.

Helsinki, on 18 February 2005

Risto Järvinen PricewaterhouseCoopers OyAPA Pekka Nikula

APA

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Posiva OyFI-27160 OLKILUOTOFinlandTel: +358 2 837 231Fax +358 2 8372 3709www.posiva.fi