Fortum Oyj, Finland's biggest utility, said second-quarter profit rose 5 percent as earnings improved at its power generation unit.

Net income rose to 243 million euros ($385 million), or 27 cents a share, from 231 million euros, or 26 cents, a year earlier, Fortum said in a statement today. That's less than the 264 million-euro average estimate of 10 analysts polled by SME Direkt. Sales rose to 1.32 billion euros from 959 million euros.

``Fortum's consistent hedging performance, higher average Nord Pool spot prices and higher hydro power volumes contributed to the improvement,'' the Espoo, Finland-based company said. Fortum's financial position is ``strong'' and remains ``well positioned'' for the future, it said.

Fortum is expanding amid rising energy demand in the Nordic region, Baltic states and Russia, where it took a controlling stake in generating company OAO TGK-10 this year. The company expects the acquisition to ``marginally dilute'' Fortum's earnings per share in 2008 and 2009.

The generation branch sold Nordic power at an average price of 47.9 euros a megawatt-hour, 33 percent more than a year earlier and higher than the average spot price of 34.6 euros on the Nordic Nord Pool exchange.

At the beginning of July, Fortum had hedged about 70 percent of the power generation unit's estimated Nordic electricity sales for the remainder of this year at about 46 euros a megawatt hour. For next year, about 45 percent of the unit's estimated Nordic electricity sales was hedged at about 51 euros, it said.

Electricity consumption in the Nordic countries is expected to rise by about 1 percent a year over the next few years, the company said.