Finland’s Fortum Sells Power Grid To Make Way For Russian Power Source

Posted: March 18, 2015 in Econ 101, Free Trade, Sanctions on Russia Meaningless, Technology and Energy

SOURCE: http://www.ft.com/fastft/291472/finlands-fortum-seals-6.6bn-deal-swedish-unit

SEE ALSO:  Russia Approves $2.3B For Finnish Nuclear Power Plant


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Fortum seals €6.6bn deal for Swedish unit

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March 13, 2015

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Fortum has sold its Swedish electricity grid business for €6.6bn to a group of Swedish funds and Canada’s Borealis as the Finnish utility completes it move out of power distribution.

The sale, which will bring a one-off gain of about €4.4bn, is only the latest in a series of sales that included a 2013 disposal of the Finnish grid for €2.55bn to a consortium also including Borealis, reports Richard Milne in Oslo.

The sale is part of a European trend for utilities to sell their distribution networks to focus primarily on power generation and to help reduce large debt burdens.

Canada’s Borealis has a 50 per cent stake in the successful consortium alongside the Swedish national pension funds AP1 and AP3 as well as Folksam, a local mutual insurance business. It beat off opposition from the Goldman Sachs’ infrastructure arm and private equity firm 3i.

Timo Karttinen, Fortum’s interim chief executive, said:

After the divestment of its distribution businesses Fortum will concentrate on the growth and development of our core businesses, based on our competences: CO2-free hydro and nuclear power generation and efficient combined heat and power production.

Fortum is looking at eastern Europe and Russia in particular for future growth. It is one of the European companies most exposed to Russia and in December signed a deal on nuclear and hydroelectric power with state-backed companies.

The Finnish utility said it was prepared to take a stake of up 15 per cent in a controversial nuclear plant in Finland to be built and part-financed by Rosatom, the Russian state-owned energy group. The project led to the near-collapse of the Finnish government last year amid accusations of “Finlandisation” or cosying up to Russia.

Fortum, in which the Finnish government is the largest shareholder with a 50 per cent stake, makes about a fifth of its sales in Russia. It is also reported by Reuters to be interested in Slovenske Elektrarne, the Slovakian utility that is being sold by Italy’s Enel.

As a result of the Swedish grid sale, Fortum trimmed its target for net debt as a proportion of operating profit from three times to two-and-a-half. It kept its target for return on capital employed at 12 per cent.

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