Finland's Fortum agrees on sale of power distribution business to Suomi Power Networks

December 12
5:39 AM 2013

Fortum Oyj will be selling its power distribution business in Finland to Canada's Borealis Infrastructure Management Inc and other investors, Bloomberg reported. Fortum Oyj is the largest utility firm in Finland. It gives a wide range of energy related products and services, including the generation, distribution and sale of electricity and heat and steam. It also operates power plants. Its operations are mainly in Northern Europe but it also operates globally.

In a statement, Fortum said the buyer for the business is Suomi Power Networks Oy and has a price tag of € 2.55 billion or $3.5 billion. The deal, which is on a debt and cash-free basis, will book a one-time sales gain of up to €1.9 billion for Fortum. The company said the transaction is set to close next quarter after it has been approved by regulators.

The report said First State Investments and Borealis Infrastructure each hold a 40% stake in Suomi Power Networks. Keva, a Finnish pension fund, owns a 12.5% stake while the remaining 7.5% stake is held by LocalTapiola Pension.

According to the report, institutional investors and pension funds are getting lured to infrastructure assets since they are relatively safe and offer steady cash flows. Fortum also said it is looking into the possible sale of its distribution networks located in Sweden and Norway since it is seeking to concentrate on generating power. The company also added that Fortum's Finland grid generated revenue of €321 million in 2012.

Borealis Infrastructure Management Inc is the infrastructure unit of Omers, the sixth largest pension fund manager in Canada. The report said it was part of a group that did not push through with a £5.3 billion or $8.7 billion offer for Severn Trent Plc, a utility firm in the UK, six months ago. It is the co-owner of Associated British Ports, the biggest ports operator in the UK.

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