Oslo to purchase Hafslund ASA for €730M

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Oslo to purchase Hafslund ASA for €730M

Fortum and the City of Oslo have entered into an agreement to restructure their ownership in Hafslund ASA, one of the largest listed power groups in the Nordic region.

The transactions are subject to approval by the Oslo City Council (Bystyret), the necessary regulatory approvals and fulfillment of the customary closing conditions. The closing of the transactions is expected during the
third quarter of 2017.

Fortum will sell its 34.1% stake in Hafslund ASA to the City of Oslo for approximately €730 million (US$802.6 million) before the proposed dividend for the Annual General Meeting 2017. Fortum will book a one-time tax-free sales gain totalling approximately €330 million (US$362.8 million), which corresponds to €0.37 (US$0.41) earnings per share. The final gain will be determined at the closing of all transactions and will be reported in Fortum's Other segment.

Fortum will acquire 100% of Hafslund’s current Markets business area, which operates in Norway, Sweden and Finland. This will almost double Fortum's number of electricity retail customers in the Nordics – from 1.3 million to 2.4 million.

Hafslund’s Heat business area and the City of Oslo’s waste-to-energy company Klemetsrudanlegget AS (KEA) will be combined into one company, forming an integrated value chain in the waste-to-energy system. Fortum will acquire 50% of the combined company. The combined entity will be owned 50/50 by Fortum and the City of Oslo, with Fortum having operational responsibility. Heat and KEA will be consolidated as a subsidiary to Fortum, with a 50% minority interest.

In addition, Fortum will acquire 10% of Hafslund’s current Production business area. The total debt-free price of the acquisitions is approximately €970 million (US$1.066 billion).

The combined net cash investment of the transactions is expected to be approximately €240 million (US$263.9 million). In 2016, the combined consolidated Sales and EBITDA of Hafslund Markets and Heat & KEA (on a 100% basis) were approximately €950 million (US$1.044 billion) and approximately €130 million (US$143 million) respectively.

Pekka Lundmark, Fortum’s President and CEO, says:

"We are forming a strong partnership with the City of Oslo in areas where we can combine competences to drive innovation for a greener Oslo, one of Europe’s fastest growing urban areas. At the same time, we want to enable people and businesses to make more environmentally friendly choices. KEA is also a contender for Norway’s carbon capture and storage pilot programme, and I believe that together with Fortum, its position will be stronger.

In electricity retail the combination of Hafslund and Fortum will have significant scale benefits, which will enhance the development of new technologies and services for customers. The proposed transactions support Fortum’s strategic growth and cash flow ambitions. We are naturally very excited to be able to develop sustainable solutions for yet another major European city. Our strategy implementation will continue and we still have significant financial headroom available for market consolidation."

Raymond Johansen, Governing Mayor of Oslo, says:

"We are very pleased to have Fortum as our industrial partner in district heating and cooling and waste-to-energy. Together we will better be able to develop new technologies for sustainable and smart solutions for Oslo and its inhabitants."

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