February, the 29th, 2008
Fortum to acquire controlling stake in Russian TGC-10
Fortum will acquire a controlling stake in the Russian territorial generating company 10 (TGC-10). The acquisition is in line with Fortum's growth strategy and will make Fortum a significant player in one of the worlds largest energy markets with high demand growth. If Fortum reaches a 100% holding in TGC-10, the total value of the transaction will be around EUR 2.7 billion. Fortum will retain its financial flexibility and will continue its Nordic investment programme as planned.
Fortum participated in a share auction conducted on 28th February to acquire a controlling stake in the listed Russian TGC-10. Fortum will acquire a 29% stake of the company from RAO UES for EUR 0.8 billion. In addition, Fortum has committed to acquiring a further 34-47% stake (range depending on how minority shareholders will use their pre-emption rights) in TGG-10 through a share issue for EUR 0.9-1.3 billion. This capital increase of EUR 1.3 billion will remain in TGC-10 and will be used to finance its committed capacity investment programme planned at EUR 2.2 billion.
In the first phase of the transaction, Fortum will receive 63-76% of the company's shares and voting rights. The closing of the first phase is expected in March 2008. Fortum will also make a mandatory offer to purchase the remaining 24-37% of the shares held by minority shareholders.
The total consideration, EUR 1.7-2.7 billion, is to be financed with long-term bank loans. Fortums pro forma net debt/EBITDA will be around 2.8x at acquisition assuming Fortum will reach 100% ownership of TGC-10.
The acquisition of TGC-10 is a significant step in delivering on our strategy. This is a great opportunity to become a significant player in the world's 4th largest energy market. We will maintain our financial flexibility that allows us to continue our Nordic capacity investment programme and finance potential future investments. We are very pleased to have successfully taken this strategically important step, says Mikael Lilius, Fortums President and CEO.
TGC-10 is a territorial generating company operating in Urals region. Out of all territorial generating companies, TGC-10 has the best capacity utilization rates and it is the leading district heating supplier in its area. The total installed capacity is 3,000 MW electricity and 15,800 MW heat with annual production of 18 TWh electricity and 27 TWh heat, to be compared with Fortums current 10,900 MW electricity and 11 200 MW heat with production of 52 TWh electricity and 26 TWh heat. The company has an extensive investment plan to further increase its electricity production capacity with 2,300 MW by 2013. The generation assets are located in an area with significant oil and gas industry. The number of employees is 6,100.
"In the on-going Russian energy sector reform, TGC-10 is an excellent entity for Fortum. It operates in the heart of the fast growing Russian oil and gas producing regions. We know we can contribute to the Russian energy sector in many ways by being a reliable energy partner and by bringing in leading technologies and best practices to improve efficiency and thus make a positive impact on the environment. We are very inspired by the work ahead of us", says Tapio Kuula, Senior Vice President of Fortum.
SVP, Corporate Communications
Mikael Lilius, President and CEO, Fortum Corporation, +358(0)10 45 29100
Tapio Kuula, Senior Vice President, Fortum Corporation, +358(0)10 54 24112
OMX Nordic Exchange Helsinki
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