Fortum sells Finnish power distribution grid for $3.5 billion
HELSINKI (Reuters) - State-controlled Finnish utility Fortum (FUM1V.HE) has agreed to sell its power distribution grid in Finland to a consortium of institutional investors led by First State Investments and Borealis Infrastructure for 2.55 billion euros ($3.5 billion).
The deal is the latest in a series of regulated distribution network sales made by large energy firms wanting to cut debt and focus on their power generation businesses instead.
Analysts said the price achieved by Fortum for the Finnish network was higher than expected, while Fortum said it would book a gain of up to 1.9 billion euros on the deal, corresponding to around two euros per share.
Fortum launched the sale of the grid in September and Reuters on Wednesday reported that the company was in exclusive talks with the consortium.
It is also preparing for a possible sale of its Swedish and Norwegian grid businesses, and one investor said the deal value for the Finnish grid was encouraging.
"It looks like the price is around 10-15 percent higher than what was expected. It is definitely a good price, and it could be they would get in total close to 7 billion euros from all their grids," said Jari Honko, an Alandsbanken portfolio manager who said Fortum was one of his fund's biggest investments.
"It is interesting to see what they will do with these gains. I think one possible option is to buy E.ON's (EONGn.DE) nuclear or hydro assets in Sweden."
The deal highlights the increasing popularity of established infrastructure assets for pension funds and other institutional investors seeking relatively safe and assured returns in a low interest rate world.
The Finnish grid, which covers about 20 percent of the country's local electricity distribution, recorded 325 million euros in sales and 154 million in earnings before interest, taxes, depreciation and amortization over the last 12 months.
First State, an asset management business owned by Commonwealth Bank of Australia (CBA.AX), and Borealis Infrastructure, owned by Canadian pension fund OMERS, both have a 40 percent stake in the buying consortium called Suomi Power Networks.
It also includes Finnish pension funds Keva, with 12.5 percent and LocalTapiola Pension with 7.5 percent.
Fortum's distribution businesses have yielded a return on net assets of about 8 percent and with total sales of around 1 billion euros contributed some 17 percent of the group's turnover last year.
(Reporting by Jussi Rosendahl; Editing by Greg Mahlich)
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