UPDATE 1-Fortum's Q4 profit falls more than expected

Tue Feb 4, 2014 2:36am EST

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OSLO, Feb 4 (Reuters) - Finnish utility Fortum reported a bigger than expected drop in fourth-quarter underlying profit and said it was looking at opportunities to sell more of its electricity distribution business.

Fortum said on Tuesday its quarterly comparable operating profit fell 17 percent to 493 million euros ($666 million), well below the market's forecast for 550 million. It proposed a dividend of 1.1 euros per share, above forecasts for 1 euro.

"Precipitation was weak in Fortum's operating areas during the first three quarters of the year; this put pressure on hydro volumes and thus impacted Fortum's results negatively," the company said in a statement.

"Looking at the operating environment for Fortum overall, it's clear that the markets will remain challenging also in 2014," it added.

Fortum said it expected annual power demand in the Nordic countries to grow an average 0.5 percent in the coming years.

Last December, the company announced plans to sell its local power distribution grid to a group of institutional investors led by First State Investments and Borealis Infrastructure for 2.55 billion euros, and said it was also looking to sell its Swedish and Norwegian distribution networks.

The sale was part of a series of regulated grid sales by large energy firms seeking to cut debt and focus on their power generation businesses instead.

Fortum said earlier its sale of the Swedish grid could take place in the latter half of 2014, while the smaller Norwegian business might be sold sooner.

($1 = 0.7397 euros) (Reporting by Balazs Koranyi, Ole Petter Skonnord and Nerijus Adomaitis; Editing by Mark Potter)

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