Finland-headed energy utility Fortum Oyj has disclosed that it has signed an agreement to sell its 50 percent ownership in the Norwegian district heating company Fortum Oslo Varme AS to an investor consortium. The total consideration for Fortum’s share is approximately NOK 10 billion (≈ EUR 1 billion) on a cash and debt-free basis. The closing of the transactions is expected during the second quarter of 2022, subject to regulatory approvals and customary closing conditions.
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Fortum Oslo Varme is jointly owned (50/50) by Fortum and the City of Oslo, and it is the largest supplier of district heating in Norway supplying 36 percent of district heating generated in Norway in 2021. It sold 1.8 TWh of district heating and generated 0.1 TWh of electricity in 2021.
Fortum Oslo Varme’s waste-to-energy plant at Klemetsrud, Oslo is also Norway’s largest with a capacity to end-treat 315 000 tonnes of waste per year. The company employs approximately 200 people. In 2017, Fortum became the owner of Fortum Oslo Varme in the Hafslund transaction.
Divesting heat and cooling businesses
Over the past years, Fortum has divested several of its heating and cooling businesses. In 2020, Fortum divested its district heating businesses in Joensuu and Järvenpää in Finland, and in 2021, Fortum sold its district heating businesses in the Baltics and its 50 percent ownership in Stockholm Exergi in Sweden.
In the case of Fortum Oslo Varme, Fortum was approached by the buyer, an investor consortium comprising Hafslund Eco, Infranode, and HitecVision. Following a thorough internal assessment, a decision was taken to divest the 50 percent ownership.
Fortum Oslo Varme is an innovative and successful company, and its heating and cooling operations fit very well with Hafslund Eco’s renewable generation and infrastructure portfolio. We believe that combining the great competencies of Fortum Oslo Varme with Hafslund Eco’s competence and experience within renewable energy and the Nordic power market will create exciting opportunities for sustainable growth, said Finn Bjørn Ruyter, CEO of Hafslund Eco.
Billion EUR deal
The total consideration for Fortum’s share is approximately NOK 10 billion (≈ EUR 1 billion) on a cash and debt-free basis, and as part of the transaction, Fortum will de consolidate a related NOK 2 billion loan (≈ EUR 200 million) from the City of Oslo.
The consideration is based on a 100 percent enterprise value of NOK 20 billion (≈ EUR 2 billion). Fortum expects to record a tax-exempt capital gain of approximately EUR 0.6 billion in the City Solutions segment’s results in connection with the closing of the transaction expected during the second quarter of 2022.
We have had a strong partnership with the City of Oslo, combining competencies to drive innovation for a greener Oslo. Fortum Oslo Varme has ambitious plans for its Klemetsrud waste-to-energy plant to implement carbon capture and storage (CCS) as one important technology to combat climate change. Fortum Oslo Varme is a well-run business so after the Hafslund Eco-led consortium approached us, we considered our options carefully. Our conclusion is that it is in the best interest of Fortum Oslo Varme to continue its good development under the new ownership known for its sustainable hydropower and long-term investments in infrastructure in Northern Europe, said Markus Rauramo, President and CEO of Fortum.
The transaction is subject to approval by the Oslo City Council (Bystyret), necessary regulatory approvals, and fulfillment of customary closing conditions.