17/1/2005

E.ON to sell stake in Finnish subsidiary to Fortum

HELSINKI - German energy industry corporation E.ON, which also operates in the Czech Republic, will sell its 65.6 percent stake in a Finnish subsidiary E.ON Finland to Fortum. Fortum will thus increase control over Finnish electricity market, following from the company announcement today.

Fortum added that it also approached another shareholder, the Finnish city of Espoo, with an offer of buying out E.ON shares. It offers to buy the 34.3 percent stake for € 257m.

Fortum has plans for a € 300m. investment upon acquiring the stake in the electricity industry company. The investment would be chiefly aimed at increasing production capacity.

Fortum intends to cover most of the financing of the acquisition by taking a loan. The net debt of the company would thus go up to € 650mn and the debt to assets ratio would be 81 percent. The deal is expected to increase the profit of the company in the coming two years.

Finnish company Fortum emerged from a 1998 merger of Neste and IVO. It employs 13,200 people and the Finnish government holds a 71 percent stake in it. It is the second largest energy industry in Scandinavia after Swedish Vattenfall. It serves 1.3 million customers in Estonia, Finland, Germany and Sweden, reported Reuters and AP.

In the Czech Republic, the E.ON group consists of E.ON Jihomoravská energetika, Jihočeská energetika and E.ON Czech Holding, which also owns a 16 percent stake in Východočeská plynárenská gas distributor. JME and JČE serve 1.4m. customers. Annually, they supply 12b. kWh of electricity. They hold about a 24 percent share of the Czech market.

Source: Czech News Agency (ČTK)