City of Espoo to sell its E.ON shares to Fortum

The City of Espoo is to sell its shares in electricity supplier E.ON Finland to the state-owned energy company Fortum for approximately EUR 364 million.
      The City Board of Espoo unanimously decided to propose the transaction to the City Council at the forthcoming council meeting on 16th January.
      Previously the City of Espoo has doggedly rejected all of Fortum's attempts to buy the shares, and Fortum has repeatedly extended the deadlines of its bids.
      However, money talked in the end. Fortum had earlier offered EUR 48.00 per share, but now raised the bid to EUR 68.00.
     
The prerequisite for the transaction is that Fortum will also obtain ownership of the German E.ON Group's holdings. Fortum and E.ON have previously been to court over their dispute over Fortum's option to buy E.ON Finland.
      Fortum obtained the option to acquire E.ON Finland from the beginning of 2005 after it sold E.ON a company that it owned in Germany in 2002.
     
After the latest transaction, Fortum will own a total of 99.8 percent of E.ON Finland´s shares.
      The deal has failed to materialise until now since the City of Espoo has refused to sell its shares because of a disputed clause in the co-ownership deal it has with the E.ON Group.
      Espoo gained its current ownership of 34.2 percent of E.ON Finland in 2001, when it sold the municipal electric utility Espoon Sähkö to the German E.ON energy group.
      On 16th January the Espoo City Council is expected to approve and confirm the transaction.
      According to the chairman of the City Board of Espoo, Jukka Mäkelä (con.), the sale will have a "significant impact on balancing the city's economy".
     
The total purchase price for E.ON Finland is approximately EUR 750 million.
      This means that the City of Espoo, in addition to securing a hefty premium on the current price of the listed stock (trading at EUR 44.00 in Helsinki on Tuesday), will be collecting almost as much for its 34% stake as the German E-ON Group gets for its two-thirds share of the company.
      E-ON Finland serves around 175,000 customers.
      It is not thought likely that Fortum will be able easily to recoup its spending through higher energy bills to Espoo residents, as there is competition in the electrical utilities market. However, there are some question-marks over the prospects for district heating prices.


Previously in HS International Edition:
  Fortum to go to court over dispute over option to buy E.ON Finland (26.1.2005)
  Fortum wants to buy Espoo electric utility (18.1.2005)
  Fortum to become leading retail electricity company in Nordic region (11.5.2004)

Links:
  Fortum press release