Fortum was forced to withdraw from its plans to acquire the City of Oslo's holding in Norwegian power company Hafslund on Tuesday.
Fortum and the Oslo City Board agreed slightly over one week ago that Fortum would buy the city's stake of 53.7 percent in Hafslund.
The City Board conceded on Tuesday that the deal did not have majority approval in the Oslo City Council, and Fortum and the City Board decided to cancel their agreement entirely. The deal would have made Fortum the largest electricity retailer in the Nordic region.
Fortum reported that the failure of the acquisition was a disappointment, and that the company had done all it could to make the deal succeed. When the acquisition was first announced, Fortum was confident that there would be no problems with the City Council.
Fortum blames politics, and the oddities of Norwegian politics in particular, for the cancellation of the deal. The Finnish energy giant will retain its holding of 34 percent in Hafslund and continue to develop the company as a minority shareholder.
Fortum does not plan to lodge a higher offer for the Hafslund shares, as the price was never significant in the process. The Oslo councillors who opposed the deal do not want to see hydroelectric facilities wind up in the hands of foreign owners.
Fortum was surprised that the positive aspects of the sale were never discussed in Norway. Hafslund has a relatively weak balance sheet, and Fortum could have provided the company with some financial muscle.
The Oslo City Board does not intend to try to sell the city's Hafslund holding during the remainder of the City Council's term, or the next 3.5 years.
