Fortum to spin off oil business at one go after good year

Mikael Lilius

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The energy corporation Fortum plans to split into two at one go in the spring. On Tuesday the Fortum management announced details of its plan to spin off its petroleum operations, and to establish Fortum Oil as a separate company. Fortum was formed in 1998 in a merger between two state-owned energy companies - the electricity producer Imatran Voima (IVO) and the oil company Neste.
      Under the plan 51% of the new Fortum Oil is to be under direct state ownership. The company is to be listed on the Helsinki Stock Exchange.
     
Fortum will distribute 85% of the shares of the oil company to its present shareholders as dividends.
      Only 15% of the shares are to be sold to investors in a share issue which is likely to be held in April next year.
      Under the original plan, which was announced a year ago, most of the oil operations of Fortum were to have been sold in connection with putting the company on the market. However, in December Parliament insisted that the state, which has a 60% holding in Fortum, should also have a majority holding in the new oil company, either directly, or through Fortum.
      This would have required Fortum to remain a major owner of the oil company, and for the state to buy shares of the new company in a share issue.
      CEO Mikael Lilius says that a different course of action was taken because Fortum’s financial state has proven to be better than expected.
     
Fortum has been favoured by exceptionally good circumstances in the past year. Heavy rains in Finland have replenished the supply of hydroelectric power after three consecutive years of very low precipitation.
      The petroleum operations have also made good profits in recent months, benefiting from higher prices of oil transport and the rise in the value of its stockpiles of crude oil.
      Fortum’s profits were nearly 30% higher this year than in the same period last year, and the company has managed to pay off about EUR 400 million of its debts. 


Previously in HS International Edition:
  Oil operations of Fortum to be listed already next spring (10.10.2003)
  Fortum intends to spin off oil operations into separate listed company (10.9.2003)

Links:
  Fortum press release: Fortum Oil separation through a share dividend and a sale of shares (14.9.2004)

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