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Fortum plans to increase its hydro portfolio by 60% through the restructuring of TGC-1 – Subject to successful restructuring, Fortum ready to take a minority stake in the Finnish Fennovoima nuclear project

02 December 2014, 11:50 EET

FORTUM CORPORATION STOCK EXCHANGE RELEASE 2 DECEMBER 2014 at 11:50 EET

Fortum and Gazprom Energoholding have signed a protocol to start a restructuring process of their ownership of TGC-1, a Territorial Generating Company in Russia. TGC-1 owns and operates hydro power and thermal power plants in North-West Russia as well as heat distribution networks in St. Petersburg. Currently Gazprom Energoholding owns 51.8% of the TGC-1 shares and Fortum 29.5%.

As part of the restructuring, Fortum will establish a joint venture together with Rosatom to own the hydro assets of TGC-1, while Gazprom Energoholding continues with the heat and thermal power businesses of TGC-1. By utilising its present stake in TGC-1, Fortum would obtain a 75-plus-percent ownership in the new hydro power company. Rosatom would have a 25-minus-percent minority holding in the new hydro power company.

Fortum, Gazprom Energoholding and Rosatom have signed a protocol to start the restructuring process. The parties shall agree on the detailed structure, practical arrangements and final commercial terms of the transactions. The new company will be consolidated to Fortum Group as a subsidiary.

Provided that Fortum obtains a 75-plus-percent  ownership in TGC-1 hydro assets, Fortum would be ready to participate with a minority stake (max 15%) in the Finnish Fennovoima nuclear power project on the same terms and conditions as the other Finnish companies currently participating in the project. 

“These transactions strengthen the cooperation between energy sector companies in Finland and Russia and also with our long-term partner, Fortum,” says Mr. Sergey Kirienko, CEO of Rosatom.

“Restructuring of TGC-1 assets will increase Fortum’s total hydro power generation by 60% to 34 TWh, which clearly demonstrates Fortum’s strong commitment  to CO2-free production. As we already have more than five decades of experience in working in Russia and with Russian partners, increasing our volume of hydro power in Russia is a natural step for us”, says Tapio Kuula, President and CEO of Fortum Corporation.

“Fennovoima’s nuclear project is important for Finland. While Fortum’s participation and competencies are extremely valuable for the project, it will also provide Fortum with possibilities to grow in the area of nuclear expert services”, says Mr. Kuula.

TGC-1 is a major Territorial Generating Company in terms of installed capacity operating in the North-West Russia. TGC-1 generates electricity and heat in 54 power plants in St. Petersburg, Leningrad oblast, Karelia and Kola regions and supplies heat mainly in the St. Petersburg area.

TGC-1 owns and operates a fleet of 40 hydro power plants with a total capacity of approx. 3,000 MW. Hydro power generation accounts for 41% (12-13 TWh) of the company's total electricity generation. In addition, the company owns 14 thermal plants with a total electricity capacity of 4,300 MW (with a production of 17 TWh/a) and has a total heat capacity of 16,500 MW (29 TWh/a). The shares of TGC-1 are listed on the Moscow Exchange (MOEX).

In 2013, the IFRS consolidated net sales of TGC-1 amounted to approximately EUR 1,400 million, EBITDA to approximately EUR 340 million and operating profit to approximately EUR 200 million. Total assets of the company were approximately EUR 2,600 million and number of employees amounted to approximately 7,600 at the end of 2013. IFRS figures have been calculated at the currency exchange rates on 30 September 2014.

Fortum Corporation
Helena Aatinen
Senior Vice President, Corporate Communications
+358 10 452 0480

Further information:
Tapio Kuula, President and CEO, Fortum Corporation, tel. +358 10 45 24112
Kari Kautinen, SVP, Corporate Strategy and Mergers & Acquisitions, tel. +358 10 453 2174
Communications: Helena Aatinen, SVP, Corporate Communications, tel. +358 10 45 20480
Investor Relations: Sophie Jolly, VP, Investor Relations, tel. +358 10 45 32552

Distribution:
NASDAQ OMX Helsinki
Key media
www.fortum.com

Fortum
Fortum’s purpose is to create energy that improves life for present and future generations. Catering to the versatile needs of our customers, we generate, distribute and sell electricity and heat, and offer related expert services. Our operations focus on the Nordic and Baltic countries, Russia and Poland. In 2013, Fortum’s sales totalled EUR 6.1 billion and comparable operating profit was EUR 1.6 billion. We employ approximately 8,800 people. Fortum’s shares are traded on the NASDAQ OMX Helsinki. www.fortum.com