Fortum completes shift away from electricity distribution with sale of Swedish assets

Fortum sells off electricity distribution assets
Fortum has completed the sell-off of its electricity distribution assets and will now focus on its heat and power generation business

In northern Europe, Finland’s largest utility Fortum has completed the spin-off of its Swedish electricity business as part of a move to refocus on its carbon-neutral heat and power generation business.

The new owner of the Swedish distribution business is a consortium comprising Swedish national pension funds Första AP-Fonden and Tredje AP-Fonden, Swedish mutual insurance and pension savings company Folksam and the international infrastructure investor, Borealis Infrastructure Management.

Fortum completed the divestment at the start of June securing EUR6.5 billion (SEK 60.6 billion) on a debt- and cash-free basis.

Strategic shift to heat and power production

The deal completes Fortum’s divestment process of its distribution businesses in Sweden, Norway and Finland, which began in December 2013.

This formed part of a strategic decision to concentrate on the growth and development of the core businesses, which include CO2-free hydro and nuclear power generation and efficient combined-heat and power production.

Fortum is active in lobbying for the European Union 2030 energy and climate policy to be based on a leading emission reduction target with an enforced Emissions Trading System.

In a report released by the Nordic energy services company in September 2014, Tapio Kuula, president and CEO of Fortum, said: “As European competitiveness is a key concern, a cost-efficient climate policy to minimise the price tag of decarbonisation for society is of utmost importance.

“Decisions on the 2030 climate targets and a structural reform of the ETS are urgently needed to boost the decarbonisation of society. In parallel, global efforts for pricing of carbon should be accelerated.

He added: “The growing global concern over climate change must translate to action as climate change will not wait for better economic times.”

The Fortum Energy Review also predicted that the European Union’s 2020 targets are likely to be met but at a high cost.

While current European wholesale prices are too low to attract new investments in generation without subsidies, the review says European end-user prices have increased due to higher taxes, levies and networks costs.

Addressing renewable energy, Fortum says technologies are becoming commercially viable and a transition towards a renewables-based energy system is possible with less subsidies if supported by a carbon price and market.

Fortum was one of the early adopters of smart grid technology, and deployed an advanced metering infrastructure system for 550,000 of its household and small business customers back in 2010.