Hafslund acquires Fortum’s power distribution grid operations in Norway

The Hafslund Group has reached an agreement with the Finnish energy company Fortum Corporation to acquire their power distribution grid in Norway. This makes Hafslund a stronger infrastructure company with significant growth in the number of grid customers.

The agreement constitutes 100 % of the shares in the grid company Fortum Distribution AS, which also owns 49 % of the shares in Trøgstad Elverk AS, and 100 % of the shares in the holding company Fortum Power and Heat AS which owns 49 % of the shares in Fredrikstad Energi AS (FEAS) and 35 % of the shares in Fredrikstad EnergiNett AS (FEN). The total consideration for the shares (equity value) is NOK 1,365 million, of which NOK 1.0 billion represents the purchase price for Fortum Distribution.

Fortum Distribution is Norway’s eight largest grid company and owns large parts of the power distribution grid in the county of Østfold in Norway. As of December 2013, the company had about 103 000 grid customers and a regulated asset base of NOK 953 million. The operating profit (EBIT) was NOK 141 million in 2012 and NOK 113 million in 2013. The company has 96 employees and its head office is located in Sarpsborg, southern Norway.

Fredrikstad Energi is an energy group located in Fredrikstad, sourthern Norway, of which operations primarily includes distribution grid, power sales and contracting operations. Fredrikstad Energi Nett is part of the Fredrikstad Energi Group. The municipality of Fredrikstad owns the majority of Fredrikstad Energi, with a share of 51 %, and Fredrikstad Energi is the majority owner of Fredikstad EnergiNett with a share of 65 %. Fortum Power and Heat owns the remaining 35 % of Fredrikstad EnergiNett, which is part of this transaction.

“I am pleased to announce this agreement confirming Hafslund’s long term strategy as a focused energy company with growth in our business areas. Over the recent years Hafslund has undergone a significant transformation and has repositioned its business around four core business areas; power generation, heat, power distribution and power sales. The acquisition of Fortum’s power distribution grid in Norway therefore fits well with our strategy, and will further strengthen our position as a strong infrastructure company in Eastern Norway”, says CEO of Hafslund, Finn Bjørn Ruyter.

Hafslund expects to realize synergies as Fortum’s power distribution grid in Norway is located in an area where Hafslund owns the regional transmission grid. Coordinated operation of and investments in the various grid levels will provide operational synergies, and hence further strengthen the power distribution business’ relative efficiency. The synergies will primarily be realized through more efficient contingency services and increased purchasing power of services within contingency, maintenance and building of new infrastructure. Economies of scale will also be realized within invoicing, customer service and other staff and support functions.

"Fortum Distribution is a well-managed company with competent staff. With the added expertise and enhanced resource base we will develop Hafslund as a more efficient grid company. We also look forward to being a shareholder in Fredrikstad Energi together with the municipality of Fredrikstad, and a closer cooperation with a group being in the forefront in many areas", says Ruyter.

Hafslund has entered agreements with the companies Fortum ESD Norway AS and Fortum Nordic AB NUF. The selling companies are owned and controlled by the Finnish energy group Fortum.

The total consideration will be paid by cash settlement, financed through cash flow from operations and debt. Hafslund will on the closing date settle the net interest-bearing debt in Fortum Distribution. Interest will be incurred on the purchase price for the period from 31 December 2013 to the closing of the transaction.

The planned acquisition is conditioned upon approval from the Norwegian competition authorities. The transaction is expected to be completed within 2Q 2014.

Further information on the assets in the transaction follows below:

NOK million Fortum   Distribution AS Fredrikstad   Energi AS (Group) Fredrikstad   EnergiNett AS
2011 2012 2013* 2011 2012 2013* 2011 2012 2013
Operating revenues 640 606 621 1 172 978 733 228 207 n.a.
EBITDA 176 216 190 221 200 209 66 64 n.a.
Operating profit (EBIT) 107 141 113 134 108 122 35 31 n.a.
Equity 674 651 629 471 475 546 745 746 n.a.
Interest bearing debt** 240 259 213 n.a. n.a. n.a. n.a. n.a. n.a.
Total assets 1 093 1 141 1 158 1 701 1 753 1 746 885 906 n.a.
Regulated asset base 911 934 953 n.a. n.a. n.a. 414 435 n.a.
Number of customers 101 310 101 850 102 688 n.a. n.a. n.a. 38 000 39 000 n.a.
Number of employees 99 104 96 383 94*** n.a. 20 23 n.a.

* Premliminary, not audited. Fortum Distribution has NOK 177 million in excess income as of 31.12.13.
** Including provision for group contribution.
*** The reason for the significant decline in the number of employees is that Nettpartner AS as of 31.12.2012 is defined as a joint venture and therefore not included in the number of employees per. 31.12.2012. As of 31.12.2011 there were 302 employees in Nettpartner AS.

The board of Fortum Distribution consists of Ari Eero Yrjänä Koponen, Jan Erik Halvorsrød, Irene Skår Klavestad, Erik Jansen and Morten Sørum. The management of Fortum Distributions AS consists of Erik Jansen, Irene Skår Klavestad, Arild Myrvang, Stefan Østli, Per Bergli and Terje Tinbod. For further information about Fredrikstad Energi and Fredrikstad EnergiNett respectively, see www.feas.no and www.fen.no.

The Fortum Group owns 34.1 % in Hafslund ASA.

Further information about the transaction is included in the attached appendix.

Hafslund ASA
Oslo, 9 April 2014

Further information:

Finn Bjørn Ruyter, CEO
Phone: +47 911 38 199, e-mail: finn.bjorn.ruyter@hafslund.no

Heidi Ulmo, CFO
Phone: +47 909 19 325, e-mail: heidi.ulmo@hafslund.no

Johan Chr. Hovland, Senior VP Corporate communications and public affairs
Phone: +47 917 63 491, e-mail: johan.hovland@hafslund.no