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Fortum sells Finnish district heating business, 80% stake in Nordic wind farms

Fortum Oyj is separately selling a district heating business in Finland and a majority stake in its portfolio of wind power plants across the Nordics for a total of value of about €780 million on a debt and cash free basis.

The first deal will see Fortum transfer its district heating business in Joensuu, Finland, to local power company Savon Voima Oyj for €530 million. In a separate transaction, Fortum is selling an 80% stake in its portfolio of onshore wind plants across Norway, Sweden and Finland to funds advised by Credit Suisse Energy Infrastructure Partners AG, or CSEIP, the investment manager of Credit Suisse Group AG, for €250 million.

The utility, which is majority-owned by the Finnish state, announced the deals Dec. 20 and said it expects to close them during the first quarter of 2020.

Fortum's district heating business in Joensuu is centered around a combined heat and power plant that produced about 550 GWh of heat and 240 GWh of power in 2018, the company said in a news release. Fortum expects to record a tax-exempt capital gain of about €430 million in its City Solutions segment during the first quarter of 2020 due to the disposal.

Per Langer, executive vice president of City Solutions at Fortum, said the network had raised large interest among buyers, and its disposal will allow Fortum to focus its efforts on phasing out coal use in its district heating network in Espoo, Finland, by 2025. Fortum said it is still considering strategic options for its district heating business in Estonia.

The wind portfolio deal will see Fortum sell 80% of three operational wind farms and two projects under construction to funds managed by CSEIP for a total consideration of about €250 million, of which €170 million is related to the first quarter of 2020. Fortum said the sale will have a "minor positive effect" on comparable operating profit in its Generation segment in the first quarter.

The portfolio consists of the 32-MW Nygårdsfjellet and 50-MW Ånstadblåheia farms in Norway as well as the 76-MW Solberg farm in Sweden, which are already operational, and two wind farms under construction, the 90-MW Kalax project in Finland and the 97-MW Sørfjord project in Norway.

In addition, Fortum and CSEIP agreed to exclusively develop a new 154-MW project in Sävar, Sweden, which could be built at a later stage and would bring their jointly owned capacity to about 500 MW.

Fortum will keep a 20% minority ownership in the portfolio, finish building the not-yet operational assets and continue as long-term asset manager for all of the wind parks. The company said it will also keep developing other wind projects in the region, which are still at an earlier development stage, using cash freed up through the sale.