Fortum Sells Norwegian E&P Business to ENI
Fortum has reached an agreement with Eni to sell Fortum Petroleum AS, its Norwegian Exploration & Production business, for a total consideration of approximately US $1.1 billion. The agreement is the result of the strategic review of Fortum's Norwegian E&P business that was launched in May 2002. It represents a further significant step in Fortum's restructuring program of focusing on its core businesses and divesting non-core assets. With this transaction, Fortum's gearing will decline from 84% to 71% on a pro-forma basis.
Fortum has reached agreement with Eni to sell its Norwegian E&P business for US $1.078 million in cash. The consideration comprises US $420 million in cash for 100% of the equity plus US $658 million for the assumption of interest-bearing loans. At year-end 2001 FPAS had reserves of approximately 210 million barrels of oil equivalent.
The financial effects of the transaction will be dependent on the results of FPAS during the fourth quarter of 2002. It is currently estimated that the transaction on a pre-tax basis will be neutral to earnings, and will incur a tax charge of about EUR 70 million. Fortum plans to use the proceeds to pay down debt. Based on the September 30th balance sheet, Fortum's 2002 net indebtedness will be reduced to EUR 5.1 billion on a pro forma basis, and gearing will be reduced from 84% to 71%.
Completion of the sale, which is conditional on clearance by the European Union and Norwegian Authorities, is expected in the first quarter of 2003.
"We are very pleased with the outcome of this process. The transaction is another significant step forward in Fortum's strategy of focusing on its core power and heat business and clean fuels refining and marketing business. The sale of FPAS strengthens Fortum's balance sheet and is consistent with our strategic agenda", said Mikael Lilius, President and CEO of Fortum.