LÄNSIVOIMA OYJ MERGERS INTO FORTUM CORPORATION - THE BOARDS OF DIRECTORS HAVE APPROVED THE MERGER PLAN

The Boards of Directors of Fortum Corporation and Länsivoima Oyj have 29 February 2000 approved the following Merger Plan:

 

1. Merger

 

Länsivoima Oyj will merge into Fortum Corporation so that all the assets and liabilities of Länsivoima Oyj will be transferred without liquidation proceedings to Fortum Corporation and the shareholders of the merging company Länsivoima Oyj will receive shares in the acquiring company Fortum Corporation as merger consideration.

 

2. The merging company

 

Länsivoima Oyj

register number: 29.064

address: Sähköyhtiöntie 2-6, 21530 Paimio

domicile: Paimio

 

3. The acquiring company

 

Fortum Corporation

register number: 728.243

address: Keilaniementie 1, 02150 Espoo

domicile: Helsinki

 

4. The merger consideration

 

As merger consideration the shareholders of Länsivoima Oyj shall be given ten (10) shares in Fortum Corporation against each share in Länsivoima Oyj bearing the nominal value of ten (10) Finnish marks. The nominal value of a share in Fortum Corporation at the time of delivery of the merger consideration will be 3.40 euros subject to that the General Meeting of Shareholders in Fortum Corporation will resolve on implementation of the euro currency and a bonus issue in Fortum Corporation in accordance with the proposal described further in Section 10.

 

5. The convertible bond loan of Länsivoima Oyj

 

The General Meeting of Shareholders of Länsivoima Oyj (former Lounais-Suomen Sähkö Oy) has on 18 March 1994 issued a convertible bond loan of 100,000,000 Finnish marks. According to the terms of the loan, Section III.15, if the company decides to merge into another company, a holder of a convertible bond shall be given the possibility to use his/her conversion right at a time notified by the Board of Directors of the company.

 

The holders of the convertible bonds of Länsivoima Oyj may convert their bonds into shares in Länsivoima Oyj in accordance with the exchange ratio provided in the terms of the loan and the decision of the Board of Directors taken on the basis of those terms. The bonds can be converted during a period which continues after the end of the conversion period provided in the loan terms, i.e. 31 May 2000, to 31 August 2000. At the end of this period the right to conversion shall expire and the convertible bonds can no longer be converted into shares in Länsivoima Oyj.

 

The convertible bond loan of Länsivoima Oyj shall be transferred to Fortum Corporation at the time of implementation of the merger, and Fortum Corporation shall be liable for payment of the loan capital and the interest provided in the terms of the loan to the holders of convertible bonds. The terms of the convertible bond loan shall remain unaltered, excluded, however, the conversion right relating to the loan, and what is said about Länsivoima Oyj in the terms of the loan is correspondingly applied to Fortum Corporation.

 

6. Oy Terrasilvana Ab's shares and commitments entitling to Länsivoima Oyj's shares

 

In 1993 Oy Terrasilvana Ab merged into Länsivoima Oyj in accordance with the merger agreement adopted by these companies on 16 March 1993. Those shareholders of Oy Terrasilvana Ab who have not converted their shares in Oy Terrasilvana Ab or commitments held by them entitling to shares in Länsivoima Oyj, are entitled to receive shares in Fortum Corporation as a merger consideration in the merger ratio provided in this Merger Plan. In order to receive the merger consideration such shareholder must surrender the shares held by him/her in Oy Terrasilvana Ab and/or the commitments entitling to shares in Länsivoima Oyj as well as to present due clarification concerning his/her shareholdership in Oy Terrasilvana Ab at the moment when Oy Terrasilvana Ab merged into Länsivoima Oyj.

 

7. The Articles of Association of Fortum Corporation

 

No amendments are needed to the Articles of Association of Fortum Corporation in consequence of the merger.

 

8. Description of capital loans

 

Neither Länsivoima Oyj nor Fortum Corporation has issued any capital loans described in Chapter 14, Section 4, Subsection 2, item 4 of the Companies Act.

 

9. Share ownership of the merging company in the acquiring company

 

Länsivoima Oyj and its subsidiaries do not hold any shares in Fortum Corporation.

 

10. Proposal for new issue of shares in Fortum Corporation required for the payment of the merger consideration

 

At the date of this Merger Plan the registered and fully paid share capital of Fortum Corporation is 15,695,652,700 marks and it is divided into 784,782,635 shares with the nominal value of 20 marks per share. The Board of Directors of Fortum Corporation has proposed to the Annual General Meeting of Shareholders to be held on 17 April 2000 that the share capital of Fortum Corporation will be converted into euros, the share capital of the company will be increased through a bonus issue so that no new shares will be given, and that the Articles of Association of Fortum Corporation will be amended so that the nominal value of a share is 3.40 euros.

 

In order to distribute the merger consideration the share capital of Fortum Corporation will be increased by a minimum of 3.40 and a maximum of 237,198,892 euros by issuing in aggregate a minimum of one and a maximum of 69,764,380 new shares in Fortum Corporation with the nominal value of 3.40 euros per share to the shareholders of Länsivoima Oyj who are entitled to the merger consideration. In the event that the proposals for implementation of the euro currency and the bonus issue are not adopted, the share capital of Fortum Corporation will be increased by a minimum of 20 and a maximum of 1,395,287,600 marks by issuing a minimum of one and a maximum of 69,764,380 new shares in Fortum Corporation with the nominal value of 20 marks per share to the shareholders of Länsivoima Oyj who are entitled to the merger consideration.

 

The amount of the final increase of the share capital will depend on the number of shareholders of Länsivoima Oyj who demand their shares to be redeemed in accordance with Chapter 14, Section 12 of the Companies Act and on the extent to which the holders of the convertible bonds of Länsivoima Oyj convert their convertible bonds into Länsivoima Oyj's shares during the period specified in Section 5 above.

 

The new shares in Fortum Corporation which are issued as a payment of the merger consideration will carry any and all shareholder's rights as from the registration of the increase of the share capital.

 

11. Proposal for contemplated time and other terms of the distribution of the merger consideration

 

The distribution of the merger consideration shall commence on the effective date of the merger specified further in Section 14 or, if such date is not a banking day, on the next banking day following the effective date of the merger.

 

The merger consideration shall be distributed in the book-entry system in such a manner that, on the effective date of the merger the shares of Länsivoima Oyj that have been registered in the book-entry system and entered into the shareholder register of Länsivoima Oyj will be converted into shares in Fortum Corporation in accordance with the exchange ratio agreed in the Merger Plan.

 

To those shareholders in Länsivoima Oyj who have not, prior to five (5) banking days before the effective date of the merger at the latest, surrendered their share certificates to the relevant book-entry registrar for registration of ownership, the merger consideration will be distributed after such book-entry conversion in a manner that the shares in Fortum Corporation will be entered into their book-entry accounts in accordance with the exchange ratio agreed in the Merger Plan after the effective date of the merger.

 

To those shareholders in Oy Terrasilvana Ab who are entitled to the merger consideration in accordance with Section 6 above, the merger consideration shall be distributed in the book-entry system in a manner that the shares in Fortum Corporation will, in accordance with the exchange ratio agreed in the Merger Plan, be entered into the book-entry account that is notified by each shareholder in connection with the transfer of the shares in Oy Terrasilvana Ab and/or transfer of the commitments entitling to the shares in Länsivoima Oyj and presentation of the documents of title.

 

12. Description of special benefits and rights to be granted in connection with the merger

 

No special benefits or rights have been granted to the members of the Boards of Directors, the Managing Directors and the auditors of the companies that are parties to the merger nor to the members of the Supervisory Board of Fortum Corporation or to the authorised auditor acting as an independent expert. The remuneration of the authorised auditors acting as independent experts shall be paid pursuant to an approved invoice.

 

13. Reasons for the merger and basis for the determination of consideration

 

Fortum Power and Heat Oy, a wholly-owned subsidiary of Fortum Corporation, holds approximately 78,1 % of the shares and votes in Länsivoima Oyj, and therefore Länsivoima Oyj is dominated by the Fortum group. The aim of the Fortum group is to generate company structures in the central business activities to correspond to flexible and decontrolled energy markets. For this purpose Fortum Corporation clearly needs to develop the legal structure of the group with respect to energy and electricity distribution activities, which also are central business areas in the Länsivoima group.

 

The proportion of values of Länsivoima Oyj and Fortum Corporation has been the basis for determination and valuation of the merger consideration to be paid to the shareholders of Länsivoima Oyj. In the determination and valuation attention has been paid, amongst other issues, to the market values of the companies, price development, profit records, estimated profitabilities as well as to such redemption price determined in accordance with the Securities Markets Act that Fortum Corporation has previously offered to the shareholders of Länsivoima Oyj, i.e. 45.41 euros per share. In addition, when determining the consideration, attention has been paid to the dividends proposed by the Boards of Directors of Fortum Corporation and Länsivoima Oyj to the General Meetings of Shareholders with respect to the year 1999. On the basis of the aforementioned factors the merger ratio can be found reasonable for the shareholders of Länsivoima Oyj and Fortum Corporation. There are no significant valuation problems.

 

14. The contemplated time of registration of the implementation of the merger

 

The contemplated date of registration of the implementation of the merger, which also is the effective date of the merger, is 30 September 2000.

 

15. Quotation of the new shares

 

It is intended that the new shares of Fortum Corporation issued as the merger consideration will be quoted on the main list of the Helsinki Exchanges as from the effective date of the merger or, if such date is not a trading day, as from the first trading day following the effective date of the merger.

 

16. Approval of the Merger Plan and registration

 

This Merger Plan together with the appendices hereto shall be submitted for approval by the General Meetings of Shareholders of Fortum Corporation and Länsivoima Oyj. Fortum Corporation and Länsivoima Oyj will notify the Merger Plan for registration without delay after its signing.

 

The Boards of Directors of Fortum Corporation and Länsivoima Oyj are authorised to jointly decide on such technical changes to the Merger Plan or its appendices that are demanded by the authorities or otherwise found appropriate by the Boards of Directors.

 

17. Payment of dividend in the merging company and the acquiring company

 

The Board of Directors of Länsivoima Oyj proposes to the Annual General Meeting of Shareholders to be held on 17 April 2000 that 7.80 marks (1.31 euros) per share, i.e. in aggregate approximately 51.0 million marks (approximately 8.6 million euros) will be paid as a dividend for the financial year that has ended on 31 December 1999. The Board of Directors of Fortum Corporation proposes to the Annual General Meeting of Shareholders to be held on 17 April 2000 that 0.18 euros (1.07 marks) per share, i.e. in aggregate approximately 141.3 million euros (approximately 839.9 million marks) will be paid as a dividend for the financial year that has ended on 31 December 1999. In the event that the General Meeting of Shareholders of either company would distribute dividend in excess of the proposal by the Board of Directors, the Board of Directors of the other company shall propose to the General Meeting of Shareholders the payment of an additional dividend in such a manner that the dividends distributed from the financial year 1999 correspond to the ratio of the companies respective distribution of dividends. The companies undertake not to distribute other dividends before the coming into force of the merger.

 

18. Other terms

 

(a)      The personnel of Länsivoima Oyj will transfer to Fortum Corporation with the status of continuing employees.

 

(b)      The Board of Directors and Managing Director of Länsivoima Oyj will prepare the final accounts as referred to in the Companies Act after the merger consideration has been distributed, however so that the final accounts can be presented at the General Meeting of Shareholders of Länsivoima Oyj to be held on 31 December 2000 at the latest.

 

Fortum Corporation

 

 

Antti Ruuskanen

Corporate Executive Vice President, Communications

 

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