Fortum's Uniper investment

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Fortum agrees to acquire majority in Uniper to improve stability and accelerate realisation of strategy

On 8 October 2019, Fortum entered into agreements to acquire all the shares held by funds managed by Elliott Management Corporation and its affiliates (“Elliott”) and Knight Vinke Energy Advisors Limited and its affiliates (“Knight Vinke), a total in excess of 20.5%. Fortum will pay approximately EUR 2.3 billion for the combined shareholding, corresponding to EUR 29.93 per share. Upon closing of the transactions, Fortum’s share in Uniper will increase to more than 70.5% and the total investment in Uniper to approximately EUR 6.2 billion, representing an average acquisition price of EUR 23.97 per share. 

It has been Fortum’s preference to agree with Uniper on a joint path forward, yet discussions have each time ended short of actions. Fortum is convinced that this change in Uniper’s ownership structure as well as a resolution of the complex relationship between all parties will return stability and put focus solely on the business and the opportunities available to us.

“I am pleased that we have today taken this important step to create a leader in the European energy transition. I am convinced that this will create attractive opportunities for both companies and their employees. For Fortum’s shareholders this transaction will be earnings accretive. As always, this investment follows our prudent investment criteria to add value reflecting carefully managed risks,” says Pekka Lundmark, Fortum’s President and CEO.

“The energy transition will require significant investments in the coming decades not only in renewables, but also in gas, energy storage, and other flexibility solutions to provide security of supply and to decarbonise also industry, transportation, heating, and cooling. We see an ideal match of our complementary competences. With an aggregate EBITDA of approximately EUR 3 billion, Fortum and Uniper will be in a strong position to capture the growth opportunities presented by these changes – provided that we work in full alignment,” says Pekka Lundmark.

Read more: Stock exchange release 8 October 2019, Fortum agrees to acquire majority in Uniper to improve stability and accelerate realisation of strategy

Why is Fortum investing in Uniper?

As we have consistently said since we first announced our interest in Uniper, Fortum is committed to the energy transition, but we all understand that it will not happen overnight. While we are focused on leading the transition to cleaner energy, we also understand that we have to meet the needs of our customers in terms of security of supply and affordability. And that’s where Uniper comes in, because we can’t just fast forward to the future. With the planned European coal phase out, coupled with Germany’s 2022 nuclear stop-date, Uniper’s gas-fired generation will have an important role to play in providing security of supply for the increasing share of renewables in the system.

While Uniper mainly stands for coal and gas in Germany, it has in Sweden sizable hydro capacity that complements the growing share of wind in the Nordics as well as CO2-free nuclear, which is an important base-load provider and one of our core competencies.

We expect a good return on our investment, and we believe that we can achieve even more benefits by working together with Uniper. At the same time, we want to be able to pay a good dividend to our shareholders.

That is why we invested in Uniper. Because together, Fortum and Uniper have a good strategic mix of assets - both clean and secure - as well as the expertise required to successfully and affordably drive Europe’s transition.

    Public takeover offer for all Uniper shares

    In September 2017, Fortum announced it had signed a transaction agreement with E.ON under which E.ON had the right to decide to tender its 46.65 % shareholding in Uniper SE into Fortum’s public takeover offer (PTO). In November 2017, Fortum launched a voluntary public takeover offer to all Uniper shareholders at a total value of EUR 22 per share, implying a premium of 36 % to the price prior to intense market speculation on a potential transaction at the end of May 2017. In February 2018, Fortum announced that shareholders representing 47.12 % of the shares in Uniper had accepted the offer.

    Regulatory approvals

    The PTO was conditional to regulatory and merger control approvals in several countries. During the second quarter of 2018, Fortum received the required clearances in Russia under the Strategic Investment Law as well as Competition Law. The clearances allow Fortum the acquisition of up to 50 % of shares and voting rights in Uniper. During the second quarter, Fortum also received an unconditional merger clearance decision from the European Commission. Clearances in the United States and South Africa had already been granted earlier.

    Closing of the transaction announced on 8 October 2019 is subject to customary regulatory clearances in Russia and the United States. Fortum is in discussions with the Russian state authorities and has made a preparatory filing to the Russian Federal Antimonopoly Service.

    Majority ownership in Uniper

    On 26 June 2018, Fortum closed the offer and became the largest shareholder in Uniper with 47.35 % of the shares. Since June 2018, Fortum has increased its shareholding in Uniper to further secure its voting position in any future Uniper General Meeting. On 30 June 2019, Fortum owned 49.99 % of the shares in Uniper.

    Upon closing of the transaction announced on 8 October 2019, Fortum’s share in Uniper will increase to more than 70.5% and the total investment in Uniper to approximately EUR 6.2 billion, representing an average acquisition price of EUR 23.97 per share.

    Uniper is reported as an associated company

    The share of Uniper’s profit will contribute to the EPS and dividends to the cash flow of Fortum. As a result of this transaction, Fortum’s leverage rose above Fortum’s long-term target level for net debt/EBITDA ratio of around 2.5x. Over time, however, Fortum expects its cash generation in combination with the dividend from Uniper to reduce this ratio towards the stated target.

    Fortum has consolidated Uniper as an associated company from 30 June 2018.

    Fortum will fully consolidate Uniper as a subsidiary in its financial statements from closing of the transaction announced on 8 October 2019.

    Change does not happen overnight

    Fortum wants to drive the change towards a cleaner world. Change, however, does not happen overnight, it requires persistence. The future energy system must be secure, flexible and clean. Alongside wind and solar energy, we need secure production to ensure the functionality of society at all times. Additionally, we need flexible, adjustable hydropower and gas power to ensure energy availability also when the wind isn’t blowing, or the sun isn’t shining.

    Fortum is a forerunner in low-carbon energy production, circular economy, and sustainable urban solutions. Uniper is a successful company that owns both secure and flexible production. About half of the company’s production capacity is low-carbon gas power, and about 20% is carbon-free hydro and nuclear power.

    We expect a good return on our investment, and we believe that we can achieve even more by working together with Uniper. At the same time, we want to pay a good dividend to our shareholders.

    In line with our vision, we will continue the work at Fortum for a cleaner world.

     

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