Fortum exercises control in E.ON Finland purchase

Fortum is to buy the 65 per cent share of E.ON Finland owned by Germany’s E.ON Group, exercising a call option that was part of the compensation it received from the Wesertal deal made with E.ON in 2002.

Under the terms of the call option, Fortum had to buy during the first three months of 2005 at a share price of €38 ($50), a total of €390m.

Fortum has also announced that it has made an offer to E.ON’s largest minority shareholder, the City of Espoo, which currently has a 34.2 per cent share. The offer of €48 per share is around 50 per cent higher than that of recent closed trading prices and about 60 per cent more than the average share price for 2004. The share being negotiated is expected to cost Fortum around €257m.

The purchases will be financed by debt using Fortum’s existing credit arrangements. As the purchases are realized, the net debt is expected to grow by about €650m, although Fortum estimates that the purchase will have a positive effect on earnings per share within two years. This includes the €300m development plan Fortum plans to instigate once it has obtained control.

EC wants gas market

European governments need to do more to implement market opening in their domestic gas and electricity markets, was the dominant message in an annual European Commission (EC) report.

The report, into the functioning of the internal electricity and gas market, concluded that only greater integration of national markets can bring the required level of competition to achieve greater efficiency and lower energy prices.

Market opening, nevertheless, is having a positive impact. The report shows that significant productivity gains have been achieved by the sector and that electricity prices have fallen in real terms by 10-15 per cent compared with 1995 figures.

There have also been calls from the EC to introduce a law that would require member states to meet binding targets on saving energy.

Calpine set to sell Saltend

The heavily debt-laden US power company, Calpine Corp., is considering selling one of Britain’s most modern power stations, Saltend near Hull.

Caline spent $800m on the 1200 MW gas fired plant after it had just opened in 2001 but now it looks set to sell, after appointing banker Credit Suisse First Boston to advise on financial alternatives, “including the potential sale of the plant” a statement said.

Calpine has been selling assets to reduce its substantial borrowings and according to Standard and Poor’s Rating Services, if the company achieved a $1bn sale it would look favourable for its credit quality.

Net proceeds from the sale of the facility would be used to redeem the existing $360m shares.

Elsam rejects Vattenfall for Dong

The board of Danish power company Elsam has rejected Vattenfall’s bid for 67 per cent of its shares and agreed unanimously that the proposed merger with Dansk Olie og Naturgas (DONG) is more attractive to its shareholders.

The board found some of Vattenfall’s offer preconditions were inconvenient and that its offer of €168 ($219) per share did not reflect the true value of the company. In comparison it found that the deal proposed by DONG offered Elsam’s shareholders the possibility of benefiting from any future increment in the company’s value.

After requests from Elsam’s shareholders, negotiations between Elsam, DONG and the Danish Ministry of Finance will commence with the intention of making funds available within a shorter period of time than stated in the agreement.

No January start for Swissgrid

Switzerland’s competition watchdog is to investigate a decision by electricity operators to form a joint company to manage the Swiss power network. The probe, which could take up to four months, wrecks January’s planned launch of the new firm, Swissgrid.

Seven of the country’s largest electricity grid operators have expressed their intention to unite and give Switzerland a single voice in dealing with cross-border energy transmission. But now, the Competition Commission (Comco) has said that it wanted to examine whether a move would stifle competition.

Patrik Ducery, vice director of Comco, confirmed that Swissgrid would have to put its plans on hold until the probe had been completed.

RWE to build CCGT in the UK

RWE’s subsidiary, NPower, has approached the government for permission to build a combined cycle gas turbine (CCGT) power station on its former power station site in South Wales. It has applied for consent to build a 2000 MW plant and if approved, NPower’s generation capacity will increase to 10 000 MW.

The announcement to build on the site of the now defunct oil fired station follows E.ON’s decision to convert its Grain oil fired station to gas and supports a wider trend by UK utilities to switch to gas based generation.

News digest

Europe: Global greenhouse gas credit broker,, has facilitated the largest ever deal in European Emissions Allowances. The unique deal pioneered a linked sale with ‘secondary market’ Certified Emission Reductions (CERs).

Finland: The EU competition authority is to investigate whether the financing of Teollisuuden Voima’s (TVO) project to build a fifth nuclear reactor in Finland is in breach of EU competition regulations.

France: The French parliamentary office for technical and scientific evaluation has started a series of hearings in the National Assembly intended to establish the state of research into future management of radioactive waste.

Germany: Germay’s plans for total integration of windpower in the national electricity network have raised concerns in the German energy consumers’ federation, VEA, that electricity prices will rise.

Italy: Officials from the Italian and French governments have met to try to resolve tensions between EDF and Italenergia-Bis Edison over EDF’s voting rights, which have been frozen at 2 per cent despite having an 18 per cent stake.

Netherlands: BP has begun construction of a 9 MW wind farm at its oil terminal in the port of Amsterdam. The $10m project will displace 5000 t of carbon dioxide and is due to be completed in the first half of 2005.

Norway: Wind power developer Havgul AS has submitted preliminary plans that would see 1400 MW of generating capacity established in four wind farms offshore the More og Romsdal region in Norway.

Spain: Iberdrola’s proposed takeover of energy services company Factor Energia has been given the go ahead by the country’s competition watchdog after it decided not to refer the proposed deal to the courts.

Spain: A joint European-Moroccan consortium has completed the construction of a 384 MW CCGT plant in Morocco near Tangiers and a second 400 MW plant may follow. Work is currently underway to double the 700 MW subsea grid link between Spain and Morocco.

Sweden: The severe storm that struck parts of Sweden at the start of 2005 will cost Vattenfall around SEK0.5bn ($72m) according to preliminary cost estimates.

UK: Britain’s biggest coal fired power station, Drax, could receive à‚£348m in compensation for unpaid contracts from collapsed energy group TXU Europe. The consortium of banks that owns Drax has argued that the loss of established contracts left it exposed to low wholesale energy prices.

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