Fortum announces hydropower strategy in Russia

Fortum and Gazprom Energoholding have signed a protocol to start a restructuring process of their ownership of TGC-1, a Territorial Generating Company in Russia.

TGC-1 owns and operates hydro power and thermal power plants in North-West Russia as well as heat distribution networks in St. Petersburg. Currently Gazprom Energoholding owns 51.8% of the TGC-1 shares and Fortum 29.5%.

As part of the restructuring, Fortum will establish a joint venture together with Rosatom to own the hydro assets of TGC-1, while Gazprom Energoholding continues with the heat and thermal power businesses of TGC-1. By utilising its present stake in TGC-1, Fortum would obtain a 75-plus-percent ownership in the new hydro power company. Rosatom would have a 25-minus-percent minority holding in the new hydro power company.

Fortum, Gazprom Energoholding and Rosatom have signed a protocol to start the restructuring process. The parties shall agree on the detailed structure, practical arrangements and final commercial terms of the transactions. The new company will be consolidated to Fortum Group as a subsidiary.

Provided that Fortum obtains a 75-plus-percent ownership in TGC-1 hydro assets, Fortum would be ready to participate with a minority stake (max 15%) in the Finnish Fennovoima nuclear power project on the same terms and conditions as the other Finnish companies currently participating in the project.

TGC-1 is a major Territorial Generating Company in terms of installed capacity operating in the North-West Russia. TGC-1 generates electricity and heat in 54 power plants in St. Petersburg, Leningrad oblast, Karelia and Kola regions and supplies heat mainly in the St. Petersburg area.

TGC-1 owns and operates a fleet of 40 hydro power plants with a total capacity of approx. 3,000 MW. Hydro power generation accounts for 41% (12-13 TWh) of the company's total electricity generation. In addition, the company owns 14 thermal plants with a total electricity capacity of 4,300 MW (with a production of 17 TWh/a) and has a total heat capacity of 16,500 MW (29 TWh/a). The shares of TGC-1 are listed on the Moscow Exchange (MOEX).

In 2013, the IFRS consolidated net sales of TGC-1 amounted to approximately EUR 1,400 million, EBITDA to approximately EUR 340 million and operating profit to approximately EUR 200 million. Total assets of the company were approximately EUR 2,600 million and number of employees amounted to approximately 7,600 at the end of 2013. IFRS figures have been calculated at the currency exchange rates on 30 September 2014