Fortum plans to list oil business
Posted: 9 September 2003
Significant investment in the Porvoo Refinery
Fortum has decided to commence preparations to separate its oil
business into a new company and subsequently to list the new company
on the Helsinki stock exchange through an initial public offering.
Fortum has also decided to invest EUR 500 million to upgrade the
Porvoo refinery, in order to take advantage of well established
market trends and thereby further improve its competitiveness and
profitability. These strategic decisions will enable Fortum to further
increase its Nordic utility focus and to continue to participate
actively in the restructuring of the Nordic power and heat markets.
These measures will also improve the competitive position and commercial
prospects of the oil business.
Fortum has assessed how to further develop its businesses in the
context of the continuing changes in the utility and refining &
marketing industries. In light of the capital intensive nature of
both industries, Fortum wants to ensure the availability of sufficient
resources to fund the attractive investment opportunities which
exist in both businesses. Fortum has concluded that an IPO of the
oil business best positions both businesses to take advantage of
the strategic opportunities they face and provides them with access
to separate pools of capital. These measures will create two leading
Nordic companies with strong competitive positions in their respective
markets.
Preparations to separate the oil business have started and Fortum
aims at completing the internal reorganisation during the first
half of 2004. This will enable a subsequent listing and sale of
shares subject to market conditions. The new company will include
all of Fortum's oil refining, marketing, shipping and production
assets and operations. Existing employee benefits will remain unchanged
following the separation.
The creation of an independent refining & marketing company
and subsequent stock exchange listing will enable the new company
to best pursue an independent strategy and will facilitate the EUR
500 million investment in the Porvoo refinery. The upgrade will
further strengthen the refinery's position as a highly efficient
refinery in Northern Europe.
The high expected return from the upgrade investment is driven
by the Porvoo refinery's ability to produce more high margin, environmentally
benign products from less expensive crude oil. The demand for these
products is rapidly growing in Fortum's key markets.
While the total production capacity will remain unchanged, the
refinery will be able to significantly increase the production of
high margin products, such as sulphur-free diesel, utilising for
example more Russian crude. Fortum expects to increase its refining
margin premium by at least USD 1/bbl and thus achieve an attractive
return on investment using relatively conservative assumptions.
The investment is expected to be completed by the end of 2006.
The building and engineering works related to the investment amount
to approximately 3,000 man-years and the project is expected to
result in 100 new permanent jobs.
According to President and Chief Executive Officer Mikael Lilius,
Fortum has significantly developed its businesses over the past
few years. "We have improved profitability markedly. Now we
can take advantage of new opportunities in both industries. Today's
decisions will allow us to continue to develop Fortum as the leading
utility company in the Nordic region. At the same time, we can ensure
the long term competitiveness of the new, independent refining &
marketing company."
For more information see http://www.fortum.com.
Posted by Richard Price,
Editor Pipeline Magazine
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