A consortium formed of Canada’s Borealis Infrastructure, the Third Swedish National Pension Fund (AP3), the First Swedish National Pension Fund (AP1) and Stockholm-based insurer Folksam has agreed to acquire Fortum Distribution AB, the Swedish electricity distribution business of Finland’s Fortum, for SEK60.6 billion (€6.6 billion; $7.0 billion).
The transaction will see the infrastructure investment arm of the Ontario Municipal Employees Retirement System (OMERS) own 50 percent of the business, with AP3 becoming second-largest shareholder with a 20 percent stake. Folksam, along with subsidiaries, and AP1 will own 17.5 percent and 12.5 percent respectively.
The deal remains subject to regulatory approval. Expected to close during the second quarter of this year, it is the first investment made By Borealis in Sweden.
“Sweden's strong regulatory framework and firm commitment to the rule of law make it an ideal place to invest. Fortum Distribution AB provides a strong match for OMERS long-term obligations to our plan members, and represents precisely the kind of rare, high-quality asset that fits squarely with OMERS strategy to increase its exposure to infrastructure,” said Michael Rolland, chief investment officer of OMERS’ private markets unit, in a statement.
Fortum Distribution AB is the second-largest player in the power distribution market in Sweden. It provides 906,000 customers with electricity, representing a market share of around 17 percent.
Fortum expects to pocket a one-time sales gain of about €4.4 billion through the deal, bringing the profit it has generated through divesting its distribution assets in Scandinavia over the last 15 months to €6.6 billion.
The Finnish utility started off by selling its domestic grid in December 2013 to Borealis, First State Investments and local investors Finnish Local Government Pensions Institution (Keva) and LocalTapiola Pension for €2.55 billion. It followed on in April 2014 by divesting its Norwegian power distribution and heating businesses to Hafslund Group, a Stockholm-listed power company, and London-based iCON Infrastructure Partners respectively.