iCon to acquire Fortum heating unit

The infrastructure fund manager is buying Fortum’s Norwegian heat production and district heat and cooling business.

iCon Infrastructure Partners (iCon), the London-based infrastructure fund manager, has agreed to acquire 100 percent of Fortum fjernvarme and related holdings from Fortum, the Finnish energy company.

The deal, the valuation for which was undisclosed, was part of a wider sale by Fortum of its Norwegian electricity distribution and heating businesses. It has agreed to sell the electricity distribution arm to Hafslund Group, the Oslo Stock Exchange-listed power company.

Fortum fjernvarme’s heat production comes from heat pumps and business-to-business heat plants with a combined capacity of 210 megawatts (MW). Last year, the business delivered 215 gigawatt hours (GWh) of district heat and 63GWh of district cooling to its customers – which are mainly in the Greater Oslo and Akershus areas.

Speaking to Infrastructure Investor, iCon managing director Daniel Agostino said: “It’s a very well invested business with a lot of capex committed. It’s well positioned, it has concessions in growing parts of Oslo, and great potential for expansion.”

He added that there was not a high penetration of district heating at the moment but that it was being actively encouraged. He anticipated potential for both organic growth and possible bolt-on acquisitions.

Although the sale was the subject of an auction, in which other infrastructure fund managers are understood to have participated, Agostino said iCon had approached it in a “disciplined fashion” and – having anticipated that Hafslund would be the natural buyer of the distribution arm – had effectively joined forces with Hafslund as a joint buyer.

The deal represents iCon’s fifth from the fund it closed in March last year with around €500 million in commitments. Last month, it agreed to acquire firmus energy, the Northern Irish natural gas supplier. Market sources say iCon may consider returning to market to raise a new fund sometime next year.

The latest sales are part of an ongoing process of non-core asset disposals by Fortum. Towards the end of last year, it sold its Finnish electricity grid to a consortium led by Canada’s Borealis and First State Investments for €2.55 billion. The next big sale is expected to be the firm’s Swedish grid, which is expected to raise around €5 billion.

iCon was advised on the Fortum fjernvarme deal by London-based DC Advisory.