Orkla sells part of its hydropower assets
Orkla-owned Elkem is selling its hydropower plants in Salten and
Bremanger for NOK 6 billion. The total annual power production of the
sold plants is 1.7 TWh, of which 1.5 TWh is owned production. Elkem's
power plants in Sauda and Borregaard's power plants in Sarpsborg will
be retained.
The sale agreements were approved by the Board of Directors of Orkla
ASA and of
Elkem AS on 4 October 2009.
"The power plants owned by Elkem in Salten and Bremanger are subject
to reversion, and
must be sold to public companies before the dates of reversion. The
operations in Sauda
will however be taken over by Statkraft in 2030 regardless of whether
Elkem keep the
plants or sell them to public companies. The power plant owned by
Borregaard in
Sarpsborg was built before the reversion laws were enacted and can be
retained perpetually.
The power plants in Sauda and Borregaard will therefore be kept ,"
says Orkla President
and CEO Dag J. Opedal.
The shares in Elkem Energi Siso AS and Elkem Energi Lakshola AS (the
power plants in Salten)
will be taken over by Norsk Vannkraftproduksjon AS, which is owned by
Nord-Trøndelag
Energiverk Energi AS and Østfold Energi AS on a 50/50 basis. The
shares in Elkem Energi
Bremanger AS will be taken over by Svelgen Kraft Holding AS, 56 % of
which is owned by
Sogn og Fjordane Energi Produksjon AS, 34 % by Tafjord
Kraftproduksjon AS and 10 % by
Sognekraft AS.
"Ownership of the hydropower plants has been important for the
development of Elkem's
industrial operations in the last 40 years. The plants that must be
sold before they are due
to revert, i.e. latest within the next 10-15 years, will therefore no
longer offer the long-term
supply of power that we need to develop our industrial activities. We
have obtained good
conditions through competition between several bidders. We therefore
choose to sell now,
based on the expectation that the consolidation of public power
producers in Norway is
likely to limit competition later on," says Bjørn Wiggen, Chairman of
Elkem's Board of
Directors and Orkla Executive Vice President.
The total sale price is NOK 6,009 million, consisting of NOK 4,300
million for Salten and
NOK 1,709 million for Bremanger. Settlement will be made when the
necessary official
approvals have been obtained.
In autumn 2008, the Norwegian parliament passed a new Concession Act
with a view to
securing public ownership of hydropower installations in Norway.
Under the Act, only
publicly-owned power companies may buy or build large hydropower
plants. Consequently,
Orkla is unable to further develop its hydropower operations by
acquiring and expanding
hydropower plants.
The new Act gives publicly-owned companies which take over private
power plants that
are subject to reversion a statutory right of reversion waiver. The
Norwegian parliament
resolution constituted the enactment of a 30-year-old practice of
changing concession
conditions in this way. The Svelgen III and IV, Siso and Lakshola
plants, most of which
are due to revert to the state during the period 2021 to 2029, must
therefore be sold prior
to their reversion.
The Svelgen I and II power plants and a few small plants in Bremanger
are under lease
agreements with Statkraft. The plants are operated as an integral
part of Elkem Energi
Bremanger AS's power business. Contracts for 240 GWh of hydropower
are being
concluded to ensure that the power from these plants will be used as
intended at the
Elkem Bremanger smelting plant.
The power plants in Sauda are regulated by a civil law lease
agreement with Statkraft.
The agreement runs until 2030, after which the power plants will be
returned to Statkraft
in return for financial compensation equivalent to the residual tax
written down value of
the newly built plants. In a normal year and based on current market
expectations, the
Saudefaldene plants are anticipated to contribute an annual EBITDA of
approximately
NOK 250-300 million.
In addition to Elkem's power plants in Sauda, Borregaard holds
reversion-free power
rights, primarily in Sarpsborg. Orkla's hydropower operations will
hereafter consist of
production of around 2.5 TWh.
Elkem AS and Borregaard AS are wholly-owned subsidiaries of The Orkla
Group.
Elkem AS owns 85 % of Saudefaldene.
DnB NOR Markets has acted as the financial adviser to Orkla in these
transactions.
Orkla ASA,
Oslo, 5 October 2009
Media contacts:
Bjørn Wiggen, Chairman of the Board of Elkem and Executive VP, Orkla
ASA,
Tel.: + 47 47 82 09 37
Johan Chr. Hovland, Senior VP, Elkem Energi and SVP Public Affairs,
Elkem AS,
Tel.: +47 91 76 34 91
Investor Relations contacts:
Rune Helland, tel.: +47 22 54 44 11
Siv Merethe S. Brekke, Tel.: +47 22 54 44 55
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
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