Finland details state energy firms' merger

Finland's Ministry of Trade and Industry has spelled out plans for merging Neste Oy and Imatran Voima Oy (IVO), respectively the nation's state petroleum and electric power companies.

In October, the ministry began negotiations for creation of a state energy company from Neste, of which it owns 81%, and wholly-owned IVO (OGJ, Oct. 13, 1997, p. 35).

Now the ministry plans to create a holding company, so far unnamed, into which the government's stakes in the two firms will be transferred.

The merged company will have 16,000 employees and estimated annual revenues of 55 billion markka ($10.4 billion).

Under the proposal, Neste's minority shareholders would be offered shares in the merged company in exchange for their stake in Neste. Those rejecting the shares would be offered compensation.

The value of Neste and IVO will be assessed early in 1998 to determine the trade-in ratio of shares. This will be carried out by an independent advisor and is expected to be completed during spring 1998.

Obstacles?

One obstacle to the planned merger is expected to be Neste's 50% stake in Gasum Oy, a joint venture with Russia's Gazprom to import gas into Finland and other Scandinavian countries.

Because of requirements of European Union competition authorities, Neste intends to sell part of its Gasum holding to the Finnish state and to investors independent of the state or Neste/IVO.

Neste says it will retain a substantial minority in Gasum as a means of ensuring vigorous development of the gas business in Finland and will retain the right to re-purchase its Gasum stake when competition terms are met.

The ministry said the Neste/IMO merger depends on parliamentary approval. The plan is expected to be debated by parliament during February-March 1998.

The merger was originally proposed because the government feared Neste planned to expand into power generation, to the detriment of IMO. The ministry has identified projects where the companies could cooperate.

"Studies carried out during the autumn," said the ministry, "led to the emergence of a number of cooperation projects, the implementation of which would involve investments worth a total of 10-12 billion markka ($1.9-2.3 billion).

"The bulk will be natural gas projects-for example, construction of power plants and international extension of the existing natural gas grid. Other potential cooperation areas include marketing, R&D, engineering, and operation and maintenance of installations."