TGK-10 Price Could Top $4Bln

HELSINKI -- Fortum will pay up to 2.7 billion euros ($4.1 billion) for west Siberian power generator TGK-10, should it gain full ownership of the utility, the Finnish company said Friday.

The news dented Fortum shares, which closed down 3.4 percent at 27.7 euros Friday.

Confirming it had won the auction to acquire control of TGK-10, Fortum said it planned to use long-term bank loans to finance the deal, which it expects to be earnings-diluting for two years.

"This is a great opportunity to become a significant player in the world's fourth-largest energy market," Fortum CEO Mikael Lilius said in a statement.

Fortum will buy a 29 percent stake in TGK-10 from Unified Energy System for 800 million euros. In addition, it has committed to buying a further 34 percent to 47 percent through a share issue for 900 million to 1.3 billion euros.

Fortum will receive 63 percent to 76 percent of TGK-10's shares and voting rights in the first phase, expected to close in March, and will make a mandatory offer for the remaining shares held by minority shareholders. The company is offering a record price per kilowatt to join the small number of foreign players allowed into Russia's power sector.

Fortum currently holds 25.7 percent of utility TGK-1, and has said it plans to maintain its holding above 25 percent.

Lilius said Fortum had no further plans to participate in Russian power market auctions. "This is it now," he told a news conference.