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Finland's Fortum blocks Russia's TGC-1 deal to sell grid firm

June 18, 2014, 11:36 UTC+3 ST. PETERSBURG
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ST. PETERSBURG, June 18. /ITAR-TASS/. Finnish energy company Fortum has blocked a deal of Russian electricity producer Territorial Generating Company-1 (TGC-1) to sell 75% in St. Petersburg-based grid firm Saint Petersburg heating network to the city government, Gazprom Energoholding CEO Denis Fyodorov said late Tuesday.

Fortum holds 25.6% in TGC-1, which is controlled by Gazprom Energoholding.

Fyodorov said he believed that Fortum's decision to block the deal was not right and could lead to significant changes in TGC-1's dividend policy.

The current tariff decisions will not help improve the heat supply situation in St. Petersburg without additional investments, Fyodorov said. “Maintaining thermal grids in a normal state requires 3.5-4.0 billion rubles (ca. $114 million), while additional annual investments of 5.0-6.0 billion rubles (ca. $172 million) are necessary to improve the situation,” he said.

“This creates certain risks that TGC-1 will not be paying dividends in the future while earmarking the entire net profit on thermal grids upgrade in St. Petersburg.”

The St. Petersburg government planned to acquire TGC-1's stake in the grid firm for 6.3 billion rubles.

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