Black Clouds over Fortum, Finland’s Energy Company

The Finnish government owns a large part of Fortum Plc., a large energy company, that claims to be a world leader in clean energy! 

The above message from their website should be an accurate picture of the company, but…

Several years ago this company had to sell its transmission company as a result of EU regulations. That part of the company was sold to private investors who immediately raised the transmission tariff by 30%. Not only did for Fortum receive a lower price, but they also failed to receive much higher tariffs on electricity transmission.

With €6 billion in their pocket everybody knew and that the senior management at this company would end up spending that money like a schoolboy with his pocket money burning a hole in his pocket standing outside a sweetshop.

Fortum ended up buying some 49% other German company called Uniper. This company was a spin-off from E.ON, a German energy company, that wanted to sell its coal and gas business so it could become a “Green Company”. 

Uniper is a company with operations in Germany in Russia and a few other places. It runs a trading business in coal and gas, as well as producing energy from these dirty fossil fuels. Most people in Finland see them as a dirty company that is not working towards reducing climate change. This is not the sort of company you would expect the Finnish government to welcome, especially when Finland tries hard to portray itself as a clean tech country.

So selling the transmission lines off cheaply to a private group that immediately increased tariffs drastically and then buying a fossil fuel dinosaur was not seem to be too smart by taxpayer… and we all know that natural monopolies should never privatised without really good reasons…

The management at Fortum claimed that the purchase of this company has been a great success and that the big profits will be pouring in to support Fortum’s efforts to transform it into a really Green Company. 

However, when the purchase was completed Fortum discovered that the management was hostile to any cooperation. Matters were made challenging because the company had extensive business in Russia, a country that is Finland’s biggest neighbour and not a very easy partner to work with.

Fortum wasted two years trying to get better control over the company and last week they managed to buy another 21% from an American hedge fund at a substantially higher price than what they originally paid. So now a lot of money has been spent on a dirty business, and no matter how profitable the business is Fortum will have to spend a great deal of money and time on converting the coal generation plants to natural gas.  

Fortum also increased their dependence on Russia, and because the government owns a majority stake in the company, Finland in turn has become more dependent on Russia. Finns have always had a good working relationship with Russia, but our policy has always been aimed at reducing the importance of that relationship with regard to energy. 

Very few people can understand why Fortum got involved in this deal in the first place when it doesn’t put Finland in a good light in terms of climate change and increasers our dependence  on Russian energy. Uniper is also a big partner in Nord Stream 2, the new pipeline being built under  the Baltic Sea, which can transport natural gas from the world’s largest reserves in Russia directly to EU’s consumer market.

The billions of euros that the company received from the sale of the transmission lines could have been invested in clean tech projects, but they were not… This company was not forced to make such an investment, and nothing that they are now doing has anything to do with new technology, or exporting new clean tech projects. To taxpayers this looks more like a failed bank robbery by old men in suits who should have known better. It’s difficult to understand why senior management at Fortum receive such generous remuneration when decision-making appears to produce such extraordinary results.

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