Leader – 28.9.2017 – Finland is CleanTech leader of the world… until the 54% government-owned Fortum buys German & Russian dirty fossil fuel plants

In this world of vastly expanding Green Bonds, investors must be somewhat surprised to see Fortum, the state-owned energy company in Finland, promising to buy Uniper, a spin off of E.on the big German energy company that produces 83% of its energy from fossil fuels, and 7% from nuclear. They have significant operations in Russia, Germany, Sweden, UK, Hungary, Benelux and France. This is a risky play by all accounts.

The deal for Fortum, if approved, would cost them some €8 billion and would push the company miles away from their past “vision” of being a green energy producer of renewable energy.

The cash for the deal comes from the “forced” sale of their transmission networks to private equity companies that immediately raised transmission fees to consumers.

That last deal was forced upon them by the EU and now, with pockets full of cash they have rushed into a deal that says lots about how business should not be done.

Does any member of the Finnish government really think that this is the best way to invest cash when we are trying so hard to be the CleanTech centre of the world!

Some may argue that buying these assets is great because they are so cheap, but you only need a few more Greens in Germany to sink this ship, or you only need a new move to close down nuclear power plants in Sweden, or you only need a few threats by Russia to take over the Russian strategic energy assets to see that what was thought to be cheap is nothing more than cheaper still.

Why do you think E.on is so willing to sell? The Finnish government would have done better to have demanded a huge €6 billion special dividend to ward off such flights of management fancy.

Warnings of recent experiences are clear. In 2009, the big 100% state-owned Swedish energy company called Vattenfall acquired 49% stake in a Dutch company called Nuon at a cost of SEK 89 billion. Vattenfall later wrote down the acquisition by 50 billion kronor. Vattenfall also owned lignite and coal-fired power stations in Germany up until 2016 when it completed the sale of its German lignite facilities to the Czech energy group, EPH and PPF Investments. Vattenfall have announced that they are committed to be climate neutral by 2050. As a consequence coal fired power plants are therefore classified as non-core assets. This last fact means that the price of German coal-fired plants will not be going North anytime time soon!


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