They Lost Some €6 billion But Continued…

Here is an interesting story of corporate mismanagement on one of Finland’s largest companies called Fortum.

This is a Finnish energy utility (power heat and transmission), whose majority owner is the Finnish government. It was historically focused on hydropower and was formed in 1998 by the merging of Neste Oyj (an oil refinery) and Imatran Voima Oy (hydro & nuclear) – Neste was eventually spun off in 2005!

Fortum sold their electricity transmission company to a group of private equity investors telling taxpayers that this was unable to make serious profits, and that they are forced to dispose of this activity this because of EU regulations forbid energy production companies from owning transmission companies, which are mainly natural monopolies.

Their rational was rubbish and probably open of the most stupid business decisions ever made in Finland for two reasons:

  1. The Private equity investors immediately increased the transmission tariffs by 40% and later to some 60%, naturally generating huge profits…
  2. Fortum used the meagre proceeds from the asset sale, (meagre because the sale price of was far too low) and “invested” the money in Uniperin 2017!

FinnishNews immediately published several articles in 2017 pointing out the utter stupidity of this “investment” even when the main media, and right-wing politicians were praising Fortum’s management’s prowess.

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

Now 6 years later, in November 2023, the following headline was published by the Institute for Energy Economics and Financial Analysis (IEEFA), a leading international think tank specializing on for energy projects,

“Fortum-Uniper: Finnish taxpayers’ staggering losses were predictable and avoidable”

They published the following graphic that points out the total losses for Finnish taxpayers.

The above losses of almost €6 billion happen to be equal to the total cost of TVO’s third nuclear power station that started operations this year after a delay of some 14 years due to the incompetence of the turn-key EPC contractor the French government owned EDF.

What is even more interesting is that far from losing their jobs, the former CEO of Fortum is now the CEO of Nokia and his CFO is now the CEO of Fortum. Few in the media dare speak out because these big names seem to be able to float on air from one high paying job to another without any barriers being placed in their way. Having presided over one of the worst ever financial scandals here one would think that both men and their colleagues should be shoveled of on a slow train to Siberia. It is as if good management material is in short supply, which is certainly not the case in a fine country like Finland.

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