Finland Gives Fortum Time to Find Buyers for Russian Units

(Bloomberg) -- Finland is prepared to give Fortum Oyj time to sell its Russian power plants and follow other western energy companies out of Russia.

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The departure of the state-controlled utility is the next step in severing energy ties between the two neighbors after Russia halted exports of both electricity and gas in the past few weeks. Fortum, which operates seven thermal power plants in the Ural region and western Siberia, said last month it would prefer to sell them as part of the exit.

“No country could allow power plants shutting overnight,” said Tytti Tuppurainen, the Finnish minister for European affairs, who oversees state holdings in Fortum and other important companies. “Therefore we understand that this exit has to be a managed one” and that it “cannot happen overnight.”

Europe’s biggest energy companies have already taken a financial hit of many billions as they are leaving or planning to withdraw from Russia amid the invasion of Ukraine. Fortum last month announced impairments of 2.1 billion euros ($2.2 billion) on assets that also include those owned by German subsidiary Uniper SE.

Fortum is collecting binding offers for the sale of its and Uniper’s Russian assets until June 21, Kommersant reported. According to Fortum’s terms, the deal should be completed by July 1. Inter RAO UES PJSC, Gazprom PJSC and SUEK are among potential buyers, it said. Fortum rose as much as 8.7% at 10:44 a.m. in Helsinki, while Uniper gained 6.1%.

The Finnish state holds a 50.8% stake in the nation’s biggest power producer. Chief Executive Officer Markus Rauramo told the Kauppalehti newspaper in early June that he had interested buyers for the plants even before the war and that others, both from Russian and foreign firms, have emerged lately too. The company declined to provide further details when contacted by Bloomberg on Monday.

“We’ve given the political guidance that we should cut our dependency on the Russian market, especially when it comes to fossil fuels and I’m certain that our companies, the management, have heard that message and they are acting accordingly,” Tuppurainen said in an interview at her office in Helsinki. “I’m satisfied to see that they’re also taking actions.”

Fortum and Uniper’s combined net assets in Russia are worth 3.3 billion euros ($3.4 billion) after the impairments. In addition to the seven plants, Fortum owns the nation’s largest wind and solar portfolio, while Uniper owns five other power plants.

The latest comments seem to suggest that the government is softening on the speed of the exit. Finnish Prime Minister Sanna Marin in early in April signaled that a withdrawal from Russia should come as soon as possible.

Russia accounts for about a fifth of Fortum’s operating income. Its shares have dropped by about 40% this year as the exposure has discouraged investors. By comparison, the Stoxx 600 Utilities Index is down less than 10%.

Getting out is “the wise thing to do,” Tuppurainen said. “When it comes to Fortum, clearly the Russian market is no Eldorado,” she said, invoking a metaphor for immense wealth. It’s “no longer a reliable market for companies that want to get good profits out of their investments.”

(Adds Kommersant report, share moves in fifth paragraph)

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