Good morning
Attached is the announcement that Fortum has received a decision on its review of the prerequisites for nuclear power
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And one of the most interesting conclusions is this:
The conclusion of Fortumâs report is that, with current electricity market outlooks, building new nuclear power is not economically viable if profitability is entirely dependent on electricity market prices.
However, there was nothing surprising about that. Fortum has said the same before. Electricity is too cheap for building nuclear power to make sense.
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Itâs interesting, though, that they stated electrification alone would double electricity consumption in the Nordics within a couple of decades. One would think this would specifically be a good electricity market outlook. Of course, it could be that better prices can be baked into PPA contracts for a long time when futures prices are high.
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This works both ways. PPA contracts can also secure better prices for Fortum by removing the risk of long-term purchases. On the other hand, PPAs can also be messed up, as has been seen in some Swedish wind farms. TVO had a large Mankala scheme in the background and many industrial owner-customers. For large nuclear power to get off the ground, many large partners with significant commitment would be needed in the background. If Microsoftâs data center succeeds well and the submarine cables can be protected, MS would have the ability to concentrate more AI operations in Finland and has experience with nuclear power deals.
Fortum challenges Sweden and Finland to an international competition in nuclear power. If a nuclear power subsidy competition is entered, Sweden likely has better cards. Although regulation is hoped to be light, I donât believe that the learning curve for SMR technology is anywhere near the cost curve of solar panels, wind turbines, and batteries. Similar mass production and small scale simply cannot be achieved. It remains to be seen whether Fortum will leave large-scale PV and battery technologies for competitors to implement.
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Fortum will not embark on a new large nuclear power plant alone. Large electricity users and other nuclear power operators must be involved.
In Sweden, the governmentâs proposals for new nuclear power support measures will be published in a few days. What about Finland?
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The Swedish governmentâs nuclear power support model has been announced. Three main pillars:
- The state guarantees loans taken for the construction of new nuclear power, thus lowering interest rates
- Electricity from new nuclear power is given a price guarantee
- Risk sharing between the state and the company building the nuclear power plant. If unexpected risks materialize during construction, the state will provide support. If nuclear power proves more profitable than anticipated, the state and taxpayers will also benefit from this.
An agreement will be made between the state and the company for the construction of new nuclear power, and this will still need to be approved by the EU (internal market state aid rules).
Will Fortum engage?
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It will certainly take hold if it gets the chance. Vattenfall will surely be the first to seize the opportunity there, and the locations of future nuclear power plants are likely to be a decisive factor. Surely some share of that amount will also go to Fortum.
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Vattenfall announced immediately that it intends to submit a nuclear power plant application after the summer. As you write, there are plans and space for several nuclear reactors. A potential Vattenfall & Swedish state agreement would also be a ready example for Fortum, and F could make its decision partly in light of that.
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This morningâs news reminded me of Fortumâs seized assets in Russia. Of course, the situation isnât directly comparable, as in Fortumâs case, thereâs a state actor involved. However, the conclusion is that at least some parties in Russia want to fulfill their commitments and are looking to the future. They donât want the loan taps to run dry permanently, and the sun will continue to rise. By the way, is there any new information about the lawsuit filed by Fortum regarding its Russian assets? It seems like it will be a process of many years! At some point, I recall an alternative was proposed that compensation could be obtained from Russian assets frozen in Western countries.
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More wind power for the electricity market:
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In Fortumâs case, itâs an advantage that the power plants are under the control of the Russian state, and not a local private entity, with Fortum being majority-owned by the Finnish state; then their return is possible through a state agreement. Putin can flash that card to normalize relations between states, of which there have already been first signs of such an endeavor. For Finland, itâs a harder task to restore relations; the military threat, however, remains. From Finlandâs rather large Russian population, there will certainly be pressure for some degree of restoration of relations.
But Fortumâs share could get a significant boost if even rumors of the return of the assets were to emerge.
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How does @Juha_Kinnunen see the situation of distributable funds on the balance sheet? Even after the additional dividend of âŹ0.5, approximately âŹ6 billion in funds remain. Couldnât the balance sheets still be reduced with additional dividends in the coming years?
Additionally, there are efficiency measures worth âŹ100 million in the pipeline; were these included in the forecasts?
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It is realistic that some kind of relations with Russia must be established at some point. This will take years, because there isnât the same compulsion to restore relations as in 1944. One could assume that in 10 years, when Putin has already been blessed into Russiaâs âholyâ soil, Finland will already be in trade relations with Russia, and then Fortumâs assets will be close to being returned. Iâm not holding my breath regarding the progress of the matter.
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Even if some relations with Russia were to be restored, itâs useless to imagine that Fortum would ever get anything back from Russia. Itâs not realistic to even assume such a thing. Russia would somehow reward a company that left it? Absolutely pointless dreaming.
Focus rather on the future and new business ventures.
At Fortumâs general meeting, Rauramo stated that the ownership is undeniably still Fortumâs. And Fortum did not leave Russia; rather, the Russian state took control, not ownership, of Fortumâs assets.
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Russia critically needs Western companies, and the entire national economy relies on energy sales, always will in the future. There is some reason why power plants have not been transferred to oligarchs or similar, but are still under the control of the Russian state.
A self-serving administration also rewards those who return, when it is in their interest.
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I am not Juha Kinnunen and I may not have fully understood the angle from which you approached the matter, but the assets are by no means truly distributable, even if they are called distributable. Operations tie up capital, both for facilities and, for example, for hedges. Juha can probably analyze the balance sheet situation more precisely, but I would see that after todayâs released funds, things will continue in the style of: âa very strong balance sheet, but no slack.â
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Fortum and nuclear power:
In Sweden, support packages are ready, and there are enough customers in large industrial companies. Fortum announces that an application for building a new nuclear power plant will not be submitted in 2025. So, will it be submitted in 2026?
In Finland, purse strings are tight, and the electricity demand situation is still ? But as stated in the attached YLE article, the matter will be revisited in Finland at some point. Fortum hardly bought the nuclear power plant site in Loviisa recently just for fun.
P.S. Fortumâs share price rose almost 3% today on a tough down day (situation around 11 AM). Does someone know something?
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Such was the reporting in Iltasanomatâs economy section yesterday, and having been present at the general meeting, Iâm not entirely sure if Rauramo used the exact wording âin future scenarios,â but in my opinion, he made it clear that they are Fortumâs property. And hey, letâs not turn this into a general discussion about Russian society or the Russian way of operating again, but focus on the matter itself. Itâs completely worthless if I or someone else starts guessing how this saga will eventually turn out: Fortum pitÀÀ VenĂ€jĂ€-omistustensa saamista takaisin âtĂ€ysin spekulatiivisenaâ - Ilta-Sanomat
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