Chat with this content: Summary, Analysis, News...
Share on Reddit
Fortum: The €12 Billion Gamble That Nearly Broke Finland
I. Introduction & Episode Roadmap
Picture the banks of the Vuoksi River in 1929. Finland—a young republic barely a decade old—was electrifying its future. The Imatrankoski power plant had just begun humming to life, sending electricity coursing along newly-strung lines to Helsinki, some 200 kilometers away. This was nation-building in its rawest form: harnessing nature to power industry, to light homes, to propel a small Nordic country into modernity.
Fast forward nearly a century, and the company born from that hydroelectric ambition had become something altogether different. Fortum Oyj is a Finnish state-owned energy company located in Espoo, Finland. It mainly focuses on the Nordic region. As of 2023, Fortum was the third-largest power generator in the Nordics.
But this is not a story of steady progress. This is the story of how a Nordic clean energy champion ended up losing €5.8 billion on a single German gas company acquisition while simultaneously having €1.7 billion in Russian assets seized by Vladimir Putin. It is a tale of geopolitical miscalculation, corporate hubris, and the peculiar dangers of state-owned enterprises operating at the intersection of energy markets and international politics.
Fortum's losses from Uniper are huge, reaching €5.8 billion in accounting losses alone. This equates to €1,700 per Finnish tax household or approximately 3 GW of onshore wind capacity. Because the Finnish state owns 50.76% of Fortum, these impairments effectively transferred enormous costs to Finnish taxpayers—a burden that fell on every household in the country.
The numbers are staggering in their scale. In 2022, as Russia's invasion of Ukraine sent European energy markets into chaos, Fortum recorded a consolidated annual net loss exceeding €10 billion—one of the largest corporate disasters in Finnish history. In 2022, Fortum incurred a pre-tax loss of almost €6bn when it transferred its shares in Uniper to the German government.
What makes this story particularly compelling is the arc: from hydropower pioneer to clean energy champion to fossil fuel investor to geopolitical casualty. The company that once symbolized Finland's energy independence became Exhibit A in the dangers of European energy dependency on Russia.
This deep dive traces that journey—from the rapids of Imatra in the 1920s through the Cold War nuclear bargains with Moscow, the fateful Russia expansion beginning in 2007, the even more fateful Uniper acquisition in 2017, and the catastrophic 2022 collapse that reshaped both the company and European energy policy. We'll examine what Fortum looks like today in its Nordic renaissance phase and extract the hard lessons for investors, policymakers, and corporate strategists alike.
II. The Predecessor Companies: Imatran Voima & Neste (1920s-1998)
The Birth of Finnish Power
In May 1929, as the rest of the world teetered on the edge of financial catastrophe, Finland inaugurated something altogether different: hope. The Imatra power plant on the Vuoksi River represented more than just electricity generation—it was a statement of sovereignty for a nation that had declared independence from Russia just twelve years earlier.
The predecessor of Fortum was Imatran Voima (IVO), which was founded in 1932 to operate the Imatrankoski hydroelectric power plant in Imatra. The construction of the Imatra power plant began already in 1922 as well as the power lines from Imatra to Helsinki and the power plant was opened in May 1929. Finnish Government made a decision to establish Imatran Voima Osakeyhtiö (IVO) in May 1932.
Imatran Voima Oy (IVO) was founded by the Finnish government in 1932 in the town of Imatran, where it built a 100-megawatt hydropower plant (the firm's name translates as "Imatran's water power"). In its early decades IVO concentrated on building and operating hydroelectric power plants and power transmission systems in Finland.
The company's early decades were characterized by relentless expansion. As it expanded it became a central actor of Finland's electrification and industrialisation and it went on to build dozens of power plants (water, fossil fuels, biomass and nuclear power) and thousands of kilometres of power lines across Finland and to neighbouring countries. It built, it did research, it experimented, it secured the electricity supply, organised imports and it acquired a lot of know-how along the way.
The 1960s marked IVO's entry into larger-scale thermal generation. IVO expanded further in the 1960s, building the largest coal-fired power plant in the Nordic countries to that time, and constructing power transmission links between Finland and the Soviet Union and between Finland and Sweden. In 1965 the company began electrifying the Finnish railway system. IVO entered the nuclear power generation sector in the 1970s, and began selling district heat in 1982.
The Nuclear Question: Dancing with "Eastinghouse"
Finland's nuclear journey represents one of the most fascinating chapters of Cold War industrial diplomacy. The country needed to balance its Western orientation with the geopolitical reality of sharing a 1,340-kilometer border with the Soviet Union.
The unit 1 and 2 reactors at Loviisa NPP went into commercial operation in 1977 and 1981, respectively. To comply with Finnish nuclear regulation, Westinghouse and Siemens supplied equipment and engineering expertise. This unorthodox mix of Western and Soviet enterprise led to the project developers being given the nickname "Eastinghouse".
The Loviisa nuclear power plant is the first nuclear power plant in Finland. The Loviisa nuclear power plant has two power plant units, Loviisa 1 and Loviisa 2, which started production in February 1977 and November 1980 respectively. The power plant units are VVER-440 type pressurised water reactors. The Loviisa power plant was a multicultural project, in which West and East co-operated in the field of nuclear technology for the first time. The degree of domestic origin was approximately 50%. The reactor, turbine, generator and other main components are from the former Soviet Union. Safety systems, control systems and automation systems are of Western origin. The steel containment and its related ice condensers were manufactured using Westinghouse licences. The Loviisa power plant was built to meet the most developed Western safety standards.
This hybrid approach—Soviet reactors with Western safety systems—was unprecedented. It symbolized Finland's unique position during the Cold War: a capitalist democracy that maintained careful neutrality with its powerful neighbor. The nuclear fuel itself came from Russia, creating a supply chain dependency that would persist for decades.
Neste: The Oil Counterweight
While IVO electrified Finland, Neste Oy pursued a parallel mission in petroleum. Neste, established in 1948, specialized in oil refining and marketing. The company developed into Finland's national oil champion, with refineries and an extensive distribution network.
The contrast between the two state-owned companies was stark. IVO was a profitable power generator with deep expertise in hydroelectric and nuclear operations. Neste was a much larger enterprise by revenue, but the oil business margins were thinner. This asymmetry would create tensions when the merger discussion began in the late 1990s.
By 1997, it was clear that the European energy landscape was shifting. Deregulation was sweeping across the continent, and small national champions faced pressure to consolidate or be marginalized. In late 1997 the Finnish government announced plans to merge Neste and Imatran Voima to form an enlarged energy group that would be better able to compete in the rapidly deregulating European power industry.
The stage was set for Fortum's creation—a merger born of government ambition to build a Finnish energy champion that could compete on the European stage. Whether that ambition was wise or merely wishful thinking would take two decades to become clear.
III. The Birth of Fortum & Early Strategy (1998-2006)
A Shotgun Wedding in Helsinki
The creation of Fortum was less a marriage of equals than an arranged union designed by government architects who believed bigger meant better in the new European energy marketplace.
Fortum Corporation was established on February 7, 1998, through the merger of two state-owned Finnish companies: Imatran Voima Oy (IVO), a power and heat producer founded in 1932 specializing in hydroelectric, nuclear, and combined heat and power generation, and Neste Oy, the national oil and gas firm established in 1948 with operations in refining and petrochemicals.
The logic seemed straightforward: combine Finland's dominant power generator with its national oil company to create a diversified energy giant. The reality was messier. Despite the doubts raised by some analysts as to the wisdom of combining two companies that appeared to have little synergy, the Finnish government pressed ahead, believing that it would be easier to privatize the combined group.
The transaction mechanics reflected the power dynamics. In mid-1998 Fortum Corporation emerged as a new holding company for the combined operations of Neste and IVO (the new company was initially known as IVO-Neste Group Ltd.). In December of that year stock in Fortum began trading on the Helsinki exchange through an initial public offering, with Neste's shareholders also becoming shareholders in Fortum. At year-end 1998, the Finnish government held a 75.5 percent stake.
In early 1999 Neste became known as Fortum Oil and Gas Oy, while Imatran Voima's name was changed to Fortum Power and Heat Oy. The operation and maintenance division of IVO was renamed Fortum Service Oy, while IVO's engineering operations became known as Fortum Engineering Oy.
The Divestment Era
The merged entity quickly recognized what analysts had suspected all along: oil and power generation didn't share much operational synergy. The early 2000s became a period of portfolio rationalization as Fortum shed businesses that didn't fit its emerging clean energy identity.
The most significant divestment came in 2005 when Neste's petroleum assets were spun off into a separate publicly traded company, Neste Oil (later renamed simply Neste). This allowed Fortum to focus on what the legacy IVO business did best: generating electricity from hydropower, nuclear, and increasingly, combined heat and power facilities.
Fortum also exited petrochemicals, selling its 50 percent stake in Borealis. The message to investors was clear: Fortum would be a focused power company, not a diversified energy conglomerate.
Throughout this period, Fortum expanded its Nordic footprint, particularly in Sweden. The company acquired stakes in Swedish hydropower assets and positioned itself as a leading player in the integrated Nordic power market.
The Clean Energy Identity
By the mid-2000s, Fortum had crafted a compelling narrative around clean energy leadership. With its extensive hydropower portfolio, its nuclear generation assets (both the owned Loviisa plant and minority stakes in Swedish nuclear facilities), and its minimal fossil fuel exposure in the Nordic region, Fortum could legitimately claim to be one of Europe's cleanest major power generators.
Imatran Voima acquired and built a number of other power plants, such as the largest hydroelectric power plants along the Oulujoki river, Ingå and Naantali coal-fired powerplants and the Loviisa nuclear power plant.
This clean energy positioning would become central to Fortum's investor pitch—and would make its later strategic decisions all the more perplexing.
IV. The Russia Expansion: First Major Bet (2007-2021)
Crossing the Border
In 2007, Fortum made a decision that seemed logical at the time but would prove catastrophic in hindsight: it began aggressively expanding into Russia.
In 2007, Fortum acquired 25.66% stake in TGK-1, operating in northwest Russia. In 2008, Fortum privatized the natural gas, power and heat generation company TGK-10 (now: OAO Fortum), operating in central and northern Russia.
The TGK-10 acquisition was particularly significant. Fortum Oyj won an auction for electricity generator OAO TGK-10 for as much as $3.1 billion, giving Finland's largest utility its first controlling stake in a Russian power producer. Fortum agreed to pay $1.2 billion for 55 percent of TGK-10. Espoo-based Fortum will increase its ownership to more than 75 percent by buying new shares in a transaction that may push the final price to 75.2 billion rubles ($3.1 billion).
In 2008, Fortum took a major strategic step in Russia through the acquisition of Territorial Generating Company 10 (TGC-10). The acquisition gave Fortum a significant presence in Russia's fast-evolving power markets. The acquisition doubled Fortum's heat production capacity, increased power generation capacity by over 25% and added over 7,000 employees to Fortum.
The Logic Behind the Bet
From a pure business perspective, the Russian expansion had defensible logic. Russia was liberalizing its electricity market, and capacity supply agreements (CSAs) guaranteed attractive returns for new investment. The massive generation assets in the Urals and Western Siberia served industrial customers in one of the world's resource-richest regions.
"Our total investments in Russia amount to approximately EUR 6 billion euros taking into account of the original share purchase and investments in Russia. Investments have been financed to a large part through cash flow generated in Russia. Since 2008, the Russian segment has generated more than EUR 4 billion of EBITDA. As a result, the net cash loss comprising the investment to acquire the Russian operations, received dividends and net financing totals approximately EUR 2 billion."
As of September 2013, 40% of Fortum's employees worked in Russia; the company's total investment in Russian energy amounted to 4 billion euros.
Fortum previously had a presence in Russia for more than 60 years.
By 2021, the scale of Fortum's Russian bet had grown enormous. In 2021, Fortum was estimated to have had as much as $32.6 billion in assets in Russia.
Warning Signs Ignored
The geopolitical risks were not hidden—they were screaming. In August 2008, just months after Fortum's TGK-10 acquisition, Russia invaded Georgia. Then came 2014: Russia annexed Crimea and supported separatist forces in eastern Ukraine. Western nations imposed sanctions.
According to IEEFA, this explanation ignores Russia's invasion of Georgia in 2008, and its support of separatists in Donbas and occupation of Crimea in 2014. International sanctions were already in place as a result.
Fortum's main power and heat generation acquisitions in Russia started in 2008. This move was controversial since it occurred just after Russia's 2008 aggression against Georgia. While Fortum's Russian business came increasingly under international pressure after Russia's annexation of Crimea in 2014, the company maintained operations in the country.
Most Western companies began reducing their Russian exposure after 2014. Fortum did the opposite—it doubled down.
V. The Uniper Acquisition: Doubling Down (2017-2020)
The €7 Billion Bet
If the Russia expansion was Fortum's first major gamble, the Uniper acquisition was the bet that would define the company's fate.
In September, Fortum announced it would buy E.ON's 47% stake in German power company Uniper. Fortum increased its stake to 75% in spring 2020. Uniper mainly uses oil, natural gas and coal to supply electricity.
As other international companies withdrew from Russia, Fortum doubled down on its strategy with the €7.2 billion purchase of Uniper, a German utility whose main assets were coal and gas power generation in Germany and Russia, representing the biggest acquisition in Fortum's history.
The deal progression tells the story of escalating commitment:
On September 20, 2017, Fortum's intentions to take over Uniper became public.
In September 2017, Finnish power company Fortum announced it would buy E.ON's remaining 47% stake in Uniper and make a bid for the other 53% held by other shareholders, valuing Uniper at €8 billion. A takeover bid was submitted on 7 November 2017. E.ON accepted the offer on 8 January 2018. Fortum acquired, in total, a 47.35% stake. The deal was completed on 26 June 2018, after approval by various authorities.
Upon closing of the transactions, Fortum's share in Uniper will increase to more than 70.5% and the total investment in Uniper to approximately EUR 6.2 billion, representing an average acquisition price of EUR 23.97 per share.
As of August 18, 2020, Fortum held a 75.01% stake in Uniper.
The Inconvenient Truth About "Clean Energy"
The Uniper acquisition created a fundamental contradiction at the heart of Fortum's identity. Here was a company that had carefully cultivated an image as one of Europe's cleanest generators, now controlling one of Germany's largest coal and gas portfolios.
On top of it all, Fortum just last year opened a new coal plant in Germany, Datteln4, through Uniper. When it comes to the climate, Fortum wants to have its cake and eat it too: to benefit from fossil fuels and from increasing their use, meanwhile speaking in beautiful terms about the green energy of the future.
At the moment Fortum/Uniper is hampering the coal phase-out in Europe by opening a new coal plant in Germany, called Datteln 4, and by threatening to sue the Netherlands over their new coal phase-out law.
Our subsidiary Uniper's Datteln 4 power plant will begin operating on Saturday, 30 May. The launch of the power plant has given rise to much debate due to fears that the plant will increase emissions from electricity production in Germany.
Environmental activists were unsparing in their criticism. In today's demonstration by Extinction Rebellion Finland, activists dressed in business attire spread water dyed green on the walls and windows of the Fortum head offices. In this carnevalistic demonstration they showed what Fortum's rhetoric around the climate are compared to the company's actions: pure greenwashing, green in lip service only.
The Russian Gas Dependency
The most dangerous aspect of the Uniper acquisition wasn't the coal plants—it was the gas dependency. Uniper was Germany's largest importer of natural gas, and a massive share of that gas came from one supplier: Gazprom.
Given the recent history and circumstances, a scenario in which Russia starts a war with implications on gas supply ought to have been foreseeable, according to the report.
The seven-billion-euro acquisition, she viewed, was clearly a mistake in hindsight even though it proved profitable for several years.
The scale of the transformation was remarkable. In 2020 Fortum was the biggest company in Finland by its revenue. That revenue, however, was now deeply exposed to the very geopolitical risk that cautious observers had been warning about for years.
VI. The 2022 Catastrophe: Everything Falls Apart
The Energy Crisis Unfolds
On February 24, 2022, Russian forces crossed into Ukraine. Within weeks, the European energy system that Fortum had bet billions on began to collapse.
Russia progressively cut gas supplies to Europe. For Uniper, which had long-term contracts to buy Russian gas at fixed prices and sell it to German customers, the mathematics became instantly catastrophic. As Russian deliveries fell and spot prices soared, Uniper was forced to buy replacement gas at astronomical prices while contractually obligated to supply customers at lower rates.
The energy giant, which is mostly owned by Finnish taxpayers, saw its subsidiary Uniper hard hit by Russian limits on gas deliveries. German subsidiary Uniper's long-term gas contracts, largely based on deliveries from Russia, were a key factor in the collapse. Fortum's operating profit fell to a loss of 9.14 billion euros in April-June. A year ago, the operating loss was just 840 million euros.
Uniper, which has been scrabbling to replace reduced Russian gas deliveries, earlier this month reported a 12.3 billion euro loss for the first half of this year, the biggest loss in Finnish corporate history.
The losses were accumulating at a terrifying rate—double-digit millions per day.
The German Nationalization
By summer 2022, it was clear that Uniper could not survive without massive state intervention. The German government faced an impossible choice: let Germany's largest gas importer fail, potentially disrupting energy supplies to millions of homes and businesses, or bail out a company that was now majority-owned by Finnish taxpayers.
In July 2022, the German government and Fortum agreed to bailout Uniper a €15 billion rescue deal after being severely affected by reduced supplies and high prices following the energy standoff with Russia. Germany agreed to pay €267 million for a stake in the ownership of Uniper, while also offering the firm up to €7.7 billion in financing. Under the bailout, a record in German corporate history, the government will take a 30% stake in Uniper, reducing the ownership of Fortum to 56%.
But even this unprecedented bailout proved insufficient. As the energy crisis deepened, a second, more radical intervention became necessary.
On 20 September 2022, Bloomberg News reported that the German government intended to nationalize the company, purchasing the remainder of Fortum's stake and becoming Uniper's sole owner. News of the transaction caused Uniper shares to decline and a sharp spike in Fortum's share price, resulting in a halt in trading of the latter. The German government's intention to nationalize the company was formalized the next day. Germany will spend $8 billion to acquire a 99% stake in the company. The nationalisation was completed in late December 2022.
In September 2022, Uniper and Fortum had agreed with the German government on a financial stabilization package for Uniper. Among other things, this provided in a bilateral agreement between the federal government and Fortum for the acquisition of the whole Uniper share package at a price of €1.70 per share. This transaction was implemented on December 21, 2022.
The price Fortum received—€1.70 per share—was a fraction of what it had paid. Finnish taxpayers are now getting back less than 10 per cent of the money that was originally poured into Uniper.
The Russian Asset Seizure
As if the Uniper disaster weren't enough, Fortum simultaneously lost its entire Russian business.
In April 2023, the Russian authorities seized control of Fortum's assets in Russia and deprived Fortum of its shareholder rights, based on a Presidential decree. The de facto loss of control of the Russian operations triggered a full financial deconsolidation and impairment of those assets, as reported in Fortum's second quarter 2023 results. The Russian assets have also been fully separated operationally from Fortum Group, and the former PAO Fortum has been renamed to Forward Energo by the new management.
The Kremlin said on April 26 that Moscow's move to take temporary control of the assets of Finnish energy group Fortum and its former German subsidiary Uniper was in retaliation for what it called the illegal seizure of Russian assets abroad. A day earlier, President Vladimir Putin signed a decree establishing temporary control of the Russian assets of the two European state-owned energy firms.
Fortum will record an estimated impairment of approximately EUR 1.7 billion equaling the remaining book value, which will negatively impact the Group's equity. The impairment loss will be partially tax deductible.
These notices of dispute are the first step required in the arbitration proceedings which are expected to be initiated at the end 2023. Fortum will seek compensation for the value of its shares in PAO Fortum and its investments in Russia, amounting to several billions of euros.
The Total Reckoning
The combined damage was almost beyond comprehension. Fortum's losses from Uniper are huge, reaching €5.8 billion in accounting losses alone. This equates to €1,700 per Finnish tax household or approximately 3 GW of onshore wind capacity.
Adding the Russian asset write-downs, currency losses, and the opportunity cost of a decade of misallocated capital, the total destruction of value easily exceeded €10 billion.
Beyond the book value losses directly attributable to the Uniper transaction, a significant share of Fortum's stock market value collapse, in IEEFA's view, may be attributable to the German utility. Indeed, while the stock value of the European utility sector is almost flat since the start of Russia's full-scale invasion of Ukraine in February 2022, Fortum's stock value is down 53.3%.
VII. The New Fortum: Nordic Renaissance (2023-Present)
Strategic Reset
After the carnage of 2022, Fortum faced a fundamental question: what kind of company would it become?
Overall, after a period of unprecedented turbulence, 2023 was a year of stabilising and transforming our operations. In March, we announced our new strategy and purpose with a Nordic focus along with new financial and environmental targets.
Following this divestment, Fortum has refocused its strategy on its core Nordic markets and CO₂-free power generation, particularly nuclear and hydropower, while advancing its position in the circular economy and hydrogen solutions.
The answer was a return to roots: back to the Nordics, back to clean power, back to the hydroelectric and nuclear heritage that defined the company before the Russia and Uniper adventures.
Current Business Profile
Today's Fortum is a dramatically different company than the one that existed in 2020. The group generated 46 TWh in 2024 (-1%), including 24 TWh of nuclear (-2%), 20 TWh of hydropower (-3%) and 0.9 TWh of wind (x9) in the Nordic countries.
We fully own the Loviisa nuclear power plant in Finland and co-own plants in Olkiluoto, Finland, as well as Forsmark and Oskarshamn, Sweden, amounting to a combined capacity of 3.2 GW.
We have a total of 111 hydropower plants in Sweden. Hydropower is the most important form of renewable energy in the Nordic countries. It is a steady source of power that produces no CO2 emissions.
This positions Fortum operations as a leading clean energy producer in Europe, with nearly 99% of its power generation derived from renewable or nuclear sources.
In 2024, roughly 85% of the Group's comparable EBITDA originated from the company's Nordic 47 TWh outright power generation, which is mostly based on CO2-free hydro and nuclear power. Fortum is the largest electricity retailer in the Nordics with 2.1 million customers representing a market share of 13%.
Financial Recovery
The balance sheet stabilization has been remarkable. Comparable EBITDA was EUR 1,556 (1,903) million. Comparable operating profit was EUR 1,178 (1,544) million. Operating profit was EUR 1,325 (1,662) million.
Based on our Group results and strong financial position, Fortum's Board of Directors is proposing to the Annual General Meeting a dividend of EUR 1.40 per share comprising EUR 0.90 corresponding to a 90% payout of comparable EPS and a special dividend of EUR 0.50. In Fortum's dividend policy, the payout ratio is 60–90% of the Group's comparable EPS.
Supported by the divestment of our recycling and waste business, our financial position continues to be strong with very low leverage of 0.2 times and we continued to have sufficient liquidity and credit line buffers at the end of the year. During 2024, we were happy to have S&P Global Ratings upgrade our long-term credit rating to BBB+ with Stable Outlook and Fitch Ratings affirm our long-term rating of BBB with Stable Outlook.
The Loviisa Extension
One of the most important strategic decisions has been extending the life of the Loviisa nuclear plant—Finland's original nuclear facility and now Fortum's most valuable wholly-owned asset.
In 2023, the Finnish government granted the Loviisa nuclear power plant a new operating license until the end of 2050. During this new licensing period, the plant is expected to produce up to 177 terawatt-hours of emission-free electricity.
The first batch of Westinghouse fuel was loaded to Loviisa 2 reactor in 2024, guaranteeing a Western alternative to the Russian fuel.
The investments at the Loviisa power plant are expected to reach one billion euros by 2050.
New Nuclear: Proceeding with Caution
Fortum has also explored new nuclear construction, but with a notably more cautious approach than its previous expansion efforts.
A conclusion of Fortum's study is that with the current power market outlook, new nuclear is not economically viable on a merchant basis only. However, based on the analysis Fortum conducted and based on newbuild projects ongoing in other western countries, new nuclear projects can be manageable with a solid risk sharing framework – like the one being prepared by the Swedish government – when matched with increased customer demand.
During the feasibility study, Fortum evaluated different large and small modular reactor (SMR) designs together with vendors. The company said it will now continue to deepen the collaboration with two conventional reactor technology providers - EDF (EPR) and Westinghouse-Hyundai (AP1000) - and one SMR developer - GE-Hitachi (BWRX-300).
VIII. Playbook: Business & Investing Lessons
The State Ownership Paradox
The Fortum saga raises profound questions about state-owned enterprises and corporate governance. Strategic deals by state-owned companies ought to have more government oversight, and executives who cause large losses should face the consequences, think tank Institute for Energy Economics and Financial Analysis said. Top managers engaged in a "gamble" for which there was insufficient accountability. Pekka Lundmark, who was CEO when Fortum bought Uniper, is now the CEO of Finnish telecom giant Nokia Oyj, and Rauramo, who was CFO, remains in charge of Fortum.
Pekka Lundmark (born 9 December 1963) is a Finnish business executive, and former president and CEO of Nokia, from 2020 to March 2025. Previously, he was CEO of Fortum, a Finnish state-owned energy company, from 2015 to July 2020.
In IEEFA's view, Fortum's exposure to Russia was too risky due to the international geopolitical context, and the losses from the Uniper investment were foreseeable. It is also concerning that a state company was able to make such a huge and high-risk investment without more government and parliamentary involvement.
To ensure that such an adverse outcome does not reoccur, IEEFA recommends an EU-wide mechanism that requires that certain strategic investment decisions be approved by parliament and government.
Geopolitical Risk Assessment
The Fortum case offers a masterclass in the dangers of ignoring geopolitical risk when it's inconvenient for the investment thesis.
Overall, Fortum invested an excessive share of assets in Russia, and the company's narrative about unforeseeable losses is not compelling given the timeline of events. With its financial firepower in 2017, Fortum missed an opportunity to become a leading European player in renewable energy. Instead, it doubled down on coal and gas power through Uniper.
The timeline is damning: - 2008: Russia invades Georgia → Fortum acquires TGK-10 - 2014: Russia annexes Crimea → Fortum maintains Russian operations - 2017: International sanctions in place → Fortum announces Uniper acquisition - 2020: Fortum increases Uniper stake to 75% - 2022: Russia invades Ukraine → Total collapse
Clean Energy Identity vs. Fossil Acquisitions
Perhaps the most instructive lesson concerns the dangers of cognitive dissonance between corporate identity and corporate actions.
During the acquisition period, Fortum was criticised in the Finnish media and by climate activists for purchasing fossil fuel assets through the deal. In addition, while many other international companies reduced their activities in Russia following its occupation of Crimea, Fortum increased its presence in the country by acquiring Uniper, whose portfolio was mostly made up of coal- and gas-fired power generation in Germany and Russia. "Due diligence around the acquisition should have alerted Fortum to the overbearing risk of placing this bet on fossil fuel power and on Russia. Instead, management proceeded with a disastrous deal that has cost Finnish taxpayers dearly."
Currency Risk in Emerging Markets
One often-overlooked aspect of the Russia losses is currency risk. The Russian ruble has been highly volatile, and Fortum's Russian assets were constantly subject to translation effects that eroded value even before the 2022 collapse.
IX. Porter's 5 Forces & Hamilton's 7 Powers Analysis
Porter's 5 Forces Analysis
Threat of New Entrants: Low-Medium
The Nordic power generation market presents significant barriers to entry. Nuclear and large-scale hydropower require enormous capital investments, lengthy permitting processes, and specialized expertise accumulated over decades. However, wind and solar continue to attract new entrants, and Fortum must compete against a growing roster of renewable developers. The key differentiator is that Fortum's hydro and nuclear assets represent effectively non-replicable infrastructure—no one is building new major dams in the Nordics, and nuclear development faces its own regulatory hurdles.
Bargaining Power of Suppliers: Medium
Nuclear fuel supply has been a particular concern. Fortum's Loviisa plant originally relied on Russian TVEL fuel, creating supply chain vulnerability that has only recently been addressed through the Westinghouse partnership. For hydropower, the "supplier" is nature itself—water flows are outside anyone's control. For district heating and combined heat and power, fuel procurement (natural gas, biomass) involves standard commodity markets with moderate supplier power.
Bargaining Power of Buyers: Medium-High
Fortum sells into competitive wholesale electricity markets where prices are set by supply-demand dynamics rather than by any individual producer. For retail customers, switching costs are low, though Fortum has maintained market share through service quality and brand recognition. Large industrial customers increasingly negotiate long-term power purchase agreements (PPAs), which provide price certainty but also limit upside capture during high-price periods.
Threat of Substitutes: Medium
At the grid level, electricity is electricity—one MWh is fungible with another regardless of generation source. However, Fortum's clean generation profile provides differentiation through Guarantees of Origin and ESG credentials that some customers specifically value. The broader threat is demand destruction from energy efficiency improvements or on-site generation (industrial customers installing their own solar or wind).
Industry Rivalry: High
The Nordic power market features several large state-backed competitors (Vattenfall in Sweden, Statkraft in Norway) plus various municipal utilities and private developers. Competition is intense in both wholesale generation and retail electricity sales. In the Nordic power generation sector, its main competitors include Vattenfall (Swedish state-owned), Statkraft (Norwegian state-owned), and Ørsted (DNNGY). These companies compete primarily in hydropower and nuclear generation, as well as in the growing renewable energy space. In Finland specifically, Fortum faces competition from Helen Oy and Pohjolan Voima, while in Sweden, it competes with E.ON (EONGY) and Vattenfall.
Hamilton's 7 Powers Framework
Scale Economies: Moderate
Fortum benefits from scale in generation operations—spreading fixed costs across 47 TWh of annual output creates competitive advantages in maintenance, fuel procurement, and grid services. However, the scale benefits are less pronounced than in manufacturing industries, as power plants are geographically dispersed and cannot be easily "consolidated."
Network Effects: Weak
Unlike platform businesses, power generation exhibits minimal network effects. Having more customers doesn't make the service more valuable to other customers.
Counter-Positioning: Strong (Post-2022)
Fortum's current strategic positioning—clean Nordic generation—represents genuine counter-positioning against fossil fuel-dependent competitors. Incumbents facing coal phase-outs cannot easily replicate Fortum's decades of hydro and nuclear operating experience. The company's decision not to pursue merchant-basis new nuclear (absent government support) also reflects counter-positioning: avoiding the capital destruction risks that have plagued other nuclear developers.
Switching Costs: Low (Wholesale), Moderate (Retail)
Wholesale electricity has no switching costs—power is fungible. Retail electricity does create modest switching friction through inertia and billing relationships, but these are not durable competitive advantages.
Branding: Moderate
The Fortum brand carries weight in Finland and Sweden, particularly after the company's clean-up post-Uniper. The "clean energy" positioning has value with ESG-conscious customers. However, electricity remains fundamentally a commodity, limiting branding power.
Cornered Resource: Strong
This is Fortum's most significant competitive advantage. The company owns or co-owns effectively irreplaceable hydropower and nuclear assets. We have a total of 124 hydropower plants in Finland and Sweden. In addition, we are co-owner of several other hydropower plants. No new major hydropower can be built in the Nordics due to environmental restrictions; existing permits and infrastructure represent genuine cornered resources.
Process Power: Moderate-Strong
Decades of nuclear operating experience at Loviisa (with 89.4% load factor—among the best globally for pressurized water reactors) represent embedded process power. This expertise is not easily acquired; it requires institutional knowledge developed over the plant's 45+ year operating history.
X. Key Performance Indicators to Track
For investors monitoring Fortum's ongoing performance, three KPIs merit particular attention:
1. Achieved Power Price vs. Nord Pool System Price
Fortum's ability to capture value depends on the spread between its achieved power price (including hedging gains, optimization premium, and Guarantees of Origin) versus the underlying wholesale market price. Management has guided to an annual optimization premium of €6-8 per MWh. The Generation segment's estimated Nordic generation hedges: approximately 75% at EUR 42 per MWh for 2025 and approximately 45% at EUR 41 per MWh for 2026. Tracking whether Fortum consistently captures this premium reveals management execution quality and the value of the flexible hydro fleet.
2. Nuclear Availability Factor
The Loviisa plant produces roughly half of Fortum's wholly-owned generation volume. Nuclear availability factor—the percentage of theoretical maximum output actually achieved—is the critical operational metric. Finnish reactors have historically achieved 90%+ availability, among the world's best. Any degradation signals operational issues; sustained high performance validates the €1 billion lifetime extension investment.
3. Financial Net Debt / Comparable EBITDA
After the Uniper catastrophe, balance sheet strength is paramount. At year-end 2024, the ratio was at a healthy level of 0.2 times. Management targets maintaining this below 2.0-2.5x. This ratio indicates both financial flexibility for future opportunities and cushion against market downturns. The current 0.2x level is extremely conservative—potentially too conservative from a capital efficiency standpoint—but understandable given institutional trauma from the recent near-death experience.
XI. Conclusion: From Catastrophe to Clean Energy Champion?
The Fortum story is ultimately one of redemption in progress. The company that nearly broke Finland through geopolitical miscalculation has emerged as a focused Nordic clean energy generator with a fortress balance sheet and some of Europe's most valuable power generation assets.
The transformation has come at enormous cost. Finnish taxpayers lost billions. Management that made catastrophic decisions faced minimal accountability. The opportunity cost—what Fortum might have built with €7+ billion invested in Nordic renewables rather than Russian gas dependency—can never be recovered.
Yet the company that exists today has genuine strengths. The 124 hydropower plants, the Loviisa nuclear facility extending to 2050, the stakes in Swedish nuclear assets—these represent irreplaceable clean generation capacity that will only become more valuable as Europe pursues decarbonization.
The key questions for investors are whether current management has internalized the lessons of the Uniper debacle, whether the Nordic focus will persist through the next cycle of empire-building temptation, and whether Fortum can capture growth opportunities in electrification without repeating past mistakes.
"We at Fortum believe it makes sense to keep all low-carbon production technologies in the toolbox also in the future and that's why we will continue to develop our nuclear capabilities as a long-term option," says Markus Rauramo, President and CEO of Fortum. "In the next 5-10 years, new demand in the Nordics will be primarily met with new onshore wind and solar power coupled with flexibility and storage solutions as well as lifetime extensions of existing nuclear power plants. To prepare for the growing needs of our customers, we are developing a ready-to-build renewables pipeline, exploring pumped hydro, and extending the lifetime of our Loviisa plant. New nuclear could provide new supply to the Nordics earliest in the second half of the 2030s, if market and regulatory conditions are right."
For a company born from the hydroelectric dreams of a young Finnish republic, the return to Nordic clean energy feels like coming home. Whether that home proves profitable for shareholders—and safe for Finnish taxpayers—remains to be seen.
Myth vs. Reality
Myth: The Uniper losses were unforeseeable—no one could have predicted Russia would invade Ukraine.
Reality: Russia's pattern of aggression (Georgia 2008, Crimea 2014, Donbas separatists 2014-2022) was well established. Fortum's due diligence should have stress-tested scenarios involving Russian supply disruption. The €7.2 billion bet on a company heavily dependent on Gazprom gas contracts was a calculated risk that ignored mounting warning signs.
Myth: Fortum's Russian investments generated strong returns before the seizure.
Reality: On a cash basis, Fortum generated ~€4 billion of EBITDA from Russia since 2008 but invested ~€6 billion (including original acquisitions and subsequent investments). Currency translation losses of ~€1.9 billion further eroded value. The net cash loss before the 2023 seizure was already ~€2 billion, and that was before losing the entire remaining book value.
Myth: Fortum is now a pure clean energy company.
Reality: Fortum's generation portfolio is indeed ~99% CO2-free in the Nordics. However, the company still operates district heating in Poland with coal exposure that won't be fully phased out until 2027. The clean energy positioning is substantially accurate but not absolute.
Spotify
Apple Podcasts
Amazon Music
Audible
YouTube
Castbox
Pocket Casts