Home Future payments Finnish electrician Fortum leaves Russia

Finnish electrician Fortum leaves Russia

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The sign of Finnish energy company Fortum is seen at its headquarters in Espoo, Finland July 17, 2018. REUTERS/Ints Kalnins

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  • Fortum seeks buyer for Russian assets
  • Decision comes as Finland seeks to join NATO
  • Utilities post operating loss in first quarter

COPENHAGEN, May 12 (Reuters) – Finland’s Fortum (FORTUM.HE) will leave Russia and is seeking a buyer for its assets there, the utility said on Thursday, as the country applied to join NATO in a decision that drew an angry reaction from the Kremlin.

Fortum, which is majority state-owned, said in March it would continue existing operations in Russia but freeze new investments.

On Thursday he said he had now decided to “pursue a controlled exit” from the country – joining a long list of Western companies to pull out after the invasion of Ukraine.

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“We will try to find a buyer,” chief executive Markus Rauramo told Reuters after the company posted a first-quarter operating loss, driven by weakness at German subsidiary Uniper. Read more

Shares of Fortum, already down around 30% since the start of the Russian invasion, fell another 6% at 1205 GMT.

“We expect few potential buyers and an expensive exit option,” Credit Suisse analysts said in a note to clients.

Rauramo said the assets have attracted interest over the years, but declined to comment on any current interest. Read more

When asked if Finland’s announcement of NATO has complicated matters, he added: “I don’t know if it will have an impact or not, but…generally speaking, the he current operating environment is more tense and unstable and we are better prepared.”

Fortum’s Russian unit operates seven thermal power plants for district heating. Uniper (UN01.DE), of which Fortum owns 78%, also has five factories across Russia through its subsidiary Unipro (UPRO.MM).

GAS PURCHASES ‘COMPLIANT WITH SANCTIONS’

Besides its operations in Russia, where it made a fifth of its operating profit last year, Fortum has exposure to Russia through Uniper, which buys large quantities of Russian gas through long-term supply contracts.

Rauramo said the company was in close dialogue with the German government and Russian gas giant Gazprom on how to implement Moscow’s request to pay for gas in rubles.

European gas buyers fear that accessing this request, under which they must open accounts at Gazprombank for future payments, could violate sanctions imposed on Russia.

Rauramo said Uniper would continue to pay for Russian gas in euros. “Whatever the solution for this to happen in compliance with the sanctions, it must be worked out between the parties,” he added.

Fortum has previously said it will record a pre-tax impairment of 2.1 billion euros of its Russian operations in the first quarter, after which the company has net assets worth 3.3 billion euros. in the country.

It posted a first-quarter operating loss of 438 million euros ($460 million), down from a profit of 1.2 billion euros a year earlier and in line with the loss of 436 million euros expected by analysts in a survey provided by the company.

Finland said on Thursday it would apply to join NATO “without delay”, with Sweden expected to follow. The Kremlin called Helsinki’s announcement a direct threat to Russia and threatened an unspecified response. Read more

($1 = 0.9520 euros)

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Reporting by Stine Jacobsen Editing by Mark Potter and John Stonestreet

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