Russia took control of utilities owned by Finland’s Fortum Oyj and Germany’s Uniper SE, the first such move by the Kremlin in retaliation for European countries’ asset freezes over its invasion of Ukraine .
Russian President Vladimir Putin on Tuesday afternoon signed a decree allowing the government to introduce “temporary” state control over the assets of companies or individuals from “unfriendly” states – which include the US and its allies – in response to similar movements or the threat. of them, for these countries.
Ownership of the assets is not affected, according to the Federal Agency for State Property Management, the government body that will manage the assets.
The only assets listed so far in an addendum are Uniper’s 83.7% stake in Unipro PJSC and Fortum’s 98.2% stake in local Fortum PJSC. Both companies had tried to sell their stakes after Putin ordered troops into Ukraine last year, but were blocked by the Kremlin, which has banned foreign investors from selling Russian assets without special permission and required a steep discount .
Falling shares
Fortum shares fell as much as 3% in early trading at 10:02 a.m. in Helsinki.
Russia threatened to seize the assets of foreign companies last year after Germany took control of a local arm of natural gas producer Gazprom PJSC, which it later nationalized. Chancellor Olaf Scholz’s government has also seized refining assets partially owned by the sanctioned state oil company, Rosneft PJSC.
“The external manager is given powers that allow him to ensure the efficiency of companies in accordance with their importance for the Russian economy,” the state real estate agency said in its statement. The original owner “no longer has the right to make management decisions,” he said.
The decree introduces temporary external management on a case-by-case basis and the list of assets can be expanded if necessary, the agency said. The agreement can only be terminated by presidential decree.
Fortum said in a statement on Wednesday that it had no official confirmation of Russia’s move or its potential implications for assets, and would issue a comment when it has more information.
The Finnish state-controlled company was among the largest foreign investors in Russia’s power sector, with seven thermal power plants in the Urals region and western Siberia, as well as the country’s largest wind and solar portfolio . In May 2022, he announced a plan to put the assets up for sale, but the process stalled because the Kremlin refused to approve the deals.
Uniper posted a 4.4 billion euro ($4.8 billion) loss at its Russian unit Unipro earlier this year saying it no longer controlled the subsidiary’s operations. The German company was trying to sell Unipro and said in February it had lined up a Russian buyer, but the deal was blocked pending Putin’s approval.
Uniper is a former subsidiary of Fortum and was taken over by the German state last year to prevent its collapse.
To date, Fortum had taken write-downs of €1.7 billion on its assets, leaving them worth €1.7 billion on its books.
Fortum is unlikely to regain control of its assets in Russia unless there is “a fundamental change in the political landscape”, which currently looks “unlikely” in the short to medium term, Danske Bank analyst Jakob Magnussen wrote in a credit memo. .
“With Fortum no longer in formal control of its Russian assets, we see a good chance that some investors will be willing to invest in Fortum, as the Russian exposure may no longer be an obstacle from an ESG perspective,” he said. Magnussen said. said
–With the assistance of Leo Laikola and Kati Pohjanpalo.
