Fortum fights to sell seized Russian assets and get compensation

4:20 am Wednesday, August 09th, 2023

By Anne Kauranen

HELSINKI (Reuters) – Finnish utility Fortum still hopes to sell its Russian assets and get compensation for their seizure by the Kremlin via arbitration, its chief executive told Reuters.

Fortum is one of a handful of companies with assets placed under “temporary control” by Moscow in response to the European Union’s sanctions since the start of Russia’s war in Ukraine, which prompted over a thousand Western firms to exit Russia.

In the second quarter, Fortum wrote off the entire value – 1.7 billion euros ($1.9 billion) – of its seven thermal power plants and a joint-venture portfolio of wind and solar plants in Russia, after Moscow placed them under its control by presidential decree in April.

“We still hold legal ownership of the businesses, but we don’t get any information, dividends or loan paybacks from there,” CEO Markus Rauramo said in his first interview about the subject.

“We do still pursue their sale,” he added.

Rauramo did not give further details about that, but said Fortum had been in advanced talks with a potential buyer for the asset portfolio, which he described as “well-invested, profitable, efficient and the best that exists in Russia”.

Before the seizure, Fortum and its unidentified potential buyer had presented their plans to the Russian government commission that gives permission for foreign-owned asset sales.

Instead of approving the deal, Russia announced the seizure, which came as a surprise and without any warning, Rauramo said.

Finding the right buyer is crucial, experts and executives at companies that have successfully left Russia have told Reuters, with close relations to government officials seen as a real advantage.

President Vladimir Putin’s seizure decree was published late on April 25 and new management took control of the Russian unit, PAO Fortum, the following lunchtime.

Fortum has started legal proceedings to seek compensation for the seizure on the basis of international investment protection agreements which Russia has signed, Rauramo said, adding the arbitration would begin next year.

“We aim to get the value of our possessions back and we believe that we will get some compensation,” he said.

Fortum’s businesses in Russia have also left it with another unsolved legal dispute – with its long-time Nordic partner in wind power, Vestas.

Meanwhile, Fortum will focus on its new strategy centred around clean Nordic energy where Rauramo sees “big growth opportunities”. The company will aim to increase renewable power production, while studying new opportunities such as synthetic hydrogen.

($1 = 0.9112 euros)

(Reporting by Anne Kauranen in Helsinki Additional reporting by Alexander Marrow Editing by Josephine Mason and Mark Potter)