On Wednesday the majority-state-owned Fortum offered to buy all the shares in German utility Uniper in a nearly-eight-billion-euro deal that would boost its gas, coal, hydroelectric and nuclear assets. Uniper's management describes the Fortum's bid as hostile and has questioned whether the companies fit strategically.
Fortum is offering to buy almost half of Uniper's shares from German giant E.ON. E.ON formally has until early next year to decide whether to sell its stake, but has already signed a memorandum agreeing to sell its 46.7-percent share to Fortum. It’s valued at 3.8 billion euros. Fortum would then hold more than 30 percent of Uniper stock and would be required to make a takeover offer.
Bigger in all but market value
Uniper, which operates power plants in Europe and Russia, is bigger than Fortum by almost all measures. It has about 300 power plants to Fortum’s 200, with a generating capacity more than twice that of the Finnish company’s – and more than all of Finland’s capacity put together. Uniper has 13,000 employees compared to Fortum’s 9,000.
Only in market value does Fortum beat Uniper, at roughly14 billion euros contrasted with the German utility’s value of around eight billion.
Old-school and fossil-heavy
Besides its holdings in Russia, Fortum’s generating capacity is nearly carbon-neutral, relying mostly on nuclear and hydropower, with a small but growing slice of other renewables.
Uniper, meanwhile, is an old-school fossil-heavy utility.
Fortum has 13 GW of electricity generating capacity. At 4.6 GW, hydroelectric holds the biggest share in its portfolio, followed closely by coal and gas at 4.5 GW. Nuclear accounts for 3 GW while wind, solar and others make up the remaining one gigawatt or so.
Uniper’s capacity is more than twice as big at 37 GW. Of this the lion’s share, 32 GW, relies on coal and gas, which each account for about one third of its portfolio. Just 3.6 is produced with water power and one-tenth of a gigawatt from other renewables.
Investor pullout possible?
The financial news site Taloussanomat notes that if the deal goes through, it could spur some major investors to divest themselves of Fortum shares as its fossil-fuel holdings might exceed pre-set caps on such ownership. For instance the pension fund Ilmarinen, which holds 0.8 percent of Fortum's stock, has pledged not to invest in energy companies that rely on coal for more than 30 percent of their capacity.
Fortum is majority-owned by the Finnish government – which has pledged to gradually phase out the use of fossil fuels so that Finland can meet its commitments under the UN’s Paris Agreement on climate.