Fortum has been a money trap for Kurika – “It's not like we're going bankrupt right now”


Chairman of the City Board Olavi Kandolin (center): “The biggest concern here has been whether our ownership control and Fortum's management can be tough enough in negotiations with the Germans.”

Fortum has been a money shampoo for Kurika – ”No täss&auml ; now right away to be going bankrupt”

Aerial view from the plains of Kurika. Kurika [email protected] at 17:42

In the town of Kurika in South Pohja, the alley race of Fortum's German subsidiary Uniper has been closely followed and no wonder. Kurikka is a major owner of Fortum, and Fortum owns 78 percent of Uniper.

– The biggest concern here has been whether our ownership control and Fortum's management know how to be tough enough in negotiations with the Germans, chairman of the Kurika town board Olavi Kandolin (center) commented to Iltalehti on Wednesday.

Kandolin believes that in Germany it is understood that the Finns are not completely unarmed in the negotiations.

– Yes, Finland should have enough compression force, because Germany wants households and industry to get gas. Germany cannot afford to let Uniper go bankrupt. That's the cold truth. And they have the power to allow Uniper to raise the price of gas, says Kandolin.

– It can't happen now that Germany takes over Uniper and then gives the company permission to raise the price of gas, Kandolin continues .

> Markus Rauramoon is still “tough”.

– I believe that a solution will be found. The blow here will surely be taken hard by everyone now, but we believe that a good result will be reached.

Uniper's collapse has more than halved the stock price of the parent company Fortum this year, and future dividends are at risk.


– Hindsight is pointless. We must remember that no one knew how to predict the war in Ukraine, at least not on this scale, says Kandolin.

– And whoever knew how to predict should be the richest man or woman in the world today, Kandolin adds.

Read also

Reuters: Germany giving Uniper permission to raise the price of gas – rescue package ready already on Friday?

Kurikka has huge equity assets

The city of Kurika is Fortum's 6th largest owner with a 0.7 percent ownership stake and Neste's 6th largest owner with a 0.6 percent ownership stake.

Calculated at Tuesday's closing prices, the value of the share pot was 289 million euros. Fortum's share was just under 76.1 million euros.

Kurika's Fortum and Neste ownership goes back to Jyllinkosken Sähkö, which was owned by the city. In the 1990s, the municipality's electricity company was merged with Southwest Finland's electricity company from Paimio. The name of the new company became Länsivoima Oy, which was listed on the stock exchange.

The state-owned company Imatran Voima (IVO) started buying Länsivoima's shares in the 90s, when the big Finnish and Swedish electricity companies fought a merciless race for Finland's regional electricity companies. Fortum, born from the merger of IVO and Neste, continued to make purchases.

Kurikka finally sold its Länsivoima shares to Fortum at the end of the 90s. The transaction amount was paid in Fortum shares.

You can read more about Kurika's stock market holdings here.

Should the risk have been diversified?

In Kurika, there has been a discussion about diversifying equity investments ever since the city became a major owner of Fortum. Diversification aims to equalize the risk.

– We were criticized a lot when everything was in one share (Fortum), says Kandolin.

The situation changed in 2004. Fortum was split into two companies, and Fortum's owners received Neste shares as dividends.

Neste's success on the stock market has been staggering.

– Now Neste's share of the portfolio is more than 70 percent, so in practice this kind of diversification has taken place, Kandolin says.

The shares of Fortum and Neste have been entered in the city's balance sheet at a really fair underprice.

– For example, Fortum's balance sheet value is in the order of one million euros, so it's not going to go bankrupt right away, says Kandolin.

Dividend money is good for the townspeople

Kurikka has done wisely by not selling its shares. Their value has developed well in the long term and the dividend flow has been plentiful, totaling well over 100 million euros. For example, from last year, the city's coffers received a dividend pot of just under 11 million euros.

The ideal situation, according to Kandolin, would be that the dividends could be used for investments, and thus build and develop the city.

Now the money has largely gone to running the city's operating economy.

– Of course, you can criticize it, but you have to remember that the dividend money has been used to maintain a significantly better level of service for the townspeople, Kandolin says.

– For example, we have free daycare. There would be no such thing without dividend income, and there is no such thing in other cities of this size.

Dividend money has also gone into investments.

– New hospitals, a high school and a vocational school are on the way and a huge amount of money has been put into the infrastructure. It hasn't been quiet in the village, a lot has been built, says Kandolin.

Kurika's municipal tax, or tax rate, is 21 percent.

A lot of tax rate would it be without dividend income?

– We would certainly be at the top of the province. The municipal tax would be 2-3 percentage points higher than the current one.

The estimate is formulaic.

– You have to remember that if there were no dividend income, of course expenses would also be lower, Kandolin says.

Kurika had 20,197 inhabitants at the end of last year. The share capital coming from Neste and Fortum for each resident of Kurikka was 14,309 euros calculated at the closing price on Tuesday.

Tuppurainen: no additional costs for taxpayers from the Uniper crisis on 19.7. 16:21 Perspective: Fortum closed its eyes to the Russian risk and now the company is in crisis 14.7. 16:56 Analysis: Fortum will soon be in your wallet on 16.7. 15:13


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