Iltalehti compiled the key questions and answers to the Uniper [email protected]
[email protected] at 14:04 (edited at 14:28)
- Uniper, a subsidiary of the Finnish state company Fortum, is in crisis.
- The reason is that, that Uniper buys gas at a high price and sells it cheap in Germany.
- Fortum has already helped Uniper with a financing package of 8 billion, but it was not enough.
- The companies and the Finnish and German governments are now negotiating a solution.
What the hell Uniper , which 8 billion funding package? Who owns, who pays and to whom? Iltalehti compiled eight burning questions revolving around the crisis and their answers.
Currently, the Finnish state company Fortum, its subsidiary Uniper and the governments of Germany and Finland are negotiating a solution to Uniper's crisis situation.
Furthermore, there has been debate in Finland about whether the risks related to Uniper should have been better identified years ago – and whose responsibility it would have been.
Iltalehti interviewed Aalto University's professor of technical physics Peter Lund and OP analyst Henri Parkkist for the story.
1. What causes Uniper's cost crisis?
Lund says that two factors have led to the cost crisis: due to the corona pandemic, the energy market had weakened in early 2020, but the recovery of the Asian economy in the summer of 2021 quickly increased the demand and price of gas. Russia's war of aggression against Ukraine in the spring of 2022 was another blow.
Russia has reduced gas exports and the world market price of gas has risen enormously. at the same time, the EU wants to get rid of Russian gas.
Uniper has to buy gas from elsewhere. At the same time, it is still selling gas to German consumers at the contracted price – well below the price at which it itself buys gas.
Uniper's newest coal-fired power plant is Datteln 4 located in Germany. For example, environmental organizations have criticized it, and Finland has had its share: Finland has ambitious climate goals, but its state-owned company's subsidiary started a new coal-fired power plant in 2020. AOP
2. Why doesn't Uniper just sell gas at a higher price forward?
Uniper has already agreed on gas sales prices with its customers and has to respect its agreements. If the contracts are to be broken, it requires the intervention of the German state.
Amendments to the German Energy Security Act have now been approved, which, if decided, would enable the transfer of higher procurement costs to customers. At that point, customers could choose between a higher price and giving up gas, OP's Parkkinen says. Uniper has proposed that the legislation would be used to pass on prices to customers.
Lund says that if Germany decides to intervene in the agreements, it could have far-reaching political implications. Even now, the price of electricity and gasoline have risen and energy poverty in Germany is estimated to increase significantly.
– If in this situation Uniper transferred all its price pressure to consumers, Germany would be in a tight spot domestically. It would become a big political problem, not only for Germany but it could expand to Europe. The political risk is so enormous that no one knows what will happen, Lund says.
Owner guidance minister Tytti Tuppurainen said on Tuesday 19 July that the state “had been informed” about the 8 billion financing package from Fortum to Uniper. Henri Kärkkäinen
3. What are Fortum's options now?
All available options cost money.
One option is Fortum's wish that Uniper be broken up. Fortum is probably willing to give up the gas business in Germany, but is interested in buying Uniper's nuclear and hydropower in Sweden, Parkkinen believes.
– In Finnish, it sounds smart, but if you think about the parts that are being talked about, Fortum would clean Uniper like a shack, that is, the valuable parts would remain in Finland and the junk parts would remain with Uniper, says Lund.
If such an arrangement were made, it would cost something. Lund estimates that a package of arrangements would probably be made in which the Finnish and German governments would finance the separation.
– That will probably be discussed now, I could imagine, Lund says.
The news agency Reuters reported on Wednesday that Germany would give Uniper permission to raise the price of gas as part of the company's rescue package, and the negotiation result would be announced already on Friday. Owner guidance minister Tytti Tuppurainen (sd) messaged Iltalehti early Thursday afternoon that she will not comment on the negotiations or their schedule.
Reuters: Germany to give Uniper permission to raise gas prices – rescue package ready already on Friday?
Another much-discussed option – according to Lund, the worst-case scenario – is to let Uniper go bankrupt. Germany has said it will not let this happen. If bankruptcy threatens, Germany would take a significant ownership or even nationalize the company, Lund estimates.
At the same time, Fortum could lose a significant part of its investments in Uniper. Fortum has initially invested 7 billion in capital in Uniper, and provided a financing package of 8 billion. In addition to this, Fortum has 5 billion invested in Russia.
4. What money was used to pay for the financing package already provided by Fortum? Was there permission from the Finnish government?
In the beginning of the year, before the war of aggression against Russia, Fortum already gave an 8 billion financing package to Uniper because of its financial difficulties. The financing package consists of loans and guarantees. There is no more public information about the financing package, OP's Parkkinen says. There has been an estimate in the public that the money has already been spent.
Where does the money come from? Parkkinen explains: Fortum has created a financing facility for itself through the channels it usually handles its financing. The money comes from financial sources that are already ready or as loan money. Sometimes listed companies also cover their financing needs by issuing shares.
– Yes, the permission of the Finnish government must have been obtained. Fortum's board has a representative of the Finnish government. I am sure that there has been contact with the owner, in this case the minister responsible for ownership control or the highest official, says Lund.
5. Why did Fortum buy Uniper in the first place?
First, Fortum bought 49.9 percent of Uniper in 2017. In 2019, it increased its ownership by about 20 percent, and later added more so that the ownership is now 78 percent.
Both Lund and Parkkinen say that Fortum was particularly interested in Uniper's nuclear power and hydropower. In 2017, the greatest value was estimated to be in Swedish hydropower, and this is still the case, says Parkkinen.
Lund points out that Uniper achieved much more: 80 percent of the company's energy production capacity is something that did not initially fit Fortum's to a palette striving for clean forms of energy, such as gas.
Mika Lintilä was the Minister of Ownership in 2017, when Fortum bought just under 50 percent of Uniper. Now Lintilä is the minister responsible for energy. Henri Kärkkäinen
6. What kind of risks were known when the deal was made and ownership increased?
Lund says that, first of all, there was a risk that Fortum would buy a much larger company. In 2020, Uniper's turnover was more than ten times larger than Fortum's. If there were problems, the resources of a small operator would not be enough to solve them. Fortum also lacked knowledge of the gas business.
Another risk was investing in coal and natural gas, old technology. At one time, E.ON and RWE, one of Germany's largest energy companies, put their old risky industries into Uniper. It was bought by Fortum.
– It was known that Uniper was like a “junk bank” and should not be touched because of the risks, says Lund.
According to Lund, Germany as a business area was also a risk. Uniper mainly heats German homes and supplies gas to industry, so there is a lot of politics involved. Germany also has a strong trade union movement.
In addition, Lund highlights as a risk that Fortum invests in fossil fuels at the same time as Finland and Europe strive towards climate-friendly energy production.
The Russian risk deepened by the Uniper deal was already a topic of conversation at the time of the purchase in 2017.
At that time, Prime Minister Juha Sipilä (Centre) said that the deal does not involve foreign and security policy dimensions. Among the politicians, for example Ville Niinistö (Vihr) criticized Sipilä, saying that it is naive to claim that the deal does not increase Fortum's risk in relation to Russia. Uniper's large emissions drew criticism from a climate perspective.
7. Which politicians are responsible for the Uniper agreement?
Fortum bought Uniper in 2017 and increased its holdings in 2020. Now there is a crisis.
In 2017, Sipilä was the prime minister and Mika Lintilä (center) was the minister of ownership. Lintilä said at the time that it was not known that the Uniper deal would involve any special risks. Sipilä also ignored possible foreign policy risks.
Until November 2019, Tuppurainen served as the Minister of Ownership Management in Sanna Marini's (sd) government.
Lund says that other large companies, for example Neste and the gas industry, have actively tried to get rid of dependence on Russia in recent years. Lund wonders how Fortum has only increased its dependence on Russia.
– When Russia attacked Ukraine, the brakes should have been pulled pretty quickly. It was then that energy might become an extension of politics. Your politician should have rung the clock. The Finnish government has acted terribly slowly in this, Lund says.
Lund says he understands that politicians cannot interfere in the company's operations, but “I guess the owner is looking after his holdings”.
– As if washing hands in a situation where hands should have been dipped in clay. To help the situation go in the right direction, contracts can be changed or changed, Lund says.
In Finland, the parliament's finance committee met exceptionally during the summer break on Tuesday 19 July. The reason was Uniper. Henri Kärkkäinen
8. Why should ordinary Finns be interested in Uniper's crisis?
From the perspective of security of supply and the functioning of society, Fortum and Uniper are important companies in Finland and Germany, says Parkkinen.
The sums to be lost are enormous. Finland's state budget this year is 64.8 billion. The financing package granted by Fortum to Uniper alone is an eighth of that.
Lund says that Finns should be interested in the fate of Uniper, because the state owns the majority of Uniper's parent company Fortum and has invested billions in the company. We have social security reform, there are billions missing, and it's a terrible mess when you can't find money anywhere, says Lund.
– This cannot be treated as just an “oh” type of case. That money is removed from all major social changes and improvements. It's out of our future.
Germany has bigger problems than just Uniper – hoping for a mild winter and military support from Russia 20.7. 7:00 Will Finland have to save Fortum? This is how the Uniper crisis of billions of euros can be resolved 13.7.2022 10:32 Tuppurainen: no extra 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 14.7.2022 16:56 Analysis: Fortum will soon be in your wallet on 16.7. 15:13