HS Analysis | In Uniper’s big rescue operations, Finland no longer had to play the role of financier, but the threat is not over yet

Fortum’s the first episode of the billion-euro rescue operation of the German subsidiary Uniper was completed on Friday.

For Finland, the package seems reasonable at first, at least insofar as Fortum does not have to finance Uniper any more. Germany promises to save the company with 15 billion euros and German consumers with rising gas prices.

However, it is a very complex contract, so surprises may still emerge and the final meaning of the deal will only become clear later.

The state owns 51 percent of Fortum. Fortum owns 78 percent of Uniper, but its share drops to 56 percent in the rescue package. Germany’s ownership, on the other hand, will rise to 30 percent very cheaply compared to stock exchange rates.

Read more: The rescue package was born: Germany takes 30 percent of Uniper – Fortum’s price increase turned to a decrease

Minister for Europe and Ownership Titti Tuppurainen (sd) said In an interview with HS on Monday of this week, that taxpayers’ money must not be used “unreasonably” to save Uniper. The starting point of the negotiations was that Fortum would no longer finance Uniper.

So far, it appears that these conditions are met. However, the state may have to provide more capital to Fortum if its solvency deteriorates due to Uniper.

The state has annually received half a billion euros in dividends from Fortum. There will hardly be such large dividends in the coming years.

The Uniper crisis keeps Fortum’s chances of financing new acquisitions low for a long time. The former world conqueror will now move to the provincial series for a long time.

Read more: Tuppurainen and Fortum’s Rauramo praise Uniper’s rescue package: It does not require Fortum or taxpayers to invest new capital in Uniper, says Rauramo

Finns however, taxpayers’ worries are not over.

State-majority Fortum still owns Uniper, whose business profitability will depend on Russia for a long time. Russia is waging war in Ukraine and using gas as a political weapon.

Uniper is Germany’s most significant buyer of Russian gas, and millions of German homes are heated with Uniper’s gas.

It may be that this is only Uniper’s first rescue package.

Uniper is not only the economy, but also the European foreign and security policy.

Because of that, Uniper raises very fundamental questions about the relationship between the energy business and states, the rationality of state-owned companies, and the responsibility of politicians in risky and extremely complex businesses like Uniper.

When Fortum made the decision to take over Uniper, the minister was responsible for ownership control Mika Lintilä (center).

Fortum became the majority owner of Uniper Minister of Ownership Sirpa Paateron (sd) during. Tuppurainen has been the Minister of Ownership since December 10, 2019, which means that Uniper’s rescue operation is part of his shift.

Would they politicians could have prevented the Uniper crisis?

Yes, they would, but it would have been difficult and daring.

In practice, it would have meant that officials and politicians would have taken the reins at Fortum for a while, i.e. one owner would have ordered Fortum because of his own interests, which is against the Limited Liability Companies Act.

The state could have changed those who made the Uniper decision Pekka Lundmarkin and the chairman of the board Sari Baldaufwhen Fortum’s intentions became public in autumn 2017.

Failure to do so would have been a scandal at that time, and most likely at least the minister responsible for ownership control would have had to resign.

Read more: Did you fall off the wagon? This is what Uniper’s crisis is all about

Fortum made good results at the time, and Lundmark and Baldauf were the elite of the Finnish business world. Criticizing their actions would have been a real threat from a politician in Finland recovering from the financial crisis.

The minister would hardly have served as a minister for many days if he had said in 2017 that Uniper should not be bought, because the way a German heats his apartment with Russian gas is stupid and Russian gas is bloodstained.

At the time of Fortum’s Uniper decision, the then prime minister Juha Sipilä (centre) said in 2017 that the trade has foreign and security policy dimensions. At that time, many people already had a different opinion. At last we can now see that Sipilä was wrong.

Lintilä told STT at the time of the deal’s birth that there is no special risk in Uniper.

Russia had conquered the Crimea a few years earlier, but all over the world the economy crushed even attempts at moralization. Few companies, however, played as strongly on the Russia card as the state-owned company Fortum, led by Lundmark.

Lintilä the sentence was special even without hindsight.

All deals are risks – but especially Uniper, because in the deal Fortum bought a company many times bigger than itself. Its core business is gas, which Fortum had, to say the least, no experience with.

To top it all off, Uniper is the company to which a couple of large German companies once transferred their risky businesses such as coal and gas. In addition, Uniper’s management opposed Fortum’s takeover and defined it as hostile.

Read more: Fortum’s electricity online stores started a mess, with billions of taxpayers’ money at stake – This is how the Finnish state drifted into the middle of Germany’s energy crisis

in Finland at that time there were people who spoke out loud about the Russia risk, such as the then chairman of the Green Party Ville Niinistö. In the main, the press did not, so to speak, scare gas or Russia in connection with Uniper, but Uniper’s coal power plants.

Money silenced criticism.

Last year, Uniper made half of Fortum’s operating profit. The generous dividends perhaps increased the risk awareness of the state and other owners. Fortum has been one of Finland’s most popular shares and a real stock market rocket of the 21st century.

Why should the politicians have been worried if the core of the capitalist system controlled by highly paid analysts, i.e. the stock market, did not see the company’s big Russian risk as a risk?

Why should the Minister of Ownership Management have fought back, when Fortum’s other large owners, such as Finnish insurance companies, trusted the actions of Fortum’s management?

Uniperin the main culprit of the problems is the president of Russia Vladimir Putin. Without Putin’s attack on Ukraine, the Uniper crisis would not be this big at least.

Those who guessed that Putin would attack Ukraine and that huge sanctions and an energy crisis would follow are the ones who can best afford to be taunted. Not many people have yet registered as such experts.

But precisely because of Putin’s many wars, Fortum and the owners should have emphasized the risks and morality of the trade. Putin already had so much blood on his hands at the stage of making the deal that at least Uniper’s sales contracts should have included as many crisis clauses as possible.

Now there haven’t been any, which is incomprehensible.

Uniper has sold gas with contracts, the price of which could not be changed before the current rescue package – whatever happened to the price of gas. Uniper has bought gas many times more expensive than it has sold it. Now it makes up to 50 million euros in losses per day.

For the state Uniper’s deep crisis was resolved at the turn of the year at the latest, when Fortum told the state that it had decided to give Uniper EUR 8 billion in funding. According to the rescue package, that money has not been lost, but in bankruptcy, the Germans’ financing would be in a better position.

Without the new financing, the company would probably have gone into liquidation already at that time. If the state had blocked the financing, for example by calling a general meeting and changing the management, Fortum and the governments of Finland and Germany would have already had to negotiate about saving Uniper at that time.

Maybe that would have been wise, but negotiations would have taken place at that time significantly less in the spirit of crisis and Germany’s interest in the rescue operation would not necessarily have been the same as it is today.

The war had not started, and at the time the common wisdom among energy experts was that the price of energy was falling. Uniper’s problems at that time were caused by the fact that the price of gas rose by a maximum of one thousand percent during 2021.

Not many people believed in the war in Ukraine, and Uniper’s emergency funding was supposed to be temporary.

As such, the state knew what Uniper’s problems were about, because it had just saved the Finnish gas company Gasum with 200 million euros due to the rise in gas prices.

In the stock market, the EUR 8 billion financing did not have a very significant effect on Fortum’s price, and in the media it was acknowledged as quite small. Even the opposition did not wake up.

Someone a wise man has sometimes said that in state-owned companies, profits are the merit of the company managers and losses are the fault of the politicians.

The big question is, do large energy companies even have to be listed companies or should they only be listed companies?

Just like the big banks and insurance companies, the taxpayers have to bail out the big energy companies that produce heat and electricity, whether they are state-owned or not.

Uniper crisis it seemed how dangerous it was in retrospect that in the 21st century politicians increasingly began to think that energy is a business like any other business. However, it is mostly about foreign and security policy.

Fortum’s risk business in Russia has been based on the same misconception about the interdependence of the Russian and Western economies.

All of Europe has based its Russia policy on it.

All key decision-makers in Europe, or indeed the entire Western world, from business leaders to politicians, believed that Russia’s conquest efforts would be kept in check when it was tied economically to the rest of the world.

The Uniper trade is a child of this interdependence ideology that was deeply rooted before the war in Ukraine.

In this case, in addition to Putin, especially politicians are to blame – but also voters, investors, analysts, business leaders, researchers and investment bankers.

Read more: Why should a citizen be concerned about the Uniper mess? There are at least three reasons for that