Finnish utility Fortum to quit Russia

COPENHAGEN (Reuters) -Finland’s Fortum will exit Russia and is looking for a buyer for its assets there, the utility said on Thursday, as the country flagged an application to join NATO in a move that drew an angry response from the Kremlin.

Fortum, which is majority state-owned, said in March it would continue existing operations in Russia but freeze new investments.

On Thursday it said it had now decided to “pursue a controlled exit” from the country – joining a long list of Western companies to pull out following the invasion of Ukraine.

“We will try to find a buyer,” Chief Executive Markus Rauramo told Reuters after the firm posted a first-quarter operating loss, dragged down by weakness at German subsidiary Uniper.

Fortum’s shares, already down around 30% since Russia’s invasion began, fell a further 6% by 1205 GMT.

“We expect few potential buyers and a costly exit option,” Credit Suisse analysts said in a note to clients.

Rauramo said the assets had drawn interest over the years but declined to comment on any current interest.

Asked if Finland’s NATO announcement had complicated matters, he added: “I don’t know if it will have an impact or not, but … generally speaking the current operating environment is more tense and more volatile and we have higher preparedness.”

Fortum’s Russian unit operates seven thermal power plants for district heating. Uniper, in which Fortum owns 78%, also has five plants across Russia through its Unipro subsidiary.

“SANCTIONS-COMPLIANT” GAS PURCHASES

Apart from its business in Russia, where it earned a fifth of its operating profit last year, Fortum is exposed to Russia through Uniper, which buys vast amounts of Russian gas through long-term supply contracts.

Rauramo said the firm was in close dialogue with the German government and Russian gas giant Gazprom about how to implement Moscow’s demand to pay for gas in roubles.

European gas buyers are concerned that acceding to that demand, under which they have to open accounts at Gazprombank for future payments, could be in breach of sanctions imposed against Russia.

Rauramo said Uniper would continue to pay for Russian gas in euros. “Whatever the solution then is to make this happen in a sanctions-compliant way needs to be worked out between the parties,” he added.

Fortum has previously said it would record a pre-tax impairment of 2.1 billion euros from its Russian operations in the first quarter, after which the firm has net assets worth 3.3 billion euros in the country.

It posted a first-quarter operating loss of 438 million euros ($460 million), down from a 1.2 billion euros profit a year earlier and in line with the 436 million euros loss expected by analysts in a poll provided by the company.

Finland said on Thursday it would apply to join NATO “without delay”, with Sweden expected to follow. The Kremlin called the announcement from Helsinki a direct threat to Russia and threatened an unspecified response.

($1 = 0.9520 euros)

(Reporting by Stine JacobsenEditing by Mark Potter and John Stonestreet)