ForTheDoers Blog

Putting Fortum’s cash to work – towards a cleaner future with profitable investments

Markus Rauramo 06 November 2017, 10:31 EET

The investment in Uniper, along with the other M&As, enables a strong dividend capability, continuous investments in the development and commercialization of new clean and smart solutions.


Growth has been a central part of Fortum’s strategy after the divestment of the electricity distribution business. During the past five years, we have invested close to four billion euros in renewable energy, the circular economy and sustainable city solutions. We have pursued growth both through M&A's – e.g. by acquiring the circular economy company Ekokem – and new investments.

Building on these achievements, in late September we announced our intentions to become a major shareholder in Uniper. We see this as a significant and exciting step for the future of our company and for our commitment to a cleaner world. Uniper is a great, well-managed company with significant experience in low-carbon energy. For example, the company’s hydropower capacity, is 3.6 GW, more than Finland’s entire hydropower capacity of about 3.1 GW. Uniper also provides the conventional energy assets necessary, especially gas, that are vital to ensuring the security of supply during Europe’s energy transition.

At the same time, our investment is an extremely attractive opportunity and meets the criteria we set in our growth strategy: Uniper operates in Fortum’s core competence area in electricity production, is geographically close to our home markets, and is highly cash generative, which allows for further investments in emission-free energy, without sacrificing a competitive dividend.

The investment also offers us the opportunity to expand our market area from the Nordic countries and Russia to Central Europe.

The Uniper deal not only positions us for the future but proves to be a profitable investment. Looking at a few financial key indicators makes this clear.*

  • The enterprise value/EBITDA for the investment is 6.2x, i.e. in 6+ years Uniper would generate an EBITDA equal to the debt-free price of the transaction. This is not an expensive investment.
  • Return on net assets (RONA) is about seven per cent. To put this in perspective, the comparable RONA for our Generation segment in 2016 was about 7%.
  • The impact on Fortum’s earnings per share (EPS) is about 30 cents/share. In 2016 Fortum’s EPS was EUR 0.56.
  • The dividend yield is currently about three per cent, but it is expected to increase to over six per cent by 2020.

Fortum will finance the deal with its own existing cash resources and fully committed credit facilities. While the arrangement will temporarily increase our net debt/EBITDA ratio, we expect our ongoing cash generation, coupled with the dividend from Uniper, to reduce this position toward our stated target of around 2.5.

We believe that by investing in a successful company like Uniper we responsibly fulfil our financial duty. The investment in Uniper, along with the other M&A's we have executed, enables not only a strong dividend capability but also continuous investments in the development and commercialization of new clean and smart solutions that play a significant role in our efforts to build a cleaner energy system.

Markus Rauramo
Chief Financial Officer, Fortum

* The figures have been calculated on the basis of a 47% ownership stake and analyst estimates.