In September we announced our agreement with E.ON regarding their 47 per cent stake in Uniper and our intention therefore to launch a voluntary takeover offer to all Uniper shareholders. After the news became public, some people turned their attention on the fact that 80 per cent of Uniper’s production is fossil fuel-based – mostly natural gas. That was followed by a flurry of questions: How will the investment promote the change for a cleaner world? How does Uniper mesh with Fortum’s goal to lead the transition towards a low-carbon energy system?
I am happy to share my perspective, as one of the architects of the planned transaction at Fortum as the head of the company’s mergers and acquisitions. In addition, I am also responsible for Fortum’s wind and solar businesses.
Stable financial earnings ensure investments in renewable energy
In recent years we at Fortum have decisively developed our wind and solar energy businesses with the aim to grow significantly. For example, we consider wind power to be one of the most competitive production forms in the future up here in Northern Europe. We carefully select the targets of our wind and solar energy investments. The aim is to invest where the conditions are optimum for the production form in question.
We are currently constructing or planning wind power in Sweden, Norway and Russia. We have built over 170 MW of solar energy in India within the past couple of years, and we are continuing to pursue growth. Our goal is to invest about EUR 200-400 million in India’s solar energy projects. We expect our investment in Uniper to deliver an attractive return that will further enable us to accelerate the development and implementation of sustainable energy technologies.
The energy system transition will take time
The longer we have operated in wind and solar power, the deeper our understanding of the entire energy system has become. We at Fortum clearly see that the future energy system must be secure, agile and clean, and it must provide affordable energy for European consumers and businesses. No matter how much we all would like renewable energy alone to be the solution for the globally growing energy demand, it just isn’t realistic in the current situation.
The energy system transition to low carbon and renewable will not happen overnight at the snap of the fingers. Why not? One reason is because a feasible and economically viable solution for large-scale energy storage has not yet been developed. So we need steady production at least for the coming few decades to work alongside renewables to secure the functioning of society at all times.
Additionally, we need production that can be flexibly adjusted to secure the energy supply when it isn’t windy or sunny. Here in the Nordic countries, hydropower functions in this way. Many countries, like Germany, don’t have the same alternative on such a scale. Then you have to rely on another form of balancing power. Uniper’s gas-fired power plants and their pumped storage hydro power plants are efficient tools in reaching Europe’s climate targets.
An understanding of how the different types of generation work together in the energy system, and how this will evolve in the energy transition, is very important. Uniper’s portfolio which is well diversified by both fuel type (including hydro and nuclear as well as thermal production) and geography (Germany, Russia, Sweden, the Netherlands, UK and other markets) offers a clear complement to Fortum’s own portfolio.
We at Fortum are investing simultaneously in clean, renewable energy, and, with the Uniper transaction, more in stable and adjustable production. To me, this combination indicates social responsibility by Fortum in light of our position as a significant European energy sector participant: we are rapidly advancing the transition towards a low-carbon energy system while, at the same time, making sure there is a supply of electricity and heat when the sun isn’t shining and the wind isn’t blowing. I believe that as a responsible leader at the forefront of clean energy, Fortum is the best possible partner for Uniper.
Senior Vice President, M&A and Solar & Wind Development, Fortum