Friday, April 23, 2010

Thanks, Mauri

When Minister of Finance Jyrki Katainen said yesterday "Thanks, Mauri" (Mauri meaning Minister of Economic Affairs Mauri Pekkarinen) he indicated that he was very happy of the "big energy package" including preliminary decision for two new nuclear power plants in Finland.

I want to say Thanks, Mauri with a different meaning. First of all, as stockholder of Fortum I am naturally not happy about Fortum being left standing with aging nuclear power plants without licenese to replace them.

I see two things positive in the decision:
- 2 new nuclear reactors is better than one or none - position held by Mauri and many members of the same party for a long time
- Teollisuuden Voima (TVO) got permission to build it's fourth reactor. Fortum has 26,6% stake in TVO so it gets some new capacity in that way.

However, if Fortum does not eventually get a permission to replace it's Loviisa plants, it means pretty much that Fortum does not increase it's share of Finnish nuclear power plants in long run. In fact, Fortum's share of the two new reactors in Olkiluoto is less than what it has now running in Loviisa.

So, It seems that the cabinet of Finland will propose two new reactor licenses for approval in Finnish parliament. If approved in parliament, these would go to TVO and Fennovoima. Behind Fennovoima are various Finnish entities with 66% stake and the world’s largest privately owned energy company E.ON from Germany with 34% stake.

I simply do not understand how it's better to give license to a brand new entity without existing nuclear power plants in Finland (hence no experience in building and running a plant and no existing solution for the nuclear waste apart from maybe the co-owner E.ON). There are now two locations that have nuclear waste being cooled down for eventual shipment to the final storage deep underground: Loviisa and Olkiluoto. The decision to grant license to Fennovoima means a new site will contain (cool) nuclear waste and perhaps also a new location is needed for the final storage unless TVO and Fortum yield in the matter and give permission use Posiva's site.

The Finnish state has majority ownership in Fortum and it is indicated to be company with strategic significance: "Besides a strong shareholder interest, the company is connected with strategic interests owing to which the State is to remain so far a strong shareholder or to safeguard in other ways the strategic interests concerned, if the shareholding is reduced or relinquished."

Apparently the state has plans to diminish the significance of Fortum as a player in the Nordic power market. Or then there is some other reason for this kind of decision. Helsingin Sanomat speculated today that this might be yet another punishment for Fortum for granting too generous stock options in the past for the management. This was based on quote from somebody near the matter. Excuse me, but:
- ain't that a very old matter
- Former CEO and chairman were basically "lynched" connected to that and more recent disagreements about the size of bonuses (forced to resign)
- with majority ownership that state could have capped the option and bonus plans, but they didn't (so politicians should have looked into mirror long ago about how they have managed Fortum over the years)
The big old Fortum options fuss was never handled properly. Not by the press, nor by the politicians. You see, the fuss was never about dilutation effect (the TRUE cost of options) - it was about how much money that generated for the managers. These are two completely separate things. Apparently it would have been "OK" for the politicians, the press and the public that the options would have yielded smaller profits. This would basically meant LESS taxes to the state (managers have typically tax rate of 50-60%) with the same cost (dilutation effect to the state's own share of Fortum's profits).
So with this kind of FUZZY LOGIC one can maybe understand also how it was possible to grant the permission to Fennovoima instead of Fortum.
I would have only granted Fennovoima a license if THREE licenses would have been granted. Now the state is saying to the state-owned Fortum that "you can not invest into your home country". GREAT!

No comments:

Post a Comment