I have been trimming down our position in Fortum (Nasdaq Helsinki: FORTUM) during the last 12 months as in my view there has not been much upside potential left for quite some time now compared to the situation 2-3 years ago when the stock was trading at a lot lower level and offered nice asymmetric risk/reward potential then.
Today I decided to sell the position completely. The final trigger was news that the next Finnish cabinet will very likely be formed around the political left including the Greens of Finland and the Centre Party.
In my view this combination is the worst combination possible from the view point of Fortum, where Finnish state is majority owner with over 50% stake. To boot, the cabinet would be backed by the most anti-nuclear parties there is in Finland. While I do not think any of the parties will propose ramping down the existing plants, getting them replaced eventually would likely require another kind of cabinet setup.
In terms of plants in Fortum's portfolio, the likely political "hot potato" will be the vast number of coal plants owned by Uniper where Fortum now has a big stake. The bombardment to "shut down" has already started from the finnish environmental groups (even though the plants are not even in Finland!).
Overall the political ambition level towards changing the energy mix is a bit too high, which may manifest in hasty decisions which may have unwanted consequences in the energy market.
However, Most of all it's just the socialist agenda that is in my opinion the big problem. The cabinet will not be shareholder friendly (of any company - listed or not). On top of that, there is a history of cabinet officials meddling with Fortum at least indirectly (via meddling with the board and other governance structures).
My all time favourite meddling was related to Fortum options. The politicians failed to oppose very lucrative option deal at the time when it caused the dilutation (when options were issued) to share holders. It was only when the the options were sold at huge profits that the scheme became a massive political problem.
The funny thing is that once dilutation had taken place, it was actually good for the state that the options had value. Most of the money from the options came back to government because of the ~60% tax rate for very high income individuals.
Showing posts with label Power generation. Show all posts
Showing posts with label Power generation. Show all posts
Wednesday, May 8, 2019
Friday, July 24, 2015
Increased stakes in Fortum
I have more than doubled our position in Fortum lately because I think it is now very attractively valued.
My seven reasons for holding Fortum have not changed much in two years.
The reason #7 has now realized and hidden value has been unlocked. Fortum now has liquid funds worth 8,6 billion EUR after the divertments of Finnish and Swedish power distribution businesses.
At 15,50 EUR per share it has market cap of only 13,8 billion EUR.
According to fund manager Anders Oldenburg, the hydroelectric power plants that Fortum have are alone worth 15–17 billion EUR.
Add that and the liquid funds together and you start to see the picture.
Market seems to value the company very much differently. There are short term headwinds with low price of electricity and market likely is hypersensitive with the business in Russia.
While it's entirely possible that the stock will continue to go south, one gets paid reasonably well for waiting for "better days". The "usual" dividend from Fortum has been 1,1 EUR (7,1% yield @15,50 EUR). On average analysts seem to expect 1,26 EUR next time.
My seven reasons for holding Fortum have not changed much in two years.
The reason #7 has now realized and hidden value has been unlocked. Fortum now has liquid funds worth 8,6 billion EUR after the divertments of Finnish and Swedish power distribution businesses.
At 15,50 EUR per share it has market cap of only 13,8 billion EUR.
According to fund manager Anders Oldenburg, the hydroelectric power plants that Fortum have are alone worth 15–17 billion EUR.
Add that and the liquid funds together and you start to see the picture.
Market seems to value the company very much differently. There are short term headwinds with low price of electricity and market likely is hypersensitive with the business in Russia.
While it's entirely possible that the stock will continue to go south, one gets paid reasonably well for waiting for "better days". The "usual" dividend from Fortum has been 1,1 EUR (7,1% yield @15,50 EUR). On average analysts seem to expect 1,26 EUR next time.
Friday, July 26, 2013
7 reasons why I hold Fortum
Fortum is a leading power and heat company in the Nordic area. It was established on 7th of February 1998 as combination of "Imatran Voima" (literally: "Imatra's Power"), one of the most famous Finnish power companies, and Neste (literally: "Liquid"), an Finnish oil company. Since then many investments and divestments have taken place. Most notably actions have been separation of oil business (Neste Oil) in 2005 and large investments in Russian power and heat companies (TGC-1 and TGC-10) between 2005 and now.
Fortum is among the most traded shares on the NASDAQ OMX Helsinki stock exchange where it is listed. It has market cap of approximately 13 billion euros which places it 5th in Helsinki stock exchange in terms of market cap. Finnish State is majority owner with 50,8% of all shares. Fortum is considered as strategic asset for Finland and the ownership is steered directly from the office of Prime Minister. Foreign investors have 25,5% stake in Fortum (June 2013).
The reasons I hold Fortum are:
#1 Dividend
For the past five years Fortum has paid dividend of 1 euro per share. Shares of Neste Oil distributed to shareholders of Fortum are not included.
Dividend policy:
Dividend yield based on closing price 14,78 euros (Helsinki 26th of July 2013) and assumption of 1 euro dividend would be 6,8%.
#2 Stability
Nordic power and heat business is very stable. Fortum is number #3 in power generation and #1 in heat generation in Nordic region where power market is still highly fragmented. There are over 350 power generation companies in the region.
That is where the money comes now.
In European scale Fortum is mid-sized player in power generation. However, in heat generation it is one of the biggest players in the world (5th in 2011).
#3 Very profitable business valued very reasonably
Gross margin 41%
Operating profit 30,2%
ROA 7,8%
ROI 3 year average (est 2013) 12%
ROE 3 year average (est 2013) 15,6%
P/B 1,23
P/E (est 2013) 10,5
Source: Valuatum
#4 Low carbon power generation
According to its strategy, Fortum seeks growth in low-carbon power generation, energy-efficient CHP production and customer offerings. 68% of Fortum's total power generation was CO2-free in 2012. In EU region the number was impressive 93%.
Power generation mix in 2012 was:
#5 Russian operations
OAO Fortum (former TGC-10) operates in the heart of Russia’s oil and gas producing region. TGC-1 operates in north-west Russia (area bordering Finland). Fortum owns a bit over 25% of TGC-1. Fortum's share of both combined is 26 TWh of power generation and 34 TWh of heat sales. Compared to Nordic figures (52 TWh and 15 TWh respectively) the Russian operations is significant in the company level.
Power market liberalisation is ongoing in Russia. There are separate markets for capacity and electricity. The rules favor "new" capacity over "old" (pre-2007) capacity. Bulk of capacity Fortum got in the TGC-10 deal was "old". However, they have extensive investment program at OAO Fortum to add 85% more capacity between 2011 and 2014. Majority of the capacity is to be rolled out between 2013 and 2014.
Currently operating profit coming out of Russian operations is fairly small. However, Fortum targets operating profit level (EBIT) of about EUR 500 million run-rate in its Russian division during 2015. That would yeild a significant improvement to the bottom line (was 1,4 billion EUR after tax in 2012; EPS 1,59 euros).
#6 Long term market coupling in Europe
Electricity is cheaper in Nordic region than in many other parts of Europe. New interconnections will double the transfer capacity between nordic and continential regions from current 4000 MW to 8000 MW by 2020. Net exports from Nordic region to continental Europe in 2012 was 18 TWh (2011: 7 TWh). Long term market coupling and expansion of tranfer capacity are likely to increase price of electricity in Nordic region and bring it closer to that of central Europe.
#7 Potential divestments
Fortum is assessing divestment of its electricity distribution business, which ties lots of capital, but the returns are far behind those of power generation business. Fortum is the biggest electricity distributor in the Nordic region. However, in European scale Fortum is a minor player.
The electricity distribution as separate business is likely valued higher than its currently valued as part of Fortum. This would unlock hidden value - eventually to shareholders in one form or another.
References:
All financial estimates: Valuatum (based on closing price 14,78 EUR on Helsinki stock exchange 26th of July 2013)
Company web site
Investments and divestments
http://www.fortum.com/en/investors/share-information/major-investments-and-divestments/pages/default.aspx
Strategy
http://www.fortum.com/en/investors/strategyandgrowth/pages/default.aspx
Investor presentation July 2013:
http://www.fortum.com/Lists/ArchiveLibraryList/Fortum%20investor%20material%202013/Fortum%20investor%20Material%20July%202013.pdf
Full disclosure: Author was long Fortum at the time of writing.
Fortum is among the most traded shares on the NASDAQ OMX Helsinki stock exchange where it is listed. It has market cap of approximately 13 billion euros which places it 5th in Helsinki stock exchange in terms of market cap. Finnish State is majority owner with 50,8% of all shares. Fortum is considered as strategic asset for Finland and the ownership is steered directly from the office of Prime Minister. Foreign investors have 25,5% stake in Fortum (June 2013).
The reasons I hold Fortum are:
#1 Dividend
For the past five years Fortum has paid dividend of 1 euro per share. Shares of Neste Oil distributed to shareholders of Fortum are not included.
Dividend policy:
"Fortum Corporation's target is to pay a stable, sustainable and over time increasing dividend of 50-80% of earnings per share excluding one-off items. "
Dividend yield based on closing price 14,78 euros (Helsinki 26th of July 2013) and assumption of 1 euro dividend would be 6,8%.
#2 Stability
Nordic power and heat business is very stable. Fortum is number #3 in power generation and #1 in heat generation in Nordic region where power market is still highly fragmented. There are over 350 power generation companies in the region.
That is where the money comes now.
In European scale Fortum is mid-sized player in power generation. However, in heat generation it is one of the biggest players in the world (5th in 2011).
#3 Very profitable business valued very reasonably
Gross margin 41%
Operating profit 30,2%
ROA 7,8%
ROI 3 year average (est 2013) 12%
ROE 3 year average (est 2013) 15,6%
P/B 1,23
P/E (est 2013) 10,5
Source: Valuatum
#4 Low carbon power generation
According to its strategy, Fortum seeks growth in low-carbon power generation, energy-efficient CHP production and customer offerings. 68% of Fortum's total power generation was CO2-free in 2012. In EU region the number was impressive 93%.
Power generation mix in 2012 was:
- Hydro power 34%
- Nuclear power 32%
- Natural gas 27%
- Other 7%
- Natural gas 62%
- Coal 12%
- Biomass 11%
- Other 15%
#5 Russian operations
OAO Fortum (former TGC-10) operates in the heart of Russia’s oil and gas producing region. TGC-1 operates in north-west Russia (area bordering Finland). Fortum owns a bit over 25% of TGC-1. Fortum's share of both combined is 26 TWh of power generation and 34 TWh of heat sales. Compared to Nordic figures (52 TWh and 15 TWh respectively) the Russian operations is significant in the company level.
Power market liberalisation is ongoing in Russia. There are separate markets for capacity and electricity. The rules favor "new" capacity over "old" (pre-2007) capacity. Bulk of capacity Fortum got in the TGC-10 deal was "old". However, they have extensive investment program at OAO Fortum to add 85% more capacity between 2011 and 2014. Majority of the capacity is to be rolled out between 2013 and 2014.
Currently operating profit coming out of Russian operations is fairly small. However, Fortum targets operating profit level (EBIT) of about EUR 500 million run-rate in its Russian division during 2015. That would yeild a significant improvement to the bottom line (was 1,4 billion EUR after tax in 2012; EPS 1,59 euros).
#6 Long term market coupling in Europe
Electricity is cheaper in Nordic region than in many other parts of Europe. New interconnections will double the transfer capacity between nordic and continential regions from current 4000 MW to 8000 MW by 2020. Net exports from Nordic region to continental Europe in 2012 was 18 TWh (2011: 7 TWh). Long term market coupling and expansion of tranfer capacity are likely to increase price of electricity in Nordic region and bring it closer to that of central Europe.
#7 Potential divestments
Fortum is assessing divestment of its electricity distribution business, which ties lots of capital, but the returns are far behind those of power generation business. Fortum is the biggest electricity distributor in the Nordic region. However, in European scale Fortum is a minor player.
The electricity distribution as separate business is likely valued higher than its currently valued as part of Fortum. This would unlock hidden value - eventually to shareholders in one form or another.
References:
All financial estimates: Valuatum (based on closing price 14,78 EUR on Helsinki stock exchange 26th of July 2013)
Company web site
Investments and divestments
http://www.fortum.com/en/investors/share-information/major-investments-and-divestments/pages/default.aspx
Strategy
http://www.fortum.com/en/investors/strategyandgrowth/pages/default.aspx
Investor presentation July 2013:
http://www.fortum.com/Lists/ArchiveLibraryList/Fortum%20investor%20material%202013/Fortum%20investor%20Material%20July%202013.pdf
Full disclosure: Author was long Fortum at the time of writing.
Thursday, July 1, 2010
Two new reactors
Finnish Parliament gave today approval for construction of two new commercial nuclear reactors. One new reactor will be built by energy company Teollisuuden Voima (TVO) in Olkiluoto. Fortum owns 26,6% of TVO. Therefore, as long time supporter of nuclear power and shareholder of Fortum, I am naturally happy about the decision.
TVO has two existing reactors in operation, one 1600MW reactor (TVO3) being built and one more in the planning pipeline (TVO4). The fourth reactor is likely also in the range of 1600MW meaning that both new reactors will be each equivalent to 2-3 currently operating reactors. Fortums's share of each new TVO 1600MW plant is roughly 425 MW. In comparison, Fortum's fully owned reactors in Loviisa are producing 488 MW each.
Picture: Picture. Fortum’s Loviisa nuclear power plants from air. Source: Wikipedia.
The other reactor will be built by Fennovoima in either Simo or Pyhäjoki in northern Finland. 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.
Fortum applied, but did not get preliminary green light for third reactor to Loviisa. It remains to be seen when and if it gets go ahead for that. The Loviisa plants are quite old (built in early 1970s) so eventually they need to be replaced.
TVO has two existing reactors in operation, one 1600MW reactor (TVO3) being built and one more in the planning pipeline (TVO4). The fourth reactor is likely also in the range of 1600MW meaning that both new reactors will be each equivalent to 2-3 currently operating reactors. Fortums's share of each new TVO 1600MW plant is roughly 425 MW. In comparison, Fortum's fully owned reactors in Loviisa are producing 488 MW each.
Picture: Picture. Fortum’s Loviisa nuclear power plants from air. Source: Wikipedia.
The other reactor will be built by Fennovoima in either Simo or Pyhäjoki in northern Finland. 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.
Fortum applied, but did not get preliminary green light for third reactor to Loviisa. It remains to be seen when and if it gets go ahead for that. The Loviisa plants are quite old (built in early 1970s) so eventually they need to be replaced.
Thursday, June 17, 2010
New position in Brazil: Copel
I have been searching for attractive investment opportunities in the utility sector besides Fortum Corporation (Helsinki: FUM1V) and now I have found a good one: “Companhia Paranaense de Energia” or “COPEL” (NYSE: ELP).
Copel is a Brasilian company and that’s a big plus to start with. Long term, I believe that BRIC countries are better places to put your money than the so called developed countries. One word: Growth!
The company was founded 1954 and is now the largest company in the state of Parana. It serves some 2,8 million homes, 67 plants and 300 commercial establishments and has staff of 8440 employees. Copel produces about 7% of the total electricity consumed in Brazil.
I am a big fan of electric power companies that generate majority of their power in either nuclear- or hydroelectric plants (i.e. no direct CO2 emissions). Copel is basically pure hydro play as out of its fully owned 18 plants 17 are hydroelectric plants. Hydroelectric plants have total of 4530 MW of installed capacity. The only fully owned thermoelectric plant has installed capacity of 20 MW. Via partnerships the company also has 220 MW of hydro, 388 MW of thermal and 2,5 MW of wind power.
Most of the contracted energy seems to go to regulated market until 2012 after which the free market portion will grow from the current low figure of 11%. To me this kind of information translates to higher average sales price for electricity and there seems to be definitely a big upside for profits in near future.
In addition, Copel has close to 2000km of high-voltage transmission lines and 180.000 km of distribution lines. It also operates optical transmission network for telecom/data reaching 217 cities and totalling 9580 km worth of optical cables.
The state of Parana owns 31,08% of the company, BNDESPAR (BNDES being Brazilian Development Bank so this looks like some sort of government entity) owns 23,95%. 44,09% of the stocks are free float. The stock capital is divided to common stock and two different preferred stock. Only 13,5% of common stock is free float while 78,5% of preferred stock is free float.
When buying the company from NYSE, you basically get preferred B stock. The dividend policy seems to favour preferred A, but on the other hand preferred B stock gets more dividend than common stock. For year 2009, the dividend was R$ 1,63 per class A, R$ 0,96 for class B and R$ 0,87 per common stock. With current real/USD exchange rate and ELP quote, 2009 dividend yield is around 2,8% for preferred B stock.
Some statistics (source: finwiz.com):
I hope they keep up the good work as I now own a little piece of the company!
Copel is a Brasilian company and that’s a big plus to start with. Long term, I believe that BRIC countries are better places to put your money than the so called developed countries. One word: Growth!
The company was founded 1954 and is now the largest company in the state of Parana. It serves some 2,8 million homes, 67 plants and 300 commercial establishments and has staff of 8440 employees. Copel produces about 7% of the total electricity consumed in Brazil.
I am a big fan of electric power companies that generate majority of their power in either nuclear- or hydroelectric plants (i.e. no direct CO2 emissions). Copel is basically pure hydro play as out of its fully owned 18 plants 17 are hydroelectric plants. Hydroelectric plants have total of 4530 MW of installed capacity. The only fully owned thermoelectric plant has installed capacity of 20 MW. Via partnerships the company also has 220 MW of hydro, 388 MW of thermal and 2,5 MW of wind power.
Most of the contracted energy seems to go to regulated market until 2012 after which the free market portion will grow from the current low figure of 11%. To me this kind of information translates to higher average sales price for electricity and there seems to be definitely a big upside for profits in near future.
In addition, Copel has close to 2000km of high-voltage transmission lines and 180.000 km of distribution lines. It also operates optical transmission network for telecom/data reaching 217 cities and totalling 9580 km worth of optical cables.
The state of Parana owns 31,08% of the company, BNDESPAR (BNDES being Brazilian Development Bank so this looks like some sort of government entity) owns 23,95%. 44,09% of the stocks are free float. The stock capital is divided to common stock and two different preferred stock. Only 13,5% of common stock is free float while 78,5% of preferred stock is free float.
When buying the company from NYSE, you basically get preferred B stock. The dividend policy seems to favour preferred A, but on the other hand preferred B stock gets more dividend than common stock. For year 2009, the dividend was R$ 1,63 per class A, R$ 0,96 for class B and R$ 0,87 per common stock. With current real/USD exchange rate and ELP quote, 2009 dividend yield is around 2,8% for preferred B stock.
Some statistics (source: finwiz.com):
- P/E 7,7
- P/B 1,2
- ROA 9,8%
- ROE 16,1%
- ROI 11,8%
- Gross margin 58,3%
- Profit margin 21,8%
I hope they keep up the good work as I now own a little piece of the company!
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!
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!
Wednesday, March 10, 2010
Defensive picks
I have sold my ETFs that were following broad European indexes (DAX and DJ STOXX 600). I redirected money from these broad indexes to ETFs investing in "defensive" sectors: Utilities, Healthcare and Telecommunications. Companies in these sectors should generate a healthy profit even if there will be double dip or a new recession. At any rate, I believe these sectors will do better in future than the markets as whole.
The next step is to find good individual companies in these sectors and concentrate money on those. Currently I hold only Fortum and Teliasonera directly. All other investments to these sectors go via ETFs. The main reason is that I haven't had the time to screen European companies from these sectors yet.
The next step is to find good individual companies in these sectors and concentrate money on those. Currently I hold only Fortum and Teliasonera directly. All other investments to these sectors go via ETFs. The main reason is that I haven't had the time to screen European companies from these sectors yet.
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