In response to asset freezes imposed by European countries over its invasion of Ukraine, Russia has taken control of utilities owned by Finland's Fortum Oyj and Germany's Uniper SE. This move marks the first time the Kremlin has taken such action. Russian President Vladimir Putin signed a decree allowing the government to introduce "temporary" state control over the assets of companies or individuals from "unfriendly" states, which include the US and its allies. The assets' ownership is not affected, and the Federal Agency for State Property Management will manage the assets.
The only assets listed in the addendum are Uniper's 83.7% stake in Unipro PJSC and Fortum's 98.2% stake in local Fortum PJSC. Both companies had sought to sell their stakes after Putin ordered troops into Ukraine last year, but were blocked by the Kremlin. Foreign investors have been banned from selling Russian assets without special permission and required a large discount.
The state property agency said in a statement that "the external manager receives powers that allow him to ensure the efficiency of the enterprises in accordance with their importance for the Russian economy. The original owner 'no longer has the right to make management decisions'". The decree introduces the temporary external management on a case-by-case basis, and the list of assets may be broadened if needed. The arrangement can only be terminated by presidential decree.
Fortum was among the largest foreign investors in Russia's electric-power sector, with seven thermal power plants in the Ural region and western Siberia, as well as the country's largest wind and solar portfolio. In May 2022, it announced a plan to put the assets up for sale, but the process stalled as the Kremlin refused to approve the deals.
Uniper booked a €4.4 billion ($4.8 billion) loss on its Russian unit Unipro earlier this year, saying it was no longer in control of operations at the subsidiary. The German company was trying to sell Unipro and said in February it had lined up a Russian buyer, but the deal was stuck waiting for approval from Putin. Uniper is a former subsidiary of Fortum and was taken over by the German state last year to prevent its collapse.
Fortum is not likely to regain control of its assets in Russia unless there is "a fundamental change in the political landscape", according to Danske Bank analyst Jakob Magnussen. He suggests that investors may now be willing to invest in Fortum, as the Russian exposure might no longer be an obstacle from an ESG point of view.
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