Business

Fortum and Uniper team to manage operations of generating assets, including hydro

Fortum and Uniper team to manage operations of generating assets, including hydro

Fortum and Uniper have finalized the first planning phase in three strategic cooperation areas: Nordic hydropower and physical trading optimization, wind and solar development, and hydrogen.

Under the proposed plans, Fortum would lead the operations of both companies’ Nordic hydro assets while Uniper would take the lead in the development of both companies’ wind and solar and hydrogen businesses.

In December 2020, Fortum and Uniper announced three joint cooperation areas to ensure the focused and effective implementation of the group strategy. The overall aim is to create more value for Fortum and Uniper in Nordic hydro and physical trading optimization and to better exploit growth opportunities in the areas of wind and solar and hydrogen. Based on the “One Team” approach, one of the companies will take the lead in each of these business areas.

The cooperation teams have developed the preliminary plans for the operating models, which will be further elaborated and conclusively assessed in the next phase. Implementation of the intended strategic cooperation in the three areas is subject to final approval by Fortum’s and Uniper’s governing bodies, as well as consultation with the relevant employee representation bodies in both companies.

Nordic hydro and physical trading optimization

The proposed plan anticipates that Fortum would become operationally responsible for Uniper’s hydro asset management and operations in Sweden, as well as its physical trading and optimization activities in the Nordics. The proposal would primarily affect about 180 Swedish hydro employees at Uniper. No redundancies are expected, and all existing locations of Fortum and Uniper in the joint Nordic portfolio are planned to remain in operation. Ownership of Uniper’s hydro assets would stay with Uniper.

The new operating model is planned to be implemented at the beginning of 2022.

By adopting best practices, tools and processes from both companies, the new combined Nordic hydro and physical trading team would be able to develop better digital solutions for daily operations management and improve safety performance. Fortum and Uniper believe the new operating model would create more value for both companies than continuing to optimize the two portfolios separately.

The combined activities would be led by Simon-Erik Ollus, head of Fortum’s generation division. These businesses employ around 400 people mainly in Sweden and Finland.

Wind and solar development

Fortum and Uniper plan to establish a joint organization for European onshore wind and solar activities. The initial focus will be on the most attractive European markets, starting from existing core regions. Fortum and Uniper plan to grow a sizeable portfolio of onshore wind and solar-based power generation, primarily in Europe. The target is to build 1.5 GW to 2 GW of new capacity by 2025.

The approach for European onshore wind and solar would establish a joint renewables development business that would bundle the competences in solar and wind development, asset and operations management, and expansion planning and commercialization to fully leverage the existing competences and different geographical footprints of both Uniper and Fortum. A special focus would be taken on project development to enable sizeable growth through a build-operate-transfer business model and selective investments on balance sheet.

Hydrogen business

Uniper’s presence throughout the hydrogen value chain, combined with Fortum’s strong presence in the Nordic countries, gives both companies the opportunity to take a leading position in the future hydrogen market. The joint approach for the hydrogen business under the leadership of Uniper will include the complementary technical and commercial capabilities of both companies. The new operating model for hydrogen will facilitate the development of a joint project and deal pipeline.

Creating cooperation benefits for both companies

In December 2020, Fortum and Uniper announced they identified cooperation benefits with a positive cash impact of about €100 million annually on a consolidated group basis. More than €50 million of these annual benefits are estimated to be achieved by the end of 2023, with full effect of about €100 million annually in 2025.