Finland-Russia Ink Nuclear and Hydropower Deal

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Finland and Russia are strengthening their energy ties after the coalition government helped broker a wide reaching hydropower and nuclear deal.

The deal opens the way for the construction of a new nuclear power plant, which had been hampered by government ownership rules. Finland's biggest utility, Fortum Oyj (HEL:FUM1V) (Espoo, Finland), has agreed to take a 15% stake in the 1,200-megawatt (MW) Hanhikivi-1 project at Pyhäjoki in western Finland, being developed by Fennovoima Oy (Helsinki, Finland). This means the plant overcomes the government requirement that at least 60% of the project must be owned by Finnish companies.

In April, Russian state nuclear company, Rosatom (Moscow), bought a 34% stake in Fennovoima and is proposing to use its AES-2006 reactor, the latest generation of its VVER plant designs, for the Hanhikivi-1 project. For additional information, see April 4, 2014, article - Russia Buys into Finland's Nuclear Future.

The news comes just months after the government refused a construction permit extension for the proposed Olkiluoto 4 (OL4) nuclear project, citing uncertainties over the troubled Olkiluoto 3 (OL3) nuclear project which will open nine years later than originally planned. For additional information, see September 19, 2014, article - Finnish Nuclear Project In Trouble.

The other part of the Finland-Russia energy deal will see Fortum and Russia's Gazprom (PINK:OGAZPY) (Moscow, Russia) restructure their ownership of TGC-1, a generating company in Russia operating 40 hydro plants and 14 thermal plants in northwest Russia. Fortum owns 29.5% of the venture.

The energy deal will see Fortum and Rosatom establish a joint venture to own the hydro assets of TGC-1, with Fortum controlling a 75%+ share. The hydropower plants have a combined generating capacity of 3,000 MW.

"Restructuring of TGC-1 assets will increase Fortum's total hydropower generation by 60% to 34 terawatt hours (TWh), which clearly demonstrates Fortum's strong commitment to CO2-free production," explained Tapio Kuula, President and CEO of Fortum Corporation. "As we already have more than five decades of experience in working in Russia and with Russian partners, increasing our volume of hydropower in Russia is a natural step for us. Fennovoima's nuclear project is important for Finland. While Fortum's participation and competencies are extremely valuable for the project, it will also provide Fortum with possibilities to grow in the area of nuclear expert services."

The deal with Russia has raised protests that Finland is becoming even more dependent on Russia for its energy needs. The country is 100% reliant on Russia for its gas supplies, almost three quarters of its oil, two thirds of its coal and over a quarter of its electricity.

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