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UPDATE 2-Fortum steps in to rescue Finnish-Russian nuclear project
August 5, 2015 / 7:11 AM / 2 years ago

UPDATE 2-Fortum steps in to rescue Finnish-Russian nuclear project

* Utility takes 6.6 pct stake in Fennovoima plant

* Means government's ownership requirement is met

* Helsinki's role in purchase under microscope

* Fortum deal over Russian hydro power still uncertain (Adds analyst, government comments)

By Jussi Rosendahl

HELSINKI, Aug 5 (Reuters) - State-controlled Finnish utility Fortum signed up on Wednesday as a last-minute investor in a Russian-designed nuclear reactor, offering a lifeline to a project that has raised concerns at a time of East-West tensions over Ukraine.

Fortum said it took a stake of 6.6 percent, hiking Finnish participation in the scheme above a minimum threshold of 60 percent a day before an ownership deadline.

That in turn prompted speculation over what role the government might have played in the purchase, which one analyst called a fiasco.

Economy Minister Olli Rehn said the government has spoken with Fortum but denied any pressure was put on the firm, which is 51-percent owned by the state.

The ownership requirement for the Fennovoima plant, to be built in Northern Finland at an expected cost of up to 7 billion euros ($7.6 billion) and due to come on stream in 2024, was aimed at addressing worries about an increase in Russia's influence on Finland's energy sector.

But while the parliament in Helsinki voted the project through last year, the latest opinion poll from July showed 48 percent of Finns oppose it while only 34 percent are in favour.

With the Fortum purchase the Finnish stake, owned by a number of industrial companies and small utilities, comes to about 62-65 percent, though one stakeholder is still negotiating whether it can step out.

Several of Fennovoima's original investors, including Germany's E.ON have already left the project, concerned about its profitability. Russia's state-owned Rosatom agreed in 2013 to take 34 percent if it could supply the reactor.

"The (Ukraine) crisis reflects everywhere, but energy cooperation has been left out of sanctions by the EU or Russia," minister Rehn told a news conference. He said the project is needed to bring Finland closer to self-sufficiency in energy and to curb carbon emissions.

Fortum's investment in Fennovoima was initially planned to be conditional on a deal for Fortum to get a controlling stake in a new Russian hydro power company separated from TGC-1 . However, Fortum said those talks were still going on.

Analysts were taken aback by Fortum's decision.

"From the investor perspective, it's a grand fiasco," said strategist Jukka Oksaharju from Nordnet brokerage.

"Fennovoima's profitability is very uncertain, and as that project is now rescued, there is no reason for Russia to give Fortum a controlling say over their strategically and politically important hydro power assets."

At 1040 GMT, Fortum shares were trading up 0.7 percent at 16.10 euros. They have fallen 21 percent in five months as talks with Russian stalled. ($1 = 0.9199 euros) (Editing by Louise Heavens and John Stonestreet)

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