Finland's Fortum bets on fledgling Russian wind power market

HELSINKI (Reuters) - Finnish utility Fortum is hoping to attract financial partners for its new wind and solar projects in Russia, where it aims to capitalize on its decade-long presence in the country to expand in renewables.

This approach is similar to moves by Denmark’s Orsted, the world’s largest owner of offshore wind power sites, which also has sold off large stakes in wind farms to invest the capital in new projects.

Earlier this month, Fortum sold 54 percent of its Indian solar portfolio to UK Climate Investments and Elite Alfred Berg.

“We are considering similar possibilities in other markets to bring financial investors alongside us to invest in renewables,” Fortum’s head of solar and wind development, Joonas Rauramo, told Reuters.

It would make sense to take in such partners after the development and construction phase, he said.

“In the current interest rate environment there are large amounts of money looking for green and stable investment opportunities,” he said.

Returns in renewables beat current low interest rates by a wide margin, but they are still lower than the double-digit percentage returns such projects yielded before governments across Europe cut the subsidies that cushioned the wind power sector since its inception in the early 1990s.

Fortum hopes its longstanding relationship with Russia in energy generation will help its push into wind and solar. Fortum has activities in electricity generation in the country, which is heavily dependent on fossil fuels.

“Fortum has been in Russia for decades so we see Russia as our home market,” Rauramo said, adding that not many rivals had Russian expansion in their plans.

Last year, Fortum partnered up with Russian state-owned development company Rusnano to secure contracts under the Russian capacity Supply Agreement (CSA).

Earlier this month, the 50-50 joint venture with Rusnano won the right to build 823 megawatts of wind power, which will receive a guaranteed power price corresponding to 60-90 euros per MWh for a period of 15 years under the CSA scheme.

Italian energy group Enel was also interested, but did not win any capacity in the auction.

In total, Fortum-Rusnano has secured wind contracts worth 1.8 gigawatts, while Fortum alone has won the right to construct 110 megawatts of solar power in Russia.

Final investment decisions will be taken case by case and the target is to construct the projects between 2019 and 2023, Rauramo said.

Russia’s first large-scale wind power farm, Fortum’s 35 mw Ulyanovsk project, came online in January this year.

Fortum also has renewable interests in the Nordic region, where it currently operates wind farms with a capacity of 107 mw and has a pipeline of “multiple hundreds of megawatts”.

Reporting by Stine Jacobsen. Editing by Jane Merriman