In Fortum Oyj’s first earnings call since its acquisition of a majority stake in German power producer Uniper SE, the Finnish utility assured stakeholders of its plan to cut emissions across its asset fleet. To that end, it is running strategic reviews and may explore the sale of certain plants. Fortum had already curbed emissions from its generation fleet substantially, but with the purchase of Uniper comes swelling criticism, and one project, in particular, is stirring outrage among environmentalists.
Uniper is weeks away from commissioning Germany’s last new coal-fired power plant, Datteln 4, whose closure is already in sight as part of the country’s scheduled exit from lignite-fired and hard coal power generation by 2038.
“I know it sounds crazy to start a new coal power plant in 2020,” [CEO Pekka] Lundmark said. However, he added that the achievement of emissions reductions across Europe do not depend on individual units, but rather the functioning of the Emissions Trading System, or ETS, as a whole and that the emissions cost is being paid rather than displaced. According to Lundmark, the Market Stability Reserve mechanism under the ETS, which gradually removes credits from the market to curb emissions, is working effectively and Fortum is lobbying for further tightening at an EU level.
For its old coal power generation fleet, Uniper has “an ambitious shutdown schedule,” Lundmark said, in addition to its new carbon neutrality target for 2035. Most of its German coal assets burn hard coal, and will, therefore, have to participate in auctions to determine the compensation they get for shutting down, in contrast to lignite-fired assets that will receive direct compensation.
Fortum is also working on a joint emissions reductions and asset strategy with its new subsidiary, Lundmark said, adding, “It’s a good thing for the climate that Uniper has an owner like Fortum.” But the German power producer’s environmental footprint continues to be put under the microscope by certain investors. The world’s largest sovereign wealth fund, managed by Norway’s Norges Bank, announced May 13 it is reviewing its investment in Uniper due to its coal exposure.