EON Withdraws From Finnish Nuclear Project on Price Slide

EON AG, Germany’s biggest utility, plans to withdraw from the Fennovoima Oy nuclear reactor in Finland after European energy prices declined, threatening the viability of the project.

Fennovoima, in which EON owns a 34 percent stake, plans to begin construction of a 1,600 to 1,800-megawatt reactor at Pyhaejoki in northern Finland in late 2016, Timo Kallio, executive vice president of construction, said today in an interview in Tampere, Finland. EON, the sole provider of nuclear expertise to the project, will exit the venture in the first quarter, Roger Strandahl, a spokesman for EON in Malmoe, Sweden, said today by telephone.

“We weren’t expecting it,” Fennovoima Chairman Pekka Ottavainen said by phone today. “EON’s decision to withdraw means that next spring when we ask for more funding to take the project to the next stage, we need to resolve the question of who will replace EON.”

Utilities are pulling out of nuclear projects across Europe as uncertainty over energy prices makes them too risky. EON’s withdrawal from Finland follows its decision in September 2011, along with SSE Plc and RWE AG (RWE), to give up building nuclear plants in the U.K.

German 2013 power dropped to a record 46.90 euros ($60.85) a megawatt-hour on Oct. 15 as output from wind and solar cuts usage of gas and coal plants.

Finnish Pullout

EON intends to sell all its Finnish operations in order to focus on the “most important” Nordic markets of Sweden and Denmark, including an upgrade of Sweden’s 638-megawatt Oskarshamn-2 nuclear reactor, EON Sverige Chief Executive Officer Jonas Abrahamsson said in an e-mailed statement. The company will sell its Finnish subsidiaries EON Kainuu Oy, Karhu Voima Oy and EON Suomi, as well as its 20 percent share in Finnish gas monopoly Gasum Oy.

There are 62 other companies involved in the project, which plans to sell power at production cost for the lifetime of the plant to its shareholders. Voimaosakeyhtioe SF, a joint venture of the smaller investors who collectively own 66 percent of the project, has begun talks with EON about future ownership, Fennovoima said in a statement on its website today.

“We remain committed to this project,” Mika Seitovirta, chief executive officer of Outokumpu Oyj, which owns a 10 percent stake in the project, told reporters today in Helsinki after EON’s announcement. “Of course we’re looking at the return on the investment, but we have no reason to withdraw.”

Price Rise

Nordic power prices may rise if EON’s withdrawal leads to the cancellation of the reactor, according to Pareto Securities ASA. If no buyer is found it will ease an expected glut in power supplies after 2020, he wrote in an e-mail today. At the very least, it will be delayed, he said.

Finnish nuclear operator Teollisuuden Voima Oyj’s under- construction Olkiluoto-3 reactor has missed a 2009 completion deadline, and may not start operating until 2015, Anna Lehtiranta, a company spokeswoman, said last month in an interview.

Finland is pushing ahead with plans to increase atomic output from 32 percent in 2011, even as countries from Germany to Japan begin closing reactors following the Fukushima nuclear disaster last year. Finland is investing in new capacity to reduce energy imports and provide cheap power for industry.

To contact the reporter on this story: Torsten Fagerholm in Helsinki at tfagerholm@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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