Finland Drops Nuclear Plant Deal With Russian Energy Company

(Bloomberg) -- Finland's Fennovoima Oy dropped a contract with a Russian energy company for the delivery of a nuclear power plant under construction in the Nordic country.

The deal with a unit of Rosatom Corp. ends immediately, Fennovoima said in a statement on Monday, citing “significant and growing delays during the last years” and the company's inability to mitigate the project's growing risks as a result of Russia's war.

The decision removes a conundrum for Finnish policy makers who had been looking for a legal way to prevent Russia from operating the country's critical infrastructure. Economy Minister Mika Lintila had already said he wouldn't propose a construction permit for the unit.

“Fennovoima's board saw no other option than to terminate the contract,” Chairman Esa Harmala said at a press conference. “This decision was not taken because of the war” but “because of delays and an inability to deliver, and we have seen the war added to these risks.”

The cost of the entire power-plant project, called Hanhikivi-1, was expected to be 7 billion euros ($7.4 billion) to 7.5 billion euros. Fennovoima had spent around 600 million euros to 700 million euros on the project so far, Harmala said. The decision will lead to “significant” numbers of job cuts at Fennovoima, which employs about 450 staff, said Chief Executive Officer Joachim Specht, who declined to comment on the magnitude of future losses.

Finland has a 1,300-kilometer (800-mile) border with Russia and has begun a rethink of its security setup after Russia's invasion of Ukraine. It's considering joining the NATO defense alliance and also reducing dependence on Russian energy. Power grid operator Fingrid Oyj recently reduced power imports from Russia to ensure the network's stability in case of a sudden halt in electricity flows.

Finland's economy ministry said on Monday that terminating the contract is justifiable, according to an emailed statement. The ministry plans to review the implications to the project in the near term, it said.

Fennovoima had initially been given a green light by the parliament in 2010, when it was led by EON SE. The German utility withdrew from the project in 2012, and in 2013, Rosatom stepped in. About a third of the project still belongs to Rosatom. Other owners include a plethora of Finnish energy and industrial companies, many of which have recently written down their entire stakes in the project.

‘Absolutely Incomprehensible'

Rosatom is disappointed with the decision, which it finds “absolutely incomprehensible,” Interfax reported, citing comments from the state-owned company. It said that the decision was taken without detailed discussions with shareholders and that it reserved the right to defend its interests.

Rosatom's RAOS Project unit had been informed of the decision on Friday evening, but the company “had not reacted,” Specht said.

The board had felt no pressure to terminate its contract with Rosatom, Harmala said, adding that it's “too early to speculate” on the future of the project. The site will now be preserved, or “mothballed” in a “quality controlled way” for “potential future activities,” Specht said.