In a surprising turn of events, Finnish utility company Fortum is contemplating the acquisition of a portion of its former subsidiary, Uniper. This comes three years after Fortum faced significant challenges, including multibillion-euro losses that nearly led the German gas importer to collapse.

Fortum, which is primarily owned by the Finnish government, reported a staggering pre-tax loss of almost 6 billion in 2022 linked to its investment in Uniper. This financial setback occurred after Fortum divested its stake in Uniper to the German government as part of a comprehensive 13.5 billion bailout orchestrated during the tumultuous period following Russias full-scale invasion of Ukraine, which triggered a severe energy crisis across Europe.

Following this debacle, Finland's then-finance minister publicly criticized the decision to build up an 80 percent stake in Uniper, labeling it a significant oversight. Despite this, Fortum has displayed renewed interest in acquiring Uniper's notably lucrative assets located in Sweden. Two individuals familiar with ongoing discussions confirmed this development.

Uniper plays a crucial role in Sweden's energy landscape, holding stakes in all three of the country's operational nuclear power plants, two of which also feature Fortum as a shareholder. Additionally, Uniper manages an impressive portfolio of 74 hydropower plants throughout Sweden, further underscoring its strategic importance in the region.

In a feasibility study published last month, Fortum outlined its intention to extend the operational lifespans of its existing nuclear facilities while also exploring the possibility of constructing new plants. This strategy appears to be driven by an increasing demand for reliable power sources in Sweden and beyond.

While Fortum has refrained from confirming specific details regarding its interest in Uniper's Swedish assets, it has indicated that it secured the right of first offer as part of its exit agreement with the German government. The company has consistently expressed its intention to explore these assets should they become available for acquisition.

However, the sale of Uniper's Swedish assets would necessitate a restructuring of the company, raising questions about whether the German government, which currently holds a 99 percent stake in Uniper, would be amenable to such a move.

A financial analyst at a European investment bank expressed skepticism regarding the Finnish government's likelihood of making another multibillion-euro investment in Uniper, suggesting that Sweden's state-owned power company, Vattenfall, might represent a more logical prospective buyer for the assets. The analyst remarked, We saw what happened back in the day. It was a big failure. The Finnish state is keen on securing solid dividends from Fortum, which is their primary focus not large-scale transactions.

The determination of Uniper's future trajectory will ultimately rest in the hands of the incoming German government, which is anticipated to officially take office in early May. Following the recent electoral success of Friedrich Merz, the leader of the centre-right Christian Democrats (CDU), a coalition agreement was reached this past Wednesday.

In previous discussions, German officials have floated the possibility of divesting a stake in Uniper through an initial public offering (IPO). Nonetheless, it appears that Merzs administration will likely aim to retain a strategic minority stake in Uniper, given the companys critical role in Germany's energy infrastructure.

The German government is keen on ensuring profitability from its substantial investment in Uniper, having provided 13.5 billion in equity alongside 6 billion in loans as the company struggled to offset the loss of Russian gas supplies, leading to tens of billions in losses.

Currently, Unipers market valuation stands at approximately 16 billion, based on the minuscule fraction of its shares, less than one percent, that remain publicly listed.

As potential bidders emerge, Vattenfall has been identified as a likely contender for Unipers Swedish assets, according to one insider. Furthermore, Norways government-backed energy group, Equinor, has been mentioned as a candidate for acquiring all or part of Uniper, although representatives from these companies have declined to comment on their interest.

Another possible bidder includes Czech billionaire Daniel Ketnsk, who already possesses significant stakes in companies such as the East German coal giant Leag and Thyssenkrupps steel division. A spokesperson for Ketnsk also refrained from commenting on the speculation.

Both the German finance ministry and Uniper have chosen not to provide any comments regarding the ongoing discussions.

This report has been further enriched by the contributions of Anne-Sylvaine Chassany, Raphael Minder, and Martin Sandbu, who have been closely following the developments surrounding this high-stakes narrative.