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Fortum and Vestas in €200 m contractual dispute
Sweden Finance
The state-owned Finnish company, Fortum Oyj, has initiated arbitration in the International Chamber of Commerce in Sweden against Vestas Wind Systems A/S. The arbitration claim, in excess of €200 million, relates to Vestas’ termination of Russian wind project contracts in order to comply with the European Union sanctions arising from Russia’s invasion of Ukraine. From the start of the invasion, the European Union has published a series of such packages, which include comprehensive sanctions aimed at the Russian energy sector.
These sanctions and export controls regulations prevented Vestas from delivering, installing and servicing wind turbines under its contracts with Russian customer WEDF, which is owned by Fortum. Vestas therefore invoked the sanctions-specific clause in each contract between Vestas and WEDF, which gave each
party the unambiguous right to terminate the contracts if performance was impacted by international sanctions. After months of negotiation between the parties in an effort to find an agreement, Vestas terminated the contracts in late June 2022.
What it sees as the necessity for its legal action has led Fortum to accuse Vestas of undermining European unity – in effect ‘aiding the enemy’. Questioning whether sanctions apply, it says, can only benefit the interests of Russia and its sympathisers.
Fortum’s claim concerns projects to build several wind parks with more than 50 wind turbines in Russia for which Fortum had already made sizeable advance payments to Vestas. Vestas could not deliver on its contractual obligations, but has declined to repay the advance payments and other project-related costs.
The central commercial point around which
this case revolves is, on present information, the status of the upfront payments already borne by Fortum before the invasion; the two companies entered the contract before the Russian invasion of Ukraine, and before the 2022 sanctions against Russia were in place. For its part Fortum has unequivocally rejected Vestas’ claim – it intends to ‘vigorously defend itself against false claims by its former business partner that it flouted sanctions against Russia’.
Henrik Andersen, president and CEO of Vestas, said: “We strongly believe the arbitration to be without merit, and we are astonished and dismayed a state-owned company from a fellow EU-country would openly question the sanctions against Russia and thereby the unity of EU countries. Member states and companies were aware from the outset that the sanctions would have financial consequences, also outside of Russia.”
Vogtle unit 3 connects to the grid
US Georgia Power reports that unit 3 of Vogtle NPP, the first new nuclear unit to be built in the USA in more than three decades, has been successfully synchronised and connected to the grid. Vogtle 3 reached first criticality early in March and is expected to begin commercial operation in May or June. Vogtle 4 began hot functional tests in March and is expected to enter service in late 2023 or early 2024. Both are 1117 MWe Westinghouse AP1000 reactors. Southern Nuclear will operate the new units on behalf of the co-owners – Georgia Power, Oglethorpe Power, MEAG Power and Dalton Utilities.
Vogtle units 1 and 2, which are both 1215 MWe reactors supplied by Westinghouse, were completed in 1987 and 1989. In 2009, the Nuclear Regulatory Commission (NRC) renewed their licences for an additional 20 years. Georgia Public Service Commission approved the new reactors for the Vogtle expansion in early 2009 and construction activities began the same year. At that time Vogtle 3&4 were expected to cost about $14bn and to enter service in 2016 and 2017, but in the event have suffered a series of delays.
• While the USA was bringing on line its first new NPP in thirty years, in Germany
the last three operating nuclear units were being switched off. At 11:59 pm on 15 April, Unit II of EnBW’s Neckarwestheim plant, and RWE’s Emsland plant were disconnected from the electricity grid, marking the end of nuclear generation in Germany.
All Iberdrola assets in Mexico to be sold
Mexico Mergers & acquisitions Iberdrola is selling the bulk of its Mexican power-generating assets to a state-owned fund for $6 bn, using the proceeds to accelerate its investments in the US and Europe. An agreement has been reached between Iberdrola Mexico and Mexico Infrastructure Partners, which have signed a memorandum of understanding whereby MIP will acquire 8539 MW of installed capacity from Iberdrola. Of the total, 8436MW corresponds to combined cycle gas plants and 103 MW to wind power assets. The Spanish group’s move comes after years of pressure on the company from the
6 | April 2023 |
www.modernpowersystems.com
left-leaning government of president Andrés Manuel López Obrador, who hailed the purchase as a ‘new nationalisation’. Iberdrola expects to take advantage of the large green investment incentives in the USA’s Inflation Reduction Act. He commented: “The US is probably the country that brings more opportunities for the medium and long term.” But the company has also become more positive on the EU in recent months as the continent’s own green investment plans advance, including the REPowerEU programme to overhaul the energy sector. Iberdrola’s shares rose 2.5 % to close at €11.71 in Spain following the announcement.
The deal will increase the share of Mexico’s state-owned power company CFE to 55.5 % of the market, from slightly less than 40 % now. A fund run by private asset manager Mexico Infrastructure Partners, but financed by the government will take control of 12 combined cycle generation plants and one onshore wind farm, subject to final details and approvals, Iberdrola said. Of the plants included in the agreement, 87% of the total installed capacity to be divested is currently operated by independent energy producers contracted with the Federal Electricity Commission (CFE).
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