With Laurent's Segeland from London and Gerard Reed from Berlin.
This is redefining energy today. I'm redefining energy. We're going to have a talk with the incoming president of the European Energy Association or the Utilities Association. You're Electric and yeah, actually I met Marcus some years back. Marcus is also the CEO of Fortum, so he's being through a hell of a rye in the last few years, you.
Know, yes, Joah.
So last month that broussel is E Electric Power Submit, which is really a great gathering, and unfortunately you could not be there, so I interviewed the Marcus Coroma. We talk about the whole of your Electric and then the challenges and opportunities as a finish utility. And there's a lot of interesting revelation in our conversation. But let's bring
him on today on redefining energy. We're alive from the Electric in Brussels and we have a great guess, Marcus Roma, who is not only is your Fortum the great Finnish utility, but it's the new president of your Electric.
Marcus. Welcome to the show. Thank you very much for having me. It's exciting times now in your Electric with ARSAM.
Where the summit we are in Brossel's wonderful organization Secretary General Christian Ruby is and a fantastic work for the people who don't know your electric What is your electric?
So your Electric is representing the European electricity producers and distribution companies and that means that we have thirty four member associations from thirty two different countries. So that's EU plus others plus Turkey, UK, Switzerland, Norway. So it's a
big constituency. These member associations have three thousand, five hundred member companies who employ nine hundred and seventy thousand employees and have a turnover of more than six hundred billion euros something the electricity and distribution Well, and of course your job is to go and fight the bureaucracy in Brossels, I guess yeah. So of course we're spending a lot
of time talking with Brussels. But it is very much about the dialogue between Brussels, between EO, Parliament, Commission and customers. So trying to find common ways, trying to find collaborative, progressive ways, how to reach how common goals.
Yeah, you are now President congratulation, but of course you're succeeding Leo bion Baum, CEO of Eon and also known as Leodo Great, was done an extraordinary job the past few years. So how would you describe the landscape of the industry after Leo's work?
Leo?
I have to give a compliment to Leo. So he's done great work in his seoship of Eon, navigating through the turble end times, and that of course was a big feature during his presidency of Your Electric. We have gone through one of the most turbulent periods in European landscape with everything that has happened. So we have had COVID, we have had the Russian attack on Ukraine, the resulting
commodity crisis. So Leo's leadership in navigating your Electric through that, maintaining a good relationship with customers, with the Parliament, with the Commission, and with those stakeholders, and keeping your Electric right on track through that, I think that's his great achievement. And at the same time, when dealing with these short term issues, and we had a lot of interaction with different stakeholders, We've stayed the course of electrification and decarbonization.
Leo's a special emphasis was on the grids, so really highlighting the point that in order to have this big growth in electricity supply and an fristy demand, we need really to focus on grids. So this was one point that Leo made very clear, and I think this point has sank in with the stakeholders also. I would say that was great fun. It is spite the difficult circumstances with Leo and Jorjos in the presidency team with the secretariat,
it was also fun working together. So now you're the president and you have two vice president, one of whom I know and I like a lot, which is George Joseph PPC so introduced probably your two vice president. So we have indeed a very good presidency. I'm very happy about that. So Georges was my co vice president for two years and what Georges absolutely brings to the table is the knowledge of the Southern European market and the transformation that these markets are going through.
Then we have Katherine McGregor.
Before we go to Latine mcgago, I just want to tell the listenership that the work does Georgios has done at PPC. If you had both chairs of PPC when Georgio's became CEO, you would have made more money than with bitcoin because under his tenure the sharp price of PPC has gone up fourteen fold. So he has done an extraordinary.
Job in very difficult circumstance, with a very very difficult starting point, and that I think thematic of what Europe has gone through and many countries are going through. So a massive shift from heavy fossil content into a more renewable system with a lot of investments.
Talk about Catherine now, brilliant woman.
Then moving to Katherine McGregor, so I think we have been extremely lucky to get such a prominent leader from the European utility and as Catherine Catherine is CEO of ANCHI. Catherine brings the wealth of experience not only from anchie but from her previous jobs in other companies, and she brings the continental view. But also she has the electricity business in an she and they have the gas business,
which I think is a good compliment. So of course we're not representing the gas utility represented separately, but it's good to keep in mind that we need to do a huge transformation from doubling electricity use and then halving the gas use and making that also clean if we want to achieve the decarbonization and electrification targets that we have. So having Catherine knowledge and being able to also have empathy towards this transformation that has to happen there, Catherine
is indispensable. We have been before we were appointed just right now during the summit. We have worked for some weeks already forming the presidency manifesto, and I would say we have a great dynamic and we're really covering from myself having the weight on the Nordic and Northern European experience and presence. We have Catherine covering the continent having great visibility there, and then Georgio's covering south of Europe. The Presidency really represents the whole of Europe.
You mentioned the word manifesto, the one I know is from Karl Marx, very successful. So what about the eureactric manifesto. What's in it?
The word manifesto that in my mind when I joined the presidency two years ago fondering a little bit at what is this manifesto thing about? But let's say that it's the presidency agenda. Okay, So we're basically communicating what are the things we will put our focus on for the next two years, and we have three key points there. Number one is focus on the customers, focus on industrial
and customer decarbonization. Second point is security of supply, and that is both the security or supply of the system and finding the new optimum the changing environment, but also hard security physical security. And the third point is digitalization and AI. And actually all these three things go extremely well hand in hand. Because we own this electrification journey, having to double the use of electricity and production of electricity,
it will be very different than it was historically. We're very used to dispatchable for self thermal power, which is easy to control and you can steer the system easily. We're going into an intermittent, flexible, volatile system with a lot of renewables that will require a lot of flexibility from private costostomers, from SMEs, from industrial customers and storage.
So the whole optimization problem will look very different. On top of that, we will move to fifteen minute training, which means that any data we have will quadriple and that's where the digitalization and AI come into play. So we need to embrace the digital tools. The AI capability is to integrate much more assets into the system, produce good outcomes from our customers, and that takes us back to the customer focus.
So we need to understand.
Steel, aluminium, chemic calls, hydrogen data centers, bettery factories, and continuously talk with our customers to explain what can we do in five years time, ten years time, fifteen years stim what do we need to deploy the capital to produce what they need? And then we need to listen to the customers that what do your processes look like today? Can you do something different? Can you flex maybe somewhat
your process? Can you redesign it as an industry? When follow in these three presidents and manifesto points, we have the track record and ability to deploy hundreds of billions of capital to make this transformation possible. So we can do it, but it requires a lot of customer intimacy, it requires a robust system that provides the security or supply, and it's underpin by the digitalization.
One topic which is totally linked very close to my heart, and I know there a lot of discussion, particular in the gig protocol, is about the twenty four to seven tracking. So that's something that your electric supports. I guess yes, So it's clear.
That be it electricity, albeit other use of raw materials, other processes. Tracking of the origin of what we produce and what we consume becomes very important. Otherwise you cannot certify, you cannot report your processes. And that's again where digital and AI become very valuable. So here, how many participants do we have? I heard the number about seven hundred if we talk about the summit at a very high level. I've had a lot of debates and in fact they're
all inside your manifesto. A lot of conversation have been around Spain. You know the blackout in Spain, A lot of conversation around AI, you know the promise of load growth, which we kind of been lacking here in Europe. A lot of conversation about security, a lot of conversation about relativity of prices. In fact, your manifesto and what you hear from the expert and the practitioner they are kind of aligned.
So that's a good thing.
At least we know what is to be done and let's do it. Is there any message you want to pass to regulators, because that's the moment I agree with you.
It is an intuitive manifesto and it is tightly anchored to understanding the customer needs. And that's why we have been as you're electric, we have been engaging in the antwer Declaration, and we have developed and invested in the customer dialogue ourselves. And that actually when we arrange a follow up that we called Antwerp Dialogue, we invited also
EO officials to participate in it. So the key message to political and regulatory side is that let's all talk together and make sure we understand what is technically possible to do and commercially possible to do what the customer needs, and then how does the regulation and politics fit around that. So the intuition is something I'm really looking for. So I'm really happy to hear that if this feels like it it's kind of an organically developing that's how it
should be. So it should feel like, Okay, we know where we're heading, and we know how to do it in a collaborative, transparent way with a lot of dialogue.
I always cracked the joke that when you talk about reducing bureaucracy in brows service, they so great, We're going to write a four hundred page report on how to reduce bureaucracy. That's just me so talking about your joke about the four hundred pace package on reducing bureaucracy. EU is engaging in the Omnimus package to reduce bureaucracy, and of course the concern could be that, well, we'll create
additional bureaucracy. But I think that's a serious attempt to look at all the regulation that we have in place, look at what is overlapping.
Can something be reduced? And I think this should be also and this is my message to the EU establishment that if you introduce something new, look at what you have already in place, and then try to keep the stack manageable. Company like Fortum, we can do the CSRD reporting, we can do taxonomy reporting and all the rest, but I can see that there is duplication and tripplication of information and all of that is not used by our stakeholders.
You probviosh report that nobody reads. So what's the point.
Then I can say that the content of the CSID reporting I know as you were CSRD is I know they are good at a corporate sustainability reporting directive. So this is something that company good companies who have focused on sustainability in essence have done for twenty years for us. For example, in Fortum, this wasn't the yeah, additional bird and.
Fortum it is one page, you know, we're good, we clean, it's two other pages. This it's a lot of it's a lot of information. Yeah, but this is something that actually people are using. But all of the information that is reported and published is not used.
So it's good to review.
Good time to flip from your presidency to your chairmanship or the CEO ship so Forthum, you've been through five difficulties and the main culprits are as usual, the Russians direct clean directly. So explain what happened in the past five years for Fortum. Before twenty twenty.
Fortum was focused on the Nordics in clean energy production, in district heating, in distribution of energy, as well as the retail the customer businesses. And during the preceding years we divested the ridge business, divested a big part of our district heating business and eventually acquired a majority stake and we went up to eighty percent with Uniper.
So Uniper, for the people who don't know, was the fossil fuge generation of Eon.
That's correct, and the gas trading and commodity trading story we'll be on.
Okay, So you went big gas at the moment where Russia's store system.
The idea there is that we get a strong continental footprint that we can de carbonized as we had done in many other places. We can decobonize the production fleet and we get an integrated offering of electricity and gas. In addition, by the way, we did have a large Russian business as well. Yeah, so we had about five gigawatso electrical capacity in Russia, so we had increased the
ownership to about eighty percent in Uniper. Then came the volatility of prices, first in late twenty twenty one and eventually in twenty twenty two Russia started to reduce the flows of gas, which became a problem. So we had to post increasing first increasing collaterals for the high prices
into the exchanges. So at the peak we had fifteen billion one five billion of collaterals outstanding in the exchanges with ourselves and Uniper, and then with the gas flows being reduced, we ended up having to still deliver to our customers in Uniper, but had to buy the gas from the market, so this resulting in a massive need for recapitalization, which was not possible for a fortmore a
commercial party to do. This resulted in that we sold our stake, our ownership stake to the German government who then recapitalized UNIPERS. So now it's majority on by the German government. Simultaneously, then after Russia's attack on Ukraine, then eventually in twenty twenty three, Russia took over the managerial control of our Russian business and then we wrote the
Russian business down. Having said all of this, so after that, Fortum has focused on clean Nordic energy and what has fundamentally changed is that the prospect of growth of demand in the Nordics is something that we haven't seen in the last thirty years. There's a great growth prospect for our Nordic business. The production that we have today, which is mainly hydropower and nuclear power, is ninety nine percent CO two free.
Yeah. Well, I've always have the question and we said it's one hundred percent.
Who says one to where is the one p There's a little bit of steel gas for the capacity, Okay, that's in our portfolio and that will also fade away and then focus on the growth in renewables, so that is coming. Then we have two point two million retail customers, so with the biggest retail company in the Nordics, the balance sheet is in great shape. So after all these turbulence,
we are actually debt free yeah wow. And we have almost ten billion of equity and the eight billion of liquidity, so we're in a great position to support our customers, to grow our supply and meet the growing needs. So we are talking with different sectors steel, aluminium, data centers, hydrogen synthetic fuels, battery factories, and we see the potential that the Nordic demand in the next twenty five years could grow from four hundred terrawa towers to six hundred
even eight hundred terrawa towers. And the way we are approaching that is that we are developing new renewables. So we have five gigawatts of capacity in permitting and more in early stages of planning. We are developing flexibility, so that's going to be mostly wind. It is wind and solar, so historically it's wind, but solar is becoming also competitive
in the Nordics. Then on the flexibility side, we have pumped tider development in Sweden and Finland, and we have several projects that are each some hundreds of megawatts, so really big storage to complement the renewables. And then we have on the full outside we are developing a new nuclear so we have visibility study or new nuclear. We're looking at both large reactors and SMRs. That's of course
somewhere in the future. But the message to the customers is that we can meet your growing energy needs and there is infrastructure to support you. Yeah, and the cash and the cash we have the financial means to do it.
Yeah.
So that's really great. So the message is welcome to Scandinavia. It is definitely the message. In addition to that, there is the possibility to both. There is COO two three very cost competitive supply today, there is the prospect of the new supply.
But there is infrastructure. So the Nordic countries have a history of heavy industries like pulp and paper, steel chemicals. So basically all the way up to Arctic Circle and even north of that, you have huge steel mills. You have big pulp mills, so you have all the infrastructure, the roads, the ports, the grids, the people that all the competence that you need also for new projects in order to support the customers. Further that, what we have
done in Fortum is that we are developing sites. So what we hear from customers is that they need reds, they need power, they need sites where they can locate. And I'll give an example of what this means. In the capital region of Finland around Helsinki. In twenty eighteen, are team set out to develop three sites, generic sites
that could fit data center use. And a couple of years later, after we had started the permitting and zoning and we spoke with TSO to get the grid connections available, we met Microsoft and then a while later we announced the cooperation selling these sites to Microsoft. Then we have agreed on the heat of take from the data centers hyperscale data centers that they're building in these locations. So two out of the tree will be connected to a
district heating network. So we have a two terrawat tour district heating system in Espo and Kirkonomi, and out of these data centers and the connected electrical boilers and heat pumps, we will provide one point four trabat hours to the two Dahawa tour system. This is the world's biggest hit of tech. But it's a long project, so starting from twenty eighteen, Microsoft wiill start their operations in twenty twenty seven, so almost ten years. Yeah, but we can expedite our
customers location by four and five years. With this activity, and with about a dozen sites that we have under development now, we can provide grid connection up to one point three gigawatts.
Repeat very very gently for all our infrastadial clients around the world looking to develop data center. You just said I've got one point three giga out of capacity. Please come you can plug here. The electricity is cheap where educated, it's clean. You know, we respect that contract. Everything takes the time it takes, but things get done. So that's your message.
This is indeed the case, and that does not only apply the data centers, but we have sites with ports. We have that are at the ports. So the typically industrial could be still could be aluminium battery factories. So there is infrastructure also for heavy export or import oriented industries available. Yes, very welcome, very ready to do a
new business. Good Okay, So now let's talk about the giant there in the room, which is your eastern neighbor who's not only has been causing indirectly trouble, but it's bothering you on a daily basis, if I understand, So what's going on there. We have a land border of one thousand, three hundred kilometers with Russia, so we are enables forever, so we have to have a relationship of varying SOT over time. And now with the war on Ukraine,
the EU position and finished position is clear. We are against this aggression against Ukraine, so now the relationship is very cold between the two countries. There is investment into preparedness continuously and not as such saying that this is Russia, but generically as a company. We are continuously under cyber attacks daily. We have drones flying around there, espionage, there's a satellite disruption, communication disruption, but this is something that
we deal with daily. And in this environment, the availability of our hydropower and nuclear power is over ninety percent, so we keep our plants available. How to tackle this is own preparedness, having good situational awareness, authority contacts, so we are talking with the authorities, with police, with the military, with other authorities, and all the time, keeping our responses up to date.
And then practicing.
So if I look the last three years, we have had more than twenty exercises with various authorities, and this can be just exercising nuclear incidents, them incidents, disturbance and this is not relating to the current situation, but this is what we have done for years and years. So practicing and doing things together and very collaboratively is something that is a future.
Marcus.
It's been a very dense conversation and I thank you for your openness and honesty. In conclusion, how is the energy and tricy landscape in your in the next three to five years. The situation is, as we very well know, it's very volatile. So the geopolitics are turbol and there's a lot of uncertainty. Looking long term, we have great potential to electrify and de carbonize Europe and global businesses and this is something that we are set out to
do both in your Electric and in Fortum. So a message to the customers and the society is that we want to be open, we want to engage in a dialogue, we want to be collaborative and find good solutions to meet our common goals. And I would maybe I distill it in.
What is Fortum's purpose, and that is the power a world where people, nature and business thrive together, find the right balance, rich, ambitious goes and do it together.
Well, that's a great message of hope and a bright future. So thank you very much for coming on the show. I say good luck as a president and we'll see you next year.
Thank you very much, Thank you for having me on the podcast.
Thank you for.
Listening to Redefining Energy.
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