The company's Q2 result was good operationally and the reported figures were better than expected, but the EUR 5.7 billion loss is still nothing to celebrate.

Fortum's subsidiary Uniper reported its Q2 result yesterday. We were aware that Uniper's gas business was in disarray following the disruption of gas supplies from Russia, but more problems seem to be piling up all the time.

Fortum's situation is still confusing due to the European energy crisis resulting from Russian military action, but we believe that the likelihood of a rapid exit from Russia has improved. In addition, with Germany’s Energy Security Act, Uniper's worst scenario is largely excluded, even though Russian gas supplies are spluttering as the country uses energy as a political weapon. Fortum’s valuation is very low (2023e P/E under 11x) and the investment profile would become much more attractive if the exit from Russia was at least reasonably successful.

Last night, Fortum's subsidiary Uniper issued a drastic profit warning on the Q1 result and reported impairment charges related to Russia. At the same time, Uniper's risks concerning Russian gas have increased significantly. The situation is unclear in many respects at present, but with the increased risks we do not consider Fortum’s risk/return ratio reasonable. We will update our view when the situation becomes clearer or at the latest after Fortum’s result.