Antipodes Portfolio Manager, Max Shramchenko, outlines the investment case for Fortum, which operates hydro and nuclear assets in the Nordics. These are carbon-neutral, low cost assets that generate clean around-the-clock baseload power – exactly what AI operators and decarbonising industries need most.
Transcript
Imagine a place where you have readily available grid capacity to connect GWs of AI data centres — and – cut your total electricity cost by up to 70% compared to Continental Europe. Fortum, an independent power producer in Finland and Sweden, sits at the centre of this opportunity.
Fortum operates a deregulated fleet of hydro and nuclear assets in the Nordics. These carbon-neutral, low-cost assets generate clean, around-the-clock baseload power – exactly what AI operators and decarbonising industries need most.
So, what is deregulated power? In a regulated system, power plants sell electricity at regulated prices which allow stable, but moderate returns. In a deregulated system, electricity is sold at the market price based on supply and demand – rising or falling depending on the balance between the two.
The Nordic system is dominated by fixed cost hydro, nuclear and wind. This power is cheap to operate, unlike much of Continental Europe which still relies heavily on importing gas. Nordic power prices are roughly half the price of Continental Europe – not only because the generation is clean and low-cost – but also because the region has surplus capacity.
Many investors assume this supply-heavy structure will persist. But we see a different picture emerging.
With a carbon neutral grid, spare capacity, a cool climate and plenty of available land – the Nordics are a prime location for power in Europe.
Our analysis shows that total electricity cost for running a large scale data centre in Finland or Sweden could be 70% lower than Continental Europe thanks to lower prices, reduced cooling needs and a unique advantage: data centres can sell recovered heat into district-heating networks.
A data centre is essentially a giant warehouse filled with computer chips which turn electricity into heat similar to electric heaters. Instead of releasing this heat into the air, Nordic data centres can capture it and pipe it into the region’s district heating network – these are city-wide systems that use hot water to warm homes and buildings. Operators get paid for supplying the heat, further reducing the data centre’s net power cost.
Unlike traditional European data centre hubs, the Nordics have sites with immediate grid access up to 1.5GW, which is extremely rare.
Yet the market still values Fortum as if power demand will remain flat, pricing long-term Nordic electricity at around 35–40 euros per megawatt hour versus around 70 in Germany. We have all heard about $100/MWh data center power purchase agreements in the US. Electricity is a bit like air, when plentiful, nobody thinks about it, but when scarce – the anxiety and prices rise very fast, which is what we have seen in the US but not yet in Europe. But even if Fortum was selling its clean, baseload power for a very affordable 50€/MWh, at 17.5 eur/share it is on 15.5x earnings – before any upside from AI or industrial growth.
Fortum has little net debt, strong cash flows and a mid-single digit dividend yield. It’s a quality, under-appreciated clean-energy producer in the most attractive part of Europe when it comes to scaling AI and industrial growth.
Fortum is pragmatic value.
Stock commentary is illustrative only. Not a recommendation to buy, hold, or sell any security.
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