During his childhood, he liked to run faster than the other boys on the street. Now, the head of Fortum is more concerned with gaining market share than seconds. Recently, Pekka Lundmark took a bite of the Norwegian power market.
During several intense days in April, the Finnish energy group Fortum became a household name in Norway. An agreement with the City of Oslo with respect to the acquisition of Hafslund Marked, changed the company's relatively anonymous existence.
When Statkraft gathered the leaders of the Nordic power companies at the Statkraft Oslo conference in May 2017, CEO Pekka Lundmark was the man of the hour. We asked him about the competitive situation, market outlook and of course, the Hafslund agreement.
What are you particularly pleased with about the acquisition?
"The City of Oslo and Fortum have been co-owners in Hafslund for many years. Now, we've decided to create new partnerships in areas where we can combine our expertise to drive innovation and development. I'm very satisfied that together we will work to enable individual consumers and businesses to make more climate-friendly choices."
Why was it so important to acquire Hafslund's retail business?
"With Hafslund Markets, Fortum will become the largest electricity retail company in the Nordic region, almost doubling our customer base to 2.4 million. This means achieving economies of scale, which will be particularly beneficial for the development of innovative services and solutions for customers. We want to engage our customers and be a driver in the transition towards a cleaner world."
The talk in the industry is that this is the year of the customer. Now the customer is in charge. Is this a change that motivates Fortum?
"Yes of course. Norwegian consumers are widely recognised as early adopters of new technology and solutions, and the Norwegian market will be especially important for Fortum and its new ideas, digital products and services. Our Charge & Drive concept is already a leading provider of electric vehicle charging systems in Norway, and its success here is paving the way for further international growth. We consider Norway as part of our Nordic home market. We have a long-term commitment in Norway and an ambition to grow."
"Both Hafslund and Fortum are organisations that want to build strong, customer-oriented businesses with extensive offerings of new digital services. This work will accelerate when we can join forces. When the agreed transaction is completed later this year, we will gradually roll out and offer new products and solutions. Our ambition is to enable individual consumers and businesses to make more climate-friendly choices, and at the same time manage their energy consumption and costs."
> Finnish energy company with operations in the Nordic and Baltic countries, Poland and Russia.
> Produces and sells electricity and heat from hydropower, district heating, and nuclear, solar, wind and wave power.
> Is second-largest owner in Hafslund ASA.
> The company received wide attention n Norway in April 2017 when the City of Oslo and Fortum agreed to restructure Hafslund's ownership and delist the company from the stock exchange. The municipality becomes owner of power generation and the power grid, while Fortum takes over power sales. The agreement is subject to approval by Oslo City Council.
Is Fortum planning more acquisitions in Norway?
"The energy sector in Europe is definitely consolidating. We have many plans in different countries, but for obvious reasons I can't disclose these."
How would you describe the competitive relationship between the major energy companies in the Nordic region?
"There is healthy competition in the Nordic market. There are many operators in the wholesale and retail markets, and that's good. I want a well-functioning market. That is what gives customers confidence in our business."
Is Statkraft first and foremost a competitor or could we also be partners? If so, how?
"Statkraft is of course a competitor. But that doesn't mean that we don't have any contact points where we can cooperate. For example, we work together to provide a clearer message and have more impact when it comes to influencing EU decisions in Brussels. Another example is that we share experience about increased safety, which I consider to be a common issue for the entire industry."
At the Energi Norge winter conference in Helsinki in Finland, you made a strong case for a common Nordic retail electricity market. What is your vision for this market?
"We need to give customers a central role and encourage them to become active participants in the future energy market. We must enable customers to produce energy themselves by purchasing their surplus. By offering opportunities for flexibility related to demand, customers can influence both their energy consumption and their costs. If this can be done on the scale of a Nordic market, we'll be significantly more efficient, which obviously benefits our customers. Thus, I think a Nordic market for end users is important."
What will the energy sector and energy market look like in 2027?
"There are many developments that will affect the power markets in the coming decade. The planned German shutdown of nuclear power will create a need for additional power capacity. At the same time, the EU commission has an ambition to tighten up the emission trading scheme and increase the price of carbon emissions to meet the climate targets. In the Nordic region, the transmission capacity to northern Europe will increase substantially, which enables using flexible Nordic hydropower production to support a German power market more reliant on renewables. This could result in increasing price volatility also here in the Nordic region."
POSITION: CEO of Fortum Corporation.
EDUCATION: Master's degree in engineering from Helsinki University of Technology, major in information technology and international marketing.
MANAGEMENT EXPERIENCE: Previously, CEO of Konecranes, CEO of Hackmann and leading partner in Startupfactory. Also, held various management positions in Nokia. Chairman of Helsinki Metropolitan Smart & Clean Foundation.
FAMILY: Married, three children.
As a leader, what are you particularly good at?
"I think one of my best qualities as a leader is my ability to inspire and motivate others. For most people the greatest motivation comes through personal involvement – the feeling of doing something important, of being appreciated, of making a difference. In a large organisation it takes time to reach everyone personally. But I always encourage other members of the management team to foster personal engagement throughout the company."
Is our industry worth considering for young people starting a career?
"The energy industry is absolutely central to providing solutions to challenges caused by two major megatrends, climate change and urbanisation. We must find solutions that answer the world's growing need for energy and at the same time dramatically reduce CO2 emissions. We must also find sustainable solutions to challenges that rapidly growing urban areas face such as increasing pollution from heating, cooling and traffic as well as growing amounts of waste. So for young people who want to make a positive change in the world, the energy industry is the right place to be!"
Text: Knut Fjerdingstad
Photo: Thomas Barstad Eckhoff
The article has also been published in Statkraft's magazine People & Power no. 1/2017.
New opportunities in a Nordic energy shift gathered the leaders of the four power giants in the Nordic region for a debate on the challenges and business opportunities in a Nordic market characterised by power surpluses, rapid technological development and major market changes.
"How can you, who are yesterday's heroes, avoid becoming tomorrow's losers?" was one of the questions posed by debate moderator Bente Engesland, SVP of Corporate Communication in Statkraft, to (from the left) Pekka Lundmark from Finnish Fortum, Christian Rynning-Tønnesen from Statkraft, Hördur Arnarson from Icelandic Landsvirkjun and Magnus Hall from Swedish Vattenfall.
"In the Nordic region, we are experiencing a very positive trend with future-oriented carbon-free power generation, but we need to become more nimble and closer to our customers," said Hall. "It will be tougher, but more fun, too."
"I believe in survival of the fittest," said Rynning-Tønnesen. "If we manage to have effective large-scale operations and test out business models with small groups, then roll out the ones that are successful, I think we can be among the winners in the future."
06. Jul. 2017
Statkraft's internal magazine People & Power brings interesting stories about the energy sector and the company's business activities. Some of the feature articles in the magazine are presented here on the Stories web page.
Read more about the magazine