Fortum Oyj (FUM1V), Finland’s largest utility, fell the most in nine months after a vote by the European Parliament hurt the potential for future windfall profit.
Fortum shares declined as much as 7.6 percent, the biggest intraday drop since July 19. The Espoo, Finland-based company’s stock traded down 6.7 percent at 14 euros at 3:46 p.m. in Helsinki. Volume exceeded 6 million shares, more than double its three-month daily average.
Fortum generates so-called windfall profit as its nuclear and hydropower-based electricity generation is exempt from buying carbon permits while it sells power at market rates, which include the cost of carbon emissions.
The European Parliament today rejected a proposed change to emissions-trading law that would allow the supply of carbon permits to be temporarily curbed. The rules’ passage would have raised the cost to Fortum’s rivals of producing electricity, boosting power prices and increasing windfall profit for the Finnish utility.
Carbon allowances are intended to offset carbon dioxide emissions. The contracts for delivery in December fell to a record low of 2.63 euros ($3.45) after the vote.
“Fortum has benefited from not having to buy emissions allowances for its nuclear and hydropower” generation, Pasi Vaeisaenen, an analyst at Nordea Bank AB, said by phone. He has a buy rating on the shares and estimates shares will rise to 18 euros in 12 months.
“Market psychology makes the effect greater than the concrete numbers,” Vaeisaenen said. “Low carbon allowances just prevent exceptionally good profitability.”
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