Furious Fortum slams Vestas 'false claims' as accusations fly in Russia wind farm sanctions row

Fortum slammed what it called “false claims” by wind giant Vestas that it is undermining EU sanctions against Russia, as a commercial dispute escalated into a full-scale public row between the Finnish state-owned power group and its former wind turbine supplier.

The Danish wind OEM said the agreements that it terminated fell under sanctions imposed by the EU after the invasion of Ukraine and claimed that “questioning whether sanctions apply can only benefit the interests of Russia and its sympathisers”.

Fortum hit back with a statement of its own that said it “will vigorously defend itself against false claims by former business partner Vestas that it flouted sanctions against Russia in a commercial dispute between the two Nordic companies”.

It said the dispute concerns contracts signed before the Ukraine invasion over “projects to build several wind parks with more than 50 wind turbines in Russia for which Fortum had already made sizeable advance payments to Vestas. Vestas did not deliver on its contractual obligations and yet refused to repay the advance payments and other project-related costs”.

The Finnish group said after several months of negotiations it was left with no choice but to pursue arbitration.

Fortum general counsel Nora Steiner-Forsberg said: “As in all business partnerships, Fortum values cooperation and transparency, and has been ready to find a reasonable solution that is acceptable to both parties. As this has not been possible, we believe ICC arbitration is a fair way to settle this commercial dispute based on the facts.

“We are at a loss to understand why our long-standing business partner Vestas would suddenly question our adherence to EU sanctions in this case. There is absolutely no doubt about Fortum’s commitment to upholding and defending EU laws, EU sanctions, and ultimately EU unity.”

Fortum was before the Ukraine invasion the largest player in Russia’s nascent wind power sector with Vestas a key supplier.

The Finnish group has since 2022 been engaged in a complex and costly retreat from the Russian energy sector, where it has widespread interests stretching back decades.

Vestas has also exited the Russian market, with the costs of that reflected as part of €444m of special items in its full-year 2022 results.

'Refunding money not in agreement'

Following Fortum's statement, Vestas said: "We are disappointed to read that Fortum demands a refund of advance payments despite the inability of the parties to complete the contracts due to EU and other sanctions. Refunding money was never the agreement of the parties

"It is essential to highlight that WEDF, which is owned by Fortum, made advance payments equal to about 20-30% of each contract. By the time the EU imposed the sanctions on Russia, Vestas already had manufactured a substantial portion of the wind turbine components, with a value far in excess of the advance payments received from WEDF.

"In essence, Vestas assumed the risk and costs of producing components before receiving full payment for them and Fortum assumed the risk and cost of making advance payment before receiving the components."

Vestas added: "The contracts provide that in the case of termination due to sanctions, each party shall bear its own risks and costs. All of these arrangements and consequences were extensively negotiated and accepted by the parties prior to signing the contracts."