January 10, 2017 / 1:12 PM / in 7 months

UPDATE 1-Finnish-Russian nuclear project faces fresh challenge from court ruling

3 Min Read

(Adds comments from Valio, lawmaker)

By Jussi Rosendahl

HELSINKI, Jan 10 (Reuters) - Finnish retailer Kesko Oyj is allowed to walk away from the Fennovoima nuclear project, an arbitration court ruled on Tuesday, prompting questions over the Finnish-Russian project's funding and future ownership.

Finnish participation is crucial for the project because the government, addressing concerns about Russia's influence on the country's energy sector, has set a requirement for 60 percent local ownership.

Kesko, which owned about 2 percent of Fennovoima at the time, said in 2014 it wanted out of the project. But Fennovoima's Finnish owners said it had committed to further financing for the 6-7 billion euro ($6.4-7.4 billion) plant.

Finland's court of arbitration dismissed that claim on Tuesday.

"This is the end of the case. We are happy with the decision," Kesko spokesman Lauri Peltola said.

The project has seen several of its original investors opt out, including Germany's E.ON and Swedish metals firm Boliden.

Tuesday's ruling may open the door for further departures: Finnish dairy Valio has been looking to sell its 1.4 percent stake, but hasn't found a buyer.

"In light of this (ruling), the management will likely discuss the process over again," Valio spokeswoman Pia Kontunen said.

The Fennovoima project was close to collapse in 2015, with the government's ownership threshold seeming out of reach ahead of a licence deadline.

But state-controlled Finnish utility Fortum signed up at the last minute, prompting speculation the Finnish and Russian governments might have influenced the purchase.

Green party lawmaker Emma Kari, who opposes the project, said local authorities in Helsinki should opt out too due to rising costs. The Finnish capital owns a small stake via Vantaan Energia.

"This ruling places a big question mark on the financial basis of Fennovoima ... Joining a nuclear project led by (Russia's) Rosatom is not in the interest of our taxpayers," Kari said.

Fennovoima declined to comment and its Finnish owners' consortium, Voimaosakeyhtio SF, was not available for comment.

Prior to the ruling, the project was 66-percent owned by Voimaosakeyhtio SF, which includes more than 50 Finnish regional utilities and other companies, while Russian state-owned nuclear company Rosatom held 34 percent.

Rosatom, which has been stepping up overseas expansion, agreed in 2013 to take the stake in the project, and to supply the reactor.

The move prompted concerns in Finland after the Ukraine crisis started in 2014, but parliament supported the new plan by 115 votes to 74.

The reactor, which would be Finland's sixth, is due to come online in Pyhajoki in 2024.

$1 = 0.9427 euros Editing by Jason Neely and Mark Potter

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