Image: Martti Kainulainen / Lehtikuva

In autumn last year, state-owned energy company Fortum acquired a controlling share in biotech firm Chempolis. Prime Minister Juha Sipilä had been a part-owner of the company and his adult children are current shareholders by way of an investment holding company.

Since 1997, Chempolis had received several million euros in government support, but in spite of the funds pumped in, its biofuel refining technology never took off and was never harnessed for industrial production.

In recent years, Chempolis found itself in financial dire straits; however the situation eased in October 2016, when Fortum invested more than six million euros. At the same time, the private circular economy fund owned by the Taaleri Group also ploughed some four million euros into the firm.

Although Fortum is a stock-listed company, the state owns a majority share of 50.7 percent. Prime Minister Juha Sipilä, who took office in June 2015, took the unusual step of assuming responsibility for the state’s ownership steering programme. At the same time, Fortum began to prepare for its financial intervention into Chempolis, which was at the time on the verge of going under.

The partial buyout took place in October 2016, making Fortum the tech firm’s largest owner with a 34 percent stake in the company. Sipilä’s children own five percent of the company through an investment holding company, Fortel Invest.

The Fortum investment came at a critical time for Chempolis. At the end of 2015 the Chempolis board declared in its annual report that the company’s cash reserves would not see it through to the end of 2016. According to the auditor’s report, the company’s cash position was so weak, that its ability to continue operations came under great doubt.

Innovation financier Tekes tightens purse strings

Chempolis had long been a regular customer of state funding agencies. In particular, the state innovation fund Tekes had been a key backer of the company. Starting from the end of the 1990s, Tekes had forked out millions of euros in taxpayer money to the firm.

In 2008, Chempolis received its first payout from Tekes, more than one million euros. The following year, the agency advanced the company nearly two million. In 2011, another funding injection was paid out. That year, the state audit body VTV ran spot checks of the state’s funding for energy and climate companies.

VTV had selected companies participating in Tekes’ cleantech funding programme and evaluated the return on investment. The report concluded that in the case of Chempolis, the state had not received sufficient return in exchange for its funding and that there had not been any commercial successes.

Elusive business success

The largest recipients of state funding had been Neste, Chempolis, UPM-Kymenne, Metso and Wärtsilä. With its lean finances and lack of commercial success, Chempolis’ position as one of the five biggest recipients of state funding raised eyebrows.

The firm's longed-for commercial breakthrough never emerged although several media outlets produced glowing reports of potential deals, including an industrial order from China estimated at tens of millions of euros.

In 2008, it was reported that Chempolis and the forestry products company UPM had entered an agreement to construct a biofuel refinery. Later, in 2010, media reported on an order comprising three refineries for a company known as Tianjin Jiuqian Paper. Those refineries were to be built from 2012 to 2013. In spite of the news reports, these plants have yet to see the light of day.

Yle’s investigative journalism programme MOT reports that over the course of 15 years, Chempolis received more than 10 million euros in state funding and other support from funds owned by the Finnish Innovation Fund Sitra and the state-owned export credit company Finnvera.

Fortum planning proof-of-concept refinery

Fortum said that it had long planned an investment in the struggling technology company.

"Fortum’s interest in Chempolis’ technology grew during the autumn of 2015," said Fortum technology director and current Chempolis board member Heli Antila.

According to Antila, Fortum has also invested in other promising technology companies, but noted that Chempolis is the only biotech company to have caught its eye.

She said that the real reason for acquiring Chempolis was its budding technology and the energy giant's plans to construct a new production facility in Finland using Chempolis processes. She said that the firm would then be able to prove that its production process can operate for commercial-scale output.