Caruna owners pursue billion-euro claim against Finland after sale

Caruna’s current owners will continue pursuing a compensation claim of more than two billion euros against the Finnish state after the electricity distribution company changes hands, according to information obtained by Yle.

Spanish energy company Iberdrola announced the acquisition of an 80 per cent stake in Caruna two weeks ago. The claim launched by Caruna’s current owners will remain in force after the majority ownership is transferred to Iberdrola, Yle reported, citing sources.

The claim concerns a regulatory change introduced in 2023. The Energy Authority changed the method used to calculate a reasonable return for electricity network companies, which determines how much they can charge for electricity transmission and how much revenue they can earn.

Most of Finland’s approximately 80 electricity distribution companies appealed the decision to the Market Court. Caruna’s owners instead took the case to arbitration in Washington under the auspices of the World Bank. The independent arbitrators’ decisions are binding.

Finnish pension company involved indirectly

Finnish pension company Elo owns 7.5 per cent of Caruna, while Swedish pension company AMF owns 12.5 per cent. US investment company KKR and Canadian pension fund OTPP are selling their stakes to Iberdrola.

Jukka Vähäpesola, Elo’s head of equity investments, said the company had no active role in the claim but believed the proceedings would continue.

“Elo is involved in the claim indirectly because one of the claimants is Caruna’s Dutch parent company, of which Elo is a minority shareholder,” Vähäpesola said.

He said Elo did not take part in the sale because the price offered was not high enough. Elo was not involved in launching the arbitration proceedings.

First investment protection arbitration against Finland

The arbitration was initiated under the Energy Charter Treaty, or ECT, which Finland has signed and which includes investment protection for international investors. It is the first time Finland has been taken to arbitration under the treaty.

The claimants argue that the Energy Authority changed the energy regulations suddenly and unpredictably. They say the change significantly reduced the profitability of investments made earlier and breached the regulatory stability promised under the ECT.

Under the new model, the value of an electricity network is calculated using the price level from the year in which each investment was made. Previously, older investments were also valued using the price level of the most recent year.

Rising costs in recent years have reduced the calculated value of network companies’ earlier investments and consequently limited their returns. The Energy Authority sets limits on the returns of electricity transmission companies because they operate as monopolies and their customers cannot switch to another provider.

The arbitrators must determine whether the change reduced investment returns in breach of the ECT. Documents from the World Bank’s International Centre for Settlement of Investment Disputes show that the arbitration began in spring 2025. The parties held a hearing in London in February this year.

Vähäpesola said the proceedings were likely to take a long time. A final decision could still be two or three years away, he said.