Strong Q1 Fortum performance The cold weather, which boosted heat volumes in the Solutions business and Russia, as well as the recovery in Russian spot power prices and waste and recycling activity all helped Fortum beat our expectations in Q1 ''21. The European generation business performed in line with our expectations and forward hedging was also in line with our estimates. We have increased our estimates for Russia for 2021 and beyond, and we have made small tweaks to our Uniper divisional estimates following last week''s results. Fortum and Uniper moving closer The management changes at Uniper have brought the two groups closer and this week the OneTeam results were announced, which impacts the Nordic hydro activities as well as European renewables and hydrogen future projects. The Russian operators, another obvious area of overlap, have not yet been addressed. Fortum appears happy to buy Uniper shares opportunistically in the open market and committed again to not push for a DPLA or squeeze-out before year-end. Fortum strategic reviews ongoing There was no news on the assets that Fortum is currently reviewing - Polish heat, Stockholm Exergi, Consumer Solutions - although press reports had suggested that bids for Stockholm Exergi were due last week. We would expect more information by the time of the Q2 results. Reiterate Underperform Although Uniper shares are likely to remain supported by Fortum''s market buying or possibility of a future squeeze-out, we see better fundamental upside elsewhere in the sector and highlight that on a fundamental basis the trading share price is above our price target. Fortum''s disposal program is progressing well and is alleviating the near-term balance sheet concerns we had, although the volatility of Uniper''s cash flows and a possible future squeeze-out mean that risks remain. We continue to view Fortum''s current share price as overestimating the positive impact of a higher CO2 price.