Economic data

Annual report 1 January–31 December 2021

Westenergy Ltd was registered in the Finnish Trade Register on 1 January 2008. The company’s trade register number is 2165379–9 and its domicile is Mustasaari. The company is owned by Oy Botniarosk Ab, Lakeuden Etappi Oy, Loimi-Hämeen Jätehuolto Oy, Millespakka Oy, Ab Stormossen Oy and Vestia Oy. The past financial period was the thirteenth in the company’s history. Westenergy’s main line of business is operating a Waste-to-Energy plant. The company operates on the absorption principle and does not distribute dividends.

The company has built a plant specialising in the energy production from and conversion of non-recyclable municipal waste on a property that it owns in Koivulahti, Mustasaari, and it sells services to its shareholders on the absorption principle. The energy produced at the plant is converted into electricity and district heat using the machinery of the company’s partner, Vaasan Sähkö Oy. The plant was completed and went into operation in August 2012.

During 2021, Westenergy Ltd’s plant continued to seek high availability and high efficiency. Continuous use for a period of 16 months was set as a goal. The persistent work to improve the plant’s availability seems to be creating results. The plant’s annual maintenance shutdown was moved to spring 2022, meaning that there was no need to stop the plant for a service stop in 2021. Extending the maintenance interval is a big step forward. Since there were no significant disturbances in 2021, new annual records were set for the utilisation of waste and the production of energy. All of this was naturally important for the company in terms of economy.

The company’s turnover increased substantially year-on-year. This was mainly due to the fact that the plant was in operation throughout the year, resulting in higher sales volumes and lower costs. The price of electricity was another factor contributing significantly to the increased turnover. In 2021, the price of electricity was clearly higher than expected and higher than in previous years. The amount of electricity supplied fell slightly short of expectations, although mainly at the cost of district heat supply, so this was not financially significant to Westenergy. Energy storage was also utilised during the year.

The COVID-19 pandemic also had an impact on Westenergy’s operations. Various restrictions became commonplace during the year, but all in all, Westenergy has been coping quite well with the pandemic so far. In terms of economics, the pandemic has reduced the cost level slightly since it has not been possible to organise training courses, events, trips and so on.

 

The amount of bottom slag produced and processed was on a par with previous years. The work we have done together with our partners Lakeuden Etappi Oy and Suomen Erityisjäte Oy in developing the processing of ash further has yielded results over the years. The treatment of bottom slag and the processing methods are undergoing constant development, and the achieved efficiency has brought cost savings. Suomen Erityisjäte Oy has been responsible for the treatment of bottom slag during the financial period.

The high availability rate and efficiency were also reflected in the maintenance costs, which were significantly lower than in previous years. The fact that the plant could be kept in continuous operation for a longer period than before had a big influence on this. The good availability is also reflected in lower variable expenses. Fixed expenses were also lower than before and below the estimate. Financial expenses decreased compared to the previous year. The COVID-19 pandemic also resulted in considerable savings in administrative expenses, such as travel, training and certain services. This was naturally the result of various restrictions in Finland.

The company’s investments made during the 2021 financial period totalled MEUR 4.39. The new storage and road area was the biggest investment in 2021. This investment will be finalised in spring 2022. For this investment, the company also acquired areas of land that were adjacent to the existing property during the year. Other investments during the financial period included, among other things, the boiler underpressure system and the virtual presentation materials for the plant.

Westenergy’s major investment programme for 2019–2021 had an impact on depreciation and amortisation. The investments made have increased amortisation for their part. Depreciation increased slightly year-on-year as well. The company’s Board has decided on a new depreciation and amortisation programme. The depreciation and amortisation programme will transition to the maximum depreciation on all buildings allowed by the Act on the Taxation of Business Income as of the beginning of 2022, which better matches the development of the condition of buildings.

The company’s cash position is good, and the company has been able to fulfil its financial obligations well. The company has access to a financing arrangement agreed earlier that it will probably still use at the beginning of 2022 to cover the investment costs. The company will rearrange the majority of its long-term financing in 2022.

Westenergy refined its strategy further during the financial period. The long-term strategy is aligned with the climate and circular economy targets of the EU and Finland. Westenergy collaborated with its owner companies and other stakeholders in innovating and seeking new solutions for the future. Westenergy has acted as a pioneering force in defining the Green Deal package for the industry, which led to the initiation of negotiations on the national level, led by the Ministry of the Environment. Westenergy provides strong support to development projects and dissertations on the circular economy and climate matters. The company is working in close relationship with numerous cooperation partners in the areas mentioned above. Based on the strategy work, the financial period saw progress in development projects associated with, for example, carbon dioxide recovery and utilisation, refining of green hydrogen, more efficient utilisation of biofuels, heat storage, refining non-utilisable waste fractions into energy and other materials, and building a circular economy road map and ecosystem for the waste-to-energy industry. During the financial period, Westenergy completed a large-scale study investigating the possibilities for the recovery of carbon dioxide in connection with the utilisation of waste as energy, including the various technologies, their cost-efficiency, and investment costs. The project was partly funded by the Ministry of Economic Affairs and Employment.

Westenergy Ltd is committed to following the quality, environmental and occupational health and safety policies that the company has defined. Through certified systems, Westenergy Ltd aims to improve the overall quality and cost-effectiveness of its operations. An occupational health and safety system is used to manage known risks, maintain the health and working ability of employees and improve occupational health and safety. Westenergy Ltd aims at managing environmental risks with actions and programmes defined in the environmental system. Westenergy Ltd reports new developments concerning quality, the environment and occupational health and safety to interest groups primarily in the form of an annual report. Westenergy’s management system complies with the standards of quality (ISO 9001:2015), the environment (ISO 14001:2015) and occupational health and safety (ISO 45001:2018). The systems were evaluated both internally and by an independent external auditor in 2021.

The company employed 33 people at the beginning of the financial period and 34 people at the end of the financial period. The average number of employees during the year was 36. The salaries and remuneration paid in 2021 totalled EUR 2,331,902. The following table includes some key figures related to the personnel.

In the past operating period, the Board of Directors consisted of Paavo Eloniemi (Chairman), Ragnvald Blomfeldt (Vice-Chairman), Paavo Hankonen, Jouko Huumarkangas (until 10 June 2021), Antti-Kalle Levijoki (from 10 June 2021), Teuvo Suominen and Harri Virtanen (ordinary members). The Board met 11 times in total during the past financial period. Olli Alhoniemi acted as the Managing Director of Westenergy. The company’s regular auditor was the CPA firm Ernst & Young Oy, with Kjell Berts, CPA (until 10 June 2021), and Kristian Berg, CPA (from 10 June 2021), acting as the principal auditor.

The crisis that began between Russia and Ukraine at the beginning of 2022 has had no immediate impact on Westenergy’s operations. Westenergy is investigating the effects of a prolonged crisis, as well as any indirect impacts. There have been no significant events after the end of the financial period.

The company’s registered share capital was EUR 15,903,873 at the end of the financial period. The company has 15,903,873 shares. The redemption clause set in the articles of association is applied to the shares, according to which other shareholders have the primary right to redeem shares, and the company itself has the secondary right if the shares are to be transferred to a third party.

Because of the absorption principle, it is not appropriate to compare the key figures to profit-making companies when analysing Westenergy’s operations, financial position and results.
In compliance with Section 3 of the articles of association, the company does not distribute dividends. The Board of Directors proposes that the net profit for the period of EUR -3,993.26 be transferred to the profit and loss account as the company’s equity.

Vaasa 24 March 2022

Westenergy Oy Ab, Company Board

Profit and loss statement

 

Balance sheet

Financial statement

Accounting policies

ACCOUNTING POLICIES

Policies followed in the financial statements
The financial statements have been drawn up in accordance with the Finnish Government Decree on the information presented in the financial statements of a small undertaking and micro-undertaking (PMA, Chapters 2 and 3).

Derivatives
The company has entered into an interest derivative contract to manage the volatility of interest rates. Interest derivatives are hedged. The hedge instruments’ impact on profit is recognised together with the hedged item. Unrealised changes in value are recognised in the fair value reserve of equity. The fair value is calculated taking into account the deferred tax receivables.

VALUATION AND MATCHING PRINCIPLES AND METHODOLOGY

Intangible assets recorded in the fixed assets of the company are valued at the historical cost of acquisition.

The fixed assets are valued at the variable and fixed costs of acquisition, the latter related to the fixed asset project.

The acquisition costs of reproducible assets are written off in accordance with the established plan. The depreciation plan is determined on the basis of economic life.

In all other respects, the financial statements have been drawn up in accordance with the valuation and matching principles and methodology given in the decree on the financial statements of small undertakings.

DETAILS ON THE DERIVATIVE CONTRACTS THAT HEDGE AGAINST INTEREST RATE RISK

The notional amount of the interest rate swap contract is EUR 18,000,000 from 8 December 2017 to 8 December 2027, with the interest rate being 3-month Euribor. The company receives 3-month Euribor and pays fixed interest.

This interest rate swap contract hedges Westenergy’s loan of MEUR 23.4 with the final maturity date in one year. The review of loan terms is in 2022.

The cash flows of the interest rate swap contract are recognised in profit or loss for the same periods as the interest flows of the hedged loan until 8 December 2027

The fair value of the contract at the date of closure of the accounts:

 

The financial statements have been signed by

AUDITOR’S NOTE

Based on the audit I performed, I have issued an audit report today.

Vaasa 28.3.2021

Kristian Berg, CPA.

AUDITOR’S REPORT

To the Annual General Meeting of Westenergy Oy Ab

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion

We have audited the financial statements of Westenergy Oy Ab (business identity code 2165379-9) for the year ended 31 December, 2020. The financial statements comprise the balance sheet, income statement, cash flow statement and notes.

In our opinion, the financial statements give a true and fair view of the company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements.

Basis for Opinion

We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor’s Responsibilities for the Audit of Financial Statements section of our report. We are independent of the company in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of the Board of Directors and the Managing Director for the Financial Statements

The Board of Directors and the Managing Director are responsible for the preparation of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the company’s ability to continue as going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the company or cease operations, or there is no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Other reporting requirements

Other information

The Board of Directors and the Managing Director are responsible for the other information. The other information comprises the report of the Board of Directors.

Our opinion on the financial statements does not cover the other information.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.

In our opinion, the information in the report of the Board of Directors is consistent with the information in the financial statements and the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.

If, based on the work we have performed, we conclude that there is a material misstatement of the report of the Board of Directors, we are required to report that fact. We have nothing to report in this regard.

VaasA 28.3.2021

Ernst & Young Oy
Authorized Public Accountant Firm

Kristian Berg
KHT