Annual report 1 January–31 December 2020
Westenergy Oy Ab was registered in the Finnish Trade Register on 1 January 2008. The company’s trade registration number is 2165379 – 9 and its registered office is in 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 twelfth 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 specialised in the energy use and refining of non-recyclable municipal waste on a property that it owns in Koivulahti, Mustasaari, and sells services to its shareholders on the absorption principle. The energy produced by the plant is refined into electricity and district heat with the machinery of the company’s partner, Vaasan Sähkö Oy. The plant was finished and went into operation in August 2012.
Ownership arrangements whereby Loimi-Hämeen Jätehuolto Oy became an important shareholder of the company were completed in 2019. Waste deliveries from Loimi-Hämeen Jätehuolto Oy commenced on 1 July 2020.
During 2020, Westenergy Oy Ab’s plant continued to seek high availability and high efficiency. Significant investments were made in late 2019 to purify flue gases and utilise the energy contained by it, among other measures. The year 2020 proved that the investments met the expectations set for them. The output of district heat reached a new record-high level. The purification of the flue gases of the plant improved considerably further. The amount of waste utilised was also record-high, 193,675 tonnes. The efficiency of the plant also reached a new record. Production-wise, 2020 was therefore quite a successful year. High availability and the annual maintenance turnaround were completed with excellent result and guaranteed also a financially good result.
The company’s turnover increased slightly year-on-year. This was primarily attributable to district heat volumes and a decrease in costs year-on-year. The price of electricity was lower than expected in 2020. The amount of electricity supplied fell short of expectations, although to some extent at the cost of district heat supply, so this was not financially very significant to Westenergy. The storage of heat was also experimented, with promising results, during the year.
The COVID-19 pandemic that erupted early in the year also had impacts on the operations of Westenergy. Various restrictions became commonplace during the year. The annual service stop took place in autumn 2020, when the epidemic was close to its worst in the Vaasa region. Furthermore, almost one in four of the personnel that took part in the service stop came from abroad. In fact, the planning and implementation of the service stop required extraordinary carefulness and allocation of resources. The implementation succeeded excellently, however, and no COVID-19 infections or even suspected infections emerged during the annual service stop.
The amount of bottom ash 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 processing of bottom ash and associated operating models have become increasingly efficient and the related costs have been decreased further. The processing of bottom ash was subjected to competitive bidding during 2020. The bid was won by Suomen Erityisjäte Oy, with whom an agreement on the further processing of bottom ash was signed.
The maintenance costs were below the estimate and also decreased year-on-year. The efficiently completed annual service stop contributed to this. The annual service stop of Westenergy’s plant took place in late October and lasted for 2 weeks. Due to the COVID-19 pandemic, preparations had to be made for the annual turnaround well in advance. Some purchases and agreements had to be made much in advance, even in the spring, to ensure availability.
Chemical costs were on a par with the previous year. With the flue gas scrubber, new chemicals were taken into use, but the scrubber made it possible to keep the total costs of chemicals well under control. In all, Westenergy’s variable expenses were clearly lower than the previous year and also estimates. Fixed expenses were also lower than before and below the estimate, excluding depreciation and amortisation. 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 diverse travel and assembly restrictions in Finland.
The investments made during the 2020 financial period totalled MEUR 2.19. The most significant of them was the finalisation of the flue gas scrubber investment. The scrubber investment was primarily made in 2019, and the scrubber entered into test use in November 2019. However, the final installations and commissioning only took place in 2020. With the investment, Westenergy can more efficiently respond to environmental regulations regarding flue gas treatment imposed by the EU BREF document. Moreover, the system can more efficiently utilise the heat energy in flue gases. In addition, the company made significant investments in bag filter conveyors and accessories, a new operating system, mercury analysis system and drainage water oil trap, among others. The planning of a new access road and intermediate storage area for waste also commenced during the year.
Westenergy’s major investment programme for 2019–2020 had an impact on depreciation and amortisation. Investments capitalised during the year resulted in higher depreciation and amortisation. Depreciation and amortisation increased considerably year-on-year. 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 Business Income Tax Act as of the beginning of 2022, which better matches the development of the condition of buildings.
The company’s cash position is good. During 2020, the company negotiated a new MEUR 8.5 additional financing arrangement to cover its investment needs. MEUR 1 of the new financing was withdrawn in December 2020. The aim is to make use of the rest of the agreed arrangement during 2021.
Westenergy refined its strategy further during the financial period. The company’s strategy is, to a large extent, determined by the EU’s and Finland’s goals in climate and circular economy matters. Westenergy makes and seeks future solutions together with its shareholders and any other partners. Westenergy has been a pioneer in the industry by defining a separate Green Deal package for the sector and, according to a report commissioned by the Ministry of the Environment, even nationwide industry operators are cautiously positive about it. Westenergy provides strong support to development projects and dissertations on circular economy and climate affairs. The company has closely co-operated in connection with the above-mentioned sectors with the University of Vaasa and VEBIC, among others. Based on the strategy work, the financial period saw progress in development projects associated with e.g. carbon dioxide recovery, more efficient utilisation of biofuels, heat storage, refining non-utilisable waste fractions into energy and other materials, investigating any additional capacity and building a circular economy road map and ecosystem for the waste-to-energy industry. The company has also participated actively in the development of circular economy solutions together with the municipality of Mustasaari, Vaasanseudun Kehitys Oy and its shareholders.
Westenergy Oy Ab is committed to following the quality, environmental, and occupational health and safety policies which the company has defined. Through certified systems, Westenergy Oy Ab 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 the occupational safety and occupational healthcare. Westenergy Oy Ab aims to manage environmental risks with actions and programmes defined in the environmental system. Westenergy Oy Ab reports new developments concerning quality, environment and occupational health and safety to stakeholders primarily in its annual report. Westenergy’s management system, which complies with the standards of quality (ISO 9001:2015), environment (ISO 14001:2015) and occupational health and safety (ISO 45001:2018), was evaluated by an independent external auditor in 2020.
The company employed 33 people at the beginning of the financial period and 33 people at the end of the financial period. The average number of employees during the year was 37. The salaries and remuneration paid in 2020 totalled EUR 2,266,380. 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, Teuvo Suominen and Harri Virtanen (ordinary members). The Board met ten 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, acting as the principal auditor.
There have been no other 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 shares are subject to a redemption clause in the articles of association, 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 12,038.92 be transferred to the profit and loss account as the company’s equity.
Vaasa, 25 February 2021
Westenergy Oy Ab, Board of Directors
Profit and loss statement
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).
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 21,000,000 from 8 December 2017 to 8 December 2027 with the interest rate being 3-month Euribor. The company receives 3-month Euribor and pays a fixed interest.
This interest rate swap contract hedges Westenergy’s loan of MEUR 24.6 with the final maturity date in two years. 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:
ACCOUNTING BOOKS USED IN THE FINANCIAL PERIOD
General journal, digital
General ledger, digital
Balance book, manual
Separate payroll accounting
VOUCHER TYPES USED IN THE FINANCIAL PERIOD
Handelsbanken bank account voucher type 20
Purchase invoices voucher type 71
Electronic purchase invoices voucher type 73
Cash and memo vouchers voucher type 90
VAT entries voucher type 91
Vouchers of passing on of charges voucher type 92
Based on the audit I performed, I have issued today an audit report. 8.4.2021 Kjell Berts, CPA.
To the Annual General Meeting of Westenergy Oy Ab
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
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
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.
Ernst & Young Oy
Authorized Public Accountant Firm