Annual report 1 January–31 December 2022
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 fourteenth 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 plant was completed and went into operation in August 2012. The energy produced at the plant is converted into electricity and district heat using the machinery of the company’s partner, Vaasan Sähkö Oy.
During 2022, Westenergy Ltd’s plant continued to maintain high availability. The maintenance shutdown was arranged effectively – even slightly ahead of the schedule – and all planned work was completed. In general, the maintenance costs were well under control during the year. Westenergy’s plant operated successfully throughout the year. Availability was 100%, with the exception of the shutdown period. These trustworthy operations were naturally a prerequisite for the reliability of energy deliveries. The energy deliveries were well within the estimate. During the year, we managed to efficiently utilise waste heat storage together with Vaasan Sähkö. All of this was important for the company in terms of economy.
Energy prices fluctuated strongly during the year. Revenue from the sale of energy was considerably higher than in previous years. Gate fees were lower than before during the year. Westenergy’s turnover fell from last year. It must be noted that year 2021 was an exceptional year in Westenergy’s history, so making comparisons is challenging. When comparing with earlier years, the turnover remains at the same level.
At the beginning of 2022, the COVID-19 pandemic continued to limit operations and cause uncertainty. Westenergy survived the pandemic without any significant problems. Absences due to illness grew slightly in 2022. Chemical prices have also rocketed due to the global crises caused by the COVID-19 pandemic and the war in Ukraine. Westenergy’s chemical prices increased considerably during the past year. But also in this regard, the excellent operational capacity of the plant managed to keep the costs tolerable. Specific consumption of chemicals was kept under control and, thereby, the cost effects were limited.
Bottom slag was generated and processed as in previous years. The work we have done together with our partners Lakeuden Etappi Oy and Suomen Erityisjäte Oy in the processing of slag further has yielded results over the years. The treatment of bottom slag and the processing methods have become more effective and the operations are balanced, cost effective and predictable. Suomen Erityisjäte Oy has been responsible for the treatment of bottom slag during the financial period.
The company’s investments made during the 2022 financial period totalled MEUR 2.4. The new storage and road area was the biggest investment in 2022. This project included the new temporary waste storage area, warehouse, new access route, scales with buildings and access control arrangements. The investment was completed and commissioned during the summer this year. Other investments implemented during the period included, for example, the change in the property automation system.
The investments made have increased amortisation for their part in 2021–2022. However, amortisation as a whole has decreased year-on-year, as long-term amortisation (10 years) has now been completed. The company’s Board has also decided on a new depreciation and amortisation programme. The depreciation and amortisation programme transitioned to the maximum depreciation on all buildings and structures allowed by the Act on the Taxation of Business Income as of the beginning of 2022. This matches better with 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. It was not necessary for the company to take out more loan for investments in 2022. During the year, a significant part of Westenergy Ltd’s financing was renewed.
Westenergy has finetuned its strategy work during the 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. These negotiations are still under way. 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 and more efficient utilisation of biofuels.
In 2022, Westenergy launched the Energy Sampo CCU project together with several partners. In this project, the aim is to design and build a new next-generation synthetic methane (LSNG) production facility in connection of Westenergy’s waste energy plant. Public funding is applied for the projects and, once it is granted, the investment decision for the project is expected to be confirmed in 2023. The Energy Sampo CCU project supports Finland’s journey towards a carbon-neutral future in accordance with the EU’s Fit for 55 targets. The project promotes the phasing out of imported fossil fuels, and is a step towards the carbon-neutral district heat solution in the Vaasa region. In Westenergy’s strategy, this project is the first major step towards carbon neutrality.
Westenergy is committed to following the quality, environmental and occupational health and safety policies that the company has defined. Through certified systems, Westenergy 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 aims at managing environmental risks with actions and programmes defined in the environmental system. Westenergy 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 2022.
The company employed 34 people at the beginning of the financial period and 37 people at the end of the financial period. The average number of employees during the year was 36. The salaries and remuneration paid in 2022 totalled EUR 2,609,547. The following table includes some key figures related to the personnel.
In the past financial period, the Board of Directors consisted of Paavo Eloniemi (Chair), Ragnvald Blomfeldt (Vice-Chair), Paavo Hankonen, Antti-Kalle Levijoki (until 16 June 2022), Jouko Huumarkangas (from 16 June 2022), Teuvo Suominen and Harri Virtanen.
An Extraordinary General Meeting was held on 25 November 2022. According to the valid Articles of Association, the term of members of the Board end at the end of the second General Meeting following the election, so the shareholders decided to re-elect the aforementioned members of the Board, i.e. Paavo Eloniemi (Chair), Ragnvald Blomfeldt (Vice-Chair), Paavo Hankonen, Jouko Huumarkangas, Teuvo Suominen and Harri Virtanen, without convening on 12 December 2022.
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 audit firm Ernst & Young Oy with Kristian Berg, CPA, acting as the principal auditor.
The Extraordinary General Meeting held on 25 November 2022 authorised the Board to decide on a share issue directed at Ab Ekorosk Oy, in which a maximum of 1,100,000 shares will be issued. On 15 December 2022, Westenergy Ltd’s Board decided on the directed share issue, in which 1,062,819 new shares in the company were offered to Ab Ekorosk Oy, in deviation from the shareholders’ pre-emptive rights, for a subscription price of EUR 2.48774 per share, i.e. a total of EUR 2,644,018. The directed share issue was based on weighty financial reasons as provided in Chapter 9 section 4(1) of the Limited Liability Companies Act, with the aim of strengthening the company’s financial standing and securing sufficient supply of raw materials. The subscription period was 1–31 January 2023. All shares were subscribed and paid up by 17 January 2023. Of the share subscription price, EUR 1,062,819 is recognised in share capital and EUR 1,581,199 in reserve for invested unrestricted equity.
The following table shows the number of shares and share of ownership by owner after the share issue arrangements.
An Extraordinary General Meeting convened on 31 January 2023. A new member was elected to Westenergy Ltd’s Board in the General Meeting. The new member of the Board is Stefan Storholm. The General Meeting also made a few changes to the company’s Articles of Association.
The objective of the ownership arrangements is to strengthen the ownership base of Westenergy Ltd, which would guarantee a sufficient waste supply until a distant future and enable Westenergy to provide cost-effective services to its shareholders. Until now, the current shareholders of Westenergy have acquired non-recyclable waste for energy production also outside their own operating areas through contractual arrangements.
With the ownership arrangements, the shareholders’ agreements and the supply agreements, which determine the relationship and operations between the shareholders and the company, were updated accordingly. The share of ownership still directly correlates with the supply quotas of each shareholder.
There have been no significant events after the end of the financial period.
The company’s registered share capital was EUR 15,903,873 and there were 15,903,873 shares in the company at the end of the financial period. 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 result for the period of EUR -9,799.71 be transferred to the profit and loss account as the company’s equity.
Vaasa, 23 February 2023
Westenergy Ltd, Company Board
Profit and loss statement
The financial statements are prepared in accordance with the valid Accounting Act.
The company has signed a derivate contract in order to manage the volatility of interest rates. Hedge accounting is applied to the derivates. 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
Tangible and intangible assets recorded in the fixed assets of the company are valued at the historical cost of acquisition.
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.
Valuation of inventories
Inventories are valued at the historical cost of acquisition in accordance with the FIFO principle.
The pension cover of the company’s employees is managed by an external pension insurance company. Pension costs are recognised as expenses in the year of accrual.
Comparability of the result
The results for this and the previous period are comparable.
DETAILS ON THE DERIVATIVE CONTRACTS THAT HEDGE AGAINST INTEREST RATE RISK
The notional amount of the interest rate swap contract is EUR 15,000,000 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 Ltd’s loan of MEUR 15.
The interest rate swap cash flows 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 BOARD OF DIRECTORS’ PROPOSAL ON THE USE OF THE NON-RESTRICTED EQUITY
The Board proposes that no dividends will be paid.
ACCOUNTING BOOKS USED IN THE FINANCIAL PERIOD
Financial statements, Digital in the archive for documents
Balance sheet specifications, Digital in the archive for documents
Chart of accounts and balance list, Digital in the archive for documents
General journal, Digital in the archive for documents
General ledger, Digital in the archive for documents
VOUCHER TYPES AND STORING METHODS
ACC – Matching Digital in the Fennoa system
BA1 – Bank account 1 Digital in the Fennoa system
GL – Memo Digital in the Fennoa system
IN – Sales invoice Digital in the Fennoa system
OLD – Import Digital in the Fennoa system
PU – Purchase invoice Digital in the Fennoa system
TI – Travel expense report Digital in the Fennoa system
VAT – Value added tax Digital in the Fennoa system
Chairman of the Board
Based on the audit I performed, I have issued an audit report today.
Kristian Berg, CGR.
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, 2022. 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