Helen’s interim report: Strategy implementation in exceptional circumstances

January–March 2022

- The Group’s net turnover grew year on year, totalling EUR 508 million (EUR 408 million).
- Operating profit decreased and was EUR 45 million (EUR 63 million).
- Heat sales were down by 11% on the previous year, standing at 2,536 GWh (2,856 GWh).
- Total electricity sales fell by 33% to 1,500 GWh (2,231 GWh).
- Cooling sales decreased by 14% to 24 GWh (28 GWh).
- Electricity distribution in Helsinki remained unchanged at 1,227 GWh (1,227 GWh).

Helen group's key figures

CEO Juha-Pekka Weckström comments:

- The first quarter of 2022 was exceptional in many respects. Russia’s attack on Ukraine changed not only the world, but also the energy market that was already in the middle of a transition. However, we continued our work according to the strategy and, as a company, we have a clear direction towards carbon-neutral production that also increases our independence from imported energy. Our pace of investment in carbon-neutral and emission-free energy remained at a high level throughout the quarter as planned. We decided on a significant 165 MW wind power investment with Ålandsbanken Wind Power Fund.

We launched on the market the Energy Renovation concept and our upgraded range of heat-related products and services, which introduces geothermal heat as a main heating system in addition to district heat. The value of offers on geothermal heat grew well, amounting to EUR 21 million. In addition, the number of our customers grew in all segments during the first quarter. This shows that our products are competitive and create value for our customers.

Net sales in the first quarter grew to EUR 508 million due to high prices of energy commodities and the market prices of electricity, says Helen’s CEO Juha-Pekka Weckström.

Key events in January-March

-  We decided to procure coal from elsewhere than Russia for the time being. We will meet our contractual obligations on coal contracts that will expire soon, but we will not sign new contracts on Russian coal.

- All 20 wind turbines of the Lakiakangas 3 wind farm, with a total output of 86 MW, started production use.
- Together with Ålandsbanken Wind Power Fund, we acquired the Kalistanneva wind farm near Kurikka. The wind farm will have 30 wind turbines, and its total capacity is 165 MW. The wind farm is estimated to be in full operation in January 2025.
- The construction of the joint venture on wind power between Helen and Fortum started. The joint venture consists of two wind farms and a total of 56 wind turbines with an estimated annual electricity production of about 1.1 TWh. The wind farm will be built in the vicinity of Närpiö and Kristiinankaupunki. The wind farm is estimated to be commissioned in the second quarter of 2024 at the latest.

- We launched the Energy Renovation concept, which is Helen’s turnkey service for housing cooperatives to cut energy costs in heating, improve living comfort, acquire electric vehicle charging points and get solar power plants for housing companies.
- We launched the upgraded heat range for housing cooperatives. With the new range, we offer our customers geothermal heat as a main heating system in addition to district heat, and even more solutions that increase heating efficiency, such as exhaust air heat pumps and energy renovations.

- The pre-operational testing phase at Olkiluoto 3 started in March.
- In the seawater heat recovery project, we launched public procurement concerning the selection of an alliance partner for the seawater system. The objective of the competitive tendering is to find a world-class construction partner to form an alliance that develops and implements the project phase of the seawater system and bring it to completion.

- Together with the entire branch, we joined Fingrid’s Datahub as planned on 21 February 2022. This was preceded by extensive development work lasting about two years.
- We introduced a new customer system in terms of our heat customers.
- We drew up an agreement with Hesburger on the implementation of four high power charging stations for electric vehicles.
- We published our annual report for 2021 and our updated sustainability report.

Events after the financial period

On 4 April 2022, we told that we will start a process of investigating on procuring operation and maintenance tasks as a service. Moving to a service procurement operating model is part of the adjustment measures related to the closing of the Hanasaari power plant and the Salmisaari coal-fired power plant. The study is also a step forward in the green transition in accordance with the strategy.

On 5 April 2022, we reported that we have made a further investment in clean and emission-free energy. The amount of electricity produced with wind power will increase further at Helen when Suomen Hyötytuuli Oy made a decision to invest in the construction of the Oosinselkä wind farm in Pori and its neighbouring municipality Eurajoki. Our wholly owned subsidiary Oy Mankala Ab is one of the shareholders of Hyötytuuli, and Mankala has a 25 per cent share in the Oosinselkä wind farm. A total of 15 wind turbines with a total output of 93 MW will be built in the Oosinselkä wind farm.

12 April 2022: The EU member states have accepted new import sanctions on Russian coal. This import ban on coal imposed by the EU entered into force on 9 April 2022, but it will not be applied to contracts signed before 9 April 2022 until from 10 August 2022. Helen endorses the sanctions, and as a company we comply with the EU’s effective sanctions in relation to the war in Ukraine.

Outlook

Our significant change projects and carbon-neutral production projects progressed as planned. We will also continue our investments in order to accelerate the change to carbon-neutral electricity and heat production. Our production structure will change from combined heat and power production to separate production as the co-generation of Hanasaari and Salmisaari ends. The main forms of separate production are wind, hydro and nuclear power. The Salmisaari area will continue to be used in energy production.

The construction of our joint project of two wind farms in Ostrobothnia with Fortum continues, and the Kalistanneva wind farm we own together with Ålandsbanken Wind Power Fund is starting to take shape. We aim to continue wind power investments.

We will promote the utilisation of waste heat. The role of solar energy is growing, and we aim to make further investments in solar energy. We will put into service a heat pump that utilises the internal cooling water circulation and waste heat of the Vuosaari power plants as well as the heat of seawater. The seventh heat pump at Katri Vala is making progress and, in terms of the Mustikkamaa cavern heat accumulator, we have reached the heating phase that will be implemented in accordance with the situation in the energy market. Hydrogen will have an important role in the carbon-neutral society of the future, and we are planning hydrogen-related cooperation contracts.

The war in Ukraine is further accelerating the energy transition, underlining the need for energy self-sufficiency. Helen will replace some of its current production with diverse technological solutions, for example, electric boilers, air-to-water heat pumps, heat recovery from data centres, and various geothermal heat solutions. Helen will increase cooperation in heat procurement with neighbouring municipalities. Helen sees that small modular reactors (SMR) are a noteworthy solution for an energy solution of the future. We aim to make it possible together with the authorities (the Ministry of Economic Affairs and Employment, the Radiation and Nuclear Safety Authority STUK) to reform legislation on the nuclear energy sector and the related licensing, and to accelerate the reform.

Our vision is to be the most customer-focused energy company in the market. In order to reach this target, we continue our efforts to improve the customer experience. The vision aiming for customer-orientation requires focusing on digital customer encounters and the digitalisation of the solution business.

We continue to highlight our reformed and extensive range of heat-related products and services. With the new range, we offer our customers geothermal heat as a main heating system in addition to district heat, and even more solutions that increase heating efficiency, such as exhaust air heat pumps and energy renovations.

We expect market instability to continue at least until the end of the war in Ukraine. We are preparing for the end of fuel procurement from Russia. Fuel procurement from new channels will incur increasing costs. The challenging market conditions further accelerate price fluctuations. This will continue to undermine the predictability of the energy markets. The situation of the electricity retail market will remain challenging in the changing market conditions. It can be said that the risks in the energy industry in general will increase further in the future. Helen’s profitability will be undermined further by the high costs of emission allowances and fuels in 2022. For this reason, it is challenging to carry on a profitable district heating business. We have already in the past predicted that the result for 2022 will not reach the previous year’s level. In addition, the current market situation has considerably increased uncertainty with regard to the result.