Helen Group’s half-year report January–June 2024: Investments in clean energy production made the district heating business profitable and reduced customer prices
April–June 2024
- Consolidated net sales decreased year-on-year and amounted to EUR 272 million (EUR 325 million).
- Operating profit increased and amounted to EUR 20 million (EUR 12 million).
- Electricity sales decreased by 11% to 918 GWh (1,035 GWh).
- Electricity distribution in Helsinki increased by 3% to 1,018 GWh (993 GWh).
- Heat sales increased by 2% to 1,026 GWh (1,005 GWh).
- Cooling sales increased by 13% to 69 GWh (61 GWh).
January–June 2024
- Consolidated net sales decreased year-on-year and amounted to EUR 903 million (EUR 1,052 million).
- Operating profit was on a par with the comparison period at EUR 80 million (EUR 79 million).
- Electricity sales decreased by 3% to 2,408 GWh (2,486 GWh).
- Electricity distribution in Helsinki increased by 5% to 2,268 GWh (2,159 GWh).
- Heat sales increased by 9% to 3,740 GWh (3,439 GWh).
- Cooling sales increased by 14% to 105 GWh (92 GWh).
Consolidated key figures
| EUR million unless otherwise specified | Q2/2024 | Q2/2023 | Change | Q1–Q2/2024 | Q1–Q2/2023 | Change | 2023 |
|---|---|---|---|---|---|---|---|
| Net sales | 272 | 325 | -16% | 903 | 1,052 | -14% | 1,826 |
| Operating profit before depreciations (EBITDA) | 48 | 59 | -18% | 167 | 190 | -12% | 308 |
| Operating profit (EBIT) | 20 | 12 | 69% | 80 | 79 | 2% | 93 |
| % of net sales | 7% | 4% | 75% | 9% | 7% | 18% | 5% |
| Profit before taxes | 27 | 6 | 343% | 86 | 74 | 16% | 75 |
| Gross capital expenditure | 147 | 126 | 17% | 249 | 200 | 24% | 408 |
| Equity ratio, % | 55% | 57% | -4% | 54% | |||
| Return on capital employed (ROCE) LTM, % | 4% | 5% | -20% | 4% | |||
| Balance sheet total | 3,993 | 3,810 | 5% | 4,005 | |||
| Average number of employees | 786 | 731 | 8% | 757 |
Comments by CEO Olli Sirkka
The second quarter marked a turning point as Helen lowered the price of district heating for Helsinki residents by an average of over 5%. The reduction in the price was enabled by investments in clean energy production to replace fossil energy production. The lower costs of clean energy production also improve the profitability of the business. To continue the green transition of district heating, we made an investment decision during the review period on an air-to-water heat pump plant and two electric boilers to be built at the Patola production site. The development of heat pump plants in various parts of Helsinki, along with numerous electric boilers, will enable Helen to phase out coal in spring 2025. The green transition of district heating has a significant impact on our emissions, which were reduced by 20% year-on-year during the period under review.
Helen’s net sales decreased by 14% year-on-year, mainly due to the lower market price of electricity, and amounted to EUR 903 million (EUR 1,052 million). Operating profit came to EUR 80 million (EUR 79 million). Operating profit was reduced by a write-down of EUR 11 million recognised on fixed assets in relation to the closure of the Kellosaari reserve power plant and accelerated depreciation of fixed assets amounting to EUR 18 million (EUR 34 million) in relation to the discontinuation of coal-based production in Salmisaari. Helen’s reported relative profitability improved and was 9% (7%), with profitability adjusted for non-recurring items remaining unchanged at 12% (12%). Profitability in the previous year was reduced by non-recurring expenses and accelerated depreciation recognised in relation to the closure of the Hanasaari power plant.
A key development with regard to the profitability of the Group’s business units was district heating becoming profitable after years of operating at a loss. The profitability of electricity production decreased significantly year-on-year due to the decreased market price of electricity. In 2023, when the market price situation was challenging, we offered our customers Helen Smart Electricity Guarantee contracts, which were affordable to the customers but loss-making for the company. When the impact of that contract type is eliminated, the electricity sales business will return to profitability in 2024.
Our investments in clean energy will exceed EUR 600 million this year, and the green transition will not end there. We are committed to making our energy production carbon-neutral by 2030, and our aim is to phase out combustion by 2040. The achievement of the latter objective is contingent on the regulations enabling small-scale nuclear power progressing as planned. In order to promote the adoption of small-scale nuclear power, we continued the preparation of our nuclear energy programme. We explore heat-only alternatives as well as combined heat and power alternatives to ensure the achievement of a solution that will deliver the greatest benefits to Helsinki and Finland as a whole.
The electricity markets continue to show signs of stabilising, and the situation is returning to the pre-energy crisis levels. The average prices of electricity have become more moderate, but price fluctuations are here to stay. It is important to note that price volatility also creates new business opportunities for companies investing in electricity storage solutions, for example. Industries with high energy consumption and society as a whole can achieve a competitive advantage by capitalising on price fluctuations and developing their operations on the terms of renewable energy.
In May, we inaugurated the Pjelax wind farm located in the municipalities of Närpiö and Kristiinankaupunki. The wind farm will produce over 1 TWh of wind power annually. While weather-dependent wind power production increases and intensifies price volatility, it is also a precondition for the electrification of district heating and other investments in the green transition. One such investment is Helen’s first green hydrogen production plant, on which we made an investment decision during the period under review. The pilot plant will enable us to explore the preconditions for large-scale hydrogen production on the terms of weather-dependent renewable energy.
Significant events during the review period
- Helen made an investment decision on an air-to-water heat pump plant and two electric boilers with a combined heat production capacity of 100 MW to be located at the company’s existing production site in Patola. The air-to-water heat pump plant, based on new technology, will be the first of its size in the world. The heating plant complex is expected to be completed during the 2026–2027 heating season.
- The Pjelax wind farm, located in the municipalities of Närpiö and Kristiinankaupunki, was inaugurated. Consisting of 56 wind turbines, the wind farm will produce more than 1 TWh of wind power annually, which represents approximately 5% of Finland’s total wind power production. The wind farm’s other owner is Fortum Corporation with a shareholding of 60%. Helen will purchase approximately half of the wind farm’s electricity production until the end of its life cycle.
- Helen made an investment decision on a green hydrogen production plant to be built in Vuosaari, Helsinki. This is Helen’s first hydrogen project. The project will allow the company to increase its expertise to meet the needs of large-scale hydrogen production and enhance the flexibility of the entire energy system. The produced hydrogen will primarily be used through a hydrogen refuelling station to be built in connection with the plant.
- The total price of district heating was decreased by an estimated average of 5.3% in connection with the publication of energy fees for district heating. The decrease is due to investments in clean energy production that replaces fossil energy production. In connection with this, Helen also launched a new fixed-term and fixed-price district heating product that makes it possible for customers to lock the price of district heating for three years at a time.
- Helen Electricity Network Ltd published an electricity distribution network development plan, for which nearly 13,000 items of customer feedback were received. The development plan, which is published every two years, describes preparations for the future needs of the electricity network.
Outlook to the future
The electricity market is extremely sensitive to changes, which makes it very difficult to predict the future prices of electricity. The increase in prices seen in April–May has levelled off. The prices of electricity futures have fallen back to the levels seen at the beginning of April. In July–September, the market will closely follow the developments of the Nordic conditions for hydropower production. Precipitation levels in the late summer and early autumn may affect the prices for the remainder of the year and next winter.
The price fluctuations that are inherently part of the electricity market are at the core of Helen’s strategy, and the company aims to take advantage of the opportunities they present. By operating in accordance with its strategy, Helen will be increasingly able to balance fluctuations in prices in the future by increasing electricity consumption when supply is high, and reducing consumption when supply is low. Helen’s result for 2024 is expected to be better than the result for the previous year.
The uncertainty associated with the general economic situation, prolonged high inflation and high interest rates and the rise in costs are reflected in the energy sector as decreasing orders and financing-related challenges. In spite of these challenges, Finland must not lose its position as a leader in the green transition. Despite the weakening economic situation, it is extremely important to maintain the planned rate of investment so that the transition from fossil fuels to renewable and carbon-neutral energy production is achieved in a timely manner.
Helen’s investments in carbon-neutral electricity, heat and cooling production are becoming concrete as new wind and solar farms are built around Finland and existing power plant sites in Helsinki are transformed. The company’s production structure is shifting from combined heat and power generation to separate production, in which the main electricity production forms are wind, solar, hydro and nuclear power. Heat production is rapidly becoming increasingly electric. In the future, it will consist of heat pumps, electric boilers and sustainable bioenergy.
Green hydrogen will emerge as a new addition to Helen’s production palette. The preconditions for large-scale production will be investigated by means of a pilot plant. Assessments of the role of small-scale nuclear power as part of a sustainable energy system are also moving forward.
The interim report for January–September will be published on 31 October 2024.