Year 2017 went well, even better than forecast. The high utilisa-tion rate of operating activities and improved efficiency were also reflected in the company’s financial operations. The turnover in 2017 was 18,864,300 EUR. The largest part of the turnover was generated from the sale of waste incineration services to the owner companies. Another significant source of income for the company was from energy (in the form of steam) sold to the energy company, Vaasan Sähkö Oy. Last year, it was particularly pleasing that there was a considerable increase in the share of district heating, because of investments made during the pre-vious year. In addition, the company had significant sales from selling the metal separated from the bottom slag.

The company’s financial position is good. During the year, the high utilisation of unrecoverable municipal waste that was able to be efficiently burnt was almost at a record high (188,208 tonnes). Delivery volumes, especially for district heating and electricity, were good and exceeded the estimated quantities.

The prices of electricity and district heating were very much as predicted. Also, the amount of waste delivered exceeded the planned volume. The use and costs of chemicals remained moderate during the year. Cost benefits were achieved through the competitive tendering process concerning the most signifi-cant chemicals. These benefits will be fully realised in 2018. Ash treatment with our cooperation partners is developing in a good direction and the cost developments have been good. The ex-cellent utilisation rate is also reflected in maintenance costs. In this area, we succeeded particularly well during 2017. Significant savings were achieved in the maintenance costs compared to the previous year and the budget. Investments made during the financial year (289,393 EUR) relate to the renewal of the heat exchanger, the operating system data acquisition server and the emission reporting system.

The company’s cash position is still good. Westenergy Oy Ab has completely renewed its financial solution during 2017. A new 66 MEUR finance program has been agreed with Handelsbanken. The finance program includes a loan of 60 MEUR, raised during 2017. In addition, an agreement has been made to draw 6 MEUR in 2018. The company has hedged its position using 100% of its long-term foreign capital through financial instruments. This provides protection from potentially adverse changes on the fi-nancial markets. In this way, the company aims to reduce the fluctuation and financial risk of the company’s result.

During the past fiscal year, research and development activities were conducted relating to the optimisation of the waste incin-eration plant and the development of waste-quality monitor-ing. Among other areas, student theses related to these issues were commissioned. In addition, the company is involved with the University of Vaasa in the VTT (Technical Research Centre of Finland) SHARE project – an Industry Sharing Platform to promote the transition to the circular economy. The SHARE re-search project is a consortium consisting of VTT, University of Vaasa, Westenergy, HSY, Abloy, Roima and Sharetribe.

Westenergy has continued to work on a potential flue gas scrubber investment. With this investment, Westenergy Oy Ab would be able to meet stricter environmental standards. In the EU, a waste incineration BREF document will be decided and it is quite likely that this will lead to stricter emission regulations. Westenergy Oy Ab has applied for and received a new environmental permit decision, but the company itself has appealed against the deci-sion. Despite the appeal, the company can continue to operate according to the new licence. The new environmental permit has updated the plant’s operation capacity to respond to real situa-tions and the requested permission for a flue gas scrubber in-vestment. Westenergy Oy Ab has participated in environmental permit studies and observations such as monitoring the air qual-ity and ash analysis in the Vaasa region.

Westenergy is committed to its quality, environment and oc-cupational health and safety policy. With the help of the cer-tified systems, Westenergy aims at improving the quality and cost efficiency of its operations continuously. The occupational health and safety system helps recognise and control safety risks and maintain the health and safety of the personnel as well as improve the level of occupational health and safety opera-tions. With procedures and programs outlined in the environ-mental system, Westenergy controls the environmental risks. Improvements in quality, environmental matters and occupa-tional health and safety are reported to interest groups mainly in the annual report. Westenergy’s management system meets the requirements of the quality (ISO 9001:2015), environment (ISO 14001:2015) and occupational health and safety (OHSAS 18001:2008) standards. The management system has been as-sessed by an independent auditor in 2016.

At the beginning of the accounting period, there were 31 em-ployees working at Westenergy, and 34 employees at the end of the accounting period. There were on average 35 employees working at Westenergy in 2016. Salaries and fees were 2 161 588 euros in 2016. The key figures related to the personnel canbe seen in the table below.

Paavo Eloniemi (Chairman of the Board), Heikki Halla-aho (Vice-Chairman of the Board), Håkan Anttila, Paavo Hankonen, Jouko Huumarkangas, Ari Perälä, Harri Virtanen and Gunbritt Tallbäck (Board members) formed the company board during the accounting period. The company board has gathered alto-gether eight times during the accounting period.
Olli Alhoniemi has acted as the Managing Director. The account-ant of the company has been APA firm Ernst & Young Oy, princi-pal responsible auditor being Kjell Berts, APA.

In 2016, Westenergy was served with an action for damages. The case is still open. After the accounting period, there were no other significant events.

The registered capital stock of the company was 12 000 000 euros at the end of the accounting period. There are 12 000 000 shares in the company. The redemption clause of the articles of association applies to the shares according to which other share-holders have the overriding right of redemption, the company holding the secondary right, if the new owner is some other than a current owner.

Because of the absorption principle it is not relevant to compare the key figures to profit-making companies to analyse the busi-ness operations, financial status or result of the company.

According to the 3rd article of the articles of association, no div-idends are paid. The company board suggests that the profit for the period is to be transferred to the profit/loss account to the company’s capital.

Vaasa 13 April 2018

Westenergy Oy Ab, Company Board

Profit and loss statement

Balance sheet

Balance sheet

Financial statement

ACCOUNTING PRINCIPLES

Followed provisions

The financial statements have been compiled in accordance with the Government Decree on the financial statements of a small undertaking. (PMA Cap. 2 and 3)

Derivatives

The company has entered into a derivative contract to hedge interest rate risk for one of the company’s loans. Hedge ac-counting is applied to interest rate derivatives. The impact of the derivative instrument on profit is entered on an accrual basis against the cash flow from the loan interest rates protected by the agreement. Unrealized changes in value are entered to fair value reserve in equity. Deferred tax assets have been taken into account for the current value.

ACCRUAL PRINCIPLES AND METHODS

Intangible assets marked to non-current assets are valued to their acquisition cost.

The fixed assets of the company are valued to the variable and to the fixed acquisition cost related to the fixed assets project.

The acquisition cost of the fixed assets owned by the company is depreciated according to the defined plan.

The depreciation plan is based on the depreciable lifetime.

Otherwise the financial statements have been compiled by following the valuation and accrual principles and methods in the provisions for the financial statements on a small undertaking.

CAPITALISED INTERESTS PAYABLE

The undepreciated part of the capitalised interest payable in the balance sheet item intangible assets is as follows:

PERSONNEL AND COMPANY BOARD

The company employed altogether 37 people in the accounting period.

INFORMATION ON DERIVATIVES FOR HEDGING AGAINST INTEREST RATE RISK

The nominal value of the interest rate swap is MEUR 30 000 000, contract period 8.12.2017–8.12.2027, 3-month Euribor. The company recieves interest in 3-month Euribor and pays a fixed interest on the loan.

This interest rate swap hedges Westenergy Oy Ab:s loan of MEUR 30, which is due in 5 years. The terms of the loan will be reviewed in 2020.

Cash flows from the interest rate swap are entered as profit in periods that correspond to the interest flows of the hedged loan, from the balance sheet date up until 8.12.2027.

The current value of the interest rate swap on the balance sheet date:

CONTINGENT LIABILITIES AND OTHER COMMITMENTS

In the beginning of 2016, Westenergy Oy Ab was served with an action for damages at the local court. The case is still in court.

LIABILITIES THAT WILL FALL DUE LATER THAN IN FIVE YEARS

ACCOUNTING BOOKS USED IN THE ACCOUNTING PERIOD

General Journal, IT
General Ledger, IT
Balance Sheet Book, bound
Payroll Accounting as separate

VERIFICATION TYPES USED IN THE ACCOUNTING PERIOD

Handelsbanken bank account: verification type 20

Purchase accounts: verification type 71

Purchase accounts in electronic form:  verification type 73

Cash and memo vouchers:  verification type 90

VAT entries:  verification type 91

Type of verification, roll forward: verification type 92

SIGNATURES

Vaasa 13 April 2018

AUDITOR’S NOTE

Auditor’s Report has been issued today.

Vaasa 26 April 2018

REPORT ON THE AUDIT OF FINANCIAL STATEMENTS

Opinion

We have audited the financial statements of Westenergy Oy Ab (business identity code 2165379-9) for the year ended 31 December, 2017. 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

The Board of Directors and the Managing Director are re-sponsible for the preparation of financial statements that givea 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 Financial Statements Our objectives are to obtain reasonable assurance on wheth-er 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 ba-sis 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 au-dit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the compa-ny 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 re-garding, among other matters, the planned scope and timing of the audit and significant audit findings, including any sig-nificant deficiencies in internal control that we identify during our audit.

OTHER REPORTING REQUIREMENTS

Other information

The Board of Directors and the Managing Director are re-sponsible for the other information. The other information comprises information included in 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 information included in the report of the Board of Directors and, in doing so, consider whether the information included in the report of the Board of Directors 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 in the information included in the report of the Board of Directors, we are required to re-port this fact. We have nothing to report in this regard.

Vaasa 26.4.2018

Ernst & Young Oy
Authorized Public Accountant Firm

Kjell Berts
Authorized Public Accountant