Near-term risks

In its operations, Enersense is exposed to strategic, operational and financial risks as well as to external threats. Enersense seeks to protect against these risks by means of a continuous and systematic risk assessment process, for example, and by fully considering risk factors when deciding on business projects or investments that are significant for the Group. In June 2024, Enersense announced that it was conducting a strategic assessment of its non-core businesses, the completion and timing of which involve uncertainty. In addition, in connection with the new financing limit agreed in June, changes were made to the special terms (covenants) related to the financing agreement. These covenants are strict in the company’s current financial situation. Otherwise, no material changes have taken place in significant short-term risks and uncertainties, compared with what was reported in the Board of Directors’ report for 2023.

The ongoing international conflicts are maintaining geopolitical tensions and uncertainty about the development of the global economy. Inflation continues to be high in places in the markets relevant for Enersense, and in terms of old agreements in particular, there is a risk that the agreements cannot be renegotiated. Increased uncertainty about economic development and the increase in operating and financial costs caused by high inflation have had a negative impact on investment environment, and in the short term, the difficult predictability of the operating environment has started to cause delays in investment decisions. This may lead to a deterioration in customers’ financial position and further to a decrease in demand for Enersense’s services and slower-than-expected sales development. The change in the investment environment may also have a negative impact on Enersense’s financial situation through the availability of financing, for example, and on certain items valued on the balance sheet. However, inflation and interest rates have turned to decline.

Enersense Group’s financing agreement includes financial covenants regarding the Group’s equity ratio, the ratio of interest-bearing net debt to EBITDA and minimum liquidity. Breaching the covenants may give a financing provider the right to demand accelerated or immediate repayment of the loans and simultaneous cancellation of any committed but undrawn amounts as well as any amounts under guarantee facilities.

The strategic assessment related to Enersense’s non-core businesses may not lead to the desired end-result and thus, the company may not be able to implement its new strategy of focusing on its core businesses. The company may fail in change management, or in providing retraining quickly enough, or in the implementation of its key strategic development projects due to insufficient resources or inadequate management, information management, monitoring and planning, A failure in strategy implementation may also lead to weaker cash flow and insufficient funding.

The tight competitive situation in many of Enersense’s business areas and the offerings of any new competitors may cause pressure in terms of project sales prices and profitability. Materialised challenges in the availability of skilled labour may affect Enersense’s operations.

A broader description of the company’s most significant risks and uncertainties is presented on the company’s website.

The risks related to the company’s financing are explained in more detail in Note 20 “Financial risk and capital management” to the Financial Statements 2023, which is available on the company’s website. The new covenant values, agreed in June 2024, are presented in the section “Financial position and cash flow” of this business review. The values are still valid, except for the September 2024 equity ratio covenant, which was changed to 12% during the quarter.

(Q3/2024 Business Review, 28.10.2024)