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 itself against the risks, for example through continuous and systematic assessment and by taking risk factors into account comprehensively when deciding on business projects or investments that are significant for the Group.

Near-term risks and uncertainties

The on-going international conflicts maintain geopolitical tensions and uncertainty about the development of the global economy. Shifts in international policy may change the market environment, and the green energy transition projects may be slowed down. Inflation, on the other hand, has levelled off in the markets relevant to Enersense, close to the European Central Bank’s long-term target level.

Uncertainty about economic developments continues to have a negative impact on the investment climate. It may lead to a decline in the financial position of customers and weaker demand for Enersense’s services. The change in the investment environment may also have a negative impact on Enersense’s financial situation, for example through the availability of financing and value measurement of certain items in the balance sheet.

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. Challenges in availability of skilled workforce may impact Enersense’s operation, if realised.

Strategic risks

In June 2024, Enersense announced that it would conduct strategic assessments of its non-core businesses, the implementation and timing of which are subject to uncertainty. The assessment may not lead to the desired outcome and the company will not be able to implement its new strategic focus on its core businesses. The company may fail to manage change or to re-train sufficiently quickly or to implement its key strategic development projects due to insufficient resources or inadequate management, information management, monitoring and planning. Strategy failure can also lead to reduced cash flow and insufficient funding.

The company aims to digitalise its business where appropriate and to adopt operational efficiency tools and practices. As digitalisation accelerates, failure or wrong choices in adopting new tools and practices may slow down the business and its development or reduce the relative efficiency and competitiveness of operations.

Unless Enersense is able to recruit, train, motivate and retain qualified staff, it may be unable to compete effectively and fully implement its strategy.

Operational risks

Enersense’s customers are typically owners of construction or industrial projects, developers, main contractors or suppliers, with whom Enersense usually implements a project, service or framework contract. The company often enters into project specific contracts, which involve uncertainty in terms of successful competitive bidding. This makes it difficult to make reliable estimates of the company’s business performance and financial position over a period of time longer than the order backlog. Correspondingly, framework agreements do not guarantee that the company is successful in the tendering for individual deliveries falling within the scope of the framework agreement. The profitability of large fixed-price projects requires accurate pricing estimates and project management. In addition, changes in regulatory requirements and restrictions and the associated uncertainty can have a material impact, particularly on the customer base in the energy business.

Enersense serves its customers throughout the life cycle of projects, for example with operation, maintenance and repair services. For long-term service contracts, operational efficiency is the key; it has a significant impact on the profitability of the contracts.

General economic uncertainty may reduce customers’ willingness to invest and can affect projects already in Enersense’s backlog, which may be subject to delays or interruptions. It may also lead to a deterioration in the financial position of Enersense’s customers or suppliers, which, if realised, could result in losses and other negative consequences for the company.

Enersense has some large key customers whose purchasing behaviour has a significant impact on the performance of the business. If one of these key customers were to switch their purchases from Enersense to its competitors, or drastically changed their operating model, or if projects of importance to the company were to be terminated, interrupted or scaled down unexpectedly, the company’s ability to find a replacement customer volume would be limited in the short term.

Guarantees

Enersense’s customers typically require guarantees for, e.g. work, deliveries and warranty periods. Granting such guarantees to a customer is often a prerequisite for Enersense to be able to bid for a new project. However, the guarantee arrangements do not oblige the issuer; the issuer decides on each guarantee individually. For example, any previous negligence and failures by Enersense or, in particular, a deterioration of Enersense’s solvency or financial position could lead to Enersense not being granted the guarantees it needs for executing new projects.

Financing

Enersense Group’s financing package includes covenants on the Group’s equity ratio, the ratio of interestbearing net debt to EBITDA, and minimum liquidity. A breach of the covenants may entitle the financier to demand accelerated or immediate repayment of the loans and simultaneously cancel any amounts committed but not drawn by the financier and any amounts under the guarantee arrangements. Sufficiency of funding and success of funding negotiations are key factors for the continuity of Enersense’s operations. A more detailed explanation of the risks associated with the company’s financing is provided in Note 20 Financial risk and capital management to the Financial Statements to be published on 26 March 2025.

Partners

Enersense collaborates with subcontractors and other partners during the various phases of projects and services. Typically, the outsourcing or subcontracting includes material deliveries, subcontracting (e.g. civil engineering), provision of resources and deliveries of equipment that Enersense does not or cannot provide. Enersense may fail in evaluating and choosing subcontractors or may be required to accept partially
unfavourable contract terms to ensure the acquisition of such services. Subcontractors may not be able to deliver on time or to the level, cost structure or quality expected by Enersense, or may otherwise perform inadequately or in violation of laws or regulations. Enersense’s subcontractors may also cease to provide services to Enersense due to their inability or unwillingness to do so, or they may increase prices significantly. Disruptions affecting Enersense, such as delays or terminations of agreements or the inability of subcontractors to provide services within the specified time or at an acceptable cost, can lead to disputes regarding customer claims for compensation for any damages Enersense may have caused.

The procurement of services and materials is an essential part of Enersense’s business. Enersense deals only with reputable and reliable partners. Subcontractors and other partners are subject to background and business checks prior to entering into cooperation. Failure to enforce and monitor the legality and
responsibility requirements of subcontractors and material suppliers and to address irregularities could expose the company to additional contractual liabilities or even result in fines.

Hazard risks

Enersense’s hazard and continuity risks are mainly related to people, property and IT systems. Although the company has protected its operations and property by means of normal insurance, the materialisation of hazard risks may result in damage to people and property or business. In addition, the reliability and functionality of IT systems are essential for the continuity of Enersense’s operations. Prolonged interruptions in key systems could limit Enersense’s opportunities to operate profitably and efficiently. Cyberthreats can also pose threats to Enersense’s data resources.

Disputes

The Group companies have ongoing legal disputes and disagreements, some of which are in progress in general or administrative courts or in arbitration in Finland and abroad. Disputes are typically related to claims against Enersense for alleged defective performance, delays or damages caused to customers, particularly in project activities, or to claims made by Enersense against its suppliers or customers. The outcome of claims, disputes and legal processes is difficult to predict. The company has assessed the potential impacts of the disputes, and has recorded provisions based on these assessments.

(Financial Statement Bulletin 2024, 28.2.2025