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 the above risks  through regular risk assessment and particularly in connection with the processing of its strategy and decisions related to business projects or investments significant for  the Group. Enersense announced in June 2024 that it is conducting strategic assessment on its non-core businesses. The completion and progress of the assessment  contains uncertainties. In addition, changes were made in covenants regarding the company’s financing package in connection with the new RCF. In the company’s  current financial position, the covenants are considered tight. Otherwise, compared with what was reported in the Board of Directors’ report for 2023, no material  changes have taken place in significant short-term risks and uncertainties.

The on-going international conflicts maintain geopolitical tensions and uncertainty about the development of the global economy. Inflation in some of the markets  relevant to Enersense continues to be high and there is a risk that old contracts in particular 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 begun to cause delays in investment decisions. This may lead to a  deterioration in the financial position of customers and further to a decrease in demand for Enersense’s services and slower-than-expected sales development. Changes in  the investment environment may have a negative impact on Enersense’s financial position, through factors such as the availability of financing, as well as value measurement of certain items in the balance sheet.

Enersense Group’s financing agreement includes financial covenants concerning the Group’s equity ratio, its 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.

Enersense’s strategic assessment regarding its non-core businesses may not lead to the desired end-result and thus, the company may not be able to execute its new  strategy. The company may fail in change management, or in its reskilling ability and speed, or due to possible insufficient resources, management, information  management, monitoring and planning, Enersense may fail in executing its key strategic development projects. 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. Challenges in availability of skilled workforce may impact Enersense’s operation, if realised.

(Half-year Financial Report, 1 August 2024)