Vuosikertomus 2015
Vuosikertomus 2015

Report of the board of directors

Operating environment and market development

The revival of the world trade was clearly slower than expected in 2015. The monetary measures adopted since mid 2014 in Europe have created better possibilities to tackle the disturbances in the global economy and supported growth in the eurozone. Economic growth in Finland fell clearly behind the growth in the eurozone, and at the moment, the Finnish economy runs on borrowed money. The financial position of the Finnish public economy has showed a deficit for six years running. For several years, the energy industry has been the leading investor in the industrial sector in Finland, although the significantly reduced market price of electricity has postponed decisions on planned investments in production. It is estimated that the share of energy investments of the total investments in the industrial sector was more than 30 percent in 2015.

Last year, electricity consumption in Finland amounted to 82.5 terawatt hours (TWh), which was 1.1 percent less than in the previous year, mainly because record warm weather. The year 2015 was the warmest in the Finnish history of temperature measurement. Industrial electricity consumption stood at 38.9 TWh, a decrease of 0.9 percent, and the rest of the consumption at 41.5 TWh, a decrease of about 1.0 percent from the previous year.

A total of 19.8 percent of the electricity consumption was covered by net imports and 80.2 percent by Finland’s own production. The exceptionally good hydro balance in the Nordic countries allowed the high level of net imports. Most of the imported electricity came from Sweden, which raised its electricity exports to a new record. In 2015, most of the electricity exported by Finland went to Estonia, a total of 5.0 TWh. In 2015, a total of 79 percent of the electricity generated in Finland (66.2 TWh) was greenhouse gas emission free, i.e. carbon dioxide neutral, which was a new record again. Also with regard to hydroelectric power, 2015 was a record year. Electricity production increased to nearly 17 TWh, which covered one fifth of the electricity demand. The joint production of electricity and heat covered 25 percent of the consumption, nuclear power 27 percent, hydroelectric power 20 percent, and coal and other condensing power about 5 percent. The share of wind power was almost three percent (2.3 TWh), an increase of 110 percent from the previous year.

The wholesale prices of electricity in the Nordic market remained at a low level in 2015. In Finland, the price of market electricity was almost 18 percent lower than the average price in 2014. The low prices have been due to increase in the production of subsidised renewable energy, decrease in the prices of fuels, reduced consumption of electricity owing to warm weather and oversupply of electricity owing to the good hydro balance. The Finnish regional price was continuously higher than the system price. In 2015, the average regional price in Finland was more than 40 percent higher than the average system price. This was due to restricted transmission capacity from the west and the scarcity of imports from Russia.

The third regulation period of the Finnish Energy Authority for electricity distribution ended on 31 December 2015. Towards the end of 2015, the Energy Authority confirmed the methods concerning the determination of return in network operations for the fourth (2016-2019) and fifth (2020-2023) regulation periods. The Energy Authority monitors the overall reasonableness of the returns of the distribution system operators from network operations and the fees charged for distribution services during the whole regulation period.

Operations of Pohjois-Karjalan Sähkö Oy

In 2015, electricity consumption in Pohjois-Karjalan Sähkö Oy’s distribution concession area was 1 1086 million kilowatt hours, which was 1.7 percent less than in the previous year. This was mainly due to warmer than normal weather conditions. The effect of the warm periods on electricity consumption in the winter months was especially significant.

The Group’s turnover in 2015 was 109.1 million euro, a decrease of about seven percent from the previous year.

The turnover from electricity sales was 57.9 million euro, a fall of about 10 percent from the previous year. The reduced turnover was mainly due to decreased sales prices. The increase in heavily subsidised renewable energy and the plunge in fuel prices have practically halved wholesale electricity prices in Finland in the 2010s. In spite of the challenges in the wholesale market, we succeeded in adjusting our operations in such a manner that we met our targets for the gross margin on sales and operating profit in electricity sales.

The production volumes of our own hydropower plants amounted to 212 million kilowatt hours, an increase of 14 percent on the previous year. The realised production was about 10 % larger than in an average year and covered about 20% of the electricity consumed in our concession area. At the Vihtakoski power plant, PKS made a significant environmental investment by building an oil separation system for cooling water to minimise the danger of oil spills into the lower course of the river. Various dam repairs and other minor modernisations were also made at different power plants.

Pohjois-Karjalan Sähkö Oy is a shareholder of Kymppivoima Oy, through which Pohjois-Karjalan Sähkö Oy owns production shares in various power companies, such as Pohjolan Voima Oy, Etelä-Pohjanmaan Voima Oy and Teollisuuden Voima Plc. These production shares provided Pohjois-Karjalan Sähkö Oy with a total of about 142 million kilowatt hours of electricity in 2015. Together with our own hydropower production, this production volume accounted for 30 percent of the total amount of the electricity we sold. The volume of our own electricity production has varied from 350 to 600 million kilowatt hours, depending on the hydro balance and the wholesale market prices of electricity.

During the financial period, we sold 281 new electricity distribution connections, which is about 12 percent less than in the year before. The number of new connections sold to leisure homes fell by 30 per cent, and the number of connections sold to permanent residences by about 2 percent. The income from connection fees stood at EUR 1.5 million. At the end of the year, the number of metering points was 88 578.

During the first third of the year, crown snow load caused wide disturbances in electricity distribution. Besides, heavy storms caused disturbances in electricity distribution in the early part of the summer and in the autumn. Especially the “Valio” storm of 2 October 2015 lasted long and caused wide damages. Despite prompt fault repairs, the standard compensations payable to customers in case of power breaks of more than 12 hours amounted to about 1.8 million euro.

The installation of remote monitored smart electricity meters for all our customers was completed by the end of 2015. This has allowed efficient utilisation of metering, alarm and electricity quality related data in invoicing, contracts, imbalance settlements and establishment of electrical faults. Towards the end of 2015, PKS launched “OmaPKS” electronic service that utilises the electricity consumption data available from the smart meters.

The construction of the weatherproof distribution network required by the Electricity Market Act proceeded as planned during 2015. In several built-up areas, PKS replaced a total of 112 kilometres of medium voltage overhead cables with underground cabling and built 18 new park transformer substations. In sparsely populated areas, PKS improved the security of electricity supply in a 72 kilometre long line section by transferring medium voltage networks to road sides and cabling branch lines with a 1000 volt line structure. In addition, the security of supply was improved in power line corridors in forest areas by clearing and pruning trees in a total of 2 337 kilometres of medium and low voltage power line corridors, of which 230 kilometres of near forest zone sections were brought to a production forest level, and a weatherproof near forest zone of 415 kilometres was created through strip felling.

Turnover and result

The Group’s turnover amounted to EUR 109.1 (2014: 117.4 and 2013: 119.0) million. The turnover of the parent company was EUR 57.9 (2014: 64.2 and 2013: 70.5) million. The Group’s turnover decreased by EUR 8.3 million and the turnover of the parent company by EUR 6.3 million from the previous year.

The Group’s operating profit was EUR 11.9 (2014: 17.9 and 2013: 16.3) million. The operating profit of the parent company amounted to EUR 3.0 (2014: 5.7 and 2013: 7.2) million. The EBIT-% of the Group was 10.9 (2014: 15.2 and 2013: 13.6). The corresponding figures of the parent company were 5.2 (2014: 8.9 and 2013: 10.4). The profit of the Group was EUR 9.0 (2014: 14.1 and 2013: 15.4) million. The corresponding figures of parent company were EUR 1. 4 (2014: 1.4 and 2013: 1.7) million. The Return on Investment (ROI) in the Group was 4.6 (2014: 7.6 and 2013: 7.4) percent and 1.7 (2014: 2.5 and 2013: 3.4) percent in the parent company. The Return on Equity (ROE) in the Group was 3.8 (2014: 6.1 and 2013: 7.1) percent and 1.7 (2014: 2.2 and 2013:3.2) percent in the parent company.

Investments and financing

The Group’s net investments amounted to EUR 28.1 (2014: 29.4 and 2013: 33.2) million. The corresponding figures of the parent company were EUR 31.2 (2014: 32.6 and 2013: 37.5) million. Of the parent company’s total investments, the investments in distribution networks amounted to EUR 28.2 (2014: 27.5 and 2013: 36.5) million. Of the total network investments, the construction of new electricity distribution connections amounted to EUR 1.9 million. Investments in substations amounted to EUR 1.7 million, and the rest, EUR 24.6 million, was invested in the renovation of the distribution network.

At the end of the financial period, the Group’s interest-bearing debts stood at EUR 34.0 (2014: 6.3 and 2013: 7.5) million. The corresponding figures of the parent company were EUR 34.0 (2014: 6.3 and 2013: 7.5) million. With the connection fees included in the shareholders’ equity, the Group’s equity ratio was 73.7 (2014: 83.4 and 2013: 82.0) percent and the equity ratio of the parent company 78.5 (2014: 87.3 and 2013: 86.0) percent. With the connection fees treated as liabilities, the corresponding figures were 40.5 (2014: 45.4 and 2013: 43.3) percent for the Group and 48.2 (2014: 52.4 and 2013: 50.7) percent for the parent company.

Group structure

On 31 December 2015, the Pohjois-Karjalan Sähkö Group comprised the parent company Pohjois-Karjalan Sähkö Oy and its subsidiaries Kuurnan Voima Oy (parent company holding 89 %), Enerke Oy (100%), PKS Sähkönsiirto Oy (100 %), and Enerke Oy’s fully owned subsidiary SLT-Consults Oy.

Shares and ownership

The company has one series of shares. There are no special terms related to the shares, and all shares have an equal right to dividends and company assets. On 31 December 2015, the ownership of the company was divided between various owner groups as follows:

Owner entities Number Number of Shares Holding (%)
Pohjois-Karjalan Energiaholding Oy 1 947 759 54,1
Municipalities 19 793 141 45,3
Government 1 8 000 0,5
Companies 2 1 100 0,1
Total 23 1 750 000 100,0

Annual general meeting

The Annual General Meeting was held on 28 April 2015. The Meeting decided, in accordance with the proposal of the Board of Directors, to distribute a dividend of EUR 2.62 per share, totalling EUR 4 585 000. The Annual General Meeting re-elected the following outgoing Board members for the following three-year term: Pauli Bau from Ilomantsi and Matti Timonen from Nurmes.


In compliance with the Limited Liability Companies Act, the Annual General Meeting elects the Board of Directors of the company. In the reporting period, the Board of Directors of the company consisted of the following members: Jukka Kankkunen, Farmer, Chairman; Pertti Turunen, Industrial Employee, Deputy Chairman; Pauli Bau Municipal Councillor, Member; Hilkka Hiltunen, Municipal Councillor, Member; Markku Kauppinen, D.Soc.Sc.,M.Sc.(Econ & Bus. Adm.), Member; Pirjo Smolander, Physiotherapist, Member; Matti Timonen, Farmer, Member. The Managing Director of the company was Jorma Korhonen, M.Sc. (Eng.).


The auditor elected by the Annual General Meeting was Idman Vilén Grant Thornton Oy, Public Accountants, with Matti Pettersson, MSc (Econ), Authorised Public Accountant, as the principal auditor.

Key risks

The company has cost price based liability for the costs of the power plant holdings owned through Kymppivoima Oy. In addition to the production costs of the coal-fired power plants and the cost of market-price electricity, the profitability of the production of coal-fired power plants is also affected by the price of the emission allowance. Major fluctuations in emission allowance prices combined with the price fluctuations in market-price electricity have a fundamental impact on the profitability of power plants. In the past few years, the wholesale price of electricity has plunged, which has significantly weakened the profitability of coal-fired power plants. As a consequence, several coal-fired power plants have been run down, and in 2015, PKS’s power plant holdings were reduced to less than half of the previous holdings.

The company has hedged and will hedge itself against above price fluctuations through active utilisation of price derivatives in accordance with the hedging strategy included in the Risk Management Manual approved by the Board of Directors.

Massive storm damages to the power network may result in significant standard compensations to customers if the damages are so extensive that it is not possible to repair them within a reasonable time. The company has protected itself against this risk by keeping power line corridors clear, by thinning near forest zones, by making, where possible, power line corridors weatherproof, and by ensuring the availability of fault repair capacity in such a manner that the full fault repair capacity of Enerke Oy together with an extensive network of subcontractors is available whenever necessary. The office personnel of the network company also participate in dealing with fault situations in accordance with proactive operating models practised in advance. The economic effects of the standard compensation risk have also been limited by taking out an insurance policy.


In 2015, the Group had an average of 253 permanent employees (276 in 2014 and 284 in 2013). The number of permanent employees was 266 at the beginning and 240 at the end of the financial period. In the Group, the total wages, salaries, fees and fringe benefits paid were as follows: Board members 60 530.00 euro, Managing Directors and their deputies 534 382.39 euro and the rest of the employees 11 971 914.13 euro.

In 2015, the parent company had an average of 62 permanent employees (64 in 2014 and 64 in 2013). The number of permanent employees was 64 at the beginning and 59 at the end of the financial period. In the parent company, the total wages, salaries, fees and fringe benefits paid were as follows: Board members 44 260.00 euro, Managing Director and his deputy 237 977.84 euro and the rest of the employees 3 022 798.70 euro.


The goal of the environmental system of Pohjois-Karjalan Sähkö Oy is to include the Group’s environmental goals in the operating plans and practical work. Apart from the Group, the company’s subcontractors and partners also comply with the regulations of PKS’s environmental management system. Each business unit is separately responsible for planning and implementing the measures related to the environmental management system. The implementation of the measures is reviewed annually when the Group’s operating plans are made. The PKS Group’s environmental programme will be revised during 2016.

Environtmental goals of Pohjois-Karjalan Sähkö Oy

  • To prevent environmental accidents through systematic maintenance, mapping of high-risk objects and updating of contingency plans.
  • To take environmental impacts into account in all activities, e.g. in purchases related to network materials, real estate and equipment.
  • To improve the efficiency of the company’s own operating processes, e.g. in logistics and real estate management.
  • To support the energy saving activities of the customers through communications and by providing services that significantly help them improve their energy use habits.
  • To minimise environmental impacts at the network planning and construction stages.

PKS was accepted to the Biosphere Reserve collaboration network

In December 2015, Pohjois-Karjalan Sähkö Oy was accepted as a new partner to the North Karelia Biosphere Reserve, which coordinates sustainable development principles and activities in the area. The partners are entitled to use UNESCO logos.

The partnership is based on the preparedness of the company to comply with the principles of sustainable development and commit itself to developing its operations in accordance with them. The Biosphere Reserve is currently preparing a province-wide sustainable lifestyle project. The project is also a response to the challenges of the Paris Climate Agreement. One of the major objectives of the biosphere reserve system is to develop regional solutions to environmental problems.

The North Karelia Biosphere Reserve is one of the areas in UNESCO’s Man and the Biosphere Programme (MAB), which promotes sustainable development. The network of the North Karelia Biosphere Reserve consists of about thirty partners. The partnership agreement defines the partner’s strengths, development targets and objectives for collaboration. The North Karelia Centre for Economic Development, Transport and the Environment (ELY) is responsible for the administration of the Biosphere Reserve. There are 651 biosphere reserves in the world. Together, they form the world’s most significant regional system for the promotion of sustainable development.

Outlook for 2016

Owing to a strong growth in planned depreciation caused by increased investments, the company’s operating profit for 2016 is expected to be lower than in 2015.

Board of directors’ proposal for the disposal of the profit

The unrestricted shareholders’ equity of the parent company is 48 266 625 euro, of which the profit for the financial period is 1 460 744 euro. The Board of Directors proposes that the parent company pay a dividend of EUR 2.62 per share, totalling EUR 4 585 000, and set aside a sum of EUR 50 000 for purposes of public utility. The rest of the distributable funds will be retained in the shareholders’ equity. No essential changes have taken place in the company’s financial situation after the end of the financial period. The company’s liquidity is good and, according to the Board of Directors, the proposed distribution of profits will not jeopardise the company’s financial standing.