The Herrfors Group Annual Report 2025 has been published

Group CEO’s Review

Well positioned for increased demand

Electricity consumption in Finland has remained at roughly the same level throughout the 2000s. Industrial electricity use has decreased, mainly because the electricity-intensive production of mechanical pulp for newspaper and magazine paper has been significantly reduced. Electricity consumption in other industrial sectors has remained largely unchanged. The service, household, and other sectors have increased their consumption by approximately the same amount as industry has decreased. Forecasts predicting increased electricity consumption over the next five years have repeatedly proven incorrect over a long period of time.

During the past two years, the electricity system has experienced a surplus of wind power, making production unprofitable on the physical electricity market. Overproduction has pushed market electricity prices down to unsustainably low levels.

We are now seeing clear signs for the first time that electricity consumption is beginning to increase. Today, there is more than 1,000 MW of electric boiler capacity producing district heating when electricity prices are low, and new capacity is being built rapidly. New data centers are being established, and several investment decisions are under preparation. Arctial’s plans for an aluminum factory will also increase consumption if the project is realized. However, profitability calculations for new electricity-intensive operators must withstand sufficiently high electricity prices, often secured through bilateral agreements (PPAs), in order for new electricity production to be built.

Herrfors active in the new electricity market

The frequency-controlled reserve market, together with the high price volatility caused by wind and solar power, has during the past five years become an important component of the physical electricity market. Herrfors actively utilizes these opportunities. In Ylivieska, our electric boilers have been in operation since 2024 and participate together with our battery energy storage system (BESS) in Oravais on the reserve market as an integrated entity. In addition, the electric boilers are optimized in interaction with the combined heat and power plant in Ylivieska, where expensive biofuel can be replaced with cheaper heat production. Ylivieska also has the possibility to store heat, providing increased flexibility in the overall optimization.

Based on the experiences from Ylivieska and Oravais, we are planning to invest in Jakobstad in a similar concept on a larger scale: a new electric boiler facility and a large district heating storage system that can be optimized together with heat deliveries from Alholmens Kraft. The overall solution may also be combined with a new battery energy storage system or other solutions enabled by developments in the physical electricity market. In this way, we can continue to keep district heating prices at a competitive level in the future.

Group result for 2025

The Herrfors Group’s turnover decreased to EUR 196 million (2024: EUR 227 million), mainly due to lower electricity prices, which also resulted in reduced electricity production.

Other events during the year

During the year, we introduced the possibility for our spot-price electricity customers to hedge electricity prices for selected future months. Customers can view market price levels online and thereby follow price developments and lock in future electricity consumption at desired price levels.

Within our subsidiary group Härjeåns, a decision was made in autumn 2025 to discontinue pellet production. The business has experienced profitability challenges for many years, and despite various measures, we have not found sustainable solutions. The impairment of the pellet factory and related infrastructure burdens the Herrfors Group’s operating result by EUR 26.3 million, resulting in an operating profit for 2025 of EUR -10.8 million. Without this impairment, the operating profit would have been EUR 15.5 million, which is in line with 2024. Despite the pellet production business, the Härjeåns Group has previously demonstrated good profitability, which will now improve further and constitutes a significant part of the Herrfors Group’s turnover and results.

The Herrfors Group’s cash flow before investments was strong and amounted to EUR 37.6 million (EUR 20.5 million). The Group’s equity ratio remained unchanged at 46%.

Investments amounted to EUR 29 million (EUR 30 million), most of which related to the modernization of the electricity network. We are also investing in an expansion of the northern part of our regional grid (110 kV), which is a multi-year project. The renewal of the Kaitfors hydropower plant in Nedervetil is currently ongoing. During the year, our new office, including warehouse and staff facilities, was also commissioned in Ylivieska. Previously, network and customer service personnel were spread across several locations, but operations have now been centralized under one roof. Power plant and district heating personnel remain at the power plant in Ylivieska.

The Group published its first sustainability report for the 2025 financial year concerning the Group companies in Finland. The report is based on the EU VSME standard. In order to identify the most relevant areas for sustainability efforts, a double materiality assessment was conducted during 2024. Sustainability issues have long been central within the Herrfors Group, not least regarding renewable energy production.

On December 31, 2025, the Group company Katternö Kraft was merged into Perhonjoki, which simultaneously changed its name to Katternö Kraft. This constituted the second phase in simplifying the Group structure. Following the change, the Herrfors Group consists of the parent company Herrfors and the subsidiaries Herrfors Nät-Verkko, Katternö Kraft, and Härjeåns Kraft (Sweden). The new structure creates greater transparency, more efficient decision-making, and improved cost efficiency.

Thanks to the Group’s stable equity ratio, we can continue to develop operations and capitalize on unexpected opportunities offered by the changing electricity market. This enables us to continue offering our customers competitive electricity and district heating prices in the future.

“I would like to extend my sincere thanks to our personnel, customers, and partners for excellent cooperation during the past year.”

Roger Holm
CEO, Group President