Lehto Group Plc, inside information: Information about Lehto's energy construction business and the company's intention to apply for the transfer of share trading to the First North Growth Market

Lehto Group Plc
Insider information
15 November 2024 at 11.00 (Finnish time)
 

Lehto Group Oyj ("Lehto" or "Company") has previously announced on 29 May 2024 that it will focus its business on real estate energy solutions and electricity storages ("Energy construction business"). The company has also reported on the change in business direction in the January-June 2024 half-year report published on August 1, 2024.

Energy construction business in short

The energy construction business is based on the utilization of electricity storages in balancing the production and demand of the electricity market (so-called reserve and wholesale markets) and in energy saving solutions for buildings.

The strong growth of weather-dependent wind and solar power causes an imbalance between the production and consumption of electricity, which in turn creates an imbalance in the power grids. The imbalance of electricity networks can be managed with electricity storages, which enable electricity to be charged and discharged when needed. When the production of electricity is high, energy is loaded into the electricity storages, and when the production is low, energy is taken from them. Already today, there are adjustment reserves connected to electricity networks, which are used to prepare for changes in the frequency, production and consumption of electricity, but the need for reserves is now increasing strongly as a result of the growth of renewable energy sources.

A large part of the electricity storages operating or under construction in Finland and Europe are so-called battery parks, where a relatively large electricity storage capacity is placed at one point. Lehto's primary goal is to build a decentralized electricity storage system, where relatively small batteries are placed in properties in different parts of Finland. This model enables the utilization of existing electrical connections and also serves the properties' own energy saving needs. When the electricity storage is connected to the property's own electricity production, for example the electrical energy produced by the solar panels in excess of the property's needs can be stored in the battery and the stored electricity can be used when energy is expensive. In addition to the distributed electricity storage system, the Company's goal is to build medium-sized battery parks detached from real estate.

Lehto is also developing a solution where the property's HVAC solutions (eg ventilation, heating) work together with batteries as balancers of the electricity grid. Lehto's partner company has wide range of properties’ HVAC systems under its remote control, which enables the utilization of building technology in balancing the electricity grid. Electricity storage facilities placed in properties can simultaneously serve the needs of the property and operate in the reserve and wholesale markets.

In its energy construction business, Lehto acquires suitable sites for use of batteries (buildings or land areas), designs and implements the installation of batteries at sites of use, if necessary, connects the batteries as part of the property's own energy solution, obtains the necessary permits, and makes the necessary agreements with property owners, electricity grid companies and business partner companies. Batteries are bought or rented and their operation is controlled by the partner company's software.

The business income is generated from the reserve market compensations paid by Fingrid, the Finnish grid company, proceeds from the sales and purchase of electricity from the Nord Pool marketplace, and from the compensations paid by property owners and users. Lehto also develops battery park projects to be sold to investors in the industry.

During the summer of 2024, Lehto has implemented the first pilot project where the electricity storage is connected to the property. The electricity storage and its control mechanisms have been verified by Fingrid and the electricity storage is already in use by the reserve market.

By the end of 2024, Lehto's goal is to have the first electricity storage sites, which will primarily be used for the needs of the reserve market, put into production use. Projects start to accumulate new cash flow as soon as they are completed. 

During 2025, Lehto's goal is to build significantly more new electricity storage capacity, which will be used primarily in the reserve and wholesale markets, but also in connection with the properties' own energy solutions. The key financial goal for 2025 is to increase operating profit and business cash flow to a positive level.

During the years 2026-2028, Lehto's goal is to build new electricity storage capacity in such a way that the turnover from electricity storages in 2028 would be around 25 million euros and the operating profit would be more than 10% of the turnover.

The business requires significant battery investments, which in the initial phase are acquired by renting and in the later phase also partly by purchasing for own balance sheet. The working capital needs of the initial phase of the business are financed by the capital investments specified in Lehto's restructuring program.

Company’s restructuring program

Lehto Group Oyj's corporate restructuring program was confirmed on September 24, 2024, and the key content of the restructuring program is presented in the stock exchange release published on the same day. The restructuring program takes into account the financing needs of the Company's energy construction business.  The restructuring program requires the Company to acquire 2.5 million euros in equity financing by January 3, 2025, and 2.5 million euros in equity or debt financing by the end of 2025. In addition, the restructuring program requires the conversion of the EUR 15 million convertible bond issued by Lehto into shares by December 31, 2024, at least for Lehto Invest Oy's share EUR 9.98 million.

Transferring trading of the shares to the First North Growth Market

As a result of the changes in the company's business and structure, the Company intends to apply for the transfer of trading of shares from the Nasdaq Helsinki stock exchange list (main list) to the First North Growth Market, which suits the Company's current size category and growth profile. Accepting shares for trading on the First North Growth Market requires the preparation of a company description document (yhtiöesite in Finnish) and the approval of Nasdaq Helsinki.

According to the company's estimate, trading of shares on the First North Growth Market could start in the first or second quarter of 2025. The shares created in the conversion of the above-mentioned convertible bond are applied for trading in connection with the change in the market place.

Additional information:

Lehto Group Plc

Hannu Lehto, CEO and board member

+358 500 280 448