State offers €40 million for Palokki hydropower plant

The Finnish state is offering €40 million to buy the Palokki hydropower plant in Heinävesi and remove its dam, but it has not received all the information it requested from the plant’s owner, Yle reported.

The state wants to buy the plant from North Karelia Electricity and restore the rapids submerged by the dam, as well as those below the power plant. The government programme calls for improving conditions for migratory fish.

The state held a seminar for municipalities in Joensuu on Friday to support their decision-making. The 17 municipalities that own the dam and power plant must decide by the end of October whether to accept the offer.

Only some of the municipalities had stated their position before the seminar, but those that had done so supported selling Palokki to the state.

Disagreement over the plant’s financial value

The parties have disagreed for about three years over the possible demolition of the dam and sale of the power plant. The main difference of opinion concerns the plant’s economic significance.

North Karelia Electricity chief executive Tuure Aho has described hydropower as important to the company’s business. The owner municipalities received about €4.6 million in dividends from the energy company last year.

Electricity consumption is increasing in Finland. However, Asta Sihvonen-Punkka, chief executive of the power transmission company Fingrid, said that future additions to weather-independent energy production would come from sources other than hydropower.

Ville Sailas, who has advised the state, said the state had not been able to discuss with the company what level of returns it expects. The state suspects that North Karelia Electricity’s electricity sales are not profitable and that the company’s result comes from electricity distribution.

Finance professor Sami Torstila of Aalto University has calculated the plant’s expected returns but said he had not received information from the North Karelia Electricity Group.

“The state’s offer is fair if free cash flow is €2.5 million a year,” Torstila said.

The state estimates that Palokki generates annual returns of between €1.5 million and €3 million. According to the buyers, the owner municipalities could receive annual returns of €1.5 million by investing the proceeds from the sale without taking risks.

Seminar held behind closed doors

The state’s seminar in Joensuu was closed to the media at the request of municipal managers, according to Jari-Pekka Punkari, a senior government official in the Prime Minister’s Office. More than 120 people attended.

Speakers included the chief executive of Fingrid, a representative of the National Emergency Supply Agency, representatives of the financial sector, fisheries experts from the Centre for Economic Development, Transport and the Environment, and a tourism professor.

North Karelia Electricity had no representative scheduled to speak or take part in the panel discussion.

Municipal decision-makers left the seminar without commenting to Yle. Each municipality will now decide whether to sell its share of the power plant to the state, and municipal councils in North Karelia are likely to vote on the issue during the autumn.