2022 - MuniFin

European Commission approved an extension and amendments to the Finnish aid scheme to support municipal energy companies

28.12.2022

The European Commission approved on 21 December 2022 an extension to the Finnish subsidised loan and guarantee scheme that allows MuniFin and municipalities to finance municipal energy companies. The Commission also extended the arrangement’s scope of application. The recently approved amendments to the scheme are in place until the end of 2023.

The aid scheme is related to the effect Russia’s war against Ukraine has had on European energy markets. Under normal conditions, EU State aid rules prohibit MuniFin from financing energy companies, but this scheme was approved under the Temporary Crisis Framework to ensure the continuity of the energy sector’s operations and strengthen Finland’s security of supply.

The Commission first granted MuniFin and Finnish municipalities license to finance municipal energy companies in October 2022, but this decision was only effective until the end of 2022. Under the arrangement approved in October, financing could be granted only towards liquidity needs related to the collateral requirements on the derivatives exchange, spot market, balancing market and bilateral trading.

When MuniFin, the Municipal Guarantee Board and the Ministry of Economic Affairs and Employment notified to the Commission of the recently approved scheme for 2023, they extended the arrangement’s scope to cover other potential crisis situations in energy companies. These include the elevated liquidity needs arising from the energy crisis that are related to working capital and investments.

Best prepare in advance

“We’ve been getting some inquiries about municipal energy companies’ financing, and we’re currently processing a few loan applications. We encourage both municipalities and their energy companies to prepare for possible financing needs in advance”, says Aku Dunderfelt, Executive Vice President, Customer Solutions at MuniFin.

MuniFin can finance energy companies either directly or through the municipalities that own them. MuniFin can finance municipal energy companies directly only if they have a 100% municipal guarantee. This requirement applies to all of MuniFin’s finance to companies under municipal control. MuniFin can process loan applications only after the loan has been guaranteed by the city or municipal council, and the funds cannot be transferred until after the guarantee decision has become legally valid.

Municipalities and their energy companies should prepare for potential financing needs in advance. The municipal council’s guarantee decision does not oblige the loan to be withdrawn if it proves unnecessary.

Loans must meet the Commission’s requirements

Loans granted to energy companies by either municipalities or MuniFin must meet the eligibility requirements set out in the Commission’s decision. These include, for example, the energy company’s written account of how it will allocate the funds to needs specifically related to the energy crisis.

Loan contracts under the recently approved scheme must be signed by 31 December 2023 at the latest. The maximum loan amount per beneficiary cannot exceed either a) the liquidity needs derived from the additional collateral requirements for the coming 12 months or b) 15% of the beneficiary’s average total annual turnover over the last three closed accounting periods. In other financing needs arising from the energy crisis than those derived from the collateral requirements on the energy markets, the maximum loan amount cannot exceed the needs for the coming six months. The maximum maturity of the loans is six years, which is three years more than the maximum maturity for loans under the previously approved scheme. The Commission’s decision also sets out minimum requirements for loan pricing and details other technical requirements.

MuniFin encourages municipalities and their energy companies to read the Commission’s decision carefully when preparing their decisions about energy company loans and to take into account the key principles of and references to the Commission’s decision when formulating their own decisions. The Commission’s decision will be available on the Commission’s website soon.

Economy MuniFin Sustainability

The Sekasin Collective offers young people online mental health help

19.12.2022

The Sekasin Collective has a vision where no youth is forced to manage their mental health issues alone. To reach this goal, the Collective works to reach young people online in a variety of ways. Their channels are aimed at youths and young adults between the ages of 12 to 29 who are looking for someone who could listen to them.

At the core of the collective’s work is a low threshold for contact. No official diagnoses or medical referrals are needed to start a chat; if the person feels they’d like to chat with someone about how they are doing and holding up, that is enough.

Young people need someone to talk to – and they need it more than society’s equipped to handle

The Collective operates the Sekasin chat, an online service where a large group of volunteers and a host of social and health workers and youth professionals are available to chat with young people. Last autumn the chat, originally available only in Finnish, also started its first official Swedish-speaking service hours. In 2021, people reached out to the Sekasin chat approximately 17,000 times – unfortunately, the Collective had the capacity to respond to only about one in every five people.

Many of the online discussions revolve around anxiety and depression, especially when it comes to youths aged 15 to 19. Over the course of the pandemic, chats initiated by people between 25 to 29 (i.e., young adults shifting from studies to worklife) were also slightly on the rise. Around ten chats each day focus on suicidal or self-destructive thoughts.

The Sekasin Collective also reaches out to its audience on Discord: their Sekasin Gaming community offers Finnish youngsters a place to have anonymous discussions with almost 14,000 other youths. In addition to the peer group, the server also has professionals from different sectors supporting the young participants and moderating discussion to make sure it’s safe around the clock.

Sekasin – every day of the year

The Sekasin Collective’s operations are run by the MIELI Mental Health Finland association, SOS Children’s Villages, the Finnish Red Cross, and the Finnish Federation for Settlement Houses. The Collective’s channels are open for young people on every day of the year, including in and around the Christmas holidays.

The Sekasin chat is open on weekdays from 9am to midnight and on weekends from 3pm to midnight at sekasin.fi. The Sekasin chat is available in Swedish on Mondays and Thursdays from 2pm to 7pm and on Saturdays from 4pm to 8pm. The Sekasin Gaming community on Discord is available and moderated at all hours.

The Sekasin Collective’s work is made possible by charitable donations.

MuniFin

MuniFin’s economic forecast Q4/2022: Rough year, with some effects yet to show

15.12.2022

The sanctions imposed on Russia by Western countries and Russia’s countermeasures affected international trade and increased the price of both energy and raw materials. Cost pressures also further accelerated inflation, which had already been increasing in the previous year. Confidence in the economy was badly shaken by the combined effect of the war, the rising cost of living and energy-related concerns.

Further tumult was created by the sharp U-turn in monetary policy. Central banks had been underestimating the risks associated with persistent inflation even before the Russian invasion, so when the monetary policy was finally and belatedly tightened, it had to be done fast and in exceptionally large steps.

Positively surprising economic resilience

Despite the sharp turns in the operating environment, the development of GDP was a positive surprise in 2022. The euro area saw relatively stable growth, and thanks to an unexpectedly strong early first half, Finland’s GDP growth remained positive until the third quarter.

The stronger-than-expected economic development stemmed from several different factors. The bottlenecks in production and supply chains, which severely disrupted goods trade last year, largely cleared during 2022. The service sector also started to revitalise after the COVID restrictions were lifted. Many households accumulated extra savings during the COVID period, which has helped them cope with the rapidly rising cost of living to some extent. The business sector seems to have adapted to the European energy crisis better than expected.

Recession projected to remain mild, but risks are growing

Despite the positive observations above, the growth outlook clearly weakened in all main economic areas this autumn. Finland is likely to have already entered a recession due to the threefold trouble households have with food, energy and housing costs, which are all rising quickly and eroding consumers’ purchasing power and bringing down private consumption. The rapid increase in interest rates is slowing down investments and cooling down the housing market. Residential property prices have already turned to a noticeable decline.

Thanks to Finland’s robust industry and high employment, MuniFin still estimates that this period of economic recession will be relatively mild and short-lived. We maintain our GDP forecast for the next few years unchanged, at -0.5% for 2023 and 1.5% for 2024. We revised our GDP forecast for the current year slightly, raising it to 1.8% due to the unexpectedly strong economic development.

It should be noted, however, that the above-mentioned scenario of mild recession involves considerable risks. Consumers’ savings will shrink and the negative effects of the rising cost of living may begin to accumulate during the next year. Moreover, the simultaneous cooling of the economic cycles in Europe, the United States and China may weaken exports more than expected.

Sharply rising interest rates also pose a significant risk to future economic development, and they have not yet had their full effect on all debtors. Many households have their interest rate review dates in the first half of 2023 and will not face the substantially rising loan servicing costs until next winter and spring.

High employment steadies the outlook

For now, employers seem to be looking beyond the temporary recession, aiming to retain skilled workforce. Layoffs return on the agenda if the economic stagnation becomes worse than expected in the winter, but large-scale unemployment is still a long way from the severe labour shortage currently occurring in Finland.

It is to be expected that the contracting economic cycle will eventually also affect the labour market to some extent: employment growth will halt and the unemployment rate will turn to a moderate rise. MuniFin still expects unemployment to rise moderately to 7.4% next year and to remain at approximately the same level (7.3%) in 2024.

Interest rates will continue to rise in early 2023

The strongest rise in consumer prices is already calming down, but it may take a couple of years for inflation to slow down to the target level of the central banks. Interest rate hikes will presumably continue at least through the first half of 2023, with other ways of tightening monetary policy lasting much longer. Key interest rate is expected to rise to around 5% in the United States and to around 2.5–3% in the euro area.

Inflation peak soon passed

In Finland, inflation reached its highest level in almost 40 years in 2022, but nevertheless remained below the euro area average. Energy prices have affected inflation somewhat less in Finland than in Central Europe, and long contract periods might also factor into this as they react to cost pressures with a delay. The flipside to this is that inflation may also fall more slowly in Finland than in the euro area.

MuniFin revised its inflation forecast for the current year to 7.0%. The inflation peak will probably occur at the end of 2022, but inflation will remain at an exceptionally high level also next year. In 2023, we expect consumer prices to rise at an average rate of 4.5%, and in 2024 we expect inflation to finally decrease to 2%.

The year 2023 is an opportunity for municipalities to make their economy more sustainable

Finland’s health and social services reform will change Finnish municipal sector fundamentally. It will halve the volume of municipal operations and shake up the structure of income and expenses. But municipalities will not bear the full force of these changes next year as they will be soothed by a one-time tax benefit of more than one billion euros, stemming from the tax cuts introduced by the reform and implemented fully only in 2024.

Thanks to this temporary tax benefit, municipalities will be in a stronger position in 2023 than ever before in the 2000s, even though the increase in salary and interest expenses and the acceleration of overall inflation will take a toll on municipal sector as well. This will offer municipalities some breathing space next year, which they would be wise to spend on securing their financial sustainability in the long term.

One of the reform’s financial effects is the heightened significance of capital expenditure: the needs for municipal investments will not drop nearly as much as operating expenses. At the same time, depreciation will play a greater role in the municipal cost structure. After the reform, it will be even more important for municipalities to ensure their investment capacity.

Municipalities should not be fooled by the temporarily strong financial figures of 2023. Instead, they should pay even more attention to securing sufficient income now that interest rates have risen considerably and made loan servicing costs a significant cost item again.

The gap between financially strong municipalities and those in deficit will widen

The health and social services reform is widening the financial gap between municipalities, giving financially strong municipalities more room to manoeuvre while putting municipalities that are in deficit in an even more difficult position.

It is especially important for municipalities in structural deficit to try to find solutions to their situation. As a general rule, the reform will not significantly change the municipalities’ financial balance in terms of euros, but imbalances may grow markedly in relation to the size of the operational economy. Municipalities will have a much more limited scope for adjusting their operations in the future.

In some municipalities, the need to improve the cost-effectiveness of core operations can prove so great that it may well speed up cooperation between municipalities and eventually also result in municipal mergers. Severe financial deficit is relatively more common in small municipalities with less than 5,000 inhabitants than in large and medium-sized municipalities.

Finnish municipalities will also have to prepare for the possibility that a severely imbalanced central government finances may reflect on state transfers in the coming years. Even though the rising costs of health and social services will be removed from municipalities, the financing gap of the wellbeing services counties will pose an indirect threat to municipal finances as well.

Additional information:

Timo Vesala, Chief Economist
timo.vesala@kuntarahoitus.fi
tel. +358 50 5320 702

Soili Helminen, Communications Manager
ext-soili.helminen@kuntarahoitus.fi
tel. +358 400 204 853

Economy MuniFin

MuniFin joins Partnership for Carbon Accounting Financials (PCAF)

14.12.2022

PCAF is a partnership of financial institutions with 346 members worldwide that work together to implement a harmonised and transparent method for GHG accounting. By joining, MuniFin commits to measure and disclose GHG associated with its lending and liquidity portfolios.

As a financial institution, MuniFin makes its greatest positive impact through its customers and financing the green transition.

“As the only financial institution in Finland specialised in financing municipalities and the affordable social housing sector, our mission is to build a more sustainable future together with our customers. To better succeed in this, it is imperative to understand the climate impact of our lending portfolio”, says Sustainability Manager Kalle Kinnunen.

The regulatory requirements for disclosing financed emissions are catching up, but it is the voluntary efforts that generate the greatest results.

“PCAF and the global GHG accounting and reporting standard have become the gold standard and we are happy to join this development and remain in the ranks of forerunners in sustainability. We had already applied PCAF’s guidance to our GHG accounting before joining. Still, methodologies for many sectors are continuously developing rather than established. We hope to benefit the network with our expertise on the municipal sector”, Kinnunen continues.

Reducing emissions is vital across the economy. According to Kinnunen, collaboration is key when it comes to sustainability and Finnish municipalities are a great example.

“The Finnish HINKU network is a great demonstration. Already 92 Finnish municipalities are members and they are committed to reducing their emissions by 80% from their 2007 levels by 2030. The network is coordinated by the Finnish Environment Institute SYKE that is the forerunner in municipal emission calculation, not only in Finland, but globally”, says Kinnunen.

In 2016, MuniFin was the first financial institution in Finland to offer green finance for climate and environmentally friendly investments, such as public transportation, renewable energy and sustainable buildings.

“Buildings are a significant source of emissions and to reduce them, energy efficiency is an important aspect to focus on. We want to continue to encourage and support our customers to make investments that reduce their emissions while meeting the needs of the people”, Kinnunen explains.

Kinnunen is eager to start the collaboration.

“We joined PCAF to better understand our impact. We need actual numbers, measurable goals and transparency followed by actions to push the whole industry towards more sustainable choices”, he says.

Further information

Kalle Kinnunen

Sustainability Manager, Funding and Sustainability

+358 400 489 425

Antti Kontio

Head of Funding and Sustainability, MuniFin

Tel. +358 500 3700285

PCAF: Financial institutions taking action

MuniFin Sustainability

Final report on financing the green transition: Major investments are required but also create new opportunities for Finland

12.12.2022

The final report of the national working group on financing the green transition in Finland, published on 9 December 2022, states that to mitigate climate change, halt biodiversity loss and transition to a circular economy, major investments will be needed from businesses, households and the public sector. The green transition will require system-level change in all of society and a comprehensive reform of economic structures, but it will also increase demand for Finnish expertise.

In January 2022, the Ministry of Finance, the Ministry of the Environment, and the Ministry of Economic Affairs and Employment appointed a national working group to get a comprehensive view on financing the green transition and financing measures to accelerate the transition in an ecologically, economically and socially sustainable manner. According to the working group, Russia’s war of aggression has escalated the change in the geopolitical situation and increased the urgency of the green transition and the need to break away from the fossil-fuel economy.

The report presents the key objectives defined by the working group to develop green transition financing and offers solutions and an estimate of the scale of the related investment needs. The report also discusses the role of various parties in financing the green transition and the different ways in which sustainability is taken into account in the financial markets. The working group submitted its final report to Minister of Finance Annika Saarikko, Minister of the Environment and Climate Change Maria Ohisalo and Minister of Economic Affairs Mika Lintilä on 9 December.

The working group was made up of public and private sector experts. One of the working group’s members was MuniFin’s Head of Funding and Sustainability Antti Kontio.

“Being a part of this important national working group has been inspiring. As a result of our work, the key parties in the green transition now have a shared view of the development needs and recommendations for the transition”, says Kontio.

According to the report, the green transition will open up new opportunities for Finland by increasing global demand for Finnish expertise, sustainable solutions and innovations.

“Our customers – municipalities and affordable social housing organisations – play a major role in the green transition. Our job at MuniFin is to support the important work our customers are doing to the best of our ability: by financing the green transition and by sharing our customers’ innovative sustainable solutions to help achieve the national goal of carbon neutrality by 2035”, Kontio explains.

The report is in Finnish and a summary in English can be found here.

Green finance Sustainability

MuniFin’s funding forecast for 2023: EUR 8–9 billion

8.12.2022

MuniFin will continue to focus on issuing strategic benchmarks in EUR and USD. The plan is to issue approximately 2/3 of the long-term funding through EUR and USD strategic benchmarks and the rest 1/3 through tactical bonds, which include other public markets (e.g., GBP, NOK, AUD) and private placements. Maturity target for the year will be slightly shorter compared to previous years, between 4–5 years.

MuniFin also aims to continue its commitment to issue green and social bonds next year. Sizes will depend on the underlying asset development of the customer financing portfolio.

In 2022, MuniFin has issued EUR 8.8 billion of new long-term funding and the program is nearly completed. This year MuniFin has issued three new benchmark transactions in EUR and USD, together with several EUR taps on the existing lines. Two of the strategic benchmarks were in EUR and one in USD. A new 7-year EUR 500 million green bond was issued in May 2022. In tactical funding, main currencies have been GBP and NOK. Allocation to tactical funding has been higher than planned this year and can be explained by market volatility in strategic markets combined with attractive opportunities in other markets.

The top 4 issuance currencies in 2022 are thus far EUR (39%), GBP (19%), USD (19%) and NOK (17%). These currencies account for 94% of the new funding issued in 2022.

^{Further information}

Antti Kontio

Head of Funding and Sustainability, MuniFin

Tel. +358 500 3700285

Funding MuniFin

Finnish system for affordable social housing supports social mixing and brings down homelessness

18.11.2022

In Finland, affordable social housing is mainly provided by municipality-owned companies and a few nationwide non-profit organisations. The production is financed through interest subsidy loans granted by a commercial bank or other financial institution like MuniFin. The loans are guaranteed by the Finnish state through The Housing Finance and Development Centre of Finland (ARA), which is administered by the Ministry of the Environment.

ARA has a major responsibility in the implementation of Finnish housing policy. The main objectives of the government’s housing policy development programme, updated in 2021, are building a carbon neutral society and improving the quality of construction, supporting sustainable urban development, increasing housing construction in growing urban areas and eradicating homelessness within two government terms.

Among other tasks addressed to the organisation, ARA grants guarantees for housing and construction as well as controls and supervises the use of the ARA housing stock. ARA also designates and maintains a list of non-profit organisations entitled to get interest subsidy loans.

MuniFin is the main financier of affordable social housing production in Finland. The loan periods are long, up to 41 years.

“This model ensures that the financing is long-lasting and predictable. At the moment, only MuniFin grants loans this long. The state guarantee affects the price of the loans making them cheaper” says Juha Kaakinen, a recently retired long-time CEO of Y-Foundation, one of the nationwide providers of affordable social housing and key developer of the Housing First principle in Finland.

“This is also a very inexpensive way for the state to produce affordable social housing”, Kaakinen continues.

ARA oversees the providers and projects. This ensures the apartments are of high quality.

“The quality of affordable social housing apartments is sometimes even better than the non-subsidised apartments.”

No family homelessness in Finland

Social mixing is a central and much valued pillar of Finnish housing policy. The right to housing is enshrined in the Finnish constitution. The biggest cities in Finland have for a long time had a principle of ensuring that 25% of new homes are affordable social housing apartments. Now the aim is to increase this share up to 35%.

The rent level of affordable housing apartments is significantly lower than in the private sector, especially in the Helsinki metropolitan area. Rising interest rates are increasing the funding expenses of the housing providers, which will also impact rents in the near future. ARA however recommends that the rents in the ARA housing stock should only be raised moderately.¹

In clear contrast to other countries, e.g. the Netherlands and Austria, the residents are mainly people of low income, who are most in need of state-subsidised housing. The applicants are evaluated through three criteria: need, wealth and income. When comparing the applicants, homeless people and others in urgent need of an apartment, applicants with most limited needs and of lowest income are given priority.² The ARA housing stock also includes homes for students, and residential homes for people with special needs, elderly people in poor health, and persons recovering from mental health problems.

The role of social housing has been remarkable in tackling homelessness.

“We have had a stable level of affordable housing production. Some years have been quieter than others, but 7000–9000 apartments have been built every year. The high and stable level of production differentiates Finland from other countries. And thanks to this, there’s no family homelessness in Finland”, Kaakinen says.

Social housing has also been instrumental in preventing segregation and facilitating work-related migration. Social housing influences rent levels in the private sector and lowers the costs of housing allowance granted by the state. The lower rent levels also makes it possible for people of low income to live closer to their workplaces and to manage on their salary.

“Living in a reasonably priced apartment may be the only possibility for many people to save enough money to buy an apartment of their own at some point, which is still something many Finns strive to”, Kaakinen continues.

Forerunners in fighting climate change

Many of the social housing providers have climate change high on their agenda. More and more wooden residential buildings are being constructed, and many of the providers have pilot projects for developing more sustainable buildings and construction methods. The energy efficiency of social housing buildings is generally higher than buildings of the private sector. According to Juha Kaakinen, the big question is how to transform social housing toward carbon neutrality in a way that maintains affordable rents.

“The social housing sector has shown its will and power to fight climate change. Still, new ideas are needed for example to transform existing buildings into affordable apartments”, Kaakinen says.

FACTS

There are 3.2 million apartments in Finland. Around 62% of all apartments are owned and 34% rented.³ Around one third of all apartments have been constructed using state subsidies.⁴

MuniFin is the only credit institution in Finland that specialises solely in financing the municipal sector and non-profit housing production. At the end of 2021, 48% of MuniFin’s long-term customer finance portfolio consisted of loans granted for housing.

The Finnish Government housing policy

ARA implements Finland’s housing policy

ARA housing stock

Economy Social housing

Professor optimistic about the upcoming winter in Finland: “Power shortages seem unlikely”

9.11.2022

The price of electricity is soaring to record highs across Europe, putting many consumers in a tight spot. In September, electricity cost an average of 215 euros per megawatt-hour in Finland, while two years earlier the price was less than 40 euros. Prices are rising even faster in Germany, where the monthly average for September was 346 euros.

These steep increases are driven by bottlenecks in production, most importantly the shutdown of the energy trade and gas supply caused by the Russian war in Ukraine. But the war is not the only reason behind the energy crisis, says Samuli Honkapuro, professor in energy markets and energy systems at LUT University. The European energy market has been hit by a perfect storm.

Samu Honkapuro is tenured professor in Energy Markets and Energy Systems in LUT University, School of Energy Systems, Lappeenranta. His key research interests are electricity market design and business models for integration of distributed energy resources, demand side management, and energy communities. Photo: LUT University

“Pretty much every indicator has pointed in the wrong direction. The Nordic countries have experienced a couple of dry years, which has upped the price of hydropower. France’s problems with nuclear power have strained Central Europe, and emissions rights have also had a small impact. And then, of course, the war started”, Honkapuro observes.

The situation in the Nordic countries is better than in most of Europe. Finland has systematically decentralised energy production and steered away from fossil sources such as natural gas, making the availability of energy less dependent on individual forms of production.

“Roughly one quarter of our electricity is nuclear, twenty per cent hydro and ten per cent wind power. One quarter comes from combined electricity and heat production, and the rest is imported”, Honkapuro reports.

Last year, approximately forty per cent of Finland’s imported electricity came from Russia and the rest from Nordic countries. The Russian imports have since then been completely replaced by Nordic or Baltic electricity.

Finland requires 40–45 terawatt-hours of energy for heating residential buildings each year. More than 80 per cent of this is produced by district heating, wood or electricity. In 2021, more than half of district heating was produced with renewable energy or waste heat, and slightly more than a quarter with fossil fuels: natural gas (12%), coal (11%) and oil (3%). Natural gas has been imported almost exclusively from Russia, but its importance in electricity and heat production has been small. The Russian pipeline has now been replaced with Balticconnector, a natural gas pipeline between Finland and Estonia, and by liquefied natural gas transported by sea. Finland is in a markedly different situation compared to Germany, for example, where natural gas is by far the most popular method of house heating.

“Where Finns once decided to build district heating networks, Germans chose natural gas Finland uses gas mainly for industrial purposes, and those amounts are relatively small too.”

Even though Finland is not a major consumer of natural gas, the upward pressure on gas prices nevertheless has its impact here, too. Natural gas is one of the cornerstones of Central European electricity and heat production, and its price dictates the formation of energy prices throughout the region. This effect is somewhat mitigated by the limited transmission capacity, which causes the greatest price pressure in the Nordic countries to be limited to Southern Norway.

“Southern Norway is tightly integrated into the European energy market, with pipelines going to Germany, Netherlands and the UK. Electricity is now several times more expensive in the south of Norway than in the north”, Honkapuro points out.

Finland relieved by flexible demand

Limited transmission capacity protects Finland from the worst price pressures, and price spikes are also levelled out by flexible demand, which works well in Finland. Energy production and demand are kept in balance through reserve and balancing markets managed by Finland’s transmission system operator Fingrid. In Finland, users also participate in these markets, as opposed to many European countries, where they are only meant for producers.

“Many industrial and production processes are included this system. For example, the lighting of almost all of Finland’s largest greenhouses can be temporarily cut off during the heaviest peak demand. Fingrid will then pay them a compensation for the outage”, Honkapuro explains.

Finland is also gaining an increasing amount of wind power. Last year broke all records with 141 new wind turbines, but this year, this record was broken in less than six months. At the end of 2025, Fingrid estimates Finland’s wind turbines to produce approximately 32 terawatt-hours per year, which is almost half of Finland’s total energy production last year.

As wind power becomes more popular, production becomes more dependent on the weather. Demand should therefore continue to be flexible.

“We have a lot of automation technology that can be used to regulate things like the ventilation of office buildings in step with electricity prices, but this type of automation is not yet used nearly to its full potential. Because electricity has been very cheap, there hasn’t been so much incentive for these types of renovations.”

Finland, a green electricity superpower?

Honkapuro sees a silver lining in the energy crisis. The high prices accelerate the green transition and encourage governments and companies to invest in energy efficiency and flexible demand. According to Honkapuro, the Finnish energy market’s future is bright, which bodes well for the country’s economy as a whole.

“For example, a megawatt-hour of new wind power costs 20–30 euros to produce in Finland, compared to approximately 70 euros in Germany. In a few years, Finland will produce so much inexpensive renewable energy that it may have great potential to attract industry and investments.”

But first, we have a difficult winter ahead of us. Honkapuro remains optimistic about that as well.

“This autumn we’ve noticed that high electricity price cuts consumption by a surprisingly large amount. When the price rises further, consumption may fall even more. I don’t think that we’ll have to deal with power shortages this winter.”

Should the demand of electricity nevertheless exceed supply, Fingrid has the means to regulate electricity consumption. For households, this would mean predetermined rolling blackouts of a couple of hours across Finland. While this is undoubtedly an undesirable scenario, it is reassuring to know a game plan exists for tackling it.

“We’re prepared for it. And at least we’d then get to study how the blackouts work in practice”, Honkapuro chuckles.

The wooden apartment building quarter in Kuokkala sparks spontaneous meetings

21.10.2022

The wooden apartment building quarter in Kuokkala is being developed by the Yrjö and Hanna Foundation, and it aims to be a pioneering project both in terms of its environmental consciousness and communality. The quarter is entitled Kalon, and it won the Asuntoreformi architecture competition in 2018. The name Kalon stems from ancient Greek philosophy and means moral beauty, beauty that is more than skin deep.

The quarter will consist of five wooden apartment buildings, which will have 166 apartments in total.

“Kalon completes the neighbourhood. The architecture and materials of the buildings tie them seamlessly to the surrounding buildings, the Kuokkala wooden church and the pioneering Puukuokka wooden apartment buildings”, says Ilkka Murto, director of real estate management at the Yrjö and Hanna Foundation.

The Kalon buildings are constructed from prefabricated wooden elements, meaning that 70–80% of the buildings are made at the factory before they are transported to the building site.

The buildings are heated with geothermal heat, and they have solar panels on the roof to generate electricity. The residents will be able to monitor their energy consumption in real time.

“The Yrjö and Hanna Foundation has decided to use geothermal heat as the primary source of energy in its buildings whenever possible. Finding places for the geothermal wells in the relatively small courtyard of the Kalon quarter was a bit of a challenge, but geothermal heat is a worthwhile investment that will pay itself back”, says Murto.

Intentional bottlenecks

The Kalon quarter consists of five wooden apartment buildings that have 166 apartments in total. Four of the five buildings have been financed with MuniFin’s green finance. Construction commenced in autumn 2022 and is expected to be completed in a couple of years. One of the buildings will have right-of-occupancy housing, two will be dedicated to communal senior housing and one will be designed for people with memory disorders. The fifth building will have non-subsidised housing offered at a market price.

“We’ve studied memory-friendly housing solutions together with the Housing Finance and Development Centre of Finland ARA and Aalto University. People with mild memory disorders can live safely in their own home for longer if the building is designed with this purpose in mind. Their life can be made easier by things like the smart use of colours”, Murto explains.

Communality has played a key role in Kalon’s design. Kalon will have common facilities, carsharing and possibly also a library of things.

“The solutions employed in the quarter foster communality. Before, we included a small common room in every building, but these are not used a whole lot. By putting the common facilities of all five buildings in one building instead, we were able to create larger and more functional common facilities for everyone.”

In Kalon, the common facilities include a kitchen, a sauna and a laundry. To increase communality, special attention has been paid to how people move from one place to another within the quarter. For example, residents walk past the common facilities on their way to the bus stop, and mail is not delivered to the apartments, but instead to letter boxes located in the common facilities.

“The common room is placed in the most interesting spot, both in terms of foot traffic and functionality. We are intentionally trying to create a bit of a bottleneck to spark spontaneous meetings”, says Murto.

Communality is further increased by Kalon’s community coordinator. Activities and community services will be developed in accordance with the residents’ needs.

“Time will tell what kinds of joint activities and joint use are created and which of them will become a permanent fixture.”

Good design makes life easier for everyone

The Yrjö and Hanna Foundation works hard to improve housing. The Kalon apartments are flexible and can be adapted to various situations in life. Solutions common in senior housing, such as zero thresholds and storage space for assistive equipment, have also been introduced to family apartments. One thing the Yrjö and Hanna Foundation will not compromise is accessibility.

“One of our buildings was designed for people who need a wheelchair. It was so successful that after a while, half of the fourteen residents were able to move about in their home without a wheelchair. Highly functional solutions are not necessarily expensive if they are well-planned and included in the designs early on. Many solutions designed for senior citizens also make life easier for families with children”, Murto points out.

The Kalon buildings, like all other buildings built by the Yrjö and Hanna Foundation, will have larger-than-usual elevators. They not only make life easier for senior citizens, but also for people with a baby pram. The importance of good design and communication is particularly pronounced in development projects and experimental projects.

“To make timber construction cost-effective, it’s vital to choose the main contractor at an early stage. This allows us to design the solutions together, which means fewer surprises during construction and helps keep the costs in check”, Murto explains.

The Kalon buildings feature large balconies and functional common facilities.

“We want to challenge existing practices in the field. But when building affordable housing, every choice must be weighed carefully to keep the rents from going up. We’ve had to make some compromises in this project, too”, Murto concedes.

The Yrjö and Hanna Foundation has worked closely not just with the architects and the contractor, but also with the City of Jyväskylä and the Kuokkala parish. The ground floor of the right-of-occupancy building will have facilities in which the parish will offer daytime activities for children. Joint activities are also in the plans, to be specified after the buildings are completed.

“This is a really nice project. Collaboration with all parties has been extremely fluent”, Murto commends.

Finance for Finland’s green transition

MuniFin has offered its customers green finance for sustainable investments since 2016. Funding for green projects is sourced by issuing green bonds. For investors, MuniFin’s green bonds offer a way to finance positive impacts through carefully selected projects in e.g. buildings, transportation and renewable energy categories.

European Commission granted MuniFin license to finance municipal energy companies

10.10.2022

On 7 October 2022, the European Commission approved the notification submitted by the Municipal Guarantee Board in cooperation with MuniFin and the Ministry of Economic Affairs and Employment, granting MuniFin license to finance Finnish energy companies owned by municipalities. The arrangement will ensure the continuity of municipal energy companies’ operations and strengthen Finland’s security of supply. This type of financing can only be used towards the collateral requirements in the electricity market. The Commission’s decision will be effective until 31 December 2022.

MuniFin can finance municipal energy companies in relation to collateral requirements only if they have a 100% municipal guarantee, similarly to other companies under municipal control. This requires the municipal council’s decision.

The Commission’s decision also allows municipalities to finance their energy companies out of their own budget under exceptional terms and conditions. This means that municipalities can now apply for a loan from MuniFin and then loan the funds on to a company, applying the same terms as specified in the Commission’s decision for loans granted directly to energy companies by MuniFin.

Financing needs are hard to predict

Anticipating financing needs arising from the collateral requirements in the electricity market is very difficult at the moment.

“It’s possible that energy companies won’t have much need for MuniFin’s financing after all. But because we don’t know how the electricity market will react when energy consumption soars in the winter months, we encourage municipalities and their energy companies to prepare for possible financing needs in advance”, says Aku Dunderfelt, Head of Customer Finance at MuniFin.

According to the scheme approved by the European Commission, the maximum loan amount cannot exceed either (i) 15% of the beneficiary’s average total annual turnover over the last three closed accounting periods; or (ii) the liquidity needs derived from the additional collateral requirements for the coming 12 months. The loan has a maximum maturity of three years.

Under the recently approved scheme, energy companies can use loans granted by MuniFin or the municipality only towards the liquidity needs arising from the increased collateral requirements in the electricity derivatives market. In other words, the financing cannot be directed towards investments in renewable energy or any other purposes.