Oulu: SMEs drivers for future growth

Northern Finland’s most populous city, Oulu, is currently facing enormous challenges. The global technology companies operating in the area have drastically reduced workforce or even closed down production units. Should the region be flourishing one day again, the local small and medium-sized enterprises (SMEs) will be the driving force of the new era.

On a crispy fall day, Oulu, a city of 200,000 inhabitants, proves to be nothing but struggling. The construction work at a new 3.5 MW steam boiler plant in Pyhäntä, in the south-east of the Oulu region, is full swing. Local entrepreneur Pekka Kemppainen is demonstrating the benefits of the new plant expected to be ready in November.

His company, Latvaenergia that specialises in wood-fuelled heating plant solutions has received a loan from Oulun Osuuspankki, funded by NIB. Last June, NIB and Oulun Osuuspankki signed a loan agreement for onlending to SMEs and environmental projects in north-western Finland.

Now, with the help of this loan, Latvaenergia has been able to invest in a new boiler that generates energy from the surrounding forests for the local food industry. The new boiler plant will not only double Latvaenergia’s output and turnover in the next few years, it will also distribute the value across the whole community as well.

“Here we are witnessing something that hasn’t been done on a large scale anywhere else in Finland. Wood-based generated steam is still an unusual source of energy, especially for industrial use”, explains Mr Kemppainen.

The new boiler will allow the local energy-intensive food producers to replace oil with renewable energy. On top of that, the increased energy efficiency will help extend their manufacturing capacity.

The fuel, wood residue, is sourced from nearby forests. Mr Kemppainen explains with obvious pride the value the investment is bringing to the region.

“Latvaenergia uses local entrepreneurs to harvest, chip and transport the wood. It’s very likely that soon our clients will recruit more workers, as the new steam boiler enables them to increase their production volumes.”

Perfect example

For Oulun Osuuspankki, Latvaenergia represents a perfect example of a NIB-funded project. Latvaenergia’s loan is not only an investment that creates more jobs in the area, but using renewable energy to replace fossil fuels also helps improve the environment.

“From Oulun Osuuspankki’s perspective, the NIB loan programme fits perfectly with our corporate responsibility, especially now that this region is heavily reliant on entrepreneurs existing and growing their businesses. For us, it is important that we share the responsibility to both society and the environment”, says Helinä Saarela, Bank Manager at Oulun Osuuspankki.

SMEs bring more diversity to local industry

The Mayor of Oulu, Matti Pennanen, underlines the importance of SMEs when increasing the diversity of the region’s businesses.

“SMEs have an extremely significant and crucial role to play in this region’s current situation, but even more so in its future. What we need right now for local industry is a swift change from a few big players towards a greater variety of businesses in terms of both sizes and sectors,” says Mr Pennanen.

Oulun Osuuspankki’s Sales Manager Jouni Heikkinen agrees:

“The loan programme with NIB is a great way to open up new opportunities for the SMEs in this region. Principally, we need more investments made by SMEs in tangible capital, such as machinery and equipment, as that kind of industry didn’t really exist in Oulu previously, when this region concentrated too much around one sector”, says Heikkinen.

So far, Oulun Osuuspankki has utilised NIB funding for financing of, among other things, machinery and equipment investments and various energy efficiency projects.

Good ideas are important, of course, but courageous individuals, like Latvaenergia’s Kemppainen, who are willing to start up or extend their business concepts, are the ones who make the good ideas come true.

Pauli Piilma, director of one of Finnvera’s northern Finnish offices, sees the picture of what’s cooking for Oulu’s business future. Finnvera is a specialised financing company owned by the Finnish state.

“Finnvera receives some 800 to 900 loan applications annually in the Oulu region. Of these, around 300 are start-ups. This number has significantly increased lately,” says Mr Piilma.

Both Finnvera’s Pauli Piilma and Oulun Osuuspankki’s Jouni Heikkinen affirm that the cooperation between financiers works smoothly. Coming up with new business initiatives or pushing people to become entrepreneurs isn’t, however, an easy task.

Environmental efficiency leading the way

Environmental projects, especially those aimed at energy efficiency solutions, are a growth area for SMEs. According to Mr Heikkinen, the loan agreement with NIB has added a sustainability perspective to negotiations with potential SME borrowers.

“Since launching the NIB loan programme, we have trained our personnel to see whether there is any energy-efficiency potential in SME clients’ investment needs. For some clients, it has come as a positive surprise that cost savings and environmental improvement projects often go hand in hand”, says Mr Heikkinen.

Finnvera’s Pauli Piilma has also noticed that the financing needs for domestic biofuels and wind power in particular have increased. They still make up only a few percent of all the projects financed by Finnvera, but he is predicting an increase in the near future.