Greetings to Inderes TV. Merus Power organized a Capital Markets Day here at Sanomatalo in Helsinki today, and I am interviewing the company's CEO, Kari Tuomala. Welcome to the interview, Kari.

Thank you, Pauli. It is a pleasure to be here as an interviewee once again.

Indeed, if we start with the history: Merus Power was listed in 2021, so how has Merus Power progressed in its strategy over the last five years?

When looking back and at the starting points, where we set out from, we set tough growth and earnings targets at the time of the listing, and we needed to make a transformation from a power quality company into an energy storage company. Well. Time has flown. Of course, when you are having fun and doing big things. I would say that our strategy has been executed excellently in terms of growth. We have grown by 53 % per year, meaning we are roughly going to cross the tenfold threshold, at least within the limits of measurement accuracy. We have succeeded in our energy storage transformation. The company now firmly stands on two legs. We have a fast-growing energy storage business and a stable power quality business.

And then we have also built up a service business with good expectations. Where we have not succeeded is profitability. Fortunately, even regarding that, we can now say that a turnaround to improve profitability was achieved in 2024, and since then the margin development has been on an upward trajectory. So overall, I am. I am actually really pleased with the results achieved by our team, and in that sense this first Capital Markets Day. Well, this is a good moment. A moment now to see that we have come this far and where we are heading.

Yes, indeed today you announced a new strategy update. What new elements does it bring to this previous continuum?

Well, in that. We haven't brought any radical changes other than these. Let's say that in the new strategy period. Well. Profitability is at the center, earnings growth before general growth. And a clear message that we will remain strongly in this power quality market. Even though the temptation might be to go all-in on energy storages, we see the synergy benefit between these two. On the technology side, it is so strong, and also for the company's overall risk management, we want to take the company forward with this structure we have actually achieved.

Energy storage systems. Power quality and a growing service business. Predictability and stability. A bit like what is offered to power grids. Stability and performance.

Yes, and growth and growth. Yes, yes. You gave a revenue target of 160 million EUR for the year 2030. What is this growth target based on, and what kind of market conditions do you expect it to necessitate?

We don't really need to expect any miracles from the market. If we. If the market remains as it is, that is. That is already an extremely good growth platform for us. For the first time in the company's history, we have had a domestic market for the past five years. Power quality has always been sought from the world. The market is growing in Finland and Europe, and in that sense, regarding this revenue growth prospect, we see that all the cards are in our own hands: through what measures we internationalize, what our market entry strategy is, and how we seek new markets? How we are able to develop competitive solutions for these export markets? That concept will not necessarily be exactly the same as the one we operate with in the domestic market.

These are the factors with which that growth is brought home, because the general market for energy storages is growing massively, and that is not a constraint; the power quality market is experiencing more modest growth, but 5 % a year is still good growth there. There you have to win new markets, be better in various segments, and sharpen our competition.

Good. Indeed, this rapid growth that you have achieved over the past five years? And then again, profitability hasn't quite gone hand in hand so far. Do you see that during this new strategy period. You will nevertheless be able to execute both of these simultaneously?

Now there are much better opportunities for that. We did these. We did quite big things during this and the previous, or now the current strategy period. We recruited experts into the company or built expertise within the company. We have. We have tripled our headcount since the listing moment. There are now 154 of us at the moment, and we have built a new factory. A factory, and then developed new products. Now these basic elements are in place, and we will continue to invest in people. In production facilities and product development. But those steps are smaller, and we don't have to do everything so fast.

So I do see driving this margin development and growth hand in hand today as essentially easier than it was in the previous strategy period. Even back then it was attempted, but. Indeed, as the saying goes, speed did not fix all mistakes, but those mistakes have now been learned from, and now they are taken. Taken to the bottom line as margin.

Yes, well of course this profitability is one part of my next question, but I'm wondering how this heavy growth is financed. Do you still potentially need more capital from the markets, or will it come through your internal cash flow?

Our main idea is that this improving margin development enhances the company's ability to secure financing. We got through this far, this strategy period, with quite scarce financing, and there was very little debt. That wasn't because it wasn't wanted, but it wasn't available. And now that the company has shown that there is positive margin development. When we hopefully reach the plus side as soon as possible, then the availability and also the cost of bank financing and all other guarantees—which are prerequisites for financing our business—will improve and become cheaper, and through that we try to enter a positive cycle financially as well, so that if the growth rate exceeds our estimates or some exceptional situations arise, then we may need to evaluate whether other financing methods need to be implemented.

The company's size also opens up different opportunities. Bonds or similar instruments will be arranged alongside or for the purpose of debt financing.

Yes, then when examining you in relation to this market, which is nonetheless large and global. What are the opportunities for an actor like Merus Power to compete against, for example, Chinese import technology? What? What is your competitiveness based on?

Our competitiveness is based on that comprehensive expertise, which. In practice, we make everything from the battery's. Battery BMS system or plus-minus terminals all the way to the power grid. Converters, the control system. This is where we create added value. It is clear that this competition coming from Chinese full-scope suppliers is. It is price competition, and it is tough competition. But if we look back, during this past period we have nevertheless managed to grow faster than the market, and through that. We can say that we are able to compete with Chinese manufacturers. Not with price, but with the total value generated for customers. And they have made purchasing decisions favoring us.

In that sense, what was stated in today's presentation is true: the competitive landscape for European actors in Europe is improving. An absurd saying even. We have no way of competing in China, but the Chinese can compete here. But it happens. It has happened now through this regulation, and I believe it improves our relative competitive position when Chinese technologies can no longer be purchased for EU-funded projects. But for critical infrastructure, it is a tough race, and the point isn't to cry about it but to develop our own operations to be more competitive. Yes.

Then, power quality solutions. Alongside energy storage, these have been your smaller and slower-growing segment. How seriously are you investing in growth in this area now, or is the focus more on margin there?

Well. If we consider its significance for us as a whole, power quality solutions hold the company DNA. DNA. That is where we originate from, and we find it important. It has formed the company's technology backbone. We have achieved good results. It has not grown at the same pace as energy storage. But. There have been a few years when the investments in it were not at the same level as when we ramped up the company as quickly as possible into this energy storage market.

Moving forward, we will continue to find it significant, we will invest more, and indeed our expectation for those margins as well is that they will support our R&D resources and this technology company profile. So expectations for margins are also good, meaning competitive technology for demanding applications. And these power grid technologies were mentioned earlier. So there is an opening market there where we certainly have opportunities. Data centers are not the only place where this compensator technology can be utilized.

Yes, indeed, recently in Finland and other countries as well, there has been a lot of talk about data centers and the increase in electricity demand. What is the role of energy storage or your offering in general in enabling the operation of data centers?

Speaking of our offering in general, we can provide power quality inside data centers, which brings energy efficiency and reliability. And we have already succeeded in that on a one-off basis. We have not been able to solidify our position in those value chains. Work towards that is ongoing, and that work takes place in the target countries where these are specified and purchases are then made between the data center wall and the grid.

So that is it. It depends quite a lot on how that market is steered in terms of regulation and other factors. But. If demand response requirements or load flexibility requirements are imposed on data centers, then these energy storage solutions become the means for data centers to balance their own load, or alternatively these grid connection requirements and related power quality standards, so it is taking shape right now and it is at a rather fascinating stage. We certainly have solutions depending on which direction it goes, meaning different technologies.

Good. We will keep following how the company is able to advance its strategy. Thank you very much for the interview, Kari.

Thank you, Pauli.