Board of Directors' report 2011

Transcription

1 Board of Directors' report 2011 The Group's activities Nord-Trøndelag Elektrisitetsverk Holding AS (NTE) is a group owned by Nord- Trøndelag County Council. The Group carries out production and sales of energyand telecommunications products, construction and management of infrastructure for energy and telecommunications, services for electronic enterprises and sales of electric items to consumers. The Group s headquarter is located in Steinkjer municipality. NTEs owner assumes a long-term perspective for its ownership with financial, industrial and regional objectives for the development of the Group. Financially, NTE wants to preserve and further develop the owner's values in the company and wants to achieve a satisfying long-term yield through efficient and businesslike operations. Industrially, the Group is a customer- and market-oriented company that delivers excellent products, services and infrastructures to its customers. On the basis of its business operations, NTE exercises an active role in the society and contributes to the development of North- Trøndelag. This role is based on the Group's headquarter being situated in North-Trøndelag. Furthermore, a solid financial foundation and a strong market position in the region are essential for the exercise of such social role. Year 2011 Mid-Norway went into 2011 with record low energy reservoir levels and the risk of periods of insufficient electricity in the region. A relatively mild winter helped avoid the energy crisis to happen and significant rainfall in the second half of the year generated reservoir levels well above the average at the beginning of winter 2011/2012. The Board of Directors has focused on the Group's underlying profitability also in 2011 in order to consolidate the situation and it has implemented organizational changes and market adjustments, particularly in the competitive segments of the business. Economic performance Assumption In compliance with financial law 3-3, the Board of Directors confirms that accounts are prepared on the assumption of continued operations and that the Group is in a healthy economic and financial position.

2 Net income The business year 2011 for the NTE Group has ended with earnings before taxes of NOK 381 millions, compared with NOK 614 millions in As a result of writedown of financial assets, the net income was a loss of NOK 14.6 against a profit of NOK 160 the year before. The operations in most of NTE s business areas are good. NTE Energy and NTE Nett provide the largest contributions to the result. NTE Elektro continues the positive trend from last year, but there are still profitability challenges in larger business projects. A positive trend continues also in NTE Market with a significant improvement in the energy sale, but the retail business did not achieve a profit in Along with the other owners of the telecommunications company Ventelo, in December 2011 NTE signed an agreement to sell its Ventelo shares to EQT, which lead to NOK 162 in write-down of the investment in Ventelo in the accounts for The Group had a tax expense of NOK 395 compared to NOK 455 in Operating revenue In 2011 the group had a turnover of NOK 3,423 millions compared to NOK 3,966 millions in The electricity price for Central Norway (NO3) was ore/kwh compared to ore/ kwh in The power generation was 4,052 GWh, which is 700 GWh higher than the year before. The normal production is about 3.9 TWh. Operating expenses The operational costs amounted to NOK 2,480 million in 2011, which are NOK 478 millions lower than in Operating income The operational result before the depreciations (EBITDA) was NOK 1,283 millions compared to NOK 1,338 millions in The operational result was NOK 943 millions compared to NOK 1,008 millions in Financial records The Group net financial expenses were NOK 563 millions.

3 Cash flow and capital relationships The cash flow from the operational activities was NOK 714 millions in 2011 compared to NOK 682 millions in The investment activities amounted to NOK 424 millions, while the financing activities resulted in a net cash flow of minus NOK 452 millions. The Group's liquidity was reduced by NOK 162 millions. The 31.December 2011the accounted assets of the Group amounted to NOK 9,851 millions. Of these, NOK 5,838 millions were fixed tangible assets. 31. December 2011 the equity amounted to NOK 2,343 millions compared to NOK 2,359 millions at the end of The Group has an equity ratio of The Board of Directors considers NTE s financial resources to be good. Bank deposits, cash and the market-based bonds and cerificates amount to NOK 317 millions as of 31. December The equivalent in 2010 was NOK 626 millions. Last year the Group invested NOK 590 in fixed tangible and financial assets. Financial management NTE adheres the "Rules for financial management for Nord-Trøndelag County Council". This means that the financial management is carried out according to a low risk strategy. NTE does not have financial investments in stocks, mutual funds, etc. The investments in individual securities are distributed in several offerings according to certain conditions and no issue can have a rating lower than BBB. All investments in securities have face value in Norwegian kroner. Loans The Group's long-term interest-bearing debt was NOK 6,344 millions, inclusive of a subordinated loan of NOK 2,000 millions from the Nord-Trøndelag County Council which has decay in A significant part of the debt is fixed so that the Group's financial results are less affected by market changes in interest rates. Financial risk Market Risk NTE reduces the currency risk by securing contracts in foreign currencies by termcontracts. All future fixed price contracts, sales and purchases of energy are secured. All loans are in Norwegian crowns and have fixed interests with different duration in the individual loans in the loan portfolio. Credit risk The risk that NTE s counterparties do not have the financial ability to meet their obligations is considered to be relatively small. NTE has a large customer base, the claims are thus well spread across many customers.

4 Liquidity risk The liquidity of the company is considered to be good and there is no decision to introduce measures to change the liquidity risk. The due dates for accounts receivables are maintained and the investments will continue to be in securities with good liquidity. NTE has a satisfactory credit rating and the Group's liquidity risk is therefore assessed as low. Nord-Trøndelag Elektrisitetsverk Holding AS For Nord-Trøndelag Elektrisitetsverk Holding AS, the parent company, the business year 2011 ended with earnings before income taxes of NOK 72 millions and with a net income of NOK 3.8 millions. Allocation of the net income The net income of NOK millions of NTE Holding AS was allocated as follows: Transferred to other equity capital: NOK millions Interest on Subordinated Loans and Buy-out Concession of Licensing Power to the Owner and Municipality As owner, North-Trøndelag County Council has a subordinated loan of two billions in NTE. This gave an interest income to the county council of NOK 150 millions in In 2011 NTE paid NOK 17 millions to North-Trøndelag county council for the for concessions and 10 millions in guarantee commissions. The payment for concessions to municipalities which have energy production amounted to NOK 16 millions. Risk management and internal control NTE is currently working to develop the Group's risk management and risk culture. There is a significant volume-, price- and currency risk associated with energy production and energy trading, both in the wholesale and in the retail market. The electricity prices are affected by the prices of other energy sources such as oil, gas and coal prices and by the prices for CO 2 quotes. Furthermore, rainfall and temperatures are of great importance and provide significant fluctuations in both prices and production volumes. The bottlenecks in the transmission grid especially between southern Norway and central Norway can create significant price differences in terms of regional prices. The Board of Directors is kept constantly informed through regular reports on the Group s financial status, on the forecasts for the current year and on the long-term

5 forecasts. There is an internal auditing function that based on annual assessments conducts an internal audit commissioned by the audit committee. Employees and organization At the end of 2011 there were 932 employees in the Group, down from the 986 of the previous year. The decrease is the result of the sale of the daughter company NTE VVS AS, the liquidation of parts of NTE Enterprise AS and the general downsizing in NTE Elektro. The workforce amounted to 884, a decrease of percent of the employees were women, a proportion that has remained stable for several years. Of a total of 36 new employees during the year, there were also 17 percent of women. It is a goal for the company to increase the proportion of women among managers and other employees. The Group has one woman in the Corporate Leadership group. Two out of five members of the Board of Directors are women; also the boards of directors of the daughter companies have the same representation. In the Group s HR strategy it is stated that in the recruitment of new employees NTE has to place emphasis on gender equality and on equal treatment of the applicants regardless of their cultural/ethnic background. NTE seeks to avoid any kind of discrimination in line with the purposes of the Anti- Discrimination Act and of the Accessibility Act. At the end of the year there were 35 apprentices at NTE, barely six percent of these were women. The applications for vacancies externally advertised, suggests that NTE is perceived as an attractive workplace within most occupational groups. The competition for employees with technical education in certain subjects and geographical areas seem to be bigger. The apprenticeships is an important part of the recruitment. In order to further strengthen the recruitment, NTE has also taken in trainees for several years, both on its own and in collaboration with other companies through Intro Innherred. NTE cooperates closely with universities and colleges on further education, including NTNU through Partners for innovation. Leadership is defined as a critical success factor in NTE. As a result, in 2010 the leadership development program "Tett på" was established. There are almost 100 managers of the Group and of its daughter companies participating in the program, which lasts for several years. In 2011, 21 different courses were carried out with a total of 1100 participants, five employees have started with decentralized engineering education and six employees have received student grants for part-time studies at college- and university level.

6 Health and safety NTE emphasizes that all employees should have a good and safe working environment, where security is integrated into all the aspects of the corporate activities. NTE is certified according to the ISO standards ISO9001 (quality) and ISO1400 (environment). This has contributed to the improvement of processes, governing documents, HSE work in general and of the systems that are used for monitoring and documentation. Sick leave NTE has had a downward trend in sickness absence since In 2011 the sickness absence in the Group was 4.0 percent compared 5.1 percent in Short-term absence is stable and relatively low, 0.9 percent in It is particularly the long-term absence to be reduced from 2010 to During 2010 and 2011 NTE has introduced tools and has prioritized resources for a closer monitoring of the employees with health problems, either with long-term absence or with frequent absence periods. NTE's goal is to keep employees with disabilities. Some workers have gone into partial disability benefits and can therefore stay longer at work. Personal injuries In 2011, 36 injuries were registered, 7 of which led to absence. In 2010 the figures were respectively 31 and 8. In spite of the increased number of injuries from 2010 to 2011, there was a reduction in the number of events with a high risk potential. Absence injuries gave 87 days of absence in 2011 while the corresponding figure for 2010 was 195 days. In 2010 and in 2011 NTE introduced new tools to reduce risk in general. Emergency NTE's goal is to ensure continual supply of power in Nord-Trøndelag. NTE s emergency planning is particularly focused on efficient operations, on recovery under extraordinary circumstances and on having sufficient emergency resources in the form of personnel and expertise. The company conducts regular exercises with both the operational personnel and the management at the operational, tactical and strategic levels. At the end of 2011 two severe weather events took place, "Berit" and "Dagmar," which gave power failure for short periods. NTE s emergency organization has received positive feedback for the handling of such events. The external environment NTE contributes to a better environment and to reduced emissions through the production of clean and renewable energy. All the electricity that we produce comes from renewable sources, first and foremost water and then wind, which are part of the solution to climate changes. As an ISO certified company also for environmental management, NTE works

7 systematically to find long-term sustainable solutions that help reduce the negative impact on both humans and the environment and to reduce the risk of accidents that can harm the nature and the environment. The Group assumes that all its business produces some form of environmental damages. Through various measures, both during the construction and during the normal operations and maintenance ( drift ), NTE attempts to reduce these drawbacks. The Group's environmental impact is first and foremost in the forms of: impact on the landscape, use of energy and other resources, greenhouse gas emissions from transport, waste and aesthetic impact in terms of production facilities and line grids. NTE cooperates with several companies to develop commercial and profitable use of electric vehicles. From 2011 NTE has increased the degree of sorting waste and has reduced CO2 emissions. NTE has also implemented measures to reduce the use of paper. Modern conference facilities help to reduce business trips and thus CO2 emissions. In 2011 NTE has recorded five oil events with risk of leaks to waterways. Business Development NTE business development contributes to innovation and value creation based on the Group's capital, expertise and customer base. A separate unit for strategy and business development has been established at the Group s headquarter in order to evaluate, initiate and develop new business opportunities in areas in which NTE has or can achieve competitive advantages. Besides innovation, business development activities contribute to NTE appearing to be one of the most attractive employers in Mid-Norway and they help to position Mid- Norway as a leading and sustainable growth region. As an important element of its development, NTE is part of the network Partners for innovation together with NTNU and Sparebank1 SMN. NTE is an active participant in the electrification of transportation in central Norway, among the others through its daughter company EV Power AS. Through its business, NTE has taken a leading role in the energy industry in the development of future smart grids. Project Demo Steinkjer, owned by NTE, will try out different models for future concepts when the new advanced measurement systems will be implemented in the coming years. Ethics NTE has an ethical code that determines how the Group and its employees should behave when they represent NTE. The platform is based on the NTE values of closeness, reliability and transparency. The ethical code applies to NTE s own employees as well as to others who are engaged to represent the Group.

8 Corporate Social Responsibility NTE s owner has stated that the Group should play a role in the North- Trøndelag s society. For NTE this implies that social responsibility should be exercised in a manner that contributes to the creation of competitive advantages both for the company and for North-Trøndelag as a county. Actions that can contribute to promote social development require efficient and profitable operations for the company. The Board of Directors has determined that NTE, on the basis of business and ethical operations, will manage its social responsibility as follows: 1. We will further develop the three major balances grid, energy and broadband. Good preparedness in grid is fundamental to all decisions; the company will contribute to the further development of renewable energy and will introduce new services through the construction of fiber-based communications solutions. NTE will also contribute, together with others, to build high-speed communication solutions in areas that are, as a starting point, commercially unprofitable. 2. We will contribute to innovation and R&D in Trøndelag. The company will engage in long-term business development based on NTE s own customer base, expertise and capital. 3. We will participate in the development of attractive and creative local communities through a defined long-term cooperation with culture and sports. Reputation and Profile NTE focuses on having a good reputation. The foundation of a good reputation is achieved through adherence to the core values of closeness, reliability and transparency and is built, among the others, through good customer service, quality in products and services, media awareness and cooperation with culture and sports. NTE has a good and stable reputation and surveys show that the perception of the company is satisfactory. In 2011 NTE was referenced in 450 reports in the media, mainly in media in Trøndelag, but also in national media. In 2010 the corresponding figure was around 700; the difference from 2010 to 2011 shows media interest related to the development of power prices, which were covered with great interest in An analysis of the last three months of 2011 shows that out of 129 reports in this period, 94 reports have been rated as positive or neutral. Business Areas NTE Energi AS NTE Energi AS include energy production, wholesale sales of electric energy, development of new energy, and operation of energy facilities, and preparedness of production facilities. The company manages NTEs ownership holdings in the windpower company Sarepta Energi AS, in Siso Energy AS, in the joint ownership Linnvasselv, in Åbjøra-Kolsvik kraftverk and in other small energy companies. NTE

9 sold out its shares of BioVarme AS at the end of the year. In 2011 NTE s share of production in fully-owned or partially-owned power plant was 4,052 GWh, 165 GWh over the average production. A production record was set both with regards to hydropower and windpower. In 2011 NTE Energy AS had incomes for 1,815 millions, EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) of NOK 988 millions and a net income of NOK 314 millions. Water reservoir levels at the end of the year was 1880 GWh, which is around 900 GWh more than at the end of Dola kraftverk (6.9 GWh) was commissioned in April 2011 and in January 2012 it was one of the first power plants in Norway to be awarded electricity certificate. During the year NTE received a new concession within small hydropower. Together with TrønderEnergi Kraft AS, NTE owns the windpower company Sarepta Energi AS; in summer 2011 the company began the construction of the first phase of the Ytre Vikna wind park. During 2011, NTE Energi entered, directly or through joint ventures, two major longterm agreements for the sale of energy. The duration of the contracts is from 7 to 15 years NTE Nett AS NTE Nett AS is responsible for power supply and associated activities within the monopoly part of NTE. The grid company incomes depend on the Norwegian Water Resources and Energy Directorate s regulation of the profits frame. The company's results are created through efficient operations and costs management. In 2011 NTE Nett AS had a revenue cap of NOK 578 millions and an operating income of NOK 83.8 millions; the net income amounted to NOK 52.5 millions. NTE s grid rent to end-users did not increase from 2010 to 2011, but the national consumption tax increased slightly. NTE s line grid was significantly affected by the storm over large parts of the country the 25. December and about 15,000 households were without electricity for short or long periods. In the coming years NTE Nett is in front of bigger investments in the renewal of the line grid and has built up an organization with expertise and capacity to undertake the tasks ahead. NTE Elektro AS NTE Elektro AS supplies electrical installations and operates electric contracts. NTE Entreprise is organized into a separate company under NTE Elektro.

10 The total revenue of NTE Elektro was NOK 236 millions which provided an operating income of NOK 6.5 millions and a net income of NOK 4.8 millions. In 2011 NTE Entreprise had a net income of minus 8.5 millions. During the year, parts of NTE Entreprise were sold to a group of employees. In 2011 NTE sold the NTE VVS to the employees of the company. NTE Marked AS NTE Marked AS has the Group s responsibility for marketing, sales and service for NTE s products and services and ensures improved profitability among NTE s customer-oriented activities. The company includes the sales force, fiber, and customer service and its wholly-owned daughter company NTE Handel AS. In 2011 NTE Marked AS had a turnover of NOK 987 millions. The operating income was minus NOK 12.5 millions and the net income was minus NOK 33.6 millions. NTE Handel AS sells electrical supplies through stores affiliated to the Expert chain. Last year the company owned and ran 15 electrical stores in North-Trøndelag and 1 electric store in Trondheim. The company is part of NTE Market s business strategy to be an important market channel to customers for a variety of NTE products and services through the concept of "NTE in the shop." The customers' use of this channel increases. In 2011 NTE Handel had a turnover of NOK 150 millions. The net income was minus 11.9 millions. In 2011 the shops of NTE Handel went through a demanding period. At the end of the year it was decided to close down 6 of the smaller shops in order to improve the profitability for the retail business. The employees have shown great willingness and flexibility to change and to implement the company s adopted business strategy. Parent company NTE Holding AS The Group's parent company operates traditional group functions such as economy and financial management, ICTs, purchasing, business development, communications, human resources and HSE/QA function. Moreover, the parent company manages the Group's commercial properties and its own car workshop. The department NTE Energy Development has as main objective to initiate and carry out profitable development of projects with emphasis on the utilization of renewable energy sources and it provides services to other parts of the NTE Group as well as to external customers.

11 NTE Entreprenør AS From the 1. January 2012 NTE Entreprenør AS has been established as a new, wholly-owned daughter company of NTE. NTE Entreprenør includes NTE Elektro, NTE Entreprise and units that provide services in grid operations and in the planning and in the implementation of energy projects. The establishment was done in order to exploit the company s resources and expertise and therefore to meet the constantly increasing competition in several market areas. The new company will have a special focus on the efficient and profitable execution of major contracts. Conditions and future prospects The Board of Directors places emphasis on keeping NTE innovative and socially responsible. It is essential for the Group to be in constant development and growth within the prioritized areas of business. NTE will face massive investments in the coming years, both in production facilities, power grids and fiber grids. The Board of Directors is therefore committed to strengthen NTE s financial basis through increased focus on the costs of the operations and on the critical assessment of potential investments. At the end of 2011 the resources situation for the Group's power production was better than it had been for several years. The rainfall was well above the average in the autumn of 2011 and more snow than the average in the reservoir areas makes the outlook for 2012 satisfactory. However, the power situation in Mid-Norway is still strained; the power prices in our region on level with the rest of the country, requires that the rainfall continues also in 2012 at least on annual average. The green certificate market in Norway and Sweden is now in place; this gives the expectation that new energy projects can be realized and that they can contribute to improve the energy balance in Mid-Norway. The power grid is an infrastructure on which the society depends, therefore it is essential that the framework conditions are such that the grid can both be maintained and renewed and that the grid company can maintain a satisfying praperdness. To ensure the people living in North-Trøndelag a satisfying security of supply, in the coming years NTE will carry out a significant investment program in line grid. Thanks to the employees, the customers and others The competition and the need for profits challenge employees' ability and willingness to develop. NTE wishes to meet these challenges also in the coming years through a close cooperation with the unions. The Board of Directors would like to thank the NTE employees for their efforts in the operations and in the development of the company, as well as the NTE customers and partners for good relations in 2011.