Preface. It also considers the prerequisites to fulfil our vision, such as a competent staff, excellent partnerships and sound finances.

Transcription

1 Business plan 2015

2 Contents 3 Preface 4 Framework of Aarhus Vand A/S 7 Mission, vision and values 8 Extended collaboration with the City of Aarhus 9 Annual wheel, Management by objectives 11 Company objectives and performance indicators 12 Strategy 2020 focus on growth, productivity and ingenuity 17 Internationalisation - focus on the USA, South-east Asia and Zambia 19 Climate adaptation operator of the entire water cycle 21 Joint purchasing saves millions 22 We enhance our customer dialogue 24 Budget for Tariffs for Organisation 29 Description of the departments' tasks

3 Preface As one of the largest water companies in Denmark, we commit to supporting the water industry. We have extensive knowledge in the operation of various facilities, establishing organisations, analysing, tendering, planning, project management, training and commissioning facilities. Looking beyond our borders, we can provide input with knowledge and support for Danish exports. At the same time, we and the industry can gain new knowledge to optimise and develop processes and procedures, thus improving the entire industry. WELCOME to Aarhus Vand's business plan The business plan describes in words and pictures the company's exhilarating, current developments and its expected results for We have established a sound and excellent base for the further development of Aarhus Vand. This is essential as the setting of the company is constantly changing. Factors such as adaptation to climate change, legislative changes, strict financial regulation and a current reform of the Danish water sector require reaction and adaptation. Collaboration with our key stakeholders customers, owners and authorities is rewarding and in 2015 we will together balance expectations for our roles and responsibilities. In our efforts to realise Aarhus Vand's Strategy 2020 we will be focusing on growth, productivity and ingenuity in 2015 which will enable us even more to shape the future water company in Aarhus. With its plan for growth in water, biological and environmental solutions, the Danish government has facilitated enhancing the dialogue between water companies, knowledge institutions, industry and technology suppliers in order to further innovation and exports in the existing setting of the water sector. The overall water market is expected to increase annually by some 6 per cent the next five years while various new areas of technology are expected to increase by up to 20 per cent a year. In 2011, the international water technology market was estimated at DKK 2,500 billion which is nearly triple the size of the wind turbine industry (Grontmij 2011). One-third of Denmark's water industry is located in Business Region Aarhus, which is the domicile of several market leaders in water. Increasing global demand for water technology holds a vast potential for additional growth in Business Region Aarhus. However, more coordinated and strategic efforts are needed across the municipalities to ensure that the business potential in water is utilised optimally. Many locally oriented companies in Business Region Aarhus can be part of more globally oriented value chains and if supported, this may affect both local and regional business development and growth positively. Aarhus Vand will become a more attractive workplace to employees if company activities take on an international dimension where water companies and the industry can boost their knowhow to optimise and develop processes and procedures, thus improving the individual companies. Aarhus Vand would like to deliver and share the responsibility of increasing Danish exports in water applications. Our business plan also describes Aarhus Vand's mission, vision and objectives under the setting laid out for our activities by our owner and Danish legislation. It also describes how we organise work and sets out our values and our strategy for the years ahead. It also considers the prerequisites to fulfil our vision, such as a competent staff, excellent partnerships and sound finances. Basic components of our business plan: Framework of Aarhus Vand A/S Aarhus Vand's mission and vision Management by objectives Strategihuset 2015 Financial framework for 2015 Organisation and resources Enjoy your reading. Best regards Lars Schrøder Director 3

4 Framework of Aarhus Vand A/S AARHUS VAND IS A DANISH PUBLIC LIMITED COMPANY owned 100% by the City of Aarhus. The company's activities comprise rainwater disposal (including climate adaptation projects), the production and distribution of drinking water, the transport and purification of wastewater, the emptying of private holding tanks as well as safeguarding a balanced and healthy water cycle. We are recovering, treating and distributing more than 15 million m 3 of drinking water and purifying more than 30 million m 3 of wastewater a year in nine waterworks and nine wastewater treatment plants. The company has a staff of 197 competent, dedicated employees. Aarhus Vand's income is based on user payments in the form of connection fees, fixed charges, road charges, variable water and sewage disposal charges and a charge for emptying private holding tanks. Under the Danish Consolidated Act on Water Supply and the Danish Act on Payment Rules regarding wastewater, the income must finance the company's annual production and administration costs, financial expenses and investments. The supply secretariat (Forsyningssekretariat) is charged with regulating the company's finances according to a price cap based on the company's historical prices, developments in its costs and efficiency improvement requirements. Danish Water Sector Reform The Danish Water Sector Act is under reform and Deloitte's assessment of the current Water Sector Act concludes: Regarding financial regulations: The current regulatory model's key challenge is that all regulations are generally based on almost inconsistent elements given the price cap regulation and tax liability imposed at the same time combined with the existing self-financing principle. Each of these regulatory mechanisms 4

5 represents its own considerations in terms of limiting the water companies' ability to utilise monopoly rights and limiting the effects of earnings, if any. However, together they form the basis of restrictive, administration-intensive regulations which unnecessarily restrict the water companies' latitude, incentives to streamline activities, innovative capacity and collaboration options with the water sector. Regarding self-financing : Reduces the water companies' incentives to streamline activities. Deloitte finds that it will not be beneficial to prevent private commercial stakeholders from investing in Danish water companies. On the contrary, the involvement of private commercial stakeholders is expected to help boost increased consolidation in the water sector with a major financial potential and increased out-sourcing of operating tasks. Regarding consolidation: The Danish Water Sector Act and its related regulation result in various barriers to consolidating the Danish water sector. The barriers are: Ban on differentiated wastewater tariffs. The costs for mergers must be kept below the water companies' price caps which puts the water companies' financial latitude under pressure. Small water companies do not want to come within the Water Sector Act as a result of mergers. The risk of taxation of transfers of values as a result of water company mergers. Limitation of the municipalities' influence over municipally owned water companies. Official responsibility is shared between several municipalities in mergers between water companies owned by municipalities. Uncertainty regarding financial regulation in connection with mergers between water companies covered by the Act and water companies not covered by the Act. Municipalities risk setting off in their block grants after mergers of municipally owned water companies as a result of provisions in the Stop Act. Regarding distribution of tasks: The provisions regarding the contents of wastewater and water supply plans do not fully support the separation of the official and operating responsibility which was the plan of hiving off the municipally owned supply activities. The distribution of tasks and responsibilities in the adaptation of climate changes is not considered appropriate. In relation to the municipalities' implementation of their roles as owner, various inexpediencies appear as far as the composition of boards of directors is concerned in particular which may result in conflicts of interests between the municipalities' role of authority and the boards of directors' obligation to safeguard the interests of the water companies. Such inexpediencies might be handled through increased focus on board members having the proper competencies and a deliberate decision made in the municipalities to handle the composition of the members on the water companies' boards of directors to be able to minimise the risk of conflicts of interests and at the same time deal with them professionally should they occur. The supply secretariat supersedes the municipalities' role as approver of the tariffs set by the municipally owned water companies. The municipalities' approval of the terms regarding the consumers' payment of tariffs and construction contributions also involves an inexpedient opportunity to influence the liquidity of the water companies. Regarding innovation: The current price cap regulation reduces the financial capacity of the water companies to seek new technology. The price cap regulation does not involve any incentives to deliver on environmental, climate and service objectives in addition to the requirements following from the regulation. Danish and international experience show that mainly major water companies are committed to the development of technologies and business promotion and that these companies in particular are interesting partners to the suppliers and consulting firms in water technology. In this connection, it is estimated that the Water Sector Act has more indirect barriers to growth and business promotion as this regulation limits consolidation of the Danish water sector. The water companies' ability to commit to related activities which are a natural progression of their supply activities is seen as an expedient initiative to encourage water companies to commit themselves to development projects and business promotion. However, existing revenue limits are seen to severely limit the companies' commitment. In this connection, it must be realised that the existing opportunities of increasing revenue from related activities through 60/40 companies where a private stakeholder owns 60% of the shares fell short of the intended purpose. This corporate form is neither attractive to the water companies nor to the water technology companies. 5

6 Board of directors Hans E. Pedersen Camilla Fabricius Ellen M. Basse Ango Winther Lars B. Mathiesen Chairman Director of Customer Innovation, AarhusKarlshamn. Deputy chairman Member of the Aarhus City Council for the Social Democrats. Professor, doctor of laws & jur.dr. (h.c.) Professor, environmental law at Aarhus University. Member of the Aarhus City Council for the Social Democrats. Member of the Aarhus City Council for the Liberal Alliance. Bjørn Rohde Henrik Frier Mads Thomsen Henning Møller Employee representative, Aarhus Vand. Employee representative, Aarhus Vand. Employee representative, Aarhus Vand. Consumer representative. 6

7 Mission, vision and values Mission The company's objective is to offer and develop resource-efficient services throughout the water cycle creating a climate-adapted healthy environment as well as growth and export to the benefit of customers and stakeholders. Vision Aarhus Vand wants to be Denmark s leading water company. Aarhus Vand will focus on developing a value-adding water company with characteristics such as: Environmentally sound, resource-efficient, energy-neutral, well-run, innovative and partnership-promoting. Aarhus Vand has an excellent basis for creating overall solutions and committing to sustainability in relation to the overall water cycle. The water and wastewater sections each has its own considerable strengths and potential. We can achieve a unique position by coordinating the competencies. At the same time, excellent opportunities have been created to streamline operations by utilising synergies optimally in a wide range of areas. Continued development of production plant combined with extensive participation in research projects and highly competent and well-educated employees will help ensure that we and our surroundings see Aarhus Vand as the leading water company in Denmark. The key conditions to the company's success are that all employees at Aarhus Vand work individually and together to implement our goals and to keep our customers in focus in our daily work. Values At Aarhus Vand, we not only manage by goals but also by values. Our four WATER values we feeling, responsibility, innovation and dialogue are part of our DNA. The values are related to the following statements which must guide how we fulfil these values. WE FEELING We have each other's best interests at heart We make room for diversity We are good colleagues and reinforce our sense of community Together we build the best workplace INNOVATION We make room for creativity We dare lead the way We realise ideas quickly We challenge the way things are done RESPONSIBILITY We keep our promises and stand by what we do We take responsibility for our surroundings We improve our competencies We show initiative DIALOGUE We are honest and show respect We are open and trustful We give and receive praise and complaints We share knowledge and experience 7

8 Extended collaboration with the City of Aarhus THE CITY OF AARHUS' OWNER STRATEGY SETS OUT what the municipality wants from the company in the short and long term. The municipality's role as an owner and authority rest with The Mayor's Department and Technical Services and Environment. At a general meeting each spring, the City Council elects the board of directors who will safeguard the interests of the owner and of the company. In accordance with the City of Aarhus' owner strategy, Aarhus Vand keeps its focus on operating the company with a high degree of continuity of supply and on a financially and environmentally sustainable basis. The City of Aarhus' plans regarding for example the water supply plan, the wastewater plan, the environmental action plan and climate adaptation plan set the framework of Aarhus Vand's tasks in the years to come. In order to support the municipality's climate plan and environmental action plan we are preparing ongoing initiatives to reduce our energy consumption and CO 2 emissions. For many years, we have been increasing sewerage capacity and adapted sewerage infrastructure to climate changes. In the coming years, we will also begin to adapt our facilities to the increased precipitation which we expect. Our focus is, among other things, to establish separation systems and local handling of precipitation through various measures such as percolation, retardation and evaporation. In existing areas with combined sewerage as well as in new areas of serviced plots we are implementing sustain- able solutions to the benefit of the entire water cycle in accordance with the plans of the City of Aarhus. Under the municipality's environmental action plan we are converting land into forest and we support the municipality's wishes for more water in the city by establishing various rainwater basins in the form of small lakes. We are integrating these lakes into the surroundings and establish them in connection with new serviced plots and also in built-up areas. In order to improve the aquatic environment we are completing various initiatives to help improve the water quality of our streams, lakes and in Aarhus Bay. As one of the first municipalities in Denmark, the City of Aarhus can say the efforts of improving wastewater treatment in the open countryside has been completed and that Aarhus Vand has reduced rainwater related emissions of diluted wastewater so that we have met the municipality's goals from the environmental action plan. As a result, Aarhus is one of the most advanced municipalities in this area. With the changed climate conditions, including monster rain, etc., our cities are facing new challenges which call for controlling and directing water and wastewater to reduce damming and flooding. Rain storms produce water from many sources and water from the roads runs to the sewers through the road drains. Water from the properties in the affected areas follows the same route. When lakes and watercourses flood, water will often run into the sewers and when green areas, lawns, etc. are saturated, water will go to the lowest areas. Water knows no boundaries and cannot see whether it should be in a sewer, a watercourse or in basements and viaducts. The water runs downhill which presents us as a water company with major and very expensive challenges. The solution to these challenges is to increase sewerage capacity and the capacities of watercourses running into the sea. We do that in various ways. We establish major sewers and expand watercourses in some places whereas we establish canals and tunnels in other places for the large amounts of water during rain storms. And we also lead the water for storage in parks, green areas and other places where it does no harm.

9 Annual wheel, 2015 ANNUAL WHEEL for the collaboration with the City of Aarhus Month Involved party(ies) The Mayor is informed about the company's activities January Chairman of the Board, Director, Mayor and City Manager The Financing Committee is informed of and discusses the company's annual report City Council deliberations: Presentation of annual report Approval of revised owner strategy, if any May May Chairman of the Board, Director and the Financing Committee The entire City Council General meeting May The Mayor and the Mayor's Department Company strategy March Board of directors, Executive board, owner and authority ANNUAL WHEEL for the board of directors Month Comment New Year's reception January 1 st board meeting 2015 February Strategy workshop with the City of Aarhus March With the participation of owner and authority 2 nd board meeting 2015 April Financial statements 2014 Board of directors' seminar May 3 rd board meeting 2015 August 4 th board meeting 2015 November Budget 2016 DANVA annual meeting May 9

10 Management by objectives AT AARHUS VAND, WE WISH to measure and document our performance mainly through our accredited management system which focuses on documentation, assessment and improvement. The many objectives set are part of our model for management by objectives which creates a general view of the work as well as connection with the company's objectives. This model has simplified our management by objectives by replacing various other measuring tools and provides a clear focus on the key tasks we should work on during the year. At the same time, the model integrates the requirements for management by objectives, reporting, etc. which are the results of the requirements and provisions included in the Danish Companies Act. The process in the work on our objective goes from mission across vision to dimensions and on to company objectives to performance indicators in each department. This is in part supported by actually formulated objectives and performance indicators, in part by action plans and analyses of key factors of success. 10

11 Company objectives and performance indicators AARHUS VAND'S BUSINESS STRATEGY towards 2020 has three focus areas: Growth, productivity and ingenuity. These focus areas point out the three most important overall areas in which the company must develop over the coming years. Business objectives have been set for 2015 in the three areas (see the figure below). These focus areas and the related business objectives are based on our nine sub-strategies: The overall water cycle, market and customers, efficiency and quality, energy and CO 2, financing, IT, competency, internationalisation as well as partnerships and consolidation. Moreover, the objectives must be met through various other tasks and projects supporting the company's mission, vision and Strategy The connection appears from the illustration which is a framework of the direction in which Aarhus Vand wants to move. Based on the framework below, we have prepared various performance indicators for departments and functions which together form the contents and management parameters of Aarhus Vand's model for management by objectives. Vision Aarhus Vand wants to be Denmark s leading water company strategy: Focuses on developing a value-adding water company with characteristics such as: Environmentally sound, resource-efficient, energy-neutral, well-run, innovative and partnership-promoting GROWTH Goal: Increased by 20% towards 2020 PRODUCTIVITY Goal: Increased by 20% towards 2020 INGENUITY Goal: Measured on the effect of productivity and growth 2015 Increase gross revenue by DKK 15 million Increase productivity by 2% Five new products / services marketed Sub-strategies: The overall water cycle, market and customers, efficiency and quality, energy and CO 2, financing, IT, competency, internationalisation as well as partnerships and consolidation. Basis Values: We feeling, responsibility, innovation and dialogue. Mission: To offer and develop resource-efficient services throughout the water cycle creating a climate-adapted healthy environment as well as growth and export to the benefit of customers and stakeholders. Figure Aarhus Vand's business strategy towards

12 Strategy 2020 focus on growth, productivity and ingenuity WITH OUR THREE FOCUS AREA, growth, productivity and ingenuity, we want to strengthen focus in our strategy work towards 2020 and make it easier to see the connection between the nine sub-strategies which form the basis of our overall strategy. This focus also shows our wish to create development for ourselves and the community by supporting the current trends to create growth, export, productivity and creativity in Denmark. So we want to hook Aarhus Vand to this social development. The supply secretariat and we require ongoing improvements and streamlining. However, at Aarhus Vand we would like also to ensure that reducing expenses and resource consumption in production is matched by growth. It is healthy for a company to streamline and grow at the same time. However, increased production at lower costs and increased efficiency also translate into fewer employees. We do not want that. Our goal is at least to maintain the current size of Aarhus Vand. That's why we set ourselves the goal of creating growth to offset the reduction of the company which increased productivity will involve. This means that our growth volume should match the reduction in our productivity volume. Our third focus area is ingenuity which is an old word for innovation but which is more about creativity, getting ideas and creating the framework of being innovative. Ingenuity must form the basis of productivity and must point out our areas of growth. We are working on ingenuity in an ideas forum on our intranet, we prepare action plans regarding ingenuity, hold workshops and invite external parties to challenge us in areas of special importance. In addition to this, ingenuity is a key element in our customer and market strategy where we focus on developing new products and new product opportunities. In 2015, we will hire a business developer whose task, among others, will be to identify new products and services, to make them marketable and market them. Together, this will help us select, year after year, the right products to the benefit of Aarhus Vand and thereby our customers. We have set specific objective for 2015 in each area: We must increase gross revenue by DKK 15 million through new initiatives, we must increase productivity by 2 per cent and we must market 5 new products or services. However, these focus areas point towards 2020 where the objectives are to increase productivity by 20 per cent, to increase growth by 20 per cent and to measure the effect on our productivity and growth. By increasing productivity by 20 per cent towards 2020 we are creating the latitude for 12

13 growth and ingenuity which will help increase productivity. By also increasing growth by 20 per cent towards 2020 we are, among other things, increasing revenue by DKK 120 million and creating the basis of up to 50 jobs. Ingenuity is measured on the effect of productivity and growth. Indicators may be the extent and participants of development projects. The focus areas of 2015 chosen for Aarhus Vand's nine substrategies each governed by a program manager are shown on the following two pages. These focus areas will be updated on an ongoing basis at program manager meetings throughout the year. This will open the door to new projects whereas others will cease as the framework changes, among other things due to the reform of the Water Sector Act. - The three focus areas of growth, productivity and ingenuity cut to the bone and clearly indicate how we should streamline the company. The focus areas already exist in our nine sub-strategies but crystallise the work we have done with Strategy 2020 over the last four years. Claus Homann, Strategic Manager 13

14 THE OVERALL WATER CYCLE Objective: To ensure a water cycle affected by humans but sustainable and based on a holistic approach. Focus areas: In the project regarding separation of rainwater and wastewater in Risvangen/Vorrevangen to develop new products and services, such as service packages for the residents, LAR solutions on own sites as a service from Aarhus Vand as well as free advice and instructions. To develop new operating activities such as take-over of the operation and ownership of the lock at the harbour by the City of Aarhus. To clarify whether measurements/monitoring of the overall water cycle should form part of Aarhus Vand's services. To uncover the opportunities of Aarhus Vand to operate and have the responsibility of the overall water cycle and thus also the responsibility of ensuring implementation of the best solutions in terms of economics and environment above and below the ground. MARKETS AND CUSTOMERS Objective: To set a framework of opting in and out of all future opportunities. Focus areas: To increase customer involvement, e.g. by developing customer meetings, uncovering needs for counselling and services, developing our customer panel, establishing a customer forum and entering into a dialogue with housing associations and companies. Product development, e.g. by updating our product catalogue and employing a business developer. To increase market understanding and segmentation. EFFICIENCY AND QUALITY Objective: To help meet Aarhus Vand's objective of 20 per cent streamlining in 2020 Focus areas: Further development of Aarhus Vand's strategy wall which shows the results of our strategy work using a simple visual model. To find new methods and tools that can improve our efficiency in relation to our level of quality and costs, e.g. Asset Management, and to develop the use of benchmarking results in Danva and the supply secretariat. ENERGY & CO 2 Objective: That Aarhus Vand is energy and CO 2 neutral by 2030, at the latest. Focus areas: To specify the overall objective of the energy and CO 2 strategy. To ensure further reduction of energy and CO 2 in operating and construction work. To increase the energy production from biogas and to ensure improved utilisation of surplus heating. To investigate new opportunities of substituting CO 2 by purchasing and reuse. To look into the potential of binding CO2 through converting land into forest, etc. FINANCING Objective: To utilise the financing options ensuring that we will still have the financial latitude to implement strategic developments through the other sub-strategies. Focus areas: To define the framework and contents of the financing strategy. To develop a business case model, including clarification of regulatory uncertainties. To examine the need to adjust how we register our financial data. To strengthen collaboration with other companies, including Shared, regarding accounting, regulation and finances. To assess the need to upgrade our financial management system to create opportunities of collaboration with other companies and to assess the need to acquire a business intelligence solution. 14

15 IT Objective: To control the direction of IT work at Aarhus Vand towards becoming a digital water company. Focus areas: To prepare an IT organisation analysis in order to adapt the transverse IT organisation to a joint IT culture at Aarhus Vand. To prepare for the future we call it IT consolidation which means that we will work to improve the quality of IT service's internal activities at Aarhus Vand. The actual IT activities: Supplier overview, system owner roles, SLA agreements, IT emergency plans, safety policy and monitoring of key systems. To develop the IT architecture based on Aarhus Vand's DDV rack (Det Digitale Vandselskab (The Digital Water Company)). To complete projects according to the Strategy for digital communication, including development of a new website. COMPETENCIES Objective: To create an overall strategy for Aarhus Vand's creation of competencies ensuring that the required competencies are present, recruited and developed. Focus areas: Competency workshops will be held as a main activity in 2015 for all functions of Aarhus Vand. The required and key competencies to fulfil our strategy must be determined as well as various ways to develop these competencies. Focus will be on development through a dialogue between the manager and employee. Continued development of material for the performance appraisal process focusing on development of competencies and Aarhus Vand's model for roles and career paths. To develop a recruiting strategy towards efficient recruiting processes and ensuring that employments are made strategically. INTERNATIONALISATION Objective: To further development and export of Danish water technology and at the same time gain new knowledge through a strategic collaboration in 3VAND HOFOR, Vandcenter Syd and Aarhus Vand. Focus areas: To enter into agreements with contractors and advisors regarding collaboration on tasks abroad. To establish collaboration with embassies in order to further and support the development of exports and penetration of Danish water technology, e.g. through postings. To collaborate with twin towns, such as Harbin in China. To exchange experience with international utilities. PARTNERSHIPS AND CONSOLIDATION Objective: To develop our competencies and knowledge to ensure that we are focusing on the best possible solutions. To prepare Aarhus Vand for growth to ensure that we are one the companies existing in Focus areas: The sub-strategy have already produced various initiatives and results that help consolidate the company, create new partnerships and growth which have been commissioned, such as the establishment of Shared, the joint service company. As a result, the strategy is resting for now but it will be reactivated when new initiatives are required. 15

16 Organisation of our strategy efforts in 2015 Based on our three strategic focus areas growth, productivity and ingenuity we will be working with a wide range of projects in 2015 which are partly in one of the three focus areas and partly across the areas. We will be working with an organisation where one programme manager of each of the three focus areas is the 'ambassador' to the company objectives and in charge of keeping focus on achieving these objectives. These programme managers must also ensure that growth, productivity and ingenuity are part of the departments' action plans for 2015 and they must support coherence between the nine sub-strategies. The nine sub-strategies are the backbone of Aarhus Vand's Strategy A programme head is in charge of each sub-strategy and runs them and the projects involved together with various key employees. The program heads must coordinate activities with each other and with the programme managers. Aarhus Vand's three department managers support the programme managers in defining objectives and creating results. The strategic manager sets the direction, coordinates and creates commitment and is the sparring partner for the CEO and the rest of the management group in relation to the development of strategies and implementation. The strategic manager also ensures that the strategy work is supported by organisational development at Aarhus Vand. In relation to each manager and employee, we want to ensure focus on strategic efforts in 2015 by integrating the sub-strategies more clearly or more substantially into the organisation to make it a more natural part of our daily work. The spreading of responsibility for implementing strategies must continue to ensure that as an employee, you are able to identify yourself with the contents. 16

17 Internationalisation focus on the USA, Southeast Asia and Zambia OUR STRATEGIC COLLABORATION in 3Vand with Hofor and Vandcenter Syd focuses on four specific areas: Climate adaptation, protection of groundwater, research and development and internationalisation. Aarhus Vand is part of this collaboration in order to develop the company, to support a development of the Danish water sector and to support the export potential of Danish water technology. This work involves close collaboration with Danish companies who want to promote exports. Our role is to sell know-how and make demonstration plant available. At 3Vand, we want to strengthen our international focus in We gain new knowledge through our international efforts which help up optimise and develop our processes and procedures and thus improve the companies. To employees, our companies will become more attractive places of work when we acquire an international dimension. At 3Vand, we will direct our international efforts particularly at the USA (Chicago), Southeast Asia (Singapore and Harbin) and Zambia in Chicago As part of our collaboration on internationalisation in 3Vand, Aarhus Vand has lent its project manager, Flemming B. Møller, in 2014 and 2015 to work in Chicago with the Danish Trade Council, which is under the Ministry of Foreign Affairs of Denmark. The Danish companies DHI, Nissen, Landia, Danfoss and AVK are members of the Water Technology Alliance and contribute to the financing of the posting while the Trade Council and the Danish Nature Agency support the alliance with approx. DKK 1 million. Flemming Møller is to help spread knowledge about what we can in Denmark in terms of efficient water supplies and wastewater treatment. In the USA, they have not previously focused on reducing energy consumption at wastewater treatment plants where we have competencies and experience which may be of use to them. Danish companies and advisors should then take over and negotiate agreements. We also need new knowledge also from abroad to improve Aarhus Vand. Our presence in Chicago will allow us to build networks to exchange knowledge. We will see technologies which are more advanced in some areas than in Denmark. We will be signing an agreement in 2015 with Chicago Water which will, among other things, involve a mutual commitment to exchange knowledge in specific areas and to exchange employees which means that they will also be posting employees in Denmark. The plan is also to sign similar agreements with one or more additional water and wastewater companies in the USA. The objective is to launch 2-3 projects involving Danish companies in the USA in I am to help promote the business of the Danish companies. I am to help spread the knowledge about what we can in Denmark after which the companies and advisors take over and negotiate various agreements. Flemming Møller, Project Manager and on loan as Senior Technical Advisor to the Danish Trade Council 17

18 - The project in Zambia is of great importance to the development of collaboration in the water industry in Denmark. For 3Vand, this means that our goal for internationalisation and presence in Africa, Southeast Asia and the USA is close to being achieved. Claus Homann, Department Manager Singapore Like the Consulate General of Denmark in Chicago, the Danish Embassy in Singapore wants to contribute to the export of Danish know-how and water technology. The Embassy sees 3Vand as an equal organisation that represents public Denmark since the collaboration is not linked directly to companies. The Embassy would therefore like 3Vand to post a technical advisor profile in the region to support the Embassy and other initiatives. The model used may be similar to the one in Chicago where Aarhus Vand has posted an employee. The Embassy also sees an opportunity for an employee supporting the other embassies in Southeast Asia in the water technology area. In 2014, Aarhus Vand has therefore participated in several Singapore delegations with DHI, Grundfos and AVK within the framework of 3Vand. The utility company Singapore Water which operates at a very high professional level has also visited 3Vand and is very receptive to collaboration. In Singapore, wastewater is purified intensively and part of it is used as drinking water. Based on our dialogue, the following topics, among others, proved to be relevant: Wastewater energy production, optimisation of wastewater purification, utilisation of groundwater resources, tools for improving water production efficiency as well as sustainability. Zambia In 2014, 3Vand entered into a training contract in Zambia to be executed in Krüger and Veolia were awarded the task of renovating and extending a number of water and wastewater treatment plants financed by Danish funds in the so-called Kafubu Sustainable Water and Sanitation Improvement Project. Aarhus Vand employees will work in Zambia for several short periods of time training local employees in handling the operation and maintenance of drainage and distribution systems, water treatment and associated plant activities. The training comprises a school period of 69 days and 353 days in the form of on-thejob-training. This is supported by extensive training of instructors who will pass on the tasks to new, future staff. Harbin The city of Harbin is the City of Aarhus' twin city in China where we support the Danish municipality's initiatives and, against payment, offer Danish companies such as Grundfos and AVK support for their projects in the region. We inform them, among other things, about the Danish model where municipally owned water companies collaborate with private suppliers on energy optimisation, groundwater protection, etc. At Aarhus Vand, we see an opportunity to play a part as a water utility ambassador in the region. An independent role where we represent what we do in Denmark, communicating knowledge to the Danish companies with the know-how and the products required. Additionally, we can serve as a networker facilitating Danish turnkey solutions which can be tested and used for reference purposes in the region. 18

19 Climate adaptation operator of the entire water cycle THE WATER SECTOR REFORM IN 2010 has, on the one hand, resulted in water companies having had to increase the focus on their core tasks due to the Danish government's efficiency improvement requirements. On the other hand, the reform has enabled the water companies to play a freer role where new tasks can be included in the companies' portfolio to the extent permitted by legislation and financial regulation. At Aarhus Vand, we want to seize this opportunity to assume responsibility for the operating tasks in connection with the water cycle. As a water company, we are basically an operating organisation and we already carry out several operating tasks in the water area. By assuming new operating tasks, we can create overall solutions and synergies in the water cycle, thus providing customers with an unambiguous entry into the handling of water. The authorities of the water area should still be the government and municipalities. However, the water cycle is a coherent system. So there should only be one operator to take care of the operative handling of the overall water cycle and to ensure implementation of the best solutions in terms of economics and environment above and below ground. This is important, not least because in Denmark, we are facing major challenges in the water area. Two of the most important challenges are to safeguard our drinking water and to handle extreme rainfall events. Our role as an operator of the overall water cycle is to cover the tasks: planning, plant and operation. The water cycle comprises recovery of groundwater, water supply, including alternative types of supply such as secondary water (roof water, surface water, purified wastewater, etc.) as well as the discharge and purification of wastewater and rainwater to the recipient. The discharge of rainwater may more or less affect how areas are used in cities and is, therefore, closely connected to the physical planning handled by municipalities. Together with Hofor, Biofos and Vandcenter Syd (Water Center South) we will, therefore, in 2015 intensify our strategic work to ensure that we, as water companies, become operators of the overall water cycle; because from a socio-economic point of view, it is cheaper to solve tasks in the rainwater area (hydraulic tasks within surface water) by assigning the obligation and the financial means to the water companies. Today, the responsibility is shared between the water companies (via tariffs), municipalities (via taxes) and consumers (via self-financing). Examples of how Aarhus Vand can fill the role as an operator of the water cycle: Brabrand Lake Aarhus Å stream lock at the Port of Aarhus: Aarhus Vand uses Aarhus Å stream as a retarding basin in connection with major rainfall events to protect the citizens against flooding. The lock works as a regulator for holding back the water and the associated pumping system ensures that water can be pumped out into the bay at any time when the tide is up. New water canal in Lystrup: Aarhus Vand is establishing a new water canal next to the existing watercourse to be able to handle rainfall events that exceed the service level target. The existing watercourse is given high priority and must be protected during heavy rain. - We believe that by placing the entire obligation in the hands of the water companies, it will be possible to create the best solutions in terms of economics and environment. And that we can make sure that tasks will be carried out to the necessary extent to ensure future handling of the climate challenges. Claus Møller Pedersen, Department Manager 19

20 Measurement/monitoring in water areas: This may e.g. take place by controlling purified water being pumped back into the Giber Å stream system and carrying out measurements to document the effect of what we do. In 2015, Aarhus Vand expects to enter into a contract with the City of Aarhus on the operation of the lock at the harbour. The annual operating costs will be approx. DKK 700,000. Efforts are also being made to assign the ownership of the lock to Aarhus Vand. Aarhus Vand's ongoing and planned climate adaptation projects: Operation of the lock (approx. DKK 0,7 million/year). Seven climate adaptation projects in Lystrup (total expenditure approx. DKK 18 million, distributed by DKK 6 million in each of the years 2014, 2015 and 2016). Separation of rainwater and wastewater in Risvangen and Vorrevangen. Creative use of water at Frederiksgade (expenditure approx. DKK 10 million, probably in 2017). Layout of the Marselisborg Park as a recreational area with LAR (local discharge of rainwater). A climate adaptation project in Skejby to be further specified in In addition to this, several climate adaptation projects will be implemented in the coming years in connection with the separation of rainwater and wastewater. These projects will be identified continually but are not yet mentioned specifically in the climate adaptation plan. 20

21 Joint purchasing saves millions IN 2014, AARHUS VAND INVITED all interested water and wastewater companies to enter into closer collaboration across municipal borders. This resulted in the establishment of Shared, a new joint service company between Odder Spildevand, Syddjurs Spildevand, Favrskov Forsyning and Aarhus Vand. Based on purchasing, the company is to handle a number of tasks and services for the four utilities but in the long run also for other interested companies in the region. suited for joint purchasing such as standard products and services that are estimated to have an annual profit potential of DKK 6-8 million. The analysis also shows annual efficiency improvement potential of some DKK 1 million through standardisation of purchasing processes, contracts and tender templates, in-house tender competencies, law and tendering routines as well as internal monitoring and supplier management, and thus reduced administrative costs. By gathering the resources in a joint service company, we can afford employing highly specialised staff with the proper experience. In 2014, Shared therefore employed a purchasing manager, and in early 2015, the company will employ two purchasing consultants. Together they are to professionalise purchasing for the four companies behind Shared, and not least save millions. This is to take place, among other things, by negotiating and entering into new contracts utilising the advantages of being several companies purchasing together. An external analysis ordered by the parties behind Shared shows that a joint service company provides several advantages in the form of savings and improved control of purchasing processes. The analysis identifies a number of purchasing types that are - Shared will challenge us in the way we purchase today which is a highly decentralised process. When we professionalise and centralise the tender process, resources will be released which we can use for our core activities. This is common sense and adds value for our customers. Jakob Juhl, Chairman of the Board of Shared and Director of Favrskov Forsyning 21

22 We enhance our customer dialogue IN 2014, THE SETUP OF A DIGITAL CUSTOMER PANEL was the most important new initiative to enhance our customer dialogue. It got off to a good start with a response rate of more than 90 for the first survey and the panel now has 330 participants. In 2015, we will carry out 4-5 new surveys to shed light on urgent, important matters such as, for example, our customers' experience of the water quality we deliver, opinions about our initiatives to preserve clean water, the possibility of decalcification of water and other measures that contribute to making Aarhus an attractive place to live. The results of the surveys in the customer panel are used as a source of inspiration for our product development, efficiency improvement measures, determination of new strategies and expansion of our services. We present the results of the surveys openly to our staff and customers alike, for example at our website. - Through our customer panel, new ideas and measures are tested and we receive concrete suggestions for how to improve our services. Mads Bayer, Department Manager 22

23 One of the results of our surveys through the customer panel is the wide support for Aarhus Vand's and the City Council's decision to produce drinking water exclusively from the aquifers. And that we, if needed, can increase the price of water by up to 5 per cent as long as the money is earmarked for groundwater protection. Like other water companies in Denmark, Aarhus Vand also has a customer representative on its board of directors. In 2015, we will supplement the customer representation by setting up a socalled advisory board which is to consist of members with a strong professional background and serve as a sounding board and a network for the management of Aarhus Vand. The advisory board will make it possible for management to carry out in-depth, challenging and holistic discussions of, among other things, strategic measures capable of developing Aarhus Vand as a company and support business development. In this connection, it will also be possible to set up focus groups. In 2015, we will continue to focus on improving our customer communication, e.g. by improving our letters to customers. We will enhance the dialogue with our business customers and establish focus groups in selected areas. Our web solutions will also receive a major facelift in We will measure continually how satisfied people are with our telephone service and develop our communication in connection with our construction projects.

24 Budget for 2015 OPERATING AND CASH BUDGETS, DKK 1, Operating budget Cash budget Operating budget Cash budget Water and wastewater charges Service fees Connection fees and other income Total income Operating costs Depreciation Profit/Loss before financial income and expenses Interest Operating profit/loss for the year Investments Repayment of loan Positive/negative cash flow for the year (borrowing requirement for the year) 516,059 63,500 57, , , , ,506-16, ,736* 516,059 63,500 57, , , ,506-16, , ,950-15, , ,401 33,848 59, , , , ,874-10,439 90, ,401 33,848 59, , , ,274-10, , ,600-11, ,346 *As is evident from the above our operating profit is 109,736 TDKK. Since this cannot cover our expected investments for 2015, our borrowing requirement is 101,570 TDKK. INVESTMENT BUDGET, DKK 1, Reinvestment/New investment in operating activities Reconstruction of sewerages Land development and other new sewerages Climate adaptations and other environmental projects New investments in connection with wastewater treatment plants Centralisation of wastewater treatment plant in south Other investments, wastewater investment in continuity of supply Establishment of pipes, pressure boosters, etc. Renovation of pipes, etc. Reinvestment, waterworks, source sites and drillings Replacement of water meters Other investments, water 30, ,900 38,000 17,500 75,000 37,000 26,300 1,500 19,500 56,600 15,450 6,000 15,200 Total investments in Aarhus Vand in ,950 24