23 Feb /163. Annual Report 2014

Transcription

1 Fel! Okänt namn på dokumentegenskap. 23 Feb /163 Annual Report /131

2 Contents 4 DIRECTOR-GENERAL S STATEMENT 7 THIS IS SVENSKA KRAFTNÄT 9 VISION, GOALS AND VALUES 10 THE YEAR THAT WAS 12 FINANCIAL OVERVIEW 15 EXPANDING THE GRID 17 REPORT OF THE BOARD OF DIRECTORS GOVERNANCE FINANCIAL POSITION INVESTMENTS BUSINESS SEGMENTS EMPLOYEES HEALTH, SAFETY, ENVIRONMENT AND QUALITY RESEARCH AND DEVELOPMENT INTERNATIONAL COLLABORATION 74 SEVEN-YEAR REVIEW OF THE GROUP FINANCIAL STATEMENTS 76 Consolidated income statement 77 Consolidated income statement by business segment 82 Consolidated balance sheet 86 Consolidated cash flow statement 88 Consolidated statement of changes in equity 89 Parent company income statement 91 Parent company balance sheet 93 Parent company cash flow statement 94 Parent company statement of changes in equity ADDITIONAL DISCLOSURES AND NOTES 2/131

3 103 Notes APPROPRIATION OF RETAINED EARNINGS AUDITOR S REPORT 119 BOARD OF DIRECTORS 120 DEFINITIONS 122 ADDRESSES 3/131

4 DIRECTOR-GENERAL S STATEMENT The electricity sector has become a successful Swedish export industry. With annual domestic electricity consumption in the region of 140 TWh, we have still managed to export a net 20, 10 and 5 TWh of electricity annually over the past three years. Exports benefit the national economy and are made possible through Svenska kraftnät s high degree of integration with Sweden s neighbours. The large number of links to our neighbouring countries enable exports of surplus electricity but also strengthen Sweden s security of supply through the possibility of imports. Yet there is also a risk in placing too much emphasis on the strength of our energy balance. We need to ensure not only that we have enough electrical energy over the course of the year, but also enough power on the coldest, most windless winter day. Over the past year, starting at our annual customer and stakeholder meeting in March, Svenska kraftnät has therefore sought to highlight the importance of the power issue. By the end of the next ten-year period several of Sweden s nuclear reactors will have been decommissioned. Svenska kraftnät s assessment is that the new situation can be addressed by expanding the network of electricity interconnectors and increasing flexibility on the demand side, but that additional stable (plannable) generating capacity will also be needed in southern Sweden. This is something the today s electricity market is not capable of providing, as it is not profitable to build any new generating capacity outside the certificate system. The issue of power will thus be the big challenge for the new Energy Commission that the Swedish government is about to appoint. Many important development projects The coming changes will not only result in the removal of important generating capacity in southern Sweden but also in a sharp increase in the share of volatile (weather-dependent) capacity. This, in turn, will create significant challenges for Svenska kraftnät s frequency and balancing control systems. That s why we have launched an internal initiative called Project Operational Reliability to determine how these challenges should be met. The initiative covers issues such as voltage regulation, frequency quality, inertia, power grid safeguards and the quality of real-time data. We have also taken the initiative to review the legal framework, especially those regulations which are relevant for Svenska kraftnät s role as system operator. This is 4/131

5 because there is still considerable uncertainty about the deeper significance of this role and about the attendant rights and obligations for Svenska kraftnät. It is my hope that towards the end of the year we will be able to submit concrete proposals for necessary clarifications to the Swedish Ministry of the Environment and Energy. Building new infrastructure In 2015 the majority of Svenska kraftnät s two largest investment projects, NordBalt and SydVästlänken, will be completed. Through NordBalt we will help to integrate the emerging Baltic electricity market with the Nordic and broader European markets. This is a project which also has significant geopolitical importance in the Baltic Sea region. NordBalt will strengthen Lithuania s and the other Baltic states security of supply. We will thereby strengthen their national sovereignty in a situation where Russia is ever more clearly showing its great power ambitions and willingness to use energy as a political bargaining tool. In the SydVästlänken, or SouthWest Link, project we have suffered setbacks. Alstom was not able to deliver the new network monitoring system but forced us to cancel the agreement and SydVästlänken underestimated the challenges involved in delivering the advanced HVDC 1 technology demanded by Svenska kraftnät. To achieve full delivery, we have therefore been obliged to modify the delivery terms, which has resulted in a significant delay in the project. In the longer term the biggest problem facing SydVästlänken is not the delayed delivery, but the erroneous expectations created by the HVDC component of the link. Alternating or direct current overhead line or underground cable? In the early days of electricity direct current was commonly used but today electricity is generated, transmitted and used almost exclusively as alternating current. Direct current is useful in cases where a large amount of energy needs to be transferred from one point to another. Svenska kraftnät uses this technology when it is possible and expedient, for example when linking up different synchronous areas and in longdistance submarine cables, such as in our links to Finland, Lithuania, Poland, Germany and Jutland. Onshore, the Swedish national grid currently consists of 15,000 km of alternating current transmission lines. We have practically no direct current lines. As we now introduce this technology for the first time in SydVästlänken the goal is precisely to transfer large amounts of energy from one point to another from central to southern 1 HVDC = high-voltage direct current. 5/131

6 Sweden. But this doesn t mean that direct current is a potential alternative to alternating current in a general sense. The public has high hopes, however, as direct current would enable the use of underground cables while alternating current in practice requires conventional overhead lines. In this respect local authorities and major interest groups are not acting responsibly in persisting in their demands for direct current underground cables in cases where this is both technically impossible and unreasonable on financial grounds. Final words Our economic outcome for 2014 was better than budgeted. The parent company reports a surplus of SEK 731 million, which represents a return of 7.2 per cent, above the government s required return of 6.0 per cent. In all other respects, too, Svenska kraftnät has met fulfilled the requirements and achieved the targets defined by the Swedish government. Stockholm, February 2015 MIKAEL ODENBERG 6/131

7 THIS IS SVENSKA KRAFTNÄT ENSURING THAT SWEDEN NEVER STOPS The state enterprise Svenska kraftnät manages and develops the national electricity grid. Sweden s national grid comprises 15,000 km of 400 kv and 220 kv power lines, about 160 transformer and switching stations and 16 cross-border transmission lines. Svenska kraftnät is the system operator for electricity, which means that it has overall responsibility for ensuring a reliable electricity supply and that a balance between supply and consumption of electricity is maintained at all times. Svenska kraftnät is also the government agency responsible for power contingency planning and the supervisory agency for dam safety in Sweden. Sundbyberg is home to the national control room, which monitors and controls the grid around the clock. Svenska kraftnät also has offices in Sundsvall and Halmstad as well as a network operations centre in Sollefteå. At the end of 2014 the company had 530 permanent employees, most of whom worked at the head office in Sundbyberg. In addition, several hundred people are employed across the country on a consulting basis and under construction contracts. The framework for Svenska kraftnät s investment activities is defined by the Swedish parliament. The goals, reporting requirements and financial criteria which apply to Svenska kraftnät are defined by the government in a set of instructions and in the appropriation letter. The company s operations and costs are funded largely through fees paid to Svenska kraftnät by regional transmission networks, large electricity producers and balance providers. A KEY ROLE IN CLIMATE POLICY Svenska kraftnät is tasked with promoting an open Swedish, Nordic and European electricity market. The company develops the national grid and electricity market to meet the country s need for a safe, environmentally friendly and cost-effective electricity supply. Svenska kraftnät thus also plays an important role in climate policy. 7/131

8 SVENSKA KRAFTNÄT S ROLE IN THE ELECTRICITY MARKET Svenska kraftnät s network customers are large electricity generation facilities, regional networks and certain consumption facilities that are connected to the national grid. Maintaining a balance between supply and use of electricity requires that production be planned on the basis of forecasts for consumption. These forecasts are based on information provided by the companies acting as balance providers. Balance providers are those companies which under an agreement with Svenska kraftnät have assumed responsibility for ensuring that the supply of electricity is equal to the electricity that is consumed. Electricity producers and suppliers are examples of balance providers. An electricity supplier may perform the role of balance provider itself or transfer this responsibility to another company. The local network companies submit consumption figures to Svenska kraftnät, which uses the data to calculate how well the balance providers are balancing the supply and consumption of electricity. THE LINE OF TRANSMISSION The electricity market consists of two parts physical transmission of electricity and financial trading in electricity. The physical part refers to the transmission of electricity from power plant to user. Electricity transmission networks, which consist of local and regional networks and the national grid, constitute natural monopolies that are regulated by the Swedish Energy Markets Inspectorate. The financial part refers to power trading, which means that electricity producers sell electricity, usually through a power exchange, to electricity suppliers, which in turn sell it to the users. This activity is subject to open competition among electricity market operators. Electricity users thus pay for two separate services: for the electricity they consume and for the transmission of electricity over the networks. The marketplace for power trading is the Nordic power exchange Nord Pool Spot, which offers a spot market (physical trading) for hourly trading in electricity for nextday delivery. Nord Pool Spot is owned by the Nordic and Baltic transmission system operators and is headquartered in Oslo. The Nasdaq OMX Stockholm Exchange has a futures market (financial trading) for long-term trading where market players can hedge their electricity prices several years in advance. Most of the hourly trading activity takes place on the spot market while a smaller volume takes the form of bilateral trades between producers and suppliers of electricity. Longer-term trading may also take place bilaterally, normally through brokers. Electricity market participants also include transmission system operators in other countries. Svenska kraftnät works closely with the Norwegian, Finnish and Danish grid operators to ensure that the electricity system is operated efficiently. International 8/131

9 cooperation is evolving continuously and is acquiring an increasingly European focus. All European transmission system operators collaborate through ENTSO-E 2. Illustration: The line of transmission VISION, GOALS AND VALUES A LEADING ROLE IN ENSURING A SECURE AND SUSTAINABLE ELECTRICITY SUPPLY That is Svenska kraftnät s vision. It expresses the company s ambition to play a leading role in electricity, whatever the task at hand: ensuring a high level of operational reliability, building a more efficient power market or connecting wind farms and other renewable energy facilities. Svenska kraftnät aims to operate a national transmission grid that is reliable and safe for humans. The company works to build sustainable, environmentally adapted solutions for Sweden s electricity supply. SVENSKA KRAFTNÄT S LONG-TERM GOALS For Svenska kraftnät strategic management by objectives is an important factor. The company therefore operates on the basis of four long-term goals: > Ensuring that the electricity system is robust and operates securely and effectively in a changing world. > Developing the national grid efficiently and for the benefit of the electricity market. > Ensuring that Svenska kraftnät operates efficiently and proactively as a single entity. > Being one of Sweden s most attractive employers. SVENSKA KRAFTNÄT S CORE VALUES Svenska kraftnät s core values reflect the company that we want to be. Our four core values area: > development > responsibility > efficiency 2 European Network of Transmission System Operators for Electricity (ENTSO-E). 9/131

10 > clarity 10/131

11 THE YEAR THAT WAS INVESTING TO MEET FUTURE CHALLENGES JANAUARY/FEBRUARY Our investment and financing plan for is submitted to the Swedish government. Svenska kraftnät is expected to invest up to SEK 12 billion over the period, depending mainly on energy and climate policy as well as increased market integration. Common price coupling 3 is introduced in northwest Europe. Price coupling is a key element of the EU s ambition to build a single retail market in Europe. MARCH Svenska kraftnät s annual customer and stakeholder meeting stimulates a lot of interest in the issue of power. Industry and market representatives gather for presentations and panel discussions on how to manage Sweden s long-term electricity supply. Svenska kraftnät s Director-General, Mikael Odenberg, and the chief executive of German system operator 50Hertz, Boris Schucht, sign a memorandum of understanding on a feasibility study for a new link between southern Sweden and northern Germany, called Hansa PowerBridge. On 28 March the public administrative court rejects Värnamo Elnäts s appeal against Svenska kraftnät s division of Sweden into four bidding areas. The ruling has come into effect. APRIL/MAY The land and environmental court upholds Svenska kraftnät s right to use creosotetreated wood in pylon foundations, finally putting an end to a legal dispute that has been going on for many years. 3 This means that the power exchanges simultaneously and using the same methods of calculation calculate market prices and trading volumes between areas for the coming 24-hour delivery period. 11/131

12 Svenska kraftnät cancels its contract with Alstom Grid for delivery of a new network monitoring system due partly to very extensive delays. General Electric is contracted as a new supplier of an upgraded system for JUNE/JULY/AUGUST Six briefings for landowners and the public kick off a three-month long period of consultation on the new Ekhyddan Nybro Hemsjö overhead line. Alstom Grid files a claim against Svenska kraftnät with the Stockholm District Court, demanding 10 million for the cancellation of the contract for a new network monitoring system. On 4 September Svenska kraftnät responds to the charge, filing a counterclaim against Alstom for SEK 63 million. The peak power reserve for winter 2014/2015 is procured. Subsequently the volume is topped up to the 1,500 MW ceiling in response to increased uncertainty, partly as a result of a winter-long shutdown of the Oskarshamn 2 reactor. Svenska kraftnät reports on its mission from the government in the appropriation letter on the classification of hydroelectric dams. In its report Svenska kraftnät sets out a timetable for the classification of dams as well as an allocation key for the funds to be transferred to county administrations for their classification work. SEPTEMBER The Board of Directors confirms the grid tariff for Under the adopted resolution, the tariff for the grid as a whole is reduced slightly but notice is also given of the need for higher tariffs in the longer term. On 11 September the Swedish government decides to the transfer responsibility for the management of electricity certificate accounts and guarantees of origin from Svenska kraftnät to the Swedish Energy Agency. OCTOBER The commissioning of the southern direct current portion of the SydVästlänken link is postponed, with initial commissioning now scheduled for September 2015 followed by full commissioning in January The postponement is due to delayed deliveries from the supplier, Alstom Grid. Svenska kraftnät criticises the final report of the Commission on Water-related Activities for its failure to take account of the energy aspect and for the absence of impact assessments for the Swedish energy system. 12/131

13 NOVEMBER The first stage of CityLink in the Stockholms Ström project a new overhead line and underground cable to the north of Stockholm is completed. Svenska kraftnät arranges Emergency Course 2014, bringing together operations staff from the Nordic system operators for a joint communication exercise in a simulated control room environment. The Board decides to raise the fees for balance providers as of 1 February 2015 in response to increased costs for reserves in Svenska kraftnät s role as system operator. DECEMBER The 600 MW production component of the peak power reserve is procured for winter 2015/2016 and winter 2016/2017. The procurement was brought forward in order to enable market participants to plan ahead and to meet the challenges created by the delays to the SydVästlänken project. Svenska kraftnät publishes a Nordic development plan together with the other Nordic system operators. The plan covers the period until 2030 and is based on work on the European ten-year TYNDP plan. FINANCIAL OVERVIEW IN BRIEF Operations in Energy supplied to the grid TWh Energy withdrawn from the grid TWh Operational reliability Disturbances on the grid No Disturbances resulting outages No Energy not supplied (ENS) MWh Power not supplied (PNS) MW Financial facts, Group Consolidated operating revenue SEKm 9,319 10,111 Consolidated profit SEKm Return on adjusted equity % Debt/equity ratio % /131

14 Investments SEKm 4,353 3,642 Total assets SEKm 22,338 18,635 Employee information Permanent employees No /131

15 FINANCIAL PERFORMANCE 15/131

16 16/131

17 EXPANDING THE GRID FACTORS INFLUENCING THE EXPANSION OF THE GRID The Swedish national grid is going through an intensive period in which the company is expanding and strengthening the national electricity grid. The expansion is driven by several interacting factors. CLIMATE GOALS > The EU s climate and energy package to promote renewable energy. > A continued expansion of wind energy and increased wind energy integration. A SINGLE EUROPEAN ENERGY MARKET > The Third Internal Energy Market Package for electricity and gas, which is aimed at increasing competition in the electricity and natural gas markets. > Safe and secure energy supply for European consumers. > Increased market integration in northern Europe. IMPROVED OPERATIONAL RELIABILITY > Our increasing dependence on electricity requires a reliable national grid. > Large need for reinvestment. > An increased volume of renewable energy affects the balance of the electricity system. MAJOR EXPANSION PROJECTS Svenska kraftnät expects to invest over SEK 50 billion by This volume includes new investment as well as reinvestment. Some of the company s current new investment projects are: 1. SydVästlänken the SydVästlänken link, which is aimed at improving the operational reliability and capacity of the Swedish national grid. The link is also important for the planned major expansion of wind energy capacity. 2. Stockholms Ström Together with the network companies Vattenfall and Fortum, Svenska kraftnät is strengthening the transmission network in the Stockholm region to meet tomorrow s growth and need for a secure electricity supply. The initiative consists of over 50 sub-projects, including the laying or construction of new underground cables, sea cables, overhead lines, tunnels and transformer stations. 17/131

18 3. Gotlandsförbindelsen Svenska kraftnät is planning to build a transmission line between Gotland and the Swedish mainland to enable a large-scale expansion of wind energy capacity on the island. 4. NordBalt Together with Lithuanian grid operator LitGrid, Svenska kraftnät is building a direct current transmission line between Sweden and Lithuania. Upon completion of the cable to Sweden, the Baltic countries will be fully integrated with the Nordic and European electricity market. WHAT WILL THE INVESTMENT VOLUME MEAN FOR SVENSKA KRAFTNÄT? The large investment volume will put more pressure on the organisation, with regard to funding as well as Svenska kraftnät s ability to implement its many investment projects. CLEAR INFORMATION A new power line involves many important dialogues with affected landowners, government agencies, local authorities and organisations. Due to the large investments that are now being made, a growing number of people are coming into contact with Svenska kraftnät. Coordinated communication and clear information are therefore of central importance. EFFECTIVE METHODS AND SMART PARTNERSHIPS Many ongoing investment projects also require effective work methods in the project organisation. Exploiting synergies between different projects is crucially important. Svenska kraftnät is now working on establishing strategic purchasing practices to improve its ability to handle the large volume of procurements that will be needed for the planned investments. SKILLED AND SATISFIED STAFF To meet the coming challenges, Svenska kraftnät has recruited many new employees over the past few years. The company is now aiming to becoming one of Sweden s best workplaces. By adopting this goal, Svenska kraftnät is striving to be a modern and stimulating workplace with the ability to recruit, retain and develop employees with the right skill profiles. Svenska kraftnät s ambition is to ensure that its employees enjoy their work and do a good job. 18/131

19 <<Report of the Board of Directors 2014>> 01. GOVERNANCE ORGANISATION The Board and Director-General of Svenska kraftnät are appointed the Swedish government. Svenska kraftnät is organised into nine departments. In addition, there are five councils for cooperation with external stakeholders. The Group consists of the parent company, one subsidiary and seven associated companies in Sweden, Norway and Finland. The largest associated company is the Nordic power exchange, Nord Pool Spot AS, which is headquartered in Oslo. Svenska kraftnät s Board has appointed an Audit Committee from among its members. The Committee is led by the Deputy Chairman of the Board and prepares the annual internal audit plan and matters relating to risk assessment, internal control and financial reporting. 19/131

20 Illustration: Organisation 31 Dec 2014 MISSION AND GOVERNANCE Svenska kraftnät s mission is defined by the Swedish government in Regulation (2007:1119) setting forth instructions for Affärsverket svenska kraftnät and in the annual appropriation letters. The company s principal mission is to > provide safe, efficient and environmentally friendly electric power transmission on the national grid > act as system operator for electricity in a cost-effective manner > promote an open Swedish, Nordic and European market for electricity > ensure a robust power supply Svenska kraftnät s vision and goals are based on its government-defined mission. The annual activity planning process begins with a business intelligence process, a review of goals and risks, and a discussion on Svenska kraftnät s focus and ambitions for the coming year. Objectives and targets are defined at the general level and used as a basis for the planning of operational activities. The results are compiled in an activity plan and associated risk analysis. The risk analysis describes those material risks 20/131

21 which could obstruct the achievement of Svenska kraftnät s defined goals as well as measures for managing risks. Each year, Svenska kraftnät also draws up a three-year investment and financing plan. The plan is submitted for approval by the Swedish parliament through the budget proposition. To meet its need for longer-term planning, the Board of Svenska kraftnät adopted a long-term plan called Perspective Plan 2025 in The plan sets forth Svenska kraftnät s priorities and intentions for the development of the national grid until the mid-2020s. INTERNAL GOVERNANCE AND CONTROL Through the Government Agencies and Institutes Ordinance (2007:515) the Swedish government has defined requirements for good internal governance and control in all government agencies. Svenska kraftnät is also subject to the Internal Governance and Control Ordinance (2007:603), which specifies requirements for systematic and documented management of risks. A description of Svenska kraftnät s activities aimed at ensuring compliance with the requirements is given in the following. A well functioning system of internal governance and control requires an appropriate and well functioning internal environment. At Svenska kraftnät this includes work on values and desired behaviour, leadership development, and policies and guidelines. Well functioning communication is another key requirement for effective governance. Svenska kraftnät works continuously on developing its tools and methods to meet the need for effective communication and information. Good risk management improves the chances of achieving defined goals. Each year, Svenska kraftnät identifies general risks affecting the company in connection with preparing its business plan. An action plan is drawn up to manage the identified risks. Risk analysis and risk management are also integrated in the company s project and line operations. These areas are also subject to requirements for management of identified risks. The activity plan and associated risk analysis are reviewed on a quarterly basis and an annual summary is produced in February after the end of the financial year. In other areas progress is reviewed annually, based on each project and contract plan or by agreement as regards individual tasks. The internal auditor reports his findings to the Director-General as well as the Board and its Audit Committee on an ongoing basis. The National Audit Office also conducts specific audits of different areas of operation. 21/131

22 ACTIVITIES FOR DEVELOPING INTERNAL GOVERNANCE AND CONTROL To establish a better environment for effective governance, a project aimed at developing Svenska kraftnät s goal structure and goals was initiated in This goalcentred activity continued in Another long-term goal has been formulated and all of the company s four long-term goals have been specified through objectives and key performance indicators. Svenska kraftnät s work on key performance indicators will be further developed to create an improved framework for establishing the right priorities. Work is also underway on developing the governance structure for the company s project activities. In 2014 it was decided to introduce an established administration model to ensure that operational needs for IT support are met in an effective manner. The project was initiated in 2014 and is scheduled to be completed in An action plan for dealing with irregularities was drawn up in Work on implementing the plan began in 2014 and will continue in Work has also begun on producing a code of conduct. Leadership criteria have been introduced and work is also underway on formulating employee criteria. Activities have been conducted with the aim of improving the company s activities in those areas in which the National Audit Office and internal auditor made observations in the course of their audits. These observations related to the annual accounts, balancing settlement, non-current assets, authorisation management and processes for operational and administrative control. Svenska kraftnät s guidelines and policy for risk management were revised during the year. Work has also begun on developing risk management in the company s project activities. RISK MANAGEMENT The following is a description of various types of risk that the company needs to manage along with examples of implemented risk management measures. Operational risks Significant operational risks that were managed in 2014 included delays in construction projects, the connection of renewable electricity facilities and frequency control in the national grid. There are various risks associated with Svenska kraftnät s ability to meet the timetable for its construction projects. These include the ability to obtain the necessary permits 22/131

23 in time, handling outages, setting the right priorities for expansion projects and ensuring that suppliers meet their obligations. One risk-limiting measure involved implementing an improved model for prioritising expansion projects. The model will facilitate resource planning. Another measure is the development of a concept that will enable Svenska kraftnät to notify any parties affected by a delay in a construction project at as early a stage as possible. Significant resources and specialised expertise are also required, both internally in the company and externally among contractors, designers and consultants engaged in the construction of stations and transmission lines. Svenska kraftnät works continuously to ensure that the company has access to the right expertise, internally and among contractors. As part of this effort, the company continually updates the parties concerned on planned and adopted investment plans. In Sweden renewable electricity capacity, and particularly wind power, is currently undergoing a major expansion. This affects the balance in the system, as wind power production cannot be controlled and is hard to forecast. Moreover, uncertainty about production volumes and the siting of new wind farms makes Svenska kraftnät s longterm planning more difficult. To limit the risks, the company has continued its efforts to forge close contacts with market players and provided guidance on issues concerning the connection of wind farms to the grid. Svenska kraftnät has also participated in a Nordic analysis group focusing on frequency and balancing issues. Renewable electricity production also has different technical properties than today s conventional hydroelectric and thermal power systems. The power system would not, for example, be able to sustain a switch from conventional electricity production to wind power unless the same amount of inertia is introduced in the system. Svenska kraftnät has started an initiative aimed at enhancing its ability to forecast, monitor and control the inertia in the power system, as this is critical for the continued operational reliability of the electricity system. Despite these challenges, the risk of an outage on the grid is relatively small. The grid is robustly constructed, with a strong capacity to maintain electricity supply even in disturbed operating conditions. The risk of a major power outage cannot be completely eliminated. Svenska kraftnät is taking a range of measures, including a major investment programme, to further increase the reliability of the grid. Financial risks Svenska kraftnät s central role in the electricity market and the high rate of investment result in significant economic flows. The company is thus exposed to various financial risks, including credit risks, currency risks, interest rate risks and liquidity risks. The management of these risks is regulated in the company s financial policy. The risks are managed with a long-term perspective in order to create stable financial prospects for the company. 23/131

24 Due to the transmission losses that occur on the grid Svenska kraftnät is one of Sweden s biggest consumers of electricity. The risks that Svenska kraftnät is exposed to through its procurement of grid losses are managed in accordance with the company s guidelines for procurement of grid losses. Other risks Svenska kraftnät s ability to monitor and control the national grid is dependent on well-functioning IT and telecommunication systems. IT and telecommunication systems are built with a high level of redundancy to ensure continuous operation. Another important aspect of operational reliability is to analyse and address weaknesses in IT security, with regard to technology, rules and procedures. To structure and quality-assure its environmental work throughout the organisation, Svenska kraftnät uses an environmental management system that is certified under the ISO standard. This also reduces the risk that environmental impact assessments will delay the investment projects. The company performs its own environmental audits and specifies environmental requirements in procurements for construction and maintenance projects. The company uses training and internal communication to continually raise awareness of the environmental requirements that Svenska kraftnät is required to meet. Examples of risk management in the line operations for financial reporting include clear decision-making processes for significant decisions and performance analyses. Inspections, both manual and automated, are also performed. These include procedures for ascertaining the existence of assets and liabilities, and for ensuring that assets, liabilities and financial transactions have been correctly registered. Training and skills development activities are other examples of risk management. SECURITY Svenska kraftnät s security work is driven by the ambition to maintain a high awareness of security issues in all areas of the company s operations. This enables operational control of the company s security work and management of applicable risks. During the year work continued on reviewing the company s internal security regulations, and instructions for certain priority areas are now being prepared. Inhouse managers, new employees, operations and maintenance staff as well as contractors working at the company s facilities have taken part in security training activities on ongoing basis. Svenska kraftnät s signals security instructions have been revised and the annual internal inspection has been conducted at two signals security units. 24/131

25 As in 2013, Svenska kraftnät handled around 12,000 security protection issues in These issues involve vetting of individuals and background checks on persons working in positions requiring security clearance or who are involved in critical activities relating to electricity supply. During the year work was carried out on preparing a new security analysis in accordance with the provisions of the Swedish Security Protection Act. The security analysis was adopted at the end of January SUBSIDIARIES AND ASSOCIATES The Svenska kraftnät Group has one subsidiary and seven associated companies in Sweden, Norway and Finland. SUBSIDIARIES Svenska Kraftnät Gasturbiner AB The company is wholly owned by Svenska kraftnät and is responsible for operating and maintaining the gas turbine plants which it owns. The plants are needed for managing disturbances in the power system. The company owns eleven gas turbines located in Varberg, Norrköping, Trollhättan, Norrtälje and Gothenburg, with a combined capacity of 690 MW. The company s turnover in 2014 was SEK 82 (83) million. ASSOCIATES Nord Pool Spot AS The company operates the Nordic power exchange, i.e. the marketplace for physical power trading in the Nordic and Baltic countries the electricity spot market. The company is owned jointly by the system operators for the national grids in the respective countries. Svenska kraftnät and Statnett each own 28.2 per cent of the company. Energinet.dk and Fingrid own 18.8 per cent each while Augstsprieguma tīkls, Elering and Litgrid own 2 per cent each. The company generated gross sales of NOK 121,000 (131,000) million and net sales of NOK 311 (232) million. Physical power trading on Nord Pool Spot totalled 501 (493) TWh. Triangelbolaget D4 AB The company administers the Stockholm Oslo Gothenburg Malmö Stockholm fibre-optic cables on behalf of its shareholders. Lease income is passed on directly to the shareholders. The company is owned in equal shares by Svenska kraftnät, Vattenfall AB, Fortum Distribution AB and Tele2 AB. 25/131

26 The company had a turnover of SEK 29 (32) million in Kraftdragarna AB The company carries out heavy transports for companies operating mainly on the electricity supply side. The company also maintains preparedness for urgent transports for its shareholders. The shareholders are Svenska kraftnät, with a 50 per cent stake, Vattenfall and Vattenfall Eldistribution, which hold 25 per cent each. The company s turnover in 2014 was SEK 31 (49) million. STRI AB The company conducts research and development in the field of electric power transmission and high voltage testing on behalf of the shareholders and other stakeholders. The shareholders are Svenska kraftnät, with a stake of 25 per cent, ABB with 50 per cent, and Statnett and Det Norske Veritas with 12.5 per cent each. The company had a turnover of SEK 86 (87) million in Elforsk AB Elforsk conducts joint research and development activities on behalf of the electrical power industry in Sweden. Svenska kraftnät is involved mainly in those areas of operation which relate to the electric power system, transmission of electricity and development of the electricity market. Svenska kraftnät has a 25 per cent stake in the company, with the remaining 75 per cent being owned by the trade association Svensk Energi. In January the company s operations will be transferred to Energiforsk AB. The company had a turnover of SEK 161 (165) million in Energiforsk AB Energiforsk was formed in December 2014 through a merger of Elforsk, Fjärrsyn, Värmeforsk and SGCBedriver. The company will be conducting contract research and other energy-related scientific activities. In January 2015 the operations that were previously conducted in Elforsk AB will be transferred to Energiforsk. The shareholders are Svenska kraftnät, with 20 per cent, Svensk Energi, with 30 per cent, Svensk Fjärrvärme, with 20 per cent, and Energigas Sverige and Swedegas, with 15 per cent each. The company had no operations during the year. esett Oy The company s object is to manage a joint Nordic balancing settlement system starting in Svenska kraftnät, Fingrid and Statnett each own a third of the company. 26/131

27 The business is under construction. The company posted a loss of SEK -2 (-) million in Results The associated company in the Group that has the biggest impact on consolidated earnings is Nord Pool Spot AS. Svenska kraftnät s share of the profit or loss of each company is included in the consolidated profit. The Group s share of the profit was SEK 13 (19) million, of which SEK 5 million 2013 refers to the result of the issue of new shares in Nord Pool Spot AS. Share of profit or loss of associates (SEKm) Nord Pool Spot AS STRI AB 2 2 Kraftdragarna AB -1 1 esett OY -2 - Other 0 0 Total FINANCIAL POSITION Under the government appropriation letter, Affärsverket svenska kraftnät is required to achieve a return on adjusted equity, after a flat-rate deduction for tax, of 6 per cent over the course of a business cycle. The return is calculated excluding shares in the profit or loss from sales in associates and any surplus or deficit from operations related to electricity certificates and guarantees of origin. Capacity charges (congestion revenues) received when price differences arise between bidding areas need to be handled in accordance with the regime resulting from European Parliament and Council Regulation (EC) No 714/2009, which means that provisions are made for unused capacity charges. The return on adjusted equity for 2014 was 7.2 (8.6) per cent, which means that the target was achieved. In the parent company the return was 7.2 (8.9) per cent. 27/131

28 The debt/equity ratio was 83.3 (54.8) per cent, which is below the 120 per cent ceiling specified in the government appropriation letter. The debt/equity ratio in the parent company was 86.4 (56.7) per cent. Under the dividend policy adopted by the government, 65 per cent of the consolidated profit for the year should be distributed to the State, which is what happened in 2014 in respect of the profit for the preceding year. SALES AND RESULTS Consolidated operating revenue decreased by 8 per cent to SEK 9,319 (10,111) million. The decrease was mainly due to lower revenues from balancing and frequency control, which totalled SEK 4,264 (4,977) million. The decline in revenue was due to a lower electricity price and volume compared with the previous year. On a gross basis, both revenue and expenses are determined by the market price of electricity and volume of balancing energy in each bidding area. Gross revenue and expenses can therefore vary significantly from one year to another. Revenues for transmission of electricity over the national grid declined to SEK 4,305 (4,387) million. This was chiefly due to a decrease in energy revenues compared with the previous year, to SEK 1,561 (1,870) million, as a result of a reduced usage fee for Transit revenues increased to SEK 417 (167) million. Operating expenses were SEK 8,651 (9,280) million. The decrease was primarily due to reduced costs for balancing energy, which totalled SEK 3,590 (4,306) million, and lower costs for energy compensation, at SEK 331 (502) million. As on the revenue side, the lower costs for balancing energy was due to a lower electricity price and volume while the lower cost for energy compensation was due to a reduced usage fee. Transit costs increased to SEK 183 (104) million. 28/131

29 Svenska kraftnät remains in a recruitment phase and created 51 (31) new full-time jobs in This resulted in an increase in staff costs by SEK 26 million. Depreciation, amortisation and impairment of non-current assets increased by SEK 212 million, from SEK 715 million to SEK 927 million. Depreciation and amortisation charges were SEK 8 million lower, at SEK 660 (668) million, after several facilities had been fully depreciated. Impairment losses increased from SEK 47 million to SEK 267 million owing to the termination of two investment projects. When Svenska kraftnät was forced to cancel its contract with Alstom Grid for delivery of a new network monitoring system the accrued expenditure was charged to expense, reducing earnings by SEK 173 million. Project planning expenditure of SEK 93 million for the Ekhyddan Barkeryd transmission line project was also expensed. The project resulted from the need to handle an increase in power at the Oskarshamn nuclear power plant. However, new network studies conducted in autumn 2014 showed that it will be possible to handle both the increase in power at Oskarshamn and ensure the operational reliability of the future network that will come into being upon completion of the Gotland and NordBalt projects through the new Ekhyddan Nybro Hemsjö transmission line. The Ekhyddan Barkeryd project has therefore been terminated. In the previous year consolidated earnings were hit by a SEK 47 million impairment charge related to the decision not to build the western branch to Norway in the SydVästlänken project. Earnings from interests in associates were SEK 13 (19) million, which is SEK 6 million less than in the prior year. Earnings for the prior year included a profit of SEK 5 million attributable to a share offering in Nord Pool Spot occasioned by the addition of new shareholders. The consolidated operating profit was SEK 681 (850) million, which is SEK 169 million lower than in The consolidated operating margin was 7.3 per cent, which is 1.1 percentage points lower than in the previous year. Net financial income was SEK 52 (4) million, which is an increase of SEK 48 million from the previous year. The improvement in net financial income was mainly due to an elimination of SEK 50 million related to indexation of the parent company s pension liability under the bases for safeguarding of pensions adopted by the National Government Employee Pensions Board (SPV). The indexation for the previous year was SEK -1 million. The consolidated profit for the year was SEK 731 (850) million. The consolidated return on adjusted equity was 7.2 (8.6) per cent, which is 1.2 percentage points above the target return of 6 per cent. 29/131

30 FUNDING The company s operations are funded through equity and loans from the National Debt Office. At year-end 2014 the outstanding debt to the National Debt Office was SEK 6,202 (3,775) million. Consolidated cash and cash equivalents were SEK 225 (160) million. In 2014 Svenska kraftnät had the right to raise loans from and outside the National Debt Office in a total amount of SEK 9,300 million. Svenska kraftnät has two further sources of funding: capacity charges and investment grants. CAPACITY CHARGES Capacity charges are allocated from NordPool Spot based on price differences that arise between bidding areas. Under the regime resulting from European Parliament and Council Regulation (EC) No 714/2009, capacity charges may be used for countertrade and funding of investments which are intended to enhance or maintain the transmission capacity of the grid. Capacity charges received increased compared with the previous year, to SEK 1,172 (700) million. The price of electricity and the price differences which arise between bidding areas depend on a wide variety of factors, including temperature, water availability in the reservoirs, the availability of nuclear power and transmission capacity between bidding areas and on cross-border transmission lines. Of capacity charges received in 2014, SEK 12 (22) million was used to cover costs for counter-trade while SEK 347 (322) was used as investment grants for realised investments. The remaining SEK 813 (356) million has been reclassified as long-term liabilities in the balance sheet to be used as investment grants in future years, as there were not enough investments that met the criteria for allocation from external capacity charges. Out of capacity charges brought forward from previous years, SEK - (199) million was used as investment grants for investments realised in When capacity charges are used as grants for realised investments, an asset is capitalised with the same depreciable life as the facility to which the grants are linked. Capacity charges thus help to reduce the annual expense for the facility. In 2014 SEK 347 (521) million was used as co-funding for realised investments. The figure of SEK 521 million for 2013 includes capacity charges brought forward from previous years. In 2014 no funds brought forward from previous years were available for use as investment grants. INVESTMENT GRANTS The second source of funding is investment grants. One type of investment grant is the fee which Svenska kraftnät charges to connect network customers to the grid. The connection fee is intended to fund the measures that are taken, for capacity or 30/131

31 operational reliability reasons, to connect a particular facility. Investment grants may also be provided by landowners who receive released land as a result of the expansion of the network. The Stockholm Power project is one such example. Another type of investment grant comes from the EU, which is co-funding NordBalt, a direct current link being built between Sweden and Lithuania. Investment grants totalled SEK 193 (74) million in The subsidiary company Svenska Kraftnät Gasturbiner AB is funded through a loan from the parent company. Borrowing at year-end was SEK 88 (77) million. COST EFFECTIVENESS Svenska kraftnät aims to maintain a level of cost effectiveness that is at least on a par with comparable companies. To assess the company s effectiveness and identify potential improvements, comparisons are made in the form of benchmarking studies. The most recent benchmarking study was conducted in by the Council of European Energy Regulators (CEER). The study showed that Svenska kraftnät is one of the most efficient transmission system operators in Europe. It was noted, however, that Svenska kraftnät faces a period of extensive reinvestment in the grid and that it will therefore be challenging to maintain the same level of efficiency and cost control. As part of their project activities, Statnett, Fingrid, Energinet.dk and Svenska kraftnät have established a framework for exchange of experiences so that each party can learn and benefit from the others experiences of project implementation. The initiative is centred on issues such as health and safety, the environment, contract evaluation and information management. 03. INVESTMENTS The expansion of the grid follows the national economy, and the underlying rationale for Svenska kraftnät s investment in the grid is defined in Sweden s energy and climate policy. This creates requirements for market integration, the expansion of transmission networks to enable the connection of new generating capacity and reinvestment to ensure a robust power supply. 31/131

32 The Group made investments of SEK 4,353 (3,642) million in New investments were SEK 3,574 (3,165) million and reinvestments SEK 779 (477) million. The breakdown of investments by Group company was as follows. Investments (SEKm) Parent company Grid investments 4,282 3,577 Fibre-optic investments 1 3 Intangible assets Total parent company 4,331 3,640 Svenska Kraftnät Gasturbiner AB 22 2 Total 4,353 3,642 The Group made total investments of SEK 4,353 (3,642) million. Of this amount, SEK 4,305 (3,582) million refers to investments in property, plant and equipment. The Transmission of Electricity on the Grid business segment accounted for the majority, with investments of SEK 4,326 (3,624) million. For 2014 the Swedish parliament approved an investment plan of SEK 5,564 (5,000) million. Actual investments in the grid in were lower than planned, however, for three main reasons: > The contractors were unable to deliver on their undertakings. > The price of electricity was low, which meant that external parties did not have the necessary profitability to be able to complete their planned investments. > Projects were started later than expected. 32/131

33 The shortfall is also explained by delays caused by protracted permitting processes. A detailed description of deviations is presented in Svenska kraftnät s Investment and Financing Plan , which will be submitted to the Swedish government by 1 March In 2013 Svenska kraftnät adopted a long-term development plan for the national grid called Perspective Plan The plan clarifies Svenska kraftnät s priorities and intentions for the development of the grid over the next ten-year period. There are three principal drivers influencing decisions on investments in the grid: removing bottlenecks through new construction and integrating the market, connecting new power generation facilities, and making the necessary reinvestments. BOTTLENECKS AND MARKET INTEGRATION Svenska kraftnät is striving to establish an efficient and well functioning competitive market for electricity. An important objective is therefore to eliminate bottlenecks in the Nordic transmission network and in transmission lines between Scandinavia and the continent through new construction. The SydVästlänken transmission line is Svenska kraftnät s biggest investment to date, with an estimated cost of SEK 7,800 million. The line will form an important transmission link to southern Sweden and help to improve the operational reliability of the grid in this part of the country. The line will have a capacity of 1,200 MW. On 22 January 2014 Östansjö, the last of three new grid stations on the line, was completed. SydVästlänken s 190 km long cable and 250 km long overhead line were completed in MEET THE PEOPLE BEHIND SYDVÄSTLÄNKEN The SydVästlänken transmission line is taking shape. The project is Svenska kraftnät s biggest infrastructure project to date an investment worth around SEK 8 billion. The 430 km long link will strengthen the operational reliability of the grid and increase transmission capacity to southern Sweden. Dialogue an important part of Lina s work Lina Andersson is one of our construction inspectors. Her task is to regularly assess the progress of construction activities and support the contractors in their work in various ways. In my role I serve as an important link between the contractor, which is building the line, and the project designer, who has done the calculations and modelling, Lina explains. As a construction inspector, Lina s work was at its most intense during the period when the locations for the foundations of each pylon were being marked out in the 33/131

34 power line corridor. Only when digging began was it possible to know for sure what type of foundation would be needed in each location. The foundations have been designed to withstand every conceivable stress. With pylons expected to stand and remain stable for nearly 70 years, the foundations are a critical factor for ensuring a robust and reliable grid. For a construction inspector every day looks different, with site visits alternating with meetings. What I enjoy most is that I get to be involved in so many different parts of a power line construction project. I get to see so much and learn new things every day. It is in the field that all the various parts start to fit together, Lina says. Health and safety a key part of Sverker s leadership Sverker Ekehage is chief project manager for the SydVästlänken power line project. He is proud of how the project is being implemented and looks forward to the day when the link will be transferring electricity over the grid. As I see it, we haven t just built a power line. We have built something that will benefit society and give Sweden a more secure and reliable electricity supply, Sverker explains. Over 240 people, in-house staff as well as consultants, are working on the project on the client side, i.e. Svenska kraftnät. Like construction inspectors, health and safety coordinators, who monitor the work environment, are key individuals for the success of a project. For SydVästlänken systematic health and safety work has been an important issue. We work actively on ensuring that everyone is able to work in a safe and sound work environment. My view is that our work on these issues has also made a valuable contribution to Svenska kraftnät s other investment projects. SydVästlänken is Svenska kraftnät s biggest investment project to date, and the new link is attracting a lot of interest, both internally and externally. I enjoy work on an infrastructure project that has attracted so much outside interest. Within the organisation I see a strong commitment and interest, and it feels like all those working on the project are devoted to their task, Sverker concludes. NordBalt is a cross-border transmission line that is being built between Sweden and Lithuania with an estimated price tag of SEK 3,000 million. The aim is to connect the emerging Baltic electricity market with the Nordic and European markets. The link will also help to improve the Baltic states security of electricity supply. NordBalt is a 34/131

35 collaborative project between Svenska kraftnät and the Baltic grid operators Litgrid in Lithuania and Augstsprieguma tīkls in Latvia. NordBalt is a priority project for the European Commission. In the framework of the European Energy Programme for Recovery (EEPR) the European Commission has set aside 175 million for the project. The line will have a capacity of 700 MW. Investments for increased market integration and alleviation of bottlenecks in the grid totalled SEK 3,306 (2,492) million in CONNECTING NEW GENERATING CAPACITY Svenska kraftnät has a duty to connect new generating capacity, which mainly relates to power increases in nuclear power plants and the connection of new wind farms. A major expansion of wind power is being planned on Gotland. In 2014 Svenska kraftnät worked on the design for a new line connecting Gotland to the Swedish national grid, as the two existing regional network links were insufficient to cater for the planned expansion of wind power on the island. There is significant potential to expand wind power in Dalsland, Bohuslän and Västergötland. In just one area, located between Borgvik to the north and Stenungsund to the south, there are plans to build up to 2,500 MW of new wind power capacity. A new 400 kv station is therefore being built in the area. In the county of Västerbotten there are plans for new wind farms with a projected increase in capacity of around 800 MW. A new 400 kv station is therefore being built in the area. A lower electricity price is creating profitability issues for many planned wind farms. This has led to increased uncertainty, with some projects being mothballed. Since the 1980s Sweden s nuclear power plants have gradually increased their electricity production. Extensive improvements to the connecting networks are required to enable the country s nuclear power plants to further increase production. The East Svealand programme included plans for significant investments in new transmission lines and stations to handle the feed-in of additional power from the three nuclear reactors in Forsmark. However, it now seems clear that the planned increase in power at Forsmark 3 will not be implemented. Negotiations are underway on new connection agreements, which will cover all of Svenska kraftnät s investment expenditure for Forsmark, including the SEK 31 million which has already been invested in project design for three transmission lines related to Forsmark 3. In the event that Svenska kraftnät receives no compensation for its investment expenditure for these three lines, this would have a negative impact on earnings of SEK 31 million. 35/131

36 Investments related to the connection of new generating capacity totalled SEK 209 (159) million in REINVESTMENTS In many places the Swedish national grid will soon reach the end of its technical life. Svenska kraftnät is working on plans to make the necessary investments. In 2014 an inventory of facilities on the grid was completed. The results of the inventory will be used as a basis for more detailed programmes for reinvestment in transmission lines and stations. The status inventory showed that there will be a very significant need to invest in existing facilities over the coming years. To optimise the replacement of facilities and minimise outage times owing to replacement and maintenance work, the company will be using a strategic management approach. This includes adapting to future conditions and using data and information about the company s facilities to make decisions at the right time, in the right place and in the right way. As the population grows so, too, does the need for electricity. The growth of the Stockholm region has made it necessary to review the network structure which provides the city with electricity. In the Stockholms Ström project the electricity grid in Stockholm is being restructured in a collaborative project involving Svenska kraftnät, Vattenfall Eldistribution and Fortum Distribution. Together with the local authority and construction companies in Stockholm County, some 50 new projects affecting 20 municipalities are being funded. In 2014 investments were made in new grid stations, power lines and cables. Stockholms Ström comprises investments totalling SEK 5,630 million, of which Svenska kraftnät will provide SEK 4,600 million. The aim is to achieve an improved network architecture, cut energy losses and increase security of supply. In 2014 work was underway on the overhead line and cable between Hagby and Anneberg. Work was also undertaken on the Anneberg Skanstull and Danderyd Järva cable projects. In Kalix work is progressing on a new substation that will increase the operational reliability of the grid when it is connected to the regional network. A number of stations are also being converted into modern double breaker stations to increase reliability. In 2014 investments were made in new data communication systems connecting network operations centres and grid stations. The project will result in a modern communication solution that is able to meet operational requirements for security, availability and other criteria. The system consists of three parts an operational telecommunication network, an operational data network and an operational monitoring system. 36/131

37 Svenska kraftnät s grid control and monitoring system was taken into use in 2001 and is now nearing the end of its life. Upgrade work is underway to ensure the long-term operation of the national grid and meet the high standards required for control room operations. Reinvestments during the year were SEK 838 (991) million, of which SEK 707 million refers to reinvestments in existing facilities. 04. BUSINESS SEGMENTS Svenska kraftnät s operations are divided into five business segments: > Transmission of Electricity on the Grid > System Operator Electricity > Telecommunications > Chargeable Activities > Power Contingency Planning This chapter describes the results of the business segments. The Telecommunications business segment is presented below broken down by internal use and use by external customers. The breakdown by segment in the table is a consequence of this. Until 31 May 2013 Svenska kraftnät was the Swedish system operator for gas. On 1 June 2013, following a decision by the government, Swedegas AB became the new system operator. Final settlement was made in the third quarter of the same year. Some activities, such as primary control and disturbance reserve, are common to several business segments. The allocation of expenses and revenue is described in the respective sections. Group Operating revenue Operating profit Investments (SEKm) Transmission of 4,600 4, ,326 3,624 Electricity on the Grid System Operator 4,376 5, /131

38 Electricity Telecommunications external Telecommunications internal System Operator Gas Chargeable Activities Associates Power Contingency Planning Segment elimination Total 9,319 10, ,353 3,642 Parent company Operating revenue Operating profit Investments (SEKm) Transmission of 4,605 4, ,319 3,623 Electricity on the Grid System Operator 4,377 5, Electricity Telecommunications external Telecommunications internal System Operator Gas Chargeable Activities Power Contingency Planning Segment elimination Total 9,325 10, ,321 3,640 Illustration: The Nordic power grid in 2014 TRANSMISSION OF ELECTRICITY ON THE GRID Network operations comprise the expansion, operation and maintenance of the national grid in Sweden. Svenska kraftnät s network customers are large electricity generating facilities, regional networks and certain consumption facilities that are connected to the grid. The company concludes a contract of use with customers for access and use of the grid. The grid tariff is a service-dependent tariff, which means 4 Final settlement was made in the third quarter of Final settlement was made in the third quarter of /131

39 that a subscriber is given access to the whole electricity market, regardless of where in the country the feed-in point is, at the agreed power level. The grid tariff consists of two charges: > The capacity charge covers operation, maintenance, depreciation and capital costs for the network. The charge is based on the customer s annual capacity subscription for supply or consumption at each connection point. Feed-in fees are lowest in the south and increase linearly with latitude, being highest in the north. For withdrawal fees the opposite applies. This geographical differentiation is designed to provide long-term price signals on the siting of generating and consumption facilities. > The usage fee is intended to cover costs for transmission losses on the grid. The fee is designed to cover the cost of losses in the grid caused by supply or consumption at individual connection points. Supply or consumption that results in reduced grid losses reduces the usage fee. This is known as energy compensation. Transmission of Electricity on the Grid Group (SEKm) Grid tariff Capacity charge 2,327 2,350 Usage fee 1,561 1,870 Total 3,888 4,220 Transit revenue Total 4,305,4,387, Grid tariff revenues were SEK 3,888 (4,220) million. Of the total amount, 60 (56) per cent refers to capacity charges and 40 (44) per cent to usage fees. For 2014 usage fees were reduced by 13 per cent for all bidding areas because the procurement of energy losses was made at a lower price. Transit revenues, which are earned when the grid is used for transmission of power through Sweden to other countries, were significantly higher than in the previous year, at SEK 417 (167) million. Out of total revenues for the year, SEK 119 million and SEK 11 million refer to revenues attributable to 2013 and 2012, respectively, which means that the actual outcome for 2014 was SEK 287 million. Power subscription national grid /131

40 Supply, MW 20,781 21,461 Consumption, MW 19,584 19,342 Number of customers Feed-in subscriptions decreased while consumption subscriptions increased somewhat compared with The number of customers connected to the grid decreased, to 24 (29). The decrease was due to corporate mergers. Transmission of Electricity on the Grid Energy supplied to the grid, TWh Energy consumed from the grid, TWh Max power consumption, MWh/h (hour with highest power consumption) ,558 20,003 Energy supplied in 2014 was (119.3) TWh and energy consumed (116.5) TWh. The supply of energy to the grid decreased compared with the previous year, despite marginally higher electricity production in the country. The reason is that some of the generated electricity is fed into the underlying regional networks. The reduced consumption is explained by slightly lower electricity use, as 2014 was a year with an above-normal average temperature. Transmission losses on the grid Energy losses, TWh Share of energy consumed, % Max power losses, MWh/h (hour with highest energy losses) Energy losses in the grid were 3.0 (2.8) TWh, which was slightly higher than in the previous year. The increased losses are explained by the fact that 2014 was a year with higher hydropower production in northern Sweden and in Norway than in This led to an increase in the transfer of electricity from north to south, which normally involves long transports from generator to consumer. As transmission losses depend on distance, this meant that transmission losses were higher in Transmission of Electricity on the Grid (SEKm) Operating revenue 4,600 4,724 Operating expenses -3,836-3,727 Operating profit /131

41 The operating profit for the business segment Transmission of Electricity on the Grid was SEK 764 (997) million. Operating revenues decreased by SEK 124 million compared with the previous year. The lower revenue is due principally to a reduced usage fee for 2014 and reduced supply and consumption of electricity in the grid. The reduction in the fee was due to the fact that the procurement of energy losses was made at a lower price than in Expenses for energy compensation also declined, again due mainly to the reduced usage fee. Supply and consumption of electricity in the grid were both lower than in 2013, which has a certain impact on revenue and expenses. Energy revenues and energy compensation depend on where in the grid the energy is supplied and consumed. Supply is to a large extent influenced by generating capacity at nuclear power plants and by water levels in reservoirs. Electricity prices in neighbouring countries also affect the use and supply of electricity through exports and imports, respectively. Power revenues declined by SEK 23 million, which was mainly due to reduced revenues form temporary subscriptions, which were SEK 47 million in 2014 compared with SEK 75 million in Svenska kraftnät has both revenues and costs for transit. The compensation agreement for transit, Inter TSO Compensation, is an agreement among 35 European transmission system operators and is governed by Regulation (EU) No 838/2010. The object of the agreement and its calculation mechanism are to ensure that each party receives and provides economic compensation for the use of networks for transmission of energy through one country to another. In theory, the compensation consists of two parts: compensation for infrastructure and compensation for losses. Every month each party to the agreement submits six snapshot views of flows in each network as well as the measured values of exchanges through cross-border transmission lines. These are then calculated centrally and netted to minimise payment flows among the parties. The compensation which Svenska kraftnät receives and pays is related to the flows of all participating transmission system operators. There is therefore no or a very weak correlation between, for instance, Svenska kraftnät s costs for losses and the compensation received by the company. The same applies to compensation for infrastructure. The very weak correlation is explained by the fact that the economic outcome is not solely dependent on Sweden s transmission losses, net export situation and reservoir levels, but depends on the values reported by all European countries. Transit revenues in 2014 were significantly higher than in 2013, totalling SEK 417 (167) million. Out of total revenues for the year, SEK 119 million and SEK 11 million refer to revenues attributable to 2013 and 2012, respectively, which means that the actual outcome for 2014 was SEK 287 million. Costs were also higher, at SEK 183 (104) million. Out of the total transit costs, SEK 27 million refers to 2013 and SEK 10 million 41/131

42 to 2012, which means that the actual outcome was SEK 146 million. The increase in revenues and costs was due to the fact that ENTSO-ITC 6 invoiced for the period July December 2013 in 2014 and that the previous year s provisions for these revenues and costs were too low. The difficulty of predicting the economic outcome for the right period is due to the complexity of the allocation mechanism in the agreement with ENTSO as well as the long time lag before invoicing and corrections are made. The profit for the year is partly based on estimated revenues and expenses. Revenue from capacity charges and investment grants in 2014 were SEK 149 (136) million. Of this, SEK 137 (114) million refers to revenues for the year through grants for grid investment and SEK 12 (22) million to counter-trade costs for the year. The increase in grants for grid investments is due to the inflow of capacity charges in 2014, which were used for investments and thus affected the income statement in the form of settlement of capitalised investment grants. Operating expenses increased by SEK 109 million compared with 2013, which was mainly due to increased costs for transit and the recognition of accrued expenditure related to terminated projects. The increased costs for the purchase of energy losses, which totalled SEK 1,224 (1,200) million, were due to an increased loss volume. The price is hedged at the system price while the current spot price in each bidding area is used to determine the energy loss price. A certain portion of the energy loss price is thus unhedged and depends on the spot price. This cost increased compared with The hedged loss price was lower during the period than in the previous year, which partly offset the increased cost. The Group s revenues and expenses for primary control decreased. Overall, revenues declined from SEK 230 million in 2013 to SEK 166 million in 2014 while expenses declined from SEK 777 million in 2013 to SEK 737 million in Revenues and expenses for primary control attributable to the business segment declined. Revenues were SEK 28 (66) million and expenses SEK 155 (236) million. The decreased expenses are largely due to a reduced need for one of the components of primary control, frequency containment reserve - disturbance (FCR-D). The reason for this is that the audit at Oskarshamn 3 started earlier and took longer than expected. A frequency containment reserve is maintained as insurance to manage disturbances caused by the loss of the largest source of production. Oskarshamn 3 is the largest source of production in the Swedish electricity system, and when this reactor is not in operation the need to maintain a frequency containment reserve is reduced. When Svenska kraftnät was forced to cancel its contract with Alstom Grid for delivery of a new network monitoring system the accrued expenditure was charged to expense, 6 Inter transmission system Operator Compensation for Transits (ITC). 42/131

43 reducing earnings by SEK 173 million. Project planning expenditure of SEK 93 million for the Ekhyddan Barkeryd transmission line project was also expensed. The project resulted from the need to handle an increase in power at the Oskarshamn nuclear power plant. However, new network studies conducted in autumn 2014 showed that it will be possible to handle both the increase in power at Oskarshamn and ensure the operational reliability of the future network that will come into being upon completion of the Gotland and NordBalt projects through the new Ekhyddan Nybro Hemsjö transmission line. The Ekhyddan Barkeryd project has therefore been terminated. Earnings for the previous year include a charge of SEK 55 million related to the decision not to build the western branch to Norway in the SydVästlänken expansion project. The operating margin for the business segment was 16.6 (21.1) per cent, which is 4.5 percentage points lower than in the previous year. The business segment made investments of SEK 4,326 (3,624) million in OPERATIONAL RELIABILITY IN 2014 Operational reliability was good in 2014, although disturbances and energy and power not supplied were higher than in The number of disturbances in the grid was 205 (177), of which most were handled through automatic disconnection of faults with no impact on electricity supply. A number of disturbances in the grid did result in energy not supplied (ENS), however. OPERATIONAL DISTURBANCES Operational disturbances in the grid, 205 no Operational disturbances in the grid 22 resulting in outages, no Energy not supplied (ENS), MWh Power not supplied (PNS), MW The number of operational disturbances on the grid over the last five-year period is shown above. The number of disturbances resulting in supply interruptions for electricity customers was 22 (1). Energy not supplied (ENS) to electricity customers was 10.6 (0.2) MWh. The target is to keep ENS below 10 MWh/year. Power not supplied (PNS) was 84.3 (10.0) MW in The target is to keep PNS below 80 MW per year. 43/131

44 Several metering transformers exploded during the hot summer of The failure of so many devices in such a brief space of time is very unusual, and it has not been possible to determine the cause of the explosions. All of the exploded metering transformers were of the same make and were manufactured in the same year, and have now been replaced. The relatively high number of disturbances is also explained by a season with more thunder disturbances than in any previous thunder season. Several strokes of lightning hit radial 7 transmission lines and resulted in brief interruptions with less than 0.1 MWh of energy not supplied per fault. As several radial transmission lines were hit by lighting, this resulted in a high level of power not supplied. An instance of disturbance caused by thunder, leading to faults, resulted in 6.3 MWh of energy not supplied. SYSTEM OPERATOR ELECTRICITY Svenska kraftnät is the system operator for electricity, which means that it is responsible for ensuring a reliable electricity supply and that a balance between supply and consumption of electricity is maintained at all times, i.e. that the frequency is 50 Hz. To achieve this, Svenska kraftnät concludes agreements on balancing responsibility for electricity with 28 companies that have undertaken to act as balance providers. The business segment also includes Ediel communication and the power reserve that Svenska kraftnät has been commissioned to procure. The targets for operational reliability defined by Svenska kraftnät are subject to approval by the government. To meet these targets, Svenska kraftnät needs to ensure that voltage, frequency and power flows remain within the defined limits. BALANCING CONTROL Responsibility for planning their consumption and production and thus helping to ensure a balance in the electricity system rests with the companies acting as balance providers. Svenska kraftnät s responsibility is to balance the supply and consumption of electricity during each hour of operation. The balance providers also have economic responsibility for ensuring that the amount of electricity supplied to the electricity system is the same as the amount that is used. Any deviations from the plan will have various economic consequences. The balance provider agreement therefore also contains pricing schemes that are designed to give the companies an incentive to maintain the balance. To maintain the operational reliability of the network as well as the frequency of the electricity system in cases where the balance providers deviate from their plans, Svenska kraftnät carries out the necessary balancing control. This means that the 7 Only one line to the connection point. 44/131

45 company places orders with balance providers to increase or decrease their production or consumption. In addition to these manual orders in what is known as the regulating energy market, Svenska kraftnät procures various reserves, including the primary control, automatic secondary control and disturbance reserves. These are used when manual orders are insufficient to achieve a balance in the electricity system and keep the frequency within the permissible limits. Svenska kraftnät s expenses and revenues for balancing control depend partly on the imbalance volume and partly on the price for the necessary adjustments. On a gross basis, revenues and expenses for balancing control can vary quite significantly from one year to another, as the price of regulating resources varies with the underlying market prices for electricity. The adjustments that are ordered in the regulating energy market are used as a basis for pricing in the balancing settlement system and result in expenses and revenue for Svenska kraftnät. Svenska kraftnät s expenses for reserves are largely funded through fees charged to the balance providers. The principles for pricing of imbalances are largely defined at the Nordic level through an agreement among the Nordic transmission system operators as part of the effort to establish a single Nordic retail market. In recent years expenses have increased in the business segment, which has been posting losses for a number of years. In 2014 it was decided to raise the fee on two occasions to curb the deficits. On 1 December 2014 the basic fee for consumption was raised along with the balancing energy fee. On 1 August the fees were raised again following a decision by the Board of Svenska kraftnät. The basic fee for total consumption was raised again while the balancing energy fee was left unchanged. The fixed monthly fee paid by each balance provider was kept unchanged on both occasions. BALANCING ENERGY BETWEEN BIDDING AREAS Balancing energy between bidding areas is defined as the difference between planned and physical flows between bidding areas and may involve a cost for Svenska kraftnät. Such balancing energy is priced at the average regulating price in each area. Balancing energy from a high-price area to a low-price area entails a loss for the transmission system operators concerned in relation to purchased/sold balancing energy/regulating energy in each area. Similarly, the TSOs will make a profit when this type of balancing energy goes from a low-price area to a high-price area. On cross-border transmission lines the risk is shared between Svenska kraftnät and the foreign TSO. Following the introduced of multiple bidding areas, balancing energy arises also in Sweden. Discussions are currently underway between the Nordic transmission system operators on how to reduce the costs. In 2014 costs have been reported on a joint 45/131

46 Nordic basis broken down by pricing area and transmission system operator. The aim is to raise awareness of when and how these costs arise. Illustration: Maps of bidding areas FREQUENCY CONTROL Frequency quality is measured regularly as frequency deviation in number of minutes per year outside the nominal frequency of 50 Hz + /- 0.1 Hz. The target is a frequency not exceeding 6,000 minutes per year outside the Hz range. In 2014 the frequency was outside this range during 10,366 (11,429) minutes. Frequency control is done either automatically or manually. Automatic primary control consists of two products: frequency containment reserve - normal operation (FCR-N) and frequency containment reserve disturbances (FCR-D). Through manual control the frequency is restored to 50 Hz within 15 minutes, and the automatic reserves are also restored. FCR-N is set to maintain the frequency within the 49.9 to 50.1 Hz range in normal operating conditions. FCR-D is set to ensure that the frequency does not drop below 49.5 Hz during disturbed operating conditions. In January a trial of the new automatic reserve for secondary control during normal operation (FRR-A) 8 was started in the Nordic power system. Frequency improvements have been identified during those hours when the reserve has been used actively. The trial continued in 2014 with the aim of identifying reasonable levels for volume, expenses and market functioning throughout the Nordic region. In addition to the improved operational reliability offered by FRR-A, another key objective is to develop a well functioning market solution. The work will continue in In the final quarter of 2014 Svenska kraftnät conducted a joint pilot project, the Hasle pilot, together with the Norwegian grid operator Statnett. In the pilot project some transmission capacity is reserved in the Hasle line between bidding areas NO1 and SE3. The purpose is to assess how capacity can be reserved on socio-economic grounds. The results show that it is possible to reserve capacity in such a way that it benefits the national economy and ensures more efficient use of the available reserves. In addition to the overarching objectives of creating wider economic benefits and using resources efficiently, the ambition is to create an environment that will promote increased competition and lower prices. A potential second phase of the project and further evaluations will be conducted in Illustration: Electricity balance 8 Automatic frequency restoration reserve (FRR-A). 46/131

47 THE POWER SITUATION The year began amid relatively high temperatures for the time of year. The highest level of consumption in the previous winter (2013/2014) occurred on 13 January 2014 with a reading of 24,760 MW, which was 2,000 MW less than the highest consumption registered in the winter of 2012/2013. Water reservoir levels were slightly below their 20-year average at the beginning and also towards the end of the year. Two nuclear power plants were subject to audits at the end of the year. In 2014 a further 1,035 MW of wind power capacity was installed, bringing total installed wind power capacity in Sweden to 5,504 MW at year-end. The power situation is also affected by the availability of cross-border transmission lines and the general conditions for import and export. The Konti-Skan 1 line between Sweden and Denmark is currently unavailable due to the failure of a transformer on the Swedish side. The trade capacity for import and export to Jutland in Denmark at the end of the year was reduced from 700 MW to around 300 MW. PEAK POWER RESERVE Under the Swedish Peak Power Reserve Act (2003:436), Svenska kraftnät is charged with ensuring that a peak power reserve is available during the winter period. The Peak Power Reserve Ordinance (2010:2004) indicates the quantity to be procured for each winter period. For the period 16 November 2014 to 15 March 2015 Svenska kraftnät is required to ensure that a peak power reserve of up to 1,500 (1,500) MW is available. The peak power reserve is intended to help maintain electricity supply in extreme situations that can arise in very cold weather. The reserve is funded through a special fee levied from the balance providers and is secured through agreements between Svenska kraftnät and producers, suppliers and users of electricity for the provision of additional generating capacity or a potential reduction in consumption. In 2014 Svenska kraftnät procured a peak power reserve of 1,500 (1,489) MW, of which 626 (958) MW referred to additional generating capacity and 874 (531) MW to reduced consumption. The peak power reserve was not used in However, the standby time has been changed to two hours for Karlshamn and Stenungsund 3 and 4. The standby time was reduced to twelve hours on 12 December, when the risk of storms was deemed to be very high. 47/131

48 RESULTS FOR THE BUSINESS SEGMENT System Operator Electricity (SEKm) Operating revenue 4,376 5,066 Operating expenses -4,510-5,258 Operating profit The business segment System Operator Electricity reports an operating loss of SEK -134 (-192) million. The reduced loss was due to an increase in revenues from balance providers as a result of an increased basic fee for consumption and production and an increased fee for balancing energy. However, the fee increases were still insufficient to cover the increased expenses and achieve breakeven. Consolidated operating revenues fell by SEK 690 million compared with 2013, to SEK 4,376 (5,066) million. Operating expenses also decreased, to SEK 4,510 (5,258) million, resulting in a deficit. Gross revenue and expenses from balance providers and transmission system operators increased. On a gross basis, revenues and expenses for purchased and sold balancing energy are determined by the market price of electricity and volume of balancing energy in each area. In 2014 both the volume and average price of purchased and sold balancing energy decreased. Earnings increased by SEK 58 million compared with the previous year. On a consolidated basis, total revenue and expenses for primary control decreased in the business segments Transmission of Electricity of the Grid and System Operator Electricity. Total revenues declined from SEK 230 million in 2013 to SEK 166 million in 2014 while expenses fell from SEK 777 million in 2013 to SEK 737 million in Revenues in the business segment System Operator Electricity decreased, to SEK 138 (163) million. Expenses for purchased primary control reserves increased to SEK 583 (541) million. The high level of expenses is due to increased prices compared with the previous year, with the price being affected by factors such as water levels in the reservoirs. Purchased FCR-N increased to SEK 503 (423) million compared with 2013 while purchased FCR-D was lower, at SEK 80 (118) million, moderating the increased expense somewhat. The net loss for balancing energy among bidding areas in 2014 was SEK 68 (44) million, of which SEK 15 (18) million refers to Sweden internally. 48/131

49 Revenues from balance providers for the peak power reserve were SEK 112 (138) million. These revenues are recognised in the winter months, from mid-november to mid-march. The cost for the peak power reserve in the same period was SEK 112 (138) million. The change is partly due to a decline in the procured volume. Svenska kraftnät s revenues from balance providers are matched with the costs, resulting in a breakeven result. The expense for the disturbance reserve was SEK 111 (125) million, of which a third, SEK 37 (41) million, was recognised in System Operator Electricity. The business segment reports an operating loss of SEK -134 (-192) million. The operating margin was -3.1 (-3.8) per cent. The business segment made investments of SEK 15 (1) million in TELECOMMUNICATIONS To control and monitor the national grid for electricity, Svenska kraftnät maintains a nationwide telecommunications and data network. This network is essential to maintaining a high level of reliability in the grid, something that is especially important during the re-establishment phase after an operation malfunction. For this reason, the communications network is designed with three separate communication paths along important stretches. To assure operation in the event of a power outage, there is also a back-up system in the form of uninterruptible power supply. This is used by the business segment Transmission of Electricity on the Grid, generating revenues for the Telecommunications business segment. The telephone and communications network is required to have an availability of at least per cent measured on redundant (duplicate) connections. The outcome for the year was 100 (100) per cent. The communications network consists of optical fibre, which is mainly installed in the top lines of power lines. The network consists of about 7,950 km of own optical fibre and about 2,300 km of optical fibre that is leased from other network owners. In 2014 the fibre-optic network was upgraded and expanded with about 450 km of optical fibre. Svenska kraftnät is required to operate the communications network in a cost-effective and competitively neutral manner. The communications network and the amount of installed fibre provide greater capacity than Svenska kraftnät needs for its own operations and communication. Svenska kraftnät therefore leases out dark fibre, i.e. optical fibre without active telecom equipment, to major telecom operators, power 49/131

50 companies and other users. This is done partly through direct sales and partly through collaboration in the associated company Triangelbolaget D4 9. The maintenance of the fibre-optic network is performed by a contractor and forms part of Svenska kraftnät s central maintenance procurement. Internal operation, monitoring and the contingency planning function are coordinated with other monitoring and contingency planning activities for IT functions. This makes it possible to maintain cost-effective operation and very low running costs. In addition, active connections, in the form of capacity, are leased to energy companies for their operational communications. Revenue is also generated from the lease of capacity services and antenna locations on masts and pylons. Telecommunications (SEKm) Operating revenue External Internal Total Operating expenses External Internal Total Operating profit External Internal 10 3 Total operating profit Total revenue in the business segment was SEK 131 (126) million, of which SEK 73 (75) million refers to external operations. The lease of dark fibre accounts for the largest share of external revenue. Internal revenue from the business segment Transmission of Electricity on the Grid was SEK 58 (51) million. The operating profit was SEK 36 (30) million. The lower figure for 2013 was due to insufficient provisions for inter-segment revenues between Telecommunications and Transmission of Electricity on the Grid. The operating margin was 27.5 (23.8) per cent. Investments in Telecommunications in 2014 were SEK 12 (16) million /131

51 Illustration: The fibre-optic network SYSTEM OPERATOR GAS On 1 June 2013 Swedegas AB took over as system operator for Sweden s natural gas supply. Final settlement was made in the third quarter of System Operator Gas (SEKm) Operating revenue - 31 Operating expenses Operating profit - 1 CHARGEABLE ACTIVITIES The business segment Chargeable Activities covers management of electricity certificate accounts and issuance of guarantees of origin. TRANSFER OF ACCOUNT MANAGEMENT RESPONSIBILITY TO THE SWEDISH ENERGY AGENCY On 2 April 2014 Svenska kraftnät proposed to the Swedish government that responsibility for the management of electricity certificate accounts and guarantees of origin for electricity be transferred to the Swedish Energy Agency. On 11 September 2014 the government approved the transfer, which will take place on 1 January 2015, when the amendments to the relevant regulations take effect. ELECTRICITY CERTIFICATES In a joint scheme with Norway, Sweden operates a certificate system that is designed to promote renewable electricity generation. Under the system, producers of renewable electricity are entitled to receive one electricity certificate from the government for each megawatt-hour of generated electricity. In 2014 Svenska kraftnät was responsible for the issuance of electricity certificates and management of certificate accounts, for which it charged a fee that is fixed by the government. All other regulatory duties were handled by the Swedish Energy Agency. In 2014 Svenska kraftnät issued around 17 (15) million electricity certificates. Approximately 49 (46) million certificates were traded during the year at an average price of SEK 196 (203) per certificate. Since the system was introduced about 176 (159) million certificates have been issued in Sweden. The surplus of registered electricity certificates increased this year too, as a smaller number of certificates were cancelled than were issued in /131

52 Chargeable Activities, electricity certificates (SEKm) Operating revenue Account fee 8 8 Administrative fee 0 0 Operating expenses Operating expenses Operating profit 2-2 GUARANTEES OF ORIGIN Sweden has a statutory system for guarantees of origin, which means that all generated electricity is eligible for guarantees of origin, i.e. an electronic document which guarantees the origin of electricity. Guarantees of origin can be issued, transferred and cancelled. Cancelled guarantees form the basis for the electricity supplier s origin marking of electricity. In 2014 Svenska kraftnät was the agency responsible for issuing and maintaining accounts for the administration of guarantees of origin. All other regulatory duties were handled by the Swedish Energy Agency. In 2014 Svenska kraftnät issued (141.6) million guarantees of origin. During the year (127.3) million guarantees of origin were transferred and 76.7 (88.7) million were cancelled in favour of deliveries of electricity. The number of guarantees of origin that have been cancelled automatically is 40.0 (44.2) million. Guarantees of origin are cancelled automatically when their validity expires, which occurs twelve months after the end of the production period. Today producers are not required to apply for and obtain guarantees of origin for the electricity they generate. Revenues increased compared with 2013, which was due to the increase in the fees for management of guarantee of origin accounts as of 1 May Chargeable Activities, guarantees of origin (SEKm) Operating revenue Account fee 8 5 Operating expenses Operating expenses -6-8 Operating profit 2-3 TOTAL RESULTS FOR THE BUSINESS SEGMENT Chargeable Activities (SEKm) Total operating revenue /131

53 Total operating expenses Total operating profit for the 4-5 business segment Total operating revenue for the business segment Chargeable Activities was SEK 16 (13) million. Operating expenses were SEK 12 (18) million and the operating profit was SEK 4 (-5) million. Activities involving electricity certificates and guarantees of origin are not intended to generate a profit. Instead, the level of revenues should be adjusted to cover the costs incurred in conducting the activities. Due to the profit for the year and previous years there is currently an accumulated surplus from electricity certificate revenues of SEK 48 million and a deficit of SEK -1 million for guarantees of origin. Upon the transfer of Svenska kraftnät s regulatory duties to the Swedish Energy Agency, the accumulated surplus of SEK 16 million (after distribution of 65 per cent of the annual profits to the State) will be transferred to the Energy Agency. The operating margin was 25.0 (-38.5) per cent. The business segment made investments of SEK 0 (1) million in POWER CONTINGENCY PLANNING Svenska kraftnät is the government agency responsible for power contingency planning, which means that the company receives funding to ensure that national electricity supply is strengthened so as to withstand severe stresses. In 2014 Svenska kraftnät received SEK 255 (255) million in government funding, of which SEK 248 (202) million was used. The funds were used for preventive preparedness measures, measures designed to withstand and handle disturbances, and measures for increased preparedness and war. RISK AND VULNERABILITY ANALYSES In 2014 the national risk and vulnerability analysis was developed. Information was obtained from companies and agencies involved in electricity supply. The request for information was based on sources of risk identified by Svenska kraftnät in its analyses. The guidance for risk and vulnerability analyses for the electricity sector was revised. The guidance is intended to serve as a basis for the preparation of risk and vulnerability analyses by companies and agencies involved in electricity supply. In the Nordic preparedness and security forum NordBER a specially appointed working group produced a risk and vulnerability analysis in which two scenarios were analysed in order to identify risks and vulnerabilities in the system of electrical supply. 53/131

54 ACTIVITIES AIMED AT REDUCING RISKS OF SEVERE DISRUPTIONS In 2014 Svenska kraftnät allocated funds to the disturbance reserve in order to maintain the preparedness of Sweden s gas turbine plants. The aim is to enable a change-over to island operation 10 and electricity generation in priority areas in case of major operational disturbances. To be able to start planned island operation areas, Svenska kraftnät has identified and taken measures for enabling black starts, control capability and voice communication. Operational tests, exercises and training sessions for employees and organisations were conducted on three occasions in order to verify island operation capability and increase participants knowledge of island operation. A third mobile distribution substation was procured. The substation enables Svenska kraftnät, within 48 hours, to temporarily replace and cut down the restore time in case of the failure of a distribution substation in the Stockholm region and other regions. Svenska kraftnät has reviewed and verified the redundancy and durability of operational communications for a number of organisations. The aim is to enable decisions on technical measures for the use of remote communications to control and monitor transmission networks and generating facilities. Back-up generators were installed at five priority facilities to enable a rapid return to normal operation with functioning communications after extended and widespread outages in the electricity system. Training and exercises for employees of contractors in how to operate and maintain back-up generators were conducted. HARNESSING AND COORDINATION OF RESOURCES National grid and regional transmission network installers received training in how to rebuild collapsed power lines using specially designed contingency equipment. Distribution electricians working in local networks were trained in how to repair national grid and regional transmission lines. Civil defence personnel working under voluntary agreements also received training aimed at maintaining their skills. Emergency response leaders were given training in leadership and repair work, and employees in Svenska kraftnät s preparedness organisation for emergency stocks also received training. During the year tracked vehicle and crawler tractor drivers, coordination and standby power operators and pilots from the voluntary organisations were given training in how to support the electricity companies. Volunteers participated in a regional coordination exercise. The forest fire in Västmanland triggered an effort to gather and coordinate the resources of the local community. Svenska kraftnät provided tracked vehicles driven 10 A local transmission network that is established in case of disturbances. 54/131

55 by the Volunteer Automobile Corps, Rakel mobile handsets and generators for the command and control site used by the emergency response leadership. The Voluntary Radio Organisation supported the tracked vehicle operation with Rakel support. In NordBER priority was given to development activities related to coordinated repair preparedness for grid transmission lines, a Nordic preparedness plan and information security. Grid operators and government agencies in the Nordic countries were invited to take part in each other s emergency preparedness exercises. FAST AND EFFECTIVE COMMAND AND COMMUNICATION Training and exercise activities were conducted for employees in the seven electricity collaboration areas. The aim was to increase the participants crisis management skills through repetition and application of their knowledge of the Susie situation monitoring and reporting system. A new version of Susie was launched. The new version focuses primarily on simplifying the management of resources. A direct link to Swedish Radio s issue tracking system has also been created in Susie to enable users to quickly pass on information on disturbances to Sveriges Radio, Sweden s public service radio broadcaster. Automatic reporting to Susie was implemented by half of the network companies. Svenska kraftnät and the Swedish Post and Telecom Authority (PTS) funded training and exercises in crisis management. The courses were aimed at participants from the energy and telecom industries. During the year Svenska kraftnät trained eight network companies in how to manage operational situations in case of severe strains on the electrical supply system. They were briefed on national and electrical supply crisis preparedness measures as well as electrical phenomena. CONNECTION TO RAKEL Rakel is Sweden s national communication system for coordination and command. Voice teams 11 and guidelines for how to use Rakel in the electricity supply system were established and adopted during the year. The activities were conducted in collaboration with the Swedish Civil Contingencies Agency and representatives from the Swedish electricity industry. Svenska kraftnät participated in the Electricity Industry s Rakel Forum. A pilot project was conducted in which Svenska kraftnät helped five companies in the electricity supply sector to implement Rakel. The aim was partly to secure these 11 A predefined group that can communicate in Rakel. 55/131

56 companies voice communications and partly to document the implementation process. The process will later be published in a guidance document for Rakel. A basic training course for Rakel was produced and about 150 end users in the electricity supply sector completed the course. About 30 companies implemented Rakel in connection with the transfer of Rakel subscriptions to representatives of the electricity coordination leadership teams. In connection with these exercises and training activities Svenska kraftnät worked to raise awareness and provide instruction in the use of Rakel among electricity industry players. Liaison tests were conducted for two of the national voice teams for the electricity supply system. CONTINGENCY PLANNING Svenska kraftnät s crisis management organisation received training and further contingency planning activities were conducted. A guidance document for crisis management in the electricity supply system was produced. The document is designed to support planning for the management and minimisation of disruptions to the companies operations. Svenska kraftnät acted as chairman for the technical infrastructure coordination area. The activities centred on developing focus area and planning work. SECURITY-RELATED PREPAREDNESS MEASURES As sector agency for energy supply, Svenska kraftnät works to ensure optimal security protection in the electricity industry. Security protection involves taking preventive measures against espionage, sabotage and other crimes which pose a threat to national security, including protection against terrorism. Svenska kraftnät works regularly to clarify the security-related requirements and guidelines that the energy supply sector is required to abide by. Particular effort was put into briefing relevant parties on Svenska kraftnät s Regulations and General Guidelines on Security Protection, SvKFS 2013:1. The company s own security analysis was also revised during the year. A new energy security portal 12 was launched in The portal serves as a reference site for relevant governing and supporting documents and is designed to facilitate security work in the industry. The portal is also used to communicate news and information on recent developments. 12www.energisakerhetsportalen.se 56/131

57 To support systematic information security work in the electricity industry, the company has produced guidance documents for information security. Svenska kraftnät s supervisory activities have been developed and closer collaboration in the field has been established with the Swedish Security Service and the Swedish Radiation Safety Authority. Security protection activities, in the form of the strengthening of physical protection, were implemented at ten facilities in the electricity industry. Five feasibility studies were conducted and technical requirements specifications were produced. Svenska kraftnät has promoted research into the security of the SCADA 13 systems by funding a research project at the Royal Institute of Technology. DAM SAFETY Svenska kraftnät works to promote dam safety in Sweden. This includes > monitoring and contributing to the improvement of dam safety > collaborating with the relevant government agencies and organisations > regular reporting to the government on new developments NEW REGULATIONS FOR DAM SAFETY A new regulation for dam safety applies from 1 July In June Svenska kraftnät submitted its report on a government assignment for the classification of hydroelectric dams and produced a timetable for classification of the existing dams. Procedures for the county administrations work on dam safety classification and the forms for the transfer of funds from Svenska kraftnät to the county administrations were drafted and agreed up. Regulations and general guidelines for impact assessments were adopted and distributed to the relevant parties. SUPERVISORY GUIDANCE Svenska kraftnät is responsible for supervisory guidance for dam safety in accordance with Chapter 11 of the Swedish Environmental Code. In 2014 the company produced a national summary of the dam owners annual reports for the County Administration relating to dam safety and also followed up the County Administration s supervisory activities. Expanded reporting for dams for which the consequences of a dam failure would be particularly severe formed part of the regular reporting procedure for the first time. 13 Supervisory Control and Data Acquisition (SCADA). 57/131

58 CLIMATE CHANGE AND DESIGN FLOWS FOR DAMS Svenska kraftnät monitors the impact of climate change on dam safety. Together with the power industry, mining industry and Swedish Meteorological and Hydrological Institute, Svenska kraftnät initiated a project in 2014 aimed at revising the guidelines for design flows for dams with regard to the climate issue and other factors. CONTINGENCY PLANNING FOR DAM FAILURES AND HIGH FLOWS Svenska kraftnät works to reduce the risk of severe disruptions to the normal functioning of society as a result of the failure of a dam or high flows in regulated rivers. The company supports the development of coordinated contingency planning for dam failures in major rivers with hydroelectric power stations. In 2014 flooding maps were produced for the Viskan and Voxnan rivers. Work on a coordinated contingency plan for dam failure is currently underway for the twelve largest hydropower rivers. KNOWLEDGE DEVELOPMENT AND TALENT MANAGEMENT Svenska kraftnät promotes research, development and knowledge exchange in the field of dam safety. Together with the power industry, the company supports Elforsk AB s 14 dam safety research and development project. Svenska kraftnät has supported and participated in about ten projects covering emergency preparedness exercises, methodology for mapping of properties and facilities at risk of flooding in case of a dam failure, high flows and climate change. Svenska kraftnät supports the Swedish Hydropower Centre, a centre for higher education and research that works to secure long-term access to skilled labour in the field of hydroelectric power and dam safety. PERMITTING Svenska kraftnät regularly takes part in consultations and submits opinions on permitting matters in accordance with Chapter 11 of the Swedish Environmental Code and referral processes related to dam safety. 05. EMPLOYEES In 2014 the number of employees, the workload and the need to engage external assistance continued to increase. Svenska kraftnät s international operations require ever greater internal resources while emerging technologies and the new duties involved demand new skills. 14 The research and development company for the Swedish electricity industry (Elforsk AB). 58/131

59 Svenska kraftnät has chosen to use in-house staff for strategically important duties. As a contracting party, the company is not able to directly control the type of skilled labour that is available in the market. A key challenge for the company is therefore to work with consultants and contractors to ensure that individuals with key skills remain in the industry. Major external changes and an expanded mission require long-term and carefully considered talent management, based on operational requirements and needs. Svenska kraftnät strives to maintain a good balance of age, gender and ethnicity. The company also aims to conduct safe and sustainable operations with healthy employees. FOCUSING ON BEING AN ATTRACTIVE EMPLOYER Svenska kraftnät s goal is to be one of Sweden s most attractive employers. An employee survey conducted at the beginning of the year and a leader survey from the autumn show that Svenska kraftnät is already a very good employer. Meeting the challenges of the future is creating ever greater challenges for our leaders. Clear, grounded and goal-oriented leadership is one of several key criteria for creating a good, efficient and value-driven workplace. To strengthen its brand and attractiveness as an employer, Svenska kraftnät has launched a project called Sweden s Best Workplace which brings together different activities in a development platform that is aimed at developing and retaining employees and attracting new talent. AIMING TO BECOME ONE OF SWEDEN S BEST WORKPLACES Svenska kraftnät is currently going through an intensive and expansive period. This creates a greater need for new employees than ever before. Right now we are expanding the Swedish national grid to meet today s high power consumption and the need for a secure electricity supply. This means that we need to recruit new colleagues. But that s not enough. We also need to ensure that we retain our employees and managers, Claes Vallin, HR Director at Svenska kraftnät, explains. To do this, Svenska kraftnät has set a goal of becoming one of Sweden s most attractive employers an ambitious goal that requires continuous business development and commitment throughout the organisation. Collaboration is a guiding principle for all our processes, which means that our employees are involved in all development issues, big and small. ENSURING THAT SWEDEN NEVER STOPS Challenging tasks. Clear development paths. A good work-life balance. Good benefits. Many arguments are put forward when Svenska kraftnät s employees are given an 59/131

60 opportunity to say what they think of their workplace. But one factor outweighs all the others. Our work is meaningful. Without us, Sweden stops working, so there is pride in the walls at Svenska kraftnät, says Claes Vallin. The work we do carries a lot of responsibility but it is often challenging as well, which means that you are constantly developing your skills. The heart of our culture is working together, sharing knowledge and helping each other. We all work towards the same goal, and that requires a team spirit, Claes adds. Another important feel-good factor that emerges from employee surveys is that Svenska kraftnät enables a good work-life balance. A balance between professional and private life ensures that employees enjoy their work. We also avoid arranging meetings early in the morning or late in the afternoon, to enable our employees to juggle their many commitments. LEADERS WHO KNOW HOW TO LEAD Employee surveys over the years have shown that Svenska kraftnät has leaders who are liked by the employees. The rapid expansion that the company is currently undergoing is, however, creating new and growing demands, for which clear and goal-oriented leadership is one of several key criteria. This will be achieved by giving the company s leaders development opportunities, tools and other means for handling the different dimensions of leadership. KEY PERFORMANCE INDICATORS, TARGETS AND OUTCOMES The Group had 530 (478) permanent employees at year-end. The number of annual full-time equivalents was 522 (471), of whom 338 (314) were men and 184 (157) women. Staff turnover was 4.0 (6.9) per cent, including retirements. Sick leave during the year was 2.4 (2.6) per cent. The average age of Svenska kraftnät employees is 44 (44) years. The age profile has changed significantly over the past decade. From being an organisation with many older employees, the age profile is now balanced. 60/131

61 Svenska kraftnät is perceived by its employees as a workplace with a high degree of equality that is parent-friendly and where great respect is shown for employees with different backgrounds. The proportion of women in the organisation is increasing steadily and is now over a third. Nearly half of the company s leaders are women. KPIs, targets and outcomes Outcome 2013 Target 2014 Outcome 2014 Target 2015 Number of permanent employees Full-time equivalents Total staff turnover 6.9 % <5 % 4.0 % <5% Staff turnover excl. retirement 4.5 % <2.5 % 3.4 % <2.5% Average age 44 yrs <45 yrs 44 yrs <45 yrs Share of women 33 % 35 % 36 % >36 % Share of female managers 48 % >40% 47 % >40 % Foreign background (SCB s definition) 11 % >12 % 13 % >12% Sick leave 2.6 % <2 % 2.4 % <2% Employees with zero sick leave 54 % > 60 % 51 % >60% Share of employees on long-term 1.2 % <1 % 0.8 % <1% 61/131

62 sick leave of over 60 days Employees on full-time sick leave New employees Average age of new employees 38 yrs <40 yrs 39 yrs <40 yrs Share of women among new employees 37 % >40% 42 % >40% Job rotation, number of people 30 >30 22 >30 The target for the number of permanent employees at year-end 2014 was 565. The lower outcome, of 530, was mainly due to a later than expected start to the recruitment processes and the difficulty of finding candidates with certain skills profiles. Sick leave has declined somewhat and remains at a relatively low level, although the target for 2014 was not achieved. In Svenska kraftnät s annual skills assessment each department specifies those areas of expertise that will be essential to their operations over the next two years and the skills gaps that need to be filled. The assessment also indicates which parts of the organisation have a high dependence on key personnel as well as the risks that may arise if the gaps are not filled. A certain skills gap exists in 49 (54) per cent of Svenska kraftnät s areas of expertise and a significant gap exists in 4 (5) per cent. In 24 (24) per cent of the company s areas of expertise there is a dependence on key personnel. The skills assessment shows that the use of consultants and improved methods and processes are the most common means to address the skills gaps. An assessment of the experience and skills of employees that will be retiring over the coming five-year period is performed annually. The analysis shows which employees have skills that need to be transferred to younger employees in some form. In 2014, 36 (36) employees were covered by plans for such skills transfer, including 15 (16) with mission-critical skills. Nearly all employees took part in a performance review during the year, which also involved formulating individual development plans. A trainee programme with four young engineers was launched during the year. Svenska kraftnät participated in three (four) career days at selected universities and acted as supervisor for five (14) dissertations. 62/131

63 Svenska kraftnät has continued to focus on being a healthy and safe workplace. The company responds quickly to cases of long-term sickness. After the second week of sick leave it is required that a rehabilitation plan be drawn up between the employee and his or her manager. This has helped nearly all employees on long-term sick leave to return to work. In the autumn risk assessments of the work environment were carried out throughout the organisation. Sick leave (%) <29 yrs yrs 50 yrs TOTAL Women Men TOTAL During the year the concept of leadership supply and development was developed and leadership criteria were defined. To an increasing extent, Svenska kraftnät s leaders have also received individual support in their leadership. A leadership programme for 14 leaders was implemented during the year. Planning for a new preparatory programme for leadership talent in 2015 has now been completed. To further strengthen its leadership and provide support to all employees in leading roles, Svenska kraftnät produced a leadership handbook during the year. The handbook is based on exercises and theories that are used in leadership programmes and that participants have found to have practical application. Over the past few years Svenska kraftnät has worked actively to clarify its expectations on leaders and other employees. In 2014 an initiative aimed at defining employee criteria was started. The employee criteria are based on Svenska kraftnät s core values, leadership criteria and current salary criteria, and are aimed at clarifying these expectations. To build support for the employee criteria in the organisation and to enable discussions on the subject with employees, units and departments conducted workshops during the autumn. TALENT MANAGEMENT GOALS FOR 2015 In 2015 about 80 new employees will be recruited. Under its current plan, Svenska kraftnät will have nearly 600 permanent employees by year-end A continued focus on effective recruitment processes and a good induction of new employees are crucially important. In 2015 the company s strategy for employee skills development will be further elaborated. A proposal for a development and career model will be drawn up and implemented. In 2015 Svenska kraftnät will carry out a skills assessment, which will be 63/131

64 used as a basis for ensuring that the whole organisation has the right skills to meet its goals and challenges. The assessment will describe which activities need to be conducted to assure the necessary transfer of skills from older to younger employees. As in previous years, special initiatives will be implemented to reduce the company s dependence on key personnel. Support, governance and inspiration on HR issues for the company s leaders contribute to good leadership. A leader survey is planned for 2015 to identify the need for development among Svenska kraftnät s leaders. The company will identify twelve potential leaders to participate in a preparatory leadership programme. A similar programme for project managers will also be carried out. Through a continued focus on the psychosocial work environment, Svenska kraftnät will help to ensure a healthy and safe workplace. Work on promoting equality and diversity has continued as planned, and the company s equality and diversity plan will be updated. Work on strengthening Svenska kraftnät as an employer and employer brand has continued, and measurements will be made among our employees as well as students to assess progress. The company will be taking part in at least four career days and offer at least ten dissertations. Other targets for 2015 are presented in the table for key performance indicators, targets and outcomes. TALENT MANAGEMENT GOALS FOR 2016/2017 The long-term goal for the company s future talent management is to make Svenska kraftnät one of Sweden s most attractive employers. The company aims to be viewed as a modern and stimulating workplace that is committed to retaining and developing the right skills. Another goal is to be a well known employer among external target groups that are of interest to Svenska kraftnät. Employer also refers to Svenska kraftnät s role as purchaser of consulting and contractor services. Svenska kraftnät has the following focus for its talent management activities: > Leaders and other employees should display those key behaviours that have been defined in the company s leadership and employee criteria. By developing leadership and employeeship, the company clarifies expectations and levels of 64/131

65 ambition. The expected result is satisfied, efficient and motivated employees and leaders. > Svenska kraftnät aims to recruit, develop and retain individuals with the right skills to ensure that it is able to realise its goals. By developing and monitoring its employees and leaders skills, the company strives to ensure that it has the right expertise in relation to its requirements. > Svenska kraftnät takes responsibility for sustainability issues and maintains high standards to ensure that it offers a safe and stimulating work environment for employees, consultants and contractors. > Svenska kraftnät aims to develop a culture of continual learning to ensure that it operates more efficiently. The company seeks to establish a feedback culture in which good examples are highlighted and recycled, and in which the company evaluates what is being done and how it is done, thereby building an organisation that is flexible and more inclined to change. 06. HEALTH, SAFETY, ENVIRONMENT AND QUALITY Svenska kraftnät s mission is to offer safe, effective and environmentally adapted transmission of electricity on the Swedish national grid. Our vision, A leading role for a secure and sustainable electricity supply, is based on this mission and expresses the company s desire to seek environmentally adapted, safe and sustainable solutions. Svenska kraftnät has a great responsibility in its efforts to achieve the EU s climate and energy targets, but also a responsibility for running its business in a way that is safe for people as well as the environment. INDUSTRY-LEADING HSE WORK Over the past few years Svenska kraftnät has worked consciously to coordinate its activities in health, work environment, electrical safety, safety and quality (HSE). By taking a coordinated approach to these issues, the company offers more effective support to the operations. In order to create a stronger focus on these issues as well as a clearer governance structure for the activities, a new organisational unit was established in 2014 with coordinating responsibility for health, safety, environment and quality. The vision for the new HSE unit is to establish Svenska kraftnät as the leading player in HSE in the electricity industry. 65/131

66 The biggest risks for personal injuries and environmental impact exist in the extensive construction projects that are underway and in the management operations. The need for support in HSE work is therefore greatest in these operations. To meet this need, Svenska kraftnät has established an internal support organisation with HSE coordinators. Their duty is to serve as the extended arm of the HSE unit and provide coordinated expert support to the investment and management operations in their HSE activities. Through this solution, the company ensures that HSE work is conducted in a systematic manner and that internal control and monitoring of the contractors work is effective. During the year Svenska kraftnät improved the HSE requirements that the company specifies for construction contracts. The environmental requirements have been updated and harmonised with those of other major developers. New requirements have also been introduced for procurements of construction services. In particular, contractors are now required to describe how their organisation works to ensure compliance with environmental legislation. Contractors must be able to show that they have procedures in place for risk management and quality management. The company has also initiated an effort aimed at formulating requirements for reasonable employment and working conditions for employees of contractors. Svenska kraftnät works systematically in all areas of HSE. The company s environmental management system has, for example, been certified under the ISO standard. The certificate was renewed at the end of Under the Swedish Environmental Management Ordinance (2009:907), the company is required to submit a report on its environmental management activities to the Swedish Ministry of the Environment and the Swedish Environmental Protection Agency on an annual basis. The report is submitted in connection with the company s annual report. Another example is systematic health and safety work in the from of risk analyses and action plans for addressing risks in accordance with statutory requirements. MINIMISING RISKS THROUGH EFFECTIVE INCIDENT MANAGEMENT A new system for incident management, ENIA, was taken into use in the spring. The system is used to handle accidents, incidents and deviations in the HSE field. The purpose of the incident management system is to ensure effective management of incidents and produce event data that can be used for long-term prevention. Svenska kraftnät s general objective is to ensure that no serious accidents or incidents with a known root cause are repeated. In 2014 all employees received training in how to use the system, with special training initiatives aimed at operational managers and consultants. Procedures for incident management have been implemented in all construction projects and to some extent 66/131

67 also in the company s maintenance operations. Contractors can report incidents in a simple way using a specially designed mobile app. In total, 669 incidents (including audit non-conformities) were reported in Of these, 62 per cent were addressed and closed. Most of the reported incidents originate from construction projects or relate to the work environment. The number of reported incidents and observations is low in relation to the number of accidents, which suggests that some incidents and observations go unreported. Initiatives aimed at increasing the reporting of incidents and observations will therefore be important going forward. Successful incident management relies on complete and correct analyses of root causes as well as experience feedback in the organisation. Here there is still a potential for improvement, and the company will continue to work on this issue in RISK ANALYSES Another important measure for preventing injuries and damage to the environment is to conduct risk analyses at an early stage of planning. In connection with technical feasibility studies, risk assessment meetings with people from units which influence and are responsible for the planning, implementation and management of a construction project. Risk assessment meetings are held to document and ensure that HSE risks are identified, assessed and addressed. In 2014 risk assessment meetings focusing primarily on health and safety risks were initiated. In 2015 the risk analyses will be expanded to comprise environmental risks, which will provide better documentation for selecting environmentally adapted technical solutions and materials. INTERNAL AUDITS PLAY AN IMPORTANT ROLE IN IMPROVEMENT WORK Svenska kraftnät uses audits as a tool for systematic follow-up of HSE activities. In 2014 six audits covering environment, health and safety, electrical safety and quality were conducted in the company s maintenance operations. Audits were also conducted in two construction projects. The audits showed that the contractors on the whole are committed to HSE issues and are open to improvement opportunities. Issues exist in the systematic work, especially with regard to risk and deviation management. Electrical safety is an area where announced audits and unannounced inspections are used as tools for assessing the quality of electrical safety work. The results of the audits and inspections carried out in 2014 indicate that there is a generally high level of awareness of electrical safety issues and that electrical safety requirements are observed by the company s contractors. 67/131

68 Internal environmental audits are conducted on a rolling basis, so that the whole company is audited over a three-year period. A number of employees have completed external training courses in environmental auditing and an environmental audit team has been established. RESPONSIBILITY FOR HEALTH AND SAFETY HAS BEEN DELEGATED Ultimate responsibility for health and safety at Svenska kraftnät rests with the Director-General. To maintain responsibility, Svenska kraftnät put a lot of work into clarifying roles and responsibilities and delegating duties to managers and project managers in In connection with this all relevant employees have completed health and safety training courses and a number of tools have been developed to assist managers and project managers who need to be able to handle these duties. In electricity safety, too, various skills development training programmes and other initiatives have been implemented. In 2014 a number of courses and seminars covering a variety of themes were arranged for maintenance engineers, project managers and contractors. Specially adapted environmental training courses have been arranged for managers, project managers and other key categories. HIGH ELECTRICAL SAFETY A CENTRAL OBJECTIVE Svenska kraftnät has a responsibility for protecting people and property from injury or damage from electric current. Maintaining a high level of electrical safety is a central goal for Svenska kraftnät and its subsidiaries. In Europe work on the maintenance of electrical facilities is regulated in a common European maintenance standard. The standard was revised in 2013 and has subsequently been adopted as a Swedish standard. Using the maintenance standard as a basis, it should, in theory, be possible to implement the same electrical safety measures regardless of country. To ensure that the safety of individuals is not put at risk, the company, as a buyer, needs to clearly indicate the requirements that apply in the services which it procures. In 2014 Svenska kraftnät took part in the work of completing the revised version of the Swedish electrical safety instructions (ESA) for the electricity industry, which are based on the Swedish maintenance standard. The industry intends to introduce these ESA14 instructions in summer /131

69 DEVELOPING QUALITY MANAGEMENT IN CONSTRUCTION PROJECTS In 2014 Svenska kraftnät conducted an extensive quality survey for the company s investment activities. The survey identifies those elements that exist, or are missing, for ensuring that Svenska kraftnät s production model for implementation of construction projects establishes a quality-centred approach. The results show that the production model is used and works well but needs to supplemented with additional procedures. One improvement measure that is proposed is to develop a structured approach for ensuring greater uniformity in work on quality and control plans. There is also a need to produce checklists for each field and branch of technology. A number of procedures and templates will also need to be drawn up. ENERGY EFFICIENCY AND LIMITATION OF EMISSIONS An extensive programme aimed at improving energy efficiency at Svenska kraftnät s station facilities is underway. In 2014 an inventory of existing stations, including energy inspections, was completed. Following an evaluation of the results, an action programme has been adopted. In an initial stage measures aimed at cutting energy use and facilitating future monitoring of consumption are being implemented at six grid stations. The company will then implement appropriate measures for the other stations on an ongoing basis. The measures relate primarily to ventilation, integrated control of systems, and the installation of heat pumps and inverters. In 2015 the knowledge acquired through energy inspections will also be converted into energy efficiency requirements for new stations. Following the energy survey conducted in the spring, measures based on an action plan are now also being implemented at the company s central grid and emergency supply depot. Air source heat pumps have been installed, for instance. Svenska kraftnät is working systematically to limit emissions of the greenhouse gas sulphur hexafluoride (SF6), which is used in switches and other devices. In 2014, too, emissions were very small, at 0.2 (0.2) per cent of the total amount of gas. This is well below the limits for new equipment, with suppliers guaranteeing maximum emissions of 0.5 per cent. Over the past five years Svenska kraftnät s average emissions from its facilities have been around 0.2 per cent, even though a large portion of the equipment is of an older type. The low emissions are the result of several years of long-term work on issues like preventive maintenance, training and rapid repairs to leaking equipment. 69/131

70 The company recently raised its standards for emissions of carbon dioxide from machinery and vehicles used in construction projects. As several major construction projects are now being implemented, total emissions from construction projects are larger than in previous years. BETTER CONTROL OVER THE USE OF CHEMICALS To improve its control over the use of chemicals, Svenska kraftnät has tightened its requirements for contractors use of chemicals. In early 2014 a chemicals system was procured that is used for reporting chemicals. Chemicals are examined and classified before they are cleared for use. The new requirements are designed to promote reduced use of chemicals that are damaging to health and the environment in the operations and to ensure improved control over the correct handling of the products. In 2013 and 2014 Svenska kraftnät conducted an R&D project to obtain better data for determining how to handle sleeper foundation blocks when power lines are demolished. The project includes sampling and analysis of the distribution of creosote in different soil and water conditions. The results showed that the risk that contaminants will spread beyond the immediate proximity of the foundations is minimal. Svenska kraftnät s environmental requirements have been supplemented with a requirement for foundations and more detailed instructions for the demolition of foundations are being prepared. A project is underway aimed at developing prefabricated concrete foundations as an alternative to creosote-treated wood foundations. The new concrete foundations will be available for use in locations where use of creosote foundations is inappropriate, for example in places where there is a high rate of water exchange. NEW PYLONS DEVELOPED Svenska kraftnät strives not take up unnecessary space when building new transmission lines. The traditional angle pylons, in particular, take up a lot of space. In a development project new angle pylons were designed in The new pylons take up much less ground space and also have a smaller visual impact. In a power line corridor close to Lake Storuman Svenska kraftnät is testing composite 220 kv poles as an alternative to creosote-treated wood poles. Two new poles were erected in August to replace creosote-treated poles that needed to be replaced due to rot damage. The new poles are currently being evaluated. 70/131

71 POWER LINE CORRIDORS CAN CONTRIBUTE TO FUNCTIONING GREEN INFRASTRUCTURE Recently there has been growing interest in how infrastructure environments, such as power line corridors, can contribute to functioning green infrastructure and biological diversity. The Swedish Board of Agriculture has established a coordinating group for management of grasslands in infrastructure environments. Svenska kraftnät is taking part in this work together with several other parties, including the Swedish Transport Administration, Artdatabanken (Species Data Bank), Vattenfall, Swedavia and researchers. Correctly managed, infrastructure environments can be resource for preserving biological diversity. In one project, conducted in collaboration with the Swedish Biodiversity Centre and the Swedish University of Agricultural Sciences (SLU), the extent to which power line corridors act as dispersal corridors for butterflies in different types of landscape was examined. In 2014 inventories and studies of the movements of tagged individuals were conducted. The project is scheduled to be completed in In another project the University of Agricultural Sciences is developing and testing methods and designs for a nationwide programme for monitoring of valuable natural features in power line corridors on the national grid. In 2014 the university studied different habitats in the field to produce data on which to base decisions on appropriate methods. 07. RESEARCH AND DEVELOPMENT Research and development (R&D) in the fields of electric power transmission and distribution plays an important role in Svenska kraftnät s operations. The company is therefore involved in research and technology development projects aimed at supporting a future electricity system. As today, tomorrow s electricity system needs to live up to the defined climate goals, be reliable and sufficiently flexible to adapt to a changing external environment and changing requirements. Svenska kraftnät is involved in and supports technological research, development and demonstration in ten areas of technology: > system use and operational reliability > system impact from large-scale renewable electricity generation > the environment 71/131

72 > information and operating systems > maintenance > dam safety > the electricity market > technology for stations and transmission lines > talent management > other initiatives covering multiple technology areas In 2014 Svenska kraftnät continued to strengthen its R&D work and prepared a prospective three-year R&D plan. Svenska kraftnät often conducts research and development activities in partnership with companies in the industry through Elforsk AB, a company that is jointly owned with Svensk Energi and that will become Energiforsk AB on 1 January Working with universities is another priority. Overall, research and development activities are of great long-term importance for ensuring access to and developing the skills which Svenska kraftnät needs to be able fulfil its mission today and in the future. Together with ABB, Statnett and Det Norske Veritas (DNV), Svenska kraftnät is a joint owner of the development company STRI AB in Ludvika, which conducts research and development projects. Several of these are conducted in collaboration with the shareholders and with the Nordic grid operators. In 2014 the focus on research issues that are of common interest in Europe continued to increase. Examples of such issues include integration and balancing of renewable energy across multiple grids. In 2014 Svenska kraftnät used SEK 26 (20) million for research and development. During the year projects were conducted that will help improve the operational reliability, availability and efficiency of the electricity system over the long term. The following are a few examples: > In 2013 and 2014 Svenska kraftnät conducted an R&D project to obtain better data for determining how to handle sleeper foundation blocks when power lines are demolished. The project included sampling and analysis of the distribution of creosote in different soil and water conditions. The results showed that the risk that contaminants will spread beyond the immediate proximity of the foundations is minimal. > A prototype has been built to test a measurement method for non-contact temperature monitoring of disconnectors. This was installed on a test basis in 72/131

73 2012. As of 2013 the data is being analysed at the Royal Institute of Technology as part of a Ph.D. project. The work continued in > In 2014 further studies were made of how Svenska kraftnät should respond to the expected reduction of inertia in the power system, which can lead to unacceptable frequency deviations. A partnership with Fingrid and Nordiska Analys Gruppen (NAG) resulted in a proposal for solutions on how to prevent frequency deviations after major disturbances. > Power system models for Svenska kraftnät s Aristo power system simulator were further developed. The power system simulator is used for operator training, operational analysis and power system studies. It is also important to ensure that the simulator is used in higher education, to enhance skills. Aristo is also used at the Chalmers University of Technology, the Royal Institute of Technology and the Faculty of Engineering at Lund University. > Svenska kraftnät is participating in the Nordic knowledge network for research into phasor measurement units (PMU). This is a new technology that can help improve our understanding of the dynamics of the Nordic networks, improve monitoring capabilities and ultimately provide control mechanisms for the networks. > SCADA 15 security is an initiative in information and operating systems that was established in 2010 and continued in The initiative is a joint project between the Royal Institute of Technology, Swedish Defence Research Agency and Svenska kraftnät in which Svenska kraftnät is funding research at the Royal Institute of Technology. > Svenska kraftnät has strengthened its collaboration with the Royal Institute of Technology after one employee was appointed visiting professor at the institute in > In 2014 Svenska kraftnät continued to study two new techniques that can enable improved assessments of the status and risk of disturbance associated with tall trees in power line corridors. One method uses advanced laser-based measuring techniques. The other is based on three-dimensional photography combined with advanced computerised interpretation. The goal is to introduce the technique that is best suited for the company s maintenance activities from an operational perspective. > Svenska kraftnät is providing financial support to two university research programmes, Elektra and Vindforsk, and is providing direct support to selected research projects at university colleges. 15 Supervisory Control and Data Acquisition (SCADA). 73/131

74 > As part of its work on developing smart grids, Svenska kraftnät is participating in an Elforsk project. The company has also taken an active role in the Swedish government s coordinating council for smart grids. > Svenska kraftnät is supporting knowledge and competency building in dam safety, partly through R&D projects and partly by supporting the Swedish Hydropower Centre, a centre for higher education and research in the fields o hydroelectric power and mining dams. The Centre s activities are divided into two areas of expertise hydraulic engineering, and hydro turbines and generators. Svenska kraftnät supports both areas. 08. INTERNATIONAL COLLABORATION Svenska kraftnät is working to increase the integration and harmonisation of the Nordic and Baltic electricity markets and electricity grids. The company is also tasked with developing electricity market cooperation in Europe to promote the development of a single market for electricity. EUROPEAN ELECTRICITY MARKET COOPERATION In Europe extensive work is underway to create an integrated European electricity market with a secure energy supply. The EU s third legislative package for an internal electricity market is a key part of this effort, which has prompted in an increased demand for a European presence and focus for Svenska kraftnät. Svenska kraftnät s engagement in European cooperation takes place under the aegis of the European Network of Transmission System Operators for Electricity (ENTSO-E), which brings together 41 European grid operators in 34 countries. ENTSO has been tasked by the European Commission with two principal duties: > Produce a proposal for binding European rules, or network codes in the areas of operation, grid connection and the electricity market. > Produce a European Ten-Year Network Development Plan (TYNDP). NETWORK CODES AND COMMISSION GUIDELINES In 2014 Svenska kraftnät participated in ENTSO s work on producing a proposal for network codes. The company has assisted ENTSO in preparing for discussions with the European Commission and the European Agency for the Cooperation of Energy Regulators (ACER). The company also assisted the Swedish government prior to the comitology on the network codes. 74/131

75 In 2014 the Commission continued to work on the network codes proposed by ENTSO (see status illustration below). As part of this work, certain network codes have been reformulated as guidelines. Regardless of whether the proposals are submitted as network codes or guidelines, they will enter into force as EU regulations. They will thus become binding for each member state. In December 2014 the first set of guidelines, Framework Guidelines on Capacity Allocation and Congestion Management for Electricity, were approved in the first instance (all member states). The guidelines are expected to become effective in the second quarter of Even if the network codes/guidelines have not yet taken effect, a number of preparatory projects have been initiated in ENTSO. 75/131

76 In 2014 Svenska kraftnät started a project called SincE 16, which is aimed at ensuring that the company complies with the coming network codes/guidelines. During the year the expected network codes/guidelines were reviewed. In the course of the review Svenska kraftnät identified changes that are likely to be needed to ensure that the company lives up to the coming regulations. In ENTSO work has begun on implementing certain requirements and on developing coordinating methods. Svenska kraftnät participated in this work during the year. One example is the ongoing market coupling project in north-western and southern Europe. Market coupling in Europe The integration of electricity markets in Europe remained a key issue for Svenska kraftnät and its European partners in During the year Svenska kraftnät continued to be involved in those projects which are aimed at deepening the integration of electricity markets in the Nordic region, central and western Europe, Switzerland and the United Kingdom through price coupling of several regions. This means that the power exchanges simultaneously and using the same methods of calculation calculate market prices and trading volumes between areas for the coming 24-hour delivery period, with the aim of assuring correct prices and flows between exchange regions. Through price coupling it is possible to use the overall resources more efficiently and thus achieve increased security of supply within and among the countries in the region. The project originates in the EU regional initiatives that were launched in 2009 by the relevant regulators with the support of system operators and power exchanges. On 5 February 2014 market prices and trading volumes for day-ahead trading in the northwest European region were calculated for the first time, simultaneously and using the same calculation method. Price coupling covered about 75 per cent of the European electricity market and marks an important step towards the establishment of a single European electricity market in line with the EU s ambition. The expansion of collaboration in Europe will continue also after this. On 13 May 2014 the number of countries participating in the price coupling project increased as Spain, France and Portugal joined the scheme. Work is underway on also involving Italy and Switzerland in the partnership. In 2014 Svenska kraftnät, along with the power exchanges and other transmission system operators, was involved in a development project aimed at creating a single intraday trading system covering the Nordic region, central, southern and western Europe, including the United Kingdom and Switzerland. The project is in the form of a pilot project for ENTSO and is being closely monitored by the European Commission 16 Svenska kraftnät Implementation of Network Codes in Europe. 76/131

77 and ACER. The purpose is to enable more efficient trading among European countries and further the integration of a larger volume of renewable electricity through integrated capacity allocation and a single order book. It is also expected that the project could result in reduced costs for balancing and reserves. The idea is that the intraday solution that is produced will over time be expanded to also comprise other regions in Europe. The goal is to implement the new platform for intraday trading at the end of NEW EUROPEAN TEN-YEAR NETWORK DEVELOPMENT PLAN Svenska kraftnät is participating in ENTSO s biannual preparation of a European Ten- Year Network Development Plan (TYNDP). Based on various visions, the plan describes the potential development of the electricity network over the next 10 to 15 years in accordance with directives from the EU. The plan identifies needs for investments to ensure that the transmission network contributes to the EU s energy policy objectives related to security of supply and climate change while also furthering the process of creating an integrated electricity market. The latest version, TYNDP2014, which was completed in 2014, points to potential grid investments in Europe of up to 150 billion in the period to These improvements to the network, which have already been adopted, initiated or are under consideration, will have a positive impact on the European economy and environment, and will pave the way for an increased share of renewable electricity production. INCREASED ACCESS TO MARKET INFORMATION The Transparency Regulation aims to give European market players access to the market information they need to be able to make effective decisions on trading, production and other matters. As of 5 January 2015 the information has been available to the public on a platform 17 created by ENTSO. In 2014 Svenska kraftnät participated in ENTSO s work on setting up the platform. The company has also been engaged in a project aimed at ensuring that the demanded information, such as unavailability of production facilities, total production volumes and regulating energy prices, is passed on from Nord Pool Spot and Svenska kraftnät to the platform. NORDIC HARMONISATION NORDIC BALANCING SETTLEMENT (NBS) Together with its counterparts in Finland and Norway, Fingrid and Statnett, Svenska kraftnät is conducting a project called Nordic Balancing Settlement, which is aimed at establishing a joint Nordic balancing settlement system. The work forms an important part in the development of a Nordic retail market. The goal for the project is to /131

78 establish a joint company, along with an IT system and balancing settlement system, that will cut down on administration and lead to long-term cost savings. Against this background a jointly owned company called esett Oy was established in Work on the project continued during the year with the harmonisation of the market models and implementation of new system support for balancing settlement. Together with the Swedish Energy Markets Inspectorate, Svenska kraftnät has identified necessary amendments to the Swedish Electricity Act, ordinances and regulations following the introduction for NBS. The report of the Energy Markets Inspectorate on legal amendments has been out for consultation and is now going through a drafting process at the government. THE REGULATING ENERGY MARKET In 2014 Svenska kraftnät and the other Nordic system operators reviewed the function of the Nordic regulating energy market with the aim of developing the joint regulating energy market. This work has resulted in a proposal for improvements which relate to reduced requirements for bid volumes, electronic orders, harmonisation of activity times used in determining prices and the permissibility of recovering bids. The measures are aimed at increased efficiency and development to obtain more bids, and at adapting the regulating energy market in line with the coming balancing network code and preparing for increased exchanges with neighbouring non-nordic countries. Based on the Nordic review, Svenska kraftnät and the other Nordic system operators are participating in one of the European pilot projects for implementation of the coming balancing network code in Europe. The objectives are to: > develop the Nordic regulating energy market in accordance with the proposed measures for improving the liquidity and efficiency of the regulating energy market. > expand the Nordic regulating energy market to include more neighbouring countries. Currently three studies into the possibility of establishing exchanges with non-nordic neighbouring countries Germany, the Baltic states and Poland are underway. The Nordic-Baltic study is an extension of a project established in the Baltic Energy Market Interconnection Plan (BEMIP). The purpose is to clarify how the Baltic TSOs can develop the Baltic regulating energy market to bring it into full conformity with the Nordic market. The project forms part of the implementation of EU rules. 78/131

79 DEVELOPING THE ELECTRICITY MARKET IN THE BALTICS In 2014 efforts to integrate the Baltic and Nordic electricity markets continued. The work is based on BEMIP and was initiated by the European Commission with the aim of introducing a common regime for reserves and a balancing energy market. The regime needs to be consistent with the regulations and market mechanisms that apply in the Nordic market and implemented by the deadline indicated in European legislation. The whole Baltic region is now integrated with the Nordic electricity market in terms of day-ahead and intraday trading. The integration has been effected in two ways. Firstly, by expanding the electricity market to the Baltics with the help of Nord Pool Spot. Secondly, by expanding the grid in cases where this is of strategic importance for the European electricity market, for example between Sweden and Lithuania. The new transmission line, called NordBalt, is a direct current cable between Sweden and Lithuania. The cable is necessary for the establishment of a Nordic-Baltic electricity market and commissioning is scheduled for the end of SEVEN-YEAR REVIEW OF THE GROUP Some development work remains to be done before the market benefit of NordBalt and the linked-up Nordic-Baltic market can be realised. This applies, for instance, to the goal of further integration, for example through the establishment of a Nordic-Baltic regulating energy market and joint handling of capacity allocation and network limitations. 79/131

80 Income statement, SEKm Operating revenue 9,319 10,111 9,789 9,282 10,547 6,851 7,717 Operating expenses excluding depreciation, amortisation and impairment -7,724-8,565-7,999-7,965-9,098-5,881-6,328 Depreciation, amortisation and impairment Profit/loss from interests in associates ,069 Operating profit , ,873 Financial items Profit after financial items ,806 Tax Minority share of profit after tax Profit for the year ,803, Balance sheet, SEKm Intangible assets Property, plant and equipment 20,096 16,498 13,568 12,465 10,400 9,782 8,893 Non-current financial assets ,528 Inventories Current receivables 1,584 1,440 1,666 1,844 1,972 1, Cash and cash equivalents Total assets 22,338 18,635 15,932 15,541 13,209 11,654 11,715 Equity 9,026 8,849 8,625 8,054 7,971 7,457 8,114 Minority interests Deferred tax liability Non-current liabilities Interest-bearing 6,202 3,775 1,854 2,768 1,972 1,835 1,621 Non-interest-bearing 5,031 3,870 3,272 1, Provisions Current liabilities Interest-bearing Non-interest-bearing 1,384 1,427 1,482 2,205 1,684 1,264 1,024 Total equity and liabilities 22,338 18,635 15,932 15,541 13,209 11,654 11,715 Key performance indicators Return on adjusted equity after tax 18 % Return on capital employed % Equity/assets ratio % Operating margin % Capital turnover ratio times Debt/equity ratio % Self-financing ratio times Interest coverage ratio 19 times n/a n/a Return after flat-rate tax of 22 per cent from Adjusted equity refers to the average of opening and closing restricted equity for the year and 78 per cent of non-restricted equity. 19 As the interest expense in 2013 and 2014 was positive, this key performance indicator is not applicable for these years. 80/131

81 Other Internally allocated funds SEKm 1,271 1,460 1,680 1,189 1, ,347 Net debt SEKm 6,640 4,296 2,277 2,655 2,162 2,220 2,007 Investments SEKm 4,353 3,642 2,375 2,771 1,276 1, Dividend paid to the government SEKm , Man-years No Energy supplied to the grid TWh Energy consumed from the grid TWh Energy losses TWh /131

82 09. FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT Jan-Dec Jan-Dec SEKm Not e Operating revenue - Revenue from transmission of electricity 1 4,305 4,387 - Revenue from balancing and frequency control 4,264 4,977 - Revenue from peak power reserve Government grant for power contingency planning - Other external revenue Net sales 9,188 9,984 Capitalised expenditure Other operating revenue Total operating revenue 9,319 10,111 Operating expenses Staff costs Costs for transmission of electricity 6-1,738-1,806 - Costs for balancing and frequency control -4,391-5,197 - Peak power reserve Disturbance reserve Operations and maintenance expenses Other external expenses Miscellaneous external expenses -7,255-8,112 Depreciation, amortisation and impairment of property, plant and equipment and intangible assets 13, Other operating expenses Total operating expenses -8,651-9,280 Profit/loss from interests in associates Operating profit Profit/loss from financial investments Profit/loss from securities and receivables classified as non-current assets Other interest income and similar items Interest expense and similar items Profit after financial items Tax on profit for the year Deferred tax Minority share of profit after tax /131

83 Profit for the year BALANCE SHEET BY BUSINESS SEGMENT (SEKm) 2014 Transmission System Telecom- Chargeable Power Associates Total of Electricity Operator munications Activities Contingency Name on the Grid Electricity Operations Revenue from transmission of electricity Revenue from balancing and frequency control Revenue from peak power reserve Government grants for power contingency Other external revenue NET SALES Capitalised expenditure Other operating revenue ADDITIONAL OPERATING REVENUE TOTAL OPERATING REVENUE Staff costs STAFF COSTS Costs for transmission of electricity Costs for balancing and frequency control Disturbance reserve Peak power reserve Operations and maintenance expenses Other external expenses Consolidation adjustment disturbance reserve MISCELLANEOUS EXTERNAL EXPENSES Depreciation, amortisation and impairment DEPREC, AMORT & IMP OF PPE AND INTANGIBLE ASSETS OTHER OPERATING EXPENSES TOTAL OPERATING EXPENSES INTERNAL ITEMS TOTAL INTERNAL ITEMS Profit/loss from shares in associates Operating profit 3031, Effektavgift, fasta /131

84 INCOME STATEMENT BY BUSINESS SEGMENT (SEKm) COMMENTS ON THE INCOME STATEMENT OPERATING REVENUE Operating revenue fell in 2014, to SEK 9,319 (10,111) million, a decrease of SEK 792 million. The decrease is mainly attributable to the business segment System Operator Electricity. A small portion of the decrease is attributable to the business segment Transmission of Electricity on the Grid. Revenue from balancing and frequency control declined by SEK 713 million to SEK 4,264 (4,977) million, which was largely due to lower revenues from balance providers and system operators on the back of a lower electricity price and lower volumes compared with the previous year. Revenue from transmission of electricity declined to SEK 4,305 (4,387) million, chiefly as a result of a reduced usage fee and lower supply of electricity to the grid. Supply to the grid decreased compared with the previous year, despite marginally higher electricity production in the country. The reason is that some of the generated electricity is fed into the underlying regional networks. Transit revenue increased compared with the previous year, however. OPERATING PROFIT Transmission System of Electricity Operator on the Grid Electricity Telecom- Chargeable munications Activities Power Contingency Operations System Operator Gas Associates Total (SEKm) Name Revenue from transmission of electricity Revenue from balancing and frequency control Revenue from peak power reserve Government grants for electricity contingency Other external revenue NET SALES Capitalised expenditure Other operating revenue TOTAL OEPRATING REVENUE STAFF COSTS Costs for transmission of electricity Costs for balancing and frequency control Disturbance reserve Peak power reserve Operations and maintenance expenses Other external expenses MISCELLANEOUS EXTERNAL EXPENSES Depreciation, amortisation and impairment Other operating expenses TOTAL OPERATING EXPENSES Internal revenue Internal expenses INTERNAL ITEMS TOTAL INTERNAL ITEMS Profit/loss from shares in associates OPERATING PROFIT The consolidated operating profit was SEK 681 (850) million, which is SEK 169 million less than in The operating profit includes external revenue and expenses, shares 20 The allocation key for revenue and expenses by business segment was changed in 2014 to improve the allocation of revenue and expenses to the correct business segment. Figures for 2013 have not been adjusted, which means that revenue and expenses for each row and business segment are not fully comparable. 84/131

85 in the profit or loss of associated companies and depreciation, amortisation and impairment in the Group. Operating expenses were SEK 8,651 (9,280) million. Some categories of expense relate to two business segments: Transmission of Electricity on the Grid and System Operator Electricity. Expenses that cannot be directly attributed have been allocated between the two segments on a standardised basis. Transmission of Electricity on the Grid is the dominant profit-generating business segment in Svenska kraftnät s operations. The operating profit for the year for the business segment was SEK 764 (997) million. The lower profit was mainly due to the recognition of impairment losses in 2014, as described below. Energy revenues and energy compensation were lower than in 2013 due to the reduction of the usage fee, which was prompted by the lower than expected price achieved in the procurement of energy losses. The supply and consumption of electricity were both down on In 2014 costs for energy losses increased by SEK 24 million compared with the previous year. Transit revenues in 2014 were significantly higher than in The increase was due to the time lag before settlement with ENTSO-ITC is made, with settlement for revenues earned in 2013 being made in Transit costs were also higher. In view of the complexity of the allocation mechanism in the agreement with ENTSO, coupled with the long time lag before invoicing and corrections are made, it is hard to predict the economic outcome for the right period. The profit for the year is partly based on estimated revenue and expenses. Revenue and expenses for primary control were down on 2013, which was largely due to a reduced need for one of the components of primary control, frequency containment reserve disturbance (FCR-D). The business segment System Operator Electricity reported an operating loss of SEK -134 (-192) million. The turnover for balancing and frequency control reflect the level of electricity prices during the year, which is evident in the form of a significant gross deviation compared with the previous year. In 2014 both the volume and price of purchased and sold balancing energy fell. The improved operating profit was due to increased revenues from fees from balance providers after fees were raised on two occasions during the year. The raised fees were still insufficient to cover the increased expenses and achieve breakeven. Revenues for primary control were down somewhat while expenses increased for the business segment. The Telecommunications business segment reported an operating profit of SEK 36 (30) million. The lower figure for last year was due to insufficient provisions for inter- 85/131

86 segment revenues between Telecommunications and Transmission of Electricity on the Grid. During the year the Power Contingency Planning business segment used SEK 248 (202) million of the appropriation for power contingency planning, which was funded through grants. The operating profit for the Chargeable Activities business segment was SEK 4 (-5) million. Svenska kraftnät is still in a recruitment phase and has added 51 (31) new full-time employees since December Staff costs increased by SEK 26 million from SEK 432 million in 2013 to SEK 458 million in Depreciation, amortisation and impairment of non-current assets increased by SEK 212 million from SEK 715 million to SEK 927 million. Depreciation and amortisation of non-current assets decreased by SEK 8 million to SEK 660 million. The decrease is explained by the fact that several facilities were fully depreciated during the year. The increase refers to the expenses arising as result of the impairment losses that were recognised in 2014, which totalled SEK 267 million. Svenska kraftnät has cancelled its contract with Alstom Grid for delivery of a new network monitoring system. The accrued expenses have been charged to expense, which has had a negative impact on earnings of SEK 173 million. Project planning expenditure of SEK 93 million for the Ekhyddan Barkeryd transmission line project was also charged to expense. The project resulted from the need to handle an increase in power at the Oskarshamn nuclear power plant. However, new network studies conducted in autumn 2014 showed that it will be possible to handle both the increase in power at Oskarshamn and ensure the operational reliability of the future network that will come into being upon completion of the Gotland and NordBalt projects through the new Ekhyddan Nybro Hemsjö transmission line. The Ekhyddan Barkeryd project has therefore been terminated. Earnings for last year include a SEK 55 million charge related to the decision not to build the western branch to Norway in the SydVästlänken project, of which SEK 47 million referred to impairment losses. The East Svealand programme included plans for significant investments in new transmission lines and stations to handle the feed-in of additional power from the three nuclear reactors in Forsmark. The increase in power at Forsmark 3 will not be implemented, however. Negotiations are underway on new connection agreements, which will cover all of Svenska kraftnät s investment expenditure for Forsmark, including the SEK 31 million which has already been invested in project design for 86/131

87 three transmission lines related to Forsmark 3. If no compensation is paid to Svenska kraftnät for its investment expenditure for the three transmission lines for Forsmark 3 for which planning work has been completed, this would have a negative impact on earnings of SEK 31 million. Earnings from interests in associates were SEK 13 (19) million, which is SEK 6 million less than in the prior year. Out of the total figure, SEK - (5) million is due to the result of a share offering in Nord Pool Spot occasioned by the addition of new shareholders. The consolidated operating margin was 7.3 (8.4) per cent, which is 1.1 percentage points lower than in the previous year. NET FINANCIAL INCOME Net financial income in the Group was SEK 52 (4) million, which is an increase of SEK 48 million compared with the previous year. Interest income in the Group was SEK 3 (2) million. The improvement in net financial income was mainly due to an elimination of SEK 50 million related to indexation of the parent company s pension liability under the bases for safeguarding of pensions adopted by the National Government Employee Pensions Board (SPV). The indexation for the previous year was SEK -1 million. Despite increased borrowing, the interest expense for loans from the National Debt Office has decreased by SEK 1 million to SEK -21 million, which is due to a lower interest rate environment than in The parent company s interest on loans to the National Debt Office at 31 December 2014 was 0.0 per cent. The same applies for interest expenses during the construction period that have been capitalised. Despite the high level of investment, these declined by SEK 7 million from the previous year due to the interest rate environment, which had a negative impact on net financial income. PROFIT FOR THE YEAR The consolidated operating profit for the year was SEK 731 (850) million, which is SEK 119 million less than in The profit represents a return on adjusted equity of 7.2 (8.6) per cent. Under the government appropriation letter for 2014, Svenska kraftnät s target is to achieve a return on adjusted equity of 6 per cent over the course of a business cycle. The net profit margin after flat-rate tax was 6.1 (6.6) per cent. 87/131

88 CONSOLIDATED BALANCE SHEET SEKm Note 31 Dec Dec /131

89 ASSETS Non-current assets Intangible assets 13 Capitalised software development costs Land rights Rights of use for fibre-optic cables Assets under construction Property, plant and equipment 14 Buildings and land Machinery and other technical equipment 9,981 9,750 Assets under construction 9,660 6,329 20,096 16,498 Non-current financial assets Interests in associates Non-current receivables from associates Other non-current receivables Total non-current assets 20,444 16,948 Current assets Inventories Raw material inventories Current receivables Accounts receivable Receivables from associates Other receivables Receivables from the State Prepaid expenses and accrued income ,584 1,440 Short-term investments Cash and bank balances Total current assets 1,917 1,687 TOTAL ASSETS 22,338 18,635 Contingent assets 29 SEKm Note 31 Dec Dec /131

90 EQUITY AND LIABILITIES Equity Restricted equity Government capital Other restricted capital 3,633 3,626 4,233 4,226 Non-restricted equity Retained earnings 4,062 3,773 Profit for the year ,793 4,623 Total equity 9,026 8,849 Minority interests - - Deferred tax liability Provisions Provisions for pensions and similar obligations Other provisions Non-current liabilities Interest-bearing liabilities 25 6,202 3,775 Non-interest-bearing liabilities 26 5,031 3,870 11,233 7,645 Current liabilities Accounts payable Tax liability - 0 Other liabilities Accrued expenses and deferred income ,384 1,427 TOTAL EQUITY AND LIABILITIES 22,338 18,635 Pledged assets None None Contingent liabilities 29, 30 90/131

91 COMMENTS ON THE BALANCE SHEET TOTAL ASSETS Consolidated total assets were SEK 22,338 (18,635) million. This is an increase of SEK 3,703 million, which is mainly due to increased assets under construction. NON-CURRENT ASSETS Svenska kraftnät s intangible assets consist of land rights, rights of use for fibre-optic cables, licenses and capitalised software development costs. The carrying amount was SEK 188 (328) million. Investments in software, mainly the upgrading of the network monitoring system, were SEK 34 (60) million. Amortisation of intangible assets for the year was SEK 23 (35) million. In addition, impairment losses of SEK 165 (-) million have been recognised. Property, plant and equipment mainly comprise power lines, stations, buildings and land, fibre-optic cables and other technical equipment as well as assets under construction. Property, plant and equipment had a total value of SEK 20,096 (16,498) million, which is an increase of SEK 3,598 million. Investments during the year were SEK 4,305 (3,582) million and depreciation was SEK 637 (633) million. In addition, impairment losses of SEK 57 (47) million have been recognised. Other non-current assets comprise interests in associates and non-current receivables. Interests in associates were SEK 128 (121) million. In 2014 the parent company received SEK 4 (4) million in dividends from Nord Pool Spot AS. The profit from shares in associates was SEK 13 (19) million. INVENTORIES Inventories, which totalled SEK 85 (87) million, include fuel for gas turbines in the subsidiary company Svenska Kraftnät Gasturbiner AB. CURRENT ASSETS Current assets were SEK 1,894 (1,687) million, of which SEK 225 (160) million refers to cash and cash equivalents. The increase mainly relates to accrued income for balancing energy, which was not invoiced during the period and for which provisions have therefore been made. EQUITY Consolidated equity at year-end was SEK 9,026 (8,849) million. During the year SEK 553 (618) million was distributed to the State. The consolidated profit for the year was SEK 731 (850) million. 91/131

92 NON-CURRENT LIABILITIES The Group s non-current liabilities consist of the parent company s credit line with the National Debt Office in the amount of SEK 6,202 (3,775) million. The increase of SEK 2,427 million is explained by increased investments compared with the previous year, which has increased debt. The average interest rate on the Group s loans in 2014 was 0.42 (0.78) per cent. Non-interest-bearing non-current liabilities, which consist of contributions from landowners, investment grants from stakeholders, capacity charges recognised as liabilities, advances from customers in the fibre-optic business and other customers were SEK 5,031 (3,870) million. The change was mainly due to funded capacity charges for the year in the amount of SEK 813 (356) million, which could not be used as investment grants in 2014 due to a shortage of investments meeting the criteria for allocation from external capacity charges. The change is also due to an increase in capitalised investment grants and capacity fees. Net debt increased by SEK 2,344 million to SEK 6,640 (4,296) million. This affected the debt/equity ratio, which increased to 83.3 (54.8) per cent. As above, the primary reason was increased investments, leading to a higher debt level. The 2014 government appropriation letter for Svenska kraftnät specifies a maximum debt/equity ratio of 120 per cent. CURRENT LIABILITIES Accounts payable decrease from SEK 761 million in 2013 to SEK 657 million in 2014 while accrued expenses and deferred income decreased from SEK 623 million in 2013 to SEK 620 million in Accounts payable are affected by payment plans for the projects and therefore vary from year to year. 92/131

93 CONSOLIDATED CASH FLOW STATEMENT Jan-Dec Jan-Dec SEKm Operating activities Operating profit before financial items Adjustment for non-cash items Depreciation, amortisation and impairment Other items Financial income and expense Dividend received 4 4 Tax paid -4-9 Cash flow before change in working capital and investments 1,271 1,460 Change in inventories 3-3 Change in current receivables Change in current liabilities 2 77 Cash flow before investments 1,197 1,696 Investing activities Investments in intangible assets Investments in property, plant and equipment -4,217-3,739 Investments in financial assets Sale of non-current assets - 19 Net investments in operations -4,296-3,798 Cash flow after investments -3,099-2,102 Financing activities Change in interest-bearing loans 2,427 1,920 Change in other non-current liabilities 1, Dividend paid Financing activities 3,164 2,052 Change in liquidity Cash and cash equivalents incl. short-term investments at beginning of year Cash and cash equivalents incl. short-term investments at end of year Change in cash and cash equivalents /131

94 COMMENTS ON THE CASH FLOW STATEMENT The cash flow statement is intended to describe the Svenska kraftnät Group s ability to generate cash and cash equivalents and supplements the description of profitability and financial position presented in the income statement and balance sheet. Cash and cash equivalents refer to cash and bank balances. Cash flow from operating activities before changes in working capital declined by SEK 189 million from 2013 to SEK 1,271 (1,460) million. The decrease is primarily attributable to a lower operating profit. Cash flow from operating activities decreased by SEK 74 million compared with 2013 to SEK 1,197 (1,696) million. The decrease is chiefly due to an increase in current receivables, in particular increased provisions for accrued income. The Group s investments increased in 2014, to SEK 4,353 (3,642) million, of which SEK 4,265 (3,798) million refers to investments affecting cash flow. Investments affecting cash flow are influenced by the inclusion of payments relating to investments for the previous year in cash flow for the period (the same applies to the previous year s investments). Investing cash flow has also been adjusted for non-cash items, such as capitalised construction interest. The change in interest-bearing loans was SEK 2,427 (1,920) million. The increased need for borrowing is explained by the high rate of investment. Other non-current liabilities increased by SEK 1,290 (750) million, mainly as a result of an increase in allocations of capacity charges and external investment grants. SEK 553 (618) million was distributed to the State. Cash flow for the year was SEK 65 million, compared with SEK -50 million in /131

95 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (SEKm) Government capital Other restricted capital Retained earnings incl. profit for the year Total equity Opening balance ,603 4,422 8,625 Dividend Translation difference Transfer between restricted/non-restricted capital Profit for the year Closing balance ,626 4,623 8,849 Opening balance ,626 4,623 8,849 Dividend Translation difference Transfer between restricted/non-restricted capital Profit for the year Closing balance ,633 4,793 9,026 Consolidated equity was SEK 9,026 (8,849) million, of which SEK 4,233 (4,226) million refers to restricted equity. The appropriation of retained earnings proposed in the annual report for 2013 was approved by the Swedish government. 95/131

96 PARENT COMPANY INCOME STATEMENT Jan-Dec Jan-Dec SEKm Note Operating revenue - Revenue from transmission of electricity 1 4,316 4,397 - Revenue from balancing and frequency control 4,264 4,978 - Revenue from peak power reserve Government grant for power contingency planning - Other external revenue Net sales 9,194 9,991 Capitalised expenditure Other operating revenue Total operating revenue 9,325 10,118 Operating expenses Staff costs Costs for transmission of electricity 6-1,738-1,806 - Costs for balancing and frequency control -4,392-5,202 - Peak power reserve Disturbance reserve Operations and maintenance expenses Other external expenses Miscellaneous external expenses -7,293-8,157 Depreciation, amortisation and impairment of property, plant and equipment and intangible assets 13, Other operating expenses Total operating expenses -8,669-9,306 Operating profit Profit/loss from financial investments Profit/loss from securities and receivables classified as non-current assets Other interest income and similar items Interest expense and similar items Profit after financial items Profit for the year /131

97 97/131

98 THE PARENT COMPANY AFFÄRSVERKET SVENSKA KRAFTNÄT Operating revenue was SEK 9,325 (10,118) million, of which SEK 12 (13) million related to sales to Group companies. The profit after financial items was SEK 714 (853) million. The parent company s investments in property, plant and equipment and intangible assets totalled SEK 4,331 (3,640) million. Cash and cash equivalents at 31 December 2014 were SEK 192 (150) million. The parent company finances its operations with equity and loans from the National Debt Office. At year-end outstanding debt was SEK 6,202 (3,775) million and equity SEK 8,799 (8,638) million. In 2014 the parent company received co-funding for a number of investment projects and used capacity charges received to fund investments that are designed to enhance or maintain electricity transmission capacity in the grid. 98/131

99 PARENT COMPANY BALANCE SHEET SEKm Note 31 Dec Dec 2013 ASSETS Non-current assets Intangible assets 13 Capitalised software development costs Land rights Rights of use for fibre-optic cables Assets under construction Property, plant and equipment 14 Buildings and land Machinery and equipment 9,810 9,582 Assets under construction 9,660 6,327 19,914 16,316 Non-current financial assets Interests in Group companies Receivables from Group companies Interests in associates Receivables from associates Other non-current receivables Total non-current assets 20,282 16,784 Current assets Current receivables Accounts receivable Receivables from Group companies Receivables from associates Other receivables Receivables from the State Prepaid expenses and accrued income ,604 1,461 Short-term investments Cash and bank balances TOTAL ASSETS 22,078 18,395 Contingent assets 29 99/131

100 PARENT COMPANY BALANCE SHEET SEKm Note 31 Dec Dec 2013 EQUITY AND LIABILITIES Equity Restricted equity Government capital Other restricted capital 3,314 3,314 3,914 3,914 Non-restricted equity Retained earnings 4,171 3,871 Profit for the year ,885 4,724 Total equity 8,799 8,638 Provisions Provisions for pensions and similar obligations Other provisions 0 - Total provisions Non-current liabilities Interest-bearing liabilities 25 6,202 3,775 Non-interest-bearing liabilities 26 5,031 3,870 11,233 7,645 Current liabilities Accounts payable Liabilities to Group companies 8 8 Other liabilities Accrued expenses and deferred income ,383 1,431 Total liabilities 12,627 9,076 TOTAL EQUITY AND LIABILITIES 22,078 18,395 Pledged assets None None Contingent liabilities 29, /131

101 PARENT COMPANY CASH FLOW STATEMENT Jan-Dec Jan-Dec SEKm Operating activities Operating profit before financial items Adjustment for non-cash items Depreciation, amortisation and impairment Other items Financial income and expense Dividend received 4 4 Cash flow before change in working capital and investments 1,243 1,431 Change in inventories 0 2 Change in current receivables Change in current liabilities 3 82 Cash flow before investments 1,161 1,660 Investing activities Change in non-current receivables Change in other financial assets Investments in intangible assets Investments in property, plant and equipment -4,195-3,737 Investments in financial assets Sale of non-current assets 0 19 Net investments in operations -4,283-3,741 Cash flow after investments -3,122-2,081 Financing activities Change in interest-bearing loans 2,427 1,920 Change in other non-current liabilities 1, Dividend paid Financing activities 3,164 2,091 Change in liquidity Cash and cash equivalents incl. short-term investments at beginning of year Cash and cash equivalents incl. short-term investments at end of year Change in cash and cash equivalents /131

102 PARENT COMPANY STATEMENT OF CHANGES IN EQUITY (SEKm) Government capital Other restricted capital Retained earnings incl. profit for the year Total equity Opening balance ,314 4,489 8,403 Dividend Profit for the year Closing balance ,314 4,724 8,638 Opening balance ,314 4,724 8,638 Dividend Profit for the year Closing balance ,314 4,885 8,799 of which SEK 3,914 (3,914) million refers to restricted equity. The dividend is accounted for in the following income item: Amount to pay in Amount paid in Income item, SEK Dividend paid in by parent company and payment of the same in government tax 553, , /131

103 10. ADDITIONAL DISCLOSURES AND NOTES ACCOUNTING AND VALUATION PRINCIPLES BASIS OF PREPARATION OF FINANCIAL STATEMENTS Svenska kraftnät s financial statements comply with the Swedish Bookkeeping Ordinance (2000:606) and the regulations and general directions of the Swedish National Financial Management Authority. The Ordinance is consistent with the Swedish Accounting Act but is adapted for the circumstances applying for government agencies and state enterprises. With certain addenda notified in government appropriation letters, prepared in accordance with the Swedish Annual Accounts and Budget Documentation Ordinance (2000:605) and the regulations and general directions of the Swedish National Financial Management Authority. A part of Svenska kraftnät s operations, power contingency planning, is financed by government grants. These operations are also subject to the Swedish Appropriation Ordinance (1996:1189), which, in particular, sets forth the principles for settlement of appropriations and the transfer of unused funds between budget years. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS The parent company s functional currency is Swedish kronor, which is the reporting currency for the parent company as well as the Group. Unless otherwise indicated, all indicated amounts are rounded to the nearest million Swedish kronor. Income statement items refer to the period 1 January 31 December. Balance sheet items refer to 31 December. Figures in parentheses refer to the previous year s values. GROUP ACCOUNTING PRINCIPLES GROUP ACCOUNTING PRINCIPLES The Svenska kraftnät Group comprises the parent company Affärsverket svenska kraftnät, one subsidiary and seven associated companies. The parent company is a Swedish state enterprise with registered office in Sundbyberg. The Swedish government has a controlling interest in the Group. The subsidiary and associated companies are limited companies or companies with an equivalent legal status abroad. PRINCIPLES OF CONSOLIDATION The consolidated financial statements are prepared in accordance with the purchase method, which means, essentially, that the cost of shares in the subsidiary are 103/131

104 eliminated in equity in the subsidiary at the acquisition date. The recommendations on consolidation of the Swedish Financial Accounting Standards Council are applied. Intercompany profits are fully eliminated. Associated companies are accounted for by applying the equity method. This means that the carrying amount of shares and interests in associates in the consolidated financial statements are measured at the Group s share of equity in the associates. Svenska kraftnät s share of the profit or loss of an associate is thus included in profit or loss and dividend paid in the consolidated financial statements. The share is included in retained earnings. UNTAXED RESERVES/APPROPRIATIONS In preparing the consolidated financial statements, untaxed reserves and appropriations in the subsidiary have been divided between deferred tax and restricted equity. The deferred tax liability has been calculated at the current tax rate. RECOGNITION OF REVENUE Revenue is recognised to the extent that it is likely that the economic benefits will accrue to the Group and the revenue can be reliably measured. Revenue is recognised net of VAT. Intercompany sales are eliminated in the consolidated financial statements. Revenue from transmission of electricity Revenue from transmission of electricity comprises capacity charges and usage fees as well as compensation for transits. Capacity charges are fixed annual charges for subscriptions, which are recognised on a straight-line basis over the period which the charge is intended to cover, while usage fees are recognised in connection with use of Svenska kraftnät s services. Revenues for transit are received when the grid is used for transmission of energy through Sweden to other countries. The compensation agreement for transit, Inter TSO Compensation, is an agreement among 35 transmission system operators in Europe. The object of the agreement and its calculation mechanism are to ensure that each party receives and provides economic compensation for the use of networks for transmission of energy through one country to another. In theory, the compensation consists of two parts: compensation for infrastructure and compensation for losses. The compensation which Svenska kraftnät receives and pays is set in relation to the flows of all other participating TSOs. Revenue from balancing and frequency control This form of revenue consists chiefly of sold balancing energy. If a customer has made a net purchase of balancing energy during the settlement period this is reported as 104/131

105 balancing energy revenue for Svenska kraftnät. If the customer has instead made a net sale of balancing energy, this is reported as a balancing energy cost. Revenue from capacity charges Revenue from capacity charges refers to compensation from received capacity charges for covering counter-trade costs for the year as well as revenue from capitalised capacity charges. Revenue from capitalised capacity charges is settled at the same intervals as the depreciation charges for the investment projects for which capacity charges have been used. How received capacity charges may be used is regulated in Regulation (EC) No 714/2009 of the European Parliament and of the Council. Other revenue Other revenue includes revenue from chargeable activities and use of the Eidel IT system as well as revenue for covering the costs for the peak power reserve. Revenue from capitalised expenditure and government grants for power contingency planning are also recognised here. Other revenue is recognised as the services are provided. SEGMENT REPORTING OR BUSINESS SEGMENTS The Svenska kraftnät Group s primary segments are business segments. The Group s operations are divided into five business segments. A business segment is a unit of Svenska kraftnät that is distinguishable for accounting purposes from other operations based on the risks and opportunities created by Svenska kraftnät s engagements. ALLOCATION OF REVENUE AND EXPENSES TO BUSINESS SEGMENTS Revenue and expenses which relate to several business segments are allocated to these using the following allocation keys: > Expenses for the disturbance reserve are dividend into three, with one third allocated to each of Transmission of Electricity on the Grid, System Operator Electricity and Power Contingency Planning. > For Revenue and expenses for primary control in case of operational disturbances (FCR-D) one third is allocated to System Operator Electricity and two thirds to Transmission of Electricity on the Grid. For revenue and expenses for primary control during normal operation (FCR-N) and secondary control (FRR-A) the full amount is allocated to System Operator Electricity. > Shared revenue and expenses are allocated using the following allocation key: Transmission of Electricity on the Grid: 80 per cent, System Operator Electricity: 11 per cent, Power Contingency Planning: 5 per cent, Telecommunications: 3 per cent and Chargeable Activities: 1 per cent. 105/131

106 > The Telecommunications business segment provides a nationwide telecommunications and data network that is essential to maintaining a high level of operational reliability in the grid. Transmission of Electricity on the Grid uses the service and incurs internal expenses. INTEREST INCOME Interest income is recognised as earned. It is accounted for in the income statement in the period in which it arises. INTEREST EXPENSE Interest expense comprises interest and other expenses incurred in connection with the borrowing of capital. The interest expense is recognised in the period to which it refers. Interest expenses during the period of construction are capitalised in respect of the construction of non-current assets worth more than SEK 100 million. RECEIVABLES AND LIABILITIES Assets and liabilities have been measured at cost unless otherwise indicated. Doubtful receivables are assessed individually and stated at the amount that is expected to be paid. RECEIVABLES AND LIABILITIES IN FOREIGN CURRENCY Receivables and liabilities in foreign currency have been translated at closing rates. The difference between the value at the acquisition date and the value at the closing date has been charged to earnings. INVENTORIES Inventories in the Group consist of fuel for operating gas turbines. Inventories have been measured at the lower of cost and fair value in accordance with the FIFO principle. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise bank balances. DERIVATIVES The parent company uses derivatives to hedge against financial risks, primarily electricity price risks and currency risks for electricity losses. MEASUREMENT OF ELECTRICITY FUTURES Electricity futures which reflect actual operational requirements with no intentional over-hedging are not accounted for in the balance sheet. Electricity futures which exceed requirements are measured at the lower of cost or market (LCM), which means 106/131

107 that a contract which constitutes an over-hedge is recognised as an expense immediately. Any gains should not be recognised. LCM also means that changes in value are recognised on an ongoing basis from the date of concluding the contracts. The actual requirement for electricity is defined as the lowest annual volume for Svenska kraftnät s electricity losses over the last five years broken down by quarter. ACCOUNTING OF LEASES All leases constitute and are accounted for as operating leases. They are charged to expense on a straight-line basis. There are no finance leases. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recognised at cost less accumulated scheduled depreciation and impairment. New construction as well as extensions and conversions which increase the long-term standard, quality or performance of assets are classified as investments. Expenditure for repairs and maintenance is expensed in the period in which it is incurred. Work that is required to ensure that an item of property, plant and equipment can be used as originally intended, but which does not increase its performance or materially extend its life is classified as maintenance. Interest expenses during the construction period are capitalised if the asset under construction has a value exceeding SEK 100 million. INTANGIBLE ASSETS Expenditure for land rights, rights of use for fibre-optic cables, licenses, assets under construction and software development costs is capitalised and amortised on a straight-line basis over the useful life of the asset. All intangible assets have determinable useful lives. Land rights are amortised over the useful life of the transmission line concession, normally 40 years. Rights of use refer to fibre-optic cables and are amortised over a period of 15 to 25 years in accordance with the term of the contract. The parent company s settlement system is estimated to have a useful life of ten years. The assessment is based on the development time, the complexity of the system and the difficulty of replacing it. DEPRECIATION Scheduled depreciation is based on the cost and estimated useful life of the asset. Linear depreciation is used for all items of property, plant and equipment. Residual values and useful lives of assets are reviewed on an ongoing basis and adjusted where required. 107/131

108 Annual depreciation rates (%) Transmission lines, excluding submarine cables and associated lines 2.5 Underground and submarine cables and associated lines 3.3 Control equipment in stations 6.7 Other station components 3.3 Fibre-optic cables 4.0 Spare parts 6.7 Telecom and information systems Gas turbine plants 5.0 PCs and equipment 33.3 IMPAIRMENT In connection with the closing of the books assets are tested for indications of impairment to determine whether any items of property, plant and equipment or intangible assets have been impaired. A non-current asset with a fair value that is less than the carrying amount should be written down to this value if it can be assumed that the decline in value will be permanent. The value for the operations is the higher of the replacement cost for an equivalent asset and net realisable value. Impairment losses are charged to the income statement. PROVISIONS A provision is recognised in the balance sheet when there is a legal or constructive obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. TAXES Svenska kraftnät s subsidiaries are liable to pay income tax for limited companies while Svenska kraftnät itself, as a state enterprise and part of the Swedish State, is exempt from income tax. Deferred tax on differences between the accounting and taxable profit is not accounted for by the parent company and the Svenska kraftnät Group, with the exception of deferred tax on untaxed reserves in the subsidiary. Deferred tax assets are recognised to the extent that it is deemed likely that sufficient taxable profits will be available in the foreseeable future. PENSIONS Since 2003 a pension agreement, PA-03, has applied for State employees born in 1943 or later. PA-91 applies for employees born in 1942 or earlier. The size of the pension liability is calculated by the National Government Employee Pensions Board (SPV). PA-03 includes old-age pension, survivor s pension and disability pension. PA-03 includes defined contribution pensions individual old-age pension and supplementary old-age pension, Kåpan. Premiums are paid for these. Defined benefit pensions are also included old-age pension on incomes over 7.5 income base 108/131

109 amounts and old-age pension in accordance with transition rules for employees born between 1943 and These obligations are accounted for in the item Provisions for pensions. The provision for pension liabilities for the year and premiums paid have been charged to expense. The interest portion of pension expense for the year has been recognised as an interest expense. About one per cent of the employees had not been updated. The pension liability for these employees has there been calculated at a flat rate. Updating means that SPV reviews all positions which a State employee has held, in the State, municipal or private sector. If there are gaps in the term of employment the pension liability is calculated at a flat rate. This means, for instance, that SPV will assume that the employee has been a State employee since the age of 28 and that the liability is calculated using a factor of The actual liability may thus be lower or higher. Svenska kraftnät does not deem that the pension liability is too low and has chosen to recognise the liability calculated by SPV. The recognised pension comprises the actuarially calculated estimated amounts for which Svenska kraftnät is liable under the PA-91 and PA-03 pension agreements. The pension liability has been calculated on the bases defined by the Board of Directors of SPV. In defining the bases, it was deemed permissible to use the basis of calculation for either 2014 or 2015 in determining the pension liability for In essence, the difference between the two is that basis of calculation for 2015 is based on a higher assumed return (0.8 per cent instead of 0.5 per cent). Svenska kraftnät has recognised the liability in accordance with the 2015 basis of calculation, as this is the latest available calculation of the liability. The portion of the change in the pension liability that is due to the transition to the 2015 basis of calculation has been accounted for as an interest expense. Svenska kraftnät pays special payroll tax on pension payments in accordance with the Ordinance on the Determination of Special Payroll Tax on State Pension Expenses (1991:704), not based on provisions for pensions. As the pension liability refers to future pension payments, a provision for special payroll tax is made based on the size of the pension liability at year-end. INVESTMENT GRANTS External contributions to investments do not reduce the cost of the investment but are recognised as a liability in the balance sheet in the amount of the received contribution. As the non-current asset is depreciated or amortised revenue from capitalised investment grants is deducted as other revenue in the income statement. 109/131

110 CAPACITY CHARGES In accordance with Regulation (EC) No 714/2009 of the European Parliament and of the Council on conditions for access to the network for cross-border exchanges in electricity, capacity charges received are recognised as current liabilities in the balance sheet on an ongoing basis and are deducted primarily from (settled in the first hand against) counter-trade costs during the financial year. The remaining capacity charges are reclassified to non-current liabilities and can be used for investment grants/cofunding of investments which maintain or enhance the transmission capacity of the grid. RESEARCH AND DEVELOPMENT COSTS Development work is an integral part of Svenska kraftnät s operations and refers to long-term improvement measures which are expensed on an ongoing basis over the course of the year. Svenska kraftnät conducts research and development work with the aim of increasing the operational reliability, efficiency and environmental standards of the company s network and system operations. No research expenditure is therefore capitalised. CASH FLOW STATEMENT The cash flow statement is prepared using the indirect method. The reported cash flow comprises transactions involving incoming and outgoing payments. This means that differences may occur compared which changes in individual items in the balance sheet. BORROWING Borrowing is recognised at the nominal amount. INTERESTS IN GROUP COMPANIES Interests in Group companies are stated at cost less any impairment. Dividends received are recognised when the right to a dividend is deemed to be secure. SUPERVISORY AUTHORITY The supervisory authority for Svenska kraftnät s network operations is the Swedish Energy Markets Inspectorate. 110/131

111 NOTES NOTE 1 REVENUE FROM TRANSMISSION OF ELECTRICITY Group Parent company SEKm Capacity charges 2,327 2,350 2,338 2,360 Usage fees 1,561 1,870 1,561 1,870 Transit revenue Total 4,305 4,387 4,316 4,397 NOTE 2 GRANTS FOR POWER CONTINGENCY PLANNING Reporting of grants for parent company SEK 000 Grant Opening Allocation for the Total Expendi- Closing transfer year under disposable ture transfer amount appropriation letter amount amount Expenditure area 21 Energy 1:10 Power contingency planning Appropriation item 1, Power contingency planning 136, , , , ,877 Total 136, , , , ,877 Terms for appropriation under appropriation letter SEKm Max amount Outcome Administrative expenses in operations Of the funds used during the year in the amount of SEK 248 (202) million, SEK 10 million was used for crisis preparedness measures, SEK 29 million for repair preparedness, SEK 141 million for measures for robust electricity supply, SEK 22 million for security protection and information security measures, SEK 14 million for electronic communications, SEK 12 million for dam safety measures and SEK 20 million for management. Out of the funds used during the year, SEK 157 million was passed on. 111/131

112 For the grant there is also an authorisation limit, such as binding civil liabilities obligations resulting in future expenditure. These are presented in the table below. The application for the authorisation limit is based on actual as well as forecast obligations. Use of the authorisation limit in 2014 was lower than expected. This was partly due to the fact that planned training activities were not implemented. The financial compensation for the disturbance reserve was also lower than expected. Costs for technical measures related to mobile stations, the replacement of engines in tracked vehicles, measures in network operations centres and security protection measures at facilities were also lower than expected or have been transferred for implementation in Due to staff changes during the year, the administrative expenses were also lower than expected. Expenditure area 21 Energy 1:11 Power contingency planning Authorisation, relating to outstanding obligations Opening obligations Outstandin g obligations Allocation per year SEK Appropriation item 1, Power contingency planning 300, , , ,403 25,047 * * Of which SEK 6,300 thousand refers to 2017 and NOTE 3 OTHER EXTERNAL EXPENSES Group Parent company SEKm Revenue from capitalised capacity charges Revenues from capacity charges (countertrade) Revenue from capitalised investment grants Telecom revenue System revenue natural gas Revenue from chargeable activities Other revenue Total NOTE 4 CAPITALISED EXPENDITURE 112/131

113 The item refers to labour costs for Svenska kraftnät s own employees that has been capitalised in respect of investment projects. The investment projects refer partly to assets under construction and partly to capitalised IT development projects. Group and parent company SEKm Assets under construction Capitalised software development costs Total NOTE 5 STAFF COSTS The Group s staff costs were SEK 458 (432) million, of which SEK 281 (255) million refers to payroll costs. In addition, the Group had retirement benefit costs of SEK 49 (59) million and paid social-security contributions of SEK 103 (95) million. All staff costs are attributable to the parent company, as the subsidiary company Svenska Kraftnät Gasturbiner has no employees. The number of man-years in the Group was 504 (461). At 31 December the Group had 530 (478) permanent employees, of which 530 (478) were employed in the parent company. The average number of employees in 2014 was 529 (481). The breakdown between men and women is shown in the table below. Employees Group Parent company Number Women Men Total The Director-General s salary was SEK 1.4 (1.3) million and the retirement benefit cost SEK 0.6 (0.9) million, based on calculations by the National Government Employee Pensions Board (SPV). The Deputy Director General s salary was SEK 1.2 (1.2) million and the retirement benefit cost SEK 0.8 (1.5) million. Board of Directors Number Women 3 2 Men 7 7 Total /131

114 Remuneration in Swedish kronor paid to Board members, etc. is presented in the following table. Board member Position Born Appoint ed Directorships in other government agencies Directorships in limited companies Fee Bo Källstrand Chairman ,004 Anna-Stina Nordmark- Nilsson Mikael Odenberg Karin Stierna Björn Carlsson Bo Netz Bo Normark Charlotte Zackari Oskar Engblom Stefan Ekberg Total Deputy Chairman Advisor and consultant in own company, Regina AB Seventh AP Fund, National Government Employee Pensions Board (SPV) Sveaskog AB (publ), Sveaskog Förvaltnings AB, Softronic AB (publ), Dedicare Director-General Board of the Swedish Agency for Government Employers, National Total Defence executive team, the Crisis Management Council of the Swedish Government. The Coordination Council for Municipal commissioner, Strömsund municipality CEO Ackkärrs Bruk. Investment banking consultant Deputy Director- General, Sida General Counsel, Swedish Customs Employee representative, SACO Employee representative, ST AB (publ) 69,000 Smart Grids , , Swedish Arts Council AB Trav och Galopp 56, Member of the Energy 56,004 Development Committee at the Swedish Energy Agency. The Coordination Council for Smart Grids , , /131

115 Under the instructions governing its activities, Svenska kraftnät is required to have a council that has insight into the company s power contingency planning activities as well as a council that can assist the company in its work on dam safety issues. The members of the Power Contingency Planning Council are appointed by the Swedish government while the members of the Dam Safety Council are appointed by the Director-General. The remuneration, in Swedish kronor, paid to the members of the Power Contingency Planning Council in 2014 was: Johan Askelund 2,925 Greta Berg 1,950 Lars Joelsson 1,950 Daniel Jonsson 2,925 Rémy Kolessar 1,950 Ove Landberg 2,925 Jan Mörtberg 2,925 Cecilia Nyström 2,925 Anders Richert 975 Mikael Toll 2,925 Mats Wallinder 1,950 Total 26,325 The remuneration, in Swedish kronor, paid to the Dam Safety Council in 2014 was: Henrik Löv 36,000 The remuneration paid for representation on the Telecommunications Interference Committee in 2014 was: Alf Andersson 32,000 Of the above amounts, SEK 48,575 was paid in NOTE 6 COSTS FOR TRANSMISSION OF ELECTRICITY Group Parent company SEKm Purchase of energy losses 1,224 1,200 1,224 1,200 Energy compensation Transit costs Total 1,738 1,806 1,738 1, /131

116 NOTE 7 OTHER EXTERNAL EXPENSES Group Parent company SEKm Counter-trade for the grid R&D measures Power contingency planning measures Natural gas, purchase and operations costs Other external expenses Total NOTE 8 PROFIT/LOSS FROM INTERESTS IN ASSOCIATES Group SEKm Nord Pool Spot AS esett Oy -2 - STRI AB 2 2 Kraftdragarna AB -1 1 Other 0 0 Total NOTE 9 PROFIT/LOSS FROM SECURITIES AND RECEIVABLES CLASSIFIED AS NON-CURRENT ASSETS Parent Group company SEKm Profit/loss from liquidation of subsidiaries Dividends on shares and interests in associates Interest income on long-term receivable in subsidiaries Total /131

117 NOTE 10 OTHER INTEREST INCOME AND SIMILAR ITEMS Group Parent company SEKm Interest income from bank deposits Other interest income Total Shares in the profit or loss of associates are presented in a separate note. Dividends and profits or losses from the sale of shares and interests in associates are presented in Note 8. NOTE 11 INTEREST EXPENSE AND SIMILAR ITEMS Group Parent company SEKm Interest expense, pension liability Interest expense, non-current liabilities Interest expense, loans from the National Debt Office Interest expense, current liabilities Interest expense, currency futures Capitalised construction interest Foreign exchange differences Total Interest and foreign exchange differences should be viewed in a single context irrespective of whether the foreign exchange differences are positive or negative. NOTE 12 TAX ON PROFIT FOR THE YEAR Group SEKm Current tax -4-3 Deferred tax 2-2 Total /131

118 As most of the consolidated profit before tax is earned in the parent company, which is exempt from income tax, the relationship between the tax expense for the year and the reported consolidated profit before tax is not presented. NOTE 13 INTANGIBLE ASSETS Intangible assets comprise land rights in the form of easements and transmission line rights, rights of use for fibre-optic cables, licenses and capitalised software development costs. Group and parent company, SEKm Capitalised software development costs Land rights Rights of use for fibre-optic cables Assets under construction Total Cost at beginning of year Acquisitions Impairment Cost at end of year Amortisation at beginning of year Amortisation for the year Amortisation at end of year Amortised cost at end of year Amortisation previous financial year NOTE 14 PROPERTY, PLANT AND EQUIPMENT Group, SEKm Buildings and land Machinery and other technical equipment Assets under construction Total Cost at beginning of year ,226 6,329 28,310 Adjustment opening balance Acquisitions ,276 4,305 Sales and disposals Impairment Reclassifications /131

119 Cost at end of year ,413 9,660 32,881 Depreciation at beginning of ,476-11,812 year Adjustment opening balance Sales and disposals Depreciation for the year Depreciation at end of year Depreciated cost at end of year Depreciation previous financial year ,432-12, ,981 9,660 20, Parent company, SEKm Buildings and land Machinery and other technical equipment Assets under construction Total Cost at beginning of year ,001 6,327 27,064 Adjustment opening balance Acquisitions - 7 4,276 4,283 Sales and disposals Impairment Reclassifications Cost at end of year ,164 9,660 31,614 Depreciation at beginning of ,419-10,748 year Adjustment opening balance Sales and disposals Depreciation for the year Depreciation at end of year Depreciated cost at end of year Depreciation previous financial year ,354-11, ,810 9,660 19, The term Machinery and other technical equipment includes switchgear, power lines, submarine cables, control equipment, fibre-optic cables, and telecom and information 119/131

120 systems. Disposals occur mainly in connection with the commissioning of facilities after reinvestments. The assessed value for properties in the Group is SEK 66 (52) million. NOTE 15 INTERESTS IN GROUP COMPANIES Company Corporate ID number Regd office Share, % No. Nominal value Carryin g amount Svenska Kraftnät Stockholm Gasturbiner AB Total 9 9 NOTE 16 RECEIVABLES FROM GROUP COMPANIES Parent company SEKm Loan receivable from subsidiary Total Refers to a loan receivable with conditional repayment terms. During the year a new loan of SEK 11 million was issued, of which SEK 9 million refers to the non-current portion. No repayments were made in A repayment of SEK 11 million was made on 5 January NOTE 17 INTERESTS IN ASSOCIATES (SEKm) Company Corporate ID number Regd office Share % No. Group Parent company Nord Pool Spot AS Lysaker , STRI AB Ludvika Kraftdragarna AB Västerås 50 5, Elforsk AB Stockholm Energiforsk AB Stockholm 20 1, Triangelbolaget D Stockholm AB esett Oy Helsinki , Total Cost is equal to the carrying amount in the parent company. 120/131

121 NOTE 18 NON-CURRENT RECEIVABLES FROM ASSOCIATES Group Parent company SEKm Loan receivable from associate Total NOTE 19 OTHER NON-CURRENT RECEIVABLES Parent Group company SEKm Collateral for financial trading on Nasdaq/OMX Total NOTE 20 OTHER RECEIVABLES Parent Group company SEKm VAT receivable Tax asset Review supplier invoices Other current receivables Total NOTE 21 RECEIVABLES FROM THE STATE The outstanding receivable of SEK 77 (64) million refers to the difference between funds withdrawn and deposited on Svenska kraftnät s checking account with the State and deduction of expenditure/payment of income in relation to the State budget. Parent company SEKm Collection Recognised in respect of income item (dividend) /131

122 Collected funds paid to non-interest-bearing flow Appropriations in non-interest-bearing flow Opening balance (receivable +, liability -) 64 3 Recognised in respect of appropriations Funds attributable to transfers etc. paid to non-interest-bearing flow Closing balance NOTE 22 PREPAID EXPENSES AND ACCRUED INCOME Group Parent company SEKm Prepaid premises expenses Other prepaid expenses Accrued network revenue Accrued revenue, balance providers and system operators Other accrued income Total NOTE 23 DEFERRED TAX LIABILITY Group SEKm Deferred tax liability Total The deferred tax liability is attributable to untaxed reserves. NOTE 24 PROVISIONS FOR PENSIONS Group and parent company SEKm Opening balance Pensions paid Annual indexation of pension liability Interest on pension liability 4 3 Interest on provisions for payroll tax 6 9 Adjustment of pension liability and payroll tax due to change of calculation principle (reduced interest rate /131

123 assumption) Closing balance NOTE 25 NON-CURRENT INTEREST-BEARING LIABILITIES Group and parent company SEKm Opening balance 3,775 1,854 New loans raised 7,832 5,711 Repayment of loans -5,405-3,790 Liability to National Debt Office The available credit line is SEK 9,300 million. 6,202 3,775 NOTE 26 NON-INTEREST-BEARING LIABILITIES Group Parent company SEKm Contributions from landowners Investment grants b/f Capitalised investment grants Deducted investment grants Capacity charges b/for 1, , Capitalised capacity charges 3,091 2,745 3,091 2,745 Deducted capacity charges Advances from fibre-optic customers Advances fibre-optic Group companies Liability provision for skills development Total 5,031 3,870 5,031 3,870 NOTE 27 OTHER LIABILITIES Group Parent company SEKm Advances from customers Staff-related liabilities Derivatives, unrealised loss EU grants not passed on Other current liabilities /131

124 Total NOTE 28 ACCRUED EXPENSES AND DEFERRED INCOME Group Parent company SEKm Accrued expenses, balance providers/system operators Accrued expenses, balancing control Accrued expenses, peak power reserve Accrued expenses, energy crediting Accrued expenses, peak power reserve Accrued expenses, transit compensation Accrued payroll costs Accrued maintenance costs Accrued power contingency planning costs Accrued expenditure, investments Other accrued expenses Prepaid telecom revenue Total NOTE 29 CONTINGENT ASSETS AND CONTINGENT LIABILITIES Alstom Grid SAS has filed a claim against Svenska kraftnät with the Stockholm District Court, demanding around SEK 12 million and calling for the court to rule that Alstom is entitled to compensation for damage to goodwill. Responding to the charge, Svenska kraftnät has contested Alstom s petitions, called for the court to reject Alstom s claim for compensation on the grounds of damage to goodwill and filed a counterclaim against Alstom for SEK 63 million plus interest. The amount refers to repayment of payments made, damages as result of the cancellation and penalties for delays. Written preparations in the district court are currently underway. NOTE 30 FUTURE LEASE LIABILITIES Contracted future lease liabilities fall due as shown below. All leases refer to operating leases. The amounts for the parent company also include liabilities to the subsidiary company Svenska Kraftnät Gasturbiner AB. Group Parent company 124/131

125 SEKm Within 1 year Later than 1 year but within 5 years Later than 5 years Total 1,253 1,313 1,470 1, APPROPRIATION OF RETAINED EARNINGS The State s share of retained earnings is SEK 4,793 million, of which SEK 731 refers to the profit for the year. In accordance with Svenska kraftnät s dividend policy, it is proposed that SEK 475 million be allocated for dividends and that the surplus be carried forward. Non-restricted equity in the parent company is SEK 4,885 million, of which SEK 714 million refers to the profit for the year. The Board of Directors proposes that the parent company income statement and balance sheet and consolidated income statement and balance sheet for 2014 be approved. We certify that the annual accounts give a true and fair view of the results of the operations and of expenses, revenues and the financial position of the parent company and the Group. We deem that the internal governance and control at the parent company is satisfactory. Sundbyberg, 23 February 2015 Bo Källstrand Anna-Stina Nordmark-Nilsson Mikael Odenberg Chairman Deputy Chairman Director-General 125/131

126 Björn Carlsson Bo Netz Bo Normark Karin Stierna Charlotte Zackari ste Oscar Engblom Employee representative SACO Stefan Ekberg Employee representative ST 12. AUDITOR S REPORT 126/131

127 BOARD OF DIRECTORS Bo Källstrand Chairman Born 1949, appointed Former Governor of Västernorrland County. Chairman of the Seventh AP Fund, Director of the Ebba och Sven Schwartz foundation and Director of the Royal Swedish Academy of Engineering Sciences, Dept. II, Electrical Engineering. Anna-Stina Nordmark-Nilsson Deputy Chairman Born 1956, appointed Advisor and consultant in own company, Regina AB, Director of Sveaskog AB (publ), Sveaskog Förvaltnings AB, Softronic AB (publ) and Dedicare AB (publ). Chairman of the Swedish Sports Organisation for the Disabled and Swedish Paralympic Committee. Mikael Odenberg Director-General Born 1953, appointed Former government minister. Director of the Swedish Agency for Government Employers, National Total Defence executive team and the Crisis Management Council of the Swedish Government. Director of the Royal Swedish Academy of War Sciences and the Business Executives Council of the Royal Swedish Academy of Engineering Sciences. Karin Stierna Born 1970, appointed Municipal commissioner in Strömsund. Björn Carlsson Born 1952, appointed CEO Ackkärrs Bruk and investment banking consultant. Bo Netz Born 1962, appointed Deputy Director-General of SIDA, Director of the Swedish Arts Council and AB Trav och Galopp. Bo Normark Born 1947, appointed Member of the Energy Development Committee at the Swedish Energy Agency. Charlotte Zackari Born 1954, appointed General Counsel at Swedish Customs. Oskar Engblom Born 1981, appointed Employee representative, SACO. Stefan Ekberg Born 1956, appointed Employee representative, ST. 127/131

128 DEFINITIONS DEFINITIONS OF KEY PERFORMANCE INDICATORS RETURN ON ADJUSTED EQUITY Profit after financial items less flat-rate tax (22 per cent) as a percentage of adjusted equity. The return is calculated exclusive of any surplus or deficit from operations related to electricity certificates and guarantees of origin. Adjusted equity is calculated as the average of opening and closing restricted equity for the year (government capital and restricted reserves) and 78 per cent of non-restricted equity. RETURN ON CAPITAL EMPLOYED Profit after financial items plus interest expense as a percentage of average capital employed. Average capital employed is defined as total assets less non-interest-bearing liabilities including deferred flat-rate tax in equity. EQUITY/ASSETS RATIO Adjusted equity at year-end as a percentage of total capital. Adjusted equity includes adjustment for flat-rate tax. OPERATING MARGIN Operating profit as a percentage of operating revenue. DEBT/EQUITY RATIO Interest-bearing net liabilities divided by adjusted equity. SELF-FINANCING RATIO Cash flow before investments divided by investments in property, plant and equipment and intangible investments affecting cash flow. INTEREST COVERAGE RATIO Profit for the year plus interest expense divided by interest expense. NET DEBT Provisions and interest-bearing liabilities less interest-bearing financial assets. CAPITAL TURNOVER RATE Turnover divided by average total assets. 128/131

129 INTERNALLY ALLOCATED FUNDS Cash flow before change in working capital and investments. Obtained from the cash flow statement. 129/131

130 ADDRESSES Svenska kraftnät, head office Box 1200, SE Sundbyberg Visiting address: Sturegatan 1 Tel: +46 (0) Fax: +46 (0) [email protected] Invoice address: Svenska kraftnät FE 5105, SE Frösön Svenska kraftnät, Halmstad Region Syd Box 819, SE Halmstad Visiting address: Kristian IV:s väg 3 Tel: +46 (0) Fax: +46 (0) , +46 (0) Svenska kraftnät, Sollefteå Nipan 51, SE Sollefteå Tel: +46 (0) Fax: +46 (0) Svenska kraftnät, Sundsvall Region Nord Box 603, SE Sundsvall Visiting address: Erstagatan 2 Tel: +46 (0) Fax: +46 (0) Elforsk AB Olof Palmes gata 31, SE Stockholm Tel: +46 (0) Fax: +46 (0) Energiforsk AB Olof Palmes gata 31, SE Stockholm Tel: +46 (0) esett Oy Bleckslagargatan 21, FIN Helsinki, Finland Tel: (+358) Kraftdragarna AB Norra Seglargatan 15, SE Västerås Tel: +46 (0) Fax: +46 (0) Nord Pool Spot AS, head office P.b. 121, NO-1325 Lysaker, Norway Tel: (+47) Fax: (+47) /131

131 STRI AB Box 707, SE Ludvika Tel: +46 (0) Fax: +46 (0) Svenska Kraftnät Gasturbiner AB Box 1200, SE Sundbyberg Visiting address: Sturegatan 1 Tel: +46 (0) Fax: +46 (0) Triangelbolaget D4 AB Box 26, SE Bjärred Tel: +46 (0) Fax: +46 (0) /131