Financial report 2012
Torsås Bodö Nynäshamn Skara Herrljunga Ulricehamn Hallabro Bromölla Kristianstad Photographers Petter Duvander (cover), Josefin Hofvander (5)
Höör Landskrona Eslöv Lund Ystad Hörby Örtofta Lomma Skurup Contents Sustainability - part of our business concept Excerpt from the 2012 Annual Report 4 6 Income statement 9 Balance sheet 10 Pledged securities and contingent liabilities 11 Summary of changes in share equity 12 Cash flow analysis 13 Supplementary disclosures regarding cash flow analysis 14
Sustainability - part of our business concept Lunds Energikoncernen presented a sustainability report for the first time in 2011. At the time, it provided a method for evaluating the present situation and reporting what we have already achieved. We are now taking the next step in this process by allowing sustainability issues to play a central role in our operations and business concept. In 2012, Lunds Energikoncernen commenced a journey of change, entailing innovation and a new approach to our operations and organisation. This journey means that we are actively including sustainability in our core operations, and also establishing a new Strategic Business Development unit. This unit will be responsible for developing and driving the Group s business intelligence, sustainability and CSR/CSV issues and introducing them into the Group s operations and reality. The energy sector is a key player as we move toward a sustainable society and thus has a major responsibility. We have based our work on a future scenario in 2021 and an energy supply based on today s social trends. In the transport sector, fossil fuels are giving way to a full palette of other fuels, and we currently invest in three of them: electricity, gas and biodiesel. This trend also demonstrates how people are increasingly interested in producing their own energy, which is a driving force behind the development of new services in small-scale electricity production and smart grids. The price trend for solar cells entails, for example, that a more wide-scale installation of solar cells in properties in southern Sweden will become profitable. The strong interest in building out wind power will also continue. As an energy company, environmental issues play a key role in our sustainability practices and in 1998, we were one of the first energy companies in Sweden to acquire ISO 14001 certification. Our environmental objectives are high and our key figures for 2012 show that we are constantly moving forward. But sustainability involves far more than environmental practices. For us, it also includes accepting responsibility for future generations by contributing to the progress of our owner municipalities and their sustainable development efforts. Our operations are committed to meeting the municipal regulatory requirements of acting in the public interest, while also complying with the Swedish Companies Act in terms of good financial housekeeping. This balance provides the basis of our operations and is both a challenge and one of our greatest strengths in sustainability practices. In today s society, we are increasingly dependent on constant access to different forms of energy. In other words, the energy supply is a vital parameter as we move toward a sustainable society, and welfare and growth are key components. Favourable profitability and financial stability are essential for long-term sustainable development. This year s results were a vast improvement on last year, due to a higher production volume and the insurance compensation we received. In 2012, earnings amounted to SEK 240 million, compared with SEK 68 million in 2011. For a municipal energy company, profit maximization is not our primary driver. We provide both commercial and public benefit, by ensuring that municipal residents have the best-possible access to energy while accounting for our social, financial and environmental responsibilities. We are also subject to yield requirements from our owner municipalities, which means that some of our profit is redistributed to municipal residents in the form of municipal services. 4 Annual Report 2012 Lunds Energikoncernen
For us, it also includes accepting responsibility for future generations by contributing to the progress of our owner municipalities and their sustainable development efforts. In recent years, we have set an upward trend in terms of customer satisfaction. The new approach to our organisation and operations includes a greater focus on the development of customer relations based on closer collaboration, with clarity and professionalism as our guiding principles. Our investment in research and innovation will also increase, in close collaboration with universities and colleges, to produce new and attractive customer solutions. This will provide latitude for meeting the future challenges and demands we face. Our aim is that all employees and owners will be familiar with our sustainability practices and what they entail at an overall level. We would also like our customers, suppliers and local residents to be aware of our endeavours. Continuous dialogue will increase our understanding of each other and how we can work toward a sustainable society. During the spring of 2013, the Group s vision and strategy work and implementation of the organisational changes that were identified in 2012 will continue. The new organisation, in which sustainability and commitment are the guiding principles, will be launched on 1 May. Lund, March 2013 Sylvia Michel, President and CEO Annual Report 2012 Lunds Energikoncernen 5
Excerpt from the 2012 Annual Report This is an excerpt from the Lunds Energi Group s annual report for 2012. The complete document is available to order from our Customer Services and on our website, where you can also download a digital copy immediately. The references to notes in tables on the following pages are still there, although the notes themselves can only be found in the 2012 Annual Report. Last year s figures are given in brackets. Operations in general Lunds Energikoncernen AB (publ) is a sub-group that is owned by Kraftringen AB (556527-9758), with its registered office in Lund. This company is in turn owned by the municipalities of Lund (82.4 %), Eslöv (12.0 %), Hörby (3.5 %) and Lomma (2.1 %). The business encompasses energy production and energy distribution, contract operations and IT communication. The company owns and manages properties and facilities for the business requirements, shares and participations in companies in the energy sector, as well as conducting services related to the business. The company is run according to business principles, with due observance of the municipal purpose of the business as well as the principles set out in the Articles of Association and owners directives The Group must have a strong local presence, and must conduct and develop local energy activities with the focus on a good environment, high delivery reliability, a high level of service and rational energy usage. Lunds Energikoncernen has published a Sustainability Report since 2011 as a supplement to the Group s financial reporting. The purpose of the Sustainability Report is to disclose the Group s economic, environmental and social impact. Measuring, presenting and taking responsibility for what the organisation has achieved by implementing sustainability initiatives increases transparency for the Group s stakeholders. Significant events during the year In 2012, the Group conducted an analysis of its existing operations and long-term conditions in the energy sector. This led to a decision concerning a new vision, business concept and changed organisational structure. In 2013, the Group s corporate structure will be consolidated through a number of mergers. Standard & Poor s rating is set at BBB+/negative outlook/a 2/K-1. The Group s small-scale operation is viewed negatively, although this is compensated by strong owner support and the stability within the monopolies. The negative outlook assessment principally reflects the project risks in the Örtofta building project. The Group s changeover from fossil dependence to more efficient electricity and district heating production via renewable energy sources continued during the year. Construction of a biofuel-fired combined heat and power plant, Örtoftaverket, commenced in 2012 and is expected to be in full operation by the first half of 2014. The well developed district heating network in the Eslöv-Lund-Lomma area, which is provided with heating from Sweden s largest geothermal heating system (heat storage in bedrock ) makes it possible to utilise surplus heat from the region s industries, agriculture and largescale households. In 2012, the 25 year-old geothermal wells in Värpinge, Lund, were extensively renovated. Electricity production in Norway was negatively impacted by low energy prices and a slightly less favourable exchange rate compared with preceding years. However, the earnings trend improved compared with 2011 due to a higher production volume and insurance compensation received for operational problems in 2011. A new model for regulating earnings from electricity supply networks entered into force in 2012. As a result, during 2011, the Energy Markets Inspectorate established the permitted extent of electricity supply network earnings, known as the earnings framework, for the period 2012-2015. The Group s allocated earnings framework has been appealed, as it is not considered to have been calculated according to applicable regulations. In 2012, extensive reconstruction and reinvestment in the power transmission and distribution network was implemented to further enhance supply reliability. The electricity trading operation showed a positive trend. In 2012, the Group succeeded in maintaining its market position despite intensifying competition. 6 Annual Report 2012 Lunds Energikoncernen
The successful launch of new portfolio administration services, combined with strong sales initiatives, resulted in a number of contracts with major consumers of both electricity and gas. At the beginning of 2012, a partnership with Quadracom strengthened operations in the Open City Network. Growth increased in the black fibre operations. Development of the Group s energy contracts was relatively favourable despite a declining market and intense competition. Lunds Energikoncernen AB (publ) is the Parent Company of 12 (14) companies and prepares its own consolidated accounts. The Parent Company s activities include development work and Group-wide support functions. On 1 January 2012, Kviinge Energi AB was divested to Brittedals Elnät Ekonomisk Förening. Turnover and profit trend Operating profit amounted to SEK 267.1 million (109.5). Profit after financial items amounted to SEK 239.6 million (68.3). Profit for the year amounted to SEK 270.5 million (50.0) for the Group. In the closing accounts for 2011, consolidated goodwill, etc. was written down by SEK 41.8 million, and SEK 30.4 million was reserved for future price hedging contracts in respect of fuel purchases. The reversal of provisions in 2011 had a positive impact of SEK 30.4 million in 2012. The results were also positively impacted by insurance compensation received and increased profitability in Norwegian electricity production. Net sales rose 2 per cent to SEK 2,682 million (2,623). Of these sales, electricity and electricity distribution accounted for SEK 1,572 million (1,638), district heating for SEK 701 million (662), gas for SEK 219 million (146), district cooling SEK 23 million (21), contracting SEK 6 million (5) and other items SEK 161 million (151). Investments during the year amounted to SEK 648 million (194). Expectations in respect of future developments The Group s profit for 2013 is expected to be on a par with the owners yield requirements. In December 2012, the Board of Directors adopted a new business strategy focus and organisation, including a consolidation of the Group s operations and increased customer focus. Risk exposure and financial instruments By nature of its business, the Group is exposed to various types of financial risk. Financial risks refer to fluctuations in the Group s profits and cash flow as a result of changes in energy prices (principally oil, natural gas and electricity), exchange rates, interest rates, refinancing and credit risks. The Group s risk policy is determined by the Group s Board of Directors, and forms a framework of guidelines and regulations in the form of risk mandates and limits for all financial risks on the energy, interest and currency markets. Responsibility for the Group s market risks associated with energy sales, principally electricity, district heating and natural gas, is handled by the Group s associated company, Modity Energy Trading AB. Correspondingly, the financial transactions and risks are handled by the Parent Company s finance unit. The overall objective is to supply cost-effective financing and hedging of all energy prices, and to minimise the effects of market fluctuations on the Group s results. In order to follow up the development and control of operations that are exposed to risks, the CEO is assisted by a Risk Committee and a Risk Controller. Environmental information In 2012, carbon dioxide emissions decreased compared with the preceding year, despite a somewhat higher level of production. With planned investments in new facilities, including the biopower and heat plant in Örtofta, our focus on fossil-free heating production by 2020 remains firm. The Group has facilities with compulsory licences in Lund, Lomma, Eslöv, Klippan and Ljungbyhed for the production of district heating, district cooling and electricity. All facilities have permits for operations in accordance with the Environmental Protection Act or the Environmental Code. The environmental impact of the business consists primarily of emissions to the air from the combustion of fuels (renewable/non-renewable) for the production of electricity and heat. Since 1998, the Group has held environmental certification in accordance with the ISO 14001 standard. Governance of the company The Board of Directors has decided, as far as is deemed appropriate and feasible, to adapt its working methods to the Swedish Code of Corporate Governance. Annual Report 2012 Lunds Energikoncernen 7
According to the Code s rules, the Board of Directors must issue a report annually in which it e.g. explains departures from the regulations. A corporate governance report has been prepared for 2012 and will be published separately. Significant events after the balance sheet date In January 2013, as part of the Group s ongoing consolidation process, the Board of Directors decided to merge the following subsidiaries and their operations, Kraftringen Produktion AB, Kraftringen Försäljning AB, Nynäshamn Energi Försäljning AB and Kraftringen Öppet Stadsnät AB with the Parent Company Lunds Energikoncernen AB. A decision was also made to merge the two subsidiaries, Nynäshamn Energi AB and Kraftringen Nät AB. No other events occurred after the balance-sheet date or before the signing of this annual report that are deemed to be significant. The balance sheet and income statement, as well as the allocation of profits, will be determined at the Annual General Meeting on 23 April 2013. Proposed allocation of the company s profit or loss The Board of Directors proposes that disposable funds, amounting to SEK 539,871,931.29, be allocated as follows: Balance carried forward 539,871,931 Total 539,871,931 As far as the company s profits and financial position in general are concerned, please refer to the following income statement and balance sheet and the associated notes to the accounts. Financial overview, the past 5 years Amounts in SEK million (if not specified otherwise) 2012 2011 2010 2009 2008 Turnover 2 820 2 721 3 408 3 022 2 841 Profits after net interest income/expense 239,6 68,3 139,3 144,0 165,1 Equity ratio 42,9 % 42,1 % 40,1 % 39,7 % 37,0 % Yield equity 9,1 % 2,8 % 5,9 % 6,3 % 7,4 % Dividend per share (SEK) Group contribution per share (SEK) 0,00 0 12,33 12,33 12,30 Dividend Group contribution 0,0 0,0 60,0 60,0 59,8 Investments over the past 5 years Amounts in SEK million (if not specified otherwise) 2012 2011 2010 2009 2008 Investments 648 194 292 264 465 8 Annual Report 2012 Lunds Energikoncernen
Income statement Amounts in TSEK Note 2012-01-01 2012-12-31 2011-01-01 2011-12-31 Net turnover 1 2 681 820 2 623 136 Capitalised work for own account 98 434 64 285 Other operating income 39 555 33 911 2 819 810 2 721 332 Operating expenses Raw materials and consumables 2-69 277-66 439 Purchase of energy and energy taxes -1 596 125-1 645 778 Other external costs 3, 4-345 511-312 178 Personnel costs 5-301 183-301 942 Depreciation and write-downs of tangible and intangible assets 6-239 823-283 846 Other operating expenses 7-825 -1 671 Operating profit 267 067 109 478 Profit from financial items Profit/loss from shares in associated companies Result from securities and receivables accounted for as fixed assets Other interest income and similar profit items 9 10 11 9 353-3 253 4 923 7 665 1 182 5 730 Interest expenses and similar profit/loss items 12-38 507-55 782 Profit after financial items 13 239 582 68 273 Tax on year s profit 15 31 619-17 368 Minority share of the profit/loss for the year -727-939 Profit/loss for the year 270 474 49 965 Profit per share Profit per share (SEK) 55,57 10,27 Annual Report 2012 Lunds Energikoncernen 9
Balance sheet Assets Amounts in TSEK Note 2012-12-31 2011-12-31 Fixed assets Intangible assets Electricity certificate and emission rights 16 15 746 14 628 Usage rights hydro-electric power 16 268 013 267 853 Computer software 16 22 786 31 903 Goodwill 16 3 297 5 209 Advance payments regarding intangible assets 17 4 166 1 241 314 009 320 835 Tangible assets Buildings and land 18 149 113 159 072 Machinery and other technical assets 19 2 527 838 2 620 310 Equipment, tools, fixtures and fittings 20 16 470 20 220 New plants being built and advance payments for tangible assets 21 787 422 271 622 3 480 843 3 071 225 Financial fixed assets Participations in associated companies 23 39 761 39 297 Assets in associated companies 24-818 Other long-term security holdings 25 28 209 28 394 Deferred tax asset 33 4 164 9 717 Other long-term receivables 26 - - 72 134 78 225 Total fixed assets 3 866 985 3 470 284 Current assets Stock, etc. 27 Raw materials and consumables 71 985 82 338 71 985 82 338 Current receivables Accounts receivable 273 690 220 615 Receivables from Parent Company 147 052 27 168 Income taxes recoverable 5 306 9 140 Established but non-invoiced revenue 28 5 330 15 083 Other receivables 71 238 51 198 Prepaid expenses and accrued income 29 357 593 313 142 860 208 636 346 Cash and bank balances 21 111 72 537 Total current assets 953 304 791 222 Total assets 4 820 289 4 261 506 10 Annual Report 2012 Lunds Energikoncernen
Balance sheet Equity and debts Amounts in TSEK Note 2012-12-31 2011-12-31 Shareholders equity Share capital 48 672 48 672 Restricted reserves 1 488 833 1 275 578 Non-restricted reserves 257 700 421 997 Profit/loss for the year 270 474 49 965 2 065 679 1 796 213 Minority interest 1 905 2 187 Allocations Allocations for pensions and similar obligations 32 29 027 29 314 Allocations for deferred tax 33 489 260 542 541 Other provisions 34 446 30 857 518 733 602 712 Long-term liabilities Other liabilities to credit institutes 35 1 200 000 700 000 Other liabilities 162 162 1 200 162 700 162 Current liabilities Liabilities to credit institutions 30 347 499 603 522 Overdraft 4 802 Accounts payable 198 522 107 060 Current tax debts 16 400 9 434 Other liabilities 88 558 85 709 Accrued expenses and deferred income 36 378 031 354 507 1 033 811 1 160 232 Total equity and liabilities 4 820 289 4 261 506 Pledged securities and contingent liabilities Amounts in TSEK 2012-12-31 2011-12-31 Pledged assets For own liabilities and provisions Floating charges Contingent liabilities Guarantee commitments for the benefit of associated companies * 1 029 700 1 554 918 1 029 700 1 554 918 * According to the division of responsibility in the shareholder agreement between the owner companies (Lunds Energikoncernen AB and Öresundskraft AB) of Modity Energy Trading AB, the Group s right of recourse as at the balance sheet date amounts to SEK 159 767 thousand (277,377). The corresponding figure for Öresundskraft AB at the same time amounts to SEK 0 thousand (27,527). Annual Report 2012 Lunds Energikoncernen 11
Summary of changes in share equity Amounts in TSEK Share capital Non-distributable reserves Non-restricted reserves Group Closing balance in accordance with balance sheet on 31 December 2010 48 672 1 211 547 485 743 Movement between restricted and non-restricted equity 64 031-64 031 Profit/loss for the year 49 965 Group contribution 38 Tax effect on Group contribution -10 Translation difference * 257 Equity on 31-12-2011 48 672 1 275 578 471 962 Movement between restricted and non-restricted equity 213 254-213 254 Profit/loss for the year 270 474 Group contribution -5 550 Tax effect on Group contribution 1 460 Translation difference * 3 082 Equity on 31-12-2012 48 672 1 488 833 528 174 * Accumulated translation difference in foreign subsidiaries net assets amounts to -3 494 TSEK (-6 576). The share capital consists of 4,867,242 shares and has a quota value of SEK 10. 12 Annual Report 2012 Lunds Energikoncernen
Cash flow analysis Amounts in TSEK 2012-01-01 2012-12-31 2011-01-01 2011-12-31 Current operations Profit after financial items 239 582 68 273 Adjustments for non-cash items, etc. 218 528 317 119 458 110 385 392 Taxes paid -2 179-17 746 Cash flow from operating activities before changes in operating capital 455 932 367 646 Cash flow from changes in operating capital Increase (-) /Decrease (+) in inventories 10 354-52 067 Increase (-) /Decrease (+) in current receivables -237 288 55 975 Increase (+) /Decrease (-) in current liabilities 114 725-38 162 Cash flow from operating activities 343 723 333 392 Investment activities Sale of subsidiary 7 565 Acquisition of intangible assets -7 823-7 535 Acquisition of tangible assets -647 867-194 384 Sale of tangible assets 7 423 2 191 Acquisition of financial assets -2 250-9 749 Sale/decrease in financial assets 25 1 245 Cash flow from investment activities -642 927-208 232 Financing operations Loans raised 248 779 Amortisation of loans -136 576 Dividends paid -1 010-1 051 Cash flow from financing activities 247 769-137 627 Cash flow for the year -51 435-12 467 Liquid assets at beginning of year 72 537 85 004 Exchange rate difference in liquid assets 8 1 Liquid assets at end of year 21 111 72 537 Annual Report 2012 Lunds Energikoncernen 13
Supplementary disclosures regarding cash flow analysis Amounts in TSEK 2012-01-01 2012-12-31 2011-01-01 2011-12-31 Paid interest and dividends received Dividends received 2 080 2 386 Interest received 4 019 4 333 Interest paid 43 785 49 440 Adjustments for non-cash items, etc. Less: profit participations in associated companies -8 736-7 665 Received dividends 4 914 Depreciation and write-downs of assets 254 877 292 601 Unrealised currency rate differences -574 77 Capital result from sale of fixed assets 487 3 635 Capital result from sale of operations/subsidiary -1 742 Pension allocations -287-7 820 Other provisions -30 411 29 728 Other earnings items not affecting liquidity 6 563 218 528 317 119 Sale of subsidiaries and other business units Sold assets and liabilities Tangible assets 9 955 Raw materials and consumables Current receivables 91 Liquid assets Total assets 10 046 Allocations 1 721 Current liabilities 2 502 Total liabilities and provisions 4 223 Sales price 7 565 Sales price received 7 565 Less: Liquid assets in the sold business operation 7 565 Effect on liquid assets Liquid assets The following are included as liquid assets: Cash and bank balances 21 111 72 537 The above items have been classified as liquid assets on the basis that: There is an insignificant risk of value fluctuations. They can easily be turned into cash. They have a duration of 3 months at the most from date of acquisition. 21 111 72 537 14 Annual Report 2012 Lunds Energikoncernen
Annual Report 2012 Lunds Energikoncernen 15
Lunds Energikoncernen AB (publ) Box 25 221 00 Lund Visiting address: Scheelevägen 16 Telephone +46(0)46-12 97 70 Fax +46(0)46-35 60 72 Environmental certification: ISO 14001 E-mail info@lundsenergikoncernen.se CIN: 556100-9852 Website www.lundsenergikoncernen.se