Skellefteå Kraft Excerpt from Annual Report 2011

Skellefteå Kraft Excerpt from Annual Report 2011
This is Skellefteå Kraft
Skellefteå Kraft is one of the country’s
largest electricity producers and is the
largest among the municipal electricity
producers. The company has a wide range
of operations in the energy sector and produces 4.4 TWh of electricity in an average
year in wholly-owned and partially-owned
subsidiaries.
Skellefteå Kraft’s electricity production consists of 69% hydroelectric power,
3% wind power, 15% thermal power and
13% nuclear power via part-ownership of
the Forsmark plant.
The number of electricity customers
on Skellefteå Kraft’s books were around
134,600 at the end of 2011. Skellefteå
Kraft also distributes electricity through
its own networks in central and northern Västerbotten and southern Lapland.
In addition, services are provided to the
electricity industry in the form of physical and financial power services to other
companies.
The company produces heating and
biopellets, primarily at the Hedensbyn
Integrated Bioenergy Plant. Biopellets are
sold to several markets, northern Sweden
being the main market. District heating
is produced and distributed to customers
connected to grids in Skellefteå, Lycksele,
Storuman, Malå and Robertsfors. In the
Skellefteå region the company provides a
broadband infrastructure and the rental of
office premises in its own properties.
2
OPERATIONS IN MORE THAN
30 LOCATIONS
Skellefteå Kraft is one of the region’s largest companies with operations in about
ten municipalities and over 600 employees in wholly-owned and partially-owned
subsidiaries. Its operations and continued
forward-looking investment programmes,
primarily in renewable electricity production, create a substantial number of job
opportunities among contractors and suppliers in the region.
The company’s activities are run via permanent operating centres in more than 30
locations in Västerbotten, Norrbotten and
Jämtland.
Most of Skellefteå Kraft’s operations
are in northern Västerbotten. The region
is largely rural and the towns and villages
have a significant need for industrial development and increased employment.
Skellefteå Kraft’s aim is, where possible,
to develop operations so that they have a
positive effect on the region.
THE BEST OPTION FOR CUSTOMERS
Skellefteå Kraft wants to use its own
energ­y resources and high level of competence to provide attractive products and
services at competitive prices. As one of
few energy companies in Sweden with its
own production plants, Skellefteå Kraft is
able credibly to claim to be the best option
for customers. This is one of the long-term
strategies underlying the establishment of
the company. Its wide range of operations
also creates excellent conditions for it to
be able to provide customers with attractive energy and communications solutions.
The core values that run throughout the
company’s operations are reliability, responsibility, drive and proximity.
Good work/life balance produces
a powerful work environment
One Skellefteå Kraft, a collective group
that is all-inclusive and where all the parts
and employees are equally important, is an
outlook that permeates the company’s approach to strategic development. In practical terms it is all about giving individuals
the space to develop in their professional
roles while at the same time creating conditions for managers to develop and shape
clearer and more experienced leadership.
Together these result in a more committed
working environment, which is evidenced
in surveys. The Group’s employee satisfaction index (ESI) is improving all the time
and compared with the previous survey,
undertaken in 2009, the 2011 index had
risen by no fewer than 10 percentage
points, from 61% to 71%.
”This is proof that we are doing the
right thing when we aim at the whole
picture, at focusing on behaviour and
­attitudes ­together with other parameters of
the working environment,” says Gunna­r
Tenevall, Head of Human Resources.
SUBSTANTIAL RECRUITMENT NEEDS
Skellefteå Kraft has expanded considerably in the last ten years. The workforce has
more than doubled, increasing from about
300 to 633 employees by the end of 2011.
The company will be taking on yet more
staff as a consequence of its growth and
owing to forthcoming retirements. The
starting point for the company’s efforts on
staff is to be found in the Group-wide staff
concept and human resource strategy that
were adopted in 2009.
”All who are employed at Skellefteå
Kraft have a good work/life balance, in
other words quality leisure time that they
can devote to their families and interests.
People who feel good perform and do
bette­r at work, which means both the individual and the company is able to grow”,
says Gunnar Tenevall.
The group in brief
• Turnover increased by 13% from SEK 4,541 million to SEK 5,140
million during the year.
• Operating expenses increased from SEK 3,870 million to SEK 4,664
million in the same period.
• Operating profit fell by 27% from SEK 705 million to SEK 515
million.
• The operating margin reached 10.0% compared with 15.5% in the
same period the previous year.
• Net financial income improved from SEK -176 million to SEK -86
million.
• The result after net financial items was SEK 429 million compared
with SEK 529 million for the same period in 2010.
20112010
Net turnover, SEK M
5,140
4,541
Operating profit, SEK M
515
705
Profit after net financial income, SEK M
429
529
Balance sheet total, SEK M
9,722
9,414
Shareholders’ equity, SEK M
4,540
4,327
Investments, SEK M
926
731
Return on equity, %
9.2
10.6
Return on assets, %
5.7
7.0
Return on capital employed, %
6.9
8.4
Operating margin, %
10.0
15.5
Solidity, %
46.7
46.0
Number of employees
633
525
3
Business Area Electric Power
The development of the electrical business
The company’s objective is to increase
electricity production from wind power to
approximately 600 GWh by 2015.
Otherwise most of Skellefteå Kraft’s
electricity production consists of hydroelectric power. There current investments
and development work are aimed at improving performance at existing hydroelectric power plants. In 2011 electricity production from hydroelectric power
amounted to 2,500 GWh (2,602).
Business Area Electric Power, which produces and sells electricity and related services to private households, industry and
organisations, can look back on 2011
from a positive perspective. There has
been an increase in commercial efficiency
at several levels. On the private customer
side Skellefteå Kraft has followed a number of players in the industry and brought
in a fixed charge for its service contracts.
In addition, some unique products in the
form of long-term renewable contracts
have been launched. Power trading operations have grown at a fast rate since the
beginning of 2006 and the customer base
now amounts to 25% of the total Swedish
market. Skellefteå Kraft’s electricity production has reached 3,640 GWh (3,641)
and consists of 69% hydroelectric power,
4
3% wind power, 15% thermal power and
13% nuclear power. The business area is
also active in continuous power trading on
the Nord Pool power exchange.
INCREASED PROPORTION
OF WIND POWER
Skellefteå Kraft has substantially increased
the proportion of electricity production it
obtains from wind power as a result of its
investments in wind power in an arctic
climate. In 2011 total production of wind
power electricity amounted to 110 GWh.
During the year trial operations of wind
farms were launched in Jokkmokksliden
and Storliden with good results. In 2012
the first of a total of 90 wind turbines are
to be commissioned in Blaiken outside
Storuman.
CHANGING ENERGY MARKET
On 1 November Sweden was divided into
four electricity areas from north to south.
The areas were determined in part on the
basis of production and demand. This
meant that the northernmost parts of Sweden had a lower electricity price than the
southern parts.
Given the physical limitations of the
grids, in the long term this will have a negative impact on the profitability of electricity production in Norrland compared with
other parts of the country. Skellefteå Kraft
is therefore looking outside its own region
to find investment projects that meet the
owner’s profitability requirements.
TURNOVER AND EARNINGS
The business area’s turnover amounted to
SEK 4,013.9 million and operating profit
amounted to SEK 673.5 million (830.9).
Return on total assets was 13.8%.
Business Area Electric Networks
The most important things are availability and a good price
Business Area Electric Networks distributes and supplies electricity to 64,000
customers within its own grid area, which
covers central and northern Västerbotten and southern Lapland. The operation
is run within the independent subsidiary
Skellefteå Kraft Elnät AB and electricity
from 57 different suppliers is distributed
within the grid.
The grid tariff consists for the most part
of a component that is fixed regardless of
how much electricity is transported. The
reason for this is that the infrastructure
makes up most of the power grid owner’s
costs and power legislation makes demands on real costs.
Although Skellefteå Kraft’s power grid
is one of Sweden’s largest rural grids, with
long distances between customers, the
power grid tariff is at the average level for
the country.
WEATHERPROOFING
Weatherproofing of the power grid has
continued during the year. This is primarily done in two ways: by cables being dug
into the ground and by uninsulated overhead lines being replaced with insulated
wire.
“Making the main system robust against
weather disruption is the single most effective means of reducing downtime. Generally, when there are several faults all at
the same time, downtime tends to be prolonged because we then lack resources to
deal with the faults at the same time,” explains Lars-Olof Martinsson, business area
manager.
The grid’s total length is 12,000 kilometres, of which large parts consist of overhead lines in woodland.
NEW WIND FARMS
The connection of new wind farms has also
required extensive resources. Skellefte­
å
Kraft’s wind farms in Malå were connected to the grid during the year, at a cost
of SEK 42 million. As part of the increase
in electricity production within the power
grid area, the company is looking into the
building of a new connecting station to the
grid together with Svenska Kraftnät.
SATISFIED CUSTOMERS
The annual surveys carried out by the
Swedish Quality Index indicate that the
business area has once again performed
well, achieving Sweden’s most satisfied
corporate customers and the second-most
satisfied private customers.
“Our vision is to be Sweden’s best power
grid company,” says Lars-Olof Martinsson.
TURNOVER AND EARNINGS
The business area’s turnover amounted to
SEK 425.1 million and operating profit
amounted to SEK 87.1 million (69.5). Return on total assets was 7.7%.
5
Business Area Heating
District heating is growing through clear customer focus
Business Area Heating sells, distributes
and produces district heating, bioelectricity, district cooling and biopellets to private
and corporate customers. District heating
is produced primarily at the Hedensbyn
and Storuman Integrated Bioenergy Plants
and at the power and heating plants in
Malå and Lycksele. Heating is also supplied to customers from about sixty smaller boiler plants. Biopellets are produced in
Hedensbyn.
HARSH PELLET MARKET CONDITIONS
AND EXPENSIVE FUEL
Business Area Heating’s fall in profits for
2011 amounted to SEK 180.4 million. The
results are due to a hot year, low electricity
prices and a very tough pellet market.
“Competition from imported pellets to
larger customers is fierce, but even small
homeowners have more options open to
them. There is also a sluggishness in the
system; potential pellet customers who
burn wood do not tend to throw out their
boiler until it packs up,” explains Seved
Lycksell, business area manager.
A further negative factor has been the
price trend on the raw materials side, bearing in mind that biofuel is the business area’s biggest item of expenditure.
6
“On the other hand, the district heating
business has grown really well during the
year. We have intensified our marketing efforts and simplified our range of services.
The two- and four-year biofuel packages
with fixed electricity prices for district
heating customers are an example of this.”
THE ADVANTAGES OF PEAT EXTRACTION
Peat currently represents about 10 per cent
of Skellefteå Kraft’s energy production,
but the plan is to reach up to 25%. Peat
has a higher energy content than other biofuels, and contributes to improved combustion chemistry at the same time, which
increases the operating availability of the
integrated bioenergy plants’ advanced
steam boilers.
In addition, peat extraction creates jobs
in Norrland and can be done at a local
level with a low environmental impact.
TURNOVER AND EARNINGS
The business area’s turnover amounted to
SEK 694.5 million and operating profit
amounted to SEK -231.8 million (-51.4).
Return on total assets was negative.
Business Area Development
New business area focuses on growth and business
management responsibility for building
and construction projects run by Skellefteå Kraft and manages the company’s land
and forest properties. Business Unit Properties’ results for the year are SEK 16 million and are better than budget. The occupancy rate is somewhat lower than the
96% target, but is nonetheless at 94.9%.
As a result of extensive organisational
changes, this year Skellefteå Kraft has created a new business area, Development.
The manager, Kajsa Hedberg, explains the
aim of the change:
“An important part of our new organisation is about streamlining Skellefteå
Kraft’s operations. There we have opted
to separate out those areas that are not
directly related to energy. Our task in
Business Area Development is to manage
a portfolio of operations by means of active control by the owner so that these are
developed in the best possible way.
The operations consist first of all of the
Broadband and Properties business units,
together with associated companies Ackra
Invest and GreenExergy. Part of our task is
to develop the operations portfolio so that
it not only supports the Group’s core activities, but also contributes to an improved
business and innovation culture throughout the region. It is important for Skellefteå Kraft to see how we can contribute to
development and growth in the region by
means of linkages and collaboration with
external players.
“In addition to the above, we are to ensure a structured and proactive process for
acquisitions and disposals throughout the
Group, which will occur in close co-operation with the other business areas.”
BROADBAND
Despite geographical challenges including
long distances between households, the
broadband network in the Skellefteå municipality is the very best in Sweden. The
fibre network is one of the biggest in the
country and the number of connections
is almost in the same category as Gothenburg.
Results for Business Unit Broadband
have been extremely positive: breakeven
against a budgeted SEK -12.5 million.
Sales have increased significantly, both
as regards broadband portal services and
more advanced corporate services.
TURNOVER AND EARNINGS
The business area’s turnover amounted to
SEK 151.0 million and operating profit
amounted to SEK 16.4 million (-4.4).
­Return on total assets was 1.7%.
PROPERTIES
Business Unit Properties manages, develops and rents out premises to tenants, primarily in the Sirius block in central Skellefteå. The business unit also has project
7
Energy maintenance, SEU
Strong growth forecast
Skellefteå EnergiUnderhåll (SEU) supplies
maintenance services to energy companies
with their own wind power, hydroelectric
power and thermal power plants, as well
as industry and grids.
The company’s products and services
consist of maintenance of electric power
systems, inspection centres and control
systems, rotating machinery, mechanical
services, dams and dam safety and special
services. It operates in Skellefteå, Finnfors, Norsjö and Arjeplog. SEU has been
a wholly-owned subsidiary of Skellefteå
Kraft since January 2011.
Its customers are located within a large
area. Most of the company’s activities are
carried out along the Skellefte River, but
it also operates on the Ume River and the
Ångerman River.
ENORMOUS TRUST
The issue of availability and efficiency at
work is no less important as regards preventive maintenance, which constitutes a
large part of SEU’s operations.
“Any loss of production is extremely
expensive and that is something we work
hard to minimise,” says Gerhard Lindwall, CEO at SEU.
Many of the customers are large energy companies that view the long-term
8
a­ pproach and quality assurances in SEU’s
operations as an enormous asset in their
own activities. That is the reason they often commission turnkey projects with the
company, which at the next stage benefit
smaller local players.
During 2011 SEU was awarded occupational health and safety certification, having attained environmental certification
according to ISO 14001 a year earlier.
WIND POWER CREATES NEW DEMANDS
The multiple establishment of wind farms
being carried out in northern Sweden
means that demand for SEU’s services is
going to increase in the next few years.
This is going to lead to substantial recruitment needs and forecasts show that
the size of the workforce, with internal
consolidations within the Group, could
double in the next ten years. The strategy
for growth continues to be the same as for
existing work: to build trust by means of
reliability and quality.
TURNOVER AND EARNINGS
The business area’s turnover amounted
to SEK 141 (115) million and operating
profit amounted to SEK 13.0 million (7.9).
9
Income Statement of the group, amounts in SEK million
20112010
REVENUES
Net turnover
5,139.5
4,541.3
Work performed by the company for its own use and capitalized
22.9
18.4
Other operating revenues
16.5
15.3
Total revenues
5,178.9
4,575.0
COSTS
Energy and production costs
-3,240.9
-2,602.3
Other external costs
-493.5
-483.6
Pejrsonal costs
-400.6
-334.2
Depreciation -514.2-326.2
Other operating expenses
-3.1
-23.5
Shares of income in associated companies
-11.3
-100.4
Total costs
-4,663.6
-3,870.2
OPERATING PROFIT
515.3704.8
Income from security paper and receivables from fixed assets
27.5
-68.1
Other interest income and similar income items
3.4
6.1
Interest expenses and similar income items
-117.3
-113.7
Net financial income
-86.4
-175.7
PROFIT AFTER NET FINANCIAL INCOME
428.9
529.1
Taxes -19.3-82.2
NET INCOME
409.6
446.9
10
Balance sheet of the group, amounts in SEK million
2011-12-312010-12-31
ASSETS
Fixed assets
Intangible asets
159.9
168.7
Tangible assets
7,769.7
7,357.5
Shares in associated companies
128.7
137.5
Receivables from associated companies
230.8
140.8
Other long-term securities holding
13.2
16.3
Other long-term receivables
243.8
228.4
Total fixed assets
8,546.1
8,049.2
Current assets
Inventories etc
191.9
135.3
Customer receivables
258.9
316.2
Receivables from associated companies
0.0
3.1
Other receivables
24.9
22.4
Prepaid expenses and accrued income
567.9
835.7
Cash and bank
132.1
51.8
Total current assets
1,175.7
1,364.5
TOTAL ASSETS
9,721.8
9,413.7
TOTAL EQUITY AND LIABILITIES
Shareholders’ equity
Restricted equity
204.0
204.0
Non-restricted equity
3,926.2
3,675.8
This year’s result
409.6
446.9
Total shareholders’equity
4,539.8
4,326.7
Allocations
Liabilities to credit institute
3,435.4
2,755.0
Provisions for pensions
21.2
21.2
Other allocations
8.2
9.2
Deferred tax liability
801.4
781.7
Other debts
66.1
9.7
Total allocations
4,332.3
3,576.8
Current liabilities
Liabilities to credit institute
5.0
643.1
Advance payments from customers
14.4
6.6
Accounts payable
183.8
252.0
Liabilities to asociated companies
10.6
18.6
Income tax liabilities
15.7
1.9
Other liabilities
153.0
164.4
Accrued expenses and deferred income
467.2
423.6
Total current liabilities
849.7
1 510.2
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
9,721.8
9,413.7
Pledged assets
17.8
17.8
Guarantees 488.4501.7
11
Cash flow break-down analysis of the group, amounts in SEK million
2011
2010
CURRENT OPERATIONS
Profit after net finansial income
428.9
529.1
Adjustment of items not in cash flow
depreciations
514.2
326.2
write-down in financial fixed assets
4.0
184.6
share in profit in associated companies
7.9
95.7
profit after sale of fixed assets etc
-8.0
-16.2
increase(-)/decrease in interest receivables, liabilities
-28.0
17.3
Paid(-)/repaid income tax
-
-
Cash flow from current operations before change in working capital
919.0
1,136.7
Cash flow from change in working capital
Increase(-)/decrease in inventories etc
-56.6
20.2
Increase(-)/decrease in operating receivables
327.4
-366.7
Increase/decrease(-) in allocations
-1.0
1.5
Increase/decrease(-) in operating liabilities
3.9
209.2
Change in working capital due to acquisitions
0.0
-2.1
Cash flow from current operations
1,192.7
998.8
INVESTMENTS
Acquisition of intangible fixed assets
-
Acquisition of tangible fixed assets
-923.7
-725.4
Acquisition of financial fixed assets
-4.0
-23.2
Acquisition of subsidiary company
0.0
-26.5
Sale of fixed assets
15.5
108.1
Capital withdrawal from associated companies
0.0
5.0
Increase(-)/decrease in other long-term receivables
-105.0
-36.0
Received government contribution
2.1
44.0
Cash flow from investments
-1,015.1
-654.0
EXTERNAL FINANCING
New loans
680.4
55.0
Repayments and prepaid loans etc
-638.1
-123.1
Increase/decrease(-) in other long-term liabilities
56.4
-12.3
Group contribution
0.0
-50.0
Allocation to the municipality
-196.0
-180.0
Cash flow from external financing
-97.3
-310.4
Change in cash flow during the period
80.3
34.4
Liquid funds at the beginning of the period
51.8
17.4
Liquid funds at the end of the period
132.1
51.8
12
FLERÅRSÖVERSIKT
Year review, amounts in SEK million
2011 201020092008200720062005200420032002
FROM INCOME STATEMENT
Net turnover
5,139.5 4,541.33,618.83,626.53,075.83,210.42,245.51,961.81,842.41,546.6
Expenses and other business items
-4,110.0 -3,510.3 -2,684.4 -2,544.0 -2,197.8 -2,302.2 -1,351.6 -1,237.6 -1,312.2 -1,019.2
Depreciation
-514.2 -326.2-407.6-350.2-276.1-270.4-258.3-242.5-223.8-204.4
OPERATING PROFIT
Net financial income
Net financial costs
PROFIT AFTER NET
Taxes
NET INCOME
515.3 704.8526.8732.3601.9637.8635.6481.7306.4323.0
30.9-62.023.440.744.315.210.3 1.3-2.9 8.5
-117.3 -113.7-115.4-151.2-139.7-114.8-119.8-132.0-149.5-144.4
428.9
529.1
434.8
621.8
506.5
538.2
526.1
351.0
154.0
187.1
-19.3 -82.2 -75.5 -8.0-62.8-72.5-106.0 -56.9 -8.8-15.0
409.6 446.9359.3613.8443.7465.7420.1294.1145.2172.1
FROM BALANCE SHEET
Intangible assets
159.9 168.7156.4161.7166.0171.1176.2176.4189.3204.1
Tangible assets
7,769.7 7,357.57,071.86,858.76,361.05,943.35,559.55,417.45,301.34,827.7
Financial fixed assets
616.5 523.0768.7678.3581.6520.7434.9249.7205.9183.8
Current receivabes and inventories
1,043.6 1,312.7
985.2 1,070.9 1,188.2
796.9
638.8
516.5
454.3
368.9
Cash and bank
132.1 51.817.423.615.248.653.058.0
111.965.2
TOTAL ASSETS
9,721.8 9,413.78,999.58,793.28,312.07,480.66,862.46,418.06,262.75,649.7
Shareholders equity
4,539.8 4,326.74,123.33,939.73,464.53,140.72,782.82,435.52,220.52,149.3
Interest-bearing long-term liabilities
and allocations
3,456.6 2,776.22,916.82,640.22,627.82,506.22,668.02,805.92,871.22,710.1
Non-interest-bearing long-term liabilities
and allocations
875.7 800.6726.7656.9665.4605.8547.6449.4380.8362.9
Interest-bearing current liabilities
5.0 643.1573.1833.1975.8608.1371.1265.5438.5106.2
Non-interest-bearing current liabilities
844.7 867.1659.6726.0578.5619.8492.9461.7351.7321.2
TOTAL SHAREHOLDERS EQUITY
AND LIABIITIES
9,721.8 9,413.78,999.58,795.98,312.07,480.66,862.46,418.06,262.75,649.7
KEY RATIOS
Return on equity, %
9.2
10.6
8.9
16.6
13.4
15.7
16.1
12.6
6.6
8.2
Return on assets, %
5.7 7.06.29.08.29.19.77.65.16.0
Return on capital employed, %
6.9
8.4
7.3
10.7
9.7
10.8
11.4
8.8
5.8
6.7
Operating margin, %
10.0 15.514.620.219.619.928.324.616.620.9
Net margin, %
8.3 11.712.017.116.516.823.417.9 8.412.1
Solidity, %
46.7 46.045.844.841.742.040.637.935.538.0
Self-financing, %
81.9 130.7124.6 88.2 86.5104.2158.0133.4 44.2117.5
Interest coverage ratio, times
4.7 5.74.85.14.65.75.43.72.02.3
Debt ratio, times
0.8 0.80.80.91.01.01.11.31.51.3
Capital turnover ratio, times
0.65 0.590.480.500.460.530.400.360.350.31
OTHER INFORMATION SEK MILLION
Capital employed
8,001.4 7,746.07,613.27,413.07,068.16,255.05,821.95,506.95,530.24,965.6
Net investments in plants
921.6 681.4614.4815.6700.0657.3408.0359.5679.4257.1
Net investments in shares
4.0
49.7
3.3
112.1
60.6
13.4
32.9
23.1
3.2
21.2
Allocation to the municipality
196.0
180.0
170.0
153.0
124.0
104.0
85.0
78.0
74.0
63.0
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Krux. Photo Patrick Degerman. May 2012.
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