Menu
Annual report 2014

Board of Directors' report

Statnett has the overall responsibility for ensuring a stable and secure supply of electricity in Norway and for facilitating a well-functioning power market.

The Statnett Group’s underlying profit after tax amounted to NOK 1 284 million in 2014 (NOK 832 million in 2013). The underlying profit or loss is based on the regulated permitted revenue, whereas the recorded profit or loss will depend on stipulated tariffs and congestion revenues. The recorded net profit for the Group amounted to NOK 829 million in 2014 (NOK 82 million).

In 2014, Statnett met company objectives that are important for the development of the next generation power system. Investments in grid facilities and Statnett's project scope reached new record levels. Several new facilities that are critical for security of supply and central IT systems were commissioned. Despite the higher activity level, Statnett's improvement work within HSE resulted in a 50 percent reduction in lost-time injuries. Progress was also made in the work relating to the Nordic region and Europe, through commissioning of the Skagerrak 4 interconnector and implementation of price coupling in northwestern Europe. In order to promote further growth as well as increased cost efficiency, Statnett reorganised the company in 2014 and introduced a broad efficiency improvement programme, which is ongoing. This reduced controllable operating costs by an estimated 11 percent, compared with the 2013 budget. The 2014 employee opinion survey shows a continued high score. The high project activity level resulted in a number of outages in a currently highly utilised, ageing grid. More frequent extreme weather presents an additional challenge. In 2014, system operations maintained high quality also in challenging periods. Operations were stable and the power situation in Norway remained good throughout the year.

To maintain and improve security of supply, facilitate value creation and reduce emissions of greenhouse gases, Statnett is well underway with the development of the next generation power system. Statnett invested NOK 6 billion in 2014. These investments reflects a high level of activity, which is projected to continue in the years to come, and also includes significant reinvestments in existing plants and facilities.

Skagerrak 4, the fourth interconnector between Norway and Denmark, entered commercial operation in December 2014. The new cable increased transmission capacity between the two countries by 700 MW. The Eastern Corridor, the power line between Kristiansand and Rød, was commissioned at 420 kV voltage level. Together, these facilities contribute to a more reliable power supply and increased value creation through better opportunities for utilising the renewable energy generated in both Norway and Denmark. The last three of a total of nine cables for the Ytre Oslofjord interconnector also came online in 2014, and parts of the Ørskog-Sogndal power line were completed towards the end of 2014.

Statnett has a portfolio of development projects under planning and implementation. In September 2014, Statnett submitted its updated investment plan to the Norwegian Water Resources and Energy Directorate (NVE). Scheduled implementation of the projects generally follows the 2013 Grid Development Plan. However, adjustments have been made to the schedule and in cost estimates for certain projects. Statnett's NOK 50-70 billion investment portfolio for the next decade may be affected by, for instance, reassignment of priorities in the portfolio, new licensing terms and cost developments in the supplier market. Statnett recently made a decision to invest in an interconnector to Germany, and investment decisions are scheduled in the near future for several major projects. This means that Statnett will enter into contracts which commit the enterprise to invest significant amounts in the period leading up to 2020.

Statnett's future investments in the main grid will result in increased grid tariffs and will thus represent higher costs for the users. To the extent possible, Statnett will therefore try to balance grid measures, systemic measures, the use of ICT systems and market design solutions, to ensure security of supply as well as a cost-efficient development of the next generation power system. A good cooperation with the customers is important for Statnett to carry out its core tasks efficiently. Statnett meets customers in several arenas, and conducts an annual customer satisfaction survey to ensure that the customers' interests are maintained.

The Nordic and North European energy system is in change. This places new demands on the future Norwegian power system to ensure we maintain a robust grid and a flexible supply of energy. This assumes that Statnett as Transmission System Operator takes over the entire main grid in Norway, which corresponds to an increase in Statnett's facilities of approximately 15 per cent. To facilitate new renewable energy and a projected Nordic power surplus, and to ensure security of supply in dry years, it is necessary to increase the power exchange capacity with power systems outside the Nordic region. The international interconnectors to Germany and the UK will contribute to increased value creation and security of supply during dry spells in Norway. The new cables will also improve security of supply in Germany and the UK, and balance variations in German and British renewable power production throughout the day.

Statnett puts Health, Safety and the Environment (HSE) first, directed at both regular operations and construction activities. The enterprise has improved its safety results and works systematically towards the objective of becoming the HSE leader among transmission system operators in Europe by the end of 2017, specified to a lost time injury rate (OIFR1 value) of two or lower. In 2014, Statnett's OIFR1 value was 4.4 (including contractors/suppliers), compared with 9.8 in 2013. The number of lost-time injuries was thereby reduced from 39 in 2013 to 19 in 2014. The company has good and stable results within electrical safety partly as a result of clear and effective guidelines incorporated over time. Statnett had lower energy consumption and greenhouse gas emissions in 2014 than previous years, and the company has not caused serious environmental incidents in 2014.

The increased activity affects the risk situation for Statnett. Statnett practises unified risk management, and extensive improvements and measures have been implemented to meet this challenge.

Statnett's financial position ability was strengthened by the injection of new equity in 2013 in addition to an improved underlying profit over the last two years. Statnett is focusing on maintaining its position as one of the most cost-efficient TSOs in Europe.This is supported by a broad efficiency improvement program established in 2013 with the aim of increasing efficiency by 15 percent by the end of 2018. The program addresses controllable operating costs, measures to reduce the implementation time of projects and measures to reduce project unit costs. Efforts are also targeted the optimization of services costs. For 2014, Statnett had a subsidiary objective to reduce controllable operating costs by 5 percent compared with the 2013 budget. The financial result for the year shows a calculated improvement of 11 percent.

Security of supply

The energy situation has been good throughout 2014. At the beginning of 2014, there was a surplus in the hydrological balance of approximately three TWh. The average temperature for Norway as a whole was 2.2°C above normal, and the year was the hottest in a series dating back to the year 1900. Precipitation was at a normal level in 2014. Southern Norway had higher precipitation than normal, whereas precipitation was below normal levels in the Trøndelag region and Northern Norway. At the end of 2014, there was a shortfall in the hydrological balance of approximately three TWh.

Reservoir water levels in Norway were 68 percent at the beginning of 2014. At year-end, reservoir water levels were 69 percent, one percentage point below the median for the 1990-2014 measuring period. Unequal distribution of precipitation throughout the year resulted in substantial variations in reservoir water levels in the spot market areas at year-end. Reservoir water levels in Southern Norway (NO1, NO2, NO5) were above the median, whereas levels were below the median in Central and Northern Norway (NO3 and NO4).

Reservoir levels Norway

58534db22bb4d904a238f55154250b97

Overall power generation was 141 TWh in 2014, and the overall power consumption 126 TWh. The corresponding figures for 2013 were 133 TWh and 128 TWh respectively. Net export in 2014 was 15 TWh compared with net export of 5 TWh in 2013.

Operations were characterised by disconnections due to maintenance and development, and the need for special adjustments increased. The most extensive disconnection was related to construction of the power line between Ørskog and Sogndal, Rød-Hasle and the Eastern Corridor. From October, commissioning of Skagerrak 4 also reduced capacity on the Skagerrak interconnector.

There were several operational interruptions in 2014 that affected operations for shorter or longer periods:

  • A fault in the voltage transformer in Ofoten on 21 February caused load shedding of about 220 MW north of Ofoten. All available resources were applied to increase generation, including the gass power plant on Melkøya. Most of the power lines resumed operation in less than an hour, and most of the shed load was restored within 30 minutes.
  • On 13 and 14 March, the storm "Kyrre" caused power line outages in Central and Northern Norway, both in the 132 kV and 420 kV grid. In Lofoten, manual load shedding of consumption was necessary three times. An outage of Salten substation resulted in several instances of separate operation in Salten and the Helgeland area. Finnfjord, Rana Stålovn and Salten verk were down several times.
  • Viklandet-Fræna was down on 16 March. Due to simultaneous modification work on the Viklandet-Ørskog power line, the entire grid from Molde to Åskåra was affected by a power outage, including Nyhamna (Ormen Lange). The grid was soon restored and supplied via 132 kV. Due to strong winds, the power line was not reconnected until the following morning. A permission to start the back-up power plant at Nyhamna was granted to secure supply to the Ormen Lange field, but this was not necessary.
  • On 23 July, there was an outage in the 300 kV power line between Tegneby and Hasle, and the 420 kV Tegneby-Hasle power line was emergency disconnected due to a forest fire below the power lines. The incident resulted in special regulation in Southern Norway and repurchasing of peak power from Sweden as the capacity to Sweden was reduced. The power line was reconnected the next day.
  • On 6 December, the 420 kV power line between Ørskog and Viklandet was disconnected due to an grounding fault. This resulted in an outage in Sunnmøre down to Åskåra. After about an hour, power was back in most of the area.

In February, the North-Western European Price Coupling (NWE) went live. The markets in the Nordic region, United Kingdom and Western Europe are now connected through a common price calculation system.

The Hasle Pilot project was launched during the period 27 October - 15 December. This is a bilateral project between Svenska Kraftnät and Statnett SF concerning the exchange of secondary reserves. Based on a socio-economic analysis, up to 50 MW of capacity on a cross-section between Norway and Sweden (Haslesnittet) was reserved for the sale of secondary reserves during this period.

Investments

Statnett is planning and implementing a number of development projects, in line with White Paper No. 14 (2011-2012), the Grid Report. In September 2014, Statnett submitted its updated investment plan to the Norwegian Water Resources and Energy Directorate (NVE). Scheduled implementation of the projects generally follows the 2013 Grid Development Plan. However, adjustments have been made to the schedule and in cost estimates for certain projects.

In total, Statnett invested NOK 5 981 million in 2014 (NOK 6 375 million in 2013), including commissioned projects, projects under construction, ICT projects and other investments.

Development investments

1cd68c84b384a807366e658dd9741362

Figure: Investments in NorNed in 2005-2008 was NOK 2 446 million

Commissioned projects totalled NOK 6 954 million in 2014 compared with NOK 4 545 million in 2013. The largest commissioned projects were the international interconnector to Denmark Skagerrak 4, the Eastern Corridor power line project, the Ørskog - Sogndal power line sections and the final section of the cable project Ytre Oslofjord.

At year-end 2014, the value of plants under construction was NOK 5 047 million, compared with NOK 6 020 million in 2013. Statnett's total investments were on a par with the 2013 level, which reflects continuous development activities. Furthermore, completion of major projects in 2014 contributed to a net reduction of plants under construction.

The most important projects are listed in the following table.

Overview of major investement projects

See www.statnett.no for more information about the projects.

ProjectLocationExpected investments NOK million
Completed projects  
Skagerrak 4Norway/Denmark 
Eastern Corridor, voltage upgrade and new power lineVest-Agder/Telemark 
Ytre OslofjordVestfold/Østfold 
Ørskog - Ørsta (part of Ørskog - Sogndal)Møre og Romsdal 
Station investments (spare transformers, Frogner, Mestervik and other)  
New Regulation and Market System  
Under implementation  
Ørskog - Sogndal, new 420 kV power lineMøre og Romsdal/Sogn og FjordaneMNOK 4 600 - 5 600
Ofoten - Balsfjord, new 420 kV power lineNordland/TromsMNOK 3 200 - 3 700
Station investments (transformer capacity Eastern Norway,  
reactors for power reduction, Feda and other) MNOK 2 100 - 2 500
Voltage upgrade Central Norway,  
subsection Klæbu - NamsosTrøndelagMNOK 700 - 800
Final licence granted  
Western Corridor, voltage upgrade 1) MNOK 8 000 - 10 000
Namsos - Storheia, new 420 kV power lineTrøndelagMNOK 1 800 - 2 400
Storeheia - Snillfjord, new 420 kV power lineTrøndelagMNOK 1 900 - 2 700
Snillfjord - Trollheim, new 420 kV power lineTrøndelag/Møre og RomsdalMNOK 1 600 - 2 300
Station investments (Vemorktoppen, Mauranger, Kobbelv and others) MNOK 1 250 - 1 750
Voltage upgrade Middle Norway, subsection Nedre Røssåga - NamsosNorland/TrøndelagMNOK 800 - 1 000
Interconnectors, final licence granted  
Cable to England (NSN Link) MEUR 750 - 1 000 2)
Cable to Germany (NordLink) MEUR 750 - 1 000 2)
Planned investments, licences pending or appealed  
Balsfjord-Skaidi (-Hammerfest), new 420 kV power lineTroms/FinnmarkMNOK 4 000 - 6 000
Lyse - StølaheiaRogalandMNOK 2 500 - 3 500
Station investments (Smestad,  
transformers Western Norway and others) MNOK 1 300 - 1 700
Indre Oslofjord, reinvestments interconnectorsAkershus/BuskerudMNOK 1 050 - 1 200
Voltage upgrade Central Norway,  
subsection Aura/Viklandet - TrollheimTrøndelag/Møre og RomsdalMNOK 500 - 700
ICT projects  
Renewal of Statnett's central operations system MNOK 500 - 600
Elhub MNOK 400 - 500

1) Parts of the project are under planning and going through licensing procedure
2) Statnett's share. Exposure mainly in Euro until contracts are signed. With an exchange rate of 8,77 EUR/NOK this corresponds a span of 7-9 billion NOK per project. Agreements with partners in Germany and England will be in Euro.

The amounts in the table show the anticipated range including all project costs.
Projects under construction are shown in current rates, other projects in 2014 rates.

Important project events

Major investment projects - completed

  • Skagerrak 4: The fourth cable interconnector between Norway and Denmark was completed and entered commercial operation on 29 December 2014, according to time and within cost. This has increased capacity between Norway and Denmark from 1 000 MW to 1 700 MW.
  • Voltage upgrade Eastern Corridor: Kristiansand-Rød was completed and commissioned at 420 kV in December 2014. This interconnector strengthens security of supply and is an important prerequisite for increasing international power trading.
  • New cables Ytre Oslofjord: The last three oil cables, of a total of nine, were commissioned in 2014. The project strengthens security of supply in Southern Norway and power trading with Sweden in Eastern Norway.
  • New Regulation and Market System: Completed in November 2014 according to schedule and within the cost limit. The system will enable the implementation of improved system operation solutions.
  • Substation investments: Projects have been completed at substations in Sortland, Aura and Frogner. In addition, back-up transformers have been established at various substations. Construction of Mestervik station was completed. These projects will improve security of supply in respective regions.

Major ongoing investment projects

  • Ørskog - Sogndal: Parts of the project have been completed, and the 420 kV Ørskog-Ørsta interconnector entered operation in January 2015. In January 2015, the enforcement officer in Bremanger decided to grant Statnett access to the properties in Myklebustdalen valley. Statnett has resumed work in Myklebustdalen, but is still awaiting access to Sørdalen.
  • Ofoten-Balsfjord: Development of a new 420 kV power line was initiated in the second quarter of 2014. Work has started on four substations and on all three subsections along the power line route.
  • Voltage upgrade Western Corridor: Insulation upgrade of the Solhom-Arendal and Feda-Tonstad power lines was decided and implemented in June 2014. Statnett has made investment decisions for five power line sections and five associated substations. Work is scheduled to start in 2015. In October 2014, Statnett received a final licence decision for the southern section (Kvinesdal-Ertsmyra). In December 2014, the Norwegian Water Resources and Energy Directorate (NVE) made a final licence decision for the sections Ertsmyra-Lyse and Ertsmyra-Fjotland. The decision is now appealed.
  • International interconnector Germany (NordLink): The partners Statnett, TenneT and KfW made a final investment decision in February 2015 concerning construction of an international interconnector between Norway and Germany. The international interconnector will have a capacity of 1 400 MW and will run between Tonstad in Norway and Wilster in Schleswig-Holstein in Germany.
  • Voltage upgrade Central Norway: The project consists of the subsections Klæbu – Namsos, Namsos - Nedre Røssåga and Klæbu-Viklandet/Aura. Work on the Klæbu – Namsos section started in 2014, whereas work on the Nedre Røssåga-Namsos section was granted a licence from the Norwegian Water Resources and Energy Directorate (NVE) in 2014 with expected start-up in 2015. A licence application was submitted to the Norwegian Water Resources and Energy Directorate (NVE) for the Trollheim-Viklandet/Aura subsection in December 2014.
  • Substation investments: The phase advancer in Feda entered operation in February 2015. Strengthening of transformer capacity for several substations in Eastern Norway is in the execution phase. Work on reactive compensation in Lofoten and Vesterålen will be continued in 2015 and a reinvestment project in Lakselv substation will be completed in 2015.
  • Cable projects in Northern Norway: A decision has been made to start reinvestment in the cable above Tjeldsundet, and work to establish a standby cable in the region will be completed in 2015.

Other projects under development

  • International interconnector UK (NSN Link): The Ministry of Petroleum and Energy (MPE) has granted a foreign trade licence and plant licence. The planned international interconnector has a capacity of 1 400 MW and will be installed between Kvilldal in Suldal Municipality and Blyth in the UK.
  • Balsfjord-Skaidi (Hammerfest): Preparations to develop a 420 kV power line have started. A project licence is expected in 2015.
  • Reinvestment cables Indre Oslofjord: In September 2014, Statnett made an investment decision to upgrade the subsea interconnector cables in Indre Oslofjord. The project will secure a reliable supply of electricity to central parts of Eastern Norway, and is a key prerequisite for upgrading the power grid in the Oslo region. The NVE granted a licence in April 2014. The licence has been appealed to the MPE. A start-up decision will be made once a final licence has been granted.
  • Namsos – Storheia: Preparation work for development is under way. Assuming that start-up for a sufficient amount of wind is decided on the Namsos - Storheia and Snillfjord – Trollheim sections, a decision is scheduled to be made to start a new 420 kV power line between Namsos and Storheia.

Research and development

Research and development (R&D) in Statnett is a strategic tool to promote value creation, innovation and green solutions. In 2014, Statnett invested NOK 54 million in R&D, NOK 11 million more than in 2013.

The end of 2014 marked the conclusion of a three-year R&D programme period involving three topics related to Statnett's corporate strategy. The three programmes that have been running during the period 2012-2014 are:

  • Smart Grid: Developing and testing new solutions for safe and efficient operations which will meet future challenges
  • Solutions and technology for the next generation main grid: Developing and implementing a pilot facility to enable construction of a robust main grid adapted to the environment
  • Priorities:
  • Environmental challenges: Impact of new infrastructure on the environment
  • Social acceptance: Ensure acceptance and understanding for Statnett’s socio-economic mandate, secure a stable supply of electricity and promote value creation through interaction with the other Nordic countries and Europe

National, European and international R&D collaboration

In addition to its own R&D activities, Statnett cooperates with external expertise environments both in Norway and abroad. Statnett is committed to developing an R&D strategy through ENTSO-E. This will give the company the opportunity to participate in jointly financed research and development projects together with other transmission system operators, as well as universities in Europe with financial support from the EU. See Corporate Social Responsibility for more detailed information about Statnett's R&D work.

Financial performance

The annual financial statements for Statnett SF and the Statnett Group have been prepared in compliance with the International Financial Reporting Standards (IFRS) and interpretations established by the International Accounting Standards Board (IASB) which have been approved by the EU. Comments to the accounting items are in relation to the Group's financial statement. Developments described for the Group also apply to the parent company.

Operating revenues

Statnett's operating revenues in 2014 totalled NOK 5 563 million (NOK 4 561 million in 2013). The increase in operating revenues was mainly due to higher fixed tariff revenues as a consequence of increased tariff rates for producers and increased tariffs for consumption customers with high use time. In addition, there are higher congestion revenues in 2014 due to increased price differentials linked to low prices in Southern Norway.

Statnett's operating revenues mainly derive from grid operations regulated by the NVE, which stipulates a cap (permitted revenue) for Statnett's revenues. Permitted revenue increased from NOK 5 361 million in 2013 to NOK 6 054 million in 2014, mainly due to increased activity and increased asset base. Operating revenues from regulated activities in Statnett's financial reporting consist primarily of fixed grid tariffs from the customers as well as congestion revenues (price differences between areas in the Nordic region and towards the Netherlands). If the total revenues from grid operations for one year diverge from the permitted revenue, so-called higher or lower revenue will occur. Higher/lower revenue will even out over time through adjustment of future grid tariffs. In 2014, Statnett had a lower revenue of NOK 665 million (NOK 958 million), excluding interest. Accumulated higher revenue including interest was NOK 1 790 million at the end of 2014.

Operating revenue

94f827fdf85727b809cf77f29325c3f5

Operating costs

The Group's operating costs totalled NOK 4 185 million in 2014 (NOK 4 215 million).

System services costs amounted to NOK 609 million in 2014, up NOK 40 million compared with 2013. The increase is mainly related to higher costs associated with special adjustments. This was due to long-term disconnections, particularly in connection with construction of the Ørskog-Sogndal power line, as well as high summer temperatures which caused heavy snow melting and lower power line capacity out of the surplus areas.

For 2014, transmission loss totalled NOK 586 million, down NOK 112 million from 2013. The reduction was due to a combination of lower prices and lower loss volume.

Wage costs for 2014 totalled NOK 715 million, down NOK 64 million from 2013. The reduction was due to increased capitalisation of own hours in investment projects, partly as a result of Statnett's efficiency improvement programme, somewhat offset by increased wage costs due to an increase in staff in the enterprise.

Depreciation and impairment totalled NOK 1 150 million in 2014, up NOK 102 million compared with 2013. The increase was due to an increase in the number of facilities and increased depreciation and impairment as a result of removal obligations.

In 2014, other operating costs totalled NOK 1 125 million, on a par with 2013. Increased costs associated with service agreements, property tax, repairs and maintenance are offset by reduced costs associated with premises, property, equipment and materials, partly due to Statnett's efficiency improvement programme.

Net profit

The Group's operating profit for 2014 amounted to NOK 1 378 million (NOK 346 million). Adjusted for the year’s changes in unrecognised higher revenue balance, the underlying profit totalled NOK 2 001 million (NOK 1 388 million).

Revenues from associates totalled NOK 11 million in 2014 (NOK 10 million).

The Group's net financial items amounted to a loss of NOK 258 million, on a par with 2013.

Profit for the year after tax in 2014 was NOK 829 million (NOK 82 million). The underlying profit after tax for 2014 (corrected for changes in unrecognised higher revenue) amounted to NOK 1 284 million (NOK 832 million). The higher underlying profit was primarily due to higher regulated permitted revenue due to increased activity and increased asset base.

Cash flow and balance sheet

The Group’s operating activities generated an accumulated cash flow of NOK 3 028 million at the end of 2014, compared with NOK 1 224 million in 2013. Net cash flow from investment activities totalled NOK -5 997 million compared with NOK -6 197 million in 2013. In total, loans were paid down by NOK 2 287 million, and new loans of NOK 3 048 million were raised. At year-end 2014, the Group's liquid assets and market-based securities amounted to NOK 4 364 million (NOK 1 610 million).

At the end of 2014, the Group had total assets of NOK 41 107 million (NOK 34 897 million), and interest-bearing debt amounted to NOK 24 643 million (19 909 million). Interest-bearing debt includes security under CSA (Credit Support Annex) of NOK 1 860 million (NOK 173 million). The market value of recognised interest swap and currency swap agreements (fair value hedges) related to interest-bearing debt was NOK 3 185 million. Interest-bearing debt, corrected for this, totalled NOK 21 458 million.

In the first quarter of 2014, Statnett received an equity injection of NOK 3 250 million. At year-end, the Group’s equity capital totalled NOK 12 629 million (NOK 12 135 million including decided new equity). Statnett SF's distributable equity was NOK 6 240 million at year-end (NOK 5 839 million). Corrected for net higher/lower revenue, the equity ratio was 28 percent.

The Board of Directors and management consider the enterprise's equity and liquidity to be prudent.

Subsidiaries and associated companies

Statnett SF is required to provide heavy transport preparedness for the Norwegian power supply. Statnett’s wholly owned subsidiary Statnett Transport AS is required to ensure efficient and competitive implementation of this duty. In 2014, operating revenues for Statnett Transport amounted to NOK 151 million (NOK 147 million) and the profit before tax was NOK 24 million (NOK 19.6 million).

Statnett SF has an ownership interest of 28.2 percent in Nord Pool Spot AS. Statnett’s share of the profit in Nord Pool AS contributed NOK 13 million (NOK 10 million) to the Statnett Group's profit in 2014.

On 3 February 2014, Statnett SF purchased 50 percent of the shares in Lyse Sentralnett AS. Following the acquisition, Statnett SF has achieved control of Lyse Sentralnett AS, which has been consolidated in the Statnett group accounts. Operating revenues for Lyse Sentralnett AS during the 2014 ownership period amounted to NOK 37 million and profit before tax was NOK 9 million.

In the autumn of 2013, the Nordic transmission system operators Fingrid, Svenska Kraftnät and Statnett established the company eSett OY. Statnett has an ownership interest of 33.3 percent in the company. The company will provide balance settlement services for market players in Finland, Sweden and Norway from first half 2016. In 2014, the company recorded a loss of NOK 6 million. Statnett's share constituted a loss of NOK 2 million.

Risk

Statnett practises unified risk management which reflects that the enterprise is responsible for critical infrastructure in a vulnerable society, and that the enterprise is in a phase with a significant project volume as well as increase in facilities. A secure supply of electric power forms the basis for a stable supply of electricity to the end-users, value creation and realisation of climate-friendly solutions. Statnett's risk management covers the enterprise's entire perspective, including strategic, commercial, operational and financial aspects. Within HSE the company has a zero objective for serious incidents and the risk of disruption in the supply of electric power is subject to strict criteria.

Please see the separate section of the annual report for more detailed information about the framework for Statnett's risk management and specific risks. This section includes information about Statnett's financial risk management and how the Group uses financial instruments in its risk management.

Employees and organisation

Statnett's head office is in Oslo, with administrative offices in Alta, Sunndalsøra, and Trondheim. Statnett also has an office in Brussels. In addition, Statnett employees are located at facilities all over Norway.

Employees

Statnett has an ambitious mission and must ensure that the right expertise is in place for the right jobs. At year-end, Statnett SF had 1 121 employees, compared with 1 079 the year before. The increase in staff is mainly owing to an increasing number of tasks in connection with planning and implementation of investment projects, preparedness and main grid acquisitions from regional grid companies (Lyse).

Statnett has low turnover, but many employees will reach retirement age in the next few years. Consequently, Statnett makes a targeted effort to be an attractive employer in order to attract new employees, as well as to retain and develop the expertise of current employees. This includes both a trainee programme and an apprentice programme in electrical power engineering and ICT. Statnett has a career development model and also introduced a manager development programme in 2014 to further develop management at all levels. Furthermore, Statnett has a senior policy to retain valuable employees and their expertise until retirement age. The average retirement age in Statnett was above 68 in 2014.

Statnett conducts annual employee surveys. For Statnett, the survey has benchmarking opportunities with other players in the energy industry, and employees have an opportunity to express what they think about Statnett as an employer and workplace. As in previous years, the overall results for 2014 were good and above average for the industry. Some results were significantly better than for other participating companies in Norway.

Gender equality and diversity

Statnett has a zero tolerance policy regarding discrimination and harassment. The enterprise follows this up with local safety delegates, appraisal interviews and opinion polls. It is important to Statnett to ensure a diverse organisation in terms of gender, ethnicity and age. In 2014, 8.3 percent of employees recruited in 2014 came from non-Norwegian backgrounds, compared with 9.1 percent in 2013. The total percentage of women has increased from 25.0 percent in 2013, to 25.4 percent in 2014. The percentage of female employees in the energy sector in general is approximately 20 percent. At the end of 2014, four of the nine members of Statnett’s Board of Directors and two of the seven members of the Group management were women. Women filled 28.1 percent of all managerial positions in the Group and five of Statnett's ten trainees in 2014 were female. Statnett will continue efforts to increase the number of women in technical and managerial positions. Employment conditions for women and men are monitored using a variety of methods, including wage reviews and staff surveys. Women and men with approximately the same educational background and experience, and employed in comparable positions receive equal pay. See also Notes 6 and 19 for more information about wage costs and remuneration to the Group management.

Health, safety and the working environment

Statnett's objective is to prevent accidents and injuries as well as unnecessary environmental impact. The enterprise has improved its safety results and works systematically towards its objective to become the HSE leader among transmission system operators in Europe by the end of 2017. The objective has been specified to a lost time injury rate (OIFR1 value) of two or lower. To achieve this objective, initiatives have been implemented relating to safety culture, risk assessments, expertise and supplier requirements. Statnett sets the same requirements for suppliers as for its own employees.

Statnett reports incidents and deviations occurring in its own organisation, as well as in contractor/supplier organisations. Reporting of incidents and nonconformities increased in 2014. This is a result of increased project activities combined with improved reporting routines in recent years. Statnett focuses on risk factors and how to mitigate them, both during project planning and physical work operations.

Lost-time injuries and hours worked are reported also for contractors in development projects. This is done by estimating the total OIFR1 value (injury frequency rate, number of lost-time injuries per million hours worked) and LTIFR value (lost-time injuries, number of days away from work due to injuries per million hours worked) for the enterprise's activities.

Four internal lost-time injuries were reported in 2014, whereas our suppliers/contractors reported 15 lost-time injuries. In 2014, the OIFR1 value for Statnett's own employees was 1.9, compared with 2.5 in 2013. Including suppliers/contractors, the OIFR1 value was 4.4, down from 9.8 at the end of 2013. The LTIFR value for Statnett's own employees was 155 in 2014 compared with 62.2 in 2013. Including suppliers/contractors the LTIFR value was 126 in 2014 compared with 214 in 2013.

In 2014, the overall absence due to illness was 3.1 percent, the same as in 2013. Even though absence due to illness is lower than in the energy industry in general, Statnett is focusing on analysing the reasons for the absence due to illness and on identifying measures that can reduce absence due to illness further. This involves adaptation of individual workplaces and various health-promoting and illness-reducing measures, including use of safety inspections and physical therapy treatment.

Lost-time injuries, Occupational illness Freaquency rate (OIFR), Lost time injury frequency rate (LTIFR), Absence due to illness

D9c1096e9fb195876fa4bfaf48c0f4ed

Figure: OIFR = number of lost-time injuries per million hours worked
Figure: LTIFR = number of days awau from work due to injuries per million hours worked

Corporate social responsibility

Corporate social responsibility (CSR) in Statnett entails integration of social and environmental considerations in the company's social mandate in a way that extends beyond the minimum requirements stipulated in laws and regulations. The work on corporate social responsibility is naturally linked to the development of the next generation power system and the enterprise's social mandate, which states that Statnett shall maintain security of supply through a grid with satisfactory quality and capacity, and conduct its activities to promote value creation in society and realisation of Norway's climate goals. Statnett shall use the activities, expertise and resource base in the company to perform its social mission in such a way that it has positive ripple effects for society.

Statnett reports annually on CSR in accordance with the globally recognised reporting framework, Global Reporting Initiative (GRI). Statnett's GRI reporting complies with the requirements relating to CSR reporting stipulated in the Norwegian Accounting Act. Please see the description of CSR in Statnett's annual report for more information about corporate social responsibility.

Climate and the environment

Statnett has an environmental management system certified according to ISO 14001:2004 and all Statnett's office buildings have been certified as Eco-Lighthouses. Statnett is working to continuously improve the company's environmental performance and focuses on minimising the environmental impact of the company's operations as much as possible.

Any environmental incidents that do occur are recorded and followed up in the Statnett deviation system. In 2014, 316 incidents occurred, compared with 178 incidents in 2013. There were no serious incidents, but 24 incidents resulting in major environmental damage were reported. Statnett has a strong focus on preventative environmental work, from the early planning phase, throughout the construction phase and during the operations phase. As a result, there are generally few incidents with a major risk potential in the enterprise.

The most important contribution from Statnett to reduce emission of greenhouse gases is to develop the next generation main grid. Statnett is also working on reducing its energy consumption and greenhouse gas emissions from daily operations. In 2014, the largest sources of greenhouse gas emissions were leaks from the SF6 facilities, energy consumption in buildings, and emissions and discharges related to construction activities. Greenhouse gas emissions totalled 13 630 tonnes in 2014, compared with 16 278 tonnes in 2013. The reduction is mainly due to lower SF6 power emissions, and somewhat lower electricity consumption for own heating.

For a more detailed account of climate and the environment, please see the statement under Corporate Social Responsibility in the annual report.

Corporate management

Statnett is a state enterprise wholly owned by the Norwegian State through the Ministry of Petroleum and Energy.

Statnett’s corporate management principles clarify the distribution of roles between the owner, the Board of Directors and the general management. Statnett adheres to the Norwegian State’s Principles for Good Corporate Governance and follows the recommendations laid down by the Norwegian Corporate Governance Board (NUES) to the extent permitted by the enterprise's organisation. A separate description of corporate management in the annual report gives an account of Statnett's compliance with the NUES principles.

Changes in the Board of Directors

Trine Pande-Rolfsen was elected employee representative on Statnett’s Board of Directors in June 2014. She replaced Kjerstin Bakke.

Changes in the Group management

In connection with a reorganisation decided in the autumn of 2013, two new executive vice presidents were appointed as of January 2014; Elisabeth Vike Vardheim and Bente Monica Haaland.

Outlook

In the years leading up to 2020, significant growth is expected in the investment scope across the entire industry. Statnett has significantly upgraded capacity in recent years, and this will continue. The need for a speedy capacity upgrade, combined with a large investment portfolio for the entire industry, also puts increasing pressure on unit costs. This situation has intensified since the last grid development plan, and is likely to continue to do so over the next few years. Statnett therefore facilitates more stable and long-term assignments. During the period leading up to the coming grid development plan, Statnett will assess possible changes to the project portfolio together with the industry. At the same time Statnett's business are exposed to the uncertainty in potential changes in demand and consumption patterns of energy, possible climate impacts affecting Statnett's plants and activities, and technological development.

Statnett has been granted a licence for international interconnectors to Germany and the UK, and has along with its partners TenneT and KfW made investment decision for an interconnector to Germany. Both projects have high priority and are important for the development and integration of the Northern European power system. The projects will help ensure strengthened security of supply in Norway, Germany and the UK, and balance variations in German and British renewable power production throughout the day. Power exchange capacity generates value creation in Norway. Moreover, the projects will support the ambitions to increase generation of renewable energy throughout the region and contribute to achieving the EU's climate and energy targets.

The Ministry of Petroleum and Energy has submitted proposed amendments to the Energy Act for consultation as a result of the EUs third electricity legislative package. The proposal entails substantial growth in the tasks assigned to Statnett if Statnett assumes ownership of the remaining 15 percent of the main grid. This will lead to an increased need for investments and staff in Statnett, but will also allow for an overall more efficient organisation of main grid operations and development in the long term. A natural consequence of this is that Statnett will sell it's regional grid facilities. This places great demands on Statnett when it comes to coordinating a number of projects in existing facilities while operating the power system.

The need for a high preparedness focus will continue in the years to come. The grid development measures with the highest priority have a clear positive effect on security of supply. However, the large project scope also entails major additional strain on a generally highly utilised and ageing power grid. ICT security is also in focus, and together with other key power industry players, Statnett established the company KraftCERT in 2014 to further strengthen efforts in this area.

Statnett is involved in cooperation both at a European and Nordic level. This work is important, as key framework conditions stipulated by the EU also are relevant for Norway through the EEA Agreement. The establishment of a common European power market makes it necessary to harmonise the framework for the electricity market, as well as for system and grid operations. As the Norwegian and the Nordic power system differs from the European system, it is important that the framework conditions are formulated to safeguard Norwegian and Nordic security of supply and ensure value creation from Norwegian hydropower.

Major investments will be made in the main grid over an extended period, and all customers must contribute towards the financing. Statnett's work is based on a socio-economic model, and must ensure transparent and grid-based tariffs for all customer groups.

Statnett is focusing on maintaining its position as one of the most cost-efficient TSOs in Europe. In 2013, the enterprise established an objective to increase efficiency by 15 percent by the end of 2018, compared to the 2013 budget. Statnett's subsidiary objectives for 2014 were achieved. Statnett will continue to step up its improvement work in 2015 and the objective is to realise the potential for economies of scale inherent in the combination of existing facilities, new commissioned facilities and acquisition of the remaining part of the main grid as a consequence of the EUs third electricity legislative package.

In accordance with Section 3-3a of the Norwegian Accounting Act, the Board confirms that conditions exist for continued operation of the enterprise on a going concern basis and that the annual accounts have been prepared under this assumption.

Allocation of profit

Based on the increased need for investments and borrowings, a proposal was put forward in Proposition to the Storting No. 1 (2013-2014), the Norwegian National Budget, to contribute NOK 3 250 million to Statnett's equity. Statnett received the contribution in January 2014. Dividend for the fiscal years 2014 - 2016 was set at 25 percent of the dividend basis. Dividend for the 2013 fiscal year was set at zero. The basis for the dividend is defined as the Group's net profit after tax, adjusted for changes in the balance for higher/lower revenue for the year after tax.

On the basis of the above, the Board therefore recommends that the annual profit from Statnett SF be allocated as follows:

Divided321
To other equity80
Total allocated401

Declaration from the Board of Directors and President and CEO

We confirm that the financial statements for the period 1 January to 31 December 2014 have, to the best of our knowledge, been prepared in compliance with IFRS and that the disclosures in the financial statements give a true and fair picture of the enterprise’s and the Group’s assets, liabilities, financial position and results as a whole, and that the disclosures in the annual report give a true and fair overview of the development, results and position of the enterprise and the Group, together with a description of the most significant risk and uncertainty factors faced by the enterprise.

Oslo, 26 March 2015
The Board of Directors, Statnett SF

  • KolbjornKolbjørn AlmlidChairman of the Board
  • PerPer HjorthDeputy Chairman
  • MariaMaria SandsmarkBoard member
  • EgilEgil GjestelandBoard member
  • KirstenKirsten Indgjerd VærdalBoard member
  • PaalPål Erland OpgårdBoard member
  • SteinarSteinar JøråndstadBoard member
  • SynneSynne Larsen HombleBoard member
  • TrineTrine Pande-RolfsenBoard member
  • AukeAuke LontPresident and CEO