Good corporate governance enables Statnett to fulfil its social responsibilities by clearly defining the distribution of roles between the owner, Board of Directors and the administration, and set the framework for desired conduct in the company. Statnett adheres to the Norwegian State's principles for sound corporate governance, and has also decided to report compliance with the Norwegian Code of Practice for Corporate Governance (www.nues.no). Deviations from the Code of Practice are explained.
The Accounting Act's guidelines for corporate governance reporting are complied with by the reporting in relation to requirements in Section 3-3b, Items 4, 7 and 8 below.
1. Statement on corporate governance
Statnett is a state enterprise, established under the Act relating to state-owned enterprises and owned by the Norwegian State through the Ministry of Petroleum and Energy (MPE). The Minister's administration of ownership is exercised under constitutional and parliamentary responsibility. The enterprise is independent and wholly responsible for its obligations.
Good corporate governance is a precondition for stable value creation over time and helps Statnett meet the requirements and expectations laid down by the owner, employees, customers, suppliers, lenders and others stakeholders.
Statnett's governing bodies establish the framework for the enterprise's activities. These comprise constitutional principles related to the public ownership, the Norwegian State's corporate governance principles, as well as articles of association and decisions made by the Enterprise General Meeting. The Board of Directors ensures that Statnett has a sound corporate governance by outlining corporate governance framework and by clarifying the enterprise's value base, ethical guidelines, corporate social responsibility policy and principles for management and control. Along with the instructions to the Board of Directors and instructions to the President and CEO, this framework constitutes the key governing documentation in Statnett.
Statnett's corporate governance framework consists of four levels of documented guidelines:
Level 1: Guidelines adopted by the Board of Directors, referred to as management policies. These relate to our value base, values, ethical guidelines, corporate social responsibility, governance management and control policy as well as asset management policy.
Level 2: Function policies stipulate common principles including guidelines for decisions and conduct.
Level 3: Description of Statnett's main processes, their sequence, deliveries, roles and responsibilities, taking into account common function policy principles and instruction requirements.
Level 4: Guidelines of an operational nature such as procedures, instructions, checklists and manuals.
Statnett focuses on quality management and continuous improvement, and is certified according to PAS 55 (quality standard for asset management) and ISO 14001 (environmental management).
Statnett has a purpose in the government's sector policy and the enterprise's activities are clearly described in the articles of association.
Section 2 of Statnett's articles of association stipulates that ”Statnett SF is the Transmission System Operator in the Norwegian power system.” As Transmission System Operator, Statnett is responsible for ensuring that there is an instantaneous balance at all times between production and consumption of electric power in Norway. Our System Operator role is described in more detail in the Regulations relating to system operation.
Furthermore, Statnett's objects clause stipulates that ”the enterprise is responsible for ensuring efficient operations in a social economy perspective and for developing the main power grid. Statnett SF shall, alone or with others, plan and engineer, build, own and operate transmission facilities. Statnett SF will execute the tasks assigned to the company pursuant to applicable laws, regulations and licences. In other respects, Statnett SF will adhere to commercial principles.” Statnett's articles of association are available on our web site.
Statnett has defined its mission, values, main objectives and strategy:
Statnett will facilitate the development of the next generation power system by 2030.
Statnett’s values are a long-term perspective, respect and community.
Statnett's main objectives:
Security of supply
Statnett shall maintain security of supply through a grid with satisfactory quality and capacity.
Statnett's services shall create value for customers and for Norwegian society in general.
Statnett shall facilitate the realisation of Norway's climate objectives.
You can find more information on Statnett's main goals and strategy in the 2014 annual report.
3. Equity and dividends
At an extraordinary general meeting on 17 December 2013, it was decided to grant Statnett NOK 3.25 billion in equity. As a result, Statnett's equity is appropriately aligned with the company's current activities and risk profile.
The owner's dividend policy is stipulated in the government budget. In Proposition to the Storting No. 1 (2011-2012), the Norwegian government has established a long-term dividend policy of 50 percent of the defined dividend basis. In connection with Statnett's request for new equity Statnett requested that no dividends should be paid for the 2013 fiscal year, and amended its dividends policy from a dividends percentage of 50 to 25 percent for the fiscal years 2014, 2015 and 2016. The basis for the dividend is defined as the Group's net annual profit after tax, adjusted for changes in the balance for higher/lower revenue for the year after tax.
The decision to increase capital can only be made by the Enterprise General Meeting.
4. Equal treatment of owners and transactions with closely related parties
Statnett SF is wholly-owned by the Norwegian State through the Ministry of Petroleum and Energy (MPE). Consequently, the enterprise has no guidelines for equal treatment of various owners.
For major transactions between the enterprise and related parties, Statnett performs value assessments prepared by independent third parties in accordance with national legislation.
Statnett’s ethical guidelines states that employees must report any potential issues related to conflict of interest. The Ethics Ombudsperson function has been established as a whistle-blowing channel.
5. Freely negotiable
Statnett is a state enterprise without transferable ownership interests.
6. The Enterprise General Meeting
The Ministry of Petroleum and Energy is the enterprise’s supreme decision-making body through the Enterprise General Meeting.
The following issues are discussed and settled at the Enterprise General Meeting:
Adoption of the enterprise’s profit and loss account and balance sheet, including distribution of profit or coverage of loss for the year, adoption of the Group's consolidated profit and loss account and balance sheet. In addition, any other matters are discussed pertaining to the General Meeting according to Norwegian laws and regulations, including election of the Statnett Board of Directors and stipulation of remuneration for board members and the board committee. The Board of Directors and the company's auditor attend the Enterprise General Meeting.
The Ministry of Petroleum and Energy's authority in the enterprise may not be exercised outside the Enterprise General Meeting. The General Meeting adopts Statnett’s articles of association, including Statnett’s objects clause which provides the framework for the operations that Statnett may undertake. An ordinary general meeting is held every year by the end of June.
7. Election committee
Statnett has no election committee. The MPE designates the enterprise's board members at the Enterprise General Meeting.
Figure: Overview of Statnett's governance structure at the end of 2014. The formal reporting lines are shown as solid lines.
8. Corporate Assembly and Board of Directors: composition and independence
Statnett has no corporate assembly. The enterprise's Board of Directors shall consist of seven to nine members, in addition to any deputy members. Two, or possibly three members, and any of their deputy members are appointed by and among the enterprise’s employees according to the relevant rules laid down in Section 20 of the Act relating to state-owned enterprises and associated regulations. Pursuant to Section 21 of the Act relating to state-owned enterprises, board members are elected for a period of maximum two years, but will remain in office until a new member has been elected even though his/her term of office has expired.
See the annual report for more information about each board member.
Pursuant to the Act relating to state-owned enterprises, the President and CEO cannot be a member of the board. With the exception of employee representatives, members of the Board of Directors are independent of the enterprise and the owner.
The Board of Directors had an attendance record of 99.28 percent in 2014. The table below shows the attendance of each board member at board meetings and subcommittees.
|Board Meeting (10 meetings)||The Audit Committee (9 meetings)||Project Committee (9 meetings)||Remuneration Committee (2 meetings)|
|Kirsten Indgjerd Værdal||10||2|
|Synne Larsen Homble||9|
|Trine Pande-Rolfsen (tiltrådte juni 2014)||5|
|Pål Erland Opgård||9||9||2|
|Kjerstin Bakke (fratrådte juni 2014)||5|
|Karianne Burhol (vara for Pål E. Opgård)||1|
9. The work of the Board of Directors
The Board has responsibility for the proper leadership, management and control of Statnett and establishes annual plans for their work in line with Statnett annual planning cycle. Instructions clarify roles and responsibilities between the Board, CEO and internal audit and helps to ensure clear roles and responsibilities. The Board outlines instructions for the CEO, approves the corporate strategy and ensures that Statnett is appropriately organized. The Board approves the annual budget; ensure that Statnett has an appropriate internal control environment, a reliable management of financial assets and a good working environment. Statnett's ethical guidelines states that board members must report any potential issues related to conflict of interest. The Board conducts an annual evaluation of its work and competence in order to ensure good quality in its work.
The Audit Committee
The audit committee is a preparatory body for the Board. The Audit Committee prepares the Board's supervision of the financial reporting process, follows up the Statnett framework for enterprise risk management and internal control, including internal audit. Furthermore, the Committee has ongoing contact with the Independent external auditor on the audit of the enterprise and monitors the auditor's independence in accordance with the collar of the Audit and Auditors Act.
The compensation committee assists the Board in its efforts to determine the CEO's employment terms and principles, as well as guidelines for remuneration of Statnett's Group Management. In accordance with Section 8 of the articles of association, the Board prepares a statement on executive pay in accordance with the provisions in the Public Limited Liability Companies Act, the Norwegian Accounting Act, and the Guidelines relating to state-owned companies. See also Note 19 in the financial statement.
The Committee works is a preparatory body for the Board in monitoring Statnett's development projects that require board approval. The Committee's objective is to ensure good project ownership and the committee focus on projects from the investment decision (BP2) in Statnett project model. Project Committee submits its assessments to the board, but does not make decisions on behalf of the Board. The committee reviews its mandate annually and propose updates if necessary.
10. Risk management and internal control
Statnett works systematically to review any risks associated with our activities and the Board of Directors receives a risk report every quarter. All development projects approved by the Board of Directors are reported to the Board and include an updated risk profile for the individual project. See the separate section on risk management in the annual report for a more detailed description of Statnett's risk management framework.
Combined with the enterprise's organisation, performance management and reporting lines, Statnett's ethical guidelines and value base make up the foundation for a good internal control environment. Internal control is an integral part of corporate governance and is based on the principle of three lines of defence (manager, policies manager/staff and internal auditor). Quarterly management reporting is conducted as part of the follow-up, including a review of HSE results and financial key figures. In order to strengthen the work on internal control, responsibility has been clarified in the organisation and a project has been initiated to describe and improve the critical work processes. The Board of Directors reviews and assesses the enterprise's internal control procedures on an annual basis.
Statnett publishes quarterly financial reports. The external and internal reporting is reviewed by the Group management, the Audit Committee and the Board of Directors.
Internal control and financial reporting
A separate policy has been developed for accounting and financial reporting. An overview has been established of control activities conducted to ensure correct financial reporting, and risk assessments are performed of the most important processes when necessary. The Audit Committee, internal auditor and the Board monitor the enterprise's internal control systems.
Statnett's ethical guidelines cover areas that are important to ensure good business ethics in all aspects of our activities. The guidelines lay down specific and practical rules, and set standards for the conduct of all employees. Statnett has appointed an Ethics Ombudsperson who is responsible for ensuring compliance with the Norwegian Working Environment Act with respect to facilitating reporting of censurable conditions. Failure to comply with the ethical guidelines may result in sanctions, depending on the nature and scope of the breach. The ethical guidelines apply to board members, managers, employees, contractor personnel and any other party acting on behalf of Statnett.
Ethical guidelines for contractors
Statnett puts particular emphasis on ensuring that our suppliers and partners comply with our ethical guidelines for suppliers. The suppliers’ obligation to comply with the ethical requirements is stipulated in the contracts we enter into with our suppliers. Inspections and audits are conducted in order to make sure that the requirements are complied with during execution of the contracts. The ethical guidelines for employees and contractors are available in their entirety on Statnett's web site.
11. Remuneration of the Board of Directors
See Note 19 in the annual accounts for a detailed overview of Board remunerations.
Board member remunerations are not associated with profit or loss, option programmes or similar.
12. Remuneration of executive employees
Statnett follows the guidelines that apply for executive pay in state enterprises. In accordance with Section 8 of the articles of association, the Board of Directors prepares a statement concerning remuneration to the President and CEO and the Group management in accordance with the provisions in the Public Limited Liability Companies Act, the Norwegian Accounting Act, and the Guidelines relating to state-owned companies.
See Note 19 in the annual accounts for a detailed overview of remuneration of executive employees.
13. Information and communication
Statnett is governed by the Freedom of Information Act (with a few exemptions), regulations relating to dissemination of information to the power market and safety and preparedness legislation. The Board of Directors has stipulated guidelines for reporting. Statnett distributes financial and operational information in accordance with the regulatory requirements and practises transparency and openness. Financial and operational information as well as the enterprise's financial calendar are available on Statnett's website.
In addition to the dialogue with the owners which takes place at the Enterprise General Meeting, the owner also promotes communication between the Board of Directors and the owner outside the General Meeting. The purpose of the Owner’s Meeting is to provide an informal forum where the Board of Directors and the owner can exchange opinions and discuss issues of great financial or strategic importance to Statnett. The views expressed by the owner at the Owner’s Meeting provide input for Statnett’s administration and Board of Directors. Issues requiring owner approval must be discussed at the Enterprise’s General Meeting.
14. Company takeover
Statnett SF is a state enterprise. The sale of assets would entail a restructuring of the business organisation and a legal amendment which requires the consent of the Norwegian Parliament.
External auditors are appointed by the General Meeting and are independent of Statnett. The enterprise's external auditor for 2014 was Ernst & Young AS. The external auditor presents an annual work schedule to the Audit Committee. The external auditor attends meetings in the Audit Committee to discuss relevant issues. The auditor participates in the Board’s consideration of the annual accounts. The external auditor attends one annual Board meeting where the management is not present. The Audit Committee evaluates and proposes an external auditor and is responsible for monitoring the auditor's independence. As an important part of the process of ensuring the auditor's independence, the Board of Directors has established guidelines relating to the enterprise's access to use the external auditor for assignments other than audits. Each year, the external auditor reviews the company's internal control together with the Audit Committee. See Note 23 of the financial statement for information about the auditor's fees, divided between auditing and other consulting services.