Annual report 2016 Annual report 2016 Statnett is the system operator in the Norwegian power system and is responsible for ensuring socio-economically efficient operations and develop- ment of the trans- mission grid 2 Annual Report 2016 Content Content The president and CEO comments on 2016 4 Risk management and internal control 50 Remuneration of the Board of Directors 51 Statnett's strategy 7 Remuneration of executive employees 51 Information and communications 51 This is Statnett 9 Company takeover 51 Statnett's tasks 9 Auditor 51 Organizational structure 10 Risk management 53 Presentation of the Group management 12 Risk management framework 53 HSE 53 Highlights 2016 14 Risk of power supply interruptions 53 Risks in system operation 54 Financial framework conditions 18 Energy access 54 Statnett's revenues 18 ICT security 54 Repayment of higher revenue 18 Reputational risk 54 Revenue and result development 18 Financial risk 55 Higher/lower revenue development 18 The investment level affects revenues and the Board of Directors' report 57 balance sheet 19 Safe and efficient operations 58 Key figures 20 Development of the next generation power system 59 Important project events 62 Corporate Social Responsibility 2016 22 Health, safety and the working environment 62 Managing corporate social responsibility 22 Recruitment and employee development 64 Security of supply and preparedness 24 Gender equality and diversity 64 Value creation and cost effectiveness 24 Research & development 64 Ethics and anti-corruption 25 Financial performance 64 Health, safety and the environment (HSE) 25 Risk 66 Climate and the environment 27 Corporate social responsibility 66 Employees 33 Climate and the environment 67 Procurement 34 Corporate management 67 Local footprints 35 Changes in the Board of Directors 67 Licensing process and stakeholder dialogue 36 Outlook 67 Innovation and R&D 37 Going concern 68 About the report 37 Profit allocation 68 Declaration from the Board of Directors Corporate governance 46 and President and CEO 68 Statement on corporate governance 46 Business 47 The Board of Directors 70 Equity and dividends 47 Equal treatment of owners and transactions with Financial reporting closely related parties 47 Statement of comprehensive income 72 Negotiability 47 Balance sheet 73 The Enterprise General Meeting 47 Statement of changes in equity 74 Election committee 47 Cash flow statement 75 Corporate Assembly and Board of Directors: Notes 77 composition and independence 47 Governance structure 48 Auditor´s report 127 The responsibilities of the Board of Directors 49 Cost development 131 3 Annual report 2016 The President and CEO comments on 2016 The President and CEO comments on 2016 Statnett’s mission remains the same; we must ensure a safe The grid we are building now is important in attaining a secure and and efficient operation of the power system, promote value efficient power supply, adapted to the needs of the future. creation and facilitate renewable power production. To reach these goals we are constructing a grid that will meet the Secure and efficient needs of the future, we collaborate with others in developing During this phase of intensive construction, it is particularly impor- better market solutions, and we use ICT to make the power tant to focus on safety in the building processes and a cost-efficient system intelligent and secure. In 2016, we also stepped up implementation of the projects. Systematic and targeted technology the work to fulfil our zero vision for accidents and lost-time development, qualification and standardisation will enable us to build injuries. safer and more cost-efficiently. We are reducing costs by developing expert procurement teams and hiring more competitive suppliers. A grid for the future As 2016 came to an end, we had almost reached the half-way The year 2016 was affected by two fatal accidents in April and May point in our ambitious development plan that will strengthen the of 2016, when two people lost their lives in separate construction transmission grid throughout Norway. In 2017-2020, we plan to projects. The accidents were unrelated and quite different, but they construct more than 1 000 kilometres of new power lines and have led to changes in how we plan our further work in order to about 1 350 kilometres of cables, and we will start the construction prevent a recurrence of such tragedies. of 20 new substations. Health, environment and safety has been at the top of Statnett’s In 2016, we completed the largest individual power line project in agenda for many years. We have achieved a great deal, but not Norway so far: the construction of the 420 kV power line between reached our goal. These accidents are a painful reminder of that. Ørskog at Sunnmøre and Sogndal. It comprises 300 kilometres of Immediately after the accidents we prepared an action plan which new power lines and six new substations. In another major project we are implementing in our organisation as well as in cooperation between Ofoten in Nordland county and Balsfjord in Troms county, with our suppliers. two out of three sections of the 420 kV power line were completed in 2016. This strengthens security of supply in our northern- We have a zero vision for lost-time injuries, and we are now taking most counties. further steps to make sure that everyone working for Statnett will get home safe and sound every day. In 2016, Statnett’s Board of Directors approved further construc- tion northwards from Balsfjord and a new line between Namsos Stable operations and Surna in order to pave the way for wind power at Fosen in Operating the transmission grid can be challenging at times, both Trøndelag county and elsewhere. The Board also approved the due to bad weather and because parts of the grid do not have first construction phase in a major upgrade of the grid in the Oslo the capacity we'd like. The fact that we are constructing new grid region. sections brings its own challenges to the power system operation in the form of many disconnections. It also means that the trading We have started constructing the interconnectors to Germany and capacity at times will be limited on certain sections. the UK. They are important for the evolvement and integration of the North-European power system. We are also upgrading the We had no major irregularities in 2016, mostly thanks to fairly transmission grid in South-Western Norway, among other things stable weather and good operations planning. A new record was to be able to handle increased overseas power trading efficiently. set in Norway on 21 January 2016, when consumption peaked at 4 Annual report 2016 The President and CEO comments on 2016 24 485 MWh in one hour between 8 am and 9 am – sufficient energy for the long term. During this last year we have reaped the benefits to charge 300,000 Tesla cars. A week later, when the extreme of dedicated work in various areas, such as live-line working and weather Tor swept over Central and North Norway, our trans- voltage upgrades, new VSC technology applied in our cable systems mission grid stood up to the challenge, with only brief outages and pre-fabricated foundations, which enable us to extend the in a few areas near the coast. That same month we also set a building season. production record, with 26 766 MWh produced in one hour. To be successful we require good interaction with our Nordic neigh- In June, we had a breakdown of one of the six subsea cables in bours, with the EU and with subordinate grids (DSO). There is a Inner Oslofjord, between Hurumlandet and Vestby. This breakdown process of change taking place on every front. As an example, a led to a more challenging power situation in Eastern Norway and new Nordic office for operational planning is being set up in Copen- reduced export capacity to Sweden, until a new back-up cable was hagen, scheduled to be operative from 1 December 2017. This deployed in October. The entire subsea cable system from 1975 is a collaboration between the Nordic TSOs; Svenska Kraftnät, is now being replaced and the capacity will be reduced until the Energinet.dk, Fingrid and Statnett. Our joint office will ensure access new cables will be commissioned in 2017. This is also part of our to better data across the Nordic power systems, better market extensive construction programme and vital for security of supply conditions and improved security of supply for a power system in in Norway’s most populous region. continuous change. Need for new solutions Digitisation presents new opportunities Increasing prosperity, electrification and digitisation of our society Digitisation allows for more efficient solutions throughout the power make reliable power supply even more important. Norway might system and can be an instrument for more cost-efficient operation, see a wide-ranging electrification of the transport sector over the maintenance and development of the grid. Statnett would like to next 10-20 years. We may also become hosts for new IT centres make use of the new opportunities offered by digital substations and other industry that will create value based on our emission-free and other forward-looking solutions. Digitisation permits better power production. interaction between consumption, production and the grid. However, our solutions also need to be safe and secure. In many In parallel with these trends, the power system is becoming more areas, new solutions may contribute to both financial savings and complex: We are building cables to the UK and Germany and our reduced risk to people, for example in power line maintenance. Nordic neighbours are also strengthening their connections outside the Nordic area. This creates value, but it also makes the flow in Development of new, forward-looking solutions will be a key task the power grid more challenging.