Elering Annual Report 2014
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Kadaka tee 42 / 12915 Tallinn ESTONIA Annual Report phone: +372 715 1222 fax: +372 715 1200 e-mail: [email protected] www.elering.ee 2014 Annual Report 2014 Management Report of Elering's Annual Report Five years of Elering's independence 4 Overview of Elering 6 Key indicators of the Estonian electricity system 8 Summary of the financial year 14 Development of the electricity network 16 Development of the electricity market 22 Operation of the Estonian electricity system 27 Research and development 35 Social responsibility 42 Corporate governance 45 Elering and the environment 52 Organisation and people 56 Five years of Elering's independence TAAVI VESKIMÄGI Chairman of the Management Board Success story of the Estonian The opening of the Estonian electricity market has electricity market been a success story and Elering with its independent operations has been one of its architects. As a com- The beginning of 2015 marked the 5th anniversary of pany, Elering believes in the market. We believe that the formation of Elering, an independent electricity in the long run, functioning energy markets are the transmission system operator. These five years of cheapest way to ensure security of supply for energy independent operations of Elering have confirmed consumers. that the decision to separate the transmission system operator from Eesti Energia was a right one. Setting up an independent system operator has created a Attention on management quality possibility to create a competitive electricity market in Estonia with multiple market participants. Elering’s goal is to prove in practice that a state- owned enterprise can be well managed. On the basis Before the partial opening of the electricity market for of external assessment, it seems that this can be large consumers on 1 April 2010, essentially all electric- possible. Among business enterprises, Elering has ity consumers in Estonia were purchasing electricity the highest credit rating in the Baltic States (A3 from from Eesti Energia at a fixed price. Today, Estonia Moody’s). According to the report of the State Audit has a functioning power exchange characterised by Office, Elering is the best managed state enterprise multiple products, tens of electricity sellers, most in Estonia. In a survey of European regulators, Elering consumers having electricity supply contracts, many posted a 100% score. These are only some examples of buying electricity at the day-ahead exchange price and comparisons that highlight the management quality of the biggest market participant with a market share of Elering. around 60%. It is all based on clear strategic definition of Elering’s Since 2014 when the EstLink 2 interconnector was risk profile. We have defined ourselves as a low-risk launched, we can talk about a common hourly enterprise that is operating in a fully regulated busi- Estonian-Finnish electricity market that is part of the ness. Elering will not be expanding into other economic wider Nordic-Baltic electricity market. All this has been sectors than regulated energy-related business. accomplished in less than five years. For an Estonian consumer, electricity has become a commodity like any Although we act in the public interest, all our cur- other. And this is exactly how it should be. rent and future activities as a business enterprise 4 are targeted at creating added value for our owner. In Vision of a united system five years of independent operations we have gener- administrator electricity balance Five years ated 63.6 million euros of added value for our owner, as compared to the capital return approved by the The company’s long-term strategy is to become a joint regulator. We are proud of this. Behind this significant system operator for electricity and gas in order to bet- achievement are a good financing system, cost effi- ter fulfil Elering’s mission to ensure Estonian consum- of Elering's ciency and an efficient electricity transmission system. ers security of energy supply at all times. We understand that the tasks set on Elering by law Joint management of electricity and gas transmission and the state ownership also mean higher expecta- networks also enables to improve energy security of independence tions on corporate governance. Implementation of consumers, to create more value for the owner and good corporate governance practices and detailed to achieve more efficient management of energy procedures must ensure that the owner has confidence networks. in the efficient management of the company. Devel- opment of good corporate governance is a precondi- The activity of Elering in developing the Estonian tion for continuing the development that has been energy sector in both electricity and gas system is achieved until now. based on the fundamental principle of the EU energy policy – a single energy network and a common energy In this regard, the central task for 2015 is to formulate market in Europe. In our opinion the future possibili- the strategy of a joint transmission operator based on ties of the Estonian energy sector are in the integra- the knowhow, skills and experience of employees of tion of energy systems. The connection of energy Elering and EV Võrguteenus, operator of the natural networks and liberalization of energy markets creates gas transmission network. the preconditions for strengthening energy security and security of supply through the diversification of fuels, expansion of generation prospects and increas- Successful major projects ing the flexibility of system management. In a way, 2014 is an interim finish for us. Many objec- The vision that was confirmed in December in Elering’s tives that were set when Elering was formed have "Integration of Energy Systems Strategy 2024" lays been achieved. This is especially true with regard to down the three most strategic areas of activity for the large investments. Speaking of five years of indepen- next decade: first, synchronisation of the Baltic elec- dent Elering, one should mention major projects aimed tricity systems with the electricity system of continen- at supporting the development of the regional electric- tal Europe; secondly, final development of the regional ity market and at ensuring supply of quality electricity electricity market as part of the pan-European electric- for all Estonian consumers at any time. In five years, ity market; third, creating a competitive regional gas Elering has invested approximately 500 million euros market with many market players together with the in achieving the above objectives. Key projects include necessary infrastructure. Estonian-Finnish interconnections EstLink 1 and EstLink 2, emergency reserve power plants in Kiisa and the new Tartu-Viljandi-Sindi high-voltage line. 5 Overview of Elering Elering is a transmission system operator that Elering's investments in fixed assets (MEUR) manages Estonia’s electricity system in real time and is responsible for its functioning. Our goal is 203 to ensure that our customers enjoy a consistent, high-quality electricity supply at all times. To Joinings ensure security of supply, we create conditions Emergency reserve power plants EstLink 2 for the functioning of the electricity market and EstLink 1 develop cross-border interconnections. Ordinary Investments 482 100 million euros in investments from 2010-2014 78 74 2014 27 completed major projects: EstLink 2 Emergency reserve power plants 2010 2011 2012 2013 2014 Tartu-Viljandi-Sindi 330/110 kV high-voltage line 2 139 5539 146 DC converter km of km of high-voltage overhead substations stations DC cable lines and underground lines EstLink 1 EstLink 2 Loksa Võsu Kunda Viimsi Liiva Kallavere Kolga Narva Pea Viitna Haljala Viru- Aseri Allika Kreenholmi Ida Jägala Nigula MVTLVT Oru Joala Kuusalu PTK Narva HEJ Veskimetsa Uhtna Raasiku - Veo St. Peterburg Harku Rakvere Püssi Jüri Raasiku Rakvere-Põhja Aidu Pargi NEMK Balti Ej Paldiski Kehra Kadrina Sirgala Keila Ahtme Eesti EJ OT Kingissepp Aruküla Jaoskonna 1-2 Kiikla Estonia-Põhja Eesti EJ Tapa Jaoskonna 3B Rummu Konsu Alutaguse Nõva Kiisa Roela Kohila Aravete Väike-Maarja Aulepa Ellamaa Alajõe Roosna-Alliku Risti Rapla Taebla Haapsalu Kehtna Kullamaa Mustvee Türi Paide Martna Valgu Koigi Kantküla Vigala Imavere Põdra Jõgeva Lihula Saare Rõuste Põltsamaa Alatskivi Pärnu-Jaagup Muhu Tusti i Virtsu Leisi Orissaare Lõpe Voldi Võiküla Suure-Jaani Oiu Valjala Audru Sindi Tartu Metsakombinaadi Ülejõe Viljandi Emajõe Anne Papiniidu Reinu Tööstuse Puhja Kuuste Kabli Elva Sikassaare Rõngu Maaritsa Kilingi-Nõmme Abja Põlva Ruusa 110 kV substation Otepää 330 kV substation Tõrva Kanepi Estonia-Latvia third interconnection (planned) Riga Sõmerpalu 330 kV line Tsirguliina Võru Soo Pskov Linda 220 kV line Valga Rõuge 110 kV line Valka Valmiera 35 kV line Ruusmäe Mõniste Aluksne Average age 42 Average length of employment 16 Financial figures (MEUR) 2011 2012 2013 2014 Revenue 94.4 109.5 134.4 130.8 Operating expenses 65.8 68.2 81.1 80.0 Operating profit 28.6 41.3 53.3 50.8 Net profit 20.5 34.9 49.0 40.7 Borrowings 221.6 227.0 312.4 347.9 146 Equity 190.3 225.1 274.1 314.8 Assets 486.4 515.7 670.9 employees, the share 790.0 of women is 25% EBITDA 49.8 64.1 77.0 82.0 Investments 78.1 73.9 203.3 100.5 Financial Ratios ROE 11.7% 16.8% 19.6% 13.8% Equity/Assets 39% 44% 41% 40% Net Borrowings/EBITDA 4.0 3.3 4.0 3.9 interconnections Net profit ROE = with Finland, Average equity Russia and Latvia Net Borrowings = interest-bearing liabilities – cash and cash equivalents EBITDA = Operating profit + depreciation and amortization Key indicators of the Estonian electricity system Electricity balance In 2014, Estonia’s electricity consumption, including network losses, increased by 1% and amounted to 8.1 TWh. Elering’s domestic transmission service (without network losses) was unchanged year on year. Elering’s network losses increased due to the inclusion of the losses of two DC power lines (EstLink 1 and EstLink 2) in Elering’s balance.