Northern Ireland Energy Holdings Annual Report 2009
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Annual Report 2009 A mutual energy company working for consumers EU internal market for electricity - France UK Ireland, stakeholder site visit to Ballycronane converter station, Islandmagee 09 Annual Report and Accounts BGT gas pressure reduction site, Knocknagoney Northern Ireland Energy Holdings Limited Annual Report and Accounts 2009 contents Chairman’s Statement . 5 Operating and Financial Review . 8 Board of Directors . 21 Corporate Governance Statement. 22 Remuneration Committee Report. 27 Audit Committee Report. 30 Members. 31 Northern Ireland Energy Holdings Ltd (Report and Financial Statements) . 35 Moyle Interconnector (Financing) plc (Report and Financial Statements) . 67 Premier Transmission Financing plc (Report and Financial Statements). 93 Belfast Gas Transmission Financing plc (Report and Financial Statements). 121 “ A mutual energy company working for consumers ” Northern Ireland Energy Holdings Limited Chairman’s Statement Peter Warry Chairman In presenting the fourth set of accounts for the Northern Ireland Energy Holdings (“NIEH”) Group of companies, and my first as Chairman, I am very pleased to report that the Group has operated its assets – Northern Ireland’s gas Our business model and electricity transmission links from Great Britain and “ the gas transmission pipeline to Greater Belfast, safely comprising low cost and with a high degree of reliability. Our business model comprising low cost of capital, no dividend payments and of capital, no dividend a focus on operational efficiencies has made a significant contribution to reducing the cost of energy for consumers in Northern Ireland, which is increasingly important at a payments and a focus time of such economic uncertainty. on operational Proven benefits The consolidation of Belfast Gas Transmission into our efficiencies has made gas transmission business has delivered the benefits promised at the time of acquisition, reducing the cost of operating this pipeline to £4.7m from £9.6m under its a significant previous owner. The expanded group continues to deliver on its promises to reduce the cost of operation of energy contribution to infrastructure, for all energy consumers in Northern Ireland. reducing the cost of Safety Safety is at the very heart of our activities and continues energy for consumers to be at the top of the Boards agenda. One of the fundamental requirements of our stakeholders is the safe Northern Ireland in Northern Ireland, operation of our assets with very high levels of availability. In this respect the continued excellent performance is a which is increasingly credit to both the management and staff of our companies and those of our key partnership contractors in SONI, ESBI, Siemens, Bord Gais Eireann and Scotia Gas important at a time of Networks. All of the gas used in Northern Ireland was supplied through Premier Transmission and Belfast Gas such economic Transmission pipelines which were fully available all year. Energy Holdings For periods during the year security of electricity supply uncertainty. throughout Ireland depended on the availability of the Moyle Interconnector, which operated for the entire year without any unnotified breakdowns. The Board will ” continue to strive to maintain these high standards. 5 Northern Ireland Energy Holdings Limited Chairman’s Statement Costs to the consumer We continue to be supportive of the development of a gas We continue to measure our success by the savings we storage facility under Larne Lough. Initial studies indicate make for the energy consumers of Northern Ireland. We that the storage facility could store up to 500 million cubic fully expect to deliver the cost of capital savings, of some meters of gas, enough to supply Northern Ireland for £81m (net present value) calculated at the inception of our about three months. This year, Portland Gas (NI) have three transactions to date. In addition the Group’s focused on the conceptual design, planning and operating companies were again able to make further regulatory arrangements necessary to make this major contributions to lower energy prices in Northern Ireland by project possible, with the intention of submitting a lowering operating costs. For the sixth successive year planning application by the end of 2009. This project has Moyle was able to make a further significant contribution the prospect of enhancing security, producing more to reducing electricity prices in Northern Ireland in 2009- stable gas prices and improving the utilisation of existing 10 by avoiding any cash call on consumers. This was infrastructure and will bring significant benefits for energy achieved by setting aside £11.9m from its accumulated users in Northern Ireland. We look forward to continuing reserves at the end of the year. The gas transmission to work with Portland Gas (NI) to advance this project. businesses produced operational cost savings against forecast of £1.8m. This enabled the company to cover a Members and Board revenue shortfall of £1.1m (due to lower than shipper As a Group dedicated to the long term interests of the predicted gas volumes) and set aside £0.7m, thus energy consumers of Northern Ireland, we remain contributing to lower gas prices to end consumers. committed to the highest standards of corporate governance. We believe that the arrangements for the The Group continues to take a long term view in respect of supervision of the conduct of the Group’s business have the use of reserves to minimise costs to the consumer, been successful in providing solid corporate governance. aiming to do so as evenly as possible over the term of its We are grateful to our members for their support and for debt. Moyle invested £10m in “loan notes” which will their challenge to the board and its executive produce cash returns from 2013 to 2016, when its bond management. I met many of the members recently at our repayments will have increased. The European member’s information day, where we had an opportunity Renewable Energy Fund is well established now with to discuss the performance of the group and reaffirm our commitments of €105m, including €15m committed by priorities for the future. I look forward to continuing to NIEH. With a steady pipeline of projects we expect this work closely with the members into the future in fund to produce attractive returns in the medium term and furthering the interests of the energy consumers of allow the Group to continue providing its services to Northern Ireland. customers at a lower cost than any other utility provider in Northern Ireland. Alasdair Locke our founding chairman stood down from the Board at the end of 2008 and two further long- Future prospects standing directors, Alan McClure and Damian McAteer, Major changes in the energy markets of Northern Ireland will be standing down at the AGM in line with good Northern Ireland and the Republic of Ireland continue. The Single governance practice. I would like to thank them all for Electricity Market or SEM, introduced in 2007 initially their excellent service to the Company, indeed, without provided good revenues for Moyle, however in 2008 their contributions the Company would not have come auctions for future years have, as expected, realised lower into being. During the year, in addition to my appointment returns. This is a trend which is likely to continue. We will as chairman on the 31 December 2008, we appointed continue to press for the full SEM capacity payment to be two replacement non-executive Directors, Gerry Walsh paid to the Interconnector supply chain in a similar way (former CEO, Bord Gas Eireann) on 1 October 2008 and that it is paid to generators. The detrimental treatment of Regina Finn (CEO, OFWAT) on 1 November 2008. We are Energy Holdings the Interconnector under the SEM greatly increases the currently seeking replacements for two further non- likelihood of cash calls on Northern Ireland consumers – executive Directors to refresh the board in line with costs which should be borne by all the consumers in scheduled retirements. Ireland. I would like to thank my colleagues on the board, our Work is well advanced on a joint regulatory initiative, the members, the executives and staff and our contracting common arrangements for gas or CAG. Regulators north partners for their significant contribution to the ongoing and south have produced conclusions papers for business of our Group. I look forward to working with all consideration by their respective governments; we await of them in meeting our goals for the future and continuing the outcome of these deliberations. We are broadly to deliver value to all our stakeholders. 7 supportive of the strategic objectives of this initiative and will work to ensure that any benefit which might accrue will be captured for Northern Ireland consumers. Northern Ireland Energy Holdings Limited Operating and Financial Review Business Description Northern Ireland Energy Holdings (“NIEH”) was formed as a holding company in August 2005 to own and operate energy infrastructure in the long-term interest of the energy consumers of Northern Ireland. The Group is involved in both gas and electricity. The group’s electricity business is centered on the Moyle Interconnector (Financing) plc group of companies, of which the principal subsidiary is Moyle Interconnector Limited (MIL). The group’s gas business comprises the Premier Transmission Financing plc group of companies and the Belfast Gas Transmission Financing plc group of companies, of which the principal subsidiaries are Northern Ireland Energy Holdings Executive Directors, Premier Transmission Limited (PTL) and Belfast Gas Bill Cargo and Paddy Larkin Transmission Limited (BGTL). Table of key acquisitions Asset Acquired Associated Term Real rate bond issuance Moyle interconnector, 500 megawatt DC link April 2003 £135m 30year 2.94% Scotland to Northern Ireland Premier Transmission, Scotland to March 2005 £107m 25year 2.46% Northern Ireland gas pipeline Belfast gas transmission March 2008 £109m 40year 2.21% pipeline, Islandmagee to Belfast The principal activities of the Group, are the ownership NIEH is a company limited by guarantee with no and operation of energy links within Northern Ireland and shareholders, commonly known as a “mutual".