Annual Report 2019
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The GEN Group is becoming the region’s leading provider of RELIABLE, SAFE, COMPETITIVE AND LOW-CARBON energy supply to consumers. ANNUAL REPORT of the company GEN and the GEN Group for 2019 The Annual Report in digital format is available online at: http://letnoporocilo.gen-energija.si/en ANNUAL REPORT OF THE COMPANY GEN AND THE GEN GROUP FOR 2019 Krško, June 2020 Table of contents I. INTRODUCTION 27 1. Key financial performance details 28 2. Letter from the Management 32 3. Report of the Supervisory Board 34 4. Statement of Corporate Governance for GEN energija d.o.o. 40 5. General information about GEN 42 6. Holding activities of the company GEN 44 7. Corporate policy of the company GEN 48 8. Pursuing sustainability focuses through responsible operations 50 9. Notable events in the companies making up the GEN Group 53 II. BUSINESS REPORT 58 1. Economic trends and their impact on the electricity sector 60 2. Electricity production and ancillary services 61 3. Electricity purchase 67 4. Electricity trading and sales 68 5. Sales of natural gas 70 6. R&D, capital expenditures and investments of the GEN Group companies 71 7. Financial operations 78 8. Employees, knowledge and development of human resources 80 9. Promoting the knowledge of energy and the energy industry 84 10. Quality policy and safety assurance 88 11. Risk and opportunity management 92 III. FINANCIAL REPORT OF THE COMPANY GEN 98 1. Independent auditor's report 100 2. Statement on the responsibilities of the Management 102 3. Introductory notes on the preparation of financial statements 103 4. Financial statements 104 5. Basis for drawing up the financial report of the company GEN 110 6. Accounting policies 111 7. Notes on the financial statements 116 8. Other disclosures 128 9. Financial risk management 130 10. Events after the reporting period 131 IV. FINANCIAL REPORT OF THE GEN GROUP 132 1. Independent auditor's report 134 2. Statement of the Management 136 3. Financial statements of the Group 137 4. Notes on the financial statements 142 5. Notes on and disclosures of items in the financial statements of the GEN Group 160 6. Financial instruments - book value, fair value and risk management 181 V. ON CORPORATE REPORTING OF THE GEN GROUP 193 1. Compliance with reporting policies 194 2. Sustainable reporting pursuant to GRI guidelines 195 3. Link between capitals and financial and non-financial information on business operations 199 6 THE GEN GROUP AT A GLANCE The GEN Group is one of the largest and strongest business groups in investment terms in Slovenia. We run an integrated electricity supply chain: • we generate electricity from low-carbon sources: nuclear and hydro, • we engage in electricity trading and sales in the domestic market and more than 20 retail and wholesale markets across Europe, • we channel our capital into development and investments, primarily ongoing thorough maintenance of existing as well as responsible planning and construction of new, low-carbon production capacities for supporting the electricity supply in Slovenia. 6,300—6,800 GWh 30% AVERAGE ANNUAL ELECTRICITY PRODUCTION SHARE OF THE COUNTRY'S TOTAL OUTPUT OF OUR POWER PLANTS ELECTRICITY PRODUCTION more than 99% 21 OF THE ELECTRICITY WE GENERATE EUROPEAN MARKETS IN WHICH COMES FROM LOW-CARBON NUCLEAR AND WE ARE PRESENT THROUGH HYDRO ENERGY TRADING AND SALES ACTIVITIES ANNUAL REPORT OF THE COMPANY GEN AND THE GEN GROUP 2019 7 OUR GENERATION UNITS – POWER PLANTS Nuclear power plant Hydroelectric power plant Thermal power plant Solar power plant Hydroelectric power plant MOSTE Hydroelectric Hydroelectric power plant power plant Thermal power plant MAVČIČE VRHOVO BRESTANICA Hydroelectric power plant MEDVODE Nuclear power plant KRŠKO Hydroelectric power plant BOŠTANJ Hidroelektrarna Hydroelectric power plant ARTO-BLANCA MOKRICE (planned) Hydroelectric power plant BREŽICE Hydroelectric power plant KRŠKO THE PRESENCE OF THE GROUP’S COMPANIES ON ELECTRICITY MARKETS AND EXCHANGES Regional power exchange Electricity and natural gas Electricity 8 Fulfilling our mission. Responding to challenges. ANNUAL REPORT OF THE COMPANY GEN AND THE GEN GROUP 2019 9 VISION The GEN Group is taking over a leading role in the region in providing consumers with a reliable, safe, competitive and low-carbon supply of energy. MISSION With its efficient and safe production, the GEN Group is an essential building block for ensuring the stability of Slovenia's electric power grid. By expanding our nuclear power generation programme, we are making a significant con- tribution to energy self-sufficiency and the quality of living of the population. Through a value added chain, which incorporates production, trading and sales, as well as investments in existing and new production facilities, we ensure a reliable, competitive and consumer-oriented supply of energy and energy services. 10 The GEN Group's central strategic development project --JEK 2 JEK 2 is a much-needed, feasible and economically sound project. Strengthens Ensures affordable the reliability of electricity prices for customer supply households and the economy JEK 2 PROJECT IS THE RIGHT SOLUTION TO CURRENT CHALLENGES IN ENERGY FUTURE TERMS Increases the Is acceptable in climate, competitiveness of environmental and spatial Slovenia’s economy terms and has a positive impact on biodiversity and habitats ANNUAL REPORT OF THE COMPANY GEN AND THE GEN GROUP 2019 11 PURPOSE-SPECIFIC GOALS • To ensure a long-term reliable, safe, • To reduce reliance on imported environmentally responsible and electricity and ensure as high a level competitive supply of electricity in of self-sufficiency in electricity supply Slovenia, as possible for Slovenia, • To facilitate the decarbonization of • To use the location of the existing the electricity generation sector nuclear power plant for continued and consequently support Slovenia's production of electricity, fulfilment of climate goals, • To tap into the existing knowledge and • To offset the production outputs of experience in operating, maintaining NEK and TEŠ in the long term and and upgrading a nuclear power plant, to make up for shortages due to • To ensure secure, quality jobs over the increasingly large consumption of long term. electricity as a result of electrification of transport, heating and cooling, OPERATIONAL GOAL installed capacity* 1,100 MW *one of the three versions examined in the Prefeasibility Study annual production output 8.8–12.8 TWh GOALS of the JEK 2 project 12 Nuclear energy creates positive economic impacts Positive impacts of the nuclear energy sector for the EU 2050 2019 EUR 575.9 BN EUR 507.4 BN annual contribution of the nuclear GDP contribution of the nuclear energy energy sector in the EU GDP, making sector to the EU GDP, making up up 1.5–2% of the total EU GDP for 2050 3–3.5% of the EU GDP for 2019 1,321,600 1,129,900 average annual number of jobs JOBS average annual number of jobs sustained or created by the EU nuclear sustained or created by Europe's energy sector nuclear energy sector EUR 490.9 BN EUR 383.1 BN HOUSEHOLD average net annual household income average net annual household income due to the activities of the EU nuclear INCOME due to the activities of the EU nuclear energy sector energy sector EUR 110.2 BN EUR 124.2 BN PUBLIC average annual public revenues average annual public revenues generated through tax payments by the REVENUES generated through tax payments by the EU nuclear energy sector EU nuclear energy sector The nuclear energy sector The scenario of high growth in today has an important nuclear production capacity* impact on Europe’s economy brings about a major increase and sustains more than in the nuclear energy’s 1,100,000 jobs across the EU positive impacts on the entire member states. European economy. * High-growth scenario under which 150 GW of new production capacities are projected to be deployed in Europe between 2020 and 2050. Source: Deloitte. Economic and Social Impact Report 2019. ANNUAL REPORT OF THE COMPANY GEN AND THE GEN GROUP 2019 13 Positive impacts of the nuclear energy sector for Slovenia EUR 2.2 BN GDP 5,500 JOBS (TOTAL) 2,500 HIGHLY SKILLED JOBS HOUSEHOLD INCOME EUR 1.6 BN PUBLIC REVENUES EUR 0.6 BN GW EUR BN of installed nuclear 4.3 production capacity in the EU GDP. 1 generates 14 Capitals and results in 2019 Capitals of the GEN Group Infrastructural capital Nuclear power plant, hydroelectric power plants on the river Sava, gas-fired thermal power plant (ancillary services), and distributed renewable STRATEGY AND sources (solar power plants). RISKS AND RESOURCE Advanced software/IT infrastructure for OPPORTUNITIES ALLOCATION facilitating effective energy trading and sales at home and abroad. SAFETY Natural capital PRODUCTION Low-carbon energy sources: primarily nuclear and hydro. Y T Y I T I L I L I B B A A Financial capital I N I L E Financial resources (mainly through equity and A R T borrowing) needed for providing comprehensive S electricity supply services. U S TRADING AND SALES DEVELOPMENT AND INVESTMENTS Employees and intellectual capital The knowledge, skills and dedication of our em- ployees for performing our principal activities. KNOWLEDGE BUSINESS BUSINESS PERFORMANCE OUTLOOKS Social capital Relations with external stakeholders in providing comprehensive electricity supply services. Promoting the understanding and appreciation of the importance of energy supply for our daily lives and enduring social prosperity. ANNUAL REPORT OF THE COMPANY GEN AND THE GEN GROUP 2019 15 Results of the GEN Group in 2019 Total production