ANNUAL REPORT 2020 5 Renewable Energy Sources Fed the Grid in 2020 www.sev.fo Contents Report from the SEV Board of Directors to its owners Annual Report and Annual Accounts 2020 66 at the Annual General Meeting 4 Management Report 69 Independent Auditor's Report 70 Organisation 16 Five, green-energy sources fed the grid in 2020 18 Key Figures 72 The Porkeri Windfarm, a major breakthrough 24 Financial Ratios 72 Solar energy yields more than expected 28 Management Review 74 The Biogas Power Plant, a good addition to the Green Course 32 Accounting Principles 84 The tidal energy project is now producing power 34 Offshore wind turbine park east of Nólsoy 38 Income Statement 1 January - 31 December 91 Balance sheet 31 December 92 2020 in Brief 42 Cash flow statement 94 The effect of the coronavirus on the well-being and Notes 96 work performance of SEV staff was varied 50 Distribution of activities, production and grid 108 Heilsa, Trygd og Umhvørvi 58 Operations - production and grid 114 Annual Report 2020 Annual General Meeting 23 April 2021 Photos: SEV, Faroephoto, Sansir, Klara Johannesen, Minesto, Eyðna J. M. Joensen, Kári Durhuus, Lbf, Articon, Fotostudio, SMJ, Niels Jacob Eysturberg and Mads á Heyggi. Layout: Sansir Print: Estra 4 SEV / ANNUAL REPORT 2020 SEV / ANNUAL REPORT 2020 5 Report from the SEV Board of Directors to its owners at the Annual General Meeting In any review of SEV’s business activity dur- ing 2020, one can hardly avoid mentioning the coronavirus pandemic and its global impact, both great and small. 6 SEV / ANNUAL REPORT 2020 SEV / ANNUAL REPORT 2020 7 On St. Gregory’s Day (12 March) last year when the The evaluation group consists of Heðin Mortensen, Faroe Islands closed down to protect the country Tórshavn Municipality; Karl H. Johansen, Klaksvík; RESULT AFTER TAXES and its people against the COVID-19 pandemic, SEV Torbjørn Jacobsen, Runavík; Bjarni Prior, Vágur; Kris- had already undertaken measures to protect the tin Michelsen, Tvøroyri; and Kári Johansen, chairper- electricity system, thereby ensuring the distribution son of the SEV Board of Directors. of electricity to each and all. POLITICAL TRENDS As one of the cornerstones of Faroese society and a The current political coalition has decided to review provider of vital services, SEV takes its responsibility the Faroese electrical system. This decision was an- and obligation very seriously. nounced in their joint manifesto declared in Septem- ber 2019. Thus, SEV not only followed the government recom- 49,8 DKK MILLION mendations and guidelines, but also undertook rig- The Environment and Industry Minister Helgi Abra- orous and stringent initiatives to secure the supply hamsen visited SEV on 24 February 2020 to partici- The Management find the result satisfactory. of electricity throughout the country and the entire pate in a theme day arranged by SEV to provide an staff without complaint worked hard to meet the overview of the Faroese electric system and the so- Expexted result was DKK 62.7 Million challenges brought about by the pandemic. called “green course” toward the production of elec- tricity from totally renewable energy resources. Also The business activity of SEV since the last Annual present were key persons from the ministry and the General Meeting is described in detail in this report. Environment Agency. Further, the Board of Directors has highlighted the issues that the Board believes would be of most in- In July 2020, the Minister, together with a work terest to the owners of SEV. The report is submitted group from the Ministry of the Environment and In- in accordance with Article 3, Paragraph 12 b, and dustry (UVMR), presented a report to the municipal- Article 4, Paragraph 11a of SEV’s Articles of Associa- ities and SEV on how the Faroese electric system tion. should be organized, relative to the previous pro- nouncement of the coalition: NEW BOARD OF DIRECTORS At SEV’s Extraordinary General Meeting held on Fri- “In order to obtain full transparency regarding the Minister, Bárður Á Steig Nielsen, and Minister Helgi to change from day to day or from hour to hour rela- day, 19 February 2021, a new Board was elected: operational costs of the grid, work should be under- Abrahamsen on 17 September 2020 on what work tive to the exact cost of electricity production. Kári Johansen, representing Tórshavn; Haraldur S. taken to divest the grid from the other activities of should be done in the future. Hammer, North Streymoy; Sonni L. Petersen, Eystu- SEV. Full transparency shall provide the basis under Such a system could very well stimulate consumers roy; Sune Jacobsen, Vágoy; Oddmar Á Lakjuni, North which private enterprises shall have the possibility of Again on 24 September 2020, the Municipal Associ- to use green or cheaper electric power, and, in addi- Islands; Poul Klementsen, Sandoy; and Nilas Hentze, accessing the grid and to sell their respective elec- ation and SEV met with Minister Helgi Abrahamsen tion, such a system could provide households and Suðuroy. tricity production to the grid.” to explore the mandate the work group received businesses greater transparency and choice relative from the Ministry. It was agreed to broaden the man- to consumption and the cost of electric power. At Subsequently, the Board elected Kári Johansen as The municipalities, all of which own SEV, immediate- date to also cover solutions based on SEV’s current the very least, such a system would enable SEV to chairperson and Haraldur S. Hammer as vice-chair- ly reviewed the situation and declared their dissatis- corporate structure with separate operational divi- make full use of its production facilities and thus di- person. faction with the proposal. From their perspective, sions. minish the need for more production power. any possible changes should, overall, benefit con- It was further unanimously agreed that the structure sumers and advance the goal of green power. The Within the framework of the expanded mandate, As a society, the Faroe Islands is facing major envi- of SEV as an electric utility company be reviewed Municipal Association and SEV met with the Prime SEV has discussed with the UVMR working group ronmental challenges, as well as the increasing price and if deemed necessary detailed recommendations the electric power system, including the eventual of oil. These challenges demand a re-evaluation and/ could be presented to amend the present corporate " As a society, the Faroe Islands is facing problems, limitations, challenges, and benefits that or a reorganization of the entire energy sector, not structure of SEV at a forthcoming Extraordinary exist in the current structure and how best to im- just the electricity system and grid. General Meeting later in the year. major environmental challenges, as well as prove it. the increasing price of oil. These challenges SEV is convinced that, in addition to a reassessment An evaluation group consisting of five mayors and The work on generating greater transparency in the of the electricity system, focus should be placed on the chairperson of SEV was formed, which shall itself demand a re-evaluation and/ or a reorgan- provision of electric power by SEV is underway. Soon the reorganization of the entire energy sector in the outline its work mandate and avail itself of both out- a decision can be taken on whether to introduce a Faroe Islands. It is extremely important to ensure side and in-house expertise as necessary to facilitate ization of the entire energy sector, not just new pricing structure. The idea has been discussed as that the electrical system of the Faroe Islands is al- generating the best results possible. the electricity system and grid" to whether pricing, for example, could be structured ways organized and managed to provide the greatest 8 SEV / ANNUAL REPORT 2020 SEV / ANNUAL REPORT 2020 9 "On this "power portal", the consumer can monitor his or her power usage Key Figures benefit to the Faroese community as a whole, indi- and consumption patterns" vidual consumers, and the green course toward re- newable energy resources. THE CONSUMER 2020 usage and consumption patterns. The portal is espe- As otherwise noted, in order to implement and ad- cially useful for commercial customers and govern- vance the green power shift, it is necessary that the ment offices because it provides an excellent tool by HYDRO POWER (GWh) commercial and government sectors, as well as the which to gain a better overview of electricity con- private consumer, whole-heartedly support sustain- sumption and management. It is possible for custom- able energy solutions, especially within heating and ers to log-in to this power portal via the public digital transport. The latest figures indicate that the public access systems, “Vangin” and “Samleikin”. 109 initiatives of less VAT on heat pumps and electric ve- hicles, etc., together with lower electricity prices for AS SEV manages to diversify more and more the 2019: 104 GWh these specific consumption groups, are having a pos- electricity pricing structure, the portal will become a itive effect. very handy tool for both its private and business cus- tomers, as well as the public sector. The political arena has to be aware that the above- The electricity system of the country operates at its named support initiatives could very well create a best when those that manage it do so in close collab- new competitive reality for P/F Fjarhitafelagið, oration with the consumers of electricity to enhance which already is a green home and business heating customer consumption behaviour thus avoiding un- solution. necessary costly expansion of the system, which would in turn impact the cost of electricity. SEV believes that it is unfortunate that the coalition has expanded the VAT-free support system to also WIND POWER include the purchase of hybrid and plug-in hybrid ve- For the first time since the Húsahagi windfarm went WIND POWER (GWh) FOSSIL FUELS (GWh) SOLAR POWER (KWh) hicles.