Annual report and annual accounts 2009

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541 705 Electricity grid overview

Contents

Report from the Board of Directors ...... 2 Annual report and annual accounts 2009 . . . . . 35 The past year ...... 4 Board statement ...... 36 Exchange of real estate between SEV Independent auditor’s report ...... 37 and Municipality ...... 6 Key figures ...... 38 Skúvoy new tanks and turbine generator ...... 6 Key figures ...... 39 Dwindling construction activity affects Annual report ...... 40 number of new electricity meters ...... 7 Applied accounting principles ...... 42 SEV documentary as teaching material ...... 7 Income statement ...... 44 State-of-the-art control room at the Sund plant ...... 8 Balance sheet as per 31 december NCS ...... 9 – ASSETS ...... 45 Drilling to Selatrað starts this summer ...... 9 Balance sheet as per 31 december Energy Advice Service 2009 ...... 10 – LIABILITIES ...... 46 Many anniversaries at SEV ...... 11 Cash flow statement ...... 47 SEV and DONG Energy in a pioneering joint venture ...... 12 Equity report ...... 48 Industry and authorities briefed on plans for electric cars . . . 14 Notes to the annual report ...... 49 Hard-working website ...... 15 Power production unchanged in 2009 ...... 15 New substation in Trongisvági ...... 16 One in four meters now included in the remote reading system ...... 16 SEV supports the government’s climate policy ...... 17 SEV at COP15 Power. . . plant . . –. oil-fired ...... 19 Employee Association, employee days and employee events 20 Health, safety andPower environmental plant – hydro issues ...... 22 The U .S . ambassador visits SEV ...... 26 32 interruptions on the high-voltage grid ...... 27 60kV Substation Distribution grid ...... 28 Engine overview at 31/12 2009 ...... 29 Avroknað elsølaPower 2005-2009 plant – wind í MWh ...... 30 SEV investments 1997 - 2009 ...... 30 Oil consumption60 in kV tonnes Transmission 1988-2009 line ...... 31 Maximum load and available power - Central region20 1954-2009 kV Transmission . . line ...... 31 Electricity generation for the entire country by power plant, 2009 ...... 32 Annual report and annual accounts 2009 Electricity generation10 kV Transmissionon Suðuroy line 1940-2009 ...... 32 Editor: Leivur Hansen, Public Relations Manager. Electricity generation per capita 1970-2009 ...... 33 Photos: SEV Electricity generation 6 kV Transmissionfor the entire line country 1954-2009 . . . . 33 Layout and printing: Føroyaprent, Tórshavn, Daily Load 7 October 2009 ...... 34 Total SEV annualUndersea 12-month cable generation (1985-2009) ...... 34 Report from the Board of Directors

Global solidarity and renewable in defining SEV’s values and these Parliament at the next Ólavsøka energy efforts are to be completed this sitting (i .e . from July 29) . Demands for greater global solidarity summer . in energy production and emissions Electricity Production Act are increasing . The Faroes should Cooperation and connections Pursuant to the new Act, SEV was participate in binding international The Board strives to strengthen and granted provisional licences for its cooperation to this effect and SEV maintain excellent cooperation with production and network activities on supports the Faroese authorities in our partners, small and big . The December 30, 2008 . These licences Tórshavn Municipality owns the other hole in a cliff face to make a swinging quite a success, around 100 people recognizing international agreements basis for our existence as an organi- have since been extended; meanwhile, half . SEV has the following repres- column of seawater generate high and participated . in this area . zation is closely linked to our users the Electricity Production Oversight en ta tives on the company Board: low pressure, which makes a turbine SEV wants to be an active partner and partners . Over the past year the Board and SEV continue talks about Kári Jacobsen, Jákup Suni Lauritsen spin and generate electricity . P/F FDS in the Faroese government’s efforts Board has met and cooperate with the final wording of conditions . and Hákun Djurhuus . The Board has Two possible pilot plant locations SEV owns 20 % of this company . SEV to make its targets reality . This great a whole range of stakeholders: The In connection with the 2010 budget, elected Kári Jacobsen its Chairman . have been discussed . An application is represented on the Board by Finn responsibility is a challenge . As by Faroese Minister for Electricity Supply, SEV requested permission to raise The company’s objective is to has been submitted to the owners’ Jakobsen, the current Chairman . The far the largest individual Faroese Johan Dahl, on several occasions; electricity prices by DKK 0 08/kWh. . The supply heat, by transmitting waste association of the Nýpan outfield company’s objective is to administer energy producer SEV, in supporting The Faroese Minister for Energy, request was, however, refused by the heat, in the Municipality of Tórshavn in Miðvágur for permission to con- data such as maps and geographical the government in internationally Annika Olsen; Føroya Náttúru- og Electricity Production Oversight Board . as well as to trade and carry out other struct in Nýpuberg in Vágar, and an indexes and to provide services for bind ing commitments, has prepared Umhvørvisverndarfelag (Faroese Since then the parties have engaged in related activities . Plans are underway application has also been submitted public and private entities, as well as for potentially extensive and costly Nature and Environment Conservation protracted and in-depth talks on how to expand the company as it must to the owners’ association of the to trade and carry out other related expansions in sustainable energy . Society), represented by Kári Thomsen to interpret and organize the financial make supply available in new areas as Miðjan outfield in Sandur to con- activities . The other shareholders are SEV expects the government to and Hanus Vang; the Administration and administrative frameworks for they gradually come under construc- struct there . The owners in Vágar Føroya Tele, Landsverk (Faroese Office recognize and value its good will, for the Botnur outfield in Vágur; develop ing power production . SEV’s tion in the Hoyvík outfield, a Tórshavn rejected the application, while the of Public Works), Umhvørvisstovan and play its part in ensuring that Vestmanna Municipality; DONG Energy Board and management have repeat- suburb . Studies are also underway to association in Sandur is willing to (Faroese Environment Agency), national and local authorities toget- Representatives; Representa tives of ed time and again that it is difficult determine how more large-scale users discuss such construction further . Tórshavn Municipality and Klaksvík her tackle the challenges ahead – in the British Parliament; Íleggingargrunn - to expand in accordance with Faroese can be connected to the system . Sandur Municipality has also granted Municipality . both words and deeds . urin fyri Føroyar (Investment Fund for climate policy, if it is not possible to By reusing waste heat from the a construction permit, provided an The target is renewables account- the Faroes); the Faroese Parliament’s establish an adequate financial frame- Hjalla waste incineration plant, and agreement can be reached with the Expanding hydroelectric power ing for 75% of power prod uc tion on Rules Committee; Knud Simonsen; the work for SEV’s activities . The talks now also from the turbines at the site owners . The Building Committee for the Eiði land by 2020 . An expansion of all Electricity Production Oversight Board; have focused on presenting the condi- Sund power plant, the Faroes avoid The DKK 10 .2 million EU grant is 2 project is made up of Steinbjørn sources of renewable energy will be Sp/f Røkt; and next on the agenda is a tions the financial sector lays down for having to import a significant quantity still available; however, it requires O . Jacobsen, Pauli T . Petersen, Marin required to reach this goal . meeting with Sund Municipality . Laurie major expansions of power grids . of oil, thus the system also contributes full support for the pilot project . Katrina Frýdal and Hákun Djurhuus .

S . Fulton, US Ambassador to , The Electricity Production Oversight to keeping our CO2 emissions down . Project costs will total around DKK Steinbjørn O . Jacobsen chairs the Management and staff has also visited SEV the meeting Board is working on tendering an The tender for building a new boiler 48 million . SEV has stated that it is Committee and Henning Jacobsen is The Board is very pleased with the touched upon topics such as how SEV expansion of wind production and plant in the Hoyvík outfield has been willing to support the project with up its secretary . work SEV’s management and staff can participate in the efforts to solve has consulted SEV on the matter . launched . to 20% of this amount, however, this The North section of the Eiði 2 pro- are doing to secure a growing share the global climate problem . The phase 1 expansion can probably support hinges on certain conditions, ject has been completed and is now of renewables for the people and Furthermore the Board has visited commence this autumn . SEV will P/F SeWave which include support from the in use . It cost around DKK 63 million . industry of the Faroes . The Board many of the company’s production decide on its arrangements for the up- SEV owns 100 % of this company Faroese Gover nment matching SEV’s An agreement has been signed with has noted the high level of job plants and found that care and coming wind production tender . and its Board is made up of: Páll á financial support . Moreover the the joint venture J . K . Petersen and satisfaction at SEV, and recogn izes diligence are SEV key words . In accordance with the provisions Reynatúgvu, Niels Olaf Eyvindsson, company itself has to obtain the M . T . Højgaard for the South section that a satisfied team of employ- The Faroese Ministry of Industry and procedures of the Electricity George Lane and Hákun Djurhuus . The remaining funding before the project of the project, which is estimated to ees is a precondition for a sound has been working on updating Production Oversight Board, SEV has Board has elected Páll á Reynatúgvu can go ahead . cost DKK 135 million . A third turbine company . The management deserv- legislation on heavy current reviewed P/F Røkt’s pumped storage its Chairman . After a meeting between the comp- is also to be installed at the plant, and es praise for its active and farsighted equipment and licensing of electrical project . The company’s objective is to any and the Faroese Government is expected to cost around DKK 30 role in the efforts to further develop installers, and there have been research, develop and generate wave in October, a funding application million . the company . hearings with parties such as Subsidiaries and associate power; this includes building and runn- was submitted . The pilot project’s These expansions are funded with a The management and Board SEV and the Electricity Production companies ing wave power plants and any other destiny is intimately linked to the loan from the Íleggingargrunnurin fyri have drafted both mission and Oversight Board . The parties have activities related to wave power . The Faroese Government’s response to the Føroyar totalling DKK 218 million . vision state ments for SEV . Currently cooperated constructively and P/F Fjarhitafelagið first step is to carry out a pilot project application . On February 9 SeWave Eiði 2’s annual production will reach everyone at the company is involved aim to submit bills to the Faroese SEV owns 50 % of this company; consisting in waves rolling through a organized a Wave Power Day . It was around 17 million kWh, and the whole

2 Report from the Board of Directors Report from the Board of Directors 3 Eiði project will at completion generate limited results of the conference . more extensive repairs than initially around 60 million kWh every year . In preparing for the conference the estimated . The works are now finished SEV’s Board has decided to further Faroese Government decided to draw and the total cost amounts to DKK study expanding hydroelectric power up a Faroese climate policy . As part 8 5. million . It also turned out to be at Víkarvatn, in order to analyse this of the preparations the Ministry of the necessary to repair the stacks at project thoroughly . A budget allocation Interior appointed a multidisciplinary Station 2 at a total cost of DKK 0 8. is therefore made for these studies in working group to draft a report . SEV million . 2010 . participated in the working group . One of the turbine generators In this year’s first quarter SEV rented at the Fossá plant broke down in Developing renewable sources of three small electric cars, which were February . Repairs are underway and energy manufactured as test cars for COP are expected to total DKK 3 00. million . On June 23 last year SEV and 15 . They were tested throughout The turbine will be ready for use again DONG Energy signed a joint venture the Faroes, all those interested were in August . agreement . We will work together to given a chance to try them and there The pipes leading down to the ensure the greatest possible share of was great demand . The aim of this Fossá plant have to be sandblasted renewables in Faroese energy produc- initiative was mainly to make way for and painted this summer . SEV has tion . This is simpler and cheaper in a new modes of transport that follow contracted a Norwegian company for The past year small power grid like the Faroese one, in the wake of new and sustainable the job . which is not linked up to other grids . technology . Research fund for developing We will work towards better harness- renewable energy ing fluctuating energy sources, such Exchange of real estate between The Board has decided to draw as wind, tidal and wave, in power SEV and Vestmanna Municipality up a statute governing a fund for production . On November 12 last year the devel oping renewables . The idea is Many different points of view have exchange of real estate with Vest- to make financial support available been expressed in the public sphere manna Municipality was finally con- through application to academic about feeding wind energy into a firmed . The Municipality now owns the and professional capacity-building pump mechanism that would pump lots registered as 266a and 266k in initia tives and concrete small-scale water up to high-lying storages from Vestmanna and the buildings on them, projects that contribute to develop- where it would be used to generate namely Winther’s house, an office ing renewables . electricity . SEV felt that there was building, the old residential property á We must look to the future with insufficient up-to-date knowledge in Fitjunum and the old warehouse . SEV courage and farsightedness . We the area and therefore decided last now owns the lot registered as 216u, know the 2020 climate and energy summer to launch more in-depth which is the plot under SEV’s current challenges, but we must look even studies . The aims are to find techni- storage and workshop buildings inni á further ahead and prepare thoroughly . cal solutions and determine their Fjørð . Up until now SEV had rented this We must prepare for a world in which economies, as well as mapping and land . With the exchange Vestmanna electricity plays a much greater ranking the most suitable locations Municipality now owns a protected role than today . And, although it is for such systems . The results of these historical building á Fitjunum . Hope- an enormous challenge for all the studies are now ready and these find- fully these properties will be brought segments in the Faroese power grid, ings will be disseminated . back to life, they are ideally suited we must aim for 100% renewable Last September SEV participated in for cultural activities or local history power production on land by 2040 . the Nordic Climate Solutions Confer - initiatives . Cooperation and a common ence in Copenhagen . It was a very understanding between national and interesting opportunity to promote Production and operation local authorities are vital prerequisites SEV and catch up on what others are Power production remains unchanged for the Faroes adding its grain of sand doing . The Conference consisted of an at the moment . Total production is to completing this international task . exhibition and a series of lectures by calculated at the end of every month . SEV will inexorably play a key role important players in the field, who also Power production levels and changes in reaching this challenging, but bright participated in the panel discussions . are interesting indicators of the goal . Hákun Djurhuus, Managing Director, socioeconomic climate . represented SEV on the panel . The extensive task of completely Páll á Reynatúgvu, Chairman of the Board of Last December saw the UN COP transforming the control room system Directors 15 climate conference in Copenhagen . at the Sund plant has been completed . SEV participated and regrets the rather The Sund plant oil tanks required

4 Report from the Board of Directors Representatives for Vestmanna Municipality and SEV ready to sign the real estate exchange agreement . In front Karl A . Olsen, Mayor, (left) and Páll á Reynatúgvu, SEV Chairman .

Dwindling construction activity affects number of new electricity meters

Last year 393 new electricity meters year as opposed to 39 in 2008, in were installed, down 55 from 2008 Norðstreymur 34 compared to 40 and when 448 new meters were deployed . in Oyggjarnar 13 versus 20 . Exchange of real estate SEV’s Installation Department On the other hand, more new believes the main reason for the meters were installed in Norðoyggjar Dwindling construction activity led between SEV and Vestmanna Municipality reduction to be the decline in and Suðuroy in 2009 than in 2008 . to more than fifty fewer electricity residential property construction . In Norðoyggjar there was an increase meters being installed in the Faroes SEV now owns the plot located Inni á The agreement finally settled the totall ing 4,621 m2 . The Municipality In 2009, 136 new meters were from 44 to 59 and in Suðuroy from 26 last year than the year before . Fjørð in Vestmanna, which the comp - matter, which it has taken 23 years needs part of this property to expand installed in the Central Region (Tórs- to 30 . any so far had been leasing from to resolve . The exchange came into one of its roads, Niðari Vegur . havn), compared to 146 in 2008 . In The number of meters removed Last year a total of 2200 old Vestmanna Municipality for its activi- force at New Year . The agreement grants Vestmanna 40 fewer meters were put was also significantly higher meters were replaced with remote ties in the area . In parallel SEV’s real Pursuant to the agreement, SEV Municipality ordinary right of pre- up last year than the year before: through out the Faroes last year read meters . The preceding year estate located á Fitjunum has been takes over an industrial area of emption to SEV’s real estate Inni 93 in 2009 versus 133 in 2008 . In than the year before: 96 in 2009 as 1715 meters were replaced . transferred to Vestmanna Municipality . 5,740 m2 Inni á Fjørð, where SEV’s á Fjørð and to the buildings on it . Vágar 28 meters were deployed last compared to 77 in 2008 . In November last year SEV and the power plant is located . Simul tane- The parties do not give each other Municipality signed the real estate ously Vestmanna Municipality takes any compensation other than the exchange agreement in Vestmanna . over SEV’s property á Fitjunum exchanged real estate . SEV documentary as teaching material

Skúvoy When the documentary “Ljósbrøgd” new tanks and turbine generator (Feats of Light) was released on DVD last spring, SEV’s Board decid- Everything went smoothly when a The power plant’s roof and windows ed to present 50 copies to the crew from SEV and the construction will be replaced and the area around Faroese National Centre for Teaching company Norðhús installed two new the building tidied . Materials . oil tanks and a new turbine generator It will all be completed this summer . The presentation was made at in Skúvoy in late August . SEV’s stand at Fish Expo Faroes It only took them an hour and a Other modernizations 2009, which took place in Gunda- half to complete the task in the fine The power plants in and Svínoy dal ur in Tórshavn in May . Petur weather . have also been modernized with new Simonsen, Centre director, received The new tanks have a capacity of electrical panels and control systems . the documentaries and thanked 30,000 litres each . The old tanks from They are automatic, so it is possible to SEV for the generous gift, which the 1978 took 20,000 litres a piece . remote control them from the central Centre will use to teach secondary The works on Skúvoy also include region . and upper secondary school students making a new tank farm with an oil If there is a problem with a turbine about electricity and energy . separator and repairing the building generator or the line to Svínoy, the The 35-minute documentary housing the turbine generator . system automatically triggers another examines SEV’s history, activities and Hákun Djurhuus, SEV Managing Director, presents Petur S . Simonsen, National Centre The tank farm itself has been turbine generator . Customers will thus future plans, but also the world’s first Director, with the first of 50 copies of the SEV documentary “Ljósbrøgd”, directed by The new tanks in Skúvoy have now been journalists Kári Durhuus (middle) and Zacharias Hammer . installed . Foto: Hans Jákup Petersen . completed, but outstanding tasks only notice a very brief interruption in attempts at generating hydroelectric include fitting a steel ladder to enable power supply . power in the late 19th century . access to the tanks as well as the The plants send a warning to the Ólavur á Heygum’s pioneering the first Faroese power plants í Botni platform under them, and building a staff on duty in the central region work in Vestmanna 100 years ago is in Vágur and á Rundingi in Tórshavn, fence with a gate . when a failure occurs . of course also portrayed, along with which were both built in 1921 .

6 The past year The past year 7 Finn Jakobsen, Technical Director, presents the new control room at the well-attended reception right before Christmas last year .

conditions for energy supply and the Business School, moderator, Jens Kirk, conditions needed for renewable Chair of the Climate and Energy Policy energy to become a major share of Committee of the Danish Parliament, NCS supply . In this context Hákun Djurhuus and Ulrik Stridbæk, Economist, DONG NORDIC CLIMATE SOLUTIONS: presented the framework conditions Energy . In September last year, SEV repre- for generating and supplying electricity sentatives and other represen tativ - in a remote island society like the es of industry participated in the Faroes, as well as the GRANI joint third international trade conference, venture with DONG Energy, which, for Nordic Climate Solutions, at the example, is intended to accelerate the Bella Center in Copenhagen . Hákun electrification of the Faroese society . Djurhuus, SEV Managing Director, was The members of the panel were (from the only one to represent the Faroes left): Britta Thomsen, MEP for the out of the 70 conference speakers . Social Democrats, Hákun Djurhuus, His presentation was part of a panel SEV Managing Director, Jakob discussion focusing on the framework Bundgaard, lecturer at Copenhagen State-of-the-art control room at the Sund plant

At SEV’s largest oil-fired power control room was inaugurated on work is that the physical working plant, the Sund plant, extensive December 1 . This very room has environment be as good as possible . modernizations have been carried been the plant’s heart and soul - You here at the Sund plant are out both indoors and outdoors over since its installation 25 years ago, the backbone of SEV’s activities . You the last year and a half . They have but now it has truly been given produce half of our output; in fact, The Eiði 2 South building contract improved working conditions and pride of place . people have you to thank for every was signed in November . From job satisfaction considerably at this The room has been fully repaired other cup of coffee . So it is only left: Ole Steen Christensen, MT important workplace . and revamped . Moreover all the old reasonable that you be taken good Højgaard Føroyar, Steinbjørn O . The extensive modernizations of equipment has been replaced with care of, he jokingly stated . Jacobsen, Building Committee Chair, Stein Olvur Petersen, J&K Petersen the M4 and M5 turbine generators cutting-edge digital equipment . Contractors, and Hákun Djurhuus, were completed in May, and a few The old control room brimmed New turbine hall in the pipeline SEV Managing Director and member additional and outstanding tasks with panels and switchboards and On the same occasion, he also of the Building Committee . were handled in September . instruments . These have now all announced that SEV will begin a All electrical panels, many cables been transferred to six computer new project at Sund as part of the and other electrical equipment at screens, while whole bundles of company’s efforts to satisfy future Station 2 have now been replaced . cables have been replaced by a few electricity demand . A new turbine to Selatrað starts this summer A state-of-the-art control system network cables . hall is in the pipeline, it is scheduled Drilling has been installed for controlling and for completion in about 4 – 5 years . The construction companies MT largest section of the Eiði 2 project . prepared for the task and brought monitoring the whole plant . M1 and Total makeover Fjarhitafelagið, the Faroese waste Føroyar and J&K Petersen are now The northern section from Norðskáli on site by a trailer . Excavations are M2, which were set up in 2001 and The decision to give the control room heat transmission company, has prepar ing to start drilling for the Eiði to Svínáír was concluded by the expected to commence around July 2004, respectively, have also been this full facelift was made in the finally been connected to the Sund 2 South project . These two compan- same construction companies before 1 . The tunnel will reach a diameter fully integrated into the new system . autumn of 2008, when SEV – along plant . ies submitted the lowest tender for Christmas, and cost DKK 62 million . of around 3 m . Tanks, roofs and stacks were with the Danish company BWSC – At present 28 people work at the the project, which includes building an The southern section is scheduled Henning Jacobsen, architect and overhauled . This also goes for the began the challenging modernization Sund plant, most are mechanical 8 4. km long water-catchment tunnel for completion in early 2013 . Overall consultant, stays on as site manager . Vágur plant where the new tank of the technical equipment at the engineers and there are a few along with the stream intakes from the Eiði 2 project will increase SEV’s Given the great increase in water farm was completed . Repairs and Sund plant . unskilled workers . There are always Norðskáli south to beyond Veðranes . hydroelectric power production by volume generated by the Eiði 2 improvements are underway at the SEV’s Technical Director, Finn two people on watch in the control The construction costs amount to around 16 million kilowatt-hours . As is expansion, the Eiði plant will require Strond, Eiði and Vestmanna plants . Jakobsen, said at the reception for room, and they are very happy with DKK 76 .4 million, roughly DKK 25 the Eiði plant produces 40 million kWh . an additional turbine, expected to the inauguration of the new control the new working environment . Jákup million less than the estimated DKK The tunnel to Selatrað will be cost around DKK 25 to 30 million . The crowning glory room; that the precondition for Sørensen is plant superintendent at 102 million . excavated with one of SEV’s tunnel The plant is already equipped with To cap it all off a new soundproof job satisfaction and wellbeing at Sund . Eiði 2 South is the second and boring machines, which was recently two turbines .

8 The past year The past year 9 Year 9 pupils from the Vágur school at SEV’s teaching facilities in Tórshavn .

Suðuroy and the Faroese College of free for one week each . Around 200 Energy advice for organizations: Education: people take us up on the offer every We organized an energy advice Students from the Public Health year . At the same time they receive evening at SEV for an organization . School usually visit SEV once and informational materials on how to About 25 of its members attended are taught about electric power as cut household electricity use . and enjoyed this cosy get-together well as using and saving electricity with good advice . in ordinary households . This was Advice over the phone: Conferences, sales conventions also the case in 2009 . A group of In February and March the Energy and exhibitions: students from the Faroese College of Advice Service receives a great SEV attends exhibitions alone Education also visited us for a lecture number of calls from people and with others – we also lend parts on using and saving electricity . who seek advice on how to save of our exhibition to others . We lent electricity or make better use of the equipment for the Tórshavn City Student projects: KWh they buy from SEV . Around 200 Council Environment Week in May, With the UN Climate Summit COP- people phoned in for advice in 2009 . we visited the Nordic House with our 15, in Copenhagen in December exhibition on Women’s Day, March 2009, many students were doing Home visits: 8, and again in August, when the

projects on electricity use and CO2 Occasionally something particular is well-known Danish life-style expert emissions in particular . This meant going on, which a household simply Kristine Feldthaus spoke there . We that many students came to SEV for does not understand . In these cases have also lent part of our exhibition materials and presentations about the energy adviser makes home to the Faroese Museum of Natural the subject . visits, often to older people, to take History during the autumn break, measurements, explain how things when the Faroese museum festival Borrowing electricity gauges: add up and teach people in their takes place . We also participated at In late January, when SEV bills all own home . Eight home visits were the sales convention in Skála in the 2009 its customers, there is a scramble made in 2009 . autumn, where 200 people stopped Energy Advice Service to borrow electricity gauges from by for a chat about electricity and Kristiana Rein, SEV energy advisor: up of four physics teachers from children from the first day of SEV . Customers can borrow them for received materials on electricity use . different parts of the country . school to switch off the lights when 2009 was similar to previous The contest was first held in everybody leaves a room . years at the Energy Advice Service, 2008, when a form from the activities included: Ziskatrøð School won the main prize . Lectures and energy advice at This contest runs for seven weeks upper secondary schools: Many at SEV Electricity project days for year 9 and the forms are set physics and We were invited to give lectures and anniversaries pupils (aged 15 to 16): maths questions . They also have advice at upper secondary schools This activity has been running for to calculate/measure the electricity six times . A few weeks before our Last year was marked by many around 10 years now, and in 2009 different appliances use and make visit we lend these students a class anniversaries at SEV . No fewer than The married couple around 600 pupils from 28 forms calculations . They are asked about set of electricity gauges, which they seven employees celebrated between Edith and Kristian visited SEV’s head office at Landa- energy saving advice and have to use to measure electricity use at 25 and 45 years with the company! F . Guttesen from vegur 92 . This activity commences make suggestions . All forms that home and make calculations . They were (years of service in Vestmanna . when the school year starts in Aug/ handed in the final creative project brackets): Sep and continues to early December, were given the opportunity to present Technical schools: Páll Hansen (35), Árni Nielsen (45), when there is a break . It starts up at the Nordic House in Tórshavn . In The Technical School in Tórshavn Daisy Petersen (25), Kurt K . Andersen again in January and runs to Easter, by 2009 the year 7 form from Velbastað - visits SEV with its students on (30), Jákup Sørensen (30), Páll Svartá which time nearly all year 9 forms in ur won the main prize – an April week- foundation courses in technology as (35) and Pól Joensen (25) . the country have visited us . end trip to Iceland for the whole form . well as apprentice electricians . The Congratulations to all seven of you! school visits every year and usually Linesmen Páll Svartá in Saksun been part of the team that has carried served SEV for over 20 years, stepp- Physics contest for year 7 pupils All year 1 forms receive a letter twice a year . Students receive and Jákup Brekká in Hvalvík retire SEV forward over all these years, and ed down as storage supervisor Inni (aged 13 to 14): from SEV: a special lecture on what SEV’s this year . Páll turned 70 on March 26 we thank them for that . á Fjørð in Vestmanna at around the For this contest SEV sought the When school starts all year 1 forms responsibilities are and good advice and Jákup will be the same age on Edith Guttesen, who worked same time, however, he still works at advice and organizational help of in the Faroes receive a letter from on electricity, which they, in turn, can August 21 . Jákup and Páll have served in SEV’s bookkeeping for over 20 the storage . a “support group”, which was made SEV with materials and drawings for convey to clients . as SEV linesmen for 38 and 36 years years, retired last year . Her husband, Jonsvein á Rógvu is the new the children . SEV wants to encourage The Public Health School in respectively . These two have certainly Kristian F . Guttesen, who has also storage supervisor .

10 The past year The past year 11 Hákun Djurhuus, SEV Managing Director, and Charles Nielsen, DONG Energy Director of Development, shake hands after signing the joint venture agreement . Far left: Páll á Reynatúgvu, SEV Chairman, and far right: Johan Dahl, Faroese Minister for energy supply .

The SEV working group, which is studying the possibility of reusing hydroelectric power by using a pumping system . From left: Herluf Mortensen, Tove Brink, Terji Nielsen, Henning Jacobsen, Anders Nedergaard-Hansen and Magnus K . Magnussen .

This electric car added to the atmosphere at the official signing of the joint venture agreement between SEV and DONG Energy . Minister Johan Dahl became the first person to take the sleek and silent little Japanese car for a drive in the streets of Tórshavn . SEV and DONG Energy in a pioneering joint venture four working groups with 4-5 representatives from each company The goal is to develop and increase watching over the treasure, which these efforts shall benefit both the to study issues related to wind the share of sustainable energy on Sjúrður was destined to find . Faroese and a continuous European turbines, wind forecasts, conditions the power grid . These experiences GRANI was the clever grey steed power grid in the future . for electric cars and a new control will also benefit other countries and who helped his master slay the The Faroes will become a room at SEV´s main power plant in and also exercise a degree of control hydroelectric, wave, tidal, solar and parts of the world . dragon, so Sjúrður could win the laboratory for these trials, and will Tórshavn . over customer appliances . hybrid wind/hydro with a pumping The most significant development treasure, which turned out to contain thus have an important role to play The wind turbine group will try A board has been appointed system . for SEV since the last annual general so much wisdom and make Sjúrður in the international pursuit to solve to adapt existing and future wind to monitor this work, it has five The new control system must also meeting is probably the joint venture so omniscient that he even learned the world´s energy and climate turbines and technology to the members: Hákun Djurhuus and Finn be capable of interconnecting with agreement between SEV and to understand birdsong . problems . Faroese power grid and climate . Jakobsen (representing SEV) and appliances such as heat pumps and Denmark´s biggest energy company, - The agreement we have SEV has decided to increase the The weather forecast group will Charles Nielsen, Tommy Mølbak electric cars and optimizing output DONG Energy, which will initially run signed will also take us on a long share of sustainable energy, e .g ., draw up a weather forecast system, and Leo Enrico Jensen (representing at the production units . to 2013 . challenging quest and we will wind energy, in its power production, which can contribute to optimizing DONG Energy) . The agreement known as GRANI have to wrestle the mighty forces and with its know-how in the area, production from wind and hydro Project leaders have also been Smart Grid was signed at a formal event in of nature itself . Hopefully these DONG Energy can contribute to energy . appointed: Terji Nielsen (SEV) and The general project title is “Smart Müllers Pakkhús in Tórshavn on June challenges will makes us too wiser accelerating this process . The electric car group will study Charles Nielsen (DONG Energy) . Grid” emphasizing intelligent 23, in the presence of representatives and more clear-sighted and bring us DONG Energy, on the other hand, how to integrate electric cars into control of the power system, which of the political system, public and knowledge that will benefit coming wants to conduct swift reliable trials Faroese society and how they can New control system generates interplay between the private institutions, as well as both generations, said SEV and DONG of new technology and concepts and contribute to increasing the share of The new control room project is different types of power production companies . Energy in a joint statement when the remote isolated Faroese electric sustainable energy . How, when and underway and the aim is to have a and use by households and industry . they signed the agreement . power system is practically tailored where to recharge the cars? How to concept ready in 2013 . Terji Nielsen, project leader and The legendary Grani for the purpose . charge for recharging? This will be a modern control SEV engineer, states that the first The joint venture is named after the Focus on sustainable energy The control room group will draw system capable of managing and set of preliminary results from the legend of Sjúrður Sigmundarsson, In the agreement SEV and DONG Four working groups established up a proposal for an up-to-date controlling power production with different studies will probably be who slew the Long Dragon at Energy commit to focusing on Since signing the agreement, control room, which can control all both existing and new energy available later this year . Glitraheiður . The dragon was sustainable energy . The results of the parties have established production units, new as well as old, production methods, such as: wind,

12 The past year The past year 13 From SEV’s briefing last September about plans for electric cars and the conditions offered by the Faroes .

There has been a surge in interest in Hard-working SEV’s website over the past year . website SEV’s website has been bustling with interesting . It is, for example, also activity over the past year . This has available in English now . substantially increased interested in In addition to SEV’s history and the page, while it is also quoted time organization, the English site also and again by the press as well as contains information about the other websites and news portals . power grid in the Faroes, including Since early January last year, hydro, wind and diesel power plants, customers with remote meters the website has been updated electrical installations and other have been able to monitor their several times a day with relevant relevant matters, such as the GRANI energy use 24-7 on the website . domestic and foreign news about joint venture . Furthermore all annual Anyone interested can now also power supply, the climate and the reports dating back to 2001 are daily monitor the proportions of the environment . Great effort is also available on the website . different energy sources used to being put into informing people of This enables our international generate electricity . The pie chart on SEV’s ongoing works in the Faroes . partners and other foreigners the front page of SEV’s website is Industry and authorities New services and options made interested in Faroese electric power refreshed every 5 minutes . briefed on plans for electric cars available on the website over the issues to benefit from the website SEV’s IT Department maintains last year have also contributed too . and manages the website . to making it more exciting and Since late November last year, SEV and Dong Energy aim to – as part of the GRANI joint venture – encourage car manufacturers to use the Faroes as testing ground for developing electric cars . The Faroes are considered unchanged in 2009 exceptionally well-suited due to their Power production size and climate conditions . Total power output last year was SEV therefore organized an virtually the same as the previous information session last autumn year . When SEV´s Operations for the car company Akstovan, Department calculated total produc- the Faroese Ministry of Trade and tion at New Year, the result was a Industry and other invited guests . fraction under 2008 production at SEV presented these plans and the minus 0 1%. . Last year’s production conditions required to the guests . in the central region was down At the same time car company Two of the converted Citroën C1-electric cars charging at the recharge point in SEV’s yard at 0 9%. compared to 2008, whereas representatives were asked to Landavegur in Tórshavn . production in Suðuroy was up 7 8%. . inform their partners abroad of these Production totalled 275,527 MWh opportunities . DONG Energy representatives is During the first quarter of of which around 39% was generated All parties at the meeting agreed currently studying how the electric this year, SEV conducted a trial from hydro and wind and roughly that electric cars will gradually car can become a natural feature in cooperation with institutions, 61% from oil, compared to 39 5%. replace petrol and diesel cars, of plans to increase production companies, local authorities and and 60 5%,. respectively, the year and that the authorities and other from sustainable energy in the private people . SEV tested three before . Last summer´s prolonged drought led to a slight dip in power production from sustainable stakeholders must therefore prepare Faroes . This, for example, requires a converted Citroën C1 electric cars, Hydroelectric production fell energy . for the changeover . The parties study of the power grid as well as which it borrowed for the purpose 3 6%. compared to 2008, especially agreed to meet regularly to brief determining how to charge for power from Danish rental company Sixt . because of the unusually dry summer . and in 2008 Spf . Røkt´s production year totalled that of an average each other about developments in used by electric cars . SEV plans to repeat this as soon Wind energy production jumped was unusually low due to different year . the area . The plan is to present the first as the first real electric cars hit the 15 7%. for two reasons: the winds mishaps, which were remedied that Thermal production rose 0 .7% in A working group with SEV and preliminary results later this year . market . in 2009 were better than in 2008; same year . Røkt´s production last 2009 .

14 The past year The past year 15 SEV supports the government’s climate policy

SEV wants to be an active partner in the government’s efforts to make its climate policy targets reality .

Demands for greater global solidarity Inside the new substation . The Trongisvági power station in energy production and emissions are growing . The Faroes should participate in such binding international New in Trongisvági cooperation and SEV supports substation the governments’ recognition of The new 20 KV substation was build a new station – and this was substation much easier than it would international agreements in the area . inaugurated at the Trongisvági plant a wise choice, says Heri Mortensen, have been otherwise . Páll á Reynatúgvu, SEV on November 1 . The station is the engineer at the Production - There is no doubt that we will Chairman, clearly stated this at pivot of the power grid in northern Department . be following this same procedure in the extraordinary annual general Suðuroy . The new station was fully future, says Heri Mortensen . meeting in November . The old switches dated back completed and tested before work He emphasized that SEV has to the mid 60’s and were in poor began to transfer the high voltage made it its objective to be an active condition . Instead of simply replacing lines to the new station . This made partner in the government’s efforts the old switches, SEV decided to the move from the old to the new to make its climate policy targets reality .

Ready to take on great challenges Annika Olsen, Minister for climate and energy affairs, and Páll á Reynatúgvu, SEV Chairman, With this in mind, SEV has prepared photographed last autumn after an information session at SEV about the Faroese climate One in four meters for extensive and costly expansions policy . now included in the remote reading system in sustainable energy and therefore hopes and expects the government the share of renewables in power The parliamentary resolution also to recognize and value its good will, production . requires the government to take the The country-wide effort to replace participating in the system can – as and play its part by making sure necessary steps to draft a proposal all old meters is on schedule . To mentioned in another article – that national and local authorities Partners in drawing up a climate on the legal framework required to date (01/03/10) 5,500 meters have monitor their electricity use and bill together tackle the challenges ahead policy carry out the will of the parliament . been replaced, i .e . roughly a quarter on SEV’s website . – in both words and deeds . SEV’s Managing Director was last Furthermore the resolution of all meters installed in the Faroes, SEV aims to read all Faroese SEV’s target is that renewables year asked by the government to requires the minister for climate according to SEV’s Installation meters remotely by 2010 . Three shall account for 75% of power participate in the working group that affairs to submit a report on Department . people are dedicated to replacing old production on land by 2020 . drew up a draft climate policy for the progress towards the emission This system frees SEV from meters with remote reading enabled As part of the measures to Faroes, which the parliament later reduction targets every other year having to go out and read each meters . Around 2,500 meters are achieve this, SEV aims to improve took up at a plenary session . – starting from the 2011-2012 individual meter . replaced annually . This is a 10-year storage of energy from variable In October the Faroese Parliament session of the Faroese Parliament . The new digital meters are project, which began in 2006 and sources, such as wind, tidal and unanimously passed a proposal from In accordance with the connected to a remote metering is estimated to cost around DKK 25 wave power in power provision . all parties in parliament, based on parliamentary resolution the report system, which enables SEV to million in total . The joint venture between the climate policy, to cut Faroese shall also analyse the possibility

calculate electricity use directly at SEV and DONG Energy is of vital CO2 emissions by at least 20% by for further increasing the domestic its head office at Landavegur 92 in SEV plans to read all Faroese meters importance to these efforts, because 2020 compared to emissions in emission reduction targets . Tórshavn . Furthermore customers remotely by 2016 . its objective is precisely to maximize 2005 .

16 The past year The past year 17 SEV at COP15 Both SEV’s board and management with the COP15, in addition to On the other hand, the Faroes did visited Copenhagen during the UN the Bella Center itself, of course, reach an agreement with Denmark Climate Summit there in December . where the actual talks about a new about the explicit mention of Faroese SEV representatives along with international climate agreement were climate targets in any new climate Faroese government representatives underway . agreement, in line with demands met with the management of Unfortunately no actual agreement made by both the Faroese Parliament Denmark’s top energy company, was reached in the end . The parties and Government . A similar agreement DONG Energy . They discussed simply issued a declaration called the was also reached between Denmark common interests based on the “Copenhagen Accord”, according to and Greenland . GRANI joint venture, which the which each country shall individually The UN intends to make a fresh parties signed last June and which is try to prevent the average global attempt to reach a politically and discussed further in another article . temperature from rising by more than legally binding climate agreement The SEV representatives also two degrees . However the Accord in Mexico in December this year . The visited several interesting exhibitions contains no binding demands for the agreement is to succeed the Kyoto put on in Copenhagen in connection next 10 (2020) or 40 (2050) years . Protocol, which expires in 2012 .

The world’s heads of state and government tried to the very end to cobble together a new climate agreement in Copenhagen, alas in vain . Photo: Susan Walsh/AP

DONG Energy invited SEV and Faroese government representatives for a lunch meeting at the Nimb in Tivoli, where topics such as the GRANI joint venture as well as oil and gas explorations in the Faroes were discussed . From left: Arne Poulsen, Permanent Secretary of the Faroese Ministry of Trade and Industry, Páll á Reynatúgvu, SEV Chairman, Johan Dahl, Faroese Minister for electricity supply and oil affairs , Anders Eldrup, DONG Energy CEO, Hákun Djurhuus, SEV Managing Director, and Charles Nielsen, DONG Energy Director of R & D .

SEV and Faroese government representatives at DONG Energy’s Avedøre plant . From left: Kári A . Jacobsen, Pauli T . Petersen, Steinbjørn O . Jacobsen, Johan Dahl, John P . Danielsen, Marin Katrina Frýdal, Terji Nielsen and the guide from DONG Energy . 18 The past year The past year 19 Age – all employees 2009 “Ársins herðaklapp 2009” award was handed to Jákup Brekká in Hvalvík . He has been a SEV linesman – and 30 lines master for a time – for almost 40 years . 25

20 Excursion to on June 4 15 The Employee Association arranged 10 the annual employee excursion on June 4 . We all met on the quay in 5 Sørvágur, and sailed from there 0 along the beautiful west flank of

26-30 31-35 36-40 41-45 46-50 51-55 56-60 61-65 25 years 66 years Vágoy out to Koltur, where we were and younger and older given a guided tour of the island . Most employees scaled Høgakoltur, Length of service – all employees 2009 while some stayed behind to light 60 the grill, so everyone could get a bite before the party headed home 50 via Gamlarætt . The harmonica and 40 guitar were of course present and spirits were high . 30

20

10

0

0-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 41-45 46-50

hiring . Jákup is always ready to give a hand when he is called upon, no matter what time of day or night . He is hard-working and enthusiastic . Employee He is never afraid to face and tackle Association, a new challenge . He is always the first person at work . If he has made an appointment, it will be kept . He is employee Employee Day November 27 in with an employee award “Ársins always kind and in a good mood, and days Tórshavn herðaklapp” for a few years now . to top it all off he is good company” . At the Employee Day on November This is one of the highlights of the Jákup Brekká was then called 27, which this time took place in Employee Day, which the Employee up to receive a gift, flowers and a employee the Tórshavn Theatre, the Employee Association – along with the HR certificate in recognition of the 2009 and events Association general meeting was Department – organize in November . employee award . convened and it re-elected the Board . This year it was celebrated at the Oluffa undir Kletti: the Hósvík village hall on April 30 . Theatre in Tórshavn . Christmas celebration The activities included presenting The day’s agenda also included The 2009 award was handed On December 4, the Employee The members of the Employee the new working clothes to a management briefing . Hákun to Jákup Brekká in Hvalvík . He has Association organized a Christmas Association Board are Anna Vang, the employees . The Employee Djurhuus, Managing Director, ended been a SEV linesman – and lines dinner at the local football club Otto West, Karsten Hansen and Association and HR Department the day with a very interesting master for a time – for almost 40 premises in . Robert McBirnie Sjanna Hentze . The first event they had worked together to set up a presentation on development in years . Employee Association and provided the entertainment, Santa organized in 2009 was a Shrovetide new work clothes scheme, which practice . Hákun mentioned how management representatives decide Claus paid a visit and the Employee celebration at the Tórshavn plant was implemented after the summer important mission, vision, strategy together who is to receive the Association also prepared a fun quiz . and Shrove was also celebrated in holidays . and values are and promised that employee award . They choose from The 2009 children’s Christmas Skálabotnur and Suðuroy . these would be drafted for SEV nominations submitted by employees . party took place on Thursday The Employee Day program also before the 2010 summer break . December 10 at SEV’s head office . Employee Day April 30 in Hósvík included a management briefing, When explaining why Jákup Brekká As in previous years, head office The Employee Association, along and Diana Borgnýardóttir gave a Employee award 2009 was awarded this honour it was said, employees arranged it . Santa Claus with the HR Department, also presentation on communication . SEV has been recognizing employees that „this man is a workforce, whom visited and the children received organized the Employee Day at who deserve special recognition other employers can only dream of presents .

20 The past year The past year 21 Hákun Djurhuus handed a fully equipped state-of-the-art bicycle to an excited Tummas Joensen . An award for crossing the Hvalvík mountain pass to and from work, a two-hour walk each way .

who have participated in the Faroese Health checks Mohr gave a talk on exercise . These Flag Day Run and Public Health Last September company-wide were very interesting and the Run, for example by paying their health checks began . Malan Egholm management continues its efforts to registration fee . from the Faroese Public Health offer the employees options, which Committee was in charge of the can improve their health . Outdoor Week checks . She was also in charge of In week 22 the Faroese Public the country-wide health checks, Health Committee organized the which the authorities launched last Safety Outdoor Week . The aim was to year in order to determine the actual get people to leave their cars and state of the Faroese population’s SEV is an advanced company, which walk to and from work . SEV fully health – and SEV’s employees prioritizes safety and the working supported the initiative and brought received the exact same checks . environment highly to everyone’s it to the employees’ attention . In These were offered on a voluntary benefit . conjunction with the Outdoor Week basis and 112 employees decided SEV organized a competition . It ran to participate . The aim was first and Safety initiatives from Monday morning to Friday, foremost to allow employees to get In 2009 SEV’s Safety Committee each time the employees walked to know their own state of health . has, among other things, worked to or from work they received one on procuring adequate safety point, which was also a lottery ticket . At the Employee Day on November equipment and drafting a driving The condition was that they had to 27, Malan Egholm presented policy . The Committee has also walk for at least 15 minutes . When the results of the checks . In brief worked on implementing a system the competition ended at noon on they indicated that two-thirds of for employees to report “near May 29, all the lottery tickets were the participants had acceptable misses” in order to improve safety collected and in the afternoon eight levels of cholesterol . That 27% of at the workplace . SEV “borrows” its prize-winners were drawn . the participants smoked, that the employees from their families, and Kristian Thorleifsson, who is a average BMI was slightly elevated therefore wants them to return home linesman in Tórshavn, won the main and that the fat percentage was too in the same condition they were in prize, a bicycle . high . Several people were also told when they left for work . that their blood pressure was too Two hours – each way high and were asked to go see their Personal injuries One particular employee really stood doctor for further tests . Although SEV works systematically Health, safety and out for his special participation in the on safety, and SEV’s vision is cero Outdoor Week . This was 56-year-old Presentations on diet and injuries, it is unavoidable that injuries Tummas Joensen in Skála . Every exercise can happen . Below is the number morning he would leave his car in On the same Employee Day Jóhanna of injuries, which led to one or more environmental issues Hvalvík and brave mountains and á Tjaldrarfløtti gave a presentation days off work in addition to the Annika F . Berg, health, safety and scheme has been in place for a few sign-up for a three to six month valleys to and from his workplace on healthy food habits and Magni day when they were sustained environment manager: years and it was expanded in 2008 . subscription at fitness centres in in Vestmanna, where he manages It can be difficult for employees Tórshavn, Klaksvík orTvøroyri . the Fossá plant . Crossing the Hvalvík Personal injuries 1996-2009 On December 17 SEV formulated who work shifts to exercise regularly . mountain pass would take two hours a Health, Safety and Environment Therefore SEV has installed exercise Walking group – each way . SEV’s management Injuries Policy (HSE), which is publicly equipment at workplaces, with shift The employees at the head office in felt that this was such a great 4 available on SEV’s website www . work . In late 2008 regulations on Tórshavn took the initiative to go for achievement, that it could not go sev .fo and has been posted at all sports and regular physical exercise walks after work once a week . They unnoticed . Recognition came on the 3 workplaces came into force . In summary, they went on several walks along the so- morning of June 12, when SEV’s translate into SEV supporting its called Horse Trail – between Hotel Managing Director arranged to meet 2 employees by paying for half of Føroyar and Norðasta Horn . They Tummas in Kollafjørður . There Hákun Health their expenses on sports and similar also walked to Gulin, old Hoyvík and Djurhuus handed an excited Tummas 1 activities, up to a maximum of other areas in and around Tórshavn . Joensen a bicycle fully equipped In 2009 SEV focused more on DKK 1000 per year . When these with all the latest gear . It was, of 0 Year employee health . A workplace fruit regulations entered into force, the SEV sponsorship course, accompanied by a matching employees were offered a group SEV has also sponsored employees, bicycle helmet . 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

22 The past year The past year 23 Environment The main impact SEV operations have on the environment Below is an illustration of the main environmental impacts of SEV’s Emissions: power production activities: CO2, SO2, NOx, heavy Regular electricity production metal particulates takes place at thirteen plants generating according to demand . Of these thirteen, three are large Energy use: Production: thermal plants: the Strond, Sund Own electricity use Electricity and Vágur plant . SEV has six Heavy fuel oil Waste heat hydroelectric plants: the Strond, Gas oil Eiði, Fossá, Mýra, Heygur and í Botni Gasoline/Diesel Sludge: plants . It furthermore has five minor Oil residue plants, which supply power to Fugloy, Water and Wind Mykines, Koltur, Skúvoy and Stóra Refuse: Dímun . Metal Photo 1: Tórshavn Municipality’s equipment was used to Photo 2: Bark was spread over the oil, and then the oil- skim the oil from the ocean surface and pump it into tanks . contaminated sand and bark were dug up and disposed of . Moreover SEV has four wind Supplies: Paper/rags turbines in the Nes outfield on Cleaning solutions, Chemical residue Eysturoy . oil and chemicals Insulation remnants Waste Environmental accident Tórshavn Municipality was in charge SEV’s activities generate a great On April 14, 2009 there was an oil of the recovery operation . SEV is Emissions deal of waste . Much of this waste leak at the Sund plant, which lead to very pleased that the cleanup was Burning fossil fuels has one of is buried and recycled . Some waste, oil spilling into fiord . so successful that the spill left no Waste water from the greatest impacts on the oil separator including chemical residues, is sent The accident occurred when traces . environment . Most of SEV’s for special processing . diesel oil was being pumped from a

CO2 emissions stem from oil Thermal discharge / Most of the waste recycled is storage tank into a day tank . Following the incident SEV has made consumption in production . The seawater for cooling used oil, which is handled by the Measures were immediately put in significant improvements, in order to second largest source of SEV’s Faroese waste disposal company place to tackle the spill . The cleanup prevent any repeat . The measures emissions is oil consumption Water from turbines IRF . Iron and metal also account for went well, because the wind was include a new safety system to for heating old buildings and a large share of the waste . blowing straight into Kaldbaksbotnur prevent over-pumping along with turbine generators, the third is oil and gathered all the oil in one place . new alarms . consumption in transport .

CO2 emissions 2009 Environmental approval Waste 2008-2009 Entry into force Environmental approval of the Sund power plant March 11, 2004 Waste Environmental approval of the Sund bunkering system . Annex to the approval of the Sund power plant . March 23, 2006 1500 Environmental approval of SEV’s wind turbines in the Nes outfield May 14, 2004 1200 2008 2009 SEV has applied for environmental approval of the Vágur plant and for a 900 Oil for heating (build. and renewal of the Sund plant’s environmental approval . generators); 852 tonnes CO2 Oil for transport; 600

230 tonnes CO2 Oil for production; 300 112.750 tonnes CO2

Total emissions: 113.787 tonnes CO2 0 Total production: 275.527 MWh Incineration (m3) Landfill (m3) Special processing (kg) Recycling (m3) CO2 per kWh: 413 g/kWh

24 The past year The past year 25 Failures per year

Total

200 197

150

119

100 91 83 79 77 75 64 53 54 54 48 50 43 40 35 39 33 35 29 28 32 Laurie S . Fulton starts one of the water turbines at the Fossá plant, while Hákun Djurhuus presents Laurie S . Fulton with a Pól Joensen, Hákun Djurhuus and Páll á Reynatúgvu watch attentively . gift from SEV – a glass tray, shaped as a klipfish . 0 Year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 The U S. . ambassador 32 interruptions visits SEV on the high-voltage grid

When the U .S . ambassador to In 2009 there were 32 failures on In the control room at the Denmark, Laurie S . Fulton, visited SEV’s high voltage grid . However Fossá plant . Emil við Á, Types of failures 2009 the Faroes in March to familiarize mechanical engineer (far unlike other years there were only six herself with Faroese issues, she also right), was on duty that day . failures on the overhead power lines . Total = 32 paid a visit to SEV’s Fossá plant in This is because the winter went Vestmanna . The Faroes serve as a laboratory After staying for an hour and a smoothly and also because many Cable failure 9,4% Following a guided tour of the plant, for this research and Laurie S . Fulton half, much longer than planned, overhead power lines have been Power plant failure 25,0% which included a chance for her to also considered this an excellent she happily thanked her hosts and replaced by cables . The figures also Kaðalfeilur 9,4% start one of the water turbines, SEV’s idea, taking into account the hurried on with her busy agenda . reflect a systematic maintenances management gave a presentation country’s size and location . effort, says Jón Nielsen, director of about the Faroese electric power SEV’s Operations Department . system and future plans in the area . Work on running 0 4. KV cables The ambassador was fascinated by instead of overhead power lines Transformation the fact that the Faroes are among continues . The last overhead lines in substation 9,4% Europe’s top five countries when it Tvøroyri will be gone in three years . comes to generating power from Work on running 10 and 20 KV renewable energy . cables between villages is also She also found the studies progressing as scheduled . Other failure 12,5% Line failure 18,8% currently underway of the - In Sandoy and Vágar cabling is so possibilities for a hybrid hydro-wind advanced that you will not see any pump system as well as wave overhead lines there in a few years and tidal energy highly interesting . either, states Jón Nielsen . Reason unknown 15,6% Moreover she welcomed the GRANI He also says that the fall joint venture between SEV and in construction activity on the DONG Energy, which, in addition to Faroes has meant more time for Tórshavn have been replaced . The old was put in place around the same increasing the share of renewables maintenance, which will also be pylons, which were put up in the mid time as that between Vestmanna and on the Faroese power grid, is needed over the coming years . 60’s, were severely weathered . Tórshavn, so several of those pylons intended to support and develop Pól Joensen, Fossá Plant Manager, Páll á Reynatúgvu, Chairman, Laurie S . Fulton, Several pylons on the 60 KV power The stretch of overhead lines will also have to be replaced over the global electric power systems . Ambassador, Hákun Djurhuus, Managing Director, and Finn Jakobsen, Technical Director . line stretch between Vestmanna and between Vestmanna and Skálabotnur coming years .

26 The past year The past year 27 Distribution grid Engine overview at 31/12 2009

Location Engine MW Hk Engine type Engine manufacturer Powered by Year Age Hours

Botnur T1 1 1 .360 Pelton water turbine Voith Water 1965 44 173 .211

Botnur T2 2 2 .719 Francis water turbine Voith Water 1966 43 132 .904 Fugloy Svínoy Viðoy Borðoy Kunoy Kallsoy Eysturoy Vágoy Mykines Nólsoy Koltur Hestoy Sandoy Skúvoy Stóra Dímun Suðuroy number Total Eiðisverkið T1 6,7 9 .109 Francis water turbine Voith Water 1987 22 80 .332

T2 6,7 9 .109 Francis water turbine Voith Water 1987 22 74 .818 6kV Transmission Eiðisverkið 1 2 3 stk . substations M1 0,15 204 Wind turbine ( fixed pitch) Nordtank Wind 1993 16 101 .961 10kV Transmission Neshagi 1 6 32 3 7 64 1 16 50 180 stk . substations M2 0,66 897 Wind turbine ( variable pitch) Vestas Wind 2005 4 28 .364 20kV Transmission Neshagi 2 109 74 28 1 214 stk . substations M3 0,66 897 Wind turbine ( variable pitch) Vestas Wind 2005 4 29 .637 60kV Transmission Neshagi 1 2 4 7 stk . substations Neshagi M4 0,66 897 Wind turbine ( variable pitch) Vestas Wind 2005 4 23 .491 Total areas 1 1 6 37 3 7 111 142 28 1 1 16 50 404 stk . Skopunarverkið M1 – M3 1,826 2 .483 4-T Mercedes og Deutz Diesel 1984

Smáverk 1,7 2 .311 4-T Deutz, Mercedes, Perkins Diesel 6kV Transformers 2 4 6 stk . Strond M2 2,3 3 .127 4-T KV 12 SS Mirrleese Blackstone Diesel 1965 44 78 .756 10kV Transformers 1 6 38 3 7 74 1 17 57 204 stk . Strond M3 3,6 4 .895 4-T 12 M 453 K Krupp Mak Diesel 1982 27 43 .804 20kV Transformers 4 127 96 32 1 3 3 266 stk . Strond T1 1,4 1 .903 Francis water turbine Sulzer Hydro Water 1998 11 36 .263 60kV Transformers 1 3 12 16 stk . Sundsverkið M1 8,1 11 .013 4-T 9M43C Caterpillar/MaK Heavy oil 2001 8 30 .639 Total areas 2 1 6 47 3 7 130 182 32 1 1 20 60 492 stk . Sundsverkið M2 8,1 11 .013 4-T 9M43C Caterpillar/MaK Heavy oil 2004 5 25 .277

M3 5,7 7 .750 4-T KV16MAJOR Mirrleese Blackstone Heavy oil 1978 31 78 .360 0,4kV cable distribution Sundsverkið 13 20 78 492 29 29 1558 2275 504 7 38 10 214 11 827 6105 stk . cabinets Sundsverkið M4 12,4 16 .859 2-T 12 L55 GSCA B&W Götaverken Heavy oil 1983 26 141 .365 60kV line 1,02 38,09 42,99 82,10 km . Sundsverkið M5 12,4 16 .859 2-T 12 L55 GSCA B&W Götaverken Heavy oil 1988 21 114 .492 60kV cable 0,09 13,61 14,81 28,50 km Tvøroyri M1 2 2 .719 4-T Nohab Diesel 1973 36 85 .928 20kV line 66,48 60,04 12,21 12,03 150,75 km Vágsverkið M1 2,7 3 .671 4-T 9 M 453 Krupp Mak Heavy oil 1983 26 105 .267 20kV cable 11,46 132,91 138,22 34,90 0,56 0,63 4,30 322,98 km Vágsverkið M2 2,7 3 .671 4-T 9 M 453 Krupp Mak Heavy oil 1983 26 106 .568 10kV line 3,53 17,36 13,84 11,59 9,58 7,87 17,33 53,26 134,35 km Vágsverkið M3 4,32 5 .874 4-T 9M32C Caterpillar/MaK Heavy oil 2004 5 34 .173 10kV cable 0,52 3,47 30,74 0,16 7,23 67,26 1,47 28,11 56,39 195,35 km Vestmanna Fossá 1 2,1 2 .855 Pelton water turbine Maier Water 1953 56 198 .972 6kV line 2,19 7,17 9,36 km Vestmanna Fossá 2 4,2 5 .710 Francis water turbine Voith Water 1956 53 310 .694 6kV cable 0,17 0,07 0,16 0,40 km Vestmanna Heygav . 1 4,9 6 .662 Francis water turbine Voith Water 1963 46 196 .146 0,4kV line 0,76 1,20 0,90 4,13 6,99 km Vestmanna Mýruv . 1 2,4 3 .263 Francis water turbine Voith Water 1961 48 324 .101 0,4kV cable 1,10 3,62 11,56 60,15 2,75 3,00 198,19 275,45 55,57 0,55 3,45 0,38 1,76 28,84 0,94 94,71 742,00 km

Total power: 101 MW Remote kWh meters 59 66 112 115 80 114 1307 1997 742 52 172 151 54 2 488 5511 stk . kWh meters without 137 .833 Hk 3 9 162 2388 2 6 3932 8412 858 1 6 2 43 721 2 2422 18969 stk . remote reading Total kWh meters/area 62 75 274 2503 82 120 5239 10409 1600 53 178 2 43 872 54 4 2910 24480 stk .

28 The past year The past year 29 Invoiced electricity sales 2005-2009 in MWh Oil consumption in tonnes 1988-2009

Total Total Total Total Total Change Consumer sectors 2005 2006 2007 2008 2009 2008-2009 Tonnes Gas oil Heavy fuel oil Total

1 . Agriculture, aquaculture, fishing and raw materials industry 17 .154 19 .403 23 .364 23 .228 27 .194 17,1 40000

2 . Production and construction industries 52 .284 57 .184 58 .845 58 .775 57 .170 -2,7

3 . Retail stores, restaurants and hotels 19 .336 20 .451 22 .124 22 .804 22 .462 -1,5 35000

4 . Transport, postal services and telecos 20 .155 22 .518 23 .144 28 .681 31:053 8;3 30000 5 . Financial services, insurance and other service industries 3 .806 3 .984 4 .075 4 .161 4 .141 -0,5

6 . Public and private services, churches, religious organizations, ect . 34 .483 34 .885 39 .745 41 .195 39 .779 -3,4 25000 7 . Street lighting 6 .193 6 .588 6 .739 6 .967 6 .695 -3,9

8 . Houses, apartments, summer homes, small boat storage 75 .734 76 .585 78 .761 77 .387 80 .309 3,8 20000 Invoiced Electricity Sales, Total 229 .145 241 .598 256 .797 263:198 268:803 2,1

Electricity generation, calender year 244 .877 259 .478 269 .416 275 .829 275 .527 -0,1 15000

Note: Innvoiced electricity sales do not follow exactly the calendar year, while calculation of electricity generation is based on data available at the close of each year . 10000 The difference between invoiced electricity sales and calculated production stems from line and transformer loss plus SEV’s own consumption and certain deferred consumption . 5000 Included in electricity generation is electricity purchased from other producers .

0 Year 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Maximum load and available power - Central region 1954-2009 SEV investments 1997 - 2009 MW Investments (DKK million) 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 100 Hydroelectric plant 30,7 35,1 43,3 13,7 8,6 8,6 0,0 0,3 0,3 0,5 4,0 27,4 43,0 90 Other power plants 0,1 0,1 1,1 5,8 30,4 18,1 52,0 18,0 20,0 2,3 2,8 5,0 3,1

Distribution plants 12,5 21,0 13,8 13,6 14,6 19,5 17,4 18,6 18,2 32,8 41,9 41,1 19,6 80

Joint property 0,5 0,1 1,8 0,7 0,1 0,0 0,1 0,8 0,0 0 0,8 0,0 0 70 Land - - - 1,5 -4,8 0,0 0,0 0,0 0,0 0 0,0 0,0 0 60 Other production equipment 2,1 1,8 2,6 1,5 2,4 1,7 2,4 2,0 3,2 2,2 2,5 3,1 5,6 50 Total 45,9 58,1 62,6 36,8 51,3 47,9 71,9 39,7 41,7 37,8 52,0 76,6 71,8 40

30

20

10

00 Year 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Available power Max. load

30 The past year The past year 31 Electricity generation for the entire Electricity generation per capita 1970-2009

country by power plant, 2009 kWh 6000 VINDUR 5,4%

VESTMANNA 16,0% 5000 EIÐI 14,4%

4000

SUÐUROY 9,6% 3000

2000

SKOPUN/SMÁVIRKI 0,2% 1000 STROND 1,6% SUND 52,7%

0 Year 70 75 80 85 90 95 00 05 09

Electricity generation on Suðuroy 1940-2009 Electricity generation for the entire country 1954-2009

Mill. kWh Water Oil Total Mill. kWh Water Oil Wind Total 30 300

25 250

20 200

15 150

10 100

5 50

0 Year 0 40 45 50 55 60 65 70 75 80 85 90 95 00 05 09 54 60 65 70 75 80 85 90 95 00 05 09 Year

32 The past year The past year 33 Daily Load 7 October 2009

MW 40

35

30

25

20 15 Annual report 10 5 and 0 Time 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 annual accounts Total SEV annual 12-month generation (1985-2009) Mill. kWh 2009

260

240

220

200

180

160 | 85 | 86 | 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 | 95 | 96 | 97 | 98 | 99 | 00 | 01 | 02 | 03 | 04 | 05 | 06 | 07 | 08 | 09 |

34 The past year Board statement Independent auditor’s report

We hereby present SEV’s 2009 of the Company’s assets, liabilities To the owners of elfelagið sev principles; and making accounting in order to design audit procedures Annual Report and Accounts . The and financial position, as well as the estimates that are reasonable under that are appropriate under the Annual Report and Accounts have results of the Company’s operations Certification of the Annual Report the given circumstances given circumstances, but not for the been drawn up pursuant to the and its cash flow . We have audited the Annual Report purpose of expressing an opinion provisions in the Faroese Accounts of Elfelagið SEV for the fiscal year Auditor responsibility on the effectiveness of the internal Act and the Company statutes . The Annual Report and Accounts are 1 January – 31 December 2009, Our responsibility is to express an controls . The audit also includes submitted to the General Meeting which comprises the management opinion on the Annual Report based evaluating the appropriateness of It is our opinion that the accounting and the Board recommends their statement, management report, on our audit . We conducted our the accounting principles applied by method used is adequate and approval . accounting principles applied, income audit in accordance with applicable management, evaluating whether ensures that the Annual Report and statement, balance sheet, equity Faroese auditing standards and the accounting estimates, made by Accounts give a true and fair view Tórshavn April 9, 2010 report, cash flow statement and regulations, which require that we the management, are reasonable, relevant notes . The Annual Report uphold ethical standards, and plan as well as evaluating the overall has been prepared in accordance and conduct the audit to obtain presentation of the Annual Report . Board: with the Faroese Accounts Act . reasonable assurance that the We believe that the audit Annual Report is free from material evidence we have obtained is Management responsibility for the misstatement . sufficient and appropriate to provide Annual Report An audit involves performing a basis for our audit opinion . Management is responsible procedures to obtain audit Our audit did not result in any ______for preparing an Annual Report evidence concerning the amounts qualification . Páll á Reynatúgvu, Chair Jákup Suni Lauritsen, Deputy Chair Marin Katrina Frýdal that gives a true and fair view and disclosures in the Annual in accordance with the Faroese Report . The procedures selected Opinion Accounts Act . This responsibility depend on the auditor’s judgment, It is our opinion that the Annual extends to designing, implementing including the assessment of the Report gives a true and fair view of and maintaining internal control risks of material misstatement in the Company’s assets, liabilities, and ______relevant to the preparation and the Annual Report, whether due to financial position as at 31 December Steinbjørn O . Jacobsen Kári E . Jacobsen Niels Olaf Eyvindsson fair and accurate presentation of fraud or error . In making said risk 2009, and of the results of the an Annual Report that is free from assessments, the auditor considers Company’s operations and cash flow material misstatement, whether the internal controls in place relevant for the fiscal year 1 January – 31 due to fraud or error; selecting and to the preparation and fair and true December 2009 pursuant to the applying appropriate accounting presentation of the Annual Report Faroese Accounts Act . ______Pauli T . Petersen Tórshavn April 9, 2010

NOTA Management: Financial Management: A certified public accounting firm

______Hans Laksá Jóannes Olsen Hákun Djurhuus John P . Danielsen Chartered Public Accountant Registered Accountant

36 Annual report and annual accounts 2009 Annual report and annual accounts 2009 37 Key figures Key figures

All figures provided in tDKK 2009 2008 2007 2006 2005 Profitability 2009 2008 2007 2006 2005 Return on equity 1,0% -9,1% 3,4% 4,8% 13,5% Income statement Return on assets 6,0% 4,3% 11,8% 15,7% 17,2% Net sales 279 .870 276 .860 249 .105 238 .359 226 .072 Profit margin 24,8% 7,5% 25,6% 34,4% 39,5% Result of ordinary operations 69 .282 20 .752 63 .795 81 .992 89 .391 Asset turnover 0,24 0,57 0,46 0,46 0,43 Result of financial items -5 .210 -3 .533 -2 .293 -5 .847 -7 .574 Result of extraordinary operations 0 0 0 0 0 Solvency Annual result 9 .257 -31 .138 12 .036 16 .217 22 .256 Equity/asset ratio 82,1% 67,3% 66,2% 65,9% 63,2%

Balance sheet Other Total assets 1 .151 .024 484 .126 539 .325 523 .545 520 241. Average number of employees 153 140 145 145 145 Carried over to basis for depreciation 102 .706 47 .315 70 .350 26 .046 37 458. Equity 945 .563 325 .987 357 .125 345 .089 328 872. Calculation of key figures Key figures have been calculated in accordance with recommendations by The Danish Society of Financial Analysts Cash flows Net cash flows from Operations 44 .164 19 .332 71 .535 74 .062 80 602. Return on equity Annual result x 100 Investments -71 .856 -76 .613 -52 .038 -38 .410 -44 .177 Average equity Financials 40 .158 -18 .018 -18 .930 -21 .030 -28 .629

Return on assets Result of ordinary operations x 100 Annual cash flows 12 .466 -75 .299 567 14 .622 7 796. Total assets

Profit margin Result of ordinary operations x 100 Net sales

Asset turnover Net sales Total assets

Equity/asset ratio Equity closing balance x 100 Total assets

38 Annual report and annual accounts 2009 Annual report and annual accounts 2009 39 Annual report

Main activities Revenues totalled DKK 279 .9 million . expansion was taken out later in the The Company is, to a certain extent, Prospects for the fiscal year This also means that, without the Elfelagið SEV [SEV electricity utility] Roughly DKK 3 million more than the year than initially planned . exposed to changes in the interest 2010 requested authorization to raise is an inter-municipal corporate previous year, but DKK 7 .1 million rate level, but has chosen not to Operations in 2010 are likely to yield electricity prices, operational cash enterprise . Its purpose is to produce less than budgeted for 2009 . The Depreciations, the method changed use interest rate positions or similar a lower profit before depreciations . flow profits will probably not suffice electric power and to distribute main reason is that the required as of January 1, 2009 on orders by measures to hedge against interest After depreciations there will be a to pay the loan instalments required said electricity among residents permission to raise the price of the Electricity Production Oversight rate risk . Existing loans are all fixed- significant loss . under existing loan agreements . This of the participating municipalities . electricity by DKK 0 .04/kWh was not Board . Property values have changed rate, including the construction loans means that there will be no self- Pursuant to the statutes, the granted by the authorities . Electricity significantly as of January 1, 2009, for “Eiði 2”, which will be due for Revenues, which mostly accrue from financing of planned investments Company shall advance its business sales in kWh remained virtually in parallel, depreciation periods interest rate review by the end of the amount and price of electricity worth over DKK 100 million . A purpose according to the principles unchanged . have lengthened considerably for 2013 . sold, will probably remain the same result with so little self-financing of commerce on a commercially most properties . At first this will not as in 2009, whereas operational is inadequate, if SEV, in addition to sound basis and with due regard Practically all revenues accrued from change total depreciations much; Environment expenses will increase significantly . investing in renewing diesel plants for the environment . Pursuant to electricity sales . however, it will gradually lead to The Company prioritizes the Oil expenses in particular look set and expanding the grid, is also to the Electricity Production Act, SEV’s significant changes . Based on these environment and therefore greatly to be much higher than the previous expand renewables in order to meet network activities shall be financially Expenses before depreciation changes total depreciation in 2009 emphasizes full compliance at year . the targets set out in the climate sustainable, so that revenues suffice totalled DKK 215 .8 million, DKK 13 .3 is around DKK 54 .8 million . all times with environmental report, adopted by the Faroese to pay for operations and necessary million less than budgeted . requirements, regulations and We can conclude that SEV will not Government and Parliament . investment . Investments standards . be granted permission from the Oil expenses, in particular, have Investments in fixed assets authorities to raise the price of Events after the close of the All municipalities in the Faroes are reduced total expenses . Average amounted to DKK 70 .6 million . Knowledge resources electricity, and therefore revenues fiscal year members of SEV . To yearend 2008 2009 oil prices were far below This means DKK 35 .6 million less It is very important for the Company will probably be DKK 20 million From the closing date of the the members bear the responsibility estimated when the budget was than budgeted and DKK 6 million that adequate knowledge and lower than planned . financial statement to date, nothing for any Company debt and possible approved in November 2008 . less than the previous year . The experience are available in all areas has occurred that would impact the losses . As of January 1, 2009 the According to budget oil would cost difference between investments of activity . To the extent considered As for expenses, based on the oil true and fair assessment of the municipalities shall only be liable for SEV DKK 97 .3 million; however, the planned and investments executed necessary, arrangements are made price level through most of the first Company set forth in the Annual employee expenses . final cost only amounted to DKK is mainly due to the investments in for suitable staff training . quarter of 2010, oil expenses can be Report . 75 .9 million . Production at SEV’s hydroelectric and wind power . DKK expected to total around DKK 106 This report includes Company thermal plants only rose by 0 .7% . 14 .7 million less than planned were Development million, around DKK 30 million more activities from 01 .01 09. to 31 12. .09 . The impact of the increase in oil invested in hydroelectricity, mainly The Company continuously works than the previous year . Damage to a used is therefore very limited . because the investment works on developing safety, security generator at the Fossá plant, which Development of Company commenced later than planned . and quality of supply . Plans was sustained in February 2010, will activities and financial situation Other operational expenses accrued The DKK 9 million allocated to wind are underway to increase the probably cost roughly DKK 3 million . The operational result for 2009 on wages, materials and services power were not spent . production share of renewables, was a surplus of DKK 9 .3 million totalled DKK 10 million over budget . such as hydroelectricity, water, With reservations for any oil price compared to a DKK 31 .1 million Special risks wave and tidal power . This is done changes, unexpected damages deficit the previous year . Based Interest expenses netted DKK The Company has limited individual as part of the effort to reach the or other unexpected operational on the 2009 budget, approved in 5 .2 million, DKK 1 .7 million under customer risk, and constantly national targets set for developing expenses, we can conclude that the

November 2008, a DKK 7 9. million budget, due to the fact that a monitors customers’ debt to the renewables and cutting CO2 result of operations in 2010 is likely surplus was forecast . planned loan for the hydroelectric Company . emissions . to be considerably worse than in previous years .

40 Annual report and annual accounts 2009 Annual report and annual accounts 2009 41 Changes in deferred taxes due to Financial assets Equity changed tax rate are included in the Financial assets are recognized at Elfelagið SEV is an inter-municipal Applied accounting income sheet . their acquisition value . corporate enterprise, in which all Faroese municipalities hold shares . BALANCE SHEET Securities (cash equivalents) Each individual municipality’s equity Bonds are recognized at exchange- is calculated at yearend on the basis principles Tangible Assets rate-adjusted value . of its number of inhabitants . Tangible assets are measured in the balance sheet at cost price less Deferred taxes KEY FIGURES General accumulated depreciation or, when Deferred tax is calculated on the Key figures are calculated The Annual Report was prepared in On recognition and measurement, Depreciation the latter is lower, at the recoverable basis of all temporary differences in accordance with the accordance with the provisions in account is taken of foreseeable Depreciation and amortization amount . The recoverable amount is between the carrying amount and recommendations by The Danish the Faroese Annual Accounts Act for losses and risks arising before the of fixed assets are arranged as the value of the asset in connection tax base of assets and liabilities Society of Financial Analysts . Class C medium-sized companies . time at which the annual report is systematic depreciation over the with continued use or sale . and is recognised in the balance The Company now sets aside presented and proving or disproving assets’ expected useful lives . Fixed sheet at the tax regulations and CASH FLOW STATEMENT allocations for pensions due in the matters arising on or before the assets are included at cost price Cost price includes direct and indirect rates applicable . Deferred tax assets, The cash flow statement is prepared accounts . Notwithstanding the above balance sheet date . and the depreciation is linear . The material and labour costs . including tax deficits carried-over, using the indirect method, showing mentioned, the accounting principles depreciation period ranges from 3 to are recognised at the expected cash flows from operating, investing remain unchanged from the previous FOREIGN CURRENCY AND 50 years . When the new Electricity Production realisable value . and financing activities as well as year . HEDGING TRANSACTIONS Act entered into force on January changes in cash-on-hand at the The annual report is presented in Financial items 1, 2009, the Electricity Production Current taxes beginning and end of the year . Amounts in the income sheet, Danish kroner (DKK) . Financial items include interest Oversight Board demanded Current tax payable and receivable balance sheet, notes, etc . are receivable and interest payable, significant changes to the is recognised in the balance sheet Cash flows from operating activities rounded to whole figures without During the year, foreign currency realised and unrealised capital depreciation period for assets, as tax computed on the basis of the comprise results of operations for decimals . As each figure is rounded transactions are translated into gains and losses on securities, debt and that these changes should taxable income for the year, adjusted the year, adjusted for non-cash individually, there may be rounding Danish kroner using the rate of and transfers in foreign currencies, be retroactive dating back to the for tax paid on account . operating items, income tax paid and differences between the additions exchange applicable at the date amortization of financial assets original year of acquisition . This changes in working capital . presented and the sum of the of transaction . Receivables and and liabilities in addition to interest means that fixed assets have been Liabilities other than provisions underlying figures . liabilities and other items in foreign expenses . Financial revenues and adjusted by DKK 629,049,604 as Long-term liabilities other than Cash flows from investing activities currencies are translated into Danish financial costs are recognized on an per January 1, 2009 . provisions are measured at cost comprise the acquisition and Basis of recognition and kroner using the exchange rates ongoing basis . at the time of contracting such disposal of intangible assets and measurement applicable at the balance sheet date . Inventories liabilities . Liabilities other than tangible assets as well as acquisition Income is recognised in the income Realised and unrealised translation Extraordinary items Inventories are measured at the provisions are subsequently and disposal of companies . statement as earned, including gains and losses are recognised Extraordinary items comprise income lower of cost according to the FIFO measured at amortised cost, where value adjustments of financial in the income statement under and expenses from events or carry- principle and net realisable value . capital losses and loan expenses Cash flows from financing activities assets and liabilities . All expenses, financial items . overs, which clearly deviate from are distributed over the term of comprise financing from and including depreciation, amortisation the Company’s results of ordinary The cost of raw materials and the liabilities on the basis of the dividend paid to shareholders as well and impairment losses, are also INCOME STATEMENT operations, and are therefore not consumables as well as goods for calculated, effective rate of interest as the arrangement and repayment recognised in the income statement . likely to be recurrent . resale is measured as purchase at the time of contracting such of long-term liabilities other than Net sales prices plus expenses incurred directly liabilities . provisions . Assets are recognised in the balance Revenues from the sale of goods Taxes in connection with the purchase . sheet when it is probable that and services are included in the The current and changed deferred Short-term liabilities other than Cash at the beginning and end of the future economic benefits will flow income statement, provided that taxes for the period are recognised The cost of manufactured goods provisions are also measured at year comprise cash and short-term to the Company and the value delivery has been effected and the in the income statement as taxes for and work in progress is measured amortised cost, which usually investments with no significant price of such assets can be measured risk has passed to the buyer by the the year with the portion attributable as the amount of direct and indirect corresponds to the nominal value of risk, which can easily be exchanged reliably . Liabilities are recognised end of the financial year . Net sales to the profit/loss for the year, and material and labour costs . the debt . for cash . in the balance sheet when they are measured without VAT . directly in equity with the portion are reasonably likely to occur and attributable to amounts recognised Receivables Pension liabilities can be measured reliably . On initial Expenses directly in equity . Tax in the income Receivables are measured at Provisions are made for pension recognition, assets and liabilities This item comprises costs related to statement is classified as either nominal value less assessed risks of liabilities in accordance with are measured at cost . Subsequently, purchasing wind power, oil, materials tax on ordinary operations or tax on bad debts computed on the basis of actuarial calculations . assets and liabilities are measured and other services, as well as other extraordinary events . individual assessments . as described for each item below . administrative costs .

42 Annual report and annual accounts 2009 Annual report and annual accounts 2009 43 Income statement Balance sheet as per 31 december

tDKK tDKK Note 2009 2008 Opening balance tDKK ASSETS Note 2009 01 .01 .09 2008

Revenues 1 279 .869 .614 276 860. Real estate, power plants etc . 2,3,4,8 1 021. .503 .935 973 .613 344 .563 Purchased wind energy 2,3,4 -2 .699 .562 -2 185. Investment works in progress 12 822. .210 46 .070 46 .070 Cost of oil 2,3,4 -75 .853 .709 -119 .923 Fixed assets 1 034. 326. 145. 1 .019 .683 390 .633 Materials and services 2,3,4 -69 .757 .144 -78 .545 Wages 2,3,4,5 -62 .276 .848 -55 .454 Share equity 4 975. .168 4 .975 4 .975 Total expenses -210 .587 .263 -256 .107 Financial assets 4 975. 168. 4 .975 4 .975

Result of ordinary operations 69 .282 .351 20 .753 TOTAL ASSETS 1 039. 301. 313. 1 .024 .658 395 .608

Depreciations 2,3,4,8 -54 .814 .967 -48 .357 Oil inventory 18 554. .895 8 .469 8 .469 Result before financial items and taxes 14 .467 .384 -27 .604 Materials inventory 10 936. .942 9 .452 9 .452 Contract work in progress 176 250. 623 623 Financial items, net 7 -5 .210 .104 -3 534. Total inventory 29 .668 .087 18 544. 18 544. Result before taxes 9 .257 .280 -31 .138

Electricity debtors 9 32 724. .333 35 .794 35 .794 Taxes 6 0 0 Other debtors 3 744. .617 4 .868 4 .868 Annual result 9 .257 .280 -31 .138 Other accounts receivable 8 813. .139 5 .004 5 .004 Total debt 45 .282 .089 45 666. 45 666. Dividends Result carried over 321 .846 .965 352 985. Bonds 7 348. 40 40 Opening adjustment 610 .319 .053 0 Securities 7 348. 40 40 Annual result 9 .257 .280 -31 .138 Total 941 .423 .298 321 847. Cash-on-hand 36 .764 .845 24 268. 24 268. TOTAL CURRENT ASSETS 111 722. 369. 88 518. 88 518. Proposed dividends TOTAL ASSETS 1 151. 023. 682. 1 .113 .176 484 .126 Result carried over 941 .423 .298 321 847. Total 941 .423 .298 321 847.

44 Annual report and annual accounts 2009 Annual report and annual accounts 2009 45 Balance sheet as per 31 december Cash flow statement

tDKK Opening balance t D K K LIABILITIES Note 2009 01 .01 .09 2008 (1,000 DKK) 2009 2008 Annual result 9 .257 -31 .138 Deposit 4 .139 .875 4 .140 4 140. Depreciation 54 .815 48 .357 Capital account 941 .423 .298 935 .896 321 847. Change in liquidity (operations) 64 072. 17 219. TOTAL EQUITY 10 945 .563 .173 940 .036 325 987. Change in debt 359 -5 .497 Provisions for pension liability 18 .730 .552 15 .000 0 Change in short-term debt -9 .144 -6 .044 Deferred tax 6 0 0 0 Change in oil inventory -10 .086 11 .650 Total provisions 18 .730 .552 15 .000 0 Change in materials inventory -1 .038 2 .004 44 .163 19 .332 Loans 11 145 .954 .641 105 .797 105 797. Long-term debt 145 .954 .641 105 .797 105 797. Investment: fixed assets, change in work in progress -71 .856 -76 .613 Shares 0 0 Electricity creditors 12 18 .682 .759 18 .667 18 667. Instalment payments 40 .158 -18 .018 Other creditors 19 .472 .018 31 .476 31 476. Changes in liquidity 12 465. -75 299. Holiday pay due 2 .620 .539 2 .199 2 199. Short-term debt 40 .775 .316 52 .342 52 .342 Opening balance cash-on-hand 24 .268 99 .526 Opening balance bonds 39 80 TOTAL DEBT 186 .729 .957 158 .139 158 139. Closing balance liquidity 36 772. 24 307. TOTAL LIABILITIES 1 .151 .023 .682 1 .113 .176 484 126. Closing balance liquidity: Cash-on-hand 36 .765 24 .268 Mortgage surety interest 13 Bonds 7 39 36 772. 24 307.

46 Annual report and annual accounts 2009 Annual report and annual accounts 2009 47 Notes to the annual report

tDKK 1 . Revenue 2009 2008 kWh charge 260 277. 858. 255 .881 Fixed payments 16 380. .022 15 .970 Connection fees 2 094. .100 3 .254 Equity report Other revenues 1 117. .634 1 .755 Total revenue 279 869. 614. 276 .860

2 . Expenditure per plant Materials Wages Depreciation Total tDKK Oil 2009 2009 2009 2009 2009 Total 2008 All figures provided in tDKK Deposit Profit carried over Total Turbine department 0 422 033. 1 114. .882 -56 .100 1 .480 .815 1 .608 Fossa plant 0 1 561. .563 4 409. .252 439 959. 6 .410 .774 4 .719 Heyga plant 0 238 820. 279 897. 301 889. 820 .605 386 Equity 01 .01 2008. 4 .140 352 .985 357 125. Mýru plant 0 967 482. 510 456. 392 233. 1 .870 .171 774 Opening adjustment 0 0 0 Eiði plant 20 471. 1 748. .294 1 346. .823 12 331. .100 15 .446 .688 10 .333 Opening balance adjusted equity 4 .140 352 .985 357 125. Botnur plant 0 401 504. 175 923. 331 832. 909 .259 608 Vág plant 8 829. .662 4 359. .595 5 740. .184 1 961. .041 20 .890 .481 28 .926 Annual result 0 -31 .138 -31 .138 Tvøroyri plant 0 1 097. .403 105 437. 164 623. 1 .367 .463 2 .997 Sund plant 64 106. .458 25 142. .857 15 992. .771 12 538. .916 117 .781 .002 138 .408 Skopun 0 36 600. 73 989. 250 563. 361 .152 7 .320 Equity 31 .12 .2008 4 .140 321 .847 325 987. KG plant 1 542. .529 2 534. .760 1 367. .487 457 694. 5 .902 .470 5 .201 150 kW wind turbine 0 31 507. 19 496. 79 51 .081 143 750 kW wind turbine 0 556 625. 144 623. 1 158. .082 1 .859 .330 2 .108 Equity 01 .01 2009. 4 .140 321 .847 325 987. Wind power technology 0 0 0 0 0 0 Small plants (KG joint work) 0 21 156. 14 787. 128 36 .071 16 Opening adjustment 0 610 .319 610 319. Mobile aggregate 4 056. -7 888. 110 247. 49 549. 155 .964 300 Opening balance adjusted equity 4 .140 932 .166 936 306. Fugloy 242 529. 287 083. 458 336. 178 151. 1 .166 .098 1 .571 Svínoy 6 639. 48 825. 163 617. 193 368. 412 .449 106 Annual result 0 9 .257 9 257. Mykines 313 981. 167 524. 295 157. 0 776 .663 774 1 751. 9 453. 26 861. 0 38 .066 27 Koltur 102 460. 112 408. 50 447. 0 265 .315 287 Equity 31 .12 .2009 4 .140 941 .423 945 563. Nólsoy 1 143. 25 652. 29 738. 0 56 .534 103 Skúvoy 375 234. 577 969. 382 243. 0 1 .335 .446 841 Dímun 77 502. 153 894. 65 130. 78 205. 374 .731 799 Production activities 75 .624 .416 40 .495 .119 32 .877 .783 30 .771 .312 179 .768 .630 208 .355 Wind power purchase 2 .699 .562 2 .185 Interest 5 .210 .104 3 .533 Changes in deposits – break-down 2009 2008 2007 2006 2005 Other grid activities 229 293. 29 .262 .025 29 .399 .065 24 .043 .655 82 934. .038 93 924. Total activities 75 .853 .709 69 .757 .144 62 .276 .848 54 .814 .967 270 .612 .334 307 .997

Beginning of year deposit balance 4 .140 4 .140 4 .140 4 .140 4 140. Increased deposit 0 0 0 0 0 3 . Network activities and administration Materials Wages Depreciation Total tDKK Total 4 .140 4 .140 4 .140 4 .140 4 140. Oil 2009 2009 2009 2009 2009 total 2008 Substations 699 795. 275 463. 2 673. .035 3 .648 .293 5 .561 Distribution stations 122 981. 13 392. .746 14 757. .272 17 054. .475 45 .327 .474 50 .321 Installation 1 096. .905 3 144. .900 734 256. 4 .976 .061 4 .756 Engineering 1 069. .670 3 914. .439 -85 .371 4 .898 .738 1 .860 Technical 739 669. 1 124. .596 92 964. 1 .957 .229 2 .654 122 981. 16 998. .784 23 216. .671 20 469. .359 60 .807 .795 65 .152 Administration 106 312. 16 287. .674 12 691. .322 3 574. .296 32 .659 .604 28 .772 Network activities 229 293. 33 .286 .458 35 .907 .993 24 .043 .655 93 467. .399 93 924.

Share distributed to production plants 4 024. .432 6 508. .928 10 .533 .360 Net network activities 229 293. 29 262. .026 29 399. .065 24 043. .655 82 .934 .039 93 .924

48 Annual report and annual accounts 2009 Annual report and annual accounts 2009 49 Notes to the annual report Notes to the annual report

4 . Administration Materials Wages Depreciation Total t D K K tDKK Oil 2009 2009 2009 2009 2009 total 2008 9 . Electricity debtors 2009 2008 General meeting and board 358 .488 1 .166 .816 1 .525 .303 1 649. Payments during fiscal year: Employer workers’ benefits contributions 1 .445 .789 -177 1 .445 .612 1 795. Ordinary customers 2 991. .645 3 .595 Electricity Production Oversight 1 .671 .374 1 .671 .374 967 Max . customers 2 453. .232 4 .665 Studies and consultancy 1 .564 .126 1 .564 .126 2 316. 5 444. 877. 8 .260 IT 2 .212 .674 3 .167 2 .215 .841 1 937. Unpaid balances: Management and office expenses 2 .055 .864 9 .222 .717 11 .278 .581 8 093. Ordinary customers 23 555. .622 22 .774 Energy advice service 247 .360 320 .708 568 .067 12 Max . customers 4 923. .833 5 .760 Public servants’ pensions 0 750 .656 750 .656 757 28 .479 .455 28 534. Loss on unpaid debt 644 .064 644 .064 496 Provisions for loss from unpaid electricity customer debt -1 200. .000 -1 .000 Other administrative expenses 106 .312 6 .087 .935 1 .227 .436 3 .574 .296 10 .995 .980 10 749. Total electricity customer debt 32 .724 .333 35 794. 106 .312 16 .287 .674 12 .691 .322 3 .574 .296 32 .659 .604 28 .772 Share distributed to production plants 3 .602 .400 2 .618 .500 6 .220 .900 Network activities administration 106 .312 12 .685 .274 10 .072 .822 3 .574 .296 26 .438 .704 28 .772

tDKK MUNICIPAL EGINOGN 5 . Employee expenses 2009 2008 10 . Distribution of equity DEPOSITS 31 12. .2009 Wages 59 .087 .801 52 957. Pensions 5 .718 .668 4 369. Hvannasund 36 375. 8 .417 .659 Employer’s contributions to worker benefits 1 .445 .789 1 795. Klaksvík 520 250. 93 .697 .258 Total 66 .252 .258 59 .121 Fugloy 17 500. 735 .336 Board and management wages 1 .870 .854 1 731. Viðareiði 25 250. 6 .869 .584 Average number of employees 153 140 Kunoy 12 625. 2 .941 .343 Húsar 17 500. 1 .103 .004 tDKK Eiði 78 625. 12 .887 .727 6 . Taxes 2009 2008 Sunda 177 367. 31 .948 .404 Current taxes 0 0 Fuglafjørður 136 250. 29 .723 .046 Deferred taxes 0 0 Eystur 146 500. 37 .966 .547 Total taxes 0 0 Nes/Runavík 332 133. 97 .993 .167 Deferred taxes Sjógv 92 875. 19 .447 .696 Opening balance provisions 0 0 Kvívík 59 125. 11 .494 .459 Changes in deferred tax over the year 0 0 Vestmanna 125 250. 23 .008 .269 Vága 169 625. 37 .598 .879 Provisions at yearend 0 0 Sørvágur 127 500. 22 .079 .424 Sandur 72 250. 10 .797 .825 Skopun 71 000. 9 .404 .558 7 . Financial items Skálavík 30 750. 3 .173 .554 Interest payable 5 .681 .900 6 777. Húsavík 25 125. 2 .438 .219 Interest receivable -471 .796 -3 243. Skúvoy 17 875. 986 .898 5 .210 .104 3 534. Hvalba 103 625. 13 .990 .731 Tvøroyri 255 250. 33 .728 .691 8 . Real estate and depreciations (tDKK 1 .000) Fámjin 23 125. 2 .089 .902 Production Buildings Distribution Hov 22 875. 2 .341 .464 plants and land stations Equipment Porkeri 51 000. 6 .347 .109 Acquisition value beginning year 1 .198 .961 65 .320 658 .433 112 930. Vágur 218 375. 26 .394 .684 Addition 70 .269 0 27 .637 4 800. Sumba 81 375. 7 .295 .305 Acquisition value yearend 1 .269 .230 65 .320 686 .070 117 730. Tórshavn 1 092. .500 384 .522 .556

4 139. 875. 941 .423 .298 Depreciations beginning year -642 .362 -22 .292 -295 .908 -101 .469 Depreciations over year -30 .716 -1 .221 -19 .602 -3 277. Depreciations yearend -673 .078 -23 .513 -315 .510 -104 .746

Booked value yearend 596 .152 41 .807 370 .560 12 .984

50 Annual report and annual accounts 2009 Annual report and annual accounts 2009 51 Notes to the annual report Electricity grid overview

11 . Loans The Company’s debt becomes due for payment as follows:

2009 Within 1 year 14 974. Between 1 and 5 years 55 265. After 5 years 75 716.

12 . Electricity creditors DKK 18,682,759 This is debt owed to customers who have used less electricity than they paid for, and therefore have credit with SEV .

13 . Mortgages The total mortgage on the Company’s assets is DKK 218 million .

Power plant – oil-fired

Power plant – hydro

60kV Substation

Power plant – wind

60 kV Transmission line

20 kV Transmission line

Annual report and annual accounts 2009 10 kV Transmission line Editor: Leivur Hansen, Public Relations Manager. Photos: SEV 6 kV Transmission line Layout and printing: Føroyaprent, Tórshavn, Faroe Islands Undersea cable

52 Annual report and annual accounts 2009 Annual report and annual accounts 2009

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