Skellefteå Kraft Excerpt from Annual Report 2013 This is Skellefteå Kraft Aitik

Sädva Rebnis

Uljabuouda We strive to be 's best energy com- the same time constantly strengthening thers development of the region. In other pany and regard ourselves as the champion the expertise of our employees. And, of words, safeguard the region's energy sup- of the energy industry. We are dependable course, by offering our customers attrac- ply, create good infrastructure within ener- Klippen Bergnäs Norrlanders who put the customer and the tive products and services at competitive gy, telecommunications and data commu- Hemavan Blaiken Jokkmokksliden Sikfors Slagnäs Grytfors customer's needs first. How? By investing prices. Our owner, Skellefteå Municipality, nication, and supply capital and business Storliden Jörn Byske in our own energy resources and our own also sets requirements for us. We should expertise to the region. Norrheden Malå Norsjö Kristineberg Boliden Kåge sustainable energy production, while at aim to generate profitable growth that fur- Rengård Hedensbyn Båtfors Finnfors Skellefteå Rönnskär Röjnoret Granfors Bureå Krångfors Selsfors Burträsk Lövånger Ånäset Vindeln Our products and services Jakobstad Electricity. We produce and sell electricity to customers throughout Sweden. As a customer, you can – Alholmen choose between three tariffs: Fixed, Variable and Square Metres. In autumn 2013 we decided to completely abolish the expensive default rate. Sällsjö Electricity networks. Our electricity networks are in Skellefteå, Norsjö, Malå, Robertsfors and parts of ­Vindeln, Arvidsjaur, Piteå, and Lycksele. We take care of these to ensure electricity can be transported to you. The latest customer satisfaction survey shows that we have the most satisfied residential customers in the country and the second most satisfied corporate customers. Sundsvall

District heating. Our district heating network is primarily in Skellefteå. This delivers water heated by renew- able and recovered fuel.

Broadband. We construct and own Skekraft.net, a broadband network covering Skellefteå and the ­surrounding area. Taking area and population combined with the broadband speed on offer, Skellefteå Munici- pality has Sweden's foremost broadband network.

Premises and property. We own, manage and lease premises in the Expolaris Center district in central Skellefteå.

SEU, Energiunderhåll. Energiunderhåll delivers maintenance services to energy companies requiring ­support within wind power, hydropower and combined power and heating, as well as major energy users within the industry. Wind power Nuclear power Forsmark Hydropower Peat

Thermal pover Local district heating

Electicity, Sales office 2 thermal power Stockholm Aitik

Sädva Rebnis

Uljabuouda

Klippen Bergnäs Hemavan Blaiken Jokkmokksliden Sikfors Slagnäs Grytfors Storuman Storliden Jörn Byske Norrheden Malå Norsjö Kristineberg Boliden Kåge Rengård Hedensbyn Lycksele Båtfors Finnfors Skellefteå Rönnskär Röjnoret Granfors Bureå Krångfors Selsfors Burträsk Lövånger Ånäset Vindeln Robertsfors

Jakobstad – Alholmen

Sällsjö

Sundsvall

Where our power is generated

These are Skellefteå Kraft's production facilities and sales offices, from Stockholm in the south to Aitik in the north, and from Jakob- stad in the east to Klippen in the west.

Wind power Nuclear power Forsmark Hydropower Peat

Thermal pover Local district heating

Electicity, Sales office 3 thermal power Stockholm Skellefteå Kraft 2013 - in brief

General

637 300 people full-time employees in 2013 or just over work principally from our office was the year Skellefteå Kraft was founded. building in central Skellefteå, while others work at various units in Västerbotten, Norrbotten and at our sales office in Sundsvall.

Finance

TURNOVER PROFIT AFTER NET OPERATING MARGIN FINANCIAL INCOME SEK MILLION 5,500 SEK MILLION 5,000 800

4,500 700 % 4,000 18 600 3,500 16 500 14 3,000 12 SEK 215 2,500 400 10 2,000 300 8 million 1,500 200 6 was the dividend to owner Skellefteå 1,000 4 Municipality in 2013. This corresponds 100 500 2 to 4% of the equity. 0 0 0 2012 2013 2012 2013 2012 2013

4 Social Environment

48 people have been recruited during the past year. 81%

Proportion of electricity from 1.9% renewable production. Our absence due to illness rate in 2013. The target was 2.5%.

83% 80% Our attendance rate among Proportion of heating from Skellefteå Kraft's employees in renewable production. 2013. The target was 85%. Customers

Number 1 in the country Skellefteå Kraft provides the best customer service in the energy industry. This accolade is based on a survey of over 2,000 Swedish consumers regarding the service provided by various companies and which companies they regard as having exceeded expectations in terms of service.

5 Our responsibility to customers Our customers should never feel guilty

As a customer of ours you need never feel trict heating and electricity supply corpo- guilty about enjoying a long shower or rate), except electricity supply residential, having your home a little warmer. You can where we are in 10th place. always rely on our products maintaining In 2013, for the second successive year, a high level of quality and being sustain- we won the award for the energy sector's ably produced. This outlook applies to all best customer service. This was awarded our customers, regardless of whether we by ServiceScore in conjunction with the are talking about electricity, broadband or Swedish Marketing Federation (Sver- district heating. We also want to challenge iges Marknadsförbund). This accolade is the energy sector in terms of communica- based on a survey of over 2,000 Swedish tion, by being clearer, more straightfor- consumers. ward, more helpful and more accessible than our competitors. OUR OBJECTIVES, CUSTOMERS Increased national awareness. We work HOW TO BE THE BEST IN THE INDUSTRY to ensure that more potential customers We are driven by the concept of giving the around the country are aware of us, which customer a better, i.e. clearer and more lays the foundation for an expanded cus- straightforward, alternative. Our overall tomer base in the long term. We are on the objective is to have the most satisfied cus- right track, and with our campaign "Inte tomers in the industry and thus move to- en eljätte" (Not an electricity giant) we are wards our vision of being the best energy positioning ourselves as the clear alterna- company in the industry. tive to the electricity giants. We aim to be innovators in a traditionally dissatisfied OUR RESPONSIBILITY TO CUSTOMERS sector. quently, we are focusing on customer in- IN FIGURES sight through customer surveys and focus The Swedish quality index measures cus- Increased customer satisfaction. Satisfied groups, among other things. tomer satisfaction, and their surveys show customers and long-standing customer that we are number one or two in the en- relationships are important success fac- Improved customer experience. Our ergy sector in all business areas (electricity tors for us. In the annual measurements customer service team has 16 employees networks residential and corporate, dis- of customer satisfaction conducted by the ready to deal with customer enquiries. Swedish quality index This is our outward face, and in a normal we have remained at year they receive over 90,000 calls. Since Customer Safisfaction Index, a constant level, well autumn 2013, customers can also contact above the industry in- residential customers 2013 our customer service via Facebook. This dex, in recent years, team is one of the keys to ensuring an even but we want more and better customer experience, but there are Electricity supply 72,2 are striving for a cus- more ways we can improve our clarity; by Industry average tomer satisfaction val- adapting the tone of all our texts, for ex-

Electricity networks 77,7 ue of 75 for the group. ample.

Industry average In order to achieve this, we need to know Reduced customer administration costs. District heating 77,4 how our customers We are streamlining our routines and pro- Industry average behave and what they cesses to ensure that contact with our cus- 0 20 40 60 80 100 think and need. Conse- tomers is fair, straightforward and clear.

6 Our financial responsibility We work towards long-term growth

Our owner, Skellefteå Municipality, sets ing our investments accordingly. This threaten our business. The objective is to requirements for us. We must aim to means that we are focusing heavily on our get more out of the operations we want to achieve a return on equity of at least 10 own production and primarily on renew- continue with and to divest the segments per cent. We are working towards long- able energy sources, such as wind and hy- that do not fit our profile, considering our term stable economic value growth, with dropower. We are also reviewing our fo- financial sustainability. We must also dare the aim of burdening neither nature nor cus on other production sources, with the to be entrepreneurs, i.e. have the courage human resources. intention of phasing out any that are not to focus on business development within profitable or sustainable in the long term. our core activity. HOW TO BE THE BEST IN THE INDUSTRY We are aiming to ensure stable economic By investing wisely in sustainable and own growth and at the same time working to- We aim to give back to our owner, Skel- production we safeguard profitability and wards refining our production and making lefteå Municipality. Every year we give 4 growth. it 100% sustainable in the long term. per cent of the equity to the municipal- Taking financial responsibility means ity as a dividend. The more we grow, the that the group's profits benefit local resi- We want to achieve an operating profit bigger the dividend, which leads to better dents in Skellefteå. We give back 4 per cent of SEK 1 billion. We will do this through prospects for us as local citizens. In order of the equity every year to our owner, the shrewd investments and by being better at to continue with this we need to grow and municipality. utilising the production sources we have at make a profit. In addition, we are one of the biggest in- present. The key is optimisation, in other vestors in the local area, which makes us words, fine-tuning production by means of an important engine in the region. better maintenance and planned mainte- nance and finding improvement points. We OUR OBJECTIVES, ECONOMIC are also looking more closely at our sub- We want to have our own 100%-sustain- sidiary operations, charting what drives able energy production, and we are adapt- revenue and what possible scenarios might

7 Our social responsibility We provide an outlet for entrepreneurship

We safeguard the health and safety of Increased attendance rate. The attendance our employees and others affected by our rate is defined as "the number of employ- activities. We want to build good relations ees who have been absent due to illness for with existing and potential employees, as no more than five days during the year". well as with various stakeholders in the The result for 2013 was 80 per cent, but community. We want our employees to our objective is to achieve 85 per cent. We feel that Skellefteå Kraft is a company that aim to improve our attendance rate in the offers an outlet for creativity, drive and en- long term, and we will achieve this by con- trepreneurship. Our priority issues include tinuing our ambitious focus on health and safeguarding our future provision of ex- fitness, but also by creating opportunities pertise, working towards greater diversity for development of both employees and and creating a safe working environment. managers in a good working environment.

HOW TO BE THE BEST IN THE INDUSTRY Reduced numbers of occupational inju- In order to accomplish our business and ries. Our vision for Skellefteå Kraft is to operational goals we need well-trained, have workplaces free from accidents, ill skilled and committed employees and health and work-related injuries and ill- managers. Every employee should have nesses. This will be achieved through fo- good opportunities to develop as an indi- cus on working environment issues of all vidual in a wider context, i.e. understand types. One essential element is to have a their role and how they can contribute to certified management system that employs the whole. Everyone needs to feel that they risk analyses and quality-assured working are being seen, listened to and respected in methods to help keep accidents to a mini- order to enable us to be the best energy mum. company in Sweden. The target for 2013 was for the number of occupational injuries to be a maximum OUR OBJECTIVES, SOCIAL of 1.5 accidents resulting in absence per 1 Skills development. Large-scale retirement Satisfied employees. Every two years we million hours worked. The result for 2013 departures and extensive wind power in- measure what our employees think of was 3.2 accidents. vestments over the next few years mean Skellefteå Kraft within a number of areas, that energy companies will be on the look- such as employeeship, communication We aim to be among the 20 most attrac- out for new talent with the right expertise. and working environment. From 2013, tive companies at the three Norrland uni- We have good partnerships with a num- this index is designated MMI (Motivated versities. The energy sector demands tech- ber of bodies, from secondary schools to Employee Index - 'Motiverad Medarbetar- nical expertise and so do we. Therefore universities. We are also focusing strongly index' in Swedish), with a maximum in- we make determined and focused efforts on exchange of experience and skills dex value of 100. The target for the 2013 to reach out to students at the three Norr­ development for our existing employees. index for the group was 73, and the ac- land universities, partly to interest them in In order to support these processes, there tual result was 70. A very good result, but the energy sector, and partly to generate is access to on-the-job training����������� and mobil- there are improvement areas to work on specific interest in us. ity between different posts is actively en- over the coming year. couraged.

8 Our environmental responsibility We aim to produce our own sustainable energy

Sustainability should permeate our deci- OUR OBJECTIVES, ENVIRONMENT documentation to be produced. This work sions and actions. We are therefore work- 100% sustainable energy production. We has subsequently incorporated specific ing strategically and long term to provide are investing heavily to reduce depend- measures and exchange of experience. society with 100% sustainable and self- ence on coal and oil, primarily through produced energy. Our work should also projects that increase our own production From 2013, any passenger cars purchased be compatible with the guidelines of our of renewable energy. Investments are be- will be powered by renewable fuels*. owner, Skellefteå Municipality. ing made in wind power, bio-energy and We aim to reduce our energy usage for our hydropower. Our own electricity produc- own transport by 10 per cent by 2015, HOW TO BE THE BEST IN THE INDUSTRY tion currently consists of 82.2 per cent compared with 2010. Our vehicle fleet Our overall environmental goal should renewable energy (according to the EU's needs to be adapted to future demands, support our vision of being the best en- definition, where peat is not defined as which means that all transport and travel ergy company. Our efforts and objectives renewable), with the bulk of production must be more efficient than in the past. A take their bearing from sustainable energy coming from hydropower, and the remain- project commenced in 2013 to compile production. Environmental issues should der from wind and bio-based combined new criteria for vehicle purchasing. These be better integrated into the investment power and heating. criteria should contribute to safer vehicles decisions and choices we make. The in- with better environmental performance. In vestment process includes procedures and We aim to improve the energy efficiency addition to checking and overhauling our tools intended to ensure that responsibil- of our business by 25 per cent by 2020, vehicle fleet we need to develop travel-free ity and decision-making are kept close to compared with 2009. Together with other meetings ���������������������������������and provide training for our em- operations. Environmental and working companies in the municipal group we pur- ployees in available technology. environment issues are naturally linked in sue common energy and climate strategies. * The exception is passenger cars stationed when the business makes assessments and These initially consisted of finding good within our business area where there are no decisions in accordance with established methods for following up on energy sta- alternative fuels available and where require- objectives and frameworks. tistics, to enable useful and comparable ments are set for availability and range.

9 Income Statement of the group, amounts in SEK million

2013 2012 REVENUES Net turnover 4,249.8 4,606.5 Work performed by the company for its own use and capitalized 41.1 23.6 Other operating revenues 14.3 32.5

Total revenues 4,305.2 4,662.6

COSTS Energy and production costs -2,316.2 -2,631.6 Other external costs -599.1 -497.0 Personnel costs -455.4 -420.9 Depreciation -586.6 -451.7 Other operating expenses -7.4 -23.5 Shares of income in associated companies -45.2 24.7

Total costs -4,009.9 -4,000.0

OPERATING PROFIT 295.3 662.6

Income from security paper and receivables from fixed assets -57.8 46.4 Other interest income and similar income items 3.8 2.1 Interest expenses and similar income items -116.0 -112.3

Net financial income -170.0 -63.8

PROFIT AFTER NET FINANCIAL INCOME 125.3 598.8

Appropriations -7.3 0.0 Taxes -11.5 63.2

NET INCOME 106.5 662.0

10 Balance sheet of the group, amounts in SEK million

2013-12-31 2012-12-31 ASSETS Fixed assets Intangible assets 140.0 148.6 Tangible assets 8,347.7 8,054.1 Shares in associated companies 26.4 152.1 Receivables from associated companies 409.8 409.8 Other long-term securities holding 8.4 8.4 Other long-term receivables 305.5 281.2

Total fixed assets 9,237.8 9,054.2

Current assets Inventories etc 133.2 141.7 Customer receivables 261.2 291.4 Receivables from associated companies 0.1 0.0 Other receivables 28.9 35.0 Prepaid expenses and accrued income 457.4 603.4 Cash and bank 483.9 379.0

Total current assets 1,364.7 1,450.5

TOTAL ASSETS 10,602.5 10,504.7

TOTAL EQUITY AND LIABILITIES Shareholders’ equity Restricted equity 204.0 204.0 Non-restricted equity 4,577.7 4,127.6 This year’s result 106.5 662.0

Total shareholders’equity 4,888.2 4,993.6

Allocations Liabilities to credit institute 3,982.2 3,795.2 Provisions for pensions 27.9 21.2 Other allocations 8.3 8.1 Deferred tax liability 749.2 737.7 Other debts 93.4 96.2

Total allocations 4,861.0 4,658.4

Current liabilities Liabilities to credit institute 5.4 0.0 Advance payments from customers 1.6 0.0 Accounts payable 246.5 304.3 Liabilities to asociated companies 0.0 0.0 Income tax liabilities 56.8 17.6 Other liabilities 163.3 151.4 Accrued expenses and deferred income 379.7 379.4

Total current liabilities 853.3 852.7

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 10 602.5 10,504.7

Pledged assets 189.1 129.8 Guarantees 1,551.8 697.4 11 Cash flow break-down analysis of the group,amounts in SEK million

2013 2012 CURRENT OPERATIONS Profit after net financial income 125.3 598.8 Adjustment of items not in cash flow depreciations 586.6 451.7 write-down in financial fixed assets 83.6 2.6 share in profit in associated companies 45.2 -27.4 profit after sale of fixed assets etc 6.1 -12.9 increase(-)/decrease in interest receivables, liabilities -2.7 -1.6 Paid(-)/repaid income tax - -

Cash flow from current operations before change in working capital 844.1 1,011.2

Cash flow from change in working capital Increase(-)/decrease in inventories etc 8.5 50.2 Increase(-)/decrease in operating receivables 182.2 -78.1 Increase/decrease(-) in allocations 6.9 -0.1 Increase/decrease(-) in operating liabilities -2.1 9.6

Cash flow from current operations 1,039.6 992.8

INVESTMENTS Acquisition of intangible fixed assets - - Acquisition of tangible fixed assets -882.5 -726.4 Acquisition of financial fixed assets 0.0 -1.8 Sale of fixed assets 3.8 18.8 Capital withdrawal from associated companies 0.0 0.0 Increase(-)/decrease in other long-term receivables -24.3 -216.4 Received government contribution 1.0 -

Cash flow from investments -902.0 -925.8

EXTERNAL FINANCING New loans 192.4 354.8 Repayments and prepaid loans etc - - Increase/decrease(-) in other long-term liabilities -2.8 30.1 Group contribution -7.3 0.0 Allocation to the municipality -215.0 -205.0

Cash flow from external financing -32.7 179.9

Change in cash flow during the period 104.9 246.9 Liquid funds at the beginning of the period 379.0 132.1

Liquid funds at the end of the period 483.9 379.0

12 Year review, amounts in SEK million

2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 FROM INCOME STATEMENT

Net turnover 4,249.8 4,606.5 5,139.5 4,541.3 3,618.8 3,626.5 3,075.8 3,210.4 2,245.5 1,961.8 Expenses and other business items -3,367.9 -3,492.2 -4,110.0 -3,510.3 -2,684.4 -2,544.0 -2,197.8 -2,302.2 -1,351.6 -1,237.6 Depreciation -586.6 -451.7 -514.2 -326.2 -407.6 -350.2 -276.1 -270.4 -258.3 -242.5

OPERATING PROFIT 295.3 662.6 515.3 704.8 526.8 732.3 601.9 637.8 635.6 481.7

Net financial income -54.0 48.5 30.9 -62.0 23.4 40.7 44.3 15.2 10.3 1.3 Net financial costs -116.0 -112.3 -117.3 -113.7 -115.4 -151.2 -139.7 -114.8 -119.8 -132.0

PROFIT AFTER NET 125.3 598.8 428.9 529.1 434.8 621.8 506.5 538.2 526.1 351.0

Group contribution -7.3 ------Taxes -11.5 63.2 -19.3 -82.2 -75.5 -8.0 -62.8 -72.5 -106.0 -56.9

NET INCOME 106.5 662.0 409.6 446.9 359.3 613.8 443.7 465.7 420.1 294.1

FROM BALANCE SHEET Intangible assets 140.0 148.6 159.9 168.7 156.4 161.7 166.0 171.1 176.2 176.4 Tangible assets 8,347.7 8,054.1 7,769.7 7,357.5 7,071.8 6,858.7 6,361.0 5,943.3 5,559.5 5,417.4 Financial fixed assets 750.1 851.5 616.5 523.0 768.7 678.3 581.6 520.7 434.9 249.7 Current receivables and inventories 880.8 1 071.5 1 043.6 1 312.7 985.2 1 070.9 1 188.2 796.9 638.8 516.5 Cash and bank 483.9 379.0 132.1 51.8 17.4 23.6 15.2 48.6 53.0 58.0

TOTAL ASSETS 10,602.5 10,504.7 9,721.8 9,413.7 8,999.5 8,793.2 8,312.0 7,480.6 6,862.4 6,418.0

SHAREHOLDERS EQUITY 4,888.2 4,993.6 4,539.8 4,326.7 4,123.3 3,939.7 3,464.5 3,140.7 2,782.8 2,435.5 Interest-bearing long-term liabilities and allocations 4,010.1 3,816.4 3,456.6 2,776.2 2,916.8 2,640.2 2,627.8 2,506.2 2,668.0 2,805.9 Non-interest-bearing long-term liabilities and allocations 850.9 842.0 875.7 800.6 726.7 656.9 665.4 605.8 547.6 449.4 Interest-bearing current liabilities 5.4 0.0 5.0 643.1 573.1 833.1 975.8 608.1 371.1 265.5 Non-interest-bearing current liabilities 847.9 852.7 844.7 867.1 659.6 726.0 578.5 619.8 492.9 461.7

TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 10,602.5 10,504.7 9,721.8 9,413.7 8,999.5 8,795.9 8,312.0 7,480.6 6,862.4 6,418.0

KEY RATIOS Return on equity, % 2.5 12.6 9.7 12.5 10.8 16.8 15.3 18.2 20.2 15.1 Return on assets, % 2.3 7.0 5.7 7.0 6.2 9.0 8.2 9.1 9.7 7.6 Return on capital employed, % 2.7 8.5 6.9 8.4 7.3 10.7 9.7 10.8 11.4 8.8 Operating margin, % 6.9 14.4 10.0 15.5 14.6 20.2 19.6 19.9 28.3 24.6 Net margin, % 2.9 13.0 8.3 11.7 12.0 17.1 16.5 16.8 23.4 17.9 Solidity, % 46.1 47.5 46.7 46.0 45.8 44.8 41.7 42.0 40.6 37.9 Self-financing, % 71.5 112.7 81.9 106.1 124.6 88.2 86.5 104.2 158.0 133.4 Interest coverage ratio, times 2.1 6.3 4.7 5.7 4.8 5.1 4.6 5.7 5.4 3.7 Debt ratio, times 0.8 0.8 0.8 0.8 0.8 0.9 1.0 1.0 1.1 1.3 Capital turnover ratio, times 0.48 0.55 0.65 0.59 0.48 0.50 0.46 0.53 0.40 0.36

OTHER INFORMATION Capital employed 8,903.7 8,810.0 8,001.4 7,746.0 7,613.2 7,413.0 7,068.1 6,255.0 5,821.9 5,506.9 Net investments in plants 875.4 726.4 921.6 681.4 614.4 815.6 700.0 657.3 408.0 359.5 Net investments in shares 0.0 1.8 4.0 49.7 3.3 112.1 60.6 13.4 32.9 23.1 Allocation to the municipality 215.0 205.0 196.0 180.0 170.0 153.0 124.0 104.0 85.0 78.0 13 SE-931 80 Skellefteå, Sweden. Tel +46 910 77 25 00, fax +46 910 77 28 82, [email protected], www.skekraft.se Krux. Photo Patrick Degerman. April 2014.