REN - REDES ENERGÉTICAS NACIONAIS SGPS, SA REN – Redes Energéticas Nacionais, SGPS, S.A
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ANNUAL REPORT 2010 REN - REDES ENERGÉTICAS NACIONAIS SGPS, SA SGPS, NACIONAIS ENERGÉTICAS REDES - REN 2010 REPORT ANNUAL ANNUAL REPORT 2010 REN – Redes Energéticas Nacionais, SGPS, S.A. Avenida Estados Unidos da América, 55 1749-061 Lisboa Telephone: +351 210 013 500 www.ren.pt WorldReginfo - 6798b7db-3e0b-402c-8806-a432da2afb36 │ CONTENTS ANNUAL REPORT 2010 REN – REDES ENERGÉTICAS NACIONAIS SGPS, SA Table of contents Chairman's statement 3 REN at a glance 5 Management report 31 Accounts 73 Consolidated financial statements Separate financial statements Auditors’ reports and opinions Audit committee’s reports and opinions Extract from the minutes of the annual general meeting Legislation in 2010 172 Glossary 176 WorldReginfo - 6798b7db-3e0b-402c-8806-a432da2afb36 │ CHAIRMAN’S STATEMENT ANNUAL REPORT 2010 REN – REDES ENERGÉTICAS NACIONAIS SGPS, SA Chairman’s statement Portugal had an extremely difficult 2010 as the Regarding the infrastructure brought into operation in international financial crisis raged back and financial 2010, I would highlight, in electricity, the new markets expressed doubts about the solvency of selected interconnecting line at 400 MW between Portugal and Eurozone countries, including Portugal. This situation led to Spain in the international section of river Douro; in natural widening spreads between the benchmark German bond gas, I wish to emphasise the renewal of the national control yield and its counterparts in several so‐called peripheral centre at Bucelas. countries. In the Portuguese case, this spread widened more than any time since the creation of the euro. In The Group’s operating costs were significantly reduced addition to the higher cost of sovereign debt, the banking as duplications were eliminated and process efficiency system was virtually barred from access to any form of improved. Thus, meeting the challenge of a more external borrowing except for credit extended by the demanding regulation in place since January 1st 2009 for European Central Bank. electricity and since July 1st 2010 for natural gas. REN was not unaffected by the financial crisis. Our credit Our human resources management progressed ratings were downgraded by two notches before the end of significantly in 2010. Performance evaluation became 2010 in line with the ratings of the Republic of Portugal. At widespread across the company, based on individual – and, the same time, the cost of new borrowings surged and whenever possible, quantified – goals. The individual repricing provisions in existing lines prompted the upward performance component was complemented by a revision of interest rates. However, the impact of the crisis component reflecting the company’s overall performance. on the company’s accounts was substantially mitigated by Senior management positions were renewed either by the rebalancing of REN’s debt, carried out during the past internal promotion or new hiring from private‐sector three years, which protected us from refinancing risk and enterprises, including PSI‐20 companies. The new interest rate rises. The extension of the average debt managers were hired according to strict professional skills maturity from one year in 2007 to five years in 2010, the criteria, which strengthened REN’s technical capabilities. access to international credit ratings in 2008 and the This renewal coincided with the retirement (or early sourcing of additional finance from the European retirement) of several managers and was a step towards Investment Bank (EIB) – which today accounts for 35% of higher internal mobility. total Group debt – were all decisive. Interest rate risk is mitigated, as 70% of the company’s debt is now on a fixed To complete this short review of the most salient aspects rate basis. of REN’s business in 2010, I would like to point out that net profit for the year was 110.3 million euros, or 17.7% down At the operating level, REN fully delivered once again the from 134,0 million euros in 2009. This decline was a result results to which it had committed in its activity plan: capital of extraordinary events beyond REN’s activities: first, the expenditure amounted to 443 million euros and assets change in the company income tax (IRC) rate, and then, the brought into operation in the year amounted to 411 million provisions made for a contingent liability arising from the euros. right to Galp Energia’s dividend payment in respect of financial 2005. Recurrent net profit grew 11% between REN’s team made a remarkable effort to ensure the 2009 and 2010, which primarily reflected the expanded flawless execution of its capital budgeting plan for 2010. asset base and the reduction in operating costs. This was achieved against a background of internal restructuring designed to clearly separate project and Financial 2011 presents even larger challenges. In a very technical specifications activities from purchasing routines. difficult economic environment, the company plans to keep These changes, which ensure more transparency and a high level of capital expenditure, both in electricity and better internal control did not impair the pace of natural gas and efforts will continue towards raising the investments or the placement of new facilities into efficiency of operational and supporting activities. operation. Once again, REN lived up to its reputation of delivering on schedule the investments listed in its activity At the same time, REN is raising its profile abroad as it plans. takes full advantage of its high technical skills. 3 WorldReginfo - 6798b7db-3e0b-402c-8806-a432da2afb36 │ CHAIRMAN’S STATEMENT ANNUAL REPORT 2010 REN – REDES ENERGÉTICAS NACIONAIS SGPS, SA I would like to thank our shareholders for their trust in the company and its management and their contribution to stability and growth. I would also like to express my recognition to the company’s supervisory bodies for their diligence and good efforts in improving REN’s performance and dependability. Finally, a special word is in order to our employees, the company’s main asset. In an extremely complex economic environment, the company team evidenced unparalleled professionalism and dedication. Their attitude is the clearest proof that REN is up to the large responsibilities and challenges that lie ahead. Lisbon, 16 March 2011 Rui Cartaxo Rui Cartaxo Chairman REN ‐ Redes Energéticas Nacionais 4 WorldReginfo - 6798b7db-3e0b-402c-8806-a432da2afb36 REN AT A GLANCE ANNUAL REPORT 2010 REN – REDES ENERGÉTICAS NACIONAIS SGPS, SA REN at a glance WorldReginfo - 6798b7db-3e0b-402c-8806-a432da2afb36 REN AT A GLANCE ANNUAL REPORT 2010 REN – REDES ENERGÉTICAS NACIONAIS SGPS, SA Table of contents Profile 7 Main events in 2010 8 Major shareholders 10 Key performance indicators 11 Regulated assets 15 Technical infrastructure 20 Corporate structure 24 Organisational set‐up 25 Executive director roles 26 Governing bodies 27 Managing directors and managers 29 WorldReginfo - 6798b7db-3e0b-402c-8806-a432da2afb36 REN AT A GLANCE ANNUAL REPORT 2010 REN – REDES ENERGÉTICAS NACIONAIS SGPS, SA Profile REN, whose main activity is to manage energy transmission systems, is one of the few European operators in both electricity and natural gas. REN’s operations focus on these two sectors: • Electricity, through its very‐high voltage transmission services and the technical management of the domestic electricity system for which it has a 50‐year public‐service concession from 2007; and • Natural gas, through its high‐pressure transmission services, the technical management of the domestic natural gas system, the reception, storage and regasification of liquefied natural gas (LNG) and the underground storage of natural gas, under three 40‐year public‐service concessions since 2006. Through its 90% equity stake in OMIP SGPS – whose subsidiaries OMIP and OMIClear manage the Iberian electricity derivatives market and its clearing house – Pipeline REN promotes the development of the Iberian energy market. In addition, REN has since 2002 operated in the telecommunications sector through RENTELECOM, which was created to explore the surplus capacity of the security telecommunications networks that are essential to the successful system management of electricity and natural gas networks. In October 2010, the Portuguese state awarded ENONDAS, a company fully controlled by REN, a concession for the generation of electricity from wave energy in a pilot zone north of S. Pedro de Moel. This concession is valid for 45 years and includes a licence to build the required infrastructure for connection to the transmission grid. Tower 7 WorldReginfo - 6798b7db-3e0b-402c-8806-a432da2afb36 REN AT A GLANCE ANNUAL REPORT 2010 REN – REDES ENERGÉTICAS NACIONAIS SGPS, SA Main events in 2010 Set‐up of the procurement department Expansion of the Sines terminal New interconnection at International Douro January To coordinate purchases and contract awards, a procurement department is set up for the Group. Several lines are connected to wind farms: Lomba do Vale and Terra Fria to the Frades substation, and the Alto Douro wind farm to the Valdigem substation. February REN Armazenagem and RENTELECOM are awarded APCER’s Quality, Environment and Safety certification. Seveso audits are conducted in REN Atlântico and REN Armazenagem facilities. March REN, SGPS, S.A. elects new governing bodies for 2010‐2012. An Emergency Restoration System (ERS) of towers was used for the first time to avert the fall, in an extreme weather event, of supports on the 220kV Carregado‐Fanhões‐Sacavém power line. April The executive