2018 Contents. INTRODUCTION About us. 1 This is Ellevio. 2 ELLEVIO 2018 Review of 2018. 5 CEO’S STATEMENT We need to build the electricity network 6 of the future, today. MARKET CONDITIONS Overall objectives. 8 AND DRIVERS Regulation of the electricity network. 8 The Swedish electricity market – how it works. 10 Drivers. 12 VALUE CREATION From the big things to the little things. 18 Society and customers. 20 Employees. 22 Environment. 30 Owners. 33 INVESTMENTS AND FINANCING Investments. 34 Financing. 38 ANNUAL REPORT 43 CORPORATE GOVERNANCE 71 SUSTAINABILITY MANAGEMENT AND RESULTS 76 The Annual Report consists of an administration report, financial statements and notes on pages 43–68. (The auditors’ report appears on page 69.) The sustainability report has been produced in line with Global Reporting Initiatives (GRI) standards ”core” level. The complete sustainability report comprises the description of our sustainability efforts on pages 2–39 along with Sustainability management and results and the GRI index on pages 76–87. The sustainability report also covers Ellevio’s Communication on Progress to the UN Global Compact. The statutory sustainable report in accordance with the Annual Accounts Act covers pages 2–4, 18–33 and 76–87. Ellevio AB (publ) Box 242 07 104 51 Stockholm www.ellevio.se All values are expressed in SEK. Figures within parentheses refer to 2017, unless specified otherwise. The data concerning markets and the competitive situation are Ellevio’s own estimates unless a specific source is indicated. These estimates are based on the best and latest available facts from published sources. About us. Sometimes it’s warm, sometimes it’s cold. Sometimes light, sometimes dark. We need to cool down, heat up, add darkness and bring light. And of course we need to charge our cars, trim beards, run production lines, cook food, transport goods, milk cows, surf the inter- net, check our teeth and ride in lifts. How lucky we are to have electricity! Reliable and stable distribution of electricity is a pre- requisite for the functioning of our daily lives as well as the ability to develop solutions and innovations and ensure that Sweden achieves its climate targets. Our responsibility is to ensure a reliable supply of electricity to our current 957,000 customers, while also enabling society and Sweden to keep developing. Step-by-step, these efforts bring us closer to our vision of using our commitment and expertise to contribute to a bright and sustainable future. Welcome to Ellevio. Ellevio is future- proofing Sweden. Our mission Ellevio’s customers are to have an uninterrupted Ellevio is one of Sweden’s largest electricity network supply of electricity, regardless of whether they live companies. Our task is to safeguard the supply of in the country or in an urban area. electricity to homes, workplaces and societal func- Electrification, digitisation, urbanisation and new tions by ensuring that the electricity network in our types of production are all placing new requirements network areas is sustainable in the long term and can on our electricity network. Ellevio is investing close to thus ensure that a climate-smart energy system can be SEK 10 billion between 2016 and 2019 to mod- produced. An important part of this responsibility ernise and future-proof our electricity networks, an consists of weather-proofing the electricity network in increase of 100 percent compared with the previous rural areas and strengthening and regenerating the four-year period. So far we have invested around electricity network in cities. SEK 7.4 billion, fully in line with our plan. The need Producing and maintaining a reliable supply of for investments in the future-proofing of Sweden will electricity is one of society’s most vital assignments. remain for the foreseeable future. With the right cir- We view this responsibility with humility and a strong cumstances and with reasonable conditions, Ellevio desire to keep contributing to sustainable societal can continue its investment programme for decades development. With the right conditions and in col- to come. laboration with society, we want to realise our vision We are a regulated business subject to the provi- of using our commitment and expertise to contribute sions of the Electricity Act. The public agency Swedish to a bright and sustainable future, step by step. Energy Markets Inspectorate implements legislation and regulations and monitors the extent to which we A few facts about us fulfil our mission. We own, operate and develop regional and local The company is owned by pension savers via the electricity networks and distribute electricity with Swedish Third National Pension Fund, Folksam and 99.98 percent reliability to 957,000 customers in the First National Pension Fund, as well as OMERS Sweden. Our network is 76,500 km long, corre- Infrastructure, which invests in infrastructure for sponding to almost two trips around the Earth. OMERS, one of Canada’s largest pension funds. Our customers are spread across the West coast, The owners all share a long-term approach and mid-Sweden, and Stockholm. The main proportion of want to invest in businesses that contribute to sustain- our networks is located in rural areas, but most of our able development. The value we create goes customers are in Stockholm. We have a clear objective; straight back to the pension savers. Mission. Strategy. To improve quality of life by guaranteeing Our overall strategy is to deliver value a long-term sustainable electricity network. to our customers and investors by ensuring a reliable, future-proofed electricity network, efficient operations, Vision. committed employees and growth To contribute to a bright and sustainable through acquisitions. future through our commitment and expertise. 2 ELLEVIO 2018 • THis is Ellevio Seven strategic focus areas. Ellevio is responsible for critical infrastructure that fulfils a fundamental function in society. Our operations involve a very wide range of responsibilities. Our vision is to contribute to a bright and sustainable future through our commitment and expertise. Ellevio’s overall strategy to achieve this vision and create value for our customers and investors is to guarantee a reliable electricity network, efficient operations, committed employees and continued growth. We have seven strategic focus areas that aim to create value for our customers and investors. 1. Sustainability 5. Improved reliability through For Ellevio, sustainability means striking the right efficient investments balance between financial, social and environ- Investments to maintain high reliability and further mental sustainability in order to create long-term improve it in certain areas is an important aspect value for our stakeholders. of Ellevio’s operations. 2. Customer experience 6. Operational efficiency The core of the customer experience is a reliable Our strategy for operational efficiency includes electricity network and an attractive range of reducing the costs of repairing faults and mainte- services. nance through the extensive investments planned for the electricity network. 3. Committed employees Ellevio is to be an organisation where everyone 7. Growth through acquisitions takes responsibility for their own development, as According to the strategy for growth through well as that of their team and the company. Our acquisitions, Ellevio will identify, evaluate and, conduct is guided by our values of reliability, when the opportunity arises, carry out acquisitions commitment and development. of electrical grid businesses. 4. Regulation and sector development The electricity network market is regulated and it is important to Ellevio to be involved in developing those regulations and to contribute knowledge, experience and opinions to issues that are import- ant in terms of ensuring the electricity market func- tions and develops as best it can. Investments 2015–2018 Net sales 2018 SEKm 3,000 SEK 6,974 M 2,500 2,000 Investments in tangible and 1,500 intangible assets 2018 1,000 500 SEK 2,870 M 0 2015 2016 2017 2018 Basic investments Customer-driven investments Other investments ELLEVIO 2018 • THis is Ellevio 3 Our networks. Västra Svealand-Västergötland 133,000 customers 25,600 km of electricity network 193 metres of electricity network per customer Dalarna-Södra Norrland 103,000 customers 15,000 km of electricity network 147 metres of electricity network per customer West Coast Stockholm 126,000 customers 595,000 customers 14,000 km of electricity network 15,400 km of electricity network 113 metres of electricity network 27 metres of electricity network per customer per customer Our electricity network is divided into Our objective. four local network areas based on Ellevio’s customers should have an geographical location. Since 1 January uninterrupted electricity supply – 2018 these have been divided up into today, tomorrow and in 50 years. two tariff zones. In addition to the four local electricity networks, we also own regional networks in Stockholm and rural areas. In total, this represents about 70,000 km of local networks and 6,500 km of regional networks. 4 ELLEVIO 2018 • THis is Ellevio Review of 2018. Quarter 1. Quarter 2. The energy tax transfer from electricity traders Installs Vallentuna’s first charging stations. to electricity network companies is imple- Together with the municipality, Ellevio has installed mented. The responsibility for energy taxes, which some 40 charging stations for charging electric vehi- was previously invoiced by customers’ electricity trad- cles at a number of important, high-traffic locations. ers, has now been transferred to electricity network Implements several equality initiatives. As a companies. The overall price has not been affected, whole, the energy sector is unequal and Ellevio as but the increase in the electricity network share corre- a company reflects that sector. For this reason, sponds to an equally sized reduction in the electricity Ellevio has launched several initiatives that aim to trader share, so neither traders nor companies will drive our efforts forward and learn from other indus- see a change in earnings due to the reform.