Meny

Board of Director's report

Statnett has the overall responsibility for ensuring a stable and secure supply of electricity in Norway and for facilitating a well-functioning power market. 2013 has been a year with stable operations, and the power situation in Norway has been good throughout the year.

To maintain and improve security of supply, facilitate value creation and reduce emissions of greenhouse gases, Statnett is well underway with the construction of the next generation main grid. Statnett invested NOK 6.4 billion in 2013, which is twice as much as in 2012. This reflects a historically high level of activity, which is projected to continue in the years to come. The increased investment levels also include significant reinvestments in existing plants and facilities.

The Sima-Samnanger and Varangerbotn-Skogfoss power-lines, which are important for security of supply to the Bergen area and East Finnmark, were completed in 2013. Several major projects are under construction and will be commissioned during the period 2014-2016, including a new subsea cable to Denmark, Skagerrak 4, and the Ørskog-Sogndal power line, which is important for security of supply in central Norway. In the near future, final investment decisions are scheduled for several major projects, and in 2014, Statnett is expected to enter into contracts which will commit the enterprise to significant investments in the period leading up to 2020.

Statnett's development plans are described in the 2013 Grid Development Plan. The plan is consistent with the Norwegian government's Grid Report (White Paper No. 14 (2011-2012)) and includes annual investments of NOK 5-7 billion in new network capacity. The mission imposes substantial demands on Statnett’s organisation and on the interaction with stakeholders. This requires effective licensing processes, a strengthening of Statnett's own implementation strategy as well as increased use of the supplier industry. The plan may also be affected by, among other, reassignment of priorities in the portfolio, new licensing terms and cost developments in the supplier market.

In addition, structural changes are anticipated in the Nordic and North European energy system, which will set new requirements for the future Norwegian main grid to maintain robustness and ensure flexibility in the energy supply. This assumes that Statnett, as Transmission System Operator (TSO), acquires the entire main grid, which corresponds to an increase in Statnett's facilities of approximately 15 percent.

To facilitate new renewable energy, mainly small-scale hydropower and wind power, as well as an anticipated Nordic power surplus, and to ensure security of supply in dry years, it is necessary to increase the power exchange capacity with power systems outside the Nordic region. After having reached an agreement, with key parties in Germany and the UK in 2012 for the construction of international interconnectors, Statnett submitted an application for a foreign trade licence to the Ministry of Petroleum and Energy (MPE) in the second quarter of 2013. The interconnector to Germany is scheduled for completion in 2018 and the UK interconnector in 2020. These projects are important for the development of the Northern European power grid and are a high priority for all parties involved.

All Statnett's investments should be socio-economically rational. However, the future investments in the main grid will result in increased grid tariffs and will thus represent higher costs for the users. To the extent possible, Statnett seeks to balance investment initiatives necessitated by the need to ensure security of supply with a cost-efficient development plan.

Statnett maintains a focus on Health, Safety and the Environment (HSE) directed at both regular operations and the growing construction activities. Several measures were introduced in 2013 and Statnett is working systematically to facilitate Statnett's achievement of the company's HSE ambition which involves that, by the end of 2017, the company and its external suppliers will be the leading TSO in Europe. On 3 January 2013, a tragic accident occurred on one of Statnett’s development projects, in which a subcontractor employee lost his life during installation work.

The increased activity affects the risk situation for Statnett. Statnett practises unified risk management, and extensive improvements and measures have been implemented to meet this challenge.

Statnett is certified according to the quality standard PAS 55 (Publicly Available Specification 55). PAS 55 sets requirements related to the asset management in a lifetime perspective. The standard assumes a clear connection between the enterprise's strategy and plans and the implementation of activities and risk-based decisions. PAS 55 assumes continuous asset management improvement and underpins Statnett's focus on cost-efficient operations during a strong growth phase.

Statnett is among the most cost-efficient TSOs in Europe according to a comparison study conducted by the Norwegian Water Resources and Energy Directorate (NVE), which compared costefficiency in about 20 European TSOs.

Statnett's financial execution ability was strengthened by the injection of new equity in 2013. Statnett's solvency and financial execution ability was strengthened by the injection of new equity of NOK 3.25 billion in January 2014. Furthermore, it is decided that no dividend will be paid for 2013 and the dividend policy has been amended from 50 percent to 25 percent for the years 2014 to 2016.

Security of supply

At the beginning of 2013, there was a shortfall in the hydrological balance of approx. 3 TWh. Low precipitation and high consumption impaired the hydrological balance in the first months of the year. The largest shortfall in the hydrological balance was registered in the first week of April, 20 TWh below normal. Heavy precipitation in the second quarter strengthened the balance, and a fourth quarter with heavy precipitation and unseasonably high temperatures resulted in a surplus at year-end of 3 TWh compared with normal.

At the beginning of 2013, reservoir water levels were 69 percent, on par with the median level for the 1993-2013 measuring period. Throughout the year, reservoir water levels were somewhat below normal in some periods. However, mild weather and heavy precipitation towards the end of the year resulted in reservoir water levels of 68 percent, two percentage points below the median.

At the beginning of April, the power situation in Western Norway (NO5 and the northwestern part of NO2) and central Norway (NO3) was changed from normal to pressed. A pressed power situation means that the flexibility in the power system, to handle low water inflow or long-term faults in transmission and production facilities, is limited. This situation continued until mid-May when the status was changed back to normal.

Following the cold and dry start of the year, temperatures and the amount of precipitation increased to above normal. In 2013, the average temperature for Norway as a whole was 1.0 °C above normal, and precipitation was 110 percent of normal levels in 2013. 

Reservior levels Norway

Converted into energy, precipitation equalled 129 TWh in 2013, 1 TWh less than normal (based on the 1981-2010 period). The overall energy production in 2013 was 133 TWh and total power consumption 128 TWh. The corresponding figures for 2012 were 148 TWh and 130 respectively. Net exports were 5 TWh in 2013, compared with 18 TWh in 2012.

New production and consumption records were set in January due to cold weather:

  • A new production record of 26 075 MW was set on Wednesday 16 January in the 17th hour.
  • A new consumption record of 24 180 MW was set on Wednesday 23 January in the 9th hour.

From February, all Nordic countries are members of the secondary reserves market (FRR). The market was operational until the end of May when the project entered an evaluation period. The market was relaunched in September. Norway's share has been 35 MW (100 MW in the Nordic region) with the exception of certain higher quantity trial periods, with up to 135 MW (350 MW in the Nordic region).

As a result of the commissioning of the new 420kV power line between Sima and Samnanger in December, the spot market boundary between NO5 and NO1 was moved.

The 420 kV interconnector between Rød and Hasle has 2 new sets of cables, which has increased the capacity between NO2 and NO1.

There were several operational interruptions in 2013 that affected operations for shorter or longer periods

  • A storm on 2 March resulted in several power line breakdowns in central Norway. The power line between Viklandet and Fræna was out of operation until 5 March, which meant that consumption on Ormen Lange had to be reduced by 50 MW, compared with a normal consumption of approximately 170 MW. Short-term consumption outages also occurred at Hydro Aluminium in Sunndalsøra and at Hustadmarmor on 2 March.
  • Two major operational interruptions caused a complete blackout in Lofoten, Vesterålen and the Harstad area on two separate occasions on 13 and 14 March. The first incident resulted in a disconnection of 170 MW of consumption and lasted for several hours, whereas the second incident caused a loss of up to 300 MW of consumption, lasting for about one hour.
  • On 18 April, a transformer breakdown in Ørskog caused power supply outages from Kjelbotn (Ålesund) to Grov (Førde). About 180 000 people were without electricity for 90 minutes.
  • Major lightning storms between 22 July and 1 August resulted in many outages. Øst-Finnmark County was hardest hit, where Vardø and Vadsø were without electricity for several hours on 29 July.
  • The NorNed cable was out of operation from 28 October to 18 December due to a storm in the Netherlands. The storm also hit Denmark and Germany and resulted in interruption of wind power and power line outages. The imbalances were to a large degree transferred to the Nordic region and regulated in Norway.
  • The Rana-Svartisen and Kobbelv-Ofoten power lines were down on 3 December due to wind and snow. This resulted in a separate area in Salten with a short-term frequency above 52 Hz. The Kobbelv-Ofoten power line was soon back in service, but the Rana-Svartisen power line was out of operation for six hours.

Investments

Statnett has major development projects under planning and implementation. The plans are presented in Statnett's 2013 Grid Development Plan.

Statnett invested NOK 6 415 million in 2013, including both commissioned and ongoing investment projects. This is an increase from NOK 3 152 million in 2012.

Commissioned projects totalled NOK 4 545 million in 2013 compared with NOK 1 339 million in 2012.

At year-end 2013, the value of plants under construction was NOK 6 020 million, a net increase of NOK 1 743 million in 2013. This was mainly related to the power lines Ørskog-Sogndal and the Skagerrak 4 interconnector to Denmark.

The most important projects are listed in the table below. Projects for which licence applications are pending or licences have been appealed, are being considered by the Norwegian authorities.

Overview of major investment projects

See www.statnett.no for more information about the projects.

Styrets beretning Tabell 1 O ENG

The amounts in the table show the anticipated range including all project costs.

Projects under construction are shown in current NOK, other projects in 2013 NOK.

Important project events in 2013

Major investment projects - completed

  • Sima - Samnanger: A new 420 kV power line was put into operation on 9 December 2013.
  • Varangerbotn - Skogfoss: A new 132 kV power line has entered service and modifications of high voltage installations in the Varangerbotn and Skogfoss substations have been implemented.
  • Substation investments: Major substation investment projects have been completed relating to transformation, distribution and compensation totalling NOK 575 million.

Ongoing major investment project

  • Ørskog - Sogndal: Overall, the project is on schedule for final commissioning in 2016.
  • Ofoten - Balsfjord: In August 2013, Statnett received a licence from the Ministry of Petroleum and Energy (MPE). Work on access to the route is ongoing. Queries to suppliers have been issued and are being considered.
  • Skagerrak 4: The project is proceeding as scheduled with handover expected in December 2014.
  • Eastern Corridor: The project is proceeding as scheduled with final commissioning expected in the autumn of 2014.
  • Ytre Oslofjord: The facility came online in November 2013 with 6 of 9 new cables in operation. The last 3 oil cables will be installed in 2014.

Other projects under development

  • Western Corridor: The work to upgrade the voltage between Kristiansand and Feda has started and is scheduled to be completed in 2014. In December 2013, the Norwegian Water Resources and Energy Directorate (NVE) granted Statnett a licence for voltage upgrades of the facilities on the Solhom - Arendal and Feda - Tonstad sections. Licences for several other sections are being considered by the Norwegian Water Resources and Energy Directorate (NVE).
  • Namsos - Trollheim: In August 2013, Statnett received a facility licence from the Ministry of Petroleum and Energy (MPE). Statnett will facilitate construction of the wind farms by reinforcing the grid as necessary as soon as the wind farm players have made an investment decision.
  • Balsfjord – Hammerfest: An updated needs and profitability analysis has been implemented and an investment decision in principle is scheduled for 2014. A licence for the project is still being considered by the Ministry of Petroleum and Energy (MPE).
  • Klæbu - Namsos: The project is proceeding according to schedule and a final investment decision is expected in the summer of 2014.
  • The interconnector to Germany: Application for overseas license was submitted MPE in May 2013. In December 2013, the Norwegian Water Resources and Energy Directorate (NVE) submitted its final assessment of the impact on the power system, environment, natural resources and society from the planned cable between Norway and Germany. The assessment will form the basis for the MPE's consideration of the licence application. An agreement has also been entered into with the German authorities in Schleswig-Holstein relating to a progress plan for the licensing process for a converter facility, subterranean cable and a cable to the 12-mile boundary on the German side.
  • The UK interconnector: Application for overseas license was submitted MPE in May 2013. In December 2013, Statnett was granted a facility licence for a cable interconnector to the UK. The planned international interconnector has a capacity of 1 400 MW and will be installed between Kvilldal in Suldal Municipality and Blyth in the UK.

Research, development and expertise building

Research and development (R&D) in Statnett is a strategic tool to promote value creation, innovation and green solutions. In 2013, Statnett invested NOK 43 million in R&D, NOK 6 million more than in 2012. Three strategic R&D programmes have been initiated, linked to Statnett's Group strategy. The 3 programmes run from 2012 to 2014 and are:

  • Smart Grid: Developing and testing new solutions for safe and efficient operations which will meet future challenges.
  • Solutions and technology for the next generation main grid: Developing and implementing a pilot facility to enable building a robust main grid adapted to the environment.
  • Priorities:
    • Environmental challenges: Impact of new infrastructure on the environment.
    • Social Acceptance: Ensure acceptance and understanding for Statnett’s socio-economic mandate, secure a stable supply of electricity and promote value creation through interaction with the other Nordic countries and Europe.

In addition to its own R&D activities, Statnett cooperates closely with external expertise environments both in Norway and abroad. Furthermore, Statnett is committed to developing an R&D strategy through ENTSO-E, which will give the company the opportunity to participate in jointly financed R&D projects together with other transmission system operators, as well as universities in Europe with financial support from the EU. See Corporate Social Responsibility for more detailed information about Statnett's R&D work. 

Financial performance

The annual financial statements for Statnett SF and the Statnett Group have been prepared in compliance with the International Financial Reporting Standards (IFRS) and interpretations established by the International Accounting Standards Board (IASB), which have been approved by the EU. Comments to the accounting items are in relation to the Group's financial statement. Developments described for the Group also apply to the parent company.

Operating revenues

Statnett's operating revenues in 2013 totalled NOK 4 561 million (NOK 5 334 million in 2012). The reduction in operating revenues in 2013 was due to lower tariff revenues due to planned downward adjustment of tariffs for 2013 as well as lower congestion revenues (price differences between areas in the Nordic region and towards the Netherlands).

Statnett's operating revenues mainly derive from grid operations regulated by the NVE, which stipulates a cap (permitted revenue) for Statnett's evenues. Operating revenues in Statnett’s financial reporting consist primarily of fixed grid tariffs from the customers as well as congestion revenues. Permitted revenue increased from NOK 4 025 million in 2012 to NOK.

5 361 million in 2013, mainly due to increased permitted return on grid capital, and an increase in facilities. If the total revenues from grid operations for one year diverge from the permitted revenue, so-called higher or lower revenue will occur. Higher/lower revenue will even out over time through adjustment of future grid tariffs. In 2013, Statnett had a lower revenue of NOK 958 million (higher revenue of NOK 1 065 million), excluding interest. At the end of 2013, accumulated higher revenue, including interest, 

Operating costs

The Group's operating costs totalled NOK 4 215 million in 2013 (NOK 3 901 million).

System services costs amounted to NOK 569 million in 2013, up NOK 64 million compared with 2012. The increase was mainly due to the launch of the secondary reserves market.

For 2013, transmission losses amounted to NOK 698 million, up NOK 107 million compared with 2012. The increase was due to higher prices, somewhat offset by a lower loss volume.

Wage costs for 2013 totalled NOK 779 million, down NOK 23 million from 2012. The reduction was due to increased capitalisation of own hours and lower pension costs following a change in actuarial assumptions relating to the discount rate. This was somewhat offset by an increase in wage costs as a result of higher construction, operation and maintenance activity.

Depreciation and write-downs totalled NOK 1 048 million in 2013, up NOK 221 million compared with 2012. This was due to an increase in the number of facilities as well as depreciation and write-downs relating to Statnett's former head office and the South-West Link.

Other operating costs totalled NOK 1 121 in 2013, down NOK 55 million from 2012. The change was due to lower project development costs in relation to international interconnectors in 2013.

Net profit

The Group's operating profit for 2013 amounted to NOK 346 million (NOK 1 433 million).

Revenues from associates totalled NOK 10 million in 2013 (NOK 9 million).

The Group's net financial items for 2013 amounted to a loss of NOK 267 million (loss of NOK 280 million). Higher construction loan interest was recognised in the balance sheet due to an increase in project activities in 2013. This was somewhat offset by higher interest costs in 2013 as a result of an increase in loans.

Profit for the year after tax in 2013 was NOK 82 million (NOK 837 million). Profit after tax for 2013, corrected for non-recognised higher/lower revenue and estimated interest costs, was NOK 832 million (NOK 234 million). The higher adjusted profit was mainly due to an increase in permitted return on grid capital, and an increase in the number of facilities.

The corrected result corresponds to the dividend basis. 

Cash flow and balance sheet

The Group’s operating activities generated an accumulated cash flow of NOK 1 304 million in 2013. The net cash flow from investment activities totalled NOK -6 197 million. In total, loans were paid down by NOK 2 883 million, and new loans of NOK 8 195 million were raised. At year-end 2013, the Group's liquid assets and market-based securities amounted to NOK 1 610 million (NOK 1 302 million).

At the end of 2013, the Group had total assets of NOK 34 897 million (NOK 25 794 million). Interest-bearing debt amounted to NOK 19 909 million. The market value of recognised interest swap and currency swap agreements (fair value hedges) related to interest-bearing debt was NOK 554 million. Interest-bearing debt, corrected for this, totalled NOK 19 355 million.

At an Enterprise General Meeting on 17 December, it was decided to increase Statnett's equity by NOK 3 250 million. At year-end 2013, the Group’s equity, including new equity, totalled NOK 12 135 million (NOK 8 852 million). The company's distributable equity was NOK 5 839 million at year-end (NOK 5 876 million). Corrected for net higher/lower revenue, the equity ratio was 30 percent.

The Board of Directors and management consider the enterprise's equity and liquidity to be prudent. 

Subsidiaries and associated companies

Statnett SF is required to provide heavy transport preparedness for the Norwegian power supply. Statnett’s wholly owned subsidiary Statnett Transport AS is required to ensure efficient and competitive implementation of this duty. In 2013, operating revenues for Statnett Transport amounted to NOK 147 million (NOK 137 million) and the profit before tax was NOK 22 million (NOK 18 million).

At the end of 2013, Statnett SF had an ownership interest of 28.8 percent in Nord Pool Spot AS. In the third quarter of 2013, the Latvian Transmission System Operator Augstsprieguma exercised the option stipulated in the letter of intent to purchase two percent of the shares. This reduced Statnett's ownership interest to 28.2 percent, and generated revenues of NOK 3 million. Statnett’s share of the profit in Nord Pool ASA contributed NOK 10 million (NOK 9 million) to the Statnett Group's profit in 2013.

In May, Statnett assumed ownership of its new head office at 33 Nydalen Allé by exercising the purchase option negotiated in connection with the initial lease agreement with Avantor AS. This entailed that Statnett SF purchased 100 percent of the shares in Nydalshøyden bygg C AS, which owned the building. In December 2013, the building was resold to Statnett SF.

At the end of 2013, the Nordic transmission system operators Fingrid OY, Svenska Kraftnät and Statnett SF established the company eSett OY. Statnett has an ownership interest of 33.3 percent in the company. The company will develop systems for balance settlement and from the second half of 2015 provide balance settlement services for market players in Finland, Sweden and. The company will be based in Helsinki. 

Risk management and internal control

Statnett practises unified risk management which reflects that the enterprise manages critical infrastructure in a vulnerable society, and that the enterprise is in a growth phase with a significant project volume. A secure supply of electric power forms the basis for a stable supply of electricity to the end-users, value creation and realisation of climate-friendly solutions. Statnett's risk management covers the entire scope of the enterprise, including strategic, commercial, operational and financial aspects. Statnett's risk management and internal control is an integral part of the company's activities, coordinated across the organisation by means of a common methodology and framework. Statnett’s tolerance for risks with a potential impact on HSE and supply of electrical power is low. Please see the separate section of the annual report for more detailed information about the framework for Statnett's risk management and specific risks. 

Employees and organisation

Statnett's head office is in Oslo, with administrative offices in Alta, Sunndalsøra, Trondheim and Brussels. In addition, Statnett employees work at facilities all over Norway.

Employees

Statnett has an ambitious mission and must ensure that the right expertise is in place for the right jobs. At the turn of the year, Statnett SF had 1 079 employees, compared with 994 the year before. The increase in staff is mainly owing to an increasing number of tasks in connection with planning and implementation of investment projects, as well as increased requirements related to preparedness.

Statnett has a low staff turnover. However, many of our employees will reach retirement age in the next few years. Consequently, Statnett makes a targeted effort to be an attractive employer in order to attract new employees, as well as to retain and develop the expertise of existing employees. This includes both a trainee programme and an apprentice programme in electrical power engineering and ICT. A career development model has also been introduced which focuses on individual development of Statnett's personnel. Furthermore, Statnett has a senior policy to retain valuable employees and expertise until retirement age. The average retirement age in Statnett was above 67 in 2013.

Statnett conducts yearly organisation surveys. This gives Statnett benchmarking opportunities against other players in the energy industry, and employees have an opportunity to express what they think about Statnett as an employer and workplace. The overall results for 2013 were good and above average for the industry. Some results were significantly better than for other participating companies in Norway.

Gender equality and diversity

Statnett has a zero tolerance policy regarding discrimination and harassment. The enterprise follows this up with local safety delegates, appraisal interviews and opinion polls. It is important to Statnett to ensure a diverse organisation in terms of gender, ethnicity and age. 9.1 percent of employees recruited in 2013 came from non-Norwegian backgrounds, up from 5.3 percent in 2012. The total percentage of women has increased from 24 percent in 2012, to 25 percent in 2013. The percentage of female employees in the energy sector in general is approx. 20 percent. At the end of 2013, four of the nine members of Statnett’s Board of Directors and one of the seven members of the Group management were women. As of January 2014, two of seven members of the Group management are women. Women filled 26 percent of all managerial positions in the Group and three of Statnett's ten trainees in 2013 were female. Statnett has an ambition to increase the number of women in technical and managerial positions. Employment conditions for women and men are monitored using a variety of methods, including wage reviews and staff surveys. Women and men with approximately the same educational background and experience, and employed in comparable positions receive equal pay. See also Notes 4 and 14 for more information about wage costs and remuneration to the Group management.

Health, safety and the working environment

Statnett has a zero policy with regard to accidents, injuries and unnecessary environmental impact. The effort to prevent serious incidents was strengthened in 2013 and will be further intensified. Statnett's ambition is that, by the end of 2017, the company and its external suppliers will be the leading TSO in Europe. To succeed, we need to further increase our focus on safety and quality of deliveries from external technological environments and suppliers. Statnett reports lost-time injuries and hours worked both in its own organisation as well as for contractors in development projects. This is done by estimating the total OIFR value and LTIFR for the enterprise's activities.

Statnett registers HSE incidents and deviations occurring in its own organisation, as well as in contractor/supplier organisations. Reporting of HSE incidents and nonconformities increased in 2013. This is a result of increased project activities combined with improved reporting routines in recent years. Statnett focuses on risk factors and how to mitigate them, both during the project planning and during physical work operations.

On 3 January 2013, a tragic accident occurred in connection with one of Statnett's development projects. A subcontractor employee lost his life during installation work. The accident is being investigated by the police. Statnett instigated its own investigation of the accident and has implemented measures to reduce the risk associated with the use of construction equipment.

Five internal lost-time injuries were reported in 2013, whereas our suppliers/contractors reported 34 lost-time injuries. In 2013, the OIFR value for Statnett's own employees was 2.5, down from 4.4 in 2012. The OIFR value including supplier/contractor companies was 9.8 in 2013. The LTIFR for Statnett's own employees was 62.2 in 2013 compared with 63.4 in 2012. The LTIFR value including supplier/contractor companies was 214 in 2013.

Statnett also reports on H2 (number of injuries per million hours worked). The H2 value for Statnett's own employees was 8.1 in 2013 compared with 8.3 in 2013.

There has been a reduction in the Group’s overall absence due to illness in recent years. In 2013, the overall absence due to illness was 3.1 percent, compared with 3.6 percent in 2012. Even though absence due to illness is lower than in the energy industry in general, Statnett is focussing on analysing the reasons for the absence due to illness and on identifying measures that can reduce absence due to illness further. This involves adaptation of individual workplaces and various health-promoting and illness-reducing measures, including use of safety inspections and physical therapy treatment.

Corporate social responsibility

Corporate social responsibility (CSR) is incorporated in Statnett's fundamental values, which Is a central part of the enterprise's management system. Statnett focuses on understanding the expectations of the community, and on handling these expectations in a manner which generates mutual respect. The key elements are embedded in Statnett's objectives, which stipulate that Statnett will maintain security of supply through a grid with sufficient capacity and high quality, that Statnett's services will generate value for our customers and society at large, and that Statnett will pave the way for realisation of Norway’s climate objectives. CSR in Statnett entails integration of social and environmental considerations in the company's daily operations and and in relations with stakeholders. CSR is integrated in the enterprise's governance and embedded in management and organization.

Statnett reports annually on CSR in accordance with the globally recognised reporting framework, Global Reporting Initiative (GRI). Statnett's GRI reporting complies with the new requirements relating to CSR reporting stipulated in the Norwegian Accounting Act. The new requirements are applicable as of 2013. Please see the description of CSR in Statnett's annual report for more information about corporate social responsibility.

Climate and the environment

Statnett's Environmental Management System is certified in accordance with ISO 14001:2004. Statnett is working to continuously improve the company's environmental performance and focuses on minimising the environmental impact of the company's operations as much as possible.

Any environmental incidents that do occur are recorded and followed up in the Statnett deviation system. In 2013, 178 incidents occurred, compared with 67 incidents in the previous year. Statnett has a strong focus on preventive environmental work, from the early planning phase until the facility is completed, which reduces the risk of serious incidents. However, with a high activity level, incidents cannot be entirely prevented, but incidents with a high risk potential are very few.

The most important sources of greenhouse gas emissions from Statnett's activities are leaks from the SF6 facilities, emissions from mobile reserve power plants and transportation. In addition, emissions occur in connection with construction activities. Emissions have increased in recent years, both as a result of increased activity, operation of the back-up power plants and increased use of SF6.

Statnett is working to reduce its own emissions of greenhouse gases by minimising the company's climate contributions with regard to own consumption, such as heating, cooling and operation of Statnett's offices and other buildings. Like Statnett's administration building in Trondheim, the new head office in Oslo is an energy class A office building.

For a more detailed account of climate and the environment, please see the statement under Corporate Social Responsibility in the annual report.

Corporate governance

Statnett is a state enterprise wholly owned by the Norwegian State through the Ministry of Petroleum and Energy (MPE).

Statnett’s corporate management principles clarify the distribution of roles between the owner, the Board of Directors and the group management. Statnett adheres to the Norwegian State’s Principles for Good Corporate Governance and follows the recommendations laid down by the Norwegian Corporate Governance Board (NUES) to the extent permitted by the enterprise organisation. A separate description of corporate management in the annual report gives an account of Statnett's compliance with the NUES principles.

Changes in the Board of Directors
In connection with the Main Grid User Council being disbanded, the practice of appointing one representative from the users among the members of the board was discontinued. Maria Sandsmark was elected to the Board of Statnett SF at an extraordinary enterprise meeting on 11 January 2013. She replaced Kristin Lian who represented the users. On 24 June, Synne Homble was elected to the Board of Statnett SF. She replaced Heidi Ekrem.

Changes in the Group management
The Statnett Group is reorganising to be better prepared for the great tasks ahead. As of January 2014, two new Executive Vice Presidents have been appointed, Elisabeth Vike and Bente Monica Haaland. Executive Vice President Bente Hagem will head the enterprise's work relating to European affairs and has left the management group. Executive Vice President Gunnar Løvås has . left Statnett.

Outlook

Statnett's 2013 Grid Development Plan forms the basis for the next generation main grid. This will involve both new and upgrades of existing power lines and facilities. There will be intense construction activity in this period. This places great demands on Statnett when it comes to coordinating a number of projects in existing facilities while operating the power system, including comprehensive planning of disconnections. Large scope of the bypassed plants during the construction will involve a controlled weakening of security of supply in periods. Statnett has also strengthened operative preparedness to improve its ability to handle unforeseen and critical incidents.

Statnett has several important projects under construction. There is currently particular focus on progress in the Ørskog-Sogndal and Ofoten-Balsfjord projects, which are important power lines to secure supply to central Norway and northern-Norway, respectively. In South and South-western Norway, work has started with upgrade the wiring from the current 300 kV to 420 kV in the Western corridor, between Kristiansand and Sauda and the Eastern corridor, between Kristiansand and Rød, in order to improve security of supply and to increase capacity of the grid. There is also strong focus on completing the cable projects Ytre Oslofjord and Skagerrak 4 to Denmark.

Statnett is working on the construction of interconnectors to Germany and the UK, which are scheduled for completion in 2018 and 2020 respectively. These projects are important for the development of the Northern European power grid and are a high priority for all parties involved. The new cables will help ensure security of supply during cold and dry spells and balance variations in German and British renewable power production throughout the day. Power exchange capacity generates value creation in Norway. Moreover, the projects will support the ambitions to increase generation of renewable energy throughout the region and the EU's climate and energy targets. Furthermore, the new interconnectors will contribute to the further integration of the Northern European power market.

In 2013, Statnett received a licence for a power line between Namsos and Trollheim, which will facilitate development of wind power. The development is scheduled to take place in stages and Statnett has started the planning phase in collaboration with the wind power developers. Realisation of the Namsos-Trollheim power line is contingent on the wind power developers making an investment decision for their planned wind power projects.

To be able to implement the planned development projects according to schedule, Statnett is dependent on an effective licensing process and an external supplier market that can offer sufficient capacity in the years to come. Statnett is eager to further improve collaboration with all involved parties to secure important input to the planning and realisation of new power lines. In this regard, initiatives have been taken in relation to local and regional authorities as well as other stakeholders. Among other initiatives, Statnett has strengthened cooperation with regional grid companies to ensure the best possible knowledge of local conditions.

Due to an increase in the company's investment activities in new and existing grid facilities, the number of Statnett facilities will increase significantly. New facilities will be commissioned and some of the old facilities will be phased out. Statnett is concerned with managing the company’s facilities in a uniform and prudent manner. To succeed, we need to further increase our focus on safety and quality of deliveries from external technological environments and suppliers.

The Ministry of Petroleum and Energy (MPE) has sent proposals for amendments to the Energy Act for consultation as a result of the third EU energy market package. The proposal entails substantial growth in the tasks assigned to Statnett if Statnett must assume ownership and/or operational responsibility for the remaining Norwegian main grid. The Ministry of Petroleum and Energy (MPE) expects a potential implementation to take place in the next few years. This will increase Statnett facilities by approximately 15 percent and lead to an increased need for investments and staffbeyond existing plans.

Statnett is involved in international cooperation both at a European and Nordic level. This work is important as many of the framework conditions are stipulated by the EU and are relevant for Norway through the EEA agreement. The establishment of a common European power market makes it necessary to harmonise the framework for the electricity market, as well as for system and grid operations. As the Norwegian power system differs from the European system, it is essential that the framework conditions are formulated to safeguard Norwegian security of supply and ensure value creation from Norwegian hydropower. The Nordic TSOs cooperate on many key issues at a European level, such as the establishment of eSett OY and the price coupling of the spot markets in North West Europe.

During the period leading up to 2020, major investments will be made in the main grid, and all customer groups must contribute towards the financing. Statnett's work is based on a socio-economic model which must weigh concerns relating to tariff consequences for various customer groups against the need for investments in the main grid. In 2013, the Norwegian Water Resources and Energy Directorate (NVE) conducted a comparison study, together with about 20 other European regulators, which compared cost efficiency among the respective TSOs. The comparison study concluded that Statnett is one of the most cost-efficient TSOs in Europe. It is important for Statnett to maintain this position throughout the company's current strong growth phase. Consequently, Statnett aims to increase efficiency by 15 percent by the end of 2016.

In accordance with Section 3-3a of the Norwegian Accounting Act, the Board confirms that conditions exist for continued operation of the enterprise on a going concern basis and that the annual accounts have been prepared under this assumption.

Allocation of profit

Based on the increased need for investments and borrowings, a proposal was put forward in Proposition to the White Paper No. 1 (2013-2014), the Norwegian National Budget, to contribute NOK 3 250 million to Statnett's equity. Dividend for the fiscal years 2014 - 2016 was set at 25 percent of the dividend basis. Dividend for the 2013 fiscal year is set at zero. The basis for the dividend is defined as the Group's net profit after tax, adjusted for changes in the balance for higher/lower revenue for the year after tax.

On the basis of the above, the Board therefore recommends that the annual profit from Statnett SF be allocated as follows:

Dividend: 

0

To other equity: 

NOK 80 million

Total allocated: 

NOK 80 million

Declaration from the Board of Directors and President and CEO

We confirm that the financial statements for the period 1 January to 31 December 2013 have, to the best of our knowledge, been prepared in compliance with IFRS and that the disclosures in the financial statements give a true and fair picture of the enterprise’s and the Group’s assets, liabilities, financial position and results as a whole, and that the disclosures in the annual report give a true and fair overview of the development, results and position of the enterprise and the Group, together with a description of the most significant risk and uncertainty factors faced by the enterprises.

Oslo 27 March 2014

The Board of Directors, Statnett SF

Kolbjørn Almlid
Chairman of the Board
Per Hjorth
Deputy Chairman
Maria Sandsmark
Board member
Egil Gjesteland
Board member
Kirsten Indgjerd Værdal
Board member
Pål Erland Opgård
Board member, employee representative
Steinar Jøråndstad
Board member, employee representative
Synne Larsen Homble
Board member
Kjerstin Bakke
Board member, employee representative
Auke Lont
President and CEO
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