Teollisuuden Voima Oyj's report of the Board of Directors and financial statements 2015
29.2.2016
Online Annual Report 2015
Report of the Board of Directors and Financial statements 2015 (pdf)
Corporate Governance Statement 2015 (pdf)
Year 2015 in Brief
The energy sector is in the midst of a rapidly started transition which may take several years. Due to overcapacity in the electricity market and the subsidy mechanisms of renewable energy generation forms, the market price of electricity has significantly fallen. At the same time, the costs related to nuclear power generation have risen. This development has led to a deterioration of the profitability of all base load power production, including nuclear power.
The electricity production at Teollisuuden Voima's (TVO) Olkiluoto nuclear power plant in 2015 was 14.26 TWh (billion kilowatt-hours), which accounted for about 17 percent of all electricity consumed in Finland.
The consolidated turnover for 2015 was EUR 275.7 (327.2) million. The amount of electricity delivered to the shareholders was 14,405 (15,140) GWh. The drop in the amount of electricity delivered to shareholders was mainly caused by a near three-week shutdown of OL2 due to water leakage in the generator in February, as well as the decreased supply of electricity from the Meri-Pori coal-fired power plant. TVO operates on a cost-price principle (Mankala principle). TVO's goal is not to make profit or pay dividends. The shareholders are charged incurred costs in the price of electricity and thus in principle the profit/loss for the financial year is zero. Due to the Company's operating principle, key indicators based on financial performance will not be presented.
TVO is preparing for the renewal of the operating license for Olkiluoto 1 and Olkiluoto 2 power plant units in 2018 by making plant modifications to further improve safety in possible but unlikely accident situations, where several safety systems were lost simultaneously.
In the Olkiluoto 3 Project, a significant milestone was achieved when the factory acceptance tests of both the process and safety control and instrumentation (I&C) systems were completed. Most of the construction works for the plant unit have been completed. Next, the project will focus on finalizing the installations, as well as testing and commissioning of the systems.
In June, TVO's Extraordinary General Meeting decided not to apply for a construction license for the Olkiluoto 4 nuclear power plant unit during the validity of the decision-in-principle made in 2010. The decision-in-principle expired at the end of June 2015.
In November 2015, the Finnish Government granted a construction license for Posiva’s final disposal repository and encapsulation plant to be constructed in Olkiluoto.
TVO introduced a new operating model and took measures to improve cost efficiency with the aim of generating annual cost savings of EUR 15 million. As a result TVO's personnel work reduced by about 100 man-years. In connection with a business transfer, Posiva's support functions and part of safety functions (a total of 30 persons) transferred from Posiva to TVO in the beginning of January 2015. At the end of the year, the total number of personnel in TVO Group was 749 (809) and in Posiva 77 (117).
Operating Environment
The energy sector is in the midst of a rapidly started transition which may take several years. The economic stagnation has led to a drop in demand. On the other hand, the electricity supply has increased since different subsidy mechanisms promote investments in renewable energy, especially in wind power. As a result the market price of electricity has significantly fallen. At the same time, the costs related to nuclear power have risen.
The development has led to a deterioration of the profitability of all base load power production, including nuclear power. In a short time, about 2,500 MW of electric power is phasing out in Finland. In Sweden, power companies have announced plans to close nuclear power plants before the end of their technical lifetime. This may lead to power shortage, especially during peak consumption.
The total consumption of electricity in Finland in 2015 was 82.5 terawatt hours (TWh). The consumption decreased by 1.1 percent compared to the previous year. The share of net electricity imports was 19.8 percent (16.3 TWh) of the total consumption. The amount of nuclear power generated in 2015 was 22.3 TWh, which accounted for 27.1 percent of the electricity procured.
In March, Parliament passed a bill to amend the Finnish Nuclear Energy Act and the Radiation Act. The Radiation and Nuclear Safety Authority Finland (STUK) received a wider mandate to issue binding regulations on the safe use of radiation. The nuclear safety research fee collected from nuclear plant holders and the fees charged to licensees under their waste management obligation will be increased for a fixed term. For TVO, the fees charged will increase by approximately EUR 2 million per year, over the period 2016–2020.
The Program of Prime Minister Juha Sipilä’s Government was finalized at the end of May. The Government’s objective includes replacing imported fossil fuel-based energy and achieving the 2020 climate objectives during the government term.
In the early part of the year, the European Commission released a communication on the proposed EU Energy Union. According to the communication, diversification of the supply of nuclear fuel is important to ensure supply security. In July, the Commission released another communication on the electricity market and launched the related stakeholder consultation. Legislative initiatives are expected from the Commission in 2016. One of the most important items to be decided will be the reform of the European electricity market model. Its main objective is to integrate renewable energy sources into the market and increase investments in intermittent production that supports flexible power generation.
In July, the European Commission published a proposal for new legislation to reform the EU emissions trading scheme. Over the long term, the Commission aims to improve the system so that in future, the emissions trading scheme could be used as the primary control system to reach the climate objectives.
In October, Parliament enacted the legislative proposal to increase the maximum limit of power plant property tax. The maximum property tax rate will increase from 2.85 per cent to 3.10 per cent starting from 2016.
In November, the European Commission initiated a consultation concerning the renewal of the nuclear power investment notification procedure, which is based on Articles 41–44 of the Euratom agreement. According to the Commission, the present procedures are scattered and unclear from the perspective of the notifying party.
At the Paris climate conference in December 2015, over 190 countries adopted the universal, legally binding global climate agreement. Governments agreed a long-term goal of keeping the increase in global average temperature to below 2 degrees Celsius and to aim to limit the increase to 1.5 degrees Celsius. Country-specific emission reduction targets are not considered binding. Each country can decide for itself the most appropriate means of reducing emissions.
Main events
TVO's nuclear power plant in Olkiluoto had a good production year in 2015. Olkiluoto 1 achieved the second highest production volume 7.40 TWh (billion kilowatt-hours) in the history of the plant unit. The combined production of both plant units was 14.26 TWh. The production of Olkiluoto 2 was decreased by a generator failure in February. The combined load factor of the plant units was 92.7 per cent. Together with the share of the Meri-Pori coal-fired power plant TVO's production was 14.43 TWh. The electricity produced in Olkiluoto accounted for about 17 per cent of all electricity consumed in Finland.
The annual outages of 2015 at the Olkiluoto nuclear power plant were carried out from May 3 to June 5, 2015. OL1 underwent a refueling outage and OL2 had a maintenance outage.
The new YVL Guides (regulatory guides on nuclear safety) published by the Radiation and Nuclear Safety Authority Finland (STUK) at the end of 2013 were implemented for the most part at the Olkiluoto power plant during 2015. The operating plant units at Olkiluoto meet the technical requirements of the new YVL Guides well.
Most of the construction works for the Olkiluoto 3 plant unit have been completed. The factory acceptance tests of the process control and instrumentation (I&C) systems were completed, and the systems were delivered to Olkiluoto in August. The factory acceptance tests of the safety I&C systems were completed in December. Next, the project will focus on finalizing the installations, as well as testing and commissioning of the systems. According to the schedule updated by the Supplier, regular electricity production at OL3 will commence at the end of 2018.
In July, TVO and the Supplier, Areva-Siemens Consortium, updated their claims in the International Chamber of Commerce (ICC) arbitration proceedings concerning the delay in the OL3 Project. The quantification estimate updated by TVO of its costs and losses is approximately EUR 2.6 billion until December 2018. The Supplier’s monetary claim was approximately EUR 3.4 billion in total. The claim covered events that occurred during the construction period until the end of June 2011. TVO has found the earlier claims by the Supplier to be without merit.
In February 2016, the Supplier updated its claim in the arbitration proceedings concerning the delay in the OL3 Project. The Supplier's monetary claim is now approximately EUR 3.52 billion in total. Changes in the arbitration proceedings after the year end are described in the paragraph 'Major Events after the End of the Year'.
In June, TVO's Extraordinary General Meeting decided not to apply for a construction license for the Olkiluoto 4 nuclear power plant unit during the validity of the decision-in-principle made in 2010. The decision-in-principle expired at the end of June 2015.
In November 2015, the Finnish Government granted a construction license for Posiva’s final disposal repository and encapsulation plant to be constructed in Olkiluoto.
TVO's co-operation negotiations initiated at the beginning of January 2015 concluded at the end of February. The negotiations focused on reorganizing functions and improving cost efficiency. The aim is to generate annual savings of EUR 15 million. Through the negotiations, the number of personnel was cut by 42 employees. Other personnel reductions achieved through various voluntary arrangements, making the total amount approximately 100 man-years.
Financial Performance
TVO operates on a cost-price principle (Mankala principle). TVO's goal is not to make profit or pay dividends. The shareholders are charged incurred costs in the price of electricity and thus in principle the profit/loss for the financial year is zero. The shareholders pay variable costs based on the volumes of energy supplied and fixed costs in proportion to their ownership regardless of whether they have made any use of their share of the output or not. Due to the Company's operating principle, key indicators based on financial performance will not be presented.
The consolidated turnover for 2015 was EUR 275.7 (327.2) million. The amount of electricity delivered to the shareholders was 14,405 (15,140) GWh. The drop in the amount of electricity delivered to shareholders was mainly caused by a near three-week shutdown of OL2 due to water leakage in the generator in February, as well as the decreased supply of electricity from the Meri-Pori coal-fired power plant.
The consolidated profit/loss was EUR 4.6 (-0.7) million.
Financing and Liquidity
TVO’s financial situation has developed as planned.
TVO’s liabilities (non-current and current) at the end of the year, excluding the loan from the Finnish State Nuclear Waste Management Fund relent to shareholders, totaled EUR 3,987.5 (December 31, 2014: 3,727.3) million, of which EUR 479.3 (439.3) million were subordinated shareholder loans. During 2015, TVO raised a total of EUR 600.0 (801.8) million in non-current liabilities, of which EUR 100.0 (100.0) million were subordinated shareholder loans. Repayments during the period under review amounted to EUR 222.6 (580.0) million, of which EUR 60.0 (0.0) million were subordinated shareholder loans.
In January, Japan Credit Rating Agency (JCR) lowered its AA rating for TVO to AA- and estimated the outlook to be stable. In May, Fitch Ratings reinstated its rating to BBB/F3 with a stable out¬look. Standard & Poor’s lowered its rating for TVO in May from BBB/A-2 to BBB-/A-3 with a continued negative outlook.
In February, TVO issued a EUR 500 million 10-year bond with an annual coupon of 2.125 per cent under its Euro Medium Term Note (EMTN) Program. In June, the value of the EMTN Program was increased from EUR 3.5 billion to EUR 4 billion.
The OL3 project’s share of financing costs has been capitalized in the balance sheet.
TVO uses its right to borrow funds back from the Finnish State Nuclear Waste Management Fund within the framework of legal regulations. On December 31, 2015, the amount of the loan was EUR 1.009,1 (December 31, 2014: 982.8) million and it has been relent to the Company's A-series shareholders. The loan from the Finnish State Nuclear Waste Management Fund was increased by EUR 26.3 (51.1) million on March 31, 2015.
Share Capital
TVO's share capital on December 31, 2015 was EUR 606.2 (606.2) million.
The Company has 1,394,283,730 (1,394,283,730) shares, of which 680,000,000 belong to the A series, 680,000,000 to the B series and 34,283,730 to the C series. The A series shares entitle to electricity generated at the OL1 and OL2 units and the B series shares to the electricity generated at the OL3 unit. The C series owners have right to acquire electricity generated by TVO's share of the Meri-Pori coal-fired power plant.
Administrative Principles
Because TVO is a non-listed public company applying the cost-price principle, it observes the Corporate Governance Code for listed companies where applicable. TVO is not obligated to observe the Corporate Governance Code nor therefore its Comply or Explain principle. According to the Securities Market Act (14.12.2012/746), the issuer of a security subject to public trading must provide a Corporate Governance Statement in its Annual Report or separately. TVO has given a separate Corporate Governance Statement which is published on its website, www.tvo.fi at the same time with this Report of the Board of Directors.
Administrative Bodies
TVO's administrative bodies and their operations in 2015 have been described in a separate Corporate Governance Statement to be found on the Company's website.
Regulatory Environment
The purpose of the nuclear energy legislation is to ensure that the use of nuclear energy is conducted in a manner that benefits the overall good of society. The main rules of the use of nuclear energy, monitoring the use, and nuclear safety, are included in the Finnish Nuclear Energy Act and Nuclear Energy Decree as well as lower level statutes issued pursuant to them, such as the Radiation and Nuclear Safety Authority's YVL (NPP) guidelines. Other regulations pertaining to the exploitation of nuclear energy will be found in the Radiation Act.
New Regulatory Guides on nuclear safety (YVL Guides) published by the Radiation and Nuclear Safety Authority Finland (STUK) in November 2013 have been adopted at the Olkiluoto power plant. Most of the requirements specified for nuclear power plants and the licensees of the plants enforced as of September 1, 2015.
The new Guides lay down increased requirements and specify them in more detail. They cover the design and operation of nuclear power plants, the safety of the plant and the environment, nuclear materials and nuclear waste as well as structures and equipment at nuclear facilities. STUK issued separate decisions regarding the application of the requirements at existing plant units, such as OL1 and OL2. As far as new nuclear power plants are concerned, the new Guides will be enforced as such. An assessment of compliance with the new requirements at the OL3 plant unit will be submitted to STUK at the latest in the same context as the operating license application for OL3 is submitted to the Ministry of Employment and the Economy.
TVO carried out the compliance assessment as part of a more extensive project that focused on the assessment of the safety level.
In addition, the Nuclear Liability Act concerns the liability the operator of a nuclear plant has in the event of a nuclear accident. A temporary amendment to the Nuclear Liability Act came into force as of the beginning of 2012. According to the temporary amendment, the plant operator's liability for a nuclear incident in Finland is unlimited but limited to a maximum amount of 600 million Special Drawing Rights (SDR), corresponding to EUR 700 million, for nuclear damage outside of Finland. The operator has to have insurance up to a minimum of 600 million SDR.
The use of nuclear energy is subject to license. Applications are made to the Government for a decision-in-principle, construction license and operating license. The Radiation and Nuclear Safety Authority Finland (STUK) is responsible for monitoring the safety of nuclear energy use. STUK is also responsible for monitoring safety and emergency arrangements and nuclear material.
Risk Management, Major Risks and Uncertainties
Risk Management
Risk management is a systematic approach which aims to support the fulfillment of TVO's strategy and business objectives as well as to ensure the existence of TVO's operational preconditions. Risk management is executed based on the company's policies and corporate governance.
Risk management is supervised by the Board of Directors of the Company, which endorses the principles on which it is based. The CEO, with the help of the Company's Management Board, is in charge of the risk management according to TVO's objectives and strategy. Under the Management Group there is a risk management group that is in charge of ensuring adequate risk treatment in the company.
The organization units are responsible for risk identification, analyzing and risk treatment. Risk identification is carried out as part of TVO´s strategic and operational planning and follow-up as well as part of project management.
TVO has launched a company-wide risk management process which the Company's organization units comply with. By operating in accordance with the risk management process TVO ensures that risks facing the Company are systematically identified and each risk is treated according to its significance. The objective of the risk treatment process is either to prevent the risk from materializing or to reduce its likelihood or consequence.
TVO reduces risks connected with safety and production by keeping the plant units in good condition. Safe and reliable production is ensured by efficient life-cycle management of the plant units and high-quality planning and implementation of the annual outages.
Indemnity and property risks are covered with insurances. The aim of insurance management is to keep the scope, cover and cost of insurance in an acceptable level. TVO is a member of European nuclear insurance associations. Statutory liability insurance is in force for nuclear liability.
Fuel for the production of electricity, uranium and coal, is bought on the global market. Risks connected with nuclear fuel have been reduced by making purchases from a variety of suppliers and by concluding long-term contracts.
At OL3, risk management during the construction stage is primarily a question of overseeing and guiding the work of the Supplier according to the terms of the turnkey contract. Property damage risks and possible delays caused by them are covered by insurances.
TVO's financing and financial risk management is dealt with centrally by the Company's Treasury and Risk Management function in accordance with the financing policy adopted by the Board of Directors. The financing risks of TVO's business include liquidity and market and credit risks. By diversifying sources of finance, and with long-term credit commitments and liquid funds, financing risks can be reduced. The financial position has been strengthened by issuing long term private placements and bonds. TVO has reduced market risks by making use of interest rate and currency derivatives. According to the Company's financing policy, the loans denominated in foreign currencies will be hedged to the euro until the maturity date by using derivatives. Financial risk management and fuel price risks are dealt with in the notes to the consolidated financial statements, note 27 (Financial Risk Management).
Major Risks and Uncertainties
TVO's major risks are related to the schedule of the OL3 project. Originally the electricity production was scheduled to start at the end of April 2009. The completion of the project, however, has been delayed.
According to the schedule updated by the Supplier in September 2014, regular electricity production in the unit will commence at the end of 2018.
The delay causes additional costs and losses, for which the Company has claimed compensation from the turnkey supplier of the OL3 plant.
There are no major risks or uncertainties concerning electricity production at OL1 and OL2 plant units or the Meri-Pori coal-fired power plant.
Pending Court Cases and Disputes
In 2012, TVO submitted a claim and defense in the International Chamber of Commerce (ICC) arbitration proceedings concerning the delay and the ensuing costs incurred at the Olkiluoto 3 project. In July 2015, TVO updated its quantification estimate of its costs and losses to amount to approximately EUR 2.6 billion until December 2018, which, according to the schedule submitted by the OL3 Supplier in September 2014, is the estimated start of regular electricity production of OL3.
The proceedings were initiated in December 2008 by the OL3 Supplier. The Supplier’s monetary claim, updated in July 2015, was approximately EUR 3.4 billion in total. The claim covered events that occurred during the construction period until the end of June 2011. The sum included penalty interest (calculated until July 2015) and payments delayed by TVO under the plant contract amounting to a total of approximately EUR 1.4 billion, as well as approximately EUR 140 million in alleged loss of profit. Having considered and found the earlier claims by the Supplier to be without merit, TVO will scrutinize the updated claim and respond to it in due course.
In February 2016, the Supplier updated its claim in the arbitration proceedings concerning the delay in the OL3 Project. The Supplier's monetary claim is now approximately EUR 3.52 billion in total. Changes in the arbitration proceedings after the year end are described in the paragraph 'Major Events after the End of the Year'.
The Supplier consortium companies (AREVA GmbH, AREVA NP SAS and Siemens AG) are jointly and severally liable for the plant contract obligations.
The arbitration proceedings may continue for several years.
TVO has not recorded any receivables or provisions on the basis of claims presented in the arbitration proceedings.
Nuclear Power
TVO owns and operates two nuclear power plant units, Olkiluoto 1 (OL1) and Olkiluoto 2 (OL2), and is building a new plant unit, Olkiluoto 3 (OL3) at Olkiluoto in Eurajoki, Finland.
Olkiluoto 1 and Olkiluoto 2
The electricity production of the Olkiluoto power plant units, OL1 and OL2, during 2015 was 14,261 (14,763) GWh. The total load factor was 92.7 (96.0) %.
The plant units operated safely. OL1's net production was 7,397 (7,266) GWh and load factor 96.2 (94.5) %. OL2's net production was 6,864 (7,497) GWh and load factor 89.2 (97.4) %.
OL2 was out of production nearly three weeks in February. On February 4, a water leak was detected in the water-cooled generator of the plant unit, and the generation of electricity was interrupted. After examination by TVO experts and the generator supplier, TVO decided to replace the rotor of the generator. Generation of electricity recommenced on February 24.
TVO is preparing for the upcoming operating license renewal of OL1 and OL2 in 2018 by making plant modifications, which will further improve the plant units’ safety in possible but unlikely accidents in which several safety systems would be lost at the same time.
Annual Outages
The annual outages of 2015 at the Olkiluoto nuclear power plant were carried out from May 3 to June 5, 2015. OL1 underwent a refueling outage that lasted more than 10 days, and OL2 had a maintenance outage taking more than 17 days.
In addition to refueling, maintenance, repair work and tests were carried out in OL1, and a mixing unit in the feedwater system was replaced.
Apart from refueling, the major activities carried out in OL2 included equipment work in two subsystems, one of them comprising the replacement of low-voltage equipment. Both feedwater mixing units were also replaced.
Apart from TVO’s own personnel, up to 800 subcontractor employees were involved in the annual outage work.
Olkiluoto 3
Olkiluoto 3 (OL3), currently under construction, was procured as a fixed-price turnkey project from a consortium (Supplier) formed by AREVA GmbH, AREVA NP SAS and Siemens AG. As stipulated in the plant contract, the consortium companies have joint and several liability for the contractual obligations. Originally, commercial electricity production was scheduled to start at the end of April 2009.
According to the schedule updated by the Supplier in September 2014, regular electricity production in the unit will commence at the end of 2018.
Most of the construction works for the plant unit have been completed. The installation of the electrical systems, the instrumentation and control system (I&C), and mechanical systems is still in progress. Factory acceptance testing of the process I&C system was completed, and the system was transferred to Olkiluoto in August. The factory acceptance testing of the safety I&C systems was completed in December.
The first phase of the commissioning of the turbine plant has been completed. Some of the systems and components will be kept in operation; the rest will be preserved in accordance with a separate plan.
The workforce at the site at the end of the year was about 2,300 persons. Occupational safety at the site remained at a good level.
The pending disputes concerning the plant unit are described in the paragraph ‘Pending Court Cases and Disputes’ and 'Major Events after the End of the Year'.
All realized costs of the OL3 project that can be recognized in the cost of the asset have been entered as property, plant and equipment in the Group balance sheet.
Olkiluoto 4
On July 1, 2010, Parliament approved the favorable decision-in-principle made by the Government on May 6, 2010 regarding TVO’s application to construct a fourth nuclear power plant unit (Olkiluoto 4) in Olkiluoto. According to the decision-in-principle, it will expire unless an application for a construction license is submitted a maximum of five years after the date of Parliament’s decision to approve the decision-in-principle.
On May 20, 2014, TVO submitted an application to the Government asking for a new time limit for submitting the construction license application. On September 25, 2014, the Government rejected TVO’s application.
TVO’s Extraordinary General Meeting on June 24, 2015 decided, as proposed by the Company's Board of Directors, not to apply for a construction license for OL4 during the validity of the decision-in-principle and not to carry out the project referred to in the contractual undertaking which the shareholders and TVO signed earlier for the bidding and engineering phase.
The value of property, plant and equipment relating to the OL4 project, amounting to EUR 58.2 million, was recognized as an asset write-down in TVO’s balance sheet and recorded as impairment charge to the profit and loss statement. The impairment charge does not affect TVO’s consolidated profit/loss, as TVO has invoiced the impairment charge form the shareholders in proportion to their shareholder loans to OL4. The impairment charge invoiced from the shareholders is presented under other income. TVO has settled the invoices against the OL4 shareholder loans and has refunded EUR 1.8 million to the shareholders. On September 30, 2015, there are no remaining OL4 shareholder loans or shareholder loan commitments.
TVO will remain prepared for applying for a new decision-in-principle for OL4. The application is subject to a separate decision.
Nuclear Fuel
In 2015, the nuclear fuel purchases amounted to EUR 65.7 (54.9) million and the amount consumed to EUR 52.9 (51.4) million.
The nuclear fuel and uranium stock carrying value on December 31, 2015 was EUR 224.2 (December 31, 2014: 211.4) million.
Nuclear Waste Management
Under the Finnish Nuclear Energy Act, the Company is responsible for the measures related to nuclear waste management and the related costs.
The nuclear waste management program for the Olkiluoto and Loviisa power plants for 2016–2018 was completed. The nuclear waste management program, which is prepared every three years, contains the main objectives and tasks for nuclear waste management for 2016–2021.
The liabilities in the consolidated financial statement show a provision related to nuclear waste management liability of EUR 971.2 (December 31, 2014: 930.3) million, calculated according to the international IFRS accounting principles. A corresponding amount, under assets, represents the Company's share in the Finnish State Nuclear Waste Management Fund.
In order to cover the costs of nuclear waste management, TVO makes contributions to the Finnish State Nuclear Waste Management Fund. In December 2015, MEE set TVO's liability for nuclear waste management at EUR 1,369.4 (1,349.1) million to the end of 2015 and the Company's funding target for 2016 at EUR 1,369.4 (1,345.4) million.
In March 2015, the Finnish State Nuclear Management Fund confirmed TVO's nuclear waste management fee for 2014 at EUR 20.8 (56.1) million, which was paid into the Fund on March 31, 2015 (March 31, 2014). The nuclear waste management fee for 2015 will be confirmed in March 2016.
A total of 6,321 (6,214) m³ of low- and medium-level radioactive waste has accumulated from the OL1 and OL2 plant units during their operation. During 2015, the amount of waste increased by 107 m3. The waste is disposed of in the final repository for low- and medium-level waste (VLJ repository) in Olkiluoto.
The total amount of spent nuclear fuel by the end of the year was 1,432 (1,397) tons, of which 35 (34) tons accumulated in 2015. The spent fuel is stored in the fuel pools of the plant units and in an interim storage facility (the KPA storage facility) at Olkiluoto.
Final Disposal of Spent Nuclear Fuel
Posiva Oy is in charge of executing in Olkiluoto the final disposal of the spent nuclear fuel generated by its owners, TVO at its power plant in Olkiluoto and Fortum at its power plant in Loviisa. TVO owns 60 percent of Posiva and Fortum Power and Heat 40 percent.
The Radiation and Nuclear Safety Authority Finland (STUK) issued a positive safety evaluation for Posiva’s construction license application in February, and the Government granted a construction license for Posiva’s final disposal repository and encapsulation plant in November 2015. The company is now moving on from the research, development and engineering work to the construction of the final disposal facility in Olkiluoto.
Equipping the underground ONKALO research facility with technical facilities and systems is for the most part complete, and the construction work for the second phase of the hoist building has been completed. In December, Posiva and KONE Hissit Oy signed a contract on the delivery of a passenger elevator for ONKALO.
In the DOPAS research project, coordinated by Posiva and partly funded by the EU, casting work for the concrete sealing plug for final disposal tunnels, which is under Posiva’s responsibility, has been completed.
In November, Posiva announced a plan to launch a service business aiming at offering expertise services on global markets.
Coal Power
TVO has a 45 percent holding in the Meri-Pori coal-fired power plant owned and operated by Fortum Power and Heat Oy. The Meri-Pori power plant is located on the Tahkoluoto island in Pori, Finland.
Meri-Pori
The amount of electricity produced by TVO's share at the Meri-Pori coal-fired power plant was 167.2 (399.7) GWh requiring 60.7 (144.9) thousand tons of coal and 138.7 (334.4) thousand tons of carbon dioxide emission rights.
Research and Development
Research and development costs were EUR 17.2 (18.4) million, most of which was used for R&D activities related to nuclear waste management.
TVO is a major financier of Finnish public sector research programs for reactor safety and nuclear waste management. In 2015, TVO's contribution to the Finnish State Nuclear Waste Management Fund, which finances such programs, amounted to EUR 4.7 (4.7) million.
Acquisitions of Tangible and Intangible Assets and Shares
Investments in 2015 were EUR 345.2 (338.5) million. Investments of the parent company were EUR 344.3 (339.4) million, of which EUR 297.7 (292.9) million was allocated to the OL3 project.
At present, several plant modifications are planned and implemented in Olkiluoto to prepare the OL1 and OL2 plant units for the renewal of the operating license in 2018.
With the contract signed with Wärtsilä Finland Oy in May 2013, TVO is replacing by the end of 2022 the original eight emergency diesel generators and associated auxiliary systems of OL1 and OL2 plant units. In addition, a ninth diesel generator will be acquired, for which a building is currently under construction. An agreement for the construction works was made with Skanska Talonrakennus Oy at the end of May. The emergency diesel project is the largest plant modification project ever carried out in Olkiluoto.
In July 2014, TVO signed a contract with Westinghouse Electric Sweden (WSE) for the replacement of the main circulation pumps at OL1 and OL2. The replacement of the pumps will be carried out on a turnkey basis. The main circulation pumps will be replaced during the annual outages of 2016–2018.
In June, an agreement was made with SPX Clyde Union regarding pump systems to be installed at OL1 and OL2 plant units. The pumps are driven by steam generated in the reactor, and they operate also under complete blackout conditions and even when submerged.
Carbon dioxide emission allowances have been relinquished to the Energy Market authority worth EUR 1.9 (2.7) million. In 2015, emission allowances were acquired worth EUR 1.2 (1.9) million. The Company’s need for carbon dioxide emission allowances for the period under review was covered by acquired emission allowances.
Safety and Environmental Issues
The Olkiluoto nuclear power plant units operated safely during the year. No incidents with a major impact on nuclear safety occurred. In 2015, six special reports were prepared for the Radiation and Nuclear Safety Authority (STUK). Five events were classified on the international INES scale (0–7) at level 0 (No safety significance) and one was classified at level 1 (Minor problem, significant safety margin remaining).
TVO's operations were in accordance with the Company's environmental policy, environmental permits, and environmental management system. Its environmental management system, which also covers the construction phase of the OL3 unit, complies with the international ISO 14001 Standard and with the Energy Efficiency System, and is also EMAS registered.
The environmental load caused by the Olkiluoto nuclear power plant was minor. As in previous years, radioactive emissions into the atmosphere and water were extremely low, and significantly lower than the limits set by the authorities.
TVO's operations were developed considering the requirements of the environmental permit and according to the environmental management system. The Company has identified seven significant environmental aspects related to its activities, and the harmful impacts are being minimized in each phase of the electricity production chain. According to the continuous improvement principal, objectives and targets are determined for the operations, and their achievement status is being regularly monitored within the Company's environmental group consisting of experts from several different fields. Corrective actions are defined whenever necessary. Within the reporting year, no significant environmental deviation occurred. Overall, 27 minor environmental observations or minor deviations were detected during the operating cycle, and nine at the OL3 construction site. These all related to minor hydraulic oil leakages and the processing and reporting of chemicals or waste.
TVO has a certified occupational health and safety system compliant with the OHSAS 18001 Standard, in which also the activities at the OL3 construction site are included. The occupational safety goal on the whole Olkiluoto island is zero accidents and common working methods. As in earlier years, actions to reach the zero-accident goal were continued, and the systems integration will provide a basis for common working methods.
More detailed information on the environmental issues and indicators as well as occupational safety indicators for 2015 will be reported in the Corporate Social Responsibility Report and Environmental Report which will be published on TVO's website www.tvo.fi. The contents of the reports will be verified by an outside body.
Group Personnel and Training
Personnel
At the year-end, the total number of personnel in the Group was 749 (809), and the average during the year was 794 (863). The year-end total number of personnel in the Company was 748 (805), and the average during the year was 791 (858). The year-end total for permanent personnel was 730 (751).
TVO recruited 69 (33) employees in 2015. During the year, 90 (44) permanent employees left the Company, including 28 (25) who retired.
In connection with a business transfer, Posiva's support functions and part of safety functions (a total of 30 persons) transferred from Posiva to TVO in the beginning of January 2015. The business transfer was related to TVO operations development project in which functions were centralized in order to improve flexibility and efficiency.
TVO’s co-operation negotiations initiated in the beginning of January 2015 concluded at the end of February. The negotiations focused on reorganizing functions and improving cost efficiency with the view to secure TVO’s competitive edge on the challenging electricity supply market. The aim is to generate savings of EUR 15 million per year. Prior to the negotiations, the estimated maximum need of personnel reductions was 110 man-years. Through the negotiations, the number of personnel was cut by 42 employees, including 11 terminated contracts. Other personnel reductions achieved through voluntary arrangements so that the total amount of reductions was approximately 100 man-years. The co-operation negotiations concerned the near-entire TVO personnel except those working in operational or safety related positions.
In April 2015, TVO introduced a new operating model and organizational structure. This, together with the changes described above affected to the fact that many people changed tasks during 2015. In connection with the launch of the organizational reform and new operating model, personnel were also encouraged to change tasks.
The collective agreements for different groups of personnel in the energy industry will be in force in accordance with the so called framework agreement of labor confederations until January 31, 2017.
The human resource issues and indicators for 2015 will be reported in more detail in the Corporate Social Responsibility Report on TVO's website, www.tvo.fi. The contents of the report will be verified by an outside body.
Training
The basic, continuing and further training of TVO employees was implemented according to the annual training program the same way as in previous years. The personnel was trained for a total of 7,392 (7,272) days, on average 9.3 (8.5) days per each TVO employee.
The operators of OL1 and OL2 participated in operation training days and advanced simulator courses in the spring and autumn 2015 according to their refresher training program. A basic simulator course was arranged according to plan for a training group of operators who started in 2014.
The operators of OL3 participated in operation training days in the spring and autumn 2015 according to their refresher training program. The OL3 operators work in shifts in the combined operating organization of the Supplier and TVO, performing system operation and monitoring tasks. OL3 operators also participated in the extensive inspection and preparation work of OL3 operating instructions during 2015.
Everyone working in the Olkiluoto nuclear power plant area must participate in induction training. The general part is intended for all persons working in the Olkiluoto area and the radiation part for those working in the controlled area. During 2015, a total of 3,576 (2,238) people took the general part of the induction training and 956 (900) people the radiation protection part (those recorded by January 13, 2016). Both training courses were offered in Finnish and English. Both parts are also available in the external online learning environment for revision in Finnish and English.
Matters and indicators concerning the development of the personnel’s competences in 2015 will be reported in more detail in the Corporate Social Responsibility Report, which will be available on the TVO website at www.tvo.fi. The information in the report will be verified by an outside party.
Subsidiaries and Joint Ventures
TVO Nuclear Services Oy (TVONS) is a wholly-owned subsidiary of TVO. TVONS provides its customers with expertise and services related to high-level nuclear safety, cost-effective operations, and nuclear waste management. The special expertise of TVO personnel is at TVONS customers' disposal.
Posiva Oy, jointly owned by TVO and Fortum, is responsible for the research of the final disposal of spent nuclear fuel and implementation of the final repository of its shareholders' Olkiluoto and Loviisa NPPs. TVO owns 60 percent of Posiva. Posiva continued construction and equipment of the underground research facility for final disposal according to plan. The Finnish Government granted a construction license for Posiva’s final disposal repository and encapsulation plant in November 2015.
Major Events after the End of the Year
On February 2, 2016, TVO signed a new revolving credit facility of EUR 1,300 million. The Facility refinances TVO’s existing revolving credit facility signed in March 2011 and consists of two tranches: EUR 1,000 million 5-year tranche and EUR 300 million 3-year tranche. Both tranches include two one-year extension options. The Facility will be used for general corporate purposes and will serve as the core relationship facility for the future.
In the International Chamber of Commerce (ICC) arbitration proceedings concerning the delay in the OL3 Project, the Supplier updated its monetary claim in February 2016. The Supplier's monetary claim is now approximately EUR 3.52 billion in total. The sum is based on the Supplier’s updated analysis of events that occurred through September 2014, with certain claims quantified to December 31, 2014. The sum includes penalty interest (calculated to June 30, 2016) and payments allegedly delayed by TVO under the plant contract amounting to a combined total of approximately EUR 1.45 billion, as well as approximately EUR 135 million in alleged loss of profit. TVO has considered and found the earlier claims by the supplier to be without merit, and will scrutinize the updated claim.
In February 2016, Japan Credit Rating Agency (JCR) decided to keep TVO's credit rating unchanged at AA-. TVO's outlook JCR estimated to be stable.
Prospects for the Future
Electricity production is expected to continue as in previous years. The prerequisites for nuclear power production at Olkiluoto are good. Nuclear fuel availability is guaranteed by long-term agreements.
Realization of the OL3 nuclear power plant project and preparing the plant unit for production will be continued. Commissioning of the process systems is planned to start in the spring. At the same time, the operating license application will be submitted to the Finnish Ministry of Employment and the Economy. TVO will continue to support the Supplier to complete the project.
The Meri-Pori coal-fired power plant capacity will be utilized in accordance with the former principles. The utilization rate of the Meri-Pori coal-fired power plant varies annually. All incurred costs will be charged from the shareholders in the price of electricity. The shareholders pay variable costs based on the volumes of energy supplied and fixed costs in proportion to their ownership regardless of whether they have made any use of their share of the output or not.
Posiva is preparing to start the construction projects of the encapsulation plant and final repository.
Proposals to the Annual General Meeting
Teollisuuden Voima Oyj's distributable equity as of December 31, 2015 amounted to EUR 9,360,000. The Board of Directors proposes to the Annual General Meeting that no dividend shall be paid.
For more information, please contact:
Jarmo Tanhua, President and CEO, tel. +358 2 8381 2000
Anja Ussa, Senior Vice President, Finance, tel. +358 2 8381 6100
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