Teollisuuden Voima Oyj´s Interim Report 1 January - 30 June 2009
Stock Exchange Release July, 14 2009
Interim Report 1 January - 30 June 2009 in PDF-format
The electricity production of Teollisuuden Voima Oyj continued reliably, the construction of the Olkiluoto 3 power plant unit progressed and the preparation for the Olkiluoto 4 project proceeded.
TVO issued a EUR 750 million bond.
Operating Environment
During the first quarter of the year the use of electricity in Finland decreased by 7.4% compared to the corresponding period of the previous year.
Nuclear Power
Olkiluoto 1 and Olkiluoto 2
The electricity production of the Olkiluoto power plant units, Olkiluoto 1 (OL1) and Olkiluoto 2 (OL2) from 1 January to 30 June 2009 was 6,943 (1 January 3 - June 2008: 6,833) GWh. The total capacity factor was 93.0 (91.1)%.
The plant units operated safely and reliably during the period under review. OL1´s net production was 3,551 (3,297) GWh and the capacity factor 95.2 (87.9)%. OL2´s net production was 3,392 (3,536) GWh and the capacity factor 90.9 (94.2)%.
Olkiluoto 1
Average electrical power MW
1 July 2008 - 30 June 2009
Olkiluoto 2
Average electrical power MW
1 July 2008 - 30 June 2009
Annual Outages
The 2009 annual outages of the Olkiluoto nuclear power plant were completed on 30 May. The inspections proved the both power plant units to be in safe and reliable condition for the next operation cycle.
The short refuelling outage for OL1 lasted about eight days. Other works included, in addition to refuelling, maintenance of one of the recirculation pumps and inspections of the reactor internals and one low-pressure turbine.
The service outage at OL2 lasted about sixteen and a half days. In addition to refuelling, other major works included e.g. replacement of a cooling system valve of the shutdown reactor and inspections of two low-pressure turbines.
A new outage building was taken into use.
Besides TVO´s own personnel there was a peak of about 800 external outage workers.
Olkiluoto 3
The nuclear power plant unit Olkiluoto 3 (OL3), currently under construction was commissioned as a turnkey project from the consortium (referred to as the supplier) formed by AREVA NP GmbH, AREVA NP SAS and Siemens AG. Originally the commercial electricity production was scheduled to start at the end of April 2009. The completion of the plant unit, however, has been delayed and, according to the supplier´s notice, the commercial start-up has been postponed until June 2012. TVO has commissioned the unit as a fixed-priced turnkey project and the supplier has the responsibility for the time schedule.
The design of the OL3 continued, along with the processing of documents by the authorities, the construction work and the manufacture and installation of equipment. The last ring parts of the steel liner that ensures the gas-tightness of the containment building were lifted into the building. Equipment and component deliveries to Olkiluoto continued. The reactor pressure vessel was transported to Olkiluoto in the beginning of January, and the material hatch, the steel frame of the control building and the dome part of the steel lining were delivered in May. Manufacture of the other main components, such as four steam generators and the pressurizer continued in France.
Installations at the turbine island continued. The steel structures of the cooling water pump building were installed. The switchyard was nearly completed and TVO´s cable work was finished.
The arbitration proceedings initiated in 2008 concerning the delay of the plant unit and the ensuing costs incurred by the delay as well as the cost of a technically resolved issue connected with the construction work, continued. The arbitration proceedings may continue for several years.
The workforce at the site at the end of the period under review was about 4,200. The safety level at the site remained good.
All the realised costs of the OL3 project that can be recognized in cost of the asset have been booked as property, plant and equipment on the Group balance sheet.
Olkiluoto 4 Project
In spring 2008, TVO submitted an application to the Finnish Government for a decision in principle for the construction of a fourth nuclear power plant unit (OL4) at Olkiluoto.
The Ministry of Employment and the Economy has received the statements necessary for the handling of the application. The statement by the Eurajoki municipality is legally valid.
Feasibility studies with plant suppliers continued. The studies have been extended from safety and licensing to constructability, project implementation and power plant engineering.
STUK, the Radiation and Nuclear Safety Authority in Finland, has submitted a preliminary safety assessment regarding the OL4 project to the Ministry of Employment and the Economy. All the plant alternatives presented by TVO are feasible and TVO has the capabilities to realise the project according to high safety and quality culture. The Finnish government and parliament are expected to handle TVO´s application for a decision in principle in 2010.
Nuclear Fuel
During the period under review, nuclear fuel purchases amounted to EUR 18.2 (18.1) million and the amount consumed to EUR 18.9 (17.8) million.
The nuclear fuel and uranium stock carrying value on 30 June 2009 was EUR 156.3 (30 June 2008: 146.9) million, of which the value of the fuel in the reactors was EUR 83.1 (84.9) million.
Nuclear Waste Management
Posiva Oy, TVO´s joint venture company, is responsible for the final disposal of spent nuclear fuel on behalf of its shareholders, TVO and Fortum Power and Heat Oy. The construction work for the ONKALO research facility, which is part of the project for the final disposal repository, continued at Olkiluoto.
In order to cover the costs of nuclear waste management, TVO makes contributions into the Finnish State Nuclear Waste Management Fund. In January 2009, the Ministry of Employment and the Economy set TVO´s liability for nuclear waste management at EUR 1,137.6 (1,079.8) million to the end of 2008 and the company´s target reserve in the Fund at EUR 1,001.2 (927.7) million. The difference is covered by guarantees.
In March 2009, the Finnish State Nuclear Waste Management Fund confirmed the nuclear waste management fee for 2008 at EUR 32.6 (30.5) million, which was paid into the Fund on 31 March 2009 (31 March 2008).
The liabilities, in the consolidated financial statement, show a nuclear waste management liability of EUR 608.3 (575.9) million, calculated according to international IFRS accounting principles. A corresponding amount, under assets, represents the Company´s share in the Finnish State Nuclear Waste Management Fund.
Coal Power
Meri-Pori
The amount of electricity produced by TVO´s share at Meri-Pori coal-fired power plant on 1 January?30 June 2009 was 304.6 (118.5) GWh requiring 105.1 (42.7) thousand tons of coal and 246.3 (101.4) thousand tons of carbon dioxide emission rights.
The company´s share of the free emission rights for the Meri-Pori coal-fired power plant totalled 1,479.7 thousand tons in 2008?2012. In 2009 the share is 295.9 thousand tons.
TVO´s share of Meri-Pori´s production
Average electrical power MW
1 July 2009 - 30 June 2009
Acquisitions of Tangible and Intangible Assets and Shares
Investments during the period under review were EUR 145.4 (99.2) million. Investments of the parent company were EUR 140.0 (96.9) million, of which EUR 108.6 (68.6) million was allocated to the OL3 project.
Preparations for a project to replace the low-pressure turbines and generators in the OL1 and OL2 plant units scheduled for 2010 and 2011 continued as planned.
The carbon dioxide emission rights relinquished to the Energy Market Authority valued at EUR 10.6 (0.1) million. Carbon dioxide emission rights were acquired in 2009, costing EUR 1.9 (2.0) million.
Pending Court Cases and Disputes
In December 2008, TVO was informed by the International Chamber of Commerce (ICC) that the supplier had filed a request for arbitration concerning the delay at OL3 and the ensuing costs incurred. The supplier´s monetary claim is approximately EUR 1 billion. About one half of the claimed amount relates to alleged additional cost on account of the delay. The remainder relates to milestone payments pursuant to the OL3 Plant Contract that in TVO´s opinion have not yet become payable. TVO has considered and found the claim by the supplier to be without merit.
In April 2009, TVO submitted to ICC its answer and counterclaim due to the supplier´s request for arbitration filed with ICC in December 2008 concerning the delay at OL3 and the ensuing costs incurred. TVO´s counterclaim in money is currently approximately EUR 1.4 billion.
TVO is also involved in another ICC arbitration proceeding under the ICC rules concerning the costs of a technically resolved issue in connection with the construction work at OL3. The amount is minor in the context of the value of the project.
Arbitration proceedings may continue for several years.
No receivables or provisions have been recorded as a result of the arbitration proceedings.
Group Personnel
Group personnel numbered 938 at the end of the period under review (31 December 2008: 783; 30 June 2008: 905). The number of permanent employees at the end of the period under review was 727 (31 December 2008: 715; 30 June 2008: 705).
The number of people hired on a permanent basis was 23 (38) during the period under review. 11 (16) permanent employees left the company, 5 (4) of them retired.
Changes in the Group Management
The following appointments have been made in the Group Management: Anna Lehtiranta has been appointed as Senior Vice President, Corporate Communications and CSR and Anneli Nikula as Senior Adviser as of 11 May 2009, Risto Siilos as Senior Vice President, Corporate Services as of 1 July 2009 and Olli-Pekka Luhta as Manager, OL4 Project as of 1 July 2009.
In the same connection, Mr. Reijo Sundell has been appointed as President, Posiva Oy.
Annual General Meeting
TVO´s Annual General Meeting was held on 30 March 2009. The AGM approved the financial statement for the year 2008, confirmed the consolidated income statement and balance sheet and discharged the members of the Board of Directors and the President and CEO from liability.
Mr. Jukka Hakkila was elected as a new member of the Board of Directors to succeed Mr. Esa Tirkkonen. The other Board members were re-elected. At its organisation meeting held on the same day as the AGM meeting, The Board of Directors elected Mr. Timo Rajala as Chairman and Mr. Tapio Kuula as Deputy Chairman.
Group´s Financial Performance
The consolidated turnover for the period under review was EUR 148.6 (115.6) million. The amount of electricity delivered to shareholders was 7,209 (6,923) GWh.
The consolidated profit/loss was EUR -26.3 (-11.4) million. The adjusted consolidated profit/loss was EUR -11.3 (-26.0) million. Valuation of the nuclear waste management liability and non-hedge accounted derivative financial instruments required by IFRS standards have been taken into account in the adjusted profit/loss (see Key Figures).
Group´s Financing and Liquidity
The Group´s financial situation has developed as planned. Liquidity position was exceptionally high due to the EUR 750 million bond issued in June 2009.
The Company´s interest-bearing liabilities (non-current and current) totalled EUR 2,667.3 (1,466.6) million at the end of the period under review excluding the loan from the Finnish State Nuclear Waste Management, relent to shareholders. During the period under review, TVO raised a total of EUR 907.0 (150.0) million in non-current liabilities, while repayments amounted to EUR 107.4 (53.5) million. The loan from the Finnish State Nuclear Waste Management Fund was increased by EUR 55.1 (47.7) million. The OL3 project´s share of financing costs has been capitalised 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. The amount of the loan is EUR 750.9 (695.8) million and it is included in interest-bearing liabilities.
In June, TVO established a 2 billion Euro Medium Term Note Programme (EMTN), which is listed on the Luxembourg Stock Exchange. The Company issued a EUR 750 million seven-year bond under the programme. The bond carries an annual coupon of 6%. Both the bond and the programme are rated A- (stable outlook) by Fitch Ratings (Fitch). The proceeds of the offering will be used for general corporate purposes.
Both the Japan Credit Rating Agency (JCR) and Fitch confirmed their credit ratings for TVO at their previous levels. The JCR rating was confirmed at AA Flat in January and the Fitch long-term credit rating at A- and short-term credit rating at F2 in June. The outlook was assessed as being stable.
The Annual General Meeting on 30 March 2009 decided to raise the company share capital by EUR 100.0 million by issuing 94,813,692 new B shares amounting to EUR 100.0 million. The subscription price shall be paid in 2009 at a date decided by the Board of Directors. The increase in share capital was based on the OL3 financing plan, according to which the equity required by investment accrues as the project proceeds.
On 30 March 2009, TVO´s B series shareholders committed to provide a EUR 300.0 million subordinated shareholder´s loan to TVO. The loan has not been drawn.
Auditing
This Interim Report is unaudited.
Risks and Uncertainty Factors in the Near Future
The major risks and uncertainty factors in TVO´s operations are to be found in the 2008 Annual Report on page 15.
The change in market interest rates will have an impact on the consolidated profit/loss for the period through the changes in fair values of financial instruments.
During the period under review, no remarkable new risks connected with the Company´s operations have arisen.
Assessment of Year-end Developments
With the preconditions being good, production at the Olkiluoto nuclear power plant is expected to continue in the manner of the previous year.
TVO will continue cooperation with the supplier in the implementation of the OL3 nuclear power plant unit.
The decision in principle phase and planning of the resources and activities of OL4 project will continue.
TVO will employ the capacity at the Meri-Pori coal-fired power plant in line with the previous principles.
Events After the Period Under Review
There are no material events or changes after the end of the interim report period that need reporting.
13 July 2009
Teollisuuden Voima Oyj
Board of Directors
Press inquiries:
Jarmo Tanhua, President and CEO, tel. +358 2 8381 2000
Anna Lehtiranta, Senior Vice President, Corporate Relations, tel. +358 2 8381 5200