The operating principle of Powest

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1 REVIEW

2 The operating principle of Powest Powest owns companies whose businesses support the energy supply of its shareholders. In addition, Powest provides Pohjolan Voima with financial and payroll services. Shareholders by sector 31 Dec 2007 Forest industry 62.9% Energy and power supply companies 21.3% Cities 6.5% Chemical industry 4.9% Metal industry 0.1% Others 4.3% Hydropower Nuclear power Thermal power New energy sources Supply optimisation Ownership in Fingrid Operation and maintenance of thermal power plants Regional grid business Pohjolan Voima s financial and payroll management services

3 Review by the President The concentration of Powest s activity on the operation and maintenance of thermal power plants and on the provision of financial and payroll services was finalised in As part of the concentration, Powest s subsidiary Nordic Energy Oy sold its electricity derivative contract portfolio and all the physical electricity contracts expired at the end of In addition, the remaining shares of the company Winwind, which produces wind turbines, were sold. Proma-Palvelut Oy, the company providing operating and maintenance services, has, since July, managed the operation and maintenance of the Kristiinankaupunki, Nokia, Tahkoluoto, Vaskiluoto and Seinäjoki power plants, assuming comprehensive responsibility for the services. During the year, the operation of Proma-Palvelut has been streamlined to match the new business model and the flexibility required by the varying operating needs of thermal power plants. The development programme will be continued in 2008 in close co-operation with the personnel. We have also developed the core service activities by renewing basic information systems. During the year we have adopted a new uniform maintenance information system, Arttu, and the payroll system Hertsi with its worktime reporting application. This has meant for all of us at Powest the introduction of new tools and working methods, but on the other hand it has increased efficiency and more uniform practices as well as reduced routine work. I wish to thank the whole personnel of Powest most warmly for the joint efforts to develop and adjust our operation to meet the needs of the changing operating environment of the energy sector. We will continue to do our best to improve the quality and cost-effectiveness of our basic services. Thus we shall be able to support the energy supply of our shareholders in the best possible way. Minna Korkeaoja ANNUAL REVIEW 2007 PoWEST 3

4 Changes in business operations and Group structure In September, Nordic Energy Oy sold its electricity derivative contract portfolio to the Norwegian EGL Nordic AS. All the physical electricity supply contracts expired at the end of Powest sold its shares in Winwind Oy, which it had received in connection with the merger of Voimarakenne, to the majority owner, the Indian compan y Avis Venture Ltd. in September. Powest no longer holds shares in Winwind. New service contracts were adopted at the Kristiina, Nokia, Seinäjoki, Tahkoluoto and Vaskiluoto power plants at the beginning of July Proma-Palvelut Oy is responsible for the operation and maintenance of the power plants. Empower Oy was chosen to provide the corresponding services to the Mussalo power plants as from October Proma-Palvelut had previously been responsible for the operation of the Mussalo plants and Empower for the maintenance, with personnel resources hired from Proma-Palvelut. 64 persons were transferred from Proma-Palvelut to Empower. The Estlink cable connection between Finland and Estonia was taken into use at the beginning of Powest s subsidiary Finestlink Oy holds 10.1% of the cable company Nordic Energy Link AS. The cable connection has functioned according to expectations. Measurements of dissipation and black start tests caused some short-term outages. Powest sold the Leväsuo property at Oulu in March 2007 and at the same time signed a five-year lease with the new owner for the office space needed. Investments The Group s investments, excluding financial investments, totalled EUR (1.120) million. This mostly consisted of the renovation of the transmission line in the regional grid along the River Iijoki, between K ierikki and Pahkakoski. The sales of non-current asset s were EUR (11.912) million. PoWEST ANNUAL REVIEW

5 Key figures on the financial position and result Powest Oy key figures Turnover, Operating profit, As percentage of operating profit, % 99% 212% -25% Return on equity, % 10% 98% -157% Equity-to-assets ratio, % 9% 9% 1% Average number of personnel Most of the parent company turnover came from the sales of financial and payroll management services. The operating profit contains a capital gain on the sale of non-current assets of EUR (7.207) million. Powest received a Group contribution of EUR million from PVO-Alueverkot Oy in 2007 and a Group contribution of EUR million from Nordic Energy in the previous year. The Powest Group key figures Turnover, Operating profit, As percentage of operating profit, % -28% 13% -1% Return on equity, % -12% 40% 0% Equity-to-assets ratio, % 25% 13% 8% Average number of personnel The turnover contains a EUR (7.409 in 2006, in 2005) million fair value change in the market value of Nordic Energy s electricity contracts. The operat ing profit contains a purchase price adjustment of EUR million in The operating profi t also contains the supplementary purchase price o f EUR million for the shares of Nordic Energ y paid to TXU Europe (in administration) in April ANNUAL REVIEW 2007 PoWEST 5

6 Board members from left to right: Timo Rajala, Minna Korkeaoja, Jari Niemelä, Orvo Laurila and Risto Vesala. Board of Directors on 31 December 2007 The Annual General Meeting elected the following members to the Board of Directors on 28 March 2007: Timo Rajala, Minna Korkeaoja, Orvo Laurila, Jari Niemelä and Risto Vesala. Timo Rajala was elected Chairman in the organising meeting of the Board of Directors. The President of the company is Minna Korkeaoja, M.Sc.(Econ.). Auditor PricewaterhouseCoopers, Authorised Public Accountants, acts as the regular auditor, with Eero Suomela, Authorised Public Accountant as the auditor in charge. Holding in subsidiaries Average number of personnel in 2007 Parent company Powest Oy Finestlink Oy Nordic Energy Oy Proma-Palvelut Oy PVO-Alueverkot Oy 60% 100% 66% 100% PoWEST ANNUAL REVIEW

7 Profit and Loss Account and Balance Sheet 1 Jan 31 Dec GROUP PARENT COMPANY PROFIT AND LOSS ACCOUNT Turnover Other operating income Raw materials and services Personnel expenses Depreciation and impairment Other operating expenses Operating profit or loss Financial income and expenses Profit or loss before extraordinary items Extraordinary items Profit or loss before appropriations and taxes Appropriations Increase (-) or decrease (+) in depreciation differences Income taxes Minority interest Profit or loss for the financial year Dec GROUP PARENT COMPANY BALANCE SHEET ASSETS NON-CURRENT ASSETS Intangible assets Tangible assets Investments Holdings in Group companies Other investments CURRENT ASSETS Current receivables Cash in hand and at banks EQUITY AND LIABILITIES Shareholder s equity Share capital Share premium Retained earnings Profit or loss for the financial year Minority interest Accumulated appropriations Depreciation difference Liabilities Deferred tax liability Non-current liabilities Current liabilities ANNUAL REVIEW 2007 PoWEST 7

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