Board of Directors' report. 1 Gasum financial statements contents

Transcription

1 Board of Directors' report and financial statements 2013 contents Gasum Corporation Board of Directors' report Formulas for the key financial indicators... 9 Income statement Balance sheet Cash flow statement...13 Notes to the financial statements revenue other operating income Materials and services staff costs management pension commitments depreciation auditor's fees financial income and expenses appropriations direct taxes fixed assets financial assets inventories receivables shareholders' equity accumulated appropriations deferred tax liabilities long-term debt short-term debt securities liabilities Unbundled income statement Unbundled balance sheet Auditor's report Statement by the Supervisory Board Gasum financial statements 2013

2 Report by Gasum Corporation s Board of Directors 2013 OPERATING ENVIRONMENT Finland s economic situation remained unsettled throughout 2013, and this was also reflected in the energy market. Energy consumption was also affected by the exceptionally warm weather. According to statistics produced by Finnish Energy Industries, industrial electricity consumption increased by approximately 1%, but in other sectors consumption was reduced by 3.5%, mainly due to warm weather. In 2013 the sales of natural gas decreased by 5% on the year earlier and totalled 33.2 TWh, while in 2012 the figure had been 34.9 TWh. In addition to weather conditions, sales were also affected by the poor price competitiveness of natural gas. Although the price of natural gas showed a slight downward trend throughout 2013, the low price levels prevailing in emissions trading and the electricity market adversely affected the price competitiveness of natural gas, particularly against coal. The market situation was partly influenced by the Finnish energy tax reform that took place in 2011 and involved a decision to raise natural gas taxation in three stages. The second increase entered into force at the beginning of In conjunction with Finland s 2013 state budget an amendment to energy taxation was adopted, resulting in a shift in heating fuel taxation based on energy content and carbon dioxide emissions towards a carbon dioxide tax. Finland's National Energy and Climate Strategy was updated by the Government in March Natural gas still plays a clear role in Finland s energy production in the new strategy, which sets the target of replacing 10% of the current use of natural gas by wood-based biogas. The diversification of natural gas sourcing and the creation of a pipeline connection for Finland to trans-european energy networks via the Baltics are also regarded as a key goal. Finland and Estonia are both interested in constructing an LNG terminal, but EU financial support will only be provided to one regional project. Finland and Estonia were unable to reach an agreement concerning the location of the terminal in In line with its strategy, Gasum will continue to develop the gas market and a business portfolio based on gas. The company aims to diversify the use and sourcing of natural gas and be the leading biogas market operator in Finland. Gasum is also considering the expansion of its operating area in the Baltic Rim. The company will invest strongly in new products, such as liquefied natural gas (LNG) and land and maritime transport fuels, as well as in new technologies, such as wood-based biogas (bio-sng, synthetic natural gas). Gasum is also promoting cooperation projects with Baltic gas markets. Revenue, BALANCE SHEET AND RESULT The Gasum Group s revenue for 1 January to 31 December 2013 totalled 1,147.5 million ( 1,281.8 million in 2012). Operating profit totalled 36.8 million or 3.2% of the revenue total ( 62.1 million or 4.8% of the revenue total). The decreases in revenue and gross margin were due to reduced natural gas sales volumes. During the year under review the Gasum Group's return on equity was 8.3% (10.6%). The Group's balance sheet total at 31 December 2013 was million ( million) and its equity ratio 52.3% (48.6%). Reported under assets in the Group s balance sheet is an advance payment of 82.7 million to Gazprom Export for failing to take the minimum contracted annual quantity in previous years ( ) as required under the Take or Pay obligation related to the gas supply contract. By its nature this is an advance payment for future natural gas use. Gasum has a longterm right to utilise this advance payment. The Gasum Group s investments in 2013 totalled 21.4 million ( 20.5 million) and were primarily targeted at gas transmission network development and maintenance and the development of new business activities. The Group s cash flow after interest dividends was 87.0 million after interest and dividends. Revenue, BALANCE SHEET AND RESULT thousand Revenue Gasum Corporation 1,134,314 1,267,113 1,244,695 Gasum Group 1,147,473 1,281,816 1,258,097 Operating profit Gasum Corporation 32,665 56,133 86,458 Gasum Group 36,767 62,100 92,124 Balance sheet total Gasum Corporation 735, , ,297 Gasum Group 768, , ,504 2 Gasum financial statements 2013

3 The Group s liquid assets at 31 December 2013 totalled 5.5 million ( 12.9 million). Interest-bearing debt totalled million ( million), of which 93.0 million were longterm ( million) and 71.5 million short-term ( 57.2 million). BUSINESS DEVELOPMENT IN 2013 Energy Trade Energy Trade, which includes wholesale trade in natural gas, the biogas business and the LNG business, is the Gasum Group s most important business area in terms of revenue. Operating profit from wholesale trade in natural gas does not depend merely on developments in natural gas sales volumes. Instead, it is also affected by the trade structure and the price balance between natural gas acquisition and sales. The reasonableness of natural gas wholesale pricing is supervised by the Energy Authority. To support wholesale trade in natural gas, Gasum has developed short-term products for increased flexibility in trading as well as services for natural gas price risk management. The biogas and LNG business areas will enable the diversification of sourcing in the future. New gas products are the most important issues enabling growth for the Group. In its liquefied form, natural gas can be delivered outside the pipeline network, which provides potential access to entirely new customer groups. These include customers in the fields of shipping, land transport and industry. With the regulations on Baltic Sea shipping emissions getting stricter, the need for marine LNG is estimated to total at least 1.2 million tonnes (25 TWh). wholesale trade in energy Wholesale trade in natural gas was clearly below the 2012 level and the longer-term average. The low price levels of electricity and emission allowances resulted in a clear decrease in the utilisation rates of combined heat and power production (CHP) plants from the year before. For a long time natural gas was the most important district heat fuel, but in 2013 it was taken over by wood. In 2013 natural gas accounted for 26% and wood and other biofuels for 29% of the district heat fuels total. The share of coal was 26%, down from the previous year's figure of 24.5%. The pricing of the energy sales of natural gas is based on the natural gas supply contract between Gasum and Russian Gazprom s subsidiary Gazprom Export. The current supply contract, valid until the end of 2026, is based on the special structure of Finland s natural gas market, which is reflected in the fact that the price of natural gas follows not just changes in oil prices but also fluctuations in the price of coal and domestic market energy prices. The price of natural gas showed a slight downward trend throughout 2013, with the year-on-year drop compared with 2012 averaging 8%. energy trade services The sales of Gasum s energy trade hedging products fell in 2013 due to the decrease in the wholesale figures. The volumes seen in 2014, however, are at the same level as in Hedging in electricity and emissions trading was still not attractive among natural gas customers due to the unfavourable price relationships. The sales of the Gasum Plussa product were 4% of the total sales of natural gas, which meant a proportional increase on the year before (2%). The share of the secondary market was 1.9%. The report service facilitating price development forecasting provided by Gasum Energy Trade Services is used by almost half of the natural gas customers. lng sales and development projects Gasum s liquefied natural gas (LNG) sales amounted to 1,422 tonnes. The main customer was the Wärtsilä Vaasa production facility, which uses LNG in engine test runs. LNG is produced at Gasum's Porvoo liquefaction facility and delivered to customers by truck. Gasum invested strongly in the development of the LNG business in A development company called Manga LNG was established by Outokumpu, Ruukki Metals, Gasum and EPV Energy in December. The company aims to construct an LNG import terminal in Röyttää, Tornio, and create an efficient logistics chain around it. The company will apply for investment aid from the Ministry of Employment and the Economy in early Gasum has selected Tahkoluoto, Pori, as the construction site for an LNG terminal. According to Gasum's plans, the terminal will supply fuel particularly to Baltic Sea shipping and industrial facilities in the local area. The terminal investment will total around 60 million. Gasum estimates that construction in Pori will begin in 2014 and be completed in Gasum is also interested in opening a terminal in Turku at a later date. biogas and renewables Gasum s biogas supply improved considerably in A total of 31,721 MWh of biogas was injected into the Gasum network in 2013 an amount almost seven times that injected in the year before (4,513 MWh). This added production was generated at the biogas production facility that has been operating in conjunction with the Suomenoja wastewater treatment plant of the Helsinki Region Environmental Services Authority (HSY) since late The construction of Finland s largest biogas production and upgrading facility owned by Gasum and LABIO (formerly called Kujalan Komposti) began in Lahti in spring The facility will produce biogas from waste generated in the Päijät- Häme region. The facility is estimated to be ready for production in June In 2013 biogas was offered by Gasum for transport use, but the further improvements in supply resulted in explorations of interest in utilising biogas among other customer groups as well. Energy Services The Gasum Group s Energy Services business area covers distribution transmission, solution and distribution gas sales, heat services and transport services. In Finland a total of 7 km of new pipeline sections were constructed for the Gasum Paikallisjakelu distribution network in 2013, with the network length now totalling 563 km. In Estonia Gasum Eesti has a total of 62 km of distribution network in Tabasalu and Rapla. The sales of retailed natural gas by Gasum Energiapalvelut Oy totalled 50.7 million m³ in The most important growth area for Gasum s distribution sales is the Nummela area of Vihti. Sales in other areas 3 Gasum financial statements 2013

4 turned out challenging as customers postponed investments due to the recession and the poor price competitiveness of gas. Customer losses were seen in the Kymenlaakso region in particular. Operating in Estonia, the sales and revenue of Gasum Eesti AS increased, with the company s natural gas sales totalling 3.1 million m³. Distribution transmission services were also sold by the company to other retailers, and the transmission sales totalled 9.3 million m³. In transport the focus remained on marketing biogas as a vehicle fuel. The number of transport customers increased by 27% in The sales of natural energy gases at Gasum s public filling stations increased by 22% on the year before, and biogas accounted for around 30% of the annual sales of Gasum's public filling stations. Local buses serving urban areas form an important transport customer segment, with other customers including delivery and waste management vehicles, taxis, forklift trucks and a steadily growing number of private motorists. Two new Gasum filling stations were opened in 2013, one in Tytyri, Lohja, and the other in Hermanni, Helsinki. Gasum anticipates excellent transport fuel growth potential for biogas as a renewable local fuel. In Helsinki Metropolitan Area public transport the share of gas has become smaller. Efforts have, however, been made to take the considerable environmental benefits that can be obtained with biogas into consideration in contexts such as Helsinki Region Transport s (HSL) competitive tendering concerning public transport services. Transmission Services The Gasum Group s Transmission Services covers Gasum Corporation s wholesale gas transmission services. Gasum is the Finnish transmission network operator under the Natural Gas Market Act and obliged to maintain and develop the network. The bulk of the Gasum Group's balance sheet consists of the natural gas transmission network. Transmission network maintenance and development also play a key role in the Gasum strategy, including as a distribution channel for new, bio-based energy gases. Gasum's activities are supervised by the Energy Authority, which has appointed Gasum as the natural gas transmission system operator (TSO) in Finland. The Energy Authority approves the terms and conditions imposed by Gasum to implement system responsibility. It also supervises the reasonableness of Gasum's transmission pricing, the operative costs that can be affected and the quality level of natural gas supply. The majority of fixed costs consist of maintenance costs. The regulation used to take place over periods of four years. A decision was, however, made by the Energy Authority to extend the period that commenced in 2010 by two years until the end of The decision was based on the Authority s wish to harmonise the regulatory periods of electricity Transmission network maintenance and development also play a key role in the Gasum strategy. network and natural gas network operations. The change was implemented under the 2013 reform of the Natural Gas Market Act. The 2013 revenue from Gasum s transmission services was below the maximum permitted level. The cost efficiency and supply security targets set for wholesale transmission were reached in The rate of return on transmission services was below the permitted annual level, and the cumulative return below the permitted level for the latest period is almost 100 million. Regardless of the rate of return being below the permitted level, Gasum has not increased the transmission tariff in order to avoid a reduction in the competitiveness of gas. The supply security target has been reached every year, but the cost efficiency target was exceeded in the two previous years, which has contributed to a reduction in the permitted rate of return. The security of natural gas supply remained at a good level in The amount of energy not delivered accounted for % of the total energy volume transmitted via the network. There were three planned network service interruptions and another three interruptions caused by disturbances. The total length of the natural gas transmission network was 1,286 km at the end of The calculated network capacity was 9,250 MW in No new pipeline sections were connected to the network in 2013, but a 32-km parallel section in Kotka was taken out of active use. The renewal of the network control system was launched by Gasum in The current transmission network control system has been in operation since The new system will help Gasum respond to transmission service needs and changes in the operating environment over the next 15 years. The system will be introduced in late Gasum and the Baltic transmission system operators (TSOs) EG Võrguteenus (Estonia), Latvijas Gaze (Latvia) and Amber Grid (Lithuania) teamed up to commission a study from the Latvian consulting company Olimps on the countries shared gas infrastructure development needs and supply security. Issues examined in the study included the region s LNG terminal projects, the utilisation of the Latvian gas storage facilities and development needs relating to the countries' pipeline networks. Findings made by the study include the LNG terminal under construction in Klaipeda, Lithuania, not being able to serve the Finnish and Estonian needs under the current infrastructure setup. The utilisation of the Inčukalns gas storage facilities by Finland requires the strengthening of the pipeline as well as compressor infrastructure. It was also found by the study that the placement of the regional LNG terminal in Finland instead of Estonia would have benefits from the viewpoint of issues such as supply security and investment costs. finngulf lng and balticconnector Gasum s transmission system operator (TSO) role also entails Gasum s obligation to develop the gas system. In line with the Finnish Government's policy, Gasum is exploring the opportunity to develop the transmission network by constructing an LNG terminal in Finland as part of the Finngulf LNG project. The Balticconnector project is looking into the opportunity to connect the Finnish and Estonian gas networks with a pipeline laid under the Gulf of Finland. A Memorandum of Under- 4 Gasum financial statements 2013

5 standing (MoU) was signed in early 2013 by Gasum and the Estonian TSO EG Võrguteenus concerning their joint development of the Balticconnector project. The Finngulf LNG and Balticconnector projects are included in the Projects of Common Interest (PCI) list published by the European Commission in October 2013 and therefore eligible to apply for EU financial support and covered by the accelerated permit granting procedure. As regards the Finngulf LNG project, the Environmental Impact Assessment (EIA) procedure launched by Gasum in April 2012 was completed in autumn The EIA covered the potential construction of the terminal in two locations, Ingå and Porvoo, with three different size options considered for the terminal. Both locations were found to be possible as regards the environmental perspective. The EIA on the Balticconnector gas pipeline was launched in late gas exchange ltd Gasum subsidiary Gas Exchange Ltd operates an online marketplace for secondary market trading in natural gas and for Gasum s short-term products. Trading on the Finnish Gas Exchange totalled 2,035 GWh, down 23% on the year before (2,636 GWh). The volume corresponded to 6.1% of total natural gas consumption, while the figure a year earlier had been 7.5%. The number of transactions in 2013 was 101,000. In the gas sector, marketplaces such as the Gas Exchange operate under gas transmission activities in order to separate the marketplaces from the sellers and buyers of gas and to place them under the control of a party that is independent of these. In addition to gas trading, these marketplaces are usually also used as transmission network capacity marketplaces and as transmission network operator tools for the buying and selling of gas needed for network balancing. Experiences gained from the operations of the Gas Exchange and the technical applications developed for it were utilised in the launch of gas exchange trading in the Baltics. GET Baltic, the company responsible for the operations of the Lithuanian gas marketplace, began trading in January The annual trading volume of the GET Baltic gas exchange totalled 536 GWh, corresponding to 2% of the total consumption of gas in Lithuania. The company is owned by Gasum (34%) and Lietuvos Dujos (66%). Plans to launch a project to also establish a gas exchange company in Estonia in 2013 were postponed. RISKS AND RISK MANAGEMENT Gasum's business risks include those related to the energy market and fuel price development as well as those related to access to natural gas, the functioning of the transmission system, business regulation, safety and security, and environmental impacts. The most considerable risks from the profit perspective are to do with fuel price development and business regulation. There are also considerable risks involved in the new business activities created by Gasum. The energy sector Gasum got close to its occupational safety targets set for is characterised by large initial investments, the profitability of which is difficult to predict specifically before the operations are launched and have become established. Gasum is prepared for natural gas supply disruptions with reserve fuel arrangements. The functioning of the transmission system is monitored and improved through network renewal and new construction in accordance with a long-term plan. Gasum has been developing fuel, particularly oil, price risk management for several years. Efforts are made to manage risks relating to new business activities through measures including the utilisation of international references as background data and minimising any risks relating to financing. Natural gas network operations and energy trade are both supervised by the Energy Authority. Changes in Finnish or European regulation may result in adverse effects on Gasum s financial position or opportunities to pursue objectives set for the development of the natural gas market. THE ENVIRONMENT AND SAFETY Gasum s integrated management system comprises quality, environmental and safety management systems and is certified in accordance with the ISO 9001:2008, ISO 14001: 2004 and OHSAS 18001:2007 standards. System conformity is monitored annually through internal audits as well as audits conducted by an external organisation. The most significant environmental impacts of Gasum's operations result from the use of compressors and the construction of pipelines. Some of the compressor stations required in natural gas transmission come under emissions trading. Nitrogen oxide emissions are reduced by selecting those compressor units that utilise low-emissions combustion technologies. Carbon dioxide emissions are minimised by using less fuel gases at compressor stations. Environmental effects of construction are reduced through approaches including new construction technologies and in-depth preliminary assessments of environmental impacts. Gasum got close to its occupational safety targets set for One of the personnel-wide performance targets was to make safety observations and enter them into the monitoring system. The minimum objective was for every staff member to make at least three observations. The objective was reached well, and the number of observations increased six-fold from the year earlier. Gasum Group employees had a total of two accidents at work that resulted in at least one day off work in 2013, while the target had been zero accidents. The sick leave rate was 2.46% of total working hours. The company is a signatory to the Finnish industrial energy efficiency agreement and a member of the Zero Accident Forum, which comes under the national industrial accident programme, and the Chemical Industry of Finland's Responsible Care Initiative. Gasum has also made a commitment to the Baltic Sea Action Group regarding the development of capacities to use LNG as a shipping fuel. Gasum is also a member of the Climate Partners network of the City of Helsinki and local businesses. Gasum s Climate Commitments include using biogas to fuel the company cars and service vehicles in the Helsinki region. 5 Gasum financial statements 2013

6 DEVELOPMENT PROJECTS In 2013 Gasum continued explorations into the construction of the LNG supply and logistics chain and the further specification of customer potential. Gasum is making investments for the development of the Finnish gas infrastructure in Gasum s key growth areas and developing the Finnish energy infrastructure with environmentally friendly solutions. Biogas is an important business area for Gasum's future. Gasum, Helsingin Energia and Metsä Fibre, a Metsä Group company, are conducting a joint feasibility study on the construction of a biorefinery for biogas production in Joutseno. If realised, the biorefinery will produce biogas from renewable wood raw material for transmission to customers along the gas network. The project s Environmental Impact Assessment (EIA) was completed in August The EIA procedure and the more in-depth technology reviews confirm that the project is feasible as regards its environmental impacts and technology aspects. In the prevailing emissions trading and electricity market situation, however, wood-based biogas produced in Finland is not able to compete with other fuels. The implementation of the project would only be possible with sufficient national support. No further decisions have been made concerning the promotion of the project. In January 2014 a new Enterprise Resource Planning (ERP) system was taken into use by Gasum, which resulted in a major reform of many issues, such as financial processes. The project aims to provide business support throughout the Gasum Group, including improved internal efficiency, resource management and reporting. RESEARCH The winners of the Gasum innovation competition launched in October 2012 were announced in June The aim was to find and promote new natural energy gas solutions for a sustainable tomorrow through the facilitation of the creation of new technologies, business activities and enterprises by players in the gas sector. The winning entry was an innovation by the Gasvuala team providing a module solution for the fuel conversion of ships to LNG. Prizes were also given to the idea of utilising natural energy gases to charge electric cars and another team's idea of improving energy efficiency in greenhouse cultivation with natural energy gases. A total of 100,000 was given out in prizes. Six grants were issued in 2013 from the Gasum Gas Fund administered by the Finnish Foundation for Technology Promotion, amounting to a total of 46,500. To increase interest in gas-related research, Gasum and the Foundation organised a current issues seminar on the gas sector aimed at students and researchers. Gasum is a shareholder of CLEEN Ltd, a Strategic Centre for Science, Technology and Innovation that aims to organise strategic research collaboration between enterprises operating in the energy and environmental sectors as well as the funding required for this. Participation in its operations promotes the implementation of Gasum's own technology projects. GROUP STRUCTURE AND PERSONNEL The Gasum Group consists of the parent company Gasum Corporation and the subsidiaries Gasum Energiapalvelut Oy, Gasum Paikallisjakelu Oy, Gasum Tekniikka Oy, Gas Exchange Ltd, Helsingin Kaupunkikaasu Oy and Gasum Eesti AS. The entire Group s maintenance services are centralised under Gasum Tekniikka Oy. Gasum Paikallisjakelu Oy is responsible for the Group s distribution network maintenance and development and Gasum Energiapalvelut Oy for natural gas retail trade, solution sales and heat services. New ventures and major investment projects resulted in an increase in the number of Gasum employees in 2013, and the Gasum Group had an average of 273 employees in The average number of Gasum Corporation employees was 120. Of the largest subsidiaries in terms of personnel, Gasum Tekniikka Oy had 125 and Gasum Energiapalvelut Oy 20 employees. OWNERSHIP STRUCTURE AND SHARES There were no changes among Gasum shareholders in 2013 despite the October 2012 announcement of E.ON Ruhrgas International GmbH of its plans to give up its shareholding in Gasum. Gasum is owned by: Fortum Heat and Gas Oy 31% OAO Gazprom 25% Finnish State 24% E.ON Ruhrgas International GmbH 20% The company's share capital is divided into Series A and Series K shares. There are 53,000,000 Series A shares and 1 Series K share. The Series K share is owned by the Finnish State. Each share entitles its owner to one vote when voting in shareholders' meetings. The rendering of decisions in shareholders' meetings regarding amendments to the company's Articles of Association, and the selection of the Supervisory Board's Chairperson, Deputy Chairperson and Members as well as their discharge of responsibilities requires, in addition to the majority required under the Limited Liability Companies Act, also a corresponding majority of the votes given by the A shares as well as the votes given by the K share. All Series A shares and the Series K share have the same right to dividends and the company s assets. GROUP STRUCTURE AND PERSONNEL Salaries and remuneration (excl. benefits) thousand Gasum Corporation 9,387 8,389 10,205 Gasum Group 16,747 15,693 15,897 Personnel (average) Gasum Corporation Gasum Group Gasum financial statements 2013

7 The acquisition of the Series K share by way of a transfer requires the consent of Gasum Corporation s Board of Directors. If this consent is not forthcoming, the holder of the K share has the right to demand that the share be converted to an A share. CORPORATE GOVERNANCE In 2013 the Gasum Group organisation consisted of three business areas and three Group functions. A new organisation structure under which Gasum's business activities are divided into four business areas and six Group functions was announced in January In accordance with the Finnish Limited Liability Companies Act, those responsible for Group administration and operations are Gasum Corporation s general meeting of shareholders, Board of Directors and CEO. The general meeting of shareholders also selects Gasum's Supervisory Board. The Supervisory Board is responsible for ensuring that the company is run in line with the decisions and instructions of the general meeting of shareholders and sound business principles. The Supervisory Board makes decisions on major strategic policies regarding Gasum Corporation and also selects Gasum Corporation s Board of Directors. The Board of Directors comprises the chairperson and a maximum of six ordinary members. The Board of Directors is responsible for the company s administration and operations in compliance with legislation, the Articles of Association and the instructions issued by the Supervisory Board and for decisions on issues such as the conveyance and mortgaging of fixed assets and the hiring and dismissal of senior managers not appointed by the Supervisory Board. The CEO is assisted in the steering of the Group's operations by the Management Team. Gasum s Annual General Meeting (AGM) was held on 22 May The shareholders adopted the financial statements for 2012, approved the payment of dividend recommended by the Board of Directors and the bonuses to be paid to employees and released the members of the Supervisory Board, the Board of Directors and the CEO from liability for the 2012 financial year. Members of the Supervisory Board were also confirmed by the AGM. Jorma Eloranta was reappointed as Chairman, Jarmo Väisänen as Vice Chairman and Seppo Aho, Timo Karttinen, Pavel Oderov and Matthias Kohlenbach as members. Rainer Link and Igor Lipskiy were appointed as new members of the Supervisory Board. Appointed by the AGM, authorised public accountants Pricewaterhouse- Coopers Oy acted as the Gasum Group s auditors, with Pasi Karppinen APA as the principal auditor. CEO Antero Jännes served as Chairman of Gasum Corporation s Board of Directors. Björn Ahlnäs served as Deputy Chairman and Board member until 1 May 2013, which is when Board member Christer Paltschik was appointed as Deputy Chairman, while the other Board members were Aleksei Novitsky, Ari Suomilammi and Kristiina Vuori. In September 2013 Johanna Lamminen was appointed as Board member. She joined Gasum in September 2013 as Executive Vice President and began as CEO on 1 March 2013 and Chairperson of the Board of Directors in March 2014 following the retirement of Antero Jännes. During the year under review, the Supervisory Board met 3 times and the Board of Directors 14 times. In accordance with the instructions issued by the Government's Ownership Steering Department, Gasum has drawn up guidelines specifying the principles of good governance and ethical practice to be applied within the company. A summary of the guidelines in Finnish can be found on Gasum's website. In 2013 the Gasum Group operated performance and profit bonus schemes, and a long-term reward system was applied to Group key persons. These are in accordance with the guidelines issued concerning the state s associated companies. The maximum reward for senior executives is 50% of annual salary. Gasum has obtained consultancy services regarding the design of management reward systems from PCA Corporation Finance, with Tapio Tolvanen acting as the head consultant. events after the year under review Gasum will acquire the majority (51%) of the LNG distribution business of the Norwegian company Skangass from the Lyse Corporation. The acquisition is part of Gasum s above-mentioned strategy of improving access to competitive LNG in Finland. Skangass terminals and tankers will contribute towards improved supply security in Gasum s LNG offering and enable the fast development of gas infrastructure in the northern Baltic Sea region. Larger combined import volumes will result in more efficient sourcing and also make it more viable to open new LNG terminals. The acquisition will unify the Finnish, Norwegian and Swedish markets geographically, enabling the delivery of a competitive product throughout the region. It will also improve the operational development of procurement and distribution services and efficiency in the logistics chain and chartering as well as increasing overall storage capacity. The transaction will result in Gasum s LNG business, including the Porvoo production facility and the planned Pori terminal, becoming part of the new joint venture. The Skangass LNG plant in Risavika, Norway, will remain in Lyse s ownership, but the new joint venture, Skangass A/S, has entered into a long-term supply contract concerning the use of the plant. The Skangass Öra terminal in Norway as well as the Lysekil terminal already under construction and the Gävle terminal being planned in Sweden will all be operating under the new company. Skangass has charterparties for two LNG tankers, and the acquisition will result in the companies having a combined fleet of 20 LNG road tankers. Tor Morten Osmundsen will continue as the CEO of the new Skangass, and Gasum CEO Johanna Lamminen will chair the company's Board of Directors. FUTURE OUTLOOK The Finnish Government has launched the preparation of a new Energy and Climate Roadmap. The process will involve explorations into key alternatives available to reach the emission reduction targets set for The Government aims to reduce greenhouse gas emissions by 80 95% by Commissioned by Gasum, a study was conducted by Gaia Consulting 7 Gasum financial statements 2013

8 on gas as part of an intelligent energy future, which helps prepare the ground for the role of gas in the new Energy and Climate Roadmap and as part of Finland's energy future. The findings of the study include that competitive access to gas is a prerequisite for the competitiveness of Finnish industries. The gas system must be developed as a whole in order to be able to share the benefits of gas as extensively as possible. The benefits of gas must be taken outside the area covered by the gas pipeline network through the LNG distribution network. Gas is the only fuel that enables efficient cogeneration of heat and power and fast and extensive adjustability. Gas also enables the large-scale storage of renewable energy using power-to-gas technology. Biogas can help reduce emissions in the nonemissions trading sector in transport and agriculture in particular. A major market is being created for liquefied natural gas (LNG) in the Nordic countries. The new sulphur dioxide emission limits that will enter into force in 2015 will increase the need for cleaner shipping fuels. In addition to maritime transport, improved access to LNG will also serve the growing needs of heavy-duty transport and industrial facilities located beyond the natural gas network catchment area. The demand for cleaner fuels will also be increased by the stricter environmental regulations applied to the industry in the coming years. Gasum s strategic goal is to achieve the speedy and successful development of the LNG market in particular. In addition to building the required infrastructure, this will also require integration with other parts of the LNG value chain, such as production and imports. As well as Finland, Gasum regards the entire northern Baltic Sea region as the foundation for its business development. PROPOSAL FOR THE DISTRIBUTION OF PROFIT Gasum Corporation s distributable assets total 45,001,871.24, of which the profit for the financial year is 17,951, Regarding the use of distributable assets, the Board of Directors recommend that a dividend of per share, in other words a total of 17,914,000.34, be paid and that the remaining shareholder s equity of 27,087, be retained. 8 Gasum financial statements 2013

9 Formulas for the key financial indicators Operating profit % = Operating profit 100 Revenue Quick ratio (QR) = Cash and receivables 100 (Short-term liabilities advance payments) Return on equity (ROE) % = (Profit for the year taxes) 100 (Total equity average) Equity ratio % = (Shareholders equity + provisions) 100 (Balance sheet total) Gearing % = Interest-bearing net debt 100 Total equity Return on net assets (RONA) after taxes % = (Profit before extraordinary items + interest payable and similar expenses taxes) 100 Average capital employed 9 Gasum financial statements 2013

10 Income statement million Group Parent company Revenue (1) 1,147 1,282 1,134 1,267 Other operating income (2) Materials and services (3) Raw materials and consumables Purchases during the financial year -1,040-1,150-1,039-1,148 Staff costs Salaries and remuneration (4) Social security costs Pension costs Other social security costs Depreciation (6) Depreciation according to plan Other operating expenses Operating profit Financial income and expenses (7) Interest payable Profit before extraordinary items Extraordinary income (7) Group contribution Profit before appropriations and taxes Appropriations Increase (-) or decrease (+) in depreciation difference (8) Income taxes (9) Profit for the financial year Gasum financial statements 2013

11 Balance sheet million Group Parent company ASSETS FIXED ASSETS Intangible rights and assets (10) Other long-term expenditure Goodwill Tangible assets (10) Land and water Buildings and structures Machinery and equipment Other tangible assets Tangible assets in the course of construction Financial assets (11) Shares in Group companies Amounts owed by Group companies Shares in associated companies Other shares and holdings CURRENT ASSETS Inventories (12) Receivables (13) Long-term Other receivables Short-term Accounts receivable Accounts receivable owed by Group companies Other receivables Prepayments and accrued income Cash and cash equivalents Gasum financial statements 2013

12 million Group Parent company SHAREHOLDERS EQUITY AND LIABILITIES SHAREHOLDERS EQUITY (14) Share capital Retained earnings Profit for the financial year ACCUMULATED APPROPRIATIONS Accumulated depreciation difference DEFERRED TAX LIABILITY (16) DEBT Long-term (17) Loans from financial institutions Other long-term debts Short-term (18) Loans from financial institutions Accounts payable Accounts payable owed to Group companies Other payables Accruals and deferred income Gasum financial statements 2013

13 Cash flow statement million Group Parent company Cash inflow from operating activities + Payments received from sales 1,189 1,203 1,175 1,189 + Payments received from other operating activities Payments of other operating expenses -1,091-1,174-1,084-1,167 Cash inflow from operating activities before financial items and taxes Interest paid and payments of other financial expenses for operating activities Taxes paid Cash inflow from operating activities before extraordinary items Cash inflow from operating activities (A) Cash inflow/outflow from investing activities - Investments in tangible and intangible assets Gains on the divestment of tangible and intangible assets Investments in other financial assets Loans granted Repayments of loan receivables Cash inflow/outflow from investing activities (B) Cash inflow/outflow from financing activities + Increase in shareholders' equity Increase in short-term loans Repayments of short-term loans /+ Increase/decrease in short-term liabilities Increase in long-term loans Repayments of long-term loans /+ Increase/decrease in long-term receivables /+ Net cash flow from extraordinary financial items Dividends paid and other distribution of profit Cash inflow/outflow from financing activities (C) Change in liquid assets (A+B+C) Liquid assets at 1 January Liquid assets at 31 December Gasum financial statements 2013

14 Notes to the financial statements CONSOLIDATED ACCOUNTING PRINCIPLES Gasum Corporation is the parent company of the Gasum Group and has its registered office in Espoo, Finland. Copies of the consolidated financial statements are available from Gasum Corporation's head office at Miestentie 1, FI Espoo, Finland and on the company's website at The consolidated financial statements include the accounts of the parent company Gasum Corporation and of the subsidiaries Gasum Energiapalvelut Oy, Gasum Tekniikka Oy, Helsingin Kaupunkikaasu Oy, Gas Exchange Ltd, Gasum Paikallisjakelu Oy, Finngulf LNG Oy, Gasum LNG Oy and Gasum Eesti AS. Gasum Eesti AS and Gasum Tekniikka Oy are fully owned by Gasum Energiapalvelut Oy. No separate consolidated accounts have been prepared on the subgroup comprising Gasum Energiapalvelut Oy, Gasum Tekniikka Oy and Gasum Eesti AS. The consolidated financial state- ments are based on the acquisition cost principle. The difference between the acquisition cost and equity at the time of acquisition, arising from the elimination of mutual shareholdings, has been treated as goodwill on consolidation and is depreciated over its estimated lifetime subject to a maximum of 20 years. Intragroup transactions have been eliminated in the income statement and balance sheet. The associated companies have been consolidated using the equity method. Share of the associated companies' result for the financial year based on the ownership rate is reported as a separate item under financial income and expenses. Goodwill arising from the acquisition of the associated company is included in the value of the associated company's shares and depreciated in the same manner as goodwill on consolidation over 20 years. The financial statements have been prepared in accordance with the laws and regulations governing their preparation in Finland. The company's financial year is the same as the calendar year. RECOGNITION OF REVENUE FROM SALES Revenue from the sale of gas is recognised once the gas has been delivered. Revenue from services is recognised once the service has been delivered. FOREIGN CURRENCY ITEMS Receivables and debts denominated in foreign currency have been valued at the rates quoted by the European Central Bank. VALUATION OF FIXED ASSETS Fixed assets are recognised in the balance sheet at acquisition cost less depreciation according to plan. Planned depreciation is booked as straight-line depreciation based on the economic life of tangible and intangible assets. Grants received are recognised as decrease in acquisition cost. The economic lifetime expectancies used are: Group Parent company Buildings and structures yrs yrs yrs yrs Other tangible assets yrs yrs yrs yrs Machinery and equipment 3 25 yrs 3 25 yrs 3 15 yrs 3 15 yrs Other long-term expenditure 5 40 yrs 5 40 yrs 5 10 yrs 5 10 yrs Intangible rights and assets 3 10 yrs 3 10 yrs 3 5 yrs 3 5 yrs Goodwill on consolidation 20 yrs 20 yrs - - No project wages or related labour costs were recognised under acquisition cost of tangible and intangible assets during the financial year. INVENTORIES Inventories have been valued in accordance with the FIFO principle at the direct acquisition cost, or replacement cost or the probable recoverable amount, whichever is the lowest. PENSION COSTS Pension cover for Group employees has been arranged through external pension insurance companies. Statutory pension costs are recognised in the year of accrual. Mandatum Life Insurance Company's supplementary pension cover resulted in costs totalling 2,017,560 during the period. Supplementary pension cover is recognised on a cash basis. MANDATORY PROVISIONS The emission allowances granted during the 2013 financial year for Gasum's emissions did not exceed the emission allowances held in Gasum's accounts, so no provision is necessary. At the end of the period there were a total of 808 (46,202) emission allowances received from the Energy Market Authority during 2012 and earlier in Gasum's holding accounts. The free allocation for 2013 is yet to take place. Also held in the accounts are a total of 24,462 (18,242) Emission Reduction Units (ERU) acquired via the NEFCO Carbon Fund. Based on the emission allowance and ERU market price levels of 31 December 2013, this makes an off-balance sheet asset of 9, ( 297,336). DEFERRED TAX LIABILITY The depreciation difference in the consolidated financial statements has been divided into distributable equity and deferred tax liability. CHANGE IN BALANCE SHEET PRESENTATION The ToP payment on account totalling 82,747, presented earlier under short- and long-term receivables has in the 2013 financial statements been transferred under inventories, which is where it belongs due to its nature. 14 Gasum financial statements 2013

15 thousand Group Parent company Revenue By geographical area Finland 1,145,095 1,279,719 1,133,914 1,266,996 Rest of Europe 1,978 2, Other Total 1,147,473 1,281,816 1,134,314 1,267, OTHER OPERATING INCOME Gains on the divestment of fixed assets Rents Other Total MATERIALS AND SERVICES Raw materials and consumables Purchases during the financial year 1,039,708 1,150,303 1,038,016 1,148,712 Change in inventories ,040,366 1,149,595 1,038,550 1,148, STAFF COSTS Salaries and remuneration 16,747 15,693 9,387 8,389 Pension costs 5,128 4,764 3,566 3,166 Statutory social security costs Total 22,736 21,376 13,414 11,953 Benefits Total 23,420 22,053 13,862 12,376 Staff costs in the income statement exclude the cash value of the benefits. Management salaries and remuneration Chief Executive Officers 904 1, CEO's supplementary pension cover Members of the Board of Directors and Supervisory Board 1,062 1, Average number of employees in the Group and parent company during the year Office workers Workers Total MANAGEMENT PENSION COMMITMENTS Chief Executive Officer Antero Jännes' retirement age is 60 according to his supplementary pension arrangement. The arrangement is a benefit-based pension scheme in which the pension is 66% of the base salary. Chief Executive Officer Johanna Lamminen's pension is prescribed by law. 6. DEPRECIATION Depreciation according to plan Depreciation on intangible rights Depreciation on long-term expenditure 1,241 1,224 1,105 1,093 Depreciation on goodwill on consolidation Depreciation on buildings and structures 21,146 21,270 19,780 19,973 Depreciation on machinery and equipment 6,543 7,234 5,684 6,382 Depreciation on other tangible assets Total depreciation 29,576 30,400 26,949 27, Gasum financial statements 2013

16 thousand Group Parent company AUDITOR'S FEES PricewaterhouseCoopers Oy Statutory audit Other fees FINANCIAL INCOME AND EXPENSES Share of associated companies' profit (loss) Interest receivable from non-current financial assets From Group companies Other interest receivable and similar income From Group companies From others Total interest receivable from non-current financial assets and other interest receivable and similar income Interest payable and similar expenses To others 5,638 5,453 5,638 5,452 Total financial income and expenses 5,687 5,451 5,408 5,039 of which total from related parties Extraordinary income Group contribution - - 2,468 3, APPROPRIATIONS Difference between depreciation according to plan and depreciation carried out in taxation - - 5,900 10, DIRECT TAXES Taxes from previous years Income tax on ordinary business operations 5,883 10,745 5,267 9,957 Income tax on extraordinary items Change in deferred tax liability -8,331 3, ,448 14,012 5,872 10, Gasum financial statements 2013