REVIEW
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
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 2007. 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 2007. 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
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 2007. 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 2007. 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 2007. 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 2007. 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 1.655 (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 5.804 (11.912) million. PoWEST ANNUAL REVIEW 2007 4
Key figures on the financial position and result Powest Oy key figures 2007 2006 2005 Turnover, 3 081 482 3 112 749 2 758 727 Operating profit, 3 059 301 6 584 499-699 119 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 42 43 47 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 3.543 (7.207) million. Powest received a Group contribution of EUR 0.100 million from PVO-Alueverkot Oy in 2007 and a Group contribution of EUR 2.000 million from Nordic Energy in the previous year. The Powest Group key figures 2007 2006 2005 Turnover, 25 883 405 113 504 183 130 230 977 Operating profit, -7 279 232 14 542 507-1 673 345 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 401 445 471 The turnover contains a EUR -2.416 (7.409 in 2006, 9.337 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 4.250 million in 2006. The operating profi t also contains the supplementary purchase price o f EUR 3.000 million for the shares of Nordic Energ y paid to TXU Europe (in administration) in April 2007. ANNUAL REVIEW 2007 PoWEST 5
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% 42 - - 359 - PoWEST ANNUAL REVIEW 2007 6
Profit and Loss Account and Balance Sheet 1 Jan 31 Dec 1 000 GROUP PARENT COMPANY PROFIT AND LOSS ACCOUNT 2007 2006 2007 2006 Turnover 25 883 113 504 3 081 3 112 Other operating income 3 701 5 916 3 543 7 209 Raw materials and services -2 932-72 865 - - Personnel expenses -20 091-21 500-1 618-1 557 Depreciation and impairment -3 700-741 -161-269 Other operating expenses -10 140-9 771-1 786-1 911 Operating profit or loss - 7 279 14 543 3 059 6 584 Financial income and expenses 3 200-1 937-2 257-2 070 Profit or loss before extraordinary items -4 079 12 606 802 4 514 Extraordinary items - - 100 2 000 Profit or loss before appropriations and taxes -4 079 12 606 902 6 514 Appropriations Increase (-) or decrease (+) in depreciation differences - - -10 17 Income taxes -286-380 - - Minority interest -198-190 - - Profit or loss for the financial year -4 563 12 036 892 6 531 31 Dec 1 000 GROUP PARENT COMPANY BALANCE SHEET 2007 2006 2007 2006 ASSETS NON-CURRENT ASSETS Intangible assets 1 927 1 541 374 253 Tangible assets 7 125 7 480 756 1 774 Investments 2 221 3 417 Holdings in Group companies 85 246 82 289 Other investments 0 1 112 11 273 12 438 86 376 85 428 CURRENT ASSETS Current receivables 110 328 255 784 318 339 Cash in hand and at banks 674 12 663 0 0 111 002 268 447 318 339 122 275 280 885 86 694 85 767 EQUITY AND LIABILITIES Shareholder s equity Share capital 2 184 2 184 2 184 2 184 Share premium 1 506 1 506 1 506 1 506 Retained earnings 29 736 18 965 2 898-2 369 Profit or loss for the financial year - 4 563 12 036 892 6 531 28 863 34 691 7 480 7 852 Minority interest 1 624 1 522 Accumulated appropriations Depreciation difference - - 29 18 Liabilities Deferred tax liability 246 157 - - Non-current liabilities 5 000 5 000 - - Current liabilities 86 542 239 515 79 185 77 897 91 788 244 672 79 185 77 897 122 275 280 885 86 694 85 767 ANNUAL REVIEW 2007 PoWEST 7
PoWEST Annual Review 2007 8