In 2015, we at Ellevio introduced one of our biggest investment programmes ever. During the year, we invested SEK 1,706 million in a sustainable electricity network for our customers. These investments are also the focus of our first annual report as a new company, which was published in July.
In 2015, our investments amounted to more than SEK 1.7 billion, which is an increase of 40 per cent on the previous year. Between 2016 and 2019, we will invest over SEK 9 billion.
- This investment involves the modernisation of our electricity network and capacity enhancements in Stockholm to meet a growing demand. We also continue to weatherproof networks in the countryside, work that started after the big winter storm Gudrun in 2005 and that can now take place at a faster pace, says CEO Johan Lindehag.
- We are responsible for a critical infrastructure that fulfils a basic function in society and the investments that we are making now are required for us to continue to offer our customers the delivery quality that they want, now and in the future, says Lindehag.
We create value for many stakeholders
Electricity distribution is a basic service in society and we at Ellevio have an important social function that affects many people every day. We offer a reliable service and serve our customers, we pay our contractors and suppliers for their work, salary to employees, returns to the owners, and we pay tax to the society.
Since 1 June 2015, we have new owners – the Third Swedish National Pension Fund, Folksam, First Swedish National Pension Fund and Borealis Infrastructure. They have a long-term ownership perspective that fits well with our long-term investment horizon. We are facing a period of extensive investment in the electricity network and the new owners enable these investments.
Ellevio’s net sales, primarily consisting of network and connection fees, amounted to SEK 6,014 million in 2015. The operating profit after depreciation was SEK 1,675 million and this profit will in turn cover interest, tax and returns. After financial items, our profit amounted to SEK 285 million.
Customers and society:
Much of our funds are invested in the development of a long-term sustainable electricity network, i.e. improvements for our customers. Through our electricity network projects, we provide work for close to 3,000 people every year around the country, through our contractors, making us a major employer. We also pay tax to society. In 2015 we paid SEK 373 million in tax in total (in the form of income tax, property tax, social security tax and special payroll tax on pension costs).
We have just over 400 employees. They plan and manage our network projects, monitor the netwok 24 hours a day and ensure that faults leading to power outages for our customers are fixed as quickly as possible. They also serve our customers when it comes to connections, moving, meter readings, electricity consumption, etc. Salaries and remuneration for our employees amounted to SEK 250 million.
Our owners’ contribution to Ellevio consists of shareholder loans and equity. Loans amount to SEK 17 billion and equity to just over SEK 7 billion: SEK 24.4 billion in total. Returns to the owners consist of interest on loans of 8.5%, which calculated on the basis of total owner capital means that they receive a return of around 6%. A decision is made on a year to year basis on how much should be paid out and how much should be channelled back into operations for investment purposes. In 2015 we paid out SEK 489 million in returns and SEK 372 million was channelled back into operations. In this way, pension money continues to be invested in the company. We have not requested tax deductions for interest, which means that it is equal to dividends.
Long-term stable financing is a prerequisite for our operations
We are facing major investments in the future. Renewal and capacity enhancement in Stockholm, which is growing rapidly, and continued weatherproofing in the countryside. Investments that will continue for a long time. Our operations are regulated, and the regulation periods last four years. Our investments, on the other hand, have a 40-year investment perspective (over 10 times as long) that requires stable and long-term financing.
Our loans consist of so-called “senior” and “junior” loans, and shareholder loans. These are comparable to first mortgage loans (senior) and last mortgage loans (junior) when buying property. The loans have different interest rates depending on duration and risk. The average lending rate for senior loans is approx. 2% and for junior loans it is 4.9%. The average interest rate for all external loans is approx. 2.5%. Shareholder loans with a duration of 25 years that are subordinated to other loans have a rate of 8.5% (equivalent to approx. 6% on total shareholder capital, see above under Owners). Subordinated debt means that lenders only receive interest payments after instalments and interest have been paid on other loans, and they thus bear a higher risk.
Our financing and interest do not affect customer prices
We have thoroughly regulated operations and our revenue is determined by the Swedish Energy Markets Inspectorate, the authority that monitors us. This income needs to cover reasonable costs for our operations and a reasonable return. The allowed revenue, i.e. how much we may charge our customers, is determined based on regulations that are identical for all Swedish distribution network operators. Who owns a business (municipality or private or other) or how the business is financed have no bearing on the allowed revenue. This means that neither financing nor interest rates have any impact on customer prices. More information about the costs for which we receive cover in accordance with the regulations can be found on page 26 of our annual report’s front section.
The annual report can be found here in Swedish and English: https://www.ellevio.se/privat/om-oss/arsredovisning-2015/
For more information, please contact:
Jonatan Björck, press contact at Ellevio, email@example.com, tel. +46 (0)72-56 15 416