Annual Report • Apr 7, 2011
Annual Report
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Arise Windpower AB | Annual Report 2010 1
| Message from the CEO5 | |
|---|---|
| Arise Windpower in brief 6 | |
| Summary of financial information 6 | |
| Description of the business 8 | |
| Business concept, goal and strategy 8 | |
| Investment appraisal10 | |
| Project portfolio12 | |
| Directors' report14 | |
| Environmental impact17 | |
| Risks and uncertainties17 | |
| Code of conduct 18 | |
| Outlook for 201119 | |
| Consolidated financial statements 20 | |
| Parent company financial statements 38 | |
| Appropriation of retained earnings 45 | |
| Audit report46 | |
| Corporate governance report 47 | |
| Shareholders51 | |
| Board of Directors52 | |
| Senior management 53 | |
| AGM and calendar 54 |
■ Decision to start construction of 8 Vestas V 90 turbines in Mönsterås (16 MW/35 GWh/year)
■ IPO on Nasdaq OMX, Mid Cap. The company raises SEK 550 million before issue costs in a share offering.
■ 10-year partnership agreement concluded with EON in connection with the sale of the Knäred station.
■ Decision to start construction of 12 Vestas V 100 turbines in Askersund and Västervik (22 MW/60 GWh/year).
■ Loan agreement concluded with DnB NOR for the wind farm in Fröslida, Hylte municipality.
2010 expansion target reached, with 124 mw in operation or under construction.
Arise Windpower is a leading company in the rapidly expanding Swedish wind power market. In addition to wind farms that have already been put into operation, the Company also has a healthy project portfolio of more than 900 MW in southern Sweden, where the conditions for building wind farms are particularly favourable.
The Company's business concept and strength is to deal with the entire chain from project development to the sale of environmentally friendly electricity, as well as exploiting the large-scale benefits this creates in the form of low investment- and operating costs, in addition to costeffective project development.
2010 was an eventful year in which Arise Windpower reached a number of key milestones:
■ On 24 March the company was listed on Nasdaq OMX Mid Cap. A simultaneous share offering raises SEK 550 million. The company's shareholder base is strengthened through the addition of new shareholders such as Länsförsäkringar, Alecta, ATP of Denmark and Pohjola of Finland as well as a further 3,600 private shareholders.
■ The expansion target was achieved as work on a further 36 wind turbines is initiated, to be added to the 22 already in operation. The company thus has about 124 MW in operation or under construction, which is more than sufficient to generate a profit after tax on an annualised basis in a reasonably normal wind year.
■ The investment cost was further reduced, to approximately SEK 14.8 million/MW on average for ongoing projects, which is below the previously communicated target of SEK 15.0 million/MW.
■ Operations and maintenance costs have also been cut significantly and the trend is still down.
■ New, efficient wind turbines with a higher output per installed MW are being launched in the market, which reduces the specific production cost.
■ More local authorities accept taller wind turbines, and the company has received a permit to build a turbine with a total height of almost 200 metres in the municipality of Mönsterås. As wind speeds increase with altitude, this will improve the prospects for wind energy production and profitability.
In 2010 the Swedish national grid decided to divide the country into four separate electricity price regions. Under the current system, the price is the same throughout the country. The new system will be introduced as of year-end 2011 and is expected to result in higher prices in the southern part of the country, where the company has its base. Currently (March 2011) the price difference is €5 to €6/MWh, which of course benefits the company.
In 2010 Norway and Sweden agreed to introduce a common electricity certificate system. Provided the proposal is adopted by the Norwegian parliament in spring 2011, we expect there is a reasonable chance that prices of electricity certificates will increase, which will benefit the company.
The outcome of the company's price hedging strategy has so far been successful, creating good prospects for loan funding of new wind farms, as shown by the new loan agreements that have been concluded. After the end of the reporting period Arise Windpower has also concluded a loan agreement with Nordea Bank, which means that the company now has three strong Nordic banks as lenders.
According to the Danish Wind Energy Index, winds were weaker in 2010 than at any time since the index was first calculated in 1979. In terms of results, the weak winds led to an output loss of about 17 GWh, representing a loss of revenue of around SEK 14 million based on average spot prices in the electricity and certificate markets in 2010.
Electricity production from Danish wind turbines 1979 – 2010. 100 is the average during 31 years.
It is very clear that abnormally cold weather results in correspondingly less favourable wind conditions. The early winter also led to delays of about six weeks in the start of construction and commissioning of the Fröslida, Kåphult and Idhult wind farms. All wind farms are now in operation, and on 9 March 2011, at 4 p.m., the company celebrated the 100 MW milestone.
A further 36 MW are currently under construction. The total capacity of 136 MW is expected to generate about 250 GWh in 2011 and 350 GWh in a full year of operation.
To further reduce its operations and maintenance costs while also improving the availability of wind farms in operation, a decision has been taken to employ a number of in-
Peter Nygren, CEO, Arise Windpower.
house servicing staff. This will further cut the cost of supervision and servicing. However, the strategy is not to carry out all servicing in-house but to continue to engage the wind power supplier and/or external companies for this work.
In order to further improve the efficiency of the company's activities in development of new wind farms, electrical production and the sale of electricity, a reorganisation was implemented in February 2011 which essentially creates a new senior management function. The senior management team will focus on strategic issues, marketing, follow-up and control, and resource planning.
The goal for 2011 is to have 260 MW in operation or under construction. The company has all the resources required to realise this goal as well as the necessary equity capital. We look forward to an interesting and profitable 2011!
Halmstad, April 2011 Peter Nygren CEO, Arise Windpower AB
I n 2010 Arise Windpower raised 29 turbines in a four separate projects, began construction of another two, completed a successful initial public offering which raised SEK 550 million before issue costs, strengthened its loan funding arrangements and exceeded its published targets.
Arise Windpower is a leading company in the fast growing Swedish wind power market. The company has a strong project portfolio with a total projected capacity of over 1,000 MW in southern Sweden, where conditions for wind farms are particularly favourable. The business concept is to sell environmental friendly produced electricity in its own wind turbines. The company's strength lies in its ability to manage all links in the chain of production, from product development to sale of electricity, and to exploit the economies of scale this creates in the form of low investment and operating expenses. The company's wind farms are built to be retained for 20 years or more. In addition to cost effectiveness, our focus is therefore on quality and high availability. A carefully calibrated price hedging strategy for electricity and electricity certificates makes it easier to raise loan capital and stabilises revenue streams.
The profitability criterion is strict; no new wind farm is built unless the investment is expected to generate a return on invested capital of at least 10 per cent. The expected return in the company's portfolio exceeds this level.
The company is well capitalised, with sufficient capital to enable an expansion by about 260 MW of green wind power.
Arise Windpower's target is to have about 300 onshore wind turbines in the 1.8 – 3.0 MW category in operation or under construction by year-end 2014, which represents an investment of about SEK 10 billion. To achieve this target, the company has since its founding in 2006 concluded about 350 leases for land in southern Sweden and established an extensive project portfolio consisting of about 60 projects.
To ensure future deliveries of the necessary inputs, Arise Windpower has concluded framework agreements with GE Energy and Vestas. The agreements provide for the delivery of 132 turbines during the period 2010– 2012. Long-term delivery agreements have also been signed for delivery of concrete and road-building materials in southern Sweden (5-year) and for electrical equipment and the
| 2010 | 2009 | 2008 | |
|---|---|---|---|
| Summary of income statement | |||
| Net sales | 66.7 | 27.0 | — |
| Operating result before depreciation (EBITDA) | 35.1 | 1.7 | – 15.4 |
| Operating result (EBIT) | – 1.6 | – 10.8 | – 16.0 |
| Net financial income/expense | – 22.4 | – 0.6 | 9.5 |
| Profit/loss for the year | – 18.3 | – 7.6 | – 3.3 |
| Summary of balance sheet | |||
| Total non-current assets | 1 734.4 | 918.3 | 354.8 |
| Cash and cash equivalents | 249.6 | 341.3 | 408.9 |
| Shareholders' equity | 1 194.8 | 680.3 | 373.6 |
| Total assets | 2 074.5 | 1 348.1 | 824.3 |
| Net interest-bearing liabilities | – 556.3 | – 258.7 | 118.9 |
| Summary of cash flow statement | |||
| Cash flow from operating activities | 32.1 | – 119.9 | 71.1 |
| Cash flow from investing activities | – 811.8 | – 567.6 | – 334.3 |
| Cash flow from financing activities | 688.0 | 619.9 | 627.3 |
| Key ratios | |||
| Installed capacity at end of period, MW | 46.5 | 34.0 | — |
| Electricity production during period, GWh | 88.5 | 36.0 | — |
| Earnings per share before dilution, SEK | – 0.72 | – 0.44 | – 0.21 |
| Earnings per share, after dilution, SEK | – 0.72 | – 0.44 | – 0.21 |
| EBITDA margin, % | 52.6% | 6.4% | neg. |
| Return on capital employed, % | 2.8% | 0.3% | neg. |
| Return on equity, % | neg. | neg. | neg. |
| Equity/assets ratio, % | 57.6% | 50.5% | 45.3% |
| No. of employees at end of period | 27 | 21 | 15 |
For definitions of key ratios, see page 23
| 2011 | 2012 | 2013 | 2014 | 2015 |
|---|---|---|---|---|
| 139 | 149 | 131 | 61 | 44 |
| 455 | 458 | 455 | 458 | 470 |
| 149 | 162 | 222 | 169 | 0 |
| 332 | 326 | 327 | 298 | 0 |
connection of new wind farms to the nation al grid. Arise Windpower has thus secured a large portion of its future inputs.
In addition to wind farms, the Group is working on establishing the transmission networks required to connect the company's wind farms to the national grid. The use of in-house resources and talent cuts lead times and reduces the cost of connecting wind farms to the grid.
To avoid delays in connection with the raising of wind turbines, the company has since summer 2010 had its own mobile crane, which is specially adapted for wind turbine construction. Access to suitable cranes in the market is limited today. By working continu ally on reducing bottlenecks, the company shortens lead times to cash flows from its wind turbines.
Another benefit is that the turbines can be built in high points in the terrain thanks to the crane's exceptional lifting capacity (147 metres/100 tonnes). Raising a wind turbine to a higher level exposes it to stronger winds, which increases the output. Simply put, an extra five metres in height increases the pre sent value of revenues by about SEK 0.5 mil lion per installed MW.
Arise Windpower's revenues come from the sale of electricity and electricity certificates. To manage the risk associated with fluctua tions in market prices, Arise Windpower's policy is to hedge up to 60 per cent of its future expected production in a falling hedg ing channel for up to five years.
The company's price hedges at 31 Decem ber are shown in the table on page 6.
An own mobile crane, which can lift 100 tonnes 147 metres, shortens lead times to cash flows from the wind turbines.
Arise Windpower is one of the leading companies in the fast growing Swedish wind power market. We handle all stages of the value chain in the construction of new wind farms, from project development to the sale of green electricity from our own onshore wind turbines. The company's approach is industrial, large-scale and results-oriented. This means that the business is built up methodically and through multiple parallel projects. The company has all the key resources required for rapid and effective project development. In view of the current trend towards a growing focus on green solutions in all areas of society, we have strong confidence in our business concept.
Arise Windpower has been building wind farms since 2006, evolving into a leading player in the Swedish wind power market. The company's historical development is shown in the illustration below.
Arise Windpower's vision is to be one of Sweden's leading providers of onshore wind power in terms of size as well as expertise, and thereby contribute to the global adjustment to a sustainable society. The Company intends to take an active part in the development and consolidation of a new, emerging wind power sector in Sweden.
By leasing land in wind locations deemed to be economically favourable, Arise Windpower is aiming to have about 300 wind turbines with capacities of 1.8 to 3.0 MW in operation or under construction by the end of 2014. This represents an investment of about SEK 10 billion, of which about 25–30 per cent is expected to be equity capital. With about 300 turbines in operation, the company will produce about 2 TWh of green electricity a year, which would be equivalent to about half of Sweden's total wind power output in 2010.
Arise Windpower's business concept is to sell electricity generated by company-owned onshore wind turbines. The company is an integrated wind power company with control over all aspects of the value chain; from prospecting and permit management to funding, construction and operation of turbines, and the sale of green electricity and long-term ownership.
Arise Windpower has the following strategies maximising shareholder value:
■ A qualitative and focused project portfolio ■ An industrial approach and large-scale expansion
■ Organisational and financial strength and a focus on profitability
The company's priority is to build large wind farms, generally with capacities exceeding 10 MW, and preferably located in southern Sweden.
Southern Sweden has exceptionally good wind conditions, a well developed transmission network, low costs for feeding electricity into the grid and lower transit costs for produced electricity, offering advantages compared with the northern part of the country. The road network and infrastructure are also well developed, resulting in lower investment costs for other infrastructure in connection with wind turbine construction.
The shorter transport distances for equipment and material minimise the environmental impact during construction. The recently adopted decision to divide Sweden into different price regions will also result in higher electricity prices in southern Sweden than in the country as a whole.
The southern part of Sweden is also more densely populated than the north. Because of this, wind farms in the south generally consist of a smaller number of turbines than those located further north.
To be able to build larger wind farms, the company thus needs to venture slightly further north in Sweden, which is what it has done. In Jädraås, a community slightly to the west of Gävle, Bergvik Skogar and OPP have applied for and received a permit to build up to 116 wind turbines.
Arise Windpower has concluded an agreement giving the company an option to acquire the project and intends, if it exercises the option, to build 66 three megawatt turbines with a total capacity of 198 MW in an initial phase.
Work on the wind farm is expected to begin in summer 2011 and Arise intends to retain ownership of at least half the farm. It is intended that the remaining part will be offered to external parties.
The investment appraisal to the right illustrates what Arise is doing on a dayto-day basis with a view to achieving its financial targets.
Many factors influence the profitability of a wind farm. Arise Windpower works actively and continuously to identify the optimal design for each wind farm in order to maximise output and strives to continuously lower its investment and operating expenses. The estimates therefore vary from one project to another and change over time in response to changing economic conditions and other external factors.
The key elements of Arise Windpower's target return are illustrated to the right along with a simplified estimate based on 1 MW. The company believes the estimate represents an average megawatt in the project portfolio, for which the parameters are in line with today's actual levels.
The decision to invest in a new wind farm centres on the adopted requirement of an expected return on invested capital of at least 10 per cent. The most significant parameters influencing the expected return are wind strength, expected production, investment cost, operating expense and revenue level. Production-related operating expenses comprise lease payments and costs for transit of electricity and balancing energy. Other operating expenses refer mainly to servicing and maintenance, insurance, property tax and administration. All these operating expenses have been taken into account in the illustrative sample calculation below.
The estimates are based on the assumption that a wind turbine has a useful life of 20 years. However, foundations, electrical installations and roads have significantly longer useful lives, and in cases where this is possible a new wind turbine could be installed after 20 years at a lower total investment cost. This has not been taken into account in the estimate shown above. Electricity certificates are received for the first 15 years, after which
| MSEK | Key performance ind. | |
|---|---|---|
| Investment | 15.0 | 15 MSEK/MW |
| 5 SEK/kWh | ||
| Revenues 2.3 |
750 SEK/MWh | |
| 3,000 MWh/MW | ||
| Operating expenses | – 0.4 | – 130 SEK/MWh |
| EBITDA | 1.9 | 620 SEK/MWh |
| Interest expense | – 0.6 | 6% |
revenue levels are expected to fall in the last five years. In the sample calculation above it is assumed that the wind turbines will be funded using 30 per cent equity and 70 loan capital.
Arise Windpower considers that the wind farms in the company's project portfolio as a whole are located in economically favourable locations offering the potential for good returns in view of current investment costs, operating expenses and revenues.
The company succeeded in cutting the investment cost per installed MW in 2010, bringing it in line with or just below the communicated target (SEK 15m/MW). The reduction was achieved chiefly through economies of scale, which have led to lower input prices and reduced contract costs, but was also due to the strengthening of the Swedish krona against the euro. In the absence of any dramatic change in the SEK–EUR exchange rate, the cost per installed MW is expected to remain stable or decline further in 2011.
The cost of servicing and maintenance has also been reduced and is expected to be towards the lower end of the communicated target range (SEK 120–160/MWh). This is mainly due to low transit costs for generated electricity and because the company has employed a number of in-house servicing staff, which has cut the cost compared with externally purchased servicing. The total operating cost, including costs for insurance, lease payments, administration, servicing and maintenance, is expected to be in line with the communicated target and remain around SEK 130/MWh or less.
Wind power suppliers are now generally offering turbines with larger blade diameters and taller towers, which increases the output in relation to the installed capacity. A grow ing acceptance of taller wind turbines among local authorites is another positive factor.
As towers increase in height so does the average wind speed and thus also the amount of electricity generated. The company has, for instance, received a permit to build a wind turbine in Mönsterås with a maximum total height of 198 metres, versus a maximum total height of 150 metres in the company's current projects.
An example of how production efficiency has increased is shown in the example below. The example is based on an average wind speed of 6.7 metres per second (15 mph) at hub height and a 12 per cent loss of output due to the wind park effect.
As shown below, production increases significantly for a V 100 compared with a V 90 machine despite the simultaneous 10 per cent output loss. This is due to the con siderably larger swept area of a V 100 (100 m rotor diameter) compared with a V 90 (90 m rotor diameter).
The trend is towards larger rotor diame ters and taller towers, two factors which in dependently of each other increase electri city production thanks to the larger swept area and higher wind strengths.
| Make – type | MWh/ year |
Full load hours |
|---|---|---|
| V 90 – 2.0 MW | 5 284 | 2,642 h |
| V 100 – 1.8 MW | 5 986 | 3,326 h |
| Increased efficiency | 13 % | 26 % |
The average wind speed increases in hight and thus also the amount of generated electricity.
Arise Windpower's projects are categ0 rised based on the following criteria.:
Wind power projects where the wind farm has been taken into production after completion of test runs and is generating electricity. In the first three months the turbines are calibrated and serviced thoroughly for the first time. During this period the output has not yet been optimised. Full and normal production can be expected only after three months, following approval of test runs and handover.
Refers to projects where the requisite permits have been obtained, an investment decision has been made by the company's Board of Directors, equity and loan funding is available and procurements have been made representing the majority of the project's total investment cost.
Projects that have received the permits required to start construction but where construction has not yet begun. In some cases Arise Windpower will wait until sufficient wind data is available.
The first stage in a permit application is a process of consultation where the company applies for permits to build the wind farm from the relevant regional and local authorities. If the transmission network is to be built by Arise Elnät the company will also apply for a concession to operate the network from the Swedish Energy Markets Inspectorate. This stage is concluded when all requisite permits have been obtained or if a permit application has been rejected.
After signing land lease agreements Arise Windpower begins project planning work on the site's precise wind power characteristics. The area is carefully analysed and the exact coordinates of the planned turbines are determined.The initial wind studies are based on theoretical maps but at a later stage actual wind measurements are made using the company's wind measuring equipment.
Land lease agreements have been signed after negotiations between landowners and Arise Windpower. Long-term land leases have been concluded for the entire project portfolio, giving the company the right, but not an obligation, to build wind turbines on the leased properties. For most of the projects, project planning has been initiated but has not yet been completed. The feasibility studies performed by the company before a lease is signed result in a preliminary specification of the siting of the new wind turbines.
| Number of pro jects |
Number of wind turbines |
Total output (MW) |
Average output per turbine (MW) |
|
|---|---|---|---|---|
| In operation | 3 | 22 | 47 | 2.1 |
| Under construction | 5 | 36 | 78 | 2.2 |
| Project portfolio | ||||
| Permits received | 5 | 14 | 37 | 2.7 |
| Permits pending | 24 | 161 | 379 | 2.4 |
| Proj. planning compl. | 22 | 186 | 430 | 2.3 |
| Lease signed | 3 | 25 | 58 | 2.3 |
| Total portfolio | 62 | 444 | 1,029 | 2.3 |
About 15 per cent (approx. 150 MW) of the above project portfolio is affected by the restrictions, which relate to the JAS 39 Gripen fighter aircraft, announced by the Swedish Armed Forces. However, the introduction of such restrictions do not affect the company's expansion plans, as the remaining projects are available for the planned expansion and the lease portfolio is continually replenished. Wind farms in operation or under construction are not affected. The total number of MW in the portfolio may increase and decrease over time, which is natural as the date for the start of the construction phase approaches and as poor wind locations are winnowed out along with locations where there are conflicting interests and obstacles. New leases are therefore continually added to the project portfolio. It should be noted that the right to acquire the Jädraås project (200 MW) is not included in the above project summary
| Farms in operation and under construction | ||||||
|---|---|---|---|---|---|---|
| Number | Wind turbines | Type Output | Total output (MW) |
Anticipated production (GWh) |
Commissio ning/antici pated comm. |
|
| In operation | ||||||
| Oxhult | 12 | Vestas V90 | 2.0 | 24.0 | 62 | Mar-09 |
| Råbelöv | 5 | Vestas V90 | 2.0 | 10.0 | 28 | Dec-09 |
| Brunsmo | 5 | GE 2,5 | 2.5 | 12.5 | 34 | Mar-10 |
| Under construction | ||||||
| Fröslida | 9 | GE 2,5 | 2.5 | 22.5 | 56 | Dec-10 |
| Idhult | 8 | Vestas V90 | 2.0 | 16.0 | 35 | Feb-11 |
| Kåphult | 7 | GE 2,5 | 2.5 | 17.5 | 47 | Feb-11 |
Södra Kärra 6 Vestas V100 1.8 10.8 30 May-11 Blekhem 6 Vestas V100 1.8 10.8 30 Jun -11
Total 58 124.1 322
The Board of Directors and Chief Executive Officer of Arise Windpower AB (publ), organisation number 556274-6726, hereby present their annual report and consolidated financial statements for the financial year ended 31 December 2010.
Arise Windpower AB is the parent company of the Arise Windpower Group, which consists of the wholly owned subsidiaries Arise Wind Farm 1–8, which own and operate the wind farms, Arise Elnät AB, Arise Service AB (name changed in 2011) and Arise Kran AB.
The parent company performs project planning for suitable wind locations, obtains permits, assists on procurement of funding, key components, infrastructure work and construction contracts, and administers and manages the sale of electricity on behalf of the Group companies.
The subsidiary company Arise Wind Farm 1 AB manages the electricity-generating wind farms Oxhult outside Laholm (12 turbines) and Råbelöv outside Kristianstad (5 turbines). In spring a five-turbine wind farm in Brunsmo outside Karlskrona was taken into operation and towards the end of the year work began on erecting seven turbines at the Kåphult farm, which is adjacent to the Oxhult farm. Commissioning, performance testing and test runs of the Kåphult farm took place in February/March and handover of the farm from the supplier is expected to take place during April 2011.
The subsidiary company Arise Wind Farm 3 AB manages the nineturbine Fröslida wind farm outside Hylte. The farm went into operation just before year-end and was handed over in late March 2011.
The subsidiary company Arise Wind Farm 4 AB manages the eightturbine Idhult wind farm outside Mönsterås. The farm has gone into operation and was handed over in late March 2011.
The operations of Arise Elnät AB were changed somewhat through the sale of the power grid station in Knäred to EON Elnät AB in the second quarter of 2010. The company has since focused on providing electrical consulting services with responsibility for electrical construction contracts relating to the Group's wind farm construction projects. Arise Elnät AB also handles applications for concessions to build the transmission networks used to transmit the electricity generated by the Group's wind farms to upstream networks.
Arise Service AB (formerly Arise Service & Projektering AB) previously owned the Group's measurement equipment and performed wind measurements. Towards the end of 2010 these activities were taken over by the parent company. Instead, the company has now begun on establishing a servicing operation, which will eventually assume responsibility for and service the Group's wind turbines.
The subsidiary company Arise Kran AB was activated in summer 2010 in connection with the delivery of the company's Liebherr 1750 mobile crane. Having an in-house crane improves control and offers logistical benefits for the Group's planned construction of new wind farms. Arise Kran AB handled the raising of the turbines at the company's Idhult and Kåphult wind farms in the latter part of 2010.
All operations in the Group are conducted in Sweden.
The company has completed its initial public offering and has been listed on the Mid Cap list of the NASDAQ OMX Stockholm exchange since 24 March 2010. In connection with the IPO in the spring the company completed two share offerings, raising SEK 554 million before issue costs.
In 2010 Arise Windpower began work on the construction of wind turbines with a total capacity of 77.6 MW, which means that the company now has 58 turbines with a total capacity of 124.1 MW in operation or under construction. The expansion has proceeded according to plan, despite a continued slow permit process, which is due partly to local authorities' right to veto wind projects and the restrictions relating to air traffic, radar installations and the JAS fighter aircraft announced by the Swedish Armed Forces. The company has been able to continue the expansion by acquiring farms with existing permits.
In 2010 loan agreements were concluded with Swedbank, DnB NOR and Nordea.
Net sales were SEK 66.7 million (27.0), an increase of 147 per cent. Work performed by the company for its own use and capitalised was SEK 18.6 million (13.3) while other operating income was SEK 22.1 million (3.2). This meant that total consolidated income was SEK 107.4 million (43.5), an increase of 147 per cent.
Net sales were attributable to production of electricity at the Group's wind farms and comprise income from sold electricity as well as sold and earned electricity certificates for actual produced electricity. Wind-wise, the year was weaker than normal, with an electricity production of about 84 per cent of a normal wind year. As the company is still in a build-up phase, production at recently built wind farms has been adversely affected by additional optimisation measures and analyses, which reduced availability. The company is working closely with wind power suppliers Vestas and GE Energy to optimise the performance of their respective wind turbines, and this work is expected to result in performance improvements at the company's existing and future wind farms.
The company's price hedges are based on planned production and are arranged in good time before actual delivery is due. Depending on the rate of expansion and wind conditions during the delivery period, actual production may differ from planned production. To meet its delivery undertakings, the company purchases the difference from the market, which is then delivered to the buyer of electricity or electricity certificates. If this results in a gain the transaction is recognised in other operating income (SEK 7.2 million in 2010 and SEK 2.6 million in 2009) or in other operating expenses in case of a loss (SEK 2.0 million in 2010 and SEK 0 million in 2009). Other operating income refers primarily to income from the crane business in the amount of SEK 9.3 million (–) and gains on the sale of non-current assets of SEK 4.7 million (–).
The operating result before depreciation and amortisation (EBIT-DA) was SEK 35.1 million (1.7). Staff costs were SEK –31.0 million (– 23.4) and other external expenses were SEK – 41.3 million (–18.4). The increase is attributable primarily to the expansion of the business, which has resulted in a larger number of projects and an increase in the number of employees, and to the fact that expenses for the crane business are included in other external expenses.
The operating result (EBIT) was SEK – 1.6 million (–10.8), which includes scheduled depreciation of SEK –36.7 million (– 12.5). The net financial expense was SEK –22.4 million (– 0.6) and the loss before tax SEK –24.0 million (–11.4). The loss after tax was SEK – 18.3 million (–7.6), which corresponds to earnings per share of SEK –0.72 (–0.44).
The company posts a total loss of SEK – 18.9 million (–6.9) after cash flow hedges of electricity, interest rates and currencies reduced total earnings by SEK 0.6 million, compared with a net increase in total earnings of SEK 0.8 million in 2009.
Net investments in 2010 were SEK 900 million (568) after deductions for grants from the Swedish Energy Agency of SEK 16 million (31). The full invested amount is related to the construction of electrical power generation facilities, except for SEK 61 million (–), which has been invested in a mobile crane and related equipment.
Arise Windpower's cash flow from operating activities was SEK 32 million (– 120). Investments were SEK –900 million (–568) while sales of non-current assets totalled SEK 88 million (–), resulting in a cash flow after investing activities of SEK –780 million (– 688). Long-term and current interest-bearing liabilities increased by SEK 206 million (310). Share offerings raised a net SEK 525 million (310) for the Group while interest payments reduced cash flow by SEK –23 million. SEK 20 million (–) has been paid into frozen accounts, mainly under agreements on loan funding, resulting in a 12-month cash flow of SEK – 92 million (– 68).
Interest-bearing net liabilities were SEK 533 million, compared with SEK 259 million at the same date the year before. The equity/assets ratio at the end of the period was 57.6 per cent (50.5%).
Cash and cash equivalents were SEK 250 million (341), in addition to which the company had unused credits and grants at the end of the period in the amount of SEK 388 million (92).
As Arise Windpower only has Swedish subsidiaries, tax has been calculated at the Swedish rate of corporate tax, 26.3 per cent.
In 2010 Arise Windpower continued to engage in research activities through partnerships and by actively supporting a professorship at Halmstad University focused on onshore wind analysis.
In addition to these activities, the Group is conducting an internal development project together with Vestas and GE Energy aimed at increasing knowledge of wind behaviour in different environments. Methods for improving the accuracy of noise analysis and improved foundation design have also been developed.
The average number of employees in the Group in 2010 was 24 (18). The total number of employees at year-end was 27 (21). Additional information concerning employee numbers as well as salaries, compensation and terms of employment is provided in Note 4 to the consolidated financial statements.
In 2010 the parent company continued to build up the business, performed most of the project planning for suitable wind locations, concluded leases, produced impact assessments and detailed development plans, obtained building permits, procured products and services, handled the Group's power and certificate trading activities, and performed central administrative services.
The parent company handles the Group's production plans and electricity hedges in accordance with the adopted financial policy. The electricity-producing subsidiaries (the Arise Wind Farm companies) sell all generated electricity to the parent company at contracted prices. The parent company then sells the electricity to customers based on bilateral agreements or in the spot market, and the net result of the trades is recognised in net sales.
The gross result in the parent company, which also comprises expenses billed within the Group, including work performed by the company for its own use and capitalised, was SEK 24 million (27) in 2010. The net result after tax was SEK – 5 million (5). The parent company has paid advances for some investments on behalf of subsidiaries. Net investments during the year were SEK 213 million (30). Subsidiaries were capitalised in the amount of SEK 248 million (33).
The average number of employees in 2010 was 16 (13) and at yearend the parent company had 20 (15) employees. For information on employee numbers, salaries, compensation and terms of employment, see Note 4 to the consolidated financial statements on pages 28 –29.
The Group's principal business is to generate and transport green electricity without releasing carbon dioxide, dust or other emissions into the air, water or ground. The operations comprise construction and civil engineering works in connection with the erection of wind turbines and associated electrical installations, which comply with applicable regulations governing such activities.
The Group's handling of oils, chemicals and fuels is limited to oils for lubrication of the moving parts of wind turbines, such handling as is required for the land improvement and civil engineering works performed by external contractors, and fuel for vehicles used by sup pliers and the Group. The operation of wind farm installations has a direct impact on the environment in the form of noise, shadows and visual impressions.
Through its ownership and operation of wind turbines and electrical installations the Group conducts operations that are subject to per mit and notification requirements under the Swedish Environmental Code.
The Group holds all permits that are required to conduct its cur rent operations.
Arise Windpower divides risks into external risks (political factors, economic fluctuations, climatic conditions and competitors), finan cial risks (energy prices, certificate prices, currencies, interest rates, financing, capital, liquidity and credit) and operational risks (opera tions, operating expenses, contracts, disputes, insurance and other risk management).
Arise Windpower's assessment is that demand for wind-generated electricity will remain strong for the foreseeable future. The political goal initiated by the Swedish Energy Agency is to ensure that no less than 30 TWh, rather than the current 2 TWh, of Sweden's electricity consumption comes from renewable energy by 2020, which means that new wind farms will need to be built on a large scale.
Sensitivity to economic conditions is linked primarily to access to equity and loan capital, which means that a downturn in financial markets could make it more difficult to raise capital.
Arise Windpower's revenues are dependent on the amount of elec tricity generated by its installed wind farms, which in turn depends on wind speeds in the locations concerned during the period and the availability of the wind turbines. Wind strengths vary from season to season over the course of the year but also from one year to another. By building a portfolio of projects in different geographic locations and by performing extensive wind measurements prior to investment decisions, the risk of variations in output is reduced. However, un favourable weather conditions and climate change can have a nega tive impact on electricity production, which in turn would affect the Company's earnings.
As regards competition, Arise Windpower is one of only a few play ers in the market that are able to offer landowners an integrated con cept comprising construction of wind farms, grid connection, largescale procurement of turbines and access to a wheeled crane with the capacity to lift all currently available turbines up to 3 MW in size. An industrial approach combined with in-house control of construction projects are two key elements of the Group's future competitiveness.
Energy price risk arises from fluctuations in the price of electricity, as quoted on the Nord Pool exchange. The Group manages this risk by hedging a portion of its planned production. Electricity certificate price risks are managed in a similar way.
Currency risk in the Group arises chiefly in connection with the procurement of turbines and the sale of electricity on Nord Pool, both of which are normally priced in euros. Flow-wise, this risk will eventually even itself out to some extent but in the meantime the Group seeks to offset the risk by hedging transactions in foreign currency. Interest risk has been managed by fixing interest rates on most of the loans raised by the Group through swap or cap agreements.
Liquidity risk refers to the risk that Arise Windpower will be unable to meet its liabilities due to inadequate liquidity or difficulties in raising new loans. Arise Windpower will maintain financial preparedness in the form of a liquidity reserve consisting of cash and cash equivalents and unused committed lines of credit in the amount of at least SEK 50 million.
Fore more information, see Note 11 to the consolidated financial statements on pages 32 – 35.
The risk of significant consequences from a total suspension of all of the company's wind turbines as a result of simultaneous technical failures is deemed to be low. This is partly because the wind farms are spread across a wide geographic area but also because the company has installed turbines from different makers, currently Vestas and GE. This risk will diminish as the company continues to build new production capacity in additional locations. Work is underway on building a complete maintenance system for all of the company's wind turbines covering factors such as qualified vibration measurements in all key components of each turbine, complete component registers and systems for logging errors and measures taken in respect of the turbines. This system makes the company less dependent on the wind turbine supplier and will improve availability over time. Arise Windpower deems that there are currently no disputes which could have a significant adverse impact on the Group's financial position. The Group's insurance programme comprises business interruption insurance, liability insurance, product liability, pure economic loss and limited cover for environmental damage.
Arise Windpower deems that the Group's the operational risks are reduced by the size of the Group and the composition of senior management, which includes executives with a deep insight into as well as regular and close contact with the company's operating activities.
Information on corporate governance and the work of the Board in 2010 is provided in the corporate governance report on pages 47–50.
At 31 December 2010, 31,561,070 shares were outstanding, including 925,500 treasury shares. Each shareholder is entitled to vote the full number of shares owned or represented by him or her. All shares carry equal rights to a dividend.
Under existing warrant schemes, holders of warrants were at 31 December 2010 entitled to subscribe for the equivalent of 1,315,000 shares, which upon full exercise would result in a dilution of 4.1 per cent. However, one of the warrant schemes contains terms and conditions which are expected lead to the subscription of no more than 922,500 shares (Note 15), which would represent a dilution of 2.9 per cent.
No restrictions on the transferability of shares in the Company are provided for in the Articles of Association or applicable laws. The company is not aware of any other agreements between shareholders that impose restrictions on the transferability of shares.
Information about the company's shareholders is found on page 51.
The Group has no material agreements which would be terminable in consequence of a change in ownership. No agreements exist between the company and Directors or employees that provide for compensation if these give notice of termination, are dismissed without reasonable cause or if their employment or contract ceases as a result of a public takeover bid.
Arise Windpower attaches great importance to ensuring that its operations comply with applicable laws and high standards of business ethics. The company's code of conduct emphasises the principles governing the Group's relationship to its employees, business partners and other stakeholders. The code of conduct applies to employees as well as Directors. The Group's suppliers, resellers, consultants and other business partners are also expected to respect and apply the code of conduct.
The code of conduct establishes that bribes must never be used, that the company should be restrictive in terms of offering gifts and that all business transactions must be clearly accounted for in the company's accounts, which must be prepared in accordance with generally accepted accounting principles and give a true, relevant and comprehensible picture.
Arise Windpower takes a neutral position on political issues. Neither the name of the Group nor its assets may be used to promote political parties or the interests of individual candidates.
The code of conduct also covers the company's efforts to promote a sustainable society, stating that the Group's products and processes should be designed in a way which makes efficient use of energy and raw materials while minimising waste and residues over the life a product.
Arise Windpower recruits and treats its employees in a way that is not discriminatory in respect of sex, race, religion, age, disability, sexual preference, nationality, political belief, origin, etc. The Group encourages diversity at all levels. Child labour is not tolerated, nor is work performed under compulsion or threat. Freedom of association and the right of collective bargaining and agreements must be respected.
Senior executives should be offered a fixed salary that is consistent with market rates and based on the individual's responsibility and conduct. Bonuses should be based on targets that are attributable to
and relevant for the business. In 2010 senior executives were eligible to receive a bonus capped at six months' salary, with the exception of one person, who was entitled to a bonus of up to 12 months' salary. The latter is due to an agreement concluded at the time of the founding of the company, when the employee concerned worked on a commission basis with no fixed salary. No bonuses were paid to the founders, Peter Nygren and Leif Jansson, in 2010, as these two persons have chosen not to receive a bonus. A set of amended guidelines have been proposed for 2011, under which bonuses would be capped at four months' salary and a warrants programme introduced. A more detailed description of the guidelines is available on the company's website, www.arisewindpower.se, under "Corporate governance".
The company has raised SEK 9.9 million in equity capital after members of the company's Board of Directors and other holders of warrants exercised some of their warrants early in the new year.
The Group is well equipped to continue to expand its portfolio of wind farms, and the challenge is still to maintain a sufficiently high pace of expansion. The goal is to have 260 MW in operation or under construction by the end of 2011, which means that a further 136 MW will need to be built in 2011. The Group's continued expansion, with the goal of having about 300 wind turbines in operation or under construction by the end of 2014 will require additional equity and external loan capital.
| SEK millions | Note | 2010 | 2009 |
|---|---|---|---|
| Net sales | 66.7 | 27.0 | |
| Work performed by the company for its own use and capitalised | 18.6 | 13.3 | |
| Other operating income | 22.1 | 3.2 | |
| Total income | 2 | 107.4 | 43.5 |
| Staff costs | 4 | – 31.0 | – 23.4 |
| Other external expenses | 5 | – 41.3 | – 18.4 |
| Operating result before depreciation (EBITDA) | 35.1 | 1.7 | |
| Depreciation of property, plant and equipment | 9 | – 36.7 | – 12.5 |
| Operating result (EBIT) | – 1.6 | – 10.8 | |
| Financial income | 6 | 2.1 | 7.4 |
| Financial expense | 6 | – 24.5 | – 8.0 |
| Profit/loss before tax | – 24.0 | – 11.4 | |
| Income tax | 7 | 5.7 | 3.8 |
| Profit/loss for the year | – 18.3 | – 7.6 | |
| Earnings per share (SEK) | |||
| Before dilution | – 0.72 | – 0.44 | |
| After dilution | – 0.72 | – 0.44 | |
| No. of shares at beginning of year | 20,488,570 | 14,516,385 | |
| No. of shares at end of year | 30,635,570 | 20,488,570 | |
Earnings per share before dilution are calculated by dividing the profit for the year by the number of shares. The average number of outstanding shares used in calculating earnings per share before dilution was 25,562,070 (2009: 17,502,478 shares). The company has issued warrants that could result in dilution but no dilution is reported as the company's earnings are negative.
Treasury shares have not been included in calculating earnings per share.
| SEK millions | 2010 | 2009 |
|---|---|---|
| Profit/loss for the year | – 18.3 | – 7.6 |
| Other comprehensive income | ||
| Cash flow hedges | – 0.8 | 1.0 |
| Income tax attributable to components of other comprehensive income | 0.2 | – 0.3 |
| Other comprehensive income for the year, net after tax | – 0.6 | 0.7 |
| Total comprehensive income for the year | – 18.9 | – 6.9 |
The comprehensive income is 100 per cent attributable to the shareholders of the parent company.
| SEK millions | Note | 2010 | 2009 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 9 | 1,677.9 | 898.1 |
| Deferred tax assets | 7 | 33.7 | 20.2 |
| Other financial assets | 12 | 22.9 | 0.0 |
| Total non-current assets | 1,734.4 | 918.3 | |
| Current assets | |||
| Inventories | 10 | 16.6 | 1.0 |
| Trade receivables | 2.9 | 7.0 | |
| Other current receivables | 11,13 | 17.5 | 47.1 |
| Prepaid expenses and accrued income | 14 | 53.4 | 33.4 |
| Cash and cash equivalents | 249.6 | 341.3 | |
| Total current assets | 340.1 | 429.9 | |
| TOTAL ASSETS | 2,074.5 | 1,348.1 | |
| EQUITY | |||
| Share capital | 15 | 2.5 | 1.7 |
| Other contributed capital | 1,238.1 | 705.5 | |
| Hedging reserve | – 10.6 | – 10.0 | |
| Accumulated deficit | – 35.3 | – 16.9 | |
| Total equity | 1,194.8 | 680.3 | |
| LIABILITIES | |||
| Long-term liabilities | |||
| Long-term interest-bearing liabilities | 16 | 758.9 | 586.9 |
| Provisions | 17 | 6.6 | 3.4 |
| Total long-term liabilities | 765.5 | 590.3 | |
| Current liabilities | |||
| Current interest-bearing liabilities | 16 | 47.0 | 13.1 |
| Trade payables | 25.6 | 18.5 | |
| Other liabilities | 11 | 22.5 | 38.8 |
| Accrued expenses and deferred income | 18 | 19.1 | 7.1 |
| Total current liabilities | 114.2 | 77.6 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 2,074.5 | 1,348.1 | |
| Pledged assets | 19 | 1,808.7 | 905.3 |
| Contingent liabilities | 19 | 58.1 | — |
| SEK millions | Note | 2010 | 2009 |
|---|---|---|---|
| Operating activities | |||
| Operating result (EBIT) | – 1.6 | – 10.8 | |
| Adjustment for non-cash items | 8 | 29.9 | 12.5 |
| Tax paid | – 0.3 | – 0.2 | |
| Cash flow from operating activities before changes in working capital | 28.0 | 1.5 | |
| Cash flow from changes in working capital | |||
| Increase in inventories | – 15.6 | – 1.0 | |
| Increase (–)/Decrease (+) in operating assets | 2.5 | – 4.4 | |
| Increase (+) /Decrease (–) in operating liabilities | 17.3 | – 116.1 | |
| Cash flow from operating activities | 32.1 | – 119.9 | |
| Investing activities | |||
| Acquisition of property, plant and equipment | – 899.6 | – 583.0 | |
| Government grants | — | 15.4 | |
| Sale of property, plant and equipment | 87.8 | — | |
| Cash flow from investing activities | – 811.8 | – 567.6 | |
| Financing activities | |||
| Increase in interest-bearing liabilities | 205.9 | 310.0 | |
| Deposits into frozen accounts | – 20.4 | — | |
| Interest paid | – 25.0 | – 8.9 | |
| Interest received | 2.1 | 8.7 | |
| Issue of new shares | 525.4 | 310.1 | |
| Cash flow from financing activities | 688.0 | 619.9 | |
| Cash flow for the year | – 91.7 | – 67.6 | |
| Cash and cash equivalents at beginning of year | 341.3 | 408.9 | |
| Cash and cash equivalents at end of year | 249.6 | 341.3 | |
| Interest-bearing liabilities at end of year | – 805.9 | – 600.0 | |
| Other financial assets at end of period | 22.9 | — | |
| Net liability / Net interest-bearing assets | – 533.4 | – 258.7 | |
| SEK millions | Share capital |
Other con tributed capital |
Hedging reserve |
Accumulat ed deficit |
Total equity |
|---|---|---|---|---|---|
| Opening balance at 1 Jan 2009 | 1.2 | 392.5 | – 10.8 | – 9.3 | 373.6 |
| Profit/loss for the year | — | — | — | – 7.6 | – 7.6 |
| Cash flow hedges, unrealised changes in value | |||||
| – Fair value, change for year | — | — | 1.0 | — | 1.0 |
| – Fair value, change for year | — | — | – 0.3 | — | – 0.3 |
| Issue of new shares | 0.5 | 328.0 | — | — | 328.5 |
| Cost of issue of new shares | — | – 18.3 | — | — | – 18.3 |
| Tax relating to cost of issue of new shares | — | 4.8 | — | — | 4.8 |
| Adjustment in value of issued warrants | — | – 1.4 | — | — | – 1.4 |
| Equity at 31 Dec 2009 | 1.7 | 705.5 | – 10.0 | – 16.9 | 680.3 |
| Profit/loss for the year | — | — | — | – 18.3 | – 18.3 |
| Cash flow hedges, unrealised changes in value | |||||
| – Fair value, change for year | — | — | – 0.8 | — | – 0.8 |
| – Fair value, change for year | — | — | 0.2 | — | 0.2 |
| Issue of new shares | 0.8 | 553.5 | — | — | 554.3 |
| Cost of issue of new shares | — | – 28.9 | — | — | – 28.9 |
| Tax relating to cost of issue of new shares | — | 7.6 | — | — | 7.6 |
| Adjustment in value of issued warrants | — | – 0.2 | — | — | – 0.2 |
| Other transactions | — | 0.6 | — | — | 0.6 |
| Equity at 31 Dec 2010 | 2.5 | 1,238.1 | – 10.6 | – 35.3 | 1,194.8 |
Return on capital employed EBITDA / average capital employed Return on equity Profit/loss for year / average equity Equity/assets ratio Shareholders' equity / total assets
EBITDA margin Operating result before depreciation (EBITDA) / net sales Earnings per share, before dilution Profit/loss for the year / average number of outstanding shares before dilution Earnings per share, after dilution Profit/loss for the year / average number of outstanding shares after dilution Net interest-bearing liabilities Interest-bearing liabilities – cash – other financial assets
Arise Windpower AB (publ), organisation number 556274-6726, is a limited company registered in Sweden. The company's registered office is in Halmstad. The company's and subsidiaries' principal operations are described in the Directors' report in this annual report. The consolidated financial statements for the financial year ended 31 December 2010 were approved by the Board of Directors on 1 April 2011 and will be presented to the Annual General Meeting for adoption on 27 April 2011.
Arise Windpower complies with and has prepared consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the interpretations of the International Financial Interpretations Committee (IFRIC), as approved by the European Commission for application in the EU. The Group also applies RFR 1 Supplementary Accounting Rules for Corporate Groups of the Swedish Financial Reporting Board, which specifies the additional disclosures required under the Swedish Annual Accounts Act.
The Group's reporting currency and the parent company's functional currency is Swedish kronor (SEK). Unless otherwise stated, all amounts are stated in millions of Swedish kronor. In the consolidated financial statements items have been recognised at cost, except for financial instruments, which have been stated at fair value. Accounting policies deemed material to the Group are described in the following.
Subsidiaries are those companies in which the Group directly or indirectly holds more than 50 per cent of the votes or in other ways exercises a controlling influence. Subsidiaries are included in the consolidated financial statements as of the time when the controlling influence is transferred to the Group and are excluded from the consolidated financial statements as of the time when the controlling influence ceases.
Subsidiaries are reported in accordance with the purchase method. Acquired identifiable assets, liabilities and contingent liabilities are carried at fair value at the date of acquisition. Any surplus, defined as the difference between cost and fair value of the acquired interests and the sum of fair value of acquired identifiable assets and liabilities, is recognised as goodwill. If the cost is less than the fair value of the net assets of the acquired subsidiary the difference is recognised directly in the income statement.
All internal transactions between Group companies and intercompany balances have been eliminated in the consolidated financial statements.
In the consolidated financial statements leases are classified as finance or operating leases. A finance lease is an agreement under which the economic benefits associated with the undertaking have in all material respects been transferred to the lessee. Other contracts are accounted for as operating leases and charged to expense on a straight-line basis over the term of the lease.
Each lease payment is divided into repayment of loan and financial expense. The corresponding liabilities, less financial expenses, are included in the balance sheet items Long-term interest-bearing liabilities and Current interest-bearing liabilities. The interest portion of the financial expense is recognised in the income statement and distributed over the term of the lease so that an amount corresponding to a fixed interest rate for the liability recognised in each accounting period is charged to the income statement in each period. Non-current assets held under a finance lease is written off over its useful life or the term of lease, whichever is shorter.
The Group concludes leases with landowners covering periods of 30 years or more for the erection of wind turbines. Leases relating to land are defined as operating leases. Lease payments made under an operating lease are recognised as income systematically over the term of the lease.
Transactions in foreign currency are accounted for in each unit based on the unit's functional currency by applying the transaction date exchange rate. Monetary assets and liabilities in foreign currency are translated at closing rates, and the resulting foreign exchange differences are included in profit/loss for the period. Foreign exchange differences on operating receivables and liabilities are recognised in operating profit or loss while foreign exchange differences on financial assets and liabilities are recognised in net financial expense/income.
Gains and losses on derivatives used for hedging are recognised in the income and expense items where the hedged transaction is accounted for.
Income is recognised in the income statement when material risks and benefits have been transferred to the buyer. Income is not recognised if it is likely that the economic benefits will not accrue to the Group. Income is carried at the actual value of what has been received or is expected to be received, less any discounts applied.
Net sales comprise sales of generated electricity, earned and sold electricity certificates and realised electricity and currency derivatives attributable to hedged production. Other operating income comprises income for sold but not yet generated electricity, income from crane rental, capital gains from the sale of non-current assets (Note 2), and other minor items.
Income relating to the sale of generated electricity is accounted for in the period in which delivery is made at the obtained spot, forward or other agreed price. Income relating to electricity certificates is recognised at the applicable spot, forward or other agreed price for the period in which the electricity certificates are earned, which is the period in which the electricity is produced.
Electricity certificates are accounted for as inventories in the balance sheet upon registration in the Energy Agency's account and as accrued income for as long as they have been earned but not yet registered.
Government grants are stated at fair value when it is reasonably certain that such grants will be received and that the Group will satisfy all conditions associated with the assistance.
Income from government grants are recognised in the income statement in the same period in which the expense for which the grant has been received is recognised. As regards government grants which have been received for investments in non-current assets, these are recognised in the balance sheet by reducing the amount of the investment.
Compensation to employees in the form of salaries, holiday pay, paid sick leave, etc as well as pensions is recognised as it is earned. As regards retirement benefit obligations, the Group only has defined contribution pension plans, which essentially comprise retirement pension, disability pension and family pension.
Premiums are paid over the course of the year by each company in the Group to separate legal entities, normally insurance companies. The size of the premium is based on the size of the salary. Other than pension payments, the Group has no obligation to pay any further contributions. Costs are charged to consolidated earnings as and when the benefits are earned, which is normally when the premiums are paid. For information on compensation to senior executives, see the Directors' report, page 19.
The tax expense or tax asset for the period comprises current tax and deferred tax. Current tax is based on the taxable profit for the year. Taxable profit for the year differs from reported profit for the year in that it has been adjusted for non-taxable and non-deductible items. Deferred tax is tax which is attributable to taxable or deductible temporary differences which incur or reduce tax in the future.
Deferred tax is calculated using the balance sheet liability method for all temporary differences between the carrying amounts and tax bases of assets and liabilities. The amounts are calculated based on how the temporary differences are expected to be offset and by applying the tax rates and rules that have been adopted or announced at the balance sheet date.
Deferred tax assets attributable to tax losses and deductible temporary differences are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences and tax losses can be offset.
Deferred tax is recognised as an income or expense in the income statement, except in those cases where it refers to transactions which have been recognised directly in equity, except in cases where it refers to transactions which have been recognised in other comprehensive income or in equity, in which case any tax effect is also recognised in other comprehensive income or equity.
Deferred tax assets and tax liabilities are offset against each another when they refer to income tax that is payable to the same tax authority and when the Group intends to settle the tax by paying the net amount.
Property, plant and equipment is recognised at cost less accumulated depreciation and any impairment losses. The cost includes expenditure which is directly attributable to the acquisition of the asset and transfers from equity of earnings from approved cash flow hedges relating to foreign currency purchases of property, plant and equipment. The cost of wind power and electrical facilities includes, unlike the cost of other investments, expenditure relating to optimisation and commissioning. Interest expenses during the period of construction and assembly are included in the cost. All expenditure on new investments in progress are recognised as assets.
In connection with the granting of permits for the erection of wind turbines the Group undertakes to restore land to its original condition at the end of the useful life. A provision for the estimated cost of restoration is made in the financial statements and included in the cost of the wind turbine.
Any additional expenditure is added to the carrying amount of the asset or recognised as a separate component only when it is probable that the future economic benefits associated with the asset will accrue to the Group and the cost can be reliably measured. All other forms of repairs and maintenance are recognised as expenses in the income statement in the periods in which they are incurred.
Land is assumed to have an indefinite useful life and is therefore not depreciated. Wind power facilities are written off on a straightline basis down to the estimated residual value over the asset's estimated useful life. The following useful lives are applied in calculating straight-line depreciation:
At each reporting date the assets' useful lives are reviewed and the Group's assets are tested for impairment. In case of impairment, the asset's recoverable amount is calculated.
The recoverable amount is the higher of the asset's value in use and net realisable value. Value in use is defined as the present value of all incoming and outgoing payments attributable to the asset during the period it is expected to be used in the business plus the present value of the net realisable value at the end of the asset's useful life. If the calculated recoverable amount is less than the carrying amount the asset is written down to its recoverable amount.
A previous impairment loss is reversed when a change has occurred in the assumptions used in determining the asset's recoverable value at the time of recognising the impairment loss and as a result of which the impairment loss is no longer deemed to exist. Reversals of previous impairment losses are assessed individually and recognised in the income statement.
Financial assets can be divided into the following categories: financial assets carried at fair value through the income statement, loans and trade receivables, investments held to maturity, and financial assets available for sale. The classification depends on the purpose for which the financial asset was acquired. The classification of financial assets is determined by management upon initial recognition. The only category held by the company is loans and trade receivables.
Loans and trade receivables are financial assets that are not derivatives, have specified or specifiable payments and are not listed on an active market. They are included in current assets, with the exception of items maturing later than 12 months from the balance sheet date, which are classified as non-current assets. The Group's loans and trade receivables comprise trade receivables and other receivables as well as cash and cash equivalents in the balance sheet.
After the acquisition date loans and trade receivables are stated at amortised cost by applying the effective interest method.
A financial asset or financial liability is recognised in the balance sheet when Arise Windpower becomes a party to the contractual terms and conditions of the instrument. A financial asset is removed from the balance sheet when the rights inherent in the agreement are realised or expire or if the company loses control over them. A financial liability is removed from the balance sheet when the obligation in the agreement is fulfilled or otherwise ceases to apply. Acquisitions and sales of financial assets are recognised at the transaction date, which is the date when the company undertakes to acquire or divest the asset, except in cases where the company acquires or divests listed securities, in which case settlement date accounting is used. At each reporting date Arise Windpower assesses if there are objective indications of impairment of a financial asset or group of financial assets.
Official market prices at the closing date are used in determining the fair value of long-term derivatives. In calculating the market value of other financial assets and financial liabilities, the valuation is based on generally accepted methods such as discounting of future cash flows to quoted market interest rates for the maturities concerned. Translations into Swedish kronor are made at the quoted exchange rates at the closing date.
Financial assets and liabilities are offset against each other and the net amount is recognised in the balance sheet when there is a legal right of set-off and there is an intention to settle the items by a net amount or to simultaneously realise the asset and settle the liability.
Cash and cash equivalents comprise cash and bank balances, which are stated at fair value.
All derivatives are stated at fair value in the balance sheet. Valuations of hedging instruments for electricity prices, currencies and interest rates are based on observable data. For derivatives for which hedge accounting is not applied and derivatives included in a fair value hedge, changes in value are recognised in the income statement. For cash flow hedges, changes in value are recognised in separate categories of equity pending recognition of the hedged item in the income statement. Any gains or losses on hedging instruments attributable to the effective portion of the hedge are accounted for in equity under the hedging reserve. Any gains or losses attributable to ineffective portions of a hedge are accounted for in the income statement, in the case of electricity and currencies, in profit/loss for the year, and in the case of interest rate derivatives, in net financial expense/income.
Liabilities to credit institutions and credit facilities are categorised as "Other financial liabilities" and valued at amortised cost, whereby any directly attributable expenses such as initial direct costs are allocated over the term of the loan by applying the effective interest method. Non-current liabilities have an expected maturity of more than one year while current liabilities have a maturity of less than one year.
Borrowing costs which are directly attributable to the acquisition, construction or production of an asset that takes a substantial period of time to get ready for its intended use are recognised as assets in the consolidated financial statements, as part of the cost of the asset (Note 9).
Inventories are valued at the lower of cost and net realisable value. Net realisable value is the value quoted on a specific exchange for electricity certificates or if another agreement has been concluded. The cost of inventories is calculated by applying the first in, first out method (FIFO).
Operating segments are reported in a way that is consistent with the company' internal reporting, which in the case of Arise Windpower means Wind power operations and Other wind power development.
In preparing financial statements in accordance with IFRS and generally accepted accounting principles, estimates and assumptions about the future are made which affect the balance sheet and income and expense items reported in the financial statements. These assessments are based on historical experience and on assumptions which management and that eBoard deem to be reasonable under present circumstances. In cases where it is not possible to determine the carrying amounts of assets and liabilities on the basis of information from other sources, valuations are based on such estimates and assumptions. If other assumptions are made or other conditions are present, actual figures may differ from these assessments. As these types of assessments are normally most significant in respect of the valuation of taxes, assessments concerning future taxation may have a material impact on Arise Windpower's earnings and financial position.
Deferred tax assets relating to tax losses in the amount of SEK 25.2 million (22.3) have been recognised in the consolidated financial statements (Note 7). The carrying amount of these tax assets has been assessed as at the closing date, and it has been deemed probable that the tax losses can be used to offset future taxable profits. The tax assets refer to Swedish tax losses, which can be carried forward indefinitely. The Group's operations, in the form of actual wind farms in operation, are expected to generate significant profits over the next few years. Arise Windpower therefore believe there are compelling reasons to expect that it will be possible to use the tax losses to which the tax assets are attributable to offset future taxable profits.
The useful life of a wind turbine has been deemed to be about 20 years, which is the figure on which the investment appraisal is based. In cases where the useful life proves to be less than 20 years this could have a negative impact on Arise Windpower's earnings and cash flow.
The company has concluded framework agreements for the purchase of wind turbines, which contain clauses providing for cancellation fees under certain circumstances. Based on actual purchase plans and forecasts, management does not expect that any fees will be payable (Notes 9 and 19).
In certain projects Arise Windpower is required to dismantle the turbines upon decommissioning. The cost of dismantling a wind turbine and restoring the land around the turbine has been estimated at SEK 6.6 million (3.4) for an installed turbine, for which a provision has been made in the accounts (Note 17) and included in the basis for depreciation.
(a) New and amended standards, and interpretations which will be applied for the first time in respect of financial years beginning on 1 January 2010 but are currently not relevant for the Group (but which may affect the accounting of future transactions and business events)1.
IFRIC 18 Transfer of Assets from Customers applies to transfers of assets which took place on or after 1 July 2009. This interpretation clarifies the requirement of the IFRS standard for the accounting of agreements under which a company receives from a customer an item of property, plant and equipment which the company must then use either to connect the customer to a network or to provide the customer with ongoing access to goods or services (e.g. electricity, gas or water) or to do both of these things. In certain cases a company may receive cash and cash equivalents from a customer with the requirement that the company use this amount exclusively for the purpose of constructing or acquiring an item of property, plant and equipment required to connect the customer to a network or to provide the customer with ongoing access to goods or services or to do both of these things.
IFRIC 9 AND IAS 39 (amendment) Embedded Derivatives (apply for financial years ending on 30 June 2009 or later). Under this amendment, a company is required to assess whether an embedded derivative is required to be separated from the host contract when the company reclassifies a hybrid financial asset from the fair value category through the income statement. The assessment is made on the basis of the circumstance existing at the date when the company first became a party to the contract and the date when there is a change in the terms of the contract which significantly modifies the cash flows that would otherwise be required under the contract, whichever is later. If the company is unable to make this assessment the hybrid contract should continue to be classified as carried at fair value through the income statement.
IFRS 2 (amendment) Group Cash-settled Share-based Payment Transactions applies for financial years beginning on 1 January 2010 or later. The amendment incorporates IFRIC 8 Scope of IFRS 2 and IFRIC 11 IFRS 2 - Group and Treasury Share Transactions into the standard. It also supplements the existing guidance contained in IFRIC 11 in respect of the classification of Group transactions, which is not addressed in the interpretation.
(b) New standards, amendments and interpretations of existing standards which have not yet entered into force and have not been applied in advance by the Group.
IFRS 9 Financial Instruments (published in November 2009). This standard constitutes the first step in the process of replacing IAS 39 Financial Instruments - Recognition and Measurement. IFRS 9 introduces two new requirements for the valuation and classification of financial instruments and will probably affect the accounting of financial assets in the consolidated financial statements. The provisions relating to financial liabilities have in all material respects been transferred from IAS 39, with the exception of the fair value alternative. The standard is not applicable until financial years beginning on 1 January 2013 but can be applied in advance. However, the standard has not yet been adopted by the EU.
The Group still needs to evaluate the full impact of IFRS 9 on the financial statements.
Net sales comprise sales of generated electricity, earned and sold electricity certificates and realised electricity and currency derivatives attributable to hedged production.
| 2010 | 2009 | |
|---|---|---|
| Electricity | 38.0 | 16.2 |
| Electricity certificates | 28.7 | 10.8 |
| Net sales | 66.7 | 27.0 |
Realised derivatives had a positive impact on net sales of SEK 6.6 million (7.3).
The Group's total power generation for the year was 88,5 GWh (36.0). The average income for electricity was SEK 429 (451) per MWh and for electricity certificates SEK 325 (299) per MWh, i.e. an average income of SEK 754 (751) per MWh.
Other operating income comprises the following items:
| Other operating income | 22.1 | 3.2 |
|---|---|---|
| Other items | 0.9 | 0.6 |
| Gain on sale of non-current assets | 4.7 | — |
| Income from crane rental | 9.3 | — |
| Other inc. relating to electricity and cert. | 7.2 | 2.6 |
| 2010 | 2009 | |
Work performed by the company for its own use refers to internal work on the Group's wind power projects that has been capitalised.
The Group's internal reporting system is based on the returns and profitability of the wind farms that have been built and put into operation, which means that Wind power operations is the primary basis of classification in segment reporting. All other operations in the Group are aimed at developing wind farms, and these have therefore been classified as Other wind power development. Internal prices charged between different segments of the Group are defined on the basis of the arm's length principle, i.e. between parties that are independent of each other, well informed and have an interest in ensuring that the transactions are completed. Income, earnings and assets for the segments include directly attributable items as well as items that can be allocated to the segments in a reasonable and reliable manner.
| Wind power op. | Other wind power dev. | Eliminations | Group | |||||
|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |
| Net sales, external | 66.7 | 27.0 | — | — | — | — | 66.7 | 27.0 |
| Net sales, internal | — | — | 17.6 | 19.5 | – 17.6 | – 19.5 | — | — |
| Work performed by the Company for its own use and capitalised |
— | — | 18.6 | 13.3 | — | — | 18.6 | 13.3 |
| Other income | 7.2 | 2.6 | 14.8 | 0.6 | — | — | 22.1 | 3.2 |
| Total income | 73.9 | 29.7 | 51.0 | 33.3 | – 17.6 | – 19.5 | 107.4 | 43.5 |
| Operational result | 56.4 | 21.9 | 50.0 | 32.8 | – 16.6 | – 17.7 | 89.9 | 36.9 |
| Op. result before depreciation (EBITDA) | 55.2 | 20.9 | – 9.1 | – 4.1 | – 10.9 | – 15.0 | 35.1 | 1.7 |
| Operating result (EBIT) | 22.3 | 8.7 | – 12.4 | – 6.8 | – 11.5 | – 12.7 | – 1.6 | – 10.8 |
| Assets | 1,657.9 | 411.4 | 416.6 | 936.7 | — | — | 2,074.5 | 1,348.1 |
All activities of the Group are conducted in Sweden. In the Wind power operations segment SEK 22.7 million (5.7) refers to sales to an individual customer. The eliminations comprise sales of leases for land exploitation, rent for measuring equipment, consulting services, which refer mainly to permit and project planning work, and billing of administration expenses.
| Average number of employees | 2010 | 2009 | ||||
|---|---|---|---|---|---|---|
| Women | Men | Total | Women | Men | Total | |
| Parent company | 5 | 13 | 18 | 3 | 10 | 13 |
| Subsidiaries | — | 6 | 6 | — | 5 | 5 |
| Total Group | 5 | 19 | 24 | 3 | 15 | 18 |
| Salaries and other compensation | ||||||
| Board of Directors and CEO |
Of which variable remuner. |
Other employees |
Board of Directors and CEO |
Of which variable remuner. |
Other employees |
|
| Parent company 1) 2) | 5.3 | — | 8.2 | 4.9 | 0.2 | 5.9 |
| Subsidiaries 3) | 2.1 | 0.2 | 3.0 | 2.0 | 0.3 | 2.5 |
| Total Group | 7.4 | 0.2 | 11.2 | 6.9 | 0.5 | 8.4 |
| Salaries and other compensation | ||||||
| Salaries and compens. |
Soc. sec. contrib. |
of which pens. cost |
Salaries and compens. |
Soc. sec. contrib. |
of which pens. cost |
|
| Parent company | 13.5 | 7.7 | 2.5 | 10.8 | 5.8 | 2.1 |
| Subsidiaries | 5.1 | 3.4 | 1.3 | 4.5 | 3.5 | 1.6 |
| Total Group | 18.6 | 11.1 | 3.8 | 15.3 | 9.3 | 3.7 |
1) Leif Jansson was both a senior executive and a Director during the year. His compensation is reported under Compensation to the Board of Directors.
2) In addition to salaries and compensation, consulting fees of SEK 1.8 (–) million have been paid to Ulf Corné.
3) In addition to salaries and compensation, consulting fees of SEK 0.3 million (0.3) have been paid to three Directors of subsidiary companies.
| Compensation to the Board of Directors, CEO and other senior executives |
Directors' fees |
Salaries | Variable com pensation |
Other benefits |
Pension cost |
|---|---|---|---|---|---|
| Pehr G Gyllenhammar, Chairman | 1.0 | — | — | — | — |
| Birger von Hall | 0.5 | — | — | — | — |
| Joachim Gahm | 0.5 | — | — | — | — |
| Ulf Corné 1) | 0.2 | — | — | — | — |
| Jon G Brandsar | — | — | — | — | — |
| Leif Jansson | — | 1.3 | — | 0.1 | 0.4 |
| Total compensation to Board | 2.2 | 1.3 | — | 0.1 | 0.4 |
| Peter Nygren, CEO | 1.7 | — | 0.1 | 0.5 | |
| Other senior executives (8 persons) | 0.5 | 0.3 | 1.7 | ||
| Total compensation to CEO and senior executives | — | 7.4 | 0.5 | 0.4 | 2.2 |
1) In addition to salaries and compensation, consulting fees of SEK 1.8 (–) million have been paid to Ulf Corné.
The Chairman of the Board and Directors are paid fees in accordance with resolutions of the general shareholders' meeting. Executive Directors have not received any compensation or benefits in addition to those associated with their employment. The compensation paid to the Chief Executive Officer and other senior executives consists of a basic salary, variable compensation, other benefits and pension. Senior executives refer to those nine persons (including Leif Jansson) who together with the CEO made up the senior management team in 2010.
All employees are covered by a collective compensation scheme which is tied directly to the quantitative targets that have been adopted in the Group. The targets for 2010 were achieved to a certain extent, and variable compensation of SEK 0.8 million (1.4) based on this compensation scheme was paid in the form of salaries and pensions. No other compensation or dilutive compensation is paid.
Other benefits refer principally to company car benefits.
The retirement age for the CEO and other senior executives is 65. The pension premium to the CEO is 35 per cent of the pensionable salary and is paid under a defined contribution pension plan. Other senior executives also have defined contribution plans, and for 2010 the average premium was 26 per cent (29%) of the basic salary. Variable compensation is not pensionable, either for the CEO or for senior executives. All pensions are secure, i.e. they are not conditional on future employment.
The contract between the company and Chief Executive Officer is subject to six months' notice by either party. The contracts of other senior executives are normally subject to three to six months' notice by the company. The employee's normal salary is paid during the
| 2010 | 2009 |
|---|---|
| 1.0% | 0.5% |
| 0.3% | 0.5% |
| 0.7% | 0.0% |
| 1.1% | 0.6% |
| 0.6% | 0.4% |
| 4.7% | 0.0% |
| 0.1% | 0.9% |
| 0.3% | 2.0% |
Total sick leave is defined as a percentage of the employees' total normal working hours. Long-term sick leave refers to a continuous period of absence of 60 days or more.
period of notice. No severance pay is payable to the Chief Executive Officer or other senior executives.
Compensation and benefits in the form of financial instruments have not been paid or provided for.
In 2010 the Remuneration Committee submitted recommendations to the Board of Directors concerning principles on compensation to senior executives. The recommendations covered the proportion between fixed and variable compensation, and the size of any salary increases. The Remuneration Committee has also presented a proposal on criteria for assessing variable compensation and other pension terms and severance pay. The Board of Directors has discussed the Remuneration Committee's proposal and submitted a proposal on compensation policy to the Annual General Meeting, which adopted the submitted proposal.
The compensation payable to the CEO for the financial year 2010 was approved by the Chairman of the Board based on the recommendation of the Remuneration Committee and the remuneration policy adopted by the AGM. The compensation paid to other senior executives has been set by the CEO in consultation with the Remuneration Committee and in accordance with the aforementioned remuneration policy.
In 2010 the Remuneration Committee consisted of Birger von Hall, Committee Chairman, and Joachim Gahm. The Committee convenes when required, or at least two times a year, to draft proposals on compensation for the CEO and to approve or reject the CEO's proposal on compensation and terms and conditions for those senior executives who report directly to him. The committee also draws up principles for salary structure and terms of employment for the Group's senior executives. These are submitted to the AGM for adoption. The Remuneration Committee presents proposals on compensation, terms and conditions and principles to the Board of Directors, which adopts resolutions on these matters. In 2010 the committee convened on three occasions.
| Women | Men | |||
|---|---|---|---|---|
| No. of | Per cent | No. of | Per cent | |
| 2010 | ||||
| Board of Directors | 0 | 0% | 6 | 100% |
| Senior management | 1 | 10% | 9 | 90% |
| 2009 | ||||
| Board of Directors | 0 | 0% | 6 | 100% |
| Senior management | 1 | 12% | 7 | 88% |
| 2010 | 2009 | |
|---|---|---|
| Öhrlings PricewaterhouseCoopers | ||
| Audit assignment | 0.7 | 0.4 |
| Audit services in add. to audit assignment | 0.6 | 0.2 |
| Tax advice | 0.0 | 0.0 |
| Other services | 0.8 | 0.6 |
| Total | 2.1 | 1.2 |
Operating expenses were reduced by SEK 1.2 million (1.6) through government grants provided by the Swedish Energy Agency.
| 2010 | 2009 | |
|---|---|---|
| Interest income | 1.9 | 7.4 |
| Foreign exchange gains | 0.2 | — |
| Total financial income | 2.1 | 7.4 |
| Interest expenses | – 23.7 | – 7.8 |
| Foreign exchange losses | – 0.8 | – 0.2 |
| Total financial expense | – 24.5 | – 8.0 |
| Tax on the profit for the year | 2010 | 2009 |
|---|---|---|
| Deferred tax | 5.7 | 3.8 |
| Reported tax | 5.7 | 3.8 |
| Deferred tax | ||
| Relating to unused tax losses 1) | 25.2 | 22.3 |
| Derivatives stated at fair value | – 0.0 | 3.6 |
| Non-current assets | 8.5 | – 5.7 |
| Total recognised deferred tax | 33.7 | 20.2 |
| Reconciliation of reported tax in Group | ||
| Profit/loss before tax | – 24.0 | – 11.4 |
| Tax, 26.3% | 6.3 | 3.0 |
| Tax effect of: | ||
| Non-deductible expenses | – 0.4 | – 0.0 |
| Correction of tax expense for prior years | — | 0.8 |
| Other additional and removed items | – 0.2 | — |
| Reported tax on profit for the year | 5.7 | 3.8 |
| Change in deferred tax | ||
| Opening value, net | 20.2 | 11.9 |
| Reported deferred tax on profit for the year | 5.7 | 3.8 |
| Tax items recognised directly in equity 2) | 7.8 | 4.6 |
| Closing value, net | 33.7 | 20.2 |
1) Total consolidated tax losses were SEK 96 million (85). Out of this, SEK 9 million (9) is frozen for use in the 2013 tax year and SEK 28 million (28) is frozen for use in the 2014 tax year. It is expected that the full amount of tax losses can be used to offset future taxable profits. 2) Tax items which are recognised directly in equity refer to the Group's hedging reserve, which is attributable to interest rate, electricity and currency futures and the tax effect for expenses relating to share offerings.
Cash and cash equivalents comprise cash and bank balances.
| Total | 29.9 | 12.5 |
|---|---|---|
| Gain/loss from sale of property, plant and equipment | – 4.7 | — |
| Impairment of proceeds from warrants | – 0.2 | — |
| Change in cash balances (bank deposits) derivatives | – 1.9 | — |
| Depreciation and impairment of property, plant and equipment | 36.7 | 12.5 |
| 2010 | 2009 |
| Buildings and land 1) |
Wind power, foundations and electrical inst. |
Equipment, tools, fixtures and fittings |
Advances and construction in progress 2) |
Total | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |
| Cost at beginning of year | 4.6 | 3.4 | 469.7 | — | 8.0 | 6.0 | 428.9 | 334.1 | 911.2 | 343.5 |
| Purchases/investments 3) | 2.2 | 1.3 | — | — | 67.5 | 3.2 | 846.2 | 594.0 | 915.9 | 598.5 |
| Grants | — | — | — | – 20.8 | — | — | – 16.3 | – 10.1 | – 16.3 | – 30.8 |
| Sales/disposals | – 1.0 | — | – 81.6 | — | – 0.5 | — | — | — | – 83.1 | — |
| Reclassifications | 0.1 | – 0.1 | 361.4 | 490.5 | — | – 1.2 | – 361.5 | – 489.1 | — | — |
| Cost at end of year | 5.9 | 4.6 | 749.5 | 469.7 | 75.0 | 8.0 | 897.3 | 428.9 | 1,727.7 | 911.2 |
| Acc. depreciation and impair ment at beginning of year |
– 0.0 | — | – 12.2 | — | – 0.9 | – 0.6 | — | — | – 13.1 | – 0.6 |
| Depr. charge for the year | – 0.1 | – 0.0 | – 31.8 | – 12.2 | – 4.8 | – 0.3 | — | — | – 36.7 | – 12.5 |
| Sales/disposals | — | — | – 0.4 | — | 0.4 | — | — | — | — | — |
| Acc. deprec. and impairm. at end of year |
– 0.1 | – 0.0 | – 44.4 | – 12.2 | – 5.3 | – 0.9 | — | — | – 49.8 | – 13.1 |
| Depr. cost at end of year 4) | 5.8 | 4.6 | 705.1 | 457.5 | 69.7 | 7.1 | 897.3 | 428.9 | 1,677.9 | 898.1 |
1) The item buildings and land includes land with a total carrying amount of SEK 2.1 million (1.7). The Group's properties have a total assessed value of SEK 3.2 million (1.6), of which SEK 1.1 million (0.7) refers to assessed values of land.
2) Work in progress includes advances relating to property, plant and equipment of SEK 76.4 million (4.8).
3) Investments for the year include capitalised interest of SEK 4.7 million (16.6) based on an average interest rate of 3.7 per cent (4.9%).
4) Depreciated cost includes SEK 58 million (–) relating to finance leases.
Framework agreements for delivery of 112 wind turbines from GE Energy and Vestas with options for delivery during the period 2010– 2012 have been concluded. The agreements entail framework agreement obligations to acquire wind turbines. Failure to fulfil these agreements could incur costs of up to SEK 87 million (127) for the company during the period 2011–2012. The company intends to continually conclude agreements with suppliers for its continued expansion until 2014.
The company has concluded operating leases, which mainly refer to leases for land in connection with the erection of wind turbines, for which minimum lease payments are shown below. Lease payments for the year relating to operating leases are SEK 6.4 million (1.9).
| Total | 54.1 | 20.1 |
|---|---|---|
| In 6 to 20 years | 39.6 | 14.8 |
| In 2 to 5 years | 11.3 | 4.1 |
| Within 1 year | 3.2 | 1.3 |
| 2010 | 2009 |
The land lease expense is based on minimum lease payments for wind turbines in operation and under construction, and for agreements where all permits for the erection of wind turbines have been obtained. Minimum lease payments are indexed. On top of this, a variable fee based on revenues from generated electricity is paid.
| Electricity certificates | 7.0 | 1.0 |
|---|---|---|
| Electrical equipment | 9.6 | — |
| 2010 | 2009 |
Inventories are accounted for in accordance with the policies described in Note 1.
The most significant financial risks to which the Group is exposed are energy price risk, currency risk, interest risk, financing risk, capital risk and credit risk. The overall goal of the Group's financial risk management is to identify and control the Group's financial risks. Risk management is centralised to the parent company's finance function. All financial risks that exist or arise in the Group's subsidiaries are managed by the central finance function.
The most significant risk and the risk that has the biggest impact on consolidated earnings is energy price risk, which is related to electricity prices and electricity certificate prices. The risk arises in cases where prices for sold energy have not been hedged, which means that changes in prices in the power market will have a direct impact on the Group's operating earnings. The purpose of the Group's price hedging strategy is to minimise the risk of fluctuations in consolidated earnings through price hedging.
Electricity prices in the power market vary over time, and the Group strives to ensure that the price of delivered electricity should, at the time of delivery, be 30 to 60 per cent hedged with a falling hedging channel for future years, where the channel in year 5 should be 0 to 10 per cent, see graph below. The remaining volume is sold at variable prices. The hedged portion of sales must remain within the defined price hedging channel at any given time. Prices can be hedged bilaterally, through physical delivery contracts with major consumers of electricity, and financially, by purchasing electricity derivatives on the Nordic power exchange, Nord Pool. Price risk can be hedged up to five years prior to delivery of the same volume.
If the price of electricity to be delivered is hedged before the production capacity concerned has become operational a volume risk arises, i.e. the risk of non-delivery or delays in the delivery of the electricity. Risk can also arise in cases where production, due to weak winds or no wind and/or disruptions to production, falls below fixed delivery undertakings provided for in bilateral contracts. In such cases additional electricity will need to be purchased on Nord Pool at the prevailing market price, which may be higher than the selling price provided for in the fixed electricity contract. The Group strives to hedge prices of electricity from facilities that have yet to go into operation; in the first hand, through bilateral contracts which limit volume risk; in the second hand, provided this results in a higher revenue, through financial hedging on Nord Pool. However, financial hedging of prices of electricity from non-operational facilities is subject to a limit of 25 per cent of the planned annual output. The remaining portion, up to the target price hedging level, is hedged through bilateral contracts.
Price hedging through various types of financial derivatives must be performed in a way that meets the requirements for hedge accounting according to IAS 39. Derivatives are carried at market value in the balance sheet while unrealised changes in value are recognised in the balance sheet and the hedging reserve in equity. When the hedged position is recognised in the income statement the gain or loss from the derivatives transaction is transferred from equity to the income statement to meet the gain or loss on the hedged position. Price hedging via Nord Pool is generally made in the Nordic price area, at a "system price", while actual production and delivery is made in the Stockholm price area. In connection with price hedging on Nord Pool the Group strives to ensure that the price area risk is also eliminated through trading in CFDs (contracts for difference).
On electricity-related issues the Group works with Scandem, which, in addition to providing assistance on power trading and electricity issues, also handles the Group's need for balancing energy. This need arises on those occasions when the actual physical delivery of electricity deviates from the forecast delivery. The difference, positive or negative, is known as balancing energy and is administered by Scandem. Through aggregation with Scandem's other customers a lower balance power cost is generally achieved than if Arise Windpower had administered this process itself.
The Group's currency risk exposure arises mainly in connection with the sale of electricity on the Nord Pool power market (transaction exposure), the purchase of wind turbines and the translation of balance sheet items in foreign currency (translation exposure). All of these transactions are mostly made in EUR. The risk on the sales side is managed by hedging the currency portion of hedged power prices using EUR currency futures. Wind power investments in foreign currency are hedged by concluding futures contracts at the time of making the investment decision or by purchasing currency which is deposited in an account.
Under the Group's adopted financial policy, prices and currencies in contracted and forecast payment flows must be hedged up to five years in advance in a channel of 30 to 60 per cent. The Group uses currency futures to manage currency risk exposure and applies hedge accounting for contracted future payment flows and the translation of financial assets and liabilities. Arise Windpower's net foreign currency flow refers almost exclusively to EUR. Foreign exchange differences on operating liabilities are recognised along with the investment. The gain or loss from currency futures held for hedging purposes is recognised in net sales. Foreign exchange differences on financial liabilities and assets are recognised in net financial expense/income
Financial and other operating-related assets and liabilities in foreign currencies arise almost exclusively in connection with the purchase of wind turbines and other electrical installations, which are normally hedged using currency futures. Other items are not significant and are not currency-hedged.
Interest risk is defined as the risk of a fall in earnings caused by a change in market interest rates. The Group's financial policy includes guidelines on fixed-rate periods (interest rate duration). The management of interest risk is aimed at reducing negative effects from changes in market interest rates. The Group strives to achieve a balance between cost-effective borrowing and risk exposure, and a negative impact on earnings in the event of a sudden major change in interest rates. The exposure is hedged using interest rate swaps and cap, which cover parts of the Group's long-term borrowing, see Note 16.
A change in any of the following variables will affect earnings before tax for 2011 (SEKm) as follows:
| Variable | Change | Impact on pro-fit/loss before tax | ||
|---|---|---|---|---|
| Production | 10% | 5.1 | ||
| Electricity price | 10% | 3.7 | ||
| Electricity certificate price | 10% | 2.8 | ||
| Interest expense | 1% point | 6.6 | ||
| Investment cost | 10% | 2.4 | ||
| EUR/SEK for investments | 10% | 1.6 | ||
| EUR/SEK for electricity prices | 10% | 0.2 |
| 2010 | 2009 | |||||
|---|---|---|---|---|---|---|
| Interest-bearing | Non-interest- | Interest-bearing | Non-interest | |||
| Fixed rate | Variable rate | bearing | Fixed rate | Variable rate | bearing | |
| Current receivables | 1 | 73 | 0 | 87 | ||
| Long-term receivables | 34 | 20 | ||||
| Cash and cash equivalents | 250 | 341 | ||||
| Current liabilities | – 47 | – 67 | – 13 | – 64 | ||
| Long-term liabilities | – 579 | – 180 | – 407 | – 180 | ||
| Total | – 626 | 71 | 40 | – 420 | 161 | 43 |
The Group's goal for capital structure is to secure the Group's ability to continue its operations with the aim of generating a return for its shareholders while also creating benefits for other stakeholders and to optimise the capital structure with regard to the cost of capital. The issuance of new shares or sale of assets are examples of measures that the Group can employ to adjust its capital structure. See also the information on dividend policy and equity/assets ratio on page 51. The Group aims to maintain an equity/assets ratio of 25 per cent. At 31 December 2009 the actual equity/assets ratio was 57.6 per cent (50.5%).
Financing risk is defined as the risk that the Company will be unable to meet its liabilities due to insufficient liquidity or difficulties in obtaining funding. The Group's objective is to always have more than one lender that is willing to offer funding on market terms. The Group's policy states that a liquidity reserve of SEK 50 million must be available at all times.
The Group's expansion plan will require continued funding. Share offerings and other forms of capital contribution enable continued loan funding, see Note 16.
Credit risk, or counterparty risk, is the risk of incurring a loss if a counterparty fails to meet its obligations. Commercial credit risk, which refers to the solvency of customers, is managed by the Company's central finance function through careful monitoring of track records on payments and customers' financial reports as well as good communications. The Group's total credit risk will be distributed across a small number of customers, which will account for a relatively large share of the Group's trade receivables. All customers have a high level of transparency, including the Nord Pool marketplace, which is the Company's single largest customer in this context.
During periods when the Company temporarily has excess liquidity a certain portion of this liquidity may be invested to obtain a higher return. Excess liquidity may only be invested in assets with a low counterparty risk that have been approved by the Board of Directors. These are bank accounts (special savings, business or investment accounts), treasury bills or certificates if the counterparty has a credit rating of at least A3/A– from Moody's or Standard & Poor's. Investments in complex financial products are not permitted even if they meet the credit rating criteria.
In cases where fair value differs from the carrying amount fair value is stated in the associated note.
The hedging reserve consists of interest, electricity and currency futures contracts. The Group's financial policy states that transaction exposures must be hedged through hedging of prices and exchange rates in future contracted payment flows using electricity and currency futures contracts. Contracts have been concluded with maturities matching those of the underlying contracted orders and payment flows.
| 2010 | 2009 | ||||
|---|---|---|---|---|---|
| SEK millions | Carrying amount | Fair value | Carrying amount | Fair value | |
| Electricity futures | 9 | 9 | 24 | 24 | |
| Currency futures, EUR/SEK | – 4 | – 4 | – 1 | – 1 | |
| Currency futures, SEK/EUR | 5 | 5 | 0 | 0 | |
| Interest rate swaps | – 21 | – 21 | – 36 | – 36 | |
| Hedging reserve | – 11 | – 11 | – 14 | – 14 |
The estimated fair value is based on market prices and generally accepted valuation methods. Currency futures refer to sales and purchases of EUR for hedging of electricity sales and the purchase of wind turbines. For each position there is a counterflow in SEK.
The following tables show the breakdown of financial instruments in the balance sheets for 2010 and 2009.
| Total liabilities | 21 | 859 | — | 880 |
|---|---|---|---|---|
| Total current liabilities | 21 | 94 | — | 115 |
| Accrued expenses and deferred income | 19 | 19 | ||
| Other liabilities | 21 | 2 | 23 | |
| Trade payables | 26 | 26 | ||
| Current interest-bearing liabilities | 47 | 47 | ||
| Current liabilities | ||||
| Provisions | 6 | 6 | ||
| Long-term interest-bearing liabilities | 759 | 759 | ||
| Derivatives stated at fair value |
Other financial liabilities |
Non-financial liabilities |
Total | |
| Liabilities | ||||
| Total assets | 9 | 367 | 1,699 | 2,075 |
| Total current assets | 9 | 310 | 21 | 340 |
| Cash and cash equivalents | 250 | 250 | ||
| Prepaid expenses and accrued income | 49 | 4 | 53 | |
| Other receivables | 9 | 11 | 20 | |
| Inventories | 17 | 17 | ||
| Other financial assets Current assets |
23 | 23 | ||
| Deferred tax assets | 34 | 34 | ||
| Property, plant and equipment | 1,678 | 1,678 | ||
| fair value | receivables | assets | Total | |
| Derivatives stated at | Loans and trade | Non-financial | ||
| Assets | 2010 |
| SEK millions | Within 1 year | In 2–3 years | In 4–-5 years | After 5 years | Total contracted cash flow |
|---|---|---|---|---|---|
| Electricity futures contracts | 2 | 7 | — | — | 9 |
| Currency futures contracts | 3 | 2 | — | — | 5 |
| Total | 5 | 9 | — | — | 14 |
| Assets | 2009 | |||
|---|---|---|---|---|
| Derivatives stated at fair value |
Loans and trade receivables |
Non-financial assets |
Total | |
| Property, plant and equipment | 898 | 898 | ||
| Deferred tax assets | 20 | 20 | ||
| Current assets | ||||
| Inventories | 1 | 1 | ||
| Other receivables | 24 | 30 | 54 | |
| Prepaid expenses and accrued income | 29 | 5 | 33 | |
| Cash and cash equivalents | 341 | 341 | ||
| Total current assets | 24 | 400 | 6 | 430 |
| Total assets | 24 | 421 | 904 | 1,348 |
| Derivatives stated at fair value |
Other financial liabilities |
Non-financial liabilities |
Total | |
|---|---|---|---|---|
| Long-term interest-bearing liabilities | 587 | 587 | ||
| Provisions | 3 | 3 | ||
| Current liabilities | ||||
| Current interest-bearing liabilities | 13 | 13 | ||
| Trade payables | 19 | 19 | ||
| Other liabilities | 37 | 1 | 39 | |
| Accrued expenses and deferred income | 1 | 7 | 7 | |
| Total current liabilities | 37 | 34 | 7 | 78 |
| Total liabilities | 37 | 624 | 7 | 668 |
The maturity structure of interest-bearing liabilities is shown in Note 16 Interest-bearing liabilities. Other financial liabilities, such as trade payables and advances to customers, have contractual maturities of 1–60 days.
| Note 12 Other financial assets | ||||
|---|---|---|---|---|
| 2010 | 2009 | |||
| Deposited into frozen accounts | 20.4 | — | ||
| Credit fees recognised in accounting period | 1.9 | — | ||
| Other receivables | 0.6 | — | ||
| Total | 22.9 | — |
| Total | 17.5 | 47.1 |
|---|---|---|
| Other receivables | 5.5 | 1.5 |
| Current tax receivables | 0.5 | 0.4 |
| Derivatives | 8.9 | 23.7 |
| VAT receivable | 2.6 | 21.4 |
| 2010 | 2009 |
| Other prepaid expenses | 5.2 | 8.0 |
|---|---|---|
| Prepaid financial expenses 2) | 3.9 | 2.1 |
| Other accrued income 1) | 44.3 | 23.3 |
| 2010 | 2009 |
1) Includes a receivable of SEK 34.6 million (18.4) from the Swedish Energy Agency.
2) Refers to the expense in connection with the raising of loans. The expense is allocated over the term of the loan.
| Number of registered shares in the parent company | 2010 | 2009 |
|---|---|---|
| Issued at 1 January | 21,426,070 | 15,453,885 |
| Issues of new shares | 10,135,000 | 5,972,185 |
| Issued at 31 December | 31,561,070 | 21,426,070 |
All shares are fully paid up. Each share carries an equal right to the company's assets and profits. The quotient value of the shares is SEK 0.08.
In 2007 and 2008 decisions were taken to issue warrants for shares in Arise Windpower AB to the Board of Directors, members of management and other key individuals as well as external stakeholders such as landowners and consultants.
| Board of Directors | Employees | External stakeholders | Total | |
|---|---|---|---|---|
| Warrants 2007, not exercised | 45,500 | 3,000 | — | |
| Warrants 2008 | 3,000 | 66,000 | 192,500 | |
| Entitle to subscribe for no. of shares | 242,500 | 110,000 | 962,500 | 1,315,000 |
Warrants have been issued in five separate series. The purchase price for warrants offered to the Board and employees (series 1 – 4) was based on the estimated market price at the time of subscription, as determined by the Black & Scholes valuation model.
Warrants to external stakeholders (series 5) have been allocated free of charge.
| Series 1 | Series 2 | Series 3 | Series 4 | Series 5 | Total | |
|---|---|---|---|---|---|---|
| Warrants 2007, not exercised | 45,500 | 3,000 | — | — | — | |
| Warrants 2008 | — | — | 11,000 | 55,000 | 192,500 | |
| Entitle to subscribe for no. of shares | 227,500 | 15,000 | 55,000 | 55,000 | 962,500 | 1,315,000 |
| Subscription price (SEK) | 32 | 40 | 40 | 62.50 | 45 |
A warrant entitles the holder, during certain specified periods, to subscribe for one or five shares of Arise Windpower AB at the price stated in the table above.
The subscription period for series 1 is 2 March 2008 - 2 March 2011
The subscription period for series 2 is 1 March – 31 March in the years 2009 – 2011 The subscription period for series 3 is 1 March – 31 March in the years 2009 – 2011 The subscription period for series 4 is 1 November – 30 November in the years 2009 – 2011 The subscription period for series 5 is 1 February – 28 February in the years 2009 – 2015
The exercise of warrants of series 5 is also contingent on the fulfilment of certain conditions relating to agreements, permits and the erection of wind turbines.
Full exercise of the allocated warrants would result in a dilution of 4.1 per cent of the share capital and votes. Management deems that the terms and conditions attached to series 5 would result in the exercise of warrants representing no more than 922,500 shares, which would represent a dilution of 2.9 per cent.
The Group has concluded credit agreements with banks which contain loan covenants giving the lenders the right to call the loans in case of changes to Arise Windpower's financial key ratios. These clauses contain requirements relating to the company's equity/assets ratio and debt service ratio, which is defined as EBITDA divided by interest paid and loan repayments over the past 12-month period. No loan covenants have been breached.
The Group's total credit facilities at 31 December 2010 were SEK 953 million (657) and are used primarily to fund the operations in the form of bank loans. Interest payments are hedged through interest swaps and cap. The Group currently holds five contracts with an average fixed-rate period of 3.7 years (3.3). The funding cost is based on the confirmed fixed-rate period and agreed margin. The Group's average effective interest rate in 2010 was 3.9 per cent (4.9%).
| Total | 758.9 | 586.9 |
|---|---|---|
| Current portion of long-term loans | – 47.0 | – 13.1 |
| Long-term loans | 805.9 | 600.0 |
| 2010 | 2009 |
| SEK millions | Within 1 year |
In 2–3 years |
In 4–5 years |
After 5 years |
Total contracted cash flow |
|---|---|---|---|---|---|
| Bank loans* | 86 | 174 | 170 | 710 | 1,139 |
| Trade payables | 26 | 26 | |||
| Interest rate futures* | |||||
| Currency futures | 24 | 25 | 49 | ||
| Currency futures | – 180 | – 180 | |||
| Total | – 45 | 199 | 170 | 710 | 1,034 |
* In calculating interest payments on bank loans, the effect of interest rate futures have been taken into account in determining the interest based on the situation at year-end.
Currency futures refer to sales and purchases of EUR for hedging of electricity sales and the purchase of wind turbines. For each position there is a counterflow in SEK.
The item refers to provisions for restoration expenses relating to installed wind turbines.
| Total | 19.1 | 7.1 |
|---|---|---|
| Other accrued expenses | 11.7 | 2.6 |
| Accrued staff-related costs | 7.0 | 4.0 |
| Accrued financial expenses | 0.4 | 0.5 |
| 2010 | 2009 |
| Pledged assets | 2010 | 2009 |
|---|---|---|
| Pledged shares in subsidiaries | 625.9 | 196.7 |
| Transf. of collateral for wind turb. & land leases | 1,182.8 | 708.6 |
| Total | 1,808.7 | 905.3 |
| Contingent liabilities | ||
| Financing leases | 58.1 | — |
| Total | 58.1 | — |
The company has concluded framework agreements for the purchase of wind turbines, which contain clauses providing for cancellation fees under certain circumstances. Based on current purchasing plans and forecasts, management does not expect that any fees will be payable.
| SEK millions | Note | 2010 | 2009 |
|---|---|---|---|
| Net sales | 10.4 | 18.1 | |
| Work performed by the company for its own use and capitalised | 13.2 | 8.6 | |
| Total income | 2 | 23.6 | 26.7 |
| Staff costs | 3 | – 22.3 | – 15.9 |
| Other external expenses | 4 | – 13.2 | – 9.8 |
| Operating result before depreciation (EBITDA) | – 11.9 | 1.0 | |
| Depreciation of property, plant and equipment | 7 | – 1.0 | – 0.3 |
| Operating result (EBIT) | – 12.9 | 0.8 | |
| Financial income | 5 | 6.1 | 5.6 |
| Financial expense | 5 | – 0.5 | 0.0 |
| Profit/loss before tax | – 7.3 | 6.3 | |
| Income tax | 6 | 1.8 | – 0.9 |
| Profit/loss for the year and comprehensive income | – 5.4 | 5.5 |
| SEK millions | Note | 2010 | 2009 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 7 | 254.2 | 41.7 |
| Shares in subsidiaries | 8 | 508.5 | 260.1 |
| Shares and interests | 0.6 | — | |
| Receivables from Group companies | — | 50.0 | |
| Deferred tax assets | 6 | 22.4 | 12.9 |
| Other financial assets | 9 | 8.4 | — |
| Total non-current assets | 794.0 | 364.8 | |
| Current assets | |||
| Inventories | 10 | 8.4 | 1.0 |
| Receivables from Group companies | 363.8 | 103.7 | |
| Trade receivables | — | 7.0 | |
| Current tax receivables | 0.5 | 0.3 | |
| Other current receivables | 0.5 | 2.7 | |
| Prepaid expenses and accrued income | 11 | 40.7 | 20.1 |
| Cash and cash equivalents | 37.6 | 234.5 | |
| Total current assets | 451.5 | 369.3 | |
| TOTAL ASSETS | 1,245.5 | 734.0 | |
| EQUITY | |||
| Restricted equity | |||
| Share capital | 2.5 | 1.7 | |
| Statutory reserve | 0.0 | 0.0 | |
| Non-restricted equity | |||
| Share premium account | 1,282.7 | 749.9 | |
| Accumulated deficit | – 53.3 | – 58.8 | |
| Profit/loss for the year | – 5.4 | 5.5 | |
| Total equity | 1,226.4 | 698.3 | |
| Current liabilities | |||
| Liabilities to Group companies | — | 25.5 | |
| Trade payables | 7.3 | 5.2 | |
| Other liabilities | 5.7 | 1.2 | |
| Accrued expenses and deferred income | 12 | 6.1 | 3.8 |
| Total current liabilities | 19.1 | 35.8 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 1,245.5 | 734.0 | |
| Pledged assets | 14 | 220.1 | 220.1 |
| Contingent liabilities | 14 | None | None |
| SEK millions | Note | 2010 | 2009 |
|---|---|---|---|
| Operating activities | |||
| Operating result (EBIT) | – 12.9 | 0.8 | |
| Adjustment for non-cash items | 13 | 1.0 | 0.0 |
| Tax paid | – 0.3 | – 0.1 | |
| Cash flow from operating activities before changes in working capital | – 12.2 | 0.7 | |
| Cash flow from changes in working capital | |||
| Increase in inventories | – 7.4 | – 1.0 | |
| Increase in operating assets | – 271.5 | – 47.5 | |
| Increase (+) /Decrease (–) in operating liabilities | – 13.5 | 15.1 | |
| Cash flow from operating activities | – 304.6 | – 32.7 | |
| Investing activities | |||
| Acquisition of property, plant and equipment | – 213.4 | – 29.6 | |
| Acquisition of financial assets | – 0.6 | — | |
| Sale of property, plant and equipment | — | 1.0 | |
| Investment in subsidiaries | – 248.4 | – 33.0 | |
| Cash flow from investing activities | – 462.4 | – 61.6 | |
| Financing activities | |||
| Loans Group companies | 50.0 | – 50.0 | |
| Interest received | 3.1 | 6.9 | |
| Deposits into frozen accounts | – 8.4 | — | |
| Issue of new shares | 525.4 | 310.1 | |
| Cash flow from financing activities | 570.1 | 267.0 | |
| Cash flow for the year | – 197.0 | 172.8 | |
| Cash and cash equivalents at beginning of year | 234.5 | 61.8 | |
| Cash and cash equivalents at end of year | 37.6 | 234.5 |
| SEK millions | Share capital |
Statutory reserve |
Share premi um account |
Accumulated deficit |
Total equity |
|---|---|---|---|---|---|
| Opening balance at 1 Jan 2009 | 1.2 | 0.0 | 435.4 | – 58.8 | 377.9 |
| Profit/loss for the year | — | — | — | 5.5 | 5.5 |
| Issue of new shares | 0.5 | — | 328.0 | — | 328.5 |
| Cost of issue of new shares | — | — | – 18.3 | — | – 18.3 |
| Tax relating to cost of issue of new shares | — | — | 4.8 | — | 4.8 |
| Result of merger | — | — | 0.0 | — | 0.0 |
| Equity at 31 Dec 2009 | 1.7 | 0.0 | 749.9 | – 53.3 | 698.3 |
| Profit/loss for the year | — | — | — | – 5.4 | – 5.4 |
| Issue of new shares | 0.8 | — | 553.5 | — | 554.3 |
| Cost of issue of new shares | — | — | – 28.9 | — | – 28.9 |
| Tax relating to cost of issue of new shares | — | — | 7.6 | — | 7.6 |
| Use of treasury shares in connection with acq. of assets | — | — | 0.6 | — | 0.6 |
| Equity at 31 Dec 2010 | 2.5 | 0.0 | 1,282.7 | – 58.7 | 1,226.4 |
The parent company has prepared its annual accounts in accordance with the Swedish Annual Accounts Act, RFR 2 Accounting for Legal Entities and applicable statements from the Swedish Financial Reporting Board. RFR 2 states that the parent company should apply all EU-adopted IFRS and interpretations in the annual accounts for the legal entity insofar as this is possible under the Swedish Annual Accounts Act and Pension Obligations Vesting Act (Tryggandelagen) with regard to the relationship between accounting and taxation. The parent company applies essentially the same principles as those described for the Group. The parent company applies the exemption rule in respect of IAS 39, which means that financial instruments are stated at cost. Other differences between the Group and parent company accounting policies are described in the following.
Swedish tax laws allow businesses to transfer assets to specific reserves and funds which are reported separately in the parent company. This enables a company to administer and retain reported profits in the business and thus defer the date of taxation. Untaxed reserves become taxable only upon reversal. In the event that a company incurs a loss the untaxed reserves can be used to cover the loss without incurring tax.
Group contributions and shareholder contributions are accounted for in accordance with Statement UFR 2 of the Swedish Financial Reporting Board. This means that Group contributions and shareholder contributions are recognised based on their economic significance. The contributions are accounted for as a capital transfer, i.e. as a decrease or increase of non-restricted equity. The consequence of this accounting principle is that only tax which is attributable to income and expense items is recognised in the income statement.
Net sales in the parent company mainly comprise leasehold rights and consulting expenses that have been invoiced internally within the Group. A net gain of SEK 4.1 million (4.3) from purchases and sales of electricity and electricity certificates and gains or losses from financial derivatives has been recognised in the accounts.
For employee-related information, see Note 4 to the consolidated financial statements.
| 2010 | 2009 | |
|---|---|---|
| Öhrlings PricewaterhouseCoopers | ||
| Audit assignment | 0.5 | 0.3 |
| Audit serv. in add. to audit assignment | 0.6 | 0.2 |
| Tax advice | 0.0 | 0.0 |
| Other services | 0.8 | 0.6 |
| Total | 1.9 | 1.1 |
| Interest expenses Foreign exchange losses |
– 0.0 – 0.5 |
— — |
|---|---|---|
| Total financial income | 6.1 | 5.6 |
| Interest income | 6.1 | 5.6 |
| 2010 | 2009 |
| Tax on the profit for the year | 2010 | 2009 |
|---|---|---|
| Deferred tax | 1,8 | -0,9 |
| Reported tax | 1,8 | -0,9 |
| Deferred tax | ||
| Relating to unused tax losses | 22,4 | 12,9 |
| Total recognised deferred tax | 22,4 | 12,9 |
| Change in deferred tax | ||
| Opening value, net | 12,9 | 9,0 |
| Reported deferred tax on profit for the year | 1,8 | -0,9 |
| Tax items recognised directly in equity 1) | 7,7 | 4,8 |
| Closing value, net | 22,4 | 12,9 |
1) Tax items recognised directly in equity refer to the tax effect of expenses relating to share offerings. All figures for deferred tax have been restated based on the applicable tax rate for 2011 of 26.3 per cent.
| Buildings and land 1) |
Equipment, tools and installations |
Advances and work in progress 2) |
Total | |||||
|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |
| Cost at beginning of year | 1.3 | — | 2.2 | 1.5 | 38.5 | 12.0 | 42.0 | 13.5 |
| Purchases/investments | — | 1.3 | 4.1 | 1.7 | 205.5 | 26.5 | 209.6 | 29.5 |
| Purchases from Group companies | — | — | 6.2 | — | — | — | 6.2 | — |
| Sales/disposals | — | — | — | – 1.0 | — | — | — | – 1.0 |
| Cost at end of year | 1.3 | 1.3 | 12.5 | 2.2 | 244.0 | 38.5 | 257.8 | 42.0 |
| Acc. depr. and imp. at beg. of year | – 0.0 | — | – 0.3 | – 0.3 | — | — | – 0.3 | – 0.3 |
| Depreciation charge for the year | – 0.0 | -0.0 | – 1.0 | – 0.2 | — | — | – 1.0 | – 0.2 |
| Assumed depreciation | — | — | – 2.3 | — | — | — | – 2.3 | — |
| Sales/disposals | — | — | — | 0.2 | — | — | — | 0.2 |
| Acc. deprec. and imp. at end of year | – 0.0 | – 0.0 | – 3.6 | – 0.3 | — | — | – 3.6 | – 0.3 |
| Depreciated cost at end of year | 1.3 | 1.3 | 8.9 | 1.9 | 244.0 | 38.5 | 254.2 | 41.7 |
1) The item buildings and land includes land with a total carrying amount of SEK 0.7 million (0.7). The parent company's properties have a total assessed value of SEK 0.3 million (0.3), of which SEK 0.2 million (0.2) refers to assessed values of land. 2) Work in progress includes advances relating to property, plant and equipment of SEK 76.4 million (4.8).
Framework agreements for delivery of 112 wind turbines from GE Energy and Vestas with options for delivery during the period 2010–2012 have been concluded. The agreements entail framework agreement obligations to acquire wind turbines. Failure to fulfil these agreements could incur costs of up to SEK 87 million (127) for the company during the period 2011–2012. The company intends to continually conclude agreements with suppliers for its continued expansion until 2014.
| Carrying amount at beginning of year | 2010 260.1 |
2009 227.1 |
|---|---|---|
| Investment in subsidiaries | 248.4 | — |
| Shareholder contributions | — | 33.0 |
| Carrying amount at end of year | 508.5 | 260.1 |
| Namn | Org.no. | Regd. off. No. of shares | Owned share, % | Carr. amount of hold. | Equity | |
|---|---|---|---|---|---|---|
| Arise Elnät AB | 556747-2641 | Halmstad | 1 000 | 100% | 35.1 | 31.0 |
| Arise Service & Projektering AB 1) | 556756-2730 | Halmstad | 1 000 | 100% | 4.1 | 3.3 |
| Arise Kran AB | 556758-8966 | Halmstad | 1 000 | 100% | 4.1 | 3.4 |
| Arise Wind Farm 1 AB | 556732-8942 | Halmstad | 1 000 | 100% | 290.1 | 287.5 |
| Arise Wind Farm 2 AB | 556758-9113 Halmstad | 1 000 | 100% | 0.1 | 0.1 | |
| Arise Wind Farm 3 AB | 556758-9105 | Halmstad | 1 000 | 100% | 94.5 | 94.6 |
| Arise Wind Farm 4 AB | 556758-8933 | Halmstad | 1 000 | 100% | 80.1 | 80.1 |
| Arise Wind Farm 5 AB | 556758-8982 | Halmstad | 1 000 | 100% | 0.1 | 0.1 |
| Arise Wind Farm 6 AB | 556758-8974 | Halmstad | 1 000 | 100% | 0.1 | 0.1 |
| Arise Wind Farm 7 AB | 556758-8909 | Halmstad | 1 000 | 100% | 0.1 | 0.1 |
| Arise Wind Farm 8 AB | 556758-8891 | Halmstad | 1 000 | 100% | 0.1 | 0.1 |
| Summa | 508.5 | 500.4 |
1) The name of the company was changed to Arise Service AB in January 2011.
| 8.4 | — |
|---|---|
| 8.4 | — |
| 2010 | 2009 |
| Total | 8.4 | 1.0 |
|---|---|---|
| Certificates | 8.4 | 1.0 |
| 2010 | 2009 |
Inventories are accounted for in accordance with the Group's accounting policies, which are described in Note 1.
| Total | 40.7 | 20.0 |
|---|---|---|
| Other prepaid expenses | 1.1 | 1.6 |
| Other accrued income | 5.0 | 0.0 |
| Accrued income, Swedish Energy Agency | 34.6 | 18.4 |
| 2010 | 2009 |
| Total | 6.1 | 3.8 |
|---|---|---|
| Other accrued expenses | 2.1 | 1.1 |
| Accrued staff-related costs | 4.0 | 2.7 |
| 2010 | 2009 |
Cash and cash equivalents comprise cash and bank balances.
| Total | 1.0 | 0.0 |
|---|---|---|
| Other items | — | – 0.1 |
| Gain/loss fr. sale of prop., plant and equip. | — | – 0.2 |
| Depr. and impairm. of prop., plant and equip. | 1.0 | 0.3 |
| 2010 | 2009 |
| Contingent liabilities | — | — |
|---|---|---|
| Total | 384.6 | 220.1 |
| Shares in subsidiaries | 384.6 | 220.1 |
| 2010 | 2009 |
The company has concluded framework agreements for the purchase of wind turbines, which contain clauses providing for cancellation fees under certain circumstances. Based on current purchasing plans and forecasts, management does not expect that any fees will be payable.
| 2010 | 2009 | |
|---|---|---|
| Sale of goods and services to subsidiaries | 60.0 | 16.5 |
| Purchase of goods and services from subs. | 67.6 | 29.2 |
| Transactions with main owners | ||
| PLU Energy Intressenter AB, owned by Peter Nygren, Leif Jansson, Ulf Corné and families |
— | — |
| Ulf Corné through Forsus AB | 1.8 | — |
| Total | — | — |
| Transactions with other senior executives | — | — |
The parent company made sales to subsidiaries of SEK 60.0 million (16.5), which refer to sales of leases for land exploitation, consulting income referring mainly to permit and project planning services and billing of administration expenses. The parent company made purchases of goods and services from subsidiaries of SEK 67.6 million (29.2), which refer to electricity and electricity certificates, the purchase of measurement and calculation services and rent payments for measurement equipment.
During the year Ulf Corné worked on a number of specified tasks on a contract basis, receiving a market-based compensation of SEK 1.8 million (–). Other than what is stated above, no Director or senior executive has had any direct or indirect involvement in any business transaction between him- or herself and the Company that is or was unusual in terms of its character or its terms and conditions. Information on compensation to Directors and other senior executives is provided in Note 4 to the consolidated financial statements.
| Parent company | SEK |
|---|---|
| Accumulated deficit from prior years | – 53,300,186 |
| Share premium account, non-restricted equity | 1,282,665,961 |
| Profit/loss for the year | – 5,446,989 |
| Total available earnings | 1,223,918,786 |
The Board of Directors and Chief Executive Officer propose to the Annual General Meeting that the earnings be appropriated as follows: Carried forward 1,223,918,786
For more information on the Group and parent company's results and financial positions, see the income statements, balance sheets, cash flow statements and notes to the accounts. The income statements and balance sheets will be presented for approval to the Annual General Meeting on 27 April 2011.
The Board of Directors and Chief Executive Officer hereby certify that the annual report has been prepared in compliance with the Swedish Annual Accounts Act and RFR 1.1 Supplementary Accounting Rules for Corporate Groups of the Swedish Financial Reporting Board and gives a true and fair view of the company's financial position and results and that the Directors' Report gives a true and fair overview of the development of the company's business, financial position and results and describes significant risks and uncertainties faced by the company. The Board of Directors and Chief Executive Officer hereby certify that the consolidated financial statements have been prepared in compliance with the International Financial Reporting Standards (IFRS), as adopted by the EU, and give a true and fair view of the Group's financial position and results and that the consolidated Directors' report gives a true and fair overview of the development of the Group's business, financial position and results, and describes significant risks and uncertainties faced by the companies included in the Group.
Halmstad, 1 April 2011
Pehr G Gyllenhammar Leif Jansson Ulf Corné Chairman Director Director
Birger von Hall Joachim Gahm Jon G Brandsar Director Director Director
Peter Nygren CEO
We presented our audit report on 1 April 2011
Bror Frid
Öhrlings PricewaterhouseCoopers AB
Authorised Public Accountant
Org. no. 556274-6726
We have examined the annual accounts, consolidated financial statements and accounting records as well as the Board of Directors and Chief Executive Officer's administration of Arise Windpower AB (publ) for 2010. The company's annual accounts and consolidated financial statement are included in the printed version of this document on pages 14–45. Responsibility for the accounts and administration of the company and for ensuring that the Swedish Annual Accounts Act is applied in preparing the annual accounts and that the International Financial Reporting Standards (IFRS), as adopted by the EU and implemented in the Swedish Annual Accounts Act, are applied in preparing the consolidated financial statements rests with the Board of Directors and Chief Executive Officer. Our responsibility is to express an opinion on the annual accounts, consolidated financial statements and administration of the company on the basis of our audit.
The audit has been performed in accordance with generally accepted auditing standards in Sweden (Swedish GAAS). This means that we have planned and conducted our audit so as to obtain a high but not absolute degree of certainty that the annual accounts and consolidated financial statements contain no material errors. An audit entails an examination of a selection of records and other accounting information. It also comprises a review of the accounting policies and the Board of Directors' and Chief Executive Officer's adherence to these policies and an assessment of those significant estimates employed by the Board of Directors and Chief Executive Officer in preparing the annual accounts and consolidated financial statements as well as an evaluation of the overall information contained in the annual accounts and consolidated financial statements. As a basis for our statement on release from liability, we have examined significant decisions, actions and circumstances of the company in order to be able to determine the liability, if any, to the company of any Director or the Chief Executive Officer. We have also examined whether any Director or the Chief Executive Officer has in any other way acted in violation of the Swedish Companies Act, the Annual Accounts Act or the company's Articles of Association. We believe our audit gives us a reasonable basis for making the following statements.
The annual accounts have been prepared in accordance with the Annual Accounts Act and give a true and fair view of the company's results and financial position in accordance with Swedish GAAS. The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), as adopted by the EU and implemented in the Swedish Annual Accounts Act, and provide a true and fair view of the Group's results and financial position. The Directors' Report is consistent with the other parts of the annual accounts and consolidated financial statements.
We recommend that the Annual General Meeting adopt the parent company and consolidated income statements and balance sheets, and allocate the profit of the parent company in accordance with the proposal in the Directors' Report, and that the members of the Board of Directors and the Chief Executive Officer be released from liability for the financial year.
Gothenburg, 1 april 2011
Bror Frid Authorised Public Accountant
Arise Windpower AB (publ) ("Arise") is a Swedish public limited company which is listed on Nasdaq OMX Stockholm. Arise applies the Swedish Corporate Governance Code (the "Code"). This corporate governance report has been prepared in compliance with the provisions contained in the Code, Chapter 6, Sections 6–9 of the Swedish Annual Accounts Act and Chapter 9, Section 31 of the Swedish Companies Act and refers to the financial year 2010. Arise Windpower's Articles of Association and other information pertaining to corporate governance in Arise is provided on our website, www.arisewindpower.se.
Corporate governance in Arise complies with the Code and is thus based on principles provided for in legislation, listing agreements, guidelines and good practice. An explained deviation from the Code is that the Chairman of the Board served as Chairman of the Nominating Committee. The reason for the deviation is based on the Chairman's experience from similar assignments and other qualifications. Information on other deviations from the Code is reported in the corporate governance report.
According to the shareholders' register maintained by Euroclear Sweden AB (formerly VPC AB), Arise had approximately 3,180 shareholders at 31 December 2010. Shareholders with a direct and indirect shareholding representing more than 10 per cent of the votes are Tredje AP-fonden and Länsförsäkringar Fondförvaltning AB. According to a press release of 27 December 2010, the company's founders have transferred 3,162,498 shares to companies which they control. Until that date PLU Energy Holding AB had a shareholding representing more than 10 per cent of the votes. More information about major shareholders is provided on Arise Windpower's website, www.arisewindpower.se.
The share capital of Arise at 31 December 2010 was SEK 2,524,885.60 represented by 31,561,070 shares. All shares are of the same type and thus carry the same rights to the company's assets, profits and dividends.
Arise Windpower's highest decision-making body is the general shareholders' meeting. Notice of the Annual General Meeting, or an extraordinary general meeting at which matters relating to an amendment of the Articles of Association will be discussed, is given no earlier than six weeks and no later than four weeks before the meeting. All shareholders who are included in a transcript of the shareholders' register and have registered for the meeting in time have the right attend and vote at the meeting. There are no restrictions on the number of votes that can be cast by an individual shareholder. Shareholders who are not able to attend themselves may be represented by proxies. The most recent Annual General Meeting was the AGM in Laholm on 22 April 2010. This AGM authorised the Board to take decisions relating to share buybacks, the transfer of treasury shares and the issuance of shares. The minutes from the AGM are available on Arise Windpower's website. The next Annual General Meeting will be held in Halmstad on
27 April 2011. A shareholder wishing to have an issue addressed at a general shareholders' meeting can send a written request to Arise Windpower AB (publ), Att: styrelsens ordförande, Box 808, SE-301 18 Halmstad. The Board of Directors must be in receipt of such requests no later than seven weeks before the meeting, or at least sufficiently far in advance to ensure that the issue can be included, if required, in the notice of the meeting.
At the Annual General Meeting on 22 April 2010 the shareholders adopted a set of procedures for the appointment of a Nominating Committee in preparation for future elections and fees. The resolution adopted by the AGM states that the Nominating Committee should consist of five regular members, comprising representatives for the four largest owners at the beginning of October and the Chairman of the Board. As announced by Arise in October 2010, the Nominating Committee for the 2011 AGM consists of Bengt Hellström (Third AP Fund), Joachim Gahm (PLU/founders), Albert Hæggström (Länsförsäkringar), Peter van Berlekom (Nordea Fonder) and the Chairman of the Board, Pehr G Gyllenhammar. The majority of the Nominating Committee's members are independent in relation to the Company and management.
The Code states that the Nominating Committee's task is to prepare issues relating to appointments and fees in preparation for the following general shareholders' meeting. The Nominating Committee will make a presentation of its activities in connection with the Annual General Meeting. Shareholders wishing to submit a proposal to the Nominating Committee have had the opportunity to contact the Chairman of the Nominating Committee: Arise Windpower AB (publ), Att: Valberedningens ordförande, Box 808, SE-301 18 Halmstad.
The Board of Directors is responsible for the Company's administration of its affairs and organisation. The Articles of Association state that the Board of Directors should comprise at least three and not more than nine Board members. The Articles of Association contain no special provisions relating to the appointment or dismissal of Directors. At the most recent AGM, held on 22 April 2010, a Board was elected consisting of the regular Directors Pehr G Gyllenhammar (Chairman), Jon G Brandsar, Birger von Hall, Joachim Gahm, Leif Jansson and Ulf Corné. No Deputy Directors were appointed.
In 2010 the Board of Directors worked intensively from time to time, addressing issues such as projects, funding and expansion plans. Under its rules of procedure, the Board is required to hold at least six regular meetings between two Annual General Meetings. However, in the financial year 2010 the Board held 13 meetings, all of which were minuted. Directors' attendance at such meetings is shown in the following table.
A description of the Board of Directors including information about Board members' other directorships, independence and relevant holdings of shares and warrants is given on page 52. Compensation and other benefits provided to the Board are described in Note 4 on page 28. All Directors' appointed by a general shareholders' meeting except Leif Jansson have been independent in relation to the company and management (see also page 28). Out of those Directors that have been independent in relation to the company and management, all except Jon G Brandsar and Ulf Corné have also been independent in relation to major shareholders. More information about the Board of Directors is provided on Arise Windpower's website, www.arisewindpower.se.
| No. of meetings |
Present at |
Atten dance, % |
|
|---|---|---|---|
| Pehr G Gyllenhammar, Chairman | 13 | 13 | 100 |
| Birger von Hall | 13 | 13 | 100 |
| Joachim Gahm | 13 | 13 | 100 |
| Leif Jansson | 13 | 13 | 100 |
| Ulf Corné | 13 | 13 | 100 |
| Jon G Brandsar | 13 | 12 | 92 |
Ideally, the Board's meetings should take the form of physical meetings at Arise Windpower's head office. Extra meetings may take the form of a conference call, however. For practical reasons, several of the Board's meetings in 2010 took the form of conference calls. The Chairman leads and organises the work of the Board. The lawyer Jonas Frii has served as the Board's secretary. Prior to each meeting a proposed agenda and documentation on the issues to be addressed at the meeting are distributed. The proposed agenda is drafted by the CEO in consultation with the Chairman. Issues presented to the Board are for information, discussion or resolution. Decisions are made only after discussion and after all Directors attending the meeting have had an opportunity to express an opinion. The Board's broad experience from different fields often results in a constructive and open discussion. In 2010 no Director expressed reservations against any issue that came up for resolution. Any objections are recorded in the minutes. Open issues are followed up continuously.
The Board has not established a division of responsibilities among its members, other than what is provided for in the rules of procedure governing the activities of the Board and its committees. The rules of procedure for the Board, which are reviewed annually, govern the division of duties among the Chairman, the Board of Directors and its committees. The rules of procedure include a list of issues that must be addressed at each regular meeting of the Board. The Board has evaluated its own work. The evaluation, which was internal and carried out under the leadership of the Chairman, covered the work of the Board as well as the Directors. The results of the evaluation have been presented to the Nominating Committee. The Board has evaluated the work of the CEO.
During the period until the 2011 AGM the Remuneration Committee consists of the Directors Birger von Hall (Chairman) and Joachim Gahm. Issues addressed by the Remuneration Committee are normally presented by the CEO, with the exception of issues which relate to his or her own salary or benefits. The Remuneration Committee convened on three occasions in 2010, and has held two meetings so far in 2011. All Directors participated in all meetings. The Committee prepares issues relating to compensation and other terms of employment for the Chief Executive Officer and other senior executives as well as issues relating
to variable compensation schemes in the Group. All members of the committee are independent in relation to Arise and its senior executives. The committee's work is based on the resolutions adopted at the most recent AGM on guidelines for compensation to senior executives.
During the period until the 2011 AGM the Audit Committee consists of the Directors Birger von Hall (Chairman), Joachim Gahm and Jon Brandsar. Issues addressed by the committee are presented by the CFO, Thomas Johansson. The Audit Committee held five meetings in 2010. Attendance during the year was high at all meetings. The Audit Committee prepares issues relating to financial reporting, risks, governing documents, key ratios, accounting rules and internal control. The committee also conducts an ongoing dialogue with the company's auditor. In addition, a specially established Finance Committee has prepared certain issues relating to capital raising and acquisitions.
Arise Windpower's senior management team and senior management's holdings of shares and warrants are described on page 53.
At the AGM in 2008 Öhrlings PriceWaterhouseCoopers AB was appointed as the company's auditing firm with the authorised public accountant Bror Frid as chief auditor for the period until the Annual General Meeting held in the fourth year after the appointment.
The goal for Arise Windpower's internal financial control is to establish an effective decision-making process in which requirements, objectives and limits are clearly defined. The company and its management employ internal control systems to monitor the operations and the Group's financial position.
The control environment is the basis for the company's internal control. Arise Windpower's control environment consists of sound core values, integrity, competence, leadership philosophy, organisational structure, responsibility and authorities. Arise Windpower's internal rules of procedure, instructions, policies, guidelines and manuals provide guidance to the company's employees. In Arise a clear division of roles and responsibilities for effective management of the risks faced by the company is ensured partly through the use of rules of procedure, which govern the activities of the Board and its committees, and the instructions governing the work of the CEO. In the company's day-to-day activities the CEO is responsible for the system of internal controls that is required to create a control environment for significant risks. Arise also has guidelines and policies on financial governance and evaluation, communication issues and business ethics. All companies in the Group use the same accounting information system with the same chart of accounts.
The Board has appointed an Audit Committee which is tasked with ensuring that adopted policies for financial reporting and internal control are adhered to. The CEO or CFO reports the results of his work on internal control to the Audit Committee. The results of the Audit Committee's work in the form of observations, recommendations and proposals for decisions and measures are reported to the Board on a continuous basis.
Arise Windpower's internal control environment is thus based on the division of labour among the various organs of the company, reporting to the Board of Directors, adopted policies and guidelines, and on employees' compliance with policies and guidelines.
Internal control in respect of financial reporting is a part of Arise Windpower's overall internal control and is designed, inter alia, to obtain reasonable assurance of the reliability of the company's external financial reporting in the form of interim reports, annual reports and year-end financial statements, and to ensure that the company's external financial reports are prepared in compliance with applicable laws, accounting standards and other requirements applying to listed companies.
Arise continuously performs risk analyses to identify potential
sources of errors in its financial reporting. Documentation is being prepared for relevant procedures with the aim of improving traceability in accounting as Arise continues to expand. Normal control activities comprise reconciliation of accounts and supplementary controls. The purpose of all control activities is to prevent, detect and correct any errors or discrepancies in financial reports. The most significant risks relating to financial reporting identified in the Group's internal control activities are managed through control structures which are essentially based on reports on deviations from adopted goals or standards relating to currencies, price hedging and other issues.
The Board continuously evaluates the information submitted by management. In the activities of the Board and the Audit Committee great importance is attached to work on following up the effectiveness of internal control. A key task is to ensure that action is taken in response to any proposals for measures arising in connection with external audits.
The provision of correct information internally and externally requires that all parts of the organisation exchange and report relevant and important information about the activities in an effective manner. To achieve this, Arise has issued a set of policies and guidelines on the management of information in the financial process, which have been communicated to the employees by the management team.
For communications with external parties a policy has been adopted which contains guidelines for such communications. The ultimate purpose of the aforementioned policies is to ensure compliance with the Company's disclosure obligations and that investors receive correct and timely information.
Due to the size of the company, the work performed by the Audit Committee and the fact that good control procedures have been devised and implemented, the Board has not found it necessary to establish a separate internal audit function.
However, the issue of establishing a separate audit function will be reviewed annually.
Halmstad, 1 April 2011
Pehr G Gyllenhammar Leif Jansson Ulf Corné Chairman Director Director
Birger von Hall Joachim Gahm Jon G Brandsar Director Director Director
Auditor's statement on the corporate governance report To the Annual General Meeting of Arise Windpower AB (publ), org.no. 556274-6726
We have examined the corporate governance report for Arise Windpower AB (publ) for the financial year ended 31 December 2010. The company's corporate governance report is included on pages 47–50 of the printed version of this document.
Responsibility for the corporate governance report and for ensuring that it has been prepared in compliance with the Swedish Annual Accounts Act rests with the Chief Executive Officer. As a basis for our opinion on whether the corporate governance report has been prepared in accordance with and is consistent with the other sections of the annual report we have read the corporate governance report and assessed its legally defined content based on our knowledge of the company.
We consider that the corporate governance report has been prepared in accordance with, and that its legally defined information is consistent with, the other sections of the annual report and consolidated financial statements.
Gothenburg, 1 April 2011
Öhrlings PricewaterhouseCoopers AB
Bror Frid Authorised Public Accountan
The share capital of Arise Windpower AB is SEK 2.5 million, represented by 31,561,070 shares. All shares carry one vote each and all shares carry the same entitlement to a share in the company's assets and profits.
As the Group is in a build-up phase, the Board of Directors is of the opinion and has proposed that no dividends should be paid in the next few years. The financial policy states that the consolidated equity/assets ratio should exceed 25 per cent.
| Ownership structure, 31 December 2010 | Shares | Share of votes & share capital |
|---|---|---|
| Tredje AP Fonden | 4,636,363 | 14.69% |
| Founders with families and companies 1) | 4,119,408 | 13.05% |
| Länsförsäkringar Fondförvaltning AB | 3,190,771 | 10.11% |
| Nordea Investment Funds | 2,982,934 | 9.45% |
| Statkraft AS | 2,495,613 | 7.91% |
| ATP (Arbejdsmarkedets Tillaegspension) | 1,712,156 | 5.42% |
| Alecta Pensionsförsäkring | 1,500,000 | 4.75% |
| Ernström Finans AB | 1,396,818 | 4.43% |
| Vätterleden Invest AB | 1,165,745 | 3.69% |
| KL Ventures AB | 500,000 | 1.58% |
| Zinwin AB | 500,000 | 1.58% |
| Pehr G Gyllenhammar | 446,639 | 1.42% |
| Länsförsäkringar Gbg och Bohuslän | 400,373 | 1.27% |
| KLP-Pension | 350,000 | 1.11% |
| Pohjola Asset Management Ltd. | 344,236 | 1.09% |
| Hannells Holding AB | 328,813 | 1.04% |
| Ethos Aktiefond | 356,000 | 1.13% |
| Lundaslättens Vindfabrik | 280,165 | 0.89% |
| Hanvad Invest AB | 255,165 | 0.81% |
| Avanza Pension | 225,125 | 0.71% |
| SEB Investment Management | 212,637 | 0.67% |
| Other shareholders | 3,236,609 | 10.26% |
| Total no. of outstanding shares | 30,635,570 | 97.07% |
| Arise Windpower AB 2) | 925,500 | 2.93% |
| Total no. of registered shares | 31,561,070 | 100.00% |
1) According to a press release of 27 December 2010, the company's founders have transfered 3,162,498 shares to companies they control.
2 ) Holdings of treasury shares. There is an intention to use this shareholding in connection with acquisitions or share offerings, provided that the conditions applying to such transactions are deemed to be of value for the Group. Following the listing of Arise on NASDAQ OMX Stockholm and due to the fact that the shareholding represents less than 10 per cent of the company's share capital, Arise is no longer under an obligation to sell the shares within a certain time period.
| SHARE CAPITAL HISTORY | No. of shares | Accumulated no. of shares |
Share capital, SEK | Accumulated share capital, SEK |
|
|---|---|---|---|---|---|
| 1986 | Formation of the company | 50,000 | 50,000 | 50,000.00 | 50,000.00 |
| 1997 | Split | 950,000 | 1,000,000 | 50,000.00 | |
| 1998 | Bonus issue | 1,000,000 | 50,000.00 | 100,000.00 | |
| 2007 | New issues | 473,077 | 1,473,077 | 47,307.70 | 147,307.70 |
| 2008 | New issues | 1,420,000 | 2,893,077 | 142,000.00 | 289,307.70 |
| 2008 | Bonus issue | 2,893,077 | 867,923.10 | 1,157,230.80 | |
| 2008 | Split | 11,572,308 | 14,465,385 | 1,157,230.80 | |
| 2008 | New issue | 51,000 | 14,516,385 | 4,080.00 | 1,161,310.80 |
| 2008 | New issue 3) | 937,500 | 15,453,885 | 75,000.00 | 1,236,310.80 |
| 2009 | New issue | 5,972,185 | 21,426,070 | 477,774.80 | 1,714,085.60 |
| 2010 | New issue | 135,000 | 21,561,070 | 10,800 | 1,724,885.60 |
| 2010 | New issue | 10,000,000 | 31,561,070 | 800,000 | 2,524,885.60 |
3) Private placement in connection with the acquisition of PLU Energy Intressenter AB, which was merged with the parent company in 2009.
Pehr G Gyllenhammar, born 1935 Pehr G Gyllenhammar is a Board member and has served as the Board's Chairman since being appointed at the general shareholders' meeting on 2 October 2007. Other directorships and positions: Vice Chairman of Rothschild Europe, Chairman of Rothschild Nordic AB, Chairman of Sustainable Growth Capital SGC AB and Chairman of London Philharmonic Trust. Education: LL.M. from Lund University
(1959).
Holdings: 446,639 shares and 39,500 warrants (entitling the holder to acquire 197,500 shares).
Independence/dependence: Pehr G Gyllenhammar is independent in relation to Arise Windpower, its senior executives and major shareholders.
Jon G Brandsar has been a Board member since his appointment at the general shareholders' meeting on 16 June 2008. Other directorships and positions: Executive Vice President, Wind Power and Technologies of Statkraft AS, Managing
Director of Statkraft Development AS and Chairman of Trondheim Energi AS. Education: Degree in electrical engineering from GIH Gjøvik (1977). Holdings: –
Jon G Brandsar is considered to be independent member of the Board of Directors larger owners taken into account that Statkraft AS holds 7.91 per cent of the shares in Arise Windpower.
Jon G Brandsar is also independent in relation to Arise Windpower and its executive officers.
Ulf Corné has been a Board member since being appointed at the general shareholders' meeting on 30 April 2002.
Other directorships and positions: CEO and Director of PLU Energy Holding AB, Director of Forsus AB, Director of DontBuyIt Sverige AB, Deputy Director of Zinwin AB, Director of U Energy Holding AB, Director of Coach Manufacturing Sweden AB, Director of Sustainable Growth Capital AB and member of the Investment Committee of Innovationsbron Väst AB.
Education: M.Sc. in Engineering from Chalmers University of Technology (1980), Executive MBA studies at Santa Clara University (1991).
Holdings: 1,466,875 shares. Independence/dependence: Ulf Corné is independent in relation to Arise
Joachim Gahm, Pehr G Gyllenhammar, Ulf Corné, Leif Jansson, Jon G Brandsar, Birger von Hall
Windpower, its senior executives and major shareholders.
Joachim Gahm has been a Board member since being appointed at the general shareholders' meeting on 11 July 2007. Other directorships and positions:
Founding partner and Director of Sustainable Growth Capital SGC AB, Director of Förvaltnings AB Hanneborg. Education: M.Sc. in Economics and Business from Stockholm University (1990). Holdings: 15,000 shares and 6,000 warrants (entitling the holder to acquire 30,000 shares).
Independence/dependence: Joachim Gahm is independent in relation to Arise Windpower, its senior executives and major shareholders.
Birger von Hall has been a Board member since being appointed at the general shareholders' meeting on 11 July 2007. Other directorships and positions: Director of The Local Firm Sweden AB, Director of the Royal Bachelors Club Residence Aktiebolag, Director and Chairman of Aktiebolaget Club Avancez, Director of A och B von Hall AB, Director of Platzer Fastigheter Holding AB (publ), Director of Chalmers Innovation Affiliate Fund AB (publ), Chairman of Chalmersska Ingenjörsföreningen, Chairman of Stiftelsen Göteborgs Maritima Centrum and Director of Emils Kårhus AB.
Education: M.Sc. in Engineering from Chalmers University of Technology (1974).
Holdings: 10,000 shares and 6,000 warrants (entitling the holder to acquire 30,000 shares).
Independence/dependence: Birger von Hall is independent in relation to Arise Windpower, its senior executives and major shareholders.
Leif Jansson has been a Board member since being appointed at the general shareholders' meeting on 19 February 2007.
Other directorships and positions: Director of Arise Service & Projektering AB, Director of Arise Kran AB and Director of Arise Wind Farmbolagen, which are subsidiaries of Arise Windpower, Director of PLU Energy Holding AB, Deputy Director of Zinwin AB, Director of L Energy Holding AB and Director of L Energy Holding AS.
Education: M.Sc. in Economics and Business from the Stockholm School of Economics (1978).
Holdings: 1,278,909 shares.
Independence/dependence: Leif Jansson is independent in relation to Arise Windpower's major shareholders but, as an employed senior executive of Arise Windpower, he is dependent in relation to Arise Windpower and its senior executives.
The information, which covers holdings of shares and warrants, refers to the situation on 31 December 2010.
Peter Nygren, born 1958 CEO since 2007. Peter has long experience from major energy projects, notably as head of energy issues in the SCA Group, Vice President Project Financing at NCC, Key Customer Manager at Vattenfall and Project Manager at Calor Industrier. Holdings: 1,373,624 shares.
Thomas Johansson, born 1963 CFO since 2008. Thomas has broad experience from working as a Managing Director, Director of Finance and Administration, Director of Accounting and authorised public accountant. Holdings: 55,000 shares and 30,000 warrants (entitling the holder to acquire 30,000 shares).
COO since February 2011. Responsible for permits and detailed development plans. Lars has long experience from public administration and is responsible for permit issues and contacts with government agencies on planning, building and environment issues relating to planned wind turbines.
Holdings: 15,000 warrants (entitling the holder to acquire 15,000 shares).
Leif is responsible for leases, the development of new land areas for wind farms and, since February 2011, also for investor relations. Leif has broad experience of business development and has previously held several senior positions, including as Managing Director.
Holdings: 1,278,909 shares.
Gary Ericson, born 1952 Head of Marketing since March 2011. Gary has many years' experience from the energy industry. Before joining Arise Windpower, he worked for Halmstads Energi och Miljö AB. Holdings: 0 shares.
The senior management team after the reorganisation in February 2011. The information, which covers holdings of shares and warrants, refers to the situation on 31 December 2010.
Shareholders are invited to attend Arise Windpower's Annual General Meeting to be held at Scandic Hallandia in Halmstad, Sweden on 27 April 2011, at 11 a.m. Light refreshments and beverages will be served before the AGM.
Shareholders wishing to attend the AGM must be registered in the register of shareholders maintained by Euroclear Sweden AB (formerly VPC AB) on Tuesday 19 April 2011 and register their attendance along with that of any assistants no later than 4 p.m. on Monday 18 April 2011 by e-mail to [email protected]. It is also possible to register for the AGM by telephone, +46 (0)35 20 20 900, fax +46 (0)35 22 78 00 or by post to Arise Windpower AB (publ), Bolagsstämma, Box 808, SE-301 18 Halmstad.
Shareholders registering their attendance are required to state their name, address, telephone number, personal ID or organisation number and registered shareholding. The attendance of and information about any proxies and assistants are registered with Arise Windpower for the purpose of drawing up the electoral register. Shareholders represented by a proxy are required to issue a signed and dated authorisation to their proxy. If the authorisation is issued by a legal entity a certified copy of the certificate of registration or equivalent document for the legal entity must be presented. Any authorisations must be written and submitted no later than the AGM, but preferably by submission of a copy in advance of the meeting. Authorisation forms will be available at www.arisewindpower.se and from the head office in Halmstad, Kristian IV:s väg 3.
To be entitled to participate in the AGM, shareholders whose shares are registered with a nominee through the trust department of a bank or individual stockbroker are required to temporarily have their shares registered in their own name. This means that shareholders need to notify their nominee or bank in good time before the meeting to request temporary registration of ownership ("registration of voting rights").
Accounting documents and the audit report will be sent to shareholders requesting this, and will also be available at www.arisewindpower.se and from the head office in Halmstad. The full versions of other proposals will be available no later than Wednesday 6 April 2011 at www.arisewindpower.se and from the head office. Copies of the documents will be sent on request to shareholders stating their address.
All financial information is published at www.arisewindpower.se as soon as it has been released. In 2011 financial information will be published as follows:
The annual report is sent by mail to shareholders who have notified the company that they wish to receive it. It is also available at www.arisewindpower.se.
The persons responsible for Arise Windpower's financial information are the CEO, Peter Nygren, +46706 300 680, and CFO, Thomas Johansson, +46768 211 115.
Responsible for Investor Relations is Leif Jansson, +46707 340 554.
Arise Windpower AB, Box 808, SE-301 18 Halmstad | Phone +4635 20 20 900 | www.arisewindpower.se
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