Message from the CEO

2008 was a year of record operating profits for the TrønderEnergi Group, although profits after tax were down owing to weak financial results stemming from the international financial crisis. A highly skilled and motivated workforce, combined with a year which saw substantial inflow to hydropower reservoirs and high electricity prices, contributed to the good operating results.

At the start of 2009, we are faced with some major albeit interesting challenges. The programme of efficiency improvements within the Group is continuing. At the same time, the Group is in the process of establishing a number of new businesses which require both competence and capacity.

The overall balance of supply and demand in Central Norway remains weak. Several consecutive years with high inflow to hydropower reservoirs have served to conceal this fact from most people. The statistical data we have does, however, indicate that we will have a dry autumn followed by a dry winter and a dry summer, not necessarily this year or next year, but at some point in the future. It is my hope that by then we will have managed to secure sufficient access to new energy and power through the construction of new generating capacity and new electricity transmission capacity both within Norway and between Norway and our neighbouring countries, as well as improved energy efficiency and flexibility in energy use.

The primary task of the TrønderEnergi Group in this connection is to develop new, cost-effective energy generating capacity and to support the efforts being made to increase energy efficiency and flexibility in the use of energy in our part of the world. Much of this work will also involve measures to reduce CO2 emissions. New energy production must accordingly help reduce the future effects of climate change. This is a task which TrønderEnergi is committed to tackling on a broad front, both by investing in more small-scale hydropower plants and more wind farms within our Energy business unit, by investing in new hydropower generating capacity as part of our new foreign operations strategy, and by investing in new, renewable energy generation and energy-related industry in our Investment and Growth business unit. In addition, we are investing in energy-efficiency measures and products in our Grid Operations and Market and Services business units.

During 2008, TrønderEnergi completed the construction of the Bessakerfjellet wind power farm, which with 25 wind turbines has a total installed capacity of 57.5 MW and 176 GWh estimated mean annual electricity generation. In addition, the Norwegian Water Resources and Energy Directorate (NVE) is considering our application for a licence to build a major wind power farm in Frøya as well as our planning proposals to build two farms in Snillfjord. We are also working on plans for a number of small hydropower projects, either alone or under the auspices of one of our joint-venture companies. NVE’s capacity to process such applications is a regrettable bottleneck when it comes to realising energy projects of this kind, although NVE has now chosen to prioritise facilities in Central Norway.

In partnership with several co-owners, we are currently building a district heating system in Orkdal. We have also applied for a licence to build a number of small district heating systems in Sør-Trøndelag.

The structure of the energy industry in Central Norway is under discussion. Statkraft, the owner of Trondheim Energi Nett AS, and TrønderEnergi AS, the owner of TrønderEnergi Nett AS, agree that a merger between the grid operations of the two companies would be sensible, but have so far failed to resolve the problem of who should have the majority shareholding in the merged enterprise. The work of finding a good solution to this difficulty continues.

The issue raises several matters of principle. The EU’s Energy Commissioner has questioned whether major electricity generators should be allowed to own substantial grid operations. This discussion is also relevant from a Norwegian point of view. It is not possible in this context to discuss all the various aspects of this issue, but I ask myself whether Norwegian society would be best served if the country’s largest electricity generator by far were also the owner of major grid operations. This question is relevant for the competitive situation in the Norwegian electricity market and the regional companies’ future contributions to regional development.

In connection with the sale by certain local authorities of B-shares in TrønderEnergi AS, the company bought back 10 per cent of its own shares. These shares were sold in 2008 to Trondheim City Council, which as a result is now a significant shareholder in the company. During the year, TrønderEnergi AS purchased a small tranche of shares from Agdenes Municipality. These shares have now been offered to the other shareholders.

TrønderEnergi AS has implemented a wide-ranging programme of efficiency improvement measures throughout the Group, though with the main focus on grid operations. The staff cutbacks that were made in 2008 will continue in 2009, and we will seek to concentrate on our role as grid owner within the framework drawn up by the central government authorities. We have established TrønderEnergi Entreprenør AS, into which was spun off all the installation capacity previously organised in TrønderEnergi Nett AS. TrønderEnergi Entreprenør AS supplies construction services to our own and third-party grid operators. Considerable efficiency gains have been made by establishing the new company, as a result of which grid rental in our grid was reduced twice during the year.

For more than a year, TrønderEnergi has been working hard to prepare for ISO 9001 (quality) and ISO 14001 (environmental) certification. Our aim is to achieve certification during 2009.

Throughout 2008, the organisation worked extensively to establish new business activities. Bugoye, a small hydropower plant we are building in Uganda in partnership with Norfund AS, will be commissioned in 2009. In brief, this project is motivated by profitability, environmental and climate change issues, the hydropower competence possessed by the Group and the industry, and the desire to provide assistance to poor countries. Many organisations are considering hydropower projects in other, largely poor, countries. TrønderEnergi AS will consider in 2009 how the Group’s activities in other countries should be continued and expanded.

The TrønderEnergi Group has elected to divide its operations into four business units, as a result of the scale of the Group’s new business operations. The Energy business unit will look after all activities relating to energy production, which include electricity generation by hydropower and wind power plants, districting heating, and energy production in other countries.

The Grid Operations business unit is primarily the owner of the regional and local distribution grids in Sør-Trøndelag, but is also responsible for an extensive communications network. Clarification of the roles of owner and commissioner has considerably increased cost-consciousness within the organisation.

Market competence within the Group will be developed and honed in the Market and Services business unit. TrønderEnergi Marked AS, TrønderEnergi Entreprenør AS and TrønderElektro AS have been brought together in this unit, along with our IT company, Nidit. Our broadband business, Loqal AS, was at the end of 2008 transferred from the Investment and Growth business unit to Market and Services. TrønderEnergi Marked AS comprises our business activity in the retail market and will in addition work to develop the TrønderEnergi brand on behalf of the entire Group. The decision has been taken to merge TrønderEnergi Entreprenør AS and TrønderElektro AS, with TrønderEnergi Entreprenør AS as the acquiring company.

The primary task of the Investment and Growth business unit is to invest, through the company TrønderEnergi Invest AS, in new forms of energy production and energy-related industry in Norway. Profitability is the main objective, but also potential future value creation within the Group. In this connection, the company is participating by investing in both seed and venture funds within the region in order to build networks and contribute to future business development, but also more directly, with large-scale investment in individual companies where the aim is to contribute to profitable business development. The company made its first contribution to the Group’s activity this year through the development and transfer of the broadband company, Loqal AS. TrønderEnergi Invest AS also invests a limited amount of financial funds in listed equities and securities, for the purpose of creating a financial return and bringing financial and economic expertise to the business unit. While this has been a challenging task through the financial crisis, the business unit nevertheless posted a small profit for its first year of operations.

TrønderEnergi owns a valuable piece of property in Trondheim, which we wish to develop. This is intended to remedy the problem of cramped office space, while also creating new assets for the Group.

The Group is engaged in a comprehensive effort to manage and enhance its business reputation. We wish to cultivate our relations with our owners, and to that end during the year we visited most of the municipal councils representing the local authorities that own us. We plan to visit the remaining municipal councils in 2009. These visits have given us a good opportunity to provide information on our activities to our owners, and at the same time award a cultural and environmental prize in each local authority.

Our board of directors has approved ethical guidelines for the entire Group, which include 10 principles taken from the United Nations Global Compact. These principles govern our foreign operations and cover human rights, labour and the environment.

Through the year, every working day at TrønderEnergi has focused on the Group’s core business functions: grid operations, electricity generation and sales, both wholesale and retail. In addition to these day-to-day activities, the organisation has undertaken wide-ranging organisational and structural processes. Efforts to create new value-adding activities and to exploit the Group’s financial leverage have become an increasingly vital part of our business.

The pace of change is quickening, and this makes new demands on the competence and decision-making skills available to the Group. Competition for skilled workers is tough and getting tougher. It is therefore important for the future that TrønderEnergi should be perceived as and continue to develop as an interesting and exciting energy enterprise to work for, with interesting tasks that are important for the development of the society we live in. We want to increase the number of women working in the Group and in the industry, and have taken part in the industry’s efforts to attract and recruit more women.

At the start of 2009, the Group had 317 employees in a total of 13 companies. We are looking forward to some exciting developments in the years to come.

Rune Malmo