Elering AS Strategy 2016-2025 “Merging energy systems�
September 2015
Elering AS Strategy 2016-2025 “Merging energy systems�
September 2015
Key trends
Mission, vision, values Strategic goals and projects KPIs
2
Elering AS Strategy 2016-2025 “Merging energy systems”
September 2015
5 key trends affecting Elering I Regionalisation
II Russian energy politics
III Smart grid development
IV Stakeholder expectations
V Competition for talent
RU • Changes in decision-making powers • Threat of losing functions and/or know-how • Opportunity to expand
Affect on Elering • Risk of energy flow disruptions • Possible market manipulations
• Unpredictable and lower network use • Danger of overand underinvestment
• Pressure on high • Competition for service charges talents efficiency • Need to review • Changes in work network charges organisation and and dividends conditions of employment • Reputation risk
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Elering AS Strategy 2016-2025 “Merging energy systems”
I
September 2015
Regionalisation
Description • Regionalisation means the creation of various types of regional cooperation structures between European system operators. • This is supported by the European Commission, European regulator ACER and ENTSO-E.
• The goal is to ensure the functioning of single internal energy market, but also security of supply through better coordination of system management. • The effect on Elering is potential reduction in discretionary power or even overall function, and a corresponding loss in know-how (e.g. electricity system management). • The trend towards regionalisation has deepened sharply in recent times.
Elering’s activities 1.Increase in regional cooperation • Cooperation between system operators thus far has demonstrated effective examples of what has been achieved without structured centralisation • Further benefits analysis which could be achieved with “soft” forms of cooperation
• Identification and development of the most appropriate regional cooperation model 2.Proactive changes to the operating environment • Analysis of Elering’s strengths in regional cooperation with the aim of taking a leading roll • Leadership in regional projects – synchronisation with the Nordic Countries, joint asset management • Taking a proactive role in ENTSO-E
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Elering AS Strategy 2016-2025 “Merging energy systems”
II
RU
September 2015
Russian energy politics
Description • Russia uses energy as a political tool to establish its influence abroad. • This may be reflected in higher gas prices and disruptions to gas supplies.
• Russia may unexpectedly and unilaterally terminate synchronised operation. • There is also a danger that Russia will interrupt cross-border connections.
Elering’s activities 1. Energy independence from third countries and increases in energy security • Diversification of gas supply sources and development of regional gas market • Desynchronisation of electricity system from united Russian system • Construction of additional electricity and gas transmission capacity with other European Union member states • Support for energy union policies
EU
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Elering AS Strategy 2016-2025 “Merging energy systems”
III
September 2015
Smart grid development
Description
Elering’s activities
• The smart grid means combined changes in the energy system, resulting from the widespread deployment of information and communication technologies, the development of demand side management and storage, and distributed and renewable energy-based generation.
1. Development of new network planning principles in order to prevent incorrect investment decisions
• This will likely lead to significant changes in the network structure and smaller, irregular and unpredictable transfers of power in the grid.
3. Ensuring network access for energy produced from renewable sources while not infringing on principles of equal treatment
• This trend will be fostered by subsidies, and more affordable and available technologies.
4. Rethinking the transmission network service pricing philosophy
• Therefore, making investment decisions and load forecasts will become increasingly complicated.
2. Developing solutions for network constraint management and system balancing
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5. Further development of the Estfeed platform to ensure growth in energy efficiency and to give consumers and microproducers an active role in the energy market 6. Smart grid awareness building and participation in energy discussions 6
Elering AS Strategy 2016-2025 “Merging energy systems”
IV
September 2015
Stakeholder expectations
Description • Expectations are changing amongst all stakeholders, including market participants, clients, consumers, the owner and the regulator. • More and more clients are connecting to the network, including wind and solar energy producers, who expect swift and effective action and advice from Elering during both the connection process and network service provision. • The same affects consumers who are connecting or have already connected to the grid.
• The owner’s expectations are also changing and may be expressed in the size of network charges and dividends. • The regulator may wish to reduce the regulated Weighted Average Cost of Capital (WACC).
Elering activities 1. Improvement in customer service level quality • Solving the challenges related to customer service level quality • Sufficient investment in network reliability • Continued adjustment of Elering’s organisation and terms of network connection € 2. Cost control and monitoring • Monitoring cost levels and applying increased effectiveness to keep pace with potentially higher dividend expectations, and lower network charges and WACC expectations • Detailed analysis of investments • Finding the balance between security of supply, dividends and stakeholder expectations
• Society will not accept an insufficiently justified network charge increase. 7
Elering AS Strategy 2016-2025 “Merging energy systems”
V
September 2015
Competition for talents
Description • In the period 2013-2022, 12 thousand people annually will leave the Estonian workforce. One of the industries most affected by the movement of older workers is the energy industry. During the same period, the number of graduates from high school, vocational colleges and tertiary institutions will fall by an average of 15-30% a year compared with the period 2008-2013 (MEAC Labour requirements and supply projection until 2022) • About 25% of Elering employees are at or will reach pension age within the next 10 years. • Changes in personnel present the company with a variety of new expectations about work arrangements and content, benefits offered by the employer, development opportunities, and the work environment.
Elering’s activities 1. Finding talents • Developing reputation as an attractive employer for young talents 2. Retaining committed and productive employees • Implementation of career and development programme for young people with potential • Further development of remuneration and motivation system • Ongoing development of corporate culture according to changing personnel needs
• Development and harmonisation of management quality (incl. implementation of performance management principles) • As part of the performance management system, regular overviews of performance in business-critical positions and ongoing development 8
Elering AS Strategy 2016-2025 “Merging energy systems�
September 2015
Key trends
Mission, vision, values Strategic goals and projects KPIs
9
Elering AS Strategy 2016-2025 “Merging energy systems”
September 2015
Elering’s mission and vision Mission Elering’s mission is to ensure security of energy supply to Estonian consumers through effective regional energy markets based on reliable energy networks and competent employees. In doing so, we support competitiveness of Estonian economy.
Vision Elering’s vision is to be the best energy infrastructure company in the Baltic Sea region.
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Elering AS Strategy 2016-2025 “Merging energy systems”
September 2015
Elering’s values RESPONSIBILITY We perceive our responsibility to society in ensuring electricity and gas supplies in an economically efficient way. EQUAL TREATMENT Elering creates conditions for the functioning of the energy markets. For the functioning of an open competition market we treat all market participants equally. DEDICATION AND UNIFIED KNOW-HOW Our employees represent a large part of Elering’s assets. We appreciate everyone’s dedication to help meet our obligations to society. To achieve our goals, we unite employees with long-term experience and the latest knowledge. By implementing this potential, we create synergies which will lead us to the best solutions in the energy industry.
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Elering AS Strategy 2016-2025 “Merging energy systems�
September 2015
Key trends
Mission, vision, values Strategic goals and projects KPIs
12
Elering AS Strategy 2016-2025 “Merging energy systems”
September 2015
6 strategic perspectives and goals Regionalisation perspective
B
A Initiative in regional energy economy
We take the initiative in the development of regional energy economy management, enhancing regional cooperation and investigating expansion opportunities.
Development of regional electricity and gas market
Asset management perspective C We manage the regions most efficient electricity and gas networks, ensuring security of supply through a reduction of outages in transmission network and high availability of cross-border capacities.
Customer and society perspective We have strong customer satisfaction and stakeholder reputation as credible partner and well-managed company. Society values our contribution to socio-economic development through security of supply, innovation, environmental awareness and affordability.
Region’s most efficient network
We develop the Baltic Sea regional energy market to provide suppliers with opportunities to effectively supply their customers; and consumers to freely choose their suppliers.
D Strong financial performance
E
F Recognition by customers and society
Attractive employer
Energy market perspective
Financial perspective We create positive economic added value and maintain a strong credit rating, providing the owner with dividend revenue.
Personnel perspective We are a respected employer in the energy field and offer unique career paths to young talents. We contribute to our employees’ professional development and they take pride in their work for Elering.
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Elering AS Strategy 2016-2025 “Merging energy systems�
September 2015
Regionalisation perspective: Initiative in regional energy economy
A
Strategic goal: We take the initiative in the development of regional energy economy management, enhancing regional cooperation and investigating expansion opportunities.
KPIs
N/A
Targets
N/A
Strategic projects
1. Establish the Baltic States’ regional coordination initiative 2. Assess the feasibility of a joint Baltic control centre
2015
2016
2017
2018
2019
2020 2021-22 2023-25
A1
A2
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Elering AS Strategy 2016-2025 “Merging energy systems�
September 2015
Energy market perspective: Development of regional electricity and gas market B
Strategic goal: We develop the Baltic Sea regional energy market to provide suppliers with opportunities to effectively supply their customers; and consumers to freely choose their suppliers. KPIs Data hub availability PTR-L price ratio to price difference of EE and LV power exchanges Number of gas suppliers
Targets > 99%
Strategic projects 1. Develop energy data hub
2. Develop financial instruments to hedge 0,9-1,1 market risks (3-year 3. Ensure transparency average) and availability of market information 10
4. Implement Elering’s Gas market action plan 2020
a) Number of a) 7 5. Create common balancing providers Nordic-Baltic b) Availability time of b) > 95% electricity balancing balancing energy market between Baltics and 6. Promote demand side Nordics management Amount of renewable energy covered by certificates of origin
tbd
7. Create effective renewable energy market
2015
2016
2017
2018
2019
2020 2021-22 2023-25
B1 B2
B3
B4
B5 B6
B7 15
Elering AS Strategy 2016-2025 “Merging energy systems”
September 2015
Asset management perspective: Region’s most efficient network
C
Strategic goal: We manage the regions most efficient electricity and gas networks, ensuring security of supply through a reduction of outages in transmission network and high availability of cross-border capacities. KPIs
a) Electricity not delivered b) Outages c) Gas N-1 d) Gas losses
Uncongested time on Estonian-Finnish border
Targets
Strategic projects
2015
2016
a) <121 MWh
1. Implement the “Treefree lines” programme 2. Establish Balticconnector b) <170 3. Desynchronise from Russia c) >100% 4. Ensure reliability of electricity system d) <0,1%
> 95%
5. Conclude maintenance agreements 6. Coordinate asset management with Finnish and Latvian transmission networks
2017
2018
2019
2020
202122
202325
C1 C2 C3 C4
C5 C6
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Elering AS Strategy 2016-2025 “Merging energy systems”
September 2015
Financial perspective: Strong financial performance
D
Strategic goal: We create positive economic added value and maintain a strong credit rating, providing the owner with dividend revenue. KPIs
Targets
Strategic projects
1. Engage more costeffective financing options 2. Apply for new tariffs timeously
2015
2016
2017
2018
2019
Economic added value EVA
>0
Dividends
15 MEUR per year (5-year average)
3. Include owners request for dividends in financial forecasts
D3
A3
4. Consider Moody’s rating methodology requirements in company’s strategy and budget
D4
Financial credit rating
2020 2021-22 2023-25
D1 D2
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Elering AS Strategy 2016-2025 “Merging energy systems”
September 2015
Customer and society perspective: Recognition by customers and society
E
Strategic goal: We have strong customer satisfaction and stakeholder reputation as credible partner and well-managed company. Society values our contribution to socio-economic development through security of supply, innovation, environmental awareness and affordability. KPIs
Customer satisfaction index
Corporate reputation index
Targets
Strategic projects
TBD
1. Ensure client satisfaction
40%
2. Develop energy competence centre 3. Strengthen company’s image 4. Organise corporate governance practices according to the best practice requirements of Tallinn Stock Exchange and Financial Inspection
2015
2016
2017
2018
2019
2020 2021-22 2023-25
E1
E2 E3 E4
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Elering AS Strategy 2016-2025 “Merging energy systems”
September 2015
Personnel perspective: Attractive employer
F
Strategic goal: We are a respected employer in the energy field and offer unique career paths to young talents. We contribute to our employees’ professional development and they take pride in their work for Elering. KPIs
Employer reputation
Voluntary turnover
Targets
Strategic projects
TBD
1. Ensure strong reputation as an employer among key target groups
< 7%
2. Map successors in business-critical positions and develop young talents with key competences 3. Implement a performance management system 4. Further develop an inclusive organisational culture 5. Develop leadership skills
2015
2016
2017
2018
2019
2020
2021- 202322 25
F1
F2 F3 F4 F5
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Elering AS Strategy 2016-2025 â&#x20AC;&#x153;Merging energy systemsâ&#x20AC;?
September 2015
Key trends
Mission, vision, values Strategic goals and projects KPIs
20
Elering AS Strategy 2016-2025 “Merging energy systems”
September 2015
Actual and target levels of KPIs KPIs
Metric
Actual levels
Targets
2011
2012
2013
2014
2016
2020
2025
Data hub availability PTR-L price ratio to price difference of EE and LV exchanges Number of gas suppliers
%
N/A
N/A
N/A
N/A
> 99
> 99
> 99
Ratio
N/A
N/A
N/A
N/A
0.8-1.2
0.9-1.1
0.9-1.1
#
1
1
1
2
6
10
10
Number of balancing providers Availability time of balancing energy between Baltics and Nordics Amount of renewable energy covered by certificates of origin Electricity not delivered
#
1
1
1
1
1
3
7
%
N/A
N/A
N/A
N/A
N/A
> 95
>95
%
N/A
N/A
N/A
N/A
tbd
tbd
tbd
MWh
782
148
58
27,6
183
155
121
Outages
#
251
204
261
166
192
182
170
Gas N-1
%
68
68
68
68
68
> 100
> 100
Gas losses Uncongested time on EstonianFinnish border Economic value added EVA
%
N/A
N/A
N/A
0.4
< 0.25
< 0.1
< 0.1
%
N/A
N/A
N/A
93.6
> 95
> 95
> 95
MEUR
4.9
15.8
6.7
10.2
>0
>0
>0
Dividends
MEUR
0
0
0
0
15
15
15
Financial credit rating
Moody’s
A3
A3
A3
A3
A3
A3
A3
35
40
<7
<7
Methodology is under development
Customer satisfaction index Corporate reputation index
%
41
N/A
N/A
30
Methodology is under development
Employer reputation Voluntary turnover
27
%
6
5
7
4
<7
21