The corporate governance statement clarifies the distribution of roles between the Norwegian state as owner, the board and the management in the company.
Efficient and transparent management and control of the business will form the basis for creating long-term values for the owner, employees, other stakeholders and society in general, and, as a result, contribute to sustainable and lasting value creation. The distribution of roles shall inspire confidence among stakeholders through predictability and credibility. Open and accessible communication from the company will ensure that the Group maintains a good relationship with society in general and, in particular, with the stakeholders affected by the company’s activities.
Statkraft follows the Norwegian state's principles for sound corporate governance as described in Meld. St. 27 (2013-2014) Et mangfoldig og verdiskapende eierskap (white paper on the government’s governance), and is subject to reporting requirements relating to corporate governance according to Section 3-3b of the Accounting Act. Furthermore, Statkraft applies the Norwegian Code of Practice for Corporate Governance (NUES) within the framework established by the company's organisation and ownership.
Information that Statkraft is obliged to provide pursuant to Section 3-3b of the Accounting Act relating to corporate governance has been taken into account in this statement and follows the systems laid down in the recommendation where natural. A detailed description of how Section 3-3b, second subsection of the Accounting Act has been applied follows below:
- an indication of the recommendation and corporate management regulations that the enterprise is subject to or has otherwise chosen to adhere to
- Section (1) of the statement: Corporate governance statement
information about where recommendations and regulations as mentioned in No. 1 are publicly available - The recommendations which Statkraft follow are available at www.nues.no, in Meld. St. 27 (2013-2014) Et mangfoldig og verdiskapende eierskap (white paper on the government’s governance), and in the Norwegian state's principles for sound corporate governance.
Statkraft's code of conduct is available on Statkraft's website on corporate social responsibility.
- reasons for any noncompliances in relation to recommendations and regulations as mentioned in No. 1.
- NUES’ recommendations for the Sections (3) Equity and dividend, (4) Equal treatment of shareholders, (5) Freely negotiable shares, (6) General meetings, (7) Election committee and (14) Take-over of the company, are not relevant for Statkraft as a wholly state owned company. These items have, however, been covered in line with the requirements applying to Statkraft as a wholly-owned state company.
- a description of the main elements of the enterprise's and, for entities required to prepare financial statements, possibly also the group's systems for internal control and risk management in connection with the financial reporting process
- The statement's Section (10) Risk management and internal control
- provisions in the Articles of Association that in part or in full do not comply with provisions in Chapter 5 of the Public Limited Liability Companies Act
- The statement's Section (6) Enterprise meeting and general meeting
- composition of the board, corporate assembly, supervisory board and control committee; or working committees for these bodies, as well as a description of the main elements in the applicable instructions and guidelines for the bodies and the work of any committees
- The statement's Section (8) Corporate assembly and board of directors, composition and independence, and Section (9) The work of the board of directors
- the provisions of the Articles of Association that govern nomination and replacement of board members:
- The statement's Section (8) Corporate assembly and board of directors: composition and independence
- the provisions of the Articles of Association and authorisations that give the board authority to decide that the enterprise will repurchase or issue own shares or primary capital certificates
- The statement's Section (3) Share capital and dividends
A statement concerning follow-up of the items in the Norwegian Code of Practice for Corporate Governance is given below.
(1) CORPORATE GOVERNANCE STATEMENT
Statkraft is organised through a state enterprise, Statkraft SF. The activity in Statkraft SF is, for all practical purposes, restricted to owning all shares in Statkraft AS. Statkraft SF and Statkraft AS have an identical board of directors and management. Statkraft AS is the parent company for an underlying corporate structure. Statkraft adheres to the Norwegian Code of Practice for Corporate Governance (NUES) within the framework established by the company's organisation and ownership. Statkraft follows the Norwegian state’s principles for sound corporate governance, described in Meld. St. 27 (2013-2014) Et mangfoldig og verdiskapende eierskap (white paper on the government’s governance), and is subject to reporting requirements relating to corporate governance according to Section 3-3b of the Accounting Act.
The Norwegian state’s principles for sound corporate governance from the Governance White Paper:
Norwegian state’s principles for sound corporate governance from
the governance white paper
- Shareholders must be treated equally.
- The Norwegian state's ownership and the company's activities must be transparent.
- The owner's decisions and resolutions must be made at the general meeting.
- The board is responsible for preparing clear goals and strategies for the company within the framework of the Articles of Association. The Norwegian state has expectations for the company's results.
- The capital structure in the company must be in line with the company's purpose and situation.
- The composition of the board must be characterised by expertise, capacity and diversity based on the nature of the individual company.
- The board has the overall responsibility for the management of the company and also safeguards an independent control function vis-à-vis the company's management on behalf of the owners.
- The board must have a plan for its work, must work actively on its expertise development and must evaluate its activities.
- Wage and incentive schemes must be designed to promote value creation in the company, and must be reasonable.
- The company will work with a goal-oriented mindset in order to safeguard its corporate responsibility.
The company's value base is described in Statkraft's Code of Conduct, and the guidelines for ethics and corporate responsibility have been designed on the basis of the Code. The company' annual report includes a statement on corporate responsibility.
The objective of Statkraft AS, alone, or through participation in or cooperation with other companies, is to plan, design, construct and operate energy production facilities, undertake financial and physical energy trading, and operate businesses which are naturally associated therewith. Statkraft AS is registered in Norway and its management structure is based on Norwegian company legislation. Statkraft is also subject to the Norwegian Securities Trading Act and stock exchange regulations associated with the company’s debt obligations.
(3) SHARE CAPITAL AND DIVIDENDS
Statkraft AS’ share capital totals NOK 33 000 000 000, divided among 200 000 000 shares of NOK 165 each. The company's shares can only be owned by Statkraft SF.
Capital increases are processed through the enterprise meeting of Statkraft SF and the general meeting of shareholders in Statkraft AS.
The State as the shareholder is free to set the dividend in its wholly owned companies. The provision of the Limited Liability Companies Act to the effect that the general meeting cannot adopt a higher dividend than that proposed or accepted by the board of directors, does not apply to wholly owned state companies.
The Norwegian state communicates long-term and annual dividend expectations to Statkraft. Storting Proposition No. 40 S (2014-2015) stipulates guidelines for dividend levels for the period 2015-2018. Storting Proposition No. 1 (2007–2008) discussed the consequences of conversion to the IFRS accounting standard and concluded that dividend will normally be calculated "from group profit after tax and minority interest, adjusted for unrealised gains and losses".
The Board maintains a continuous focus on adapting the company's objectives, strategy and risk profile to the company's capital situation. Statkraft's investments are financed through a combination of retained capital, borrowings and any new capital contributed by the owner.
See Note 6 in the annual report for more information about the company's capital structure management.
(4) EQUAL TREATMENT OF SHAREHOLDERS AND TRANSACTIONS WITH RELATED PARTIES
Statkraft engages in transactions with companies that are closely related to Statkraft's shareholder, the Norwegian state. All transactions are based on regular commercial terms and principles.
The instructions to the Board of Statkraft state that neither Board members nor the President and CEO may participate in the processing or resolution of issues that are of substantial personal or financial interest to them or closely related parties. Any persons in such a situation must, on their own initiative, disclose any interest they or their closely related parties may have in the resolution of an issue. The same follows from the Group’s ethical rules.
(5) FREELY NEGOTIABLE SHARES
Shares in Statkraft AS can, according to the Articles of Association, only be owned by the state-owned enterprise Statkraft SF.
(6) ENTERPRISE MEETINGS AND GENERAL MEETINGS
The Norwegian state exercises its authority as the owner in the enterprise meeting of Statkraft SF. In accordance with the Articles of Association of Statkraft SF, Statkraft SF cannot attend and vote in a general meeting in Statkraft AS without a preceding decision in an enterprise meeting.
The enterprise meeting and the following general meeting are held once annually by the end of June. The auditor attends the enterprise meeting and the general meeting.
Before the board makes a decision in matters assumed to be of significant importance for the purpose of the enterprise/company, or which will significantly change the character of the activities, the matter must be put before the ministry representing the state's ownership in accordance with the State Enterprise Act.
(7) THE ELECTION COMMITTEE
Statkraft SF and Statkraft AS have no election committee. The election of the board members appointed by the owner in Statkraft SF will take place in the enterprise meeting. Statkraft SF and Statkraft AS have identical boards.
(8) THE CORPORATE ASSEMBLY AND BOARD OF DIRECTORS, COMPOSITION AND INDEPENDENCE
The State Enterprise Act stipulates that state-owned enterprises shall be governed by a board and a general manager. Pursuant to the Limited Liability Companies Act, Statkraft AS has entered into an agreement with its employees’ trade unions stipulating that the company will not have a corporate assembly. Three of the Board's nine members are elected by the employees based on the agreement that the company will not have a corporate assembly.
The State emphasises expertise, capacity and diversity based on the company's distinctive character when State selects people to sit on the companies' boards. The goal is for the board of each company, overall, to represent the desired expertise based on the company’s objective, business segment, challenges and the State's ownership goals. Emphasis is e.g. placed on selecting representatives with broad-based experience from commerce and industry for companies with commercial goals.
The Storting has decided that members of the Storting should not be appointed to offices in companies that are subject to the Storting's control. It is also assumed that ministers will resign from such offices when elected into the Government and also cannot be selected for new offices. The same applies to state secretaries.
There are provisions stipulating that public officials and civil servants employed in a ministry or the Central Administration in general, who deal with matters concerning the enterprise as part of their job, or that are working in a ministry or other Central Administration agency that regularly processes matters of significance for the company or the industry sector in question, cannot be elected to the company's board, see Meld. St. 27 (2013-2014) Et mangfoldig og verdiskapende eierskap (white paper on the government’s governance).
The President and CEO and senior executives of Statkraft are not members of Statkraft's Board.
Board members are elected for terms of two years and can be re-elected.
(9) THE WORK OF THE BOARD OF DIRECTORS
The Board of Directors usually meets ten times a year. The chair of the Board will hold board meetings as often as is required. The Board of Directors has stipulated board instructions with guidelines for the work and case processing of the board. The instructions also cover the President and CEO. The instructions define the work scope, duties and authorities of the President and CEO in more detail than follows from the legislation.
The Board prepares an annual agenda for its work, with a special emphasis on goals, strategies and implementation. The Board holds an annual strategy conference. The President and CEO prepares background material for such conferences, in the form of strategic, economic and financial plans.
The Board informs the boards of subsidiaries of matters of potential significance for the subsidiary in question.
The board evaluates its own performance and expertise annually.
The board has also appointed a Compensation Committee consisting of the Board chair and two of the Board's other members. The Compensation Committee prepares the Board's deliberations on the wages and other benefits paid to the President and CEO - as well as matters of principle related to wage levels, incentive schemes, pension terms, employment contracts and similar for the company’s executives. The remuneration for the Group auditor is stipulated by the board.
The Board’s Audit Committee comprises four of the Board’s members. The committee shall function as a preparatory body for the Board's management and supervision work, and at least one member of the Audit Committee shall have experience in accounts management, financial management or auditing. The background and expertise of the individual board members is available on Statkraft’s website («The Board»). An overview of the members' participation in board meetings is available in Note 37 of the annual report.
(10) RISK MANAGEMENT AND INTERNAL CONTROL
Risk management is an integrated part of all activities in Statkraft, and managers at all levels of the organisation are responsible in this regard, including subsidiaries, joint ventures and contractors. Risk management is regulated by mandates, specification documents and guidelines. Follow-up of risk and risk management are incorporated in the daily business operations.
Risk management and internal control are integral parts of the Board's work. The Board has the overall responsibility for Statkraft having suitable and efficient systems for risk management and internal control. In order to ensure this, the board shall:
- Review the Group’s most important risk areas and conduct the established internal audit at least once a year
- Ensure that the systems are adequately established, implemented and followed up, e.g. through processing of reports submitted to the board by the President and CEO and the internal audit function
- Ensure that risk management and internal control are integrated in the Group's strategy and business plans
Furthermore, the board shall ensure that the President and CEO has:
- Stipulated instructions and guidelines for how the Group's risk management and internal control will be carried out in practice
- Established adequate control processes and functions
- Ensured that Statkraft's risk management and internal control are carried out, documented, monitored and followed up in a prudent manner
Statkraft's overall control system, "The Statkraft Way", defines the Group's ground rules and ensures a sound control environment for fulfilling the management's goals and intentions. This management system has been certified in accordance with the ISO standards for quality management systems and environmental management systems (ISO 9001:2008 and ISO 14001:2004).
Corporate Audit is an independent function which assists the Board and management in making an independent and impartial evaluation of whether the Group’s most significant risks are sufficiently managed and controlled.
Corporate Audit shall also contribute to ongoing quality improvement in internal management and control systems. The Group auditor fills the role of secretary for the Board's Audit Committee. The Audit Committee and the Group auditor hold minimum one meeting per year without anyone from the Group's administration attending.
The head of the Group audit acts as notification body for unethical or illegal matters.
Internal audits are conducted according to an annual rolling plan and follow-up audits. The audit work will be carried out in accordance with the International Standards for Internal Auditing (IIA). The annual corporate audit report is submitted to the Board, which also approves the audit plan for the coming year. Corporate Audit also presents a semi-annual report to the Audit Committee. Implementation of the recommendations from Corporate Audit is regularly followed up.
The internal control includes compliance with the company's value base and guidelines for ethics and corporate responsibility. Important functions to ensure that risk management and internal control are an integrated part of the activities in Statkraft include the Group's internal auditing, the integrity officer function, the Group risk function, the Group's Investment Committee and the Group’s internal control in connection with financial reporting.
The risk management is an integrated part of other governance through a risk-based system for the corporate management's follow-up of the business areas. A centralised Group risk function has been established. The function is independent of the commercial operations. The Group's risk function monitors Statkraft's overall risk at the group level and reports to the CFO. The group's overall risk profile is concluded by the group management and is reported to the Board.
Statkraft has a central investment committee to improve risk management in relation to individual investments and across the project portfolio.
Internal control of financial reporting and financial management
The group's CFO is responsible for risk management and internal control associated with the accounts reporting process in Statkraft.
Statkraft has a financial manual which is available to all employees on the Group's portal. The manual is a tool to ensure that the requirements set by the Group's control system, "The Statkraft Way", are complied with in the financial reporting process. This includes a description of the reporting process, the internal control system, reporting instructions, financial reporting principles, reporting calendar and course calendar. The information in the manual is continuously kept up to date and all documents are updated at least once annually.
"The Statkraft Way" and the finance manual form an important basis for the other internal control work in the financial reporting. The Group has a system for internal control in the financial reporting to ensure correct accounting information in the monthly, quarterly and annual reports. The main elements of the system are risk assessment, control measures, self-evaluation, reporting and continuous exercise of control and compliance follow-up. The requirements in the internal control system have been made available to all employees via the financial manual.
The main elements in the internal control system are:
- Risk assessment
Annual review of the Group's inherent and residual risk of errors in the financial reporting. This is documented in a financial risk map presented to the Group's Audit Committee.
- Statkraft’sControl measures
Establishing control measures in order to reduce the identified inherent risk of faults down to an acceptable level. Each individual control measure must be assigned to a responsible person and the control measure descriptions are made available to all employees through the financial manual.
- Continuous control and follow-up
The controls are performed continuously by the line organisation over the course of the year, and line managers must ensure compliance with the requirements of the internal control system.
Line managers perform an annual self-evaluation by carrying out control measures and documenting them over the course of the accounting year. The result of the self-evaluation is presented to the audit committee.
Reports are submitted to the audit committee twice annually; the financial risk map and the result of the self-evaluation.
Statkraft bases its internal control work in relation to financial reporting on the Committee of Sponsoring Organizations of the Treadway Commission's (COSO’s) framework for risk management and internal control from 1992.
Statkraft prepares monthly and quarterly internal reports which analyse the performance and forecasts for the Group and the segments. The reports are reviewed and quality assured by the segment management, CFO and corporate management. Special emphasis is put on analysis of financial performance, market developments, production and investments. The internal reports are continuously reconciled with the Group's consolidated income statement and consolidated balance sheet. The results in the business units are also measured and followed up through score cards consisting of financial, operational and organisational target figures.
Annually, the Group releases four quarterly financial statements and one annual financial statement. The accounts are prepared in accordance with statutory and regulatory requirements and are presented on the basis of applicable accounting principles and within the deadlines stipulated by Statkraft's board. For each quarter, special reporting instructions are prepared and communicated to the segments. The principle documents for financial reporting and the reporting instructions set clear requirements for allocation of responsibilities as regards preparation and assuring the quality of information. In addition, risk assessment and control measures have been established on multiple levels in connection with each individual presentation of the accounts.
Internal meetings where the CFO and the segments participate are held each quarter to review the risk factors of the segments, significant accounting items and other issues. The meetings also include risks in relation to financial reporting, both in the short and long term. The drafts of accounts that are made public are reviewed by the corporate management to ensure that the information reflects the underlying operations. In addition, the board's audit committee performs a preparatory review of the quarterly accounts and annual accounts, focusing on valuation items, significant incidents and non-recurring items. For each quarter, the board's audit committee receives an accounting memo describing these types of items. The external auditor participates in all meetings of the board's audit committee.
(11) BOARD REMUNERATION
The owner stipulates the remuneration for the board. The remuneration is not related to the company's results.
Shareholder-elected board members normally do not perform any additional tasks for the company. To the extent that the members of the board perform tasks for company, this must be clarified with the other board members in advance. Board remuneratiom is descrinbed in note 37 in the annual report.
(12) REMUNERATION OF EXECUTIVE EMPLOYEES
Statkraft adheres to the Norwegian state's guidelines for employment terms for managers in state enterprises and companies.
The board will contribute to a moderate, but competitive development of executive remuneration in Statkraft. The board’s compensation committee prepares the board's deliberation of the wages of the President and CEO and the rest of the company’s senior executive management team. The CEO and President is currently remunerated with a fixed wage, and the executive vice presidents are remunerated with fixed wages and a variable wage scheme. The variable wage scheme for executive vice presidents has a maximum disbursement that complies with the owner's guidelines, see Report No. 27 (2013-2014) to the Storting. The entering into of pension agreements adheres to the current guidelines issued by the owner.
The board's declaration regarding executive wages and other remuneration to executive employees can be read in Note 37.
(13) INFORMATION AND COMMUNICATION
The board has stipulated guidelines for reporting financial and other information. Statkraft SF publishes its annual financial statement. Annually, Statkraft AS releases four quarterly financial statements and one annual financial statement.
Statkraft publishes a financial calendar listing key publication dates. The financial calendar, press releases and stock exchange notifications, investor presentations, quarterly and annual reports and other relevant information are published on Statkraft's website.
Statkraft emphasises transparent and honest communication with all stakeholders. The information the company provides to its owner, lenders and the financial markets in general shall provide sufficient details to permit an evaluation of the company’s underlying values and risk exposure. The owner and the financial markets shall be treated equally, and information shall be communicated in a timely manner.
The Articles of Association for Statkraft AS stipulate that the shares can only be owned by Statkraft SF.
The enterprise meeting appoints the auditor based on the board’s proposal, and stipulates the auditor’s fee. Statkraft SF and Statkraft AS use the same auditor. The auditor serves until a new auditor is appointed.
The board and the auditor hold at least one meeting annually where the President and CEO and other Group executives are not present. The audit committee evaluates the external auditor’s independence and has established guidelines for use of the external auditor for consultancy purposes.
As part of the ordinary audit, the auditor presents an audit plan to the audit committee. The auditor reports in writing to Statkraft's audit committee concerning the company's internal control, applied accounting principles, significant estimates in the accounts and any disagreements between the auditor and the administration. The board of directors are briefed on the highlights of the auditor's reporting.