UPM annual report 2015

First page Previous page 116-117 Next page Last page

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

23 Other non-current financial assets

19 Investment property

21 Investments in associated companies and joint ventures

Principal available-for-sale investments

Carrying value, EURm 2015 2014

As at 31 December

Number of shares 8,176,191 4,140,132

Group holding %

2015

2014

EURm

2015

2014

EURm

As at 31 December

Acquisition cost at 1 Jan.

2015

2014

EURm

Loan receivables from associated companies (Note 21)

Pohjolan Voima Oy, A serie Pohjolan Voima Oy, B serie

61.24 324 381 58.11 1,166 1,370 51.13 169 187 7.33 314 401

Additions

–

At 1 Jan. Additions

Reclassifications

–58

–14

Other loan receivables

1 – 3

Pohjolan Voima Oy, B2 serie 2,414,940

Acquisition cost at 31 Dec.

–

Derivative financial instruments

312 332

291 334

Reclassifications

–1

Kemijoki Oy

179,189 10,220

At 31 Dec.

Share of results after tax (Note 9)

Länsi-Suomen Voima Oy OEP Technologie B.V.

51.10

92 107

Accumulated depreciation and impairment at 1 Jan.

The maximum exposure to credit risk in regard to other loan receivables is their carrying amount.

Dividends received Translation differences

–1

–2

– –

–

35 29

–27

–31

Other 1)

Depreciation

–4 31

–4

At 31 Dec.

At 31 Dec. 2,085 2,510 1) 2015 includes C, M and V series of Pohjolan Voima Oy. 2014 includes C, H, M and V series of Pohjolan Voima Oy. Available-for-sale investments of UPM Energy are mainly partly owned energy companies, where UPM does not have control, joint control or significant influence. These energy companies supply energy or both energy and heat to their shareholders at cost pursuant to the so called “Mankala-principle” set forth in the respective articles of association, i.e. the energy and/or heath is supplied to the shareholders in propor- tion to their ownership and each shareholder is responsible for its respective share of the costs and liabilities related to generated energy and/or heat by the energy company concerned, as specified in the articles of association. Fair valuation of available-for-sale investments in the UPM Energy (Pohjolan Voima Oy’s A, B, B2, C, C2, M and V-shares, Kemijoki Oy shares, and Länsi-Suomen Voima Oy shares) is based on discounted cash flows model. The Group’s electricity price estimate is based on fundamental simulation of the Finnish area price. A change of +/-5% in the electricity price used in the model would change the total value of the assets by +/- EUR 342 million. The discount rate of 5.85% used in the valuation model is determined using the weighted average cost of capital method. A change of +/- 0.5% in the discount rate would change the total value of the assets by approximately -/+ EUR 330 million. Other uncertainties and risk factors in the value of the assets relate to start-up schedule of the fixed price turn-key Olkiluoto 3 nuclear power plant project and the on-going arbitration proceedings between the plant supplier AREVA-Siemens Consortium and the plant owner Teollisuuden Voima Oyj. UPM’s indirect share of the capacity of Olkiluoto 3 is approximately 31%, through its Pohjolan Voima Oy´s B2 shares. The possible outcome of the arbitration proceedings has not been taken into account in the valuation. Changes in regulatory envi- ronment or taxation could also have an impact on the value of the energy generating assets. In Q4 2015, UPM sold its 10.6% share of the OEP Technologie B.V. (SMARTRAC). Pohjolan Voima Oy B and B2 series relate to shareholdings in Teolli- suuden Voima Oyj, which operates and constructs nuclear power plants in Olkiluoto, Finland. The operation of a nuclear power plant involves potential costs and liabilities related to decommissioning and dismantling of the nuclear power plant and storage and disposal of spent fuel and, furthermore, is governed by international, European Union and local nuclear regulatory regimes. Pursuant to the Finnish Nuclear Liability Act, the operator of a nuclear facility is strictly liable for damage resulting from a nuclear incident at the operator’s installa- tion or occurring in the course of transporting nuclear fuels. Sharehold- ers of power companies that own and operate nuclear power plants are not subject to liability under the Nuclear Liability Act. In Finland, the future costs of conditioning, storage and final disposal of spent fuel, management of low and intermediate level radioactive waste and nuclear power plant decommissioning are the responsibility of the operator. Reimbursement of the operators’ costs related to decommis- sioning and dismantling of the power plant and storage and disposal of spent fuel are provided for by state-established funds funded by annual contributions from nuclear power plant operators. The contribu- tions to such funds are intended to be sufficient to cover estimated future costs which have been taken into consideration in the fair value of the related available-for-sale investments.

Reclassifications

Accumulated depreciation and impairment at 31 Dec.

–

–27

24 Other non-current assets

Investments in associated companies at 31 December 2015 include goodwill of EUR 1 million (1 million).

Carrying value at 1 Jan. Carrying value at 31 Dec.

As at 31 December

2015

2014

EURm

– 31 In 2015, reclassifications include transfers to property, plant and equipment.

Associated companies and joint ventures

Defined benefit plans (Note 29)

93 52

40 51 91

Other non-current assets

As at 31 December

At 31 Dec.

145

2015

2014

EURm

Associated companies

The amounts recognised in the income statement

Joint ventures

25 Inventories

At 31 Dec.

Year ended 31 December

2015

2014

EURm

As at 31 December

UPM has no individually material associated companies or joint ven- tures.

Rental income

2015

2014

EURm

Direct operating expenses arising from investment properties that generate rental income

Raw materials and consumables

646

548

–3

Work in progress

Finished products and goods

642

713

Transactions and balances with associated companies and joint ventures

Advance payments

20 Biological assets

At 31 Dec.

1,376

1,356

Year ended 31 December

As at 31 December

2015

2014

EURm Sales

2015 1,469

2014 1,458

EURm

26 Trade and other receivables

At 1 Jan. Additions Disposals

Purchases

As at 31 December

Non-current receivables Trade and other receivables Trade and other payables

9 1 1

8 1 2

–72 –91 377

–65 –91 120

2015 1,436

2014 1,412

EURm

Wood harvested

Trade receivables Loan receivables

Change in fair value Translation differences

Loan receivables from associated companies and joint ventures

Prepayments and accrued income Derivative financial instruments

134 128 173

143 151 144

At 31 Dec.

1,738

1,469

Year ended 31 December

Other receivables

The Group owns approximately 704,000 and 75,000 hectares forests in Finland and in the United States, respectively, and 236,000 hec- tares plantations in Uruguay. Biological assets (living trees) are meas- ured at fair value less costs to sell. The fair value is determined using discounted cash flow models. Main factors used in the valuation are estimates for growth and wood harvested, stumpage prices and dis- count rates. Stumpage price forecasts are based on the current prices adjusted by the management’s estimates for the full remaining produc- tive lives of the trees, up to 100 years for forests in Finland and in the US and up to 10 years for plantations in Uruguay. The cash flows are adjusted by selling costs and risks related to the future growth. Young saplings are valued at cost. In 2015, the fair value of biological assets in Finland was increased by EUR 265 million due to adjustment of long-term wood price estimates and change in discount rate. UPM continues to estimate a declining trend of real wood prices in Finland, although with a slightly slower rate than previously. In addition, the pre-tax discount rate used to determine the fair value of the Finnish forests was lowered from 7.5% to 7.0%. The pre-tax discount rates used to determine fair value for Uru- guayan plantations in 2015 was 10.0% (10.0%). A decrease (increase) of one percentage point in discount rate would increase (decrease) the fair value of biological assets by approximately EUR 260 million (200 million).

2015

2014

EURm

At 31 Dec.

1,876

1,856

At 1 Jan.

8 1 – 9

8 1

Loans granted Repayments

Ageing analysis of trade receivables

–1

At 31 Dec.

As at 31 December

2015 1,193

2014 1,225

EURm Undue

22 Available-for-sale investments

Past due up to 30 days Past due 31–90 days Past due over 90 days

159

133

45 39

32 22

As at 31 December

2015 2,510

2014 2,661

EURm

At 31 Dec.

1,436

1,412

At 1 Jan. Additions Disposals

31 –1

In determining the recoverability of trade receivables the Group con siders any change to the credit quality of trade receivables. There are no indications that the debtors will not meet their payment obligations with regard to trade receivables that are not overdue or impaired at 31 December 2015. In 2015, impairment of trade receivables amounted to EUR 18 million (8 million) and is recorded under other costs and expenses. Impairment is recognised when there is objective evidence that the Group is not able to collect the amounts due. Maximum exposure to credit risk, without taking into account any credit enhancements, is the carrying amount of trade and other receiv- ables.

–35

Reclassification

–10

Changes in fair values Translation differences

–424

–173

–

At 31 Dec.

2,085

2,510

At 31 December 2015 and 2014, the available-for-sale investments include only investments in unlisted shares.

contents

accounts

113

114

UPM Annual Report 2015

Made with FlippingBook