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UPM Annual Report 2014
UPM Annual Report 2014
105
106
CONTENTS
ACCOUNTS
Principal available-for-sale investments
Number
of shares
Group
holding %
Carrying value,
EURm
2014 2013
Pohjolan Voima Oy, A serie
8,176,191
61.24 381 407
Pohjolan Voima Oy, B serie
4,140,132
58.11 1,370 1,313
Pohjolan Voima Oy, B2 serie 1,859,255
50.98 187 306
Kemijoki Oy
100,797
4.13 401 443
Länsi-Suomen Voima Oy
10,220
51.10 107 109
OEP Technologie B.V.
243,670
10.86
35
35
Other
1)
–
–
29
48
At 31 Dec.
2,510 2,661
1)
Includes C, H, M and V series of Pohjolan Voima Oy.
Fair valuation of available-for-sale investments in the UPM Energy
segment (Pohjolan Voima Oy’s A, B, B2, C, C2, H, 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 369 million. The discount rate of 5.82%
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 360
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 (TVO). UPM’s indirect share of the capacity of
Olkiluoto 3 is approximately 31%, through its PVO B2 shares. The
possible outcome of the arbitration proceedings has not been taken into
account in the valuation. Changes in regulatory environment or taxation
could also have an impact on the value of the energy generating assets.
Fair value of the OEP Technologie B.V. shares is based on the dis-
counted value of sales option related to the shareholding.
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 disman-
tling 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 Liabil-
ity Act, the operator of a nuclear facility is strictly liable for damage
resulting from a nuclear incident at the operator’s installation or occur-
ring in the course of transporting nuclear fuels. Shareholders 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 decommissioning 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 contributions 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 invest-
ments.
23 Other non-current financial assets
As at 31 December
EURm
2014
2013
Loan receivables from associated companies
(Note 21)
8
8
Other loan receivables
35
35
Derivative financial instruments
291
239
At 31 Dec.
334
282
The maximum exposure to credit risk in regard to other loan receivables
is their carrying amount.
24 Other non-current assets
As at 31 December
EURm
2014
2013
Defined benefit plans (Note 29)
40
88
Other non-current assets
51
54
At 31 Dec.
91
142
25 Inventories
As at 31 December
EURm
2014
2013
Raw materials and consumables
548
565
Work in progress
55
39
Finished products and goods
713
684
Advance payments
40
39
At 31 Dec.
1,356
1,327
26 Trade and other receivables
As at 31 December
EURm
2014
2013
Trade receivables
1,412
1,398
Loan receivables
6
10
Prepayments and accrued income
143
154
Derivative financial instruments
151
226
Other receivables
144
160
At 31 Dec.
1,856
1,948
Ageing analysis of trade receivables
As at 31 December
EURm
2014
2013
Undue
1,225
1,191
Past due up to 30 days
133
137
Past due 31–90 days
32
37
Past due over 90 days
22
33
At 31 Dec.
1,412
1,398
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 De-
cember 2014. In 2014, impairment of trade receivables amounted to
EUR 8 million (17 million) and is recorded under other costs and ex-
penses. 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.
Main items included in prepayments and accrued income
As at 31 December
EURm
2014
2013
Personnel expenses
14
11
Interest income
5
2
Energy and other excise taxes
70
89
Other items
54
52
At 31 Dec.
143
154
27 Equity and reserves
Share capital
EURm
Number of shares
(1,000)
Share
capital
At 1 Jan. 2013
526,124
890
Exercise of share options
3,177
–
At 31 Dec. 2013
529,302
890
Exercise of share options
4,434
–
At 31 Dec. 2014
533,736
890
Shares
At 31 December 2014, the number of the company’s shares was
533,735,699. Each share carries one vote. The shares do not have any
nominal counter value. The shares are included within the book entry
system for securities.
Reserve for invested non-restricted equity
Reserve for invested non-restricted equity includes, under the Compa-
nies’ Act, the exercise value of shareholders’ investments in the company
unless otherwise decided by the company.
Treasury shares
The Annual General Meeting held on 8 April 2014 authorised the Board
of Directors to acquire no more than 50,000,000 of the company's own
shares. The authorisation is valid for 18 months from the date of the
decision.
As at 31 December 2014, the company held 230,737 (230,737) of its
own shares, 0.04% (0.04%) of the total number of shares. 211,481 of the
shares were returned upon their issue in 2011 to UPM without consider-
ation as part of the contractual arrangements relating to the Myllykoski
transaction and 19,256 shares in accordance with the Group’s share
reward scheme due to the termination of employment contracts in 2012.
Authorisations to increase the number of shares
The Annual General Meeting, held on 4 April 2013, authorised the
Board of Directors to decide on the issuance of shares and/or the trans-
fer of the company’s own shares held by the company and/or the issue of
special rights entitling holders to shares in the company as follows: (i)
The maximum number of new shares that may be issued and the compa-
ny’s own shares held by the company that may be transferred is, in total,
25,000,000 shares. This figure also includes the number of shares that
can be received on the basis of the special rights. (ii) The new shares and
special rights entitling holders to shares in the company may be issued
and the company’s own shares held by the company may be transferred
to the company’s shareholders in proportion to their existing sharehold-
ings in the company, or in a directed share issue, deviating from the
shareholder’s pre-emptive subscription right. This authorisation is valid
until 4 April 2016.
The subscription period for share options 2007C ended on 31 Octo-
ber 2014. During the entire share subscription period 4,435,302 shares
were subscribed through exercising 2007C share options. Following the
expiration of the 2007 stock options, the company has no stock option
programme in place.
Aside from the above, the Board of Directors has no current
authorisation to issue shares, convertible bonds or share options.
The shares available for subscription under the Board’s share issue
authorisation may increase the total number of the company’s shares by
4.68%, i.e. by 25,000,000 shares, to 558,735,699 shares.
Redemption clause
Under § 12 of UPM-Kymmene Corporation’s Articles of Association, a
shareholder who, alone or jointly with another shareholder owns 33 1/3
percent or 50 percent or more of all the company’s shares or their associ-
ated voting rights shall, at the request of other shareholders, be liable to
redeem their shares and any securities that, under the Companies Act,
carry the right to such shares, in the manner prescribed in § 12.
A resolution of a general meeting of shareholders to amend or
delete this redemption clause must be carried by shareholders represent-
ing not less than three-quarters of the votes cast and shares represented
at the meeting.
Fair value and other reserves
As at 31 December
EURm
2014
2013
Fair value reserve of available-for-sale investments
1,988
2,152
Hedging reserve
–128
–21
Legal reserve
–
53
Share premium reserve
–
50
Share-based compensation
7
22
At 31 Dec.
1,867
2,256
Changes in hedging reserve
Year ended 31 December
EURm
2014
2013
Hedging reserve at 1 Jan.
–21
7
Gains and losses on cash flow hedges
–102
33
Transfers to sales
–85
–85
Transfers to costs and expenses
51
14
Transfers to financial costs
3
2
Tax on gains and losses on cash flow hedges
20
–9
Tax on transfers to income statement
6
17
Hedging reserve at 31 Dec.
–128
–21
Components of other comprehensive income
Year ended 31 December
EURm
2014
2013
Actuarial gains and losses on defined
benefit obligations
–181
69
Translation differences
291
–219
Net investment hedge
–41
77
Cash flow hedges
gains/losses arising during the year
–82
24
reclassification adjustments
–25
–52
–107
–28
Available-for-sale investments
gains/losses arising during the year
–164
58
–164
58
Other comprehensive income
–202
–43