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UPM Annual Report 2015
UPM Annual Report 2015
113
114
contents
accounts
IN BRIEF
STRATEGY
BUSINESSES
STAKEHOLDERS
GOVERNANCE
ACCOUNTS
19 Investment property
As at 31 December
EURm
2015
2014
Acquisition cost at 1 Jan.
58
71
Additions
–
1
Reclassifications
–58
–14
Acquisition cost at 31 Dec.
–
58
Accumulated depreciation and
impairment at 1 Jan.
–27
–31
Depreciation
–4
–4
Reclassifications
31
8
Accumulated depreciation and impairment at 31 Dec.
–
–27
Carrying value at 1 Jan.
31
40
Carrying value at 31 Dec.
–
31
In 2015, reclassifications include transfers to property, plant and
equipment.
The amounts recognised in the income statement
Year ended 31 December
EURm
2015
2014
Rental income
4
4
Direct operating expenses arising from investment
properties that generate rental income
–3
–3
20 Biological assets
As at 31 December
EURm
2015
2014
At 1 Jan.
1,469
1,458
Additions
16
8
Disposals
–72
–65
Wood harvested
–91
–91
Change in fair value
377
120
Translation differences
39
39
At 31 Dec.
1,738
1,469
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).
21 Investments in associated companies
and joint ventures
As at 31 December
EURm
2015
2014
At 1 Jan.
25
22
Additions
1
1
Reclassifications
–1
–
Share of results after tax (Note 9)
3
3
Dividends received
–1
–2
Translation differences
1
1
At 31 Dec.
28
25
Investments in associated companies at 31 December 2015 include
goodwill of EUR 1 million (1 million).
Associated companies and joint ventures
As at 31 December
EURm
2015
2014
Associated companies
20
17
Joint ventures
8
8
At 31 Dec.
28
25
UPM has no individually material associated companies or joint ven-
tures.
Transactions and balances with associated companies
and joint ventures
Year ended 31 December
EURm
2015
2014
Sales
1
2
Purchases
89
83
Non-current receivables
9
8
Trade and other receivables
1
1
Trade and other payables
1
2
Loan receivables from associated companies
and joint ventures
Year ended 31 December
EURm
2015
2014
At 1 Jan.
8
8
Loans granted
1
1
Repayments
–
–1
At 31 Dec.
9
8
22 Available-for-sale investments
As at 31 December
EURm
2015
2014
At 1 Jan.
2,510
2,661
Additions
33
31
Disposals
–35
–1
Reclassification
1
–10
Changes in fair values
–424
–173
Translation differences
–
2
At 31 Dec.
2,085
2,510
At 31 December 2015 and 2014, the available-for-sale investments
include only investments in unlisted shares.
Principal available-for-sale investments
Number
of shares
Group
holding %
Carrying value,
EURm
2015 2014
Pohjolan Voima Oy, A serie
8,176,191
61.24 324 381
Pohjolan Voima Oy, B serie
4,140,132
58.11 1,166 1,370
Pohjolan Voima Oy, B2 serie 2,414,940
51.13 169 187
Kemijoki Oy
179,189
7.33 314 401
Länsi-Suomen Voima Oy
10,220
51.10
92 107
OEP Technologie B.V.
–
–
–
35
Other
1)
–
–
20
29
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.
23 Other non-current financial assets
As at 31 December
EURm
2015
2014
Loan receivables from associated companies
(Note 21)
9
8
Other loan receivables
11
35
Derivative financial instruments
312
291
At 31 Dec.
332
334
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
2015
2014
Defined benefit plans (Note 29)
93
40
Other non-current assets
52
51
At 31 Dec.
145
91
25 Inventories
As at 31 December
EURm
2015
2014
Raw materials and consumables
646
548
Work in progress
54
55
Finished products and goods
642
713
Advance payments
34
40
At 31 Dec.
1,376
1,356
26 Trade and other receivables
As at 31 December
EURm
2015
2014
Trade receivables
1,436
1,412
Loan receivables
5
6
Prepayments and accrued income
134
143
Derivative financial instruments
128
151
Other receivables
173
144
At 31 Dec.
1,876
1,856
Ageing analysis of trade receivables
As at 31 December
EURm
2015
2014
Undue
1,193
1,225
Past due up to 30 days
159
133
Past due 31–90 days
45
32
Past due over 90 days
39
22
At 31 Dec.
1,436
1,412
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.