Reliable operator

Caruna is Finland’s largest electricity distribution company. Electricity networks are an integral part of a society’s infrastructure, and therefore the reliability of electricity distribution is vital to the entire society. We aim to deliver added value to all our stakeholders and, at the same time, ensure our operations are financially, socially and environmentally sustainable.

  • During 2016, we continued to improve our electricity network by increasing the underground cabling of the networks to protect them from adverse weather conditions.
  • We raised distribution prices to finance our network improvement projects and reached a solution on a gradual introduction of price increases with the Consumer Ombudsman.
  • We have worked hard to improve the customer experience.
  • We were involved in planning the electricity network of the future with the smart grid working group organised by the Ministry of Economic Affairs and Employment.
  • Caruna’s net sales in 2016 were EUR 384 million.
  • The Board of Caruna appointed Tomi Yli-Kyyny as the new CEO.

Caruna in brief

 
Caruna is Finland’s largest electricity distribution company. Caruna’s share of the Finnish electricity distribution market is 21 per cent. We provide power to 665,000 private and corporate customers in South, Southwest and West Finland, the city of Joensuu and North Finland. Our electricity network is roughly 82,000 kilometres long and would stretch twice around the earth.

We endeavour to meet our customer’s expectations and, first and foremost, to secure an undisturbed supply of electricity.

We endeavour to meet our customer’s expectations and, first and foremost, to secure an undisturbed supply of electricity. We continuously improve and develop our electricity networks. We are set to invest EUR 200 million into improving the reliability of our electricity distribution every year for the next decade. Our vision is to be the best electricity distributor.

We have 270 of our own members of staff and we directly employ 2,000 more in our projects around Finland. Our head offices are in Espoo, Finland.

Caruna is owned by Finnish employment pension companies Keva (12.5%) and Elo (7.5%), as well as international infrastructure investors First State Investments (40%) and Borealis Infrastructure (40%). Our operations are tightly regulated. In Finland, the Finnish Energy Authority is in charge of monitoring the power supply trade.

Corporate structure

Caruna Networks Oy is the parent company of Caruna Networks Group (“Caruna”). The parent company of Caruna Networks Oy is Suomi Power BV, with its domicile in The Netherlands. In addition to Caruna Networks Oy, Caruna Group includes Caruna Networks Sähkönsiirto Oy, Caruna Networks Espoo Oy, Caruna Oy and Caruna Espoo Oy. Caruna Networks Oy owns Caruna Networks Sähkönsiirto Oy and Caruna Networks Espoo Oy, which, in turn, own Caruna Oy and Caruna Espoo Oy.

Of the Group companies, Caruna Oy and Caruna Espoo Oy conduct regional and distribution network activities in their own electricity networks under a network licence granted by the Energy Authority. Caruna Oy is responsible for the distribution of electricity in Southwest Finland, Satakunta region, South Ostrobothnia, Ostrobothnia, North Ostrobothnia and Lapland. Caruna Espoo Oy operates in Espoo, Kauniainen, Kirkkonummi and Joensuu.

Caruna Oy and Caruna Espoo Oy are separate companies with separate pricing policies, because factors such as local network conditions affect the price of electricity distribution. The majority of Caruna Oy’s network is situated in rural areas and Caruna Espoo Oy’s in urban areas.

Caruna Networks Oy, Caruna Networks Espoo Oy and Caruna Networks Sähkönsiirto Oy provide support services for the entire Caruna Group.

Financial key figures

From Caruna’s CEO

2016 was full of events for Caruna. We continued our network improvement projects, increased our customer numbers and reviewed our customer service and procurement practices, among other things.

Uninterrupted electricity supply is the key expectation of our customers. It is up to us to ensure that daily life runs smoothly for the 1.5 million people living in our network area in Finland, also promoting the general safety and security of supply in the entire society at the same time.

It is up to us to ensure that daily life runs smoothly for the 1.5 million people living in our network area in Finland.

In addition to a reliable supply, our customers expect reasonable pricing and good-quality customer service from us. The price increases we implemented in early 2016 led to extensive public debate on the pricing of electricity distribution. After talking with the Consumer Ombudsman, we changed the timing of the increases so that they are implemented gradually over two years, as they are considered reasonable by the authorities over this period of time. These price increases are necessary as they enable us to keep up with the requirements and expectations facing the sector.

Under our ten-year network improvement programme, we renew network sections at the end of their service life and install cables underground where they are protected from adverse weather conditions. We are committed to meeting the targets defined in the Electricity Market Act by 2028 by ensuring that we will be able to restore the power to our customers within six hours in urban areas and within 36 hours in rural areas. We invest roughly EUR 200 million into our network every year.

The improvement of occupational safety is one of our key goals, and we have been successful in this area. The Zero Accident Forum run by the Finnish Institute of Occupational Health assigned Caruna the highest possible category in occupational safety for the second year running. We also achieved our best result so far in the injury frequency of contractors. These are very good results, but we will still continue to pay special attention to safety. Each accident at work involving injury will be investigated and, if necessary, work practices changed to improve safety.

In accordance with the new network construction procurement strategy, key materials are acquired by Caruna instead of contractors, starting from the beginning of 2016. We extended our material recycling agreement with Kuusakoski. All materials dismantled from networks are reused.

Successful operations require employees who possess the necessary expertise and feel satisfied and happy at work, as well as good working relationships with stakeholders. During 2016, we focused our efforts on strengthening the customer-oriented approach and expertise of our personnel, along with improving their well-being and work rotation. We engaged in active dialogue with the authorities, municipalities, organisations and land-owners. These relationships will continue to be important for us in the future, too.

The energy sector is facing a great deal of change. Both the production and consumption of energy are undergoing transition. The electrification of traffic bears a great impact on the production and distribution of electrical power and likewise on the balance between supply and demand. Small-scale production of energy is important for many, considering people’s own sense of responsibility and ecological factors.

A smart electricity network enables a more efficient utilisation of energy and supports the move towards more ecological ways of producing energy. We contribute to our country meeting the national targets for reducing carbon dioxide emissions by designing and constructing our network so that it is suitable for decentralised production of renewable energy.

We forge ahead with our network improvement projects in 2017. We are also going to continue making the customer experience better.

We forge ahead with our network improvement projects in 2017. We are also going to continue making the customer experience better by, for instance, introducing new data systems that enable us to communicate with customers more efficiently. We streamline our own operations and reinforce our financial efficiency.

Caruna wants to be a reliable partner and take an active role in the development of future energy systems. Our actions are designed to serve both our customers and all stakeholders. We share positive energy.

In Espoo, March 2017

Jyrki Tammivuori
Acting CEO

Main events during 2016

JANUARY-MARCH

  • We were one of the main partners of the 2016 World Junior Ice Hockey Championships held in Helsinki at the end of 2015 and beginning of 2016. We launched a three-year long sponsorship with the Finnish Ice Hockey Association, with the particular aim of supporting exercise and sport activities for children and the youth.
  • We told our customers we would increase our prices from 1 March 2016. These increases provoked extensive public debate. In talks with the Consumer Ombudsman, we came up with a solution of introducing the increases gradually over time, and temporarily reduced the basic electricity distribution charges for a year.
  • We entered into a major three-year framework agreement with Empower, Telog and Voimatel, for the development and renovation of electricity distribution networks in South and North Ostrobothnia, Ostrobothnia and Lapland.
  • We refinanced our operations in accordance with our long-term plan. Funds obtained from international capital markets allowed us to guarantee the realisation of our network improvement projects.
  • We published our financial statement data and our first corporate responsibility report at the end of March.

APRIL-JUNE

  • We continued our efforts to secure our network improvement investments and financed our operations by bonds offered to international institutional investors.
  • The Zero Accident Forum run by the Finnish Institute of Occupational Health assigned Caruna the highest possible category in occupational safety.
  • A total of 20 people started working at Caruna for the summer.

JULY-SEPTEMBER

  • The storm Rauli in August was the most significant adverse weather event of the year to impact our network.
  • Caruna was rewarded for leadership in good customer experiences in a survey by Customer Experience Professionals Association™ CXPA Finland.
  • Kantti and Peuravaara wind farms were connected to our network.

OCTOBER-DECEMBER

  • CEO Ari Koponen announced his resignation from his post in October and Head of Finances Jyrki Tammivuori stepped into the role of acting CEO. In December, the Board appointed Tomi Yli-Kyyny as the new CEO of Caruna. He will start in the spring of 2017.
  • We signed a three-year agreement with Eltel Networks, Relacom and Vertek on network improvement work in Central and Western Uusimaa region.
  • The European Investment Bank granted Caruna a loan of EUR 200 million for the realisation of network improvement projects.
  • The increasing popularity of small-scale production of electricity started to become more visible within Caruna’s network area. The number of solar power systems connected to our network nearly tripled by the end of the year, compared to last year.
  • Throughout the year, we continued to carry out network improvement projects aimed at enhancing the reliability of supply.

Finnish electricity market

Electricity production and transmission

Electricity is produced by power plants operated by nuclear, hydro or wind power or various fuels. There are approximately 120 companies and 400 power plants producing electricity in Finland.

Main grids and distribution networks transmit electricity from power plants to private homes and other users. Fingrid Oyj is in charge of the transmission of electricity over the main grid. The main grid transmits electricity from producers to electricity distributors and industrial companies. Electricity distribution companies distribute electrical power to homes and businesses over medium and low voltage distribution networks.
 

Electricity distribution in short

Regulation of electricity distribution

The Finnish electricity distribution market is strictly regulated and monitored. The purpose of the Finnish Electricity Market Act is to ensure the reliability of supply, competitive prices and effective and equal service practices to end users.

As an electricity distributor, Caruna operates under network licences granted by the Energy Authority. The Energy Authority monitors the operations of electricity distributors and defines an allowed reasonable rate of return for the distribution of electricity. Electricity distributors then use this value as a basis for their distribution prices.

All electricity network trade is regulated by the Electricity Market Act. It is based on the premise that electricity networks constitute a market place for producers and users, that, on equal and reasonable terms, offers services to all electricity trade parties, both suppliers and buyers. Network operators, such as Caruna, are required to utilise, develop and maintain their networks in accordance with the needs of the electricity market, and thus secure the functionality and reliability of the electricity distribution system from their part. Network operators are also required to offer customers a network connection and electricity distribution on equal and reasonable terms.

Data management is likewise an important element of all electricity market activities. Caruna is under a specific, statutory obligation to remain impartial and to share all necessary data between all market parties, but on the other hand, we are also tied by the regulations on handling personal information. One of these regulations specifies that consumers must always have the right to manage any information concerning them.

The Electricity Market Act was amended in 2013, with the aim to improve the security of electricity supply.

The Electricity Market Act was amended in 2013, with the aim to improve the security of electricity supply. The Act specifies that service interruptions caused by storms or snowfall must not exceed six hours in urban areas or 36 hours in any other areas.

All electricity network operators are required to improve their reliability of supply to ensure that outages do not exceed the time limits defined in the Act after 2028. For Caruna, this means significant investments into improving the reliability of supply, for instance, by replacing overhead lines with cables underground and by increasing network automation. Other investments are necessary because aging network structures need to be renovated.

Read more about the network improvement programme and network renovation principles.

Monitoring of electricity distribution prices

The Energy Authority monitors the revenues of electricity distributors in four-year regulatory periods. If the revenue from any regulatory period exceeds the limit of reasonable return defined by the Energy Authority, the company accrues overincome. If, on the other hand, the revenues realised during a period remain below this limit, the company accrues underincome.

Caruna defines its electricity distribution prices by estimating a certain level of return and expenses.

Caruna defines its electricity distribution prices by estimating a certain level of return and expenses. There are several factors influencing the amount of expenses, such as the inflation, interest rates and weather conditions, for instance. Therefore, the estimates are rarely realised precisely as they are.

Should the amount of collected electricity distribution fees remain below the predicted level, Caruna may charge more fees during the following four-year period. If, however, the customers have been overcharged for electricity, Caruna credits the excess to customers during the following period.

Electricity networks in the future

We always strive to develop our services so that they can respond better to the expectations of our customers and the changing needs of the society. New technologies, such as energy reserves and wide-scale decentralised energy production, are going to change the tasks and business models of network operators in the future. Smart meters are a good example of changes brought about by new technologies. We installed these meters before the end of 2014, and they allow the customers to purchase electrical power by the hour and monitor their consumption at Caruna’s energy reporting service.

Smart meters are a good example of changes brought about by new technologies. We installed these meters before the end of 2014.

The smart grid working group organised by the Ministry of Economic Affairs and Employment is looking for ways to improve the involvement options available to customers. The working group intends to draw up electricity network design and construction guidelines that would ensure customers are able to be more actively involved in the electrical power market by, for instance, selling the electricity they generate with their small-scale production equipment.

Caruna’s role in the working group is to act as a technical advisor and provider of services and solutions that answer the customers’ needs. The working group is to present their guidelines for the future of the entire Finnish electricity grid in an official report in the autumn 2018.

In addition to planning for the future, we at Caruna are building a strong foundation for future energy markets, thanks to our network improvement projects which are already underway. Our current network construction principles enable a large-scale and cost-effective connection of renewable energy sources to our network. Smart meters, in turn, allow the customers to sell any electricity they are not using.

Corporate responsibility

For Caruna, sustainability means that we are trustworthy and accountable to our customers, partners and owners, for the benefit of the Finnish society, and that safety and the environment always come first in all our operations.

In 2015, we outlined the most significant impact factors of our operations, defined our key sustainability themes and set goals for our corporate responsibility.

Our goal is to be Finland’s most sustainable electricity distributor.

  • Our goal is to be Finland’s most sustainable electricity distributor, able to generate added value for our customers, owners and the society.
  • We provide a reliable electricity network for the safe and environmentally sustainable distribution of electricity.
  • We realise our vision by conducting our work ethically and taking the long-term view together with our partners.

Key corporate responsibility themes

We defined the main impacts of our business in accordance with the Global Reporting Initiative (GRI) G4 materiality analysis guidelines during the summer and autumn 2015. Along the materiality analysis process, we outlined the core focus areas of Caruna’s corporate responsibility and GRI G4 aspects.

Read more about the materiality analysis process in the GRI and data section.

We improve our operations and generate related reports focusing on essential corporate responsibility themes. We take the results of the materiality analysis process into account also when planning and implementing our collaboration with stakeholders.
 

Themes and aspects of corporate responsibility

Corporate responsibility principles

Caruna’s HSE (Health, Safety and Environment) policy describes our corporate responsibility principles:

Our products and services are safe, of a high quality and easily available.

  • Our company, all personnel and business partners adhere to the applicable laws and other regulations, best practices and sector standards.
  • We develop our electricity network by taking into account health, safety and environmental concerns both in our daily activities and long-term operations.
  • All our employees and business partners must be provided the opportunity to work in a healthy, safe and motivating working environment.
  • Our products and services are safe, of a high quality and easily available.
  • We promote the culture of good health, safety and well-being in all of our activities by setting goals, targets and plans of action in the spirit of continuous improvement.
  • We identify the environmental impact of our network assets and operations, and manage them carefully. We take into account the entire life-cycle of electricity networks.
  • We prevent and minimise any damage to people and the environment by systematic risk assessments.
  • We require our employees and business partners to commit to our responsible practices and common goals.
  • We collaborate with the municipalities, authorities, private land-owners and other external stakeholders.
  • Our operations are characterised by openness in internal and external communications, thus creating trust among customers, business partners and other stakeholders.

Corporate responsibility goals

Caruna has set goals for selected corporate responsibility-related key figures for 2017. The key indicators and goals are shown in the following table.

THEME INDICATOR 2016 GOAL 2016 RESULTS 2017 GOAL
Reliability of supply SAIDI* 117 min. 95 min. 109 min.
KAH** MEUR 23.6 MEUR 22.6 MEUR 21.4
Cabling rate 42 % 40 % 47 %
Customers covered by the network compliant with the reliability of supply requirement (%) 67 % 65 % 70 %
Customers and the society Customer satisfaction (NPS) 18. -12.5 10 (new, more comprehensive measurement)
Reputation survey results Improvement from the previous measurement No improvement (mainly due to the price changes in January) Improvement from the previous measurement
Stakeholder collaboration Active stakeholder collaboration Active stakeholder collaboration Active stakeholder collaboration
Customer satisfaction of the network improvement projects Creating the measurement method
Safety Injury Frequency of own personnel (TRIF***)  2 0 0
Injury Frequency of contractors (LWIF****)  9 5.2  8
Electricity-related injuries to third parties (reported to Tukes) 0 0 0
Personnel Employee satisfaction 74 65 (read more) 70
Training days 2 work days/person 4.2 work days/person 2 work days/person
Absences through sickness < 2.5 % 2.2 % < 2.0 %
Environment Number of oil spills  30 34 of which 7 100 kg 7 (100 kg)
Further processing of dismantled networks***** 15 % 15 % 30 %
Number of pole-mounted secondary substations at groundwater areas  830 1,150 (target not achieved as removal takes place during winter 2017) 520
Decrease in the number of overhead lines -3 200 km -1 205 km –3 800 km
Responsible procurement Description of supply chain and procurement practices Completed Completed
Supplier & contractor audits Five contractors audited Five contractors audited Six contractors audited
Pass rate for Supplier Code of Conduct training 100 %
Openness, ethical business principles and good corporate governance principles Pass rate for Caruna’s Code of Conduct online training 100 % 96,5% (target not achieved due to normal employee turnover) 100 %
Management systems and processes Renewal of management system and development of processes (ISO55001 certification)
UN Sustainable Development Goals Integration to Caruna’s business plan


*SAIDI = System Average Interruption Duration Index. Average duration of power supply interruptions per customer.

**KAH = Inconvenience caused by the interruption. The indicator shows the calculated inconvenience cost resulting from the interruption of supply, used to reflect the degree of inconvenience experienced by customers.

***TRIF = Total Recordable Injury Frequency. The indicator reflects the ratio of occupational accidents to Caruna’s employees, leading to absences from work or requiring medical treatment visits, in relation to working hours (incidents/million realised working hours).

****LWIF = Lost Workday Injury Frequency. The indicator reflects the ratio of occupational accidents to contractors or subcontractors while they work for Caruna or are within Caruna’s work sites, leading to a disability of at least one working day, in relation to working hours (incidents/million realised working hours)

*****Materials recycling has been outsourced to Kuusakoski Oy from August 2015. The Kuusakoski collaboration concerns new contractor agreements. The goal is to achieve a 30%-recycling rate for materials from dismantled network sections and for those ending up at Kuusakoski in 2017. For older agreements, contractors are in charge of recycling. The recycling rate is set to increase in the future as more contract agreements will be covered by Kuusakoski collaboration.