Annual report 2011

ANNUAL REPORT of the GEN Group

AT THE CORE OF ENERGYEnergy is what gives us incredible inner strength to achieve the seemingly impossible. Mysteriously, it is everywhere around us yet cannot be touched. Still, we need to understand it as fully as possible in order to grasp what is happening around us today and what will be happening around us tomorrow...

For this reason the GEN Group builds all its activities on the sound foundation of knowledge. Expertise and experience are the two essential ingredients that make it possible for us to deliver a comprehensive supply of electricity. In doing so, we seek to set all the electrons of our activity in motion towards the common goals of simultaneously achieving operational efficiency of our power plants, business excellence of the entire Group, environmental responsibility and care for the society. Our development is based around the needs, expectations and wishes of the environment in which we operate. We also contribute to increasing the knowledge and awareness of energy and the energy challenges our future holds, as well as to promoting interest in this area. And so we begin where it all comes from and where we ourselves operate – at the core of energy.

Published by: GEN energija, d.o.o., Vrbina 17, 8270 KrškoConceptual design and texts: GEN energija, d.o.o.Creative design, layout and production: Pristop, d.o.o.Photography: Borut Peterlin, ShutterstockPrinted by: Tiskarna Eurograf, d.o.o.Print run: 300Krško, May 2012

[email protected]

2.5.4 Purchase of business shares in SEL 372.5.5 Capital injections in GEN-I and NKBM 372.5.6 ZEL-EN 372.5.7 SRESA 372.5.8 Miscellaneous investments 382.5.9 Investments and development of the GEN Group companies 38

2.6 Human resources 392.6.1 Employees 392.6.2 Scholarships 39

2.7 Financial operations 402.7.1 Settling liabilities to the NEK Fund and securing funding

for NEK‘s fixed annual costs 402.7.2 Servicing operations and debts 402.7.3 Report on investments of surplus cash 412.7.4 Performance indicators 42

2.8 Overall responsibility 442.8.1 General social responsibility 442.8.2 Environmental responsibility 452.8.3 Economic responsibility 47

2.9 Risks 482.9.1 Quantity risks 482.9.2 Market risks 482.9.3 Financial risks 482.9.4 Operational risks 492.9.5 Ecological risks 492.9.6 Legal risks 49

3 Summary financial report of the company GEN energija, d.o.o. 51

3.1 Independent auditors’ report 52

3.2 Basis for drawing up the summary financial report 53

3.3 Financial statements 54

Contents

1 Introduction 7

1.1 Key data 8

1.2 Letter from the Director 12

1.3 Company profile 141.3.1 Company ID 141.3.2 Corporate governance 141.3.3 Subsidiaries and affiliated companies 15

1.4 GEN‘s holding activities 171.4.1 Krško Nuclear Power Plant 171.4.2 GEN-I, trgovanje in prodaja električne energije 181.4.3 Savske elektrarne Ljubljana 191.4.4 Termoelektrarna Brestanica 19

1.5 Corporate Policy of the GEN Group 201.5.1 Vision 201.5.2 Mission 201.5.3 Values 201.5.4 Strategic goals 201.5.5 Fulfilling the GEN Group’s corporate policy 21

2 Business report 23

2.1 Economic trends and their impact on the electricity business and the GEN Group 24

2.2 Electricity production and ancillary services 252.2.1 Production of electricity 252.2.2 Ancillary services 30

2.3 Electricity purchasing 31

2.4 Electricity trading and sales 322.4.1 Trading 322.4.2 Sales 34

2.5 Research & development and investments of GEN Group companies 352.5.1 HESS construction project 352.5.2 JEK 2 construction project 352.5.3 GEN Information Centre construction project 37

Table I 1: Key data on the company GEN energija, d.o.o., for 2011 against 2010 8Table I 2: Key data on the GEN Group for 2011 against 2010 9Table II 1: NEK monthly electricity production (GWh) in 2011 26Table II 2: Large-scale HPP electricity production (GWh) in 2011 27Table II 3: Large-scale HPP monthly electricity production (GWh) in 2011 27Table II 4: TEB monthly electricity production (GWh) in 2011 28Table II 5: Monthly supplied electricity (GWh) from HESS in 2011 28Table II 6: Large-unit electricity production (GWh) available to the GEN Group in 2011 29Table II 7: Investments made by GEN Group companies in 2011 (in EUR million) 35Table II 8: Number of employees by level of education as at 31/12/2011 39Table II 9: Number of scholarship recipients as at 31/12/2011 39Table II 10: Indicators for the company GEN 42Table II 11: Indicators for the GEN Group 43Table III 1: Balance sheet as at 31/12/2011 54Table III 2: Income statement for 2011 56Table III 3: Statement of other comprehensive income for 2011 57Table III 4: Statement of changes in equity for 2010 58Table III 5: Statement of changes in equity for 2011 60Table III 6: Annex to the statement of changes in equity – balance-sheet profit 61Table IV 1: About the GEN Group 65Table IV 2: Balance sheet of the Group as at 31/12/2011 66Table IV 3: Income statement of the Group for 2011 68Table IV 4: Statement of other comprehensive income of the Group for 2011 69Table IV 5: Consolidated statement of changes in equity for 2010 70Table IV 6: Consolidated statement of changes in equity for 2011 72Table IV 7: Balance-sheet profit of the Group 74

Index of figuresFigure 1: Diagrams of key data on the company GEN and the GEN Group for 2011 against 2010 10Figure 2: The GEN Group as at 31/12/2011 16Figure 3: Diagram of connections of the GEN balance subgroup 25Figure 4: Electricity production (GWh) available to the GEN Group in 2011 against 2010 29Figure 5: Electricity purchased by the GEN Group (GWh) – 50% consolidation of GEN-I and NEK 31Figure 6: Electricity (GWh) purchased by GEN Group companies 31Figure 7: Geographic presence of the GEN Group 33Figure 8: Electricity sold by the GEN Group (GWh) 34

3.3.1 Balance sheet 543.3.2 Income statement and statement of other comprehensive income 563.3.3 Statement of changes in equity 583.3.4 Balance-sheet profit account 61

4 Summary financial report of the GEN Group 63

4.1 Independent auditors’ report 64

4.2 Basis for drawing up the summary financial report of the GEN Group 654.2.1 About the GEN Group 654.2.2 Audit 654.2.3 Balance sheet of the Group 664.2.4 Income statement and statement of other comprehensive income of the Group 684.2.5 Consolidated statement of changes in equity 704.2.6 Balance-sheet profit account 74

Acronyms and abbreviations 75

Contents

Index of tables

Matter is the basic ingredient of everything around us. Smaller particles fuse into larger ones, and those into larger still, until they form a whole that displays in a multitude of forms and shapes before our eyes. Nuclear energy is the centrepiece of this incredible jigsaw puzzle we call the world.

Operating nuclear power plant systems requires expertise and experience, and the main means of gaining them is by using a training simulator. Visually, the training simulator is a precise replica of NEK’s main control room, with all its controls and instrumentation. With the help of the simulator we raise the existing theoretical knowledge, practical skills and teamwork to a higher level. It is a vital part of introductory and ongoing training of power plant operators.

Introduction

Photo: The simulator of the main control room at NEK

8 9IntroductionAnnual report of the GEN Group 2011

IntroductionAnnual report of the GEN Group 2011

Table I 2: Key data on the GEN Group for 2011 against 2010 Table I 1: Key data on the company GEN energija, d.o.o., for 2011 against 2010

1.1 Key data

GEN Group 2011 2010

Assets in EUR million 719.84 679.90

Equity in EUR million 528.64 525.26

Revenues in EUR million 573.97 385.09

EBIT in EUR million 25.93 32.93

EBITDA in EUR million 74.78 64.23

Net profit in EUR million 20.72 31.74

Value added in EUR million 105.29 92.53

Return on assets 2.96% 4.76%

Return on equity 3.93% 6.06%

Electricity sold in GWh 9,509 7,239

Company GEN 2011 2010

Assets in EUR million 517.93 505.73

Equity in EUR million 430.09 420.62

Revenues in EUR million 186.78 171.35

EBIT in EUR million 17.21 28.50

EBITDA in EUR million 18.06 29.45

Net profit in EUR million 9.43 30.52

Value added in EUR million 20.23 31.28

Return on assets 1.84% 6.02%

Return on equity 2.22% 7.28%

Electricity sold in GWh 3,432 3,253



Company GEN GEN Group

2%

7%

4%

6%

Return on equity


2%

6%

3%

5%

Return on assets


9

31

21

32

Net profit in EUR million


17

2826

33

EBIT in EUR million

385

171


187

574

Revenues in EUR million

430

529

421


525

Equity in EUR million

680720

506


518

Assets in EUR million


2031

10593

Value added in EUR million

20102011

Figure 1: Diagrams of key data on the company GEN and the GEN Group for 2011 against 2010



nia and Croatia in the category of direct sales to commer-cial consumers, and we maintained our market position in Italy and Austria. Securing our own sustainable and stable energy sources allows us to make a vital contribution to-wards reducing reliance on imports and to promoting the country‘s economic development as a result.

A strong sense of commitment shared by the employ-ees of the GEN Group and the experienced and prudent management teams make it possible for us to deliver good business results and to carry out all planned de-velopment activities. Investments in the development of suitable and qualified human resources is the single most important factor in ensuring long-term success.

Effective teamwork, diligence, experience and an active role of our employees and partners are of key impor-tance when it comes to achieving and fulfilling our com-mon vision.

I would like to thank all the employees and the manage-ment staff of the company GEN and the GEN Group for adding their valuable share and knowledge to our overall success. A special thanks also goes to all the represen-tatives of the owners, the local communities, business partners and service providers for their constructive roles and help in achieving such good business results.

Martin NovšakDirector, GEN energija, d.o.o.

Dear Reader,

For the GEN Group, the 2011 business year was full of unforeseeable challenges, but we tackled them suc-cessfully and finished the year on target. Our genera-tion facilities recorded stable and competitive operation, enabling us to supply our consumers with electricity in a timely and reliable manner.

The successful year was also marked by a number of realized investments and preparations for the upcoming planned maintenance outage of Krško Nuclear Power Plant (NEK). We also faced some unplanned challenges such as the capital injection in NKBM, disconnection of NEK from the grid, subnormal hydrology, the natural di-saster in Japan and the resulting rise in electricity prices on power exchanges.

In 2011 we also reached two major milestones. We marked 30 years of operation of our largest power gen-eration facility, NEK. By opening GEN Information Cen-tre, which features a modernized control centre and an interactive centre on energy and energy technologies named The World of Energy, GEN symbolically entered its second decade of operation.

NEK operated at full capacity all year long, apart from an unplanned outage that took place in March 2011 due to external factors, an incident on the power grid, and finished the year with business results that were in line with its economic targets. Already in 2011 NEK started intensive preparation for the regular annual planned maintenance outage, which started in April 2012. Some important replacements are going to be made during the maintenance outage: reactor head, rotor on the main power generator, and a third stand-by emergency diesel generator. Another project that was also started was the construction of flood defences in order to improve flood safety. The natural disaster that struck Japan and also

damaged the Fukushima nuclear power plant stressed the need to increase nuclear safety standards. With full support from partners GEN and HEP, NEK developed and implemented a number of short-term activities and also laid down a five-year safety investment programme, which will raise the level of nuclear safety even further. At the end of 2011 Slovenia submitted the final national report on the stress tests to determine the level of safety of operating nuclear power plants in compliance with the requirements of the European Commission and EN-SREG provisions. NEK continues to work on extending the service life of its power plant until 2043. The service life extension is expected to be granted in 2012.

Unfavourable hydrology marked the whole of 2011, so SEL was only able to meet 83% of its production target. The company SEL carried out all scheduled overhauls and inspections of its generating units and replaced the 110 kV switching station at Mavčiče HPP in 2011. GEN bought business shares of ten minority partners of the company SEL in 2011 and became the sole owner of the company. This allowed SEL to join the joint company SRESA and to continue its efforts towards the construc-tion of hydroelectric power plants in the middle course of the Sava River.

TEB completed the regular annual inspections of its gas units PB1, PB2 and PB3 successfully and on sched-ule, and in the process they also carried out a thorough inspection of the gas units‘ hot parts and replaced the computer supervision and control systems.

Through our subsidiary GEN-I we are also increasing our market share in the category of direct electricity sales to consumers. Our sales networks recorded strong growth and expansion in 2011. We launched trading activities along Turkish borders, we increased our market share in Slove-

1.2 Letter from the Director



1.3.3 Subsidiaries and affiliated companies

The GEN Group includes two jointly controlled compa-nies: NEK and GEN-I. In view of the above, the data in this Annual Report, unless specified otherwise, are based on the equity interest held by GEN; specifically, for NEK as a company and for GEN-I as a group, since GEN, holding a 50% interest in the company GEN-I, is also an indirect owner of the companies owned by GEN-I.

Whenever data refer to whole companies or groups of companies, disregarding GEN’s equity interests in indi-vidual companies and the rules of consolidation, a spe-cial annotation is used to indicate that the relevant data refer to the GEN Group companies.

GEN also holds a 12.6% equity interest in the company Hidroelektrarne na Spodnji Savi (hereinafter: HESS), and a 2.8% equity interest in HESS is also held by TEB. The company Srednjesavske elektrarne d.o.o. (hereinafter: SRESA) was founded in 2011. The companies GEN and SEL hold equity interests of 10% and 30% respectively in this company.

In addition to interests in energy production companies, GEN also holds a 9.28% equity interest in the company ZEL-EN, razvojni center energetike, d.o.o., (hereinafter: ZEL-EN) and a 6.4% equity interest in Nova KBM d.d. (hereinafter: NKBM).

1.3 Company profile

1.3.1 Company ID

Registered company name: GEN energija, d.o.o. Short registered name: GEN, d.o.o. Type of entity: limited liability company Registered office: Vrbina 17, 8270 Krško

Telephone: +386 7 49 10 112 Fax: +386 7 49 01 118 Website: www.gen-energija.si E-mail: [email protected]

Year of foundation: 2001 Founder and sole partner: Republic of Slovenia VAT ID number: SI44454686 Registration number: 1646613 Bank accounts: NLB 02924-0090457150 Banka Celje 06000-0904571665 SKB banka 03155-1000503323 Activity: K/64.200 Activities of holding companies, D/35.140 Electricity trading, and other activities. Share capital: EUR 26,059,796.00

CEO - director: Martin Novšak Chairman of the Supervisory Board: Danijel Levičar (until 30/11/2011)

Number of employees: 50

1.3.2 Corporate governance

The company GEN energija, d.o.o., (hereinafter: GEN) is governed by the founder directly and through the following company bodies:

Supervisory Board: Chairman: Danijel Levičar (until 30/11/2011) Vice Chairman: Gorazd Skubin (until 25/07/2011) Tomaž Savšek, PhD (from 26/08/2011)

Board members: Rudi Brce, MSc (until 25/07/2011) Andro Ocvirk, PhD Davorin Dimič, MSc Uroš Saksida, MSc (from 25/07/2011) Tomaž Savšek, PhD (from 25/07/2011 until 25/08/2011)

CEO - director: Martin Novšak

GEN is the parent company of the GEN Group. The main activity of the company is activities of holding companies, and GEN had the following subsidiaries as at 31/12/2011:• Nuklearna elektrarna Krško, d.o.o., (hereinafter:

NEK) (50.0%),• GEN-I, trgovanje in prodaja električne energije,

d.o.o., (hereinafter: GEN-I) (50.0%),• Savske elektrarne Ljubljana, d.o.o., (hereinafter:

SEL) (100.0%), and• Termoelektrarna Brestanica, d.o.o., (hereinafter:

TEB) (100.0%).

In addition to the subsidiaries, GEN also had the follow-ing indirectly affiliated companies as at 31/12/2011:• Companies wholly owned by GEN-I: GEN-I, d.o.o.

Zagreb, Croatia; GEN-I, d.o.o. Belgrade, Serbia; GEN-I Budapest KFt, Hungary; GEN-I DOOEL Skopje, Republic of Macedonia; GEN-I, d.o.o. Sa-rajevo, Bosnia and Herzegovina; GEN-I Tirana Sh.p.k., Albania; GEN-I Tirana Sh.p.k. – Kosovo branch; GEN-I Athens SMMLC, Greece; S.C. GEN-I Bucharest s.r.l., Romania; GEN-I Sofia SpLLC, Bulgaria; GEN-I Milano S.r.l., Italy; GEN-I Vienna GmbH, Austria, and

• The company HSE Invest, d.o.o., in which SEL holds a 25% equity interest.

http://www.gen-energija.si

mailto:[email protected]



1.4 GEN‘s holding activities

GEN’s principal operations include activities of holding companies, that is, governing other legally independent companies through equity interests held in them by the company GEN as the controlling company.

As a holding company, GEN carries out management operations through equity interests in subsidiaries and jointly controlled entities by participating in general meetings, managing financial results of subsidiaries and approving required documents, by appointing its representatives into supervisory boards of subsidiar-ies and jointly controlled entities, all in compliance with relevant articles of incorporation and memorandums of association. GEN management regularly coordinates its actions with the managements of subsidiaries and joint-ly controlled entities.

Based on the business results of individual companies within the GEN Group and the Group as a whole, we find that GEN manages the Group well, that the companies are successful in keeping costs under control, and that they fully follow their respective business plans.

1.4.1 Krško Nuclear Power Plant

Registered name: Nuklearna elektrarna Krško, d.o.o.Registered office: Vrbina 12, 8270 Krško

Pursuant to the Intergovernmental Agreement on NEK, GEN is the successor in title of Slovenian electricity boards with respect to the rights and obligations regard-ing the construction and operation of Krško Nuclear Power Plant (NEK). NEK is a jointly controlled company, with GEN and HEP each holding a 50% interest in the company‘s share capital.

Krško Nuclear Power Plant is the only facility in Slove-nia that uses nuclear energy for the commercial pro-duction of electricity. It is the largest power generation facility in Slovenia, which, after having undergone mod-ernization and replacement of low-pressure turbines, has a declared net capacity of around 696 MW in opti-mal conditions. Now that the plant has switched to an 18-month fuel cycle and the low-pressure turbines were replaced, it can generate more than 5,900 GWh per year when no planned maintenance shutdown is carried out, and around 5,400 GWh per year when a planned main-tenance shutdown is carried out. This means that, in accordance with the Intergovernmental Agreement on NEK, the available amount of electricity for the Slove-nian market ranges between 2,700 GWh and 2,900 GWh or even above.

Figure 2: The GEN Group as at 31/12/2011

100% 100% 100% 100% 100% 100%

GEN-I,d.o.o. Belgrade,

Serbia

GEN-I,Budapest Kft,

Hungary

GEN-I,d.o.o. Sarajevo,

BiH

GEN-I,Athens SMMLC,

Greece

GEN-I,Sofia SpLLC,Bulgaria

GEN-I,Vienna Gmbh,

Austria

GEN-I,d.o.o. Zagreb,

Croatia

GEN-I,DOOEL Skopje,Macedonia

S.C. GEN-I,Bucharest s.r.l.,

Romania

GEN-I,Milano S.r.l.,

Italy

GEN-I,Tirana Sh.p.k.,

Albania

GEN-I,Tirana Sh.p.k.,

Kosovo Branch

50%

TRA

DIN

G A

ND

SA

LES

PR

OD

UC

TIO

NO

THER

INVE

STM

ENTS

OTH

ER IN

VEST

MEN

TS

9.3%

100%

10%

12.6%

50%

6.4%

HESS, d.o.o.

TEB, d.o.o.

NEK, d.o.o.

SRESA, d.o.o.

SEL, d.o.o.

GEN-I, d.o.o.

Nova KBM,d.d.

ZEL-EN, d.o.o.

HSE Invest, d.o.o.

100%

30%

2.8%

25%



1.4.3 Savske elektrarne Ljubljana

Registered name: Savske elektrarne Ljubljana, d.o.o.Registered office: Gorenjska cesta 46, 1215 Medvode

GEN bought business shares of ten minority owners of the company SEL in 2011 and became its sole partner, which allows it to make autonomous decisions on the is-sues defined in the Articles of Incorporation adopted by GEN on 13/09/2011.

SEL has a long tradition in its main economic activity of producing electricity in hydroelectric power plants (HPPs). Završnica HPP, the company‘s oldest hydroelec-tric power plant, has been in operation ever since 1914, and since then the company has built four new hydro-electric power plants: Moste HPP, Mavčiče HPP, Med-vode HPP and Vrhovo HPP.

SEL fulfils an important function in the Group as it pro-duces base load as well as peak load power. SEL uti-lizes exclusively renewable energy sources for generat-ing electricity and, in addition to the large hydroelectric power plants, also runs two small-scale hydroelectric and several small-scale photovoltaic power plants, one wind turbine and one cogeneration (CHP) plant.

1.4.4 Termoelektrarna Brestanica

Registered name: Termoelektrarna Brestanica, d.o.o.Registered office: Cesta prvih borcev 18, 8280 Brestanica

Holding a 100% equity interest, GEN is the sole owner of TEB. For Slovenia‘s electric power grid, TEB, with its ancillary services, is a reliable backup energy source in the most critical of moments. With its fast generating units, the power plant specifically ensures: • Rapid deployment in the event of system overload

or power failure in other Slovenian power plants or electric power transmission lines.

• Protection against electric power grid breakdown thanks to its speedy deployment capability.

• Recovery of the electric power grid following failure and serving as an independent direct power source for NEK.

Apart from producing a substantial share of electricity, NEK is also renowned for its remarkably high production reliability rates. By consistently meeting its ambitious goals, NEK ranks in the top 25% of the best-performing nuclear power plants in operation worldwide.

In spite of an unplanned shutdown, caused by external factors in the switching station, and the harsh economic situation, NEK recorded safe and reliable operation at full capacity and finished the year with business results that match the economic plan. The natural disaster that damaged Japan‘s Fukushima nuclear power plant stressed the need to introduce more stringent nuclear safety standards. In response to the events in Japan, NEK developed and implemented a number of short-term activities and also laid down a five-year safety in-vestment programme, which will help maintain the re-quired level of nuclear safety in the long run.

1.4.2 GEN-I, trgovanje in prodaja električne energije

Registered name: GEN-I, d.o.o.Registered office: Vrbina 17, 8270 Krško

The company GEN-I is a jointly controlled company owned by partners GEN and IG Energetski sistemi d.o.o. (hereinafter: IGES). The principal areas of activity of the company GEN-I and the GEN-I Group are classified into two main categories: • Electricity trading,• Selling electricity to consumers and purchasing

electricity from producers.

The two activities are organized in profit centres and two separate portfolios, which are linked together by market prices and incorporated into the GEN-I balance group, which is managed under the electricity trading activity.

An extensive international trading network enables the company to effectively expand and steer its ever-grow-ing balance group in Slovenia with trading activities in the liquid neighbouring markets of Austria, Germany, Italy, as well as in the less liquid markets of the former Yugoslavia and the rest of Southeast Europe. To facilitate business operations in individual markets, subsidiaries wholly owned by the parent company GEN-I, d.o.o., have been founded. Most of the trading activity is done by the Slovenia-based parent company, specifically by the trad-ing division in Ljubljana, whereas the local presence in individual markets allows the Group to better under-stand the market in question and to promptly and prop-erly react to market changes.



1.5.5 Fulfilling the GEN Group’s corporate policy

The Revised GEN Energija Development Plan was dis-cussed and passed by the 181st regular session of the Government of the Republic of Slovenia, acting in the power of the General Meeting of the company GEN, on 1 October 2008. The Revised GEN Energija Development Plan superseded the previous development plan passed by the Government of the Republic of Slovenia in Decem-ber 2005. With this the GEN Group has obtained a stra-tegic document which serves as the foundation stone of the Group‘s further development.

The GEN Group continues to be at the helm of the nu-clear option in Slovenia, which is at the same time the backbone of the Group‘s future development. Moreover, the GEN Group is increasing its volume of investments in renewable energy sources and the gas technology.

Open communication among all the GEN Group companies allows uninterrupted flow of and access to information crit-ical to managing the companies, steering their operation, monitoring approved investments and handling develop-ment activities. We pay special attention to the specific na-ture of running and operating a nuclear installation, since its owner must possess a thorough understanding of the need for securing suitable human resources and for ob-taining appropriate financial resources in order to ensure reliable and safe operation of Krško Nuclear Power Plant.

The GEN Group meets all its strategic goals: by expand-ing the trading network and by launching the GEN Con-trol Centre (hereinafter: GEN CC), the Group optimizes the production and trading inside both the GEN-I bal-ance group and the GEN balance subgroup.

The corporate policy of the GEN Group derives from the Revised GEN Energija Development Plan. GEN adheres to this policy in its entirety, is its holder and ensures that it is implemented on all levels. As a result, the corporate policy of the Group is becoming the cornerstone of op-erations of all the companies in the Group.

1.5.1 Vision

The vision of the GEN Group is to become the driver of development in the areas of electric power production and comprehensive supply of electricity generated from clean, sustainable and renewable energy sources and to contribute to the sustainable development of Slovenia.

1.5.2 Mission

The mission of the GEN Group is to ensure reliable and safe production and supply of electricity with a clear fo-cus on the end user. This will be achieved by investing in clean, sustainable and renewable energy sources used for the production of electricity needed to meet Slove-nia‘s energy needs, with the strongest emphasis placed on maintaining and expanding nuclear capabilities as the cornerstone of sustainable development. In this way, the GEN Group will add its share to increasing competi-tiveness, promoting a clean environment and reducing Slovenia‘s reliance on imported energy.

1.5.3 Values

The key values of the GEN Group are:• sustainable, reliable and environmentally friendly

production of electricity;• care for the environment at the local and global

level, which constitutes the driving force behind the company‘s operations and investments;

• delivering a complete customer-oriented package for the supply of electricity and provision of related services;

• acceptability and transparency of the Group‘s activi-ties and openness towards two-way communication with all interested parties.

1.5.4 Strategic goals

The strategic goals of the GEN Group are to:• manage, run, perform maintenance on and invest in

its existing facilities with the aim of ensuring safe, reliable, eco-friendly and economical operation of the existing production units in the long term;

• expand its sales portfolio for electricity and electric-ity-related services with the aim of increasing com-petition in the market;

• invest in new production capabilities built around renewable and sustainable sources and technolo-gies in order to increase the reliability of electricity supply to consumers and, in this way, to contribute to the sustainable development of Slovenia.

1.5 Corporate Policy of the GEN Group

23UvodLetno poročilo skupine GEN 2011

Like all great things, electricity too is a result of work. It is a transient form of energy which is the easiest to use, given that we know how to generate it, safely transmit it across large distances and transform it into other forms of energy. That way it reaches the consumer in the purest and most convenient form, and seeing its immediate effects is most of the time as easy as flipping a switch.

The switching station at TEB is the largest and most advanced 110 kV switching station in Slovenia. It connects the thermal power plant to the grid and is also an important energy junction of the transmission lines for the Posavje, Zasavje and Dolenjska regions. It further strengthens TEB’s role as a key component in the national power grid. TEB is also a critical backup power source for a safe shutdown of NEK.

Business report

Photo: The 110 kV switching station at TEB

24 25Business reportAnnual report of the GEN Group 2011

2.2.1 Production of electricity

In order to ensure stability of the national electric power grid, the companies in the GEN Group not only generated electricity in 2011 but also provided ancillary services in line with the operational characteristics of their genera-tion facilities. With the aim of providing a central platform for steering the operations of individual subsidiaries and the whole balance group in real time, under normal and emergency operating conditions, a project to set up and implement a joint GEN Control Centre (GEN CC) got un-derway in 2007. The Control Centre has brought together – at the highest level, both functionally and technically – activities of individual companies in the Group, the pur-pose of which is to facilitate maximum utilization of avail-able production resources and to seize the opportunities presented by the access to the domestic and international electricity markets. The introduction of a unified man-agement process for companies within the Group has lessened the business risks (for example, the unplanned shutdown of NEK in March 2011) faced by individual com-panies and the Group as a whole.

Thanks to GEN CC, which coordinates the operation of the entire GEN balance subgroup, the production units operated in sync, and the effects of unpredictable events were effectively mitigated.

Although electricity sales and trading in the GEN Group is in the domain of GEN-I, GEN too has an independent role within its balance subgroup with respect to trading in electricity and power with other balance groups.

2.2 Electricity production and ancillary services

Consumers

GEN-Ibalance group

Sales and purchasesin foreignmarkets

Sales and purchasesin the home

market

GENbalance

subgroup

NEK696 MW

5,400 – 6,000GWh

SEL118 MW314 GWh

TEB312 MW

5 – 100 GWh

HESS 78 MW

275 GWh

Figure 3: Diagram of connections of the GEN balance subgroup

2.1 Economic trends and their impact on the electricity business and the GEN Group

Business reportAnnual report of the GEN Group 2011

It was at the beginning of 2011 that all the major mac-roeconomic indicators predicted the end of the crisis; however, as the end of the year approached, there was growing concern over a new wave of recession because the declining economic activity caused the situation in the European and global economies to deteriorate at a rapid pace.

Credit ratings of the USA and most of the leading Eu-ropean economies except Germany and France were downgraded in 2011. The situation in the financial sec-tor again took a drastic turn for the worse. The loom-ing bankruptcy of Greece, which Europe is trying to save with new bailouts, the imminent downfall of Italy and se-vere financial problems of Portugal and Spain brought the common European currency to the verge of collapse. Also, the strengthening of the U.S. dollar against the euro has left a huge impact on the markets in raw mate-rials and precious metals.

The Slovenian economy, like the European ones, expe-rienced a sharp slowdown of economic growth. Exports were the key driver of the economy. The domestic eco-nomic situation was also heavily affected by the crisis in the construction industry, which caused the collapse of a number of construction companies which had contributed a significant share to Slovenia‘s past economic growth.

The electricity generation industry and also the opera-tions of the GEN Group in 2011 were deeply affected by the natural disaster which damaged Japan‘s Fukushima nuclear power plant, as a result of which both Germany and Switzerland already announced that they were go-ing to phase out nuclear energy as part of their national energy programmes. This resulted in a hike in electric-ity prices, which was short-lived; the prices of electricity on the power futures exchange went down again to the 2010 levels at the end of the year. In the light of the bleak economic outlook and the resulting decline in industrial activity, which translates to lower consumption of elec-tricity, electricity prices in the wholesale market are not expected to increase markedly in 2012.


In 2011 the aggregated output of large-scale SEL hydro-electric power plants was 259 GWh, which is 82.76% of the production target. The lower output is the result of subnormal hydrology year-round.

Table II 2: Large-scale HPP electricity production (GWh) in 2011

HPP Target Result Ratio

MOSTE HPP 65 59 0.914

MAVČIČE HPP 62 52 0.841

MEDVODE HPP 72 65 0.898

VRHOVO HPP 114 83 0.727

TOTAL 313 259 0.828

Table II 3: Large-scale HPP monthly electricity produc-tion (GWh) in 2011

Month Target Result Ratio

January 22 35 1.571

February 18 16 0.909

March 23 25 1.104

April 31 19 0.624

May 32 19 0.596

June 28 28 1.014

July 24 20 0.824

August 18 20 1.086

September 22 13 0.594

October 33 24 0.739

November 36 18 0.491

December 26 21 0.825

TOTAL 313 259 0.828

The company carried out all scheduled overhauls and inspections of its generating units and replaced the 110 kV switching station at Mavčiče HPP in 2011. The only ex-ception was the inspection of generating unit 2 at Vrhovo HPP, which was pushed back to 2012, when the turbine control system will also be replaced during the regular inspection.

TEB

The amount of electricity generated at TEB largely de-pends on the power plant‘s backup operation for the purposes of intervention in the event of failures of larger units in the national electric power grid. When condi-tions in the electricity market are favourable, however, a portion of TEB‘s production is also offered in the market. TEB generated 12 GWh of electricity in 2011. But since GEN supplied TEB with electricity from other produc-tion units in the GEN balance subgroup in order to meet TEB‘s on-site energy needs, TEB‘s net production was 7 GWh.


NEK

Krško Nuclear Power Plant (NEK), the largest produc-tion unit in the GEN Group, delivers base load power on the daily load curve throughout the year. Having gen-erated 5,902 GWh in 2011, NEK exceeded its economic target. The amount of electricity that went to the GEN Group in accordance with the Intergovernmental Agree-ment on NEK was 2,951 GWh.

On 23/03/2011 at 10:27 a.m., NEK registered that the G2 busbar in the 400 kV switching station had failed, which caused all the systems connected to this busbar to fail as well. And because electricity could no longer be fed into the grid, the power plant automatically shut down. The shutdown was in effect from 10:27 a.m. on 23/03/2011 until 03:00 a.m. on 30/03/2011, during which time the busbar protection power supply was modified and corrective work on the generator lubrication and sealing systems and the reactor coolant pump lubrica-tion system was carried out. Despite the shutdown, NEK exceeded its annual target.

Operating on an 18-month fuel cycle, NEK underwent no annual regular maintenance outage in 2011. Nev-ertheless, NEK carried out technological upgrades and intensive preparations for the maintenance outage that started in April 2012, when the most important activities will be the replacement of the reactor head, the rotor of the main power generator and the third stand-by emer-gency diesel generator.

In the months after the Fukushima event NEK conducted what is known as stress tests, which confirmed that the nuclear power plant‘s safety culture was on a remark-ably high level. Before that, the Slovenian Nuclear Safety Administration adopted in September 2011 a Decision on the implementation of safety upgrades to prevent and

mitigate the consequences of severe accidents. The pro-posed improvements are expected to be implemented by NEK between 2012 and 2016.

Table II 1: NEK monthly electricity production (GWh) in 2011

Month Target Target (50%) Result Ratio

January 503 252 258 1.027

February 460 230 234 1.019

March 505 253 200 0.792

April 484 242 249 1.029

May 502 251 255 1.016

June 485 243 247 1.020

July 495 248 251 1.015

August 495 248 251 1.014

September 485 243 241 0.994

October 505 253 256 1.013

November 490 245 249 1.018

December 491 246 258 1.052

TOTAL 5,900 2,950 2,951 1.000

SEL

Within the national power grid, SEL‘s production units are primarily intended for delivering electricity on the daily load curve and have an option to utilize accumulation for carrying night-time energy over into daytime. The hydro-electric power plants on the Sava River are mainly run-of-the-river-type facilities with daily water accumulation, which means that they can participate in the system-wide frequency control on a day-to-day basis in response to un-evenly distributed load curve (at different times of the day).


Large production units of the GEN Group

The data given below shows that the production units in the GEN balance subgroup recorded optimal opera-tion in 2011. Thanks to GEN CC, which coordinates the operation of the entire GEN balance subgroup, the pro-duction units operated in sync, and the effects of any unpredictable events were effectively mitigated, which is clearly reflected in the Group‘s business results.

Table II 6: Large-unit electricity production (GWh) avail-able to the GEN Group in 2011

GEN Group Target Result Ratio

TOTAL 3,405 3,250 0.954

Despite the subnormal hydrology and the unplanned shutdown of NEK in March, the 2011 production of the GEN balance subgroup was higher than in 2010, which is not unusual given that no annual maintenance outage of NEK was carried out in 2011.

Small production units of the GEN Group

In addition to the large production units, the GEN Group companies also operate several small-scale production units: 2 small-scale hydroelectric power plants, 9 pho-tovoltaic power plants, 1 wind turbine and 1 CHP plant running on natural gas.

In all, the GEN Group‘s small-scale units generated 1.3 GWh of electricity in 2011.

In 2011 the company GEN received a grant – operational support for the electricity generated from renewable energy sources – in the amount of EUR 302, which has been disclosed by the company GEN in accordance with Article 4 of the Transparency of Financial Relations and Maintenance of Separate Accounts for Different Activi-ties Act (Official Gazette of the Republic of Slovenia, No. 33/2011).

Figure 4: Electricity production (GWh) available to the GEN Group in 2011 against 2010

3,123

6

2,690

427

2010

3,250

12

2,951

287

2011

GSP HPP NPP


Table II 4: TEB monthly electricity production (GWh) in 2011

Month Target Result Ratio

January 13 0 0.027

February 13 0 0.010

March 2 1 0.287

April 2 0 0.160

May 2 0 0.204

June 10 0 0.020

July 10 1 0.020

August 10 2 0.197

September 10 2 0.236

October 2 4 1.991

November 13 1 0.061

December 13 0 0.024

TOTAL 100 12 0.119

In terms of tertiary frequency control interventions, there were a total of 26 activations, or 38 start-ups, of individual gas units recorded in 2011, generating a total of 6 GWh of electricity.

TEB completed the regular annual inspections of its gas units PB1, PB2 and PB3 successfully and on schedule. Gas units PB4 and PB5 underwent what is known as a Level A inspection, which entailed the opening of the combustion chamber and a thorough inspection of the gas units‘ hot parts.

HESS

A portion of electricity from HESS was also available to the GEN balance subgroup in 2011, which, proportional to GEN‘s equity interests in HESS, amounted to 15.4% of HESS‘s total electricity production.

GEN received 28 GWh of electricity from HESS in 2011, which represents a mere 65.57% realization of the tar-get. The reason for the gap was subnormal hydrology throughout the year.

Table II 5: Monthly supplied electricity (GWh) from HESS in 2011

Month Target (15,4%) Result Ratio

January 3 4 1.321

February 3 2 0.565

March 5 3 0.657

April 4 2 0.455

May 4 2 0.480

June 3 3 0.887

July 3 2 0.777

August 2 2 0.847

September 3 1 0.397

October 4 2 0.608

November 4 2 0.442

December 4 3 0.626

TOTAL 42 28 0.656


The purchase portfolio of the GEN Group comprises elec-tricity generated in the Group’s own production units and electricity purchased elsewhere. Nuclear power is the prevailing source of electricity. A significant share in the composition of the portfolio is also occupied by renewable energy sources and the capability of providing ancillary services, particularly tertiary frequency control.

Electricity is purchased from the production units based on annual contracts.

In addition to purchases from major producers, purchas-es from producers with a declaration for their produc-tion facility (hereinafter: DP) also make up a significant part of the purchase portfolio. This is the GEN Group‘s important contribution to promoting electricity from en-vironment-friendly sources. Electricity is purchased in the home and foreign markets. Still, purchases from the GEN Group‘s own production units make up a large part of the overall purchase portfolio.

The growth of the GEN Group is also reflected in the increased electricity purchase and sales volumes. In 2011 the Group‘s electricity purchase and sales vol-umes went up by a total of 31.36%; however, due to the proportional consolidation of NEK and GEN-I, their trading and sales figures are only recognized on a fifty-fifty basis.

For the sake of clarity, the electricity purchase and sales volumes presented below reflect the proportional consolidation of NEK and recognize the total amounts for GEN-I.

Totalling 18,094 GWh, the amount of electricity pur-chased by the GEN Group companies in 2011 was much higher than it was in 2010. This includes 178 GWh pur-chased from DP and 3,250 GWh provided by GEN from its own generation units. The rest of the electricity pur-chase side of the portfolio refers to supplies from the GEN-I trading division.

2.3 Electricity purchasing

13,645

141

10,380

3,123

2010

18,094

178

14,667

3,250

2011

Figure 6: Electricity (GWh) purchased by GEN Group companies

7,239

2010

9,509

2011

Figure 5: Electricity purchased by the GEN Group (GWh) – 50% consolidation of GEN-I and NEK

DP GEN OTHER


2.2.2 Ancillary services

Due to its remarkably stable operation and ability to generate large amounts of reactive power, NEK also plays a key support role in the balancing of critical oper-ational and voltage conditions in the electric power grid within the European UCTE (Union for the Coordination of Transmission of Electricity) system.

SEL units provide tertiary frequency control and reac-tive power and have black-start capability, which means their generating units can be started up without external power supply.

TEB‘s principal function within Slovenia‘s electric power grid is to provide ancillary services (tertiary frequency control, capability to perform secondary frequency con-trol by operating the larger gas unit, black-starting gen-erating units, and delivering independent direct power supply to NEK). Playing a special role, TEB‘s systems, wiring, piping and installations all operate under spe-cific, harsh operating conditions, with many start-ups and a small number of operating hours, which calls for a specific approach to maintenance.

Pursuant to the relevant agreement, GEN provided ELES, the transmission system operator, with power in the amount of 200 MW for the purposes of providing an-cillary services of tertiary frequency control, for black-starting generating units, for voltage control and reac-tive power. The revenues derived from it totalled EUR 9.18 million and were below the target by 2.07% on ac-count of reduced availability of voltage control and reac-tive power at NEK.

32 33

Figure 7: Geographic presence of the GEN Group

GEN-I balance group

Subsidiary

Trade representation office


SLO

A

CZ

IT

CRO

BiH

RS

RO

BG

MK

KV

AL

GR

MNE

H

D

In terms of electricity trading and sales, we stood firmly on course in 2011. An increasingly large amount of elec-tricity from our own sources is being sold through our in-house know-how and competences. The GEN Group is an effective electricity trader, as its cross-border wholesale trading infrastructure gives it access to all the necessary pricing data and information needed to ensure optimal utilization of production resources.

From the perspective of electricity retailing in Slovenia, the connection between GEN and GEN-I is crucial for the GEN Group. The key feature of the relationship between the two companies is that GEN-I sells electricity for GEN on clearly defined terms and conditions. Most of GEN’s annual production is sold based on GEN’s annual sales strategy, on which the GEN Supervisory Board delivers its opinion. The provision of the right amounts of elec-tricity on a day-to-day basis, in order to deliver on the signed deals and to optimize the sales process, is car-ried out through short-term purchases of electricity to make up for shortfalls and through sales of excess elec-tricity, if and whenever applicable.

2.4.1 Trading

The sale of electricity generated by our own produc-tion units to consumers and distribution companies was the basis for trading in 2011. The total amount of elec-tricity for trading went up from 13,645 GWh in 2010 to 18,094 GWh in 2011. The economy of scale has increased as we entered new markets, and instruments have been put in place and all required authorizations obtained for comprehensive management of excess electricity and electricity shortfalls as provided for in agreements on purchasing electricity from production sources and on supplying electricity to consumers.

Slovenia is our most important retail market, but the in-creasingly large balance group is expanded and coordi-nated through trading activities in the neighbouring mar-kets. The major buyers‘ markets are Germany, Hungary, Bulgaria and Romania, and the major sellers‘ markets are Germany, Austria and Italy, then Greece, Hungary and Romania and, depending on hydrology, also Croatia, Serbia, Kosovo, Albania, Macedonia and Montenegro. The keystones of expansion into foreign markets are the Group‘s subsidiaries, which possess all the required au-thorizations, competences to adapt to distinctive local circumstances, and a proper trading infrastructure.


2.4 Electricity trading and sales

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Some important steps were made by the GEN Group companies in the areas of R&D and investments in 2011. Funds allocated to this end totalled EUR 82.25 million.

Table II 7: Investments made by GEN Group companies in 2011 (in EUR million)

GEN Group Investment cost

GEN 48.68

HESS construction project 2.23

JEK 2 construction project 1.10

GEN IC construction project 4.91

Purchase of SEL business shares 15.41

Capital injection in GEN-I 1.50

Capital injection in NKBM 20.00

ZEL-EN 0.12

SRESA 0.01

Miscellaneous investments 3.39

NEK (50%) 27.10

SEL 5.22

TEB 0.82

GEN-I (50%) 0.43

TOTAL 82.25

The company GEN made EUR 48.68 million worth of capital investments in 2011, both in the form of direct investments and financial investments. Since the com-pany‘s profits are the only viable source of finance, the capital investments were financed largely by the profits from the current and previous years. In 2011 the com-pany GEN financed its capital investments by deprecia-tion allowances in the amount of EUR 0.85 million and by the current profits and retained earnings from previous years totalling as much as EUR 47.83 million.

The company will continue its intensive investment activ-ity into 2012, which will again be financed largely by cur-rent profits and retained earnings. However, if we were to go ahead with the purchase of a large business share in the company HESS, we would also have to take out a loan.

2.5.1 HESS construction project

With the transfer of an interest in the HESS Joint Venture on 01/01/2008, GEN became a direct stakeholder in the HESS construction project. Payments for HESS are provided for in the memorandum of association, and the exact amounts are decided by the company‘s annual general meeting.

GEN put EUR 2.23 million into the HESS project in 2011, and the investment of the entire GEN Group in HESS to-talled EUR 2.73 million. Payments began in February and ended in September. The amount of payments for 2011 was planned to be higher, but the October, November and December payments were skipped due to a delay in the construction of the Krško HPP reservoir and the prepara-tion of the national spatial plan for Brežice HPP.

2.5.2 JEK 2 construction project

In October 2006 the Government of the Republic of Slo-venia adopted the Resolution on Key National Develop-ment Projects for the Period from 2007 to 2023 (ReNEP) and included among measures and projects supporting sustainable development of Slovenia the option of con-structing a second reactor unit of Krško Nuclear Power Plant. This was a clear indication the interest and direc-tion of the Government of the Republic of Slovenia in shaping the future of energy in Slovenia.

In Slovenia the situation in electricity supply has intensified in recent years, and electricity consumption has increased

2.5 Research & development and investments of GEN Group companies



2.4.2 Sales

The increase in electricity retailing volumes and our en-try into the household supply segment are proof that our products, with varying degrees of risk for the customer and ranges of services offered, have undergone fur-ther development. Among the GEN Group‘s customers are large corporations, as well as small- and mid-sized businesses, and households.

The GEN Group was a major player in all the electricity sales segments in Slovenia in 2011 and was estimated to have an overall market share of a little over 23%. The GEN Group is also actively engaged in supplying elec-tricity to consumers abroad. The key focus in this re-

Figure 8: Electricity sold by the GEN Group (GWh)

COMMERCIAL CUSTOMERS

HOUSEHOLDS AND SCC

OTHER BUYERS

ABROAD

13,645

2,292

9,773

1,480100

2010

18,094

2,577

13,917

1,427174

2011

spect shifted to Croatia in 2011, and also important are the Italian and Austrian markets. The experience gained this way is also used to good effect in ensuring rapid de-velopment and in looking for new opportunities for re-tailing elsewhere as well, particularly in the Southeast-ern European markets.

In 2011 the GEN Group companies sold 4,178 GWh of electricity in the domestic market: 2,577 GWh to com-mercial customers, 174 GWh to households and small commercial customers (SCC) and 1,427 GWh to other buyers (OB), which also purchased electricity from GEN in order to satisfy household demand.

36 37

2.5.3 GEN Information Centre construction project

The construction of GEN Information Centre (hereinaf-ter: GEN IC) premises was completed in 2011. The move to the new building was made on 18/06/2011, and the official opening took place on 06/07/2011.

GEN IC brings under one roof not only the company head-quarters with all its divisions and GEN CC, but also a state-of-the-art visitor centre named The World of Energy, whose pur-pose is to provide comprehensive information, explanations, interactive exhibits and experiments to bring energy and en-ergy technologies closer to visitors and to spark the interest in natural and technical sciences among young people.

Taking into account the value of the contract and annex-es to the contract, the total cost of GEN IC was EUR 7.3 million. EUR 4.91 million was spent to this end in 2011.

2.5.4 Purchase of business shares in SEL

The purchase of minority business shares in SEL was car-ried out in accordance with the business plan for 2011. The purchase cost EUR 15.41 million and was financed by re-tained earnings from previous years. This purchase made GEN the sole owner of SEL. It also marks the fulfilment of the goal to enable the subsidiary SEL to rejoin the pres-ent and future projects undertaken on the Sava River. This way, the company will be able to continue to evolve.

2.5.5 Capital injections in GEN-I and NKBM

The rapid business growth of the company GEN-I cre-ated a need for increasing capital adequacy, so a cap-


ital injection in the amount of EUR 1.50 million was made in January.

In accordance with the decision of the Capital Assets Management Agency of the Republic of Slovenia to amend the Articles of Incorporation of the company GEN and with the relevant decision to make a capital injec-tion, EUR 20 million worth of NKBM shares were pur-chased in April. The purchase was not envisaged in the business plan.

2.5.6 ZEL-EN

The Faculty of Energy Technology of the University of Mari-bor, in association with the municipality of Krško and 12 businesses, founded a consortium, which set up the ZEL-EN project with the aim of encouraging the companies in the consortium to invest in the development of new techno-logically advanced products and services in the area of sus-tainable energy, particularly energy efficiency and renew-able energy sources. The project was submitted to the call for proposals announced by the Ministry of the Economy to receive funding from the European Regional Development Fund and was the winner in the energy category.

In accordance with the Deed of Partnership for the es-tablishment of the company ZEL-EN, GEN paid in a por-tion of the new company‘s share capital in the amount of EUR 0.12 million.

2.5.7 SRESA

Pursuant to the Decree on the concession for the use of water for electricity generation on the Sava River section from Ježica to Suhadol, the construction of nine or ten hy-droelectric power plants on the middle course of the Sava River is planned, in the following locations: Ježica (or Ta-cen and Gameljne), Šentjakob, Zalog, Jevnica, Kresnice,

much like in other developed EU Member States. The situ-ation has changed due to the global economic crisis, but when the economy recovers, electricity consumption will begin to climb again. Slovenia is facing a problem of rela-tively old energy-production facilities, which are going to have to be eventually replaced. At the same time we are growing increasingly aware of environmental impacts and of the importance of keeping in line with the EU climate and energy package. All this calls for a closer look into the op-tion to expand the output capacity of Krško Nuclear Power Plant by building a new reactor unit, as confirmed by the draft National Energy Programme (hereinafter: NEP). The installed capacity of the planned second reactor unit would be somewhere between 1100 and 1600 MW. According to NEP, the construction of the new unit and its connection to the power grid would be completed between 2020 and 2030, with commercial operation most likely to start by 2025.

Several subprojects and activities are currently under-way in the preliminary stage of the JEK 2 project, which is divided into four stages:

a) Preliminary stage: activities until a decision on construction is reached at the national and local levels; preparation and organization of the project;

b) Preparatory stage: siting and location analysis, lay-ing down specifications for tendering procedures, ne-gotiations, and signing the construction agreement;

c) Construction stage: preparation of project docu-mentation, construction of the facility, manufacture and assembly of plant equipment, and obtaining a building permit and operating licence; and

d) Operating stage: 60 years of commercial operation.

In accordance with its business plan, GEN also pur-chased land where inhabitants of Vrbina are to be relo-cated. The cost of substitute land was EUR 1.10 million.

Due to the complexity of the JEK 2 project, GEN has already started training its existing personnel in a number of ways.

One of them is the provision of engineering services in the framework of setting up the technical specifications design for the construction of a nuclear power plant in Sudan. On this collaborative project, the experts from the company GEN were entrusted with the task of laying down a part of the technical specifications. This allows them to gain valu-able practical experience, which will be of vital importance in the preparation of the documentation for JEK 2.

The social and political acceptability of new nuclear pow-er plant construction projects in the EU and around the world was deeply impacted by the earthquake and tsuna-mi in Japan, which also damaged the Fukushima nuclear power plant. Even though the power plant withstood the effects of the earthquake well, its external power supply was cut and its crucial components were flooded by the tsunami, which resulted in a limited release of radioactive materials, luckily without casualties. A markedly negative decision with regard to future utilization of nuclear energy was only taken by Germany, which announced that all its 17 nuclear power plants would be decommissioned by 2022. Italy and Switzerland aborted all activities related to investments in and expansion of nuclear capabilities, while the rest of the countries with active nuclear pro-grammes decided to stick with their original plans.

The project is now entering a stage where, in order for it to continue, it will be up to the owner to take a clear posi-tion on the construction of JEK 2. So far we have completed all the expert studies needed for a well-grounded, broader political and social discourse on the energy future of Slo-venia and on the future role of nuclear energy. Given that activities for the adoption of a new National Energy Pro-gramme are to take place in 2012, all the bases have been covered to go ahead with the siting procedure and to defend the preservation and expansion of the nuclear option in the new national strategic document. An application to obtain an energy licence, the first authorization document in line in the decision-making process, has already been submit-ted to the ministry responsible for the energy industry.


38 39

2.6.1 Employees

The number of employees in the GEN Group is directly pro-portional to the Group’s development and the challenges it entails. We always seek to streamline the recruitment pro-cess at the level of the whole Group. The companies in the GEN Group employed a total of 1026 people as at 31/12/2011.


2.6 Human resources

According to business plan, GEN envisaged adding 9 new jobs in 2011. In effect, the company GEN added 8 people to its team in 2011, and one employee left the company, so GEN employed a team of 50 people at the end of the calendar year.

Table II 8: Number of employees by level of education as at 31/12/2011

GEN GROUP Level 1 Level 2 Level 3 Level 4 Level 5

Level 6/I

(voc.)

Level 6/II(higher ed.

and Bologna BA/BSc)

Level 7 (BA/BSc &

MA/MSc Bologna

Level 8/I

(MA/MSc)

Level 8/II

(PhD)TOTAL

GEN 0 0 0 1 3 8 5 30 0 3 50

GEN-I 0 0 0 0 24 3 27 53 9 5 121

NEK 1 7 4 33 269 72 44 176 12 5 623

SEL 6 0 0 24 40 21 5 18 1 0 115

TEB 1 4 0 25 36 17 13 20 1 0 117

TOTAL 8 11 4 83 372 121 94 297 23 13 1026

The data in Table II 8 refer to whole companies or the Group, disregarding GEN’s equity interests in individual compa-nies and the rules of consolidation.

2.6.2 Scholarships

A shortage of suitable, qualified human resources has be-come increasingly apparent around the country in recent years, and the situation is quite serious in the Posavje region as well. Individual companies are experiencing a shortage of specific human resources at various levels, particularly in the sphere of natural and technical sciences.

The companies in the Group provide company scholar-ships and participate in the uniform, region-wide Posavje Scholarship Scheme. Scholarships under this scheme are awarded to secondary school and undergraduate students studying for professions that are the most sought after or in demand among employers, who must clearly define what they are looking for in a call for tenders. The number

of scholarships awarded is subject to the amount of avail-able public funds, developmental priorities and profession-specific prospects in a given developing region.

Table II 9: Number of scholarship recipients as at 31/12/2011

GEN GROUP No. of scholarships

GEN 24

GEN-I 1

NEK 24

SEL 10

TEB 5

TOTAL 64

GEN had 24 scholarship recipients as at 31/12/2011, and the GEN Group 64.

id implementation of modifications undertaken in order to comply with the requirements for providing alternative cool-ing systems in the form of a mobile unit in the event a large commercial airliner crashed into the power plant (NRC re-quirements collectively referred to as B.5.b requirements), as well as in response to the events at Japan’s Fukushima power plant. As a result, internal safety assessment was carried out, which identified specific short-term measures to prevent and mitigate the consequences of beyond design basis nuclear ac-cidents. NEK continued to undergo comprehensive technologi-cal modernization in accordance with its long-term investment programme. The investment cost was EUR 54.20 million.

SEL

SEL consistently carries out regular major maintenance work on its facilities and makes intense development ef-forts in terms of tapping renewable energy sources. In 2011, SEL spent EUR 5.22 million in depreciation allowances and other own resources on investments and development.

The most important part of SEL‘s investing activity in 2011 was stage 2 of the reconditioning of Moste HPP, which started as early as March 2008. What is more, SEL became a 30% owner of the company SRESA in 2011, and this al-lowed it to participate in the project to build hydroelectric power plants on the middle course of the Sava River.

TEB

TEB focuses its investment and development activities chiefly on the development of its existing processes and expands its operation into other areas as well. A total of EUR 0.82 million was spent on investments and develop-ment in TEB in 2011.

GEN-I

GEN-I‘s development in the areas of sales and trading in 2011 was a step up from previous years. The company spenta total of EUR 0.86 million of its own resources on invest-ments and development.


Ponoviče, Renke, Trbovlje and Suhadol. By signing the Deed of Partnership of the limited liability company Sred-njesavske elektrarne d.o.o. on 25/11/2011, GEN joined the project as a 10% owner of the company and paid in a por-tion of the company‘s share capital in the amount of EUR 0.01 million. In 2011 the company founders coordinated the Concession Agreement with the Ministry of the Envi-ronment and Spatial Planning.

2.5.8 Miscellaneous investments

The development of the GEN Group also commits the parent company to making other investments important for its future operation. In 2011, GEN primarily invested in fixed assets and information technology, with invest-ment cost totalling EUR 3.39 million.

2.5.9 Investments and development of the GEN Group companies

All the companies in the GEN Group maintain a high lev-el of availability and operational reliability on account of regular maintenance and ongoing investments. Appro-priate control, maintenance and modernization ensure operational readiness of the systems at all times.

NEK

NEK follows the conventional strategy for operating nu-clear power plants, which entails ongoing investments in technological upgrades and modernization. The estab-lished procedure is to make five-year investment plans, and the average annual value of investments in techno-logical modernization is around EUR 38 million. Based on the aftermath of the natural disaster in Japan, which also struck the Fukushima nuclear power plant, and the results of stress tests, which revealed the need to make additional modifications to NEK, we expect the value of capital investments to increase in the years ahead.For the nuclear industry, the year 2011 was marked by a rap-

40 41

Long-term loans were taken out in 2011 by the following GEN Group companies:• GEN, for the purchase of minority interests in TEB,

which was repaid in full in 2011 with the last four payments made on the principal;

• NEK, for its modernization and fulfilment of obli-gations under Annex III to the Intergovernmental Agreement on NEK, for fuel purchase, replacement of the reactor head and application of welds on the pressurizer.

A short-term loan was taken out by the company:• GEN-I, for securing liquid assets for trading.

The loans have been secured by bank guarantees. The financing liabilities were denominated in EUR.

2.7.3 Report on investments of GEN's surplus cash

The Supervisory Board of the company GEN adopted on 16/05/2007 the GEN Investment Strategy for surplus cash. The company followed its investment strategy and placed its surplus cash predominantly in deposits with maturity ranging from one to six months. The deposited funds were spread over several different banks, with an average rate of return of 3.45%.


The financial operations of the company and the Group are, alongside obligations of controlled and jointly con-trolled companies, also significantly influenced by the commitments GEN has entered upon founding that originate in the Intergovernmental Agreement on NEK. Under this agreement, GEN not only received the right to one-half of the electricity produced by NEK but also assumed the responsibility to pay back the loans taken out for its construction, to meet its financial obligations to the NEK Fund, and to secure funding to compensate for fixed costs in the event of unplanned outages of NEK.

While the GEN Group companies meet their financing obligations mostly through depreciation allowances, GEN‘s main source of funding used for this purpose is the profit it generates.

All the obligations arising from the financial operations of the company and the GEN Group were fulfilled within dead-lines and within appropriate financial frameworks in 2011.

2.7.1 Settling liabilities to the NEK Fund and securing funding for NEK‘s fixed annual costs

Pursuant to the Intergovernmental Agreement on NEK, the Act on the Fund for Financing Decommis-sioning of NEK and Disposal of Radioactive Waste from NEK, and the Decision of the Government of the Republic of Slovenia No. 311-01/2001-21 of 7 October 2004, the company is obligated to pay into the NEK Fund by no later than the 20th day of each month a contribution in the amount of 0.30 euro cents for each kWh of electricity produced by NEK and collected in the preceding month.

Based on the amount of electricity produced in 2011, GEN paid EUR 8.85 million into the NEK Fund.

Under the Intergovernmental Agreement on NEK, the company GEN is obligated to cover NEK‘s fixed costs in-curred over a period of one year regardless of whether NEK is in or out of service. Since NEK is the dominating production unit in the GEN Group, which means the per-formance and operations of the Group are heavily depen-dent on NEK‘s production, the Group is exposed to con-siderable risks even in the event of short outages of the power plant. To secure funding for NEK‘s fixed costs, the company GEN decided to make long-term provisions in the amount of one-half of NEK‘s annual fixed costs (the other half is to be provided by the other owner of NEK).

2.7.2 Servicing operations and debts

One of the fundamental functions of financial operations in 2011 was to keep an adequate level of liquid funds for ensuring solvency. A major part in ensuring solvency is played by obligations with respect to the supplied elec-tricity and power. Particularly important is the obligation to cover NEK‘s fixed costs, which is one of the principal leverages for our prompt settlement of GEN‘s liabili-ties and for the optimization of surpluses and shortfalls among the companies in the GEN Group. Appropriate li-quidity was also ensured through consistent collection of past-due receivables. This aspect is particularly rel-evant in the case of GEN-I, but since GEN-I has this issue well taken care of with contractual terms and conditions, no major problems have been encountered to date.

Borrowing activities were focused on securing sufficient funding both for short- and long-term operations. All the companies in the Group take out loans for their own account.


2.7 Financial operations

Spurred by the developments in the financial markets, GEN reviewed the surplus cash management methods in place in its subsidiaries and found that the compa-nies in the Group rely on similar management methods aimed at reducing the risks associated with such in-vestments.


Table II 11: Indicators for the GEN Group

Performance indicators 2011 2010

Equity financing rate 73.44% 77.26%

Long-term financing rate 84.79% 88.45%

Operating fixed assets rate 50.92% 54.52%

Long-term investment rate 58.82% 60.73%

Equity to operating fixed assets 1.44 1.42

Long-term financing of fixed assets 1.41 1.43

Immediate solvency ratio - acid test ratio 1.47 2.04

Quick ratio 2.65 2.92

Current ratio 3.26 3.43

Operating efficiency ratio 1.05 1.10

Net return on equity ratio 0.04 0.06

Overall, the indicators show that the GEN Group’s per-formance in 2011 was similar to that of 2010. Noticeable declines were only recorded in the operating efficiency and the return on equity ratios, which can be attributed chiefly to the events that had a negative impact on the performance of the parent company.


2.7.4 Performance indicators

Table II 10: Indicators for the company GEN

Performance indicators 2011 2010

Equity financing rate 83.04% 83.17%

Long-term financing rate 96.47% 95.59%

Operating fixed assets rate 2.67% 1.05%

Long-term investment rate 78.24% 73.07%

Equity to operating fixed assets 31.12 79.21

Long-term financing of fixed assets 1.21 1.28

Immediate solvency ratio - acid test ratio 4.44 4.71

Quick ratio 5.75 5.76

Current ratio 5.77 5.77

Operating efficiency ratio 1.11 1.21

Net return on equity ratio 0.02 0.07

Pursuant to Article 70, paragraph 2 of the Companies Act (CA-1) and SAS 29, the indicators that best reflect the financial position or the suitability of the composition of assets and liabilities of the company and the Group are presented below.

The indicators show that the company is in a healthy financial position. Still, it may be noted that the global recession is also reflected in the selling prices of elec-tricity and the falling rate of profit as a result. The com-pany is, therefore, ready to make new capital invest-ments. In this respect, in view of the harsh economic situation and the owner‘s high expectations regarding profit rates, it is crucial that the new investments meet these expectations.

44 45

Energy literacy and raising awareness of sustainable electricity sources, the future of energy and the importance of energy efficiency among young people

In June GEN completed the construction of a visitor cen-tre named The World of Energy. The World of Energy is an innovative and, most importantly, instructive addition to the Posavje energy region and the whole of Slovenia. The aim of the centre is to provide comprehensive infor-mation and explanations and interactive exhibits and ex-periments to bring energy technologies closer to visitors and to spark interest in natural and technical sciences among the young. Smaller in scope but still an important part of activities at the World of Energy is the prepara-tion of special programmes and workshops, which GEN develops in collaboration with teachers from the schools in the Posavje region, for talented primary and second-ary school students. By the end of the year, the centre registered over 3400 visitors, 19 primary and nursery schools and 11 secondary schools.

The Energy-Efficient School project deserves spe-cial attention among the Group’s general social re-sponsibility projects. GEN revamped the project in the 2011/2012 school year, linked it to the World of Energy and renamed it “The Young in the World of Energy”. In the course of the project, groups of primary and sec-ondary school students led by mentors will be setting up projects on the topics found in the World of Energy, focusing on energy literacy and sustainable production of electricity.

Business environment and partners

The economic and financial crises prevented some businesses from forecasting offtakes of electricity and complying with all relevant contract terms. Taking into account the given circumstances and the fact that the economic situation tends to have a delayed effect on the energy industry, GEN successfully tuned in to its busi-ness partners, consumers of electricity.

2.8.2 Environmental responsibility

In accordance with its environmental policy, the GEN Group has undertaken to produce electricity in an eco-logically sound manner and to follow the Kyoto Proto-col directives on reducing greenhouse gas emissions. Among the energy sources that can make this happen is also nuclear power. And it is the nuclear power produced by NEK that is essential for the successful and environ-mentally friendly operation of the entire Group. Recog-nizing the importance of renewable energy sources, GEN added to its Group hydroelectric power plants on the Sava River through the acquisition of SEL and through active participation in the construction of hydroelectric power plants on the lower Sava River (HESS) and on the middle course of the Sava River (SRESA). GEN‘s produc-tion portfolio is complemented by TEB, which uses nat-ural gas and extra light fuel oil, the most environmen-tally acceptable fossil fuels, to generate power. Thanks to such a production portfolio and a low number of TEB


2.8 Overall responsibility

In the Revised GEN Energija Development Plan, social responsibility is defined as the factor which plays a sig-nificant part in creating and maintaining a positive busi-ness and social environment. The GEN Group companies recognize that, in order to be successful, it is vital that social responsibility is developed on various levels. So, with this in mind, the social responsibility of the GEN Group is divided into these main categories:• general social responsibility,• environmental responsibility, and • economic responsibility.

2.8.1 General social responsibility

With their operation and energy production facilities in individual locations, the GEN Group companies are tightly integrated into their local environments. From this integration with the environment stems the general social responsibility of GEN. A special focus is placed on sponsorships and donations directed to diverse areas by GEN.

Sponsorships and donations

The amount of funds earmarked for donations and spon-sorships is determined in the annual business plan and does not exceed the amount of tax-deductible expenses. The GEN Group companies receive several hundred re-quests each year. Requests that are granted are those that best match the values of individual companies and the Group.

When apportioning funds, we place a special emphasis on the intended purpose of the funds and look at wheth-er the funds are going to be used in the environments into which our individual facilities are integrated. The funds are given out for sporting, cultural, educational, development, science and research, charitable, health, ecological, humanitarian, disability and social security purposes.

From a broad spectrum of sponsorships and donations given out in 2011, the following deserves special atten-tion: our support for development and education projects and for the organization of various events, conferences, contests and competitions in the areas of energy indus-try, nuclear energy and renewable energy sources. For a number of years GEN has been sponsoring the Reak-tor Prize Contest on the topic of nuclear energy, aimed at students of natural and technical sciences. GEN also works together with the Faculty of Energy Technology in Krško, both on the organization of the annual expert conference EnRe and on other science projects. Aim-ing to promote a constructive debate on, and increase the understanding of, energy-related topics, GEN also supported the organization of many expert conferences and meetings: “Nuclear Energy for New Europe 2011”, the strategic energy conference “En.Odmev 2011”, the expert conference “Energy Industry and the Environ-ment 11”, the 10th Conference of Slovenian Electric Power Engineers, and the strategic meeting of partici-pants in the energy market “Innovation in Energy – Rev-olution in Business”, to name a few.


46 47

in the GEN Group. In this segment, the GEN Group, to-gether with its partner with which it jointly controls the company GEN-I, is the leader in Slovenia. In this way the Group provides important support to DPs of electricity. Willing to offer more than the regulated price, the Group gives them a direct financial incentive. With this busi-ness decision, the GEN Group contributes to a cleaner environment and promotes further development of eco-friendly ways of generating electricity.

The amount of CO2 emission allowances granted to the GEN Group for 2011 was 65,200 tonnes, of which only 10,662 tonnes were used up in the end. The reason why emissions were below the permissible level lies in the fact that the production output was lower than planned and that the other units in the Group recorded remarkably good production results. On top of that, natural gas, which emits less CO2 in the burning process than extra light fuel oil does, was used in power generation as much as possible.

As we make further investments in HESS and SRESA and other investments in renewable energy sources, renewable energy sources will get to play an increas-ingly important role in the Group. Electricity generated this way has an additional advantage as the producer is eligible to obtain Guarantees of Origin (hereinafter: GO). In 2011 the production companies in the GEN Group generated 287 GWh of electricity from renewable energy sources, which means they were eligible to obtain that same amount worth of GOs.

2.8.3 Economic responsibility

Economic responsibility represents one of the corner-stones of social responsibility. Judging from experience, only economically efficient businesses can be fully so-cially responsible.

The GEN Group and its individual constituent companies fulfil their economic responsibility by ensuring short- and long-term profitability, by choosing economically ef-ficient technologies for the production of electricity, and by developing competitive products and services that meet customers‘ needs.

As it can already be seen in other sections of the annual report, the GEN Group is indeed economically responsible. The Group closed the year 2011 with encouraging business results and continues to pursue clearly defined goals and an ambitious development plan in accordance with the ad-opted Revised GEN Energija Development Plan.


start-ups, more than 99% of all the electricity produced by the GEN Group was generated without greenhouse gas emissions in 2011.

Given the importance of nuclear power in the operations of the Group and in maintaining a low level of green-house gas emissions in Slovenia, the greatest emphasis is placed on ensuring effective risk management in the field of nuclear safety. Special attention is focused on en-suring and checking adherence with nuclear technology regulations and standards. To this end, it is important to keep abreast of best practices concerning nuclear safety around the world and of OSART Mission recommenda-tions and to incorporate them into NEK. Great emphasis is placed on equipment modernization and maintenance and on improving the safety culture and conscience among all company employees. Owing to all the activi-ties outlined above, NEK ranks in the top 25% of nuclear power plants worldwide in terms of operation safety and stability.

NEK, SEL and TEB have all implemented environmen-tal management systems according to the ISO 14001 standard. In this context, separate collection of munici-pal waste was introduced. Municipal wastewater is pro-cessed by special wastewater treatment facilities. The water‘s pH value, temperature, amount of undissolved material and chemical and biological oxygen demand are measured at discharge.

A maximum of one-fourth of the river‘s flow rate may be withdrawn from the Sava for cooling purposes. The temperature of the Sava River has never increased by

more than the permissible maximum limit of 3°C after discharging back into the river.

NEK also places special attention on radiological moni-toring. NEK‘s impact on the environment in 2011 was minimal, since no increased radiation levels as a result of the power plant operation was detected for the nearby residents. So, based on scientific models, it has been calculated that the impact is approximately 1 mSv or less than 0.1% of the average dose received by an individual from natural radiation sources (around 2500 mSv).

78 radioactive waste packages in a total volume of 34.7 m3 were stored in 2011. The total volume of radio-active waste stored in the temporary storage facility at the end of 2011 was 2,234.1 m3, and the total activity was 20.5 TBq. The spent fuel pool holds 984 spent fuel as-semblies from the past 24 fuel cycles. The total mass of the spent fuel material is 402 tonnes.

The GEN Group is committed to promoting production of electricity from renewable energy sources. This area is dominated by SEL, which not only operates and services its existing hydroelectric power plants but also invests in small-scale photovoltaic power plants (SPPs), wind turbines and combined heat and power (CHP) plants. TEB too invests in small-scale photovoltaic power plants. The GEN Group operated a total of nine photovoltaic power plants, with a combined installed capacity of 0.799 MW, at the end of 2011. Three of those power plants were completed and put into operation in 2011: at Vrhovo HPP, Medvode HPP and at GEN. Purchasing electricity from producers with a declaration for their production facility (DP) holds a special place


48 49

planning its cash flows, and by continually checking its contract partners and their payment track records.

2.9.4 Operational risks

Operational risks are encountered in every business process. These are risks that could lead to a financial loss for the Group should ineffective business processes and controls be in place.

IT or telecommunication system failure risks are man-aged by the companies by providing redundancy for all the key components and making sure they are regularly serviced and updated.

Human resources risks arise because, in order to achieve business plans, employees are expected not only to continually expand their existing knowledge and skills and to acquire new knowledge and skills, but also to be effective in teamwork, show a high degree of flexibility, dynamism, motivation, to take initiative, and to have an excellent rapport and communication with each other.

In general, the GEN Group minimized its exposure to op-erational risks in 2011 by taking the following measures:• coordination of the GEN Group;• introduction of ISO standards;• introduction of straightforward and open communi-

cation among all the partners in the Group;• establishment of suitable supervision - appointing

authorized representatives from GEN to supervisory boards of subsidiaries and associated companies and in the GEN-I management;

• clear definition of business processes; and• clear definition of roles, responsibilities and com-

petences of people with suitable qualifications and experience who are involved in the company‘s indi-vidual business processes.

2.9.5 Ecological risksEcological risks refer primarily to damage that may occur on the environment and the GEN Group’s facili-ties. The companies manage this type of risk through preventive and predictive maintenance of their process systems, regular periodic particulate emission/concen-tration measurements, regular daily checks of their pro-duction facilities and wastewater flow measurements.

2.9.6 Legal risksLegal risks refer to losses incurred due to violation or misinterpretation and non-observance of the law, regu-lations, directives, recommendations, valid agreements, good practices or ethical standards. The GEN Group manages these risks primarily by laying down as well-defined contract terms and conditions as possible.


Risks as a component part of the GEN Group’s opera-tions are dealt with in the same way as other key operat-ing factors. The GEN Group seeks to promptly identify, monitor and address risks so as to ensure that there are no major discrepancies from the targets.

2.9.1 Quantity risks

Quantity risks are risks associated with produced and purchased electricity which arise from the gap between the forecast and the actual amount of electricity. Quan-tity risks are internal, relating to technological and lo-gistic limitations with regard to production and timely procurement of fuels, and external, mostly having to do with weather and hydrological conditions.

Internal risks are managed and controlled indepen-dently by each individual production facility based on extensive experience and established operation modes, maintenance shutdowns, etc. NEK, SEL, TEB and HESS ensure uninterrupted operation of their production units and other electricity-generation systems independently by performing regular maintenance and periodic checks (measurements, mechanical diagnostics).

The GEN Group paid a lot of attention to limiting and managing external quantity risks. For this purpose, it has developed IT support for long- and short-term forecasting of electricity offtake and feed profiles as well as for daily monitoring of variations in quantity at most of its offtake and feeding points. The pivotal role in IT support is played by GEN CC, which fully fulfilled its function in 2011. The GEN Group has lessened its exposure to risks also by signing suitable quantity and financial contracts.

2.9.2 Market risks

Price risks arise from the volatility of prices of energy products in the global electricity market, both at home and abroad. For managing the price risks the compa-nies in the Group sign long-term contracts to minimize the risks. Despite heavy exposure to the global market in fuels and energy products, the risks are manageable because nuclear energy makes up the majority of the portfolio, and the impact of nuclear fuel on the price of electricity from NEK is limited to as low as 15%.

2.9.3 Financial risks

Credit risks are risks that arise when a business part-ner fails to fulfil his material (agreed supply/delivery of a certain amount of electricity) or financial obligations (non-payment of contractual obligations) within dead-line. Credit risks in 2011 were identified and minimized by the companies in the Group by thoroughly checking their business partners‘ liquidity position and by signing properly secured contracts (by blank drafts, bank guar-antees, and sureties).

Currency risk is a risk that arises when the value of re-ceivables and payables denominated in a foreign curren-cy fluctuates due to volatile foreign exchange rates. In the markets outside the euro area the GEN Group uses foreign currency hedging instruments, which include forward contracts and foreign currency clauses.

Liquidity risk arises when a company or a group of companies is unable to meet its current liabilities. The GEN Group managed the liquidity risk by laying down well-defined contract terms and conditions, by precisely


2.9 Risks

In essence, electricity is a natural asset, one we have come to take for granted. It took us a long time to learn how to efficiently, reliably and safely distribute electricity so it can light up any home or office at any given time.

Electricity trading in the GEN-I Group is concentrated in a central location in Ljubljana, which operates 24 hours a day every day of the week (24/7). Thanks to fixed amounts of power and electricity to be delivered, production units are guaranteed to receive steady and stable income, and consumers get access to high-quality comprehensive electricity supply and optimized purchase channels.

Summary financial report of the company GEN energija, d.o.o.

Photo: GEN-I 24/7 Trading Floor

52 53Summary financial report of the company GEN energija, d.o.o.Annual report of the GEN Group 2011

3.2 Basis for drawing up the summary financial report

Pursuant to the Companies Act, below is the summary financial report, which is an integral part of the Annual Report of the GEN Group 2011. The summary gives an overview of 2011 operations and includes condensed versions of financial statements based on audited prin-cipal financial statements: balance sheet, income state-ment, statement of other comprehensive income, cash flow statement, and statement of changes in equity.

The financial statements are presented in EUR without cents.

3.1 Independent auditors' report

Summary financial report of the company GEN energija, d.o.o.Annual report of the GEN Group 2011

3.

54 55

As at31/12/2011

As at31/12/2010

LIABILITIES 517,925,627 505,734,318

A. Equity 430,088,313 420,616,018

I. Called-up capital 26,059,796 26,059,796

II. Capital reserves 239,609,558 239,609,558

III. Revenue reserves 159,702,533 139,727,277

IV. Revaluation surplus 0 -39,442

V. Net profit or loss for the financial year 4,716,426 15,258,829

B. Provisions and long-term accruals and deferred income 69,539,807 62,833,555

I. Provisions and long-term accruals and deferred income 69,539,807 62,833,555

C. Long-term liabilities 39,581 0

I. Long-term financial liabilities 39,581 0

Č. Current liabilities 18,079,920 22,259,776

I. Current financial liabilities 0 3,005,559

II. Current operating liabilities 18,079,920 19,254,217

D. Short-term accruals and deferred income 178,006 24,969

OFF-BALANCE-SHEET LIABILITIES 2,586,396 2,040,003


3.3 Financial statements

3.3.1 Balance sheet

Table III 1: Balance sheet as at 31/12/2011

As at31/12/2011

As at31/12/2010

ASSETS 517,925,627 505,734,318

A. Fixed assets 413,680,246 377,336,432

I. Intangible assets and long-term deferred expenses and accrued income 473,546 384,949

II. Tangible fixed assets 13,348,795 4,924,991

III. Long-term financial investments 391,382,820 364,212,104

IV. Deferred tax assets 8,475,085 7,814,388

B. Current assets 104,030,288 128,320,937

I. Short-term financial investments 80,193,156 104,787,281

II. Short-term operating receivables 23,835,338 23,533,284

III. Cash 1,794 372

C. Short-term deferred expenses and accrued income 215,093 76,949

OFF-BALANCE-SHEET ASSETS 2,586,396 2,040,003


56 57

Table III 3: Statement of other comprehensive income for 2011

Financial year2011

Financial year2010

Net profit or loss for the period 9,432,852 30,517,658

Gains and losses on remeasuring available-for-sale financial assets 49,302 155,210

Total comprehensive income for the period 9,482,154 30,632,868


3.3.2 Income statement and statement of other comprehensive income

Table III 2: Income statement for 2011

Financial year2011

Financial year2010

TOTAL INCOME 186,782,560 171,351,298

Operating income 180,757,040 162,857,837

Financing income 6,023,968 8,492,924

Other income 1,552 537

TOTAL EXPENSES 175,841,038 134,580,927

Operating expenses 163,546,402 134,359,392

Purchase cost of goods, materials and services 143,235,338 120,873,337

Cost of labour 2,177,788 1,822,027

Write-offs 845,944 956,225

Other operating expenses 17,287,332 10,707,803

Financing expenses 12,294,630 221,530

Other expenses 6 5

TOTAL PROFIT OR LOSS 10,941,522 36,770,371

INCOME TAX 1,508,670 6,252,713

TOTAL PROFIT 9,432,852 30,517,658




3.3.3 Statement of changes in equity

Table III 4: Statement of changes in equity for 2010

Share capital

Capital reserves Legal reserves Other revenue

reservesRevaluation

surplus

Net profit or loss from

previous years

Net profit or loss Total

I/1 II III/1 III/5 IV V VI VII

A.1. As at 31/12/2009 26,059,796 239,609,558 2,605,980 124,862,468 -131,609 24,258,876 0 417,265,069

A.2. As at 01/01/2010 26,059,796 239,609,558 2,605,980 124,862,468 -131,609 24,258,876 0 417,265,069

B.1. Changes in equity capital – transactions with owners 0 0 0 -3,000,000 0 -24,258,876 0 -27,258,876

g) Payment of dividends 0 0 0 -3,000,000 0 -24,258,876 0 -27,258,876

B.2. Total comprehensive income for the reporting period 0 0 0 0 92,167 0 30,517,658 30,609,825

a) Input of net profit or loss for the reporting period 0 0 0 0 0 0 30,517,658 30,517,658

č) Gains and losses on remeasuring financial investments 0 0 0 0 92,167 0 0 92,167

B.3. Changes in equity 0 0 0 15,258,829 0 0 -15,258,829 0

b) Distribution of a part of net profit from the reporting period to other equity components – Management and Supervisory Board 0 0 0 15,258,829 0 0 -15,258,829 0

C. As at 31/12/2010 26,059,796 239,609,558 2,605,980 137,121,297 -39,442 0 15,258,829 420,616,018


3.3.4 Balance-sheet profit account

Table III 6: Annex to the statement of changes in equity – balance-sheet profit

Financial year2011

Financial year2010

Net profit for the financial year 9,432,852 30,517,658

Increase in revenue reserves - Management or Supervisory Board 4,716,426 15,258,829

a) other revenue reserves 4,716,426 15,258,829

Balance-sheet profit 4,716,426 15,258,829


Table III 5: Statement of changes in equity for 2011

Share capital

Capital reserves Legal reserves Other revenue

reservesRevaluation

surplus


previous years

Net profit or loss Total

I/1 II III/1 III/5 IV V VI VII

A.1. As at 31/12/2010 26,059,796 239,609,558 2,605,980 137,121,297 -39,442 0 15,258,829 420,616,018

A.2. As at 01/01/2011 26,059,796 239,609,558 2,605,980 137,121,297 -39,442 0 15,258,829 420,616,018

B.2. Total comprehensive income for the reporting period 0 0 0 0 39,442 0 9,432,852 9,472,294

a) Input of net profit or loss for the reporting period 0 0 0 0 0 0 9,432,852 9,432,852

č) Gains and losses on remeasuring financial investments 0 0 0 0 39,442 0 0 39,442

B.3. Changes in equity 0 0 0 19,975,255 0 0 -19,975,255 0

a) Distribution of the rest of net profit from the comparative reporting period to other equity components 0 0 0 15,258,829 0 0 -15,258,829 0

b) Distribution of a part of net profit from the reporting period to other equity components – Management and Supervisory Board 0 0 0 4,716,426 0 0 -4,716,426 0

C. As at 31/12/2011 26,059,796 239,609,558 2,605,980 157,096,553 0 0 4,716,426 430,088,313

Atoms, like people, change when interacting with each other. In this interaction, each atom can share electrons with another atom, giving an object a positive or negative electric charge. It is all based on mutual repulsion and attraction: objects with the same electric charge push each other apart, and objects with opposite electric charges attract one another. This is the fundamental principle behind the laws of electrostatics.

The World of Energy, which opened in July 2011, and its wealth of information are sure to hold immense attraction for visitors, who can explore multimedia exhibits and conduct interactive experiments to learn about the fundamental laws of physics, magnetism, electrical engineering and electrostatics.

Summary financial report of the GEN Group

Photo: The World of Energy experiment room and the Tesla coil, a special type of transformer producing high-frequency, high-voltage currents

64 65Summary financial report of the GEN GroupAnnual report of the GEN Group 2011

4.2.1 About the GEN Group

The purpose of compiling consolidated financial state-ments is to present the financial position and the perfor-mance of a group of interconnected companies as if they were one. Companies whose statements are taken into account when compiling consolidated statements oper-ate as individual companies which, given the relation-ships among them, constitute an economic unit but not a legal entity, since the unit as such is not an independent holder of rights and duties.

Table IV 1: About the GEN Group

Company name Status in the Group Equity stake

GEN energija Parent

GEN-I Jointly controlled 50%

NEK Jointly controlled 50%

TEB Subsidiary 100%

SEL Subsidiary 100%

The consolidation of the controlled companies is per-formed on the basis of the full consolidation method, and the jointly controlled companies are included in the Group based on the proportional consolidation method.

The subsidiary GEN-I is also the controlling company of the following wholly owned subsidiaries: • GEN-I, d.o.o., Zagreb, Croatia; • GEN-I, d.o.o. Belgrade, Serbia; • GEN-I, Budapest KFt, Hungary; • GEN-I, Skopje, Republic of Macedonia;

• GEN-I, Sarajevo, Bosnia and Herzegovina; • GEN-I, Tirana, Albania;• GEN-I, Tirana, Kosovo Branch; • GEN-I, Athens, Greece; • S.C.GEN-I, Bucharest, Romania;• GEN-I, Sofia SpLLc, Bulgaria;• GEN-I, Milano, Italy;• GEN-I, Vienna, Austria.

GEN-I‘s subsidiaries are incorporated into the Group based on the chain consolidation method or through consolidation of the subgroup of the subsidiary GEN-I.

The subsidiary SEL:• Holds a 25% interest in the company HSE Invest,

d.o.o., Obrežna 170a, 2000 Maribor, and has signifi-cant influence in this associated company. For the purposes of consolidation of the financial state-ments of the GEN Group, the company HSE Invest is recognized as an investment accounted for based on the equity method.

• Holds a 30% interest in the company Srednjesavske elektrarne, d.o.o, Ob železnici 27, 1420 Trbovlje, and has significant influence in this associated compa-ny. For the purposes of consolidation of the financial statements of the GEN Group, the company SRESA is recognized as an investment accounted for based on the equity method.

4.2.2 Audit

All the companies were audited prior to consolidation. The companies GEN, SEL and TEB were audited by Ernst & Young, d.o.o., and the companies NEK and GEN-I by KPMG Slovenija, d.o.o. All the companies in the Group received unqualified audit opinions.

4.2 Basis for drawing up the summary financial report of the GEN Group

4.1 Independent auditors' report

Summary financial report of the GEN GroupAnnual report of the GEN Group 2011


As at31/12/2011

As at31/12/2010

LIABILITIES 719,836,119 679,897,977

A. Equity 528,642,268 525,256,902

I. Called-up capital 26,059,796 26,059,796

II. Capital reserves 242,535,098 242,535,098

III. Revenue reserves 173,198,644 149,744,863

IV. Revaluation surplus 2,769,715 -728,125

V. Net profit from previous years 66,690,895 67,362,834

VI. Net profit for the financial year 17,532,834 19,593,871

VII. Minority interests 0 20,815,826

VIII. Translation adjustment to equity -144,714 -127,261

B. Provisions and long-term accruals and deferred income 75,549,194 67,675,643

I. Provisions 75,499,157 67,612,941

II. Long-term accruals and deferred income 50,037 62,702

C. Long-term liabilities 6,175,200 8,445,005

I. Long-term financial liabilities 5,027,719 8,301,672

II. Long-term operating liabilities 138,739 143,333

III. Deferred tax liabilities 1,008,742 0

Č. Current liabilities 88,023,662 75,286,475

I. Current financial liabilities 18,126,456 27,215,292

II. Current operating liabilities 69,897,206 48,071,183

D. Short-term accruals and deferred income 21,445,795 3,233,952

OFF-BALANCE-SHEET LIABILITIES 164,332,650 156,233,506


4.2.3 Balance sheet of the Group

Table IV 2: Balance sheet of the Group as at 31/12/2011

As at31/12/2011

As at31/12/2010

ASSETS 719,836,119 679,897,977

A. Fixed assets 432,790,088 421,462,202

I. Intangible assets and long-term deferred expenses and accrued income 1,758,872 1,561,152

II. Tangible fixed assets 364,791,106 369,152,105

III. Investment property 277,900 294,947

IV. Long-term financial investments 54,881,789 40,584,788

V. Long-term operating receivables 2,011,058 1,613,437

VI. Deferred tax assets 9,069,363 8,255,773

B. Current assets 276,106,053 256,581,247

I. Inventories 43,231,712 36,962,748

II. Short-term financial investments 118,619,286 144,497,665

III. Short-term operating receivables 103,731,146 66,258,087

IV. Cash 10,523,909 8,862,747

C. Short-term deferred expenses and accrued income 10,939,978 1,854,528

OFF-BALANCE-SHEET ASSETS 164,332,650 156,233,506

68 69

Table IV 4: Statement of other comprehensive income of the Group for 2011

Financial year2011

Financial year2010

Net profit or loss for the period 20,720,807 31,823,841

Gains and losses on remeasuring available-for-sale financial assets -671,406 -623,324

Gains and losses from translation of financial statements of companies abroad (im-pact of changes in exchange rates) -17,453 -246,352

Other components of comprehensive income 5,043,707 0

Total comprehensive income for the period 25,075,655 30,954,165

Net profit or loss of minority owners 0 87,103

Gains and losses on remeasuring available-for-sale financial assets of minority owners 0 82,977

Net profit or loss of majority owners 20,720,807 31,736,738

Total comprehensive income for the period for majority owners 25,075,655 30,784,085


4.2.4 Income statement and statement of other comprehensive income of the Group

Table IV 3: Income statement of the Group for 2011

Financial year2011

Financial year2010

TOTAL INCOME 573,965,138 385,092,994

Operating income 562,157,545 377,460,555

Financing income 11,486,368 7,181,040

Other income 321,225 451,399

TOTAL EXPENSES 550,390,827 345,857,015

Operating expenses 536,229,980 344,534,485

Financing expenses 14,110,653 1,228,743

Other expenses 50,194 93,787

TOTAL PROFIT OR LOSS 23,574,311 39,235,979

INCOME TAX 2,853,504 7,412,138

SHARE OF MINORITY OWNERS 0 87,103

TOTAL PROFIT OR LOSS OF MAJORITY OWNERS 20,720,807 31,736,738



4.2.5 Consolidated statement of changes in equity

Table IV 5: Consolidated statement of changes in equity for 2010

Share capital

Capital reserves

Legal reserves

Other revenue

reserves

Revaluation surplus


previous years

Net profit or loss for

the year

Translation adjustment

to equity

Minority interests Total

I/1 II III/1 III/5 IV V VI VII * VIII

A.1. As at 31/12/2009 26,059,796 242,535,098 5,207,970 130,717,573 -213,644 63,979,589 32,670,817 -114,885 20,808,274 521,650,588

b) Retroactive adjustments 0 0 0 0 0 95,374 0 0 0 95,374

A.2. As at 01/01/2010 26,059,796 242,535,098 5,207,970 130,717,573 -213,644 64,074,963 32,670,817 -114,885 20,808,274 521,745,962

B.1. Changes in equity capital – transactions with owners 0 0 0 -3,000,000 0 -24,258,876 0 0 0 -27,258,876

g) Payment of dividends 0 0 0 -3,000,000 0 -24,258,876 0 0 0 -27,258,876

B.2. Total comprehensive income for the reporting period 0 0 0 0 -514,481 -233,976 31,823,841 -12,376 -79,552 30,983,456

a) Input of net profit or loss for the reporting period 0 0 0 0 0 0 31,823,841 0 0 31,823,841

č) Gains and losses on remeasuring financial investments 0 0 0 0 -514,481 0 0 0 -79,552 -594,033

e) Gains and losses from translation of financial statements of companies abroad 0 0 0 0 0 -233,976 0 -12,376 0 -246,352

B.3. Changes in equity 0 0 778,774 16,040,546 0 27,780,724 -44,900,786 0 87,104 -213,638

a) Distribution of the rest of net profit from the comparative reporting period to other equity components 0 0 0 0 0 27,994,362 -27,994,362 0 0 0

b) Distribution of a part of net profit from the reporting period to other equity components – Management and Supervisory Board 0 0 778,774 16,040,546 0 0 -16,906,424 0 87,104 0

f) Other changes in equity 0 0 0 0 0 -213,638 0 0 -213,638

C. As at 31/12/2010 26,059,796 242,535,098 5,986,744 143,758,119 -728,125 67,362,834 19,593,871 -127,261 20,815,826 525,256,902



Table IV 6: Consolidated statement of changes in equity for 2011


Share capital

Capital reserves

Legal reserves

Other revenue

reserves

Revaluation surplus


previous years

Net profit or loss for

the year

Translation adjustment

to equity

Minority interests Total

I/1 II III/1 III/5 IV V VI VII * VIII

A.1. As at 31/12/2010 26,059,796 242,535,098 5,986,744 143,758,119 -728,125 67,362,834 19,593,871 -127,261 20,815,826 525,256,902

A.2. As at 01/01/2011 26,059,796 242,535,098 5,986,744 143,758,119 -728,125 67,362,834 19,593,871 -127,261 20,815,826 525,256,902

B.1. Changes in equity capital – transactions with owners 0 0 0 0 0 0 0 0 -20,815,826 -20,815,826

i) Other changes in equity capital 0 0 0 0 0 0 0 -20,815,826 -20,815,826

B.2. Total comprehensive income for the reporting period 0 0 0 0 3,497,840 0 20,720,807 -17,453 0 24,201,194

a) Input of net profit or loss for the reporting period 0 0 0 0 0 0 20,720,807 0 0 20,720,807

č) Gains and losses on remeasuring financial investments 0 0 0 0 -537,124 0 0 0 0 -537,124

d) Other components of comprehensive income – revaluation of derivative financial instruments 0 0 0 0 4,034,964 0 0 0 0 4,034,964

e) Gains and losses from translation of financial statements of the companies abroad 0 0 0 0 0 0 0 -17,453 0 -17,453

B.3. Changes in equity 0 0 976,743 22,477,038 0 -671,939 -22,781,844 0 0 0

a) Distribution of the rest of net profit from the comparative reporting period to other equity components 0 0 923,253 17,252,451 0 -671,939 -17,503,766 0 0 0

b) Distribution of a part of net profit from the reporting period to other equity components – Management and Supervisory Board 0 0 53,490 5,224,587 0 0 -5,278,078 0 0 0

C. As at 31/12/2011 26,059,796 242,535,098 6,963,487 166,235,157 2,769,715 66,690,895 17,532,834 -144,714 0 528,642,268

74 75

Acronyms and abbreviations

• Banka Celje – Banka Celje d.d.• BSc/BA – bachelor’s degree• CA-1 – Companies Act• CHP – combined heat and power• CO2 – carbon dioxide• d.d. - joint-stock company• d.o.o. – limited liability company• DP – producers with a declaration for their produc-

tion facility• EC – eligible customers• ELES – Elektro-Slovenija d.o.o.• ENSREG – European Nuclear Safety Regulators

Group• EU – European Union• EUR – euro• GEN – GEN energija, d.o.o.• GEN CC – GEN Control Centre• GEN IC – GEN Information Centre• GEN-I – GEN-I, trgovanje in prodaja

električne energije, d.o.o.• GO – guarantee of origin• GSP – gas-steam power plant• GWh – gigawatt-hour• HEP – Hrvatska elektroprivreda d.d.• HESS – Hidroelektrarne na spodnji Savi, d.o.o.• HPP – hydroelectric power plant• HSE – Holding Slovenske elektrarne d.o.o.• HSE Invest – HSE Invest, d.o.o.• IGES – IG Energetski sistemi d.o.o.• Intergovernmental Agreement on NEK – The agree-

ment between the Government of the Republic of Slovenia and the Government of the Republic of Croatia governing the status and other legal rela-tionships regarding investments in Krško Nuclear Power Plant, its operation and decommissioning;

Acronyms and abbreviationsAnnual report of the GEN Group 2011

• ISO standards – international standards for environ-mental management systems

• JEK 2 – Krško Nuclear Power Plant – Unit 2• kV – kilovolt• kW – kilowatt• kWh – kilowatt-hour• m3 – cubic metre• MSc/MA – master’s degree• MW – megawatt• MWh – megawatt-hour• NEK – Nuklearna elektrarna Krško, d.o.o. (Krško

Nuclear Power Plant)• NEK Fund – Fund for Financing Decommissioning

of NEK and Disposal of Radioactive Waste from NEK• NEP – National Energy Programme• NKBM – Nova kreditna banka Maribor, d.d.• NLB – Nova Ljubljanska banka, d.d.• NPP – nuclear power plant• NRC – United States Nuclear Regulatory Commission• OB – other buyers• OSART – Operational Safety Review Team• PB – gas unit• pH – measure of acidity• PhD – doctoral degree• R&D – research & development• ReNEP – Resolution on the National Energy Pro-

gramme• RES – renewable energy sources• RS – Republic of Slovenia• SAS – Slovenian Accounting Standards

4.2.6 Balance-sheet profit account

Table IV 7: Balance-sheet profit of the Group

Financial year2011

Financial year2010

Profit or loss from previous years 86,956,705 96,745,780

Group's net profit for the financial year 20,720,807 31,823,841

Increase in legal reserves – Management -976,743 -778,774

Increase in other revenue reserves – Management Board -5,224,587 -16,040,547

Increase in other revenue reserves – General Meeting Board -17,252,451 0

Release of other revenue reserves 0 3,000,000

Distribution of profit – General Meeting 0 -27,258,876

Other reductions to equity components 0 -534,719

- loss from translation of financial statements of companies abroad 0 -233,976

- tax effect of companies abroad 0 -213,639

- share of profit of minority owners 0 -87,104

Balance-sheet profit 84,223,731 86,956,705


76Acronyms and abbreviationsAnnual report of the GEN Group 2011

Acronyms and abbreviations

• SB – Supervisory Board• SCC – small commercial customer• SEL – Savske elektrarne Ljubljana, d.o.o. • SHP – small-scale hydroelectric power plant• SKB – SKB banka, d.d.• SPP – small-scale photovoltaic power plant• SRESA – Srednjesavske elektrarne d.o.o.• TBq – terabecquerel, unit of radioactive activity• TEB – Termoelektrarna Brestanica, d.o.o. (Brestan-

ica Thermal Power Plant)• UCTE – Union for the Coordination of Transmission

of Electricity• USA – United States of America• ZEL-EN – ZEL-EN, razvojni center energetike, d.o.o.• μSv – microsievert, unit of dose equivalent radiation

Annual report 2011

Documents

financial risks

gen group companies

gen groupat

company gen energija

business report

operational risks

summary financial report

gen groups corporate