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ANNUAL REPORT 2013


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CEO’S REVIEW

CONTENTS

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CONTACT

BIG CHANGES AND HUGE IMPROVEMENT IN PROFITABILITY

VEO OY RUNSORINTIE 5 FI-65380 VAASA FINLAND

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SEGMENTS  Solutions to all steps in the energy chain

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CORE STRENGTHS  Extensive experience and know-how

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WIND POWER  All the wind needs is electrification

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PROJECT  Transformer station to Luleå energi

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COOPERATION  VEO and Vacon are more than partners

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HYDRO POWER  Expert services expand

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ENERGY AMBASSADOR  Spreading the word about the Vaasa region energy cluster

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CORPORATE RESPONSIBILITY  VEO’s mission is to create growth and well-being

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BOARD OF DIRECTORS

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INCOME STATEMENT AND BALANCE SHEET

TEL. +358 207 1901 FAX. +358 207 190 501 VEO@VEO.FI WWW.VEO.FI

2013 WAS A YEAR of changes for VEO. We took a number of large steps aimed at streamlining our activities and improving profitability, and the results have been very satisfying. In two years, VEO’s operating profit has grown by EUR 3 million. VEO is a financially sound company with nearly zero debt. The future looks bright – we have developed innovative and sought-after solutions for the market and are at the moment in the middle of interesting business negotiations with new customers. We expect that by 2016 VEO’s annual turnover will reach EUR 90 million.

NORWAY: VAASA ENGINEERING AS POSTBOKS 557, 1327 LYSAKER LYSAKER TORG 25, 1366 LYSAKER TEL. +47 91 670 699

WHAT, THEN, IS behind this success? The organisation has been restructured and some activities have been outsourced. In particular, we have focused on boosting the efficiency of sales and production. We have focused sales on certain export countries and sharpened our scope of supply. In marketing we are focusing on the fastest-growing products, namely power distribution systems and renewable energy solutions. VEO’s switchgear factory is the largest of its kind in the Nordic countries, and we have worked determinedly to increase the factory’s production efficiency. The company’s entire production model was renewed when we moved from customisation to mass customisation.

RUSSIA: OOO VAASA ENGINEERING 10TH KRASNOARMEYSKAYA ST. BUILDING 22 A, 5-I FLOOR, OFFICE 310 190103 ST. PETERSBURG TEL. +7 812 438 00 56

IN 2013 WE ALSO laid the foundation for future years. We expect high sales growth from the new energy storage solutions we have developed with our partners. Another new product is a hydropower plant solution, which can be utilised particularly for small-scale hydropower plants. Over half of VEO’s operations are currently in renewable energy. We strive to develop solutions that reduce environmental impact and boost energy efficiency in production processes. We are delighted that VEO is participating in diminishing the ecological footprint in this industry of the future. The title of this review is Big changes and huge improvement in results. To this we could very well add high expectations.

In two years, VEO’s operating profit has grown by EUR 3 million. Marko Ekman, Acting CEO Marko Ekman, Acting CEO

ANNUAL REPORT 2013

ANNUAL REPORT 2013


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SEGMENTS

CORE STRENGTHS

Creating solutions for all steps in the energy chain Power generation

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VEO offers automation and electrification systems for different kinds of power generation. Our competence covers a wide range of plants producing electricity and district heating for communities or industries. The power plants can be based on different combustion technologies and fuels. You find us in hydropower plants, in wind parks, in thermal power plants or in oil and gas power plants.

Power distribution VEO delivers substations for transmission and distribution networks, as well as medium voltage switchgears for utility companies and industry as turnkey or part-delivery projects. Deliveries often include distribution automation. In industrial and power plant power distribution, the primary focus is on process reliability, safety, preventive maintenance and damage situation control.

Power utilisation

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ANNUAL REPORT 2013

VEO delivers standardised and customised independent, line-up and system drives for demanding industrial applications for customers in industries such as steel, pulp and paper manufacturing, oil refining and mining. VEO also carries out drive modernisation projects for industrial applications based on its extensive drives experience and partner network.

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Our core strengths » Highly qualified staff with extensive experience » Our design engineers and project managers are project management experts and have the expertise to choose cost effective and the technically most suitable solutions for each project

» Our own manufacturing facilities – our switchgear factory in Vaasa, Finland, is the largest one in the Nordic countries

»  Proven logistic capacity »  Our deliveries are commissioned » Comprehensive after sales services for all our deliveries that enhance our customers’ life-cycle management

50% of VEO’s revenue derives from renewable energy

70% of VEO’s revenue is exported

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timo annola

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WIND POWER

WIND POWER

ALL THE WIND NEEDS IS ELECTRIFICATION

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In 2012–2013 VEO supplied 10 substations to various wind farms

CASE Our best competitive advantages are our electrification concept and our complete turn-key service. DURING 2012–2013, VEO SUPPLIED 10 substations to various wind farms. Many of these customers wish to continue the partnership in future projects. In addition, VEO has received a substation order for Finland’s biggest wind farm, at Vähäkyrö in Vaasa. Hiironniemi considers that this shows that the company is one of most trusted and desirable partners in the business. “During the next years, a number of new wind power projects are expected to be announced. We are well situated to achieve a strong position in these, too.”

Antti Hiironniemi, Sales Manager

VEO is one of the market leaders in Finland in wind farm electrification ANNUAL REPORT 2013

VEO and Puhuri partnership continues

VEO ELECTRIFIES MOST OF FINLAND’S new wind power farms. Many companies want a full-service supplier that is able to respond to out-of-the-ordinary demands but, even so, works efficiently and delivers high quality. According to Sales Manager Antti Hiironniemi, VEO’s best competitive advantages are its electrification concept and complete turn-key service. “If necessary, we supply the entire range of wind farm electrification work, i.e. everything from the grid connection substation all the way to control and monitoring systems.”

TO ENSURE THAT VEO REMAINS the most flexible and highquality supplier of electrification solutions, it has developed its own concept, the so-called modular standard solution. “Our own electrification is in principle a standard product, which is easily adaptable to wind farms of different sizes,” says Hiironniemi. As a result of the concept, VEO’s delivery reliability is top class. “The delivery schedule is often critical for the customer, because return on investment only begins when the turbines start operating. When VEO receives an order, we move quickly; the project runs smoothly and is completed on time.”

Puhuri Oy, a Finnish wind power company, has engaged VEO as a partner in a number of wind farm projects. Initially, Puhuri and VEO entered into an agreement for the electrification of two wind farm substations. The delivery schedule for the projects was tight, but VEO completed the work successfully. Now VEO is supplying a substation for a third wind farm being constructed by Puhuri. The partners started working together in 2011 and the first two wind farm substations were completed in 2012. The Ristivuori wind farm has six turbines, and the Kopsa 1 wind farm has seven turbines. VEO’s third electrification project will be on a wind farm located in Raahe, where eight turbines will be erected in summer 2014. For all three wind farms, VEO has delivered its own modular substation concept, which also includes VEO´s VEKE mediumvoltage switchgear. The switchgear, which VEO has developed and fine-tuned to perfection during the past year, is the most important element of electricity distribution. “The Nordic countries are modernising their electricity network and in Finland, too, overhead lines are being taken underground. This is creating demand for VEKE,” concludes Hiironniemi.

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PROJECT

PROJECT

TRANSFORMER STATION TO LULEÅ ENERGI

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The biggest challenge was to find the right subcontractors. However, everything has run very smoothly and we are on schedule. Andreas Martin, Sales Manager

VEO’s first indoor 170kv AIS switchgear project ANNUAL REPORT 2013

VEO focuses on Sweden TECHNICAL ANALYST BIRGER LUNDQVIST at Luleå Energi is satisfied with VEO’s efforts. “VEO previously delivered a smaller project for us, so we were familiar with each other. VEO has done very well and we have had excellent communication throughout the process”, Lundqvist states. In spring 2014 Luleå Energi visited VEO’s factory in Vaasa for a Factory Acceptence Test (FAT). Shortly thereafter three lorries departed for Luleå with 30 metres of control cabinets and medium voltage switchgears. In addition to this, several lorries of equipment is sourced from other suppliers.

IN SWEDEN, DELIVERING SWITCHGEAR as turnkey projects is common practice. In other words, the switchgear supplier is also responsible for the construction and ground work. The 170kV transformer station that Luleå Energi ordered from VEO in the summer of 2013 is no exception. “The big challenge has been to find the right subcontractors and to coordinate the work. However, everything has run very smoothly and we are on schedule”, says Andreas Martin, Sales Manager for the Swedish and Norwegian markets.

30 metres of control and medium voltage cabinets were delivered to Luleå Energi

THE AIR INSULATED SWITCHGEAR (AIS) is being built next to Luleå Energi’s main office. Luleå Energi had initially envisioned a gas insulated switchgear, but during the tendering process the order was changed to an air insulated variant. AIS stations are more environmentally friendly because they do not use the SF6 gas, which is a potent greenhouse gas should it leak. “A gas insulated switchgear is generally more compact, but we realised that the building would only be marginally bigger if we switched to an air insulated version. Hence, changing the decision on environmental grounds was easy”, Birger Lundqvist explains.

Although VEO has been active in Sweden throughout the company’s history, efforts have recently been stepped up on the Swedish market. Besides the Luleå Energi project, VEO has received an order from Skellefteå Kraft to modernise the electrical and automation systems at a hydropower plant. “We are above all focusing on power distribution, hydropower and thermal power in Sweden”, Sales Manager Andreas Martin explains. “The Swedish market is without a doubt the toughest one in the Nordic countries. The competition is stiff and most power distribution projects are managed as public procurement projects. That said, our strong references from Finland and Norway are a great asset when it comes to sales.” In early 2014, VEO opened up a new office in Rovaniemi in the north of Finland. This action also strengthens the support for the business in Northern Sweden.

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COOPERATION

COOPERATION

MORE THAN PARTNERS

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We congratulate Vacon on their birthday and to their success. It has been 20 successful years and we look forward to a continued fruitful cooperation in the years to come. Johan Ågren, Vice President

VEO and Vacon have common roots and a close cooperation VEO celebrates 25 years, Vacon celebrates 20 years

1989 Vaasa Engineering Oy (later VEO) is founded.

1992 Vaasa Engineering acquires its present premises in Runsor, Vaasa.

1990 First projects for a Wärtsilä power plant in Mecca and to Savon Voima.

ANNUAL REPORT 2013

1995 Vaasa Control opens a factory in Vaasa, next to Vaasa Engineering’s premises in Runsor.

1993 Vaasa Control (later Vacon Plc) is founded. Vaasa Engineering owns 37.7% of the shares.

2000 Vaasa Control changes its name to Vacon and the company is listed on the Helsinki Stock Exchange. Vaasa Engineering’s ownership in Vacon is now 4%.

1999 Vaasa Group, consisting of Vaasa Control, Vaasa Engineering and Vaasa Electronics, receives the Presidential Export Reward.

2012 Vaasa Engineering changes its name to VEO.

2005 Vacon starts producing AC drives in China.

2014 Now it’s VEO turn to celebrate its 25-yearanniversary. President Barack Obama visits Vacon’s factory in the USA.

2013 Vacon celebrates its 20-year-anniversary. The company’s products and solutions provide savings equalling nearly one day’s electricity consumption for the whole world.

IN 2013 THE AC DRIVE manufacturer Vacon turned 20. Since the start in 1993, the company has gone from being a small start-up to one of the world’s leading manufacturers of AC drives. It is no exaggeration to say that VEO has played an important part in Vacon’s success story. Vacon was founded in Vaasa by a team of engineers with the vision of making the world’s best AC drives. VEO had been established four years prior and helped finance the start-up, and at first VEO owned over a third of Vacon’s shares. Hence, the histories of the two companies have been intertwined from day one. VEO AND VACON STILL MAINTAIN close cooperation, since Vacon is an important customer for VEO. The cooperation also works the other way round, since VEO is in turn Vacon’s customer. VEO delivers both standard products for Vacon and increasingly also project management and tailor-made solutions. To put it simply, VEO helps Vacon make the AC drives part of an overall solution. Vacon benefits from VEO’s long experience of project management for big global

customers. VEO also provides special solutions for Vacon’s marine division. WHEN THE TWO COMPANIES were founded they both had names that revealed their origin; Vaasa Engineering and Vaasa Control. The fact that VEO and Vacon were born in Vaasa is no coincidence, since the city on the west coast of Finland is home to the largest concentration of energy technology companies in the Nordic countries. Over 30 percent of Finland’s total export in the field comes from a region where a mere 2 percent of the population lives. A deciding factor behind the success of the energy technology cluster is that the companies network and cooperate. The cooperation between VEO and Vacon is in fact a perfect example of how a cluster works. VEO also cooperates with all other important players in the energy cluster. In fact, VEO is the most networked company in the entire cluster. And once upon a time, VEO was the first company to establish itself in Runsor, close to Vaasa Airport. Today over 4,000 energy experts work there.

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HYDROPOWER

ENERGY AMBASSADOR

EXPERT SERVICES EXPAND

Automation is becoming increasingly complex and customers do not necessarily have the expertise themselves.

WITH THE CORRECT MAINTENANCE schedule and actions, it is possible to increase a hydropower plant’s efficiency, since even small malfunctions have an immediate impact on efficiency and production. Preventive maintenance also extends the economic life of a plant, because the machinery lasts longer if the automation and the electrification are properly maintained. Therefore VEO has further developed maintenance and after sales services in in the hydropower segment.

ANNUAL REPORT 2013

THE ENERGY AMBASSADOR CAMPAIGN

Harri Ranta, Sales Manager

Condition based maintenance extends the economic life of hydropower plants IN MODERNISATIONS OF hydropower plants, VEO is Finland’s market leader. Now the company is investing even more in power plant servicing and maintenance. “Many customers are asking for maintenance services. Automation is becoming increasingly complex and customers do not necessarily have the expertise themselves,” says Harri Ranta, Sales Manager, Hydropower and Substations.

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“One step in the development of services was the hiring of five people for the new Rovaniemi operating location, which opened in early 2014. All the new employees have long experience of hydropower plant maintenance and we have a unique know-how base to work from”, says Ranta. MAINTENANCE CONTRACTS ARE always set up according to the customers’ unique demands and wishes. If a customer chooses the VEO247 maintenance, they can be sure that someone will answer the phone any time of day. “If malfunctions occur, they are often acute and assistance is needed immediately. Time is money and every minute a plant is down costs,” explains Ranta.

In autumn 2013, the Vaasa region hired an Energy Ambassador to spread the word about the leading energy cluster in the Nordic countries. VEO participated in the marketing campaign, which offered Ambassador Pentti Itkonen an unforgettable adventure around the world.

Norway hydropower plants need VEO

Cooperation in the rain forest

VEO invited the Energy Ambassador to Kongsvinger, near Oslo in Norway, where the company had just completed a significant hydropower plant modernisation project. VEO had modernised the electrification and automation systems for the old turbine. Before the modernisation, the power plant’s capacity was 22 MW, and only one turbine was in use. The upgrade and the added new turbine has doubled the plant’s capacity. “In Norway a large proportion of engineers are attracted to the oil and gas industry. VEO has therefore excellent opportunities to do well in Norway in hydropower and electricity distribution. Hydropower is a stable source of energy with growth potential. There are many existing plants that can be modernised”, says the Energy Ambassador.

The Eden Yuturi power plant and oil field are located in Equador in the middle of the Amazon rain forest. Wärtsilä delivered a gas-fired power plant, which uses as fuel natural gas previously considered to be waste gas. The power plant has been built in cooperation with a number of actors of the Vaasa region energy cluster: VEO, Wärtsilä, VAMP and Leinolat Group. VEO supplied all of the automation systems that control the turbines and auxiliary systems. The customer’s requirements for accessibility set VEO a tough challenge, all the way from design to installation finishing work. Modification work had to be done while the power plant was running. “The whole power plant is the result of Vaasa cooperation. Together the companies make great projects!”, concludes the Energy Ambassador, after his visit.

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CORPORATE RESPONSIBILITY

CORPORATE RESPONSIBILITY

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juha tamminen

1. CORPORATE RESPONSIBILITY OUR MISSION IS TO CREATE growth and well-being through our energy sector expertise and responsible operations. Our goal is to create added value for our shareholders, customers, suppliers, employees and the local community. A strong economic basis secures the continuity of our business and enables us to meet our social and environmental responsibilities. We recognise our shareholders’ goal of return on their long-term investments. We create added value for our customers by delivering solutions that meet their expectations. Our objective is to provide our key suppliers with favourable conditions for long-term and mutually beneficial co-operation. We want to provide our employees with an enjoyable and safe working environment, competitive pay and opportunities for selfdevelopment. We fulfil our tax obligations in all of the countries in which we operate and condemn all forms of corruption or fraudulent practice.

ANNUAL REPORT 2013

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Environmental responsibility

OUR OBJECTIVE IS to offer energy and material efficient solutions and processes. We strive to minimise the amount of waste generated by our activities and to maximise waste recycling. In addition to waste management, the most significant environmental considerations related to our operations are energy consumption and the management and control of isolated incidents. We are committed to recognising and observing all environmental laws and regulations related to our operations. We monitor the environmental impact of our activities and implement environmental programmes aimed at reducing negative environmental effects. Our environmental management system has been certified to ISO 14001:2004.

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Social responsibility

WE STRIVE TO MINIMISE any potential negative effects of our operations or products on health and safety. We promote the physical, mental and social welfare of our employees through preventive health care and measures aimed at maintaining work ability. We also encourage healthy lifestyles among our employees.

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Sponsorship

WE SPONSOR HIGH-LEVEL local sports clubs. In addition, we sponsor the recreational activities of our employees and their children, as well as customers, associations and organisations. Sponsorship is granted on the basis of interactive cooperation. In 2013 we sponsored, among others, VPS and VIFK (football) and Vaasan Sport (icehockey), and several junior teams in different sports, as well as student organisations. In autumn 2012, we also entered into a long-term sponsorship agreement with the Finnish international cross-country skier Toni Ketelä, who is from Vaasa.

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BOARD OF DIRECTORS

BOARD OF DIRECTORS

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Board of Directors’ Report 2013 Business strategy The business strategy of VEO is to deliver automation, operating and distribution solutions for the energy sector and process industry. Our main markets are the Nordic Countries and the Russian neighbouring area. Our vision is to be known as a professional and responsible supplier within our business area. The company will continue to grow organically. In the long run our goal is an annual growth of about 20% and continuous growth in profitability.

Corporate structure At the balance sheet date, VEO Group consisted of the parent company VEO Oy and the subsidiaries Vaasa Engineering AS, Vaasa Engineering AB, OOO Vaasa Engineering and Vaasa Engineering Kiinteistöt Oy. Vaasa Engineering Magnetointi Oy was merged with VEO Oy 1.1.2013. In addition, the parent company held 100% of Vaasa Group Automation Oy which had no operations during the financial period and is not included in the consolidated financial statements. Wringley S.A in Uruguay, owned by VEO Oy to 100%, was terminated during the financial period.

Financial standing Consolidated net sales for the financial period amounted to EUR 63.8 million (EUR 72.7 million), of which the parent company’s share was EUR 62 million (EUR 71 million). Consolidated operating profit stood at 0.3 million (EUR 1.4 million) and net profit was EUR 68.6 thousand (EUR 0.8 million). The parent company’s operating profit came to EUR 0.4 million (EUR 2.2 million) and net profit was EUR 109.7 thousand (EUR 1.4 million).

Essential transactions during the financial period During the financial period a joint operation process was initiated which lead to outsourcing of VEO’s internal logistics to Vindea Oy as a business deal, and the outsourcing of the payroll administration to Pretax Oy, and the installations business to Bilfinger Oy.

Personnel During the financial period, the Group employed on an average 375 (417) persons. Of these, the parent company employed an average of 372 (372) persons. Hired labour has been used to even out load fluctuations in the factory. The number of these persons has on average been 5 (8).

Board of Directors + CEO

Product development During the financial period, the sum invested in product development by VEO Group was EUR 1.25 million, or 1.9 percent of net revenue.

ANNUAL REPORT 2013

From the left: CEO Risto Pietilä (starting 1 April 2014) and Board members Jarmo Saaranen, Henrik Skytte, Mauri Holma (Chairman of the Board), Jan-Christer Eriksson and Stefan Storholm.

ANNUAL REPORT 2013


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INCOME STATEMENT

BALANCE SHEET

Income statement

Balance sheet 1,000 €

VEO Group

TURNOVER

1.1.–31.12.2013

1.1.–31.12.2012

63,766

72,738

–979

1,589

Other operating income

767

2 570

Variable and fixed costs

–61,708

–74,056

Change in inventories of finished goods and work in progress

OPERATING MARGIN Depreciations and write–downs OPERATING PROFIT Share of result of associated company Financing income and expenses PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES

PROFIT FOR THE FINANCIAL YEAR

ANNUAL REPORT 2013

1,000 €

VEO Group 1.1.–31.12.2013

1.1.–31.12.2012

ASSETS Fixed assets and other long-term investment

24,475

19,819

Current assets

21,220

23,767

ASSETS IN TOTAL

45,695

43,586

Invested capital

15,206

10,650

Available capital

2,973

2,904

6,254

7,885

1,846

2,841

–1 ,556

–1 ,426

290

1 415

162

176

–390

–469

LIABILITIES

62

1 122

Long-term

7

–327

69

795

SHAREHOLDERS' EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY

Short-term Income taxes

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LIABILITIES IN TOTAL

21,262

22,147

27,516

30,032

45,695

43,586

ANNUAL REPORT 2013


www.veo.fi

VEO Annual Report 2013  
VEO Annual Report 2013  

Annual report for 2013 sums up VEO's new ventures, corporate news as well as key financial figures.

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