Verdo annual report 2014

SUMMARY OF THE

ANNUAL REPORT

2014

Contents GROUP & STRATEGY Foreword

4

Executive and Supervisory boards

6

The Group's financial highlights

8

Strategy 4i16

10

Group chart

11

Verdo in the social media

11

CSR focus areas

12

ANNUAL REPORTS Verdo Generation

18

Verdo Trading

19

Verdo Renewables

20

ANNUAL REPORT

2

Income statement

23

Balance

24

Balance sheet

25

Cash flow statement

26

ANNUAL REPORT 2014

VERDO A/S Verdo is determined to be the greenest, most efficient energy provider in Denmark.

Our ambition is to develop the most profitable solutions within production and supply of green energy, at home and abroad.

Verdo produces and distributes electricity, water and heat. We also have highly competitive products within telephony and the internet, electrical installation, plumbing and sanitation, energy consultancy, alarms and security, plus the production and sale of biofuels in Denmark and the UK. Our approximately 500 employees are responsible for an annual turnover of around DKK 2.1 billion.

ANNUAL REPORT 2014

3

FOREWORD

Strengthened by adversity

Energy suppliers are sensitive to the wind and weather.

Verdo is no exception. One of the things we will remember in particular about 2014 is the warm winter, which caused sales of district heating, CHP production and sale of wood pellets to fall. But despite the warmest European winter in living memory, we still managed to make a reasonable profit, indicating that this is a very robust company.

Verdo will look back on 2014 as one of its most difficult years, something that is also reflected in our bottom line.

Turnover was DKK 2.1 billion, well under the figure for 2013. Earnings before interest, depreciation and amortisation (EBITDA) were DKK 237 million, and pre-tax profit was DKK 34 million.

Energy companies have to constantly adapt to the many new rules that can limit profit - and to which most of our concessionary business areas are subject. For example, we are additionally taxed on district heat, and the price of electricity to our customers is under pressure from regulatory changes. A political decision has also been made to prevent us from gaining returns on equity within water supply. These are all factors that limit profit.

To protect our business as much as possible, we therefore streamline the group constantly and have disposed of anything that is non-core business. We need to focus on what we are good at.

This was reflected in 2014 by focusing even more on the customer, including the provision of more precise information via a new website, not to mention public meetings and information when we improve the supply grid. We were once again one of the most efficient utility companies in Denmark, proving once and for all that we are good at providing heating, water and electricity to the benefit of our customers in terms of both quality and price.

Our customers can now also benefit from our expertise within wood pellets. We have introduced Heatlets, our new pellet brand, at home and abroad. This is a product with the highest quality in the industry and we guarantee supplies - something unique to us. By doing so, we strengthen our image as the professional, stable sup-

4

ANNUAL REPORT 2014

plier of the highest quality - something the customers much appreciate.

The production and sale of wood pellets by Renewables in the UK continues to hold a leading market position in terms of price, sales and brand. We have succeeded in getting in to many of the leading retailers and have built up a market share of around 30 percent. Renewables has delivered an operating profit and has expanded with a new warehouse to service the Midlands.

Our subidiary Carbon Partners, operating in Norway and the USA, has once again made a handsome profit and is clearly one of the best when it comes to supplying special coals to the global metal and silicium industries.

We have expanded our consultancy business and utilise our considerable experience and know-how throughout the range of our core competences: water, heating and electricity direct to the consumer and to power stations, other energy generators and to industry at home and abroad. Consultancy is a growing part of our business.

Contracting shrank in 2014, but only because we want to do what we are good at. We have focused in previous years on contracting, adapted, disposed of parts of the business and generally became more efficient. That has already led to sharply increased sales and fuller order books for this business unit.

The high level of demand for fibre continues. We were once again nominated as the best TV and internet provider by our customers in 2014, and have more than half of all households connected. We expect that figure to continue to grow, and that this business unit will become profitable within a few years.

The fact that this was a difficult year for Verdo has of course been felt by our employees. Our skilled and committed workforce has really been put to the test, but their spirit, durability, sense of humour and skills have helped ensure that we now do even more of what we are really good at - and Verdo emerged strengthened from the challenges of 2014. Looking ahead, we can already see the effects of more focus and restructuring. We will continue to apply more focus and thus specialise even further.

FOREWORD

Claus Omann Jensen Chairman of the Board

Kim Frimer CEO

ANNUAL REPORT 2014

5

SUPERVISORY BOARD 2014

Supervisory Board 2014 After election of Board of representatives and Supervisory Board in 2014, the Supervisory Board consists of:

Ebbe Bagge Hansen Employee Representative

Niels Rasmussen Vice-Chairman

Arne Erikslev Board Member

Pia Maach Møller Board Member

Claus Omann Jensen Chairman of the Board

Ejvind Clemmensen Board Member

Jan Holst Employee Representative

6

ANNUAL REPORT 2014

SUPERVISORY BOARD 2014

MANAGEMENT'S REVIEW The Supervisory board and the executive board have today, 14 April 2015, considered and adopted the annual report for 1 January - 31 December 2014 for Verdo A/S. The annual report is presented in accordance with the Danish Financial Statements Act. In our opinion, the consolidated accounts and annual accounts give a true and fair view of the group's and company's assets, liabilities and financial position as at 31 December 2014, and of the result of the group's and company's activities and the group's cash flow for the fiscal year of 1 January - 31 December 2014. We are furthermore of the opinion that the management's review contains a true and fair description of the development of the group's and company's activities and financial status, profit for the year and for the financial position of the group and company. There is significant uncertainty concerning subsidiaries, including accounting for equity capital. Please refer to note 1. The annual report is recommended for approval by the general meeting.

Jess Hansen Employee Representative

Bent Hede Board Member

Søren Sørensen Board Member

Thomas Post Employee Representative

Kim Frimer CEO

Erik Busk Jensen Board Member

ANNUAL REPORT 2014

7

THE GROUP'S FINANCIAL HIGHLIGHTS

2014 at Verdo 2014 was a difficult year for Verdo. Firstly, the warm weather affected our business on several fronts, particularly the sale of fuels from Verdo Energy A/S and the sale of heat from Verdo Varme A/S. Furthermore, the price of electricity stabilised at a very low level after dropping for several years in a row, which affected the profitability of our CHP plants in Randers and Grenaa.

The group's consolidated turnover was DKK 2.1 billion compared to DKK 2.4 billion in 2013, which is less satisfactory. Gross profit (EBITDA) was DKK 237 million, which is a slight improvement compared to 2013. The gross profit can be deemed as acceptable given the warm weather.

The European economy has still not fully recovered, which is reflected in the extremely low interest rates seen towards the end of the year.

The fact that the group's credit facilities overall are cheaper is of course good news, but the margins we are allowed to make on utility activities (electricity grid, district heating network and CHP plants) are also significantly eroded, as they are linked to the actual level of interest rates by law. Consequently, the low interest rate has a negative effect on the group overall.

Verdo A/S sold 20% of its shares in Carbon Partners Norway late in 2014 to an external partner, yielding a gain which has been recognised in the income statement. The objective of the sale was to further strengthen the excellent progress of the company.

Overall, we can conclude that even though 2014 did not go as expected, the Verdo group once again delivered a result that reflects strength even in difficult times. We are also convinced that with the measures implemented throughout the year, including a new ERP system, the disposal of certain business units and the general bolstering of the organisation, Verdo is in good shape for the years to come. This is also confirmed by the results we have already seen in early 2015.

We expect a slight to moderate improvement in the economy this year, including a slight rise in interest rates. However, the price of electricity is expected to stay at its current low level over the next few years. Nevertheless, we expect that turnover and operating profit will rise significantly during the same period.

Another effect they have is that the group's interest rate swaps had a highly negative value at year end. Negative value adjustment for interest rate swaps for the year amounted to DKK 40 million. It is important to stress that only our equity is affected, as the Verdo group does not have to provide liquidity for swaps. Equity remains nevertheless unchanged, which is deemed to be satisfactory. Return on equity remains at the same level as in 2013, i.e. 1.9%.

Financial gearing (EBITDA/net interest-bearing debt) improved slightly compared to 2013, and is now 5.4. The group's objective remains gearing between 4.5 and 3.5, which we expect to achieve within a couple of years.

Despite higher binding of working capital (especially in stock), the group's liquidity was healthy throughout the year. Cash flow was slightly better than in 2013 and liquidity reserves remain strong. Investment remained at the same level as last year, at DKK 124 million.

Kenneth R. H. Jeppesen CFO Verdo A/S

KEY FIGURES

Amounts in TDKK

2014

2013

2012

2011

2010

Gross margin ratio

27.3%

23.4%

24.4%

23.8%

32.2%

EBITDA margin

11.2%

9.7%

10.6%

10.4%

14.7%

5.4

5.5

5.0

5.5

5.9

Financial gearing Return on equity Solvency ratio

8

ANNUAL REPORT 2014

1.9%

2.0%

3.3%

4.0%

3.4%

39.6%

39.0%

37.8%

37.6%

40.5%

THE GROUP’S FINANCIAL HIGHLIGHTS

FINANCIAL AND OPERATING DATA

Amounts in TDKK Net turnover Index EBITDA Index Operating profit Index Results from net financials Index Pre-tax profit Index Profit for the year Index

2014

2013

2012

2011

2010

2,122,902

2,405,028

2,429,995

2,283,435

1,547,767

137

155

157

148

100

237,265

234,389

258,178

236,400

226,963

105

103

114

104

100

82,162

95,119

119,482

106,155

106,759

77

89

112

99

100

-48,559

-62,566

-60,043

-52,896

-64,240

76

97

93

82

100

33,603

32,553

59,439

53,259

42,519

79

77

140

125

100

24,324

25,062

41,498

50,463

42,345

57

59

98

119

100

3,295,619

3,353,197

3,310,742

3,334,711

3,121,360

106

107

106

107

100

124,555

127,529

144,345

163,618

243,832

51

52

59

67

100

1,304,213

1,308,599

1,252,319

1,254,335

1,264,745

103

103

99

99

100

Balance sheet Total assets Index Investment in tangible assets Index Equity Index

Liquidity Net cash flow from: Operations

136,089

143,894

109,996

250,436

239,691

-129,944

-133,174

-86,640

-174,355

-244,622

Financing

-25,105

-38,499

-41,090

372,999

-35,380

The year’s effect on cash flow

-18,960

-27,779

-17,734

449,080

-40,311

Investments

CALCULATION OF KEY FIGURES Key figures have been calculated according to the recommendations of the Danish Society of Financial Analysts: Gross margin ratio

EBITDA margin

Financial gearing (debt/EBITDA)

Return on equity

Solvency ratio

Gross profit x 100 Net turnover EBITDA x 100 Net turnover

Definitions: Gross profit is the net turnover with direct expenses deducted.

EBITDA is the result before depreciation.

Net interest-bearing debt is interest-bearing liabilities with the deduction of interest-bearing assets.

Net interest-bearing debt EBITDA Income from ordinary activities after tax x 100 Average equity Equity at the end of the year x 100 Total assets

ANNUAL REPORT 2014

9

STRATEGY 4i16

VERDO WANTS TO BE DENMARK'S GREENEST ENERGY COMPANY

Strategy visions Verdo has a comprehensive strategy, vision, mission and a range of values which eloquently express precisely what we stand and work for.

Strategy 4i16 Our strategic objective for 20142016 is to achieve total turnover of DKK 4 billion, with operating profit of DKK 400 million before interest, taxation, depreciation and amortisation (EBITDA). Such ambitions make high demands of the group's organisation. Verdo shall continue to be a profitable company within the Danish energy sector, able to create results on competitive terms.

Deploying values We believe it is important that all our employees are aware of Verdo's objectives and strategy - and to get there, it remains essential that we all pull together.

That's why Verdo is a value-oriented enterprise, in which we work together to reach our common goal and act responsibly. Values are essential to the choices we make.

We make an extra effort to ensure that our employees are totally familiar with them, in order to become a part become a part of the way we work. Apart from our values, we have defined four focus areas for the current strategy period as our operational strategies: customer focus, quality, productivity and skilled, engaged employees. All four areas are key reasons why customers choose Verdo as their preferred provider today, tomorrow and in the future.

10

ANNUAL REPORT 2014

VISION We create green energy

MISSION We will ensure competitive prices for electricity, water and heat.

Furthermore, we will:

• K eep Verdo profitable and independent

• I ncrease the value of Verdo through profitable growth

• M aintain or reduce our current financial gearing

• E nsure Verdo is an attractive employer

• C reate new, exciting jobs through balanced and sustained growth

VALUES At Verdo we conduct ourselves responsibly according to the values of:

• Respect and trust • Customer focus • Efficiency • Courage • Loyalty

TELECOM

Verdo Tele A/S

RENEWABLES

GROUP CHART

Verdo Renewables Ltd.:

WAOO A/S 3.32% Nianet A/S 1.74%

Verdo Energy GmbH TRADING

Verdo Energy A/S Verdo Engineering A/S Carbon Partners AS 80%

Carbon Partners Inc.

GF Energy B.V.

VERDO A/S

SUPPLY

VERDO S/I

Verdo Randers El-net A/S

Verdo Randers Electricity Supply A/S

Verdo Hillerød El-net A/S

Verdo Hillerød Electricity Supply A/S

Net-Sam Scada A/S 6,69%

Midtjysk Elhandel A/S 74% Verdo Vand Holding A/S

Verdo Water A/S

CONTRACTING

GENERATION

Verdo Varme A/S

Verdo Produktion A/S Verdo Hydrogen A/S

Verdo Entreprise A/S

Not all of Verdo’s divisions are represented in this summary of the report. All divisions are represented in the Danish annual report available at verdo.dk/årsrapport.

Verdo in the social media Customer focus also means that we need to be present in the media used by our customers. That means that Verdo is active - not just on verdo. dk - but also on Facebook, LinkedIn and with a channel on Youtube. We post news items, share our expertise and engage in dialogue with our customers via the social media. Verdo.dk includes links to our social media channels.

verdo.dk/socialemedier ANNUAL REPORT 2014

11

CSR - FOCUS AREAS

Verdo takes collective responsibility. That applies to the environment, our personnel and society at large. We strive to ensure that our CSR policy benefits both the business and society. Right from our focus on green energy at all levels of the value chain, to the welfare of our personnel and the choices we make when choosing suppliers and partners.

Given our vision of becoming Denmark's greenest energy company, we believe that CSR concerns our impact on the climate to a great degree.

throughout the business

Our CSR strategy is deeply rooted in the business. Its principles are based on our vision, mission and values - the cornerstones of Verdo. Our values come under the heading of "We conduct ourselves responsibly", which also applies to CSR. These principles form the basis of our CSR strategy and the objectives on the following pages.

More female managers We want our female personnel to perceive that they have the same career and management opportunities as their male counterparts. To realise that ambition, we actively encourage talented women to take on management responsibility. Our recruitment advertising

is designed to increase the chances of attracting more female candidates by the choice of copy and graphics.

We increased the number of female managers in 2014 by a total of five, of which three positions

STATUS PROPORTION OF FEMALE MANAGERS AS AT 31.12.2014 2014

Figures in %

Women on the Supervisory Board (target: 25%) 12.5% Female managers, total

Female managers level 1 Female managers level 2 Female managers level 3 Female managers level 4

12

ANNUAL REPORT 2014 2013

(target: 25%)

(target: 20 %)

(target: 10 %)

12%

8% 19% 14% 0%

CSR - FOCUS AREAS

Verdo's CSR principles

Based on UN principles

We will be Denmark's greenest energy company.

Verdo's CSR policy uses the UN’s Global Compact principles as a benchmark, based on international conventions within human rights, labour, environment and anti-corruption, plus our own CSR principles according to the industry we operate in. We have not formulated our own policy for human rights as yet, but support the Global Compact.

We strive to promote green solutions.

We will always choose green solutions if they are not to the detriment of Verdo.

We choose green solutions which benefit the environment, the world around us and Verdo.

We will launch initiatives which boost the loyalty of our employees.

We will launch initiatives which increase the safety of our employees.

We support sport and culture, and provide sponsorships which promote Verdo.

were newly-created. That brings us close to achieving our target for 2015.

By 2018 we want to increase the proportion of female administrative and staff management (personnel management, level 1) from 8 to 25 percent. We will increase the proportion of female managers of managers (management, level 2) from 19 to 20 percent by the end of 2015. Our target for 2014 was an increase in the proportion of female executive managers (directors, level 3) to 10 percent by 2015, which was achieved.

Women on the Supervisory Board The current Supervisory Board consists of 8 members, of which 1 is female. The company aims to increase the proportion of women on the Supervisory Board and set a target in 2014 of at least 25% women on the board by 2018. New elections to the Supervisory Board were held during the 2014 general meeting when the proportion of women elected by the Board of Representatives remained unchanged.

2013 12.5% 11%

7% 15% 14% 0% ANNUAL REPORT 2014

13

CSR - FOCUS AREAS

Customers with influence Our customers help decide the shape of our organisation. Within our three supply areas (electricity, water and heat), they elect the Board of Representatives which in turn elects Verdo's Supervisory Board. Verdo's management therefore has no influence on the

gender breakdown of the eight board members and four employee-elected representatives. There were 4 female candidates out of a total of 37 for the Board of Representatives’ election in 2014, and all 4 were elected.

Job training

and education

We see diversity in the workplace as a strength we can translate into results at Verdo.

One of the ways we encourage diversity is by inducting candidates for try-out or practical experience periods.

We also create apprenticeships and student jobs each year. We believe that this provides potential employees

with the chance to try their hand at tackling the challenges of work, or obtaining qualifications. That increases diversity within the group and contributes to the community of which we and our business are a part.

2014 12

11

8

Apprentices, adults

3

3

0

5

4

1

13

6

2

9

9

11

7

16

10

Students studying (practical experience etc.)

Employees given light duties and flexible working

Employees in job training

ANNUAL REPORT 2014

2012

Apprentices, youth

Students (office and technical designer)

14

2013

(of which 3 adults)

CSR - FOCUS AREAS

Sustainable partner

Verdo has outsourced most of its cleaning to Forenede Service A/S. We are pleased to have a partner such as Forenede Service, a company which also takes social responsibility. They believe strongly in a safe working environment and clean natural environment, using only non-PVC plastic products and packaging, dosing systems and eco-friendly products for example. Finally, Forenede Service believes in healthy employees, providing membership of local fitness centres and fruit for snacks, for example.

Green canteen

2 0 1 3

Organics

41.1 %

2 0 1 4

We think green and sustainable at Verdo. The same applies to our canteen, which won a bronze award in 2013 because between 30 and 50 percent of the ingredients we use are organic. We continued in the same vein in 2014, when the canteen focused on local ingredients, including measuring the percentage used.

Organics

Local ingredients

44.7 %

50.9 %

ANNUAL REPORT 2014

15

CSR - FOCUS AREAS

How we benchmark We measure our results within CSR. We measure the following specific aspects for CSR reporting in the annual accounts:

CO2 and NOx emissions We persistently strive to keep our CO2 and NOx emissions at a low level. Our CO2 account is vastly improved by burning biomass instead of coal, and new technology and efficient operation keep NOx emissions at a similarly low level. CO2 emissions in 2014

totalled 5,442 tonnes, with NOx emissions at 258 tonnes. CO2 and NOx emissions were a little lower in 2013, but we are now down to such a low level that even small production fluctuations and technical events will make a difference, as reflected in the difference between the 2013 and 2014 figures.

Using wood pellets as fuel Biofuels such as wood pellets and chips are CO2-neutral and are therefore very important to Verdo. For instance, we bought 'energy wood' in 2014 - exhausted rubber trees in Ghana that have

been felled - shipped it to Denmark and used it as fuel at our CHP plant in Randers.

That makes electricity and heat production greener. We used 184,430 tonnes of wood chips in 2014.

Energy savings Energy companies are obliged to realise energy savings for the end-users.

Verdo ensures that energy savings (kWh) achieved are reported annually to the Danish Energy Agency. Our energy savings are realised through Verdo Energy Consultancy,

Measurement parameter CO2 emissions NOx emissions The CO2 figures are from the CHP plant and peak load management centres in Randers. The NOx and wood chip figures are for the CHP plant in Randers only.

16

ANNUAL REPORT 2014 2013

Use of wood chips Kilowatt hours produced by green energy Energy savings Electric cars

which specialises in finding savings for private customers, public sector organisations and private sector businesses. We have also achieved savings within our own grid, totalling 26,533,551 kWh in 2014.

2014

2013

2012

5,442 tonnes

4,176 tonnes

801 tonnes

257,658 kg

306,890 kg

288,476 kg

184,430 tonnes

206,838 tonnes

208,991 tonnes

149,791,977 kWh

176,368,371 kWh

176,104,873 kWh

26,533,551 kWh

21,276,000 kWh

21,555,000 kWh

3

3

3

CSR - FOCUS AREAS

We publish our results

Occupational accidents We place a lot of emphasis at Verdo on reducing the number of occupational accidents, e.g. by registering potentially hazardous incidents and preventive activities. We also constantly monitor working environment quality via workplace evaluations. The Danish Verdo subsidiaries registered 4 occupational accidents and 97 near-accidents in 2014. Accidents in 2014 led to a total of 8 days of sick leave.

We publish a number of measurable CSR activities in the annual accounts, along with the group's other key figures. That clearly indicates that there is a relationship between CSR and good business practices at Verdo.

Several of our CSR programmes are in the public interest, and are promoted via the media.

Others are promoted via internal communication such as the intranet, creating internal pride amongst the workforce.

High performance teams We started the process of developing high performance teams in 2014 led by individual managers. The objective is for each team to develop into a 'high performance team'.

One of the important things in this process

is that every team perceives the experience of development as something positive. The team managers are supported via a buddy scheme already in place.

Measurement parameter

2014

2013

2012

Occupational accidents/near ­accidents

4/97

6/70

10/37

Verdo started the process of developing 'high performance teams' within the group in 2014 instead of measuring employee satisfaction this year.

Verdo measures satisfaction levels every two years. There are therefore no new figures for 2013. A range of measures have been implemented in 2013 based on survey responses from 2012.

Response by%: 95 Loyal: 80 Relationships: 84 Commitment: 89

Employee Satisfaction

ANNUAL REPORT 2014 2013

17

VERDO GENERATION

New activities in production 2014 will be remembered as a warm year with record low electricity prices, making the market for electricity and heat production a difficult one. Nevertheless, we were satisfied with the performance of our plants in Randers and Grenaa, despite having to close the latter down in the summer when we could not compete economically with local photovoltaic electricity production. Our contract to supply energy in Grenaa expires in 2017 and we are looking at ways of finding the best solution for the town and our customers moving forward.

Revenue from selling expertise We offer our expertise within asset management, automation, biofuels and transformer services to such customers as heat and power generators and process industry to meet the growing requirements for technology and from regulations. This is a source of revenue for us to exploit based on

our know-how, customer focus and an open market, for which we have set a target of 20 customers and five partnerships by 2017 for operation, maintenance and project management contracts.

Verdo Hydrogen Despite hitting production targets for the fifth year in a row, demand has been disappointing and therefore results are under budget. We will focus on business development, increasing efficiency and reducing maintenance costs in 2015.

VERDO GENERATION Amounts in TDKK

2014

2013

348,276

417,429

61,047

71,682

6,253

15,794

Investments

20,252

26,006

Equity

51,865

70,500

Turnover EBITDA Operating profit or loss

Verdo is determined to be the greenest, most efficient energy provider in Denmark, which is why we now overwhelmingly burn biofuels at our CHP plant in Randers. We do so for the sake of the future and because it makes financial sense. Concurrent production of heat and electricity is green common sense, because it makes maximum use of the fuel burned. And given the location of the plant on the harbour, we ensure the most efficient transport of the 240,000 tons of biomass we use every year – to the benefit of our finances and the environment.

Henrik Bøgh Nielsen Divisional Director Verdo Generation

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ANNUAL REPORT 2014

VERDO TRADING

Verdo’s trading division specialises in special carbon and biofuels. We are one of the biggest in Europe within various types of biomass including wood, nut shells and olive pits – some of the most important sustainable fuels of the future.

We also deal in coal, oil and CO2. We believe in strong relationships with customers and suppliers along with long-term planning according to demand and risks. We utilise our skills within procurement, shipping, contracting and product development to become a preferred supplier.

Thomas Bornerup Divisional Director Verdo Trading

Record temperatures gave problems Record temperatures in 2014 affected biomass sales throughout the world – not least in Europe. Higher supply than demand throughout most of 2014 affected not only our turnover, but also our bottom line, not least because of higher warehousing costs than budgeted.

GF Verdo in Holland GF Verdo’s results from wood pellet sales were unsatisfactory as a result of tough market conditions compounded by problems with distribution and warehousing. The unsatisfactory results and consequent amortisation of goodwill were a major contribution to the drop in profits for Verdo Trading as a whole.

High quality Heatlets This was the year we introduced Heatlets, our own pellet brand, in two varieties – Standard and Premium - sold online in Denmark via www.heatlets.dk and soon also available in the UK. Ghana project closed down, but new ­opportunities will arise Our import of chips from rubber trees taken out of production created lots of jobs in Ghana and Denmark but came to an end in 2014. Encour-

aged by its success, we continue to seek new sources of similar fuels able to provide secure supplies, competitive prices and high quality.

Carbon Partners buoyant Carbon Partners did well despite a difficult market with a successful change of management. We expect more growth in the USA, Middle East and Asia through closer working relationships and new partnerships. Trading in coal suffered from a drop in prices and consumption but overall, we are satisfied with the result.

Green focus and more jobs The biomass market continues to grow and we will focus even more on bioenergy and technical carbon in 2015. The strong dollar also makes it viable to sell fuels to power stations from European suppliers and we expect to gain new customers at home and abroad for high quality sustainable bioenergy, including Heatlets.

VERDO TRADING Amounts in TDKK

2014

2013

1,159,507

1,449,246

EBITDA

22,427

36,168

Operating profit or loss

-1,123

19,318

1,458

2,304

193,899

211,414

Turnover

Investments Equity

ANNUAL REPORT 2014

19

VERDO RENEWABLES

20

ANNUAL REPORT 2014

VERDO RENEWABLES

Green growth in the UK

Demand and prices continued to rise and both factories were in operation all year round in 2014, taking us into profit for the first time in December. The use of wood pellets is still low in the UK compared to Denmark, but almost doubles each year thanks to government incentives and there is vast potential. We want to be a major supplier, and our products are now available via no less than 500 retailers plus direct sales.

New distribution centre We successfully opened our first distribution centre for pellets imported via Verdo Energy and have expanded our sales team, but need to be aware of the fact that the price of oil has dropped, making it cheaper than pellets for the first time ever. 2015 will see us focusing more on rationalisation via such measures as improv-

ing our drying facilities to cut cost, increasing warehousing capacity and looking at other means of distribution for outlying areas.

Election with impact on green energy The British economy is healthy and growing but the general election in May can have an impact on green energy. Verdo Renewables has joined forces with customers and the rest of the industry to lobby the various parties to ensure that the new government will maintain the ‘Renewable Heat Incentive’ scheme into 2016.

VERDO RENEWABLES LTD. Amounts in TDKK

2014

2013

Turnover

139,967

112,117

EBITDA

-17,817

-23,499

Operating profit or loss

-26,654

-36,225

3,215

7,402

139,883

160,188

Investments Equity

Verdo Renewables’ main activity is the production and distribution of biomass-based fuels primarily in the UK. We produce wood pellets and briquettes at two factories in Scotland and England respectively with head office just south of London. We sell and provide consultancy within sustainable energy solutions based on biomass designed to help decrease climate change.

Richard Smith Divisional Director Verdo Renewables

ANNUAL REPORT 2014

21

22

ANNUAL REPORT 2014

INCOME STATEMENT

GROUP

PARENT COMPANY 2014

2013

2014

2013

DKK

TDKK

DKK

TDKK

Net turnover

2,122,901,915

2,405,028

80,000,834

76,670

Cost of raw products and auxiliary materials

1,543,882,432

1,843,315

850,776

598

Other external costs

125,250,243

108,048

40,646,034

38,882

Total external costs

1,669,132,675

1,951,363

41,496,810

39,480

Gross profit

453,769,240

453,665

38,504,024

37,190

Staff costs

216,503,988

219,276

37,912,132

38,824

Result before depreciation (EBITDA)

237,265,252

234,389

591,892

-1,634

Depreciation and amortisation of intangible and tangible assets

155,103,298

139,270

6,476,190

6,754

82,161,954

95,119

-5,884,298

-8,388

Operating profit or loss

Income from equity investments in associated companies Income from other equity investments Gains from partial sale of subsidiary Financial expenses for associated companies

0

0

1,575,164

16,362

-21,559

-997

0

-1,300

6,236,377

0

6,236,377

0 28,877

0

0

29,925,042

2,207,815

3,421

1,701,118

2,317

Other financial expenses

-56,981,352

-64,990

-8,164,995

-7,621

Total financial items

-48,558,719

-62,566

31,272,706

38,635

33,603,235

32,553

25,388,408

30,247

9,044,604

7,320

1,064,069

5,185

Group profit for the year Of which minority interests

24,558,631 234,292

25,233 171

24,324,339 0

25,062 0

Profit for the year

24,324,339

25,062

24,324,339

25,062

Other financial income

Pre-tax profit Tax on profit

Profit for the year is proposed transferred to equity as profit carried forward and reserve for net appreciation according to the equity value method.

ANNUAL REPORT 2014

23

BALANCE SHEET

ASSETS

PARENT COMPANY 31.12.14

31.12.13

31.12.14

31/12/2013

DKK

TDKK

DKK

TDKK

Goodwill

31,416,794

40,561

0

0

Total intangible assets

31,416,794

40,561

0

0

Property and buildings

171,041,505

174,374

100,509,373

100,618

CHP plant and peak load stations

471,209,006

485,526

0

0

1,575,517,794

1,573,070

0

0

251,589,576

238,475

29,894,833

8,377

22,454,798

28,123

5,054,389

14,469

2,491,812,679

2,499,568

135,458,595

123,464

Distribution systems and installation as well as meters Operating material Tangible assets under construction Total tangible assets

Equity investment in associated companies

0

0

1,460,089,882

1,506,558

4,080,208

4,029

0

0

Other securities and equity investment

19,841,132

19,863

0

0

Total financial assets

23,921,340

23,892

1,460,089,882

1,506,558

2,547,150,813

2,564,021

1,595,548,477

1,630,022

224,311,680

172,053

72,395

81

693,722

690

0

0

Total stocks

225,005,402

172,743

72,395

81

Receivables from sales and services

239,407,565

301,185

2,246,654

1,310

Other receivables

Total Raw products and auxiliary materials Prepayment for products

Current contract work

14,390,068

13,949

0

0

Receivables

96,281,219

110,001

0

0

Receivables from associated companies

0

0

824,720,541

773,177

Equity loan

0

0

510,000,000

510,000

Deferred tax assets

76,918,425

64,456

1,667,000

13,480

Other receivables

72,452,721

47,599

18,378,885

6,385

Prepaid expenses

9,256,884

12,307

2,260,897

3,373

Total receivables

508,706,882

549,497

1,359,273,977

1,307,725

14,755,624

66,936

1,206,651

909

748,467,908

789,176

1,360,553,023

1,308,715

3,295,618,721

3,353,197

2,956,101,500

2,938,737

Cash Total current assets Total assets

24

GROUP

ANNUAL REPORT 2014

BALANCE SHEET

LIABILITIES

Share capital Revaluation reserves Reserve for net revaluation following the equity value method

GROUP

PARENT COMPANY 31.12.14

31/12/2013

31.12.14

31/12/2013

DKK

TDKK

DKK

TDKK

263,024,000

263,024

263,024,000

263,024

53,959,135

53,959

0

0

0

0

51,053,474

89,749

-143,036,221

-102,467

-55,729,564

-46,128

Retained earnings

1,130,266,116

1,094,083

1,045,865,120

1,001,954

Total equity

1,304,213,030

1,308,599

1,304,213,030

1,308,599

Minority interests

15,027,454

3,964

0

0

Reserves for pensions

53,550,000

57,600

0

0

4,000,000

10,328

0

6,328

57,550,000

67,928

0

6,328

Debt to mortgage credit institute

357,023,346

363,488

55,005,303

42,797

Other credit institutes

190,534,139

207,707

188,633,055

205,395

15,047,456

18,057

0

0

Investment contribution, accrual basis of accounting

149,543,366

146,777

0

0

Total long-term debt

712,148,307

736,029

243,638,358

248,192

Net adjustment, hedging instruments

Other deferrals Total provisions

Other debt

Long-term debts due within 1 year Other credit institutes Debt to associated companies

46,395,575

46,812

17,997,000

16,257

701,956,313

735,177

629,674,424

647,195

0

0

664,598,295

634,114

151,120,577

200,538

4,359,029

4,126

Pre-paid current work

1,782,174

1,773

0

0

Company tax

7,849,498

0

2,980,048

0

285,978,163

248,878

88,641,316

73,926

11,597,630

3,499

0

0

Total short-term debt

1,206,679,930

1,236,677

1,408,250,112

1,375,618

Total debt

1,918,828,237

1,972,706

1,651,888,470

1,623,810

Total liabilities

3,295,618,721

3,353,197

2,956,101,500

2,938,737

Suppliers of products and services

Other debt Accrued income

Uncertainty in recognition and measurement Contingent liabilities Security Contractual obligations Related parties Ownership Adjustments in cash flow statement Information about segments

ANNUAL REPORT 2014

25

CASH FLOW STATEMENT

GROUP 2014

2013

DKK

TDKK

Group profit

24,324,339

25,062

Adjustments

205,042,836

196,498

Received interest income and similar income

2,207,815

3,421

Paid interest expenses and similar expenses

-56,981,352

-64,990

-6,454,689

-5,842

168,138,949

154,149

Paid company tax Operating income adjusted for non-cash items Change in working capital Stocks

-52,262,066

2,611

72,081,108

-22,975

-49,417,144

16,095

-2,452,146

-5,986

Operation’s cash flow

136,088,701

143,894

Acquisition of tangible assets

-129,579,744

-117,681

5,024,572

-10,448

Purchase of associated companies/paid earn out

-5,889,418

-10,828

Long-term receivables

-1,788,758

-552

Sale of financial assets

0

2,626

2,289,720

3,709

-129,943,628

-133,174

6,145,073

10,720

573,193

1,376

Receivable Suppliers of products and services Other operation derived debt

Installation under construction

Sale of intangible and tangible assets Investments´ cash flow Total cash flow from operations and investments

Financial leasing contracts Conversion of mortgage loan, net

14,491,591

0

Instalment payments of long-term loan

-40,170,054

-39,875

Financing cash flow

-25,105,270

-38,499

Total cash flow for the year Cash at bank and in hand at the beginning of the year Cash at bank and in hand at the beginning of the year, purchased companies Cash at bank and in hand at the end of the year

-18,960,197

-27,779

-668,240,492

-635,421

0

-5,041

-687,200,689

-668,241

Cash at bank and in hand at the end of the year is specified thus: Cash at bank and in hand

14,755,624

66,936

Short-term bank and savings bank debt

-701,956,313

-735,177

Total

-687,200,689

-668,241

The cash flow statement cannot be derived from the consolidated balance sheet.

26

ANNUAL REPORT 2014

CASH FLOW STATEMENT

COMPANY DETAILS Verdo A/S Agerskellet 7 8920 Randers NV Tel. +45 8911 4811 Fax +45 8911 4800 Domicile: Randers CBR no.: 25 48 19 68 info@verdo.dk www.verdo.dk

COLOPHONE Editor: Iglin Margrethe I. Tanggaard Verdo A/S Print run: 1,000 Photos: David Bering and Verdo A/S Production: This brochure was printed using vegetable coloured inks on Munken Polar paper at a Swan ecolabel-approved printworks.

The paper originates from FSCÂŽ certified, sustainable forestry, which protects nature and its flora and fauna plus the people working in the forest, and from other controlled sources.

ANNUAL REPORT 2014

27

VERDO

|

Agerskellet 7

|

8920 Randers NV

|

Tel. +45 8911 4811

|

info@verdo.dk