Annual Report 2019

Corporate Governance Statement 2019

1 Corporate Governance

Pohjolan Voima Oyj and its subsidiaries form the Pohjolan Voima Group. Registered office of the Group’s parent company, Pohjolan Voima Oyj, is Helsinki, Finland. Pohjolan Voima Oyj is a public limited liability company. Under its articles of association, the company acquires energy for its shareholders and engages in other related activities. The company also may own shares and assets as are required or necessary for carrying on its business.

According to the articles of association, Pohjolan Voima supplies energy to its shareholders at cost price (the Mankala principle), i.e. Pohjolan Voima delivers the energy it has produced or acquired to its shareholders in proportion to their ownership of each series of shares. Each shareholder of the series of shares in question is responsible for the annual variable and fixed costs defined in more detail in the articles of association. The parent company’s administration costs are covered by charging them as part of the fixed annual costs in a manner specified in more detail in the corporate documents.

According to the articles of association, the liability of each shareholder for the annual costs is always limited to the amount corresponding to the proportion of their shareholdings in all the shares in the series in question, and the failure of any other shareholder to satisfy the responsibilities of the shareholder for costs in proportion to the shareholder’s shareholding shall not increase any non-defaulting shareholder’s liability. The shareholders are responsible for the costs defined in Clause 4 of the articles of association.

Pohjolan Voima Oyj’s General Meeting issues directives to the Board of Directors on the composition of the Boards of Directors of the subsidiaries and, if necessary, certain decisions by the subsidiaries. The parent company’s Board of Directors and the Corporate Executive Team discuss the main principles of the Group’s operations. The parent company participates in the management and supervision of its subsidiaries and affiliated companies through its representatives appointed to the governing bodies of these companies. The Group's subsidiaries and affiliated companies have their own governing bodies as well as some task forces and corporate documents.

Pohjolan Voima’s governance is based on legislation and its corporate documents. As an unlisted public limited liability company, Pohjolan Voima is under no obligation to comply with the Corporate Governance Code. According to the Securities Markets Act the issuer of a security subject to public trading must provide a corporate governance statement in its annual report or separately.

2 Annual General Meeting

The General Meeting is the company’s highest decision-making body. The Annual General Meeting of Shareholders decides on statutory matters, elects the members of the Board of Directors, in accordance with the procedure specified in the corporate documents, confirms the fees of Board members and names an auditor. Furthermore, the annual general meeting issues binding directives to the Board of Directors regarding the elections of the ordinary and deputy members of the Boards of the subsidiaries. If necessary, the Annual General Meeting also issues binding directives to the Board on major investments of the subsidiaries and the other matters specified in the articles of association.

Any Extraordinary General Meeting decides on the matters for which the meeting has been convened at any given time.

The Annual General Meeting must be held annually by the end of June. An invitation to the annual general meeting will be sent to the shareholders at the earliest four weeks and at latest two weeks before the meeting.

Pohjolan Voima’s Annual General Meeting was held on 21 March 2019. The Annual General Meeting approved the financial statements of Pohjolan Voima Oyj for 2018, discharged the members of the Board of Directors and the President and CEO from liability, as well as elected ordinary and deputy Board members for the new term.

3 Board of Directors

Composition of the Board of Directors

The members of the Board of Directors are elected annually at the General Meeting of Shareholders. According to the Articles of Association, the Board consists of a minimum of five and a maximum of 13 ordinary members. Personal deputies for the Board members may be named. The annual general meeting of 21 March 2019 elected nine Board members and their personal deputy members. The elected Board members with their consent were CFO Tapio Korpeinen, CFO Seppo Parvi, Group General Councel Jukka Hakkila, Head of Finance & Control and Strategy Tomi Sederholm, Managing Director Anders Renvall, CEO Esa Kaikkonen, President and CEO Rami Vuola, Category Manager Energy Mikael Surakka and CEO Mikko Rintamäki.

From 1 January to 21 March 2019, the Board consisted of Tapio Korpeinen (chair), Seppo Parvi, Jukka Hakkila, Anders Renvall, Tapani Sointu, Esa Kaikkonen, Rami Vuola, Heikki Liukas and Patrick Wackström.

In its organising meeting, the Board elected Tapio Korpeinen as the chair and Seppo Parvi as the vice chair. Tiina Nyström, General Counsel, Executive Vice President, was elected as the secretary.

All of the Board members are independent of the company. The Board members do not own any shares of the company.

The procedure for the election and organisation of the Board is specified in detail in the corporate documents. The chair of the Board is named by the company’s largest shareholder and the vice chair by the second largest shareholder. The President & CEO is not a member of the Board of Directors.

Duties of the Board of Directors

The Board is responsible for the oversight and control of the company and the appropriate arrangement of the company’s administration and operations. Furthermore, the Board must ensure that the company’s accounting and financial controls are properly arranged. The Board discusses and approves Pohjolan Voima’s Code of Conduct, as well as corporate responsibility and risk management policies.

The Board is obligated to promote interests of the company and all shareholders. The Board members do not represent the parties that proposed them as Board members.

The Board of Directors´ Charter defines its main duties and operating principles in more detail.

In order to perform its duties, the Board does the following, for example:

  • Appoints the President and CEO, supervises the executive management
  • Decides on the Group’s strategy
  • Decides on the Group’s financing
  • Decides on the Group’s budget and action plan
  • Decides on remuneration system principles and approves the employment contract and other benefits of the President and CEO, unless it has authorised the Chairman of the Board or the Remuneration and Nomination Committee to make these decisions
  • Appoints committee members
  • Appoints members of task forces and workgroup
  • Approves policies and other guidelines which create the basis for the management system and internal control, as well as set limits and guide and monitor operations of the subsidiaries
  • Approves the charters of committees and workgroups
  • Supervises the Group’s risk management
  • Compiles the Report of the Board of Directors and approves the financial statements
  • Approves interim reports
  • Supervises the operations of the subsidiaries
  • Approves the charge for the fixed costs for each series of shares and other basis for share-holder invoicing
  • Summons the general meeting
  • Approves investments, acquisitions and property transactions in accordance with the corporate documents, unless the President and CEO has been authorised to make these decisions
  • Resolves upon the taking of credits and the giving of guarantees or other securities

The Board compiles an annual assessment of its own performance.

The Annual General Meeting makes decisions on the remuneration of Board and Committee members, as well as on their basis. In 2019, the remuneration paid to ordinary and deputy Board members totalled EUR 462,000.

The Board of Directors convened 14 times in 2019. On average, 99 percent of the members were present at the meetings.

Committees of the Board of Directors

To ensure that the issues within the responsibility of the Board of Directors are handled as efficiently as possible, the Board has appointed an Audit and Finance Committee and a Remuneration and Nomination Committee, each assisting and reporting to the Board of Directors and consisting of at least three members of the Board. The Board of Directors chooses the members of the Committees annually from among its members, appoints the chairs of the committees and approves their charters.

Remuneration and Nomination Committee

The Remuneration and Nomination Committee deals with matters concerning nomination and remuneration in general, the remuneration systems for the Corporate Executive Team and employees, and the committee may deal with proposals to be submitted to the Annual General Meeting regarding the nomination and remuneration of the members of the Board.

After the 2019 annual general meeting, the Board nominated Tapio Korpeinen as the chair of the Remuneration and Nomination Committee and Seppo Parvi and Anders Renvall as the other members of the committee. The Remuneration and Nomination Committee convened five times in 2019. The attendance rate at the meetings was 100 percent.

Audit and Finance Committee

The Audit and Finance Committee provides assistance to the in monitoring and evaluating the finance, financial reporting, control, and audit.

In addition, the committee prepares a recommendation for the election of the auditor and monitors the independence of the auditor.

After the 2019 annual general meeting, the Board nominated Toni Sederholm as the chair of the Audit and Financing Committee and Rami Vuola and Jukka Hakkila as the other members of the committee. From 1 January to 21 March 2019, Tapani Sointu acted as the chair of the Audit and Financing Committee, and Rami Vuola and Jukka Hakkila as the other members of the committee.

The committee convened thirteen times in 2019. The attendance percentage at the meetings was 95 percent.

In addition to the Committees of the Board of Directors, the Board can name task forces or workgroups to assist the Board and senior management. The Board confirms the duties and operating principles of task forces and workgroups.

4 President and CEO

The Board nominates the President and CEO. According to the Limited Liability Companies Act, the CEO is responsible for the day-to-day management in accordance with the instructions and regulations issued by the Board of Directors. The CEO is responsible for ensuring that the company's accounting is in compliance with the law and that the financial management is organised in a reliable manner. The CEO gives the Board and its members sufficient information for the performance of the Board's duties and implements the Board's decisions.

Pohjolan Voima Oyj’s current President and CEO is Ilkka Tykkyläinen.

5 Corporate Executive Team

The Corporate Executive Team assists the President and CEO in operational management. Members of the Corporate Executive Team report directly to the President and CEO. In 2019, the Corporate Executive Team consisted of the President and CEO, Minna Laakso, Petri Hurri, Riitta Larnimaa, Tiina Nyström and Pertti Pietinen.

6 Remuneration

The Remuneration and Nomination Committee approves the company’s remuneration systems. Incentive bonuses of the Corporate Executive Team are based on a long-term remuneration system and the criteria determined in it. The incentive scheme does not include shares or any derivatives.

The members of the Board of Directors, the President and CEO or other members of the company's management do not own the company's shares.

7 Related party adminstration

Pohjolan Voima maintains a list of related parties. The purpose of the list is to help identify transactions with a party that is considered a related party of Pohjolan Voima Oyj. The company monitors annually the related parties and assesses possible changes to its related parties. The company's related party acquirement process ensures that relevant information is included in the financial statements.

In spring 2019 the company conducted a separate inquiry to the management of their related party companies. The Board of Directors always decides on the possible transactions with the management of Pohjolan Voima Oyj and its related parties.

8 Internal control

The Board of Directors and the management are responsible for the company´s internal control system. The purpose of internal control and risk management is to ensure the efficiency and effectivity of the operations, the reliability of information, as well as compliance with the regulations and operating principles. Pohjolan Voima's governance and internal control system are based on the Articles of Association, Shareholders' Agreement as well as the Code of Conduct and other company policies, approved by the Board of Directors.

9 Financial control and reporting

The objective of internal control related to the financial reporting process is to ensure that the management has reliable, up-to-date information to help in decision-making and that the financial statements and interim reports are prepared in compliance with laws and regulations.

Pohjolan Voima Oyj complies with the International Financial Reporting Standards (IFRS) that have been approved for the EU and the requirements set for companies that have listed a bond to public trading.

In accordance with its approved charter, the Audit and Finance Committee is responsible for assisting the Board of Directors in monitoring the financial status of the company, the Group and its parts, in monitoring and evaluating the financial reporting system, accounting and financial management, the efficiency of internal control and risk management system, in monitoring the internal audit and the financial audit process, and the implementation of changes in accounting practices.

Group Finance is responsible for reporting interim reports and statutory financial statements for Pohjolan Voima Oyj and its Group companies, as well as monthly reports, profit estimates and analyses. Named business controllers review the companies’ financial status and prepare monthly internal company-level reports. The companies’ financial reporting is regularly monitored by the Boards of the companies.

In general, shared systems are used for reporting. A service provider handles the financial administration, accounting and ledger processes in compliance with described subprocesses, agreed principles, agreed roles and responsibilities and defined controls. Development of the financial reporting processes and control systems is a continuous activity.

The separate financial statements of the parent company and other Group companies follow Finnish accounting practice. Adjustments to the income statements and balance sheets reported by individual Group companies are made in Group accounting in order to comply with the accounting policies of the Group (IFRS). Consistency is ensured by reconciliation. A quarterly report on the parent company’s financial development is submitted to the Board of Directors. The consolidated IFRS financial statements are reported to the Board twice a year.

The decision-making order for expenses, investments and financial commitments is determined in the corporate documents, and approval rights are determined in stages for the different organisational levels in the policy approved by the Board. Most significant decisions are submitted separately to the Board of the individual Group company and to the Board of the parent company for approval.

10 Risk management

Risk management is a continuous process of analysing and managing threats and opportunities faced by the company in its efforts to achieve its goals, and to ensure the continuity of the business. The key principles of risk management are defined in the Pohjolan Voima Group Risk Management policy. Subsidiaries and Group functions are responsible for their own risk management and associated reporting. The management reporting on the comprehensive risk circumstances to the Board is linked to the strategy and long-term planning process. The Board of Directors oversees the reporting on risk exposures, risk management activities and results related to the company's strategy and operations.

11 Internal audit

The operating principles of Pohjolan Voima internal audit have been defined in the audit charter approved by the Board of Directors. Internal audit assists the company in achieving its objectives by providing a systematic approach to evaluate and improve governance processes, risk management and internal control. In addition, internal audit manages the reporting procedure for suspected misconduct according to a specified procedure. Internal audit reports functionally under the Audit and Finance Committee and reports summaries of its plans and findings to the Pohjolan Voima's Board of Directors.

12 Insider administration

 Pohjolan Voima Oyj follows the EU's Market Abuse Regulation, Finland's Securities Market Act, the guidelines and regulations of authorities and the Guidelines for Insiders of Listed Companies issued by Nasdaq Helsinki Ltd. The Board of Directors has approved of a policy that sets responsible persons for the actions of insider administration and the guidelines for the insider administration, and for persons involved in insider projects as well as management and their closely associated persons.

As an issuer of bonds, Pohjolan Voima Oyj, in accordance with the Market Abuse Regulation, maintains project specific insider lists on persons who work for the company on the basis of an employment contract or other contract and, either regularly or irregularly, receive insider information directly or indirectly related to the issuer. Rules for the processing of insider information have been prepared and Group General Councel is responsible for maintaining and updating them. Creating and maintaining the insider lists is the responsibility of the Company's legal affairs department. Group General Councel nominates the person responsible for managing the insider lists and his/her substitute.

13 Disclosure policy for investors

The Board of Directors of the parent company has adopted a Disclosure Policy for Investors. Pohjolan Voima has a duty to disclose information on a regular and continuous basis. The company’s communication objective is to provide, without undue delay, correct and relevant information to the investors and other market players on the company's operations, operating environment, strategy, goals, and financial situation. Stock exchange releases issued by Pohjolan Voima Oyj are approved by the company’s President and CEO, the Chairman of the Board or persons authorised by them.

14 Auditing and auditor

The principal task of statutory audit is to verify that the financial statements give true and fair view on the Group's results and financial position. The Audit and Finance Committee prepares the election process of the auditors and gives its recommendation to the Board of Directors. The Board makes a proposal of the election of the auditor to the shareholders in the Annual General Meeting. The Annual General Meeting annually appoints one auditor. The auditor must be an audit firm approved by the Finnish Chambers of Commerce.

In 2019, the annual general meeting elected PricewaterhouseCoopers Oy, authorised public accountants, as the Company´s auditor, with Jouko Malinen, Authorised Public Accountant, acting as a principal auditor.

In 2019, the auditor (PwC) received EUR 189,000 as auditing fees, as well as EUR 19,000 for other services.