WE IMPACT 
LIVES. POSITIVELY.

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CONTENT

INTRODUCTION

TRANSMITTING POSITIVE ENERGY IN THE LOCAL ENVIRONMENT

As the Slovenian electric power transmission network system operator we provide safe, reliable and continued transmission of energy 24/7. We co-create the energy future of Slovenia by maintaining, planning, building and modernising the transmission network to satisfy the increasing needs for electric power. Local communities are also our strategic partners. We are aware of the importance of our collaboration; therefore, we build trust by enforcing honest and consistent communication.

INTRODUCTION

THE CHIEF EXECUTIVE OFFICER’S ADDRESS

IMPORTANT INVESTMENTS LIE AHEAD OF ELES

The year of 2016 was marked by successes in terms of formulation and implementation of international projects in the field of smart grids, a 110 kV grid takeover and the renewal of the concession for a public economic service as the electricity system operator.

The Government of the Republic of Slovenia approved this Long-term Strategic Business Plan for ELES for the first time, and thus added weight to the strategic document. The Government of the Republic of Slovenia awarded ELES a 50-year concession for public economic service – transmission system operator of the electric power network. By signing the concession agreement the Republic of Slovenia and ELES regulated all interrelations according to the Energy Policy Act and the Concession Act, the Concession Contracts Regulation, and the method of implementation of how the public economic service – transmission system operator of the electric power network. At the end of the year the government of the Republic of Slovenia adopted the decision for transforming ELES from a public enterprise to a corporate entity.

For at least the next 50 years ELES will therefore be responsible for: stable operation of the transmission system, and guaranteeing reliable and secure operation of the electricity system in Slovenia.

We have come to the conclusion, that the challenges ahead in the production of energy from renewable energy sources, such as the sun and wind, for the transmission network are most easily addressed with innovations in the field of smart grids. Therefore, one of the strategic objectives in the Long-term Strategic Business Plan of 2016-2020 was to invest in smart grids. We started searching for partners abroad with whom we outlined a few important projects:

The upcoming years will bring many challenges for ELES. I am full of confidence that together with co-workers who are experts in their respective fields, we will successfully overcome them and fulfil the objectives set in the 2016-2020 Long-term Strategic Business Plan.

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The year of 2016 was marked by successesin terms of formulation and implementation of international projects in the field of smart grids, a 110 kV grid takeover and the renewal of the concession for a publiceconomic service as the electricity system operator.

The guidelines for ELES’ 2016 operation were already set at the end of 2015 when the preparations for the Long-term Strategic Business Plan for the 2016-2020 period were finished. The Government of the Republic of Slovenia approved this Long-term Strategic Business Plan for ELES for the first time, and thus added weight to the strategic document. The Government of the Republic of Slovenia awarded ELES a 50-year concession for public economic service – transmission system operator of the electric power network. By signing the concession agreement the Republic of Slovenia and ELES regulated all interrelations according to the Energy Policy Act and the Concession Act, the Concession Contracts Regulation, and the method of implementation of how the public economic service – transmission system operator of the electric power network. At the end of the year the government of the Republic of Slovenia adopted the decision for transforming ELES from a public enterprise to a corporate entity. For at least the next 50 years ELES will therefore be responsible for: stable operation of the transmission system, and guaranteeing reliable and secure operation of the electricity system in Slovenia.

DESPITE THE UNFAVOURABLE SITUATION OF THE ENERGY SUPPLY MARKET, ELES WAS OPERATED IN A SUCCESSFUL MANNER

V spremenljivih razmerah na področju elektroenergetike smo tudi v letu 2016 poslovali uspešno. Imeli smo 163,7 milijona evrov celotnih prihodkov, ki so bili za 7 % višji kot v preteklem letu in dva odstotka nižji, kot je bilo načrtovano. Celotnih odhodkov smo v letu 2016 imeli za 151,4 milijona evrov. Največji strošek v letu 2016 so predstavljali stroški zakupa sistemskih storitev, ki so znašali 43,3 milijona evrov ali kar 46 % vseh prihodkov, ki jih družba ELES zaračuna za uporabo prenosnega omrežja slovenskim končnim porabnikom. Poslovni izid pred obdavčitvijo je znašal 12,3 milijona evrov, po upoštevanih odloženih davkih pa smo beležili čisti poslovni izid v višini 12,6 milijona evrov.

Ker se zavedamo vpliva, ki ga imajo lahko neprepoznana tveganja na poslovanje družbe, smo v letu 2016 ponovno posodobili katalog tveganj. V krovni strukturi tveganj smo prepoznali 22 glavnih skupin tveganj, znotraj posameznih skupin prepoznana tveganja smo ocenili in zanje predlagali preventivne, blažilne ukrepe ter določili roke za njihovo izvedbo.

V družbi ELES vemo, kakšen pomen ima opravljanje naše dejavnosti za celotno slovensko družbo in kakšen je pomen naše infrastrukture, ki je uvrščena na seznam kritične infrastrukture državnega pomena, zato smo pri opravljanju dela še zlasti odgovorni. Prizadevamo si, da razvoj in napredek družbe ELES gradimo na temeljih odgovornega odnosa do lastnika, Republike Slovenije, doseganja poslovne odličnosti, skrbi za okolje ter odgovornosti do zaposlenih in družbenega okolja, v katerem delujemo.

WE DEVELOPED INTERNATIONAL PROJECTS

We have come to the conclusion, that the challenges ahead in the production of energy from renewable energy sources, such as the sun and wind, for the transmission network are most easily addressed with innovations in the field of smart grids. Therefore, one of the strategic objectives in the Long-term Strategic Business Plan of 2016-2020 was to invest in smart grids. We started searching for partners abroad with whom we outlined a few important projects. In January, work on the MIGRATE project started. The main question we have to address here is, what mass integration of production sources based on power electronics will bring to our operations? In February, work started on implementation of the FutureFlow project in the field of smart grids. In October, an agreement was signed of joint coordination of Slovenian and Croatian partners, SODO, HOPS, and HEP-ODS companies, under the international SINCRO.GRID project. The project was later prepared for the tender for the absorption of funds of the Connecting Europe Facility programme. In November, as part of the Slovenian-Japanese partnership (Project NEDO), an agreement of memorandum with the NEDO organisation, and an implementation contract with Hitachi were signed. The conclusion of the contract formally represents the start of the project that will put to the test advanced new technologies and solutions in the field of existing smart grids, and will also contribute to the establishment of a fully integrated concept of a smart grid in Slovenia.

IMPORTANT INVESTMENTS LIE AHEAD OF ELES

In 2017 ELES plans net sales revenue in the amount of EUR 150.7 million, and net profit for the accounting period in the amount of EUR 16.3 million. We will achieve the set business goals if we take into account the adopted guidelines, and if there are no unforeseen events.As far investments are concerned, the highest amount of assets will be provided for both investments and reconstruction. Large scale investments include smart grid investments (NEDO, SINCRO.GRID), construction of the ELES technological hub in Beričevo, reconstruction of the Pekre substation, and upgrading and reconstruction of the Divača substation switchyard. All investments are of big significance for the Company’s operations and will account for better reliability of the energy power transmission.In ELES we eagerly await the results of the last tender for the Horizon 2020 programme ending on February 14, where ELES took part as a partner in five applications.The upcoming years will bring many challenges for ELES. I am full of confidence that together with co-workers who are experts in their respective fields, we will successfully overcome them and fulfil the objectives set in the 2016-2020 Long-term Strategic Business Plan.

Ljubljana, 17. 5. 2017

ELES, d.o.o.
Chief Executive Officer
Aleksander Mervar; MSc

Transmission network is planned according to sustainable development principles for the preservation of the natural environment. We are also aware of the significance of codependency of man and nature. This is a responsibility that we wish to carry on to the next generations, thus we encourage activities building the philosophy of symbiosis, help and the concern for others.

OPERATION HIGHLIGHTS

01

We are a proud sponsor of PET Institute- the institute for dog-assisted therapy

DESPITE THE UNFAVOURABLESITUATION OF THE ENERGYSUPPLY MARKET, ELES WASOPERATED IN A SUCCESSFULMANNER

2016 was marked by volatile situations in the field of energy supply, but ELES still conducted business successfully. The Company had EUR 163.7 million in total revenue – 7% higher than the previous year, but 2% lower than planned. In 2016, the Company had EUR 151.4 million in total expenses. In 2016, the biggest expense was the costs of the lease of ancillary services, which totalled EUR 43.3 million, or 46% of all revenue ELES charges for the use of the transmission network to Slovenian end-consumers. Profit or loss before taxes amounted to EUR 12.3 million, and after deferred taxes the net profit of the Company amounted to EUR 12.6 million.

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FROM BALANCE SHEET (in EUR million)

Assets

611.3

623.9

656.3

674.1

648.9

690.3

684.9

Equity

381.5

381.7

379.8

324.4

313.7

389.9

357.6

BUSINESS INDICATORS

Return on equity (ROE) in %

1.3

2.2

2.3

2.9

4.0

4.8

4.7

Return on assets (ROA) in %

0.9

1.4

1.4

1.5

1.9

2.7

2.4

Operating efficiency

1.070

1.062

1.058

1.084

1.101

1.116

1.122

Net financial debt/equity

0.33

0.31

0.33

0.44

0.53

0.47

0.62

Net financial debt/EBITDA

3.39

3.30

3.31

3.47

3.67

3.82

4.49

Added value per employee (in EUR thousand)

118.4

122.8

124.0

129.9

137.9

136.3

145.0

REGULATORY FRAMEWORK INDICATOR

Attainment of regulated return in %

60.17

49.98

56.79

65.36

74.04

105.33

97.94

OTHER IMPORTANT INFORMATION

Investments (in EUR million)

67.9

46.2

37.9

37.3

34.6

99.2

87.3

NUMBER OF EMPLOYEES AS AT 31 DEC

530

538

532

546

566

556

550

As the Slovenian energy transmission system operator we cooperate with other European operators and are working together with neighbouring countries in a joint energy circle. The transmission of electricity continuously crosses borders, so that we persistently preserve balance between the production and the consumption of energy.

STRATEGIC POLICIES

02

We are a proud sponsor of
Sevnica Fishing Club

ELES set out its long-term strategic objectives in its Long-term Strategic Business Plan for the 2016-2020 period, which was endorsed by the Government of the Republic of Slovenia for the first time in its history. In addition to key strategic guidelines and objectives through 2020, this document also includes priority strategic investments and reconstruction of transmission connections.

MAIN STRATEGIC GUIDELINES FOR THE DEVELOPMENT OF ELES

Respecting target values, employees working in accordance with the code of ethics and corporate integrity guidelines with the aim of achieving an appropriate level of business excellence.

Investment and maintenance activities on the basis of asset management philosophy, introduction of this philosophy in HR management.

In addition to comprehensive control over the operation of 400 and 220 kV transmission network, assuming comprehensive control over the entire looped 110 kV network in Slovenia.

Purchase of system services at comparable prices to neighbouring TSOs. With regard to new technologies, transition to the greatest possible autonomy based on technical and economic criteria.

Investments in cross-border transmission capacities, justifying the amount of NTCs towards neighbouring TSOs – according to the national interest of the Republic of Slovenia.

Operation in the regulatory framework, providing profit to the owner with regard to regulatory methodology.

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Indicator target values were determined on the basis of the following facts:

1) ELES is listed among the top three, or at least in the average range of all (8) analysed transmission system operators in EU Member States.

2) Achieving indicator values for improving business operations.

ECONOMIC INDICATORS

TARGET VALUES FOR THE VALIDITY PERIOD OF ASP 2016-2020

Indicator

Target indicator value

Attainment of regulated return (in %)

Year 2016: 90%
Year 2017: 95%
Year 2018–2020: 100%

Return on equity (ROE) (in %)

Year 2016–2018: 3%
Year 2019–2020: 3.5%

Donos na korigirana sredstva (ROA) (v %)

Not less than 2%

Expenses per transmitted electrical energy (EUR/MWh EE)

Lower indicator value than the average of all TSOs

Loan repayment capacity

Equal or lower value than 4

Investments per peak consumption EUR/MW

Equal or higher indicator value than the average of all TSOs

Achievement of comparable prices of power lease for secondary and tertiary regulation (in %)

Years 2016 to 2018: according to current contracts
Year 2019: 140%
Year 2020: 120%

TECHNICAL INDICATORS

TARGET VALUES FOR THE VALIDITY PERIOD OF LSP 2016-2020

Indicator

Target indicator value

Exceeding permissible voltage (400 kV = 425 kV, 220 kV = 245 kV) (hours)

Maximum 50% average of voltage exceeding hours from 2011 to 2015

Non-supplied energy due to outages of transmission network elements (MWh EE)

Not more than 0.01%

The quantity of transmitted electrical energy per normalised length of the transmission network (MWh/km)

Equal or higher indicator value than the average of first three TSOs

Share of losses at electrical energy transmission (in %)

Equal or lower indicator value than the average of all TSOs

Available NTC with regard to agreed NTC with individual TSOs (APG, TERNA, HOPS)

Direction Austria – R Slovenia: : NTC 950 MW

Year 2016: 80%
Year 2017–2018: 90%
Year 2019–2020: 100%

Direction Croatia - R Slovenia: NTC 1200 MW

Year 2016–2017: 85%
Year 2018–2019: 90%
Year 2020: 95%

Direction R Slovenia-Italy: NTC 530 MW

Year 2016: 75%
Year 2017–2018: 85%
Year 2019–2020: 95%

Appropriate provision of available and reliable connections for the requirements of the electricity transmission network of the Republic of Slovenia

Continuous: 99.995% availability of telecommunications.

Energy travels with us 24 hours a day at every moment, we provide for its continuous, quality and safe transmission, because we are aware of the significance of reliable supply of slovenia with electricity. We manage this by implementing team work, where every individual is an important part of this giant energy system.

BUSINESS EXCELLENCE

03

We are a proud sponsor of RIDE Sport Club

In ELES we know what an impact our operations have on Slovenian society, and what our infrastructure means. The latter is listed as the critical infrastructure for the country. Thus, we are particularly responsible in our operations. We strive that the development and advance of ELES is built on foundations of responsible relationships to the owner, the Republic of Slovenia, achieving business excellence, environmental concerns, and being responsible for both the employees and social environment in which we operate.

SYSTEM OPERATION

Electrical energy offtake: 22,475 GWh

Electrical energy input: 22,136GWh

Peak load: 3,603 MW

Tertiary regulation: 8,708 MWh

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We play by the rules of international operating codes and by abiding high ethical standards. We are driven by values that we have evolved with our employees to mutually build a solidorganisational culture. Our value system is composed of responsibility, engagement, knowledge, reliability, cooperation and determination.

RESPONSIBILITY TOWARDS THE EMPLOYEES AND THE SOCIAL ENVIRONMENT

04

We are a proud sponsorof Divača Wind Orchestra

RESPONSIBILITY TO EMPLOYEES

In 2016, the anonymous survey on employee satisfaction (including employees from different lines of work) included 424 or 74.9% of all employees in ELES in 2016, which is 3% more than in 2015. The results of the survey showed that in general the employees are very satisfied with job stability, working time, work conditions, the work itself, education opportunities, CEO of ELES, co-workers, relations in the work group, and with the role they have in ELES. Less, but still above the Slovenian average, employees are satisfied with promotion opportunities, their paycheck, and with the general atmosphere among the employees. The total average including different aspects of satisfaction of employees amounted to 4.71 points out of 6 possible points, which is a very high figure that greatly exceeds the Slovenian average. Compared to 2015, the result is higher for 3.5% and is 0.26 point above the value of the strategic indicator defined by the Strategic Business Plan for 2016-2020.

Measured values of electric and magnetic fields were below the prescribed limits set by the Decree on Electromagnetic Radiation in the Natural and Living Environment.

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The transmission of electricity is managed by the National Control Centre's one of the most advanced technologies and highly qualified staff. Knowledge puts us on a par with themajor operators in Europe, therefore, we consider knowledge as one of the most important values that lead to the progress of the entire company.

RISK MANAGEMENT

05

We are a proud sponsor of Zavod 404,
a youth technological and research centre.

ELES is aware of the importance of active risk management. Therefore, an advanced, information-backed system was developed by the Company for determining, logging, controlling, and managing of risks that may threaten the achievement of set goals. The Company ensures key risks are detected, evaluated, and controlled in a timely manner with the setting up of a comprehensive system of risk management integrated into a single management system, and built in all processes of operation in ELES.

In 2016, the Company was implementing measures and therefore did not only came close to the still acceptable level of risks, but also lowered the risk assessment below the acceptable level. On this basis, one can conclude that the risk management system of the Company reached the strategic goal of the successful management of strategic and process risk, and thus enabled the reaching of set business and strategic goals of the Company.

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