To the Annual General Meeting of Teollisuuden
Voima Oyj
In our opinion
· the consolidated financial
statements give a true and fair view of the group’s financial position and financial
performance and cash flows in accordance with International Financial Reporting
Standards (IFRS) as adopted by the EU
· the financial statements give a true
and fair view of the parent company’s financial performance and financial
position in accordance with the laws and regulations governing the preparation
of the financial statements in Finland and comply with statutory requirements.
Our opinion is
consistent with the additional report to the Audit Committee.
We have audited the financial
statements of Teollisuuden Voima Oyj (business identity code 0196656-0) for the year ended 31 December 2018. The
financial statements comprise:
· the consolidated balance sheet, income
statement, statement of comprehensive income, statement of changes in equity,
statement of cash flows and notes, including a summary of significant
accounting policies
· the parent company’s balance sheet,
income statement, statement of cash flows and notes.
We conducted our audit in accordance with good
auditing practice in Finland. Our responsibilities under good auditing practice
are further described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report.
We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the parent company and of
the group companies in accordance with the ethical requirements that are applicable
in Finland and are relevant to our audit, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, the
non-audit services that we have provided to the parent company and to the group
companies are in accordance with the applicable law and regulations in Finland
and we have not provided non-audit services that are prohibited under Article
5(1) of Regulation (EU) No 537/2014. The non-audit services that we have
provided are disclosed in note 9 to the Financial Statements.
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Overall group materiality: € 25 million, which represents approximately 0,3 % of balance sheet total
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Group audit scope: We audited the consolidated financial statements and the financial statements of the parent company Teollisuuden Voima Oyj.
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Olkiluoto 3 power plant construction in progress
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Assets and provisions related to the nuclear waste management
obligation
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As part of designing our audit, we determined
materiality and assessed the risks of material misstatement in the financial
statements. In particular, we considered where management made subjective
judgements; for example, in respect of significant accounting estimates that
involved making assumptions and considering future events that are inherently
uncertain.
The scope of our audit was influenced by our
application of materiality. An audit is designed to obtain reasonable assurance
whether the financial statements are free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we
determined certain quantitative thresholds for materiality, including the
overall group materiality for the consolidated financial statements as set out
in the table below. These, together with qualitative considerations, helped us
to determine the scope of our audit and the nature, timing and extent of our
audit procedures and to evaluate the effect of misstatements on the financial
statements as a whole.
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Overall group materiality |
€ 25 million |
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How we determined it |
0,3% of balance sheet total |
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Rationale for the materiality benchmark applied |
We chose balance sheet total as the
benchmark because the company’s operations are very capital intensive and
because, in our view, this is the benchmark against which the performance of
the Group is commonly measured by users. |
We tailored the scope of our audit, taking into
account the structure of the group, the accounting processes and controls, and
the industry in which the group operates.
Group audit scope: We audited the consolidated
financial statements and the financial statements of the parent company
Teollisuuden Voima Oyj.
Key audit matters are those matters that, in
our professional judgment, were of most significance in our audit of the financial
statements of the current period. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
As in all of our audits, we also addressed the
risk of management override of internal controls, including among other matters
consideration of whether there was evidence of bias that represented a risk of
material misstatement due to fraud.
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Key audit matter in the audit of the group |
How our audit addressed the key audit matter |
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Olkiluoto 3 power
plant construction in progress Refer to note 12 Property, plant and equipment, Construction in
progress and advance payments and 13 Capitalized borrowing costs included in
property, plant and equipment, and intangible assets as well as accounting
principles: TVO’s cost-price principle
and Power plant construction in progress - OL3 EPR OL3 is a power plant in
construction, which has been ordered under a turnkey principle. Delivery of
the plant has been significantly delayed from the original schedule. During the OL3 project € 4.8 billion
have been capitalized in balance sheet item Property, plant and equipment,
Construction in progress and advance payments. Under the Articles of Association,
each of the shareholders of each series bears their share of the variable and
fixed annual costs as specified in detail in the Articles of Association. Our audit focused especially on
this item because of the significant monetary amount capitalized in the
balance sheet and because completion of the project has been delayed from the
original schedule. In addition, a significant amount of financing expenses
have been capitalised on this item. |
We audited the internal controls of
the company relating to approval of expenses capitalized on the OL3 project.
In addition, we reviewed company management measures, records and other
documentation regarding monitoring of progress of the project. We tested, on a sample basis,
purchase invoices and company’s own expenses relating to the project to
ascertain the costs capitalised against the power plant construction in
progress meet the recognition criteria. During our audit we reviewed
whether the borrowing costs were capitalised in accordance with the
accounting principles applied, and whether recognition to the project was
performed consistently under the same principles as in previous financial
statements. In our audit of the amount
capitalised in the balance sheet we considered the provisions regarding
shareholder responsibilities incorporated in the Articles of Association.
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Assets and provisions
related to the nuclear waste management obligation Refer accounting principle “Assets and provisions related to the
nuclear waste management obligation” and “Critical accounting estimates and
judgements’, “The provision for future obligations for the decommissioning of
the nuclear power plant and for the disposal of spent fuel”. Note 12
Property, plant and equipment, Decommissioning and note 24 Assets and
provisions related to the nuclear waste management obligation. The nuclear waste management
obligation totalling € 952 million is shown as a provision under non-current
liabilities. The fair value of the nuclear waste management provision has
been determined by discounting the future cash flows, which are based on
plans about future activity and the estimated expenditure relating to it,
taking into account actions already taken. The present initial value of the
provision for the decommissioning of a nuclear power plant (at the time of
commissioning the nuclear power plant) has been capitalised as property,
plant and equipment and will be adjusted later for possible changes in the
plan. The amount recognised relating to decommissioning will be depreciated
over the estimated operating time of the nuclear power plant. The provision for spent fuel covers
the future disposal costs of fuel used by the end of each accounting period.
The costs for the disposal are expensed during the operating time of the
plant, based on fuel usage. The impact of any changes to the plan will be
recognised immediately in the income statement based on fuel used by the end
of each accounting period. The assets and provisions related
to the nuclear waste management obligation involve inherent judgement, since
the estimates made extend far into the future, and subsequently these items
on the income statement and balance sheet were subject to special scrutiny. |
We reviewed long-term cash flow forecasts and
related documentation and interviewed preparers of these calculations to
assess foundations of the estimates and assumptions used, and whether the
cash flow forecasts are prepared consistently based on the best knowledge
available at the time. The most significant estimates relate to the amount
and time of realization of the future costs. We also examined whether changes to the
estimates are appropriately documented and approved by the management. We tested whether the calculations are
technically prepared under the same principles from one accounting period to
another. We assessed whether the discount rate and
inflation ratio used in the calculation are appropriately determined, and
whether the criteria for the used interest rate and inflation ratio are
appropriately documented and approved. Division of cash flows into costs related to
decommissioning of a nuclear power plant and those related to disposal of
spent fuel affects the outcome of the calculation. We tested whether the
division described above is made according to the documented fundamentals and
whether the division as a rule remains the same from one accounting period to
another. |
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We have no
key audit matters to report with respect to our audit of the parent company
financial statements. |
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There are no significant risks of
material misstatement referred to in Article 10(2c) of Regulation (EU) No
537/2014 with respect to the consolidated financial statements or the parent
company financial statements. |
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The Board of Directors and the Managing
Director are responsible for the preparation of consolidated financial
statements that give a true and fair view in accordance with International
Financial Reporting Standards (IFRS) as adopted by the EU, and of financial
statements that give a true and fair view in accordance with the laws and
regulations governing the preparation of financial statements in Finland and
comply with statutory requirements. The Board of Directors and the Managing
Director are also responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the
Board of Directors and the Managing Director are responsible for assessing the
parent company’s and the group’s ability to continue as a going concern,
disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting. The financial statements are prepared using
the going concern basis of accounting unless there is an intention to liquidate
the parent company or the group or to cease operations, or there is no
realistic alternative but to do so.
Our objectives are to obtain reasonable
assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with good
auditing practice will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of these financial statements.
As part of an audit in accordance with good
auditing practice, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
· Identify and assess the risks of
material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for
our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
· Obtain an understanding of internal
control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the parent company’s or the group’s internal control.
· Evaluate the appropriateness of
accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
· Conclude on the appropriateness of the
Board of Directors’ and the Managing Director’s use of the going concern basis
of accounting and based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant
doubt on the parent company’s or the group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor’s report. However, future events or conditions may cause
the parent company or the group to cease to continue as a going concern.
· Evaluate the overall presentation,
structure and content of the financial statements, including the disclosures,
and whether the financial statements represent the underlying transactions and
events so that the financial statements give a true and fair view.
· Obtain sufficient appropriate audit
evidence regarding the financial information of the entities or business
activities within the group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance
of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance
with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and
where applicable, related safeguards.
From the matters communicated with those
charged with governance, we determine those matters that were of most
significance in the audit of the financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s
report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such
communication.
Teollisuuden Voima Oyj became a public interest
entity in June 2009. We have been the auditors of Teollisuuden Voima Oyj all
that time it has been a public interest entity.
The Board of Directors and the Managing
Director are responsible for the other information. The other information comprises the
report of the Board of Directors and the information included in the Annual Report,
but does not include the financial statements and our auditor’s report thereon.
We have obtained the report of the Board of Directors and Annual Report prior
to the date of this auditor’s report.
Our opinion on the financial statements does
not cover the other information.
In connection with our audit of the financial
statements, our responsibility is to read the other information identified
above and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. With respect to the
report of the Board of Directors, our responsibility also includes considering whether
the report of the Board of Directors has been prepared in accordance with the
applicable laws and regulations.
In our opinion
· the information in the report of the
Board of Directors is consistent with the information in the financial
statements
· the report of the Board of Directors
has been prepared in accordance with the applicable laws and regulations.
If, based on the work we have performed on the other
information that we obtained prior to the date of this auditor’s report, we
conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
We support that the financial statements of the
parent company and the consolidated financial statements should be adopted. The proposal by the Board of Directors regarding the result of the
accounting period is in compliance with the Companies Act. We support that the members of the
Board of Directors and the Managing Director of the parent company should be
discharged from liability for the period audited by us.
Helsinki 27 February 2019
PricewaterhouseCoopers
Oy
Authorised Public Accountants
Jouko Malinen
Authorised Public Accountant (KHT)
