ANNUAL REPORT 2014

SHARPENING THE EDGE

2014 WAS A YEAR during which a new operational model was imple-

mented, processes were refi ned, and a set of key performance indicators

for management and development purposes was created. These steps

taken in order to streamline our activities and improve profi tability,

proved to be very successful. Our focus on boosting the effi ciency of our

sales and production activities resulted in a 28% growth in order intake

by the end of 2014, and an all-time high manufacturing effi ciency by

early 2015.

MASTERING THE ENTIRE CHAIN from power generation and distribu-

tion to power utilization is both a challenge as well as the competitive

edge of VEO. By seeing and understanding the whole picture, we can of-

fer our customers customized and fl exible solutions and a wider range of

services. We now intend to serve our customers in an even smarter and

more effective way by including more digitalized automation and data

management options in our project deliveries.

3 CEOS REVIEW

4 VEO 25 YEARS

6 COOPERATION

8 SEGMENTS

9 CORE STRENGTHS

10 SUBSTATIONS

12 HYDROPOWER

14 THERMAL POWER

16 EXPERT SERVICES

18 CORPORATE RESPONSIBILITY

20 BOARD OF DIRECTORS REPORT 2014

22 INCOME STATEMENT

23 BALANCE SHEET

VEO ANNUAL REPORT 2014

2 CONTENTS

DURING THE YEARS TO COME, we aim to strengthen our position

further in renewable energy solutions, industrial and smart power plant

electrifi cations and hydro power modernizations. We also plan to enforce

our status as a trusted partner in the strengthening of the power distri-

bution infrastructure in Finland, Sweden and Norway at both utility and

national grid levels.

TODAY we can clearly see the advantage of having merged the group

companies into a single strong, integrated entity. VEO is a solid company

with not only the know-how and experience, but also the equity and

liquidity to engage in bigger and more complex projects within our focus

markets.

I would like to extend my thanks our customers and business partners

for the fruitful cooperation during 2014. Special thanks go to our skillful

personnel for their hard work, dedication and fl exibility in the midst of all

the changes we have made during the last couple of years. We are look-

ing forward to the challenges and interesting opportunities the ongoing

year offers.

Marko Ekman

CEO

An equity ratio of 57% gives us the muscle to engage in more complex, long-term projects and partnerships. Marko Ekman, CEO

VEO ANNUAL REPORT 2014

CEOS REVIEW 3

THE THREE GIANTS ASEA, Brown Boveri and Strmberg merged

in 1986. The competitive situation of the Nordic energy technology

market changed signifi cantly and customers were concerned that

prices would rise.

We wondered, whether there was anything to be done in order to

maintain and develop domestic electricity technology know-how and

decided to become entrepreneurs ourselves. The company Vaasa Engi-

neering Oy was founded on Independence Day 6 December 1989. Apart

from me, the founding members included Harri Niemel, Henrik Skytte,

Martti Manner, Pekka Haakana, Jan Sandvik, Heikki Ojakoski and

Martti Ehrnrooth. All of us strong minded and true Ostrobothnians.

Pekka Haakana pointed out that it would be nice to have an offi ce

where you can go to work, so that was arranged. We were the fi rst en-

ergy technology company to settle down in Runsor, Vaasa. However, the

company quickly became much more than a roof over our heads.

THE FIRST ELECTRIFYING 25 YEARSWe received our fi rst orders from Savon Voima for the hydropower

plant in Karjalankoski and from Wrtsil for a diesel power plant in

Mecca. We are very proud to say that both companies remain long-term

customers and partners to this day.

An important milestone during our 25 years was purchasing our

business facilities here in Runsor from Onninen Oy in 1992. Due to the

recession, we acquired the facilities at an affordable price, and were able

to use them as guarantee for working capital loans.

The next year, 1993, we participated in establishing Vaasa Control Oy,

currently known as Vacon. At the beginning, our share was 37%. In hard

times, we have been able to realize our shares in order to maintain and

develop our own operations.

In 1994, Vaasa Electronics Oy (later VAMP Oy) was founded, which is

nowadays incorporated in Schneider Electrics. Our initial share was 40%.

Since then we have used their arc protection relays.

The same year we initiated the development of our own switchgear.

VEDA and VEKE were born.

All did not always go as planned. In 2002, two automation businesses

we acquired in Sweden went bankrupt after three struggling years.

20022009 was a period of great growth. Our turnover leapt from

25 to 80 MEUR and our staff from 200 to 400. We also founded sales

companies in Norway, Sweden and Russia.

25years of responsibility

for Energy

VEO ANNUAL REPORT 2014

4 VEO 25 YEARS

In 2010 VEO got its share of the recession. We managed through leaning

on our corner stones, and the company yet again started to grow.

We have kept VEO in Finnish ownership, strongly anchored in Vaasa,

in times when many energy businesses from the region have been sold to

foreign investors. VEO has an unyielding position at the very heart of the

Energy cluster in Vaasa.

From the bottom of my heart I would like to thank all those at VEO for

what we have achieved over the past years. I would also like to thank all

of our clients and partners for their trust and excellent co-operation. The

future looks bright!

Mauri Holma,

long-term CEO of VEO, currently chairman of the board

In the beginning there was VEO. Then Wrtsil also moved its project operations to Runsor. The current Airport Park came into existence and plenty of know-how in the energy business was concentrated to Runsor.

In the history of Finnish energy technology, signifi cant events are scarce, occurring once every 100 years. Oy Strmberg Ab was established in 1889. VEO in 1989.

VEO ANNUAL REPORT 2014

VEO 25 YEARS 5

A LONG-TERM PARTNERSHIPVEO RECEIVED ITS FIRST ORDER IN 1989 soon after the company was

founded. The customer was Savon Voima Oy. The assignment was the

upgrade of the control system at the hydropower plant in Karjalankoski.

We knew Martti Ehrnrooth from earlier remote operation pro-

jects. We put our trust in that the founders of this new business, Vaasa

Engineering, knew what they were doing. We also wished to encourage

domestic know-how and promote competition in the business. We were

not disappointed, maintenance manager at Savon Voima Juha Rsnen

ensures.

The partnership between VEO and Savon Voima has continued for

25 years. Over these years, many projects big and small have been com-

pleted.

Savon Voima has 11 hydropower plants, which require regular

maintenance and upgrades. When our partnership with VEO began, their

services included project planning and control cabinets. By the beginning

of the 90s, VEO launched their own switchgear, Rsnen recalls.

When upgrading the power plant in Juankoski in 1995, VEO also intro-

duced their own voltage regulator. The Juankoski project was memorable

in many ways. The control panels ordered by Savon Voima were ready for

installation, when there was a fi re at the Vuolenkoski hydropower plant.

VEO enquired whether they might deliver the control panels to Vuolenko-

ski instead to assist them in their hour of need.

VEO assured us that our project schedule would not suffer. They

kept their promise. The new control panels were delivered to Juankoski

according to plan, Rsnen praises.

The development continued. During 19951996 VEO offered Savon

Voima even more comprehensive and integrated solutions turbine gen-

erators with automation.

The automation delivery for the Atro power plant in 1998 also in-

cluded vacuum circuit breakers and generator protection relays.

In 2006 a brand new turbine was ordered for the power plant in Sor-

sakoski, built in 1935. On recommendation from VEO, Savon Voima chose

the turbine of Czech Mavel.

Many groups of visitors have later come to see and admire at this

specialty, Rsnen points out.

Around the same time, Savon Voima also implemented mobile con-

trols, by means of which the control centre could be bypassed if needed.

At fi rst we used Q-Tech equipment, which was later replaced by

Nokia Communicators Finnish technology to our pride and joy. In 2012

the data security was improved when we transferred to Citrix software,

Rsnen recalls.

The partnership between VEO and Savon Voima has included ten

signifi cant power plant upgrade projects and numerous service and main-

tenance contracts.

In 2015 we are upgrading the local automation at the hydropower

plant in Liuna. This will be the tenth large project we complete together.

With VEO we have a mutual understanding. Strong technical expertise,

fl exibility, continuity and economic stability are important to us. VEO

meets all of these criteria, Rsnen concludes.