Performance Report 2004
Introduction
Directors who held office during the year and subsequently were as follows:
Vincent de Rivaz (Chief Executive) (E) | |
Daniel Camus (Chairman) (NE) | Appointed 14 March 2005 |
Michel Crémieux (NE) | Resigned 14 March 2005 |
Humphrey A E Cadoux-Hudson (E) |
|
Gérard Creuzet (NE) | Resigned 14 March 2005 |
Yann V R Laroche (NE) |
|
Gerard Menjon (NE) | Appointed 14 March 2005 |
Didier Calvez (NE) | Appointed 14 March 2005 |
Anne le Lorier (NE) | Resigned 14 March 2005 |
(E) – Executive director (NE) – Non executive director | |
No contract or arrangement has been entered into at any time during the year or subsisted at the end of the year in which any Director had a material interest which was significant in relation to the Group’s business.
None of the Directors who held office at the end of the financial year had an interest in the shares of the Company or any other Group company requiring disclosure under the Companies Act 1985.
During the year, the Company made no political contributions (2003: £nil) but various charitable contributions totalling £1,923,889 (2003: £1,244,187).
The 2003 Combined Code includes a requirement for listed companies that the effectiveness of the system of internal control, including financial, operational, compliance controls, and risk management, is reviewed by the directors. In addition, the Internal Control: Guidance for Directors on the Combined Code (the Turnbull Report) which was published in September 1999, provides guidance to directors in respect of this requirement.
As a company holding listed debt, as well as being a subsidiary of Electricité de France SA, EDF Energy plc has no requirement to comply with the Combined Code. However, EDF Energy supports the principles set out in the Turnbull Committee Guidelines on risk management. Accordingly, the Board of directors has decided to adopt the Turnbull Committee Guidelines and is committed to complying with these as best practice on a voluntary basis.
The Corporate Risk Assurance Policy, implemented in 2003, is a statement of what the organisation is seeking to achieve by actively managing risk. It defines a governance structure together with roles and responsibilities that will allow the Group to:
In addition, Risk Management guidelines have been developed to provide a standard approach to Risk Management and to facilitate a meaningful consolidation of Group risks.
The Board (through the Audit Committee) is responsible for the Group’s system of internal control and for reviewing its effectiveness. However, such a system can only provide reasonable and not absolute assurance against material misstatement or loss, as it is designed to manage rather than eliminate the risk of failure to achieve business objectives.
The key elements of the Group’s system of internal control include:
Risk identification and control
The Head of Risk Assurance is responsible for maintaining an oversight of Group risk management, working closely with the Branches and other corporate functions to ensure that their risk management activities complement each other, and enhance the overall Group position. The objectives are to provide assurance that management of risks is effectively managed and embedded in day to day activities, that risk management activity has sufficient visibility and that there is transparency around decision making processes.
The Head of Process Assurance is responsible for defining the Group quality assurance structure and policies and developing a consistent approach to quality within the Group.
The main interfaces are between Management Audit and Risk Assurance whereby Risk Assurance will be primarily responsible for ensuring the identification of risks and their mitigation and Management Audit will be responsible for review of the mechanisms that provide assurance.
Specific Risk Management Committees have been established where required and operate to address specific risk areas including energy trading risk and health and safety.
During the year the emphasis has been on the assessment of the adequacy of mitigating controls and the implementation of corrective action where required.
Control environment
The Group is committed to the highest standard of business conduct. The Group is appropriately structured according to business areas. This allows for effective operations to achieve the Group’s objectives. Lines of responsibility and levels of authority are formally documented.
Control activities
Control procedures have been implemented throughout the Group and are designed to ensure complete and accurate accounting for financial transactions, to safeguard the Group’s assets and to ensure compliance with laws and regulations. There are control processes to establish budgets, financial and service targets in each Branch against which performance is monitored in detail and agreements under which relationships with partners in joint ventures are controlled. High level reporting is made by business branches and functional heads at corporate level to the Group Executive Committee and the Board. The Group Executive Committee defines authority given to individual officers of the Group. The Committee also approves the operating plan and budget, authorises individual projects within that plan and approves the award of contracts either directly or by delegated authority within agreed limits. Membership of the Committee comprises the Group Chief Executive Officer, Branch Chief Operating Officers and Corporate Directors.
Information and communication
Staff policies are in place to ensure that employees are competent, have appropriate skills and receive information required to effectively perform their roles. The Group’s Intranet is widely used to communicate information to staff.
Monitoring and corrective action
Group performance is continually monitored. Branch Chief Operating Officers and Managing Directors report regularly on operating performance.
The Audit Committee is a sub-committee of the Board with advisory responsibility for issues related to Corporate Governance, risk and control. This covers all aspects of risk management and the system of internal control including both financial, operational and compliance controls. The scope includes all EDF Energy plc companies but ultimate responsibility remains with the Board. Membership includes appointed non-executive representatives from EDF.
The Executive Committee and Audit Committee receive reports of key risks from the business units. These reports include for each risk an assessment of the likelihood of the risk occurring and the associated impact. The risk reports include the key mitigating controls and an assessment by the business units of their adequacy. Where appropriate businesses are required to identify the actions required and ensure that the risks are adequately managed.
From 1 January 2005, the internal audit activities in the Group are provided by the UK Office of the EDF Corporate Audit department ('The UK Audit Office'). The UK Audit Office reviews the operation of internal controls using a risk-based methodology. The UK Audit Office reports quarterly to the Group Executive Committee and half yearly to the Audit Committee. Assignments are determined by reference to the risk framework and discussions with senior management including members of the Group Executive Committee.
Effectiveness review
The Group is continuously making improvements to the system of internal control. This specific effectiveness review forms part of that system. At the end of the year the UK Audit Office reviewed the control environment and system of internal control. The review assessed progress in the following areas:
Material weaknesses
Significant weaknesses in internal control are reported to the Group Executive Committee and, if appropriate, to the Audit Committee. In 2004, there were no such significant weaknesses.