ANNUAL REPORT 2006

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ANNUAL REPORT 2006

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climate neutral

FINANCIAL INFORMATION DURING 2007

Interim report, January to March

2007

,

26

April Annual General Meeting,

26

April

Interim report, January to June

2007, 19

July

Interim report, January to September

2007, 26

October All fi nancial reports and press releases can be found on Tricorona’s website: www.tricorona.se

It is also possible to order and subscribe to fi nancial information and press releases via the website or from Tricorona

AB

, Box

70426, SE-107 25

Stockholm, Sweden.

ANNUAL GENERAL MEETING

The annual general meeting will take place at

15.00

on

26

April

2007

at Folkets Hus, Norra Latin, Drottninggatan

71 B

in Stockholm.

Notifi cation

Shareholders who wish to participate in the meeting must be entered in the register of shareholders maintained by the

VPC AB

by Friday,

20

April,

2007

, and must have informed the Company of their intention to participate at address Tricorona

AB

(publ), Box

70426, SE-107 25

Stockholm, Sweden, or by fax

+46 8 30 86 17

or via e-mail info@tricorona.se not later than

4

p.m.

on Monday,

23

April,

2007

. Please state name, personal or organisation identifi cation number, address and phone number as well as registered share holdings.

In order to be entitled to participate in the meeting, shareholders whose shares are registered in the name of a nominee must request that their shares be registered in their own name not later than Friday,

20

April,

2007

.

Shareholders represented by proxy should deliver a proxy form to the Company prior to the Annual General Meeting to the address above. Anyone representing a corporate entity must present a copy of the registration certifi - cate listing authorised signatories.

This annual report has been produced with the greatest possible consid-

eration for the environment. For example, we are using an environmentally

friendly type of paper for the annual report, and it is printed using water-

based printing ink. Moreover, we will only be sending the printed annual

report to those who request it.

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Q1 Q2 Q3 Q4 0

3,000 6,000 9,000 12,000 15,000

Number of emissions allowances in thousands, accumulated

02 03 04 05 06

–30 –25 –20 –15 –10 –5 0 5 10 SEK m

02 03 04 05 06

0 50 100 150 200 250 300 SEK m

TRICORONA ANNUAL REPORT 2006 HIGHLIGHTS OF 2006

HIGHLIGHTS OF 2006

FINANCIAL OVERVIEW

2006 2005 2004 2003 2002

Net sales, SEK m 278.2 165.1 39.0 14.9 1.9

Operating profi t/loss, SEK m –9.1 9.0 –2.2 –5.1 –25.6

Profi t/loss after tax, SEK m –2.3 7.5 1.6 –10.3 –28.3

Balance sheet total, SEK m 464.7 215.3 112.4 102.2 75.0

Shareholders’ equity, SEK m 357.7 114.0 51.3 49.7 48.5

Earnings per share, SEK –0.02 0.15 0.06 –0.47 –2.03

Earnings per share after dilution, SEK –0.02 0.14 0.06 –0.47 –

Quoted price at the end of the year, SEK 4.98 3.06 3.22 1.50 1.54 Market capitalisation at the end of the year, SEK m 686 189 86 40 27

PROFIT AFTER TAX NET SALES

• Net sales increased by

68

per cent to

SEK m 278.2 (165.1).

• Profi t after tax amounted to

SEK m –2.3 (7.5).

• During the year, Tricorona increased its focus on emissions trading. The subsidi- ary Carbon Asset Management was established.

• A directed share issue and a rights issue were carried out with the aim of fi nancing the company’s operations within emissions allowances. In total, the share issues amounted to

SEK m 241

before deductions for issue-related costs.

• In conjunction with the issue of new shares, the company’s ownership structure was altered. A number of institutional owners are now principal owners in the company.

• An initial delivery of project-related emissions allowances (

CER

) was imple- mented in June to Tekniska Verken in Linköping. During the year, approximately

500,000CER

s were delivered.

• The portfolio of emissions allowances amounted to

12.6

million

CER

s as of

31

December

2006

.

• New offi ces were opened in Hamburg and Beijing.

• The operations of Svenska Metallbörsen were sold to Handelsbanken.

• Niels von Zweigbergk, formerly Vice President, Business Area Commodity Services, was appointed President and

CEO

on

13

November.

EVENTS AFTER THE END OF THE PERIOD

• Climate Change Management (CCM) was acquired during the fi rst quarter.

The company develops projects that generate emissions reductions within the framework of the Kyoto Protocol, primarily in Russia, the Ukraine and Uzbekistan.

PORTFOLIO DEVELOPMENT PER QUARTER

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TRICORONA ANNUAL REPORT 2006

TRICORONA

EMISSIONS TRADING BROKERAGE CLIMATE NEUTRALISATION OTHER OPERATIONS

TCP Tricorona Climate Partner SKM

Svensk Kraftmäkling CAM

Carbon Asset Management CAS Carbon Asset Services

CCM Climate Change Management

EMISSIONS TRADING

Within the emissions trading business area, Tricorona invests in emissions allowances from various projects that are conducted in accordance with the Kyoto Protocol’s fl exible mechanism.

The purpose is to create added value for end users by contracting emissions reductions and handling project risks on the basis of a portfolio perspective. The investments to date have primarily been focused on India and China, although there have also been investments in other parts of Asia and in South Amer- ica. During the year a representative offi ce has been opened in Beijing, with the aim of increasing market presence in the important Chinese market. An offi ce was also opened in Hamburg during the Tricorona invests in and trades with

environment-related market instru- ments. The majority of the investments and trading involve project-related emissions allowances, known as Certifi ed Emissions Reductions ( CER s), within the framework of the Kyoto Protocol. Over the past year, the com- pany’s operations have increasingly come to focus on business operations with environment related market instru- ments. The operations are now con- ducted within a number of different areas:

– Emissions trading ( CAM, CAS, CCM ) – Brokerage ( SKM )

– Climate neutralisation ( TCP ) – Other operations

THIS IS TRICORONA

“Tricorona invests in and trades with

environment-related market instruments”

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CLIMATE NEUTRALISATION

Tricorona Climate Partner is a newly started operation within ‘voluntary climate neutralisation’. The purpose of the operation is to meet the increasing demand for voluntary climate neutral- isation among companies and private individuals.

BROKERAGE

Svensk Kraftmäkling is a leading broker of electricity in the deregulated Nordic energy market. The company also enjoys strong positions in the markets for electricity certifi cates and certifi cates of origin.

OTHER OPERATIONS

Other operations include the operations that were previously conducted within the Metals and Minerals divisions. The operations within Metals are primarily focused on trading in and recovering secondary metals and precious metals.

The operations within Minerals consist of a number of deposits within the industrial mineral sector, which for a number of years constituted Tricorona’s main focus.

HISTORY

Tricorona has a relatively long history as a quoted company. The company was established in 1988 and was quoted on the Stockholm Stock Exchange’s O -list as early as 1989 under the name Wermlands Guldbrytning. At that time, the company’s operations were targeted at exploration and the exploitation of gold deposits. The mining of a small gold deposit in the Dalsland region of Sweden was launched at the beginning of the 1990s and continued for almost a year.

From 1993, the operation came to focus on the exploitation of industrial min- erals. In 1996, the subsidiary company Woxna Graphite commenced the min- ing and dressing of graphite ore in the Kringelgruvan mine in Hälsingland Province. Profi tability could not be achieved due to the depressed prices on the world market, and in 2002 opera- tions in the mine were discontinued.

In order to provide Tricorona’s shareholders with a dividend during the period that the rest of the oper- ation was being built up, two metal exploration projects – Svenska Koppar (now Netrevelation) and Riddarhyttan Resources – were listed as separate com- panies in 1996 and 1997 respectively.

During 2003, it was decided that Tricorona should be restructured.

The companies M.V . Metallvärden, Svenska Metall Börsen ( SMB ) and SKM were acquired. During 2005 Tricorona acquired ANA Ädelmetall, a leading company within recovery of scrap pre- cious metal. The company’s operations were also divided up into three divisions in 2005: Metals, Commodity Services and Minerals.

During the spring of 2006, the com- pany carried out a major directed share issue and a right issue for a total of SEK m 241. The share issues were fully subscribed. These share issues were conducted with the aim of fi nancing the company’s investments and trading in project-related emissions allowances.

THIS IS TRICORONA

TRICORONA’S HISTORY

1989 The company was quoted on the Stock- holm Stock Exchange’s O-list under the name Wermlands Guldbrytning.

1993 New focus on the exploitation of industrial minerals.

1996 Mining and dressing of graphite ore was launched at the Kringelgruvan mine in Hälsingland.

1997 The metal exploration projects Svenska Koppar and Riddarhyttan Resources were transferred to separate companies.

2003 Acquisition of M.V. Metallvärden, SMB and SKM.

2005 The operation was divided into three divisions.

2006 A directed share issue and a rights issue was conducted with the aim of fi nancing the venture regarding investments and trading in project-related emissions allowances.

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raise the standards for projects to qualify as CDM or JI projects. The high stand- ard of CDM/JI projects helps to generate both legitimacy for the market-based system, as well as better foundations for the continued expansion of an interna- tional market. The political risks are still great, but we are convinced that the basis for our operation – the fl exible mecha- nisms within the Kyoto Protocol – will be a signifi cant instrument in a future solution to the greenhouse effect. It appears highly likely that the European trading system and further commitments in accordance with the Kyoto Protocol will continue after 2012.

THE FUTURE

I view the future for Tricorona with great confi dence. The strategy is to focus, develop and consolidate our unique position that we have created in this new, rapidly growing market.

With our successful combined rights and directed share issue during the year, we created the fi nancial basis for further expansion within emissions trading. With a strong focus on fi nding good projects, and thanks to committed employees, we soon succeeded in estab- lishing ourselves as a signifi cant player

TRICORONA’S POSITION STRENGTHENED DURING THE YEAR

Over the year, climate change has left clear traces in our increasingly globalised economy. The greenhouse effect, which has now also affected Sweden most tangibly in the form of storm-force winds and high water levels, has also affected Tricorona’s future. In a clear change of course from last year, we are now concentrating fully on the operations previously included in the Commodity Services Division. Trading in project- related emissions allowances in accord- ance with the Kyoto Protocol is the dominant area.

Tricorona is now at the centre of the new climate economy. Our focus on trading in project-related emissions allowances feels both correct and important. Emissions trading consti- tutes part of the solution to climate change. By investing in CDM and JI projects, we are increasing the poten- tial for the projects to succeed. We also believe that it is positive that the envi- ronmental movement is keeping a criti- cal eye on the projects that are approved by the UN . Projects that satisfy the criteria for sustainable development in the host country, and whose success depends on fi nancing from emissions allowances, are helping to create a better climate globally as well as better living conditions locally in the poorer regions of the world.

In the international debate, we have

2006 was an eventful year for Tricorona. During the year, the company has increased its focus on investing and trading in environment-related market instruments. The year has also been an eventful one for me personally. Since last autumn I have the privilege of being entrusted with the positions of President and CEO of Tricorona. Managing a company that is so well positioned in a strongly growing international market is an exciting challenge.

COMMENTS BY THE CEO

We are now an established player in both India and China, the two markets that to date have displayed the most rapid growth as regards emissions reduction projects in developing coun- tries, known as CDM projects.

Over the next few years, our most important task is to build a large port- folio of high quality projects that will deliver emissions allowances, primarily between the years of 2008 and 2012.

Our ambition is to continue to grow.

One major challenge will be to recruit skilled people. Important new markets for us will include Russia, the Ukraine and other countries in Eastern Europe where JI projects can be implemented.

THE PAST YEAR

2006 was an exciting year for us at Tricorona. Operations in the former Commodity Services division developed well during the year. Our geographical presence has been extended, with representative offi ces in Beijing and Hamburg. Having a local market pres- ence in these large, important markets has proven to be important, both for supply-chain management and for sales.

We implemented the fi rst delivery of project-based emissions allowances in June, delivering a total of around 500,000 tons during the year. This was despite the fact that the UN has not fi nal- ised the procedures for deliveries. The

Our focus on trading in project- related emissions allowances feels

both correct and important.

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TRICORONA ANNUAL REPORT 2006 COMMENTS BY THE CEO

national registers will not be in place until the middle of 2007 at the earliest.

Only when this link is in place will the prerequisites be there for the market to get under way in earnest.

We will also continue our work of creating and further developing market- places for other environment-related instruments, such as electricity certifi - cates and electricity supplied with cer- tifi cates of origin. Our strong position within power brokerage is an important foundation for our other operations.

The majority of our industrial custom- ers within electricity, electricity certifi - cates and emissions allowances can be found here.

GOLD STANDARD FUND

We have also launched the Carbon Asset Management Gold Standard Fund during the year. Through this fund we provide fi nancing of the additional costs that a Gold Standard project entails.

The Gold Standard distinction for emis- sions reduction projects was created by organisations including the WWF in order to promote sustainable develop- ment in developing countries. This dis- tinction can be obtained for CDM and JI projects that are validated on the basis of the Gold Standard’s criteria, which are more far-reaching than those stipu- lated by the Kyoto Protocol.

TRICORONA CLIMATE PARTNER

We have also decided to invest in an operation focused on companies and private individuals that want to vol- untarily reduce their impact on the climate. Within Tricorona we have accepted responsibility for the climate impact caused by our operations by using green electricity as well as by off- setting certifi cates corresponding to the amount of carbon dioxide to which the operation gives rise. I am convinced that in the future all companies that want to appear responsible and aware of their impact on the climate will offset this impact in a corresponding manner. This will not only benefi t the global climate,

but also provide Tricorona with an even larger market.

FINALLY

I am convinced that, by combining investments and trading in environ- ment-related instruments with a strong environmental profi le, Tricorona will be able to create value for our shareholders in the years to come.

Stockholm, March 2007

Niels von Zweigbergk

Over the next few years, our most important task is to build a large portfolio of high quality projects that will deliver emissions allowances, primarily

between the years of 2008

and 2012 .

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OWNERSHIP STRUCTURE AND SHARES

Tricorona shares have been quoted on the Stockholm Stock Exchange since June 1989 . The shares are currently traded on the Nordic Exchange’s list, in the Small Cap segment. A trading lot comprises 2,000 shares.

SHARE CAPITAL

As at 31 December 2006, the share capital in Tricorona AB amounted to SEK 13,787,685 divided between 137,876,845 shares, each with a nom- inal value of SEK 0.10. All the shares have equal rights to a share in the com- pany’s assets and profi ts. At the Annual General Meeting, each individual entitled to vote may vote for the full number of votes corresponding to the shares owned and represented by this individual, with no restrictions regard- ing the number of votes.

CONVERTIBLE DEBENTURES

In December 2002, the company issued convertible debenture loans (2002/2009) to Norrlandsfonden and ALMI Företagspartner Gävleborg for a total of SEK 13,356,216, which grant entitlement to conversion to 3,339,054 shares during the period 31 December 2007 to 31 December 2009. The con- version rate is SEK 4.00 and the loan has a fi xed interest rate of 2 per cent.

Norrlandsfonden is entitled to con- vert to 2,810,252 shares and ALMI to 528,802 shares.

In September 2003, Tricorona issued a further debenture loan (2003/2007) for a nominal SEK 15,198,000, which granted entitlement to conversion to 5,066,303 shares during the period 31 December 2003 to 31 August 2007.

The conversion rate was SEK 3.00 and the loan has a fi xed interest rate of 7 per cent. The conversion loan 2003/2007 is listed at NGM .

In conjunction with a rights issue in the spring, the conversion rate was recalculated accordingly. The new con- version rate since June 2006 is SEK 2.40. The fi nal date for registration of conversion is 30 June 2007.

During 2006 further conversion has been made corresponding to 2,258,588 shares. Bearing in mind the recalculation and conversion, the convertible debenture loan 2003/2007 amounted to a nominal SEK 8,732,905, which granted entitle- ment to conversion to 3,638,711 shares.

WARRANTS

In June 2005, the Board of Directors, with the support of the Annual General Meeting, decided to issue 2,890,000

warrants. This took place in accordance with an agreement with a guarantee consortium, which guaranteed the com- pany’s preferential share issue in spring 2005. A warrant grants entitlement to subscribe for one share in Tricorona at a rate of 3.18 during the period 1 July 2005 to 31 December 2006. During the year, warrants corresponding to 2,881,000 shares have been subscribed for. There are no outstanding warrants as at 31 December 2006.

TRICORONA ON THE STOCK EXCHANGE

Tricorona’s shares are quoted on the Nordic Exchange’s list, in the Small Cap segment. The company was fi rst quoted on the Stockholm Stock Exchange’s O -list in June 1989 under the name Wermlands Guldbrytning. In 1996 the name was changed to Tricorona Mineral and in 2003 the Annual General Meeting

DISTRIBUTION OF SHAREHOLDING Holding

No.share-

holders No. of shares %

1 – 2,000 4,871 3,628,145 2.6

2,001 – 20,000 2,145 15,670,545 11.4 20,001 – 100,000 295 12,284,449 8.9 100,001 – 1,000,000 82 23,753,219 17.4 OWNERSHIP STRUCTURE

No.share-

holders No. of shares % Swedish owners 7,268 92,572,633 98.07

Europe 131 44,990,055 1.77

USA 4 116,007 0.05

THE 10 LARGEST SHAREHOLDERS PER 31 DECEMBER 2006

Shareholders No. of shares

Fourth AP-Fund 12,000,000

Fautor 10,000,000

Volati Ltd 9,068,795

Robur Småbolagsfond Sverige 6,073,000 SEB Private Bank, NQI 5,738,300

BLIWA Livförsäkring 5,728,000

Handelsbankens Småbolagsfond 4,910,000

NVZ Förvaltnings 4,706,000

JP Morgan Bank 3,539,000

Svenska Handelsbanken S.A. 3,239,000

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0 2,000 4,000 6,000 8,000 10,000

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5

TRICORONA ANNUAL REPORT 2006 OWNERSHIP STRUCTURE AND SHARES

SHARE CAPITAL DEVELOPMENT

Year Transaction Changes in the

number of shares Total number

of shares Share capital

Other contributed capital

Total other contributed

capital Quota value

1988 Formation of the company 1,200,000 1,200,000 1,200,000 – – 1

1989 New share issue 1,200,000 2,400,000 2,400,000 28,800,000 28,800,000 1

1994 New share issue 2,400,000 4,800,000 4,800,000 19,200,000 48,000,000 1

1995 New share issue 600,000 5,400,000 5,400,000 13,200,000 61,200,000 1

1996 New share issue 5,400,000 10,800,000 10,800,000 21,600,000 82,800,000 1

1999 New share issue 21,600,000 32,400,000 32,400,000 –1,684,521 81,115,479 1

2000 New share issue 32,400,000 64,800,000 64,800,000 –1,770,614 79,344,865 1

2001 Write-down/combination/reduction –58,320,000 6,480,000 6,480,000 13,801,690 93,146,555 1

2001 New share issue 2,844,344 9,324,344 9,324,344 288,965 93,435,520 1

2002 New share issue 8,000,000 17,324,344 1,732,434 12,700,000 106,135,520 0,1

2003 New share issue 9,275,656 26,600,000 2,660,000 10,444,046 116,579,566 0,1

2004 New share issue 100,000 26,700,000 2,670,000 140,000 116,719,566 0.1

2004 Conversion 468 26,700,468 2,670,047 1,357 116,720,923 0.1

2005 New share issue 34,803,071 61,503,539 6,150,354 49,608,062 166,328,985 0.1

2005 Conversion 326,962 61,830,501 6,183,050 786,589 167,115,574 0.1

2006 New share issue 71,808,782 133,639,283 13,363,928 225,597,191 392,712,765 0.1

2006 Conversion 2,258,588 135,897,871 13,589,787 5,422,153 398,134,918 0.1

2006 Warrants 1,978,974 137,876,845 13,787,685 6,095,240 404,230,158 0.1

SHARE PRICE DEVELOPMENT IN 2006

decided to change the name to Tricorona.

A trading lot comprises 2,000 shares.

252 million Tricorona shares worth approximately SEK m 935 were traded during the year. The fi nal price paid on 29 December 2006 was SEK 4.98. The highest price paid during the year was SEK 6.35, which was quoted on 26 April, while the lowest price paid during the year was SEK 2.52, quoted on 2 January.

Tricorona’s market value at the year-end amounted to SEK m 687, compared with SEK m 189 the year before.

With the aim of offering sharehold- ers with uneven trading lots the oppor- tunity to achieve even trading lots of 2,000 shares, brokerage-free trading in the Tricorona shares was carried out over a three-week period during the year.

The take-up of the offer was high, and approximately a third of the company’s shareholders registered to buy or sell. In total, the registrations resulted in a net purchase of 764,793 shares.

OWNERSHIP STRUCTURE

Tricorona had approximately 7,400 shareholders at the year-end, an increase of more than 1,000 shareholders in comparison with the same time in 2005.

A number of large, institutional own- ers were added in conjunction with the

new share issues in the spring. The ten largest shareholders own approximately 47 per cent of the outstanding shares.

The board members, the management and the employees in the company own approximately 7 per cent of the out- standing shares.

The share Affärsvärlden General Index Number of shares sold in thousands (incl. those registered subsequently)

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THE MARKET FOR EMISSIONS TRADING

Man is considered to be a strong contributing factor towards global warming. The debate is no longer centred on whether climate change is taking place or not, but rather what we can do to limit it.

THE MARKET

OUR CLIMATE

The greenhouse effect is worrying both companies and politicians around the world. During 2006, the climate issue has defi nitely moved from being a mat- ter for environmentalists to one that concerns the public at large.

Several alarming reports about the way mankind is infl uencing the climate have been presented. The UN ’s climate panel, the IPCC , presented its report on 2 February 2007 in its “Summary for policymakers”, which gives a scientifi c assessment of the state of the global cli- mate. In this, around a thousand scien- tists state that people and the way we live are responsible for global warming.

Nicholas Stern , the former Chief Economist at the World Bank, published another report in 2006 that attracted a great deal of attention. The most impor- tant message in this report is:

There is still time to avoid the worst impact of climate change, if we take

use all possible means at our disposal.

This includes everything from the rich nations credibly demonstrating that we are prepared to accept our responsibil- ity for reducing our own emissions of greenhouse gases, to providing fi nancial incentives to the poorer parts of the world to limit their accelerating emis- sions of greenhouse gases.

The fl exible mechanisms in the Kyoto Protocol now appear increasingly to be a signifi cant instrument for counteract- ing climate change. Emissions reduction projects in developing countries, known as CDM projects, are playing an increas- ingly central role in the Kyoto Protocol.

THE AGREEMENT THE KYOTO PROTOCOL

In 1997, the world’s industrial nations, with the exception of countries includ- ing the USA and Australia, entered into an agreement which aims to reduce glo- bal emissions of greenhouse gases over

COUNTRY

Emissions

CO₂ top 10 Per capita Millions of

tonnes 2002 2006 2002 2006

USA 5,773 6,552 20 23

China 3,783 4,294 3 3

Russia 1,534 1,741 11 12

Japan 1,213 1,377 10 11

India 1,106 1,255 1 1

Germany 863 980 11 12

Great Britain 541 614 9 10

Canada 518 588 17 19

Italy 450 511 8 9

France 379 430 6 7

Sweden 53 60 6 7

This table only relates to carbon dioxide emissions in 2002 and preliminary calculations for 2006, and does not include the other greenhouse gases. In 2002, the USA was responsible for by far the largest emissions of carbon dioxide.

Source: timeforchange.org

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Millions of tonnes, per capita

Luxembourg USA

AustraliaCanada FinlandRussia Japan China India United Kingdom

Sweden 0

5 10 15 20 25

which the goal is a reduction in emis- sions of 5.2 per cent compared to 1990.

The agreement formerly entered into force on 16 February 2005. By 27 February 2006, a total of 162 countries had signed up to the Kyoto Protocol, although only 40 of the world’s industrial countries, known as the Annex I countries, have undertaken to reduce their emissions of greenhouse gases.

More or less all the countries that emit large volumes of greenhouse gases have ratifi ed the Kyoto Protocol apart from the USA and Australia, which jointly are responsible for a quarter of the world’s total emissions.

Emissions of greenhouse gases are measured in a unit called carbon dioxide equivalent ( _CO2 e). The different green- house gases are defi ned by their Global Warming Potential ( GWP ). For exam- ple, methane gas has a GWP factor of 21, which means that 1 tonne of meth- ane gas is as harmful as 21 tonnes of carbon dioxide.

The UN allocates emission allow- ances, know as Assigned Amount Units, or AAU s, to countries with a commit- ment to reduce their emissions. The allocated AAU s correspond to the maxi- mum level of emissions allowed during the period. The countries are respon- sible for target emissions levels being reached, either through:

• Domestic measures for actual reduc- tion of carbon dioxide emissions.

These measures can be in the form of investments in new environmen- tally friendly technology, switching to renewable fuels or other measures aimed at changing behaviour through e.g. taxation, charges or subsidies

• Flexible mechanisms, divided into three approaches:

THE MARKET

GWP FOR SIX DIFFERENT GREENHOUSE GASES Greenhouse gas Formula

Carbon dioxide equivalents

Carbon dioxide CO2 1

Methane CH4 21

Dinitrogen oxide N2O 310

Fluorinated hydrocarbons HFC 140–11,700 Chlorofl uorocarbons/

Perfl uorocarbons

CFC/

PFC 6,500–9,200 Sulphur hexafl uoride SF6 23,900

1. emissions trading between countries that have a commitment to reduce their emissions

2. the creation of new emissions allow- ances that can be traded between both countries and individual compa- nies through investments in individ- ual carbon dioxide reduction projects under the “Clean Development Mechanism” agreement, or 3. “Joint Implementation”, which

entails emissions reduction projects in countries with a commitment to reduce their emissions.

The purpose of the fl exible mechanisms is to ensure that investments in emis- sions reduction measures take place where they produce the greatest benefi t and that they are socio-economically effi cient.

CLEAN DEVELOPMENT MECHANISM (CDM)

Under the Kyoto Protocol, the Annex I countries can in practice achieve their respective emissions reductions objectives in two ways, either through domestic measures or by using the agreement’s fl exible mechanisms. The principle is that when the cost of achiev- ing reduced emissions can vary between different countries, the effect should be that the emissions reduction should take place at the lowest possible cost, and that the effect on the environment is the same wherever in the world the reduc- tions are achieved. The cost of achiev- ing a given emissions reduction is prob- ably lower in developing countries than in industrial countries. CDM applies to emissions reduction projects in develop- ing countries that do not have their own commitments to reduce their emissions according to the Kyoto Protocol.

This table relates to preliminary calculations of carbon dioxide emissions for 2006, and does not include the other greenhouse gases.

Source: timeforchange.org Emissions of greenhouse gases are measured in a unit called carbondioxide equivalent (CO₂e).

The different greenhouse gases are defi ned by their Global Warming Potential (GWP). For example, methane gas has a GWP factor of 21, which means that 1 tonne of methane gas is as harmful as 21 tonnes of carbon dioxide.

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TRICORONA ANNUAL REPORT 2006 THE MARKET

If an industrial country invests resources in emissions reduction projects in a developing country in order to reduce emissions there and transfer modern technology with the aim of creating conditions for environmentally sustain- able development, the industrial coun- try can gain access to new emissions allowances, known as CER s, which can be used to achieve the allocated emis- sions targets more effi ciently from a fi nancial perspective. These emissions allowances are also valid for use within the EU ’s trading system for emissions allowances from January 2005.

In order to generate emissions allow- ances, all CDM projects must undergo a registration process. In order for a CDM project to be implemented, it must fi rst be approved by the authorities in the host country for the project. The project description is made available to the gen- eral public, who can oppose the project should they wish. Furthermore, an inde- pendent examiner must validate the project before it can be submitted to the UN ’s Executive Board of registration.

In order for a project to be able to be approved, two primary criteria have to be satisfi ed. Firstly, the project has to contribute to sustainable economic development in the country in question.

Secondly, the project has to fulfi l the requirement for additionality, which

means that the project would not have been implemented were it not for the creation of transferable emissions allowances, i.e. it would not have been economically viable.

After the project has been imple- mented, in order for emissions rights to be issued, an independent examiner must verify the project and establish that a reduction in emissions has actu- ally been achieved. After this, the UN issues emissions allowances that can be used both by companies and individual countries in order to achieve their emis- sions reduction goals.

Examples of CDM projects in which Tricorona has invested include two wind power parks in Liaoning Province in north-east China, where the project owner Liaoning Kangping Jinshan Wind Power Ltd has invested the equiv- alent of SEK m 400. These wind power parks generate approximately 108 GW h annually, which means that they can replace coal-fi red energy produc- tion, the most common form of energy production in the region, with a corre- sponding amount of renewable energy.

JI projects refer to emissions reduction projects in a country that has a commit-

THE REGISTRATION PROCESS FOR A CDM PROJECT

Project design

and formulation National approval Validation Registration

Project

description Controller ¹⁾ A General public Executive

Board – UN

Registered CDM project Public

opposition

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ment under the Kyoto Protocol regarding reduced emissions. There are two separate processes for these projects, called track 1 and track 2. Track 2 resembles the process for CDM projects, while track 1 may take different forms in different countries. The difference between JI projects and CDM projects is that no new emissions allow- ances are generated with JI projects.

Instead, emissions allowances known as ERU s (Emission Reduction Unit) are issued. These are AAU s that are restamped to convert them from a currency between sovereign states into an emissions credit that can also be used in the private sector.

These emissions allowances are valid from January 2008.

THE EU’S TRADING SYSTEM (EU ETS)

The European Union Emission Trading Scheme ( EU ETS ) was launched on 1 January 2005 with an initial trading period running until the end of 2007.

This trading period precedes the Kyoto Protocol’s fi rst commitment period, which runs from 2008–2012. The pur- pose of the early EU ETS trading was that it would contribute to reducing emissions, as well as providing expe- rience that can be used to develop the trading system prior to the Kyoto Pro- tocol’s fi rst commitment period, which commences in 2008 and coincides with the EU ETS ’s second commitment period

2008–2012. The EU ’s emissions trading is regulated through a special directive and covers all the EU ’s Member States.

Under the Kyoto Protocol, the EU has unilaterally undertaken to reduce emissions by 8 per cent compared with the 1990 level, under the Burden Sharing Agreement. However, this commitment only applies to the EU 15 countries, i.e. the countries that were members of the EU in 1997. For the other EU coun- tries, the 5.2 per cent goal defi ned in the Kyoto Protocol applies. Emissions allowances issued by the EU ’s Member States are known as EUA s ( EU Allow- ances) and can be traded within the EU ETS .

According to an EC directive, project- based emissions allowances ( ERU s and CER s from JI and CDM projects) are also valid within the EU ETS . Through this, both countries and individual com- panies in the trading sector can offset their defi cit of emissions allowances by purchasing CER s and ERU s. Each Mem- ber State has submitted a plan to the European Commission regarding how the emissions allowances will be distrib- uted between affected national facilities and industries or businesses. On 25 June 2005, the European Commission deter- mined the fi nal allocation to the Mem- ber States in national allocation plans ( NAP ) for the period 2005–2007. The

VERIFICATION PROCESS FOR THE ISSUING OF CERS

Monitoring Verifi cation/certifi cation

Request for

issue Issue of CERs

Monitoring

report Controller ¹⁾ B Verifi cation/cer-

tifi cation report

Executive

Board – UN Purchaser

CERs

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allocations for the period 2008–2012 are currently being drawn up. For the fi rst trading period 2005–2007, emissions allowances corresponding to approxi- mately 2.2 billion tonnes of carbon diox- ide per year were allocated within the EU . In Sweden, the Swedish Environmen- tal Protection Agency is responsible for the allocation to businesses. The Swedish Environmental Protection Agency also acts as the Swedish inspection author- ity, while the emissions allowances are issued by the Swedish Energy Agency.

At present, the emissions allowances are distributed to the relevant businesses free of charge. Discussions are currently under way within several Member States regarding the auctioning off of a propor- tion of the allocation in future.

No later than 31 March each year, each affected business must report its emissions from the previous year.

Within at most one month thereafter, they must also transfer the correspond- ing number of emissions allowances to the national authority. If individual companies do not transfer emissions allowances corresponding to their actual emissions, a penalty charge of EUR 40 is incurred per excess tonne of carbon dioxide that has been emitted.

From 2008 this charge is being raised to EUR 100 per tonne. The requirement to submit emissions allowances for these excess emissions remains even after the penalty charge has been paid. According to the directive, the name of the business acting in breach of the requirement to transfer a suffi cient number of emissions allowances will also be made public.

EMISSIONS TRADING

According to the consultancy and analysis company Point Carbon, emissions trad- ing, including emissions allowances from CDM and JI projects, is anticipated to amount to EUR 34 billion by 2010, which is equivalent to a turnover of 4.5 billion emissions allowances. In 2006, the mar- ket is estimated to have traded a total of almost 900 million emissions allowances.

At present, emissions trading takes place both in a number of market- places and Over The Counter ( OTC ).

The majority of the organised trading takes place on the European Climate Exchange ( ECX ). The Nordic electric- ity market Nordpool is another impor- tant marketplace. However, by far the majority of all trading takes place bilat- erally, not via a stock exchange. EUA s are the only instrument that are cur- rently traded on an exchange. The emis- sions allowances from the Kyoto Proto- col’s fl exible mechanisms such as ERU s and CER s are only traded OTC . How- ever, it is probable that these instru- ments will also be traded on exchanges in the future.

Trading in CER s also increased dramatically during 2006 as a result of more projects having been registered and having received emissions allow- ances issued by the UN . At the year-end, 472 projects were registered and 28 mil- lion CER s had been issued.

The distribution per sector and country refers to registered projects. In total, 472 projects had been registered by the year-end. The most common types of project to date come from the energy sector, and mainly comprise contribu- tions of renewable energy such as hydroelectric power, wind power and biofuel-fi red power stations. Another common CDM project is the recovery of methane gas when handling waste.

The major CDM countries are China, India and Brazil, followed by South Korea and Mexico.

These countries jointly represent 85 per cent of the registered projects based on volume.

REGISTERED CDM PROJECTS DISTRIBUTED BY COUNTRY

China 42%

India 14%

South Korea 10%

Mexico 5%

Other 15%

REGISTERED CDM PROJECTS DISTRIBUTED BY SECTOR

Brazil 14%

Agriculture 11%

Waste

management 24%

Volatile gases from fuel 8%

Manufacturing industry 5%

Other 4%

Energy sector 48%

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Assume that Company

A

and Company

B

annually emit

100,000

tonnes of carbon dioxide and that the govern- ment allocates both of them

95,000

emissions allowances. Each emissions credit grants the entitlement to emit one tonne of carbon dioxide. Consequently, Company

A

and Company

B

must both cover their respective defi cit of

5,000

emissions allowances in order to avoid a penalty charge. This can be achieved in two ways:

1. Reduce emissions by

5,000

tonnes

2. Purchase

5,000

emissions allowances on the market at market price.

For the sake of simplicity, assume that the market price per emissions allowance is

EUR 25

per tonne. For Com- pany

A

, the cost for reducing emissions amounts to

EUR 5

per tonne. Company

A

will then reduce its emissions as this is cheaper than purchasing emissions allowances. Company

A

can also reduce its emissions by more than

5,000

tonnes, say

10,000

tonnes, which means that

5,000

emissions allowances can be sold.

The opposite situation applies to Company

B

. The cost for reducing its emissions amounts to

EUR 30

per tonne, which means that it is more advantageous to purchase emissions allowances instead of reducing emissions in its own plants.

Company

A

spends a total of

EUR 50,000

on reducing emissions by

10,000

tonnes and at the same time receives

EUR 125,000

for the

5,000

emissions allowances it sells at

EUR 25

each. Consequently Company

A

makes a net earning of

EUR 75,000

, compared to a net cost of

EUR25,000

if the

EU ETS

trading system had not been in place.

Company B spends a total of

EUR 125,000

on purchasing

5,000

emissions allowances at

EUR 25

each. As Company

B

does not have any costs for reducing emissions, but only purchases emissions allowances, the cost is

EUR 125,000

compared to a net cost of

EUR 150,000

if the

EU ETS

trading system had not been in place.

As only companies that can reduce their emissions by more than the required amount can sell emissions allow- ances (Company

A

), the emissions allowances that are purchased (by Company

B

) also represent a reduc- tion in emissions. This means that emissions overall will reduce in accordance with the country’s commitment according to the Kyoto Protocol, but that the emissions reduction takes place where it is most economical.

EXAMPLES OF EMISSIONS TRADING

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EMISSIONS TRADING BUSINESS AREA

Tricorona’s operational unit for emissions trading can be found within the Emissions Trading business area.

A new share issue was conducted within Tricorona during 2006 to fi nance this new investment.

OPERATIONS

After several years as a broker in the rapidly growing market for emissions allowances from CDM and JI projects within the subsidiary company Svensk Kraftmäkling ( SKM ), Tricorona decided in 2005 to further develop and extend this operation by investing itself in these projects and trading in emissions allow- ances in its own name. The operation within SKM was transferred to Carbon

Asset Management Sweden AB ( CAM ), which is the operational unit within emissions trading. A new share issue was conducted within Tricorona during 2006 to fi nance this new investment.

The strategy entails creating added value for end users of emissions allow- ances by means of CAM contracting volumes from many different projects and packaging these in suitable sizes

THE VALUE CHAIN IN THE CDM MARKET

Project owner Project developer Broker Power producer Industry

Funds

Voluntary climate neutralisation

Trading companies By becoming involved in CDM projects at an early stage, CAM will

be able to create value for its customers by being able to control the entire value chain – from early project development and fi nancing through to the delivery of CERs to end customers.

CARBON ASSET MANAGEMENT

(17)

TRICORONA ANNUAL REPORT 2006 OPERATIONS

according to the customers’ needs and with guaranteed delivery. In this way CAM is creating a portfolio of both purchase and sales agreements that are then matched on delivery. The agree- ments that are entered into are prima- rily of the type where the project owner does not guarantee the number of CER s that are generated. CAM is therefore endeavouring to enter into agreements with several projects and with projects of vary ing types and degrees of maturity in order to spread the risk. The strategy of spreading risk also applies to counter- parties and countries. Unique project risks that arise are handled in this way on the basis of a portfolio perspective.

CAM is endeavouring to contract every- thing that is produced from a project throughout the project’s validity period, which is normally 7 or 10 years. As the sole purchaser, CAM then gains better control over the project and is better able to manage the various project- related risks. In practice, this means that CAM enters into futures contracts where price and delivery dates are settled today, but where payment and delivery take place at later dates. Deliv- ery from a project normally takes place once a year, which CAM can infl uence by conducting emissions verifi cations at shorter intervals.

CAM also invests in the development of CDM and JI projects. CAM ’s role here is primarily to be responsible for project management and co-ordination of the efforts that are required to take a poten- tial project from the planning stage to implementation, and through the UN ’s registration process to the issuing of emissions allowances. In this respect, CAM has not assumed any share or risk in the underlying physical project,

Hydroelectric power 51%

Energy effi ciecy 16%

Wind power 7%

Recovery of methane 5%

Biomass 21%

China 60%

Vietnam 2%

India 35%

Emissions allowances in

thousands Delivery

2006 Delivery

2007 Total 2006–2012 Contracted

volume 500 1,531 13,115

Sold volume 500 870 1,370

Net position 0 661 11,745

but only in the administrative process that leads to issuing of emissions allow- ances. A typical process can take 6–12 months and require direct investments in the order of EUR 50,000–100,000.

The ambition here too is to achieve a spread of risks by managing a portfo- lio comprising various projects in vari- ous stages.

By entering into contracts at a fi xed price, CAM runs a price risk corre- sponding to the net position in the port- folio (purchased volume minus sold volume). CAM intends to retain a fun- damentally long position as regards emissions allowances, but from time to time will both increase and decrease exposure, for example through the derivatives market.

In addition to the portfolio model described above, CAM will continue to negotiate all or parts of projects where CAM transfers the entire risk to the pur- chaser. CAM also intends to participate in syndications of major projects where the end customers often comprise major fully or partially state-owned funds.

CAM ’s customers are mainly Euro- pean power producers and small to medium-sized industrial operations in Europe, as well as funds of various kinds, ranging from private funds to fully or partially state-owned funds in Europe, Canada and Japan.

Players in this market include Eco Securities Plc, Econergy Plc, AgCert Plc, Trading Emissions Plc, CAMCO Plc and Climate Change Capital Ltd.

Brazil 2%

The majority of the CDM projects that are contracted comprise renewable energy. Hydroelec- tric power, wind power and biofuels constitute almost 80 per cent of the projects. In addition, Tricorona is also investing in energy effi ciency projects, which also have the potential to be classifi ed in accordance with the Gold Standard.

DISTRIBUTION OF PORTFOLIO BY COUNTRY OF ORIGIN

DISTRIBUTION OF PORTFOLIO BY TYPE OF PROJECT

SUMMARY OF SIGNED AGREEMENTS REGARDING EMISSIONS ALLOWANCES

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CARBON ASSET MANAGEMENT GOLD STANDARD FUND

Tricorona’s ambition is to acquire emis- sions allowances that can live up to high standards for long-term sustainability.

Above all, this means projects within renewable energy and energy rationali- sation within industry. In order to fur- ther support high-quality projects, Tricorona launched the “Carbon Asset Management Gold Standard Fund” in 2006. The Gold Standard distinction was created by organisations including the WWF in order to promote sustain- able development in developing coun- tries. The distinction can be obtained for CDM and JI projects that are vali- dated on the basis of Gold Standard criteria and that are more far-reaching than those stipulated according to the Kyoto Protocol. Through the fund, Tricorona will offer fi nancing of the additional costs that the quality require- ments in a Gold Standard project entail.

Through this initiative, Tricorona will have the potential to acquire more projects with a stronger environmen- tal profi le.

THE GOLD STANDARD

Developed by WWF and NGOs in collabo- ration with governments, corporations and experts around the world, The Gold Stand- ard has long-term environmental and social integrity at its heart. The Gold Standard is rigorous, but easily adapted to changing rules and markets. Based on a simple but comprehensive screening process, The Gold Standard bolsters the foundations of credible project-based emissions trading.

Tradable credits from international emission reduction projects – if properly con- structed – will provide corporations and governments with the fl exibility to protect the climate at minimum cost. Many CDM project methodologies have been rejected by the market regulator, the CDM Executive Board, because of their low environmental integrity.

Developers and buyers were left with mean- ingless pieces of paper and damaged rep- utations. The Gold Standard carbon credits are specifi cally designed to exceed the environmental standards demanded by the market regulator and governments. That’s why they enjoy a lower risk profi le, command a price premium and signifi cantly reduce the reputational exposures of both developer and buyer. At the same time, The Gold Standard will assure host countries that projects truly contribute to their sustainable development.

www.camgoldstandard.com

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KANGPING & ZHANGWU – TWO WIND POWER PROJECTS IN CHINA

During spring

2006

, discussions were entered into with a local project developer of

CDM

projects that had been commissioned on the project owner’s behalf to develop two wind power projects, Zhangwu and Kangping in north-east China, into

CDM

projects. The two wind parks are for

24.65 MW

each and are situated in Liaoning Province, close to the border with North Korea. The projects comprise

58

wind turbines each with a capacity of

850

k

W

, and are expected to generate and supply

108.24 GW

h annually to the region.

In the region where these projects are situated,

93

per cent of energy production is made up of fossil fuels, primarily coal.

CAM

and the project owner, Liaoning Kangping Jinshan Wind Power Ltd (

LKJW

), entered into an agreement in June

2006

for the delivery of all production of

CER

s during the period

2003–2012

. The projects were validated during June by Det Norske Veritas, an independent auditor, and a request for registration with the

UN

’s convention on climate change, the

UNFCCC

, was submitted on

26

July. During this time,

CAM

and

LKJW

had applied for approval from the relevant national authority (the Swedish Energy Agency) for approval as project participants.

The projects were approved and registered with

UNFCCC

on

13

October.

Immediately after registration had been completed, the Société General de Surveillance, another independent auditor, was engaged to verify the emissions reductions that had already been achieved since the start of the projects in

2003

(it is not permitted for the same auditor both to validate the project and to verify the actual reductions). The verifi - cation was conducted during November and a formal request for the issuing of a total of

130,000 CER

s was made at the beginning of December. On

20

December, the

UNFCCC

approved this request and issued the emissions allowances to

CAM

.

Kangping and Zhangwu represent the type of project that

CAM

is prioritising and will strive for in the future. The emissions allowances are generated from projects on the basis of very demanding criteria for sustainable development.

CAM

will also seek additional quality distinctions for these projects by allowing them to undergo validation according to the Gold Standard. This quality distinction acts as a certifi cate of origin of high-quality projects and will accompany the emissions allowances when they are sold on to our customers.

Liaoning Kangping

http://cdm.unfccc.int/Projects/DB/DNV-CUK1153828094.42/view.html Liaoning Zhangwu

http://cdm.unfccc.int/Projects/DB/DNV-CUK1154525743.09/view.html

(20)

climate neutral byTricorona

Tricorona invests and trades in environ- ment-related market instruments. Dur- ing 2006, it was decided to supplement Tricorona’s business by offering climate neutralisation to companies and private individuals.

This venture in voluntary climate neutralisation is conducted within the framework of a newly formed subsidi- ary, Tricorona Climate Partner ( TCP ).

This operation includes a competitive solution for the calculation of compa- nies’ and individuals’ climate impact, where the calculation model has been verifi ed by an independent auditor. TCP offers its customers climate neutrali- sation. This entails a turnkey solution throughout the entire value chain, from analysis and calculation of the com- pany’s environmental impact, through a programme of emissions reductions measures and fi nally to climate neutral- isation via emissions allowances from CDM projects.

By establishing TCP , Tricorona’s fi nancial strength and knowledge of the market for emissions allowances is com-

bined with expertise in the calculation of environmental impact.

TCP intends to deliver climate neu- tralisation with emissions allowances that are certifi ed in accordance with the Gold Standard, a higher quality level for CDM projects, that is supported by organisations including the WWF . The ability to deliver projects with this level of quality is a strength and form of secu- rity for TCP ’s customers.

One important area is travel, encom- passing both private and business travel, which means that travel agencies, air- lines and large companies are all priori- tised target groups. As climate neutrali- sation is a global issue, the market will not be local to Sweden: the aim is to cre- ate an international customer base.

Tricorona Climate Partner offers its customers a turnkey solution ranging from analysis and calculation of climate impact to climate neutralisation via emissions allowances from CDM projects. The market for voluntary climate neutralisation is expected to grow strongly in 2007.

CLIMATE NEUTRALISATION BUSINESS AREA

(21)

5 10 15 20 25 30 35 40 45 100

150 200 250

50 Avista/SEK

Weeks OPERATIONS

THE POWER MARKET

The year was characterised by major price movements. At the beginning of the year the price of electricity on the Nordic mar- ket rose dramatically from a relatively low level. The volume traded on the mar- ket rose strongly during the fi rst quarter, before falling back as a consequence of the signifi cant price movements. The Nordic prices have become more dependent on international trends, in line with the dereg- ulation of the markets. There was a very clear link to the electricity price in Ger- many and the price of emissions allow- ances. The price of emissions allowances fell dramatically during the spring and also affected the electricity price, which fell to a corresponding degree. The low levels in the hydroelectric reservoirs contributed to high summer prices, which subsequently fell back as the reservoirs were normalised towards the end of the year.

During the second half of the year, the focus was on the hydrology of the Nordic region, and the correlation with Europe was not as strong.

Specifying the origin of electricity is set to become mandatory for all electric- ity sales within the EU. In Sweden, dis- cussions have been conducted between the responsible government departments and the business sector during the year, with the aim of identifying a good sys- tem for handling certifi cates of origin – a new market that Tricorona is looking forward to in the coming year.

ELECTRICITY CERTIFICATES

During the year, the Swedish electricity certifi cate market has been characterised

periodically by high price movements.

The year began with a fall of approxi- mately SEK 50 to SEK 150/ electricity certifi cate, and then remained more or less stationary over the summer. The autumn arrived with a dammed-up pur- chase requirement, which contributed to a steady price rise. The year ended with price levels for electricity certifi cates of around SEK 200.

In June, the Swedish Parliament decided to introduce the changes in the Electricity Certifi cates Act that had been proposed in the Government bill

“Renewable electricity with green elec- tricity certifi cates” and in the spring budget. The changes that are specifi ed in the bill are intended to provide the sys- tem with a more long-term approach and to raise the level of ambition for the production of renewable electricity.

The level of ambition is being raised and the goal is for renewable electricity production to increase by 17 TWh/year by 2016, compared to the 2002 level.

Responsibility for the quota obligation is also being moved from the electricity consumer to the electricity suppliers, and the cost of the electricity certifi cates will be incorporated in the electricity price.

The most important change is that the electricity certifi cate system is being extended until 2030, in order to create a level of stability and a long-term envi- ronment for the players’ investments in renewable electricity production.

SKM ’s leading position on the elec- tricity certifi cate market is now well established. Brokered volumes are more or less on a par with the previous year.

BROKERAGE BUSINESS AREA

Svensk Kraftmäkling is a leading broker of electricity in the deregulated Nordic power market.

The company also holds strong positions in the markets for electricity certifi cates and certifi cates of origin.

PRICE HISTORY FOR ELECTRICITY CERTIFICATES DURING 2006 TRICORONA ANNUAL REPORT 2006

(22)

TRICORONA ANNUAL REPORT 2006 OTHER OPERATIONS

OTHER BUSINESS AREA

These other operations comprise a number of companies whose business concept is to offer service to the met- allurgical sector and other industrial operations by supplying a large selec- tion of raw materials, primarily second- ary and precious metal recovery, as well as a number of deposits in the industrial mineral sector.

ANA

Ädelmetall’s operation com- prises recovering precious metals from metal waste, the sale of semifi n- ished products and the manufacture of mouldings made from precious metals.

The client groups are goldsmiths and silversmiths, dental technicians and industries that use precious metals.

M.V.

Metallvärden is a trading house whose business concept is to pro- vide service primarily to the metallurgi- cal industry in Northern Europe through deliveries of raw materials (primarily secondary) such as scrap iron and other metals of well-defi ned quality. M.V.

Metallvärden also includes a sharehold- ing corresponding to 40 per cent in Z - skrot, a metal recovery company in the northern Swedish province of Norrland.

Metallvärden i Lesjöfors owns the majority of the buildings at the old steelworks in Lesjöfors, which serve as functional production and storage areas for the recovery of metals.

A number of years ago, Tricorona operated primarily in the industrial mineral sector. A number of these deposits are still owned by the company,

During the year, Tricorona has chosen to focus on the business concerning the trade in environment-related market instruments. The company’s other activities that are conducted in the Metals and Minerals divisions have been judged to be of a non-strategic nature.

Woxna Graphite is a graphite mine situ- ated north of Edsbyn in the province of Hälsingland, where mining operations were conducted between 1998–2002. The mine has subsequently been put on hold pending the development of the market for high-quality graphite. Graphite is used in areas such as the steel industry, as well as in the manufacture of fuel cells.

Svenska Vanadin possesses mining rights (mining concessions) for an iron and vanadium deposit north of Delsbo in Hälsingland. During the year, Outokumpu Technology has updated a previously implemented “pre-feasibility study”. This report constitutes an impor- tant foundation in the sales work relat- ing to this deposit. Vanadium is primarily used as an alloy metal in special steel.

Aros Mineral holds a processing concession for one of Europe’s largest wollastonite deposits, situated in the province of Västmanland.

Svenska Kaolin owns the process- ing concession for a signifi cant kaolin deposit at Billinge in central Skåne.

Kaolin is primarily used as a coating and fi lling agent in the paper industry. It is anticipated that an application for an environmental permit will be submitted to the Environmental Court in the fi rst half of 2007. Following the share issues conducted during the year, Tricorona owns approximately 45 per cent of the shares in the company.

St1 Sweden AB was sold during the

year (the entire shareholding of 30 per

(23)

EMPLOYEES

VALUES

Tricorona’s values form the basis for an attractive working environment and create conditions for profi table growth. The values encourage all employees within Tricorona to think creatively and innovatively. They also generate respect for each other’s differ- ences and promote positive develop- ment. Within Tricorona we are trying to encourage all employees to question, take the initiative, assume responsibil- ity and work towards the guidelines and goals that Tricorona has laid down.

Tricorona is endeavouring to create an environment where individual ambi- tions correspond with those of the com- pany. As Tricorona’s ability to retain and develop the Group’s employees is extremely important for the company’s development, additional emphasis is placed on both the recruitment process and staff welfare. At the end of 2006, the company had 47 employees, of whom 75 per cent were men.

RECRUITMENT

Retaining and attracting skilled employ- ees is an important factor for success for Tricorona.

The competition is stiff, and as the sector is new and growing strongly, there are a limited number of peo- ple with experience in the areas in which Tricorona operates and requires employees.

In order to meet the requirements from an internationally expanding market and to satisfy our suppliers’ and customers’ stringent demands, it is necessary for Tricorona to be able to retain well qualifi ed employees as well as recruit new ones in the future. This is a decisive factor for success.

SALARIES AND INCENTIVE PROGRAMMES

The level of remuneration within Tricorona is competitive, as well as being in line with market conditions.

The aim is for the majority of the employees to receive a combination of fi xed and variable salary.

LOW SICKNESS ABSENCE

Committed employees, an attractive

working environment and subsidised

health care during leisure time are fac-

tors that contributed to Tricorona being

declared one of the healthiest compa-

nies on the stock market during the year,

according the Folksam’s Health Index

2006 for the private sector. Out of a

total of 227 graded companies,

Tricorona was one of only three com-

panies to be awarded the highest possi-

ble grade. The health grade is based on

the company’s total sickness absence,

long-term sickness absence and sickness

absence among women.

(24)

TRICORONA ANNUAL REPORT 2006 SUSTAINABILITY REPORTING

SUSTAINABILITY REPORTING

Within the framework of its operations, Tricorona wants to contribute to a devel- opment of both the local and the global environment that is sustainable in the long term. The products and services must satisfy society’s requirements as regards reducing the impact on the climate.

Tricorona’s operations must be char- acterised by good business ethics and responsible globalisation. This is partic- ularly important as Tricorona’s projects are primaly conducted in developing countries.

INDEPENDENT EXAMINATION

Tricorona has the expressed ambition of allowing, where possible, all sustainabil- ity information to be examined by inde- pendent parties. This year the Group’s auditors have examined all essential sustainability information in the annual report and sustainability report.

ORGANISATION AND MANAGEMENT OF SUSTAINABILITY ISSUES

Tricorona’s operational sustainability work is based on the environmental policy, as well as the company’s focus on trading in electricity and emissions allowances. Through the environmental policy, the business will:

• Reduce the environmental impact from transport, both during service assignments and deliveries, by choos- ing the optimum transport method from an environmental perspective.

• Offset all emissions that arise from air

the corresponding quantity of emis- sions allowances.

• Motivate the employees to act in an environmentally responsible way.

• Reduce the environmental impact at the offi ces by:

1. reducing the use of energy and materials 2. stipulating relevant environmental

requirements when purchasing goods and services

3. handling waste in the optimum way.

Within the Group, travel is responsible for almost all of environmental impact, which is primarily caused by fl ights and car journeys. During the year Tricorona decided to make its operations climate neutral. This is being achieved by pur- chasing and cancelling emissions allow- ances corresponding to the emissions of greenhouse gases that are produced within the operation. Tricorona’s emis- sions during 2006 correspond to 500 tonnes of carbon dioxide, which have been offset by emissions allowances gen- erated from a CDM project in India.

SUPPORT FOR CALCULATING EMISSIONS

Many interested parties are requesting tools to enable them to calculate their climate impact. Both to help them and for its own use, Tricorona has devel- oped an emissions calculator for trans- port, travel and home/offi ce space. The tool is available on Tricorona’s website, www.tricorona.se.

Tricorona operates in a sector where environmental and climate issues form the basis for the business concept.

Against this background, awareness of these issues is high within the company. Tricorona is now climate neutral, i.e. the amount of emissions caused by its operations are compensated via emissions allowances.

ANNUAL REPORT 2006