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Note 14 Available-for-sale investments
Accounting principles
The group classifies its investments into three categories: trading, held-to-maturity and available-for-sale. At the reporting date, the group held only available-for-sale investments. All available-for-sale investments are considered to be non-current assets, unless they are expected to be realised within twelve months.

Available-for-sale investments are initially recognised at fair value and subsequent gains and losses are booked to equity’s fair valuation reserve in other comprehensive income (OCI) and, when they are sold, the accumulated fair value adjustments are then included in the Consolidated Income Statement. Available-for-sale investments are assessed for indicators of impairment at the end of each reporting period. A significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. The part of the fair value reserve (OCI) represented by the impairment is transferred to the Consolidated Income Statement.
Summary of values
Year Ended 31 December
EUR million 2016 2015
Acquisition cost at 1 January
Listed securities 4 4
Operative securities 123 111
Investments classified as available-for-sale 127 115
OCI in opening balance 32 359
Available-for-Sale Investments at 1 January 159 474
Translation difference -1 1
Additions 2 14
Change in fair values accounted for as OCI 140 -328
Disposals -10 -
Income Statement - gains and losses 5 -2
Carrying Amount at 31 December 295 159
Unrealised gains and losses on securities
Year Ended 31 December
EUR million 2016 2015
Net unrealised holding gains (OCI) 170 32
Cost 125 127
Fair Value 295 159
Net unrealised holding gains (OCI) 170 32
Deferred tax -8 -5
Net Unrealised Holding Gains Shown in Equity as OCI 162 27
Change in Net Unrealised Holding Gains Shown in Equity as OCI 135 -326
PVO shares
The group holds a 15.5% (15.2%) interest in Pohjolan Voima Oy (PVO), a privately-owned group of companies in the energy sector that produces electricity and heat for its shareholders in Finland. Each subsidiary of the PVO group has its own class of shares that entitle the shareholder to the energy produced in proportion to its ownership of that class of share. The shareholders then have an obligation to cover the costs of production, which are generally lower than market prices. The holding is fair valued quarterly using an average of two methods: the discounted cash flow model and trading multiples. The valuation is categorised at level 3 in the fair value hierarchy.

The electricity prices in the model are based on Nordpool prices. Liquid future derivative prices are used for the available years in the model and thereafter increased by an inflation factor. The historical financial statements provide the basis for the cost structure for each of the power assets, which are adjusted by the inflation factor in future years. The discount rate of 3.29% used in the DCF is determined using the weighted average cost of capital method. The trading multiples are derived from a peer group of European companies operating power assets similar to PVO’s. A +/- 5% change in the electricity price used in the DCF would change the valuation by EUR 42 million and EUR -42 million, respectively. A +/- 1% absolute change in the discount rate would change the valuation by EUR -28 million and EUR 37 million, respectively.

Other uncertainties in the valuation of PVO’s share of Olkiluoto 3 nuclear power plant project relate to on-going arbitration proceedings between the plant supplier AREVA-Siemens Consortium and the plant owner Teollisuuden Voima Oyj (TVO). Stora Enso’s indirect share of the capacity of Olkiluoto 3 is approximately 8.9%, through its PVO B2 shares. The possible outcome of the arbitration proceedings has not been taken into account in the valuation.
PVO shareholding at 31 December 2016
EUR million Share Series % Holding Asset Category Fair Value 2016 Fair Value 2015
PVO-Vesivoima Oy A 20.6 Hydro 121 74
Teollisuuden Voima Oyj B 15.7 Nuclear 114 39
Teollisuuden Voima Oyj B2 14.8 Nuclear under construction 0 0
Other C,C2,V,M Various Various 7 10
Total 242 123
The valuation in 2016 amounted to EUR 242 (EUR 123) million against cost value of EUR 110 (EUR 115) million, with the revaluation of EUR 132 (EUR 8) million being taken to other comprehensive income. The change in PVO’s value is mainly caused by increase in electricity prices. No deferred tax is appropriate as under Finnish tax regulations holdings above 10% are exempt from tax on disposal proceeds.

During 2015, an impairment of EUR 2 million was taken to Income Statement in respect of the investment in C-shares series of PVO. This relates to the decision to discontinue electricity production in all the coal and oil-fired power plants of PVO-Lämpövoima Oy.

For information on the amount of electricity generated, purchased and sold, please see Stora Enso Sustainability Report 2016, section Environment and Efficiency (Energy).
Principal available-for-sale investments
As at 31 December 2016
EUR million Holding % Number of Shares Acquisition Cost Fair Value
Packages Ltd, Pakistan - listed security 5 396 650 4 42
Total Listed Securities 4 42
Pohjolan Voima Oy - unlisted security 15.5 4 943 707 110 242
Others - unlisted securities 11 11
Total Operative Securities 121 253
Total Available-for-Sale Investments at 31 December 2016 125 295
Total Available-for-Sale Investments at 31 December 2015 127 159
The difference of EUR 170 (EUR 32) million between the initial fair value at acquisition and reporting date market value of the available-for-sale investments represents the OCI reserve as shown in the Statement of Changes in Equity. Euro-denominated assets comprise 85.9% (82.7%) of available-for-sale investments.

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