Statkraft AS Annual Report

2016 CONTENT

Part 1 About Statkraft 04 Letter from the CEO 05 Statkraft in facts and figures 07 Power plants and district heating plants 08 Statkraft around the world

Part 2 Report from the Board of Directors 09 The Board of Directors of Statkraft 10 Report from the Board of Directors 35 Declaration from the Board and CEO 36 Statkraft Group Management

Part 3 Financial Statements

38 Group Financial Statement s 39 Statement of Comprehensive Income 40 Statement of Financial Position 41 Statement of Cash Flow 42 Statement of Changes in Equity 43 Notes

94 Statkraft AS Financial Statements 95 Income statement 96 Balance Sheet 97 Statement of Cash Flow 98 Notes 113 Auditor’s Report

120 Corporate Responsibility Statement 122 Statement 130 Auditor’s Statement

132 Alternative Performance Measures

133 Key figures

Read the full report at: annualreport2016.statkraft.com Providing pure energy

Statkraft is a eadi coa i hdrooer iteratioa ad roes arest eerator of reeae eer The coa eerates oer fro hdro id asfired oer ats ad district heati Statkraft is a iteratioa aer i eer arket oeratios ad is reset i ore tha cotries

STATKRAFT ÅRSRAPPORT 2016 STATKRAFT ÅRSRAPPORT 2016

STATKRAFT ANNUAL REPORT 2016 STATKRAFT ANNUAL REPORT 2016 7 Highlights of 2016: Banja hydropower plant in Albania, the renovated and expanded Nedre Røssåga hydropower plant, and Årvollskogen district heating plant in Norway, were all officially opened in 2016. Another major event was the decision to invest in the 1000 MW Fosen wind power project. Statkraft is also taking steps to participate in developing new technologies, and in February 2016 put into operation the first multi-megawatt battery in Germany. Statkraft’s high level Climate Roundtable gathered scientists, business leaders and politicians to explore new business solutions to the climate challenge.

Letter from the CEO

Powerful forces are changing and shaping the energy sector. Statkraft to become one of the most competitive companies in There is a transition towards a low-carbon economy all around our industry and lead to a strengthened position for further the world. The change is spurred by the climate agreement in growth. Paris, with a commitment from all countries to contribute to reduce greenhouse gas emissions. Statkraft has put two new power plants into operation in 2016: Nedre Røssåga in Norway and Banja in Albania. Both will As a result, carbon pricing mechanisms and support schemes contribute to strengthen Statkraft’s position as Europe’s largest for renewable energy are being deployed in an increasing generator of renewable energy. In 2016, Statkraft also decided number of countries. Market designs are being changed, together with partners to invest in the 1000 MW Fosen project technology costs are falling, fuel prices are low, energy consisting of six wind farms. These wind farms will gradually efficiency targets are increased and new business models are start production between 2018 and 2020. emerging. Maximizing the long-term value of the Nordic hydropower Based on these factors the power prices have been trending assets through maintenance and upgrading remains core for downwards in recent years, reducing profitability for many Statkraft. Project execution and business development will be energy companies. The Nordic power prices have stabilized prioritized. Complying with the highest safety, security and somewhat and in the last few months of 2016 there was a integrity standards is of great importance and requires high recovery. This cautious increase was mainly driven by short management attention. Systematic work is needed in order to term development in fuel prices, reduced nuclear availability ensure continuous improvement within these areas. and hydrology. Statkraft will remain in a consolidation phase through 2017, The operating result from the Statkraft group was on a solid and will establish a solid platform for future expansion. We level, due to effective operations and successful energy have the people, experience and know-how to create value by management. Statkraft’s updated long term price forecasts are investing in renewable energy. That is what the world needs to nevertheless down compared to what was previously fight climate change and stimulate sustainable growth. expected. This has led to impairments of asset values which have led to a negative result for Statkraft in 2016.

Statkraft needs to improve profitability in light of the external challenges, and is conducting a performance improvement programme with the target of strengthening competitiveness and reduce annual costs by NOK 800 million by the end of Christian Rynning-Tønnesen 2018. Based on a strong commitment among our employees I President and CEO am confident that this target will be met. This will enable Statkraft in facts and figures

Statkraft in facts and figures shows that the Group delivered strong results from operations. Record high production from Statkraft’s power generation in combination with higher Nordic power prices led to a solid underlying EBITDA. Statkraft invested NOK 5.7 billion in 2016 and two thirds were related to investments in new generating capacity. Investments in new capacity were mainly related to construction of Europe’s largest onshore wind park in Central-Norway, the Andershaw onshore wind farm in the UK and two large scale hydropower plants in the valley of Devoll in Albania. With a total production of 66 TWh and total installed capacity of about 19 300 MW, Statkraft is the second largest producer of electric power in the Nordics and the largest supplier of renewable energy in Europe.

Power generation (TWh) Statkraft’s production is determined by production capacity, demand, access to resources (hydrological balance and wind), spark spread (margin between power and gas price) and energy management. In 2016 the Group’s power production 66.0 56.3 totalled 66.0 TWh, plus 1.1 TWh of district heating. Statkraft had a record high production in 2016 due to increased capacity 2016 2015 and good energy management.

Serious environmental incidents Injuries (per million hours worked)

0 0 4.9 5.9 2016 2015 2016 2015

There were no serious environmental incidents in the Group in One fatal accident was recorded in Statkraft in 2016. In 2016. However, 233 minor environmental incidents were addition, 40 serious incidents (incidents with, or with the registered (228 for 2015). Most of the minor environmental potential for, serious consequences) were registered (0 and incidents in 2016 were related to short-term breaches of river 39 for 2015, respectively). The indicator for total recordable management regulations and minor oil spills with little or no injuries (TRI) per million hours worked was 4.9 in 2016, a impact on the environment. decrease of 17% compared to 2015.

5 STATKRAFT AS ANNUAL REPORT 2016 ROACE, underlying (NOK billion) The Group had a return on average capital employed (ROACE) of 11.1% in 2016, 3.3% points higher than in 2015. The increase was primarily related to higher underlying operating profit, mainly due to higher Nordic power prices 11.1 7.8 and higher Norwegian hydropower production combined with successful energy management. 2016 2015 X EBITDA, underlying (NOK billion) Capital employed (NOK billion) ion)

13.9 10.9 83.2 91.1 2016 2015 2016 2015

EBITDA (operating profit before interest, tax, depreciation and Capital employed was NOK 83.2 billion in 2016 and amortisation) was NOK 13.9 billion in 2016, an increase of decreased by NOK 7.9 billion compared to 2015. Impairments NOK X3.0 billion compared to 2015. The increaseX in EBITDA in 2016X led to a reduction in the Group’s fixed assets and was from 2015 was primarily related to higher Nordic power prices the main driver for the change in capital employed. and higher contribution from both Norwegian hydropower production and the Group’s international operations.

Profit/loss before tax (NOK billion) Investments (NOK billion) Investments (NOK billion)

5.2 -0.8 5.7 13.6 2016 2015 2016 2015

In total, the Group invested NOK 5.7 billion in 2016. The Group’s financial result was NOK 5.2 billion in 2016, Maintenance investments were primarily related to Nordic an increaseX of NOK 6.0 billion compared to 2015. Increased hydropower.X Investments in new capacity were mainly Norwegian hydropower production, higher contribution from related to wind power projects in Norway and in the UK in the Groups’ international operations and a positive net addition to construction of hydropower plants in Albania. The financial result were the main drivers of the increase. Group’s investment level has been adjusted down in accordance with reduced investment capacity.

Cash flow from operations (NOK billion) Net interest bearing debt (NOK billion) Cash flow from operations (NOK billion) FFO/Net debt 8.4 8.6 32.5 35.0 2016 2015 2016 2015

The Group generated a cash flow from operating activities of Net interest bearing debt totalled NOK 32.5 billion at the end NOK 8.4 billion in 2016. Despite an increase in EBITDA, the of the year compared to NOK 35.0 billion at the beginning of Group’sX cash flow from operations decreased by 3% mainly due the year.X The decrease in 2016 was related to a reduction in to changes in short-term items related to working capital. investments in combination with small changes in cash flows from operations.

STATKRAFT AS ANNUAL REPORT 2016 6 Power plants and district heating plants

Pro-rata1 Consolidated power plants c No. of plants Capacity (MW) No. of plants Capacity (MW) c POWER GENERATION

c Hydropower 346 15 747 263 14 075

Norway 237 12 881 171 11 586

Sweden 60 1 268 60 1 268

Germany 10 262 10 262

UK 3 49 3 49

Albania 1 72 1 72

Turkey 2 122 2 122

Brazil 10 194 5 183

Peru 9 362 9 442

Chile 3 185 1 56

Nepal 1 28 1 34

Philippines 3 146 - -

India 2 112 - -

Laos 2 50 - -

Panama 1 9 - -

Zambia 2 8 - -

Wind power 18 881 14 703

Norway 3 245 3 245

Sweden 6 338 6 338

Brazil 4 69 4 84

UK 5 230 1 36

Gas power 6 2 600 6 2 600

Norway 1 210 1 210

Germany 5 2 390 5 2 390

Bio power 2 40 2 40

Germany 2 40 2 40

Total power generation 372 19 269 285 17 418

DISTRICT HEATING

Norway 25 611 25 657

Sweden 4 164 4 164

Total district heating 29 774 29 820

1) Statkraft equity share in all power plants (pro-rata share of direct and indirect ownership), including those in partly-owned companies

7 STATKRAFT AS ANNUAL REPORT 2016 Statkraft around the world

TOTAL NUMBER OF POWER PLANTS/ STATKRAFT’S CAPACITY SYMBOLS: FACILITIES = Hydropower Power Power = Wind power generation 372 generation 19 269 MW = Gas power District District = Bio power heating 29 heating 774 MW = District heating

=Trading and origination

NORWAY 13 946 MW SWEDEN 1 770 MW

THE NETHERLANDS

UK 279 MW

GERMANY 2 692 MW

NEPAL 28 MW BELGIUM Office

TURKEY 122 MW FRANCE Project USA San Francisco LAOS 50 MW

ALBANIA 72 MW THAILAND SN Power office

SOUTHEAST EUROPE INDIA 112 MW

THE PHILIPPINES 146 MW PANAMA 9 MW

ZAMBIA 8 MW PERU 362 MW SINGAPORE SN Power office

CHILE 185 MW BRAZIL 263 MW

Statkraft SN Power

Since the founding of the company in 1895, Statkraft has The overview of consolidated plants shows the capacity of the developed from a national company, focused on developing plants that Statkraft fully consolidates in its financial reporting Norwegian hydro power resources, into an international company according to IFRS. The difference between consolidated capacity diversifying also into other sources of renewable energy. Today, and direct ownership (the pro-rata columns in the table) is mainly with a total consolidated power generation of 66 TWh in 2016, due to Statkraft’s investments in the companies BKK, Agder Statkraft is the second largest power generator in the Nordics and Energi and SN Power, all classified as equity accounted Europe’s largest supplier of renewable energy. investments according to IFRS.

The Group’s 372 power plants have a total installed capacity of 19 269 MW (Statkraft’s share). Hydropower is still the dominant technology, followed by natural gas and wind power. Most of the installed capacity is in Norway. Statkraft also owns shares in 29 district heating facilities in Norway and Sweden with a total installed capacity of 774 MW.

STATKRAFT AS ANNUAL REPORT 2016 8 The Board of Directors of Statkraft

From the left: Vilde Eriksen Bjerknes, Halvor Stenstadvold, Helene Biström, Asbjørn Sevlejordet, Thorhild Widvey, Peter Mellbye, Bengt Ekenstierna, Hilde Drønen and Thorbjørn Holøs

Thorhild Widvey Halvor Stenstadvold Hilde Drønen Born 1956, Norwegian Born 1944, Norwegian Born 1961, Norwegian

Member since: 2016, chair of the board Member since: 2003, vice chair of the board Member since: 2014, board member Member of the Compensation Committee Chair of the Audit Committee Member of the Audit Committee Current board positions: Board member: Kværner, Main work experience: Orkla: EVP. Oslo Stock Current board positions: Board member: DOF Subsea Pacific Lutheran University in Tacoma. Exchange, Borregaard and Orkla Media: chair. and various subsidiaries in the DOF ASA Group Main work experience: Minister of Culture. The Ministry of Government Administration and Main work experience: DOF: CFO (present). Minister of Petroleum and Energy. Consumer Affairs: State secretary. Bergen Yards: CFO. Møgster Group: various positions. The Ministry of Foreign Affairs: State Secretary. The Minister of Fisheries: State Secretary.

Peter Mellbye Bengt Ekenstierna Helene Biström Born 1949, Norwegian Born 1953, Swedish Born 1962, Swedish

Member since: 2016, board member Member since: 2016, board member Member since: 2016, board member Member of the Compensation Committee Current board positions: Chair: Wrams Gunnarstorp Member of the Audit Committee Current board positions: Chair: Wellesley petroleum. Castle. Board member: Adamsson Kommunikation. Current board positions: Chair: Sveaskog, Cramo PLC, Board member: TechnipFMC, Qinterra, Competentia, Main work experience: Beken: Senior advisor Gasnätet Stockholm. Board member: Pöyry PLC, KTH. Halfwave, Resoptima. (present). Several CEO positions within E.ON Group; Main work experience: Norrenergi & Miljö: MD. Main work experience: Statoil: EVP. Norwegian E.ON ES, E.ON Gas, Sydkraft Bredband and Baltic Norrenergi: MD. Vattenfall: Group executive mgmt. Export Council, Norwegian Ministry of Trade Cable. Sydkraft Elnät: COO. and Commerce: various positions.

Vilde Eriksen Bjerknes Thorbjørn Holøs Asbjørn Sevlejordet Born 1975, Norwegian Born 1957, Norwegian Born 1960, Norwegian

Member since: 2014, employee-elected board member Member since: 2002, employee-elected board member Member since: 2014, employee-elected board member Employee in Statkraft since: 2001 Member of the Audit Committee Member of the Compensation Committee Current work position: Statkraft: Vendor Manager IT. Employee since: 1976, Skagerak Energi Employee in Statkraft since: 1978 Current board positions: Chair: EL og IT Forbundet Current work position: Statkraft: Head Union Vestfold/Telemark. Vice chair: LO/Grenland representative, Mechanical maintenance worker. Current work position: Skagerak Energi: Head Union representative.

9 STATKRAFT AS ANNUAL REPORT 2016 Report from the Board of Directors

Statkraft’s power generation reached a record-high 66 TWh in 2016. The average Nordic system price was also 28% higher than the very low level in 2015. Combined with successful energy management and higher contribution from International hydropower, this led to a solid underlying EBITDA of NOK 13.9 billion. 2016 was negatively influenced by impairments, mainly caused by reduced market expectations, and partly offset by positive currency effects. Net profit before tax was NOK 5.2 billion and net profit after tax ended at NOK -179 million.

Changing market conditions and technological development are An adjustment of the strategy is that Statkraft will broaden the resulting in increased competition. Statkraft is adapting to this technology scope in selected international markets to include development through an extensive performance improvement onshore wind and solar power, in addition to hydropower. programme and a revised strategy. The performance Furthermore, Statkraft will strengthen its focus on business improvement programme is progressing according to plan. The development in Norway in order to explore new opportunities aim is to strengthen performance and reduce annual costs by arising from the energy transition. NOK 800 million, measured against the actual costs for 2015. The revised strategy shall enable Statkraft to become one of the Responsible and effective operations have first priority in all most competitive companies in the industry and strengthen the markets. In the revised strategy, optimising the value creation in position for further growth. Statkraft’s Nordic hydropower fleet will continue to be prioritised.

STATKRAFT AS ANNUAL REPORT 2016 10 Key points  Record-high Norwegian hydropower generation and successful energy management  Construction started for Europe’s largest onshore wind project in Central Norway  The strategy has been revised. Performance improvement programme introduced to strengthen competitiveness and reduce costs Health, safety and environment Consolidation as a foundation for new growth Reduced power prices have put pressure on Statkraft’s profitability There was one fatal accident in Statkraft in 2016. A contractor and financial robustness. A performance improvement programme employee lost his life in connection with repair work at the La is currently being undertaken to maximise value creation for the Oroya hydropower plant in Peru. The investigation has identified owner and strengthen competitiveness. A key objective is to root causes related to the implementation and understanding of strengthen performance and reduce controllable costs by 15%, risk mitigation systems and tools in maintenance activities, and compared with actual costs in 2015, by the end of 2018. A contract management and follow-up of HSE requirements in the substantial portfolio of cost reduction initiatives has been procurement processes. Statkraft works systematically to avoid identified, giving confidence that the target of NOK 800 million will injuries and damage in all activities. All serious incidents are be reached. subject to investigation and results from these are used to facili- tate and transfer learning across the organisation. Statkraft has Planned staff reductions have been identified as a result of the ensured that the learnings from the tragic incident in Peru are new activity level and revised organisation. This leads to planned incorporated in the HSE programme. reductions of 530-580 employees, of which 200-240 in Norway, in addition to the reduction of close to 90 employees that has already Sick leave due to illness or injuries was 3.0% in 2016, and this is taken place in 2016. considered satisfactory. While some initiatives have already been implemented, the main The Group experienced no serious environmental incidents in effort will take place in 2017 and 2018, and the programme will be 2016. finalised by the end of 2018.

Values Changing markets The values shall govern Statkraft’s actions as a business and The global demand for electricity is growing, primarily driven by provide guidance for the employee conduct: economic growth in emerging markets. Traditionally, fossil fuels  Competent. Use knowledge and experience to achieve have dominated the electricity sector in most countries. However, ambitious goals and be recognised as a leader. the share of renewables is growing, and more than half of the new  Responsible. Create value, while showing respect for employ- capacity is expected to be based on renewable technologies in the ees, customers, the environment and society. coming decade. A key driver is reduced costs for solar and wind  Innovative. Creative thinking, identify opportunities and power which make these technologies increasingly competitive develop effective solutions. compared with conventional ones. In 2015, the process towards a global response to climate change took a major step forward with The core values apply to all employees and others who represent the Paris Agreement, which introduced greenhouse gas emission Statkraft. obligations for most countries, including emerging economies. Meeting these obligations will require more use of renewable Strategy energy. While a few industrialised countries dominated the From being a supplier of energy to Norwegian industry and gen- renewables scene up to a few years ago, we are now seeing a eral consumption, Statkraft has become Europe's largest genera- larger share of the investments coming in emerging markets. tor of renewable energy with a presence in several international markets. Statkraft has established hydropower generation posi- At the same time market conditions in the power sector are tions in Europe, Asia and South America, wind power in the becoming more challenging, making it increasingly difficult to Nordic market and in the UK and gas power capacity in Germany. remain competitive. Competitive auctions are more frequently Statkraft has also established a strong position within market used to contract new capacity, and the modular nature of solar operations in Europe, and has market activities in Brazil and India. energy is increasingly paving the way for distributed power As the most important provider of long-term contracts, Statkraft is generation. Around 50% of the global solar capacity added over also an important partner for the Norwegian power-intensive the next five years is expected to be distributed. In addition, low industry. cost IT systems have accelerated the pace of innovation related to consumer-centric business models, and more specialised players The current market conditions are challenging – with low power have emerged within the distributed energy value chain. This is prices in most markets and increased competitiveness of solar challenging the business model of traditional utilities, which need and wind power. Energy markets are also characterised by an to increase cost efficiency and adapt to the new market conditions increasingly competitive environment where new players and new in order to remain competitive. The trend within distributed energy business models are entering the sector. In order to adapt to new has been more prevalent in developed countries up to now, but is market conditions and provide a basis for further growth, expected to play an increasingly important role also in emerging Statkraft’s short- term focus will be consolidation of activities to markets. improve performance and competitive strength.

11 STATKRAFT AS ANNUAL REPORT 2016 Statkraft’s competitive position Europe and the UK, as well as gas power plants. Statkraft will Unique hydropower assets operate, maintain and develop its existing hydropower portfolio to Statkraft’s power plants have low variable costs, long lifespans maximise the long-term value of the assets. A considerable share and low carbon emissions. The average production cost for the of the Nordic hydropower plants are ageing, and large European hydropower assets is well below the cost of reinvestments are planned to safeguard the value of these plants. conventional technologies. The plants are highly flexible and have Market operations a total reservoir capacity of about 40 TWh, 23% of the total The European power market is undergoing major changes. In European reservoir capacity. Based on solid market knowledge addition, new specialised companies are entering other parts of and integrated business processes, the plants enable Statkraft to the value chain with new value propositions to the customer. optimise power generation in relation to short, medium and long- Going forward, Statkraft expects to see changes in the value chain term price fluctuations in the power market. and increasing requirements to remain competitive. Statkraft will Statkraft is a major hydropower generator and has expertise in gradually increase the company’s energy trading activities and key technical disciplines, especially within operation and explore new business opportunities in a changing European maintenance. The Group is a large buyer of electro-mechanical market. In addition, Statkraft aims to develop market operations in hydropower equipment, providing opportunities for economies of selected international markets where Statkraft owns assets. scale. Statkraft has considerable upgrading activities, where the International power company has broad experience and comprehensive expertise. Statkraft has restructured the Group's international hydropower Integrated business model and market expertise activities and established integrated operations for the activities in Statkraft has extensive experience from deregulated European South Eastern Europe, South America and South Asia. The power markets and has developed cutting-edge expertise within objective of this is to exploit the Group's competitive advantage in market analysis, production optimisation of flexible power plants operations, maintenance, power optimisation and energy trading. and energy trading. Statkraft has a comprehensive system for Statkraft will focus on achieving scale in selected markets which collection and processing of hydrological and other market data in will enable effective deployment of Statkraft’s core capabilities. the European power market. Efficient data collection, models, Investments in hydropower, onshore wind and solar power will be systems and processes to prepare forecasts and utilise market evaluated on equal terms. variations are important competitive advantages. Statkraft has an Wind power integrated business model where the market analyses form the Statkraft has developed a competitive position within onshore basis for maintenance planning, power optimisation and market wind power in the Nordics and in the UK, with a track-record of operations, both in the short and the long term. The purpose of delivering construction projects on cost and time. A key priority is this is to utilise Statkraft's market expertise in combination with the to successfully deliver the construction of the Fosen project, flexibility of the power plants to maximise generation when power Statkraft’s largest onshore wind project to date, on cost and time. prices are high. The focus going forward is to ensure operational excellence in Statkraft's market presence in Continental Europe and the UK operations and maintenance for wind farms. provides valuable market information to aid in understanding future price formation in the Nordics. This is also important when it Statkraft has decided not to invest further in offshore wind projects comes to managing Norwegian and Swedish hydropower plants in and to prepare for divestment of the existing offshore wind the best possible manner. portfolio in the UK.

Statkraft has developed a market-oriented organisation with broad District heating experience from deregulated markets. Within market operations, Statkraft provide more than 1 TWh per year at ten locations in Statkraft has shown that the company is able to adapt to changes Norway and four in Sweden. Statkraft will continue to develop the in market conditions. Statkraft has established a significant posi- profitability of the existing portfolio and expand deliveries in tion within market access services for wind and solar generators connection with existing plants in Norway and Sweden. and is currently a leading player within this field in Germany, the New business development in Norway UK and the Nordic market. Statkraft is exploring commercial opportunities that emerge in the Attractive positions in growth markets energy transition to reduce greenhouse gas emissions in Norway. Statkraft has succeeded in establishing positions in several mar- Transport sector emissions will have to be reduced significantly, kets with high power consumption growth, and where renewable and two of Statkraft’s initiatives are within this area. Statkraft and energy is expected to cover a major part of this growth. Agder Energi hold the majority in the fast charger operator Grønn Kontakt, and in a partnership with Södra, Statkraft is developing Strategic focus areas production processes for industrial scale production of second Statkraft’s ambition is to strengthen its position as a leading generation biofuels. Statkraft is also facilitating large scale data international supplier of renewable energy. The revised strategy centre development in Norway. for each strategic focus area is outlined below. In addition to these focus areas, Statkraft is supporting the partly European flexible generation owned regional companies in Norway within environment-friendly European flexible generation consists of the majority of the power. Group’s hydropower business in the Nordic region, in Continental

STATKRAFT AS ANNUAL REPORT 2016 12 Power markets and generation

Most of Statkraft’s power generation is in the Nordic region and on average 1.0 and 1.2 degrees above normal respectively, while 89% of the generation took place in this market in 2016. In inflow was 98% of normal level in Norway and 84% of normal level addition, the Group has consolidated generation (the generation in Sweden. The system price was at a relatively low level for most from investments which Statkraft fully consolidates in the financial of 2016 from a historical point of view, but saw an increase statements) in Germany, the UK, Turkey, Albania, Brazil, Peru, towards the end of the year together with increasing coal prices. Chile and Nepal. Statkraft is also involved through associated The average system price on Nord Pool for the year was companies and joint ventures in these and other countries. 26.9 EUR/MWh, 28% higher than the very low prices seen in 2015, but 20% below the average for the 2011-2015 period. With All these markets are influenced by global trends such as fuel the exception of 2015, this was the lowest average yearly price prices, climate policies and climate change, lower costs for solar since 2002. and wind power and increasing potential for distributed energy. German power prices were affected by falling fuel prices at the The European power market beginning of the year. The last half of 2016 there was increasing Power markets in Europe are influenced by stagnating demand power prices, as a tighter Asian market pulled international coal and subsidy schemes across Europe. This has triggered prices upwards and several continental countries experienced considerable new renewable capacity in markets where the problems with their nuclear generation. Still, the average spot demand has stagnated. This has caused power prices in price (base) for 2016 was 29.0 EUR/MWh, 9% lower than in 2015 Continental Europe to fall to a relatively low level. and 26% below the average for the 2011-2015 period.

Power prices in the Nordic region in 2016 were affected by Power prices in the UK were also influenced by volatile fuel prices relatively mild weather and higher than normal reservoir filling at and low nuclear generation in continental countries. An additional the start of the year, amplified by falling fuel prices in the element was a general tightening of the generation stack beginning of the year. Temperatures in Norway and Sweden were

13 STATKRAFT AS ANNUAL REPORT 2016 throughout 2016 as around 4 GW of capacity was Power prices in India fell almost 20% to around 34 USD/MWh in decommissioned during the year. The average spot price (base) 2016, from 40 USD/MWh in 2015. The market faces increasing was 48.5 EUR/MWh, 13% lower than in 2015 and 12% below the overcapacity from new plants coming online, both from a pipeline average for the 2011-2015 period. A weaker British Pound of conventional coal plants and subsidised renewables. compared to the Euro influenced the price development measured in euros. Statkraft’s power generation Statkraft is the largest power generator in Norway and the second Power consumption in the Nordic region is relatively high per largest in the Nordic region. Statkraft is also Europe’s largest capita compared with other European countries, due to a supplier of renewable energy. combination of cold winters, high share of electrical heating and a relatively large percentage of power intensive industry. The Statkraft’s generation is determined by capacity, demand, access demand for power in 2016 was slightly higher than in 2015, both in to resources (hydrological balance and wind), spark spread Norway and the Nordic region. Total generation was 148.6 TWh in (margin between power and gas price) and energy management. Norway and 389.3 TWh in the Nordic region, an increase of 3% At the end of 2016, the consolidated installed capacity (the and a decrease of 1% respectively, compared with 2015. Norway capacity that Statkraft fully consolidates in the financial had a net export of power corresponding to about 11% of statements) was 18 238 MW, with hydropower contributing generation, while the Nordic region overall had a net export of 14 075 MW, gas power 2600 MW, wind power 703 MW, bio power about 1%. 40 MW and district heating was 820 MW. Statkraft also has ownership interests in associated companies and joint operations Other power markets with generation capacity, and, overall, the Group has ownership The power prices in Turkey are mainly determined by the natural interests in plants with a total installed capacity of 19 269 MW gas price, as gas-fired generation accounts for almost half of the power generation and 774 MW district heating (Statkraft’s pro-rata country’s power generation. Hydrological conditions in the country share of direct and indirect ownership). also contribute to the pricing. The average spot price (base) was 42 EUR/MWh, a decline of 8% from the preceding year. Due to a The demand for power varies throughout the day and year, and weakening of the local currency, the power price denominated in the power markets are dependent on capacity that can be Turkish Lira was, however, strengthened by 2.4%. Statkraft assets adjusted according to the demand. Statkraft has a large received a higher feed-in tariff than spot price in 2016. percentage of flexible generation capacity, and combined with extensive analysis and generation expertise, this contributes to While the launch of the Albanian power market is scheduled for consistent management of the Group’s water resources. The 2017, power prices in neighbouring countries in the south-eastern Group has an advanced energy management process and aims to region of Europe have decreased from 2015 to 2016. Hungary have generation capacity available in periods with high demand. and Romania, the main indicators in the south-eastern region of Statkraft’s large reservoir capacity with a combination of seasonal Europe, had a decrease 13% in price (35.4 EUR/MWh in 2016) and multiple-year reservoirs enables the Group to emanage th and 9% (33.3 EUR/MWh in 2016), respectively. The main drivers water resources in a perspective spanning more than one year. for the price decline are hydrological conditions and European Accordingly, generation can be kept high in peak price periods natural gas price. and lower in low-price periods. In 2016, Statkraft had record high generation, with high generation when the prices were relatively In Brazil, a continued return to normal hydrology and stagnating high. demand has led to significantly reduced spot prices to an average of 94 BRL/MWh in 2016 (27 USD/MWh), from an average of The Nordic hydrological resource situation was relatively robust at 288 BRL/MWh (86 USD/MWh) in 2015. Statkraft assets are the start of the year, but fell somewhat throughout 2016. At year- relatively unaffected by these low spot prices since they are end (week 52) the overall reservoir water levels in the Nordic contracted through long-term PPAs at higher price levels. region were 91% of the normal level. This corresponded to 75 TWh, which is 62% of the maximum reservoir capacity of Peruvian spot prices continued at relatively low levels due to 121 TWh. overcapacity. The average price in 2016 of approximately 21 USD/MWh was, nevertheless, an increase of about 40% from 2015 (15 USD/MWh). Statkraft has entered into various contracts with different maturities with higher prices than current levels. Economic growth expectations for Peru are more optimistic than in other Latin American markets; however, demand expectations have been reduced due to a decline in mining activity.

In Chile, the hydrology situation has worsened during the second half of 2016, and reservoir contents for 2017 are expected to be below average historical levels. Despite dry hydrological conditions, increasing penetration of solar and wind power, grid congestion and lower fuel price levels have pushed average spot price levels for the Central Interconnected System down 33% to about 61 USD/MWh in 2016, from 91 USD/MWh in 2015. Statkraft’s generation is partially sold through long-term contracts at higher price levels.

STATKRAFT AS ANNUAL REPORT 2016 14 In 2016, the Group’s power generation totalled 66.0 TWh (56.3 TWh), plus 1.1 TWh of district heating (1.1 TWh). Hydropower generation totalled 61.2 TWh, which was 15% higher than in 2015. Wind power generation fell by 5% from the preceding year. Improved market conditions led to an increase in running hours for Statkraft’s gas power plants. In the second half of the year there were longer periods with positive spark-spreads and the gas power generation for the year was at the highest level since 2011.

40.2 TWh (31.6 TWh) of the power generation was sold in the spot market. This corresponds to 61% of the total generation in 2016 (56%).

Statkraft is a major supplier to the power intensive industry. In 2016, the volume delivered under long-term contracts amounted to 22.3 TWh, of which the majority went to industries in the Nordic region. The high contract coverage has a stabilising effect on Statkraft’s revenues. Most of the contract volume for Nordic industries runs until 2020.

In Norway, Statkraft is required to cede a share of the power Statkraft-owned generation capacity generation to counties and municipalities where the power is - direct and indirect ownership shares produced, so-called concessionary power. Explained briefly, the price for this power corresponds to the average production cost with a small margin, which is significantly lower than the market price for power. The concessionary power volume amounted to 7% of the Group’s Norwegian hydropower generation in 2016.

15 STATKRAFT AS ANNUAL REPORT 2016 Statkraft’s activities

Key figures - consolidated operations

Statkraft European flexible Market International Wind District Industrial Other Group Group generation operations hydropower power heating ownership activities items

Power production Installed capacity (MW) 5) 17 509 14 461 - 1 086 619 - 1 344 - - 1), 2), 3), 4) 1), 2), 3) 2), 4)

Production (TWh) 5) 66.0 54.4 - 4.3 1.9 - 5.5 - -

District heating Installed capacity (MW) 820 - - - - 682.8 138 4) - - Delivered volume (GWh) 1 062 - - - - 948 114 - -

End-user sales Energy delivered, through grid to end-user (TWh) 7.0 - - - - - 7.0 - - Volume delivered, to electricity customers (TWh) 14.6 - - - - - 14.6 - -

Income statement (NOK mill.) Net operating revenues, underlying 23 033 14 865 1 238 2 234 759 552 3 602 938 -1 155 EBITDA, underlying 13 863 10 131 414 1 195 192 279 2 041 -343 -46 Operating profit/loss, underlying 10 240 8 380 400 517 -196 107 1 496 -418 -46 Operating profit/loss 3 086 4 529 -758 -819 -781 89 1 259 -381 -52

Balance sheet (NOK mill.) Total assets 166 630 57 240 179 33 756 12 660 3 521 25 360 24 060 9 854 Investments 5 657 1 736 62 1 443 1 489 155 688 83 -

1) Excluding Baltic Cable (600 MW). 2) Excluding pumped-storage hydropower. 3) Including Emden 4, Robert Frank and Kårstø which are in cold reserve. 4) Skagerak Energi's share. 5) Includes the share of consolidated companies.

Statkraft changed the segment structure in 2016. The two former The other segments, International hydropower, Wind power, segments Nordic hydropower and Continental energy and trading District heating and Industrial ownership, are not changed were replaced by European flexible generation and Market compared to previous years. operations. The reason for changing the segments was to better align the reporting structure with the strategic focus areas and the Areas not shown as separate segments are presented under the key priorities within the Group. The updated strategy has led to a heading Other activities. clearer distinction between power generating assets and market operations. The comparable figures are restated for the new segments.

The Group’s operating segments are in accordance with how the Based on the revised strategy, International hydropower will corporate management makes, follows up and evaluates its change its name to International power from the first quarter of decisions. The operating segments are based on the internal 2017. There will be no changes in the segment's financial figures. management information that is periodically reviewed by the corporate management and used as a basis for resource allocation and key performance review.

STATKRAFT AS ANNUAL REPORT 2016 16 European flexible generation European flexible generation is by far the largest segment meas- roadmap for a controlled transition to a fully renewable ured by installed capacity and assets, as well as net operating electricity system, with the ambition of 100% renewable revenues and results. The assets are largely flexible and the electricity by 2040. A favourable outcome of the Swedish majority of the capacity is related to hydropower in Norway and policy is to reduce property tax on hydropower from 2.8% to Sweden. In addition, the segment includes gas power plants in 0.5% during the period 2017-2020. In addition, the Certificate Germany and Norway, hydropower plants in Germany and the UK System will continue in Sweden and expand by another and bio-based power plants in Germany. Baltic Cable, the 18 TWh of renewable electricity generation to be built in the interconnector between Sweden and Germany, is also included. period up to 2030, while the current period for new capacity in Norway ends in 2021. The segment’s revenues are mainly generated in the spot market,  In 2016, Statkraft completed the new Nedre Røssåga hydro- long-term contracts, mainly to power intensive industry in Norway, power station in Northern Norway, thus increasing capacity by and delivering concessionary power. Multiple-year reservoirs in 100 MW to 350 MW and the annual mean generation by 200 Norway and the flexibility of the power plants enable optimisation GWh to 2150 GWh. Furthermore, Statkraft started the full of the power generation based on the hydrological situation and refurbishment of the Øvre Røssåga hydropower plant in the power prices. Norwegian hydropower is therefore optimised Northern Norway. over longer time periods than one year. In order to mitigate risk in  The Norwegian Water Resources and Energy Directorate relation to uncertainty in future prices and generation volumes, (NVE) granted Naturkraft permission to shut down the Kårstø Statkraft hedges generation revenues through physical bilateral gas-fired power plant. contracts and financial power trading. The hedged percentage of  Changing market conditions have led to impairments in 2016. generation varies with market development expectations and German gas-fired power plants were impaired by NOK 1947 generation volumes. million, mainly due to Statkraft’s expectations to when the The volume sold in the spot market can vary significantly between capital expenditures will be recovered through the Capacity years, depending on the hydrological situation, e.g. inflow and Remuneration Mechanism. In addition, some Norwegian and reservoir filling, and generation optimisation decisions. The Swedish hydropower plants and other segment assets were management of multi-year reservoirs and flexible power plants impaired by NOK 441 million, NOK 132 million and NOK 282 normally enable Statkraft to achieve a higher average price for the million, respectively. The main indicators were lower market power produced than other companies in Norway. The energy expectations and a verdict in Gulating Court of Appeal imply- management is measured through the key performance indicator ing that Statkraft is the taxable owner of Sønnå Høy, which in- «Realised price margin Norwegian Hydropower», which measures creases property tax. The case was referred to the Supreme the volume weighted average price achieved by Statkraft Court. compared to the other producers in Norway. The results have Financial performance historically shown energy management performance around 5% Successful energy management and good availability impacted better than the competitors over a rolling five-year period. the segment’s underlying EBITDA which increased by 36% Production costs in connection with hydropower are relatively low compared with 2015, to NOK 10 131 million. in comparison with other types of power generation facilities. The The segment’s underlying net operating revenues increased by low production costs are partly offset by higher tax rates for NOK 3229 million, or 28%, compared with 2015. The revenue Norwegian hydropower generation through resource rent taxation growth was driven by record-high Norwegian hydropower of 33% in 2016 and high property taxes in Sweden. To ensure that generation and an increase in Nordic power prices, particularly Statkraft maintains its long-term competitiveness, costs are towards the end of the year as well as 2.2 TWh of gas-fired power followed up through benchmarking and key performance indica- generation. tors measuring cost per kWh. In 2016, the operating cost / seven- year average generation was 13 øre/kWh. The volume sold in the spot market was 33.0 TWh. This was 42% higher than in 2015. The average Nordic system price, in Availability is an important factor in optimising hydropower reve- EUR/MWh, was 28% higher than in 2015. nues, and Statkraft uses the key performance indicator «Market- adjusted availability»1 to measure whether Statkraft’s power plants A large share of the segment’s generation is sold on long-term are available to produce when it is most profitable to do so. The contracts and this has a stabilising effect on the revenues over most critical factor affecting this KPI which can be influenced is time. In 2016, contracted volume was 18.4, TWh on par with 2015 how effectively plant maintenance is planned and executed, while and corresponding to approximately one-third of total generation. inflow and market prices are important external factors affecting the results. The market adjusted availability for the hydropower in Underlying operating expenses were 9% higher than in 2015. The the segment generally varies between 96 and 99%. main reasons for the increase were higher level of expensed maintenance project costs, higher expenses related to corporate Important events in 2016 services and exchange rate effects.  In 2016, both the Norwegian and Swedish Government de- cided on their energy policy towards 2030. The Norwegian The segment showed an operating profit for the year of NOK 4529 policies highlight the fact that flexible hydropower will continue million, negatively impacted by impairments of assets of to be the backbone of the Norwegian energy system. The NOK 2802 million and unrealised changes in value of energy Swedish long-term energy policy provides a common contracts amounting to NOK 1048 million.

1 Market adjusted availability: 1-(∑lost productioni [MWh]/∑ installed capacityi [MWh])x(1/reporting period [h])

17 STATKRAFT AS ANNUAL REPORT 2016 Market operations International hydropower Market operations is Statkraft’s interface to international markets International hydropower operates in markets with anticipated high where energy and energy-related products are traded. The growth and increasing need for energy. Statkraft is focusing on segment is also responsible for developing new customer-oriented selected markets where the Group’s hydropower expertise can business models in Europe and in selected countries where create value. The operations include hydropower activities in Statkraft owns assets. Market operations include trading, Southeast Europe, South America and South Asia, as well as the origination and market access activities, as well as a dynamic 50% shareholding in SN Power. Some investments are made asset management portfolio holding a varying amount of asset- together with local partners or international investors. backed positions for profit. Business has grown over the last few Production costs are followed up through the key performance years and has led to a significant geographical expansion with indicator «Total cost per kWh»2. In 2016, the cost was within the presence in many European countries, Brazil and India. Revenues target. can vary substantially between periods and years.

Trading and origination activities include trading with standard Important events in 2016  financial contracts, structured products and customised Statkraft completed its first power plant in Albania. The 73 MW agreements for industry and commerce (origination). Statkraft Banja power plant is the first of two being constructed as part monitors performance in trading and origination through the key of the 256 MW Devoll hydropower project.  performance indicator «Trading and origination ROCE». For the In 2016, the Devoll project was impaired by NOK 1071 million first time, the target for this indictor was not reached in 2016. due to lower expected long-term prices and updated market assessment. In Brazil, NOK 160 million was impaired, mainly The dynamic asset management portfolio is monitored on Group related to restructuring of the business in certain operations, a level and the portfolio outperformed the added value target for wind farm where lower generation is expected and reduced 2016. The contribution, however, was at a lower level than in value of some land areas. There was also an increase in 2015. provisions for the Çetin project of NOK 105 million.  Statkraft launched a process to sell the partly built Çetin The segment provides market access services for Statkraft’s own hydropower plant. Construction of the 517 MW plant is assets in Europe, as well as external generators of renewable currently suspended. energy. The aim of these activities is generation and revenue optimisation. Financial performance The underlying EBITDA more than doubled compared with Statkraft’s analysis activities play an important role for Market 2015. The increase was mainly due to new capacity and full- operations. The analysis activities are based on collection and year effect of the consolidation of Statkraft Energias Renováveis processing of hydrological, meteorological and market data. This (SKER) in Brazil. In July 2015, Statkraft increased its share- data is used to estimate future market prices. holding in SKER, a transaction that represented a change of Market operation is also responsible for exploring and developing control from an investment in an associated company to an new business models primarily targeting customer solutions in the investment in a subsidiary. distributed energy market. The segment’s net operating revenues increased by NOK 855 Important events in 2016 million to NOK 2234 million, primarily due to full-year effect of the  Statkraft entered into several new power purchase Cheves hydropower plant in Peru, which came into operation to- agreements, including a 25-year agreement for solar leasing wards the end of 2015, and full-year effect of the consolidation of in India and a 20-year agreement for 309 MW offshore wind in SKER. The power generation was 4.3 TWh in 2016, an increase the Belgian North Sea. of 19% compared with 2015. More than 80% of the generation was sold on long-term contracts. The large share of contracted Financial performance volume has a stabilising effect on the segment’s revenues. The segment’s underlying EBITDA was 414 MNOK, which was 648 MNOK lower compared to 2015. The 2016 result stayed Share of profit from associates and joint ventures saw an improve- below expectation, as many activities were impacted by the ment from 2015. This was to a large extent related to India where volatility of power and commodity prices throughout the year. The the result in 2015 was impacted by impairments of NOK 384 main reason for the decrease was lower contribution from the million.e Th contribution in 2016 was negatively impacted by an market access and origination activities. impairment and lower estimated value of deferred tax assets in Chile of NOK 203 million in total and an impairment in SN Power The segment’s operating costs decreased compared with 2015, of NOK 76 million. Both impairments in 2016 were mainly due to due to a provision for an onerous contract recorded in the second lower expected long term prices. quarter of 2015. This provision was reversed in the fourth quarter of 2016. The increase in underlying operating expenses of NOK 519 million were mainly due to a full-year effect of the acquisition of Empresa The segment showed an operating loss for the year of NOK Eléctrica Pilmaiquén in Chile in 2015 and full-year effect of the 758 million, negatively impacted by unrealised changes in value of consolidation of SKER. energy contracts of NOK 1158 million. The segment showed an operating loss for the year of NOK 819 million, negatively impacted by impairments of assets and related costs in consolidated subsidiaries of NOK 1336 million.

2) Total cost per kWh: Production costs/normalised production volume.

STATKRAFT AS ANNUAL REPORT 2016 18 Wind power District heating Wind power includes Statkraft’s investments in onshore and District heating operates in Norway and Sweden. The revenues in offshore wind power. The segment has onshore wind farms in Norway are influenced by power prices, grid tariffs and taxes. In operation in Norway, Sweden and the UK, as well as an offshore Sweden, they are determined by the alternative energy price to wind farm in operation and one under construction in the UK. The the customers, and prices are either fixed or index-regulated. revenues are derived from sale of power at spot prices as well as Waste, biomass, electricity, oil and gas are important input factors revenues from support schemes. in the production of district heating.

The production costs associated with wind power are followed up At Group level, performance is measured through the key through the target figure «Variable cost per kWh»3. The cost in performance indicator «Realised price margin»5. In 2016, the 2016 was within the target for both onshore and offshore wind. margin was exceeded the target.

Availability is followed up through the target figure «Market- Important events in 2016 4 adjusted availability» . The availability for offshore wind power  The district heating plant in Årvollskogen was opened in was within the target, while availability for onshore wind power September. When fully developed, Statkraft will produce was below target. 63 GWh of district heating in Moss/Rygge.  Statkraft entered into an agreement with Rockwool for the Important events in 2016 delivery of 7.5 GWh. Excess heat from Rockwool’s factories in  Statkraft, TrønderEnergi and the European investor Trondheim and Moss will be used as district heating in the two consortium Nordic Wind Power decided to build the 1000 MW cities. Fosen onshore wind power project in Central Norway.  Statkraft completed the reconstruction of peak load supply in Construction has started and the programme consists of six Åmål in Sweden. After this, Statkraft’s heating production in projects. The first project, Roan Wind Farm, will be in Sweden is fossil-free in normal years. commercial operation in 2018. When all six projects are  The small heating plant in Klæbu was sold to Klæbu commissioned in 2020, the projects are expected to generate Bioenergi. The plant has an installed capacity of 7.1 MW and 3.4 TWh annually. produced 4.9 GWh in 2016. Statkraft also sold the small  Statkraft completed construction of Andershaw Wind Farm in heating plant in Levanger to Innherred Biovarme. The plant Scotland in the fourth quarter. The onshore wind farm has a has an installed capacity of 4 MW and produced 4.3 GWh in total installed capacity of 36 MW. 2016.  Due to lack of financial capacity, Statkraft has decided to halt new investments in offshore wind and has started Financial performance preparations for the divestment of offshore wind assets in the The segment’s underlying EBITDA continued the growth seen UK. over the past few years and the underlying EBITDA for 2016  Changing market conditions have led to impairments within ended at NOK 279 million, an increase of 31% compared with the segment, and in 2016, Swedish wind farms were impaired 2015. The increase was due to a combination of higher volume, by NOK 585 million due to lower expected long-term prices. better prices on heating and waste handling as well as high availability and a good fuel mix. In addition, a full-year effect of Financial performance the acquisition of Gardermoen heating plant and new customers The segment had an underlying EBITDA of NOK 192 million in in existing activities had a positive impact. 2016, an increase of NOK 117 million compared with 2015. The EBITDA was influenced by lower generation than normal Operating expenses were slightly higher than in 2015, primarily despite new installed capacity in Sweden. Higher prices and lower due to higher expenses related to corporate services. operating expenses offset low generation and had a positive impact on EBITDA. The segment showed an operating profit for the year of NOK 89 million, negatively impacted by an impairment of assets of NOK The underlying net operating revenues were NOK 759 million in 18 million. 2016, 7% higher than in 2015. While the Nordic wind farms had higher than normal generation in 2015, the generation was significantly lower than normal in 2016 due to lower wind resources. However, new capacity in Sweden and higher Nordic power prices compensated for the relatively low generation. The UK wind farms had lower production in 2016 than in 2015 due to lower wind resources.

Operating expenses decreased compared with 2015, mainly due to reduced activity related to project development.

The segment showed an operating loss for the year of NOK 781 million, negatively impacted by impairment of assets of NOK 585 million.

3) Variable cost per kWh: All variable production costs/normalised production volume. 4) Market Adjusted Availability is calculated as the reduction from 100% availability that 5) Realised price margin: (Sales revenues + waste handling revenues – energy purchase the estimated lost production relative to the maximum theoretical production represents. cost)/delivered volume.

19 STATKRAFT AS ANNUAL REPORT 2016 Industrial ownership Industrial ownership includes management and development of Norwegian shareholdings, and includes the companies Skagerak Energi, Fjordkraft, BKK, Agder Energi and Istad. The first two companies are included in the consolidated financial statements, while the other three companies are reported as associated companies. Skagerak Energi’s activities are concentrated around the power generation, distribution grid operations, district heating operations, electrical entrepreneur activities and natural gas distribution. Fjordkraft’s activities are primarily sale of electricity to private households and companies.

Important events in 2016  BKK completed the refurbishment of the Matre Haugsdal hydropower plant. The capacity has been doubled to 180 MW and the mean generation has been increased by 72 GWh to 612 GWh. BKK also entered into an agreement to sell its central grid assets to Statnett.  BKK put the new 300 (420) kV Kollsnes-Mongstad power line into operation in the fourth quarter.  Agder Energi completed the Iveland 2 hydropower plant. The installed capacity is 44 MW and the average annual generation is 150 GWh.  Agder Energi decided to invest in a second generator in the Skjerka hydropower plant. The power plant has an average generation of 650 GWh per year. The new generator will increase the generation value in the waterway.  The power supplier LOS, a 100% owned subsidiary of Agder Energi, acquired the Swedish power supplier Telge Kraft, in order to strengthen its presence in the Nordic market. The total volume supplied will increase from 10 TWh to 23 TWh per year.  The natural gas distributor Skagerak Naturgass, a 100% owned subsidiary of Skagerak Energi, opened filling stations for biogas and entered into agreements for deliveries of biogas for public buses and refuse collection vehicles in the area of Grenland and Vestfold.

Financial performance The segment’s underlying EBITDA of NOK 2041 million was 6% lower than in 2015. The decline was primarily due to negative unrealised changes in energy contracts in Agder Energi.

The net operating revenues from the consolidated operations increased compared with 2016, mainly due to higher power prices and higher revenues from the grid operations in Skagerak Energi. The segment’s power generation was 5.5 TWh, on par with 2015.

The segment showed an operating profit for the year of NOK 1259 million, negatively impacted by unrealised changes in value of energy contracts in consolidated subsidiaries of NOK 237 million.

STATKRAFT AS ANNUAL REPORT 2016 20 Financial performance6 Return on investments Record-high Norwegian hydropower generation and an increase Measured as ROACE7, the Group achieved a return of 11.1% in in Nordic power prices, combined with successful energy 2016, which was 3.3 percentage points higher than in 2015. The management, led to an improvement in the Group’s EBITDA. A improvement was primarily related to higher operating profit, positive development for International hydropower further mainly due to higher Nordic power prices and higher Norwegian contributed to the increase. All segments showed a positive hydropower generation. EBITDA for the year. Operating expenses were on par with 2015.

Underlying operating revenues Impairments and negative unrealised changes in value of energy contracts impacted the result for the year and 2016 ended with a Statkraft’s revenues are generated by spot sales, contractual net profit after tax of NOK -179 million. At the end of 2016, the sales to the industry, financial trading, grid activities, district Group’s equity was NOK 4821 million lower than at the end of heating and power sales to end-users. In addition, the Group 2015. The decrease was primarily related to currency translation delivers concessionary power. The fundamental basis for effects. Statkraft’s revenues comprises power prices, energy optimisation and generation. The generation revenues are optimised through In the following, the emphasis will be on presentation of the result financial power trading, and the Group engages in trading from the underlying operations for items up to and including the activities and energy trading. operating profit. Unrealised changes in value of energy contracts and adjusted significant items in consolidated activities are Net operating revenues totalled NOK 23 033 million in 2016, 16% explained in the section ”Items excluded from the underlying higher than in 2015. The European flexible generation segment operating profit”. Income statement elements after the operating saw a substantial increase on the back of record high Norwegian profit are analysed in accordance with the recorded result. hydropower generation and significantly higher Nordic power prices, whereas the Market operation segment’s revenues

7) ROACE (%): (Operating profit adjusted for unrealised changes in the value of energy 6) Figures in parentheses show comparable figures for 2015 contracts and adjusted significant items x 100 / average capital employed.

21 STATKRAFT AS ANNUAL REPORT 2016 dropped as many activities were impacted by the volatility of (NOK 609 million). The primary contributors to the negative effect power and commodity prices throughout the year. International were embedded derivatives for bilateral industry contracts, which hydropower experienced a significant increase, primarily due to showed negative development as a result of a stronger NOK full-year effect of the Cheves hydropower plant in Peru and full- against EUR, and the financial risk reduction portfolio, which year effect of the consolidation of Statkraft Energias Renováveis showed negative development mainly due to profit realisation (SKER) in Brazil. The other segments had smaller changes in net during 2016. operating revenues. Adjusted significant items excluded from the underlying profit Underlying operating expenses amounted to NOK -4741 million in 2016 (NOK -3610 million). These were mainly related to impairments for gas fired power In total, the Group’s operating expenses increased by 3% plants and other assets in Germany of NOK 2229 million, a compared with 2015. The increase related primarily to hydropower project in Albania of NOK 1071 million, wind farms in depreciations for SKER and Cheves. Sweden of NOK 585 million and hydropower assets in the Nordics of NOK 573 million. The impairments were primarily connected to Underlying EBITDA and underlying operating profit Statkraft’s lower market expectations. NOK 161 million was Underlying EBITDA increased 28% from 2015 and operating profit impaired in Brazil, mainly related to restructuring of the business increased 37%, to NOK 13 863 million and NOK 10 240 million, in certain operations, a wind farm where lower generation is respectively. The Group’s EBITDA and operating profit are to a large expected and reduced value of some land areas. In addition, a degree generated by European flexible generation segment, which Norwegian heating plant was impaired by NOK 18 million. There contributed 73% (68%) and 82% (76%) of the total, respectively. was also an increase in provisions for the Çetin project of NOK 105 million, due to the prolonged process to find an acceptable Items excluded from the underlying operating profit solution. In total, unrealised changes in value of energy contracts and adjusted significant items had a negative effect in 2016 of NOK 7154 million (NOK -3002 million).

Unrealised changes in value of energy contracts adjusted for in the underlying operating profit amounted to NOK -2413 million

STATKRAFT AS ANNUAL REPORT 2016 22 Unrealised changes in value of energy contracts Financial items NOK mill. 2016 2015 NOK mill. 2016 2015 Generation -426 -790 Interest income 323 378 Sales and trading -1 434 -1 143 Other financial income 58 43 Customers -956 -357 Financial income 380 421 Other -1 - Interests expense -1 301 -1 322 Total sales revenues -2 817 -2 290 Other financial expenses -110 -736 Financial expenses -1 411 -2 058 Generation - -86 Net currency effects 2 847 -3 445 Sales and trading 338 1 754 Other financial items 321 -237 Customers 66 12 Net financial items 2 137 -5 318 Other - - Total energy purchase 404 1 680 Net currency effects NOK mill. 2016 2015 Unrealised changes in value not Currency hedging contracts and short term included in underlying profit -2 413 609 currency positions 1 600 -1 794 Unrealised changes in value included Realised 110 -1 675 in underlying profit 1 049 -260 Unrealised 1 490 -119 Unrealised changes in value presented in the Loans in foreign currency 939 -838 profit and loss statement -1 364 348 Realised 964 -306 Unrealised -25 -532 Internal loans, joint ventures and associates 308 -813 Adjusted significant items Realised 1 216 -2 635 NOK mill. 2016 2015 Unrealised 1 822 Gain from sale of assets - 226 -908 Impairments and related expenses -4 741 -3 836 Net currency effects 2 847 -3 445 Realised -4 616 Adjusted significant items -4 741 -3 610 2 290 Unrealised 557 1 171

Financial items Taxes The decrease in financial income was primarily related to lower The recorded tax expense was NOK 5402 million average liquidity in 2016 than in 2015. (NOK 1548 million). The increase in tax expense was mainly related to an improvement in profit before tax, which was Financial expenses were lower, mainly due to the fact that there NOK 5223 million in 2016 compared with a net loss of was a loss in 2015 in relation to a step-up acquisition in Brazil. NOK 821 million in 2015. A better result from net financial items, Lower interest rates in 2016 had a positive impact on interest higher Nordic power prices and higher Norwegian power expenses, but this was largely offset by lower capitalisation of generation were the main drivers behind the increase in tax borrowing costs in projects. expense.

Net currency effects amounted to a gain of NOK 2847 million (loss Income tax payable amounted to NOK 2762 million, an increase of of NOK 3445 million), mainly as a result of a stronger NOK against NOK 2333 million compared with 2015. Resource rent tax payable EUR and GBP. increased by NOK 768 million due to the higher power prices and

23 STATKRAFT AS ANNUAL REPORT 2016 Norwegian hydropower generation, and at NOK 2249 million it Financial structure constitutes a major part of the Group’s tax expense. The majority The main objectives of the Group’s capital structure management of the tax expense was related to Norway. are to maintain a reasonable balance between solidity and the ability to expand, and to maintain a strong credit rating. The most The high effective tax rate was mainly caused by impairments important target figure for the Group’s management of capital without recognising deferred tax assets, and resource rent tax structure is the long-term credit rating. levied on Norwegian hydropower production. Tools for long-term management of capital structure are primarily Cash flow comprised by the drawdown and repayment of long- term liabilities The Group generated a cash flow from operating activities of and payments of share capital from/to the owner. The Group is not NOK 8371 million in 2016 (NOK 8639 million). subject to any external requirements with regard to the management of capital structure other than those relating to the Net income8, adjusted for non-cash effects, was NOK 10 390 market’s expectations and the owner’s dividend requirements. million (NOK 11 167 million), including changes in short and long- term items. The changes in short and long-term items had a The Group endeavours to obtain external financing from different negative effect of NOK 1680 million (positive effect of NOK 4651 capital markets. When raising loans, Statkraft seeks to ensure an million), of which short-term items were NOK -1312 million even repayment profile, and the current maturity profile is in line (NOK 4241 million). These were mainly related to working capital, with this objective. New loans are planned in accordance with the cash collateral and changes in clearing deposit accounts. Taxes liquidity forecast, investment decisions and sale of assets. paid were NOK -2564 million (NOK -3062 million) and cash effects 11 from dividend from equity accounted investments were NOK 545 At the end of 2016, net interest-bearing debt amounted to million (NOK 534 million). NOK 32 453 million, compared with NOK 35 036 million at the beginning of the year. The decrease was related to lower Net investments9 amounted to NOK -6817 million (NOK -9834 investments. The net interest-bearing debt-equity ratio was 28.0%, million). This was primarily investments in property, plant and compared with 28.4% at year-end 2015. equipment totalling NOK -5331 million (NOK -8720 million), net cash outflow related to loans to third parties OKof N -933 million Long-term interest-bearing debt from Statkraft SF to Statkraft AS (NOK 221 million) and deconsolidation of the cash and cash amounted to NOK 400 million at the end of the year. equivalents in Dudgeon Offshore Ltd of NOK -404 million. Current assets, excluding cash and cash equivalents, amounted The net liquidity change from financing amounted to NOK -3217 to NOK 20 041 million (NOK 18 883 million) and short-term million (NOK -2603 million). New debt totalled NOK 4642 million interest-free debt was NOK 21 819 million (NOK 18 994 million) at (NOK 14 409 million), while repayment of debt was NOK -7632 the end of 2015. million (NOK -11 864 million). Dividend and group contribution paid amounted to NOK -226 million (NOK -5157 million). At the end of the year, Statkraft’s equity totalled NOK 83 519 Currency exchange rate effects on cash and cash equivalents million, compared with NOK 88 340 million at the start of the year. amounted to NOK -85 million. This corresponds to 50.1% of total assets (49.9%).

Statkraft monitors its ability to meet future liabilities through the target figure “Short-term liquidity”10, and at the end of 2016, the target figure was within the target range of 1.5 to 4.0.

8 Net income: Cash flow from operations excluding taxes paid and cash effects from equity accounted investments. 9) Net investments include investments paid at the end of the year, payments received from sale of non-current assets, net liquidity out from the Group upon acquisition of activities and repayment and disbursement of loans. 10) Short-term liquidity: (OB liquidity capacity + forecast incoming payments next 6 months) / (debt due and dividend next 6 months + (limit x forecast disbursements from 11) Net interest-bearing debt: Gross interest-bearing liabilities – bank deposits, cash in operations / Investments next 6 months). hand and similar excluding restricted funds – short-term financial investments.

STATKRAFT AS ANNUAL REPORT 2016 24 Financial strength and rating Investments It is important for Statkraft to maintain its credit rating with the two In accordance with the Group’s strategy, the project activity level major rating agencies Standard & Poor’s and Moody’s. An has been scaled down in 2016. important key figure monitored by Statkraft in relation to credit rating is the cash flow from operations in relation to net interest- In total, Statkraft invested NOK 5657 million in 2016 (NOK 13 557 bearing debt. Statkraft AS has a current credit rating of A- million), of which approximately half was invested in Norway. (negative outlook) from Standard & Poor’s and Baa1 (stable Approximately two-thirds of the total investments were made in outlook) from Moody’s. See note 6. new generating capacity. Maintenance investments were primarily made in connection with hydropower in the Nordic region. Investments in new capacity were mainly related to the Fosen onshore wind farms and the Nedre Røssåga and Ringedalen hydropower plants in Norway, the Devoll hydropower plants in Albania and the Dudgeon offshore and the Andershaw onshore wind farms in the UK.

Debt and interest rates % Share 31.12.2016 Interest rate 2016 NOK 35% 4.4 % EUR 46% 2.6 % GBP 13% 0.7 % BRL 3% 8.4 % USD 2% 5.9 % CLP/CLF 1% 6.4 % Floating rate 58% Fixed rate 42%

25 STATKRAFT AS ANNUAL REPORT 2016 Risk management between the various markets. The Group's hedging strategies are regulated by defined limits on the positions’ volume and Statkraft is exposed to risk throughout the value chain. The most value, and by criteria for evaluating new contracts against important risks are related to market operations, financial expected revenues and downside risk. The portfolio is constantly management, project execution, operating activities and adjusted in relation to updated perceptions of future prices and framework conditions. the company’s own generation capacity.

Corporate risk process Statkraft's activities in energy trading and services consist of Growth and increased internationalisation, together with both trading with standard products on energy exchanges and fundamental changes in the energy sector, set stricter sale of services or products adapted to the individual customer. requirements as regards risk management. Risk management is Risk is handled through mandates covering raw materials, an integrated part of Statkraft’s governance model through a geographical areas and duration. An independent risk risk-based approach to target setting, prioritisations and follow- management function ensures objectivity in the assessment and up of the business and staff areas. The Group's overall risk handling of risk. profile is determined by the Corporate Management and is reported to the Board of Directors. Statkraft has a central Sales activities are exposed to uncertainty in the sales price to Investment Committee that ensures an appropriate quality retail customers and companies, as well as the purchase price in assessment of risks prior to investment decisions. the wholesale market. Statkraft limits the net exposure by securing symmetry between customers and purchases in the Market risk in energy markets wholesale market and by using financial instruments. District Statkraft is exposed to significant market risk in relation to the heating operations are also exposed to market risk through generation and trading of power. Revenues from power uncertain fuel prices (waste, oil, gas, electricity and others) and generation are exposed to volume and price risk: prices to customers. However, the fact that prices to customers  Both power prices and generation volumes are impacted by are linked to fuel prices means that net exposure to price weather conditions and precipitation volumes plus changes is limited. generation, consumption and transmission conditions in the electricity market. Financial risk  Power prices are also impacted by fuel prices such as gas, The central treasury department coordinates and manages the coal and oil, in addition to the price of carbon emission financial risk associated with foreign currencies, interest rates quotas, support schemes and the introduction of new power and liquidity, including refinancing and new borrowing. The generation technologies. Group is exposed to currency risk through:  Integration between the Nordic and the Continental power Statkraft manages market risk in the energy markets by trading markets physical and financial instruments in multiple markets, a well as  The Group's energy trading in EUR entering into bilateral long-term power contracts. Increased  Financing integration of the energy markets is having a significant impact  Other cash flows related to foreign subsidiaries and on business models and risk management. Consequently, associated companies Statkraft places significant emphasis on the interrelationship

Risk exposure through the value chain

RISK ACROSS THE REGULATORY FRAMEWORK AND COUNTRY ASPECTS PEOPLE MANAGEMENT FINANCIAL VALUE CHAIN • Taxes and competition legislation • Support regime • Roles and • Leadership • Interest rate and • EU and EEA regulatory • Government, parliament responsibilities • Strategy, policy and currency framework • Country culture • Skills and knowledge procedures • Funding/liquidity • National laws and regulations • Organisation and • Counterparty (energy • Licences, concessions resources trading and excess • Partnership liquidity) • Company culture • Guarantees

RISK IN THE Energy optimisation Distribution/retail Development Construction Production VALUE CHAIN and trading customer

• Currency risk • Currency and interest rate • Hydrology • Power and fuel prices Market risk risk • Power prices, fuel prices, • Volume risk associated with carbon quota prices consumption • Interest rate risk for distribution grid revenues Operational and • Compliance breach and • Injury to employees, • Injury to employees, • Compliance breach and • Injury to employees, weakened reputation contractors or third parties contractors or third parties weakened reputation contractors or third parties project risk • Financial loss (claims for • Harm to the environment • Harm to the environment • Financial loss (fines and • Damage and losses related compensation) • Compliance breach and • Damage and losses claims for compensation) to own and third-party weakened reputation related to own and third- production plants and other • Damage and losses party production plants assets related to own and third- and other assets • Financial loss party production plants • Financial loss and other assets • Financial loss

STATKRAFT AS ANNUAL REPORT 2016 26 Currency and interest risk are regulated by means of mandates. delays, cost overruns and undesirable incidents during project Forward currency contracts, interest rate swaps, forward interest planning and execution. rate agreements and debt in foreign currency are the most important instruments. The liquidity risk in Statkraft is related to Estimates of the possible financial consequences of the total the deviation between the maturity profile of financial liabilities operational risk, as well as significant individual risks that are and the cash flows generated by the assets. The liquidity risk central drivers to the Group's overall risk profile, are included in can mainly be handled through good borrowing sources, credit the reporting of overall risk at Group level. facilities and minimum requirements for the Group's cash and cash equivalents. Regulatory, country and partner risk Statkraft's activities in Norway are influenced by framework Statkraft is exposed to credit and counterparty risk through conditions such as taxes, fees, regulations, grid regulations, energy trading and investment of surplus liquidity. The credit changes in mandatory minimum water level and other rating of all counterparties is evaluated before contracts are requirements stipulated by the Norwegian Water Resources and signed, and exposure vis-à-vis individual counterparties is Energy Directorate (NVE), as well as general terms and limited by mandates based on their credit rating. Market risk in conditions stipulated for the energy industry. These framework the energy markets and other financial risk, as well as exposure conditions can influence Statkraft's generation, costs and in connection with the issued mandates, are followed up by revenues. independent middle-office functions and regularly reported to the Corporate Management and the Board of Directors. The framework conditions in the individual countries in Europe are a result of international processes that will be important for Operational risk Norwegian and other European power plants. With its All processes throughout the value chain are exposed to international involvement, Statkraft is also directly exposed to operational risk. The operational risk is highest within national framework conditions, tax levels, licence terms and implementation of our investment projects and operational public regulation in other countries. Statkraft therefore activities. This may result in: emphasises the uncertainty in relation to the future development  Injury to employees, contractors or third parties of these factors when making investment decisions. Possible  Harm to the environment changes in the political landscape are considered, and  Compliance breach and weakened reputation maintaining an open dialogue and establishing good  Damage and losses related to own and third-party relationships with decision-makers in all relevant arenas are production plants and other assets emphasised.  Financial loss Furthermore, Statkraft is exposed to significant country risk, Statkraft's first priority is to execute development activities and especially in emerging countries, as well as partner risk. operations in a responsible manner. Statkraft does not tolerate Statkraft assesses risk for each country individually and and works actively against any act of economic crime. A series compares countries in each region. Partner risk is assessed at of corruption and fraud prevention activities are being an early stage in order to confirm the necessary integrity and implemented to build a strong compliance culture and high management structure. Statkraft is committed to ensuring that all ethical standards. Risk management at early stages of the parts of the Group comply with the Group’s policy and development for an investment project is an important success procedures. The standards have been set out and made factor. Statkraft has insurance coverage for all significant types available in the Statkraft Way management system. The of damage or injury, in part through the Group’s own insurance standards are also communicated to all partners and suppliers. company Statkraft Forsikring. Statkraft manages operational risk Corruption is a risk in several of the countries where Statkraft is through detailed procedures for activities in all operational units present. Statkraft strives to ensure compliance in all activities and various types of contingency plans. Furthermore, Statkraft and has zero tolerance for corruption. has a comprehensive system for registering and reporting risks, hazardous conditions, undesirable incidents and damage and Changing environment injuries. Such cases are analysed continuously to prevent and Climate change, technology development and changed limit any consequences, and to ensure that we can follow up consumer behaviour is of importance for all the risks described causes and implement the necessary measures. above and are important drivers for changes in framework conditions and political decisions. The increased uncertainties of All projects in Statkraft carry out systematic risk assessments. the energy markets represent both threats and opportunities. To This takes place through each project: exploit these opportunities, Statkraft strives to adapt to the  Having an allocated project reserve for larger investments changing environment by developing skilled leaders, having  Implementing follow-up and reporting of factors of sufficient flexibility and adaptability in our business models and importance rfo project development and execution decision processes, and continuously monitoring technology  Evaluating and planning measures to manage risk in the development and identifying potential business opportunities or project threats. To address the challenges related to changing market conditions and technological developments Statkraft has Major attention is devoted to development of sound systems for introduced a performance improvement programme and revised learning, establishing barriers and ensuring compliance to avoid the strategy.

27 STATKRAFT AS ANNUAL REPORT 2016 Internal control Innovation and new business development Statkraft’s management system, «The Statkraft Way», ensures a Statkraft runs innovation and new business development good control environment and contributes to achieving the activities across the company with the clear goal of further Group’s goals. Internal control requirements have been strengthening our competitive advantages in core operations incorporated into the relevant internal control area, e.g. HSE, and to identify and develop new business. During the last years, ethics, corporate responsibility, ICT and financial reporting. Statkraft has on average spent about NOK 150 million per year in this field, with NOK 200 million in 2016. Efforts are carried out Internal control over financial reporting in the following dimensions: Statkraft has a system for Internal Control over Financial Reporting (ICFR) to ensure reliable and timely financial Shorter time horizon information in the monthly, quarterly and annual reports. The Operational improvement projects addresses daily challenges ICFR is based on the COSO 2013 framework for internal control, and efforts usually yield quick results. These projects are run by published by the Committee of Sponsoring Organizations of the line management and focus on existing plants and equipment. Treadway Commission. Market innovation activities are focused on exploiting new The ICFR system shall ensure reliable and timely financial business opportunities that arise in a dynamic energy market. information. All subsidiaries are required to comply with the These activities have a relatively short time perspective and are ICFR requirements as described in «The Statkraft Way» and in related to development of products and services. Statkraft’s finance manual. The same applies for associated companies, joint operations and joint ventures where Statkraft is Longer time horizon responsible for the bookkeeping and financial reporting. If a third Statkraft Ventures is a growth tool focusing on new downstream party is responsible for the bookkeeping and the statutory business models with an annual investment capacity of EUR 10 reporting of the partly owned company, the responsible segment million. To date, Statkraft Ventures has invested in three start-up shall perform compensating controls. firms: tado° (smart thermostats), DEPsys (monitoring and optimizing the distribution grid) and Greenbird (software The Board of Directors has the overall responsibility for a well- integration for energy data-streams). In addition to making functioning ICFR system in the Group. The activities related to profitable investments, Statkraft Ventures connects new ICFR are performed in the Group’s Governance, Risk and innovative firms with various business units in Statkraft. Compliance (GRC) system, BWise, which was implemented in 2015. BWise makes it possible to efficiently monitor real time Research and development (R&D) programmes are multi-year status of control performance throughout the etire organisation. and span across all business areas. Statkraft has had R&D In 2016, Statkraft decided to implement a fraud prevention programmes within hydropower, wind power, bio-energy and system to prevent and detect fraud in processes related to climate change. From 2017, these will be combined into one procurement, accounting, tax and treasury. The system will have common R&D programme. a risk-based approach and make use of methodology already in place in the ICFR system. New Business Development activities are focused towards opportunities where Statkraft can take an industrial role. Given the The main elements of the ICFR system are risk assessment and strong transformative trends across the energy system, Statkraft is evaluation of control design, continuous performance and exploring many options. The focus is naturally on core markets, monitoring, test of control performance and reporting of ICFR to Norway in particular, and Statkraft intends to put additional the Audit Committee constituted by the Board of Directors. emphasis on this field going forward. The largest current business development initiative is biofuel. Statkraft and Södra have together established Silva Green Fuel with the objective of producing second generation biofuel from forest feedstock. The ambition is to develop a demonstration plant at Tofte, Norway, and then a commercial scale plant. If constructed, the commercial scale plant is expected to have an annual production of approximately 100 million litres of biodiesel based on Norwegian feedstock. Such a plant, and subsequently others, would represent a significant contribution towards Norway’s ambition of reducing transportation- related greenhouse gas emissions.

STATKRAFT AS ANNUAL REPORT 2016 28 Corporate Responsibility area levels and in regular business reviews. Corporate responsibility issues are also included in the Corporate Audit’s Statkraft is committed to act in a sustainable, ethical and socially scope of work. responsible manner. Statkraft carries out activities that support a global transition towards a low-carbon, climate-resilient economy Statkraft’s employees are requested to report concerns or by providing renewable and sustainable energy solutions. breaches of the rules through the line organisation or to the Statkraft’s goal is to have sustainable and safe operations where group’s independent whistle-blowing channel, which is people, communities, the environment and our assets are managed by Corporate Audit. Reporting can be made protected. anonymously, and the whistle-blower channel is also available for externals via Statkraft’s web site. In 2016, out of the total In order to fulfil these commitments, Statkraft takes guidance from number of 46 reported concerns, 18 concerns (12) were globally recognised initiatives and standards, including the reported to Corporate Audit. These concerns mainly covered OECD’s Guidelines for Multinational Enterprises and IFC’s the areas of business ethics and labour rights. Of the reported Performance Standards on Social & Environmental Sustainability. concerns some are closed after an initial evaluation by Statkraft is a member of the UN Global Compact and complies Corporate Audit, some are returned to the line organisation for with its ten principles relating to human rights, labour rights, further follow-up, while in some cases a corporate investigation environment and anti-corruption, and the company’s reporting also is needed. Corporate Audit is responsible for performing such relates to the UN Sustainable Development Goals. Statkraft’s investigations in Statkraft. In addition to reacting to reported external reporting on initiatives and performance within corporate concerns, Corporate Audit can also proactively initiate responsibility is based on the Global Reporting Initiatives preventive investigations to enhance compliance. In 2016, guidelines (GRI G4). As part of the corporate responsibility Corporate Audit initiated four investigations. reporting process, Statkraft has completed a materiality analysis where the following aspects were identified as most significant: • Safety and safeguarding of people Health and safety • Human rights Caring for people is at the heart of Statkraft’s culture and we work • Water management continuously towards our goal of zero injuries. Leadership • Biodiversity commitment, a proactive attitude towards health and safety, • Climate change mitigation, adaptation and preparedness robust planning of projects and clear safety expectations are • Business ethics and anti-corruption crucial to achieving this objective.

In Statkraft’s work and reporting on corporate responsibility In 2016, Statkraft’s activities resulted in one fatal accident in issues, the above aspects are the main focus of attention. Below which one of our contractors’ employees lost his life. The is a summary of Statkraft’s work and results in the corporate deceased was doing repair work on a siphon in La Oroya responsibility area in 2016. hydropower plant in Peru. La Oroya is 100% owned by Statkraft IH Invest AS, where Statkraft holds an ownership of 81.9%. The Management of corporate responsibility investigation has identified root causes related to the implementation and understanding of risk mitigation systems and Corporate responsibility is an integral part of Statkraft’s tools in maintenance activities, and contract management and decision-making at all levels. The Board of Directors sets the follow-up of HSE requirements in procurement processes. direction and follows up on performance. The Board has Statkraft ensures learning from the tragic incident when further adopted a Code of Conduct which describes fundamental rolling out the Statkraft HSE program. principles for sustainable, ethical and socially responsible behaviour. The Code of Conduct applies to all companies in In addition, 40 (39) serious incidents (incidents with, or with the the Statkraft Group and to all individuals who work for potential for, serious consequences) were registered. The serious Statkraft, regardless of location. incidents resulted in the fatality in Peru and five serious injuries (6). Serious incidents are investigated according to defined Statkraft’s business partners are expected to adhere to procedures to ensure learning across the organisation. Most of equivalent corporate responsibility standards as Statkraft. the serious accidents and near-accidents in 2016 were Statkraft’s corresponding requirements for the Group’s associated with driving, operation of heavy machinery, work suppliers are described in Statkraft’s Supplier Code of performed at height and lifting operations. Conduct.

In 2015, a step change programme was launched to improve and Corporate responsibility is a line and managerial responsibility develop a proactive approach to health and safety.e Th HSE in Statkraft, and systems are in place to provide employees improvement program, named “Powered by Care”, has several and managers with necessary guidance and advice to uphold components that were rolled out in 2016 and will be further desired behaviour. Principles and requirements related to implemented in 2017. Activities in 2016 include: corporate responsibility are included in Statkraft’s • A statement signed by Statkraft’s Corporate Management management system. The system facilitates a structured and making their health and safety commitment clear and visible. uniform handling of the Group’s corporate responsibility, and it • New key performance indicators with increased focus on is regularly reviewed so as to tailor it to new expectations and serious incidents were rolled out as of January 2016, and challenges. Aspects of corporate responsibility performance additional leading indicators to increase management and are followed up through scorecards at group and business

29 STATKRAFT AS ANNUAL REPORT 2016 employee engagement in health and safety activities were ambition. Since 2015, Statkraft is only investing in renewable introduced in April 2016. energy. Statkraft also supports a precautionary approach to • Life-saving rules have been designed with the aim of environmental challenges and strives to avoid, minimise, avoiding serious and fatal injuries and will be implemented in mitigate or compensate negative environmental impacts from its 2017. These rules are based on experience of high risk activities. activities in Statkraft’s operations and global knowledge from similar industries. Statkraft works strategically with the EU’s Water Framework • The CEO’s HSE Award was awarded for the first time to Directive and the Norwegian Framework for Water Regulations inspire activities that contribute to improved health and safety in order to enhance coordination of the company’s activities results. The initiative resulted in an engagement in health related to water management in Norway, Sweden and Germany. and safety issues throughout the organisation. The implementation of the EU Water Framework Directive • HSE training programmes for operation and projects are provides important guidance for the on-going Revision of Terms being developed through the Statkraft Academy. The first projects where environmental terms will be updated to current modules were launched in 2016 and the development will standards, based on cost/benefit analysis. In Norway, about 20 continue in 2017. revisions involving Statkraft assets, representing 35 TWh annual of production, are on-going or will start up in the period between The rate of lost-time injuries (LTI) was 3.1 (3.5) among Statkraft’s 2017 and 2021. employees and contractors, while the rate for all types of injuries (TRI) was 4.9 (5.9). In total 128 (176) injuries were registered, of Statkraft's core activities take into consideration a long term which 80 (104) were lost-time injuries among the Group’s perspective. The effects of climate change will influence both employees and contractors. operations and business opportunities significantly. The possible effects of climate change on Statkraft’s Nordic hydropower Sick leave in Statkraft is at a stable low level and was 3.0% in assets have been thoroughly analysed. Statkraft has adapted 2016 (3.0%). regional climate models to assess future changes in precipitation and temperature, which affect water values and Security generation possibilities. Climate change impactse outside th Security refers to the ability to keep people, operations, Nordics are addressed through hydrological impact studies information and systems secure from intentional harm or damage. related to future water availability for energy generation, Statkraft has a comprehensive approach to security topics and ecosystem services and the environment. Operational and follows international good practice for security management. investment decisions in all regions are based on assessments that include climate change considerations. An initiative was launched in 2016 to strengthen continuous efforts within the field of security in Statkraft. Initial measures include There were no serious environmental incidents in the Group in enhanced group alignment within security management and 2016. However, 233 minor environmental incidents were improved reporting of security incidents and observations. A total registered (228). Most of these were related to short-term of 39 security incidents were reported in 2016. This includes 15 IT breaches of river management regulations and minor oil spills security incidents, which were all detected and blocked, and two with little or no impact on the environment. serious security incidents related to street crime. Countries with Statkraft interests are followed up on security matters through a In 2016, Statkraft’s electricity consumption was 918 (1031) risk-based approach. GWh. In geographies where it is applicable, the electricity consumed is certified as renewable in accordance with RECS Jointly with other energy companies, Statkraft has established the (Renewable Energy Certificate System). Statkraft’s emissions of company KraftCERT. KraftCERT co-operates with NorCERT and greenhouse gases were 773 400 (258 600) tonnes of CO2 other security authorities, and its main objective is to strengthen equivalents. The increase in 2016 was due to more gas power in the utility sector’s ability to resist cyberattacks. Internally, Statkraft the energy mix. Statkraft’s operations generated has improved its operational abilities to detect and handle security 17 000 (18 900) tonnes of hazardous waste, which was treated incidents. in accordance with applicable regulations.

Updated and improved processes for emergency response Human rights and social issues management were approved in 2016, including strengthening Statkraft’s work on human rights is based on the internationally and clarification of emergency response functions in core recognised United Nation’s Guiding Principles on Business and organisational areas. The continuous strengthening of Human Rights. Statkraft’s emergency preparedness, in particular through the implementation of the updated management processes, will Alongside a policy commitment on human rights enshrined in its remain a priority in 2017. Code of Conduct, Statkraft’s approach to human rights management is based on the principles of integration and mainstreaming of human rights considerations into existing governing documents, processes Environment and climate and systems, for instance those related to procurement, social Statkraft supports a global transition towards a low-carbon issues, human resources or security. economy by providing renewable and sustainable energy solutions. Continued growth based on international good practice for environmental management is key to achieving this

STATKRAFT AS ANNUAL REPORT 2016 30 Statkraft’s salient human rights include indigenous rights, rights laws and internal rules, as well as dilemma training specifically related to local community acceptance, labour rights, health and adapted to likely risks in the relevant unit’s area of work. By the safety and security. As a result of consultations, a number of end of 2016, 100% (92%) of Statkraft’s staff had completed agreements with indigenous communities were reached in 2016. In tailored training on business ethics and anti-corruption over the July 2016, a long-term agreement concerning compensation for last two years. Moreover, 100% of people in senior management mitigation measures and land access for the operation phase of positions have received specialised anti-corruption training over affected wind farms was signed with the Jijnjevaerie Sami Village in the last two years. Sweden. A corresponding long-term agreement was signed with the Ohredahke Sami Village in Sweden in September 2016. In June Statkraft has prepared practical guidelines that advise employees 2016, Statkraft also entered into an agreement with the Northern on how to handle ethical challenges. The guidelines are a Group of the Fosen Reindeer Grazing District regarding supplement to governing documents, the existing anti-corruption compensation and mitigation measures related to the construction of handbook and the anti-corruption e-learning programme. the Fosen wind farm. Dialogue is on-going with the Southern Group. Statkraft works continuously to strengthen the culture of reporting In 2016, Statkraft engaged in discussions with rights holders and concerns and breaches. In 2016, Statkraft registered 23 reported other stakeholders relating to the planned projects in Chile (Osorno concerns related to ethics and anti-corruption. Some of those and Los Lagos), which included meetings in Chile and Norway with concerns were reported to Corporate Audit. representatives of the Mapuche, as well as with NGOs and other institutions. Indigenous communities have expressed concerns about On 13 July 2015, Statkraft acquired a controlling interest in the the projects in Chile. Statkraft aims to obtain a better understanding Brazilian company Desenvix Energias Renováveis S.A. which of the potential impacts, and is undertaking further analysis, subsequently changed name to Statkraft Energias Renováveis alongside stakeholder engagement. (SKER). Over the past years, Brazil has experienced several severe corruption cases. On this background, Statkraft initiated an Statkraft works to enhance direct and indirect benefits and internal investigation related to the subsidiary acquired in 2015. development opportunities for stakeholders. Interventions are a result Based on the investigation the company has contacted Brazilian of consultations with all affected stakeholders in accordance with authorities. It is at this stage not possible to predict if the outcome good international practices and standards, based on the could have potential negative financial effects. International Finance Corporation Performance Standards on Social & Environmental Sustainability. The Brazilian Federal Prosecutor is currently investigating potential crimes committed by representatives of the four main In 2016, core activities have included the completion of resettlement, pension funds in Brazil and representatives of companies in which compensation and livelihood development programs for the Devoll the pension funds invested, as well as any other individual who project in Albania. This was especially relevant in light of the filling of may have been involved in the alleged scheme, related to the reservoir and commencement of operations of the Banja historical investments made by the pension funds. FUNCEF, hydropower plant. At the Kargi hydropower plant in Turkey, a which invested in Desenvix (now SKER) in 2009 and 2010, and mitigation programme to improve efficiency in irrigation systems now owns 18.7% of SKER, is one of these pension funds. downstream of the power plant has been initiated in order to optimise Additionally, a civil lawsuit has been filed against the pension power production and reduce potential releases of water during the funds and companies and individuals related to the pension fund’s rice-growing season. investments, including SKER. It is at this stage not possible to predict if the outcome of the cases could have potential negative effects on SKER. Business ethics and anti-corruption work A strengthened Compliance unit was established in Corporate Legal and Compliance in 2016. The Compliance unit covers the Employees and organisation areas of corruption, fraud, money-laundering, sanctions and Having a competent and engaged workforce is strategically export control, as well as personal data protection and competition important for Statkraft. The Statkraft Academy lays the foundation law. Statkraft works actively to build a strong ethical culture and for an improved and targeted approach to training, and makes all secure robust types of internal controls. The work is tailored to the Statkraft training available at one point of contact globally. company’s risk profile and responds to applicable laws and Statkraft Academy offers training in core business processes requirements, as well as relevant international standards. such as operations and maintenance, energy management and project management, as well as in general areas such as Compliance related risk assessments are conducted regularly, business ethics, safety, and leadership. with the most frequent updates for higher risk units. In 2016, a separate assessment of fraud risks in CFO processes across the There is a close link between Statkraft’s business goals and goals company was conducted and Statkraft decided to implement a for individual leaders and employees. The overall goals for the fraud prevention system related to these processes. Statkraft also company are structured and cascaded down to individuals and established a new corporate framework for integrity due diligence discussed in the regular goal and development dialogues. reviews of third parties, suppliers and business partners.

Statkraft has a focused and systematic approach to recruitment Statkraft has rolled out mandatory business ethics and anti- and remains an attractive employer both among graduates and corruption training to all staff in the Group, with the exception of experienced employees. Skagerak Energi and Fjordkraft. Training has been focused on

31 STATKRAFT AS ANNUAL REPORT 2016 Statkraft has a structured collaboration with local employee (2013-2014) “Et mangfoldig og verdiskapende eierskap” (“Diverse representatives and represented trade unions. In addition to and value-creating State ownership”), and is subject to reporting national cooperation with trade unions, Statkraft has established a requirements relating to corporate governance according to European works council (Statkraft European Works Council, Section 3-3b of the Accounting Act. Furthermore, Statkraft applies SEWC), with employee representatives from Norway, Sweden, the Norwegian Code of Practice for Corporate Governance (NUES) Germany and the UK. For other countries, the collaboration with within the framework established by the company’s organisation employee representatives is structured and managed by the and ownership. relevant country office. Reference is also made to the separate description of corporate Statkraft supports and respects internationally recognised labour governance in the annual report on Statkraft’s website. rights wherever it operates. Relevant ILO conventions and EU directives have been included in the SEWC agreement with Corporate Audit EPSU (European Federation of Public Service Unions), the Corporate Audit is an important part of the organisation in terms federation for European unions within the energy industry. In of evaluating and improving the effectiveness of the countries not covered by SEWC, Statkraft respects the organisation's governance, risk management and internal employees’ freedom of association and collaborates with union control. The Head of the Corporate Audit reports functionally to representatives in accordance with collective bargaining the Board of Directors, the Audit Committee and the CEO, and agreements, legal requirements, international standards and administratively, i.e. day-to-day operations, to the CFO. prevailing industry best-practice for each location. Corporate Audit’s responsibilities are defined by the Board of Directors and its activities are performed with the following Statkraft aims at having a diverse working environment and objectives: considers equal treatment to be a tenet of its recruitment and HR • Increase awareness related to governance, risk management policy. Statkraft strives to attain a balanced gender distribution in and control issues the Group, including managerial positions. Statkraft’s recruitment • Provide recommendations based on cost-benefit evaluations policy requires diversity among the candidates for all leadership • Anchor responsibility and ownership in such a way that positions, with both sexes represented in final evaluations. To agreed solutions are implemented further develop the pipeline of female leaders, Statkraft prioritises • Share experience across the organisation the participation of women in leadership and talent development • Follow-up implementation of audit recommendations measures. Corporate Audit is authorised to obtain full, free, and unrestricted At the end of 2016, 25% (23%) of the Group’s employees were access to any of Statkraft records, physical properties and women, and the percentage of women in management positions personnel pertinent to carrying out audit engagements. All was 22% (23%). The percentage of women among new employees are requested to assist Corporate Audit in fulfilling its employees in 2016 was 24% (26%). The percentage of women in roles and responsibilities. The Head of Corporate Audit has free Statkraft’s Board of Directors is 44% (50%). The average salary and unrestricted access to the Board of Directors and the Audit for women compared to men in Statkraft was 0.90 (0.97), and the Committee. The Audit Committee and the Head of Corporate corresponding figure for managers was 0.90 (0.91). Audit hold a minimum of one meeting per year without the presence of the Group Administration. The Head of Corporate Audit is responsible for Statkraft’s whistle-blowing system and is At the end of 2016, the Group had 3484 (3795) full-time the first recipient of all concerns reported directly through the equivalent employees. The Group had employees in 16 (15) Whistle-blower Channel. In cases where a formal investigation is countries and 40% (43%) of the employees were located outside required, this is the responsibility of the Head of Corporate Audit. of Norway. The average length of service was 11.6 (10.8) years and the employee turnover was 6.6% (4.6%). The work of the Board of Directors Corporate Governance Thorhild Widvey succeeded Olav Fjell as the chair of the Board in June. Peter Mellbye, Bengt Ekenstierna and Helene Biström Efficient and transparent management and control of the business joined the Board as new members, replacing Berit Rødseth and form the basis for creating long-term values for the owner, Elisabeth Morthen, and Harald von Heyden who left the Board employees, other stakeholders and society in general, and as a earlier. Halvor Stenstadvold was elected the new deputy chair. result, contribute to sustainable and lasting value creation. The distribution of roles between the Norwegian state as the owner, The Board of Statkraft AS held eleven board meetings in 2016. the Board of Directors and the Management of the company shall The Board has a strong focus on operations and ongoing inspire confidence among stakeholders through predictability and development projects. A significant part of the work of the Board and accessible communication from the company credibility. Open of Directors in 2016 was discussions and alignment of the Group’s will ensure that the Group maintains a good relationship with strategy. society in general and the stakeholders affected by the company’s activities in particular. The Board has an Audit Committee consisting of four board members. The Audit Committee held seven meetings in 2016. The Statkraft follows the Norwegian State’s principles for sound Audit Committee acts as a preparatory and advisory working corporate governance, described in the White Paper Meld. St. 27

STATKRAFT AS ANNUAL REPORT 2016 32 committee in respect of the Board's administrative and supervisory tasks in the areas of: Going concern • Preparation of the Board's follow-up of the account reporting In accordance with the provisions of the Norwegian Accounting process and external financial reporting Act, the Board of Directors confirms that the annual financial • Monitoring of the systems for internal control and risk statements have been prepared on the assumption that the management related to financial reporting, including the company is a going concern. financial reporting consequences of the major risk exposures in the company • Monitor that the Company has adequate compliance Profit allocation processes and procedures to prevent and detect violations of The parent company Statkraft AS had a net profit of laws, regulations and internal requirements within areas such NOK 1371 million in 2016 (net loss of NOK 832million). as fraud and corruption and/or other areas which may have financial reporting consequences. The Board of Statkraft SF proposes that no dividend be disbursed from Statkraft SF for 2016. The Board of Statkraft AS proposes The Board also has a Compensation Committee consisting of the the following allocation of the annual profit in Statkraft AS: chair of the Board and two of the board members. The Compensation Committee held three meetings in 2016. The mandate of the Committee is as follows: Profit allocation • Once a year prepare the board’s treatment of items relating Amounts in NOK mill. to the CEO’s salary and conditions of employment Net annual profit in Statkraft AS' company accounts 1 371 • Prepare the Board’s statement on executive pay and other compensation paid to senior executives Appropriation of profit for the year and equity transfers: • Prepare the Board’s treatment of all the fundamental issues Allocated dividend from Statkraft AS to Statkraft SF 4 350 relating to salary, bonus systems, pension and employment Transfer from retained earnings -1 648 agreements and similar for the executive management in Tranfer from other paid-in capital -16 Statkraft Transfer from share premium account -1 315 • Deal with specific issues related to compensation for employees in the Statkraft Group eto th extent that the The proposed dividend is deemed to be prudent based on Committee deems that these concern matters of particular Statkraft AS’ equity and liquidity. importance for the Group’s reputation, competitiveness and attractiveness as an employer • The CEO shall consult the Compensation Committee regarding the salaries for the corporate executives and Head of Corporate Audit before they are decided upon

33 STATKRAFT AS ANNUAL REPORT 2016 Outlook There is increased focus on climate challenges globally and the utilise the large hydropower reservoir capacity to optimise majority of countries are now making commitments to reduce production. The Group’s investment level has been adjusted down greenhouse gas emission levels through the Paris Agreement. For in accordance with reduced investment capacity. the energy sector, changing framework conditions and technological development are resulting in increased competition, A key priority is to operate and develop the Norwegian and but also offer new business opportunities. Swedish hydropower portfolio effectively. After a consolidation period, Statkraft will invest in selected growth markets and explore Statkraft’s performance improvement programme will strengthen new business development opportunities in Norway. The ambition competitiveness and reduce costs. Long-term contracts are is to strengthen the position in renewable energy and be a stabilising the Group’s revenues and Statkraft will continue to competitive supplier in all markets where Statkraft has operations.

The Board of Directors of Statkraft AS Oslo, 15 February 2017

Thorhild Widvey Halvor Stenstadvold Hilde Drønen Chair of the Board Deputy chair Director

Peter Mellbye Helene Biström Bengt Ekenstierna Director Director Director

Vilde Eriksen Bjerknes Thorbjørn Holøs Asbjørn Sevlejordet Director Director Director

Christian Rynning-Tønnesen President and CEO

STATKRAFT AS ANNUAL REPORT 2016 34 Declaration from the Board and CEO

We confirm to the best of our knowledge that the consolidated financial statements for 2016 have been prepared in accordance with IFRS as adopted by the EU, as well as additional information requirements in accordance with the Norwegian Accounting Act, and that the financial statements for the parent company for 2016 have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting practice in Norway, and that the information presented in the financial statements gives a true and fair view of the Company’s and Group’s assets, liabilities, financial position and result for the period viewed in their entirety, and that the board of directors’ report gives a true and fair view of the development, performance and financial position of the Company and Group, and includes a description of the key risks and uncertainties the companies are faced with.

The Board of Directors of Statkraft AS Oslo, 15 February 2017

Thorhild Widvey Halvor Stenstadvold Hilde Drønen Chair of the Board Deputy chair Director

Peter Mellbye Helene Biström Bengt Ekenstierna Director Director Director

Vilde Eriksen Bjerknes Thorbjørn Holøs Asbjørn Sevlejordet Director Director Director

Christian Rynning-Tønnesen President and CEO

35 STATKRAFT AS ANNUAL REPORT 2016 Statkraft Group Management

From the left: Irene Egset, Steinar Bysveen, Christian Rynning-Tønnesen, Hallvard Granheim, Hilde Bakken, Jon Vatnaland and Jürgen Tzschoppe.

Christian Rynning-Tønnesen Irene Egset Hallvard Granheim Born 1959, Norwegian Born 1966, Norwegian Born 1976, Norwegian

Group management since 2010 Group management since 2016 Group management since 2014 Position: CEO Position: CFO Position: EVP Market Operations and IT Employee in Statkraft since 2010-, 1992-2005 Employee in Statkraft since 2008 Employee in Statkraft since 2012 Education: MSc NTH, Trondheim Education: MSc NHH, Bergen Education: MSc NHH, Bergen Norwegian Army officer education Former positions: Statkraft: EVP Corporate Staff, Former positions: Statkraft: EVP & CFO, Former positions: Norske Skog: CEO and CFO. SVP Financial Reporting and Strategic Finance, SVP Financial Reporting, Accounting and Tax. Statkraft: CFO and other executive positions. SVP Finance Wind Power and Technologies. Deloitte: Director, Advisory & Auditor. McKinsey: Consultant. Statoil: various positions. Norske Skog: VP Energy Sourcing & Trading. Esso Norge: Refinery commercial coordinator. Current board positions: Board member: Energi Current board positions: Board member: Norge. Klaveness. Chair: VCOM. Advisory board member: Det Norske Veritas. Deputy board member: NTNU.

Hilde Bakken Jon Vatnaland Jürgen Tzschoppe Born 1966, Norwegian Born 1975, Norwegian Born 1968, German

Group management since 2010 Group management since 2017 Group management since 2015 Position: EVP Power Generation Position: EVP Corporate Staff Position: EVP International Power Employee in Statkraft since 2000 Employee in Statkraft since 2009 Employee in Statkraft since 2002 Education: MSc NTH, Trondheim and TU Delft, Education: Cand. polit. sociology and Ph.D. innovation Education: Ph.D. Electrical engineering, RWTH Aachen Netherlands studies, UiO. Former positions: Statkraft: EVP Market Operations Former positions: Statkraft: EVP Corporate Staff Former positions: Statkraft: SVP Strategy in Wind and IT, SVP Continental Energy. MD Statkraft Markets and various positions within the Generation and Power and Technologies, MD Statkraft UK ltd, Senior GmbH and Knapsack Power GmbH & Co. KG. Market business. Norsk Hydro: various mgmt. and advisor Corporate Strategy. McKinsey: Engagement mgr. Enron: Power Trading Europe Associate. engineering positions Current board positions: Board Member: TIK Centre at IAEW Aachen: Chief engineer. Current board positions: Board member: Yara UiO. International, Oslo Energy Forum.

Steinar Bysveen Born 1958, Norwegian

Group management since 2010 Position: EVP Wind Power, District heating and Projects Employee in Statkraft since 2010 Education: MSc NTH, Trondheim. Business studies BI. Former positions: Statkraft: EVP Wind, Technology and Strategy, EVP Production and Industrial Ownership, EVP Corporate Development. Energi Norge: CEO. Industrikraft Midt-Norge: MD. Current board positions: Chair: Skagerak Energi, Fosen Vind DA. Deputy chair: BKK. Board member: Agder Energi.

STATKRAFT AS ANNUAL REPORT 2016 36

Statkraft is a significant player in international markets where energy and energy-related products are bought and sold.

37 STATKRAFT AS ANNUAL REPORT 2016 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

38 Financial Statements 2016201620162016201620162016201620162016201620162016

Group REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

ASASASASASASASASAS

STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS items Net financial Other Netcurrency effects expenses Financial income Financial Operating expenses Operating Other Property and impairments amortisationDepreciation, costs and payroll Salaries revenues Net operating costsTransmission Energypurchase Gross Other investmentsShareofprofit/lossin equityaccounted Salesrevenues million NOK Statkraft Statement which majorityinterestwhich Of interest non-controllingwhich Of Comprehensive Other Income pensions Estimatedeviation Items effects currency translation Reclassification Currency translation Items Income instrumentsin fairvalueoffinancialChanges Items OTHER majorityinterestwhich Of interest non-controllingwhich Of Net profit/loss Tax Profit/loss expense recorded in other comprehensive income in equity accounted investmentsaccounted incomein equity in othercomprehensive recorded financial itemsfinancial expenses operating revenues operating comprehensive

in in revenues operating

tax tax INCOME COMPREHENSIVE other other tax beforetax related related profit/loss and licence fees and licence comprehensive comprehensive Group AS income to to of effects estimate deviation pensions estimatedeviation instruments infairvalueoffinancial changes Comprehensive income income income that overthatrecycle related will not to foreign operations disposed ofin the disposed foreignoperations recycleover Income profit/loss: profit/loss: 39 year 4,14, 22,23 4, 14,24 4, 12,20 19, 20 19, 20 15, 16 12, 20 Note STATKRAFT 21 19 19 18 17 13 4 4 4

AS 20 621 20 987 50 448 49 -17 535 -29 093 -5 402 -5 411 -1 894 -3 733 -1 260 -8 648 -3 273 -1 -3 950 -3 733 -3 554 -3 851 -4 5 223 5 137 2 847 2 086 3 065 1 1 235 1

ANNUAL 2016 321 380 474 217 445 -117 -179 -320 -62 -17 -52 6

REPORT -16 276 -31 892 20 773 53 777 51 586 -1 772 -2 369 -1 548 -5 318 -3 445 -2 058 -4 650 -1 679 -6 401 -3 545 -1 112

4 525 4 392 6 761 6 138 4 497 1 507 2016 2015 -133 -314 -937 -598 -821 -237 758 772 204 142 421 683 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 513 7 874 4 675 1 044 6 651 9 056 8 443 3 736 7 196 2 825 5 388 5 822 10 675 27 940 57 111 22 787 88 340 21 228 37 410 62 374 10 781 26 190 19 388 176 905 148 966 176 905 111 207 31.12.2015 532 8 961 3 047 7 308 2 653 6 637 7 747 1 805 8 407 4 764 5 137 4 533 166 630 10 219 139 282 27 349 166 630 58 411 17 360 83 519 19 195 31 886 52 885 11 918 30 226 103 303 19 438

Director Director Director 31.12.2016 Hilde Drønen Bengt Bengt Ekenstierna Asbjørn Asbjørn Sevlejordet 25 28 27 29 26 28 31 28 31 21 32 28 22 23 Note 4, 4, 24 16, 30 AS

40 Director Director Deputy chair Helene Biström Thorbjørn Thorbjørn Holøs Oslo, Oslo, 15 February 2017 President and CEO Halvor Stenstadvold Board Board of Directors of Statkraft Christian Christian Rynning-Tønnesen The Position 2016201620162016201620162016201620162016201620162016

Board REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

Mellbye Financial Director Director of Peter ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL Thorhild Thorhild Widvey

AS Group Chair of the ASASASASASASASASAS Vilde Eriksen Bjerknes

liabilities liabilities

liabilities and

interest-free interest-free liabilities non-current financial assets Derivatives Non-current assets Receivables Short-term financial investments Cash and cash equivalents (included restricted cash) Current assets Inventories Derivatives Assets EQUITY LIABILITIESAND Paid-in capital Retained Retained earnings Non-controlling Non-controlling interest Equity Provisions Long-term interest-bearing Long-term interest-bearing liabilities Derivatives Long-term Short-term interest-bearing liabilities Taxes payable Other Derivatives Current Equity STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT

NOK million Statement Statement Statkraft ASSETS Intangible assets Property, plant and equipment Equity Equity accounted investments Other CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Business combinations and asset purchase, net liquidity outflowfromand assetpurchase,netliquidityBusinesscombinations Shareissue insubsidiary paid and Groupcontribution Dividend of debt Repayment New debt CASH Restrictedcash Unused overdraftfacilitiesUnused committedcreditlines Unused Considerations regarding investmentsinothercompanies regarding Considerations of loansfromthirdpartiesRepayment Loans to Profit/loss on disposal of non-current assets ofnon-currentProfit/losson disposal Profitbefore CASH million NOK Statkraft Statement The cash beenflow preparedstatement using has the indirect method. The statement starts with the Group’s profit before taxes in order to show cash flow generated SIGNIFICANT ACCOUNTING POLICIES 4) 3) 2) 1) inflowBusinessdivestments,netliquidity ofjointarrangementReclassification assetsProceedsfromsale ofnon-current Investmentsin property,plantandequipment CASH items in long-termChanges in value changes Unrealised loans currency effectoninternalRealised investmentsShareofprofit/lossin equityaccounted investmentsaccounted Profit/lossfromsale ofsharesandequity Cash Cash Net change

Profit/lossfromsale ofbusiness Depreciation, amortisation and impairment amortisationDepreciation, Cash Taxes investmentsfromequityaccountedDividend in short-termitemsChanges Cash and cash equivalents 31.12 Cash andcashequivalents 01.01 Cash andcashequivalents rateCurrency exchange reporting. This is mainly dueto Thisis mainly reporting. investments are presented as provided cash flow from operating activities. by operating activities. The cash flow statement is divided into net cash flow from operating activities, investing activities and financing activities. Dividends disbursed to the owner and to non-controlling interests are presented unde Included in cash and cash equivalents are NOK Includedincashandequivalents in companies and other are assetpurchaseinvestmentcombinations, Investmentsinbusiness Net cash deconsolidated from Netcash deconsolidated Investmentsin the activities from financing flow activities from investing flow activities from operating flow FLOW FLOW FLOW thirdparties

cash equivalents cash and in tax FROM FROM FROM Group AS 168 million lower than investments in fixedassets inthe thaninvestments 168 million lower in cash flowareNOK of FINANCING

OPERATING INVESTING CashFlow effects to Forsikring investmentsbyStatkraft non-controlling interestsnon-controlling the Groupdueto on cashandequivalents 4) ACTIVITIES ACTIVITIES ACTIVITIES

2) to reclassification of Dudgeon Offshore Ltd. WindreclassificationDudgeon Offshore of 110 million related to related 110 million

the 1) Group not presented as investmentsin not presented AS 3)

joint operations as of year end year 2016. joint operationsend as of r financing activities. Receipts and payments of interest and dividends from equity accounted the Group 41 3)

reportingsegment due NOK 49 million higher than49 million the segment reporting. 14, 22,23 29, 34 Note to 31 31 29 24 20 24 21 29 acquisition of assets not paid end as 2016 ofacquisition year of assets not paid 5 5 4 5 5 for investments in other companies shown in investments in other companies A+B+C STATKRAFT C B A

AS 11 016 11 -7 632 -7 817 -6 -1 526 -1 -5 331 -5 -1 216 -1 -3 217 -3 -2 564 -2 -1 312 -1 -1 663 -1 4 642 4 2 015 2 7 308 7 5 223 5 8 371 8 8 260 8 9 056 9

ANNUAL 593 2016 300 545 -226 -59 -404 -474 -148 -15 -368 -85 25 49 31 -8 - -

REPORT the segment

14 409 14 13 000 13 12 663 12 -11 864 -9 834 -9 -5 157 -5 -2 889 -2 -8 720 -8 -1 308 -1 -2 603 -2 -3 062 -3 -3 797 -3 1 691 1 2 200 2 9 056 9 2 635 2 8 639 8 6 401 6 4 241 4

2016 628 2015 152 471 410 534 190 -407 -821 -221 -683 -289 32 43 9 -

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

a - 6 to

20 -52 -17 -26 -937 -314 -179 -320 -825 Total 758 318 245 204 772 445 142 equity

-4 851 -2 369 -5 907 -1 830 -3 733 6 138 1 235 1 506 1 300 4 391

88 059 83 519 88 340

------7 37 -4 -7

Non- -14 -12 -42 -62 -11 250 406 138 120 756 217 318 -226 -598 -307 -825 -133 7 823 7 747 8 443 interests controlling

6 - -

20

-59 -13 -12 445 245 149 637 204 772 750 -117 -309 -138 -925 -273 parent owners 5 732 1 198 1 300 4 525 -5 101 -1 604 -1 772 -5 600 -3 950 80 235 75 771 79 898 of to to 825 million non-current 825 from assets Attributable

- - - - 6 NOK

20

-59 -13 -12 -117 -309 -138 -925 -273 445 245 149 204 637 772 5 732 1 198 4 525 equity

-5 101 -3 950 -1 604 -1 772 -5 600 23 876 17 360 22 787 Retained

------6

Accu- 772 4 654 6 063 6 504 5 732 mulated

-5 095 -5 101 11 158 translation

------

20

-189 -59 -13 -12 -117 -138 -273 245 637

-1 407 -1 604 -1 772 -5 600 21 641 12 957 14 622

------

SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT Dividends proposed at the time of approval of the financial statements are classified as as classified are statements financial the of approval of time the at proposed Dividends equity. Dividends are reclassified as current liabilities once they have been approved by the the by approved been have they once liabilities current as reclassified are Dividends equity. General Assembly. General -309 -925 -572 Other Other 445 149 204 1 198 1 333

reserves equity differences -2 421 -1 659 -2 993 42

------

750 1 300 capital Paid-in

a pay 56 361 58 411 57 111 NOK 1604 same rights voting and foreign foreign to to the 2) NOK million300 1 from took owner place. board has proposed to Norwegian state, state, Norwegian through the the Equity the related related in profit/loss: profit/loss: that recycles over that recycles over period period shares have

billion,NOK33.4 divided into200 million All current year current share capital of the the

2016201620162016201620162016201620162016201620162016

the

income income for for For year year capital capital of NOK from place 750 million owner took in December 2015.

recycle recycle over recycle recycle over SF is wholly owned by SF. non-controlling interests REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT shareholder arrangements with non-controlling shareholder a such has and reclassified towards receivable of

general assembly approved a disbursement disbursement generala assembly approved of Changes not not share

estimate deviation estimate deviation pensions changes in fair value of financial changes of financial in fair value instruments changes in fair value of financial instruments estimate deviation estimate deviation pensions effects effects SF, company, which is a Norwegian and state-owned established of to to to to will will Statkraft 1) to ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL 3)

AS Group comprehensive comprehensive comprehensive comprehensive 31.12.2016 31.12.2015 01.01.2015 4350 million. 4350 million. ASASASASASASASASAS

related related related related NOK has reassessed its OCI that OCI that other other tax tax tax tax in in in in recorded in other comprehensive income in equity recorded in other comprehensive in equity income parent company has a share capital of December 2016 conversion of loan to 29 June 2016 Statkraft’s A A conversion of loan to Statkraft In Net profit/loss million as dividend dividend of reduction reduction of non-controlling interests in equity. Ministry of Trade, Ministry of Trade, Industry and Fisheries. On Estimate Estimate deviation pensions Items Items Estimate Estimate deviation pensions Items Items Income Income Capital Capital increase Income Income Items profit/loss: Changes in fair value of financial instruments Income Items accounted investments Items Items Business combinations/divestments Changes in provision in connection with equity instruments over non-controlling interests Income Income Capital Capital increase in joint arrangements from other shareholders Transactions Transactions with non-controlling interests Currency translation Capital Capital increase STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT INFORMATION GENERAL The Balance Balance as of 1) 3) Reclassification Reclassification of loan to Dividend and Group contribution shares, each with a par value of NOK 167. Total comprehensive income operations operations disposed of in the Balance Balance as of Net profit/loss Dividend and Group contribution paid 2) are owned by Statkraft domiciled in Norway. Statkraft Total incomecomprehensive Reclassification Reclassification currency translation effects Changes in fair value of financial Changes of financial in fair value instruments profit/loss: NOK million Balance as of Statement Statement Statkraft Transactions Transactions with non-controlling interests operations operations disposed of in the Currency translation Currency translation Reclassification currency translation effects Items accounted investments CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Note20 Note19 Note18 Note17 Note16 Note15 Note14 Note13 Note12 Income Note11 Note10 Note9 Note8 Note7 Note6 instruments risk and Financial Note5 Note4 Note3 Note2 Note1 General Indexofnotes Statkraft Notes Note21 statement Hedge accountingHedge instrumentsFinancial risk Creditrisk andliquidity Analysisofmarket risk Marketrisk inthe of capitalstructureManagement policies accountingsignificant and summaryof Generalinformation Taxes statement Unrealised itemsFinancial Other Property Pensions equivalents full-timePayrollcostsand numberof Impairment Other and energypurchase Salesrevenues transactions and other Businesscombinations Segmentinformation eventsSubsequent Key accounting estimatesand judgements accounting Group AS operating expenses operating revenues operating tax effects and licence feesand licence to the Group recognised in the recognised consolidated financial statementsfinancial consolidated income Page 51 47 46 45 71 70 70 70 68 67 65 64 64 72 63 59 57 55 55 54 44 43

Note38 Note37 Note36 Note35 Note34 Note33 Note39 Other Note32 Note31 Note30 Note29 Note28 Note27 Note26 Note25 Note24 Note23 Note22 Balancesheet

information Other Related partiesRelated and the Other debt Interest-bearing Provisions Cash andcashequivalents Derivatives Receivables Inventories Associatesand jointarrangements Property,plantand equipment assetsIntangible Consolidated companies Consolidated Benefitspaid to to Feespaid Leases and obligationsPledges,guarantees and disputesContingencies non-current financial assets financialnon-current interest-freeliabilities BoardofDirectors externalauditors executive management executivemanagement STATKRAFT

AS

ANNUAL Page

REPORT 83 83 82 82 81 80 80 80 77 75 74 91 90 87 86 86 85 84

2016 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY rticipants who have have who rticipants thod corresponding to the the to corresponding thod rol exists, Statkraft evaluates evaluates Statkraft exists, rol AND RECLASSIFICATIONS RECLASSIFICATIONS AND ries’ financial statements are adjusted to correlate correlate to adjusted are statements financial ries’ Upon changes in underlying facts and and facts underlying in changes Upon ial items. ial relevant activities must be unanimous between participants which which participants between unanimous be must activities relevant ts using the equity method and presented as non-current assets. non-current as presented and method equity the using ts accoun If necessary, the subsidia the necessary, If proft/loss and net financ net and proft/loss COMPARATIVE FIGURES FIGURES COMPARATIVE investment is assessed. assessed. is investment related to to related investee. When considering whether cont whether considering When investee. financial statements in accordance with a me a with accordance in statements financial over the investee to affect its returns. returns. its affect to investee the over Joint operations are joint arrangements where the pa the where arrangements joint are operations Joint profit/loss as shares in joint ventures. ventures. joint in shares as profit/loss income statement. Joint ventures are recognised in the consolidated consolidated the in recognised are ventures Joint statement. income associated companies was presented on a separate line between operating operating between line separate a on presented was companies associated sale rights controlled by Statkraft and other shareholders. Each individual individual Each shareholders. other and Statkraft by controlled rights sale returns as a result of ownership or agreements entered into with the the with into entered agreements or ownership of result a as returns with one or several other investors. In a joint venture company, decisions decisions company, venture joint a In investors. other several or one with The Group’s share in joint operations is recognised in the consolidated consolidated the in recognised is operations joint in share Group’s The control and are excluded from the consolidation when control ceases. ceases. control when consolidation the from excluded are and control same financial statement line item both in the balance sheet and the the and sheet balance the in both item line statement financial same accounting policies, are presented on a separate line in the consolidated consolidated the in line separate a on presented are policies, accounting for control, Statkraft as an investor must have the ability to use its power power its use to ability the have must investor an as Statkraft control, for parties sharing control. control. sharing parties achieved by an investor being exposed to, or having rights to, variable variable to, rights having or to, exposed being investor an by achieved is also the presentation currency for the consolidated financial statements. statements. financial consolidated the for currency presentation the also is a part of operating profit/loss. Earlier profit or loss from joint ventures and and ventures joint from loss or profit Earlier profit/loss. operating of part a of voting rights, ownership structure and the relative strength, purchase and and purchase strength, relative the and structure ownership rights, voting of Joint ventures are companies or entities where Statkraft has joint control control joint has Statkraft where entities or companies are ventures Joint Subsidiaries are consolidated from the date when the Group achieves achieves Group the when date the from consolidated are Subsidiaries eliminated. eliminated. the on presented are and method equity the using accounts consolidated adjusted for amortisation of excess value and any deviations from from deviations any and value excess of amortisation for adjusted operating agreements. Each individual investment is assessed. To qualify qualify To assessed. is investment individual Each agreements. operating decisions about the relevant activities require the unanimous consent of the the of consent unanimous the require activities relevant the about decisions COMPREHENSIVE INCOME – CHANGES IN PRESENTATION IN CHANGES – INCOME COMPREHENSIVE previous period. previous fully consolidated entities and joint operations is eliminated. eliminated. is operations joint and entities consolidated fully 2016 presented as a separate line item under gross operating revenue and and revenue operating gross under item line separate a as presented 2016 the degree of control and the underlying facts. This includes an assessment assessment an includes This facts. underlying the and control of degree the Statkraft AS uses Norwegian kroner (NOK) as its functional currency, and it it and currency, functional its as (NOK) kroner Norwegian uses AS Statkraft influence. The Group’s share in associates are recognised in the the in recognised are associates in share Group’s The influence. company balances, including internal profits and gains and losses, are are losses, and gains and profits internal including balances, company options controlled by Statkraft and other shareholders and shareholder and and shareholder and shareholders other and Statkraft by controlled options joint venture. The Group’s share of the companies’ profit/loss after tax, tax, after profit/loss companies’ the of share Group’s The venture. joint obligations for the liabilities, relating to the operation. In joint operations, operations, joint In operation. the to relating liabilities, the for obligations unrealised gains and losses arising from intragroup transactions between between transactions intragroup from arising losses and gains unrealised flow statement and notes provide comparative information in respect of the the of respect in information comparative provide notes and statement flow companies with operations closely related to Statkraft’s operation is from from is operation Statkraft’s to related closely operations with companies normally the local currency in the country where the company operates. operates. company the where country the in currency local the normally Associates are companies or entities where Statkraft has significant significant has Statkraft where entities or companies are Associates have joint control. Statkraft classifies its investments based on an analysis of of analysis an on based investments its classifies Statkraft control. joint have with the Group’s accounting policies. Inter-company transactions and inter- and transactions Inter-company policies. accounting Group’s the with equity interests, voting rights, ownership structure and relative strength, strength, relative and structure ownership rights, voting interests, equity circumstances, a new assessment must be made as to whether this is still a a still is this whether to as made be must assessment new a circumstances, proportionate consolidation method. The proportionate share of realised and and realised of share proportionate The method. consolidation proportionate joint control over a business activity have contractual rights to the assets and and assets the to rights contractual have activity business a over control joint FOREIGN CURRENCY CURRENCY FOREIGN Subsidiaries prepare their accounts in the company’s functional currency, currency, functional company’s the in accounts their prepare Subsidiaries Income statement, statement of financial position, statement of equity, cash cash equity, of statement position, financial of statement statement, Income associated and ventures joint from loss or profit of share of Presentation 44 Note 22 Note Note 21 Note Note 16 Note Note 14 Note Note 14 Note Note 12 Note Note 35 Note Note 30 Note Note 12 Note Note 11 Note Note 10 Note Note 30 Note Note 29 Note Note 28 Note Note 26 Note Note 4 Note Note 23 Note icipants would have have would icipants 2016201620162016201620162016201620162016201620162016

lied to the consolidated financial statements as as statements financial consolidated the to lied REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

plant and equipment and plant ent of changes in equity in changes of ent ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

General information policies information General of significant and summary accounting ASASASASASASASASAS

Property, Intangible assets Intangible Taxes Pensions Cash generating units (CGU) units generating Cash Impairment Statem Leases Public subsidies Public and compensation and Sales revenue Sales Hedge accounting Hedge Concessionary power, licence fees fees licence power, Concessionary Provisions Financial instruments Financial Cash and cash equivalents cash and Cash Derivatives Business combinations and other transactions Note 5 Note transactions other and combinations Business Inventories Segment information Segment Statement of cash flow cash of Statement in respect of the previous period. period. previous the of respect in ft’s consolidated financial statements have been prepared in in prepared been have statements financial consolidated ft’s                     alue is defined as the price that would be received to sell an asset or or asset an sell to received be would that price the as defined is alue Fair v Fair The accounting policies app policies accounting The management must apply assumptions that market part market that assumptions apply must management when acquiring assets and services. and assets acquiring when use in accordance with IAS 36 Impairment of Assets. Assets. of Impairment 36 IAS with accordance in use techniques have been applied. When determining fair value, the the value, fair determining When applied. been have techniques Historical cost is generally based on fair value of the consideration given given consideration the of value fair on based generally is cost Historical balance sheet date. sheet balance value in accordance with IAS 2 Inventories and when measuring its value in in value its measuring when and Inventories 2 IAS with accordance in value contingent upon market prices being available or whether other valuation valuation other whether or available being prices market upon contingent CONSOLIDATION PRINCIPLES CONSOLIDATION part of the overall description of accounting policies: accounting of description overall the of part Statkra and certain elements of net pension assets measured at fair value at the the at value fair at measured assets pension net of elements certain and information information the London Stock Exchange. Stock London the are based on these policies, with the exception of measuring net realisable realisable net measuring of exception the with policies, these on based are investee where Statkraft, as an investor, exercises control. Control is is Control control. exercises investor, an as Statkraft, where investee The descriptions of accounting policies in the statements and notes form form notes and statements the in policies accounting of descriptions The participants at the measurement date. The measurement of fair value is is value fair of measurement The date. measurement the at participants the company has debt instruments listed on the Oslo Stock Exchange and and Exchange Stock Oslo the on listed instruments debt has company the statement of equity, statement of cash flow and notes provide comparative comparative provide notes and flow cash of statement equity, of statement Industry and Fisheries. The company’s head office is located in Oslo and and Oslo in located is office head company’s The Fisheries. and Industry The statement of comprehensive income, statement of financial position, position, financial of statement income, comprehensive of statement The liabilities measured at fair value when presenting the consolidated accounts accounts consolidated the presenting when value fair at measured liabilities cost principle, with the exception of certain financial instruments, derivatives derivatives instruments, financial certain of exception the with principle, cost in the same manner in all presented periods, unless otherwise stated otherwise unless periods, presented all in manner same the in the parent company Statkraft AS and its subsidiaries. A subsidiary is an an is subsidiary A subsidiaries. its and AS Statkraft company parent the paid to transfer a liability in an orderly transaction between market market between transaction orderly an in liability a transfer to paid Committee (IFRIC) as adopted by the EU. the by adopted as (IFRIC) Committee turn is wholly owned by the Norwegian state, through the Ministry of Trade, Trade, of Ministry the through state, Norwegian the by owned wholly is turn interpretations from International Financial Reporting Interpretations Interpretations Reporting Financial International from interpretations described in the notes to which they relate. The policies have been applied applied been have policies The relate. they which to notes the in described domiciled in Norway. Statkraft AS is wholly owned by Statkraft SF, which in in which SF, Statkraft by owned wholly is AS Statkraft Norway. in domiciled accordance with International Financial Reporting Standards (IFRS) and and (IFRS) Standards Reporting Financial International with accordance a whole are described below while the remaining accounting policies are are policies accounting remaining the while below described are whole a used in a similar valuation. Measurement and presentation of assets and and assets of presentation and Measurement valuation. similar a in used The consolidated accounts have been prepared on the basis of the historical historical the of basis the haveon accounts prepared been consolidated The STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT The consolidated financial statements comprise the financial statements of of statements financial the comprise statements financial consolidated The GENERAL INFORMATION GENERAL and established company, liability limited Norwegian a is AS Statkraft Note 1 Note CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS repayments relating to long-term liabilities long-term to relating repayments accounting are presented together with the hedged item. The first year’s year’s first The item. hedged the with together presented are accounting long-term. Some derivatives that are hedging instruments in hedge hedge in instruments hedging are that derivatives Some long-term. exception of the items mentioned below, all other items are classified as as classified are items other all below, mentioned items the of exception to be realised within 12 months after the balance sheet date. With the the With date. sheet balance the after months 12 within realised be to includes amendment to the following standards: following the to amendment includes ADOPTION OF NEW AND REVISED STANDARDS liability. liability. Balance sheet items are classified as short-term when they are expected expected are they when short-term as classified are items sheet Balance When preparing the consolidated financial statements, foreign subsidiaries, Note1 continued The IASB has issued three new standards that are particularly relevant for This effective. become have standards existing to amendments 2016 In conditions. This is the case under the current applicable standards and will significant effects from IFRS 9 and IFRS 15 with respect to recognition and are recognised in other comprehensive income and recycled to the income version of IFRS 9 Financial Instruments that replaces IAS 39 Financial monetary assets and liabilities denominated in foreign currencies are analysis is performed, representatives from Statkraft’s business areas have associated companies and joint ventures are translated into NOK in be the case when the new standards are implemented. Statkraft has started The adoption of these amendments did not have a significant impact on the ttrf:IR 16 Leases,Statkraft: IFRS IFRS 9 Financial Instruments and IFRS 15 recognized in the income statement. statement upon sale of shareholdings in foreign companies. measurement. Statkraft does however expect to prepare additional Instruments: Recognition and Measurement. IFRS 9 is effective for annual CLASSIFICATION AS SHORT-TERM/LONG-TERM accordance with the current exchange rate method. This means that been included in the process to ensure that the characteristics of energy financial statement of the Group. a process to identify which energy contracts are within the scope of IFRS 9, Foreign currency transactions are translated into the functional currency Revenue from Contracts with Customers. disclosures on financial instruments and revenue from contracts with STANDARDS AND AMENDMENTS ISSUED BUT NOT YET EFFECTIVE periods beginning on or after 1 January 2018, with early application Statkraft has a significant volume of energy contracts. A characteristic with balance sheet items are translated to NOK at the exchange rate as of 31 contracts are correctly understood. The implementation process has a global using the exchange rates prevailing at the transaction dates. Foreign customers when the standards become effective. IFRS 15 or IAS 17. Statkraft primarily consider the scope of IAS 17, and not energy contracts is that they can be accounted for as financial instruments, December; while the is incometranslated statement using monthly weighted The nature of the impending change from each new standard is discussed scope where all material energy contracts are in scope for consideration. exchange gains and losses resulting from the settlement of such IFRS 16, because the new standard on leases will earliest is effective one average exchange rates throughout the yea below. IFRS 9 Financial Instruments Based on the analyses performed to date, Stat leases or as contracts with customers, depending on the terms an transactions and from the tra year later than IF     IAS 1 (amendments) – related to disclosure initiative IFRS 11 (amendments) – related to guidance and accounting for Impact for the annual improvements to IFRSs 2012-2014 cycle acquisitions of interests in joint operations a that constitutes business IAS 16, IAS 36 and IAS 38 (amendments) - clarification of acceptable methods of depreciation a RS 9 and IFRS 15. To ensure that a thorough and proper nslation at year-end exchange rates of In July 20 14, the IASB issued the final r. Currency translation effects are presented as current current as presented are kraft does not expect any nd amortisation d 45

been issued, but are not yet effective, and in some cases have not yet been asset representing the right to use the underlying asset during the lease IFRS 15 is to recognise revenue at an amount that reflects the consideration to changes towards the implementation date. Overall, Statkraft expects no but not before an entity applies IFRS 15. A lessee can choose to apply the model similar to the accounting for finance leases under IAS 17. The income from other contracts within the scope of the standard such as information is not compulsory. For hedge accounting, the requirements are a change in an index or rate used to determine those payments). The lessee The preliminary conclusion may change, as the analysis is still ongoing. application or a modified retrospective application is required for annual Statkraft do not expect that the adoption of these Standards will have a term (i.e., the right-of-use asset). Lessees will be required to separately adopted by the EU: to which an entity expects to be entitled in exchange for transferring goods significant impacts from IFRS 9, except for additional disclosure standard using either a full retrospective or a modified retrospective standard includes two recognition exemptions for lessees – leases of ’low- contracts to sell power on exchanges, e.g. Nord Pool. Based on information generally applied prospectively, with some limited exceptions. In addition to IFRS 16 Leases will generally recognise the amount of the remeasurement of the lease periods beginning on or after 1 January 2018. Early adoption is permitted. material impact on the financial statements of the Group in future periods. recognise the interest expense on the lease liability and the depreciation requirements. Statkraft does not expect significant increase in use of hedge approach. An implementation project for IFRS 16 has been initiated, but is or services to a customer. To achieve this, IFRS 15 establishes a five-step value’ assets and short-term leases (i.e., leases with a lease term of 12 the analyses performed for energy contracts, as outlined above, Statkraft currently available, Statkraft expects no significant impacts from IFRS 15 liability as an adjustment to the right-of-use asset. IFRS 16 also requires 17 and its interpretations, including IFRIC 4. IFRS 16 sets out the principles Statkraft plans to adopt IFRS 15 in 2018 using the full retrospective method. accounting from the new standard. expense on the right-of-use asset. Lessees will also be required to permitted. The standard includes new principles for classification and still in an early stage. Statkraft will continue analysing the effects from IFRS months or less). At the commencement date of a lease, a lessee will has performed a high-level assessment of the other aspects of IFRS 9. The model to account for revenue arising from contracts with customers. The IFRS 15 Revenue from Contracts with Customers with respect to recognition and measurements. There may be certain lessees to make more extensive disclosures than under IAS 17. The new for the recognition, measurement, presentation and disclosure of leases and During 2016, the Group performed a preliminary assessment of the effects remeasure the lease liability upon the occurrence of certain events (e.g., a measurement, impairment and hedge accounting. Except for hedge recognise a liability to make lease payments (i.e., the lease liability) 16 in 2017. changes with respect of gross versus net presentation in the statement of new revenue standard will supersede all current revenue recognition assessment is based on information currently av In addition to these standards, the following new and revised IFRSs h 2014, IFRS 15 applies to contracts with customers. T standard has not yet been endorsed by EU. Early applicat requires lessees to account for from IFRS 15 on income from energy accounting, retrospecti change in the lease te requir comp rehensive income. Further, additional disclosures are being required. ements under IFRS, including IAS 18. Either a full retrospective      advance consideration Annual improvements to IFRS Standards 2014-2016 cycle IAS 7 (amendments) - disclosure initiative IAS 12 (amendments) - recognition of deferred tax assets for unrealised losses IFRS 10 and IAS 28 (amendments) - sale or contribution of assets between an investor and its associate or joint venture IFRIC 22 (interpretation) - foreign currency transaction The IASB issued IFRS 16 in 2016. IFRS 16 replaces IAS rm, a change in future lease payments resulting from ve application is required but providing comparative all leases under a single on-balance sheet STATKRAFT contracts, as discussed above, and

AS ailable and may be subject

ANNUAL he main principle under Issued by the IASB in ion is permitted,

REPORT s and and an ave

2016 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

expert

annual long provide and be used in to the to 10 Note Note Note 16 Note Note 12 Note Note 21 Note Note 24 ensure markets and the external external references markets. Such analysis markets. to analysis management view by being process aims to view upon related market analyse the reduce emissions of climate gases The to appropriate accounting policy in areas the power and the Corporate Management approves of; the assets benchmarked main results are business activities, business activities, management must apply above, significant above, significant judgement are applied in estimating tax financial include; statements. Such areas process. Corporate Management is invited the The input and scenarios applied in the

to the Statkraft’s

Classification Classification of energy contracts Pensions Classification Classification of energy revenue T Deferred Deferred Classification Classification of investments made together with third parties Classification Classification of power purchase agreements 35 Note Cost levels of competing competing Cost levels of technologies and fuels, Future energy balances Future energy Political regulations process is headed and run by a team of experts across the Corporate Management is forming its carrying amounts addition reported reported in the  the  The echnological developments Due to judgements in determining where these policies material may have a impact on how amounts are    term term price forecasts for development. In  organization. organization. and major deviations are explained. challenge asset valuations and other strategic considerations. on theBased APPLICATION OF ACCOUNTING POLICY ACCOUNTING OF APPLICATION consistency, a balanced consistency, and arrive at view of both the recommendations,  involved in the future future power prices. The A fundamental A fundamental approach is applied to includes among others;    46

annual

The Note Note 10 Note Note 10 Note 14, Note 14, 22 power and the both strategic both strategic future future prices and for assets. assets. geographical areas the Note 14, 23 Note 14, 24 level of uncertainties level of uncertainties long term price forecasts and the

its application of accounting application of accounting the 2016201620162016201620162016201620162016201620162016 be reasonable theunder

addition, addition, these assumptions critical are financial as: statement processes such In to update provides basis for intangible intangible assets The REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

management’s expectation estimates estimates on historical experience and various business activities, management must make certain accounting estimates accounting judgements and estimates ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

financial statements. Subsequent Subsequent events Key financial statements. Due to output of a continuous monitoring, process of interpreting ASASASASASASASASAS

key assumptions used by management business in making the management related the Allocation of fair value in business combinations 5 Note Valuation Valuation of long term energy contracts Valuation Valuation of certain financial obligations Impairment Impairment testing of property, plant and equipment Impairment Impairment testing of Impairment Impairment testing of equity accounted investments for of use of reasonable estimates of reasonable use and judgements estimates in is a critical element related expected market developments in the SIGNIFICANT JUDGEMENT SIGNIFICANT input input LONG TERM PRICE FORECAST FOR POWER AND OTHER AREAS OF OF AREAS OTHER AND POWER FOR FORECAST PRICE TERM LONG reported reported in the circumstances. Management Management itsbases other other assumptions that are held to decisions is management’s term price forecasts forlong related market developments. estimates estimates and judgements that effect policies, policies, operations, results of cash flows and financial position as  STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Note Note 3 There are no significant subsequent events.

One INTRODUCTION The Note 2 Note  inherent inherent in Statkraft’s preparing   update update is the and analysing global trends, as well as local market fluctuations and revenues. drivers that ultimately could affect future markets and  revenue streams beyond 2025 associated with  Statkraft performs annually an update of the decisions as well as the where Statkraft operates. CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS distinction between power g power between distinction The Group has adopted a new segment structure structure segment new a adopted has Group The segments. The underlying results are ad are results underlying The segments. accounted investments. accounted trading and origination activities. The activities will gradually incre gradually will activities The activities. origination and trading priorities within the Group. The updated strategy has led to a clearer clearer a to led has strategy updated The Group. the within priorities and used as a basis for resource allocation and key performance review. review. performance key and allocation resource for basis a as used and We are presenting the underlying operating profit/loss for each of the the of each for profit/loss operating underlying the presenting are We Statkraft AS Group “other assets” consists of all assets except equity equity except assets all of consists assets” “other Group AS Statkraft The new Market Operations segment mainly consists of market access, access, market of consists mainly segment Operations Market new The The comparable figures are restated. are figures comparable The the reporting structure is aligned with the strategic focus areas and the key key the and areas focus strategic the with aligned is structure reporting the value of the asset base. base. asset the of value management information that is periodically reviewed by the management management the by reviewed periodically is that information management assets, property plant and equipment and long-term receivables. For For receivables. long-term and equipment and plant property assets, The other segments are not changed compared to previous years. years. previous to compared changed not are segments other The Operations. The reason for changing the segments is to make sure that that sure make to is segments the changing for reason The Operations. Kingdom. The main focus for the segment is to maximise the long-term long-term the maximise to is segment the for focus main The Kingdom. operating segments have been identified on the basis of internal internal of basis the on identified been have segments operating international markets were the Group owns assets. owns Group the were markets international “Other assets” for the segments consists of goodwill, other intangible intangible other goodwill, of consists segments the for assets” “Other flexible power plants in Norway, Sweden, Germany and the United United the and Germany Sweden, Norway, in plants power flexible material non-recurring items.. non-recurring material Trading are replaced by European Flexible Generation and Market Market and Generation Flexible European by replaced are Trading Operating Officer makes, follows up and evaluates his decisions. The The decisions. his evaluates and up follows makes, Officer Operating addition, Statkraft aims to develop market operations in selected selected in operations market develop to aims Statkraft addition, The new European Flexible Generation segment mainly consists of of consists mainly segment Generation Flexible European new The arising from energy contracts (excluding Trading and Origination) and and Origination) and Trading (excluding contracts energy from arising The two former segments Nordic Hydropower and Continental Energy and and Energy Continental and Hydropower Nordic segments former two The The Group reports operating segments in accordance with how the Chief Chief the how with accordance in segments operating reports Group The Note4 create new business opportunities in a changing European market. In In market. European changing a in opportunities business new create Segmentinformation enerating assets and market operations. market and assets enerating justed for the unrealised effects effects unrealised the for justed from 1 January 2016. 2016. January 1 from ase to to ase 47 significant items a items significant and risk mitigation activities rel activities mitigation risk and European Flexible European The segments are: segments The and offshore wind power. The segment operates in N in operates segment The power. wind offshore and Group items Group return by developing, acquiring, owning and operating renewable a renewable operating and owning acquiring, developing, by return smaller producers of renewable energy, as well as revenue optimisation optimisation revenue as well as energy, renewable of producers smaller Wind power Wind Other activities Other business idea for International Hydropower is to deliver a competitive competitive a deliver to is Hydropower International for idea business the segment’s financial figures. figures. financial segment’s the Market Operations Market end-user business in Fjordkraft. Fjordkraft. in business end-user Cable and the bio-power plants in Germany. in plants bio-power the and Cable business area International hydropower is set up to accomplish this. The The this. accomplish to up set is hydropower International area business first quarter 2017 based on revised strategy. There will be no changes in in changes no be will There strategy. revised on based 2017 quarter first Norwegian shareholdings within the Group’s core business, as well as the as well as business, core Group’s the within shareholdings Norwegian Kingdom, as well as the gas fired power plants, the subsea cable Baltic Baltic cable subsea the plants, power fired gas the as well as Kingdom, leading international provider of pure energy in growth markets. The The markets. growth in energy pure of provider international leading Industrial ownership Industrial from power International to name change will hydropower International across the value chain. value the across Trading and Origination. and Trading International hydropower International hydropower business in Norway, Sweden, Germany and the United United the and Germany Sweden, Norway, in business hydropower District heating District production. the United Kingdom. United the in selected growth markets with strong focus on safety and profitability profitability and safety on focus strong with markets growth selected in

includes Statkraft’s operation and development in onshore onshore in development and operation Statkraft’s includes include eliminations, unallocated assets, adjusted adjusted assets, unallocated eliminations, include

include small-scale hydropower and group functions. group and hydropower small-scale include operates in Norway and Sweden. Sweden. and Norway in operates nd unrealised effects on energy contracts excluding excluding contracts energy on effects unrealised nd Generation

includes Trading and Origination, market access for for access market Origination, and Trading includes

includes management and development of of development and management includes

One of Statkraft’s strategic goals is to be a a be to is goals strategic Statkraft’s of One ated to both the Continental and Nordic Nordic and Continental the both to ated

includes the majority of the Group’s Group’s the of majority the includes STATKRAFT

AS

ANNUAL orway, Sweden and and Sweden orway,

REPORT ssets ssets

2016 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

- - - - 4 1

-7 -2 -39 -52 -46 items items Group Group 9 850 9 854

-1 830 -1 791 -1 155

- -

18 39 37 44

-13 -74 Other Other 939 128 824 938 -381 -418 activities activities 24 042 24 060

- - - 226 -

58

432 387 301 9 979 7 671 7 181 1 259 3 602 1 496 -237 -544

Industrial Industrial Industrial Industrial 15 381 25 360 ownership ownership

- - - - 2 - 359 138 26

13

89

-18 767 765 142 552 107 3 521 3 521 -190 District District District District heating heating

- - -

41 32 94

Wind Wind 802 667 759 power power 9 138 3 522 1 457 -585 -973 -781 -196

12 660

-

16 30

Inter- Inter- Inter- Inter- 114 162 517 5 860 2 559 2 429 1 250 2 234 -819 national national national national

-1 336 -1 910 27 896 33 756 hydropower hydropower

- 4 2 - -196 55 1 835 -12 - - -2 086 -1 750 -

55 56

-2

-14 124 179 400 1 238 -108 -758 Market Market Market Market

-1 158 26 439 26 549 Operations Operations

- - -

48 234 582 4 529 1 154 8 380 flexible flexible flexible flexible

-2 802 -4 554 -1 048 57 240 16 457 57 240 16 223 14 865 European European European European generation generation

- 362 1 935 57 708 9 47 561 679 -3 - AS 683 - 609 557 -471 - 158 474 Group 7 499 5 664 1 024 181 -257 50 1 627 -801 11 4 497 6 221 553 -1 905 -2 008 50 1 986 -437 36 1 969 1 413 - 104 -30 10 404 66 - 7 797 741 - 3 048 3 335 272 281 120 - 3 790 - 25 3 399 101 18 - 247 - Group -4 741 -8 260 -2 413 -3 610 - -6 401 -1 763 -38 -1 688 -2 083 -163 -544 -122 - 50 579 13 002 26 589 1 738 -8 626 6 093 167 2 597 3 736 3 086 1 763 51 262 13 364 28 524 1 600 755 636 6 975 716 -1 308 19 938 11 636 2 052 1 378 712 465 3 820 707 -831 19 338 - 13 6 094 3 649 8 9 604 16 4

53 804 53 330 23 033 19 438 10 240 157 517 62 390 246 28 215 10 087 3 620 15 197 28 088 9 674 176 905 62 390 259 34 309 13 736 3 628 24 801 28 104 9 678 147 192 166 630 Statkraft Statkraft Statkraft AS 2016201620162016201620162016201620162016201620162016

segment per REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

continued ASASASASASASASASAS

assets assets assets assets Other Segments Adjusted Adjusted significant items Total STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT NOK million 2015 Operating revenues external, underlying Investments Investments in new production capacity Investments in shares Operating Operating profit/loss Gross Gross operating revenues, underlying 2016 Operating revenues external, underlying NOK million Note 4 Note Accounting specification Segments Net Net operating underlying revenues, Operating Operating revenues internal, underlying Share of profit/loss accounted Share of profit/loss in equity investments Depreciation, Depreciation, amortisation and impairment Maintenance investments and other investments Operating Operating revenues internal, underlying Balance Balance sheet 31.12.16 Equity accounted investments Operating profit/loss, Operating profit/loss, underlying Share of profit/loss Share of profit/loss in equity accounted investments Unrealised changesvalue energy contracts Gross Gross operating revenues, underlying Net Net operating revenues, underlying Operating profit/loss, Operating profit/loss, underlying Unrealised value changes contracts energy Adjusted Adjusted significant items Operating Operating profit/loss Balance Balance sheet 31.12.15 Equity accounted investments Other Total Depreciation, Depreciation, amortisation and impairment Maintenance Maintenance investments and other investments Investments Investments in new production capacity Investments Investments in shares CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS described as revenues/gains and/or expens and/or revenues/gains as described Adjusted significant items significant Adjusted Spe as the market portfolios are managed and followed up on market values. market on up followed and managed are portfolios market the as energy contracts within trading and origination activities are not adjusted, adjusted, not are activities origination and trading within contracts energy have comparable figures in the financial analysis of performance. of analysis financial the in figures comparable have No external customersaccountNo external Information significant items and unrealised value of energy contracts. Unrealised Unrealised contracts. energy of value unrealised and items significant Non-current assets asof31.12.Non-current Sales revenues externalSalesrevenues 2015 Non-current assets asof31.12.Non-current Other Customer Sales and trading Sales expected to occur on a regular basis. The effects are adjusted in order to to order in adjusted are effects The basis. regular a on occur to expected Generation the Adjusted significant itemsAdjustedsignificant areas Geographical onthe Externalsales revenuesareallocated Specification is madeto Reference Specification See 1) energycontractsvalue changes Unrealised million NOK items line Underlying Note4 Sales revenues externalSalesrevenues 2016 million NOK Total Non-current assets consist of property, plant and equipment and intangible assetsexceptdeferredand intangible assets consistofproperty,plantandequipmentNon-current Impairments include related costofrelated Impairmentsinclude Gainon saleofassets Impairments and related costsImpairmentsand related country of origin for countryoforigin note14,18,22,23 and30for cification regarding continued of per per adjusted

geographical product note12.

significant the are performance measures that are adjusted for for adjusted are that measures performance are production facilityoractivity. production significant are items that are material and can be be can and material are that items are furtherinformation. for NOK area 1) 10% ormoreof customers 105 million (NOK 789 million in 2015). 789 105million (NOK items: es/losses that are not not are that es/losses basis ofthe the Group’s operating revenues. Group’soperating geographical origin of generating assetsor activities.of generating origin geographical StatkraftAS 1 3 6744702 8 0 25215 3300 25681 4790 56744 115 730 107 161 1561 0 6981661 4 3033 10448 1686 16918 19501 51 586 24 913 18 976 49 448 Group 1 925 3 634 49 in which it is impaired or the impairment is is impairment the or impaired is it which in the economics of an asset for the lifetime of that asset; not only the period period the only not asset; that of lifetime the for asset an of economics the asset is acquired until it is sold. is it until acquired is asset Impairment Impairment Relevant significant items in the period: the in items significant Relevant such a gain is related to the cumulative value creation from the time the the time the from creation value cumulative the to related is gain a such does not give an indication of future performance or periodic performance; performance; periodic or performance future of indication an give not does Gain on sales of assets assets of sales on Gain 7062122 6 9 24873 1195 21866 2182 57 046 14 659 1941 2 3 1 3254 8016 1634 14620 21 924 Norway 6 13591 5 768 988 0 -116 509 is excluded from underlying operating profit since it affects affects it since profit operating underlying from excluded is tax and are allocated onthe and areallocated Germany 441 0 1391 705 is eliminated from the measure since the gain gain the since measure the from eliminated is STATKRAFT Sweden -4 741 -7 154 -4 741 -2 413 2016 242 - - 0 -2949 8502 1 basis of reversed.

AS

ANNUAL 553767 -525 UK 92181 39 -

REPORT -3 001 -3 610 -3 836

2016 Other 2015 254 609 226 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

- 453 435 -327 -4 531 -1 732 3 062 3 090 1 173 7 947 9 679 5 622 9 913

13 358 53 344 15 846 43 431 "Norwegian hydropower and Sum related business" 3) 1) 1) 434 regional 9 890 companies Associated Associated

- 1 434 23 9 890 Sum 453 -327 related related -4 531 -1 732 2 627 434 2 655 434 1 173 7 513 434 9 245 5 097 525

12 924 434 43 454 15 411 434 43 431 excluding business" "Norwegian "Norwegian hydropower, hydropower, m our equity accounted investments in 3)

- 1 1 57 85 59 23 -88 103 527 716 Group -355 -188 1 146 5 454 1 239 5 431 Skagerak Kraft 2)

- - - AS 452 -239 Energi Energi -4 177 -1 544 5 038 2 570 2 570 1 070 6 985 8 529

11 774 38 000 14 186 38 000 ures for Skagerak Kraft Group are extracted from the segment "Norwegian "Norwegian hydropower" from: the associated companies BKK AS, Agder Energi AS and Istad AS from Industrial Ownership. The line “Profit after tax (majority share)” from the segment Industrial Ownership, refer also note 24. The column Sum “Norwegian hydropower” represents the totals for the Skagerak Kraft Group, is calculated based on Statkrafts ownership two subsidiaries after elimination of intercompany transactions and interest of 66.62%. The lines Net financial items and Tax expense shows the financial items balances. The figures for Statkraft Energi AS are extracted from the and tax related to the activities in the definition of “Norwegian segments European Flexible Generation and Market Operations, while the hydropower”. We have extracted the figures fro fig Statkraft 50 158 474 -117 -178 Group -5 402 -8 260 3 736 2 138 1 763 3 086

11 346 20 621 166 630 50 987 19 438 147 192

Statkraft Statkraft AS t operational segments. Statkraft

paid from 2016201620162016201620162016201620162016201620162016 tax

and balance sheet tax REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

(majority share) s” refer to all activities in the investments in the tax tax Statkraft ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL AS

continued ASASASASASASASASAS hydropower

after after share of profit/loss after Energi Energi assets assets expense orwegian Dividend paid to Statkraft Dividend and group contribution after Paid Paid dividend and group contribution to Profit/loss Profit/loss Profit/loss Profit/loss Investments Investments in shares Tax Maintenance Maintenance investments and other investments Investments Investments in new production capacity Net Net financial items Depreciation, Depreciation, amortisation and impairment Operating Operating profit/loss EBITDA Net Net operating revenues Total Statkraft Gross Gross operating revenues Balance Balance sheet 31.12.16 Equity accounted investments Other 3) 1) 2) NOK million 2016 Share of profit/loss in equity accounted investments N STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Note 4 Note Selected financial figures from “Norwegian hydropower and related “Norwegian hydropower” includes all activities related to our Norwegian business” associated regional companies BKK AS, Agder Energi AS and Istad AS. In the white paper Prop. 40 S (2014-2015) related to revised national hydropower assets in the subsidiaries Statkraft Energi AS and Skagerak budget, it was stated that Statkraft should disclose information related to Kraft Group, which are subject to resource rent tax. Further, it includes the Norwegian hydropower activities (“Norwegian hydropower”). Nordic dynamic asset management portfolio related to the assets defined The table below includes financial figures for the Norwegian hydropower, above and the financial risk reduction portfolio in Statkraft Energi AS. which have been extracted from differen “Related busines CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS

The acquisition method is applied in business combinations. The SIGNIFICANT ACCOUNTING POLICIES Note5 of subsidiaries. has been transferred and normally coincides with the closing date. assets and liabilities. Temporary values are adjusted throughout the consideration is measured at fair value on the transaction date, which is also provisions are recognised for deferred tax on goodwill. Transaction costs are Non-controlling interests are recognised either at fair value or the measuring period of maximum one year in order to reflect new information recognised in the income statement when incurred. the date when fair value of identifiable assets, liabilities and contingent proportionate share of the identifiable net assets and liabilities. The If The principles applied to the recognition of acquisition of associated inthe investmentis recognised transferred atfairvalue interestsis recognised obtained about circumstances that existed as of the acquisition date, if known, liabilities acquired in the transaction is measured. If the accounting of a assessment is done for each transaction. Any differences between cost and companies and joint ventures are the same as those appl would have affected the valuation on that date. Correspondingly, new assets business combination is incomplete at the end of the reporting period, in which fair value for acquired assets, liabilities and contingent liabilities are and liabilities can be recognised. The transaction the transaction occurred, recognised as business combinations are achieved instages,are achieved combinations business to

goodwill or recognised in income when the cost is lower. No Business combinations and othertransactionsBusinesscombinations Such a change inthe Sucha change Statkraft. the Group will report preliminary values for the income statement.income the point in time when controlis pointin timewhen carryingvalueof date is when risk and control the existing ownership ownership existing ied to the acquisition the

51 future cash flows. A critical input in the cash flows is the l the is flows cash the in input critical A flows. cash future All assets and liabilities are measured based on information that e that information on based measured are liabilities and assets All cash flows. cash purchase price allocation of the acquisition. the of allocation price purchase valuation of customer contracts (intangible assets) is based on discounted discounted on based is assets) (intangible contracts customer of valuation out). The earn out is recognised at fair value based on discounted future future discounted on based value fair at recognised is out earn The out). The subsidiary De subsidiary The nor does the dispute described in note 33 have any impact on the final final the on impact any have 33 note in described dispute the does nor liabilities acquired are based on management’s best judgement. The The judgement. best management’s on based are acquired liabilities Final purchase price allocation of Desenvix Energias Renovàeis S.A Renovàeis Energias Desenvix of allocation price purchase Final The acquisition cost partly consists of a contingent consideration (earn (earn consideration contingent a of consists partly cost acquisition The replacement cost. cost. replacement booked in the financial statements as of 31 December 2015. Furthermore, Furthermore, 2015. December 31 of as statements financial the in booked within one year after the acquisition date. The valuation of assets and and assets of valuation The date. acquisition the after year one within liabilities. and assets relevant of values internal experts. There are no changes from the amounts that were were that amounts the from changes no are There experts. internal on based is assets fixed of valuation The 2). note in described price forecast for power is a critical assumption used in estimating fair fair estimating in used assumption critical a is power for forecast price 2015. IFRS 3 allows making adjustments to the purchase price allocation allocation price purchase the to adjustments making allows 3 IFRS 2015. forecast, which is aligned with Statkrafts long term market view (ref.further (ref.further view market term long Statkrafts with aligned is which forecast, long-term Statkraft’s 2, Note in explained uncertainty.As withinherent managementrequires of useful life are based on assumptions supported by the supportedusefullifeare basedonassumptions on the acquisition date. The valuation is performed by both external and and external both by performed is valuation The date. acquisition the on estimatesof fairvalueand estimatesand assumptions.Management’s externaladvisors to uses independent Statkraft and liabilities, based on their estimatedfairvalues. based ontheirand liabilities, is allocated paid inbusinesscombinationsConsideration

ESTIMATES AND ASSUMPTIONS the fair value of acquired assets and liabilities. Thistypeofvaluationassets andliabilities. fair valueofacquired senvix Energias Renovàeis S.A. was acquired in July July in acquired was S.A. Renovàeis Energias senvix to make judgements as regards valuation method, valuationas regards make judgements STATKRAFT assist inthe

AS

ANNUAL For Group’s experts,but major acquisitions, major acquisitions, to ong-term price price ong-term acquired assets acquired

determination REPORT xisted xisted

2016

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY e of the new company. The owners stimated total cost price for 81.3% of hange of control in accordance with IFRS 3 is On 2 November 2015, Statkraft purchased 100% t secures 50% of Triton Knoll Offshore Wind Ltd. On 6 February 2015, Statkraft, along with Södra dermoen Energi AS (District Heating). The company On 12 February 2015, Statkraft and RWE Innogy GmbH the transaction are related to long-term power purchase Silva Green Fuel AS income, resulting in a zero effect in equity. The estimated accounting have injected NOK 50 million into the company as seed capital. the shares was NOK 3071 million, and consists of cash payment of NOK Statkraft paid NOK 86 million for its shareholding in Triton Knoll. treated as a realisation and require that a gain/loss at the time of de- has a yearly production of 54 GWh. There were no excess values. Skogägarna Ekonomisk Förening (Södra), established the company Silva agreements (intangible asset) of NOK 1549 million, power plants (fixed effect of de-recognition of the associated company is a net loss of NOK Triton Knoll 1007 million, offsetting of a liability of NOK 189 million, fair value of JOINT ARRANGEMENTS 2015 recognition of the associated company has to be calculated. At realisation Green Fuel AS, organised as a joint venture, with the goal of establishing asset) of NOK 721 million, associated company of NOK 81 million and 471 million. The net loss consists of a gain of NOK 301 million on the entered into an agreement to develop and construct the offshore wind farm previous ownership of NOK 1749 million and an estimated contingent any negative or positive effect from accumulated translation differences goodwill of NOK 455 million. underlying net asset in BRL, and a loss on accumulated translation future production of biofuel based on forest raw material at the industrial Triton Knoll, which may have an installed capacity of up to 900 MW. The Renovàeis S.A. in Brazil and changed the name to Statkraft Energias According to IFRS 10, the transaction represents a change of control from consideration of NOK 127 million. Net assets as of 30 June 2015 in has to be presented as a loss/gain in the income statement and a offshore wind farm is located off the eastern coast of England. Through differences of NOK 772 million. area housing the former cellulose factory at Tofte in Hurum. Statkraft and Renováveis (SKER). The transaction increased Statkraft’s ownership an investment in an associated company to an investment in a subsidiary. Desenvix totalled NOK 1639 million. The preliminary allocation of excess Gardermoen Energi AS corresponding positive/negative recycling amount through comprehensiv this agreement, Statkraf Södra own 51% and 49%, respectively, interest from 46.3% to 81.3%. The e A transaction that entails a c of the shares in Gar values from 52 rred 2016 Statkraft, including IN on at takeover, in addition to the On 23 April 2015, Statkraft On 13 July 2015, Statkraft TRANSACTIONS

2016201620162016201620162016201620162016201620162016

AND value in equity is related to an earlier purchase REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

On 6 February 2015 during the establishment of Silva ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

On 22 December 2015, Statkraft sold the subsidiary ASASASASASASASASAS

COMBINATIONS SALE AND RESTRUCTURING OF BUSINESS IN 2015 of of business in 2016. STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Statkraft Tofte AS Småkraft AS BUSINESS significant There were no business combinations, asset purchases or sale Note 5 continued Note tax on excess values. An additional 1.21% shareholding has been gain in associates, was NOK 334 million. Statkraft still holds one of the identified excess value of operating equipment of NOK 67 million. of non-controlling interest, where the excess values were booked against Småkraft AS. The gain from the transaction was NOK 226 million and is Green Fuel AS, Statkraft acquired all shares in Statkraft Tofte AS, acquired after the transaction date. power plants from the sale of Småkraft AS, which has been transferred Empresa Eléctrica Pilmaiquén S.A. Desenvix Energias Renovàeis S.A. previously Södra Cell Tofte AS. The acquisition of the shares in Statkraft booked in other operating revenues. Some of the shares in Småkraft AS equity. The acquisition analysis shows an excess value of NOK 2257 into a new established company Steinsvik Kraft AS. The ownership completed its purchase of the listed hydropower company Empresa completed its purchase of 35% of the shares of Desenvix Energias were owned through associates (Agder Energi AS and BKK AS). The gain Tofte AS is recognised as purchase of assets. The total cost price for the million, mainly allocated to regulation plants (fixed asset). The analysis structure of Steinsvik Kraft AS is the same as for Småkraft AS prior to the Eléctrica Pilmaiquén S.A. in Chile. The total cost price for 98.18% of the in associated companies was NOK 108 million and is booked in share of purchase of shares in Statkraft Tofte AS was NOK 220 million. Net assets sale. BUSINESS COMBINATIONS 2015 also gives goodwill of NOK 605 million, which mainly relates to the shares was NOK 1948 million. Net assets as of 23 April 2015 totalled NOK in the company totalled NOK 153 milli profit from associates and joint ventures. Total gain for difference between net present value and nominal value of the defe -272 million. The negative CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Contingent considerationContingent Non-controlling interestsNon-controlling which Of goodwill assets,excluding Fairvalue ofnetacquired Netexcess value Deferred Grossexcess value of excessvalue,attributableIdentification assets(see tablebelow) Bookvalue ofnetacquired Total shareholdings recognised Fairvalue ofpreviously Cash million NOK Consideration interestsof non-controlling Measurement Total through acquired Votingrights/shareholding dateAcquisition for Allocation Note5 continued 1) Goodwill by the assets,acquired Fairvalue ofnetacquired Total Total Investmentsin associates Majorityinterests Property,plantand equipment assetsIntangible Purchase of Purchase

business acquisition cost acquisition acquisitionfollowing votingrights/shareholding acquisition cost acquisition majoritythrough tax of onexcessvalue Statkraft

cost combinations price Tofte the and Gardermoen Energi and Gardermoen ASEnergi transaction

2015 in to: the acquisition AS is included in is included Other column. 53 Pilmaiquén Proportionate 30.0513.07.2015 23.04.2015 Empresa 98.18% 98.18% Eléctrica 1 948 1 369 1 369 1 641 2 257 1 948 1 948 1 344 4 2616 1 344 2 281 -616 -272 605 S.A. 2 1549 -24 25 - - - Proportionate Renovàeis STATKRAFT Desenvix 81.31% Energias 1 749 3 071 3 218 3 218 1 579 2 351 1 639 3 071 1 195 2 616 -772 35% 127 601 455 721 ..Other S.A. 81

AS

ANNUAL 238 238 238 170 238 238 238 3 4198 238 68 68 83070 68

- - 1749 - -1388 - 1060 - - 1525 - 1)

REPORT

4 199 5 257 4 825 4 825 3 288 4 676 1 537 5 257 3 381 2016 Total 127 626 81 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 1 -61 397 517 206 513 755 349 513 513 877 465 329 329 843 Total -242 -471 3 705 3 218 2 889 2015 7 196

-9 570 35 036 37 410 current rating 1 ------2 040 -9 -3 88 4 825 32 88 14 90 27 14 14 12 53 3 027 its 170170 1 537 1 537 239 239211 5 258 211 226 313 5 668 Other 2016 8 407 maintain

AS has a long-term credit -7 840 32 453 31 886 - 97 97 Group’s management of capital -16 S.A. 693 305 517 206 178 442 234 934 178 178 339 274 -152 -471 2 706 1 031 2 040 the

Statkraft Energias Energias Desenvix target is to for Group’s targets Group’s targets and guidelines governing 29 31 31 corresponding profitis tax. company before Renovàeis Note the

Statkraft’s - - - - - 92 21 21 -81 -41 S.A. 151 911 322 224 115 322 322 114 343 -272-272 1 639 1 639 1 003 3 734 1 948 1 927 1 948 3 071 1 346 008 4 1 279 1 695 Eléctrica Eléctrica Empresa Empresa (negative outlook) from Standard & Poor’s and Baa1 (stable Pilmaiquén Pilmaiquén A- most important target most important target figure management in 2016. of capital structure There There were no changes in the the The structure structure is long-term credit rating. rating rating of outlook) from outlook) from Moody’s. 54

1) Group is not The management of placing value of private the

capital capital structure column is based on unaudited financial statements. Profit Profit column statements. on isbased financial unaudited disclosed for Group endeavours to of capital structure capital structure is to market’s expectations and 1) 1) its The the company’s debt/equity ratio,

capital structure consist acquisitions to 1) the

the owner. owner. tax included in Other 2016201620162016201620162016201620162016201620162016 the

management in management from/to REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

included Group’s management of acquired assets acquired the ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

net draw-down and repayment of long-term liabilities and

net profit net profit since acquisition date gross operating revenue since acquisition date Gardermoen Energi AS Management of capital structure ASASASASASASASASAS to to capital capital of long-term management of

for the expand as well as maintaining a strong credit rating. of for any external requirements with regard to to to value interest-free liabilities interest-free non-current assets

acquisition cost tools main aim of owner’s dividend requirements. ability Information Information Net interest-bearing Net interest-bearing liabilities primarily of Cash and cash equivalents, Cash and cash equivalents, excluding restricted cash and short-term financial investments the The its subject capital structure other than those relating payments payments of share capital obtain external obtain external financing from various capital markets. Current Current interest-bearing debt STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT NOK million Long-term interest-bearing debt Note Note 6 The 1) Proforma Proforma figure 2015 gross operating revenue Proforma figure 2015 net profit after Net Net value of acquired assets, including increase in the Total Gross nominal value of acquired receivables Gain/loss from derecognition of previously recognised shareholding maintain a reasonable balance between the Cash and cash equivalents Cash and cash equivalents in acquired companies Net cash payments in connection with Fair value of acquired receivables Consideration Consideration equivalents and cost in cash and cash Other Liabilities and non-controlling interests Net value of acquired assets Inventory Receivables Current assets Property, and equipment Property, plant Investments in associates Other Non-current assets NOK million Book Intangible assets Note 5 continued Note Cash and cash equivalents Overview Overview Contribution Contribution Contribution Contribution Non-cash elements of acquisition cost Acquired Acquired assets Long-term interest-bearing liabilities CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS the continual moni continual the Nordic and C and Nordic markets by trading physical and financial instrumen financial and physical trading by markets A description of the energy portfolios in Statkraft can be fou be can Statkraft in portfolios energy the of description A Dehli. generate values in futures and forward markets, in addi in markets, forward and futures in values generate market exposure have been established for all portfolios. Responsibility for for Responsibility portfolios. all for established been have exposure market recognised in the income statement as part of normal purchase and sale. and purchase normal of part as statement income the in recognised periods with high demand. Statkraft manages market risk in the energy energy the in risk market manages Statkraft demand. high with periods indexed to foreign currency and raw materials such as metals. as such materials raw and currency foreign to indexed consist mainly of financial contracts for power, CO power, for contracts financial of mainly consist Düsseldorf, Istanbul, Tirana, Rio de Janeiro, San Francisco and New New and Francisco San Janeiro, de Rio Tirana, Istanbul, Düsseldorf, levels in Statkraft as a whole. Statkraft performs financial trades in order to to order in trades financial performs Statkraft whole. a as Statkraft in levels use are excepted from recognition in the balance sheet and are are and sheet balance the in recognition from excepted are use rather than individual contracts. Internal guidelines controlling the level of of level the controlling guidelines Internal contracts. individual than rather portfolios are recognised at fair value. fair at recognised are portfolios have different duration. The price of some of these sales obligations are are obligations sales these of some of price The duration. different have management process and aims to have production capacity available in in available capacity production have to aims and process management various scenarios for relevant risk factors. The management portfolios portfolios management The factors. risk relevant for scenarios various trading activities in Oslo, Trondheim, Stockholm, London, Amsterdam, Amsterdam, London, Stockholm, Trondheim, Oslo, in activities trading standardised and liquid products. Power and CO and Power products. liquid and standardised of these portfolios is to optimise portfolio revenues and reduce the risk risk the reduce and revenues portfolio optimise to is portfolios these of contracts are recognised at fair value, other contracts entered into for own own for into entered contracts other value, fair at recognised are contracts prices for power, coal, gas and oil products. Contracts in the trading trading the in Contracts products. oil and gas coal, power, for prices Risk management in energy trading in Statkraft focuses on total portfolios portfolios total on focuses Statkraft in trading energy in management Risk volume and power price risk. The company has an advanced energy energy advanced an has company The risk. price power and volume contracts stabilise Statkraft’s revenues. The bilateral industrial contracts contracts industrial bilateral The revenues. Statkraft’s stabilise contracts financial and physical contracts are continually monitored. The Group has has Group The monitored. continually are contracts physical and financial related to available production. The risk is quantified using simulations of of simulations using quantified is risk The production. available to related Trading portfolios portfolios Trading currency of the counterparty. Embedded derivatives in physical sales sales physical in derivatives Embedded counterparty. the of currency portfolio, managed in Oslo and in Düsseldorf, respectively. The objective objective The respectively. Düsseldorf, in and Oslo in managed portfolio, The company is also engaged in other trading activities. trading other in engaged also is company The products. The market risk in these contracts is mainly related to future future to related mainly is contracts these in risk market The products. trading portfolio have maturities ranging from 0 to 4 to 0 from ranging maturities have portfolio trading agreements with industrial customers in the Nordic region. These These region. Nordic the in customers industrial with agreements years. The contracts are measured at fair value. fair at measured are contracts The years. and trading of power. Revenues from power generation are exposed to to exposed are generation power from Revenues power. of trading and independent organisational units. The frameworks for trading in both both in trading for frameworks The units. organisational independent Mandates to enter into financial contracts are based on volume thresholds thresholds volume on based are contracts financial into enter to Mandates a currency exposure in relation to other currencies than the functional functional the than currencies other to relation in exposure currency a Statkraft has one Nordic and one Continental dynamic asset management management asset dynamic Continental one and Nordic one has Statkraft The production revenues are optimised through financial power trading. trading. power financial through optimised are revenues production The green certificates, gas and oil products are traded. The contracts in the the in contracts The traded. are products oil and gas certificates, green realise profit on changes in the market value of energy and energy-related energy-related and energy of value market the in changes on profit realise products. The contracts are traded on energy exchanges and by bi by and exchanges energy on traded are contracts The products. production and trading. trading. and production Bilateral contracts Bilateral contracts may include an embedded der embedded an include may contracts contracts. In general, the time horizon for these contracts is less than five five than less is contracts these for horizon time the general, In contracts. Statkraft is exposed to significant market risk in relation to the generation generation the to relation in risk market significant to exposed is Statkraft Statkraft is engaged in activities that entail risk in many areas and has a RISK AND RISK MANAGEMENT OF FINANCIAL INSTRUMENTS Note7 AND COMMODITIES assurance that the Group’s objectives will be met. GENERALLY unified approach to the Group’s market risks. The Group’s risk management In Statkraft, market risk will primarily relate to prices of energy and policy is based upon assuming the right risk based on the Group’s ability and commodities, interest rates and foreign currency. The following section willingness to take risks, expertise, financial strength and development plans. contains a more detailed description of the various types of market risk, and The purpose of risk management is to identify threats and opportunities for how these are managed. DESCRIPTION OF MARKET RISK RELATED TO PRICES ON EN the Group, and t Marketrisk inthe ontinental dynamic asset management portfolios management asset dynamic ontinental o manage the overall risk level to provide reasonable toring of granted mandates and frameworks lies with with lies frameworks and mandates granted of toring

The trading activities involve buying and selling selling and buying involve activities trading The Statkraft has entered into physical power sales sales power physical into entered has Statkraft ivative for instance in the case of of case the in instance for ivative Group 2 products, as well as as well as products, 2 , coal, gas and oil oil and gas coal, , years. The aim is to to is aim The years. ts in multiple markets. markets. multiple in ts tion to physical physical to tion nd below: below: nd

These These ERGY

lateral lateral 55 incur risk invo risk Sta Profit-at-Risk. Both methods calculate the m the calculate methods Both Profit-at-Risk. investments and dividend from subsidiaries and ass and subsidiaries from dividend and investments achieved by using financial derivatives and debt in foreign c foreign in debt and derivatives financial using by achieved are not part of these Origination activities. Origination these of part not are both standardised and structured products. Str products. structured and standardised both EUR and thus exposed to EUR. A corresponding currency exposure exposure currency corresponding A EUR. to exposed thus and EUR comp the for structure rate interest price, area prices and foreign currency are primarily used to reduce the the reduce to used primarily are currency foreign and prices area price, reported to corporate management. corporate to reported mandates are adhered to by applying specified limits for Value-at-Risk and and Value-at-Risk for limits specified applying by to adhered are mandates transaction risk, mainly in connection with energy sales revenues, revenues, sales energy with connection in mainly risk, transaction accordance with the company’s treasury strategy. Economic hedging is is hedging Economic strategy. treasury company’s the with accordance Origination portfolios Origination producers of renewable energy in Scandinavia, Germany and in the UK, UK, the in and Germany Scandinavia, in energy renewable of producers exchange rate contracts are used to achieve the desired currency and and currency desired the achieve to used are contracts rate exchange all contracts that are entered into on the power exchange are nominated in in nominated are exchange power the on into entered are that contracts all c the origination activities. Quoted, liquid contracts pertaining to system system to pertaining contracts liquid Quoted, activities. origination the in relation to established frameworks in the finance strategy is regularly regularly is strategy finance the in frameworks established to relation in Foreign exchange risk exchange Foreign established limiting the types of products that can be traded. The The traded. be can that products of types the limiting established DESCRIPTION OF FOREIGN EXCHANGE AND INTEREST RATE RISK exchanges, investments, dividends and other currency exposures in in exposures currency other and dividends investments, exchanges, forward and swaps rate interest and currency- swaps, rate Interest Market access activities for power purchase agreements with minor minor with agreements purchase power for activities access Market risks. risks. The settlement currency for Statkraft’s main power exchange is EUR, and and EUR, is exchange power main Statkraft’s for currency settlement The time. Compliance with the limit for currency and interest rate risk is followed up up followed is risk rate interest and currency for limit the with Compliance keep the shall atalltimes Statkraft the allocated risk capital. capital. risk allocated the within withregards to interestcostlow overtime,contributing across borders and virtual power plant contracts are also included within within included also are contracts plant power virtual and borders across Sta some associated companies. associated some to separate organisational units. The interest rate exposure per currency currency per exposure rate interest The units. organisational separate to management of interest rate risk is based on a balance between keeping keeping between ofinterestrate riskisbasedonabalance management Statkraft’s methods for managing these risks are described below: described are risks these managing for methods Statkraft’s Interest rate risk rate Interest allocated risk capital for these activities. Clear guidelines have been been have guidelines Clear activities. these for capital risk allocated power sales of physical contracts and financial trading on power power on trading financial and contracts physical of sales power some contracts run until 2025. The contracts are recognised at fair value. value. fair at recognised are contracts The 2025. until run contracts some employs interest rate and foreign currency derivatives to mitigate these these mitigate to derivatives currency foreign and rate interest employs flows denominated in foreign currency. currency. foreign in denominated flows time. The credit risk and operational risk are also quantified in relation to to relation in quantified also are risk operational and risk credit The time. power contracts in different currencies. Trading transportation capacity capacity transportation Trading currencies. different in contracts power subsidiaries. There is also balance sheet risk related to investments in in investments to related risk sheet balance also is There subsidiaries. requirements of hedge accounting in accordance with IAS 39. IAS with accordance in accounting hedge of requirements and following up the various positions has been separated and is allocated allocated is and separated been has positions various the up following and independently of the Group’s expected power production. Statkraft has has Statkraft production. power expected Group’s the of independently EUR. Statkraft hedges its currency exposure related to cash flows from from flows cash to related exposure currency its hedges Statkraft EUR. the contracts in the portfolio have a duration of up to five years, though though years, five to up of duration a have portfolio the in contracts the activities: foreign exchange risk and interest rate risk. Statkraft therefore therefore Statkraft risk. rate interest and risk exchange foreign activities: rate contracts and debt in foreign currency are also used to hedge cash cash hedge to used also are currency foreign in debt and contracts rate portfolio can incur, with a given probability factor over a given period of of period given a over factor probability given a with incur, can portfolio typically power contracts with tailor made profiles, long-term contracts or or contracts long-term profiles, made tailor with contracts power typically currency. Balance sheet risk is related to shareholdings in foreign foreign in shareholdings to related is risk sheet Balance currency. hedging instruments. Few of the hedging relationships fulfil the the fulfil relationships hedging the of Few instruments. hedging Statkraft is exposed to two main types of risk as regards the finance finance the regards as risk of types main two to exposed is Statkraft ontinuously by the middle-office function. Responsibility for entering into into entering for Responsibility function. middle-office the by ontinuously tkraft’s tkraft has various trading, and origination portfolios that are managed managed are that portfolios origination and trading, various has tkraft s when trading energy on other exchanges with other currencies than than currencies other with exchanges other on energy trading when s The the lved in trading structured products and contracts. The majority of of majority The contracts. and products structured trading in lved interest rate risk is monitored by having duration asmeasure.duration by having interestraterisk ismonitored rangeof2to interest rate exposure is relatedinterest rateexposure interestratechanges,and stabilizing

5 years. Origination activities include buying and selling selling and buying include activities Origination

Statkraft incurs currency risk in the form of of form the in risk currency incurs Statkraft average duration ofduration average STATKRAFT any’s debt portfolio. Forward exchange exchange Forward portfolio. debt any’s to stabilize to

aximum potential loss a a loss potential aximum its

AS uctured products are are products uctured debt portfolio.

ANNUAL the ociates in foreign foreign in ociates Debt over Debt FFO/Net Group’s cashflows its debtportfolio

REPORT urrencies as as urrencies The

2016 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 9 30 50 17 11 n/a 482 904 906 Total 2015 2015 2015 -310 12% 1 275 5 308 2 532 1 529 2 222 6 542 1 141 1 284 the 5.60% 0.00% 2.90% 8.20% 1.84% 4.80% 1.20% 0.80% 2.03% 1.69%

38 253 41 389 18 216 12 058 41 389 12 987 19 424 for Statkraft takes into account cy exchange rates is 2016 Av. interest rate (%) - 9 9 30 50 39 n/a 300 448 453 483 904 2016 2016 2016 11% -442 2.36 1.73 3.29 4 457 5 250 5 308 2 714 3 617 4 059 1 226 1 275 desired structure currency 5.90% 6.40% 2.60% 8.40% 4.40% 0.70% 10 918 11 277 12 058 38 253 18 216 the Mod. duration 5 years and more achieve to - - - 88 84 38 58 145 155 250 2015 1 417 6 947 1 100 3–5 years currency effect of combinedrate effectof currency interest and swaps. currency currency effect of combinedrate effectof currency interest and swaps. currency the the - 1 2 71 47 56 2016 175 278 Statkrafttheseuses swaps 1–3 years Future Future interest rate adjustments correlation, both within the individual areas and between the areas. taken into account. Total market risk as of 31 December 2016 was calculated at NOK 3617 The time period for the calculations is one year. For contracts with million, which has increased from last year. exposures beyond one year, only the uncertainty relating to the current The diversification effect emerges as the difference between total market year is reflected in the calculations. risk in the specified areas and total market risk, where the correlation The exposure can take the form of actual exposure or an expected maximum utilisation of the mandates. The analysis also between e.g. power prices, interest rates and curren - 56 182 668 102 203 5 306 4 598 1 110 23 142 2 775 24 612 -1 447 12 286 1 389 0-1 year

category debtor

per

from combined interest interest combined and sincefrom rate currency swaps, 1) 2) effects 1) 2) 1) 2) 2016201620162016201620162016201620162016201620162016

in the follow-up of the business areas GBP USD NOK SEK EUR BRL currency currency by currency currency REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT portfolio

by

investments investments – bonds interest interest debt market risk ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

effects of of of Analysis of market Analysisrisk market of ASASASASASASASASAS

financial fixed interest 2016 fixed interest 2015 market risk before diversification effects market risk cification split between years also take into account interest rate adjustments in interest rate swaps and combined interest rate and currency swaps. Negative figures reflect split between also adjustmentsyears reflect in andinterestand take into account interest rate figures interest rate swaps combined rate currency swaps. Negative that Management Management rate of foreign exchangepresented are detail7. risk and interest risk in more in note Includes long-term interest-bearing debt, first-year instalment on long-term interest-bearing debt, certificate loans Includes long-term interest-bearing instalment certificate debt, first-year on long-term interest-bearing debt, and Includes long-term interest-bearing debt, first-year instalment on long-term interest-bearing debt, certificat Includes long-term interest-bearing instalment certificat debt, first-year on interestswaps long-term interest-bearing rate and interest anddebt, loans, combined rate currency swaps. Management rate of foreign exchangepresented are detail7. risk and interest risk in more in note Includes long-term interest-bearing debt, first-year instalment on long-term interest-bearing debt, certificate loans Includes long-term interest-bearing instalment certificate on debt, first-year long-term interest-bearing debt, and Management rate of foreign presented exchange risk and interest risk are detail7. in more in note Debt Debt in CLP/CLF Total Total Debt Debt in GBP Debt in BRL Debt Debt in EUR Debt Debt in USD Nominal average interest rate, Debt Debt in SEK Nominal average interest rate, Nominal average interest rate, CLP/CLF receive STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Commercial and savings banks fixed interest fixed interest from interest rate swaps. 2) Short-term NOK million 1) The NOK million Debt in NOK 1) 2) Fixed interest rate debt Specification Nominal average interest rate, 1) Specifications of debt by currency includes Group’s debt portfolio. 2) NOK million Debt in NOK underlying instruments/prices and their interrelatedness are calculated NOK million Market risk in energy optimisation (volume risk, spot price risk and hedging) Statkraft follows up market risk within energy optimisation, its Trading and Note 8 Note Industry Market Market risk in end-user heating activities and district Total Diversification Diversification Total Specification Market Market risk in Trading and Origination portfolios (excl. market access activities) Market risk in interest rates and currency positions Market risk in distribution grid revenues Diversification effect as a percentage Debt in BRL Debt in CLP/CLF Total Nominal average interest rate, Nominal average interest rate, Nominal average interest rate, Debt Debt in SEK Debt in EUR Debt Debt in USD Debt in GBP Public Public sector Total and business portfolios as well as at Group level as part of reporting to Spe Origination portfolios, currency and interest rate positions, distribution grid using statistical methods. Group management and the Board. Statkraft’s targets for market risk shall revenues and end-user business and district heating. have a 95% probability of covering all potential losses, i.e deviations from The Group quantifies risk as deviations from expected net results with a expected results, connected with the market risk of positions at the given confidence level (value-at-risk). Market risk is included in these balance sheet date during the course of a year. Uncertainty in the calculations, which are used both CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS specific procedures specific contr Bilateral figures. key financial losses on receivables have been limited. been have receivables on losses settled. If a contractual counterparty experiences payment problems, problems, payment experiences counterparty contractual a If settled. allocated to different categories. The internal credit rating is based on on based is rating credit internal The categories. different to allocated internal credit rating. rating. credit internal transactions, incoming guarantees, committed but undraw but committed guarantees, incoming transactions, to meet their obligations is considered to be limited. Historically, Statkraft’s Statkraft’s Historically, limited. be to considered is obligations their meet to to a final settlement where all future contract positions are netted and and netted are positions contract future all where settlement final a to counterparty using an internal credit rating. The counter The rating. credit internal an using counterparty involving interest bearing securities, bank deposits, derivative derivative deposits, bank securities, bearing interest involving liquidity, the limits are stipulated for the individual counterparty using an an using counterparty individual the for stipulated are limits the liquidity, trading and physical sales. The total risk of counterparties not being able able being not counterparties of risk total The sales. physical and trading counterparties. In the event of default, the netting agreements give a right right a give agreements netting the default, of event the In counterparties. energy contracts entered into, the limits are stipulated for the individual individual the for stipulated are limits the into, entered contracts energy rated BBB (Standard & Poor’s) or better. For investment of surplus surplus of investment For better. or Poor’s) & (Standard BBB rated risk when entering into transactions with banks and financial institutions institutions financial and banks with transactions into entering when risk addition, Statkraft assumes counterparty risk in connection with energy energy with connection in risk counterparty assumes Statkraft addition, Statkraft has netting agreements with several of its energy trading trading energy its of several with agreements netting has Statkraft through an energy exchange is considered to be very low. For all other other all For low. very be to considered is exchange energy an through Investment of surplus liquidity is mainly distributed among institutions institutions among distributed mainly is liquidity surplus of Investment counterparty to honour its financial obligations. Statkraft is facing credit credit facing is Statkraft obligations. financial its honour to counterparty counterparty with regards to volume, amount and duration. duration. and amount volume, to regards with counterparty and to financial institutions being provider of clearing services etc. In In etc. services clearing of provider being institutions financial to and The counterparty risk for financial energy contracts which are settled settled are which contracts energy financial for risk counterparty The GENERAL INFORMATION ON CREDIT RISK Note9 1) Other Gross million NOK Net exposure creditrisk Netexposure Cash collateral Exposure creditrisk Grossexposure Cash andcashequivalents investmentsShort-termfinancial Receivables Derivatives Credit risk is the risk that Statkraft suffering losses due to the failure of a a of failure the to due losses suffering Statkraft that risk the is risk Credit The split between interest- bearing and interest-freeinterest-bearing splitbetween is non-current financial assetsfinancialnon-current exposure creditrisk: reduced by Credit risk and liquidity risk Creditrisk andliquidity 1) are applied. See note 10 for more information. more for 10 note See applied. are cash collateral: acts are subject to limits for each each for limits to subject are acts 1408 million and 0 million in 2016 and in and 2016 1408 million0and million NOK - parties are are parties n credit lines lines credit n 57 risk is quantified by com by quantified is risk of the market value of financial deri financial of value market the of been established for individual counterparties for financial en financial for counterparties individual for established been company is assessed by using ordinary internal credit credit internal ordinary using by assessed is company of financial assets, which are found in the various notes to the balance balance the to notes various the in found are which assets, financial of and reported regularly to the management. In addition, the counterparty counterparty the addition, In management. the to regularly reported and Statkraft has entered into agreements relating to interim cash settlement settlement cash interim to relating agreements into entered has Statkraft requirements. When parent company guarantees are used, the parent parent the used, are guarantees company parent When requirements. an outstanding credit risk at the period end. Similar agreements have also also have agreements Similar end. period the at risk credit outstanding an Statkraft’s gross credit risk exposure corresponds to the recognised value value recognised the to corresponds exposure risk credit gross Statkraft’s The individual counterparty exposure limits are monitored continuously continuously monitored are limits exposure counterparty individual The guarantee. internationally rated commercial bank which meets minimum rating rating minimum meets which bank commercial rated internationally will therefore not always be settled at period end. There could therefore be be therefore could There end. period at settled be always not therefore will consolidated at Group level and included in the Group risk management. risk Group the in included and level Group at consolidated counterparty will be classified in the same category as the issuer of the the of issuer the as category same the in classified be will counterparty agreements. The bank which issues the guarantee must be an an be must guarantee the issues which bank The agreements. calculated and reported for all relevant units, in addition to being being to addition in units, relevant all for reported and calculated considered to be very low. Cash collateral is settled on a weekly basis and and basis weekly a on settled is collateral Cash low. very be to considered involving bank guarantees and parent company guarantees, the the guarantees, company parent and guarantees bank involving parent company guarantees are sometimes used when entering into such such into entering when used sometimes are guarantees company parent provided, is presented below. presented is provided, Counterparty exposure in connection with these agreements are are agreements these with connection in exposure Counterparty individual counterparty defaulting. The overall counterparty risk is is risk counterparty overall The defaulting. counterparty individual collateral). collateral). Subsidiaries will never be rated higher than the parent company. In cases cases In company. parent the than higher rated be never will Subsidiaries In order to reduce credit risk in connection with investments, bank or or bank investments, with connection in risk credit reduce to order In contracts. contracts. sheet. The extent to which relevant and significant collateral has been been has collateral significant and relevant which to extent The sheet. NOK 1614 million and 1614 million 110 million in 2015. NOK 110 bining exposure with the probability of the the of probability the with exposure bining Note STATKRAFT 31 29 27 28 25 vatives with counterparties (cash (cash counterparties with vatives

AS 35 296 35 36 704 36 10 219 10 -1 408 -1 7 308 7 684 9 8 961 8

ANNUAL 532 2016 assessments. assessments.

REPORT ergy ergy 37 720 37 39 444 39 11 325 11 10 675 10 -1 725 -1 9 056 9 7 874 7

2016 513 2015 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

- -24 620 643 olatility 2 250 1 376 1 036 1 670 22 986 20 622 15 326

- - 83 18 800 549 178 100 300 3 718 1 648 vailable cash in hand, short-

- - 75 586 598 182 107 216 7 383 3 802 3 000 derivatives with negative For non-discounted non-discounted values are the 666 664 400 337 326 336 1 215 4 531 7 293 1 026 1 000 balance sheet. balance sheet. cash flows, cash flows,

- - 861 427 942 241 7 700 1 816 3 107 1 369 1 050 Liquidity forecasts are prepared to plan future financing needs as well as in the Group’s cash flows. term financial placements and unused credit facilities to cover e.g. the investment of the Group’s surplus liquidity. refinancing risk, and also to act as a buffer against volatility in the Group’s An individual target figure for short-term liquidity capacity, which reflects cash flows. A guarantee has been established to handle significant fluctuations in the Statkraft’s ability to cover its future obligations, is included in the Group’s collateral required by energy exchanges in connection with trading balanced scorecard. The objectives relating to Statkraft’s desire for a financial power contracts. The guarantee significantly reduces the v satisfactory liquidity reserve consisting of a timing of the the

- - 58 235 5 940 5 892 7 467 3 797 3 773 1 073 2 700 1 341 0-1 year 1–2 years 2–3 years 3–4 years 4–5 years 5 years and later 0-1 year 1–2 years 2–3 years 3–4 years 4–5 years 5 years and later understanding of the

period ble committed for tkraft also uses cash per Sta ection with trading both table below. trading activities. Thetrading activities. liquidity risk liabilities derivatives derivatives

to of

Norwegian market 2016201620162016201620162016201620162016201620162016

SF the value long-term REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

time periods shown in the non-discounted ASASASASASASASASAS cover margin calls related related cover margin calls

the

of to to schedule, external maturity schedule 2015 maturity schedule 2016 derivatives 2015 derivatives 2016 Group has a significantof financial number derivatives, which are presented as derivatives in the market value, where contractual market value, where contractual are decisive due dates The Allocation The Group’s liquidity risk is the risk that the Group has insufficient funds to allocated allocated Total Instalments Instalments on loans raised in non-Norwegian markets Total Total STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT NOK million Energy derivatives Instalments Instalments on bond loans from Maturity Maturity NOK million Instalments on debt from Statkraft GENERAL INFORMATION ON LIQUIDITY RISK LIQUIDITY ON INFORMATION GENERAL Note 9 continued Note Instalments Instalments on external loans in subsidiaries and other loans Total Interest Interest rate- and foreign currency derivatives Interest Interest payments bank facilities. financial power contracts and financial derivatives. meet its current payment obligations. Statkraft assumes a liquidity risk payments payments because the terms of its financial obligations do not coincide with the cash is minimised by employing the following tools: liquidity forecasts, reporting flows generated by its assets. Furthermore, Statkraft assumes liquidity risk of short-term liquidity target figures, liquidity reserve requirements, in relation to cash payments by collaterals in conn requirements relating to minimum cash in hand, requirements relating to guarantees in connection with energy trading and availa CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS objects objects n coal, carbon quotas and g and quotas carbon coal, Because not all financial hedging relationships are are relationships hedging financial all not Because receivable, accounts payable, cash, sh cash, payable, accounts receivable, derivatives may have major effects on the income statement without without statement income the on effects major have may derivatives changes in the market value of energy- and energy-related fin energy-related and energy- of value market the in changes accordance with the Group’s financial hedging strategy. The hedging hedging The strategy. hedging financial Group’s the with accordance and physical agreements relating to purchase and sale of power, gas, oil, oil, gas, power, of sale and purchase to relating agreements physical and addition, Statkraft has other financial instruments such as accounts accounts as such instruments financial other has Statkraft addition, units and cash flows, hedging is reflected in the financial statements. statements. financial the in reflected is hedging flows, cash and units energy production. Their main objectives are to achieve profit from from profit achieve to are objectives main Their production. energy the balance sheet, the effect of changes in value of financial energy energy financial of value in changes of effect the sheet, balance the contracts. Financial derivatives are used as hedging instruments in in instruments hedging as used are derivatives Financial contracts. volume. Financial instruments in energy trading mainly consist of financial financial of consist mainly trading energy in instruments Financial volume. into the two main categories; energy trading and financial activities. In In activities. financial and trading energy categories; main two the into floating (fair value hedging), hedging of some net investments in foreign foreign in investments net some of hedging hedging), value (fair floating and Origination activities are managed independently of the Group’s Group’s the of independently managed are activities Origination and combined interest rate and currency swaps and forward exchange exchange forward and swaps currency and rate interest combined in recognition for qualify not does power of production own future Group’s SIGNIFICANT ACCOUNTING POLICIES reality. reality. continuous optimisation of future revenues from the expected production production expected the from revenues future of optimisation continuous Financial instruments are recognised when Statkraft becomes a party to the position and results. Most of the financial instruments can be categorised categorised be can instruments financial the of Most results. and position arrangements where the interest rate has been changed from fixed to to fixed from changed been has rate interest the where arrangements in financial activities primarily consist of loans, interest rate swaps, swaps, rate interest loans, of consist primarily activities financial in the As statement. income the in recognised value in changes with value instruments are used in the Trading and Origination activities. The Trading Trading The activities. Origination and Trading the in used are instruments in volatility in the income statement without fully reflecting the financial financial the reflecting fully without statement income the in volatility in instruments are used as part of the Group’s financial hedging strategy for for strategy hedging financial Group’s the of part as used are instruments or loan arrangements measured at amortised cost. For selected loan loan selected For cost. amortised at measured arrangements loan or balance sheet and are of material importance for the Group’s financial financial Group’s the for importance material of are and sheet balance Financial instruments in financial activities financial in instruments Financial Financial instruments Financial balance sheet are shown as separate items and are measured at fair fair at measured are and items separate as shown are sheet balance contractual provisions of the instrument. Initial recognition of financial assets equity investments. equity financial statements, changes in value for financial instruments may result result may instruments financial for value in changes statements, financial products, as well as profit from non-standardised contracts. Financial Financial contracts. non-standardised from profit as well as products, Financial instruments account for a significant part of Statkraft’s total total Statkraft’s of part significant a for account instruments Financial GENERAL INFORMATION Note10 1) Financial instruments valued at fair value through profit or loss using the effective interest rate method, where the effective interest remains and liabilities are at fair the basis of the nature and purpose of the instruments into the categories Initial recognition of instruments are at fair value. 2) Loans and receivables “financial assets at fair value through profit or loss”, “loans and receivables”, in an active market. Loans and receivables are measured at fair value upon “available-for-sale financial assets” and “financial liabilities”. initial recognition with the addition of directly attributable transaction costs. In subsequent periods, loans and receivables are mea ecessarily reflecting the underlying business. business. underlying the reflecting ecessarily      Physical power sales contracts are as a main rule measured at fair both stand-alone derivatives, and embedded derivatives that are Currency and interest rate derivatives. separated from the host contract and recognised at fair value as if the Other financial assets held for trading. derivative were a stand-alone contract. “Own use” physical contracts for the purchase and sale of energy- value since these contracts are considered to be readily convertible to related products that are entered into as a result of mandates cash. Financial contracts for the purchase and sale of energy-related connected to Statkraft’s own requirements for use or procurement in products are classified as derivatives. Energy derivatives consist o own production normally fa are considered to be assets in foreign currency, future cash flows flows cash future currency, foreign in assets be to considered are Financial InstrumentsFinancial value. Financial assets and liabilities are classified on

in energy trading energy in

reen certificates. Derivatives recognised in the the in recognised Derivatives certificates. reen are financial receivables or debt that is not quoted ll outside the scope of IAS 39. ort-term financial investments and and investments financial ort-term

Within energy trading, financial financial trading, energy Within

Financial instruments used used instruments Financial sured at amortised cost being reflected in the the in reflected being ancial ancial f 59 purchases and sales of power and gas. Management has reviewed the has reviewed Managementpower andgas. and salesof purchases typicallyapply to instruments).Thiswill (financial According delivery. settledby physical industrycontracts)and arealways bilateralcustomerbase (forexample in the intoare entered the sale or usage requirements. Thesecontractsdonotqualify sale orusagerequirements. ofdelivery contractsthatare contractsthatare accounted in the using a fair value hierarchy which reflectsusing afairvaluehierarchy i.e. derived fromprices.i.e.derived observable Level2: Other or liabilities. marketsquotedprices inactiveLevel1: Non-adjusted levels: following credit spread will be included inthe be included creditspread will market onobservable level3isbased within ofenergy derivativesValuation ESTIMATES AND ASSUMPTIONS exemption. agreement contains a lease. A power purchase agreement contains alease contains agreement alease.Apowerpurchase contains agreement whethera powerpurchase is madewhendetermining LeasesJudgement datadoes notcoverthe observable where of investmentsinsharesandenergy derivatives Level 3consists marketdata Level3: Data Fair cash flows are discounted witharisk-freerate.cash flowsarediscounted inflation and the thisisavailable,datawhere financial liabilities are measured at amortised cost using the effective interest shareholdings in this category. The assets are initially measured at fair value years ahead oftime.years ahead (quotedfutures) “Own use” contracts within energy trading trading energy within contracts use” “Own in note35. disclosed right if contracts within the contractswithin dataexists, thiscontractisalevel3contract.Energy where observable power prices. part ofthe sales contracts.Asignificant power frombilateral derivatives energy contractsandembedded financial foreign exchange derivatives.Theseare notaffected byestimatedfuture foreignexchange together with directly attributable transaction costs. Subsequently, the assets rate method, where the effective interest remains the same over the entire the same over the entire term of the instrument. If an impairment loss is emof the instrument.term are measured at fair value with changes in value recognised in other ACCOUNTING JUDGEMENT assessed to have occurred, the loss is recognised in the income statement. comprehensive income. 4) Financial liabilities 3) Assets held as available for sale including directly attributable transaction costs. In subsequent per included in any of the above categories. Statkraft classifies strategic long- its “own use”exemption,shallbeaccounted fulfilment depends on aspecificassetandthe fulfilmentdepends

value to balance sheet. “Own use” contracts will typicallyhave astablesheet. “Ownuse”contractswill balance preparation of the preparation control for hierarchy to the

for the

39, non-financial energy contracts thatarenotcoveredby energy contracts 39,non-financial IAS power is in accordance with powerisinaccordance The assets or liabilities eitherdirectly,i.e.asprices,orindirectly, assetsorliabilities for datathan period where marketdatais unavailable.period the for for the notcovered discounted cash discounted use of

energy derivatives will normally be available normally will energy derivatives level 3 category mainly consists of physical and consistsofphysical 3categorymainly level Statkraft’s

asset or liability whichisnotbasedonobservable assetorliability If The

the are measured at fair value on initial recognition measurements. The measurements. the the Group classifies fair value measurements by Groupclassifiesfairvaluemeasurements duration of duration

quoted prices included in Level 1, which are in Level1, quotedprices included underlying asset.Furtherdetailson leasesare underlying for own useif bythe as financial instruments, andthoseas financial STATKRAFT hod is used. hod flowmet discount rate.discount whole contract period. Observable datacontract period.Observable whole last observable data adjusted withdataadjusted lastobservable are financial assets which are not definition as aresultof“ownuse” definition the embedded derivatives consistsofderivatives embedded the contract is longer thancontractis longer the Statkraft’s purpose of the purpose fair value hierarchy hasthe hierarchy fairvalue importance ofimportance for For

Physical AS as if they are derivatives as iftheyarederivatives contracts for arrangement conveys a arrangement embedded derivativesa embedded

ANNUAL expectedpurchase, for

energy contractsenergy As identical assets identical a mainrule, for receipt or

the REPORT physical recognition inputused iods, for the five period

2016

term

the

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 20 . 257 513 550 532 338 338 257 value 7 268 8 587 2 739 2 416

-4 389 -9 125 -4 302 -2 553 -6 942 -4 823 10 236 12 389 Fair Fair value Fair

------interest parity is used 143 248 248 143 2 627 3 471 2 627 3 471 Level 3 Level 3

-1 787 -1 787 -3 020 -3 020 The fair value of interest rate racts classified as assets and

- - - - - 40 20 40 6 041 7 325 3 604 2 416 2 739 4 586 are valued at quoted prices where such are Level 2 Level 2

-2 372 -4 792 -2 420 -4 823 -6 028 -1 205 ate derivatives are valued at listed prices. are valued at forward price and adjusted for inflation

are priced based on the forward price of EU Allowance - - - - 90 75 75 90 -181 -77 -364 -182 -77 530 513 550 532 1 568 1 594 1 036

Level 1 Level 1

Fair value measurement at period-end using: Fair value measurement at period-end using: contracts 2 Estimated net present value is subject to a test of reasonableness against contract delivery period, the commodity prices are adjusted for inflation to calculate exchange rates. liabilities. swaps and combined interest rate and currency swaps, is determined by The market interest rate curve (swap interest rate) is used as the basis for CO calculations made by the counterparties to the contracts. (EUA) quotas and Certified Emmision Reduction (CER) quotas. For time based on the most recent quoted price in the market. discounting derivatives. The market interest rate curve is stipulated on the discounting expected future cash flows to present value through the use of Certificates and bonds Several energy contracts have prices in different currencies. Quoted horizons beyond the horizon quoted, the price curve is adjusted for Shares and shareholdings basis of the publicised swap interest rates. A credit surcharge is added to observed market interest rates and quoted exchange rates from ECB. The foreign exchange rates from The European Central Bank (ECB) are used expected inflation. available and the securities are liquid. Other securities are valued by Green certificates valuation of forward currency exchange contracts is based on quoted the market interest rate curve in cases where the credit risk is relevant. in the valuation of contracts denominated in foreign currency. If there are discounting expected future cash flows. from the last noted price quotation. This applies to all external bilateral cont exchange rates, from which the forward exchange rate is extrapolated no quotes for the entire time period in question, the Currency and interest r 28 28 25 28 25 28 29 28 29 28 28 28 60 Note Note

ntire materialhave to losing rates quoted on relevant Changes relevant industry. the 2016201620162016201620162016201620162016201620162016

discounted discounted flow (DCF) model. Thecash the reported fair value of financial of financial reported fair value instruments. value value the REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT value value

at fair at fair at fair at fair financial assets financial assets Energy exchange contracts are valued at official closing tion of assumptions and parameters that have been the contracts extend beyond the horizon quoted on

statement statement of financial position cannot be measured based ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

Group’s financial financial Group’s statements. ASASASASASASASASAS

liabilities liabilities taken these models are from observable where possible, markets to on the shares and securities shares and securities Below is a descrip these factors these factors could affect on quoted prices in active markets, on quoted in active markets, their fair value is measured prices using valuation techniques including inputs inputs but where not feasible, a degree of judgement this is is required in establishing values. Judgements fair include considerations of inputs such as liquidity risk and volatility.risk, credit Changes in assumptions relating to recognised in the recognised When the fair values of financial assets and financial liabilities that is is that liabilities financial and assets financial of values fair the When Available-for-sale Available-for-sale Available-for-sale Available-for-sale Currency and interest Currency and interest rate derivatives Currency and interest Currency and interest rate derivatives Other Other Currency and interest Currency and interest rate derivatives Total Currency and interest Currency and interest rate derivatives Total Short-term Short-term financial investments Total STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Financial assets at fair Energy derivatives Money market funds, certificates, promissory notes, bonds Total Total 2015 NOK million Money market funds, certificates, Money market funds, certificates, promissory notes, bonds 2016 NOK million Financial assets at fair Energy derivatives Short-term Short-term financial investments Note 10 continued Note Valuation withinof investments in shares 3 is based on management’s level best knowledge of market conditions within Total Financial Energy derivatives Financial Energy derivatives effects used assumptions and contracts of Description in fair value of these investments in fair valueare not considered of these investments energy exchanges. For time horizons beyond the period for which there energy exchanges, the price is adjusted for the expected inflation. applied in the determination of fair value. are official quotes, the prices are adjusted for expected inflation. Power contracts Statkraft has energy contracts where the contract price is indexed against Several power contracts refer to area prices. These contracts are valued rates on the balance sheet date. raw materials such as metal, gas, petroleum products and coal. These are For other bilateral power contracts, the expected cash flow is stipulated on using the official closing rates on energy exchanges, where such exist. valued using forward prices from relevant commodity exchanges and the basis of a market price curve on the balance sheet date. The market Separate models are used for regional prices where official closing prices major financial institutions. If quotes are not available for the e price curve is stipulated on the basis from official c are unavailable. If CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Closing balance 31.12.2015balance Closing Net realised gain (+)/loss(-)for gain Netrealised Moved to/from (+)/loss(-)for gain Netrealised in value,incl.currencytranslationchanges Unrealised 01.01.2016balance Opening million NOK Assets Total Energycontracts million NOK unrealised Total Note10 continued Neteffectfrompower prices million NOK Sensitivity Moved to/from or realisationsAdditions Opening balance 01.01.2015balance Opening 31.12.2016balance Closing itemsFinancial The Neteffectfromgas prices Unrealised changes in value,incl.currencytranslationchanges Unrealised Additions or realisationsAdditions Debt connected to Debtconnected Debt issued in non-Norwegian markets Debtissued innon-Norwegian Bondsissued inthe debtLong-terminterest-bearing to Short-termloans Accountsreceivable Short-term interest-bearing debtShort-terminterest-bearing debt Firstyear’s instalmentonlong-term External debt in subsidiaries andotherdebt Externaldebtin subsidiaries Total Other Interest-freedebt Other Financial Total Cash andcashdeposits Other relatedReceivables Bondsand otherlong-termreceivables Indirecttaxespayable Accountspayable Loans to at amortisedcostassets Financial million NOK Assets Creditfacilities

effects interest-freeliabilities short-termdebt receivables and and associates liabilities are not symmetrical dueto are notsymmetrical analysis liabilities liabilities Level 3 Level 3 changes to cash collateral associates Norwegian market Norwegian

atamortisedcost Statkraft to of measuredat fairvalue recognisedat amortisedcost cash collateral factorsclassifiedtoLevel3

in SF value 2015 2016 to to

Statkraft Statkraft volume flexibility in the volumeflexibility SF SF based on effects effects Level3 contractsthat reducethe 61 Note 31 31 31 31 27 25 31 31 31 32 27 29 27 32 31 27 32 32 25 31 downside. Recognised value -52 211 -52 -21 673 -21 26 031 26 -2 762 -2 -7 050 -7 -6 126 -6 -1 408 -1 -9 212 -9 -1 730 -1

7 335 1 883 7 288 1 178 1 226 6 740 381 -400 -569 -974 -304 2016 -2 -

Financial assets atFinancial Fair

fairvalue 26 123 26

-54 742 -23 620

7 335 7 1 883 1 7 288 7 1 178 1 1 226 1 831 6

-2 762 -7 351 -6 348 -1 408 -9 212 -1 730 3 614 3 614 2 875 2 294 1 207 -462 -569 -974 -304 137

Note -718 -23 -25 381 value 2016 -2 20 20 5 - STATKRAFT

Financial liabilities atliabilities Financial 10%reduction Recognised value Recognised

fairvalue AS -3 020 -3 -1 364 -1 -3 020 -3 -1 787 -1 -1 256 -1 -2 071 -2

-27 166 -27 -55 387 -55

1 131 1 064 26 236 26 307

-2 794 -2 -7 050 -7 -4 508 -4 -1 614 -1 -6 857 -6 -1 362 -1 000 -1 -2 560 -2 -300 -303 -39 ANNUAL 2016

96

5 903 2 642 8 506 1 398 2 477 4 974 7 - 335 -400 -63 -11 2015 -2

REPORT 10%increase

Fairvalue 26 479 26

-28 449

-57 085

5 903 5 2 662 2 8 506 8 1 398 1 477 2 197 5

-2 794 -7 299 -4 598 -1 614 -6 857 -1 362 -1 000 -2 560 1 088 1 303 1 038 2016 -477 283 594 137 594 100 413 844 347 328 956 Total -82 -19 -864 335 2015 -63 -11 39 2015 -2 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 7 118 8 476 7 199 4 136 1 618 4 302 6 647 1 125 8 323 5 755 1 125 9 601 2 346 Net Net value Net value Net value Net value 31 675 10 219 11 918 10 675 10 781 37 316

- - - - - 94 79 69 253 935 210 110 pledged received received 1 614 1 725 2 477 2 477 1 292 1 361 1 187 collateral Financial collateral collateral Financial

------not offset not offset in collateral not offset not offset in not offset not offset in not offset in balance sheet balance sheet balance sheet pledged balance sheet Netting agreements, Financial Netting agreements, Netting agreements, Financial Netting agreements, amount amount Booked Booked amount amount Booked Booked 6 942 9 125 7 196 7 268 2 416 4 389 2 553 9 684 4 302 8 587 2 739 4 823 10 675 37 410 10 219 31 886 11 918 10 781 11 326

- - - - - 9 9 iteria of offsetting in the statement of the financial position. In the tables, the energy, currency and interest rate derivatives are Currency and interest rate derivatives are booked gross for each contract separated in assets and liabilities. Cash collaterals received or pledged in the balance sheet. are booked net per counterpart and presented as current assets/liabilities, Financial collateral is typically cash collateral payments to/from counterpart, normally a bank. Financial collateral can also be cash set a regardless of the lifetime of the corresponding derivative. The derivatives, Termination can occur for instance if a party is bankrupt or has defaulted side on a restricted bank account to cover forthcoming interest payments both current and non-current, are therefore presented on the same row in on the agreement. Such close-out netting does not in itself meet the and instalments on a loan. cr the table above. 6 258 7 740 5 078 5 078 7 732 7 732 6 258 7 740 13 318 13 318 13 318 13 318 62 Amount offset Amount offset Amount offset 2 553 2 416 7 196 2 748 4 831 20 259 16 865 16 933 15 297 17 706 16 997 12 033 37 410 16 318 20 586 17 039 23 002 19 066 31 886 Gross Gross amount Gross amount Gross Gross amount Gross amount Amount offset 27 27 28 32 28 31 28 28 28 28 31 32 28 28 31 Note Note 2016201620162016201620162016201620162016201620162016 s for instance same currency and

REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

ASASASASASASASASAS

AGREEMENTS liabilities liabilities interest-free interest-free liability interest-free interest-free liability derivatives non-current) (current and derivatives non-current) (current and derivatives (current and non-current) derivatives non-current) (current and ability simultaneously. STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT The tables show a reconciliation of gross amounts, booked amounts and Total Long-term interest-bearing debt NOK million Energy derivatives Receivables Financial NOK million Energy derivatives Financial assets Other 2015 Energy Energy derivatives Currency and interest swaps Total Financial NOK million Currency and interest Currency and interest swaps Receivables Financial assets NOK million Energy derivatives 2016 Note 10 continued Note NETTING Short-term Short-term interest-bearing debt Other Currency and interest Currency and interest swaps Currency and interest Currency and interest swaps Total Long-term interest-bearing debt Total For energy derivatives, futures and spot transactions, Statkraft has maturity. The master agreements further serve to mitigate exposure to credit loss by net value (net exposure) of financial instruments where there are netting agreements with counterparties based on various types of master allowing set-offs when an agreement is terminated, provided that such agreements setting the standard terms and conditions between the two agreements or similar. A financial asset and a financial liability are presented net in balance sheet offsetting is permitted in the jurisdiction of the counterparty. parties. In general, the master netting agreements permit netting of when Statkraft has a legally enforceable right to offset the asset and the payments and involve offsetting cash flows between the two parties when liability, and intends to settle on a net basis or realise the asset and the certain conditions are met, such a li CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS rate swaps with swaps rate in t in recognised in other comprehensive income a income comprehensive other in recognised nominal value of EUR 1200 million. The hedging instruments are interest interest are instruments hedging The million. 1200 EUR of value nominal in Statkraft Treasury Centre. In addition, GBP 220 million in synthetic debt debt synthetic in million 220 GBP addition, In Centre. Treasury Statkraft in of 2016. The effect of the hedging for the year 2016 is NOK 1058 million million 1058 NOK is 2016 year the for hedging the of effect The 2016. of The hedging objects are issued fixed-interest rate bonds with a total total a with bonds rate fixed-interest issued are objects hedging The Statkraft AS’ external debt is designated as hedging of the net investment investment net the of hedging as designated is debt external AS’ Statkraft designated as hedging instruments. hedging as designated recognised in other comprehensive income as a negative effect at the end end the at effect negative a as income comprehensive other in recognised Hedging of net investments in foreign operation foreign in investments net of Hedging hedging relationships, and the associated interest rate swaps have been been have swaps rate interest associated the and relationships, hedging income. The accumulated effect of the hedging is that NOK 1589 million is is million 1589 NOK that is hedging the of effect accumulated The income. EURIBOR. 6-month and 3-month floating to fixed from hedges. Issued bonds have been designated as hedging objects in the the in objects hedging as designated been have bonds Issued hedges. currency effects of this debt are recognised in other comprehensive comprehensive other in recognised are debt this of effects currency rate interest swap agreements The counterparties. the as banks major hedging value Fair GENERAL INFORMATION Note11 Net gain (+)/loss (-) on hedging instrumentsNetgain (+)/loss(-)onhedging million NOK Other 2) 1) hedging instrumentsused incashflow Hedging instrumentsused infairvaluehedging Hedging million NOK Fair Net gain (+)/loss (-) on hedging objects, in relation to objects,in relation Netgain (+)/loss(-)onhedging Hedging instruments used in net investments in foreign operations operations in foreigninstrumentsused innetinvestmentsHedging Total Hedge inefficiencyHedge The The he hedging of the net investment in Statkraft UK Ltd is included. The The included. is Ltd UK Statkraft in investment net the of hedging he

value fair value of hedging instrumentsfair valueofhedging value represents value represents

information

of instruments hedging a nominal value of EUR 1200 million, entered into with with into entered million, 1200 EUR of value nominal a Hedge accountingHedge fair on

the the Three loan arrangements are treated as fair value value fair as treated are arrangements loan Three currency effects income. in other comprehensive fair valuearerecognised financialfairvalue of instruments. Changes in value

hedging from financial instruments.Currency fromfinancial s a positive effect. positive a s 1) EUR 1000 million of of million 1000 EUR

the hedged risk hedged 2) effects are recognised in other comprehensive income. are recognised in other comprehensive 63 The value changes for cash flow hedges and h and hedges flow cash for changes value The change will meet the corresponding change in value of the hedged item. item. hedged the of value in change corresponding the meet will change acquisition of the financial instrument. In a fair value hedge the value value the hedge value fair a In instrument. financial the of acquisition SIGNIFICANT ACCOUNTING POLICIES related to debt in subsidiaries. in debt to related in hedge accounting are identified on the basis of the intention behind the the behind intention the of basis the on identified are accounting hedge in Gains and losses resulting from changes in exchange rates on debt entered assumed. The inefficiency is recognised in the income statement income the in recognised is inefficiency The assumed. accounting of cash flows hedged. There are some minor exceptions exceptions minor some are There hedged. flows cash of accounting instruments that are designated as hedging instruments or hedged items items hedged or instruments hedging as designated are that instruments foreign operations will be recognised in other comprehensive income. income. comprehensive other in recognised be will operations foreign deemed to be approximately the same, and 90–110% hedging efficiency is is efficiency hedging 90–110% and same, the approximately be to deemed Cash flow hedging flow Cash into to hedge net investments in a foreign entity are recognised directly in Financial instruments designated as hedging instruments hedging as designated instruments Financial other comprehensive income, and recycled to the income statement upon disposal of the foreign entity. The critical terms of the hedging object and hedgin and object hedging the of terms critical The

As a general rule, the Group does not use hedge hedge use not does Group the rule, general a As STATKRAFT -1 144 -1

476 136

-136 -181 -848 edges of net investments in in investments net of edges 2016 2016 AS -

ANNUAL g instrument are are instrument g

REPORT

Financial Financial -2 270 -2 -1 969 -1

2016 612 456 -456 -310 2015 2015 -

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

-27 639 2015 2015 the -665 -443 455 1 052 1 507 5 410 3 566 4 010 -5 437 15 516

19 694 16 181 25 986 51 586

-25 347 -31 892 It is the a generator a generator as 16 2016 2016 -368 -579 386 489 575

power plantspower recorded are under 3 634 1 065 1 345 1 925 -3 249 -24 897 -29 093 18 608 18 976 20 355 24 913 49 448 the

alue at the time of production. The The production. of time the at alue this judgement is that sales and generation generation capacity. its basis for operations operations in The the

further information. further to for note 5 note management of power meets that income from sale the in delivery quality. Revenues included in the income income the in included Revenues quality. delivery in See the sales obligations are within gross recognition. gross recognition. for sed revenues from physical and financial trading in energy contracts are are contracts energy in trading financial and physical from revenues sed Reali event of changes of event Green certificates are accounted for at fair v fair at for accounted are certificates Green portfolios are presented net as sales revenues. revenues. sales as net presented are portfolios Norwegian Water Resources and Energy Directorate (NVE). Each year, the year, Each (NVE). Directorate Energy and Resources Water Norwegian actual income and allowed income. The revenue ceiling can be adjusted in the the in adjusted be can ceiling revenue The income. allowed and income actual recognised in the balance sheet. The size of this is stated in note 33. note in stated is this of size The sheet. balance the in recognised Distribution grid activities are subject to a regulatory regime established by the the by established regime regulatory a to subject are activities grid Distribution companies. An excess/shortfall of revenue will be the difference between between difference the be will revenue of excess/shortfall An companies. sales revenues. revenues. sales ACCOUNTING JUDGEMENTS JUDGEMENTS ACCOUNTING comprises a revenue surplus/shortfall. Excess or shortfall of revenue is not not is revenue of shortfall or Excess surplus/shortfall. revenue a comprises accounting policies for green certificates. certificates. green for policies accounting a norm. The norm is established to ensure efficient operation by the the by operation efficient ensure to established is norm The norm. a and financial contracts recognised in accordance with IAS 39, are classified as as classified are 39, IAS with accordance in recognised contracts financial and The difference between the revenue ceiling and the actual tariff revenues revenues tariff actual the and ceiling revenue the between difference The accounted for in a similar manner. See note 26 for more details about about details more for 26 note See manner. similar a in for accounted ceilings are set partly on the basis of historical costs, and partly on the basis of of basis the on partly and costs, historical of basis the on partly set are ceilings presented as sales revenues. Unrealised changes in value relating to physical physical to relating value in changes Unrealised revenues. sales as presented statement correspond to the actual tariff revenues generated during the year. year. the during generated revenues tariff actual the to correspond statement change in value is recognised as sales revenue. CO2 certificates are are certificates CO2 revenue. sales as recognised is value in change criteria criteria purchases are managed independently, are nominated gross and that day-to-day day-to-day purchases at NordPool are normal purchases for long as the Statkraft both sells and purchases power through NordPool. judgement of NVE sets a revenue ceiling for the individual distribution grid owner. Revenue Revenue owner. grid distribution individual the for ceiling revenue a sets NVE subsidiary Småkraft. Småkraft. subsidiary the 64 sale of the

to NOK 226 million related third parties parties related third presentedexpenses are in while other operating revenues, to 1) 2016201620162016201620162016201620162016201620162016

s and end-user activities. Market access access Market activities. end-user and s energy purchase 2) operating revenues REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

includes trading portfolios, financial energy contracts, contracts, energy financial portfolios, trading includes ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL Other Sales revenues Sales purchase energy and

ASASASASASASASASAS ysical power generating assets. The category includes spot spot includes category The assets. generating power ysical

includes sales revenues and energy purchase related to to related purchase energy and revenues sales includes include sales revenues and energy purchase related to to related purchase energy and revenues sales include trading net- purchase - total sales revenues and energy purchase mainly consists of grid activities in in activities grid of consists mainly purchase energy and revenues sales and operating revenues in 2015 include of a gain - net

revenues - total operating revenues - sales revenues - energy purchase Revenues from power plants that are leased Other origination portfolios, market acces market portfolios, origination SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT Customers Germany). gross in the income statement. Realised gains and losses from trading trading from losses and gains Realised statement. income the in gross Norway and Peru and the subsea cable Baltic Cable (between Sweden and and Sweden (between Cable Baltic cable subsea the and Peru and Norway financial risk reduction portfolios and dynamic asset management portfolios. management asset dynamic and portfolios reduction risk financial Energy revenues are recognised upon delivery, and generally presented presented generally and delivery, upon recognised are revenues Energy Other Other buyer and the consideration can be measured reliably. measured be can consideration the and buyer Sales and trading trading and Sales certificates. activities include Fjordkraft. include activities the risk and control over the goods have substantially been transferred to the the to transferred been substantially have goods the over control and risk the sales, bilateral industry contracts, concessionary sales contracts and green green and contracts sales concessionary contracts, industry bilateral sales, activities mainly relate to the Nordic, British and German market. End-user End-user market. German and British Nordic, the to relate mainly activities operating operating expenses. Generation Generation - net Sales Sales and trading - sales revenues Total Other STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT 1) 2) NOK million Revenue from rental of power plants Note Note 13

Generation Generation - sales revenues NOK million Revenues from the sale of energy products and services are recognised when when recognised are services and products energy of sale the from Revenues INFORMATION GENERAL Presentation of the disclosures of sales revenues and energy purchase is Note 12 Note Generation Generation - energy purchase Sales Sales and trading - energy purchase Customers - sales revenues Sales Other Sales Customers Customers - net Customers Customers - energy purchase Sales Sales revenues adjusted for Other Other Energy Statkraft’s ph Statkraft’s changed from 2016 with the purpose to better present the Group’s main Generation Generation sales revenue streams and its corresponding energy purchase. The categories: comparable figures are restated. The Group’s sales revenues and energy purchase are divided into four four into divided are purchase energy and revenues sales Group’s The CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS reviewed Hydropower: as follow: are identified segment. CGUsinStatkraft operating Non-financial assets other than goodwill that suffered an impairment are thatsufferedan impairmentassetsotherthangoodwill Non-financial ACCOUNTING JUDGEMENTS generating units(CGUs)).generating the For SIGNIFICANT ACCOUNTING POLICIES Note14 Impairment attentionis givento Special Wind power plants: managed togethermanaged identified, calculations will be made and if carrying value is higher than ishigher carrying value be madeandif will calculationsidentified, by the and discussed quarterly.Indicatorsthatmightgive riseto Indicator statement. Analogue procedures are performed regarding reversal ofearlier reversal regarding are performedprocedures statement.Analogue in the lossisrecognised amount,an impairment recoverable procedures a quarterlybasis. impairment. assetmightbe impaired. indicatethator circumstances once ayearandwheneventsimpairment ofhigher allowance Property, Gas power plants: Intangible assets with indefinite usefullifearenotamortised,buttestedassets withindefinite Intangible carrying value, cannot justifythatfutureearnings quarter.Whenthere areindicators are reviewed depreciated/amortised District heating: two are not independent ofeach other.are notindependent Biomass power plants: lines. transmissionincluding recognised ifrecognised loss invalue. ofpossible areindications when there Investment impairment. Goodwill: less costto lowest levelfor

or more plants are controlled and optimised together sothatrevenues andoptimised arecontrolled or moreplants the purposes of assessing impairment losses, assets are grouped atlosses,assets aregrouped impairment purposesofassessing the assessment for

plant, for Segmentis usedasthe sell or the possible reversalofpossible The asset’sfairvalue lesscosts in impairment must bemade. impairment the

Power plants located inthe Powerplantslocated equity need to the Audit committee are informed of any impairment issues on ofany impairmentAuditcommitteeare informed recoverable amount,estimatedas the recoverable

equipment Each plant together with associated infrastructure Eachplanttogetherwithassociated valueinuse,isbelow recoverable amountiscalculated recoverable which there is separately identifiable cashflows(cash- isseparatelyidentifiable which there to

A gas power plant normally constitutes aCGU normally Agas powerplant

optimisepower production. The segments and group’s specialists.segmentsand group’s accountedinvestmentsare tested impairthe In

The individual wind powerplant.individual accordance with accordance The assetswhere oneormoreof individual biomasspowerplants.individual

and highestlevel ofaCGU the carrying value of an asset is reviewed ofanassetisreviewed carrying value intangible lowest impairment at each reporting dateateach reportingimpairment for impairment at impairment th to same water resource and samewaterresource The an impairment loss areanalysed an impairment CGU e sell andits the carrying value. thatare assets recoverable amount isthe recoverable ordinary reportingordinary for testinggoodwill An to is areported the value inuse. consider whetheran consider impairment lossis impairment higher of fair value offairvalue higher indicators are indicators If end ofevery the for

financial financial following following impairment unless for the

for

the

65  volumes: Production  value lesscost Assumptions theoretical beforetheoretical flows.Thismeans that after ESTIMATES AND ASSUMPTIONS  Power volumes, andthe production where an active marketwhere anactive the Discount third-party consultantsandStatkraft’s suppliers, losses.    situationsare present: amountis sensitive Assumptions are included. by Statkraft’s investmentsapproved construction,remaining Whendetermining onshore wind assets inthe wind assets onshore site, taking into account all expected technical, hydrological and wake technical,hydrological site,takingintoaccountall expected is the flowanalyses  valuation model applied is basedonmultiplesmodel applied valuation in the onshorewindtransactionsfromcomparable derived commissioned power plants.Provisioncommissioned significant future investments that will enhance futureinvestmentsthatwill significant restructuringactivitiesthatinclude fromderived for included in the included the Value using a required rateofreturn equalto using arequired corresponding assetsinthe corresponding risk profileof

CGU tax.Whereas the For long-termprice forecast intrapolated. onStatkraft’s sheetdate,estimated revenuesarebased balance For For market prices are applied as abasisfor marketprices areapplied Impairment loss is assessed in earlier periods Impairmentloss isassessedinearlier orproject unclear environmentregulatory isdeclining,Market outlook minimal The expected long-term power prices expectedlong-termpower thatlead to inmarketconditionsStructuralchanges is uncertainexecution

in prices: The use being tested. Expected maintenance investmentsareincluded beingtested.Expectedmaintenance

Calculated value in use is based on nominal discountrates value inuseisbasedonnominal rate Calculated difference between book value and recoverable amount is bookvalueandrecoverable differencebetween the the the volume estimate is a combination of informationfromturbineis acombinationvolume estimate period between short-term and long-term period the period short-term andlong-termbetween period long-termperiod,typically short-termperiod,typically the is calculated as future expected cash flows discounted by as futureexpectedcashflowsdiscounted is calculated

value inusecalculation.value applied applied to budget and prognosis for budgetand prognosis the sell approach isapplied sell approach tax

the long term expected production volume for long termexpectedproduction to assetor classinthe model.

value in use property, plant and equipment under plantandequipment value inuseproperty,

the

tax the The assessing fair when assessing value when for long-termprice forecast effects recoverable amount calculated are equal amountcalculatedrecoverable comparable assetsexists.Thisis applied comparable

production volume usedinthe production where the where UK, discountrate. The for same industry. power, as described in note2.power,as described discountrat are considered in the areconsidered the STATKRAFT Groupisnotyetcommitted

for the ten the fairvalueof decommissioning is usually not isusually decommissioning the for market’s required rateofreturn market’srequired years subsequent ofyears subsequent firstfiveyears, observable assets operating in amarketassetsoperating estimatingfuturerevenues. es applied take intoaccountapplied es value nextfive yearsanddonot for The relevantmarket.

in the internal estimatesinternal AS yearly power produced. yearlypower use asset’s performance of asset’sperformance for

operating expensesare operating ANNUAL lesscosttosellAfair power,expected

the calculated cash calculated The changes in the changes CGUs was discounted cash discounted UKmarket. recoverable recoverable

management REPORT any given anygiven the pricesare to

or to

for 2016

The the

for

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

2015

384 161 NOK

3 465 2 920 NOK UK UK

18 the for of annual case (see valuation wind farms Høy The

assets were assets based in the segment For sell. sell. Sønnå to the

several minor hydro one of one of 65 million in BKK. investment investment in HLC was for the A A impairment of loss 2016 for 189 262 to median price range of £750- The 4 858 4 407 yearly power produced restructure restructure Enex in 2016, the value in use calculation shows an to carrying value per MWh for Statkraft has recognised impairment changes in cost of capital. A Sweden related related (HLC) The to lower expected long-term power NOK 350 million. of of 6.2% (representing 8.1% before The hydropower assets are part of asset asset is part of Norwegian power plant is in particular S.A

tax Power and NOK some smaller hydropower plants based in NOK 132 million decision lower expected lower expected mid-term power prices for lower expected lower expected long-term prices in the for the

production capacity impairment was identified and the Due to The in Norway and for Due to 58 million. The Confluencia 48 million due to

assets was lower than Ltd A Norwegian heating plant was impaired by NOK La BKK Due to German gas-fired power plants. power gas-fired German NOK the plants discount rate of one percentage point (after tax) will result in

impairment using fair value less cost sensitivity analyses showed impact from changes minor in and for assets

in Brazil the heating accounted investments

estimated estimated value in use of the Power

nternational nternational hydropower. on a nominal discount rate after hydropower plants based in Panama, power plants in Sweden. based All segment segment European flexible generation. Calculated value in use is based tax) in both Norway and Sweden. The losses of NOK 76 million in SN SN 441 million was recognised Norway and an impairment of influenced influenced by increased tax property note 33) and is in addition sensitive million. Intangible Goodwill Hidroelectrica District District 78 million of Goodwill was impaired. Equity impaired with prices. Wind UK Invest market an indicator assessed for model applied was based on multiples 800 per MWh, achieved in comparable transactions observed in the market, and no impairment was therefore booked. Hydropower assumptions. Wind farm in Brazil are lower than previously expected. change in the Sweden impairment of NOK I assets with assets with similar support regime. production production a change in value of approximately 66

of

is based grids equipmentuse and associated in the discount to the view that after tax assets are part revenues are ax) willresult in t rights rights changes in future changes in future changes in future to The future energy to to to the future gross margin of future power price of 10 future power price of 10 NOK 585 million was Nordic market, statement segment International % (representing 7.8% before the Nordic market were assessed for 7.0 Statkraft maintains the income

Devoll project in Albania, which of of 2016201620162016201620162016201620162016201620162016 700 million in change in value in use. A 430 million. 430 million. A change in the

the segment European flexible generation. NOK 930 million. A change in the The 108 million mainly related

tax

in of 6.7% (representing of 6.7% (representing 8.5% before tax). the NOK NOK tax REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT in Germany A A impairment loss of

Albania assets assets are part of after equipment in The plants 1) recognised recognised

ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

Sweden and NOK 930 million. NOK 400 million in change in value in use. hydropower plants Banja and Moglice, was impaired with onshore wind farms based in Sweden. plants discount rate of one percentage point (after

ASASASASASASASASAS loss

for be postponed compared with earlier assumptions. This, plants are part of the power plant to The market lower expected long-term prices in the Wind power segment. Wind power segment. Calculated value in use is based on a impairment loss includes NOK impairment loss estimated estimated values in use are particularly sensitive estimated estimated values in use are particularly sensitive estimated estimated values in use are particularly sensitive % (representing 8.7% before tax). the a nominal discount rate after Wind farms in recognised of change in the discount discount rate of one percentage tax) will point (after result in approximately nominal discount rate impairment impairment using value in use calculations. % will result in approximately 10 % will result in approximately together together with indications might be set by cheaper that capacity prices hydropower plants and wind farms in the million. Nordic Due to The power prices and cost of capital. A change in the 6.0 The gross margins and cost of capital. A change in the technologies technologies impairment than expected resulted in an loss of NOK 1947 expected expected rate rate of 1 percentage point (after tax) will result in approximately NOK 900 Total Gas-fired Gas-fired gas-fired gas-fired generation is a key bridge technology for supply in Germany, but based on operational analysis the Calculated value in use is based on a nominal discount rate million. million. % will result in approximately Equity Equity accounted investments STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Hydropower Intangible Intangible assets consists of on IMPAIRMENT IN 2016 IN IMPAIRMENT Property 1) The Impairment Impairment NOK million and equipment Property, plant Note 14 continued Note tax). tax). The power prices and cost of capital. A change in the approximately approximately NOK 1071 million. hydropower. Main impairment were lower expected indicators long-term prices and updated market assessment. Calculated value in use CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Number of full-time equivalents as of31.12.Number offull-timeequivalents parks Wind IMPAIRMENT IN 2015 Note14 Average number of full-time equivalents GroupAveragenumber offull-timeequivalents 1) costsPension contributioninsurance Employers'national Salaries million NOK Note15 Other 1530 million related million 1530 of NOK show animpairmentcalculations cash flowof negativeimpactonthe el certpriceshavehadasignificant lower operational assets. In operational Total Calculated value in use is based on a nominal discountrate onanominal inuseisbased value Calculated relatedis recognised relating Whencalculating amountsto assetsin Sweden 6.6% particularly sensitive to sensitive particularly A change in the Achange 730 million. A change in the Achange 730 million. NOK Pension costs are described in furtherdetailnote costsaredescribed Pension 16. benefits for to wind parks in Sweden. The wind parksinSweden. future revenue andcost.futurerevenue the in 1) continued Sweden Swedish greenfield and operating assets.and operatinggreenfield Swedish future power price of 10 % will resultin approximately priceof10%will futurepower Payroll costs and number of full-timeequivalentsPayrollcosts andnumberof the expected value in use, assumptions aremade assumptions expectedvalue inuse, addition, an impairment charge of animpairment addition, to changes in future power prices and cost ofcapital. infuturepowerpricesandcost changes

the The wind development portfolios in Sweden. portfoliosinSweden. development wind combination of lower energy pricesand oflower combination 1750 million. NOK discountrateofone The

total estimated values inuseare estimatedvalues impairment charge onwind impairment 220 million NOK The fe tax after to impairment

the future

of 67 project execution was considered an impairment indicator animpairment was considered projectexecution the y situation in South-East Turkey and challenges related inSouth-EastTurkeyandchallenges situation y of project. to downward shift inthe downward to due 384 million with NOK were impaired Duhangan Equity more certain. thatitis mostappropriate has determinedmanagement related uncertainties significant outcomeof loss ofimpairment Changes result inapproximately point(beforetax)will percentage the Power find a sustainable solution finda sustainable the securit conclusions reached as of 31 December 2015. as of31December reached conclusions constructionworks.

accountedinvestment in plants On to 15 December 2015, 15 December these assumptions going forwardmay resultinachange going theseassumptions the

under ongoing assessments and negotiations arebecoming assessmentsand negotiations ongoing The 1297 million. NOK construction Indianmarket. The for management will continue its continue will management to movingthe decided Statkraft STATKRAFT

the India in outcomeofthese processes East South

The figures may change asthe figuresmay change 3 484 3 3 639 3 2 604 2 3 648 3 project forward. Dueto project forward. shares in Malana and Allain and Allain shares inMalana 446 386 212

2016 2016 AS

ANNUAL to Europe suspend the suspend a permanent a permanent to 500 million. 500 million. NOK recognise an recognise

for REPORT

year-end At currenteffort

the Cetin majority

to the

3 795 3 572 2 499 3 545 2016 438 444 164

2015 2015 to

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 2.50% 2.50% 1.50% 2.25% 31.12.2015 n-funded n-funded covered bonds 2.30% 2.25% 1.25% 2.00% edge funds and for use of judgement and 31.12.2016 19. 19. end of the year. The pension funds and K2013/IR73 K2013/IR73

IAS market Some Group companies in Norway

on the estimated liability and the projected yield yield projected the and liability estimated the on opinion that the Statkraft is of the calculation of pension liabilities involves the discount rate is based on high-quality corporate bonds (covered bonds e xisting members of the closed agreement who leave before pensionable during the period, the interest the period, the during reduced by the fair value of the plan assets. Gains and losses attributable to changes in actuarial assumptions or base benefit scheme is the present value of the future retirement benefitsfuture thatthe areof value present the is scheme benefit Net pension fund assets for overfunded schemes are classified as non- ESTIMATES AND ASSUMPTIONS AND ESTIMATES retirement benefit liabilities for underfunded schemes and no and schemes underfunded for liabilities benefit retirement other payroll costs, and comprises the total of the retirement benefits accrued accrued benefits retirement the of total the comprises and costs, payroll other on pension fund assets. fund pension on data are recognised in other comprehensive income. current assets and recognised in the balance sheet at fair value. Net Net value. fair at sheet balance the in currentrecognised assetsand schemes that are covered by operations are classified as long-term liabilities. long-term as classified are operations by covered are that schemes estimates estimates across a range of parameters. Present value of accrued pension The The liability recognised in the balance sheet which relates to the defined defined the to relates which sheet balance the in recognised liability The represents represents a deep and liquid marked with relevant durations that qualify as - OMF). Th properties through external asset managers. a reference a reference interest rate in accordance with The actuarial gain recognised in other comprehensive income during the The net retirement benefit cost for the period is included under and included is salaries period the for cost benefit retirement net The entitlements for defined benefit schemes and present value of accrued Unfunded defined benefit schemes age receive a deferred pension entitlement for the scheme above 12G, year is mainly due changes in assumptions for discount rate and salary pension entitlements for the year are calculated using the accrued benefits have entered into an additional pension agreement that provides all based on the accrued share, provided they have at least three years’ Pension funds and insurance companies adjustments. method. Net pension liabilities in the balance sheet are adjusted for employees whose pensionable incomes exceed 12G with a retirement and insurance companies have placed the pension assets in a diversified pension entitlements. SIGNIFICANT ACCOUNTING PRINCIPLES PRINCIPLES ACCOUNTING SIGNIFICANT expected future salary increases until retirement age. Calculations are disability pension equivalent to 66% of that portion of their pensionable portfolio of Norwegian and foreign interest-bearing securities, Norwegian based on staff numbers and salary data at the income exceeding 12G. This agreement was closed 30 April 2012. and foreign shares, secured loans to members, h E local conditions. local to 68

(G) 30 and 40 years. years. 40 and 30 ssumed that the bonds are retirement pension scheme. 1) Norwegian companies in the Group

2016201620162016201620162016201620162016201620162016

A defined contribution scheme is a a is scheme contribution defined A Companies with schemes in the SPK pay

are used cheme also entails risk coverage. A defined benefit scheme is a retirement benefit benefit retirement a is scheme benefit defined A REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

Norwegian entities. Foreign Norwegian adapted entities. entities apply assumptions mortality mortality and disability e expensed as salaries and payroll costs. payroll and salaries as expensed e for National Insurance Scheme’s basic amount ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL Pensions

assumptions ASASASASASASASASAS

al pension schemes in accordance with the Norwegian Public assumptions apply for following

The will normally be required to be paid over a period of between between of period a over paid be to required be normally will employee’s salary. To be able to receive full retirement benefits, contributions contributions benefits, retirement full receive to able be To salary. employee’s Funded defined benefit schemes benefits proportionately reduced. reduced. proportionately benefits retirement. The retirement benefit is normally set as a percentage of the the of percentage a as set normally is benefit retirement The retirement. have organised their pension schemes in the National Pension Fund made. The payments ar payments The made. Statkraft’s pension scheme for new employees in wholly owned Employees who have not made full contributions will have their retirement retirement their have will contributions full made not have who Employees (SPK), own pension funds as well as in insurance companies. Employees scheme that defines the retirement benefits that an employee will receive on on receive will employee an that benefits retirement the defines that scheme National Pension Fund (SPK) STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT 1) The Discount rate and projected yield Salary adjustment Adjustment of current pensions Adjustment of the GENERAL INFORMATION GENERAL Statkraft’s pension benefit schemes have been established in accordance Note 16 Note Demographic factors Demographic factors held to maturity. companies in Norway from 1 January 2014 is a defined contribution Pension scheme benefits are coordinated with the benefits provided by the The pension benefit scheme in the National Pension Fund (SPK) was Defined benefit schemes manager without incurring further obligations once the payment has been been has payment the once obligations further incurring without manager an annual premium and are responsible for the financing of the scheme. in the Group’s Norwegian companies participate in public service Service Pension Fund Act, the Norwegian Public Pension Service Pension with local statutes, and cover both defined contribution schemes and scheme. The contributions are 6% of the pensionable salary up to 7.1 of Norwegian National Insurance Scheme. At maximum accrual, the closed for new employees 1 January 2014. Pension benefits from the SPK are guaranteed by the Norwegian state. occupation Fund Transfer Agreement and the regulatory framework governing public retirement benefit scheme where the Group pays fixed contributions to a fund fund a to contributions fixed pays Group the where scheme benefit retirement defined benefit schemes. the National Insurance Scheme’s basic amount (G), and 18% of the retirement schemes provide pension benefits amounting to 66% of Defined contribution schemes The SPK scheme is not asset-based, but management of the pension fund service pensions. pensionable salary between 7.1G and 12G. In addition to retirement pensionable salary, up to 12G. The defined benefit schemes cover retirement, disability and survivor assets is simulated as though the assets were invested in bonds with 1, 3, Employees who leave before retirement age receive a deferred pension pensions, the contribution s pensions. The majority of the companies also offer early retirement from 5 or 10-year duration. In this simulation it is a entitlement provided they have at least three years’ pension entitlements. the age of 62 under the Norwegian early CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Fair value of pension assetsFairvalue ofpension Defined assets onpension Projectedyield assets 31.12Fairvalue ofpension Other Currency translation Paidbenefits in assetsdueto Netchange Currency translation Paidbenefits Actuarialgains/losses Schemechanges due to in liabilitiesNetchange 01.01 liabilities gross benefitpension Defined million NOK Movement - seenote30 liability netpension which Of asset- seenote25 netpension which Of in the liabilitiesNetpension contributioninsurance Employers'national entitlementsPresentvalue ofaccruedpension liabilityNetpension entitlementsPresentvalue ofaccruedpension million NOK Breakdown entitlementswithdeferred and people Pensioners Employees Members Note16 continued Employee contributionsEmployee Interestexpenses entitlementsPresentvalue ofaccruedpension million NOK Defined costrecognised Pension beforetax income in othercomprehensive andlossesrecognised gains actuarialAccumulated million NOK Actuarial instrumentsInterest-bearing Equityinstruments assetscomprise Pension assets 31.12Fairvalue ofpension assets 01.01Fairvalue ofpension million NOK Movement Actuarialgains/losses assets onpension Projectedyield Interestexpenses entitlementsPresentvalue ofaccruedpension Total cost definedbenefitschemes Netpension Schemechanges Total 31.12liabilities benefitpension Grossdefined Employerpayments Employers' national insurance contributioninsurance Employers'national liability as of 31.12.liability pension Increase(+)/decrease(-) ingrossdefined benefitschemes for Increase (+)/decrease (-) in net pension cost definedIncrease(+)/decrease(-) innetpension Sensitivity pension cost- seenote15 pension contributions schemes schemes contribution benefit gains of in in analysis

of defined defined the net

schemes lossesrecognised and fair

defined for

effects effects the benefit upon value funded defined benefit schemes fundeddefined benefit period in balance sheet balance changes additions/disposals benefit

of schemes the additions/disposals

pension assets pension

income

pension

in liability assumptions in statement other liability for for for for

for unfunded defined benefitschemes defined unfunded fundeddefinedbenefitschemes the the comprehensive defined year year benefit income schemes pension 69 Discount rate Discount 1%2%7 7 2 -11% 12% -7% 7% 21% -16% 2%2%1%-7 1 -13% 11% -17% 16% 25% -22% 31.12 1 % -1 % STATKRAFT Salaryadjustment 1 %

-1 % AS 5 254 5 6 368 6 5 254 5 732 2 1 947 1 4 896 4 957 6 541 6 247 2 115 1 852 1 3 722 3 254 5 2 262 2

ANNUAL

204 243 253 955 253 120 160 300 589 386 318 160 577 247 148 -30 -127 -160 -120 -41 -24 2016 2016 2016 2016 2016 2016 2016 68 49 Adjustment ofG Adjustment - - - -

1 % REPORT 4 896 4 5 961 5 4 896 4 641 2 1 887 1 3 524 3 896 4 663 4 541 6 996 6 125 2 065 1 011 2 2 210 2

2016 242 444 375 152 473 276 152 238 580 297 899 297 -134 -182 -590 -105 -167 -99 -25 2015 2015 2015 2015 2015 2015 2015 23 99 69 50 74 35 -1 % - -

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

- 58 407 267 164 347 239 129 191 141 2015 2015 -110 -56 Total he 139 321 321 341 1302 323 380 1 465 4 651

-1 384 -1 411 1 679 1 338 2 847 2 137

project in Turkey. Turkey. in project

the

------9 -9 16 Bank 167 160 160

------Equity method 2016 2016 487 263 141 351 245 116 161 139 657 341 1 334 3 894 1 733 1 391

------4 4 4 sale for Available 105 NOK 2016 in expensed was million related to

- - - cost 41 -913 -895 -47 -110 196 336 156 139

1 053 Assessment Assessment basis Amortised 70

- - - - 7 20 13 impairment in Turkey. Additionally, inAdditionally, impairment Turkey. -489 -489 321 321

to 1 778 1 630 profit profit or loss Fair Fair value through 789 NOK relatedmillion licence and fees 2016201620162016201620162016201620162016201620162016

1) 2) operating expenses REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL Financial items Other Property taxProperty items

ASASASASASASASASAS

income tax financial

interest expenses financial expenses operating expenses financial income note 30. 2015 other 2015 other operatingof expenses include costs Purchase of third-party Purchase of third-party services mainly includesservices. consultants, entrepreneurother expenses and In See Net Net gains and losses on derivatives and securities Total Total Capitalised Capitalised borrowing costs STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Impairment Impairment and gain/loss on financial assets Other Other Net currency effects Total Net financial items 2016 NOK million Financial Note Note 19 Interest income

1) 2) NOK million Purchase of third-party services Note Note 18

Licence fees are mainly related to hydropower plants in Norway and are adjusted in line with the Consumer Price Index, with the first adjustment taking place NOK million Property Note 17 Note

Licence fees Total Materials Power plants operated by third parties Compensation payments Rent IT Marketing Travel Insurance Other Total Other Other Financial expenses Interest expenses external debt estimated amount is based on a regulated discount rate of 3.9%, annual compensation and funds etc. In 2015, the corresponding amount was NOK 8633 million with an interest rate of 4.0%. on 1 January five years after the licence was granted and every fifth year thereafter. The present value of the Group’s future licence fee obligations, not recognised in the statement of financial position, is estimated at NOK 8823 million. T CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Netcurrency effects Interest expenses externaldebt Interestexpenses expenses Financial Other Other Capitalised borrowing costs borrowing Capitalised Other Net financial itemsNetfinancial assets on financialImpairmentand gain/loss Total Other Total Total Interestincome Financial million NOK 2015 Note19 continued Note20 Net gains and losses on derivatives and securities andlossesonderivativesNetgains Generation million NOK Salesand trading Total Total Salesand trading Generation Netcurrency effects Customers Customers unrealisedeffects Total Other Other Other financial income financial interest expenses financial expenses financial sales revenues energy purchase

financial itemsfinancial financial income items Unrealised effects recognised in the recognised arvletruhAotsdAvailable Amortised Fairvalue through profitor loss -3 024 333-1699 -3 323 -232 -232 -88 -88 21 21 - - - - -

Unrealised

71 -1 768 income statement -426 -493 -849 -300 338 404 557 507 66 - - - Assessmentbasis

-1234 -1322 -621 -165 156 266 123 cost -13 33 - - - 2016

19 402 19 51 216 51 25 762 25

-29 497 -24 963 Realised 1 925 1 4 128 4 2 290 2 -3 586 -579 -368 -186 for sale -4 -4 -4 -29 093 -29 -24 897 -24 ------18 976 18 49 448 49 24 913 24

1 925 1 3 634 3 2 847 2 -3 249 -579 -368 321 Total method Equity STATKRAFT -713 -723 -723 Unrealised 10 10

2 028 2 1 171 1 1 303 1 ------1 754 -1 681 -215

790 922 316 -12 86 - -

AS

2015 ANNUAL

15 391 15 49 558 49 28 009 28 Bank -30 212

-25 335

Realised 2 -5318 421 234 0 -3445 200 234 1 670 1 4 488 4 1 -2058 -13 -13 -3 683 -4 616 -750 -443 ------22

REPORT -31 892 -31 -25 347 -25 16 181 16 51 586 51 28 325 28

-1 410 1 670 1 5 410 5

-5 437 -3 445 2016 -665 -443 -237 -178 -236 -232 -736 Total 421 378 266 Total 43 -4

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

to 42 15 2015 2015 2015 2015 2015 -255 33% 27% 31% 25% -122 395 358 520 562 591 429

1 548 1 481 2 825 1 481 assets be utilised

- 99 99 13 2016 2016 2016 2016 2016 33% 25% 24% -41 420 429 608 5 402 4 764 2 249 2 249 1 478 2 762 34.3 34.3 % are recognised net balance sheet if they are

ted for, and therefore does not basis of expectations related amount expected to the period over which negative resource rent resource rent revenue carry-forwards are The to assets involves judgment. assets involves judgment. Deferred tax tax extent extent that it is probable will be utilised. that they years. assets assets are recognized in the the

balance sheet with positions positions see Note 33. to assets assets relating be utilised within a period of five years. to tax e rent tax. Deferred tax positions connected with income tax deferred tax uncertain tax expected expected For recognised in the within a period of ten revenues can be used is estimated revenues can be used is estimated on the normal production and price curves. Other Deferred Deferred Tax related to items recognised in other comprehensive income is also Recognition of deferred are recognised affect the calculation of deferred tax connected with resource rent. SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT payable cannot be offset against tax positions connected with resource recognised in other comprehensive income, while tax related to equity ESTIMATES AND ASSUMPTIONS AND ESTIMATES rent tax. Any natural resource tax that exceeds income tax can be carried forward transactions is recognised in equity. Deferred tax liabilities and deferred tax assets with interest to subsequent years, and is recognised as prepaid tax. provided that these are expected to reverse in the same period. The same The tax-free allowance deductible for resource rent tax is treated as a applies to deferred tax liabilities and deferred tax assets connected with permanent difference in the year it is calcula resourc 72 the taxable value payable) sheet statement (deferred sheet statement (deferred tax) statement balance income

2016201620162016201620162016201620162016201620162016 the the

statement sheet expense REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT income

tax spot price for the corresponding hour. The actual net of group contributions balance

is a profit-independent tax that is calculated on the balance sheet carryforwards payable the tax is a profit-dependent tax levied on the net resource rent income statement the in rate rate payable payable ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL in itive resource rent revenues for other power plants. Taxes

payable

tax tax tax tax in receivables ASASASASASASASASAS tax

is calculated in accordance with ordinary tax rules and by

payable payable (including natural resource tax rate rate Norwegian in tax rates Norwegian in tax rates he individual power plant’s average output over the past seven tax tax tax tax tax payable rises taxes payable and changes in deferred tax liabilities/assets. included tax expense

expense in the included in receivables - see note 27 Tax Natural Natural resource tax Taxes Taxes payable in the Resource rent Resource rent Change in deferred Previous years taxes payable STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Tax NOK million Prepaid Taxes Taxes NOK million Income Natural resource tax Tax NOK million Income Income Income The Nominal Nominal Income Withholding Withholding Previous years payable INFORMATION GENERAL Group companies that are engaged in energy generation in Norway are Note 21 Note Resource rent Resource rent of the power plant’s operating assets, multiplied by a normative interest contract price is applied for deliveries of concessionary power and power years. The tax rate is NOK 13/MWh. Income tax can be offset against the Taxes payable are calculated on the basis of the taxable income for the subject to the special rules for taxation of energy companies. The Group’s rate. Negative resource rent revenues per power plant from the 2006 fiscal year natural resource tax paid. subject to physical contracts with a term exceeding seven years. Income year. Deferred tax liabilities/assets are calculated on the basis of tax expense therefore includes, in addition to ordinary income tax, natural Resource rent tax or earlier years can only be carried forward with interest offset against from green certificates is included in gross resource rent revenue. Actual temporary differences between the accounting and tax values and the tax revenue generated by each power plant. Resource rent revenue is resource tax and resource rent tax. future positive resource rent revenues from the same power plant. From Income tax operating expenses, depreciation and a tax-free allowance are deductible. effect of losses carried forward. calculated on the basis of the individual power plant’s production hour by 2007 onwards negative resource rent revenues per power plant can be Natural resource tax applying the adopted tax rate. The tax expense in the income statement The tax-free allowance is set each year on the basis of hour, multiplied by the pooled with pos basis of t comp CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS 2) 1) Expected Profitbefore million NOK Reconciliation Note21 continued Other Effective Tax Resource rentResource Effect without Foreign Changes relatingChanges Tax-freeincome Shareofprofitfromassociates in tax Change Change in unrecognised deferred in unrecognised Change which presentedasdeferredwhich Of presentedasdeferredwhich Of resource rentNegative presentedasdeferredwhich Of presentedasdeferredwhich Of resource rentNegative Property,plantand equipment million NOK Breakdown Remeasurement of pension obligationsofpension Remeasurement million NOK tax recognisedDeferred asof31.12.2015)(NOK1336 million 31.12.2016 2) asof31.12.2015).(NOK1040 million 31.12.2016 1) Total Property,plantand equipment Currentassets/currentliabilities million NOK Total Currentassets/currentliabilities Deferredtax,resource renttax Other Tax Pension liabilitiesPension Pension liabilitiesPension Deferredtax,resource renttax Translation differencesTranslation Tax Other Total instrumentsin fairvalueoffinancialChanges Other deferredin unrecognised Change The The expense loss carryforward/compensation loss carryforward/compensation permanent differencespermanent net deferred net deferred Group also has deferred tax Groupalso hasdeferred tax Groupalso hasdeferred deferred tax deferred long-termitems long-termitems permanent differences are mainly non-deductible expenses and items included in and itemsexpenses differencesare mainlynon-deductible included permanent tax taxes of on tax

effect entail depreciation and impairment on excess values and changes in value ofequity changes on excessandininstruments.and impairmentvalues depreciationeffect entail tax tax ratedifferences rate tax expense at a nominal rateof 25%(27%) at anominal expense of rates tax deferredtax of to nominal recognised in other comprehensive income in othercomprehensive recognised tax tax previous years previous liability liability tax tax carryforward carryforward in Norwegian 2) other assetsnotrecognized in assetsnotrecognised in tax 1) 1) tax tax tax tax assets is mainly related to related assetsis mainly tax comprehensive liability, see note30 liability, asset,see note22 see note30 liability, asset,see note22 assets 1) 1) effectivetax rate taxrateand 2) 2) 1) the the income balance sheet related balance sheet This mainly relates balance sheet. impairments in Germany, Albania and inGermany,AlbaniaSweden.impairments and to negative to negative 73 the -2 244 -2 564 -2 01.01.16 01.01.15 1 471 1 298 1 6 708 6 137 8 2 715 2 8 525 8 2 509 2 609 6 8 180 8 435 9 profit and profitloss statement and without

292 352 298 451 -755 -227 -435 -682 to negative resource rent negative resource Germany with not recognised deferred Germany with not recognised deferred in the in the Tax Tax statement statement expense expense icm opeesv andsaleof comprehensive income icm opeesv andsaleof comprehensive income

420 380 186 444 438 125 132 -255 -398 -285 -405 -320 -161 32 -7 2 tax tax carryforward.amounted This

effect. income income

Items 353 276 301 239 233 320 276 Other Other -172 -70 -26 -61 2016 14 15 81 17 18 STATKRAFT -2 -3 - - tax included in included

assets of Acquisitions Acquisitions

companies companies AS NOK 103.4% the 5 223 5 1 682 1 5 402 5 1 306 1 2 445 2 1 331 1 1 545 1

to

ANNUAL profit and statementprofitloss and

317 -21 -119 -12 -244 2016

1987 million as of -147 -62 -62 -98 49 1110 million as of NOK 1110 million 20 11 ------

REPORT -188.5% -2 564 -2 531 -2 1 548 1 1 356 1 31.12.15 31.12.16 1 298 1 715 2 899 2 8 771 8 8 137 8 8 832 8 8 525 8 9 435 9 446 9

2016

751 352 -821 -222 -185 -198 -66 -46 -195 675 255 352 314 298 180 353 2015 -296 -415 -755 -435 -142 2015 28 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

- - 37 55 69

-24 -11 -24 -31 311 340 Total 2015 -428 -233 -180 -202 -284 -161 -262 Total 4 524 3 858 4 524 5 877 1 967 2 919 4 524 3 858 5 577 1 298 1 550 2 974 5 822 -1 353 -1 719

- - - 5 -6 -1 29 55 -24 -31 228 323 2016 675 -788 -428 -176 -135 -202 -318 -141 Other Other 2 974 2 405 2 974 3 762 1 368 1 859 2 974 2 405 3 483 1 453 2 405 4 533 -1 078 10–22 years ------8 -5 83 17 34 69 are expensed as incurred. -29 -57 -45 599

-565 -641 -121 -160 1 550 1 453 1 550 2 115 1 060 1 550 1 453 2 094 physical power sales power physical from agreements Goodwill Goodwill Goodwill s generate “technical goodwill”. The reason for costs

SF values excess and related to benefit can be identified from the development of an identifiable intangible this is that deferred tax cannot be booked at fair value. The fair value of a asset deferred tax liability is normally lower than the nominal value. The difference between fair value and nominal value gives a “technical goodwill”. Research and development Development costs are capitalised to the extent that a future economic Some business combination further further information. Statkraft 74 note 14 for See

excessis identified value rest throughbusinesses. acquisitionsof The power plants transferred power transferred plants from further further information. for note note 14 for See

2016201620162016201620162016201620162016201620162016

gasEnex in Brazil and German power plants. to REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

Swedish wind farms. effects effects non-current assets non-current assets 1) ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL Intangible Intangible assets

ASASASASASASASASAS asset asset is presented in more detail in note21. to/from to/from

5) 4) tax tax 2) 3)

amount is mainly technical goodwill associated with deferred tax. tax. amount is mainly technical goodwill deferred associated with Impairment is related to Impairment is mainly related Impairment is mainly related Deferred Deferred The Includes rights in connection with leasehold improvements Balance Balance at 31.12 Reclassification Reclassification between intangible assets and provisions Disposals Derecognised on disposal of a subsidiary Currency translation Amortisation Impairment Cost Cost 31.12 Accumulated amortisation and impairment as of 31.12 Transferred Transferred Balance Balance at 31.12 Additions Additions from business combinations Transferred Disposals Derecognised on disposal of a subsidiary Currency translation Amortisation Impairment Balance at 31.12 Additions Additions from business combinations Cost 31.12 Accumulated amortisation and impairment as of 31.12 Accumulated amortisation/impairment Accumulated amortisation/impairment on disposals STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Expected Expected economic lifetime 5) 2015 Balance at 01.01 4) Accumulated amortisation/impairment Accumulated amortisation/impairment on disposals Balance at 31.12 Nok million 2016 Balance at 01.01 1) 2) 3) acquisitions. Deferred Deferred NOK million POLICIES ACCOUNTING SIGNIFICANT Intangible assets are carried at cost less accumulated amortisation and Note 22 Note Nok million Goodwill Goodwill Other Total accumulated impairment losses. Costs relating to intangible assets, including goodwill, are recognised in the balance sheet provided that the requirements for doing so have been met. Goodwill and intangible assets with an indefinite useful life are not amortised and are tested annually for impairment. CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS decommissioning costs, with a bala a with costs, decommissioning Depreciation is calculated on a straight-l a on calculated is Depreciation Directly attributable borrowing costs are added t added are costs borrowing attributable Directly technologies or other areas that could provide a basis for future acti future for basis a provide could that areas other or technologies with NOK 92 million and NOK 104 million, respectively. million, 104 NOK and million 92 NOK with costs including interest on loans. loans. on interest including costs the case of time-limited licences, provisions are made for for made are provisions licences, time-limited of case the acquiring or bringing assets into a condition in which they can be used. used. be can they which in condition a into assets bringing or acquiring sheet as facilities under construction. Cost includes directly attributable attributable directly includes Cost construction. under facilities as sheet increase future production capacity are recognised in the balance sheet. In In sheet. balance the in recognised are capacity production future increase for use. The cost of property, plant and equipment includes fees for for fees includes equipment and plant property, of cost The use. for Research activities relating to new energy sources include general research projects. These projects are intended to provide further knowledge on on knowledge further provide to intended are projects These projects. research general include sources energy new to relating activities Research Costs incurred for own plant investments are recognised in the balance balance the in recognised are investments plant own for incurred Costs development activities in connection with existing plants/energy sources. Research and development activities carried out in 2016 and 2015 are expensed expensed are 2015 and 2016 in out carried activities development and Research sources. plants/energy existing with connection in activities development income statement as incurred, while other expenses that are expected to to expected are that expenses other while incurred, as statement income impairment. Depreciation is charged from the time the assets are available available are assets the time the from charged is Depreciation impairment. decision is made by the management. the by made is decision as ongoing repair and maintenance expenses, are recognised in the the in recognised are expenses, maintenance and repair ongoing as equipment are recognised at cost less accumulated depreciation and and depreciation accumulated less cost at recognised are equipment As a main principle Statkraft starts capitalising costs when an investment investment an when costs capitalising starts Statkraft principle main a As amount of the relevant asset. asset. relevant the of amount The Group’s research and development activities are focused on investigating potential new energy sources and developing existing plants and technologies. technologies. and plants existing developing and sources energy new potential investigating on focused are activities development and research Group’s The Expenses incurred after the operating asset has been taken into use, such such use, into taken been has asset operating the after incurred Expenses In order to gain new knowledge and develop new methods within the fields of energy optimisation and preservation, the Group also performs research and and research performs also Group the preservation, and optimisation energy of fields the within methods new develop and knowledge new gain to order In Investments in production facilities and other property, plant and and plant property, other and facilities production in Investments SIGNIFICANT ACCOUNTING POLICIES Property, Note23 DEVELOPMENT AND RESEARCH Note22

2) 1) assetsTransferredfromintangible at01.01Balance 2016 million NOK Capitalised borrowing costsborrowing Capitalised Currency translation assetclasses Transferredbetween Disposals Accumulated depreciation/ impairment ondisposals impairment depreciation/Accumulated Derecognised on disposal ofa subsidiary on disposal Derecognised Impairment Depreciation Additions from businesscombinationsAdditions Balance at31.12Balance Additions Cost31.12 Book value 31.12 ofassetswithinfiniteusefullifeBookvalue 31.12 Accumulated depreciation and impairment asof31.12 andimpairment depreciation Accumulated Balance at31.12Balance See The category waterfall rights is new, comparative figures have been haverestated.been figures categorywaterfallrights isnew,comparative note 14for 2) continued furtherinformation effects plant ncing entry increasing the carrying carrying the increasing entry ncing ine basis over assets’ expected expected assets’ over basis ine

and o the cost price. price. cost the o equipment vities/projects. vities/projects. euaingnrtr aefl rde n under and bridges Waterfall generators Regulation -10 489 -10 24 544 24 24 220 24 34 709 34 24 220 24

1 371 plants 326 -501 -864 -655 75 -1 / n/a n/a

- - - - -

residual values are ass are values residual right t right the licence period. Estimated useful lives, depreciation methods and and methods depreciation lives, useful Estimated period. licence the substantial difference between owning the property and having a perpetual perpetual a having and property the owning between difference substantial maintenance round is scheduled. The depreciation period is adapted to to adapted is period depreciation The scheduled. is round maintenance is closely related to the physical plant. Statkraft’s view is that there is no no is there that is view Statkraft’s plant. physical the to related closely is the balance sheet over the period until the time when the next next the when time the until period the over sheet balance the Waterfall rights are presented as property, plant and equipment since this this since equipment and plant property, as presented are rights Waterfall -26 856 -26 calculation of annual depreciation. Periodic maintenance is recognised in in recognised is maintenance Periodic depreciation. annual of calculation have perpetual life if there is no right of reversion to state ownership. ownership. state to reversion of right no is there if life perpetual have useful economic lives. Residual values are taken into account in the the in account into taken are values Residual lives. economic useful ESTIMATES AND ASSUMPTIONS Land and waterfall rights are not depreciated, as the assets are deemed to to deemed are assets the as depreciated, not are rights waterfall and Land as partofthe areincluded which obligations,Estimatesofdecommissioning depreciation. inthe and isadjusted judgements,accounting expectations. Residual values are taken intoaccountin calculatingvalues aretakenexpectations.Residual dataand historicalExpectedusefullife isestimatedbasedonexperience, Property, plant and equipment is depreciated over its is depreciatedProperty,plantand equipment 27 948 27 25 590 25 52 446 52 25 590 25 Turbines, -1 927 -1 -1 414 -1

-760 1 215 507 -45

etc. o utilize the waterfall. the utilize o 16 50

- - -

plant’s carryingamount,aresubjectplant’s 18 477 18 17 620 17 18 299 18 17 620 17 17 620 17 rights -521 -337 -679 1 ------1) essed annually. annually. essed

buildings, roads,buildings, mountain halls, mountain quay facilities Properties, 19 865 19 19 358 19 25 142 25 19 358 19

1 105 1 -5 784 -487 -815 -645 STATKRAFT 284 -28 17 62 231 - - -

construction event of any changes to eventofanychanges -2 518 -2 -4 337 -4 -2 386 -2 3 575 3 8 727 8 4 639 4 7 025 7 4 639 4

AS -554 -418 Plants 139 -37 -58 to

n/a ANNUAL 96 24 - ongoing reviews.ongoing expectedusefullife.

-11 477 -11 11 646 11 11 877 11 23 354 23 11 877 11

651 117 645 Other REPORT -154 -855 -89 -84 14

- - - -

111 207 103 304 160 975 103 304 2016 -2 518 -2 -4 407 -4 -3 411 -3 -3 108 -3 -57 671

5 343 5 17 866 the -285 139 146 174 Total

24 -

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

- 3 5 5 8 Total 708 202 266 75 75 15 15 10 35 12 10 -704 3 685 9 160 6 775 -51 418 -3 289 -2 920 -1 875 111 207 162 625 111 207 18 744 99 199 10-20 35–40 25–50 20–25

perpetual

- -

14 -10 -861 -333 Other 144 692 719 441 1 644

-1 364 11 646 22 496 11 646 10 574 -10 850

- - - Depreciation Depreciation period (years) n/a -99 -66 under 266 Plants -202 8 727 8 727 1 065 6 249 -2 275 -10 300 -1 297 11 002 13 111

construction

- - 253 78 514 253 299 -138 -291 -770 -4 641 1 882 6 813

19 865 24 506 19 865 11 225 Properties, bridges and quay facilities mountain mountain halls, buildings, buildings, roads,

------rights 566 -163 2 195 Waterfall 18 477 18 640 18 477 18 477 15 716

- 2

etc. 552 182 1 806 1 856 1 189 -160 -309 -843 Properties, Properties, mountain halls, buildings, roads, bridges etc. Other - land - underground facilities - transformer (grid) - control - control equipment - roads, bridges and quays - operating centre - communication equipment - switchgear, - switchgear, high voltage (grid) - buildings (admin etc.) - other fixed - other fixed installations - furnishings and equipment - miscellaneous fixtures - office and computer equipment - vehicles - construction equipment - small watercraft - water cooling systems

-1 508 Turbines, 27 948 51 959 27 948 25 181 -24 011 generators ted to NOK 1763 million (NOK 1970 million in 2015). The investments

- - - - 7

76 n/a n/a -7 -629 160 123 654 844 plants

-9 478 24 544 34 022 24 544 23 392 Regulation 75 40 30 75 40 40 15 25 subsidiaries. disposal of 20-22 20–25 20–25 perpetual various assets various assets is provided been no materialbelow. There have changes in depreciation the s security to counterparties. Please see note 34 for more information. 1) Depreciation Depreciation period (years) useful economic lives of 2016201620162016201620162016201620162016201620162016 PLANT EQUIPMENTAND

the REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

effects PROPERTY, OF ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

ASASASASASASASASAS

disposal and relatedof accumulated is depreciation impairment to LIVES the Most Most of Balance Balance at 31.12 Accumulated Accumulated depreciation and impairment as of 31.12 Book Book value 31.12 life of assets with infinite useful Cost 31.12 Depreciation Additions Additions Additions combinations from business Transferred Transferred between asset classes Balance at 31.12 Impairment Derecognised disposal on of a subsidiary Accumulated Accumulated depreciation/ impairment on disposals Disposals Currency translation Capitalised Capitalised borrowing costs 1) Transferred Transferred from intangible assets NOK million 2015 Balance at 01.01 Note 23 continued Note schedules compared with previous years: A A more detailed specification of STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT - transformer/generator Regulation Regulation plants - riprap dams, concrete dams USEFUL INVESTMENTS IN 2016 - other dams - tunnel - tunnel systems Turbines, generators etc… - pipe trenches - generators (turbine, valve) - wind turbines (onshore) - other mechanical installations - wind turbines - wind turbines (offshore) - gas and steam - gas and steam generators The addition in 2016 of property, plant and equipment worth NOK 5343 million (excluding capitalized borrowing costs of NOK 139 million) and intangible Waterfall Waterfall rights - gas power plant - gas power plant transformers primarily relate to hydropower plants in Norway. Investments in new capacity amounted to NOK 3736 million (NOK 7797 million in 2015). The largest projects assets worth NOK 55 million, consisted of both investments in new generating capacity, maintenance investments, other investments and reclassification of were hydropower plants in Norway and Albania and wind farms in the UK (Dudgeon). ASSETS PLEDGED AS SECURITY TO COUNTERPARTIES assets (NOK 39 million). Maintenance investments and other investments amoun Statkraft has pledged property, plant and equipment a CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS

assess the accounted Amortisation and impairment ofexcess value Amortisationand impairment Currency translation Items Currency translation Items Judgement is required Judgement Co-owned power plants, which are those power plants where Statkraft owns SIGNIFICANT ACCOUNTING POLICIES Note24 1) 01.01balance Opening million NOK 2015 2) 1) 01.01balance Opening million NOK 2016 key elementsinthe company are recognised in the Group’s consolidated financial statement only Shareofprofits Dividend Shareofprofits Closing balance 31.12balance Closing Dividend which unamortised waterfallrights unamortisedwhich Of waterfallrights unamortisedwhich Of Capital increase Capital Closing balance 31.12balance Closing increase Capital withthird partyowners. Amortisation and impairment ofexcess value Amortisationand impairment Based on size and complexity, the following associated companies and joint ventures are considered material: considered are ventures joint and companies associated following the complexity, and size on Based Excess value 31.12.Excessvalue Investment/sales Investment/sales Excess value 31.12.Excessvalue shares regardless of whether they are operated by Statkraft or one of the to the extent of other parties interest in the joint operation. carrying Hence, the are not the sole off-takers of the production and not responsible for the other owners, are recognised in accordance with the proportionate value of Statkraft’s remaining ownership is booked at continuity. In addition obligation held by the entity. ACCOUNTING JUDGEMENTS consolidation method as joint operation. changed contractual rights and obligations relating to the underlying asset or Gain/loss from a transaction where the investment changes from being debt and changes in the shareholders agreement might lead to a shift in the classified as a joint operation to be classified as a joint venture or associa acco The in SN animpairment Therehasbeen The unting method. For Statkraft, this is expected to apply if the participants shares in HLC presented in other has been impaired, see notein otherhasbeen shares inHLCpresentedimpaired,14. shares in Malana and Allain Duhangan presented in other has been impaired, see noteotherhas presented been 14. Duhangan impaired,and Allainin shares inMalana recorded in other comprehensive income in othercomprehensive recorded recorded in other comprehensive income in othercomprehensive recorded degree ofcontrolallfacts degree for as subsidiary, joint operation, jointventure orassociate. jointoperation,as subsidiary, Associatesand jointarrangements 1) assessment effects effects to The assess the degreeofcontroloverthe to Powerand whetherthe classification of investmentsinprojects classification and circumstances are evaluated. areevaluated. and circumstances related BKK 2) 1) investment should be investmentshould investee isoneof investee to a hydropower plant in Panama, in see hydropower Panama, note planta 14. Renovávei Desenvix -1 484 -1 Energias

1 567 -11 -168

-4 S.A 19 80

To ted s - - - -

the

77 BKK BKK

-200 -224 1 818 2 197 5 272 4 928 5 272 1 818 5 656 2 182 424 138 208 335 -14 -10 -14

AS AS 86

- - - -

override and the shareholders between and agreementsshareholders entity, otherfacts legal the 11 aremet, IFRS isthe in thisconsideration judgement give Statkraft agreements produce power andwherethe produce order to other including arrangement, froma jointarising or ajointventure.Rightsandobligationsoperation is ajoint whethera jointarrangementin assessing is required Judgement direct For plans andbudgets. adjustbusiness is performedoperator,a carefulanalysis technologies, in additiontechnologies, defined In the The power produced, as well as being responsible as being as well power produced, reflectother facts the has rights When Statkraft operations. oflong termfinancing order to investmentsare the arrangement isajointventure.arrangement agreements which requires unanimous consentfrom unanimous which requires agreements decisions about relevant activities that significantly affect aboutrelevantactivitiesthatsignificantlydecisions Energi AS Energi AS Energi 2 043 2 117 4 3 848 3 117 4 4 040 4 the 1 978 1 -323 -300 classify Agder Agder 314 207 596 314 the -66 -14 -66 its

relevantactivitiesof conclude on the conclude 82 76 legal from legal - - - - - relevantactivities andvaluedriversfor

the andcircumstances. joint arrangement. Power AS Power AS investment is classified as a investmentis classified 3 084 3 2 645 2 084 3 2 930 2 for the and circumstances, such as agreements betweenand circumstances,suchasagreements -189 elements that require highest degree ofjudgement.highestdegree elementsthatrequire 372 130 -62 a jointoperation to 29 company, are normally classified as joint classified company,arenormally SN SN 6 the an individual assessment per investment to assessmentperinvestment an individual ------degree ofcontrol, degree

facts powerto owners are committed to ownersarecommitted the investments,and the and circumstances, are evaluated in and circumstances,areevaluated nryLd InvestLtd. EnergyLtd. InvestLtd. EnergyLtd. STATKRAFT Offshore Offshore degree of flexibility and power to andpower offlexibility degree 2 399 2 1 980 1 399 2 2 005 2 to For -460 direct For 296 125

Scira Scira the 67 to -1 -1 is the investmentswhere Statkraft to investmentsstructuredthrougha ------whether net assetsof exist.Entitiesestablished

the has systematically Statkraft for

AS Wind UK Wind UK

relevantactivities.A key settlingofshort termand jointarrangement

1 067 1 067 each of 125 971 853

-204 -32 -15 ANNUAL

the -5 -2 -4 11 60 46

8 ------other criteria’s in othercriteria’s operator operator purchase allthe purchase

the the 1 052 1 022 1 1 296 1 416 1 3 448 3 3 088 3 448 3 3 954 3 its

416 281 138 508 REPORT te Total Other Other partners -107 -377 -54 -28 arrangement, investee,must main typeof 57 19 28 the -2 -5 -7 returnof 19 388 19 19 027 19 388 19 19 438 19

. 1 127 1 3 184 3 154 3 5 596 5 622 5 1 184 1 -1 217

2016 611 138 508 204 445 to Total

-545 -534 -970 -501 -137

to 99

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 14 14 21 21 311 406 220 297 227 370 1 711 2 448 3 296 4 362 Wind Wind UK Wind UK 42.60% 50.00% 30.00% 43.10% 49.00% 50.00% 50.00% 50.00% 40.00% 50.00% 51.00% 50.00% 90.00% 50.00% 50.00% 50.00% Voting share 60 Scira Scira Scira Scira 256 256 110 110 221 573 886 a joint a joint venture. 1 390 1 705 7 141 9 759 Offshore Offshore Offshore Offshore 11 627 14 783 to Energy Energy Ltd. Invest Ltd. Energy Ltd. Invest Ltd. companies’ operations also sell consultation also sell consultation and the Higuera of NOK 93 million, Group’s activities includeGroup’s activities 72 00% 272 681 229 162 267 -315 -290 1 821 1 978 8 226 9 799 1 991 1 401 The 50. 42.60% 50.00% 30.00% 43.10% 49.00% 50.00% 50.00% 40.00% 50.00% 51.00% 50.00% 90.00% 50.00% 50.00% 50.00% 100% of 100% of Power AS Power AS 11 million decommissioningand a bank Shareholding NOK consolidated financial statements. consolidated financial statements. Companies 99 Hidroelectrica Hidroelectrica La

570 to Agder Agder 1 178 1 516 7 973 8 486 9 431 5 071 4 747 3 561 4 045 figures apply to 10 554 16 526 14 668 Energi AS SN Energi AS SN UK.

Group is a leading commercial investor and developer of The was reclassified was reclassified from a joint operation AS AS 846 974 Ltd 1 455 1 013 4 240 3 958 9 505 7 965 4 493 5 915 1 263 2 232 BKK BKK UK. NOK 2 million, Scira

19 862 18 697 equity method equity method in the VENTURES pledges, pledges, guarantees and obligations. 78 Stockholm Kristiansand Himachal Pradesh London New Dehli New Dehli Registered Registered office Santiago Santiago London Stockholm Oslo Stockholm New Dehli Oslo Stockholm London note 34 for See COMPANIES significant significant associated companies. The

proportionate consolidation method as indicated in IFRS 11. addition addition bank guarantees there are related for core activities activities being core production, and transmission trading well of electric power, as as other NOK 385 million, Hidroelectrica La Higuera of NOK 345 million, Dudgeon of NOK 2770 million, NOK 3 million, Triton Knoll of In the its ASSOCIATES AND JOINT Scira of core activities activities being core production, and transmission sale of electric power. BKK to NOK 85 million. ASSOCIATED its offshore Sheringham offshore wind farm Shoal in the NOK 32 million. SIGNIFICANT

land-based wind farms Alltwalis, land-based farms Alltwalis, wind Baillie Burn in theand Berry IN SIGNIFICANT 2016201620162016201620162016201620162016201620162016

Ltd. NOK 46 million, Dudgeon of S.A Pte FOR

(Scira) owns the OPERATIONS AND ASSOCIATES company's debt company's debt finalised in May 2016, Dudgeon Offshore Wind S.A REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

Ltd. ACTIVITIES Berry Burn Wind Farm of Farm of Berry Burn Wind

renewable energy operations renewable operations energy in emerging in Southeast Asia, Africa and Central markets America. the Ltd JOINT

IFRS 12. THE to has operations in Southern operationshas Norway, with in Southern AS Ltd. the(WUKI) owns ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL Energy OF

AS ASASASASASASASASAS INFORMATION AB

AS has its NOK 41 million and Triton Knoll of BLP Solar Solutions has operations operations has Norway, with in Western VENTURES, VENTURES Energi a restructuring a restructuring of the

Kontakt AS Offshore Offshore comprehensive income comprehensive income Ammerån AB Byske AB Edsox Röan AB following table presents summarised financial information Power

Power AS Shares Shares in companies classified as joint ventures and associates are recognised using the Due to Total JOINT classified as joint operations are treated in accordance with Net Net profit Net profit Total Gross Gross operating revenues Gross operating revenues in accordance with The Long-term Long-term liabilities Long-term liabilities Short-term Short-term liabilities Short-term liabilities FINANCIAL FINANCIAL guarantee guarantee related Non-current Non-current assets Non-current assets BKK AS Hidroelectrica Hidroelectrica Confluencia La of Hidroelectrica Hidroelectrica La Confluencia Grønn Dugar Hydro Power Dugar Hydro Power Dudgeon Offshore Dudgeon Offshore Wind Ltd. STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Allain Allain Duhangan Hydro Power Ltd. Name JOINT NOK million Current assets 2015 contracting services, and offers broadband,and offers customers contracting services, district heating and joint metering of electricity. NOK million Current assets 2016 Note 24 continued Note DESCRIPTION Scira Offshore Scira Offshore Energy Ltd. Malana Power Company Ltd. HPC Hidroelectrica Hidroelectrica La Higuera Agder Silva Green Silva Green Fuel HPC energy-related energy-related services. SN SN HPC production, production, and transmission trading well of electric power, as as other energy-related services. Triton Knoll Offshore Triton Knoll Offshore Wind Farms Ltd. Statkraft HPC hydropower in emerging projects markets. Wind UK Invest Scira Statkraft has pledged parent company guarantees Forewind Forewind CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Harrsele Kraftwerksgesellschaft Herdecke,GmbH&Co.Kraftwerksgesellschaft Naturkraft Sira-Kvina KraftselskapDASira-Kvina WindUKInvestLtd. Agder EnergiVindDA Statkraft DA FosenVind Ltd.Forewind Aktieselskabet TyssefaldeneAktieselskabet JOINT Name GmbH&Co WindparkKollweiler Name Note24 continued Passos Maia Energética S.A. PassosMaia Energética VikingVarme Istad Nape Kraftverk SkagerakElektro FosenVind share of Energiog Miljøkapital BKK Sima AgderEnergi ASSOCIATES Vikfalli Stegaros Solbergfoss Volgsjöfors Svartisen Ulla-Førre Svorka Røldal-Suldal Tyssefaldene Folgefonn Aurlandsverkene ASSETS Selfors Forsmo Båtfors Name None of 7) 6) 5) 4) 3) 2) 1) has appropriation right has appropriation Statkraft APPROPRIATION Grytten Gäddede Kobbelv Kraftverkenei Orkla Statkraft’s Statkraft Statkraft Statkraft’s Statkraft’s Statkraft The

shareholder’s agreements indicate jointcontrol.indicate agreements shareholder’s AS AS OPERATIONS AB the the controls71.4%ofthe ofbutcontrols ofSolbergfoss, owns33.3% 35.6% of owns8.74% AS total total total 4) 7) companies have observable marketvalues inthe haveobservable companies revenues, expenses, assets and liabilities. Overview of appropriation rights:Overviewofappropriation assets andliabilities.revenues,expenses, AS 5) 1) AS AS 6) Kraft shareholding is 73.48% of which Skagerak Energi is 73.48%ofwhich shareholding Skagerak Energi Skagerakis 100%ofwhich shareholding Energi Energiis 46.7%ofwhich shareholding Skagerak AS AS

AS RIGHTS AS the 2) shares inRøldal-Suldal s in power plants also owned by other players. These rights are treated as joint operations and recognised withand recognised by otherplayers.Theserightsaretreatedasjointoperationsalso owned inpowerplantss 3) production fromproduction 1) 1) the Tysso Kraft KG which in turn owns 54.79% of turnin owns 54.79% of AS, which power plant. II the production. AS’ AS’ AS’ shareholding is 14.94%. shareholding shareholding is14.6%.shareholding shareholding is 1.49%. shareholding formoflistedmarketprices orsimilar. Oslo Vännäs Hagen Tysvær Düsseldorf London Registered officeRegistered Kristiansand Sirdal London Tyssedal officeRegistered Porsgrunn Grimstad Caçador CityCaçador Porsgrunn Trondheim Molde Skien Bergen Kristiansand Askim Eidfjord Suldal Kvinnherrad Suldal Odda Vik Tinn Stockholm Meløy Rennebu Surnadal Aurland Rauma Stockholm Sørfold 79 the Røldal-Suldal plants. Statkraft’s indirect indirect shareholding in Shareholding Shareholding STATKRAFT 100.00% 50.10% 50.57% 50.00% 50.00% 20.00% 51.00% 62.00% 46.70% 25.00% 60.17% 50.00% 49.00% 49.00% 50.10% 49.00% 50.00% 35.00% 49.90% 45.50% 33.33% 65.00% 73.48% 60.17% 88.00% 50.00% 73.10% 70.00% 48.60% 50.00% 88.00% 70.00% 82.50% 4.79% 7.00%

AS the

power plant is thus 4.79%. power plant ANNUAL Statkraft’s

REPORT Voting share Voting Voting share Voting Shareholding 100.00% 50.10% 50.57% 50.00% 50.00% 20.00% 51.00% 62.00% 46.70% 25.00% 60.17% 50.00% 49.00% 49.00% 50.10% 49.00% 50.00% 35.00% 49.90% 45.50% 33.33% 65.00% 73.48% 60.17% 88.00% 50.00% 73.10% 70.00% 48.60% 50.00% 10.60% 88.00% 70.00% 82.50%

4.79% 7.00% 2.20% 6.64% 2016 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 316 845 529 42 2015 2015 335 257 520 2 812 5 903 2 477 1 398 7 617

7 874 2 642

4 974 10 675 realisable realisable 2015 68 169 100 875 298 578 1 044 Recognised value Cost price price 658 2 499 1 842 Cost Cost g to the book value of the certificates. Any Any certificates. the of value book the to g

- 2016 338 ing certificates, the end-user business purchases purchases business end-user the certificates, ing 99 2016 8 623 8 961 1 883 6 740 381 certificates held for sale are classified as inventory inventory as classified are sale for held certificates 1 607 1 178 7 335 1 226 2

10 219 2016 60 175 115 538 2 653 2 478 1 940

Recognised value the liability is measured accordin measured is liability the net realisable value. If the certificates are held to settle the emission liability, liability, emission the settle to held are certificates the If value. realisable net Group’s obligation for deliver for obligation Group’s the ordinary course of business and are recognised at the lowest of cost and and cost of lowest the at recognised are and business of course ordinary the used to settle the emission liability in the end-user business. To meet the the meet To business. end-user the in liability emission the settle to used Other inventory is accounted for at the lowest of cost price and net and price cost of lowest the at for accounted is inventory Other (first in, first out) method. out) first in, (first Green certificates and CO and certificates Green recognised as Inventory in accordance with IAS 2 as they are held for sale in in sale for held are they as 2 IAS with accordance in Inventory as recognised balance sheet date. sheet balance less expected transaction cost. transaction expected less goods, cost is allocated in accordance with the weighted average or the FIFO FIFO the or average weighted the with accordance in allocated is cost goods, and are measured at net realisable value. Net realisable value is sale price price sale is value realisable Net value. realisable net at measured are and the certificates in the market. El-certificates purchased in the market are are market the in purchased El-certificates market. the in certificates the obligation not settled is measured at fair value of the el-certificate at the the at el-certificate the of value fair at measured is settled not obligation Cost is allocated to specific inventories where possible. For exchangeable exchangeable For possible. where inventories specific to allocated is Cost amount. 80 realisable realisable value: net and

price cost cost note 16. 1) lowest of cost price and net realisable value of certificates are accounted for in a similar similar a in for accounted are certificates the 2016201620162016201620162016201620162016201620162016 2

lower

realisable value: non-current financial assets REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

cash collateral to carryforwards associates of production and net realisable value. The change in value value in change The value. realisable net and production of ing the grants. Thus, the certificates are accounted for at fair fair at for accounted are certificates the Thus, grants. the ing ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL Receivables Inventories Other

sale: ASASASASASASASASAS measured at the at netmeasured

for

associates tax

inventories are measured at receivables and securities shares amount includes net pension asset. See

The Total Spare Spare parts Other Total Total Inventories Carbon quotas Electricity Electricity certificates NOK million Inventories eligible for receiv for eligible value at the time time the at value one accounting period, the receivable are recognised at the lowest of fair fair of lowest the at recognised are receivable the period, accounting one to be likely that Statkraft meets the conditions set out by the government and and government the by out set conditions the meets Statkraft that likely be to the period from the el-certificates are awarded to they are received exceeds exceeds received are they to awarded are el-certificates the from period the recognised as grants conditional to own production of power. It is considered considered is It power. of production own to conditional grants as recognised certificate is awarded. Certificates are classified as inventory when awarded. If If awarded. when inventory as classified are Certificates awarded. is certificate Grants and Disclosure of Government Assistance. Such certificates are are certificates Such Assistance. Government of Disclosure and Grants businesses. El-certificates received from own productions are as such not not such as are productions own from received El-certificates businesses. grant and are accounted for according to IAS 20 - Accounting for Government Government for Accounting - 20 IAS to according for accounted are and grant value at the time of production. The asset is classified as a receivable until the the until receivable a as classified is asset The production. of time the at value is recognised as sales revenue. CO revenue. sales as recognised is Generation- and end-user business are organised as two separate lines of of lines separate two as organised are business end-user and Generation- manner. Natural Natural resource tax Prepaid Prepaid Total Of which interest-bearing Short-term Short-term loans to Other Total STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Total NOK million Accounts receivable Receivables related Note Note 27

Green certificates, including el-certificates, are considered as a government government a as considered are el-certificates, including certificates, Green POLICIES ACCOUNTING SIGNIFICANT Note Note 26 1) Available NOK million amortised cost: Measured at Loans to Other Note 25 Note

Bonds and other long-term long-term receivablesBonds and other CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS used for the current cash sett cash current the for used to the off-set of different contracts, and such off-set rights will actually be be actually will rights off-set such and contracts, different of off-set the to balance sheet. Derivatives are presented net provided there is legal right right legal is there provided net presented are Derivatives sheet. balance with respect to positive and negative values are presented gross in the the in gross presented are values negative and positive to respect with separate lines in the balance sheet under assets or liabilities. Derivatives Derivatives liabilities. or assets under sheet balance the in lines separate Recognised as lossfor Recognised Total Other - Non-current assets -Non-current this: Of Total ratederivativesCurrency andinterest -Currentliabilities -Long-termliabilities assets -Non-current this: Of Total Customers Salesand trading SIGNIFICANT ACCOUNTING POLICIES Note28 as lossfor Recognised Total Other Accountsreceivable million NOK 2015 Accountsreceivable million NOK 2016 Maturityanalysis of Note27 continued -Currentliabilities Energyderivatives million NOK - net Derivatives Total assets -Non-current this: Of Total interestrate andcurrencyswaps Combined rate contractsForwardexchange Interestrateswaps million NOK Currency Total Generation million NOK on recognised are arrangements hedging to relating not Derivatives Total -Long-termliabilities -Currentassets -Currentassets -Long-termliabilities -Currentassets -Currentliabilities receivables receivables interest rate derivatives -net interest ratederivatives and Derivatives

position receivables

the the year year group lement during the terms of the contracts. All All contracts. the of terms the during lement

position Not yetdue Not Not yetdue Not

9 567 9 979 5 608 6 787 2 781 4 372 81 recognised in the income statement as currency effects and ot and effects currency as statement income the in recognised Changes in fair value of currency and interest rate derivatives are are derivatives rate interest and currency of value fair in Changes purchases, respectively. purchases, recognised in the income statement as sales revenues and energy energy and revenues sales as statement income the in recognised balance sheet. Changes in the fair value of energy derivatives are are derivatives energy of value fair the in Changes sheet. balance energy contracts traded via energy exchanges are presented net in the the in net presented are exchanges energy via traded contracts energy items, respectively. items, Receivables overdueby Receivables overdueby Receivables

Less than Less than 90 days 90 days 90 420 419 218 400 201 20

More than More than 90 days 90 days 90 294 279 163 131 200 79 -4 090 -4 -5 137 -5 -1 805 -1 047 -1 -1 506 -1

2 742 2 063 2 879 2 742 2 879 5 829 2 879 6 637 3 047 1 439 1 608 2016 2016 2016 381 216 845 808 -137 -299 -29 -137 -137 -733 STATKRAFT Receivables overdue Receivables overdue Receivables and impaired and impaired and

AS

-63 -15 -49 ANNUAL -2 -2 -

REPORT her financial financial her 10 219 10 10 675 10 -2 084 -2 -3 427 -3 -3 736 -3 084 -2 961 -1 231 -2 -2 084 -2 -5 388 -5 -2 862 -2

Total 7 335 2 883 2 201 2 150 5 903 4 285 5 753 4 285 1 164 4 772 4 285 2 201 6 651 4 675 2 833 1 841 Total 2016 2015 2015 2015 970 275 898 -875 -129 78 5

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

- 32 32 82 Sum 2015 2015 2015 2015 -753 452 502 550 2 125 9 166 9 668 9 056 9 435 7 501 8 506

-1 594 -1 108 21 228 other of name

2) - 82 371 9 166 6 936

-1 594 -1 090 Statkraft has on interest Other provisions

1) - - - 82 49 49 20 2016 2016 2016 2016 -18 566 502 473 566 2 247 6 936 7 288 7 308 9 446

19 195 Each year, concessionary sales are made to local local to made are sales concessionary year, Each

Decommissioning 16 21 cash deposit deposit is classified cash as other receivables. For Note the net unrealised gainsthat and losses table below at year end from shows net payments g the obligations under the contract exceed the economic benefits benefits economic the exceed contract the under obligations the g the for he case of certain concessionary power contracts, agreements have been been have agreements contracts, power concessionary certain of case he t meetin disclosed in note 34. note in disclosed an ongoing basis in accordance with the established concessionary price. In In price. concessionary established the with accordance in basis ongoing an capitalised value of future concessionary power obligations is estimated and and estimated is obligations power concessionary future of value capitalised (Stortinget). The supply of concessionary power is recognised as income on on income as recognised is power concessionary of supply The (Stortinget). presented under this line item. line this under presented concessionary contracts are not included in the financial statements. The The statements. financial the in included not are contracts concessionary authorities at statutory prices stipulated by the Norwegian Parliament Parliament Norwegian the by stipulated prices statutory at authorities liabilities. Bank deposits, cash and similar from joint operations are also also are operations joint from similar and Bank cash liabilities. deposits, difference between the spot price and the concessionary price. Such Such price. concessionary the and price spot the between difference Concessionary power Concessionary collateral) are recognised in the balance sheet as either receivables or or receivables either as sheet balance the in recognised are collateral) made regarding financial settlement in which Statkraft is invoiced for the the for invoiced is Statkraft which in settlement financial regarding made expected to be received from the contract. the from received be to expected daily cash management daily cash management holds no bank accounts and in the Statkraft, service providers cash deposit is classified service providers is classified cash deposit cash and cash equivalents. as (cash activities financial with connected derivatives for settlements Market counterparties: 82 to trading counterparties as security to Provisions are are Provisions

exchange clearing service. pledged to as security counterparties year 2016201620162016201620162016201620162016201620162016 notes 27 and 31.

the cover margin calls, related cover margin calls, related See to year the characteristics thecharacteristics of REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT 1)

other balance sheet items Obligations arising under onerous contracts are are contracts onerous under arising Obligations

financial financial derivatives 1) to/from 2) ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL Provisions Cash and cash equivalents and cash Cash

for cash and cash equivalents ASASASASASASASASAS of

tax y of payment is very low. Provisions are recognised in an amount amount an in recognised are Provisions low. very is payment of y value movements provisions

service provider is not a financial institution, service provider is not a financial part of Statkraft’sinstitution, not provisions following amounts in cash and cash equivalents are pledged as security the Includes NOK 110 million NOKand in 420 million respectively from 20162015 operations. and companiesas joint reported probabilit the conditions will be stated in the notes of the financial statements unless the the unless statements financial the of notes the in stated be will conditions the exist where the Group has a contract under which the unavoidable costs of of costs unavoidable the which under contract a has Group the where exist must also be possible to reliably measure the provision. With lower probability probability lower With provision. the measure reliably to possible be also must recognised and measured as provisions. An onerous contract is considered to to considered is contract onerous An provisions. as measured and recognised Classification Classification cash deposit of activities, activities, depends on the If Onerous contracts Onerous event, and where it is more than 50% probable that an obligation has arisen. It It arisen. has obligation an that probable 50% than more is it where and event, obligation at the balance sheet date. sheet balance the at obligation terms at the time of acquisition. The item also includes restricted cash. cash. restricted includes also item The acquisition. of time the at terms only recognised where there is an existing obligation as a result of a past past a of result a as obligation existing an is there where recognised only that is the best estimate of the expenditure required to settle the present present the settle to required expenditure the of estimate best the is that Cash and cash equivalents include certificates and bonds with short residual residual short with bonds and certificates include equivalents cash and Cash Other Currency rate Currency rate effect Decommissioning Total Provisions booked during Other Total Cash collateral Cash collateral made to/fromcomprises mostly of payments rate rate swaps, combined swaps and forward interest rate and currency exchange contracts. The Pension Pension liabilities STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Reclassifications Reclassifications Booked value 31.12 Booked Booked value 01.01. Provisions used/reversed during Total 2016 NOK million Deferred Provisions, contingent assets and contingent liabilities contingent and assets contingent Provisions, Note Note 30 POLICIES ACCOUNTING SIGNIFICANT Money market funds, certificates, promissory Money market funds, certificates, notes, bonds counterparties, who will eventually be repaid. NOK million Cash collateral NOK million Deposit account in connection sales on energy exchanges with power 1) Book The NOK million Cash and cash deposits POLICIES ACCOUNTING SIGNIFICANT Note 29 Note CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Debt to Debtconnected debt Firstyear’s instalmentonlong-term Short-terminterest-bearing million NOK Note31 in Turkey. In 2) Sweden. power plants in 1) Bookedvalue pr31.12 Other sheetitems from otherbalance Reclassifications Currency rateeffect during used/reversedProvisions during booked Provisions Bookedvalue 01.01. 2015 Note30 continued 1) Debt Indirecttaxespayable Accountspayable million NOK Note32 Total Creditfacilities Other Other Debt Long-term Total The Total Total loans. andotherdebt Externaldebtin subsidiaries markets Debtissued innon-Norwegian Bondsissued inthe Of equity inconnection instruments. are liabilities with provisions Includedinother has the arisewhenStatkraft typically provisions Decommissioning 2016, otherinterest-freeliabilities Group’s net repayment in 2016 amountedGroup’snetrepaymentin 2016 interest-bearing debt interest-bearing to to to movements interest-freeliabilities short-termdebt

the Statkraft Statkraft Statkraft The 720 million. is NOK provision interest-bearing debt provision was reduced due to was reduced provision Interest-bearing debt Interest-bearing Other SF SF SF cash collateral Norwegian market Norwegian interest-freeliabilities the 5931 million are accrued interest-free liabilities 2016.in interest-freeaccrued 5931 million are liabilities NOK 1) year debt the year The payments and currency effects payments and changes in changes in to

NOK the provision is related provision 2990million. right to time-limited concessions, and is mainly related to related is mainly time-limited concessions, and of 174 million. NOK 174 Other In to addition to addition an expense of changes are mainly explained by the explained are mainly changes 83 In this, aprovision of 2015 this amounted 2015 105 million due NOK 105 789 million was made in 2015 due million was made in 2015 NOK 789 to

3952 million. NOK 3952 to Decommissioning Decommissioning a prolonged process gas power plants in Germany and plantswind in gas Germany power and changes in exchange rates on foreign currency ratesonforeign in exchange changes 11 918 11 40 293 40 886 31 21 673 21

6 126 1 730 9 211 1 408 8 407 2 762 7 050 502 974 304 569 400 2016 2016 179 342 -27 2

- - - 8 STATKRAFT 1)

to find an acceptable findsolution an provisions Other

AS to

7 620 9 166 the 2151

-604 ANNUAL situation in Turkey. -1 - - 2)

REPORT 10 781 10 44 606 44 410 37 27 166 27

7 962 4 508 1 000 9 668 2 560 1 362 6 857 1 614 7 196 2 794 7 050 2016 2330 400 -631 2015 2015 Sum 11 63 8 2 -1 - FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

to the

2015 is -26 the 255 281

claim. invoiced (NVE) AS Group's settle the SKER, the Statkraft owner of opinion that third quarter of fiscal years pension fund’s It is at this stage the SVP of Corporate

the the

for on SKER. assessment. alleged scheme, related case was was referred aggregate on the Statkraft theis Group is of effects returns returns table below is recognised in CEO and the 107 million in the

Gulating Gulating Court of Appeal. the Group. The this this background, Statkraft initiated an NOK the On

53 view, there is no legal basis for 2016 -10 -63 income tax Resources and Energy Directorate Energy Resources and Directorate actual actual invoicing is adjusted. for S.A. which subsequently changed name to

the tax four four main pension funds in Brazil and Water Statkraft’s

authorities authorities in the in 2009 and now owns 18.7% and 2010, of In liabilities. Board of Directors, Board of Directors, Tax tax uncertainties litigation, of the Norwegian revenue ceiling, a shortfall of revenue arises, and if company has contacted company has contacted Brazilian authorities. contract. contract. the and resource rent the authorities authorities regarding cases could have potential negative Norwegian potential potential tax notice was of a preliminary nature with a number of reservations, notice was of a preliminary with a number of reservations, and it nature for Statkraft estimated and expensed The

pension funds and companies and individuals related to 84 hydropower plant. This conclusion would imply that the investigation investigation termination termination of the outcome of the Høy won against the the

the be probable (more likely than not) that an economic outflow will be required to to balance to SA in Belgium. tkraft, Sønnå

Sta

revenue ceiling determined by the Brazilian company Desenvix Energias Renováveis fourth quarter of 2016. predict if invoiced lower amount is than closing to the the financial outcome of these matters. additional property tax, income tax the FUNCEF, which invested in Desenvix (now SKER) company for plant

it Group assesses past years, Brazil has experienced several severe corruption cases. and resource rent tax. operations, the estimate estimate certain issues connected grid subsequent years to Statkraft Treasury Centre pension funds invested, pension funds invested, as wellas any other individual who may have been involved in the to subsequent years

to taxable ownership of the to Over Over any reassessment, any reassessment, and has made no provision pension funds. Hydropower Oslo District Court against members (current and previous) of the

2016201620162016201620162016201620162016201620162016 subsidiary acquired Based on thein 2015.

relation AS received a notice of reassessment from Norwegian accounts based on actual on actual accounts based invoicing. Accumulated excess/shortfall of revenueshown in the as the Høy have the

Cetin hydro power project in Turkey was terminated Cetin hydro power project in Turkeyterminated in April 2016. There are a number of issues still was unresolved in relation to It is at this stage not possible distribution to AS in SA outcome could have potential outcome could have potential negative financial effects. conclusion which can lead to the quantify quantify and potential There has been no development exposure. in 2016 that has an impact on Statkraft's Appeals Selection the Committee in ceiling, excess revenue arises. Excess/shortfall ceiling, excess revenue of revenue arises. Excess/shortfall will out over time as the even REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

to the for the investment investment in the Sønnå

SKER. the its legal which thedisputes, in of

revenue revenue to Statkraft purposes. For of ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL Contingencies disputes and

historic property tax, historic property tax, income tax tax this this stage it is not possible predict predict if to information currently available, these matters will be resolved without any material adverse effect individually or in the ASASASASASASASASAS to At for

ownership

actuallyamount invoiced as grid rental charges. If Group is involved in a number of legal proceedings in various forms. While acknowledging the civil works contract Brazilian Federal Prosecutor is currently investigating Brazilian investigating Federal Prosecutor is currently potential crimes committed by representatives of the contractor contractor has filed a writ in the obligation, obligation, provisions have beenbased on management’s made best estimate. Supreme Court by the 16 December 2015 Statkraft 25 August 25 August 2016 AS Saudefaldene, an external 13 July 2015, Statkraft acquired a controlling interest in the e distribution grid business, differences distribution between differences can arise grid business, historical investments made by the 2008-2014 related Statkraft Statkraft Treasury Centre On Net Net excess/shortfall of revenue financial financial position. the future future periods. On Cumulative Cumulative revenue shortfall transferred amount amount is higher than Revenues are recognised in the is therefore not possible Taxable Th STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT

DISPUTES The NOK million Cumulative revenue excess transferred Excess/shortfall CONTINGENCIES In Note 33 Note based on the disagrees that disagrees that there is a legal forbasis Turkey The Saudefaldene Saudefaldene was found not to and the one of one of these pension funds. Additionally, a civil lawsuit has been filed against termination. The representatives representatives of companies which thein to investments, investments, including Communication Communication of power plant power plant Statkraft disagrees with the not not possible Statkraft Energias Renováveis (SKER). internal investigation related 2016 related 2016 related Brazil On CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS GUARANTEES Total Total Other Guaranteesin NASDAQ Parentcompany guarantees 1) Parentcompany guarantees million NOK The PLEDGES Note34 CONTRACT OBLIGATIONS Total Other Under certainenergy owned localauthoritiesandpublicly circumstances million. bythe debtraised are entitledcompanies granted permission to grantedpermission the to The Statkraft Group has the following off-balance-sheet obligations: Whereof the

in return Statkraft acquisition ofsuch rights,the acquisition

Grouphas the Statkraft guarantees in subsidiaries guarantees guarantees in Statkraft guarantees    In addition, other subsidiaries haveatotal othersubsidiaries addition, A license agreement relating to the development, construction and operation of one hydropower plant which involves a responsibility estimated at NOK 1790 million. Obligation regarding service agreements and similar related to gas power plants of NOK 857 million. A power purchase agreement with a 15 year horizon. The purchase obligation is NOK 1313 million. most material guarantees are regarding energy purchase energy ofare regarding mostmaterialguarantees Pledges, guarantees and obligations guaranteesPledges, local authorities underthisschemetotalslocal authorities for pledge paying a shareof paying to and otherenergyexchanges Stockholm AB OMX a shareof following off-balance-sheet guarantees: off-balance-sheet following AS 1) the local authorities/companies have been localauthorities/companies power plantassecurity. the output from power plants belonging outputfrompower plants the constructioncosts. of NOK 1460 million in 1460million The NOK mortgage 14 895 million and liabilities million 14 and 895 liabilities NOK To 375 finance 85 2016. 31 December Nofundsweredrawnat 600 million. ata maximumofNOK facilitiesamounting to assetsin Statkraft Statkraft mainly in othersubsidiaries,million assets.pledged The Group recognises concessionary power as normal buying and selling in Energi Statkraft As of around 82,1 GWh and an average price from the Ministry of Petroleum accordance with stipulated concessionary power prices upon delivery, regardless of whether physical the delivery settlement or takes place upon and Energy of 11,42 øre/kWh. For the remaining contracts with financial financial settlement. Concessionary power contracts are normally regarded settlement, the estimated fair value at 31 December 2016 is around NOK as indefinite. The parties can however agree on financial settlement for a CONCESSIONARY POWER CONTRACTS 852 million. period of time. At the end of 2016, ensure compliance of long term debt. Fjordkraft has available overdraft oflong termdebt.Fjordkrafthasavailable ensure compliance of 31 December 2016, of31 December to suppliers of suppliers totalledAS As IH of 31 December 2016, of31 December the contracts with financial settlement had a total volume to InvestGroupconsistofproperty,plantandequipment NOK 1000 million, being pledged in tradereceivables pledged being 1000 million, NOK 3million. 267 the 5016 million, and atotal million,5016 NOK 27 333 27 21 663 21 23 429 23

carrying valueof 1 788 3 904 1 266 1 766 850 2016 STATKRAFT the

IH carrying valueof InvestGroup.Pledged

the AS pledged assetsin pledged

ANNUAL 5806 of NOK

REPORT the 36 263 36 29 773 29 32 101 32 pledged pledged

1 616 4 162 1 067 1 479 2 328 2016 2015 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

- - 17 29 39 17 Total 2015 1 916 1 848

1 815 3 240 2 874 19 050 26 980 external sustainability Sublease Sublease payments the underlying asset. the

- - - 7 12 12 period use of use of attestation of of attestation 1 158 1 151 the the the Variable Variable lease end of end of control the term, the asset is depreciated over the the over depreciated is asset the term, to fulfilment fulfilment depends on a specific asset and 2016 1 044 2 702 1 624 its

17 810 23 180 30 18 10 16 599 170 197 553 period the Minimum lease end of end of the purchase agreements Judgement is made when determining

arrangement conveys a right after ACCOUNTING JUDGEMENTS JUDGEMENTS ACCOUNTING ownership by the end of the lease the of end the by ownership and presented as energy purchases. energy as presented and connected with the production, lease payments are measured by consumption consumption by measured are payments lease production, the with connected over the lease term. For leased production plants where use is closely closely is use where plants production leased For term. lease the over Operating leases are mainly recognised as an expense on a straight-line basis basis straight-line a on expense an as recognised mainly are leases Operating shorter of the estimated useful life of the asset and the lease term. lease the and asset the of life useful estimated the of shorter whether whether a power purchase agreement power purchase contains a lease. A Power agreement contains a lease if the andvariousprocesses map and existing procedures, auditing requirements, auditing requirements, except from Brazilian subsidiaries. to Fees paid to 2 86 to 13 159 144 period million. the 2.2 assistance assistance Within Within 1 year of Between 1 and 5 years More than 5 years after to NOK end of end of

the following manner: 2016 amounts to for auditing and other services were as follows: external auditors period and specified in the 2016201620162016201620162016201620162016201620162016

paid for ase is used if it is possible to calculate this. If this this If this. calculate to possible is it if used is ase other services in 2016 and 2015 mainly2015 and other services in 2016 relate REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT VAT) for

Brazilian subsidiaries fees the Statkraft Group’s auditor and audits all subsidiaries subject

ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL Fees Fees paid to Leases

1) ASASASASASASASASAS

s no financial lease agreements by year end 2016. is the audit of auditing fees fees (excluding for AS are recognised as finance lease agreements when the risks and and risks the when agreements lease finance as recognised are leases leases attestation attestation services services main items in the total

consultancy services The Other Total Lease-related rent expensed in the Vehicles Total NOK million Property rental agreements Other Property Property rental agreements NOK million Vehicles implicit interest cost in the le the in cost interest implicit minimum lease payments. When calculating the lease’s present value, the the value, present lease’s the calculating When payments. lease minimum is used. However, if there is no reasonable certainty that the Group will obtain will Group the that certainty reasonable no is there if However, used. is The same depreciation period as for the company’s other depreciable assets assets depreciable other company’s the for as period depreciation same The at the fair value of the leased asset or, if lower, at the present value of the the of value present the at lower, if or, asset leased the of value fair the at costs linked to establishing the lease are included in the asset’s cost price. cost asset’s the in included are lease the establishing to linked costs Statkraft. Finance leases are capitalised at the commencement of the lease lease the of commencement the at capitalised are leases Finance Statkraft. returns incidental to ownership have been substantially transferred to to transferred substantially been have ownership to incidental returns cannot be calculated, the company’s marginal borrowing rate is used. Direct Direct used. is rate borrowing marginal company’s the calculated, be cannot Tax Total STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT 1) Statutory Other Other NOK thousand Deloitte Deloitte Note Note 36 Statkraft is offering market access to smaller renewable energy producers. Some of these contracts are defined as operating leases with variable lease The total of future minimum lease payments in relation to non-cancellable leases for each of the following period is:

POLICIES ACCOUNTING SIGNIFICANT Leases Note 35 Note report. The auditors auditors payments, and are presented as energy purchases, see note 12. The lease agreements have durations ranging from 1 to 17 years and the rent paid for 2016 was NOK 4529 million whereas the corresponding amount for 2015 was NOK 6120 million. Statkraft ha CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS total salaries and other benefits paid to the executive management amounted to NOK 27 982 209. The The 209. 982 27 NOK to amounted management executive the to paid benefits other and salaries total additional compensation for special services beyond normal managerial functions has been provided, nor have any loans or surety been granted. For 2016, 2016, For granted. been surety or loans any have nor provided, been has functions managerial normal beyond services special for compensation additional ØisteinAndresen,ExecutiveVice President Jürgen Tzschoppe,ExecutiveVicePresident AsbjørnGrundt, ExecutiveVicePresident AsbjørnGrundt, ExecutiveVicePresident Jürgen Tzschoppe,ExecutiveVicePresident Hilde Bakken,ExecutiveVicePresidentHilde Hilde Bakken,ExecutiveVicePresidentHilde Hilde Bakken,ExecutiveVicePresidentHilde SteinarBysveen,ExecutiveVice President SteinarBysveen,ExecutiveVice President Jon Brandsar,ExecutiveVicePresident SteinarBysveen,ExecutiveVice President Hallvard Granheim, ExecutiveVicePresidentHallvard (EVPs) vice presidents Hallvard Granheim, ExecutiveVicePresidentHallvard For Granheim, ExecutiveVicePresidentHallvard IreneEgset,Executive VicePresident Jon Brandsar,ExecutiveVicePresident AsbjørnGrundt, ExecutiveVicePresident IreneEgset,Executive VicePresident NOK ØisteinAndresen,ExecutiveVice President 5) January,ExecutiveVice President24 wasappointed2017. Vatnaland on Jon 4) 3) 2) 1) Presidentand CEO Rynning-Tønnesen,Christian NOK 2016 Salary unitsand supportfunctions.intobusiness is organised Statkraft Note37 The 4) 3) 2) 1) Jon Brandsar,ExecutiveVicePresident Presidentand CEO Rynning-Tønnesen,Christian NOK managementcosts– executive Pension No above. shown those than other Group same the in companies other from benefits financial or compensation any received not has management Group The 3) 2) 1) Presidentand CEO Rynning-Tønnesen,Christian 2015 Jürgen Tzschoppe,ExecutiveVicePresident disbursed in 2015.disbursed Jon Brandsar resigned as Executive Vice President 2016. as ExecutiveVicePresident on 4 resignedFebruary JonBrandsar 4FebruaryExectutiveVicePresident on IreneEgsetwasappointed2016. ExecutiveVice82015. wasappointed June, JürgenTzschoppe President on ExecutiveVice82015. wasappointed June, JürgenTzschoppe President on as ExecutiveVicePresidenton7June,2015. ØisteinAndresenresigned in 2016. in2015,butdisbursed Bonusearned 2016. as ExecutiveVicePresident on 4 resignedFebruary JonBrandsar 2016. on asExecutiveVicePresident16 November AsbjørnGrundtresigned 2016. on ExecutiveVicePresident4 IreneEgsetwasappointedFebruary 2015. ExecutiveVice8 wasappointed June JürgenTzschoppe President on in 2017. in2016,butdisbursed Bonusearned Øistein Andresen resigned as ExecutiveVicePresidenton7June ØisteinAndresenresigned2015. 2016, year’s accounting costyear’s accounting and the other

total Benefitspaid to The benefits– executivemanagement pension costs for pension comparable figuresare restated.comparable and the for

the PresidentandCEO. pension scheme reflectspension executive management wereNOK executivemanagement 3) 2)

3) 5) The 4) executive management and managementexecutive 4) 2) principle 1) 3) 2)

for disclosing bonus has changed hasfrombonus changed last disclosing year. the period duringwhichthe period The managers of theseunitsreport managers 6719919.In 87 2 871795 2 2 483786 2 2 616080 2 2 598084 2 2 647150 2 2 445655 2 2 542616 2 2 320997 2 4 978414 4 4 849680 4 2 208380 2 930022 2 062868 2 219510 3 1 534901 1 690577 1 2015the Salary Salary individual has been an executive employee. has beenan executive individual the 7 747692. amountwas NOK corresponding In

the Board Directorsof Board to annual report annual of 2015

the corresponding amount in 2015 was NOK 24 891 305. 891 24 NOK was 2015 in amount corresponding Group management, which comprises the which comprises Groupmanagement, 501 000 501 438 000 438 474 500 474 345 000 345 539 500 539 432 000 432 552 500 552 446 000 446 677 875 677 412 886 412 360 000 360 600 369 375 420 337 000 337 Bonus Bonus - - 1) 1)

STATKRAFT the figures were bonus earned in 2014, but were bonus earned in 2014, figures 1 032592 1 1 035227 1 2 413137 2 926 091 926 254 496 254 117 804 117 849 380 849 Benefits in kind and other benefits andother Benefitsin kind Benefitsin kind 91 192 91 193 756 193 153 250 153 189 585 189 165 965 165 213 598 213 129 248 129 193 630 193 189 559 189 173 511 173 171 722 171 193 057 193 154 180 915 166 114 594 114 2016 72 369 72 65 850 65

AS -

ANNUAL

REPORT 1 242989 1 1 030759 1 1 029604 1 2 537708 2 1 142185 1 and other benefitsand other executive 314 048 314 411 871 411 38 528 38 3 566551 3 3 075036 3 3 280165 3 3 109049 3 3 400248 3 3 006903 3 3 288746 3 2 956557 2 5 829800 5 5 434289 5 3 483079 3 612622 2 806800 3 1 986494 1 2 280749 2 1 756426 1

2016 2015 Salaries Salaries -

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 6 6 5 5 6 5 5 9 10 11 10 11 11 10 10 11 11 11 10 11 11 Participation Participation in Participation Participation in board meetings board meetings

------n. verage salary increases of 30 550 24 950 15 500 31 000 24 950 49 150 30 550 Committee Committee Compensation Compensation

cific issues related to compensation for ------in Board meetings Audit Audit 66 600 67 600 91 900 66 600 93 300 33 800 33 800 67 600 66 600 Committee Committee NOK 291 700 and NOK 110 250. employees in the Statkraft Group to the extent that the Committee deems that these concern matters of particular Prepare the Board’s statement on executive pay and other importance for the Group’s reputation, competitiveness and compensation paid to senior executives. attractiveness as an employer. Prepare the Board’s treatment of all the fundamental issues The CEO shall consult the Compensation Committee regarding relating to salary, bonus systems, pension and employment the salaries for the corporate executives and head of Corporate agreements and similar for the executive management in Audit before they are decided upo Statkraft. Deal with spe participationnor have any loans in committee work, or surety for     as participation Report on executive remuneration policy other employees are also considered. The CEO and corporate executives receive both a fixed salary and a Variable salary Statkraft has a variable remuneration scheme for the senior executives variable payment. Fixed salary The fixed salary is determined based on an assessment of the specific based on key performance indicators and individual goals. The purpose is position and the market – as well as an assessment against Statkraft’s to drive operational performance and manage risks to achieve the policy of offering competitive terms, but not take a leading position. When objectives in the strategy. deciding the annual salary regulation, the a Board Board 88 281 000 277 000 336 000 277 000 281 000 277 000 277 000 477 000 242 000 311 000 140 500 140 500 140 500 242 000 170 500 140 500 277 000 281 000 277 000 281 000 277 000 remuneration remuneration and remuneration and remuneration Board, Board, Audit Committee and Compensation Committee in 2016 was NOK 2 651 500, fee the directors’ the respective amounts in 2015 NOK were 2 752 000, Compensation and as wellCompensation Committee remuneration paid to this, Halvor Stenstadvold this, Stenstadvold director. Halvor was to Total Committee Committee 2016201620162016201620162016201620162016201620162016 2)

thodology is utilised. An annual survey is Board. Board. 3) Audit 1) the 1) 3) REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT 1)

Board of Directors on 1 December, 2015. 1) 1) Board, Board, the the a year prepare the board’s treatment of items relating to ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL 3) directors of

to ASASASASASASASASAS

the CEO’s salary and conditions of employment. Once Board in June 2016.  appointed appointed June 2016. board member in appointed 2016. Prior depuy chair in June the director Mellbye, Board has no remuneration Board has no remuneration agreements other than ore follow the Ministry of Trade, Industry and Fisheries’s guidance for Harald von Heyden left Was Was Left REMUNERATIONS TO SENIOR EXECUTIVES – 2016 2016 – EXECUTIVES SENIOR TO REMUNERATIONS 2016 Halvor Stenstadvold, Halvor deputy chair Stenstadvold, Helene director Biström, Olav Fjell, chair Berit J. Rødseth, deputy chair Berit J. Rødseth, deputy chair Elisabeth Morthen, director Bengt Bengt Ekenstierna, director Thorbjørn Holøs, employee-elected director Elisabeth director Morthen, Harald von Heyden, director Hilde Drønen, Hilde Drønen, director Peter Vilde Eriksen Bjerknes, employee-elected director Asbjørn Seveljordet, employee-elected director Halvor Stenstadvold, director Hilde Drønen, director Thorbjørn Holøs, employee-elected director Vilde Eriksen Bjerknes, employee-elected director Asbjørn Seveljordet, employee-elected director STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT THE BOARD’S STATEMENT REGARDING SALARIES AND OTHER OTHER AND SALARIES REGARDING STATEMENT BOARD’S THE The board of Statkraft will contribute to a moderate, but competitive The 1) Olav Fjell, Olav Fjell, chair 2015 NOK 1) 2) 3) NOK Thorhild Widvey, chair Note 37 continued Note to Remuneration been granted been granted NOK 296 100 and NOK 96 400, respectively. The then conducted, evaluating how similarly ranked positions in the development of executive remuneration in Statkraft. Principles and salary and other benefits to corporate management in state owned Norwegian labour market are compensated. This information, together guidelines for salary and other remuneration to executive management are companies. Statkraft’s policy is to offer competitive conditions, but not take a leading with internal reward practices in Statkraft, forms the basis for determining designed accordingly. There were no significant policy changes with position. Upon deciding salaries and other remunerations in Statkraft, an compensation. Organisation regard to salaries and other remunerations in 2016. The board of Statkraft has established a separate Compensation external position assessment system that ranks positions according to a Statkraft AS and subsidiaries where Statkraft has 90 % ownership and Committee. The mandate of the committee is as follows: recognized and widely used me m CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS individual’s accordance wit accordance var For the For variable remuneration scheme. The measurement is weighted on the the on weighted is measurement The scheme. remuneration variable There are several KPIs to follow up op up follow to KPIs several are There strategic ambitions for the group. The targets are se are targets The group. the for ambitions strategic included for all members of executive management. executive of members all for included newspapers, phone and coverage of broadband communication in in communication broadband of coverage and phone newspapers, objectives as well as financial and operational performance. The CEO’s CEO’s The performance. operational and financial as well as objectives creation for Statkraft; measured by different KPIs with stretch targets stretch with KPIs different by measured Statkraft; for creation different KPIs with stretch targets. stretch with KPIs different Below is a description of relevant categories of KPIs included in the the in included KPIs of categories relevant of description a is Below performance indicators are based on the most relevant value drivers and and drivers value relevant most the on based are indicators performance negative environmental impact. Common health and safety targets are are targets safety and health Common impact. environmental negative Other variable elements include arrangements with a company car, car, company a with arrangements include elements variable Other remuneration. remuneration. For the CEO and corporate management, targets are defined for strategic strategic for defined are targets management, corporate and CEO the For Other variable elements elements variable Other cost base. Also for these indicators, the main focus is on enhanced value value enhanced on is focus main the indicators, these for Also base. cost The main focus is to enhance value creation for Statkraft, measured by by measured Statkraft, for creation value enhance to is focus main The performance indicators (KPIs) in the Group scorecard. The key key The scorecard. Group the in (KPIs) indicators performance organisational development. development. organisational on health, safety and security risks for employees and reduction of of reduction and employees for risks security and safety health, on performance against a defined set of targets. targets. of set defined a against performance a clear link between value-creating activities and individual variable variable individual and activities value-creating between link clear a Moreover Statkraft follows up costs by measuring the development of the the of development the measuring by costs up follows Statkraft Moreover management and other market activities are measured against the market. market. the against measured are activities market other and management defined targets. Performance is reported and followed up through key key through up followed and reported is Performance targets. defined targets and a 30% weighting of individual targets on leadership and and leadership on targets individual of weighting 30% a and targets bonus achievement may vary from 0 to 100%, based on an evaluation of of evaluation an on based 100%, to 0 from vary may achievement bonus social and ethical standards in the industry are followed. A main focus is is focus main A followed. are industry the in standards ethical and social developed to support the performance management process, establishing establishing process, management performance the support to developed the availability in times where Statkraft benefits from available plants. plants. available from benefits Statkraft where times in availability the through profitability KPIs, where Statkraft’s added value from energy energy from value added Statkraft’s where KPIs, profitability through clear relationship between the Group’s overall Strategic platform and and platform Strategic overall Group’s the between relationship clear executive vice presidents has a combined weighting of 70% of these these of 70% of weighting combined a has presidents vice executive maximum disbursement of 25 per cent of gross base salary. The individual individual The salary. base gross of cent per 25 of disbursement maximum Within this category Statkraft monitors that required legal, environmental, environmental, legal, required that monitors Statkraft category this Within The variable remuneration scheme for Statkraft’s senior executives is is executives senior Statkraft’s for scheme remuneration variable The creation. creation. Statkraft’s financial performance from market activities is measured measured is activities market from performance financial Statkraft’s Statkraft measures the utility-adjusted availability of the power plants, i.e. i.e. plants, power the of availability utility-adjusted the measures Statkraft Statkraft has established a performance management process to ensure ensure to process management performance a established has Statkraft Note37 continued iable pay is fully based on these targets while the variable pay for the the for pay variable the while targets these on based fully is pay iable i Fin ii) iii) Operational indicators Operational iii) i) Care for people and environment and people for Care i) CEO and corporate management, the variable remuneration has a a has remuneration variable the management, corporate and CEO area of responsibility: responsibility: of area h established standards. established h ancial indicators indicators ancial erational performance. performance. erational t to ensure value value ensure to t 89 has been pa been has employee receives othe receives employee The agr The noti of period mutual The ordinary salary over 12G. Group disability coverag disability Group 12G. over salary ordinary Severance arrangements arrangements Severance resign, from his executive pos executive his from resign, Fixed salary paid to the CEO for 2017 is NOK 5 043 000, with other te other with 000, 043 5 NOK is 2017 for CEO the to paid salary Fixed employees. Terms for the CEO CEO the for Terms and will receive a pension of 66% of his annual salary, provided that he he that provided salary, annual his of 66% of pension a receive will and income above 12G in 2003. The scheme included all employees with with employees all included scheme The 2003. in 12G above income Severance pay shall be reduced according to established rules if the the if rules established to according reduced be shall pay Severance is given by the employer with a shorter deadline than mentioned above. above. mentioned than deadline shorter a with employer the by given is supplementary private pension savings. Additional salary is set at 18% of of 18% at set is salary Additional savings. pension private supplementary the company has a mutual right to request to resign, or be requested to to requested be or resign, to request to right mutual a has company the shall be paid monthly. monthly. paid be shall remuneration has been amended and the arrangement is closed to new new to closed is arrangement the and amended been has remuneration The CEO, Christian Rynning-Tønnesen, has a retirement age of 67 years, years, 67 of age retirement a has Rynning-Tønnesen, Christian CEO, The has been changed, and the arrangement is closed to new employees. new to closed is arrangement the and changed, been has Statkraft established a pension scheme funded out of current income for for income current of out funded scheme pension a established Statkraft signed guaranteeing a special severance pay from the employer if notice notice if employer the from pay severance special a guaranteeing signed additional salary system has been established that can be used for for used be can that established been has system salary additional any time after the employee has reached 62 years of age, the executive or or executive the age, of years 62 reached has employee the after time any of up to 12 months’ salary in excess of agreed notice period. The amount amount The period. notice agreed of excess in salary months’ 12 to up of part of SPK during the entire 30-year vesting period. period. vesting 30-year entire the during SPK of part closed defined benefit plan in the Government Pension Fund (SPK). (SPK). Fund Pension Government the in plan benefit defined closed 50% until the agreed-upon retirement age. The policy regarding executive executive regarding policy The age. retirement agreed-upon the until 50% companies of 28 June 2004. The policy regarding executive remuneration remuneration executive regarding policy The 2004. June 28 of companies For the CEO and certain corporate executives, agreements have been been have agreements executives, corporate certain and CEO the For new retirement pension scheme for annual salary over 12G, but an an but 12G, over salary annual for scheme pension retirement new change of position after the age of 62. These are agreements where, at at where, agreements are These 62. of age the after position of change this right of termination, the employee is entitled to a severance payment severance a to entitled is employee the termination, of right this with the right to 66% of their annual salary, provided that they have been been have they that provided salary, annual their of 66% to right the with with a salary of 75% of the executive’s pay – and working hours of up to to up of hours working and – pay executive’s the of 75% of salary a with defined contribution plan in Gjensidige Pensjonsforsikring AS and has a a has and AS Pensjonsforsikring Gjensidige in plan contribution defined employment conditions of managers in state owned enterprises and and enterprises owned state in managers of conditions employment years of employment, the employer’s period of notice is 6 months. months. 6 is notice of period employer’s the employment, of years scheme was closed to new employees in 2012. There is no established established no is There 2012. in employees new to closed was scheme The CEO and certain corporate executives have agreements regarding regarding agreements have executives corporate certain and CEO The (Arbeidsmiljøloven) for protection against dismissal. If the employer uses uses employer the If dismissal. against protection for (Arbeidsmiljøloven) Position change agreements agreements change Position corporate executives have a retirement age of 65 years at the earliest, earliest, the at years 65 of age retirement a have executives corporate agreements are entered into in accordance with the guidelines for the the for guidelines the with accordance in into entered are agreements parties exercise this right, the executive should be offered another position position another offered be should executive the right, this exercise parties For wholly owned Norwegian subsidiaries, Statkraft has established a a established has Statkraft subsidiaries, Norwegian owned wholly For executives, there is a mutual notice period of 3 months. After more than 2 2 than more After months. 3 of period notice mutual a is there executives, Pension plans plans Pension over 12G has also been established. established. been also has 12G over

annual salary over 12G, including the CEO and corporate executives. This This executives. corporate and CEO the including 12G, over salary annual as set out in this statement. this in out set as eement waives the employee’s rights in the Work Environment Act Act Environment Work the in rights employee’s the waives eement rt of SPK during the entire 30-year vesting period. The other other The period. vesting 30-year entire the during SPK of rt r income within the payment period. These These period. payment the within income r ce for the CEO is 6 months. For corporate corporate For months. 6 is CEO the for ce ition without further justification. If any of the the of any If justification. further without ition STATKRAFT

AS

e relating to salaries salaries to relating e ANNUAL

REPORT

2016 an an rms FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 44 40 2015 2015 852 749 346 409 1 230 1 798 1 604 5 409 1 528

Statkraft. executive the 32 16 2016 2016 409 348 324 1 259 1 120 4 694 4 350 7 207 1 518

State. Board and are also related and are also related Board parties of Norwegian with related parties are conducted at commercial terms and individuals stated individuals note 37 are members of stated in below table shows transactions related parties classified with as The management management or the The not been joint ventures that have associates or eliminated in the consolidated consolidated financial statements. owner

90 the

by SF controlled

SF, which is a company wholly owned by the Statkraft to AS companies and

Statkraft owner

2016201620162016201620162016201620162016201620162016

Norwegian authorities the ncial statements. to Statkraft. balancesIntercompany and SF period include: are all owned Statkraft by period with REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

AS the Statnett include:

include: Statkraft to end of the to Norwegian authorities ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL Related Related parties

end of include: the to ASASASASASASASASAS the

and licence fees transactions tax operating revenues

expenses expenses shares in Statkraft subsidiaries, subsidiaries, associates and joint arrangements in note 24 and stated Financial expenses Operating expenses Property Taxes Taxes payable Tax Dividend and Group contribution from Interest Interest expences Transmission Transmission costs Energy Energy purchases from Statoil Liabilities Liabilities at Significant STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Net operating revenues includes:

The energy purchase from Statoil shown above includes purchase of gas used either in the Group’s electricity production or resold on the market. Volumes Receivables at The Concessionary sales at statutory prices Gross NOK million NOK million Revenues note note 39 are related parties of All Note 38 Note Expenses consolidated financial statements consolidated financial presented statements and are not note. in this transactions between transactions consolidated companies are eliminated in Statkraft’s conditions. Except for interest-bearing debt covered in note 31, there are no other significant balance items between Statkraft AS and Statkraft SF. and prices are based on long-term contracts negotiated at commercial terms. Transmission costs to Statnett are mainly grid tariff. The prices in this market Statkraft also has transactions and balances with other enterprises controlled by the Norwegian state, but their size, neither individually nor combined, have are stipulated by the Norwegian Water Resources and Energy Directorate. Other transactions significance for Statkraft’s fina CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Energi Statkraft ToptanElektrikEnerjisi Statkraft InvestCarbon Statkraft Statkraft GermanyGmbH Statkraft Forsikring Statkraft Financial EnergyFinancial Statkraft Enerji Statkraft

AssetHolding Statkraft Smøla AS Vind Kjøllefjord Renewable Energies and Photovoltaics Spania and PhotovoltaicsEnergiesRenewable HitraVind Name Shares Note39 BalticCable Brasil Statkraft B.V. Runde Lange Zonnepark Solar Deutschland GmbHSolarDeutschland Statkraft MarketsGmbH Statkraft Vind Statkraft Statkraft Värme Statkraft Kargı USHolding Statkraft ÇetinEnerji Enerji Çakıt Sweden Statkraft Markets Statkraft France Statkraft Varme Statkraft Statkraft InvestimentosLtda. Statkraft Ventures GmbHVentures Statkraft GmbHTrading Statkraft Statkraft Romania Statkraft SödraVindkraft Statkraft Markets Financial Services GmbHMarketsFinancial Statkraft Statkraft Holding KnapsackGmbHHolding Statkraft GmbH Herdecke Holding Statkraft Holding SingaporeHolding Statkraft Statkraft Leasing Statkraft USLLC Statkraft Harrsele Gidekraft Devoll Hydropower Devoll StjørdalFjernvarme Vind 2AS Vind Energia doBrasilLtda.Energia Statkraft Vindpark KnapsackPower GmbH&CoKG Statkraft Himal Power Ltd.Himal Power Energias Renováveis Energias Statkraft Kızılırmak IH Knapsack Power Verwaltungs GmbHKnapsackPower Verwaltungs Energen Energias Renováveis Energias Energen S.A. Energética Seabra Monel Monjolinho EnergéticaMonel Monjolinho EnergéticaNovo Horizonte EnergéticaMacaúbas Moinho Santa Santa Enex Esmeralda AS in Invest IH Tofte Holding AS Holding South Vind SCA Vind SCA AB consolidated A.S. A.S. AB AB A.S. O&M Rosa S.A. Laura S.A. AS VindElnät SCA AB

EM AS AS S.A. Consolidated companies Consolidated AS EnerjiA.S.

AB AS SAS AS EastEurope BV AB

de SistemasElétricosLtda. AB S.A. AB AS AS AS SRL II AB Sh.A. AS AB AB AB S.A. Satıs¸ AB subsidiaries Pte. EOOD Ltd. S.A. Ltd.S¸irketi S.A. S.A. S.A. ..OA S.L. M B MO IH, IH MO, MO MO IH WP MO WP IH MO MO MO MO MO MO EF WP EF WP EF IH EF MO WP IH MO WP WP IH OA MO DH IH IH IH MO IH IH IH IH MO IH IH EF IH EF IH IH IH EF, IH MO IH EF IH DH DH EF,OA WP WP EF OA WP Segment WP EF, WP 1) Brazil Norway Turkey Norway Norway Sweden emn Düsseldorf Germany Sweden Norway ehrad Amsterdam Netherlands emn Düsseldorf Düsseldorf Germany Germany Bulgaria oai Bucuresti Romania emn Düsseldorf Germany emn üslofKnapsackPowerGmbH&CoKG Düsseldorf Germany Sweden emn Düsseldorf Germany Sweden emn Düsseldorf Germany Nepal emn Düsseldorf Germany emn Düsseldorf Germany Sweden ehrad Amsterdam Netherlands emn Düsseldorf Germany Sweden Sweden Norway Norway Sweden Sweden Brazil Brazil Brazil USA Brazil Brazil Brazil Turkey Norway Brazil Turkey Sweden Brazil Sweden Sweden Brazil Turkey Turkey ehrad Amsterdam Albania Netherlands Brazil France Brazil Norway Norway Norway Norway Norway S Spain Norway Norway Country razil weden 91 Florianopolis Oslo Istanbul Oslo Oslo Stockholm Stockholm Oslo Sofia Stockholm Stockholm Kathmandu Stockholm Stockholm Stockholm Oslo Oslo Stockholm Kungsbacka Florianopolis Florianopolis Florianopolis San Florianopolis Florianopolis Florianopolis Istanbul Oslo Florianopolis Istanbul Stockholm Florianopolis Stockholm Stockholm Florianopolis Istanbul Istanbul Tirana Florianopolis Lyon Florianopolis Trondheim Trondheim Oslo Oslo Oslo Florianopolis Malaga Oslo Oslo Malmö Parentcompany office Registered Francisco Brasil Statkraft Statkraft Statkraft Statkraft Statkraft SödraVindkraft Statkraft GermanyGmbH Statkraft Vind Statkraft Statkraft GermanyGmbH Statkraft MarketsGmbH Statkraft MarketsGmbH Statkraft MarketsGmbH Statkraft MarketsGmbH Statkraft MarketsGmbH Statkraft Vind Statkraft Holding KnapsackGmbHHolding Statkraft Statkraft MarketsGmbH Statkraft Holding SingaporeHolding Statkraft MarketsGmbH Statkraft GermanyGmbH Statkraft Vind Statkraft Statkraft Statkraft Vind Statkraft AssetHolding Statkraft Statkraft Statkraft Statkraft AssetHolding Statkraft Energias Renováveis Energias Statkraft Renováveis Energias Statkraft Renováveis Energias Statkraft USHolding Statkraft Energias Renováveis Energias Statkraft Energias Renováveis Energias Statkraft Renováveis Energias Statkraft Enerji Statkraft AssetHolding Statkraft Energias Renováveis Energias Statkraft Enerji Statkraft Sweden Statkraft Energias Renováveis Energias Statkraft Sweden Statkraft AssetHolding Statkraft Energias Renováveis Energias Statkraft Enerji Statkraft Statkraft Markets Statkraft AssetHolding Statkraft Energias Renováveis Energias Statkraft AssetHolding Statkraft InvestimentosLtda. Statkraft Varme Statkraft Energi Statkraft Statkraft Statkraft Statkraft InvestimentosLtda. Statkraft Statkraft Energi Statkraft Statkraft Energi Statkraft AS AS AS IH AS Vind SCA IH AS IH AS AS AS AS AS AS AS AS Invest Holding AS Holding Invest AB AB AB AB AS A.S. A.S. A.S. AS AS AS AS BV AB AB STATKRAFT AS AS AB AS AS AS AS AS AS AS AB Pte. S.A. S.A. S.A. S.A. S.A. S.A. S.A. S.A. S.A. S.A. Ltd.

AS

ANNUAL Shareholding and Shareholding

REPORT voting share voting 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 90.10% 90.10% 81.90% 60.00% 60.00% 57.07% 99.99% 50.57% 90.10% 81.31% 85.00% 70.00%

2016 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

2) - -3 30 00% 910 602 2015 3.15% 7 343 4 603 2 381 66.62% 55. 40.00% 67.00% 99.39% 51.00% 95.00% 11 946 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% voting share Shareholding Shareholding and activities. activities. - -1 Skagerak Skagerak Energi Group 28 Other 374 986 2016 2 489 6 710 4 889

11 599 OA: Ltd. Ltd. Ltd. Ltd. Ltd. S.A. S.A. S.A. S.A. Pte. Pte. Pte. Pte. Pte. AS AS Ltd. Pte. Ltd. S.AC.

- AS AS AS AS AS N/A -38 AS AS 2015 S.A. -784 3 223 6 805 1 139 1) 33 068 26 263 Kraft AS Kraft AS AS AS AS AS AS Industrial ownership, Industrial IO: Statkraft Industrial Holding Parent Parent company Statkraft Industrial Holding Statkraft Skagerak Skagerak Statkraft Holding Singapore Statkraft Holding Chile Pte. Statkraft Chile Inversiones Electricas Ltd. Statkraft Chile Inversiones Electricas Ltd. Skagerak Skagerak Varme Statkraft Chile Inversiones Electricas Ltd. Statkraft Holding Singapore Statkraft Holding Singapore Statkraft Statkraft Statkraft Holding Peru Statkraft Peru Statkraft Holding Singapore Statkraft Holding Singapore Statkraft Statkraft UK Ltd. Statkraft Peru Holding Statkraft UK Ltd. Statkraft Energy Ltd. Statkraft UK Ltd. Statkraft Statkraft SKIHI Group AS 40% owns directly. - N/A -49 2016 with 81.3% and Norfund 18.7%. 81.3% Norfund with and 2 297 1 098 7 110 1 239 34 045 26 935 Statkraft (48.85%). (48.85%). AS AS. Porsgrunn Skagerak Porsgrunn Skagerak Energi Porsgrunn Trondheim Fjordkraft Registered Registered office Oslo Bergen Hjartdal Santiago Porsgrunn Skagerak Energi Santiago Porsgrunn Skagerak Energi SantiagoSantiago Empresa Eléctrica Pilmaiquén Empresa Eléctrica Rucatayo Santiago Empresa Eléctrica Pilmaiquén Porsgrunn Skagerak Energi Santiago Empresa Eléctrica Pilmaiquén Santiago Skien Santiago Kathmandu Brussels Lima Lima New Dehli New Dehli Oslo Lima Oslo Beograd BKK BKK 92 (48%) AS and and AS 20% by Norway Norway Norway Norway Country Norway Norway Norway NetherlandsChile Amsterdam Norway Chile Norway Chile Chile Chile Norway Chile Chile Norway Chile Nepal Netherlands Amsterdam Belgium Peru Peru India India Norway United United Kingdom London Peru United United Kingdom London United United Kingdom London United United Kingdom London Norway Serbia 1) Power Power 2014in and is owned by Statkraft SN Wind power, DH: District District DH: power, Wind International hydropower, WP: heating, IO IO IO IO OA IO Segment Segment IO IH IH IO IH IO IH IH IH IO IH IH IO IH IH IH OA WP, MO Kingdom United London IH IH IH MO IH WP IH EF EF MO WP MO IH: 20% by Agder Agder by 20% Energi activities AS, Kraft Group’s

restructuring of restructuring old S.A. the the S.A.

S.A. of 2016201620162016201620162016201620162016201620162016

SCC Ltd. S.A.C. S.A S.A. Pte. Ltd. REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

AS AS AS AS S.A. AS Ltd. SA Pvt. Ltd. AS AS AS non-controlling interests AS Pvt. owned by 20% by Skagerak non-controlling interests to AS to 3) Kraft ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

Kraft Transrucatayo Transrucatayo 2)

Empresa Eléctrica Empresa Eléctrica Rucatayo Eléctrica Eléctrica del Sur Hidrotransmision Hidrotransmision del Sur Inversiones Inversiones Shaqsa S.A.C. AS ASASASASASASASASAS

Empresa Eléctrica Pilmaiquén Empresa Eléctrica Statkraft Chile Tinguiririca Statkraft Market Services Chile S.A. AS Statkraft Peru AS is owned by Statkraft Energy Skagerak Industrial Holding AS (3.15%), Grunnåi Kraftverk Grunnåi Kraftverk Sauland Kraftverk Sauland Kraftverk Statkraft Chile Inversiones Electricas Ltd. Skien Skien Fjernvarme Statkraft Peru Holding Kraft Skagerak Skagerak Trondheim Trondheim Statkraft Holding Chile Pte. Skagerak Skagerak Naturgass Skagerak Skagerak Nett AS Skagerak Skagerak Varme Statkraft Holding Nepal Ltd. Statkraft Holding Peru Statkraft India Statkraft Markets Rheidol 2008 Trustees Rheidol 2008 Trustees Ltd. comprehensive income Skagerak Skagerak Energi Fjordkraft Fjordkraft Andershaw Andershaw Wind Power Ltd. Statkraft Energy Ltd. Statkraft Pure Energy Ltd. EF: European flexible generation, MO: Market operations, Steinsvik Kraft is AS Fjordkraft Fjordkraft SKIHI Group was established as a part of Table based on preliminary figures. Dividend disbursed - of - of which allocated Equity - of which accumulated non-controlling interests Total Debt STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Net Net cash flow from operating activities 1) 2) NOK million Gross revenues Non-controlling interests’ share There are significant non-controlling shareholdings in SKIHI Group and Skagerak Energi Group. 3) 1) 2) Name Note 39 continued Note Assets Statkraft Treasury Centre Statkraft Industrial Holding Statkraft UK Ltd. Statkraft Vind Holding Statkraft Western Balkans d.o.o. Steinsvik

Fosen: In February 2016, Statkraft, TrønderEnergi and the European investor consortium Nordic Wind Power DA decided to join forces to realise Europe’s largest onshore wind power project in Central- Norway. The project comprises of six onshore wind farms with a combined capacity of 1000MW. Construction commenced in Q2 2016, and commissioning will be completed in 2020.

93 STATKRAFT AS ANNUAL REPORT 2016 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

94 Financial Statements 2016201620162016201620162016201620162016201620162016

REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

Statkraft AS Statkraft ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

ASASASASASASASASAS

STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS revenues Operating million NOK Statkraft Income Other Depreciation Operating cost Payrolland related Financial income income Financial and associates frominvestmentsin subsidiaries Revenues expenses Operating Appropriation Profit Tax Profit items Net financial currency andderivatives and unrealised Netrealised securities and unrealised Netrealised costs Financial Transfer from retained earnings Transferfromretained payable Dividends Transfer from share premium account Transferfromshare premium capitalTransferfromother paid-in expense operating expenses operating beforetax for the profit statement year parentcompany AS of profit

for

the year and equity transfers 95 7, 20,22 8,22 8,22 8,22 8,22 Note 5, 6 STATKRAFT 10 22 15 15 15 15 9 8

AS -1 585 -4 971 -1 127 -1 315 -1 648

1 052 3 403 1 371 2 296 4 926 2 829 4 350 ANNUAL 2016 -768 -532 -757 -926 598 -61 -16

REPORT -1 620 -4 020 -1 969 -1 355 -2 436

7 133 1 604 2016 2015 -727 -837 -825 -832 -470 -362 783 367 577 -68 - - FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY - 319 110 633 766 1 245 5 471 1 629 2 652 2 192 2 399 19 140 11 188 17 292 54 293 55 922 34 641 38 060 40 552 45 143 101 019 121 833 139 125 139 125 31.12.2015 - 48 49 790 300 428 771 5 201 1 657 1 241 6 684 78 017 20 824 99 979 12 039 17 668 54 261 54 261 29 140 31 569 23 843 31 817 117 647 117 647 Director Director Director 31.12.2016 Hilde Drønen Bengt Bengt Ekenstierna Asbjørn Asbjørn Sevlejordet 9 9 10 11 14 15 15 16 Note 19, 22 12, 22 13, 22 19, 22 19, 22 19, 22 18, 22 3, 17, 22 3, 17, 22 AS

96 Director Director Deputy chair Helene Biström Thorbjørn Thorbjørn Holøs Oslo, Oslo, 15 February 2017 President and CEO Halvor Stenstadvold Board Board of Directors of Statkraft Christian Christian Rynning-Tønnesen The 2016201620162016201620162016201620162016201620162016

Board REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

the Mellbye Director Director Peter ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL Sheet Thorhild Thorhild Widvey

AS company parent Chair of Chair of ASASASASASASASASAS asset

Vilde Vilde Eriksen Bjerknes liabilities liabilities liabilities

tax and

non-current financial assets interest-free interest-free liabilities STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT

NOK million Balance Balance Statkraft Assets Deferred Property, Property, plant and equipment Investments Investments in subsidiaries, associates and joint arrangements Derivatives Other Receivables Non-current Non-current assets Derivatives Cash and cash equivalents Current Current assets Assets EQUITY LIABILITIESAND Paid-in capital Retained Retained earnings Equity Provisions Long-term interest-bearing Long-term interest-bearing debt Derivatives Long-term Short-term interest-bearing debt Taxes Taxes payable Derivatives Other Short-term Short-term Equity CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS generated by regular operating, investing and financing activities respectively. activities financing and investing operating, regular by generated Net change Unused overdraftfacilitiesUnused Unused commited creditlines Unused 31.12 Cash andcashequivalents 01.01 Cash andcashequivalents Cash paid and Groupcontribution Dividend Repayment of debt Repayment Proceedsfromnew debt in cashpool Changes CASH Cash Divestmentsof shares Capital reduction in subsidiaries and associatesin subsidiaries reductionCapital and associatesInvestmentsin subsidiaries Investmentsin property,plantandequipment CASH Cash in othershort-termitemsChanges received anddividend Groupcontribution Write-downs/reversal of write-downs from previous years fromprevious of write-downs Write-downs/reversal Taxespaid in value changes Unrealised Depreciation Profit/losson saleofshares Profitbefore CASH million NOK Statkraft Statement flow cash show to order in year the for result company’s the with starts statement The method. indirect the using prepared been has statement flow cash The SIGNIFICANT ACCOUNTING POLICIES Booked income from dividend and group contribution withno casheffects andgroupcontributionBookedincome fromdividend Changes in long-term items in long-termChanges activities from financing flow activities from investing flow activities from operating flow FLOW FLOW FLOW

cash equivalents cash and in tax FROM FROM FROM parentcompany AS of FINANCING

INVESTING OPERATING CashFlow ACTIVITIES ACTIVITIES ACTIVITIES

97 Note 14 14 10 10 23 8 8 A+B+C STATKRAFT C B A

AS -19 986 -16 810 11 000 12 077 15 196 -7 589 -3 082 -3 397 -1 679 -1 652

1 000 5 201 5 471 4 413 7 639 7 127 2 296 4 962 ANNUAL -270 2016 -42 -99 61 20 - - 5

REPORT -35 126 -11 187 12 891 13 000 14 921 10 421 28 975 -4 089 -4 840 -7 611 -5 793 -7 126 -1 137 -9 017

1 000 5 471 9 560 4 290 2 069 2016 -119 -470 2015 450 258 -92 68 -3 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 106 106 107 107 107 108 108 109 109 109 112 112 Page external external auditors interest-free liabilities interest-free Receivables Cash and cash equivalents Equity Provisions Interest-bearing debt Other Derivatives Fees paid to Obligations guarantees and Related parties Transactions Subsequent events Note Note 13 Note 14 Note 15 Note 16 Note 17 Note 18 Note 19 Note 20 Note 21 Note 22 Note 23 Note Note 24

98 99 99 100 100 101 101 103 103 104 105 105 106 Page consolidated consolidated financial statements 2016201620162016201620162016201620162016201620162016

the to REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

operating expenses non-current financial assets ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

AS company parent ASASASASASASASASAS

Market Market risk Analysis of market risk Hedge accounting of Payroll costs and number full-time equivalents Pensions Other Financial items Taxes Property, plant and equipment Shares in subsidiaries, associates and Significant Significant accounting policies joint arrangements Other Note Note 1 Note 2 Note 3 Note 4 Note 5 Note 6 Note 7 Note 8 Note 9 Note 10 Note 11 Note 12 STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Notes Statkraft Index of notes Index of CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Foreign Foreign investments, dividends and other and dividends investments, and manages the financial risks re risks financial the manages and cash flows denominated in foreign currency. foreign in denominated flows cash Recognition of revenues from sale of goods and servic and goods of sale from revenues of Recognition time. interest cost low over time,contributing interestcostlow over keeping betweenof interestrateriskisbasedonabalance management withregards to physical power sales and financial trading on energy exchanges, exchanges, energy on trading financial and sales power physical Sta acceptable level. The central treasury function in Statkraft AS coordinates coordinates AS Statkraft in function treasury central The level. acceptable Principles for recognition of income and expensing of costs of expensing and income of recognition for Principles Interest rate risk rate Interest exchange rate contracts and debt in foreign currency are used to hedge hedge to used are currency foreign in debt and contracts rate exchange Statkraft AS hedges its currency exposure related to cash flows from from flows cash to related exposure currency its hedges AS Statkraft threats and opportunities for the Group, and to manage the risk towards an an towards risk the manage to and Group, the for opportunities and threats basis, but the actual figures may deviate from the initial estimates. initial the from deviate may figures actual the but basis, in foreign subsidiaries. subsidiaries. foreign in Forward portfolio. loan company’s the for structure rate interest and the hedging relationships fulfil the requirements of hedge accounting. hedge of requirements the fulfil relationships hedging the The descriptions of accounting policies in the statements and notes form part FOREIGN EXCHANGE AND INTEREST RATE RISK Norway (Norwegian GAAP). (Norwegian Norway The best estimate at the time when the accounts are rendered form the the form rendered are accounts the when time the at estimate best The development plans. The purpose of risk management policy is to identify identify to is policy management risk of purpose The plans. development of the overall description of accounting policies: Interest rate and currency swaps are used to achieve the desired currency currency desired the achieve to used are swaps currency and rate Interest flows in foreign currencies. Balance sheet risk is related to shareholdings shareholdings to related is risk sheet Balance currencies. foreign in flows derivatives and debt in foreign currencies as hedging instruments. Few of of Few instruments. hedging as currencies foreign in debt and derivatives managed will be provided in the following. following. the in provided be will managed accrual principle. principle. accrual with the Accounting Act and generally accepted accounting principles in in principles accounting accepted generally and Act Accounting the with estimates that affect the book value of assets, liabilities, income and costs. costs. and income liabilities, assets, of value book the affect that estimates Group’s ability and willingness to take risks, expertise, solidity and and solidity expertise, risks, take to willingness and ability Group’s form of transaction risk in connection with investments and other cash cash other and investments with connection in risk transaction of form manage the company’s interest rate and foreign exchange exposure. exposure. exchange foreign and rate interest company’s the manage the company’s financial strategy. Exposure is hedged by using financial financial using by hedged is Exposure strategy. financial company’s the and liquidity of the Group. A more detailed explanation of how these are are these how of explanation detailed more A Group. the of liquidity and when earned, while expensing of costs takes place in accordance with the the with accordance in place takes costs of expensing while earned, when Uncertainties in estimates in Uncertainties accordance in prepared been have AS Statkraft for accounts annual The GENERAL INFORMATION Note1 Statkraft AS uses interest rate and foreign currency instruments to to instruments currency foreign and rate interest uses AS Statkraft Statkraft the on based risk right the assuming about is management Risk RISK AND RISK MANAGEMENT OF FINANCIAL INSTRUMENTS IN Note2 GENERAL VALUATION AND CLASSIFICATION PRINCIPLES tkraft The          AS’ exchange risk exchange interest rate risk is monitored by having duration asmeasure.duration by having interestraterisk ismonitored Statement of cash flow Pensions Research and development costs Taxes Pro Investments in subsidiaries, associates and joint arrangements Receivables Cash and cash equivalents Long-term debt interest rate exposure isrelatedinterestrateexposure Significant accounting policies accountingSignificant Marketrisk interestratechanges,and stabilizing perty, plant and equipment

Statkraft AS incurs foreign exchange risk in the the in risk exchange foreign incurs AS Statkraft

The accounts are based on assumptions and and assumptions on based are accounts The currency exposures in accordance with with accordance in exposures currency lating to currency, interest rates, credit credit rates, interest currency, to lating to stabilize the stabilize to its debtportfolio. The Debt over Debt FFO/Net Group’scash flows es takes place place takes es Note 6 Note 7 Note 9 Note 10 Note 11 Note 13 Note 14 Note 17

99 wit more likely th likely more economic life are depreciated accord depreciated are life economic Liquidity forecasts are prepared as an importa an as prepared are forecasts Liquidity classified as current assets. Receivables that wi that Receivables assets. current as classified denominated in foreign currency are translated using the exchange rate a rate exchange the using translated are currency foreign in denominated BBB (Standard & Poor’s) or better. There are established exposure limits limits exposure established are There better. or Poor’s) & (Standard BBB relation to established frameworks in the finance strate finance the in frameworks established to relation risk at year-end. at risk Statkraft Contingent liabilities Contingent basis for the impairment no longer exists. Fixed assets with limited useful useful limited with assets Fixed exists. longer no impairment the for basis facilities have been established to secure access to short-term financing. financing. short-term to access secure to established been have facilities statements as financial income or financial cost. Transactions Transactions cost. financial or income financial as statements lasting ownership or use are classified as fixed assets. Other assets are are assets Other assets. fixed as classified are use or ownership lasting Placement of surplus liquidity is mainly divided among institutions rated rated institutions among divided mainly is liquidity surplus of Placement to separate organisational units. The interest rate exposure per currency in in currency per exposure rate interest The units. organisational separate to investments are treated in accordance with the cost method. method. cost the with accordance in treated are investments instruments. instruments. value is not expected to be transitory. Impairment is reversed when the the when reversed is Impairment transitory. be to expected not is value be settled on 31 December. Therefore there could be an outstanding credit credit outstanding an be could there Therefore December. 31 on settled be Classification and valuation of assets and debt and assets of valuation and Classification unrealised currency effects are presented as net in the financial financial the in net as presented are effects currency unrealised CREDIT RISK international money markets and from the banking market. Drawdown Drawdown market. banking the from and markets money international Long-term share investments and shareholdings and investments share Long-term operating revenues or expenses. or revenues operating to the liquidity forecast. liquidity the to the time of establishment. of time the and following up the various positions has been separated and is allocated allocated is and separated been has positions various the up following and Fixed assets are valued at cost, but are impaired when the reduction in in reduction the when impaired are but cost, at valued are assets Fixed credit risk when placing surplus liquidity and when trading in financial financial in trading when and liquidity surplus placing when risk credit Cash collateral is settled on a weekly basis and will therefore not always always not therefore will and basis weekly a on settled is collateral Cash valued at the exchange rate on the balance sheet date. Realised and and Realised date. sheet balance the on rate exchange the at valued Statkraft AS has good borrowing opportunities from the Norwegian and and Norwegian the from opportunities borrowing good has AS Statkraft Gains/losses from sale of property, plant and equipment are treated as as treated are equipment and plant property, of sale from Gains/losses reserve is a tool for risk management and functions as a buffer in relation relation in buffer a as functions and management risk for tool a is reserve to classify current and long-term liabilities. liabilities. long-term and current classify to loans are recognised in the balance sheet at nominal received amount at at amount received nominal at sheet balance the in recognised are loans loss on the other party by not fulfilling its obligations. Statkraft AS assumes assumes AS Statkraft obligations. its fulfilling not by party other the on loss continuously by the middle-office function. Responsibility for entering into into entering for Responsibility function. middle-office the by continuously For financial derivatives, credit risk is reduced by using cash collateral. collateral. cash using by reduced is risk credit derivatives, financial For Foreign currency Foreign obligations are not matched to the cash flows generated by its assets. assets. its by generated flows cash the to matched not are obligations value. LIQUIDITY RISK months are classified as current assets. Corresponding criterias are used used are criterias Corresponding assets. current as classified are months management and for planning future financing requirements. The liquidity liquidity The requirements. financing future planning for and management Current assets are valued at the lower of cost and fair value. Short-term Short-term value. fair and cost of lower the at valued are assets Current reported to corporate management. corporate to reported the transaction date. date. transaction the Compliance with the limit for currency and interest rate risk is followed up up followed is risk rate interest and currency for limit the with Compliance Credit risk is the risk of a party to a financial instrument inflicting a financial financial a inflicting instrument financial a to party a of risk the is risk Credit financial its of terms the because risk liquidity a assumes AS Statkraft within h individual counter individual h the shall AS rangeof2to an not. Best estimates are used when calculating settlement settlement calculating when used are estimates Best not. an atall timeskeepthe

Money items denominated in foreign currency are are currency foreign in denominated items Money

- 5 years. parties, which are used for short-term placements. short-term for used are which parties, Contingent liabilities are recognised if settlement is is settlement if recognised are liabilities Contingent STATKRAFT ing to schedule. to ing average duration of its durationaverage nt part of the daily liquidity liquidity daily the of part nt

AS ll be repaid within 12 12 within repaid be ll

ANNUAL Assets intended for for intended Assets

All long-term long-term All gy is regularly regularly is gy

REPORT debtportfolio

2016 t t FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

- 17 572 400 2015 2015 2015 2015 -572 -401 Total Total 1 175 7 550 6 542 5 306 4.90% 2.90% 0.80% 12 809 19 059 38 410 27 565 35 131 11 778 18 047 35 131 adapt 780 million to desired counterparties. counterparties. the 2 - - same, and 90– -266 1 400 4 531 5 667 the 5 250 4 423 9 673 9 510 38 410 hedging object and achieve the to period 2017-2022. floating floating 3-month and 6- to inefficiency inefficiency is recognized in the currency effect of combined interest rateeffectcombined currency of interest - - - - The 12 the 2016 2016 - 5 306 4.40% 2.60% 0.70% be approximately 229 2016 2016 504 -229 11 778 18 047 35 131 critical terms of Statkraftuses rate derivatives interest The Statkraftswaps these uses - - - 15 326 - - hedges expire during the 800 2 250 800 17 576 The -1 909 6 533

or NIBOR. 1–3 years 3–5 years 5 years and later Future Future interest rate adjustments - 6 204 3 000 18 814 38 410 - - 14 EURIBOR 400 agreements swap interest rate from fixed 4 317 1 110 1 101 5 306 0-1 year 12 262 1 350 21 885 2 460 1 113 24 276 are interest are interest rate swaps with a nominal value of respectively EUR and NOK 2900 million, entered into with major banks as the The month 110% hedging efficiency is assumed. hedging instrument are deemed to income statement. income statement. receives fixed interest from interest rateinterest fixed interest receives from swaps. hedged risk 100 - - 2 600 - 60 the

to Statkraft nominal from combined interest rate and rate from combinedcurrency interest swaps, since 1 - 500 -195 4 191 6 201 5 892 1 816 6 198 1 876 3 014 0-1 year 1–2 years 2–3 years 3–4 years 4–5 years 5 years and later first-year installment on long-term interest-bearing debt, certificate oninterest-bearing certificate first-year installment long-term debt, and loans hedging instruments the The associated interest rate swaps have 1) 1) 2016201620162016201620162016201620162016201620162016

hedging

SF (back-to- NOK EUR GBP AS treats some loan arrangements as fair currency value by currency currency REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT portfolio

company’s debt portfolio. Negative Negative company’s reflect debt portfolio. figures that Statkraft by

company's debt portfolio. the

Statkraft Norwegian market on fair the

interest interest debt ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL for

of of Hedge accounting Analysis of market Analysisrisk market of hedging instruments 780 million and NOK 2900 million. ASASASASASASASASAS schedule

of hedging

EUR information

debt hedging relationships, and the specification includes long-term interest-bearing debt, loans, debt, specification on includes long-term interest-bearing certificate installment ratefirst-year swaps long-term interest-bearing debt, interest combined rate and interest specification includes long-term interest-bearing debt, debt, specification includes interest-bearing long-term repayment schedule 2015 fixed interest 2016 fixed interest 2015 repayment schedule 2016 value value

hedging objects are issued fixed-interest bonds with a total The The been designated as hedging instruments. The value hedges. value hedges. Issued bond loans have been designated as hedging objects in the value of value of STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT NOK million Net gain (+)/loss (-) in income statement on hedging instruments NOK million Hedging instruments used in fair value hedging Other Fair

Note Note 4 Fair Total back agreement) Repayment Repayment NOK million Instalments on debt to 1) since debt, and and currency swaps. with Interest rate swaps and combined interest must rate swaps currency seenconnection be in interest rate exposure to Debt Debt in NOK Specification Nominal average interest rate, 1) and currency swaps. Specifications of debt by currency includes effects currency structure NOK million Debt in NOK Note 3 Note Specification Nominal average interest Nominal average interest rate, Debt Debt in EUR Nominal average interest Nominal average interest rate, Total Fixed debtinterest rate NOK million Net gain (+)/loss (-) in income statement Net gain (+)/loss (-) in income statement on hedging objects, in relation Hedge inefficiency Bonds Bonds issued in the Debt Debt in EUR Debt in GBP Total Debt Debt in GBP Debt Debt issued in non-Norwegian markets Total Other Currency effect of combined interest Currency effect of combined and interest rate currency swaps Total CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS the age of 62 unde 62 of age the the payment has been made. T made. been has payment the between 30 and 40 years. Emplo years. 40 and 30 between retirement pensions, the contribution scheme also entails r entails also scheme contribution the pensions, retirement fund assets is simulated as though the assets were invested in in invested were assets the though as simulated is assets fund 12G, with maximum accrual. Statkraft AS also offers early retirement from from retirement early offers also AS Statkraft accrual. maximum with 12G, fund manager without incurring further obligations for the company once once company the for obligations further incurring without manager fund 18% of the pensionable salary between 7.1G and 12G. In addition to to addition In 12G. and 7.1G between salary pensionable the of 18% benefits, contributions will normally be required to be paid over a period of of period a over paid be to required be normally will contributions benefits, Act). The SPK scheme is not asset based, but management of the pension pension the of management but based, asset not is scheme SPK The Act). provide pension benefits amounting to 66% of pensionable income, up to to up income, pensionable of 66% to amounting benefits pension provide retirement benefit scheme where Statkraft AS pays fixed contributions to a a to contributions fixed pays AS Statkraft where scheme benefit retirement salary up to 7.1 of the National Insurance Scheme’s basic amount (G), and and (G), amount basic Scheme’s Insurance National the of 7.1 to up salary percentage of the employee’s salary. To be able to receive full retirement retirement full receive to able be To salary. employee’s the of percentage the SPK are guaranteed by the Norwegian state (Section 1 of the Pension Pension the of 1 (Section state Norwegian the by guaranteed are SPK the Defined contribution schemes contribution Defined retirement, disability and survivor pensions. The retirement schemes schemes retirement The pensions. survivor and disability retirement, January 2014. 2014. January tjenestepensjon”). receive on retirement. The retirement benefit is normally set as a a as set normally is benefit retirement The retirement. on receive defined contribution scheme. The contributions are 6% of the pensionable pensionable the of 6% are contributions The scheme. contribution defined of the scheme in the National Pension Fund (SPK). Pension benefits from from benefits Pension (SPK). Fund Pension National the in scheme the of Funded defined benefit schemes benefit defined Funded The pension benefit scheme in SPK was closed for new employees 1 1 employees new for closed was SPK in scheme benefit pension The maturity. benefit scheme that defines the retirement benefits that an employee will will employee an that benefits retirement the defines that scheme benefit regarding mandatory occupational pension scheme (“Lov om obligatorisk obligatorisk om (“Lov scheme pension occupational mandatory regarding Statkraft AS’ pension scheme for new employees from 1 January 2014 is a a is 2014 January 1 from employees new for scheme pension AS’ Statkraft Statkraft AS pays an annual premium and is responsible for the financing financing the for responsible is and premium annual an pays AS Statkraft payroll costs. payroll contributions will have their retirement benefits proportionately reduced. proportionately benefits retirement their have will contributions Defined benefit schemes benefit Defined government bonds. In simulations it is assumed that bonds are held to to held are bonds that assumed is it simulations In bonds. government Total Other Number of full-time equivalents as of31.12Number offull-timeequivalents GENERAL INFORMATION Note6 Averagenumber offull-timeequivalents Remuneration 1) costsPension contributioninsurance Employers'national Salaries million NOK Note5 Statkraft AS is obligated to and does fulfil the requirements of the act act the of requirements the fulfil does and to obligated is AS Statkraft Pension costs are described in furtherdetailnote costsaredescribed Pension 6.

benefits Pensions full-timeequivalentsPayrollcosts andnumberof 1) to the r the Norwegian early retirement pension scheme. scheme. pension retirement early Norwegian the r Chairman and the Chairman

A defined benefit scheme is a retirement retirement a is scheme benefit defined A he payments are expensed as salaries and and salaries as expensed are payments he

yees who have not made full full made not have who yees A defined contribution scheme is a a is scheme contribution defined A

The defined benefit schemes cover cover schemes benefit defined The Board of Directors are disclosed in note37the BoardofDirectorsaredisclosed isk covers. isk Norwegian Norwegian 101 disability pension eq pension disability data are recognised directly against e against directly recognised are data at the end of the year. The discount rat discount The year. the of end the at SIGNIFICANT ACCOUNTING POLICIES employees whose pensionable incomes exceed 12G with a retirement and and retirement a with 12G exceed incomes pensionable whose employees Gains and losses attributable to changes in actuarial assumptions or base base or assumptions actuarial in changes to attributable losses and Gains The liability recognised in the balance balance the in recognised liability The retirement age. Calculations are based on staff numbers and salary data data salary and numbers staff on based are Calculations age. retirement liabilities. ESTIMATES AND ASSUMPTIONS above 12G, provided they have at least three years’ pension entitlements. pension years’ three least at have they provided 12G, above AS has entered into an additional pension agreement that provides all all provides that agreement pension additional an into entered has AS projected yield on pension fund assets. fund pension on yield projected balance sheet are adjusted for expected future salary increases until until increases salary future expected for adjusted are sheet balance schemes that are covered by operations are classified as long-term long-term as classified are operations by covered are that schemes pensionable age receive a deferred pension entitlement for the scheme scheme the for entitlement pension deferred a receive age pensionable Unfunded defined benefit schemes benefit defined Unfunded due to changes in assumptions for discount rate and salary adjustments. salary and rate discount for assumptions in changes to due accrued during the period, the interest on the estimated liability and the - the and liability estimated the on interest the period, the during accrued calculated using the accrued benefits method. Net pension liabilities in the the in liabilities pension Net method. benefits accrued the using calculated non-funded and schemes underfunded for liabilities benefit retirement Existing members of the closed agreement who leave the company before before company the leave who agreement closed the of members Existing are reduced by the fair value of the plan assets. assets. plan the of value fair the by reduced are and payroll costs, and comprises the total of the retirement benefits benefits retirement the of total the comprises and costs, payroll and and present value of accrued pension entitlements for the year are are year the for entitlements pension accrued of value present and The actuarial gain recognised directly in equity during the year is mainly mainly is year the during equity in directly recognised gain actuarial The current assets and recognised in the balance sheet at fair value. Net Net value. fair at sheet balance the in recognised and assets current income exceeding 12G. The agreement was closed 30 April 2012. 2012. April 30 closed was agreement The 12G. exceeding income bonds (covered bonds – OMF). OMF). – bonds (covered bonds benefit scheme is the present value of the future retirement benefits that that benefits retirement future the of value present the is scheme benefit The net retirement benefit cost for the period is included under salaries salaries under included is period the for cost benefit retirement net The Present value of accrued pension entitlements for defined benefit schemes schemes benefit defined for entitlements pension accrued of value Present non- as classified are schemes overfunded for assets fund pension Net Groupaccounts. uivalent to 66% of that portion of their pensionable pensionable their of portion that of 66% to uivalent 489 500 107 768 512 2016 2016 60 89 STATKRAFT

quity. sheet which relates to the defined defined the to relates which sheet In addition to the above, Statkraft Statkraft above, the to addition In e is based on high-quality corporate corporate high-quality on based is e

AS

ANNUAL

REPORT

2016 2015 2015 510 114 727 492 491 35 87 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 8 -6 80 26 98 16 88 -10 332 415 114 211 933 634 326 299 713 2015 2015 2015 2015 2.50% 2.50% 1.50% 2.25% 31.12.2015 K2013/IR73 -5 11 67 31 89 18 90 -15 2016 2016 2016 2016 425 321 107 182 737 336 303 729 1 040 2.30% 2.25% 1.25% 2.00% 31.12.2016 K2013/IR73 31.12 102 tax (G) year equity in funded defined benefit funded defined benefit schemes the unfunded unfunded defined benefit schemes for for for liability statement pension

2016201620162016201620162016201620162016201620162016

income

the schemes are used benefit in REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

mortality mortality and disability funded defined benefit schemes benefit for for defined

National Insurance Scheme’s basic amount Nationalbasic amount Insurance Scheme’s losses recognised and losses recognised directly schemes ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

assumptions net defined ASASASASASASASASAS of

of gains benefit contribution schemes pension costs following

Employers' Employers' national insurance contribution Net pension cost defined benefit schemes STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Defined Defined Actuarial Actuarial NOK million Accumulated actuarial gains and losses recognised directly in equity before NOK million Present value of accrued pension entitlements Interest Interest costs Projected yield on pension assets Employee contributions Defined Employers payments Breakdown NOK million pensionPresent value of accrued entitlements Employees Discount rate and projected and projected Discount rate yield Note 6 continued Note The Salary Salary adjustment Adjustment current pensions Adjustment of Adjustment theAdjustment of Pensioners Pensioners people and with deferred entitlements Pension cost recognised Total Fair Fair value of pension assets Demographic factors Demographic factors Members Net Net pension liability Employers' Employers' national insurance contribution Present Present value of accrued pension entitlements Net Net pension liabilities CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS are expensed as and when they are incurred. incurred. are they when and as expensed are Total Other Insurance Travelexpenses Marketing expenses IT Total Rent Materials Total Gains and losses on securities, realised and unrealised realised Gainsand lossesonsecurities, items Net financial Total unrealised Gainsand lossesderivatives, realised Gainsand lossesderivatives, Currency gains andlosses,unrealised Currency gains Note8 1) Purchaseofthird-partyservices million NOK costs of expensing for Principles SIGNIFICANT ACCOUNTING POLICIES Note7 Currency gains andlosses,realised Currency gains million NOK Net realised 1) years fromprevious of write-downs Write-downs/reversal million NOK Net realised Interestexpense million NOK costs Financial fromgroupcompanies Interestincome million NOK Financial Groupcontribution fromgroup companies Dividend million NOK Revenuesfrominvestments Other Total Gainon saleofsharesinSmåkraft down with assessment ofallthe Basedon anupdated Total Other Interest expenses externaldebt Interestexpenses Interestincome plants, an updated valuationplants,an updated The Purchase of third-party services mainly includes consultants and other consultantsservices. ofthird-partyservicesmainlyincludes Purchase and The fair value ofthe fairvalue write-downs are related to are related write-downs operating expenses operating financial income financial financial costsfinancial 1079 million in 2016. million 1079 NOK income unrealisedcurrency and unrealisedsecurities and Financial itemsFinancial Other shares inthe to groupcompanies operating expenses operating the trading activities, and currency effects,activities,trading and

the subsidiary in Enerji shares inStatkraft 1) subsidiaries Expensing of costs takes place in accordance with the accrual principle, while own research and development expenses expenses development and research own while principle, accrual the with accordance in place takes costs of Expensing assets, investments and liabilities of liabilities assets,investmentsof and Germany GmbH hasbeenassessed. Considering Germany Statkraft derivatives and

and associates and A.S. 1) Statkraft the shares have been written down been written with shares have GmbH.Germany the Turkish subsidiary Turkish 103 Enerji Statkraft the impact of impact 3883 million in 2016. NOK 3883 million the as well as currency effects,A.S., as well as currency

Q2 2016 impairment loss in impairmentGerman gas powered power 2016 -4 971 -4 -4 962 -4 -1 127 -1

3 403 4 926 2 963 1 892 3 403 2 829 257 111 598 436 -186 -20 -899 -209 757 132 138 121 286 2016 2016 2016 2016 2016 2016 51 -9 32 28 15 - - 5 STATKRAFT

the

AS shares have been written shares have

ANNUAL

REPORT -1 969 -4 020 -1 109 -3 614 -2 068 -1 355 -1 160

7 133 6 630 2016 -167 2015 2015 2015 2015 2015 2015 825 139 110 448 119 680 503 122 143 577 367 312 -20 -27 23 42 38 18 24 7 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

3 6 3 6 - - - - -2 92 43 -42 362 558 353 104 353 362 2015 2015 2015 2015 -712 -127 -168 -109 -470 25% -77% -1 245 -4 222 -1 641 -4 981 -1 245 tax values and the tax effect of

- 5 5 49 5 9 31 474 2016 2016 2016 2016 -76 -728 -854 -790 -877 -49 -425 24% 40% -790 926 574 446 926 102 474 446 1 241 2 296

-3 290 -1 738 -1 245 losses carried forward. Deferred tax assets are only recognised in the balance sheet to the extent it is probable that the assets will be realised in the future. Tax related to equity transactions is recognised in equity. Deferred tax liabilities/assets are calculated on the basis of temporary differences between the accounting and 104 net deferred tax: the effective effective tax rate loss carry forward year 2016201620162016201620162016201620162016201620162016 following

asset (-)

the

sheet tax the for asset (-) as of 01.01 asset (-) as of 31.12 expense REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

tax balance

balance sheet tax previous years income statement the nominal andtax rate to (+)/deferred (+)/deferred ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL in of

rates Taxes expense at nominal of 25% (27%) rate tax ASASASASASASASASAS tax tax (+)/deferred tax (+)/deferred tax rate

rate payable on profit payable tax tax tax tax

tax tax tax payable on taxes of: permanent net differences, long term items temporary differences and tax deferred tax tax expense comprises comprises tax expense following table provides a breakdown of expense expense in the effect effect of group contribution Tax Withholding Withholding Impairment/reversal of impairment previous years Taxes Taxes Changes in tax Other Total Effect Effect Tax-free income Changes relating Tax Applied Applied Derivatives Property, plant and equipment Pension liabilities STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Other Current assets/current Current assets/current liabilities NOK million Reconciliation NOK million Profit before Expected Income Income Tax Taxes payable in the NOK million Income Income The NOK million SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT Statkraft AS is subject to tax on profits that is calculated in accordance Note 9 Note Change in deferred Withholding Withholding Previous Previous years payable Deferred Deferred Recognised directly in equity Recognised in income Effective Breakdown deferred tax The Total Deferred Deferred with ordinary tax rules. The tax charge in the income statement comprises taxes payable and changes in deferred tax liabilities/assets. Taxes payable are calculated on the basis of the taxable income for the year. CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS AS has significant influence. Significant influence is normal is influence Significant influence. significant has AS hours in the balance sheet. balance the in hours the voting shares. Associated companies are companies where Statkraft Statkraft where companies are companies Associated shares. voting the influence is normally achieved when the company owns more than 50% of of 50% than more owns company the when achieved normally is influence starts regular operations. The acquisition cost consists solely of directly attributable costs. Indirect administration costs are excluded when recognising own own recognising when excluded are costs administration Indirect costs. attributable directly of solely consists cost acquisition The operations. regular starts company together with another party. another with together company controlling influence over financial and operational principles. Controlling Controlling principles. operational and financial over influence controlling shares. Joint arrangements are where Statkraft shares control of a a of control shares Statkraft where are arrangements Joint shares. arrangements exist where the company owns or controls from 20 to 50% of the voting voting the of 50% to 20 from controls or owns company the where exist Property, plant and equipment are recognised in the balance sheet and depreciated on a straight-line basis from the time the property, plant or equipment equipment or plant property, the time the from basis straight-line a on depreciated and sheet balance the in recognised are equipment and plant Property, SIGNIFICANT ACCOUNTING POLICIES Note10 Investment in subsidiaries, associated companies and joint joint and companies associated subsidiaries, in Investment SIGNIFICANT ACCOUNTING POLICIES Note11 TreasuryCentre Statkraft Statkraft Industrial Holding Industrial Statkraft Enerji Statkraft Germany GmbH Statkraft Forsikring Statkraft WesternBalkansd.o.o. Statkraft VindHolding Statkraft Elektrik Enerjisi ToptanElektrikEnerjisi Statkraft InvestCarbon Statkraft Asset Holding AS AssetHolding Statkraft Smøla Total Accumulated depreciation and impairment asof31.12 andimpairment depreciation Accumulated at01.01Balance million NOK UKLtd. Statkraft EnergyFinancial Statkraft Energi Statkraft Spain and Photovoltaics EnergiesRenewable Vind AS Kjøllefjord HitraVind AS Shares million NOK Steinsvik Periodofdepreciation at31.12Balance Cost31.12 at31.12Balance and impairment Depreciation Disposals Transferredfromplantsunder construction Additions subsidiaries Vind2 AS in IH Kraft subsidiaries InvestAS

AS Property, plantandequipment Shares in subsidiaries, associatesand Sharesin subsidiaries,joint arrangements A.S. Subsidiaries are companies where Statkraft AS has has AS Statkraft where companies are Subsidiaries AS 2) 2) 3) AS

2) AS AS SA 2) AB AS 2) Satıs¸ 2) Ltd.Sirketi S.L.

2) 2) ly deemed to to deemed ly Registered officeRegistered üslof100.00% Düsseldorf tchl 100.00% Stockholm egae100.00% Belgrade rses100.00% Brussels sabl100.00% 100.00% Istanbul Istanbul odn100.00% London Malaga Bergen 105 Oslo so100.00% Oslo so100.00% 100.00% Oslo Oslo so100.00% Oslo so100.00% Oslo so100.00% Oslo so100.00% Oslo so100.00% 100.00% Oslo Oslo wh purchase, the excess part represents repayment of invested capital and and capital invested of repayment represents part excess the purchase, reasons that cannot be considered transitory. Impairment is reversed reversed is Impairment transitory. considered be cannot that reasons accounting. If the dividend exceeds the share of retained profits after the the after profits retained of share the exceeds dividend the If accounting. been necessary. Impairment is done when the reduction in value is due to to due is value in reduction the when done is Impairment necessary. been companies are recognised as income in accordance with the cash basis of of basis cash the with accordance in income as recognised are companies The investment is valued at cost for the shares unless impairment has has impairment unless shares the for cost at valued is investment The income during the year when earned, while dividends from other other from dividends while earned, when year the during income in the balance sheet. balance the in Dividends and group contributions from subsidiaries are recorded as as recorded are subsidiaries from contributions group and Dividends the disbursements received are deducted from the value of the investment investment the of value the from deducted are received disbursements the Shareholding and Shareholding en the basis for the impairment no longer exists. exists. longer no impairment the for basis the en equipment and otherequipment voting share voting Buildings, Buildings, office 81.90% 40.00% 70.00% 3–75years -256 552 270 297 297 -61 Equity31.12.2016 49 39 -1 15 322 14 321 15 935 21 393 31 161 4 736 3 406 4 274 359 730 268 111 130 25 24 39 92 14 -2 STATKRAFT 1) Plantsunder construction Net profit2016 -49 49

- - - 4 4 4 4 AS 4 185

ANNUAL -339 -135 -118 287 497 764 19 24 -1 -4 -1 -1 -3 - - 5 7 1 1)

REPORT Carrying value Carrying 14 284 19 297 14 295 15 705 77 834

2016 3 847 5 759 2 642 Total -256 715 150 556 102 737 319 300 300 -61 80 50 44 95 28 43 -1 - - 1 4 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 9 16 76 83 90 16 105 550 184 2015 2015 2015 2015 -863 7 582 4 921 2 477 5 471 1 008 78 017 19 050 19 140 11 188 Statkraft 7 -8 16 157

balance sheet date) date) sheet balance the 15 million. NOK15 has on interest has on interest rate swaps, combined 16 40 22 659 84 58 17 20 17 2016 2016 2016 2016 AS 357 935 5 181 5 201 11 013 20 740 20 824 12 039 (after 2017 January 20 of Statkraft On NOK 1 000 million. 42.00% 50.00% 62.00% 50.10% as receivables or short-term debt (note 13 and 17). ownsAS directly. 40% Oslo 106 Statkraft Tysvær AS. table below shows net payments at year end from counterparties, who will eventually Kristiansand net net unrealised gains and losses that exceptions. Kristiansand Kristiansand S for The the for AS and BKK 2) footnote See transaction has not been finalised, but preliminary assessment assessment preliminary but of transactionnot loss has beena finalised, indicates the AS, Energi Agder 1) Kraft valuation of counterparties as security 2016201620162016201620162016201620162016201620162016

4) to/from 2015. for non-current financial assets company. The REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

arrangements cash collateral financial derivatives to for joint is owned 20% by Skagerak ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL Cash and cash equivalents Receivables Other 4)

AS 2) notes notes 13 and 17. holding in the and ASASASASASASASASAS AS

AS AS has unused committed credit lines of NOK 11 000 million and unused overdraft facilities of Group companies Kontakt AS arrangements associates and joint shares and loans receivables Shareholders' Shareholders' agreements indicate joint control. Based Based on preliminary unaudited financial statements 2016. Based on annual accounts Steinsvik Kraft Short-term Short-term receivables comprisefrom Group companies fromdividends groupand contribution subsidiaries. Naturkraft Naturkraft Fosen Fosen Vind AS has sold its Statkraft Vind DA Agder Energi Grønn 4) 1) 2) 3) Associates Associates Total Total Statkraft STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Net cash collateral Net cash collateral NOK million NOK million Cash and cash deposits The line item cash and cash equivalents also includes Market certificates settlements and for acquisition. bonds of with shorttime residual the termsat SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT Note Note 14 1) As of 31 December 2016 no provision for bad debt has been identified. NOK million Accounts receivable SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT Accounts receivable and other receivables are recognised at nominal value after the deduction of expected loss. Loss allocations are made on the basis of Note Note 13 NOK million Loans to Other Total Note Note 12

Other Total Receivables related Money market funds, certificates Total Group Group cash pooling receivable Cash Cash collateral Cash collateral is a payment be repaid. See Short-term Short-term receivables from group companies interest interest rate and currency swaps and forward exchange contracts. derivatives connected with financial activities (cash collateral) are recognised in the balance sheet as receivable or short-term debt. Cashpool deposits and individual evaluations of each receivable. loans to subsidiaries are net reported, and the corresponding item is classified either CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS cost) for fixed interest debt. The first year’s repayments relating to long-term debt are presented as current liabilities. current as presented are debt long-term to relating repayments year’s first The debt. interest fixed for cost) Statkraft’s Total and changes in exchange ratesonforeigncurrencyloans. in exchange and changes Total Other Debt issued in non-Norwegian markets Debtissued innon-Norwegian Bondsissued inthe Debt Long-term Total Other Short-termdebt Certificateloans to Debtrelated Norwegian state,throughNorwegian Group cash pooling debt Groupcash pooling Creditfacilities Total Other by Statkraft rightsand areowned The 1) Note15 Firstyear’s instalmentoflong-termdebt Short-terminterest-bearing million NOK SIGNIFICANT ACCOUNTING POLICIES Note17 1) liabilitiesPension million NOK Note16 Long-term debt Long-term Dividends 2016 Dividends contributionCapital Actuarial gains/losses pensions Actuarialgains/losses Dividends 2015 Dividends Profit pensions Actuarialgains/losses Equityas of31.12.16 Equityas of31.12.15 Profit Capital contributionCapital Equityas of01.01.15 million NOK Pension liabilities are described in further detail note6. in furtherdetail are described liabilities Pension The parent company has a share capital of parentcompany hasasharecapital interest-bearing debt interest-bearing capital contributions were partly settled against settledagainst receivables were partly contributionscapital to debt shorttermdebt provisions for for

Statkraft 2016 2015 net debt repayment in2016amountednetdebtrepayment interest-bearing debt cash collateral Equity Interest-bearing debt Interest-bearing Provisions SF to

1) Borrowing costs and early redemption penalty or discount are recognised in accordance with the effective interest rate method (amortised (amortised method rate interest effective the with accordance in recognised are discount or penalty redemption early and costs Borrowing Groupcompanies Norwegian market Norwegian (back-to-backagreement) 1) 1) the MinistryofTrade, IndustryandFisheries. debt which is a Norwegian state-owned company, established and domiciled in Norway.and domiciled state-ownedcompany,established which isaNorwegian SF, NOK 33.4 billion, divided into 200 million shares, each with a parvalueof shares, eachwithinto200 million divided 33.4billion, to

NOK Statkraft 3176million. had SF Other Sharecapital 33 400 33 200 33 000 107 changes are mainly explained by the explained are mainly changes 200 200 ------Paid-in capitalPaid-in Share premium Share 20 862 21 077 20 527 account -1 315 1 100 550 - - - - -

Other 52 983 29 140 21 673 23 843 15 802 changes in group cash pooling debt in groupcashpooling changes 7 050 1 292 5 892 paid-in 2016 capital 400 304 500 771 729 2016 17 53 42 167. All NOK -16 16 16 - STATKRAFT ------Statkraft shareshavethe is wholly owned bythe owned is wholly SF

AS Retained earnings -1 604 -3 019 1 371 1 629 3 979

ANNUAL -832 19 86 - - -

REPORT same voting 75 193 34 641 27 166 40 552 33 603 54 261 55 922 57 522

-1 604 -4 350 7 050 1 614 4 297 1 000 2016 equity 2015 1 371 1 300 2015 Total -832 400 766 713 750

25 26 11 53 19 86 - FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

1) - 44 52 485 470 449 140 633 110 559 212 Fair 2015 1 064 1 082 1 323 1 604 1 116 2 399 2 652 lue o a test value

- - - - 110 633 110 633 212 31.12.2015 1 323 1 116 2 652 Value 3 1) 48 42 42 837 340 413 428 844 791 353 513 Fair Carrying 2016 504 1 225 1 657 4 350 1 746 6 684 value rate swaps, as well as combined interest rate and

- - - - 48 48 428 428 791 353 513 31.12.2016 1 657 Value The accounting treatment of financial derivatives designated as

Carrying The interest rate swaps, including the interest portion of combined interest of reasonableness against calculations made by the counterparties to the hedging. In the event of hedging of assets or liabilities in the balance currency swaps, is determined by discounting expected future cash flows rate and currency swaps, are part of risk management and are accounted contracts. sheet, the derivative is recognised at fair value. net realised and unrealised currency and derivatives. Combined interest to present value through use of observed market interest rates and quoted The carrying value of the hedged asset or liability is adjusted for the value for as hedging or at the lowest value principle, depending on whether the rate and currency swaps are recorded in accordance with the lowest value exchange rates from ECB. The valuation of forward currency exchange of the financial derivative’s change in value which is related to hedged risk. requirements for hedge accounting are achieved. contracts is based on quoted exchange rates, from which the forward principle. Hedging More information about hedge accounting can be found in note 4. The fair value of interest exchange rate is extrapolated. Estimated present value is subject t hedging instruments is recorded in line with the principles for fair va ESTIMATES AND ASSUMPTIONS AND ESTIMATES 108 ng ange rate contracts are valued at 2016201620162016201620162016201620162016201620162016

ins are included in the financial result. assets Statkraft AS uses interest rate derivatives to

liabilities interest-free liabilities interest-free REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

In order to hedge against fluctuations in the foreign

ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL Derivatives Other

ASASASASASASASASAS

and interest rate derivatives and interest rate derivatives and interest rate derivatives and interest rate agreements Group companies interest-free liabilities interest-free to STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Forward Forward exchange rate contracts Interest Interest rate swaps Currency Currency Interest rate derivatives GENERAL INFORMATION GENERAL Statkraft AS trades in financial derivatives for different purposes, and Note Note 19 NOK million Accounts payable Note 18 Note

Forward Forward exchange rate contracts Total Total Indirect payable Indirect taxes loans before maturity. Interest rate derivatives in connection with loans NOK million Currency Interest rate swaps Dividends payable Derivatives – current assets NOK million Currency Interest rate swaps Combined interest Combined interest rate and currency swaps Combined interest Combined interest rate and currency swaps Derivatives Derivatives – long-term Forward exchange rate contracts Debt Debt Other Combined interest Combined interest rate and currency swaps Total Total fair value. Changes in value are recorded in the income statement as Interest rate derivatives that are defined as hedging instruments are adapt interest rate exposure to the Group’s debt portfolio. Recognition of accounts will depend on the purpose as described below. that have been repaid are normally cancelled. Gains and losses from accrued in the same way as interest on hedged debts or receivables. SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT gains and losses depends on whether the interest rate derivative has been cancelled interest rate swaps are accrued together with underlying loans. Interest rate derivatives are classified as long-term financial assets or classified as a hedging instrument. Interest rate derivatives that are not Currency derivatives long-term financial liabilities if the remaining term is longer than one year. NOK million Derivatives Derivatives – non-current Currency Currency Accounting value currency and interest and fair value of rate derivatives: hedging instruments are recorded in accordance with the lowest value currency rates, Statkraft AS uses currency derivatives in line with Gains and losses are recognised in the income statement when settli principle. Unrealised losses or ga approved financial policy. Forward exch CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Total Combined interestrate andcurrencyswaps Combined Transactions with subsidiaries, associated companies associatedTransactionswith subsidiaries,  

Forward exchange rate contractsForwardexchange Statkraft Tax    Other

Total for Sluppen Other Statutory thousand NOK Deloitte Note20 1) Interestrateswaps Currency million NOK – currentliabilities Derivatives Note19 continued The Note22 Statkraft Note21 1)   Statkraft premises. Trondheim All  Fair value does not include accrued interests. Fairvaluedoesnotinclude The intra-group transactions are conducted atmarketterms.transactionsare conducted intra-group

the consultancy services consultancy Company’s relatedparties areconsidered Company’s Group management and the Groupmanagement in note11 see specification andjointarrangements,Associatedcompanies The Other in note11 see specification subsidiaries,Directlyowned functionin Statkraft areaccruedthrough and groupcontributions Dividends Statkraft Statkraft main itemsinthe services attestationservices Oslopremises.The AS parentcompanyof respectively. ANS auditing leases office buildings in Lilleakerveien 4 and 6 in Oslo and Sluppenveien 17B in Trondheim. The 17Bin Trondheim. 4 and6inOsloSluppenveien inLilleakerveien leases officebuildings AS has guarantees and off-balance-sheet obligations totalingobligations andoff-balance-sheethas guarantees AS has committed funding of Cetin and Kargi project in Turkey ofproject inTurkey ofCetinand Kargihas committedfunding AS group companies, see specification in note24 and39to seespecificationgroup companies, interest ratederivatives and isthe sells intra-group services from centralised servicecentresservices fromcentralised sells intra-group AS is alsothe AS 1) Feespaid to Related partiesRelated andguaranteesObligations

Group’s auditor.The Statkraft fees coordinates and manages the andmanages coordinates AS for lease agreement in Trondheim expires in 2030 with an optionexpires in2030within Trondheimlease agreement otherservicesin2016 and 2015 relate The borrower for borrower the lease agreements in Oslo expire in 2028 withanoption agreementsinOsloexpire2028 lease Group, board of directors, see specification in note37to board ofdirectors,seespecification externalauditors Statkraft

the majority of to

total SF be: feespaid for and joint arrangements mainly relatemainly jointarrangements the financial risks relatingfinancial Group’s external borrowings and isthe Group’sexternalborrowings Statkraft to assistance auditing and otherservicesfor auditing the AS’ Consolidated Financial StatementsFinancial Consolidated NOK own shareholdings to map various existing processes and procedures, and procedures,various existingand map processes and 154 million. TRY 23 429 million. Of 23429million. 109 to

the currency, interest rates and liquidity ofcurrency,interestratesand liquidity Consolidated Financial StatementsFinancial Consolidated to to prolong prolong for prolong to

21 663 million concerns parent company guarantees.concerns parentcompany 21 663million this,NOK the 1 241

Statkraft 347 864 following: owner ofthe for 30

ten 5 years. plus ten (excluding VAT) (excluding AS lessors are Mustad Eiendomlessors areMustad cash pooling facilities. cashpooling The years. The 5 124 1 236 2 986 1 241 annual lease totals annual 451 451 2016 347 864 30 STATKRAFT the the attestation of annual leasetotalsannual Group. were asfollows:

AS 2 192 1 793 The

ANNUAL 7 million for 7 million NOK the 367 33 centraltreasury sustainability report. sustainability and Kjeldsberg AS

REPORT 96 million NOK

2 192 1 793 7 735 2 753 3 876 the 2016 2015 367 422 684 33

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

5 1 9 7 - - - - 37 12 17 52 17 54 45 22 21 75 56 80 88 27 44 17 70 345 481 483 251 785 202 197 176 100 696 452 122 2015 2015 7133 8 250 6 835 7 582 1 008 6 630 19 050 10 800 - - - 14 59 47 45 62 43 17 56 33 17 79 40 89 13 76 10 32 26 2016 2016 390 495 118 132 357 250 178 260 996 547 112 837 134 4 099 8 250 2 613 2 193 3 403 1 752 1 300 2 462 20 740 10 800 11 013 income) 110 (recognised financial(recognised as companies group Group are presented are presented Group below: 2016201620162016201620162016201620162016201620162016

AS companies AS AS million companies

AS REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

group AS million contribution from AB from AB expenses Energi Energi Asset Asset Holding ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL AS AS AS AS AS AS AS

group ASASASASASASASASAS AB

Invest AS Invest AS Invest AS Invest AS income and IH IH IH SF IH Statkraft Statkraft - NOKstatement Baltic Cable

Skagerak Energi operating Vind 2 AS

non-current financial assets STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Other Loan to Balance Balance sheet - NOK Non-current assets Loan to Statkraft Markets GmbH Smøla Statkraft UK Ltd. Income Operating revenues Statkraft Energi Note 22 continued Note and balances Transactions within the Derivatives Statkraft Energi Statkraft Markets GmbH Other Total Statkraft Industrial Holding Statkraft Sverige Loan to Statkraft Energi Loan to Current Current assets Kjøllefjord Vind AS Statkraft Industrial Holding Statkraft Asset Holding AS Other Financial Statkraft Energi Fosen Fosen Vind DA Statkraft Statkraft Asset Holding AS Short-term Short-term receivables group companies Statkraft Asset HoldingAS Other Baltic Baltic Cable Group cash pooling receivable Statkraft Markets GmbH Total Statkraft Other Total Other Statkraft Energi Financial to groupcosts Statkraft Markets GmbH Statkraft Statkraft UK Ltd. Statkraft Energi Statkraft Total Statkraft Statkraft Energi Dividend Total CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Asset Holding AS AssetHolding Statkraft MarketsGmbH Statkraft TreasuryCentre Statkraft Statkraft Current Derivatives TreasuryCentre Statkraft Energi Statkraft MarketsGmbH Statkraft reducing Current interest-bearing debtto Currentinterest-bearing Debt debt Long-terminterest-bearing Debt Long-term Derivatives Other of2017. Group cash pooling debt Groupcash pooling Derivatives Other Statkraft TreasuryCentre Statkraft In Asset Holding AS AssetHolding Statkraft Other Energi Statkraft Statkraft Statkraft MarketsGmbH Statkraft Current interest-free liabilities to Currentinterest-freeliabilities Sverige Statkraft MarketsGmbH Statkraft Note22 continued Guaranteesrelated Other Energi Statkraft 2016 ithasbeendecided to to

Statkraft Statkraft liabilities In IH IH IH SF the 2016 and2015the

InvestAS InvestAS InvestAS liabilities costprice of AS AS AS SF SF AB (back-to-backagreement) to group companies arelistedinnote21.group companies the SA SA SA to shares inthe share capital ofshare capital transfer Groupcompanies Groupcompanies the operations ofoperations company. Statkraft TreasuryCentre TreasuryCentre SA Statkraft was reduced byrespectivelywas reduced SA 111 to Statkraft AS. The 28 731 million, thereby 28 731million, andNOK 15 196million NOK transferisexpected 15 802 1 384 1 711 1 930 5 586 1 700 4 197 4 350 6 096 400 304 400 129 994 304 130 56 13 43 34 29 63 92 38 46 3 - - - - STATKRAFT to takeplaceduringthe

AS

ANNUAL

REPORT firsthalf 13 937 33 603

4 178 4 947 7 565 1 606 2 976 1 656 2016 212 249 400 400 234 152 217 24 13 11 29 99 42 25 31 64 11 50 - - - 9

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

Kraft transaction NOK transaction was 119 million as a financial and was booked sale. the the from gain AS to prior The 112 Småkraft Småkraft AS, sale of Småkraft which has been transferred into a new established company, Steinsvik the same as for subsidiary AS. Småkraft balance sheet date. the

AS is the after Kraft in theshares power plants from the 2016201620162016201620162016201620162016201620162016

sold its AS REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL Subsequent Subsequent events Transactions

AS one of still holds ASASASASASASASASAS

ownership structure of Steinsvik ownership structure of Steinsvik Statkraft The December 2015 Statkraft AS. In item. item. STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT There haven’t been any significant There haven’t been any significant events Note Note 24

There were no significant significant There were no business combinations, asset purchases or sale of business in 2016. Note Note 23 CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Auditor’sReport 113 STATKRAFT

AS

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REPORT

2016

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

114 2016201620162016201620162016201620162016201620162016

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ASASASASASASASASAS

STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS 115 STATKRAFT

AS

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REPORT

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FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

116 2016201620162016201620162016201620162016201620162016

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ASASASASASASASASAS

STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS 117 STATKRAFT

AS

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REPORT

2016

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

118 2016201620162016201620162016201620162016201620162016

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ASASASASASASASASAS

STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS 119 STATKRAFT

AS

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2016

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY

120 Responsibility Corporate Corporate 2016201620162016201620162016201620162016201620162016

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ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

ASASASASASASASASAS

STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS corruption and Businessethics and comprehensive review thanotheraspects–seethe review and comprehensive as aresultofthisanalysis.In materialaspects wereidentified according the aim ofidentifying preparedness adaptation mitigation, Climate people safeguarding Safety Materialaspect All Ambitions Biodiversity management Water Human aspects of corporate responsibility are importantaspects ofcorporateresponsibility anti- and rights change and to of

the

Global Reporting Initiative(GRIGlobalReporting and most significant corporate responsibility aspectscorporateresponsibility mostsignificant activities practicesin allbusiness and unethical corruption climatefootprint continuously energy systemandseeks actively prevents Statkraft friendly and sustainable friendlyand sustainable transition safetyculture and avalue-based approach througha systematic harm orinjuries contributes Statkraft precautionary approach to approach precautionary impact in ourareasof resilience facilitatesecological and challenges,biodiversity actively prevents Statkraft statement Ambition supportsa Statkraft management practicemanagement and sustainable water and sustainable aresponsible company with as a is recognised Statkraft Businessand HumanRights on PrinciplesUN Guiding actsaccording Statkraft goals to a moreclimate for to maintainalow to people corporate responsibility to

the to the

G4)        Goals               for standards, including an assessment of stakeholders’ expectations.Six an assessmentofstakeholders’ standards,including Further common understanding how climate change how climate Furthercommon understanding changes in orderto Improveour marketandstrategicanalysis to provideStatkraft’s and,as appropriate, business evaluate new business opportunities accordingly, based on company-wide climate basedoncompany-wide accordingly, opportunitiesnew business evaluate Further All to Contribute assumptions development and operationdevelopment in projecthandling andadequate ofourimpactsonbiodiversity, understanding Increased protectedareas Ensure that managers at all levels provide safety leadership at alllevelsprovidesafetyEnsurethatmanagers Continue Continue operation biodiversity, e.g. red-list species of flora and fauna, critical habitats and presence in legally e.g.red-listspecies offloraandfauna,criticalhabitatspresence biodiversity, ofon systematichandling ofperformancetrackingand communicationEnhanced Utilize a balance of leading and lagging indicators to indicators andlagging ofleading a balance Utilize Strengthen Improve focus onhighriskprocesses ethicsrisks,withparticular key business processes key business effects and self-restrictionsin ourconcessions requirements limitsand hydropeaking of waterlevels,flow- andsystematicfollow-up handling andadequateEnsureproactive accordingly, starting by major and international projects starting bymajorandinternational accordingly, process) andimproveourpractices (humanrightsduediligence management human rights related developments Follow Ensure that learnings from incidents are applied corporatewide areapplied fromincidents Ensurethatlearnings Improveprocesses andcapabilities Demonstrate sustainable water management based on improved understanding of the understandingbased onimproved water managementDemonstratesustainable Strengthen stakeholder dialogue and communication, including on our salient humanrightson oursalient including and communication,dialogue Strengthenstakeholder atprojectlevel including mechanisms, knownourgrievance Strengthenand makebetter of trainingprogramonhumanrights implementationEnsureadequate

relevantstakeholders towards However, a materiality analysis was conducted in2015with wasconducted a materialityanalysis However, Statkraft. employees complete training in business ethics in business completetrainingemployees full Corporate Responsibility Report posted on www.statkraft.com. Reportposted Responsibility fullCorporate of the the to to climatechange terms of reporting, these material aspects are given amoredetailed aspectsaregiven thesematerial termsofreporting, 2020 understanding of the understanding ensure adequate corporate-wide handling of anti-corruption and business ofanti-corruptionhandling corporate-wide adequate ensure strengthen 121 the adequacy of how business ethics is reflected in requirements and controls for and controls ethics isreflectedinrequirementsofhow business adequacy scientificmethods focus on high risk activities and preventative measures and preventativefocuson highriskactivities for

the Statkraft. material aspects material on water availability (e.g. scarcity and flood control)in allareasof (e.g.scarcityandfloodon wateravailability culture ofreportingconcernsandbreaches to increasing international and national expectations relatedexpectations and nationalinternational increasing for impact of national and international climate policies on our climatepolicies and international impactofnational assessing for The securitymanagement materiality analysis was conductedmaterialityanalysis the perspectives, including on carbon pricing,on carbon perspectives,including climate impactofourbusiness withf ocus on anti-corruptionocus measure and guide performance measure andguide incorporate climate change induced climatechange incorporate affects STATKRAFT all ourassetsandcontinue

AS

ANNUAL

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the to

2016

to

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 0 0 23 40 23 23 13 1.9 9.4 0.2 9.2 3.0 247 488 126 119 147 760 158 859 305 760 596 164 2014 2014 2014 2014 21.6 16.8 78.4 19.6 10.0 15.9 68.1 80.5 12.5 80.9 72.1 0 0 0 0 0 0 0 0 21 36 21 67 21 3.7 4.0 0.4 9.5 3.9 647 838 909100 1 262 873 1 016 809 617 909 1 262 838 675 164 2015 2015 2015 2015 19.5 17.1 80.5 15.5 89.0 96.0 11.0 80.2 69.8 1 587 1 511 2 600 2 600 2 863 2 761 100.0 100.0 13 464 13 273 11 711 11 823 16 778 16 401 16 778 16 401 0 0 0 0 0 0 0 0 0 0 5) - - 5) 5) 5) 40 4.6 0.2 9.2 4.0 522 703 820 729 545 800 729 820 657 164 2016 2016 2016 2016 19.9 17.1 80.1 71.6 14.9 74.8 80.8 69.1 184 207 1 606 2 600 2 971 28,4 25,2 25,2 14 075 12 041 17 418 17 418 % % % % % % % % % % % % % % % % % % MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW Unit Unit of measurement Unit of measurement Unit Unit of measurement Unit of measurement 122 1), 1), 4) 1), 4)

1) 1)

geography geography and and

2) geography geography 2) and and technology technology

2016201620162016201620162016201620162016201620162016

per per

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technology technology

per per development development

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world world world world ASASASASASASASASAS

under under Nordic countries European countries Nordic countries European countries Nordic countries European countries Nordic countries Nordic countries European countries Nordic countries Nordic countries Nordic countries power power Of which small-scale hydropower Of which small-scale hydropower Other Of which gas power Other Rest Rest of the Norway Other Other Norway Of which wind power Norway Of which wind power Other Bio Other Norway Rest Rest of the Of which wind power Other Norway Rest Rest of the Other Norway Other Of which bio power Rest of the Of which hydropower Of which hydropower Hydropower Of which hydropower Wind power Gas Norway Other Other Norway Other Installed Installed capacity per geography, district heating Capacity under development, Capacity under development, district heating Installed heating Installed capacity, district Capacity under development per geography, power generation Capacity Capacity under development per geography, district heating Capacity under development Capacity under development per geography, power generation Capacity Capacity under development per geography, district heating Installed Installed capacity per geography, power generation STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Capacity Capacity Capacity under development per technology, power generation Capacity under development, Capacity under development, power generation Capacity Capacity Installed Installed capacity per technology, power generation Installed capacity Installed capacity Installed capacity power generation Corporate Responsibility Statement Installed Installed capacity per geography, power generation Installed Installed capacity per geography, district heating Power generation and district Power generation district heating and production CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS District heating pergeography Districtheating District heating pergeography Districtheating Power generation per geography Powergeneration Renewable power generation power Renewable Power generation per geography Powergeneration districtheatingRenewable Districtheating waste heat and therefore counted asrenewable. counted wasteheat andtherefore Power generationper technologyPowergenerationper Power Powergeneration Power 6) 5) 4) 3) 2) 1) Non-renewable production covers gas power and share of district heating fossilfuel. of based onFrom 2015 andheating covers gaspower sharedistrict production Non-renewable The the Includes Statkraft’s Includes Includes projectswithaninvestmentdecision. Includes capacityInstalled Other Norway Other Restof the Norway Other Other Restof the Other Other Norway Gas Norway Windpower Bio Hydropower hydropower which Of which biopower which Of gaspower which Of windpower which Of Cetin project is no longer included in the included Cetinproject isnolonger which small-scale hydropower hydropower small-scale which Of generation generation power power Nordic countriesNordic Nordic countriesNordic European countriesEuropean countriesNordic European countriesEuropean countriesNordic jointly controlled Herdecke (Germany) and Kårstø (Norway) power Kårstø (Norway)plants. Herdecke(Germany)power jointlycontrolled and world world 3) <10 shareholdings in subsidiaries shareholdings where district and district and

MW. 3) 6) 6) heating heating figures,as it currently is suspended. 2) production production has majorityinterest.a Statkraft per per

technology technology

and and geography geography 123

1) 1) the Unitofmeasurement Unitofmeasurement waste used in waste TWh TWh TWh TWh TWh TWh TWh TWh TWh TWh TWh TWh TWh TWh TWh the % % % % % % % % % % % % incineration plant in Trondheim is defined as input is defined in as Trondheiminput incineration plant

STATKRAFT 81.8 18.2 52.8 66.0 92.7 91.8 96.7 61.2 66.0 2016 2016 5.9 0.9 0.2 4.8 1.1 9.2 3.9 3.2 6.1 3.5 0.5 1.1 3.3 0.0 2.2 0.3 2.3 80

AS

ANNUAL 80.1 19.9 78.9 12.9 44.4 56.3 94.3 94.7 99.1 53.1 56.3 2015 2015 6.0 0.8 0.2 2.3 1.1 3.4 1.3 7.2 4.4 0.5 1.1 0.9 0.4 0.5 0.3 2.5

REPORT

2016 79.5 20.5 for 82.9 10.0 46.4 56.0 95.4 83.6 99.1 53.4 56.0 2014 2014 3.9 0.8 0.2 3.2 1.0 2.2 1.8 5.6 3.0 0.5 1.0 0.9 0.3 0.5 0.3 1.7

FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 0 0 6 2 8 - - - - 64 46 12 473 267 2014 2014 2014 2014 2014 313 300 jointly jointly the in 2 0 0 1 4 0 0 0 5 8 3) 4) 2) 2) 14 19 61 13 46 5 6 2 408 101 2015 2015 2015 2015 2015 2015 2015 12 7 000 2 300 5 500 3 600 2 000 23 600 26 200 26 000 39 600 13 000 64 000 50 900 44 500 49 80026 200 59 700 33 500 376 400 139 600 523 000 1 799 200 258 600 188 800 197 300 1 080 000 936 400 0 0 1 4 2 5 8 4) 5) 16 12 21 23 13 46 33 6 367 120 140 2016 2016 2016 2016 2016 2016 2016 23 1 000 2 700 3 000 28 000 21 100 85 600 24 900 19 100 42 400 21 300 403 300 485 400 916 700 471 800 773 400 722 700 share of of andshare production emissions CO of kg kg Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Number Number Number Number Number Number Number Number Number Number Number Number Number Number Number Number Number Number Number Statkraft’s kg/MWh kg/MWh kg/MWh waste heat and therefore counted therefore and emissionsheat zero waste with renewable as for Unit Unit of measurement Unit Unit of measurement Unit of measurement Unit of measurement Unit Unit of measurement Unit of measurement Unit of measurement operations. 124124 waste heat and therefore counted as renewable with zero emissionszero andwith waste renewable heat as therefore greenhouse counted of gases. for Includesproduction process. also Norwegian operations. the fish. the Conservation of Nature (IUCN) Conservation Nature of or national authorities. for for operations in: 1), 1), 2) 1) emissions from incineration plant in Trondheim is defined as inputas incineration defined is plant in Trondheim 2 the total useprivate vehicle in 1) 2) 1)

waste in waste used 3) generated, generated, generated, gas power generated, district heating protected to, protected areas 2016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016201620162016 4)

and Group’s machinery vehicles. to, protected areas revisedof analysis red list species impacted by Statkraft's from affiliated from affiliated gas power plants 5) world world incineration plant in Trondheim is defined as input input incineration Trondheim as plant in is defined the 1) 1) emissions the the

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adjacent adjacent emissions or gas 6 2) rest of rest of emissions CO share of production and direct fossil

equivalents equivalents equivalents, equivalents, consolidated activities 2 2 ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

world -quotas waste used in the 2 -quotas, -quotas, consolidated activities gas 2

ASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASASAS

ownership is >50%. share. ownership is >50%. natural parks and nature or wildelife reserves. Nordic countries European countries greenhouse watercourses on watercourses species with species with habitat in areas impacted by Statkraft's species (fauna)

from from fuel consumption from cultivation list 2 Of which in the Of which in the Of which in other European countries Of which in other European countries Of which in other Nordic countries Of which from fuel consumption Of which other Nordic countries Of which in other Nordic countries Of which in Norway Of which from halon emissions Of which SF from Of which in Norway Other Other Rest of the Of which from business travel Of which Norway Of which gas power plants from Of which district heating from plants Impacted Impacted national salmon rivers Catadromous Catadromous fish Impacted protected rivers Norway Anadromous Anadromous fish -equivalent -equivalent emissions per MWh -equivalent emissions per MWh -equivalent emissions per MWh emissions 2 2 2 6 This This indicator was introduced in 2015. Limited to Includes red list species with habitat areas impacted by Skagerak Includes by red list species with habitat areas impacted Energi's operations. in operations Power Includes by red list species with habitat areas impacted Generation's Sweden. Reduction from 2015 largely due to This This indicator was introduced in 2015. Includes International species defines as red list species by either Union Includes salmon, inland trout, Includes salmon, inland trout, sea trout, grayling eel. and Includes salmon in Norway and eel in Sweden. Impact Impact entails change of waterflow, water levels or other living conditions Statkraft’s Includes Statkraft’s From 2015 the CO Comprises air travel and mileage reimbursements for Statkraft’s Statkraft’s Fossil share of emissions. 2015 theFrom Stocking Stocking of fish roe of of greenhouse gases. CO SF STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT 1) 2) Operational sites in, Operational sites in, or adjacent 3) 4) 5) 1) 2) Red Red Red list 1) 2) 1) Fish Restocking of fish and smolt Impacts Impacts Impacted river courses with: Interventions Interventions on nature and biodiversity Allocated Allocated CO 1) 2) Allocated CO Relative Relative CO 1) 3) 4) 5) 1) 2) Emissions CO Emissions of Climate Greenhouse CO controlled controlled power plants Herdecke (Germany) and Kårstø (Norway). Emissions Emissions of CO Halon emissions

124 CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS consumptionEnergyand resource Other Waste 2) 1) Electricity Consumption 1) wasteHazardous Waste Other Processwater Fossilfuel Includes cooling water in gas fired power plants, bio power plants and districtheating water ingasfiredpowerplants,bioplantsplants. coolingand Includes offuelfor consumption Includes Consists of filter dust and filter cake. Consistsoffilterdustand which pumped-storage power pumped-storagewhich Of which from waste incineration plants fromwasteincineration which Of which frombiopowerplantswhich Of fuelEngine plantsFueloil,districtheating plantsFuelgas,districtheating Waste which electricboilers which Of which other hazardous waste otherhazardous which Of Waste Bio which separatedwastewhich Of Naturalgas,gas-firedpower plants otheroperationswhich Of which residual non-hazardous waste non-hazardous residual which Of fuel waste fuel

for for district heating plants district heating bio powerplants 2) 1) for own equipment and own equipmentmachinery. districtheating 1)

125 Unitofmeasurement Unitofmeasurement Mill.Nm Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes GWh GWh GWh GWh m 3 3 1 466800 STATKRAFT 279 200 219 400 207 700 17 000 50 000 48 600 1 556 6 722 6 800 6 039 9 400 1 300 2016 2016 918 349 566 850 289 63

AS

ANNUAL 4 0 350000 349 100 110 000 2 0 205400 227 700 5 0 409700 154 200 89019400 18 900 45213223 14 502 45048600 54 500 25046600 52 500 1 031 3 1817 3712 3 438 3 506 0 6600 6 600 0 11200 8 300 8 1750 3 980 0 2000 2 000 2015 2015 858 138 91 35

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2016 2014 2014 899 668 155 95 76 0 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 3 0 0 0 B B B A- 420 165 661 684 859 159 2014 2014 2014 2014 2014 2014 2014 1.75 0 0 0 B B A 56 B+ 279 100 683 421 228 2015 2015 2015 2015 2015 2015 2015 92.4 115.8 1.50 -598 5 740 7 143 2 390 2 959 3 107 2 667 9 038 18 241 3 665 6 059 1 604 5 600 2 825 3 546 6 401 4 071 -3 376 -2 392 10 740 19 077 10 740 19 077 53 094 52 254 37 655 29 942 15 439 22 312 8 0 0 0 0 0 B B A 97 B+ -62 293 380 233 2016 2016 2016 2016 2016 2016 2016 1.14 -117 water management, water management, and minor oil 8 909 4 366 3 202 8 909 8 467 7 581 4 764 102.4 8 260 -1 757 50 987 34 261 16 727 for and above is considered as leading by Oekomby leading as and considered is above Research. B- Index Index Rating Rating Rating Rating Number Number Number concession terms NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million Unit Unit of measurement Unit Unit of measurement Unit of measurement Unit Unit of measurement Unit of measurement Unit of measurement Unit of measurement (highest), where rating rating where (highest), A+

to

E- 126 short-term short-term breaches of the to RatingAG. from standard). SF. standard). IEEE Statkraft

to AS Skagerak Nett for Statkraft 1) 2)

2) Skagerak Nett 2016201620162016201620162016201620162016201620162016 for total

rating company Oekom Research Research rating company Oekom 1) 1)

(SAIDI) the world 1) non-compliance with environmental legislation less serious environmental incidents also included situations where birds collided with wind turbines, dead white- resulting in 14 the for REPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORTREPORT

The society created goods and services to balance sheet. rest of for incidents ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL

value 1) of ASASASASASASASASAS

less serious environmental less serious environmental incidents 2016 were related in 2) distibution non-compliance with environmental legislation the water and land. for outage 1) suppliers

for creation to to wealth distributed Of which in the Of which in other European countries Dividend Of which in other Nordic countries Interest Change in equity Taxes Taxes Of which in Norway Gross Gross salaries and benefits Environmental Environmental management Products services Products and Eco-efficiency incident that results in permanent or severe environmental damage time>1incident environmental that results in permanent or severe year). (restitution but (restitution impact, permanent incident damage that causes a negative environmental environmental without year). or severe time<1 company Includes dividend Group and contribution from Includes taxes, property tax, licence contribution. fees and employers’ System System average interruption frequency index (measured based on IEEE System average interruption duration basedonindex (measured Taxes Taxes payable in the Includes energy purchases, and transmission costs operating expenses. An An Environmental Environmental assessement from spills Total Lenders/owners tailed tailed eagles. Minority Minority interests Values Share of profit Share of profit from associates Financial Financial income The STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT 1) 2) Power Power outage frequency (SAIFI) Stability Stability of electricity supply 1) Taxes Taxes Total 1) 2) 1) Distribution Employees Value Gross operating revenues Paid Judicial sanctions, environment Material judicial sanctions Most Most of Serious Serious environmental incidents 1) 2) 1) Environmental Environmental Environmental assessment result, Environment Environmental assessment Average power outage Average power outage duration Less serious environmental incidents Net Net value added Gross Gross value added Fines Fines Depreciation, Depreciation, amortisation and impairment Contribution Contribution

CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Group are handled by Corporate Audit. In by Corporate Groupare handled Statkraft the

two annual reportssince 2008. annual Employees in senior management positions that have received trainingonanti-thathave received positions in seniormanagement Employees in the on anti-corruptiontraining that havereceived Employees Training Businessethicsand anti-corruption in2016wererelated initiated fourinvestigations Whena reportedconcernisreceived,riskassessmentdoneinorderto 2) 1) Auditinthe by Corporate initiated Investigations Total Reportedconcerns concerns (whistleblowing)Reported 1) Fines sanctionsJudicial sanctions, human Judicial 2) 1) peoples rightsofindigenous involving consultationsNumber ofprojectswithongoing Consultations Human rights 1) Fines sanctionsJudicial sanctions, business Judicial 2) 1) Statkraft's in the corruption safety, business ethicsand anti-corruption.safety,business Material judicial sanctions for sanctions Materialjudicial and inNorway,SwedenChile.consultations ongoing Including in 2015. was introduced Thisindicator for sanctions Materialjudicial in 2016. was introduced Thisindicator in 2015andcoversthe was introduced Thisindicator The The respective business areas according respectivebusiness years which relatedto which Of number ofreportedconcerns number format scope ofthe on Board members that have received training on anti-corruption inthe on anti-corruption Boardmembers thathavereceivedtraining 2) for anti-corruption this indicator was changed in 2016, but historical data in 2016,buthistoricalrelated waschanged this indicator data

with whistleblowing procedures relatesprocedures whistleblowing last two indigenous (whistleblowing) business ethics andanti-corruptionbusiness years discrimination, forced labour, child labour or violations of labour forcedchild or discrimination,violationslabour, of corruption. accountingfraud,price cooperation and rights 1) ethics

peoples

2) 1) and

1) to 1)

anti-corruption Statkraft’s to Group, excluding Skagerak Energi and Fjordkraft.EnergiSkagerak Group, excludingand reporting year reporting

to the business ethicsoranti-corruption.business cases where a formal investigation is required, thisisthe is required, aformalinvestigationcases where full scope of full scope procedures

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Lost-time injuries per million hours worked per million Lost-timeinjuries Total Lost-timeinjuries hours worked Lostdays permillion hours worked per million Lost-timeinjuries Thirdparty Contractors Employees Thirdparty Contractors Employees Injuries Total hours worked per million Lost-timeinjuries Total which short-term absence (16daysorless) short-termabsence which Of Lost-timeinjuries Total Total Lostdays which long-term absence (more than16days) long-termabsence which Of fatal leave for 1)

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2) 2) non-compliance with health andsafetylegislation withhealth non-compliance (TRI) (TRI) for 20% ownership. has≥ 20% ownership. has≥ 20% ownership. has≥ serious consequences serious

3) 3) conditions for serious consequences work-related injuries. by Statkraft plantin Peru.LaOroyais100%owned La Oroyahydropower 1),2) the dayof the injury. 129 Unitofmeasurement Unitofmeasurement Unitofmeasurement Unitofmeasurement Unitofmeasurement Unitofmeasurement Lost-daysrate milion NOK rate TRI rate TRI rate TRI Number Number Number Number Number Number Number Number Number Number Number Number Number Number Number Number Number LTI LTI LTI rate rate rate for % % % alternative work assignments. alternative IH Invest AS, STATKRAFT 2016 2016 2016 2016 2016 2016 491 3.1 3.0 1.6 4.9 4.5 4.2 5.6 1.5 1.5 40 19 57 61 71 27 21 19 5 0 0 0 0 0 1 0 0 0 holds an whereStatkraft

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ANNUAL 2015 2015 2015 2015 2015 2015 106 781 3.5 3.0 3.3 5.9 3.6 6.0 5.6 1.4 1.6 63 41 63 70 22 27 12 6 0 0 0 0 0 0 0 0 0

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130 2016201620162016201620162016201620162016201620162016

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STATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFTSTATKRAFT Auditor’s

In October 2016, Statkraft reopened Nedre Røssåga hydropower plant in Nordland after an extensive renovation and expansion. The power pant is now among Norway’s largest and will produce 2.15 TWh of electricity in a normal year, equivalent to 1.6 percent of Norway’s total power generation.

131 STATKRAFT AS ANNUAL REPORT 2016 Alternative Performance Measures

As defined in ESMAs guideline on alternative performance measures (APM), an APM is understood as a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.

Statkraft uses the following APMs:

EBITDA is defined as operating profit before depreciation, amortisation and impairment.

Underlying line items are performance measures that are adjusted for significant items and unrealised value of energy contracts. Unrealised energy contracts within trading and origination activities are not adjusted, as the market portfolios are followed up on market values.

Adjusted significant items are items that are material and can be described as revenues/gains and/or expenses/losses that are not expected to occur on a regular basis. The effects are adjusted in order to have comparable figures in the financial analysis for periodic performance.

Relevant significant items in the period:  Impairment is excluded from underlying operating profit since they affect the economics of an asset for the lifetime of that asset; not only the period in which it is impaired or the impairment is reversed.  Gain from sales of assets is eliminated from the measure since the gain does not give an indication of future performance or periodic performance; such a gain is related to the cumulative value creation from the time the asset is acquired until it is sold.

Equity accounted investments are not adjusted for unrealised value of energy contracts and significant items.

Capital employed and Net interest bearing debt are defined in the table below:

ALTERNATIVE PERFORMANCE MEASURES

NOK million 2016 2015

CAPITAL EMPLOYED Intangible assets 4 533 5 822 Property, plant and equipment 103 303 111 207 Inventories 2 653 1 044 Receivables 10 219 10 675 - Receivables related to cash collateral -1 226 -2 477 - Short-term loans to equity accounted investments -381 -335 Provisions -19 195 -21 228 Taxes payable -4 764 -2 825 Other interest-free liabilities -11 918 -10 781 - Group contribution allocated, not paid 2 2 Capital employed 83 225 91 104 Average capital employed 1) 87 757 87 112

NET INTEREST BEARING DEBT Long-term interest bearing liabilities 31 886 37 410 Short-term interest bearing liabilities 8 407 7 196 Cash and cash equivalents (including restricted cash) -7 308 -9 056 Short-term financial investments -532 -513 Net interest bearing debt 32 453 35 036 1) Average capital employed is based on the average for the last four quarters.

Statkraft has decided to change the definitions of its underlying line items with effect from the first quarter in 2017. The main change relates to unrealised value changes from energy derivatives. From 2017, the only unrealised items that will be adjusted for relate to embedded derivatives in energy contracts and derivatives acquired for risk reduction purposes where the related item is carried at cost.

With regards to significant adjusted items, Statkraft will adjust for:  impairment charges and reversals of impairment charges  gain/loss from acquisition/divestment of business activities

Finally, Statkraft has also decided to amend the definition of Capital Employed.

These changes will be implemented in the first quarter, and presented in the first quarterly report for 2017. Comparative figures will be restated. The effects of these changes are not yet calculated.

STATKRAFT AS ANNUAL REPORT 2016 132 Financial key figures

Statkraft AS Group Unit 2016 2015 2014 2013 2012 From the income statement Share of profit/loss in equity accounted investments NOK mill 474 683 661 1 101 871 Gross operating revenues NOK mill 50 987 53 777 52 915 50 665 38 421 Net operating revenues NOK mill 20 621 20 773 26 466 25 347 19 223 EBITDA NOK mill 11 346 10 898 18 292 17 148 11 363 Operating profit NOK mill 3 086 4 497 14 221 14 103 6 430 Net financial items NOK mill 2 137 -5 318 -6 283 -11 592 2 341 Profit/loss before tax NOK mill 5 223 -821 7 937 2 511 8 771 Net profit/loss NOK mill -179 -2 369 3 892 208 4 551 Items excluded from underlying business Unrealised changes in value energy contracts* NOK mill -2 413 609 2 396 3 288 -1 030 Non-recurring items NOK mill -4 741 -3 610 2 053 125 -2 224 Underlying business** Gross operating revenues NOK mill 53 804 51 262 49 009 48 559 39 781 Net operating revenues NOK mill 23 033 19 938 21 263 21 646 20 078 EBITDA NOK mill 13 863 10 852 12 793 13 545 12 218 Operating profit NOK mill 10 240 7 498 9 772 10 690 9 684 From the balance sheet Property, plant & equipment and intangible assets NOK mill 107 836 117 029 102 638 104 779 91 788 Investments in associates NOK mill 19 438 19 388 19 027 16 002 15 924 Other assets NOK mill 39 357 40 488 46 152 32 906 38 195 Total assets NOK mill 166 630 176 905 167 817 153 687 145 907 Total equity NOK mill 83 519 88 340 88 059 71 107 62 350 Interest-bearing debt NOK mill 40 293 44 606 36 744 40 377 40 625 Capital employed, basic 1) NOK mill 84 604 91 089 82 244 82 985 71 282 Cash flow Net change in cash flow from operating activities NOK mill 8 371 8 639 6 898 8 106 10 290 Dividend for the year to owner (incl. non-controlling interests) NOK mill -226 5 157 74 3 094 4 293 Depreciation, amortisation and impairment NOK mill 8 260 6 401 4 071 3 045 4 933 Cash and cash equivalents NOK mill 7 308 9 056 12 663 7 685 5 440 Unused drawing rights NOK mill 13 031 15 200 14 200 14 200 14 205 Investments Maintenance investments 2) NOK mill 1 763 1 970 2 368 1 980 1 811 Investments in increased capacity, fixed assets 3) NOK mill 3 736 7 797 7 525 11 303 7 327 Investments in shareholdings 4) NOK mill 158 3 790 1 287 62 2 583 Financial variables Interest-bearing debt ratio 5) % 32.5 33.6 29.4 36.2 39.5 Equity ratio 6) % 50.1 49.9 52.5 46.3 42.7 Long-term rating - Standard & Poor’s A- A- A- A- A- Long-term rating - Moody’s Baa1 Baa1 Baa1 Baa1 Baa1 Key figures, accounts EBITDA-margin, accounts 7) % 22.3 19.2 33.7 32.4 27.9 EBITDA-margin, underlying 7) % 25.8 20.1 25.1 26.2 29.2 ROACE before tax 8) % 11.1 7.9 11.0 12.5 13.0 Net return on investments in associated companies 9) % 2.4 3.5 3.5 6.9 5.5 Tax rate 10) % 103.4 -188.5 51.0 91.7 48.1 Key figures, upstream business Production cost hydropower*** 11) 12) Øre/kWh 9.1 8.1 7.8 7.5 7.8 Production capacity**** TWh 61.3 58.7 53.7 51.2 50.4 Production, actual TWh 66.0 56.3 56.0 55.9 60.0 Installed capacity***** MW 18 330 17 758 17 161 16 630 16 055 Key figures, downstream business****** Energy delivered through grid to end-user 13) TWh 7.0 7.0 6.9 7.3 7.2 Distribution grid capital (NVE capital) 14) NOK mill 3 456 3 285 2 915 2 743 2 685 Total volume supplied, electricity customers TWh 14.6 13.3 12.6 13.0 13.2 Distric heating supplied TWh 0.9 0.8 0.8 1.0 1.0 Market variables System price, Nord Pool EUR/MWh 26.9 21.0 29.6 38.1 31.3 Spot price, European Energy Exchange EUR/MWh 29.0 31.7 32.8 37.8 42.6 Electricity consumption in the Nordic market TWh 386 379 375 382 385 Electricity generated in the Nordic market, actual TWh 389 394 385 380 399 Statkraft`s share of Nordic electricity production % 15.1 13.1 13.5 13.3 15.0

In the 2016 annual report the line item Share of profit/loss is equity accounted investments is replaced in the profit and loss statement. The line item is now a part of gross operating revenues. The comparable figures are restated. * Exclusive of trading and origination ** Adjusted for unrealised changes in values of energy contracts and material non-recurring items *** Including consolidated companies (not associates) in the Nordics, Germany and the UK **** Exclusive of gas power and district heating ***** Includes the share of consolidated companies and the associated gas power companies Herdecke and Naturkraft ****** Key figures include consolidated companies (not associates) in the Nordics

1. Property, plant & equipment 5. Interest-bearing debt * 100 11. Calculation method for 2015 and previous years. + intangible assets Interest-bearing debt + equity + receivables Production cost, incl. property tax and depreciation, + inventories 6. Total equity * 100 excl. - provisions for liabilities Total assets sales costs, overhead, net financial items and tax - taxes payable Normal output from power plants under own - other interest-free liabilities 7. Operating profit before depreciation * 100 management + provisions for dividend payable (NGAAP) Gross operating revenues 12. New calculation method from 2016. This will 2. Book value of maintenance investments to sustain 8. Operating profit * 100 increase the cost compared to previous calculation. current generating capacity Average capital employed, basic Production cost, incl. property tax and depreciation, 3. Book value of investments to expand generating 9. Share of profit/loss in equity accounted investments excl. capacity * 100 sales costs, net financial items and tax Equity accounted investments 7 years average output from power plants under own 4. Purchase of shares as well as equity increase in management other companies 10. Tax expense * 100 Profit before tax 13. Preliminary estimate for the last year.

14. Figures as of 31.12 used to calculate the revenue ceiling. The amount for the last year is preliminary.

133 STATKRAFT AS ANNUAL REPORT 2016 Non-financial key figures The following tables present Statkraft's most significant results within the areas of environmental impact, society, employees, and health and safety for the period 2012-2016. More detailed results can be found in the corporate responsibility statement.

Power generation and district heating production Unit 2016 2015 2014 2013 2012 Installed capacity, power generation 1) MW 17 418 16 778 16 401 16 041 16 257 Of which hydropower MW 14 076 13 464 13 273 12 886 13 522 Of which wind power MW 703 647 488 514 528 Of which gas power 2) MW 2 600 2 600 2 600 2 600 2 178 Of which bio power MW 40 67 40 40 29 Installed capacity, district heating MW 820 838 760 674 710 Capacity under development, power generation 1), 3) MW 729 909 1 262 1 673 1 701 Of which hydropower MW 207 5) 873 1 016 1 172 910 Of which wind power MW 522 36 247 500 361 Of which gas power 2) MW 0 0 0 0 430 Capacity under development, district heating MW 0 21 23 8 91 Power generation, actual 1) TWh 66.0 56.3 56.0 55.9 60.0 Of which hydropower TWh 61.2 53.1 53.4 52.6 57.6 Of which wind power TWh 2.3 2.5 1.7 1.4 0.8 Of which gas power 2) TWh 2.2 0.5 0.5 1.5 1.5 Of which bio power TWh 0.3 0.3 0.3 0.3 0.1 District heating production TWh 1.1 1.1 1.0 1.1 1.1 Renewable power generation 4) % 96.7 99.1 99.1 97.3 97.5 Renewable district heating 4) % 91.8 94.7 83.6 82.0 80.6 1) Includes Statkraft’s shareholdings in subsidiaries where Statkraft has a majority interest. 2) Includes the jointly controlled Herdecke (Germany) and Kårstø (Norway) power plants. 3) Includes projects with an investment decision. 4) Non-renewable production covers gas power and share of district heating based on fossil fuel. From 2015 the waste used in the incineration plant in Trondheim is defined as input for waste heat and therefore counted as renewable. 5) The Cetin project is no longer included in the figures, as it is currently suspended. Emissions and environmental incidents Unit 2016 2015 2014 2013 2012

Emissions of CO2 equivalents, consolidated activities Tonnes 773 400 258 600 313 300 469 600 483 900 Environmental incidents Serious environmental incidents Number 0 0 0 0 0 Less serious environmental incidents Number 233 228 159 127 128 Contribution to society Unit 2016 2015 2014 2013 2012 Distribution of value created 1) Dividend 2 ) NOK mill 0 1 604 5 600 0 4 000 Taxes 3) NOK mill 7 581 3 665 6 059 4 291 5 891 Interest NOK mill -1 757 5 740 7 143 11 830 3 123 Employees NOK mill 3 202 3 107 2 667 2 788 2 720 The company NOK mill -117 -3 376 -2 392 -274 321 1) As from 1 January 2013 Statkraft has implemented IFRS 11 Joint Arrangements. The effect of this is that some companies that prior were using the equity method now are using proportionate consolidation. Figures for 2012 have been restated to reflect Statkraft's financial position and results based on IFRS 11. 2) Includes dividend and Group contribution from Statkraft AS to Statkraft SF. 3) Includes taxes, property tax, licence fees and employer's contribution. Reported concerns (whistleblowing) Unit 2016 2015 2014 2013 2012 Total number of reported concerns (whistleblowing) 1), 2) Number 46 - - - - Of which related to business ethics and anti-corruption Number 23 - - - - 1) The scope of the whistleblowing procedures relates to the full scope of Statkraft's Code of Conduct, e.g. human rights, environment, health and safety, business ethics and anti-corruption. 2) The format for this indicator was changed in 2016, but historical data related to whistleblowing is available and has been published in Statkraft's annual reports since 2008. Employees and recruitment Unit 2016 2015 2014 2013 2012 Employees 31. 12 Number 3 804 4 119 3 731 3 734 3 615 Percentage of women Total % 25 23 24 23 24 In management positions % 22 23 22 22 21 Among new employees % 24 26 25 23 29 Health and safety Unit 2016 2015 2014 2013 2012 Fatalities, consolidated operations 1) Employees Number 0 0 0 0 0 Contractors Number 1 0 3 1 2 Third parties Number 0 0 0 1 2 Fatal accidents, associated activities 2) Employees Number 0 0 0 0 0 Contractors Number 0 0 1 0 0 Third parties Number 0 0 0 0 0 Seious incidents 3) Injuries with serious consequences Number 5 6 - - - Accidents with,or with potential for, serious consequences Number 19 12 - - - Injury rate 4), 5) Employees Frequency 5.6 5.6 5.6 6.8 6.6 Contractors Frequency 4.2 6,0 5.4 6.3 6.4 Absence due to illness % 3.0 3,0 2.8 2.9 3.1 1) Activities where Statkraft has > 50% ownership. 4) Includes activities where Statkraft has > 20% ownership. 2) Activities where Statkraft has 20-50% ownership. 5) Injuries per million hours worked. 3) This indicator was introduced in 2015.

STATKRAFT AS ANNUAL REPORT 2016 134 In September 2016, Statkraft officially opened its first power plant in Albania. The 73 MW Banja hydropower plant is the first of the two power plants being constructed as part of the 256 MW Devoll hydropower project.

135 STATKRAFT AS ANNUAL REPORT 2016 Design: Tangram Design AS Photo: Statkraft/People&Power Shutterstock

Paper: 300gr Scandia + 115gr Profi Matt Print: CopyCat AS Statkraft AS Annual Report 2016 Statkraft AS PO Box 200 Lilleaker NO-0216 Oslo 06 70 00 +47 24 Tel: +47 24 06 70 01 Fax: Visiting address: Lilleakerveien 6 Organisation no: 699 Statkraft AS: 987 059 www.statkraft.com Annual ReportAnnual 2016 Statkraft AS