ANNUAL REPORT 2013 CONTENT Click on the text to go to the page of your choice

Key figures 4 Group structure 8 Where we operate 9 Brief introduction to Agder Energi 10 Our business 11 Highlights in 2013 12 CEO – Forging ahead in a challienging environment 13

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Agder Energi owns a 68.6 percent interest in Otra Kraft, which is developing Skarg power station (Brokke Nord/Sør) at Bykle in the Setesdal valley. At Sarvsjuvet, a 50 metre high dam is being built. This project will increase Agder Energi’s annual electricity generation by 175 GWh, equivalent to the consumption of 9.000 detached houses.

AGDER ENERGI ANNUAL REPORT 2013 3 KEY FIGURES

RESULTATRESULTS BALANSEBALANCE 2013 2012 2011

NOK mill. %

2,800 35 Equity 4,210 3,917 3,123 2,400 30 Interest-bearing liabilities 7,668 7,223 7,028 2,000 25

1,600 20 Capital employed 11,878 11,139 10,151 1,200 15

800 10 Total assets 16,091 15,243 14,647 400 5

0 0 2013 2012 2011 2013 2012 2011

EBITDA Operating income Net income EBITDA margin Return on equity Return on capital employed (after tax)

Def. 2013 2012 2011 2010 2009 Def. 2013 2012 2011 2010 2009

AS PRESENTED IN PROFIT AND LOSS ACCOUNT FINANCING FIGURES Operating revenues NOK mill. 9,890 8,946 10,684 9,345 8,287 Funds from operation (FFO) 5 NOK mill. 1,596 1,438 1,398 1,549 1,558 EBITDA 1 NOK mill. 2,841 2,283 2,908 2,047 2,694 FFO/net interest-bearing liabilities % 21.6 20.0 19.8 23.4 27.8 Operating profit NOK mill. 2,315 1,818 2,470 1,634 2,271 Net interest-bearing liabilities/underlying EBITDA 3.3 3.7 3.6 3.4 2.2 Profit before tax NOK mill. 1,686 1,581 2,163 1,380 2,789 FFO interest cover 6 5.3 4.6 4.1 5.4 6.1 Net income NOK mill. 846 1,045 1,161 751 1,604 Equity ratio 7 % 26.1 25.6 21.9 20.9 25.5

ITEMS EXCLUDED FROM UNDERLYING OPERATIONS KEY FIGURES Unrealised gains/losses on energy contracts NOK mill. 552 326 984 -354 2 EBITDA margin 8 % 28.7 25.5 27.2 21.9 32.5 Unrealised gains and losses on currency and interest rate contracts NOK mill. -403 -25 -111 203 1,243 EBITDA margin, underlying % 24.5 22.7 19.8 23.3 31.9 Significant exceptional items and profit/loss of discontinued operations NOK mill. 0 145 6 2 -30 Return on capital employed before tax 9 % 17.2 17.6 23.3 16.1 33.6 Return on capital employed after tax 10 % 9.2 11.8 12.9 9.4 20.2 UNDERLYING OPERATIONS Return on equity after tax 11 % 20.7 28.8 34.2 20.8 47.4 EBITDA NOK mill. 2,289 1,957 1,924 2,260 2,642 Operating profit NOK mill. 1,763 1,492 1,486 1,847 2,219 HYDROELECTRIC POWER Profit before tax NOK mill. 1,537 1,280 1,290 1,490 1,574 Underlying EBITDA NOK mill. 1,675 1,570 1,440 1,728 2,283 Net income NOK mill. 739 682 526 858 738 Actual electricity generation 12 GWh 7,738 8,134 6,550 6,586 7,831 Expected electricity generation 12 GWh 7,700 7,700 7,700 7,700 7,700 BALANCE SHEET Reservoir reserves at 31 Dec. GWh 4,250 4,450 4,500 2,000 3,600 Total assets NOK mill. 16,091 15,243 14,647 16,725 14,675 Reservoir capacity GWh 5,050 5,050 5,050 5,050 5,050 Equity NOK mill. 4,210 3,917 3,123 3,488 3,740 Average spot price øre/kWh 29.0 21.8 36.0 40.7 29.5 Interest-bearing liabilities NOK mill. 7,668 7,223 7,028 7,621 5,944 Electricity price achieved øre/kWh 29.0 26.3 30.0 33.7 35.3 Capital employed 2 NOK mill. 11,878 11,139 10,151 11,109 9,684 Cost of generation/kWh øre/kWh 9.1 8.7 8.3 8.3 7.7 Unrestricted liquidity 3 NOK mill. 1,412 1,257 1,460 1,339 906 Net interest-bearing liabilities 4 NOK mill. 7,647 7,155 6,976 7,577 5,918 NETWORK Interest-bearing liabilities due over coming 12 months NOK mill. 1,773 2,433 1,769 1,727 1,608 Underlying EBITDA NOK mill. 685 320 328 563 382 Cash and cash equivalents NOK mill. 21 67 52 44 26 Number of transmission and distribution customers 1,000 188 184 178 176 173 Energy supplied GWh 5,308 5,295 5,422 5,873 5,254 CASH FLOW Power grid capital (NVE capital) 13 NOK mill. 3,523 3,322 3,139 2,986 2,794 Net cash provided by operating activities NOK mill. 1,486 970 2,097 226 1,375 KILE cost 14 NOK mill. 45 27 55 30 43 Dividends paid NOK mill. 626 653 902 900 968 Maintenance investments NOK mill. 509 355 355 316 359 Investments in expansion NOK mill. 790 601 373 442 426 Net change in loans to associates and joint ventures NOK mill. 23 44 -1 53 61 Acquisition of shares/ownership interests NOK mill. 56 60 78 142 244

AGDER ENERGI ANNUAL REPORT 2013 4 AGDER ENERGI ANNUAL REPORT 2013 5 KEY FIGURES

Def. 2013 2012 2011 2010 2009

ELECTRICITY SALES Underlying EBITDA NOK mill. 101 61 81 83 66 EBITDA margin % 2.6 1.8 1.7 1.9 2.2 Number of retail customers 15 1,000 147 149 152 153 152 Electricity sales GWh 9,850 9,780 10,409 8,677 7,307

CONTRACTING Underlying EBITDA NOK mill. 1 -31 40 36 70 EBITDA margin % 0.1 -2.0 2.8 2.8 5.1 Proportion intra-group turnover % 15.8 15.2 16.5 22.8 21.4 Order backlog NOK mill. 810 823 842 814 708

DISTRICT HEATING Underlying EBITDA NOK mill. 29 29 20 23 22 District heating supplied GWh 136 125 105 118 89 Sales price of energy supplied øre/kWh 60 56 70 71 58 Gross margin øre/kWh 39 44 39 33 45 Share of renewable generation % 97 97 92 76 86

EMPLOYEES, HEALTH AND SAFETY Number of permanent and temporary staff at 31 December 1,551 1,529 1,579 1,692 1,714 Number of permanent and temporary full-time equivalents at 31 December 1,526 1,495 1,536 1,647 1,673 Sickness absence % 3.6 3.9 4.7 4.5 4.4 Lost time injury frequency (H1) 3.9 6.8 7.9 5.1 5.6 Total injury frequency (H2) 11.2 12.9 16.2 16.2 12.8

DEFINITIONS 1. Operating profit/loss before depreciation and impairment 9. (Operating profit/loss + finance income)/average capital losses employed

2. Equity + interest-bearing liabilities 10. (Profit/loss for the year + interest expense after tax)/ Otera was commissioned by Agder Energi 3. Bank deposits and unused credit facilities. average capital employed Nett to build a new 132 kV line from Fjære Excludes restricted assets 11. Profit for the year/average equity in Grimstad to Moen in Lillesand. Replacing an older 66 kV line, it has increased the 4. Interest-bearing liabilities – unrestricted liquidity 12. All power generation figures are quoted prior to pumping reliability of the energy supply for our 5. Underlying EBITDA + dividends from A and JV + finance income and losses customers in Grimstad, Lillesand and Birkenes. – tax payable 13. Basis for calculating the income cap. Set by the Norwegian 6. FFO/interest expenses Water Resources and Energy Directorate (NVE). 7. Equity/total assets 14. Adjustment to income cap for energy not supplied 8. EBITDA/operating revenues 15. Retail customers

AGDER ENERGI ANNUAL REPORT 2013 6 AGDER ENERGI ANNUALANNUAL REPORTREPORT 20132013 7 GROUP STRUCTURE WHERE WE OPERATE

CEO Tom Nysted Power station

Premises/offices

HR AND FINANCE AND RISK MANAGEMENT District heating/cooling SHARED SERVICES Pernille K. Gulowsen Frank Håland Bergen Wind farm

Power stations under construction CSR AND CORPORATE Oslo DEVELOPMENT Unni Farestveit Stockholm

Gøteborg HYDROELECTRIC POWER ENERGY MANAGEMENT MARKET NETWORK Jan T. Tønnessen Edvard Lauen Hans Jakob Epland Svein Are Folgerø

Malmø OTERA AS AE VANNKRAFT AS AE KRAFTFORVALTNING AS AE NETT AS Jan T. Tønnessen Edvard Lauen Svein Are Folgerø LOS AS Holen Administrative and shared services Skarg AE VARME AS Business areas Brussel Valle Subsidiaries

Finndøla Brokke Rysstad Zürich

GROUP MANAGEMENT Hekni Nisserdam Tjønnefoss Hovatn Dynjanfoss Høgefoss Berlifoss Jørundland

Logna Kuli Longerak

Tonstad RISØR Osen Smeland Finså Holt

Evje Skjerka Uleberg Lislevatn Hanefoss Evenstad Håverstad

Tom Nysted Unni Farestveit Pernille Kring Gulowsen Frank Håland Stoa ARENDAL Iveland 2 Rygene Kvinesdal Iveland Fjære Nomeland Trøngsla GRIMSTAD Steinsfoss FLEKKEFJORD Høylandsfoss Hunsfoss Færåsen Laudal LILLESAND Tryland

LYNGDAL Kvavik KRISTIANSAND FARSUND Fjeldskår MANDAL Lindesnes

Jan T. Tønnessen Edvard Lauen Svein Are Folgerø Hans Jakob Epland

AGDER ENERGI ANNUAL REPORT 2013 8 AGDER ENERGI ANNUAL REPORT 2013 9 BRIEF INTRODUCTION TO AGDER ENERGI OUR BUSINESS

Agder Energi manages natural, renewable Agder Energi is a major centre of exper- Agder Energi Nett owns and operates the Agder Energi has four business areas, Energy Management Market energy sources and converts them into tise and an important employer. The transmission and distribution networks in which reflect the Group’s core activities The Energy Management business area is This business area comprises three subsi- electricity. The Group’s activities ­comprise Group has around 1,500 employees, Vest-Agder and Aust-Agder, which and how it generates added value: Hydro- responsible for maximising profit from the diaries: the contractor Otera AS, the retail the generation, distribution and sale of mainly based in the counties of Aust-­ ­comprise 20,600 km of power lines. The electric Power, Energy Management, electricity generated by the Group. It does supplier LOS AS, and the district heating ­renewable energy, as well as providing Agder and Vest-Agder in southern company has 188,000 transmission and Network and Market. this by trying to optimise scheduling and supplier Agder Energi Varme AS. energy-related services. ­Norway, but also in eastern and western distribution customers. by managing market risks, taking into ac- Norway, as well as in Sweden. The Group’s The parent company, Agder Energi AS, count hydrology, weather data and infor- • Otera AS is one of Norway’s largest Water and wind are perpetual natural head office is in Kristiansand. The company LOS is Norway’s biggest performs strategic management and pro- mation about markets. electrical infrastructure contractors. resources, and it is by harnessing them ­supplier of electricity to businesses, and vides shared services. Its financial results are driven by its that Agder Energi can add value for its Measured in hydroelectric power generati- the country’s third biggest electricity These activities are performed by the ability to implement projects success- ­shareholders, employees and wider on, Agder Energi is Norway’s fourth-largest ­supplier overall. The business areas and administrative company Agder Energi Kraftforvaltning fully and efficiently. ­society. Agder Energi has a significant energy supplier. Each year, the Group’s 47 ­departments at the parent company are AS, which acts on behalf of Agder Energi impact on the wider economy of ­southern wholly-owned and part-owned power With its 700 employees, Otera is one of led by directors. They and the CEO consti- Vannkraft AS. • LOS AS is Norway’s biggest supplier Norway, both by purchasing local goods ­stations produce around 7.7 TWh of Norway’s largest electrical infrastructure tute the senior management team. of electricity to businesses, and the and ­services and through the dividends ­renewable energy. The Group also has contractors. The company also operates in The business area is also responsible for country’s third biggest electricity sup- and taxes that we pay to the shareholder ­significant ownership interests in the wind Sweden. Hydroelectric Power the Group’s trading portfolios. plier overall. LOS generates profit from ­municipalities. Agder Energi is owned by industry, through the companies Statkraft The Hydroelectric Power business area is the margin it achieves on electricity the 30 municipalities in the region Agder Energi Vind and Bjerkreim­ Vind. Agder Energi Varme operates district responsible for developing, operating and Network sales, and by having a cost-efficient (54.5%) and Statkraft Industrial Holding ­These companies are ­planning to build ­heating plants in places such as maintaining the Group’s wholly-owned The Network business area, which opera- business model. AS (45.5%). wind farms in various ­locations in Norway. ­Kristiansand, Arendal and Grimstad. and part-owned hydroelectric power tes a monopoly, has a duty to society to ­stations. The biggest driver of value provide electrical energy to end users. The • Agder Energi Varme AS supplies district ­creation for the business is its power government caps its revenues, which me- heating and cooling in the Agder region. ­generating capacity. This is affected by ans that efficient operation and successful The company adds value by investing in the uptime of plant at power stations, management of the power grid well are the infrastructure for generating and distribu- ­reservoir volumes permitted by its licence main drivers of value for the business area. ting water-based heating and cooling to terms and addition of new capacity buildings. It generates energy using waste VISION AND VALUES through reinvestment and by obtaining The business area, which operates heat and renewable energy sources. new licences. through Agder Energi Nett AS, is responsi- Agder Energi’s vision is to be one of the leading companies in the Norwegian renewable energy sector. This involves taking a long- ble for building, operating and maintaining Goals and results term view and thinking on an industrial scale. Moreover, it means that while the Group has regional and national roots, it also has It operates through the company Agder the transmission and distribution grid in The goals and results of the business an international perspective. Energi Vannkraft AS. Aust-Agder and Vest-Agder. areas are discussed in the Directors’ ­Report and in Note 1 Segment Informati- The Group has defined its values as closeness, credibility, dynamism and innovation: on to the consolidated financial state- ments of the Agder Energi Group. • Agder Energi shall be close to its customers and the region • Agder Energi shall gain credibility by keeping promises, both to third parties and within the company • Agder Energi shall be dynamic, with a conscious corporate strategy that helps it to implement projects and achieve its goals • Agder Energi shall promote innovation and creativity, so that its employees become more skilled and efficient, enabling them to help to grow and develop the Group

Silje Stallemo (left), Anne-Christine Lykke and Kim Iversen working at the LOS customer service centre.

AGDER ENERGI ANNUAL REPORT 2013 10 AGDER ENERGI ANNUAL REPORT 2013 11 FORGING AHEAD IN A CHALLENGING HIGHLIGHTS IN 2013 ENVIRONMENT

Increased ownership interest in wind Wind farm licences included upgrades to various elements two companies’ hydropower resources added value must be safeguarded and power company In August, the Ministry of Petroleum and of grid infrastructure, as well as other in the Otra river system. The aim is to developed. In April, Agder Energi transferred all of Energy granted SAE Vind final permits associated upgrades. Three substations increase hydroelectric power ­generation its shares in Dalane Vind AS to Dalane for the wind farms at Storheia, underwent major refurbishment and and to strengthen our position in the It seems likely that we will face a energi. In return, it received shares in ­Kvenndalsfjellet, Svarthammaren and modernisation.­ electricity market. ­challenging pricing environment for a Bjerkreim Vind AS. This increased Agder Geitfjellet. In total, these four wind ­number of years, while the need for Energi’s ownership interest in Bjerkreim farms will generate up to 1.7 TWh per Investing in apprentices 2014 is a year of exciting opportunities. ­investment in the industry will only Vind. year, equivalent to the electricity con- In order to ensure that it will have the Politicians are taking an ever-increas- ­increase. At a ­company level, we must sumption of almost 100,000 households. expertise it needs in the future, Otera ing interest in the renewable energy respond by ­demanding even more of Supplying housing association with SAE Vind is a joint venture between has for many years had a system in ­industry. The Norwegian government has ­ourselves in terms of efficient operation­ electricity Statkraft (62%) and Agder Energi (38%). ­place for recruiting apprentices. In started work on a comprehensive white and industrial­ automation. Changes in During march, LOS signed an agreement ­autumn 2013 the company took on paper on climate change and energy­ the rest of Europe, and particularly in to supply electricity to the housing as- Strategic industrial partnership ­almost 30 new apprentices. policy, and has promised to ­enable new Germany, have a big impact on us. The sociation OBOS. The agreement gives In September, Hydro Energi and Agder players to own and operate international European transition from fossil fuels to LOS total responsibility for consultancy, Energi signed a letter of intent to establish New dams at Åseral interconnectors. There is a lot of interest­ renewable energy is creating opportu- management and the physical supply of a joint company to operate and develop In December, Agder Energi Vannkraft Agder Energi has put yet another busy in ­different views on, and information nities and challenges for all Norwegian around 340 GWh per year. power stations on the Otra river system. ­received licences to build new dams at year behind it. In spite of low electricity ­about, the industry’s regulatory frame­ electricity companies. Implementation of the letter of intent is Skjerkevatn and Nåvatn in Åseral ­prices the company achieved financial work and future prospects. Iveland power station expansion dependent, amongst other things, on the ­Municipality. These dams will increase results that are on a par with the indus- At a strategic level the time is overripe project Industrial Licensing Act being changed to Skjerka power station’s reservoir try leaders. After paying a total­ tax rate Agder Energi maintains a constructive for restructuring, as there are still around The project to increase Iveland power allow private companies to own power sta- ­capacity and head. of 49.9 percent, the Group made a profit dialogue with politicians and the autho- 330 electricity companies in Norway. station’s capacity was approved in May, tions through general partnerships. of NOK 845 million. Both our employe- rities. As an industry player, we want to This industry structure means that we and work started in June. Completion is Increasing grid capacity es and shareholders should be proud of have a strong voice in matters that we lack the ability to make the big invest- due in summer 2016. Annual electricity Increasing electricity generation In December, Agder Energi Nett was that achievement. consider to be of strategic importance. ments needed and to develop the exper- generation will increase by 150 GWh, In October the Norwegian Water ­licensed to build Honna substation and In our dialogue with politicians and other tise for the future. There is ­consequently equivalent to the consumption of 7,500 ­Resources and Energy Directorate gran- to upgrade the regional power lines from We are currently investing heavily in new opinion formers, we emphasise the ­value a need for a third round of restructuring, households. Total investments for the ted permission to build a new power sta- Skjerka to Logna in Åseral. These hydroelectric power plants and wind generated by the renewable energy based around the ­vertically ­integrated project are estimated at around NOK tion at Frøytlandsfoss and to increase the ­projects are important in terms of­ farms, and in 2013 we invested over NOK ­industry in Norway, which is the ­biggest groups established in the ­previous 750 million. ­capacity of Høylandsfoss power station in ­improving reliability and providing grid 1.3 billion in total, mainly in hydropower single contributor to the mainland’s round. That would give us entities­ with Kvinesdal Municipality in the county of ­access for new generation. projects and grid upgrades. Last year ­industrial production. For the industry a greater capacity for investment and Building Lislevatn power station Vest-Agder. These projects will increase we signed a letter of intent with Hydro to fulfil its role of providing an electri- skills development, improve competition In May a decision was taken to build the our annual electricity generation by 14.3 Strengthening the western part of ­Energi, which commits us to forming a city system that develops in line with the in the market and allow a sustainable Lislevatn power station in Evje og GWh, equivalent to the consumption of the grid strategic partnership based around the needs of society, its ability to generate ­dividend policy. ­Hornnes municipality. It will have a rated approximately 700 households. In December, Agder Energi Nett was capacity of 4.2 MW, and will generate ­licensed to build a new high-voltage approximately 19 GWh per year, equiva- Making the grid in Kristiansand more ­power line between Øye in Kvinesdal Tom Nysted lent to the consumption of almost 1,000 robust and Austadvika in Flekkefjord. This line CEO households. Construction is expected to Agder Energi Nett has significantly will improve reliability and enable grid take around two years, and the esti- strengthened the grid and improved re- access for new renewable generation mated cost is roughly NOK 70 million. dundancy in Kristiansand. The project from wind farms and small hydro plants.

AGDER ENERGI ANNUAL REPORT 2013 12 AGDER ENERGI ANNUAL REPORT 2013 13 CONTENT Click on the text to go to the page of your choice

Norwegian code of practice 16 Corporate governance structure 18 Corporate social responsibility (CSR) 21 Directors’ report 24 Declaration pursuant to Section 5-5 of the Securities Trading Act 33

The Agder Energi Group Income statement 36 Statement of comprehensive income 37 Statement of financial position 38 Statement of cash flows 39 Statement of changes in equity 40 Accounting principles 42 Notes 50

Agder Energi AS Profit and loss account 94 Balance Sheet 95 Cash flow statement 96 Accounting principles 97 Notes 99 Auditor’s report 110

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AGDER ENERGI ANNUAL REPORT 2013 14 AGDER ENERGI ANNUAL REPORT 2013 15 NORWEGIAN CODE OF PRACTICE

Statement of Compliance be of critical importance to society. ­Directors considers it important for the the Board, CEO and external auditor shall Entitlement of Board members to own Details of the fees paid to individual Agder Energi has chosen to follow the ­Ag­der Energi’s CSR obligations include Group to have sufficient equity to also attend. The election committee and shares Board members are presented in Note 33 corporate governance recommendations taking social and environmental factors ­provide financial stability, bearing in Board members are also entitled to Under the company’s articles of associa- to the consolidated financial statements. set out in the Norwegian Code of into account in its operations. Moreover, mind its stated goals, strategy and risk attend.­ tion and the shareholders’ agreement, ­Practice published by the Norwegian the Group shall exploit opportunities to profile. neither Board members nor other indivi- Management compensation Corporate Governance Committee create additional value where the inter- Election committee duals are entitled to own shares in Agder Management compensation reflects the (NUES), based on the 23 October 2012 ests of society and its own interests The Group’s dividend policy reflects the The articles of association specify that Energi. Group’s guidelines on compensation. edition, as corrected on 21 December coincide. Where possible, it shall fulfil its stated aim of giving shareholders a the company shall have an election Members of the senior management 2012. Agder Energi is not a publicly tra- responsibility by using knowledge and ­return on their investment through cash ­committee. It consists of five members, The work of the Board team are not entitled to any options, ded company, so it is not obliged to fol- technology related to the Group’s positi- dividends. The Group’s future dividend who are appointed for a two-year term. The Board’s tasks are regulated by the ­bonuses or performance-related pay. low the recommendations. Nevertheless, on as a supplier of renewable energy. policy will depend on parameters such as Under the current shareholders’ agree- Limited Liability Companies Act and Agder Energi implements them in so far the Group’s strategic priorities, expected ment, the municipal shareholders can other relevant legislation, the company’s Details of the compensation of each indi- as they are considered appropriate to Exemption from the Group’s guidelines cash flow, investment plans, financing ­appoint three members, while Statkraft articles of association and the Board gui- vidual member of the senior manage- Agder Energi’s business and ownership The operations of some the subsidiaries requirements, the need for adequate can appoint­ two. The election committee delines. The Board guidelines are publicly ment team are presented in Note 33 to structure. in the Group are very remote from, and ­financial flexibility and debt-servicing ­nominates candidates for the corporate available. The Board appoints the CEO. the consolidated financial statements. have little in common with, the core ability. assembly and for the Board of Directors. The Board has drawn up instructions for, Below we have set out to what extent, ­activities of Agder Energi, and there are and delegated authority to, the CEO. Information and communication and how, Agder Energi has chosen to fol- few synergies to be realised by integra- Equity raising The shareholders’ agreement contains Agder Energi satisfies all statutory requi- low the recommendations. Each heading ting them more closely with the Group’s Equity increases shall be proposed by certain rules on the work of the election Audit committee rements relating to financial reporting represents one topic covered by the re- other activities. the Board and discussed by the AGM. committee, designed to ensure In accordance with the Stock Exchange and disclosure. The Group considers commendations. The Board is not currently authorised to ­compliance with the stipulations of the Regulations, The Board of Agder Energi maintaining good, appropriate lines of This may apply to companies in the carry out equity increases. agreement. has established an audit committee. communication with its owners and Ethical guidelines Group’s development portfolio, subsidia- ­external stakeholders to be a priority. Along with its values, the ethical guideli- ry groups or joint ventures that are Equal treatment of shareholders and Corporate assembly and Board of Risk management and internal controls nes adopted by the Group provide the ­exempted from some of the Group’s transactions with related parties Directors: Composition and indepen- Agder Energi’s internal control and risk Acquisitions and disposals foundation and framework for its activi- ­guidelines. The exemptions, which are Agder Energi has two classes of shares: dence management systems are described in The disposal and acquisition of compani- ties. The target groups are all ­employees, detailed in the relevant internal guide­ A and B. Each share has one vote at the There are 15 members of Agder Energi’s the following section on corporate gover- es is handled in accordance with the rele- members of the boards of Agder Energi lines, entitle these companies to replace AGM, and has an equal entitlement to corporate assembly. Five representatives nance structure, and satisfy NUES’ re- vant authorisations within the Agder and its subsidiaries and other people certain requirements with their own ­dividends. Class A shares can only be are elected by and from the employees, commendations. Agder Energi has desig- Energi Group. Disposals and acquisitions who act on behalf of Agder Energi. Ethics rules.­ owned by hydropower licensors. The five from the municipal shareholders and ned its internal control systems and risk place as a result of the strategy decisions constitutes an integral part of the ­articles of association do not restrict five from Statkraft. The corporate assem- management principles based on the gui- of companies in the Group or through the Group’s operations and of its overall risk Business activities ­voting rights in any way. bly is elected for a two-year term, and dance of the highly-respected COSO wholly-owned subsidiary Agder Energi management process. Agder Energi’s purpose is defined in the elects its own Chair and Deputy Chair. The framework for enterprise risk manage- Venture. company’s articles of association: “The For significant transactions between the corporate assembly is invested with the ment (2004/2005). Agder Energi requires all people who act company’s purpose is to: exploit, ­produce company and shareholders, Board mem- authority and entrusted with the tasks Auditor on behalf of the Group to comply with and sell energy; contribute to the safe bers, key employees or any of their rela- specified in current legislation governing The Board guidelines require an annual Ernst & Young was the Group’s external high ethical standards, and it discusses and efficient supply of energy; and ted parties, the Board shall obtain a va- limited liability companies. review of internal controls and risk mana- auditor 2013. All of NUES’ recommenda- ethical issues openly both within the ­exploit related, profitable business luation from an independent third party. gement to be carried out in collaboration tions relating to auditors are satisfied. company and with third parties. Our ­opportunities within the energy and Under the shareholder agreement, with the external auditor. ­business partners are also expected to ­infrastructure sectors.” Free negotiability ­twelve people sit on the Group’s Board of have high ethical standards consistent The shareholders’ agreement between Directors. Four members, including the Non-executive Directors’ fees with those of the Group. Our internal Agder Energi has goals and strategies the owners of Agder Energi means that Chair and Deputy Chair, are elected at Members of the Board are paid based on control system, including our whistle­ covering the whole group, for each the shares are not freely negotiable. the proposal of the municipal sharehol- their roles. Their fees are not profit-rela- blowing procedures and ethics commit- ­business area and subsidiary, and for ders, four members are elected at the ted. No Board members are entitled to a tee, are designed to ensure that our certain aspects of its operations. Annual General Meeting proposal of Statkraft and four at the pro- pension, options or termination compen- ­organisation and employees are able to Under the agreements between share- posal of the employees. The executive sation from the company, apart from the follow the guidelines. Equity and dividends holders, the AGM is only attended by one management is not represented on the entitlements of the employee represen- At 31 December 2013, the Group had representative of the shareholder muni- Board. Board members are elected for a tatives on the Board in their capacity as Corporate social responsibility (CSR) NOK 4,210 million of equity, giving it an cipalities and one representative of two-year term. employees of the company. Agder Energi considers its business to equity ratio of 26%. The Board of ­Statkraft Industrial Holding. The Chair of

AGDER ENERGI ANNUAL REPORT 2013 16 AGDER ENERGI ANNUAL REPORT 2013 17 CORPORATE GOVERNANCE STRUCTURE

Corporate governance principles regulate the relationship between the shareholders, INTEGRATED RISK MANAGEMENT Board of Directors and executive management of a company, as well as describing In order to ensure that the instructions ment policy. Areas that involve trading in to meet its goals, including strategic, ope- the relevant roles and reporting structures. Integrated risk management provides of the owners/Board of Directors are financial markets also have risk manage- rational, reporting-related and compliance guidelines on how the company should act to control the uncertainties associated ­followed, and that the Group is managed ment strategies and limits on risk exposure. risks. This includes setting and monitoring appropriately, the Board has establis- limits on the Group’s venture capital in- with future events and the achievement of targets. Internal controls are one hed guidelines for its own activities, its Our risk management activities form an vestments, analysing potential impacts element of integrated risk management, and are designed to ensure appropriate ­subsidiaries and the Group CEO, as well as integrated part of the business operations on financial results and a more long-term risk assessment, reliable financial reporting and compliance with existing laws an authorisation matrix. These documents at individual companies within the Group, assessment of areas such as changes in underpin the Group’s strategy, which in which are responsible for mapping and ma- the regulatory framework. In combination, and regulations. turn sets out goals and priorities for the naging their own risks. Overall exposure to the Group’s policies and systems provide Group and its business area. The Board has risk is also monitored at the Group level, an integrated framework for risk manage- also adopted a general risk management­ and is included in reports to the senior ment. The Group’s next main focus in the policy, which provides the framework and management team and Board of Directors. field of integrated risk management will The Group has implemented NUES’ corporate governance recommendations in so far as they are considered appropriate to guidelines for integrated risk ­management. be on developing good presentation and Agder Energi’s business and ownership structure. The levels of authority and areas of responsibility in the corporate governance Business plans have been drawn up based The Group’s risk management systems management tools. structure are shown in the figure below. on the Group’s strategy­ and risk manage- cover all areas that could affect its ability

INTERNAL CONTROLS AND WHISTLEBLOWING PROCEDURES Integrated corporate governance model, levels and governance documents Internal control system easily accessible on the Group’s intranet Agder Energi has an internal audit service, For many years, Agder Energi has worked “Energisk”. SLIK provides an important which assists the Board, senior manage- hard to establish and improve its internal foundation for the Group’s work on inte- ment team and business areas by providing Level Responsibilities Description controls. The company’s internal control grated risk management,­ internal controls an independent, unbiased assessment of the system is documented in governance and continuous­ improvement. This lays Group’s risk management procedures. The documents that are available to all em- the foundations for a business culture internal audit service’s mandate and guideli-

Corporate governance ployees. The system used by the parent that promotes high-quality and efficient nes are approved by the Board, which also Shareholders Corporate governance company Agder Energi AS is called “THIS day-to-day operations­ and reporting to reviews the internal audit service’s annual is how we do things at Agder Energi”, the company’s executive management report and its audit plans. ­generally abbreviated to the first word and Board. of the Norwegian name – SLIK. SLIK has The external auditor is chosen by the AGM, been established in accordance with the Subsidiaries in the Group have their and is responsible for the financial audit of Board of Directors (Group) Frameworks, recommendations contained in the COSO own corporate governance systems the parent company, Group and subsidiaries. framework and in the Code of Practice with ­company-specific documentation Agder Energi has a Group-wide agreement

guidelines and Management and governance at the AE Group group strategy drawn up by the Norwegian Corporate ­describing their management structures with Ernst & Young, which must be used by Governance Committee (NUES). Systems and work processes, within frameworks all subsidiaries for the statutory audit. Com- CEO have been established to ensure that and guidelines documented in the parent panies in the Group’s seed and venture capi- Senior management team Authorisations, ­suggestions and proposed changes are company’s SLIK system. tal portfolios can have a different auditor. Executive Directors goals and guidelines recorded and discussed. This provides a basis for continuously developing and Monitoring, auditing and The Group has several channels for whist- improving the company’s established whistleblowing procedures leblowing, including one independent one, Instructions, frameworks, Boards of subsidiaries practices. In order to pick up on changes that are and there are formal procedures in place guidelines and business plans ­relevant to the company’s business, Agder for dealing with whistleblower reports. Such SLIK describes the Group’s corporate Energi has introduced an Early Warning sys- reports are treated in strict confidentiality Authorisations, target-based contracts governance model and the internal tem. This system is used to carefully monitor unless criminal conduct is involved. Agder Management and development plans frameworks and guidelines employ- developments in the regulatory environment Energi has established procedures that ees must adhere to in their day-to-day and markets in which the Group operates, ­safeguard the rights of whistleblowers. work. Through SLIK, the full range of the as well as technological developments. Group’s governance documents – from The information thus obtained is used in For issues of a more operational nature steering documents through manuals strategic and commercial decision-making (­primarily HSE-related concerns), the Group to descriptions of work processes – are procedures. has established the “RUH” system for

AGDER ENERGI ANNUAL REPORT 2013 18 AGDER ENERGI ANNUAL REPORT 2013 19 CORPORATE SOCIAL RESPONSIBILITY

­reporting unwanted incidents. This system gers, unwanted incidents and injuries. The any consequences, as well as to uncover Renewable energy is part of the solution The environmental strategy shall ensure The above activities and systems enable is used to report and record potential dan- reports are analysed with a view to limiting causes and implement corrective measures. to the global crisis arising from climate that Agder Energi meets society’s expec- the Group to properly fulfil its duties with change, and electricity plays a key role in tations with respect to protecting the en- respect to human rights, labour rights, society. Consequently, the Group’s core vironment. corporate social responsibility, the envi- RISK MANAGEMENT business is inherently sustainable. ronment and combating corruption. Work The conduct of the Group’s representati- in these areas is nevertheless a continu- Identifying and managing risks is one of Capital allocation and financing at operating units, and through contin- Nevertheless, we realise the importance ves is governed by the ethical guidelines, ous process, so we regularly review the the keys to adding value, and it forms an The energy industry is currently going gency plans. Agder Energi participates­ of how we conduct our core business at which also describe the ethical standards relevant governing documents, and their integrated part of Agder Energi’s corpora- through a period of heavy investment, in the organisation “Kraft­forsyningens Agder Energi. The business plans and expected of its business partners. By implementation. The aim is to ensure that te governance model. The Group is expos- both in generating capacity and grid in- ­beredskapsorganisasjon” (KBO) as a ­power day-to-day operations of the Group and permeating all activities at Agder Energi, we fulfil our CSR obligations in the best ed to risks in a variety of areas throughout frastructure, which increases the risk generating company,­ district ­heating com- its subsidiaries are guided by the Group’s these guidelines will help to keep the possible way. the value chain. The most important risks of sub-optimal investment decisions. A pany and grid ­operator. This requires it to strategy. This document makes it clear Group competitive and to safeguard its are related to market price movements, joint Group-wide model for the corpo- have appropriate ­contingency plans and that value must be created within an ethi- reputation. As of spring 2014 we are in the process capital allocation and financing, operatio- rate governance­ of projects is designed preventive ­measures in place. For the pur- cal framework, and that value should also of establishing a new CSR strategy: Value nal issues and the regulatory environment. to ensure­ that decisions are taken at the pose of risk management, ­Agder Energi be added for society wherever possible. Agder Energi supports the ten principles creation strategy with respect to environ- right moment and based on reliable infor- has chosen to establish­ contingency plans, set out in the UN Global Compact, and mental and societal risk. Market risk mation, and that projects are managed ef- training exercises and preventive measures Group guidelines on HSE, CSR, HR, risk strives to comply with ISO 26000 – Social Agder Energi is exposed to significant ficiently and in accordance with best prac- even at companies not covered by the KBO management and purchasing set out spe- Responsibility. More information about the Group’s CSR market risk through the generation and tice. Agder­ Energi’s investment committee requirements.­ cific aspects of how Group should meet its activities can be found in the 2013 sustai- trading of electricity, with its revenues helps to ensure that investment decisions­ responsibilities. nability report. from electricity sales being exposed elec- are based on detailed, quality-assured Regulatory environment tricity price risk and currency risk. background information, and acts as an Changes in the regulatory environ- advisory body for subsidiaries. That back- ment and political decisions affect the Hedging strategies for the power genera- ground information is entered in a model company’s room for manoeuvre and tion portfolio are subject to limits on how for long-term capital allocation, which is constitute a significant element of the much power can be sold through futures designed to ensure optimal use of capital Group’s risk exposure. Agder Energi works contracts and to an estimated minimum at the Group. systematically to understand how the re- profit requirement. Agder Energi has built gulatory environment is changing and to up a strong team specialising in energy Agder Energi has a clearly defined goal for exploit any available room for manoeuvre. management, analysis and modelling. Sub- its credit rating, in order to give it access A continuously updated position document ject to above constraints, the amount of to credit markets. is used to set out the Group’s stance on is- electricity sold through futures contracts sues and processes relating to the regula- is continuously adjusted, bearing in mind Operational risk tory environment. These stances underpin the company’s price expectations and There are operational risks associated Agder Energi’s messages in consultation generating capacity. The sale of currency with all of the processes in the value chain. processes, and provide a guide for any in- futures also takes into account electricity The most important ones are the risk of ternal adjustments that need to be carried price hedging and the total risk associated injuries to the Group’s employees, damage out by Agder Energi. The Group believes with the generation portfolio. to power plants, distribution networks and strongly in open dialogue with all relevant other assets, negative impacts on the en- decision-makers and in maintaining good The retail business is considered a mar- vironment and climate, negative impacts relationships with all stakeholders. gin business, and financial instruments are on the Group’s reputation and the risk of used to minimise the electricity price risk failures in administrative and management and currency risk. processes. Operational risk is managed through procedures governing activities

Siv Elisabeth Borgstrøm manages the regional power transmission grid department at Agder Energi Nett.

AGDER ENERGI ANNUAL REPORT 2013 20 AGDER ENERGI ANNUAL REPORT 2013 21 Thomas Haltorp at Otera is working on the new regional transmission line at Florø.

AGDER ENERGI ANNUAL REPORT 2013 22 AGDER ENERGI ANNUAL REPORT 2013 23 DIRECTORS’ REPORT

Agder Energi’s vision is to be one of the leading companies in the Norwegian renewable Net investment totalled NOK 1,355 (509) The Board proposes that Agder Energi 24 million. The amendment increased the energy sector. The Group’s activities comprise the generation, distribution and sale million in 2013. This high level of investment AS’s profit for the year be appropriated actuarial gains by the same amount, leaving explains the increase in both total assets as follows: total comprehensive income unchanged. of energy, as well as energy-related services. Most of Agder Energi’s business is done and interest-bearing liabilities. Investment (Amounts in NOK millions) in southern Norway, and the company has its head office in Kristiansand. in property, plant and equipment and intan- Allocated for dividends 707 The tax expense for 2013 was reduced by gible assets amounted to NOK 1,299 (956) Transferred to other reserves 86 the fact that Agder Energi has changed its The Group’s profit for the year was NOK million. Almost 95% of investment related Total allocations 793 model for calculating deferred resource rent 846 million in 2013, compared with NOK to the Network and Hydroelectric Power tax assets arising from temporary differen- 1,045 million in 2012. Agder Energi’s business areas. Cash flow from operating Going concern assumption ces. Meanwhile, the price of future contracts ­hydropower stations generated 7,738 GWh activities was NOK 1,486 (970) million in In accordance with the Norwegian Accoun- for electricity has fallen significantly. This of clean energy in 2013 (2012: 8,134 GWh). 2013. The increase in EBITDA adjusted for ting Act, the Board of Directors confirms has led to a downward adjustment of the unrealised gains and losses was the biggest that the going concern assumption is jus- value of negative resource rent carryfor- reason for the strong cash flow. In addition, tified, and that the annual financial state- wards. This means that there was a net NOK KEY EVENTS OF 2013 there was a reduction in trade receivables. ments have been prepared on that basis. 72 million expense arising from changes in deferred resource rent tax, NOK 92 million Agder Energi increased its ownership- In August, the Ministry of Petroleum and Industrial Licensing Act being changed Proposed dividends Changes to accounting principles, worse than the previous year. These items interest in Bjerkreim Vind to 51.2%. The Energy granted SAE Vind final permits for to allow private companies to own power The dividend for the year has been set estimates and correction to depreciation have no impact on cash flows. ­remaining shares are held by Dalane Energi the wind farms at Storheia, ­Kvenndalsfjellet, ­stations through general partnerships. based on the Group’s profit under NGAAP At the start of 2013, Agder Energi im- and Lyse. Bjerkreim Vind has a licence to Svarthammaren and Geitfjellet. The combi- (Norwegian generally accepted accounting plemented the revisions to the rules on In the fourth quarter it was discovered that ­develop Bjerkreim wind farm, which will ned rated capacity of the four wind farms In December, Agder Energi received licen- principles). The controlling interest’s NOK pensions contained in IAS 19 Employee the registered depreciation period for cer- have a rated capacity of up to 150 MW. will be up to 660 MW. SAE Vind is a joint ces to build new dams at Skjerkevatn and 845 (700) million share of NGAAP profit benefits. The most important change is tain items of property, plant and equipment venture between Agder Energi (38% inter- Nåvatn in Åseral Municipality. The main reflects the true underlying performance that the return on pension plan assets for in the Hydropower business area was too The project to increase Iveland power est) and Statkraft (62%). purpose of the project is compliance with of the Group better than the IFRS figure, as accounting purposes is now based on the high. This error, which runs right back to the station’s capacity was approved in May, and safety requirements, but it will also impro- it is less affected by unrealised gains and discount rate used to calculate the present last century, has meant that declared annu- work started in June. Completion is due in In September, Hydro Energi and Agder ve our ability to regulate the Mandal river losses. Moreover, the NGAAP profit more value of pension liabilities. Previously the al depreciation has been NOK 15 million too summer 2016. Annual electricity genera- Energi signed a letter of intent to establish system, as well as increasing the head at closely matches changes in the Group’s dis- expected return on the pension plan assets low. It has been treated as an accounting tion at Iveland 2 will increase by 150 GWh, a joint company to operate and develop Skjerka power station. tributable reserves. The Board of Director was used. The amendment must be applied error in the financial statements for prior equivalent to the consumption of 7,500 power stations on the Otra river system. proposes that NOK 707 million be paid out retrospectively, so comparative figures have years, and after adjustments for deferred ­detached houses. Total investments for the Implementation of the letter of intent is in dividends, which represents 84% of the been adjusted accordingly. For 2012, this tax, correcting it has reduced the value of project are estimated at NOK 750 million. dependent, amongst other things, on the Group’s NGAAP profit. The profit for the increased wage costs by NOK 34 million, property, plant and equipment by NOK 411 year of the parent company Agder Energi AS and reduced the tax expense by NOK 10 million and equity by NOK 173 million. There under NGAAP was NOK 793 (858) million. million. Net income was reduced by NOK is no impact on cash flows. FINANCIAL PERFORMANCE

Agder Energi’s operating revenues in 2013 Net finance costs came to NOK 629 million, Agder Energi made a profit after tax of 2013 PERFORMANCE BY BUSINESS AREA were NOK 9,890 (8,946) million. Revenues compared with NOK 237 million in 2012. NOK 846 (1,045) million. The Group did not rose in the business areas Hydroelectric The increase was due to exchange rate make any significant disposals in 2013, so The accounts for the business areas have The average spot price in Agder Energi’s previous year. This increase was the result Power, Retail Market and Network. fluctuations. The weakening of the Nor- discontinued operations did not have any been prepared under NGAAP. pricing region (NO2) was 29.0 øre/ of both higher spot prices and good sche- wegian krone against the euro meant that impact on profit after tax. This is in contrast kWh (21.8 øre/kWh), up 33% over 2012. duling. Realised gains on electricity price The Group made an operating profit of NOK realised exchange rate gains fell from NOK to 2012, when discontinued operations con- The Hydroelectric Power and Energy ­Concession power and electricity supplied hedges came to 72 million, down from NOK 2,315 (1,818) million, up NOK 497 million 125 million to NOK 52 million. This weake- tributed NOK 145 million to profit after tax. Management business areas under various long-standing contracts with 238 million in 2012. This reduction was due over 2012. Compared with the previous ning also resulted in a NOK 438 million loss The Hydroelectric Power and Energy industrial customers are sold at prices far to the increase in spot prices. year, the underlying performance impro- on the Group’s forward contracts to sell Financial results and capital structure ­Management business areas are responsible below current spot prices. Nevertheless, a ved, with all of the business areas making euros (NOK 22 million gain). Agder Energi’s assets had a book value of for developing, operating and maintaining combination of good scheduling and gains The contribution from realised forward a positive contribution. Large volumes of NOK 16,091 (15,243) million at the close of the Group’s hydroelectric power stations, on physical and cash-settled contracts currency contracts amounted to NOK 75 electricity have been sold through futures The Group’s pre-tax profit amounted to 2013. The equity ratio was 26% (26%). At and for optimising revenues from the po- ­allowed Agder Energi to achieve an average (153) million in 2013. The Norwegian krone contracts, which combined with falling fu- NOK 1,686 (1,581) million, and its tax ex- the end of the year, the Group had NOK wer generated by the company. 7,738 GWh price of 29.0 øre/kWh (26.3 øre/kWh) on weakened against the euro in 2013, which tures prices meant that unrealised gains pense was NOK 840 (681) million. The 7,668 (7,223) million of interest-bearing (8,134 GWh) of power was generated in the power that it generated in 2013. explains the lower contribution. on the value of these contracts boosted higher tax expense was mainly due to an liabilities. The average interest rate on the 2013, in line with the expected average po- operating profit by NOK 552 (326) million, increase in expenses related to resource Group’s debt portfolio was 4.0% (4.3%). wer generation­ of 7.7 TWh. This figure inclu- The turnover of these two business areas These business areas made a pre-tax profit up NOK 226 million on the previous year. rent tax; see discussion under the Hydro- The Group had NOK 1,412 (1,257) million des both power generated by wholly-owned was NOK 2,596 (2,399) million in 2013. of NOK 1,452 million, compared with NOK electric Power and Energy Management of unrestricted liquid assets and undrawn ­power stations and Agder Energi’s share of They made an operating profit of NOK 1,419 million in 2012. After a tax expense business areas. credit facilities at the close of the year. power generation at part-owned ones. 1,445 (1,366) million, 6% more than in the of NOK 758 (639) million, this gave a profit­

AGDER ENERGI ANNUAL REPORT 2013 24 AGDER ENERGI ANNUAL REPORT 2013 25 after tax of NOK 694 (780) million. The in- The Network business area ­Agder Energi Nett is well prepared for the for the increase­ in staff numbers was the The Group aims to have a sickness absence reported, so that we can discover faults and crease in the tax expense was related to The Network business area is responsible ­potential changes. merger of the subsidiary Solvea into the rate below 3.5%, and we have been wor- prevent serious incidents from happening in resource rent tax. Higher spot prices for for developing, operating and maintaining parent company. king hard to improve the way in which we the future. There has been an improvement electricity generated resulted in an ­increase the transmission and distribution grid in The Market business area deal with absences. The companies in the in this area, particularly thanks to a strong in resource rent tax payable. In addition, the- Aust-Agder and Vest-Agder. Its turnover The Market business area comprises the We work hard to keep and develop our best Group have signed up to the Norwegian focus on changing our HSE culture. re was a reduction in the net deferred tax in 2013 was NOK 1,423 (1,048) million, companies LOS, Agder Energi Varme and employees. This is done by offering com- government’s inclusive working life scheme assets related to resource rent tax. on which it made an operating profit of Otera. The business area’s turnover was petitive compensation packages, imple- for the period 2010-2013. Diversity and equal opportunity NOK 479 million, compared with NOK NOK 5,367 (5,059) million in 2013, while menting a life phase-conscious HR policy Our ethical guidelines set out how the NOK 777 (415) million was invested in 2013, 128 million the previous year. The strong its operating profit was NOK 93 (21) mil- and providing good training, as well as by During the year, 29 (37) occupational ac- Group shall be governed and managed, and of which NOK 535 (250) million related to operating profit was the result­ of a higher lion. NOK 65 (71) million was invested in promoting a results-oriented culture, HSE cidents resulting in injury were recorded. how our employees and businesspartners investments in new projects. The main rea- income cap. The income cap rose as a re- the business area in 2013. and good management. Of these, 10 (18) resulted in total lost time are expected to conduct themselves. The sons for the increase in investment were sult of both permanent­ changes­ and one- of 112 (212) days. The accident figures are guidelines also incorporate principles rela- the Brokke Nord/Sør, Skarg power station off changes that only apply­ to 2013. The The retail electricity provider LOS had In 2013, our annual employee satisfaction equivalent to a lost time injury frequency ting to equality and diversity. We support and Iveland 2 projects. Norwegian Water Resources­ and Energy­ turnover of NOK 3,930 million in 2013, com- survey once again showed that staff enjoy (number of LTIs per million work hours) of the principles set out in the UN’s Universal Directorate’s new model for calculating pared with NOK 3,424 million the previous their work and like the working environ- 3.9 (6.8), a total injury frequency (number Declaration of Human Rights and the ILO The construction of the water transfer sys- return on ­capital is a permanent change. year. The company made an operating profit ment at the Group. of injuries, whether or not they resulted in Convention, and we do not accept any form tems/dams at Brokke Nord/Sør and Skarg Compensation for expenses­ caused by bad of NOK 98 (55) million, which is its best re- lost time, per million work hours) of 11.2 of discrimination. This means that people power station will together increase our an- weather and ­actuarial losses in 2011, on sult ever. In total, LOS supplied 9,850 GWh The Board of Directors would like to thank (12.9) and an injury severity rate (number shall not be treated differently, excluded nual generating capacity by 175 GWh, and the other hand, represent a one-off gain (9,780 GWh) over the course of the year. staff for all their hard work over the course of days lost per million work hours) of 43.3 or shown preference based on their race, the projects are expected to cost just over in 2013. The same applies to extraordinary of the year. (82.0). Like the sickness absence rate, ac- gender, age, any disability, sexual orienta- NOK 900 million. Test running is planned compensation provided­ through the income Otera is one of Norway’s largest electrical cident figures were at a record low in 2013. tion, religion, political opinions or national for May 2014. Otteraaens Brugseierfore- cap for the high expenses­ experienced by infrastructure contractors. Otera’s turnover Health and safety or ethnic origin, and that no other form of ning and Otra Kraft DA, who are the ­licence all grid operators­ in 2011. The temporary in 2013 was NOK 1,347 (1,549) million, and In 2013, the Group’s sickness absence rate In 2013 we once again placed a strong em- discrimination shall be tolerated. holders, are responsible for developing the effects in 2013 were responsible for a sig- it made an operating loss of NOK 19 (48) was 3.6%, compared with 3.9% in 2012. Of phasis on HSE work, including monitoring. projects. Agder Energi is a participant/ nificantly larger proportion of the increase million. The operating loss includes a NOK that, 1.7% (1.8%) was short-term absence The Board wants to underline the impor- Women make up 13% (14%) of the Group’s shareholder in these companies, and our in profit than the new calculation model. 20 million charge for discontinued opera- and 1.9% (2.1%) was long-term absence tance of continuing this work, so that we le- employees, and there are two women and shares of expected electricity generation tions and writedowns. (more than 16 days). This is the lowest arn from near misses and thus minimise the six men in the senior management team. and investment costs are around 120 GWh The income cap imposed on grid operators sickness absence figure recorded since number of accidents and injuries. Moreover, Women occupy 33% (33%) of the seats and NOK 620 million respectively. is lowered if there are power cuts. In 2013, Agder Energi Varme supplies district hea- Agder Energi was established in 2000. our goal is for all unwanted incidents to be on the Board. power cuts cost Agder Energi Nett NOK ting and cooling in the Agder region. In Work at Iveland 2 started in the summer of 45 million, compared with NOK 27 million 2013 the company managed turnover of 2013. Iveland power station in its current in 2012. The cost in the first eleven months NOK 90 (86) million, while its operating THE ENVIRONMENT configuration is a bottleneck in the Otra was lower than normal, but bad weather profit was NOK 14 (15) million. It supplied river system. For much of the year it ope- in December cost the company NOK 19 136 GWh (125 GWh) of energy, up 9% from The Group’s businesses in the hydropo- years. Agder Energi Vannkraft is working to flow. All non-conformances were dealt with rates at full capacity, and as a result of ina- million in that month alone. the previous year. The increase was mainly wer and grid operation sectors are run establish the cause of this, by participating in accordance with current guidelines. dequate turbine flow capacity, a significant due to more customers being connected through wholly-owned and part-owned in a joint project involving both the private amount of potential electricity generation NOK 429 (419) million was invested in to its district heating network. Electricity subsidiaries. Those companies operate and public sectors. The project took vari- In conjunction with maintenance work, is lost. The new power stations will allow 2013, of which NOK 152 (179) million price hedges made a positive contribution, in accordance with government licences ous actions in the Mandal river system in approximately 300 litres of oil flowed out the available water resources in the whole ­related to investments in new projects. although it was lower than in 2012. NOK and rules based on current legislation and 2013, supported by grants from the County of the discharge pipe at Evenstad power river system to be used efficiently. Once the 52 (62) million was invested in 2013. court decisions. Governor. station. Almost all of the oil was sucked new power station is operating it will give In 2014, the transmission tariff for the up again, so the incident did not cause any an annual entitlement to around 150 GWh ­local distribution network has been Hydroelectric Power The Water Resources Act, Watercourse serious harm to the environment. of green power certificates. The estimated ­reduced by approximately 5%. Dams and power stations change the natu- ­Regulation Act, Energy Act, Industrial gross cost of the project is approximately ral environment, but the Group’s activities ­Licensing Act and Pollution Control Act are Damming river systems can result in fish NOK 700 million. Test running is expected In April the Reiten commission will do not have a bigger impact on nature or the most important pieces of legislation go- losing spawning grounds and can have a de- to take place in the second quarter of 2016. ­propose a new grid structure for Norway. society than is usual for this kind of busi- verning our business. The Group’s subsidia- trimental effect on their long-term access to ness. Furthermore, we make a significant ries are required to report any non-confor- food. In order to mitigate this, Agder Energi positive contribution to the environment by mances with the terms of their licences. In Vannkraft has performed statutory and EMPLOYEES generating on average 7.7 TWh of renewa- 2013 there were five breaches of the rules voluntary activities to reduce the environ- ble energy each year. governing the operation of the company’s mental impact of our business. We therefore Staff and organisational structure employees, representing 1,526 (1,495) the ­venture capital portfolio. The parent dams. Three of these were breaches of mi- carry out test fishing and release fish into At the close of the year, the Group had full-time equivalents. The number of em- company had 175 (164) permanent employ- In many rivers in the Agder region there nimum water levels in reservoirs, and two a number of reservoirs, in order to secure 1,551 (1,529) permanent and temporary ployees rose as a result of acquisitions in ees at the end of the year. The main reason has been a lot of bulbous rush in recent were breaches of rules on minimum water the viability of the trout population. In the

AGDER ENERGI ANNUAL REPORT 2013 26 AGDER ENERGI ANNUAL REPORT 2013 27 Mandal and Nidelva river systems, work is lations. Any environmental­ goals­ that it in- ­resulted in environmental pollution. commercial paper programme. Exposure up unpaid receivables, and the limits on ­assets, and the risk of causing environ- being done to find solutions that balance cludes may affect future decisions relating to liquidity risk is managed by the finance exposure to individual parties are moni- mental pollution. Contingency plans and the needs of salmon and power generation. to minimum river flow and water levels in Agder Energi Nett also carefully monitors and risk management department. tored and reported regularly. the procedures of individual operating In 2013 an electric fish guard was instal- reservoirs. We are working proactively to the latest research and developments in units are designed to manage these risks. led over the discharge pipe from Rygene ensure that the Group’s views are listened relation to the potential impacts of elec- We take on credit risk by selling electri- The most important operational risks Changes to the operating environment power station. to in conjunction with the setting of envi- tromagnetic fields on human health. The city, other goods and services, as well are the risk of injuries to the Group’s and political decisions are also ­potential ronmental goals and action plans. company follows the guidelines of the as by trading financial instruments. The ­employees, the risk of damage to power risks, and we constantly monitor the The licensing authorities are legally entitled­ Norwegian Radiation Protection Autho- Group has good procedures for chasing plants, distribution networks and other ­political situation. to modify licence terms, including clauses Network rity and NVE. relating to minimum flow and reservoir In principle our operation of the power grid restrictions. Vest-Agder ­County Council, is non-polluting. However, for ­operational The Group reports on matters relating to SHAREHOLDER INFORMATION which is the regional water ­authority in reasons, components are used that may the environment in a separate sustainabi- Agder, is currently drawing up a regional cause pollution in the event of an ­accident. lity report, which forms part of the Group’s The company’s share capital consists of ted indefinite waterfall licences­ under the ­existing shareholders in the event of ­shares plan based on the Norwegian water regu- In 2013 there were no incidents that corporate social responsibility reporting. 2,700,000 shares with a face value of NOK relevant ­current legislation.­ Class B shares in the company being sold. In addition,­ the 670. Of these, 1,800,000 are class A ­shares are freely negotiable.­ municipal shareholders have agreed to and 900,000 are class B ­shares. Class A ­coordinate their votes at the AGM. RISK MANAGEMENT AND INTERNAL CONTROLS shares can only be owned­ by ­shareholders A shareholders’ agreement regulates who meet the conditions for being alloca- ­matters such as pre-emptive rights for We use a balanced scorecard to manage Our corporate governance document SLIK energy sales in NOK. The use of futures the implementation of our strategy and to is an internal control system, which descri- is designed to stabilise and optimise the measure the results achieved. This system bes how the Group governs and manages Group’s revenues. Limits on trading elec- CORPORATE GOVERNANCE involves specifying key goals, strategies its activities. SLIK also sets out which tricity and currency futures are based on and parameters on scorecards, which are rules and guidelines employees need to the desired hedge ratio in relation to the Matters relating to corporate governance specified for the Group as a whole, for follow in their day-to-day work, including potential generation. The retail business are described in a separate section of this the business areas and for each individual the company’s values and its guidelines on is considered a margin business, and fi- annual report. subsidiary. ethics and corporate social responsibility. nancial instruments are used to minimise the electricity price risk and currency risk. The Board has adopted a general risk Risk management and internal controls at RESEARCH AND DEVELOPMENT management policy, which provides the Agder Energi are described in greater de- We are exposed to interest rate risk framework and guidelines for integrated tail in this report’s section on “Corporate through changes in the interest rates on The Group’s investment in R&D and innova- The challenges associated with distributed The Group’s venture capital investments risk management. Based on that policy, in- Governance Structure”. the Group’s interest-bearing liabilities, as tion helps it to build up relevant expertise, generation are another area of focus for are managed through the company Agder dividual risk management strategies have well as through the impact of interest ra- which in turn lays the foundations for long- our R&D activities. One of our important Energi Venture. In 2013, the Group did not been drawn up for the following areas: po- Risks tes on the Network business area’s income term, profitable growth and development. partners is Teknova, which has expertise in sell any of its investments, but it did put wer generation, retail market, electricity The Group is exposed to risks in a variety cap and the deductible interest rate used renewable energy research, and is involved additional resources into past investments trading and finance (interest and exchan- of areas throughout the value chain. The to calculate the resource rent tax paya- We participate in a number of R&D pro- in a number of R&D activities initiated by and invest in new projects. The venture ge rate risk). The Group’s risk manage- most important areas are related to the ble by the power generation business. The jects, both at a regional and national level. Agder Energi. capital portfolio’s two biggest invest- ment systems cover all areas that could market, financial management, operations, Group’s shared finance department coor- One example is CEDREN (Centre for Envi- ments, NEG and NetNordic, contributed a affect its ability to meet its goals. This the regulatory framework and the opera- dinates and manages financial risk. This is ronmental Design of Renewable Energy), Innovation at Agder Energi helps to develop combined operating profit before depre- includes setting and monitoring limits on ting environment. done using fixed-interest loans and with which studies the interaction between current operations, by acting as a tool for ciation and amortisation (EBITDA) of NOK the Group’s venture capital investments, the help of financial instruments. technology, the environment and society, stimulating advances and improvements. 44 million, on turnover of NOK 443 million. as well as analysing potential impacts on We are exposed to several types of market as well as the role of dispatchable hydro- One example is the acquisition of Enfo financial results. risk. Generating and selling electricity is We are exposed to liquidity risk arising power in future electric power systems. Energy, a leading aggregator company. associated with the risk of fluctuations from the fact that liabilities do not mature Our risk management activities form an in volumes and prices, which are directly at the same time as when cash flows are integrated part of the business operations affected by variations in precipitation generated. Variations in margin require- EVENTS AFTER THE REPORTING PERIOD at individual companies within the Group, levels and temperatures, and indirectly ments on futures also add to the liquidity and the companies are responsible for influenced by fluctuations in the prices of risk. Capital markets consider Agder Ener- In 2014 Agder Energi has signed a letter The total rated capacity of the three pro- Agder Energi would have a 20.9% interest, mapping and managing their own risks. gas, coal, oil and CO2 quotas. Electricity gi to be a low-risk borrower. The Group of intent with Statkraft, NTE and Trønde- jects is over 600 MW, and if the decision while NTE and TrønderEnergi would own Overall exposure to risk is also monitored trading, which is done in euros, also in- mainly finances its operations through rEnergi on jointly developing and opera- is taken to develop them, Statnett will be 14.5% each. The parties have also agreed at the Group level, and is included in re- troduces a currency risk. Market risks are the Norwegian commercial paper and ting the Storheie, Kvenndalsfjellet and able to go ahead with building a new trans- that Statkraft would be responsible for ports to the senior management team and managed with the help of various physi- bond markets, but it also uses the bank- Roan wind farms. mission line from Namsos to Storheia. ­developing, building and operating the Board of Directors. cal and cash-settled instruments, which ing market to some extent. The Group has Statkraft would have a 50.1% ownership wind farms on behalf of the company. are used to secure stable revenues from credit facilities with banks to backstop its interest in the new wind power company,

AGDER ENERGI ANNUAL REPORT 2013 28 AGDER ENERGI ANNUAL REPORT 2013 29 The parties aim to confirm their invest- require a total investment of around NOK We are not aware of any other material ment in the three projects during the first 7 billion. The company will arrange to raise events in 2014. half of 2015, provided that the wind farms external equity capital ahead of the deci- will be profitable. The three projects would sion to invest.

OUTLOOK Agder Energi is working on several ­major tricity prices. If greater investment in new than in 2013. The main reason for this is projects that – starting in 2014 – will gradu- capacity is not accompanied by an increase that in 2013 grid operators received a one- ally increase its power generating capacity, in grid integration with other countries, this off compensation through the income cap and entitle it to green power certificates.­ In will put pressure on future electricity prices. for expenses incurred in 2011. terms of hydroelectric power,­ Agder Energi is investing in a portfolio of new projects Greater market integration and measures At the end of 2013, the Group’s hydrolo- with an annual generating capacity of 500- to mitigate climate change will increase the gical resources (water and snow) were 600 GWh, if you include projects already need for flexible electricity supplies on the significantly above normal. Precipitation started. Agder Energi is also a partner in continent and in the UK. There is an EU- has been higher than normal in the first a number of major wind power projects, wide target for renewable sources to meet quarter of 2014, while Brokke Nord/Sør which have the potential to go ahead in 27 per cent of total energy consumption. and Skarg power station are also expected the next few years. Renewable energy will consequently play an to start operating in the second quarter. absolutely key role in the European energy Assuming normal precipitation levels, we Changes in Europe will lead to greater transition between now and 2050. For Nor- therefore expect a significant increase in fluctuations in electricity prices. This wegian renewable energy, this creates both hydroelectric power generation in 2014 will in turn have an impact on how Agder challenges and opportunities. If adequate in comparison with 2013. This has to be Energi prioritises its future investments. grid interconnectors are in place, we will be set against the fact that futures markets able to benefit from this development. indicate that prices will be lower in 2014, The high level of investment in new capa- but we still expect relatively high revenues city will increase power generation, which We expect our grid operating company to from electricity sales in 2014. taken in isolation would lead to lower elec- make a significantly lower profit in 2014

Kristiansand, 2 April 2014 Board of Directors of Agder Energi AS

Sigmund Kroslid Chair

Lars Erik Torjussen Bente Z. Rist Katja Lehland Steinar Bysveen Jon Vatnaland Deputy Chair

Steinar Asbjørnsen Elisabeth Morthen Johan Ekeland Øyvind Østensen Oddvar E. Berli

Gro Granås-Brattland Tom Nysted CEO

AGDER ENERGI ANNUAL REPORT 2013 30 AGDER ENERGI ANNUAL REPORT 2013 31 BOARD OF DIRECTORS Declaration pursuant to Section 5-5 of the Securities Trading Act

We confirm that, to the best of our know- ledge, the annual financial statements have been prepared in accordance with current accounting standards, and that the information contained therein pro- vides a true and fair view of the assets, liabilities, financial position and overall results of the parent company and of the Group. We also confirm that the annual report gives a true and fair view of the performance, results and financial positi- Sigmund Kroslid Lars Erik Torjussen Katja Lehland Bente Z. Rist on of the parent company and the Group, as well as describing the most important areas of risk and uncertainty facing the Group’s businesses.

Kristiansand, 2 April 2014 Board of Directors of Agder Energi AS

Steinar Bysveen Elisabeth Morthen Steinar Asbjørnsen Jon Vatnaland Sigmund Kroslid Chair

Lars Erik Torjussen Bente Z. Rist Katja Lehland Steinar Bysveen Jon Vatnaland Deputy Chair

Johan Ekeland Øyvind Østensen Oddvar Emil Berli Gro Granås-Brattland Steinar Asbjørnsen Elisabeth Morthen Johan Ekeland Øyvind Østensen Oddvar E. Berli

Gro Granås-Brattland Tom Nysted CEO

AGDER ENERGI ANNUAL REPORT 2013 32 AGDER ENERGI ANNUAL REPORT 2013 33 THE AGDER ENERGI GROUP FINANCIAL STATEMENTS CONTENT Click on the text to go to the page of your choice

Income statement 36 Statement of comprehensive income 37 Statement of financial position 38 Statement of cash flows 39 Statement of changes in equity 40 Accounting principles 42

NOTES Note 1 Segment information 50 Note 2 Acquisitions, disposals and buy-out of non-controlling interests 53 Note 3 Energy sales and purchases 54 Note 4 Transmission revenues 56 Note 5 Other operating revenues and other raw materials and consumables used 56 Note 6 Long-term manufacturing contracts 56 Note 7 Unrealised gains/losses on energy contracts 57 Note 8 Employee benefits 57 Note 9 Property taxes and licence fees 57 Note 10 Other operating expenses 58 Note 11 Auditor’s fee 58 Note 12 Finance income and costs 59 Note 13 Tax 60 Note 14 Depreciation and impairment losses 62 Note 15 Intangible assets 62 Note 16 Property, plant and equipment 64 Note 17 Associates and joint ventures 67 Note 18 Non-current financial assets 69 Note 19 Receivables 70 Note 20 Cash and cash equivalents 70 Note 21 Share capital and shareholder information 70 Note 22 Provisions 72 Note 23 Pensions 72 Note 24 Interest-bearing liabilities 76 Note 25 Other non-interest-bearing current liabilities 76 Note 26 Financial instruments 76 Note 27 Derivatives 78 Note 28 Fair value of financial instruments 79 Note 29 Financial risk management 81 Note 30 Accounting hedges 86 Note 31 Mortgaged assets, liabilities and guarantees issued 87 Note 32 Contingent liabilities and events after the balance sheet date 87 Note 33 Management compensation, etc. 88 Note 34 Related parties 90 Note 35 Discontinued operations 90

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AGDER ENERGI ANNUAL REPORT 2013 34 AGDER ENERGI ANNUAL REPORT 2013 35 INCOME STATEMENT STATEMENT OF COMPREHENSIVE INCOME

(Amounts in NOK millions) Note 2013 2012 (Amounts in NOK millions) Note 2013 2012

Energy sales 3 6,278 5,625 Net income 846 1,045 Transmission revenues 4 1,245 1,079 Other operating revenues 5 1,815 1,916 Other comprehensive income and expenses Unrealised gains/losses on energy contracts 7 552 326 Cash flow hedges 30 -139 -1 Total operating revenues 9,890 8,946 Translation differences 10 0 Tax impact 13 38 0 Energy purchases 3 -3,920 -3,367 Total items that may be reclassified to income statement -91 -1 Transmission expenses -163 -192 Other raw materials and consumables used 5 -971 -1,114 Actuarial gains and losses on pensions 23 216 531 Employee benefits 8 -1,041 -1,015 Tax impact 13 -51 -149 Depreciation and impairment losses 14 -526 -465 Total items that will not be reclassified to income statement 165 382 Property taxes and licence fees 9 -204 -194 Other operating expenses 10, 11 -750 -781 Total other comprehensive income 74 381 Total operating expenses -7,575 -7,128 Total comprehensive income 920 1,426 Operating profit 2,315 1,818 Of which attributable to non-controlling interests 15 8 Share of profit/loss of associates and jointly controlled entities 12 -5 -31 Of which attributable to controlling interest 905 1,418 Financial income 12 78 145 Unrealised gains/losses on currency and interest rate contracts 12 -403 -25 Financial expenses 12 -299 -326 Net financial expenses -629 -237

Profit before tax 1,686 1,581

Income tax 13 -470 -451 Resource rent tax 13 -370 -230 Tax expense -840 -681

Net income from continuing operations 846 900 Net income from discontinued operations 35 0 145 Net income 846 1,045

Of which attributable to non-controlling interests 12 8 Of which attributable to controlling interest 834 1,037

Earnings per share/earnings per share, diluted (NOK) 309 384

AGDER ENERGI ANNUAL REPORT 2013 36 AGDER ENERGI ANNUAL REPORT 2013 37 STATEMENT OF FINANCIAL POSITION STATEMENT OF CASH FLOWS

(Amounts in NOK millions) Note 31/12/13 31/12/12 01/01/12 (Amounts in NOK millions) Note 2013 2012

Deferred tax assets 13 374 411 434 Cash flow from operating activities Intangible assets 15 259 232 229 Profit before tax from continuing operations 1,686 1,581 Property, plant and equipment 16 11,979 11,244 10,730 Profit before tax from discontinued operations 35 0 160 Investments in associates and jointly controlled entities 17 182 197 219 Depreciation and impairment losses 14 553 476 Other non-current financial assets 18 530 456 310 Unrealised gains/losses on energy, curr. and int. rate contracts 7, 12 -149 -300 Total non-current assets 13,324 12,540 11,922 Share of profit/loss of associates and jointly controlled entities 12 5 31 Gain on disposal 2 -120 Inventories 35 35 33 Tax paid -654 -653 Receivables 19 1,677 1,934 1,602 Change in trade receivables 19 105 -191 Derivatives 27 1,022 645 449 Change in trade payables 25 14 -1 Cash and cash equivalents 20 33 89 102 Change in net working capital, etc. -76 -13 Total current assets 2,767 2,703 2,186 Net cash provided by operating activities 1,486 970

Assets of discontinued operations 35 0 0 539 Investing activities Purchase of property, plant, equipment and intangible assets 15, 16 -1,299 -956 TOTAL ASSETS 16,091 15,243 14,647 Purchase of businesses/financial assets -56 -60 Net change in loans -23 -44 Paid-in capital 21 1,907 1,907 1,907 Sale of property, plant, equipment and intangible assets 15 47 Other reserves 2,217 1,950 1,174 Sale of businesses/financial assets 8 504 Non-controlling interests 86 60 42 Net cash used in investing activities -1,355 -509 Total equity 4,210 3,917 3,123 Financing activities Deferred tax 13 520 466 331 New long-term borrowings 1,933 1,347 Provisions 22 1,134 1,366 1,925 Repayment of long-term borrowings -1,835 -1,380 Interest-bearing non-current liabilities 24 5,931 4,797 5,259 Net change in current liabilities 341 212 Total non-current liabilities 7,585 6,629 7,515 Dividends paid -626 -653 Net cash used in financing activities -187 -474 Interest-bearing current liabilities 24 1,737 2,426 1,769 Tax payable 13 771 663 655 Net change in cash and cash equivalents -56 -13 Derivatives 27 464 240 227 Other non-interest-bearing current liabilities 25 1,324 1,368 1,297 Cash and cash equivalents at start of period 89 102 Total current liabilities 4,296 4,697 3,948 Cash and cash equivalents at end of period 20 33 89

Liabilities of discontinued operations 35 0 0 61

TOTAL EQUITY AND LIABILITIES 16,091 15,243 14,647

Kristiansand, 2 April 2014 Board of Directors of Agder Energi AS

Sigmund Kroslid Chair

Lars Erik Torjussen Bente Z. Rist Katja Lehland Steinar Bysveen Jon Vatnaland Deputy Chair

Steinar Asbjørnsen Elisabeth Morthen Johan Ekeland Øyvind Østensen Oddvar E. Berli

Gro Granås-Brattland Tom Nysted CEO

AGDER ENERGI ANNUAL REPORT 2013 38 AGDER ENERGI ANNUAL REPORT 2013 39 STATEMENT OF CHANGES IN EQUITY

(Amounts in NOK millions) Paid-in Cash flow Translation Retained Total for Non-controlling Total Note capital hedges differences earnings controlling interest interests equity

Equity reported in fin. statements at 31/12/2011 1,907 28 0 1,319 3,254 42 3,296 Correction of errors in prior years’ depreciation 16 0 0 0 -173 -173 0 -173 Equity at 01/01/2012 (corrected) 1,907 28 0 1,146 3,081 42 3,123 Net income 0 0 0 1,037 1,037 8 1,045 Other comprehensive income 0 -1 0 382 381 0 381 Dividends paid 0 0 0 -650 -650 -3 -653 Other equity transactions 0 0 0 8 8 13 21 Equity at 31/12/2012 1,907 27 0 1,923 3,857 60 3,917

Equity at 01/01/2013 1,907 27 0 1,923 3,857 60 3,917 Net income 0 0 0 834 834 12 846 Other comprehensive income 0 -101 7 165 71 3 74 Dividends paid 0 0 0 -620 -620 -6 -626 Other equity transactions 0 0 0 -18 -18 17 -1 Equity at 31/12/2013 1,907 -74 7 2,284 4,124 86 4,210

AGDER ENERGI ANNUAL REPORT 2013 40 AGDER ENERGI ANNUAL REPORT 2013 41 ACCOUNTING PRINCIPLES

General information Norway. The address of the company’s the EU. The consolidated financial state- Joint ventures and associates are accoun- tiplied by the applicable tariff. The diffe- rent liabilities. Green certificates purcha- Agder Energi’s activities comprise the head office is Kjøita 18, 4630 Kristiansand. ments apply­ the historical cost principle, ted for using the equity method. The rence between the income cap and the sed are measured at cost. If the company ­generation, distribution and sale of energy, except in the cases of certain financial as- Group’s proportionate share of the profit actual tariff revenues creates a surplus has more green certificates than it needs as well as providing energy-related servi- Basis of preparation sets and liabilities (including cash-settled or loss for the year of these entities is or shortfall. This surplus or shortfall is to cover the volume of electricity sold, the ces. Most of the Group’s operations are in Agder Energi’s consolidated financial derivatives) that are measured at fair value ­recognised under finance income/costs. ­recognised through profit or loss as it excess is presented as a current asset. southern Norway. The parent company ­statements have been prepared in through profit or loss and available-for-sale On the balance sheet, these investments ­arises. Details of the surplus or shortfall Any such excess is measured at the lower ­Agder Energi AS is a Norwegian limited ­accordance with International Financial financial assets. are classified as non-current financial are given in Note 4. of cost and fair value less costs to sell. ­liability company, founded and domiciled in ­Reporting Standards (IFRS) as approved by ­assets, and are carried at cost adjusted for the Group’s share of retained earnings Long-term contracts Foreign currency since acquisition, dividends received, Revenues associated with long-term ma- The consolidated financial statements ­impairment losses and equity transac- nufacturing contracts are recognised in are presented in Norwegian kroner tions at the companies. accordance with the percentage of com- (NOK), which is also the functional SUMMARY OF THE MOST IMPORTANT ACCOUNTING PRINCIPLES pletion method. Under this method, reve- ­currency of the parent company and Revenues nues and profit are recognised gradually main subsidiaries. Subsidiaries with func- Consistency of accounting principles ­intra-group transactions, receivables, dually for each business combination. Recognition of revenues – general as the work related to the contract is tional currencies other than NOK are In 2013, Agder Energi implemented the ­liabilities and unrealised gains and losses Proceeds from the sale of goods and completed. The percentage of completi- ­responsible for less than 5% of the ­revised version of IAS 19 Employee benefits. have been eliminated in the consolidated For step acquisitions, previously held equity ­services are recognised as revenues on is normally estimated by looking at Group’s turnover. These are translated The resulting changes increased the pensi- financial statements. interests are measured at fair value at the when the goods or service are delivered. incurred expenses as a percentage of to- into NOK using the current-rate method. on expense; see Note 23. The Group has date control is obtained. Any gains or losses tal expected project expenses. Accrued also implemented the revised version of IAS Acquisitions are recognised through profit or loss. Energy sales revenues are included on the balance When preparing the accounts of the indi- 1. This led to changes in how other compre- Purchase price allocation is performed on Revenues from the sale of electricity are sheet under current receivables, while vidual companies, transactions in curren- hensive income are presented. There­ were the date when control was obtained. This Changes in ownership interests in recognised when the electricity is advance payments received are included cies other than the functional currency of no other changes to accounting principles is when the risks and rewards of owners- subsidiaries ­supplied. Realised gains or losses on under other non-interest-bearing current the company are translated into the or to the accounting standards applied that hip have been transferred, and normally Changes in the parent’s ownership ­interest ­physical and cash-settled energy liabilities. functional currency using the exchange had an impact on profit after tax, compre- coincides with the acquisition date. Trans- in a subsidiary that do not result in loss of ­contracts, classified as financial instru- rate on the date of transaction. Foreign hensive income or the balance sheet, when action costs are not included in the control are accounted for as equity trans- ments, are presented as energy sales un- Disposal of property, plant and ­equipment currency-denominated balance sheet comparing 2013 with 2012. ­purchase price, and are instead expensed actions. der operating revenues. In the case of When disposing of property, plant and items are measured using the exchange as incurred. The acquiree’s identifiable as- physical and cash-settled energy equipment, any gain or loss is calculated rate on the balance sheet date. Transla- Consolidation principles sets, liabilities and contingent liabilities Jointly controlled assets ­contracts, classified as financial instru- by comparing the sales price with the re- tion differences are recognised under fi- The consolidated financial statements that meet the conditions for recognition Ownership interests in part-controlled ments, changes in fair value are maining carrying amount of the asset nance income/costs. present the overall financial performance are recognised at their fair values at the ­power stations and water management ­presented as operating revenues under sold. Any gain or loss is presented under and position of the parent company and acquisition date, except for deferred tax associations are classified as jointly-­ unrealised gains and losses on energy other operating revenues or other opera- Financial instruments its subsidiaries when considered as a assets and liabilities which are recognised controlled assets and are accounted for contracts. Realised gains or losses on ting expenses respectively. The Group designates financial instru- ­single entity. Companies in which the at nominal value. Goodwill arising on by including the Group’s share of assets, trading portfolios are presented net as ments in the following categories: a) Group holds a controlling interest are ­acquisition is recognised at cost being the ­liabilities, revenues and expenses on the energy sales. When a contract is closed Green certificates ­Financial assets and liabilities at fair ­consolidated. A controlling interest excess of the aggregate of the considera- relevant lines in the consolidated financial out, the associated unrealised gain or Green certificates received as a result of ­value through profit or loss; b) Loans and ­normally exists if Agder Energi holds more tion transferred and the amount recogni- statements (proportionate consolidation). loss is reversed, and the realised gain or qualifying electricity generation are re- receivables; c) Financial liabilities at than 50% of voting rights, either through zed for non-controlling interest over the This applies even if the power station is loss is presented under energy sales. cognised at fair value under energy sales amortised cost. Designation is based on an ownership interest or through net identifiable assets acquired and liabili- operated as an independent enterprise. when the electricity is generated. Green the purpose of the instrument, and ­agreements. Subsidiaries acquired or ties assumed. No provision is made for Transmission revenues certificates held by the electricity gene- ­instruments are designated when they established during the year are consolida- deferred tax on goodwill. If the value of Joint ventures and associates Grid operation is subject to the regula- ration business are presented as current are acquired. ted from the date of acquisition or estab- the assets and ­liabilities transferred in A joint venture is a company that is subject­ tions of the Norwegian Water Resources assets on the balance sheet, and are lishment. The non-controlling interests’ conjunction with an acquisition exceeds to a contractual arrangement whereby and Energy Directorate (NVE) on income measured at the lower of their value a) Financial assets and liabilities at fair share of profit or loss after tax is specified the purchase price, the difference is re- two or more parties have joint control. caps. Each year, NVE specifies an income when acquired and current fair value less value through profit or loss on a separate line. cognised in the income statement under Special rules on voting rights may give cap for each individual grid operator, costs to sell. Financial assets and liabilities at fair ­value other operating revenues. owners more or less control than their which is adjusted in the event of changes through profit or loss are financial instru- All of the financial statements of indivi- ­ownership interests would imply. in the quality of supply, in order to com- When the retail business sells electricity, ments held for trading purposes. All deriva- dual companies included in the consolida- Non-controlling interests in the acquiree pensate customers for energy not sup- the estimated cost of purchasing green tives must be designated as held for tra- ted financial statements have been are measured either at fair value, or as the Associates are companies over which the plied. This gives the so-called KILE inco- certificates to cover the volume sold is ex- ding, unless they are part of an accounting­ ­restated to ensure that equivalent balance­ non-controlling interest’s share of the Group wields significant influence. me cap. The revenues recognised in the pensed. A provision for volumes not co- hedge. For derivatives other than cash flow sheet items and transactions are treated acquiree’s net identifiable assets. The mea- ­Normally this applies to companies in income statement represent the ­volumes vered by purchased green certificates is hedges, unrealised gains and losses are consistently throughout the Group. All surement method should be chosen indivi- which it has a 20-50% ownership interest. delivered during the financial period mul- included on the balance sheet under cur- ­recognised through profit or loss.

AGDER ENERGI ANNUAL REPORT 2013 42 AGDER ENERGI ANNUAL REPORT 2013 43 Physical contracts for the purchase and payments relating to interest rate swaps The Group’s euro-denominated loans and land. Compensation is also paid for any generate electricity. The Group therefore seven years, the actual contract price is sale of energy and CO2 quotas that form are presented as a finance cost. certain interest rate swaps, including damage to forests, land, etc. The compen- pays income tax, natural resource tax applied. Actual operating expenses, tax- part of the trading portfolio are defined combined currency and interest rate sation is a combination of one-off pay- and resource rent tax. deductible depreciation and a tax-free as financial instruments. Like their cash- b) Loans and receivables swaps, do meet the conditions for hedge ments and perpetual charges or obliga- allowance are deducted from the esti- settled equivalents, they are measured at On initial recognition, loans and receiva- accounting under IAS 39, and they are ac- tions to supply electricity free of charge. Income tax mated gross rent in order to reach the fair value. bles are measured at fair value plus di- counted for accordingly. These hedging The present value of annual charges and Income tax is calculated in accordance taxable net resource rent. The tax-free rectly attributable transaction costs. relationships are presented in the consoli- the cost of supplying free electricity are with standard tax rules. The tax expense allowance is determined each year by Physical contracts for the purchase and Subsequently loans and receivables are dated financial statements as follows: presented under provisions. If a contract in the income statement consists of tax multiplying the tax value of the power sale of energy and CO2 quotas that have carried at amortised cost using the ef- to supply free electricity includes the op- payable and changes in deferred tax/tax station’s property, plant and equipment been entered into for the purpose of fective interest rate method. Cash flow hedges tion of settlement in cash it is considered assets. This does not apply to deferred by a standard interest rate set by the Mi- ­obtaining electricity needed by the In so far as possible, Agder Energi uses a derivative and is measured at fair value tax liabilities/assets relating to items nistry of Finance. In 2013 the standard Group, or as a means of selling the elec- Trade and other receivables with an in- cash flow hedges to eliminate its exposure through profit or loss. On initial recogniti- ­recognised as other comprehensive interest rate was 1.5%. Resource rent tax tricity it generates, and which do not significant interest component are to fluctuations in cash flows. This includes on, the cross entry of the provision is a ­income and expenses in the statement of is covered by the so-called “verksamord- ­contain embedded derivatives, are ­recognised at their nominal value less hedging the currency risk associated with hydropower licence, which is presented comprehensive income or directly in ning”, which allows you to offset positive ­recognised on delivery. Contracts ente- any impairment losses. An impairment highly probable future revenues from under property, plant and equipment. In ­equity, or to deferred tax liabilities/­ and negative resource rent at different red into for different purposes are recor- loss is recognised if there is objective electricity sales, and regular interest pay- subsequent periods, annual compensation assets arising in conjunction with busi- power stations. This arrangement only ded in separate books. evidence that the Group will not receive ments in NOK on USD-denominated loans. payments, as well as changes to provisio- ness combinations. Tax payable is calcu- applies to negative resource rent tax payment in accordance with the original ns, are considered other operating expen- lated on the taxable profit for the year. ­arising in or after 2007. Negative Agder Energi has some physical energy conditions. The effective part of gains or losses on ses, whereas one-off payments are de- Deferred tax/tax assets are calculated ­resource rent tax that arose before 2007 sale contracts that are settled in euros. hedging instruments is recognised under ducted from the provision. on the basis of the temporary differences can only be offset at the power station The currency portion of these contracts c) Financial liabilities at amortised cost other comprehensive income and expen- that exist between accounting and tax where it arose. Any negative resource is not considered an embedded derivati- On initial recognition, financial liabilities ses in the statement of comprehensive Concession power and licence fees values, as well as the tax effect of any rent can be carried forward with interest ve that must be separated from the host are measured at fair value plus directly income, whereas the ineffective part is Each year, the Group supplies electricity loss carryforwards. Deferred income tax to be offset against future positive contract and be accounted for separately attributable transaction costs. Subsequ- recognised under finance income/costs in to local municipalities at a price set by and deferred income tax assets that are resource rent. The interest rate applied as an independent derivative. Contracts ently financial liabilities are carried at the income statement. Any effective gain the Norwegian parliament. Revenues expected to be reversed in the same to carryforwards was 2.5% for 2013. of this kind are accounted for in their amortised cost using the effective inter- or loss on a hedging instrument is recy- from this “concession power” are recog- ­period are offset against each other. An ­entirety on delivery. est rate method. cled to profit or loss if the hedged item is nised as they are earned, based on the assessment is made as to whether it will Deferred resource rent tax assets and recognised in the income statement, for regulated price. Some agreements on be possible to make use of the deferred deferred resource rent tax Presentation of derivatives in the income Hedging example when the revenues from hedged concession power are cash-settled, tax assets, and if it is highly probable that When calculating the deferred tax and statement and balance sheet In order to manage its risk exposures electricity sales are recognised. which means that Agder Energi is invoi- this is the case, they are included on the ­deferred tax assets to be included on the Derivatives are presented on separate ­arising from fluctuations in electricity ced for the difference between the spot balance sheet. balance sheet, temporary differences ­lines in the balance sheet under assets prices, exchange rates and interest rates, Fair value hedges price and the regulated price. The ­present ­relating to property, plant and equipment, and liabilities respectively. Derivatives the Group uses euro-denominated loans Agder Energi uses fair value hedging value of the future loss of revenue due to Natural resource tax pensions, some provisions and part of the are presented gross on the balance and derivatives, such as futures contracts­ ­instruments to hedge the currency risk the difference between the regulated The natural resource tax payable is not accumulated negative resource rent are ­sheet, unless there exists a legal right to for electricity, currency and CO2 quotas, associated with its interest-bearing price and spot price is not included on affected by profit, and is calculated on taken into account. The part of the nega- offset, and that right will actually be used as well as interest rate swaps. The ­liabilities and the interest-rate risk on the balance sheet, but it is presented in the basis of the individual power station’s tive resource rent tax that can be offset when the contracts are settled. In the ­purpose of these instruments is to secure ­fixed-rate loans. Note 3. average generation over the past seven against temporary differences is capitali- ­latter case, the relevant contracts are cash flows from future electricity genera- years. The tax is charged at 1.3 øre/kWh. sed on the balance sheet, as is the part ­presented net in the balance sheet. In the tion, as well as to avoid large variations in The Group’s fair value hedging instru- Each year, the Group pays licence fees to Natural resource tax can be deducted that is likely to be used within a 10-year income statement, gains and losses on the interest expense payable on the ments are derivatives, which are measu- the central government and municipalities from income tax. time frame. Provisions for deferred the fair value of derivatives are shown on Group’s debt portfolio. red at fair value through profit or loss. for the increase in generating capacity resource rent tax are based on the nomi- separate lines. Gains and losses on the The hedged items are loans whose carry- achieved by damming and piping water. Resource rent tax nal tax rate of 31%. Tax-free allowances value of energy derivatives are presented Most of the Group’s hedging instruments ing amounts fluctuate in parallel with the Licence fees are expensed as they are in- Resource rent tax is profit-related, and is are treated as a permanent difference in under operating revenues, while gains do not meet the documentation require- hedged risks. These changes in value are curred. The capitalised value of future payable at a rate of 30% of the net the year for which they are calculated, and and losses on the value of interest rate ments established by the accounting also recognised in the income statement. fees is not included on the balance sheet, resource rent estimated for each indivi- do therefore not affect the calculation of and currency derivatives are presented standards for hedge accounting. These Changes in the value of hedged items but is calculated and presented in Note 9. dual power station. The resource rent is deferred resource rent tax. under finance income/costs. When they contracts are therefore not accounted and hedges are recognised under finance estimated from the hourly output of the are realised, the proceeds from the sale for as hedges, even if they have been en- income/costs. Tax individual power station, multiplied by Deferred resource rent tax assets and of electricity derivatives are included tered into as hedges. These kinds of hed- All of the companies in the Group have to the spot price for the corresponding deferred resource rent tax are presented ­under energy sales, while the proceeds ges are treated as financial assets or fi- Compensation pay ordinary income tax. Agder Energi hour. In the case of concession power gross. from currency derivatives are presented nancial liabilities measured at fair value The Group pays compensation to landow- Vannkraft is also covered by the special and power supplied under long-term net under finance income/costs. Regular through profit or loss. ners for the right to use waterfalls and rules on the taxation of companies that ­contracts with a duration of more than

AGDER ENERGI ANNUAL REPORT 2013 44 AGDER ENERGI ANNUAL REPORT 2013 45 Classification of current and attributable to the development of an sheet, the carrying amount of the parts Inventories ­obligations on the balance sheet date, The contributions are expensed as ­non-­current assets and liabilities identifiable intangible asset will flow to that were replaced is ­deducted, and any Inventories are carried at the lower of and are discounted to their present value ­employee benefits when they are made. An asset is classified as a current asset if the entity. gain or loss is recognised­ in profit or loss. cost and fair value less costs to sell. The if this makes a significant difference. it fulfils one of the following criteria: acquisition cost is calculated using the Non-current assets held for sale and a) it is expected to be realised in, or is Property, plant and equipment Each year, Agder Energi Nett receives FIFO principle. Pensions discontinued operations held for sale or consumption in, the Investments in production facilities and customer contributions that fully or Defined benefit plans Non-current assets and groups of non- ordinary business cycle; other property, plant and equipment are ­partially pay for new connections or grid Reservoir reserves A defined benefit plan is a pension plan current assets and liabilities are classi- b) it is primarily held for trading; carried at cost, less accumulated upgrades. Customer contributions are The Group’s most valuable raw material which defines the pension benefit an fied as held for sale if they their carrying c) it is expected to be realised within ­depreciation and impairment losses. deducted from the carrying amount of is the water stored in its reservoirs. In ­employee will receive on retirement. The amount will primarily be recovered twelve months of the balance sheet ­Hydropower licences are classified as the investments they are ­supposed to ­accordance with standard practice in the pension liability recognised for defined through sale and not through future usa- date, or: property, plant and equipment. Deprecia- ­cover. power sector, the value of reservoir benefit plans is the present value of the ge. This applies to cases where the ma- d) it is a form of cash or cash equivalent, tion starts when the assets are available ­reserves is not included on the balance pension benefits earned as of the ­balance nagement has committed itself to selling unless it is subject to restrictions for use. The acquisition cost of property, Lease contracts sheet. sheet date, less the fair value of the them, and where negotiations with which mean that it cannot be realised plant and equipment includes the expen- Lease contracts are classified as either ­pension plan assets. The pension another party have been initiated prior to or used to settle a liability within ses involved­ in acquiring and preparing finance leases or operational leases, Cash pooling arrangement ­obligation is calculated annually by an ­ the end of the financial period. Assets ­twelve months of the balance sheet the asset for use. For large investments, ­depending on whether the majority of the Agder Energi AS has a cash pooling ­independent actuary using the projected held for sale are measured at the lower of date. borrowing costs are calculated using the risks and benefits associated with ­arrangement with its subsidiaries, and credit unit method. their carrying amount and fair value less average interest rate on the Group’s ­ownership are transferred to Agder the Group has a joint bank account for costs to sell. Assets held for sale are pre- A liability is classified as a current liability­ ­borrowings during the investment period, ­Energi as the lessee. Agder Energi mainly short-term deposits and short-term Actuarial gains and losses are recognised sented together on a separate line of the if it fulfils one of the following criteria: added to the acquisition cost. Costs has operational leases, and the volume of ­loans. External interest income and inter- in the statement of comprehensive balance sheet. The same applies to liabi- a) it is expected to be settled as part of ­incurred after the item entered service, finance leases is limited. In the case of est expenses arising from the cash ­income under other comprehensive lities. In the income statement, disconti- the ordinary business cycle; such as regular maintenance, are operational leases, rent is expensed as it ­pooling arrangement are presented as ­income or expenses. nued operations are presented on a se- b) it is primarily held for trading; ­expensed. arises. interest income and interest expenses in parate line as “Net income from c) it is due for payment within twelve the consolidated income statement. On Changes to defined benefit pension discontinued operations”. Comparative months of the balance sheet date; or: Costs accrued in relation to internal Impairment losses the consolidated balance sheet, net ­obligations arising from plan ­amendments figures are only restated in the income d) the company has no unconditional ­investments within the Group are capita- Property, plant, equipment and intangible ­deposits and overdrafts are presented as that are applied retrospectively, i.e. ­where statement. right to delay settlement of the liability­ lised. The acquisition cost only includes assets that are depreciated are also cash and cash equivalents and current the change in entitlement also ­applies to beyond twelve months after the directly attributable costs. Indirect costs tested for impairment if there is any liabilities respectively. past years of service, are ­recognised di- Cash flow statement ­balance sheet date. are not capitalised. ­indication to suggest that future cash rectly in the income statement. Changes The cash flow statement has been prepa- flows cannot justify the carrying amount. Liquid assets that are not applied retrospectively are red using the indirect method. All other assets are classified as non- Depreciation is calculated using the Any difference between the carrying Cash and cash equivalents includes cash, recognised through profit or loss over the current assets and all other liabilities are straight-line method over the expected amount and the recoverable amount is bank deposits and other short-term, remaining years of service. New accounting standards and inter- classified as non-current liabilities. useful life. The residual value is taken into expensed in the income statement. The ­liquid investments that can be converted pretations account when calculating annual recoverable amount is the higher of fair into known cash values immediately and The net pension liabilities associated In 2013 Agder Energi implemented the For non-current liabilities, any principal ­depreciation.. Sites are not depreciated. value less costs to sell and value in use. at insignificant risk, and that mature less with underfunded pension plans, and following new or revised accounting repayments due over the first year are Hydropower licences are not depreciated than three months after their dates of ­unfunded pension plans that are treated standards: presented as current liabilities. either, as they do not revert to public When testing for impairment, non-­current ­acquisition. as operating expenses, are classified as ­ownership, but they are instead tested assets are grouped at the lowest possible provisions for non-current liabilities. IAS 1 – Presentation of financial state- Intangible assets annually for impairment. Periodic main- level at which it is possible to identify Dividends ments: The amendment to the standard Intangible assets, including goodwill, are tenance is capitalised and depreciated ­independent cash flows (cash generating Proposed dividends are classified as The pension expense for the period is requires items presented in the state- carried at cost less accumulated depre- over the maintenance interval. The units). Most of the Group’s non-current ­equity. Dividends are reclassified as ­included under Employee benefits. It ment of comprehensive income to be ciation and impairment losses, provided ­estimated useful life, depreciation assets are held by the hydroelectric po- ­current liabilities when they are adopted ­consists of the sum of the current service grouped on the basis of whether or not that they meet the criteria for capitalisa- ­method and residual value are ­reassessed wer and network business areas. Within by the AGM. cost, interest on net pension liabilities they are potentially reclassifiable to pro- tion. Intangible assets with an uncertain each year. hydroelectric power, any power stations and employers’ NICs. fit and loss in subsequent periods. The useful life, including goodwill, are not on the same river system that are mana- Provisions, contingent assets and amendment has only affected the way in ­depreciated, and are instead tested When assets are sold or disposed of, their ged collectively are considered a cash contingent liabilities Defined contribution pension plans which certain items are presented. ­annually for impairment. carrying amount is deducted, and any generating unit. A provision is recognised if the Group has In the case of a defined contribution plan, loss or gain is recognised in the income a present obligation arising from a past the Group makes regular contributions IAS 19 – Employee benefits: Several Research costs are expensed as they are statement under other operating expen- In conjunction with each financial report, event, and if it is probable that it will have into a separate legal entity, but has no amendments have been made to the incurred. Development costs are ses and revenues. Repairs and ­regular the Group assesses whether any past im- to settle the obligation. Provisions are further liabilities once the contributions standard. From Agder Energi’s point of ­capitalised on the balance sheet if it is maintenance are expensed as ­incurred. If pairment of non-financial assets, except measured using the management’s best have been made. view the important change is that the probable that future economic benefits new parts are capitalised on the balance goodwill, should be reversed. estimate of the cost of settling the ­return on pension plan assets should no

AGDER ENERGI ANNUAL REPORT 2013 46 AGDER ENERGI ANNUAL REPORT 2013 47 longer be based on the expected return, in order to clarify the criteria for offset- the principles of IAS 27. The purpose is to judgement to assess which contracts Concession power and licence fees as the cost of future licence fees, are but should instead be equal to the ting. Agder Energi will start using the clarify the requirements that were either should be defined as financial instru- The concession power provided and the ­regulatory requirements and are there- ­discount rate used to calculate the standard as of 1 January 2014. implicit or stated in less detail in IAS 27. ments and which contracts should not, licence fees paid to the central govern- fore non-contractual liabilities. Consequ- ­pension liabilities. Any difference Agder Energi has concluded that the mainly due to the “own use” exemption. ment and municipalities are supposed to ently they are not included in the ­financial ­between the actual return and the recog- IAS 28 – Investments in associates and changes will not affect its financial state- Contracts classified as financial instru- compensate for the damage or inconve- statements, but their present value has nised return shall still be entered as an joint ventures: As a result of the introduc- ments. Agder Energi will start using the ments are carried at fair value, with gains nience caused by hydropower projects. been calculated, and is presented in Note actuarial gain/loss in the statement of tion of the new standards IFRS 11 Joint standard as of 1 January 2014. and losses recognised in profit or loss, Liabilities arising from the fact that 3 and Note 9. comprehensive income. If applied to the arrangements and IFRS 12 Disclosure of while other contracts are generally ­future concession power may be supplied 2012 financial statements, this amend- interests in other entities, IAS 28 has IFRS 11 – Joint arrangements: This stan- ­recognised on delivery. at a discount to the market price, as well ment would have increased the pension been renamed Investments in associates dard will replace IAS 31 – Interests in joint expense by NOK 34 million, and would and joint ventures, and it now describes ventures. IFRS 11 contains new guidelines have reduced profit after tax by NOK 24 how to apply the equity method to invest- on when to use proportionate consolida- million. The actuarial gain in 2012 would ments in joint ventures, as well as to as- tion and when to use the equity method; UNCERTAINTIES – CRITICAL ACCOUNTING ESTIMATES have been NOK 34 million higher. Com- sociates. Agder Energi has concluded amongst other things, the proportionate prehensive income would have remained that the changes will not affect its finan- consolidation method can no longer be In conjunction with the preparation of the Property, plant and equipment Deferred tax assets unchanged. Comparative figures have cial statements. Agder Energi will start used for joint ventures. Agder Energi has financial statements, the management Property, plant and equipment is The Group has capitalised deferred tax been restated to reflect these changes. using the standard as of 1 January 2014. significant investments in joint arrange- has to make certain estimates and as- ­depreciated over its expected useful life, assets arising from negative resource ments, but it has concluded­ that the sumptions. These affect the reported as- giving rise to depreciation in the income rent that has been carried forward. IFRS 7 – Financial instruments – disclosu- IFRS 9 – Financial instruments: The stan- amendments will not affect­ its financial sets and liabilities, including contingent statement. The expected useful life is es- ­Deferred tax assets are capitalised when res: The amendments to the standard re- dard currently includes the first and se- statements. Agder Energi will start using assets and liabilities on the balance she- timated on the basis of experience, past it is expected that it will be possible to late to the information required in the cond phases of IASB’s work on replacing the standard as of 1 January 2014. et date, and the reported revenues and performance and best judgement, and is make use of the negative resource rent notes when offsetting financial assets the current IAS 39. The first phase deals expenses for the period. Actual results adjusted if there are any changes to tho- within a ten-year time frame. The timing and liabilities. The change did not have with the classification and measurement IFRS 12 – Disclosure of interests in other may deviate from these estimates. se estimates. The residual value, which is of when it may be possible to make use any impact on Agder Energi’s reported of financial assets and liabilities, while entities: This standard contains all of the taken into account when calculating de- of negative resource rent is particularly profit or balance sheet. the second phase relates to hedge acco- disclosure requirements relating to con- The most important assumptions concer- preciation, is also e­stimated. dependent on assumptions regarding unting. The final phases of this project solidated financial statements ­previously ning the future and other key sources of ­future electricity prices. The manage- IFRS 13 – Fair value measurement: This relate to measurement at amortised cost found in IAS 27, as well as the require- estimation uncertainty are set out below. Impairment losses ment has used its best judgement when standard brings together and clarifies the and the impairment of financial assets. ments previously found in IAS 28 and IAS The Group has significant investments in making assumptions about future electri- guidelines on how to measure fair value. The Implementation has been delayed indefi- 31. There are also various new require- Fair value of financial instruments intangible assets, property, plant and city prices and other assumptions that change did not have any impact on Agder nitely, and it is now expected that the ments relating to additional ­information. The fair value of cash-settled electricity equipment, joint ventures and associates.­ affect future resource rent. See Note 13 Energi’s reported profit or ­balance sheet. standard will be effective from the year Agder Energi will start using the standard contracts and electricity contracts not These non-current assets are tested for for a more detailed description. starting 1 January 2017 at the earliest. as of 1 January 2014. covered by the own use exemption is impairment if there is an indication that The following amendments to relevant The Group will evaluate the potential partly calculated using assumptions that they have fallen in value. This might be Pensions accounting standards and interpretations ­impacts of IFRS 9, including the impacts IFRIC 21 – Levies: This interpretation add- are not observable in the market. This is indicated by changes in market prices or Calculating pension liabilities involves have been published, but had not entered of the remaining phases, as soon as the resses the accounting for liabilities to pay particularly true of long-term electricity contract structures, negative events or using best judgement and estimates for a into force when the financial statements final standard has been published. levies that are within the scope of IAS 37 contracts. Where that is the case, the other operating conditions. When calcu- number of parameters. See Note 23 for a were presented: Provisions, contingent liabilities and con- management has based its estimates on lating the recoverable amount, a number more detailed descriptions of the IFRS 10 – Consolidated financial state- tingent assets. Agder Energi will adopt the information available in the market in of estimates must be made regarding ­assumptions that have been applied. IAS 32 – Financial instruments – presen- ments: This standard contains a new the interpretation as of 1 January 2014. combination with its best judgement. ­future cash flows, with required rates of tation: This standard has been amended ­definition of control, although it builds on There is a more detailed description of return, prices, operating margins and the assumptions used to value those con- ­sales volumes being the most important tracts in Note 28. The fair value of inter- factors. CRITICAL ACCOUNTING JUDGEMENTS est rate and currency derivatives is ­based on market practice and confirmed Below we have set out the areas where accordance with IAS 39 are considered purchase, sale or usage requirements by external market players. the judgements made by management in to be contracts that can be “settled net (the “own use” exemption). In some cases applying the Group’s accounting princi- in cash”, are treated as though they were determining whether a contract of this ples potentially have a material impact financial instruments. This applies unless kind should be classified as cash-settled on the consolidated financial statements. the contracts have been entered into and is based on best judgement. continue to be held for the purpose of Non-financial energy contracts the receipt or delivery of the energy in The senior management team has, based Non-financial energy contracts, which in accordance with the Group’s expected on the criteria in IAS 39, used its best

AGDER ENERGI ANNUAL REPORT 2013 48 AGDER ENERGI ANNUAL REPORT 2013 49 NOTES

NOTE 1 SEGMENT INFORMATION

(Amounts in NOK millions) The Hydroelectric Power and Network business LOS Otera Parent/Other Eliminations Total (NGAAP) IFRS adjustments Total (IFRS) Energy Management areas area 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012

PROFIT/LOSS Note Operating revenues 2,596 2,399 1,423 1,048 3,930 3,424 1,347 1,549 924 884 -782 -593 9,438 8,711 452 235 9,890 8,946 - of which external operating revenues 1,842 2,229 1,376 999 3,911 3,402 1,134 1,313 699 632 476 136 9,438 8,711 452 235 9,890 8,946 - of which internal operating revenues 754 170 47 49 19 22 213 236 225 252 -1,258 -729 0 0 0 0 0 0 Energy and transmission expenses -243 -216 -280 -289 -3,719 -3,255 0 0 -40 -33 199 234 -4,083 -3,559 0 0 -4,083 -3,559 Other raw materials and consumables used 5 0 0 0 0 0 -1 -650 -845 -322 -303 1 22 -971 -1,127 0 13 -971 -1,114 Employee benefits 8 -164 -179 -112 -106 -52 -51 -523 -531 -352 -335 162 198 -1,041 -1,004 0 -11 -1,041 -1,015 Other operating expenses 10 -514 -434 -346 -329 -58 -56 -173 -204 -270 -290 406 324 -955 -989 1 14 -954 -975 Operating profit/loss before depreciation and impairment losses 1,675 1,570 685 324 101 61 1 -31 -60 -77 -14 185 2,388 2,032 453 251 2,841 2,283 Depreciation and impairment losses 14 -230 -204 -206 -196 -3 -6 -20 -17 -74 -78 15 -6 -518 -507 -8 42 -526 -465 Operating profit/loss 1,445 1,366 479 128 98 55 -19 -48 -134 -155 1 179 1,870 1,525 445 293 2,315 1,818 Share of profit/loss of associates and jointly controlled entities 12 0 0 0 0 0 0 0 0 11 1 -14 -32 -3 -31 -2 0 -5 -31 Finance income 12 309 438 2 1 3 4 1 1 1 611 1 838 -1 798 -2 169 128 113 -453 7 -325 120 Finance costs 12 -302 -385 -78 -84 -9 -7 -9 -9 -478 -599 581 761 -295 -323 -4 -3 -299 -326 Net finance income/costs 7 53 -76 -83 -6 -3 -8 -8 1,144 1,240 -1,231 -1,440 -170 -241 -459 4 -629 -237 Profit/loss before tax 1,452 1,419 403 45 92 52 -27 -56 1,010 1,085 -1,230 -1,261 1,700 1,284 -14 297 1,686 1,581 Tax expense 13 -758 -639 -107 -13 -26 -15 5 13 -226 -246 265 323 -847 -577 7 -104 -840 -681 Net income from continuing operations 694 780 296 32 66 37 -22 -43 784 839 -965 -938 853 707 -7 193 846 900 Net income from discontinued operations 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 145 0 145

BALANCE SHEET Total assets 7,447 7,150 4,092 3,910 637 681 543 664 11,851 11,059 -10,157 -9,584 14,413 13,880 1,678 1,363 16,091 15,243 Equity 2,281 2,179 692 657 339 326 122 148 2,798 3,320 -2,801 -3,504 3,431 3,126 779 791 4,210 3,917 Total segment liabilities 5,166 4,971 3,400 3,253 298 355 421 516 9,053 7,739 -7,356 -6,080 10,982 10,754 899 572 11,881 11,326 Capital employed 1) 5,371 4,848 2,971 3,033 380 515 253 316 10,364 10,339 -8,071 -8,462 11,268 10,589 610 550 11,878 11,139 Interest-bearing liabilities 24 3,090 2,669 2,279 2,376 41 189 131 168 7,566 7,019 -5,270 -4,958 7,837 7,463 -169 -241 7,668 7,222 Funds from operation (FFO) 2) 1,245 1,289 687 325 61 65 -1 -39 1,596 1,440 Carrying amount in associates and jointly controlled entities 17 0 131 0 0 0 0 0 0 292 168 -111 -116 181 183 0 14 181 197 Investments in intangible assets 3) 1 0 12 4 0 0 6 4 39 -13 22 0 80 -5 -6 27 74 22 Investments in property, plant and equipment 3) 777 415 417 415 0 0 7 5 118 167 -28 4 1,291 1,006 -15 0 1,276 1,006 Full-time equivalents (continuing operations) 210 198 161 154 65 66 716 742 374 335 1,526 1,495 1,526 1,495

1) Equity + interest-bearing liabilities 2) Underlying EBITDA + dividends from A and JV + finance income - tax payable 3) Includes intangible assets and property, plant and equipment acquired through business combinations Segment information is reported using the same segments as used in financial reports to the senior management team. Segment reporting is used by Agder Energi’s management to assess the performance of the various business areas, and to allocate resour- ces to them. Operating segments are presented in accordance with the organisational structure, and are based on the internal business areas. The Network business area is presented as a separate segment. The Hydroelectric Power and Energy Management business areas are presented jointly as a single segment. Within the Market business area, LOS and Otera are presented as sepa- rate segments, due to their size and the differences between their areas of activity, while Agder Energi Varme is presented under parent company/other. The financial statements follow Norwegian generally accepted accounting principles (NGAAP), as they are also used for internal corporate governance purposes.

AGDER ENERGI ANNUAL REPORT 2013 50 AGDER ENERGI ANNUAL REPORT 2013 51 Segmentation at end of year NOTE 2 ACQUISITIONS, DISPOSALS AND BUY-OUT OF NON-CONTROLLING INTERESTS Company Ownership interest Main activity The Group made the following acquisitions and disposals in 2013 and 2012. All acquisitions are accounted for using the HYDROELECTRIC POWER AND ENERGY MANAGEMENT Generation and sale of hydroelectric power ­acquisition method. The list below does not include capital increases or other financing from Agder Energi. Agder Energi Vannkraft AS 100% Agder Energi Kraftforvaltning AS 100% Acquisitions in 2013 Company Country Interest Ownership interest Business activities NETWORK Distribution of electric power in Agder bought in 2013 at 31 Dec. 2013 Agder Energi Nett AS 100% Bjerkreim Vind AS Norway 1.2 51.2 Wind power Enfo Energy AS Norway 100.0 100.0 Small generator technology LOS Sale of energy to the retail market Otera AB Sweden 9.0 76.0 Contracting LOS AS 100% PacketFront Solutions AB Sweden 100.0 100.0 Telecommunications Siemens Enterprise Communications AS Denmark 100.0 100.0 Telecommunications OTERA Contracting Smart Grid Norway AS Norway 24.3 60.0 Smart grids Otera Group Verdisikring Safety AS Norway 20.0 71.0 Alarm systems Otera AS 100% Otera Infra AS 100% The total cost of ownership interests acquired in 2013 was NOK 77 million. Otera Elektro AS 100% Otera XP AS 100% Group Otera AB 76% From 31 May 2013 (previously 67%) Calculation of net assets and goodwill at the acquisition date for acquisitions in 2013 (Amounts in NOK millions) Carrying amounts (IFRS) Fair value Acquisition balance PARENT/OTHER Generation and sale of thermal energy, at acquisition date adjustments sheet innovation and venture activities, property and parent company Deferred tax assets 0 11 11 Agder Energi AS Parent, merged with Solvea in 2013 Intangible assets 13 28 41 Innovasjon og FoU AS 100% Property, plant and equipment 2 2 Agder Energi Næringsbygg AS 100% Non-current financial assets 8 8 Lundevågveien 11 AS 100% Stock 1 1 Bjerkreim Vind AS 51.2% Acquired 30/04/2013 and new issue 05/09/2013 Trade debtors and other current receivables 49 49 Baltic Hydroenergy Group 65.9% Cash and cash equivalents 45 45 Agder Energi Varme Group Deferred tax - Agder Energi Varme AS 100% Non-current liabilities -9 -9 Norsk Varme- og Energiproduksjon AS 100% Trade payables and other current liabilities -56 -56 Agder Energi Venture Group Net assets 53 39 92 Agder Energi Venture AS 100% Non-controlling interests 16 NorgesFilm AS 93.8% Net assets acquired 76 Smart Grid Norway AS 60% New issue January 2013 and acquired April 2013 (previously 35.7%) Goodwill -11 Xynergo AS 100% Total net assets acquired plus goodwill 64 Verdisikring Safety AS 71% From 31 August 2013 (previously 51%) ReSiTec AS 100% Cash consideration for shares 41 Netsecurity Group 100% Value of shares in acquirees held prior to acquisition 1) 24 Norsk Energigjenvinning Group 67.1% Total consideration 64 NetNordic Group 54.6% Bio Energy Group 67.9% 1) Reclassified from investments in associates to subsidiaries. A NOK 12 million gain was recognised as a result of this ­ Meventus Group 100% reclassification. See Note 17. Enfo Energy Group 100% From 30 June 2013 The above table covers acquisitions of new businesses in 2013. For all acquisitions completed in 2013, non-controlling interests have been measured at fair value. Transactions relating to the buy-out of non-controlling interests are not included in the table. The Eliminations segment relates to the elimination of intra-group transactions and balances. Transactions between ­segments are on an arm’s-length basis. In 2013 Agder Energi recognised a gain of NOK 19 million as a result of the fair value of assets and liabilities transferred exceeding the consideration paid for them. This was related to an acquisition in which the parties took into account expected restructuring The IFRS adjustments segment covers items arising from the fact that the accounts of segments are presented in costs that could not be included on the balance sheet under IFRS. Around half of the restructuring costs were accrued­ and expensed­ ­accordance with NGAAP, while the consolidated financial statements are presented in accordance with IFRS. in 2013.

The vast majority of Agder Energi’s turnover comes from customers in Norway or from Nord Pool (the marketplace for trading physical power contracts). The turnover of the subsidiary group Otera AB (76% ownership interest) comes from the Swedish market.

AGDER ENERGI ANNUAL REPORT 2013 52 AGDER ENERGI ANNUAL REPORT 2013 53 Disposals in 2013 Energy purchases In 2013, Agder Energi’s disposals of subsidiaries were insignificant. (Amounts in NOK millions) 2013 2012 Spot and balancing markets 128 103 Energy trading and guarantees of origin 45 52 Acquisitions in 2012 Other 1 2 Company Country Interest Ownership interest Business Total for power generation 174 157 bought in 2012 at 31 Dec. 2012 activities Retail market 3,713 3,248 Baltic Hydroenergy AS Norway 23.2 65.9 Hydroelectric Power Network 141 109 Meventus ApS Denmark 100.0 100.0 Wind readings District heating 37 33 ReSiTec AS Norway 100.0 100.0 Recycling Other 2 0 Verdisikring Safety AS Norway 51.0 51.0 Alarm systems Eliminations -147 -180 Otera XP AS Norway 25.0 100.0 Contracting Total 3,920 3,367

The total cost of ownership interests acquired in 2012 was NOK 22 million. The table below shows key figures for our power generating activities, as well as gains/losses in relation to spot prices.

Disposals in 2012 In 2012, Agder Energi sold its shares in LOS Bynett, Bynett Privat and Sopran. For further details, see Note 35. (Amounts in NOK millions) 2013 2012 Net electricity generation (less pumping) (GWh) 7,740 8,138 Reservoir reserves at end of year (GWh) 4,250 4,450 Reservoir reserves as % of capacity 81% 85% NOTE 3 ENERGY SALES AND PURCHASES Spot value of net generation 2,292 1,942 Agder Energi optimises its generation of hydroelectric power based on an assessment of the value of available water in relation to Gains (+)/losses (-) on concession power and contracts for physical delivery signed before 1992 -222 -122 current and expected future spot prices. This assessment does not take into account any contractual obligations that it may have. Gains (+)/losses (-) on hedges 72 238 If Agder Energi’s contractual obligations to supply electricity to customers deviate from actual generation, the difference is bought Green certificates (own generation) 2 0 or sold in the spot market. Physical and cash-settled contracts are used secure cash flows from underlying power generation. All Gains (+)/losses (-) on energy trading and guarantees of origin 52 36 contracts are recognised as an adjustment to the underlying revenues from electricity generation based on the difference between Gains (+)/losses (-) on other items 28 22 the contract price and the spot price (system price for cash-settled contracts). Net energy sales from power generation 2,224 2,116

The cash-settled contracts are described in greater detail in Note 29. In addition, Agder Energi has long-term physical delivery Hedges include both cash-settled contracts and long-term physical contracts with industrial clients that are used as part of a contracts with industrial customers. These involve the supply of 7.7 TWh, 90% of which is to be supplied over the period 2014-2020. hedging strategy.

The Group’s energy sales and purchases are specified in the table below. The resources Agder Energi needs to generate power are available to it through licences. Agder Energi controls – either directly or indirectly through water management associations and joint ventures – licences to regulate watercourses and to acquire ownership Energy sales rights to waterfalls. These licences do not revert to public ownership, with the exception of a few minor regulations of the Arendal (Amounts in NOK millions) 2013 2012 river system, which constitute less than 1% of the total river regulation capacity. Agder Energi has a perpetual obligation to supply Spot and balancing markets 1,963 1,701 541 GWh each year to local municipalities, who are entitled to buy electricity at a regulated price. In most cases this price is set by Concession power and contracts for physical delivery signed before 1992 1) 193 190 the Ministry of Petroleum and Energy, but Agder Energi has some licences where the price is established individually based on go- Contracts for physical delivery signed after 1992 1) 42 23 vernment guidelines. Revenues from concession power are recognised in the profit and loss account when the electricity is supplied. Financial contracts used for hedging purposes 2) 87 238 Green certificates (own generation) 2 0 The future loss of revenue arising from the obligation to supply concession power at below market prices is estimated at NOK 3.2 Energy trading and guarantees of origin 97 108 billion. No provisions have been made for this in the financial statements, as it is estimated that the agreed price covers electricity Other 14 13 generation costs. The calculation of the loss of revenue is based on a nominal pre-tax interest rate of 5.0%, a price differential of Total for power generation 2,398 2,273 15 øre/kWh and an expected inflation rate of 2.5%. Retail market 3,901 3,392 Network 29 31 District heating 89 86 (Volumes in GWh) 2013 2012 Other 9 0 Volume of concession power (GWh) 541 541 Eliminations -147 -157 Regulated price (øre/kWh) 10.9 10.8 Total 6,278 5,625

1) The Energy Act was adopted in 1992. 2) Figures refer to realised gains and losses; unrealised gains and losses are specified in Note 7. Although these contracts are ­ used for hedging purposes, hedge accounting is not applied

AGDER ENERGI ANNUAL REPORT 2013 54 AGDER ENERGI ANNUAL REPORT 2013 55 NOTE 4 TRANSMISSION REVENUES NOTE 7 UNREALISED GAINS/LOSSES ON ENERGY CONTRACTS

The Norwegian Water Resources and Energy Directorate regulates the revenues of power grid operators by setting an annual Breakdown of profit and loss effects of financial instruments by class of instrument: income cap. Based on the income caps they have been allocated and the volumes of electricity they expect to distribute, power grid operators set the transmission tariffs payable by customers. In the event of any difference between actual and expected (Amounts in NOK millions) Note 2013 2012 volumes, revenues from transmission tariffs will show a surplus or shortfall relative to the permitted revenues (income cap). In the Portfolio of production hedges, excluding power for industrial users 27 524 241 accounts of Agder Energi Nett AS, this difference is treated as either a liability or an asset. However, in the consolidated financial Cash-settled contracts, compensation power 22 35 48 statements, which are presented in accordance with IFRS, this surplus or shortfall does not qualify for inclusion on the balance Cash-settled contracts, power for industrial users 22 10 38 sheet, and only the actual transmission tariff revenues are recognised in the income statement. Retail customer portfolio 27 -17 -2 Total 552 326 (Amounts in NOK millions)) 2013 2012 Revenues under next year’s income cap recognised in the consolidated income statement -79 126 Reversal of unrealised gains and losses at 1 January on contracts closed out during the year 1) -66 -59 Accumulated surplus transmission revenues not included on the balance sheet 172 251 Gains and losses on contracts that had not been closed out as of 31 December 618 385 Total 552 326

The above table refers to electricity contracts that must be measured at fair value through profit or loss under IAS 39. NOTE 5 OTHER OPERATING REVENUES AND OTHER RAW MATERIALS AND CONSUMABLES USED 1) Value at start of 2013 (2012) of contracts that were closed out during 2013 (2012). Other operating revenues (Amounts in NOK millions) Note 2013 2012 Contracting 6 1,347 1,313 Services 99 22 NOTE 8 EMPLOYEE BENEFITS Communication 225 165 Other revenues 144 416 (Amounts in NOK millions) Note 2013 2012 Total 1,815 1,916 Wages and salaries 968 931 Employers’ National Insurance Contributions 144 132 Electrical contracting services are provided through Otera, and cover areas such as electrical power systems, transportation, Pension expense (incl. employers’ NICs) 23 113 134 telecommunications and electrical engineering (including building and construction services, servicing, the offshore industry and Other benefits and reimbursements 30 47 marine and land-based industrial projects). Capitalised wage costs arising from own investments -214 -229 Total 1,041 1,015 Other raw materials and consumables used (Amounts in NOK millions) Note 2013 2012 Number of full-time equivalents in continuing operations at 31 December 1,526 1,495 Contracting 6 649 845 Services 0 1 For details of senior management compensation, please see Note 33. Communication 104 81 Other purchases 218 187 Total 971 1 114 NOTE 9 PROPERTY TAXES AND LICENCE FEES

(Amounts in NOK millions) 2013 2012 NOTE 6 LONG-TERM MANUFACTURING CONTRACTS Licence fees 47 49 Property taxes 157 145 The projects included under this item relate to the electrical contracting business. They are carried out for customers and are Total 204 194 accounted for using the percentage of completion method. Profit is recognised in proportion to the percentage of completion of the project. The percentage of completion is estimated to be the ratio between project costs incurred to date and total estimated Licence fees are adjusted by the consumer price index, initially at the first turn of the year five years after the licence was granted project costs. Estimated losses on projects are also recognised in the income statement. and subsequently every five years. Annual and perpetual payments to compensate for the damage or inconvenience caused by the development of hydropower stations are indexed in the same way as licence fees. (Amounts in NOK millions) 2013 2012 Revenues from fixed-price contracts included under operating revenues 665 497 The present value of future licence fees payable by the Group, for which no provision is made in the financial statements, has been Revenues, work in progress 414 540 calculated to be NOK 1 051 million using a discount rate of 3.5%, in accordance with the Regulations on indexing licence fees, annual­ Accrued revenues included under other receivables 29 25 compensation and funds, etc. (Norw.: forskrift om justering av konsesjonsavgifter, årlige erstatninger og fond mv.). Deferred revenues included under other liabilities 7 23 Costs incurred to date, work in progress 374 446 Share of outstanding receivables not yet due under contract terms 4 0 Remaining turnover from loss-making projects 8 21

AGDER ENERGI ANNUAL REPORT 2013 56 AGDER ENERGI ANNUAL REPORT 2013 57 NOTE 10 OTHER OPERATING EXPENSES NOTE 12 FINANCE INCOME AND COSTS

(Amounts in NOK millions) 2013 2012 (Amounts in NOK millions) Note 2013 2012 Property-related expenses 65 55 Lease of machinery and office equipment 15 15 Share of profit/loss of associates and jointly controlled entities 17 -5 -31 Purchase of plant and equipment 45 51 Repairs and maintenance to equipment 8 10 Net realised exchange rate gains 1) 52 125 Contractors 118 113 Interest income on loans 2) 12 13 Operation/maintenance of IT systems 49 45 Other interest income 12 9 Technical consultants 53 51 Realised gains on shares and dividend payments received 0 -2 Administrative consultants 52 59 Other finance income 2 0 Other external services 44 45 Finance income 78 145 Office supplies, telecommunications, postage, etc. 55 46 Cost of vehicles 28 35 Unrealised gains and losses on foreign currency contracts 3) 27 -438 22 Leasing 34 35 Unrealised gains and losses on interest rate contracts 27 35 -47 Travel expenses, subsistence allowances, mileage expenses, etc. 55 53 Unrealised gains/losses on currency and interest rate contracts -403 -25 Sales, advertising, representation, membership fees and gifts 34 39 Insurance premiums 16 17 Interest expense on loans 4) 241 275 Share of other operating expenses at joint ventures 82 71 Interest expense on interest rate swaps 58 36 Other operating expenses -2 41 Interest on capitalised construction loans -39 -5 Total 750 781 Impairment of non-current financial assets 5) 27 11 Other finance costs 12 9 Finance costs 299 326

NOTE 11 AUDITOR’S FEE Net finance income/costs -629 -237

The Group’s auditor is Ernst & Young, who audits the parent company and its subsidiaries with the exception of a few small 1) This item is mainly made up of net realised gains on currency futures and realised gains on the redemption of foreign subsidiaries. currency loans in 2012. 2) Relates to interest income on financial assets carried at amortised cost. (Amounts in NOK 000s excl. VAT) 2013 2012 Statutory audit 3,482 3,405 3) The breakdown is as follows: Other auditing services 52 53 (Amounts in NOK millions) 2013 2012 Tax advice 215 167 Reversal of unrealised gains and losses at 1 January on contracts closed out during the year * -76 -73 Other services not related to auditing 467 415 Gains and losses on contracts that had not been closed out as of 31 December -362 95 Total 4,216 4,040 Total -438 22

* The value of contracts that had already been signed at the start of 2013 (2012) and that were closed out during 2013 (2012).

4) Relates to interest expenses on loans carried at amortised cost. 5) Impairment of shares and other non-current financial assets.

AGDER ENERGI ANNUAL REPORT 2013 58 AGDER ENERGI ANNUAL REPORT 2013 59 NOTE 13 TAX

(Amounts in NOK millions) 2013 2012 (Amounts in NOK millions) Note 2013 2012

The tax expense comprises the following Changes in net deferred tax liability (+)/assets (-) over the year Income tax payable, 28% 474 415 Net deferred tax liability(+)/deferred tax asset(-) 31/12 last year 55 135 Resource rent tax payable, 30% 298 250 Correction of errors in prior years 16 0 -238 Change in deferred tax, income tax, 27%/28% 5 28 Net deferred tax liability(+)/deferred tax asset(-) 01/01 55 -103 Change in deferred tax, resource rent, 31%/30% 72 -20 Net disposal -1 5 Prior year adjustment -9 8 Net acquisitions -8 -4 Total tax expense in the income statement 840 681 Recognised in equity* 10 0 Recognised in other comprehensice income** 13 149 Reconciliation of nominal tax rate to effective tax rate Charged to income 77 8 Profit before tax 1,686 1,581 Net deferred tax liability(+)/deferred tax asset(-) 31/12 146 55 Expected tax expense at a nominal rate of 28% 472 443 * The effect of change in tax rate in 2013 was NOK -4 million Effect on taxes of ** The effect of change in tax rate in 2013 was NOK 7 million Permanent differences, income tax, 28% 5 1 Resource rent tax incl. deferred tax, 31%/30% 370 230 Prior year adjustment -9 8 Deferred tax recognised in other comprehensive income Net effect of change in tax rate 2 0 Actuarial gains on pensions 51 149 Total tax expense 840 681 Cash flow hedges -38 0 Net deferred tax recognised in other comprehensive income 13 149 Effective tax rate 50% 43%

Breakdown of temporary differences and negative resource rent tax carryforward Income tax NOTE 14 DEPRECIATION AND IMPAIRMENT LOSSES Property, plant and equipment 2,106 1,833 Current assets/current liabilities -89 4 (Amounts in NOK millions) Note 2013 2012 Pension liabilities -67 -488 Amortisation of intangible assets 15 16 16 Other long term liabilities -642 -508 Impairment of intangible assets 15 31 1 Derivatives 142 404 Depreciation of property, plant and equipment 16 472 443 Other -142 -41 Impairment of property, plant and equipment 16 7 5 Temporary differences 1,308 1,204 Total depreciation, amortisation and impairment losses Tax rate 27% 28% recognised in operating profit 526 465 Net deferred tax asset(-)/deferred tax liability (+) 354 337 Impairment of financial assets 12 27 11 Total depreciation, amortisation and impairment losses Resource rent tax recognised in cash flow statement 553 476 Temporary differences 533 428 Negative resource rent tax carryforward that are estimated used within the next ten years -1,205 -1,366 Net temporary differences and negative resource rent carryforward -672 -938 Tax rate 31% 30% Net deferred tax asset(-)/deferred tax liability (+) -208 -282

Net deferred tax asset is presented in the balance sheet as Deferred tax liability 520 466 Deferred tax asset -374 -411

Off-balance sheet deferred tax assets related to negative resource rent tax carryforward, 31%/30% -435 -748 Off-balance sheet deferred tax assets related to tax loss carryforward, 27%/28% -77 -80

To calculate deferred resource rent tax assets, it is necessary to assess whether it is likely that the Group will be able to make use of future loss carryforwards. The assessment has been based on a conservative estimate of future electricity prices and on the assumption that future yields on short-term government debt will be between 1.5% and 4.5%.

AGDER ENERGI ANNUAL REPORT 2013 60 AGDER ENERGI ANNUAL REPORT 2013 61 NOTE 15 INTANGIBLE ASSETS

(Amounts in NOK millions) Goodwill Software Other Total intangible intangible assets assets Acquisition cost 185 84 51 320 Accumulated depreciation and impairment losses 0 53 35 88 Carrying amount at 31/12/2012 185 31 16 232

Carrying amount at 01/01/2013 185 31 16 232 Acquisitions 7 15 52 74 Depreciation 0 10 6 16 Impairment losses 27 4 0 31 Carrying amount at 31/12/2013 165 32 62 259

Acquisition cost 192 99 103 394 Accumulated depreciation and impairment losses 27 67 41 135 Carrying amount at 31/12/2013 165 32 62 259

Useful life/depreciation period Tested annually for impairment 3-5 years 3-8 years

Goodwill impairment The Group tests goodwill annually for impairment, or more frequently if there is evidence to suggest a fall in value. Testing for impairment­ is done in the fourth quarter. Agder Energi has not identified any other intangible assets with indefinite useful lives. Goodwill that has arisen in conjunction with acquisitions has been allocated as follows:

Breakdown of goodwill on the balance sheet (Amounts in NOK millions) 2013 2012 Otera 117 142 LOS 12 12 NEG 9 9 Others 27 21 Carrying amount of goodwill 165 185

In 2013 a NOK 27 million goodwill impairment provision was recognised. This impairment related to Otera. In the case of the remai- ning goodwill on the balance sheet, no need for impairment was identified.

AGDER ENERGI ANNUAL REPORT 2013 62 AGDER ENERGI ANNUAL REPORT 2013 63 NOTE 16 PROPERTY, PLANT AND EQUIPMENT

(Amounts in NOK millions) Hydropower Property Dams Own District Regional Local Other Vehicles, fix- Work in Total own pro- Property, plant Total property, licences power heating power trans- distribution tures, fittings, progress perty, plant and equipment plant and stations mission grid network machinery and equipment at JCEs equipment

Carrying amount at 31/12/2011 1,084 181 309 2,856 381 1,018 2,375 49 147 56 8,456 2,685 11,141 Correction of depreciation in prior years - -4 -19 -303 - - - -1 - - -327 -84 -411 Carrying amount at 01/01/2012 1,084 177 290 2,554 381 1,018 2,375 48 147 56 8,129 2,600 10,730 Acquisitions 2 3 4 34 62 41 169 9 110 245 680 266 946 Disposals at book value ------3 - - 3 40 44 Acquisitions through business combinations - 2 - 39 - - - - 20 - 60 - 60 Impairment losses ------5 - - 5 - 5 Depreciation - 8 13 107 14 52 122 5 51 - 371 73 443 Carrying amount at 31/12/2012 1,086 174 281 2,520 429 1,007 2,422 45 226 300 8,491 2,754 11,244

Acquisition cost 1,101 230 508 4,702 525 1,687 4,077 175 491 300 13,797 4,376 18,173 Accumulated depreciation and impairment losses 15 55 227 2,183 97 680 1,655 130 265 - 5,306 1,622 6,928 Carrying amount at 31/12/2012 1,086 174 281 2,520 429 1,007 2,422 45 226 300 8,491 2,754 11,244

Carrying amount at 01/01/2013 1,086 174 281 2,520 429 1,007 2,422 45 226 300 8,491 2,754 11,245 Acquisitions - - 7 112 94 166 226 5 74 193 878 399 1,276 Disposals at book value - 2 - - - - 3 36 22 - 62 - 62 Impairment losses ------7 - 7 - 7 Depreciation - 8 13 120 15 59 120 3 61 - 399 73 472 Carrying amount at 31/12/2013 1,086 165 276 2,511 507 1,114 2,525 12 211 494 8,900 3,079 11,979

Acquisition cost 1,101 225 515 4,824 619 1,853 4,298 99 543 494 14,570 4,775 19,345 Accumulated depreciation and impairment losses 15 60 240 2,313 112 739 1,772 87 332 - 5,670 1,695 7,365 Carrying amount at 31/12/2013 1,086 165 276 2,511 507 1,114 2,525 12 211 494 8,900 3,079 11,979

Depreciation period (years) Indefinite 25-99/ 50-99 25-99 8-60 15-40 15-35 5-20 3-8 indefinite

For work in progress, the net change is shown. Periodic maintenance is included within the relevant category. Capitalised borrowing costs amounted to NOK 39 (5) million in 2013.

AGDER ENERGI ANNUAL REPORT 2013 64 AGDER ENERGI ANNUAL REPORT 2013 65 Below the useful lives of the most important assets on the balance sheet are set out: Reassessment of depreciation periods Hydroelectric power stations Hydroelectric power stations In addition to correcting errors from past years, we have reassessed the useful life of the most important groups of assets in our Depreciation period (years) Depreciation period (years) hydropower business, which resulted in changes to the depreciation period for certain groups of assets. The carrying amount of Waterfall rights Indefinite Machinery property, plant and equipment with a revised depreciation period will be depreciated in a straight line over the remaining useful Sites Indefinite – Runners 40 life of the assets. The revisions to useful life estimates resulted in the depreciation expense in 2013 being NOK 15 million higher – Turbines 40 than it would have been in previous years. Structures – Turbine hall cranes 25 – Rock-fill dams 99 – Turbine regulators 15 – Caverns 99 – Grating cleaners 10 NOTE 17 ASSOCIATES AND JOINT VENTURES – Concrete dams 67 – Power station buildings 67 Process equipment and communication Agder Energi has various investments in associates and joint ventures. Joint ventures include jointly controlled entities and jointly – Other buildings 50 – Grid control systems 20 controlled assets. Associates and jointly controlled entities are accounted for using the equity method, whereas proportionate – Control centre 10 consolidation is used for investments in jointly controlled assets. Penstock – Communications/Control/Logging 10 – Underground 99 Associates and jointly controlled entities (accounted for using the equity method) – Above ground pipeline 40 Electrical systems (Amounts in NOK millions) 2013 2012 – Underground pipeline 67 – Transformers 40 Associates 140 137 – Generators 40 Jointly controlled entities 42 60 Gates, gratings, entrances, etc. – Auxiliary systems (switches, low-voltage systems) 25 Carrying amount at 31 December 182 197 – Intake gates 50 – Switchgear and other high-voltage systems 25 – Dam gates 50 Profit/loss from associates 0 -5 – Gratings 50 Periodic maintenance (interval) Profit/loss from jointly controlled entities -18 -30 – Entrances 50 – Machinery – major service 20 Gain/loss on disposal/reclassification* 14 3 – Stream intakes 50 – Electrical systems – major service 20 Share of profit/loss of associates and jointly controlled entities -5 -31 – Refurbishment of buildings 25 Roads and bridges * See footnote 2) below under investments in associates and footnote 1) under investments in joint ventures. – Roads/quays 67 – Bridges 50 Breakdown of investments in associates (Amounts in NOK millions) Ownership Carrying Acquisiti- Disposals/ Consolidated Carrying interest and amount at ons dividends/ share of amount at Power distribution networks voting rights 31/12/2012 reclassification profit/loss 31/12/2013 Depreciation period (years) Correction of prior years’ errors Småkraft AS 1) 20.0% 94 30 - -1 123 Regional power transmission grid: In 2013 it became apparent that some property, plant and Skagerak Venture Capital I KS/GP KS 19.6% 6 2 - 8 16 – Power and ground cables 40 equipment in the Hydroelectric Power business area had been Teknova Invest AS 38.9% 2 - - -1 1 – Transmission substations 35 allocated too long depreciation periods. NorthConnect KS/NorthConnect AS 22.3% 5 - - -5 0 – High-voltage power lines 25 Rejlers Consulting AS 2) 31 - -29 -2 0 – Grid control systems 15 The most important issues uncovered were: Total for associates 137 32 -29 0 140 Local power distribution network: • Until the financial year 1998, it was possible to write up the – High-voltage lines and cables 40 value of property, plant and equipment if certain conditions 1) The Group has also lent NOK 200 million to Småkraft AS. In 2013, Småkraft AS had NOK 144 million in operating revenues and – Low-voltage lines and cables 30 were met. At what is now Agder Energi Vannkraft, write-ups made a NOK 5 million loss after tax. The company had NOK 1,652 million of capital, made up of NOK 1,030 million of debt and – Distribution substations 25 with a total value of NOK 1.1 billion were recognised in the NOK 622 million in equity. Småkraft has its business address in Bergen. accounts. Many of these write-ups were given too long depre- 2) At the end of 2013, Agder Energi sold its remaining 51% shareholding in Rejlers Consulting AS. This resulted in a NOK 2 million Other assets ciation periods. At the time of the write-ups, the depreciation gain being recognised. Office buildings 50 should have been based on the expected useful life, in line Sites Indefinite with the company’s guidelines on depreciation periods. Breakdown of investments in jointly controlled entities Office and IT equipment 3 • Periodic maintenance on generators and turbines was given (Amounts in NOK millions) Ownership Carrying Acquisiti- Disposals Consolidated Carrying Fixtures and fittings 5 the same useful life as if the plant had been new (40 years). interest and amount at ons share of amount at Vehicles 8 This kind of maintenance should be depreciated over the voting rights 31/12/2012 profit/loss 31/12/2013 number of years until it is next scheduled (on average ap- Bjerkreim Vind AS 1) 11 - -10 -1 0 proximately 20 years). The same error was discovered for Dalane Vind AS 1) 0 2 -2 0 0 upgrades to buildings. Statkraft Agder Energi Vind DA 2) 38.0% 46 10 - -15 41 Viking Varme AS 50.0% 3 - - -2 1 These errors in the depreciation expense in past years’ financial Total for jointly controlled entities 60 11 -12 -18 42 statements were recognised in the balance sheet at the start of the year. As a result, the carrying amount of the Group’s as- 1) Agder Energi swapped its 50% ownership interest in Dalane Vind with an increased ownership interest in Bjerkreim Vind. As sets was reduced by a total of NOK 411 million. After adjusting a result, Bjerkreim Vind is now classified as a subsidiary. In conjunction with the transaction, the Group recognised a NOK 12 for deferred tax, equity at the start of the year was reduced million increase in the value of its original holding in Bjerkreim Vind. by NOK 173 million. 2) For SAE Vind DA, the preliminary loss for the year of NOK 41 million has been used when consolidating Agder Energi’s share of profit/loss for 2013. The company had NOK 199 million of total capital, made up of NOK 188 million of equity and NOK 11 million of debt. The company has its business address in Kristiansand.

AGDER ENERGI ANNUAL REPORT 2013 66 AGDER ENERGI ANNUAL REPORT 2013 67 Jointly controlled assets (proportionate consolidation) Below there follows a summary of the Group’s share of assets, liabilities, revenues and expenses at jointly controlled assets. In the case of jointly controlled assets, the collaboration is based on an agreement that regulates key areas of cooperation. The The energy sales in the table do not represent actual revenues, and have instead been calculated by multiplying Agder Energi Group uses the proportional consolidation method to account for jointly controlled assets, and the Group’s share of revenues, Vannkraft’s actual power generation by the average electricity price, and adding Agder Energi Vannkraft’s share of revenues from expenses, assets and liabilities are consolidated on a pro-rata basis. Through Agder Energi Vannkraft, the Group participates in concession power. the following jointly controlled power stations and water management associations: (Amounts in NOK millions) 2013 2012 Otra Kraft DA owns the Holen and Brokke power stations on the River Otra. Otra Kraft is owned by Agder Energi Vannkraft, which Energy sales 882 804 has a 68.6% interest, and Skagerak Kraft, which has a 31.4% interest, and is managed through the general meeting. The company Other operating revenues 10 16 has its head office at Rysstad in Valle. Total operating revenues 892 820

Ulla Førre Agder Energi Vannkraft has a 6.0% ownership interest in Ulla Førre, which entitles it to an equivalent proportion of the Transmission expenses 37 19 power generated by the facility. The ownership interest arose as a result of certain drainage areas being transferred west. Ulla Property taxes and licence fees 22 23 Førre is owned by Statkraft, Lyse, Skagerak Energi, Haugaland kraftlag and Agder Energi Vannkraft. Depreciation 73 73 Other operating expenses 85 70 Finndøla kraftverk DA is 50:50 owned by Agder Energi Vannkraft and Skagerak Kraft. Voting rights are proportionate to the Total operating expenses 217 185 ownership interests. Operating profit/loss 675 635 The power station Hekni kraftverk is a statutory co-ownership between Agder Energi Vannkraft, with a 66.67% interest, and Skagerak Kraft, with 33.33%. The co-ownership is managed through a steering committee, and voting rights are proportionate to Non-current assets 3,079 2,838 the ownership interests. Agder Energi Vannkraft represents the co-ownership in dealings with third parties. Current assets 111 165 Total assets 3,190 3,003 The water management association Otteraaens Brugseierforening comprises Agder Energi Vannkraft, Skagerak Kraft and Vigelands Brug. The association is managed through a Board, and voting rights are proportionate to the ownership interests. Ag- Other provisions 6 10 der Energi Vannkraft’s ownership interest, including its indirect interest through Otra Kraft, is approximately 73.8%. Otteraaens Current liabilities 140 146 Brugseierforening has its business address in Valle. Net assets 3,034 2,847

The water management association Arendals Vasdrags Brugseierforening comprises Agder Energi Vannkraft, Skafså Kraftverk, Skagerak Kraft and Arendals Fossekompani. The association is managed through a Board, and has its business address in Arendal. Agder Energi Vannkraft’s ownership interest is approximately 52.2%. No single member can have more than 50% of the votes. NOTE 18 NON-CURRENT FINANCIAL ASSETS

Sira-Kvina DA is owned by Agder Energi Vannkraft (12.2%), Lyse Produksjon (41.1%), Statkraft Energi (32.1%) and Skagerak Kraft (Amounts in NOK millions) Note 2013 2012 (14.6%). The company is managed through the Board, and the voting rights of the shareholders are proportionate to their ownership Investments in shares and ownership interests 31 27 interests. The company has its business address at Tonstad. Loans to associates and joint ventures 1) 201 181 Other receivables 2) 205 189 Other non-current financial assets - 25 Pension assets 23 93 34 Total 530 456

1) Detailed information about loans to associates and joint ventures can be found in notes 17 and 26. 2) Detailed information about other receivables can be found in Note 26. They include a NOK 40 million subordinated loan to Agder Energi Pensjonskasse. In 2014 the loan has been converted into equity. They also include NOK 115 million made up of a subordinated loan to Ventelo and a vendor credit in conjunction with the sale of the shares in Ventelo.

The fair value of non-current financial assets is described in greater detail in notes 26 and 28.

AGDER ENERGI ANNUAL REPORT 2013 68 AGDER ENERGI ANNUAL REPORT 2013 69 NOTE 19 RECEIVABLES List of shareholders in Agder Energi AS Number of % of class A Number of % of class B Total number % of tot. number Share (Amounts in NOK millions) 2013 2012 class A shares shares class B shares shares of shares of shares capital Trade receivables 1,263 1,368 Bad debt provision 20 20 Statkraft Industrial Holding AS 743,197 41.289% 485,990 53.999% 1,229,187 45.525% 823,555 Total trade receivables 1,243 1,348 Arendal Municipality 115,017 6.390% 57,507 6.390% 172,524 6.390% 115,591 Accrued revenues 100 177 Kristiansand Municipality 95,400 5.300% 47,700 5.300% 143,100 5.300% 95,877 Prepaid expenses 37 49 Grimstad Municipality 53,327 2.963% 26,663 2.963% 79,990 2.963% 53,593 Receivables from joint ventures 99 89 Flekkefjord Municipality 53,269 2.959% 14,650 1.628% 67,919 2.516% 45,506 Other receivables 86 106 Lyngdal Municipality 49,745 2.764% 13,680 1.520% 63,425 2.349% 42,495 Share of current assets at joint ventures 111 165 Kvinesdal Municipality 49,254 2.736% 13,545 1.505% 62,799 2.326% 42,075 Total receivables 1,677 1,934 Lillesand Municipality 40,901 2.272% 20,450 2.272% 61,351 2.272% 41,105 Marnardal Municipality 44,500 2.472% 12,238 1.360% 56,738 2.101% 38,014 Sirdal Municipality 43,845 2.436% 12,057 1.340% 55,902 2.070% 37,454 Ageing analysis of trade receivables Mandal Municipality 42,343 2.352% 11,644 1.294% 53,987 2.000% 36,171 (Amounts in NOK millions) Not 0-30 days 31-60 days 61-90 days Over 90 days Total Vennesla Municipality 42,343 2.352% 11,644 1.294% 53,987 2.000% 36,171 overdue overdue overdue overdue overdue Froland Municipality 31,847 1.769% 15,924 1.769% 47,771 1.769% 32,007 2013 1,058 120 13 15 56 1,263 Søgne Municipality 33,601 1.867% 9,240 1.027% 42,841 1.587% 28,703 2012 1,207 85 14 10 52 1,368 Evje og Hornnes Municipality 27,511 1.528% 13,756 1.528% 41,267 1.528% 27,649 Songdalen Municipality 31,689 1.761% 8,714 0.968% 40,403 1.496% 27,070 Lindesnes Municipality 31,470 1.748% 8,654 0.962% 40,124 1.486% 26,883 Hægebostad Municipality 28,776 1.599% 7,913 0.879% 36,689 1.359% 24,582 NOTE 20 CASH AND CASH EQUIVALENTS Farsund Municipality 27,502 1.528% 7,563 0.840% 35,065 1.299% 23,494 Birkenes Municipality 22,679 1.260% 11,340 1.260% 34,019 1.260% 22,793 (Amounts in NOK millions) 2013 2012 Åmli Municipality 21,921 1.218% 10,960 1.218% 32,881 1.218% 22,030 Cash and cash equivalents 21 67 Risør Municipality 21,052 1.170% 10,525 1.169% 31,577 1.170% 21,157 Restricted assets (e.g. term deposits, tax withholding account and client assets) 12 22 Valle Municipality 20,327 1.129% 10,164 1.129% 30,491 1.129% 20,429 Total 33 89 Bygland Municipality 19,995 1.111% 9,998 1.111% 29,993 1.111% 20,095 Iveland Municipality 19,155 1.064% 9,578 1.064% 28,733 1.064% 19,251 A NOK 67 million bank guarantee covering the parent company and subsidiaries has been used as security for tax deductions at Tvedestrand Municipality 19,066 1.059% 9,533 1.059% 28,599 1.059% 19,161 source. The parent company has also set up a cash pooling arrangement with an associated NOK 500 million overdraft facility. Åseral Municipality 21,776 1.210% 5,988 0.665% 27,764 1.028% 18,602 Most subsidiaries in the Group in which the parent company holds an ownership interest of at least 50% take part in the cash Vegårshei Municipality 14,553 0.809% 7,277 0.809% 21,830 0.809% 14,626 pooling arrangement and are jointly and severally liable to the bank for the overdraft facility. Bykle Municipality 13,232 0.735% 6,616 0.735% 19,848 0.735% 13,298 Gjerstad Municipality 12,423 0.690% 6,211 0.690% 18,634 0.690% 12,485 Audnedal Municipality 8,284 0.460% 2,278 0.253% 10,562 0.391% 7,077 Total 1,800,000 100% 900,000 100% 2,700,000 100% 1,809,000 NOTE 21 SHARE CAPITAL AND SHAREHOLDER INFORMATION

The share capital is made up of Number Face value Share capital The NOK 1 809 million of share capital is made up of class A and class B shares. of shares (in NOK 000s) Share capital 2,700,000 670 1,809,000 Class A shares can only be owned by shareholders who meet the conditions for being allocated indefinite waterfall licences under the Total 2,700,000 1,809,000 relevant current legislation. Class B shares are freely negotiable. In all other respects, class A and class B shares have equal rights.

The company has entered into an industrial collaboration agreement with its biggest shareholder, Statkraft Industrial Holding AS. There is also a shareholders’ agreement between the shareholders in the company.

The company has a corporate assembly with 15 members, who are elected for a two-year term.

Proposed dividends for 2013 come to NOK 707 million in total, equivalent to NOK 262 per share.

AGDER ENERGI ANNUAL REPORT 2013 70 AGDER ENERGI ANNUAL REPORT 2013 71 NOTE 22 PROVISIONS Defined contribution pension plan Employees taken on after 1 April 2007 are entitled to membership of a defined contribution pension plan. (Amounts in NOK millions) Note 2013 2012 Pension liabilities 23 301 476 Early retirement schemes (AFP schemes) Other non-current provisions 833 890 Employees covered by a public pension plan have an early retirement scheme, known as an AFP scheme. This is a so-called public Total 1,134 1,366 sector AFP scheme, which like all such schemes set up from 2011 onwards does not receive a government subsidy. The Group is therefore fully liable for all of its obligations under the scheme. A few former employees who took early retirement prior to 2011 have so-called private AFP schemes, for which the obligation is calculated by assuming that the employer will cover 25% of the Breakdown of other non-current provisions expected cost of the AFP pension. The scheme is considered an unfunded pension plan. (Amounts in NOK millions) Supply of free electricity Supply of free electricity Cash-settled Other Total and compensation 1) and compensation 2) contracts 3) provisions When calculating the pension liability, it has been assumed that there will be a 100% take-up of the early-retirement scheme by the age of 64. For accounting purposes, employees start accruing early-retirement pension rights on reaching the age of 50 or Carrying amount at 01/01/2012 604 137 153 54 948 on joining the Group, whichever is later. Unrealised gains and losses -48 0 -38 0 -86 New provisions 0 1 0 39 40 Employees covered by the defined contribution plan are entitled to a private AFP scheme, which from 2011 onwards means a lifelong Provisions used 0 0 0 12 12 supplement to their retirement pensions from the National Insurance Scheme. This AFP scheme is funded by contributions made by Carrying amount at 31/12/2012 556 138 115 81 890 the employer. It is considered a defined benefit plan, but for the moment it is being accounted for as a defined contribution plan. This is because the administrator has not yet calculated the total obligations under the scheme. Carrying amount at 01/01/2013 556 138 115 81 890 Unrealised gains and losses -35 0 -10 0 -45 The annual contribution in 2012 was 1.75% of qualifying pay between 1 and 7.1 times the National Insurance Scheme’s basic amount New provisions 0 0 0 23 23 (“G”) per employee covered by the scheme, rising to 2% in 2013. For 2014 the rate has been set at 2.3%, and further rises are Provisions used 0 -1 0 -34 -35 expected over the coming years. Carrying amount at 31/12/2013 521 137 105 70 833 Amendments to the accounting standard IAS 19 Employee benefits 1) Perpetual obligation to supply free electricity and pay compensation accounted for in accordance with IAS 39. At the start of 2013, Agder Energi implemented the revisions to the rules on pensions contained in IAS 19 Employee benefits. The Also see notes 26 and 28. most important change from Agder Energi’s point of view is that the return on pension plan assets for accounting purposes is now 2) Perpetual obligation to supply free electricity and pay compensation accounted for in accordance with IAS 37. based on the discount rate used to calculate the present value of pension liabilities. Previously the expected return on the pension 3) Non-current cash-settled contracts measured in accordance with IAS 39. Also see notes 26 and 28. plan assets was used. The amendment must be applied retrospectively, so comparative figures have been adjusted accordingly. The 2012 pension cost therefore rose by NOK 34 million. In parallel, the actuarial gain was increased by the same amount. The gross and net pension liabilities were unchanged.

NOTE 23 PENSIONS Actuarial assumptions When calculating the pension expense and net pension liabilities, a number of assumptions have been made (see table below). The Group’s pension plans Since 31 December 2012 the discount rate has been based on the interest rate on covered bonds, rather than the yield on 10-year For employees taken on before 1 April 2007, the Group has a defined benefit pension plan run by Agder Energi Pensjonskasse, which government bonds. The assumptions used to calculate pension liabilities at 31 December 2013 do not significantly deviate from the meets the legal requirements for public sector occupational pension plans. Employees taken on after 1 April 2007 and employees Norwegian Accounting Standards Board’s guidelines on actuarial assumptions of January 2013. The Group uses the latest version outside Norway are part of a defined contribution pension plan. of the GAP 07 actuarial tables for its estimates of life expectancy, probability of disability, etc.

Defined benefit pension plans Extracts from the actuarial tables are reproduced below. This table shows life expectancy and the probability that an employee in The Group has a funded public pension plan for its employees, which entitles them to defined future pension benefits, based on a given age bracket will suffer disability or die within a year. number of years of service and salary on reaching retirement age. Provisions for pension liabilities in the pension plan are calculated using a linear accumulation model based on methods and assumptions that comply with the relevant current accounting standard.

All actuarial gains and losses that occur over the course of the financial year are presented under other comprehensive income Age Disability risk in % Mortality risk in % Life expectancy and in the statement of comprehensive income. Changes in defined benefit pension plan liabilities arising from changes to plan Man Woman Man Woman Man Woman arrangements (past service cost), are recognised directly in the income statement. 20 0.07 0.07 0.01 0.01 85 89 40 0.22 0.22 0.06 0.05 84 88 Pension liabilities were calculated by an independent actuary in December, and represent an estimate of the situation at 31 60 2.16 2.59 0.52 0.37 84 87 ­December. The senior management team considers that any changes in the assumptions and underlying data between the date 80 - - 6.04 3.35 87 90 of calculation and the balance sheet date will not have a significant impact on the figures.

AGDER ENERGI ANNUAL REPORT 2013 72 AGDER ENERGI ANNUAL REPORT 2013 73 (Amounts in NOK millions) Note 2013 2012 (Amounts in NOK millions) 2013 2012

The pension expense for the year has been calculated as follows Actuarial gains and losses are made up of Current service cost 62 80 Gains and losses due to changes in demographic assumptions -12 -20 Interest cost 76 70 Gains and losses due to changes in financial assumptions -105 417 Expected return on pension plan assets -61 -42 Excess return on assets -100 133 Employers’ National Insurance Contributions 9 - Total actuarial gains and losses included on the balance sheet 216 531 Employee contributions -7 -7 Pension expense for the year, defined benefit plans 80 102 Cost of AFP scheme including employers’ NICs 4 6 Sensitivity analysis to assess changes to pension liabilities if parameters are changed Defined contribution pension plans (incl. emp. NICs) 28 26 Change in discount rate -0.5%- +0.5%- Total pension expense recognised in the income statement 8 113 134 point point Increase(+)/Decrease(-) in pension liabilities if discount rate is changed 172 -151 Pension liabilities and pension plan assets The discount rate is considered to be the only assumption that may have a material impact on the reported pension liability. Change in gross pension liabilities For that reason a sensitivity analysis is presented only for this assumption. Gross pension liabilities at 1 Jan. incl. emp. NICs 1,993 2,332 Disposals of businesses - -23 Current service cost (incl. emp. NICs) 71 80 Assumptions used to determine pension liabilities at 31 December Interest cost 76 71 Discount rate 4.10% 3.80% Benefits paid/paid-up policies (incl. emp. NICs) -53 -69 Annual wage growth 3.50% 3.50% Actuarial gains and losses -116 -399 Increase in the National Insurance Scheme’s basic amount (”G”) 3.50% 3.50% Gross pension liabilities at 31 December (incl. emp. NICs) 1,972 1,993 Annual indexing of pensions 2.75% 2.75% Expected average remaining years of service 11 years 11 years Breakdown of defined benefit pension liabilities Funded pension liabilities 1,718 1,756 Unfunded pension liabilities 255 237 Assumptions used to calculate the pension expense for the year Gross pension liabilities at 31 December 1,972 1,993 Discount rate/return on pension plan assets 3.80% 3.00% Annual wage growth 3.50% 3.50% Change in gross pension plan assets Increase in the National Insurance Scheme’s basic amount (”G”) 3.50% 3.75% Fair value of pension plan assets at 1 January 1,552 1,355 Annual indexing of pensions 2.75% 3.00% Disposals of businesses - -13 Expected return on pension plan assets 61 42 Actuarial gains and losses 100 133 Distribution of the pension scheme assets by investment category at 31 December Pension contributions 89 84 Property funds 8% 9% Benefits paid/paid-up policies -38 -48 Interest-bearing financial instruments 51% 62% Fair value of pension plan assets at 31 December 1,764 1,552 Shares 38% 27% Other 3% 2% Net pension liabilities at 31 December 208 441 Total 100% 100%

Carrying amount of pension fund assets 18 93 34 In 2013 and 2012 all pension assets had quoted market prices. Carrying amount of pension liabilities 22 301 476 Carrying amount of net pension liabilities 208 441 Number of people covered by the pension plans Change in net defined benefit pension liabilities Defined benefit plan: current employees 541 577 Net defined benefit pension liabilities at 1 January 441 977 Defined benefit plan: current employees, accrued entitlements and retired employees 1,146 1,190 Pension expense recognised in the income statement 80 102 Defined contribution plan: current employees 982 719 Disposals of businesses - -10 Current employees entitled to public sector AFP, and early retirees 418 419 Company contributions (incl. emp. NICs) -90 -77 Pension benefits included under operating expenses (excl. emp. NICs) -6 -10 Actuarial gains and losses -216 -531 Net pension liabilities at 31 December 208 441

AGDER ENERGI ANNUAL REPORT 2013 74 AGDER ENERGI ANNUAL REPORT 2013 75 NOTE 24 INTEREST-BEARING LIABILITIES Financial instruments used in financial activities mainly consist of loans and interest rate swaps. When managing the Group’s interest rate risk, these two types of financial instruments are assessed together, and they are also viewed in the context of the (Amounts in NOK millions) 2013 2012 Group’s other interest rate risks; see Note 29. In the financial statements, loans are measured at amortised cost, whereas interest rate swaps are measured at fair value through profit or loss. This can cause fluctuations in the Group’s reported profit or loss, Interest-bearing non-current liabilities without it reflecting its overall financial performance. There are some minor exceptions to this asymmetrical treatment; see Note Bonds 3,876 2,405 30 on accounting hedges. Liabilities to financial institutions 2,045 2,378 Other interest-bearing non-current liabilities 10 14 In order to highlight the unrealised impact of these electricity, currency and interest rate contracts, their values and changes in Total 5,931 4,797 value are presented on separate lines in the balance sheet and income statement.

Interest-bearing current liabilities The table below shows the carrying amount and fair value of the Group’s financial instruments. Commercial paper 900 400 Overdraft with cash pooling arrangement 84 244 Current portion of non-current liabilities (principal repayments due within one year) 750 1,779 (Amounts in NOK millions) Note Carrying Fair Carrying Fair Other interest-bearing current liabilities 3 3 amount value amount value Total 1,737 2,426 2013 2013 2012 2012 Financial assets at fair value through profit or loss The fair value of the Group’s interest-bearing liabilities is described in Note 26. All of the above balance sheet items are carried at Derivatives 27 1,022 1,022 645 645 amortised cost in accordance with IAS 39. Note 29 sets out further details of interest rates, durations, liquidity risk, credit facilities,­ Other non-current financial assets 18 - - 25 25 etc. Some loans form part of hedging relationships in accordance with IAS 39. See Note 30 for a more detailed description. Total financial assets at fair value through profit or loss 1,022 1,022 670 670

Available-for-sale assets Shares 18 31 31 27 27 NOTE 25 OTHER NON-INTEREST-BEARING CURRENT LIABILITIES Loans and receivables at amortised cost (Amounts in NOK millions) 2013 2012 Loans to associates 18 201 201 181 181 Trade payables 414 400 Other non-current receivables 18 205 205 189 189 Unpaid government taxes and duties, tax deducted at source, etc. 323 371 Cash and cash equivalents 20 33 33 89 89 Share of non-current liabilities at joint ventures 140 146 Total loans and receivables at amortised cost 439 439 459 459 Other current liabilities 447 451 Total 1,324 1,368 Financial liabilities at fair value through profit or loss Non-current liabilities, obligation to provide free electricity and pay compensation 22 521 521 556 556 Non-current liabilities, cash-settled contracts 22 105 105 115 115 Derivatives 27 464 464 240 240 NOTE 26 FINANCIAL INSTRUMENTS Total financial liabilities at fair value through profit or loss 1,090 1,090 911 911

Financial instruments constitute a significant proportion of Agder Energi’s total assets, and they have a big impact on the Group’s Financial liabilities at amortised cost financial position and results. The majority of the financial instruments are used in energy trading or as financial activities. Bonds 24 4,632 4,670 4,184 4,231 Liabilities to financial institutions 24 2,045 2,087 2,387 2,387 Within energy trading, financial instruments are used as part of a hedging strategy. When managing the Group’s exposure to risks Commercial paper 24 900 900 400 400 associated with future electricity prices and exchange rates, these instruments are viewed together with future physical trading; Overdraft and other interest-bearing current liabilities 24 91 91 253 253 see Note 29. Physical energy trading is only recognised in the financial statements when the energy is supplied/bought, whereas Total financial liabilities at amortised cost 7,668 7,748 7,223 7,271 energy and currency derivatives are measured at fair value through profit or loss. Due to the significant volumes of these deriva- tives, gains and losses on them can potentially cause great volatility in the Group’s balance sheet and profit or loss, without this reflecting its overall financial results.

AGDER ENERGI ANNUAL REPORT 2013 76 AGDER ENERGI ANNUAL REPORT 2013 77 NOTE 27 DERIVATIVES NOTE 28 FAIR VALUE OF FINANCIAL INSTRUMENTS

Agder Energi has both independent derivatives and embedded derivatives. The below table sets out to what extent observable market data are used to value financial instruments measured at fair value. The financial instruments have been broken down into the various categories used by the Group for classification purposes. The embedded derivatives are components of perpetual contractual obligations to supply free electricity and pay compensation, as well as certain non-current cash-settled contracts. These contracts are judged to fall entirely within the scope of IAS 39, and are therefore measured at fair value. Embedded derivatives are therefore presented together with the underlying contracts. The contracts (Amounts in NOK millions) Note Total Level 1* Level 2** Level 3*** are classified as non-current liabilities; see Note 22. 2013 In the table below, (independent) derivatives with positive and negative fair values are shown separately by portfolio. The portfolios Derivatives 27 1,022 - 1,022 - are described in greater detail in Note 29. The figures for energy derivatives are the accounting values of contracts which, under the Shares and ownership interests 18 31 5 - 26 criteria set out in IAS 39, fall within the definition of financial instruments. There can be significant discrepancies between accounting Total assets 1,053 5 1,022 26 values and underlying financial values, as the portfolios contain both contracts that are covered by IAS 39 and ones that are not. A small proportion of the Group’s interest rate derivatives are designated as accounting hedges; see Note 30 on accounting hedges. Supply of free electricity and compensation 22 521 - - 521 Cash-settled contracts 22 105 - - 105 Agder Energi offers several managed electricity trading products to the retail market. With these products, Agder Energi supplies Derivatives 27 464 - 464 - physical electricity to a portfolio of customers, on whose behalf it actively trades electricity through NASDAQ (the marketplace for Total liabilities 1,090 - 464 626 cash-settled electricity futures). These NASDAQ positions are measured symmetrically. In other words, Agder Energi recognises equi- valent contracts with respect to the retail customers covered by the electricity trading products, but with the opposite exposure of the 2012 NASDAQ positions. This symmetrical treatment means that these financial positions do not have any impact on Agder Energi’s profit Derivatives 27 645 - 645 - and loss account, but it does result in an increase in total assets, as the gross value of derivatives on the balance sheet rises. At the Shares and ownership interests 18 27 14 - 13 end of 2013, the Group had derivatives worth NOK 0 (22) million that were assets in relation to NASDAQ and liabilities in relation to Other 18 25 - - 25 customers. Similarly, it had derivatives worth NOK 140 (155) million that were assets in relation to customers and liabilities in relation Total assets 697 14 645 38 to NASDAQ. In total the value of these positions is higher than the NOK 8 (32) million in electricity derivatives shown as liabilities in the table below. That is because Agder Energi has other positions at NASDAQ that are offset against the abovementioned positions Supply of free electricity and compensation 22 556 - - 556 when they are settled. These NASDAQ positions are therefore presented net on the balance sheet. Cash-settled contracts 22 115 - - 115 Derivatives 27 240 - 240 - (Amounts in NOK millions) Note Change 2013 2012 Total liabilities 911 - 240 671 Derivative assets Portfolio of cash-settled electricity contracts* 977 494 * Level 1 assets are financial instruments the fair values of which can be determined from market prices in an active market. Currency derivatives, electricity sales 9 128 ** Level 2 assets are financial instruments the fair values of which are estimated using a valuation model that only uses market data as its inputs. Interest rate swaps 36 23 *** Level 3 assets are financial instruments the fair values of which are estimated using a valuation model that does not only use market data as its Total derivatives 1,022 645 inputs. In 2013 the Group recognised a net gain of NOK 19 million on level 3 financial instruments.

Derivative liabilities Portfolio of cash-settled electricity contracts* 8 32 Currency derivatives, electricity sales 321 1 Interest rate swaps 135 207 Level 3 assets and liabilities at fair value* Total derivatives 464 240 (Amounts in NOK millions) Shares and ownership Supply of free electricity Cash-settled electricity Other interests and compensation contracts Net value of derivatives Opening balance at 01/01/2013 13 -556 -115 25 Portfolio of cash-settled electricity contracts* 7 507 969 462 Gains and losses recognised in profit or loss -1 35 10 -25 Currency derivatives, electricity sales 12 -439 -312 127 Acquisitions 14 - - - Interest rate swaps** 85 -99 -184 Closing balance at 31/12/2013 26 -521 -105 0 Total derivatives 558 405 * Liabilities are shown with a minus sign. * Includes both the portfolio of financial production hedges and the retail customer portfolio. ** For breakdown of net gain/loss on interest rate swaps, see table below.

(Amounts in NOK millions) Note Change Unrealised gains and losses through profit or loss 12 35 Gains and losses on cash flow hedges 30 5 Gains and losses on fair value hedges 30 44 Net gain/loss on interest rate swaps 85

AGDER ENERGI ANNUAL REPORT 2013 78 AGDER ENERGI ANNUAL REPORT 2013 79 FAIR VALUE OF ENERGY DERIVATIVES NOTE 29 FINANCIAL RISK MANAGEMENT

In measuring the fair value of energy derivatives, the following parameters and assumptions have been applied: Agder Energi’s business activities expose it to market risk, credit risk and liquidity risk. There follows a more detailed description of these risks, and of how they are managed. Electricity prices NASDAQ and other bilateral contracts are measured using a smooth forward curve based on the final price on the balance sheet MARKET RISK date. The prices used are discounted. Market risk primarily consists of electricity price risk, currency risk and interest rate risk. Risk management at Agder Energi focuses on entire portfolios of contracts, and not specifically on contracts that fall within the scope of IAS 39. Agder Energi has a number of perpetual supply contracts (compensation power), which are accounted for in accordance with IAS 39. The market value of these contracts has been calculated based on a 200 year term. NASDAQ market prices are applied for the There are internal guidelines on exposure to market risk, for both the hedging and trading portfolios. Agder Energi’s back and first five years. For subsequent periods the Group’s long-term price expectations are used. middle office staff have been given responsibility for continuously monitoring compliance with limits on risk exposure. Trading in both cash-settled and physical contracts is monitored systematically and reported regularly, both to senior management and to Foreign currency the Group’s risk management section. For currency derivatives and contracts quoted in foreign currency, the calculation is based on the exchange rate on the balance sheet date and the associated forward exchange rates. MARKET RISK ARISING FROM ELECTRICITY PRICES

Raw materials Power generation portfolio For certain electricity contracts, the contract price is linked to the prices of various commodities. Valuations are based on the Agder Energi’s hydroelectric power generation business is exposed to risks arising from fluctuations in prices and volumes, as both forward prices on the relevant commodity exchanges. If there are no quoted prices for the relevant time period, the commodity future prices and precipitation levels are unknown. The power generation portfolio aims to manage the market risks associated prices are inflation-adjusted from the last quoted market price. with power generation.

CO2 The net exposure of the portfolio at any given time consists of expected future power generation, purchase and sale commitments CO2 contracts are valued using the forward price of emission quotas (EUAs) on NASDAQ and ICE. under long-term physical contracts, as well as contracts on NASDAQ and bilateral cash-settled contracts. Bilateral financial contracts are only used to a limited extent. Since the aim is to hedge the value of future revenues, the portfolio maintains a net short position. Interest rates Energy derivatives are discounted by the market interest rate curve (swap curve). Where credit risk is significant, a risk premium Agder Energi enters into contracts and trades various cash-settled instruments in order to secure its revenues from electricity is added to the interest rate curve. For the purpose of discounting perpetual supply contracts related to compensation power, a sales. This helps to stabilise revenues from one year to another, which is considered desirable on account of the great uncertainty risk-adjusted nominal interest rate is used. surrounding electricity prices. Hedging activities are designed to optimise contracts in relation to the Group’s risk profile and expected electricity prices. Optimisation is done in relation to profit after tax.

FAIR VALUE OF CURRENCY AND INTEREST RATE DERIVATIVES Limits on futures trading are based on the desired hedge ratio and expected generation. In addition, trading strategies have been established at an operating level designed to manage risk using a profit at risk method with a range of potential outcomes. For risk Interest rate swaps, currency swaps and currency forwards management purposes, cash-settled and physical contracts are considered together. Interest rate and currency swaps, as well as currency forwards, are valued by discounting future cash flows to their present value. Expected cash flows are calculated and discounted by looking at the observed market interest rates on the various currencies The physical contracts in the portfolio comprise commercial sales contracts, contracts to supply concession power and various (swap curves) and the observed exchange rates, which are used to derive forward exchange rates. The estimated present values contracts to supply free power and compensation power. The durations of the commercial contracts vary, with most of them expiring are checked against the equivalent calculations carried out by the counterparties to the contracts. by the end of 2020. The Group has perpetual agreements to supply compensation power, and the contracts to supply concession power are also perpetual. These perpetual contracts cover less than ten percent of the Group’s mean electricity generation.

FAIR VALUE OF FINANCIAL INVESTMENTS The vast majority of cash-settled contracts run for less than five years.

Shares The sale of electricity in the futures market and the price sensitivity of electricity derivatives are shown in a separate section on Some of the Group’s equity investments classified as available for sale are listed on a stock exchange, while for others there are the next page. no quoted prices. The former are valued at the most recent available share price (bid price). The latter are valued using valuation techniques. Retail customer portfolio The retail market covers sales to private customers, state-owned entities and private companies. It includes both physical and cash-settled contracts. Physical contracts are mainly based on spot prices, variable rates, fixed prices or capped variable rates. Electricity for immediate use is purchased at the spot price. A number of the physical contracts are flexible in terms of the volumes delivered. Some of the cash-settled contracts with retail customers are based on back-to-back contracts on NASDAQ. Various managed electricity supply products are also offered to customers, which involve cash-settled trades on NASDAQ based on ex- pected physical deliveries.

AGDER ENERGI ANNUAL REPORT 2013 80 AGDER ENERGI ANNUAL REPORT 2013 81 The net exposure of the retail portfolio at any given time consists of sale contracts with prices that are fixed for varying lengths of MARKET RISK – CURRENCY time, as well as contracts on NASDAQ and bilateral cash-settled contracts. The vast majority of the contracts expire in less than three years. The portfolio shall minimise electricity price risk and hedge the value of future revenues from this area. The retail Agder Energi is exposed to currency risk through its electricity generation business and retail business. portfolio maintains a net long position in cash-settled contracts. The biggest exposure to currency risk arises from physical electricity sales by the electricity generation business. NordPool con- The retail business area exposes itself to variations in electricity prices by agreeing fixed prices with retail customers or by agreeing tracts are settled in euros, and Agder Energi has also entered into long-term contracts to sell electricity that are payable in euros. to give retail customers notice of changes in variable rates. Where this kind of price risk exists, prices are hedged through cash- In addition, currency risk arises as a result of financial trading on NASDAQ OMX being settled in euros. settled contracts on NASDAQ, or internally using the Group’s power generation portfolio. Limits have been set on the maximum volume of exposure. Management is kept informed of the exposure level relative to the specified limits. The retail customer portfolios Expected future cash flows from power generation over the coming years are gradually hedged. The hedge ratio is normally highest are also exposed to volume risks, as many of the physical fixed-price contracts are flexible in terms of the volumes delivered. Based for the cash flows that are closest in time. Cash-settled derivatives and foreign currency loans are used to hedge the risk. Exchange on experience, knowledge of normal seasonal variation and knowledge of other specific issues that affect end users’ electricity rate hedging can be done separately from electricity price hedging. consumption, Agder Energi calculates the volumes likely to be needed, and which consequently need to be hedged. Limits on trading foreign exchange derivatives are based on the desired hedge ratio for expected cash flows in euros from power The sale of electricity in the futures market and the price sensitivity of electricity derivatives are shown in a separate section below. generation over the coming six years. For timeframes beyond six years, only euro-denominated loans can be used for hedging purposes. Trading portfolios Agder Energi has various trading portfolios which are managed independently of its expected power generation. The portfolio mana- The retail business pays for the electricity that it buys on NordPool in euros. This gives rise to a currency risk when NOK-denominated gers trade in the market with the aim of profiting from short-term and long-term changes in the market values of energy products. fixed-price contracts are signed with customers. The currency risk associated with these fixed-price contracts is transferred to the All trading contracts are measured at fair value. The portfolios consist of short-term cash-settled futures and options contracts parent company and is managed at Group level. for electricity and electricity-related products. The contracts can be traded on NASDAQ, other stock exchanges and bilaterally. An independent risk management section is responsible for checking that trading in foreign exchange instruments adheres to the VaR calculations are the most important tool used to manage the risk exposures arising from these portfolios. Trading volumes adopted strategies and limits on risk exposure. At the close of the year, the Group had entered into forward contracts to sell 459 are significant, but the financial exposure at any given time is limited. Electricity trading authorisations are expressed in terms of million euros (2012: 287 million euros). Agder Energi has also borrowed 168 million euros. limits on potential losses. At an operating level, risk management focuses on minimising any losses. The exchange rate sensitivity of currency derivatives is shown in the table below:

Price sensitivity and sale/purchase of electricity in the futures market Currency derivatives Electricity derivatives (Amounts in NOK millions) Change in exchange rate (Amounts in NOK millions) Change in electricity prices Change in exchange rate -5% 5% -10% 10% -5% 5% Currency derivatives 192 -192 Electricity derivatives 330 -330 -50 50 The table shows how the fair values of the foreign currency derivatives would change in the event of a parallel 5% decrease/in- The table shows a partial risk analysis of how the fair values of electricity derivatives would change in the event of a parallel 10% crease in foreign currency exchange rates. A decrease is taken to mean the Norwegian krone strengthening in relation to the euro. decrease/increase in electricity futures prices and of a parallel 5% decrease/increase in foreign currency exchange rates. A de- crease is taken to mean the Norwegian krone strengthening in relation to the euro.

Euro–denominated loans (Amounts in NOK millions) Change in exchange rate The table below shows how much electricity the Group had sold in the futures market at the end of 2013 -5% 5% Euro-denominated loans 67 -67 Sales (-) and purchases (+) through the futures market (Figures stated in TWh) 2013 2012 The above table shows how the fair values of the foreign currency contracts would change in the event of a parallel 5% decrease/ Hydroelectric power generation -15 -12 increase in foreign currency exchange rates. A decrease is taken to mean the Norwegian krone strengthening in relation to the Retail market 2 2 euro. The loans have been designated as cash flow hedges, and gains and losses are recognised in the statement of comprehensive Net sales through the futures market -13 -10 income.

AGDER ENERGI ANNUAL REPORT 2013 82 AGDER ENERGI ANNUAL REPORT 2013 83 MARKET RISK – INTEREST RATES ensuring that outstanding receivables are paid on time. An aged analysis of customers is continuously monitored. If a counterparty encounters financial difficulties, special procedures are followed. Historically Agder Energi’s losses on its receivables have been low. The vast majority of the Group’s exposure to interest rate risk arises from its debt portfolio. The Group is also exposed to interest rate Limits on exposure to individual counterparties are regularly monitored and reported. Total counterparty risk is calculated and fluctuations through the deductible interest rate for resource rent purposes, and through the reference interest rate applied to the reported, as well as being consolidated at Group level. income cap on its power distribution business. Interest rate swaps are used to achieve the desired exposure to interest rates within the Group’s debt portfolio. The exposure is set by using fixed-interest loans and interest rate derivatives. The maximum credit risk arising from energy derivatives is virtually identical to the carrying amount on the balance sheet. For energy derivatives, the credit risk associated with all contracts traded through NASDAQ is limited by the fact that counterparties Sensitivity to interest rates is measured by modified duration within a defined period of 1 to 5 years. The chosen strategy aims to provide cash collateral or bank guarantees. For bilateral contracts there is not normally any such security. minimise net finance costs over the long term, while reducing risk to an acceptable level. It is based around making use of the Group’s natural interest rate hedges, such as the income cap on its power distribution business and the deductible interest rate used to cal- LIQUIDITY RISK culate the resource rent tax payable by the power generation business. The group finance department is responsible for taking posi- tions. Exposure to interest rate risk is measured. Current exposure to interest rate risk in relation to the limit specified in the finance Agder Energi is exposed to liquidity risk arising from the fact that its liabilities do not mature at the same time as when cash flows strategy is reported monthly to the CFO. Interest rate exposure is also reported to the Group’s Board of Directors in the risk report. are generated, as well as from variations in margin requirements on futures traded through NASDAQ. The capital markets consider Agder Energi to be a low-risk borrower, and the Group has good access to credit. Agder Energi mainly covers its borrowing require- Interest rate swaps ments through the Norwegian commercial paper and bond markets, but it also uses the banking market to some extent. The Group (Amounts in NOK millions) Change in interest rates also has credit facilities with banks to backstop its commercial paper programme. The credit facilities would provide sufficient time -1% point 1% point to make alternative financing arrangements in the event of the commercial paper market no longer being an attractive source of Interest rate swaps -109 109 financing. A bank guarantee has been set up to cover significant fluctuations in NASDAQ’s margin requirements on futures.

This table shows how the fair values of interest rate swaps would change in the event of a parallel 1% decrease/increase in the Liquidity risk is assessed regularly, and the Group Finance department is responsible for ensuring that the Group has sufficient yield curve. liquidity in relation to its finance strategy. Key figures relating to liquidity risk are included in the Group’s risk report to the Board of Directors.

Breakdown of interest by currency Maturity structure of liabilities 2013 2012 (Amounts in NOK millions) Carrying Due in Due in Due in Due in Due in Due after Unspecified Nominal average interest rate, NOK 4.2% 4.3% amount Nominal average interest rate, Euros 3.2% 4.7% 2013 2014 2015 2016 2017 2018 2018

Fixed-interest periods within loan portfolio Bonds and liabilities to financial institutions 6,677 782 1,400 1,068 635 718 2,074 - (Amounts in NOK millions) 1-3 years 3-5 years Over 5 years Total Commercial paper and overdraft facility 991 991 ------NOK-denominated loans 3,215 731 2,313 6,259 Total interest-bearing liabilities 7,668 1,773 1,400 1,068 635 718 2,074 - Euro-denominated loans 310 225 874 1,409 Total 3,525 956 3,187 7,668 Financial liabilities at fair value through profit or loss 1,091 ------1,091 Agder Energi uses a duration target of between 1 and 5 years to help it manage the risk exposures arising from its loan portfolio. Tax payable and deferred tax 1,291 771 - - - - - 520 Average duration at the close of the year was 3.4 years. Other non-interest-bearing current liabilities 1,322 1,322 ------Other non-interest-bearing non-current liabilities 508 ------508 Total non-interest-bearing liabilities 4,212 2,093 - - - - - 2,119 CREDIT RISK Total 11,880 3,866 1,400 1,068 635 718 2,074 2,119 Credit risk is the risk that a party to a cash-settled or physical trade will cause his counterparty to incur a loss by failing to fulfil his obligations. Agder Energi takes on counterparty risk by selling and distributing electricity, and by selling other goods and services. Breakdown of loans by currency The trading of financial instruments also gives rise to counterparty risk. The majority of cash-settled electricity contracts are (Amounts in NOK millions) 2013 2012 cleared through NASDAQ. For these contracts, there is assumed to be little counterparty risk. For all other electricity contracts, NOK-denominated loans* 6,259 6,415 the maximum exposure to any individual counterparty is determined based on an internal credit rating. The credit rating is based Euro-denominated loans 1,409 808 on information such as key financial figures. Counterparties are then grouped in various risk classes, each of which is allocated a Total 7,668 7,223 maximum exposure level. Bilateral contracts are subject to limits on exposure to individual counterparties, both in terms of value and duration. * The Group has issued a bond with a face value of USD 100 million. The bond is presented under NOK-denominated loans, as the Group has used currency In order to limit credit risk, bank guarantees are sometimes demanded when a contract is signed. Parent company guarantees are swaps to ensure that it has no exposure to USD exchange rates arising from the loan. also used. In those cases, the parent company is assessed and classified in the normal way. Agder Energi has good procedures for

AGDER ENERGI ANNUAL REPORT 2013 84 AGDER ENERGI ANNUAL REPORT 2013 85 Credit facilities with banks NOTE 31 MORTGAGED ASSETS, LIABILITIES AND GUARANTEES ISSUED The parent company has a long-term NOK 1,000 million committed facility with a bank to back-stop its short-term borrowing programme in the event of problems in financial markets. The parent company has also set up a cash pooling arrangement with Mortgages an associated NOK 500 million overdraft facility. At the close of the year, the Group had NOK 1,412 million in total in unused credit Agder Energi AS has no mortgage debt. Subsidiaries held NOK 7 million in mortgage debt, and the book value of the mortgaged facilities. assets was NOK 55 million.

Liabilities and guarantees issued Agder Energi has no covenants relating to financial key figures in its loan agreements. NOTE 30 ACCOUNTING HEDGES Of the parent company’s interest-bearing liabilities, NOK 600 million have a bank guarantee in favour of the lender. Agder Energi’s Agder Energi has various interest swaps linked to specific loans that serve as cash flow hedges, i.e. they are variable-to-fixed interest loan agreements contain negative pledge clauses, which also cover its subsidiaries. This means that any new security interests rate swaps. The total face value of these swaps is 71 million euros. require the consent of the lenders.

In addition, the Group has two combined interest rate and currency swaps, which qualify as accounting hedges. The Group has issued Agder Energi has NOK 696 million in off-balance sheet bank guarantees. NOK 361 million of this relates to a cash-settled power a 7-year, USD-denominated fixed-interest bond, which matures in 2017. In relation to this, it has entered into swap agreements which exchange agreement, NOK 67 million to electricity trading, NOK 67 million to tax deducted at source and NOK 201 million to other see it receive fixed USD interest payments, and make a combination of fixed and variable NOK interest payments. From an accounting guarantees. point of view, these swaps are considered to be fair value hedges, which swap a fixed interest rate with payments in USD to a floating interest rate with payments in NOK. For one of these swaps, the Group receives fixed interest payments in USD and pays fixed interest At the close of the year, the parent company had issued guarantees worth NOK 24 million in relation to subsidiaries’ external liabilities. payments in NOK. For accounting purposes, this swap is considered to be partly a swap from a fixed interest rate with payments in USD to a variable rate with payments in NOK, with this part of the swap being designated a fair value hedge. In addition, it is considered to Contractual obligations be a swap from a variable rate with payments in NOK to a fixed rate with payments in NOK, and this part of the swap is designated At any given time the Group has several ongoing investment projects that involve obligations to fulfil contracts with subcontractors. a cash flow hedge. The Group also has obligations arising from its ownership interests in joint ventures and water management associations; cf. Note 17.

In addition to the above, Agder Energi has designated euro 168 million worth of loans as cash flow hedges of highly probable future Agder Energi Varme has entered into a long-term contract to buy heating energy from the municipally-owned enterprise Returkraft. revenues from electricity sales. As of 2014, Agder Energi has chosen not to meet the documentation requirements in relation to acco- The contract, which runs for 20 years with an optional extension, commits Agder Energi Varme to buying an agreed volume from unting for these foreign currency loans as hedges. Consequently, hedge accounting has been discontinued for these loans as of 2014. Returkraft’s waste-to-energy plant in Kristiansand from 2010 onwards. Unrealised foreign exchange losses on the loans that arose during the period of hedge accounting will be reversed through profit or loss in the same period as the hedged electricity sales are recognised. Since 2010, Agder Energi has had its head office in leased premises at Kjøita in Kristiansand. It has signed a 15+5-year lease on the building with the lessor KN Kjøita AS. The companies in the Otera Group mainly occupy leased premises. Otera also leases its For its other financial hedging relationships, the Group does not satisfy the extensive documentation requirements specified in the fleet of vehicles. NOK 72 million was expensed in relation to these lease contracts in 2013. IFRS rules on hedge accounting.

(Amounts in NOK millions ) 2013 2012 NOTE 32 CONTINGENT LIABILITIES AND EVENTS AFTER THE BALANCE SHEET DATE Fair value of derivatives designated as hedging instruments Derivatives designated as fair value hedges 47 3 Agder Energi’s operations are extensive, and it can therefore get involved in major and minor disputes from time to time. The Derivatives designated as cash flow hedges -17 -22 Central Tax Office for Large Enterprises has questioned the tax treatment of one of Agder Energi Vannkraft’s contracts to supply Total fair value of derivatives designated as hedging instruments 30 -19 free electricity. The company has commented on, and responded to, the tax office’s preliminary evaluation. Under the tax office’s interpretation of the rules, the annual deduction from resource rent will be cut. At the time of the financial statements being pre- Fair value hedges sented, there were no other disputes with the potential to significantly impact Agder Energi’s profitability or liquidity. Gains/losses on derivatives used as fair value hedges 44 -19 Gains/losses on hedged items in fair value hedges, hedged risk -44 19 There have not been any incidents in 2014 that have a significant impact on Agder Energi’s financial position and results. Hedge ineffectiveness recognised in profit or loss - -

Cash flow hedges Gains and losses on foreign currency loans recognised in statement of comprehensive income, gross -144 42 Gains (-) reclassified from equity to profit on disposal of the instrument - -30 Gains and losses on foreign currency loans recognised in statement of comprehensive income -144 12 Gains and losses on derivatives recognised in statement of comprehensive income 5 -13 Total gains and losses on hedging instruments recognised in statement of comprehensive income -139 -1 Cash flow hedge ineffectiveness recognised in the income statement - -

AGDER ENERGI ANNUAL REPORT 2013 86 AGDER ENERGI ANNUAL REPORT 2013 87 NOTE 33 MANAGEMENT COMPENSATION, ETC. Senior management team (Amounts in NOK 000s) Basic salary Other Total taxable Pension Board of Directors benefits (1) income expense The compensation of the Board of Directors and Corporate Assembly for 2013 was NOK 1,190 000 and NOK 18,400 respectively. The equivalent figures in 2012 were NOK 1,056,417 and NOK 19,600 respectively. The Board members are not entitled to any special Tom Nysted – CEO 2,674 137 2,811 1,073 termination benefits such as bonuses, profit-sharing or options. Pernille K. Gulowsen – CFO 1,647 111 1,758 447 Unni Farestveit - Director of Corporate Social Responsibility All of the stated figures exclude employers’ NICs. and Corporate Development 1,656 110 1,766 704 Hans Jakob Epland – Business Area Director, Market 1,770 162 1,932 67 Board of Directors Frank Håland – Director of HR and Shared Services 1,539 110 1,649 62 (Amounts in NOK) Directors’ Attendance at Jan Tønnessen – Business Area Director, Hydroelectric Power 1,517 110 1,627 74 fees Board meetings Svein Are Folgerø – Business Area Director, Network 1,523 109 1,632 73 Edvard Lauen – Business Area Director, Energy Management 2,092 130 2,222 878 Sigmund Kroslid, Chair 200,000 10 of 11 Lars Erik Torjussen, Deputy Chair 150,000 9 of 11 1) Other benefits include mileage allowance, mobile phone and other minor benefits. A flat in Kristiansand has been made available Bente Z. Rist, Board member 110,000 9 of 11 to the CEO. Katja Lehland, Board member 110,000 7 of 11 Steinar Bysveen, Board member* 9 of 11 Elisabeth Morthen, Board member 110,000 11 of 11 Loans/guarantees issued and share option schemes Steinar Asbjørnsen, Board member* 11 of 11 No members of the senior management team have been granted loans or had guarantees issued on their behalf by Agder Energi. Jon Vatnaland, Board member* 9 of 11 Agder Energi does not have any share option schemes for management or other employees. Johan Ekeland, employee representative 110,000 10 of 11 Øyvind Østensen, employee representative 110,000 11 of 11 Bonuses and pension plans Oddvar E. Berli, employee representative 110,000 11 of 11 The senior management team has no bonus arrangement for 2013. Gro Granås-Brattland, employee representative 110,000 10 of 11 The CEO has a pension plan that allows him to retire at the age of 67 with a pension equivalent to 66% of his qualifying salary. * Employees of Statkraft are not paid Directors’ fees. The qualifying salary is based on his regular salary, and the cost of his pension includes retirement pension benefits in excess of 12G, which are not covered by the National Insurance Scheme or the public sector occupational pension plan. In order to receive In 2013, no separate fees were paid to the audit committee appointed by the Board. this pension, he must have 30 years of qualifying service. If the CEO is asked to leave the company, he remains entitled, during the notice period and for up to a further 12 months, to receive his salary and other benefits, less the value of any other benefits that In 2013, Board members’ deputies received NOK 70,000 in fees. he may receive during that period. The notice period is six months.

None of the Board members received compensation from any other companies in the Group, with the exception of the employee re- For other members of the senior management team, the notice period is also six months. There are no special agreements on ter- presentatives, who receive salaries for their ordinary jobs. Their compensation as Agder Energi employees is not included in the above mination compensation. The executive directors Pernille K. Gulowsen, Unni Farestveit and Edvard Lauen are entitled to a pension figures. No Board members have any loans from the company. equivalent to 66% of their qualifying salaries on retirement at the age of 67. In order to receive this pension, he must have 30 years of qualifying service. These three employees have pension agreements which state that their qualifying salaries are based on their regular salaries, and the cost of their pensions includes retirement pension benefits in excess of 12G, which are not covered by the National Insurance Scheme or the public sector occupational pension plan. Hans Jakob Epland, Jan Tønnessen, Svein Are Folgerø and Frank Håland have defined contribution pension plans in line with the Group’s standard pension plan.

AGDER ENERGI ANNUAL REPORT 2013 88 AGDER ENERGI ANNUAL REPORT 2013 89 NOTE 34 RELATED PARTIES

All subsidiaries and joint ventures specified in Note 17 are classified as related parties of Agder Energi. The people specified in Note 33, who are members of the Group’s senior management team or Board of Directors, are also related parties of Agder Energi.

Agder Energi’s largest shareholder is Statkraft Industrial Holding, which owns 45.525% of the shares in the company. Sales to the Statkraft Group amounted to NOK 139 million in 2013 and NOK 93 million in 2012. Purchases from companies in the group amounted to NOK 51 million in 2013 and NOK 23 million in 2012. Statkraft Industrial Holding AS is also a joint owner of several of the joint ventures in which Agder Energi holds an ownership interest.

Agreements have also been signed with several cultural institutions in shareholder municipalities in Agder.

All transactions with related parties are carried out on an arm’s length basis.

NOTE 35 DISCONTINUED OPERATIONS

The discontinued operations in 2012 were LOS Bynett’s fibreoptic cable business, Bynett Privat and the debt collection company Sopran. The net cash flow from investing activities includes the proceeds of the sale of shares in Ventelo.

The table below shows how the figure for “Profit/loss (discontinued calculations)” is calculated, broken down into the operating performance until disposal and the gain on disposal:

(Amounts in NOK millions) 2013 2012 Operating revenues 80 Operating expenses 50 Operating profit/loss - 30 Net finance income/costs 5 Profit/loss before tax - 25 Tax expense 7 Profit/loss after tax - 18 Gain on disposal of discontinued operations 127 Tax on gain on disposal of discontinued operations - Profit/loss after tax (discontinued operations) - 145

Net cash provided by operating activities 23 Net cash provided by/used in investing activities 490 Net cash provided by financing activities - Net cash flow (discontinued operations) - 513

AGDER ENERGI ANNUAL REPORT 2013 90 AGDER ENERGI ANNUAL REPORT 2013 91 AGDER ENERGI AS FINANCIAL STATEMENTS CONTENT Click on the text to go to the page of your choice

Profit and loss account 94 Balance Sheet 95 Cash flow statement 96 Accounting principles 97 Auditor’s report 110

NOTES Note 1 Intra-group transactions and balances 99 Note 2 Employee benefits, management compensation, etc. 99 Note 3 Pensions 100 Note 4 Auditor’s fee 103 Note 5 Other operating expenses 103 Note 6 Finance income and costs 103 Note 7 Tax 104 Note 8 Intangible assets 105 Note 9 Property, plant and equipment 105 Note 10 Other non-current financial assets 105 Note 11 Shares in subsidiaries and associates 106 Note 12 Cash and cash equivalents 107 Note 13 Equity 107 Note 14 Interest-bearing liabilities 107 Note 15 Other non-interest-bearing current liabilities 108 Note 16 Provisions 108 Note 17 Market and financial risk 108 Note 18 Contingent liabilities 109 Note 19 Mortgaged assets, liabilities and guarantees issued 109

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Agder Energi Varme uses cold water from the depths of the sea off Kristiansand to provide district cooling for buildings in the city centre. This cable was laid at a depth of around 150 metres.

AGDER ENERGI ANNUAL REPORT 2013 92 AGDER ENERGI ANNUAL REPORT 2013 93

PROFIT AND LOSS ACCOUNT BALANCE SHEET

(Amounts in NOK millions) Note 2013 2012 (Amounts in NOK millions) Note 2013 2012

Other operating revenues 1 187 119 Deferred tax assets 7 0 24 Total operating revenues 187 119 Intangible assets 8 7 12 Property, plant and equipment 9 25 41 Employee benefits 1, 2, 3 -195 -163 Investments in subsidiaries 11 3,269 3,263 Depreciation and impairment losses 8, 9 -22 -13 Investments in associates 11 273 157 Other operating expenses 1, 4, 5 -117 -134 Other non-current financial assets 10 5,803 5,521 Total operating expenses -334 -310 Total non-current assets 9,377 9,018

Operating profit/loss -147 -191 Receivables 1 1,392 1,206 Cash and cash equivalents 12 544 328 Finance income 1, 6 1,609 1,838 Total current assets 1,936 1,534 Finance costs 1, 6 -440 -545 Net finance income/costs 1,169 1,293 TOTAL ASSETS 11,313 10,552

Profit/loss before tax 1,022 1,102 Paid-in capital 13 1,907 1,907 Retained earnings 13 656 542 Tax expense 7 -229 -244 Total equity 2,563 2,449

Profit after tax 793 858 Provisions 3, 16 123 117 Deferred tax 7 4 0 Allocation of profit: Interest-bearing non-current liabilities 14 6,588 6,488 Proposed dividends 13 707 620 Total non-current liabilities 6,715 6,605 Transferred to other reserves 13 86 238 Total appropriations 793 858 Interest-bearing current liabilities 14, 17 900 400 Tax payable 7 190 171 Other non-interest-bearing curr. liabilities 1, 15 945 927 Earnings per share/EPS, diluted (NOK) 294 318 Total current liabilities 2,035 1,498

TOTAL EQUITY AND LIABILITIES 11,313 10,552

Kristiansand, 2 April 2014 Board of Directors of Agder Energi AS

Sigmund Kroslid Lars Erik Torjussen Bente Z. Rist Katja Lehland Steinar Bysveen Chair Deputy Chair

Jon Vatnaland Steinar Asbjørnsen Elisabeth Morthen Johan Ekeland Øyvind Østensen

Oddvar E. Berli Gro Granås-Brattland Tom Nysted CEO

AGDER ENERGI ANNUAL REPORT 2013 94 AGDER ENERGI ANNUAL REPORT 2013 95 CASH FLOW STATEMENT ACCOUNTING PRINCIPLES

(Amounts in NOK millions) Note 2013 2012 The financial statements have been pre- expensed as they are incurred. This means Foreign currency and currency sented in compliance with the Norwegian that expenses associated with intangible instruments Cash flow from operating activities Accounting Act and generally accepted assets are included on the balance sheet The finance department manages the Profit/loss before tax 1,022 1,102 accounting principles. if it is considered probable that future eco- Group’s overall exposure to currency risk. Depreciation and impairment losses 6, 8, 9 47 13 nomic benefits attributable to the assets To some extent Agder Energi AS acts as Cash flows from investments in subsidiaries -1,249 -1,399 Accrual, classification and will flow to the company and it has been a counterparty within the Group when it Tax paid -171 -242 measurement principles possible to reliably measure the acquisi- does not make sense to hedge subsidiar- Change in net working capital, etc. -32 253 In accordance with generally accepted tion cost of the asset. ies’ exposure to currency risk directly in Net cash (used in)/provided by operating activities -383 -273 accounting principles, the financial state- the market. Where the parent company ments are based on the historical cost, Property, plant and equipment has acted as a counterparty in conjunc- Investing activities revenue recognition, matching, conserva- Property, plant and equipment is depreci- tion with the need of subsidiaries to hedge Purchase of property, plant, equipment and intangible assets -5 -10 tism, hedging and congruence principles. ated in a straight line over its anticipated their currency risk exposure arising from Acquisitions/financial investments and equity investments in subsidiaries -167 -31 In the event of uncertainty, best judge- useful life. Maintenance on property, plant electricity sales, the contracts are ac- Net change in loans -237 -230 ment is applied. Financial statements are and equipment is considered an operat- counted for as part of the Group’s cur- Sale of businesses/financial assets 8 563 prepared using uniform principles that ing expense, while upgrades and replace- rency hedging activities. These contracts Net cash (used in)/provided by investing activities -401 292 are applied consistently over time. The ments are added to the acquisition cost are presented on the balance sheet at fair financial statements have been prepared of the asset and are depreciated together value, with changes in fair value recog- Financing activities on the assumption of the business being with the asset. The distinction between nised through profit or loss. New long-term borrowings 1,933 1,347 a going concern. maintenance and upgrades/improvements Repayment of long-term borrowings -1,833 -1,368 is judged on the basis of the condition of Receivables Net change in current interest-bearing liabilities 500 -190 Recognition of revenues and expenses the asset when it was acquired. Trade debtors and other receivables are Intra-group distributions received 1,128 1,149 Revenues and expenses are recognised in presented on the balance sheet at their Intra-group distributions paid out -108 0 the profit and loss account when they are Non-current financial investments nominal value less anticipated bad debts. Dividends paid -620 -650 earned/incurred. Revenues from the sale of The historical cost method is used for Provisions for bad debts are made on the Net cash (used in)/provided by financing activities 1,000 288 goods are recognised on delivery. Revenues shares, bonds and other financial instru- basis of individual assessments of the in- from services are recognised in the profit ments. This means that shares/owner- dividual receivables. Net change in cash and cash equivalents 216 307 and loss account as they are supplied. ship interests are carried at cost, and any dividends received are recognised as other Cash pooling arrangement Cash and cash equivalents at start of year 328 21 General principles for measurement finance income. Intra-group distributions re- Agder Energi AS is part of a cash pooling Cash and cash equivalents at end of year 544 328 and classification ceived are recognised in the year that they arrangement with its subsidiaries. This Current assets and current liabilities cover are allocated by subsidiaries. Dividends from means that the Group has a joint bank items that are due for payment within one subsidiaries are also recognised in the year account for short-term deposits and short- year of the transaction date, as well as that they are appropriated by the subsidiary. term loans. Interest income and interest items relating to the business cycle. Other Investments are written down to fair value if expenses arising from the cash pooling items are classified as non-current assets there is evidence of other-than-temporary arrangement are classified as external in or non-current liabilities. Current assets impairment. Dividends from associates are the company’s profit and loss account. are carried at the lower of cost and fair recognised when they are approved. value. Current liabilities are capitalised at Pensions their nominal value on the initial date. Interest rate swaps Defined benefit pension plan Non-current assets are carried at cost, Interest rate swaps are used to match Pension costs and pension liabilities are but are written down to the recoverable the duration and interest rate sensitiv- calculated using a linear accumulation amount if there is evidence of impair- ity of the company’s debt portfolio to the model based¬ on assumptions relating to ment, in compliance with the Norwegian Group’s policy and strategy. Interest rate discount rates, projected salaries, the level accounting standard on the impairment of swaps are managed within the context of of benefits from the National Insurance non-current assets. the Group’s overall debt portfolio. Instru- Scheme and future returns on pension ments in the hedging portfolio thus meet scheme assets, as well as actuarial cal- Intangible assets the criteria for hedge accounting, which culations of mortality, voluntary turnover, Intangible assets are included on the bal- means that all profit and loss effects are etc. Pension plan assets are measured at ance sheet if they meet the criteria for recognised over the contract period and their fair value, and have been deducted capitalisation, with the exception of re- the value of the portfolio is kept off the in the net pension liabilities on the balance search and development costs, which are balance sheet. sheet. Actuarial gains and losses over the

AGDER ENERGI ANNUAL REPORT 2013 96 AGDER ENERGI ANNUAL REPORT 2013 97 course of the year are recognised in the on the balance sheet if it is likely that Contingent liabilities and contingent NOTES balance sheet at the end of the year, so they will be realised in the future. Tax on assets that the carrying amount always reflects ­equity transactions is recognised directly If there is a greater than 50% probability the full extent of the liabilities. In the event in equity. that an uncertain liability will need to be of changes in pension obligations arising settled, a provision is made based on a from plan amendments, the portion of the Liabilities best estimate of what the settlement will NOTE 1 INTRA-GROUP TRANSACTIONS AND BALANCES change that has already been accrued at Agder Energi AS uses the amortised cost be. If there is a smaller than 50% prob- the time of the amendment is recognised principle, and consequently the effective­ ability that an uncertain liability will need (Amounts in NOK millions) Note 2013 2012 directly in the profit and loss account. Pen- interest rate method, for interest and to be settled, information is provided in sion expenses and net pension liabilities ­liabilities. Under the effective interest rate the notes. Contingent assets are not rec- Intra-group balances include a charge for employers’ national method, the carrying amount of a loan is ognised, but if there is a greater than 50% Other non-current financial assets 10 5,337 5,123 insurance contributions. the sum of future cash flows ­attributable probability that the company will receive Trade receivables 29 18 to the loan discounted by the original payment, information is provided in the Other current receivables 1,304 1,140 Defined contribution plan ­effective interest rate calculated for the notes. The amount is not estimated if it Total receivables 6,671 6,282 For defined contribution plans, the pension cash flows. This means that loan arrange- would be inappropriate to do so under expense is equivalent to the premiums/ ment fees are deducted on initial recog- generally accepted accounting principles. Trade payables 15 6 12 contributions paid over the course of the nition, and that over the duration of the Furthermore, under generally accepted ac- Other current liabilities 15 84 129 year. loan, the difference between the nominal counting principles entities shall be able Total liabilities 90 141 interest rate (the rate charged) and the to recognise liabilities/provide informa- Taxes ­effective interest rate (the rate expensed) tion based on best judgement without this Revenues and expenses relating to transactions with Group companies Income tax is calculated in accordance is recognised in the balance sheet under prejudicing the outcome of any court case. Other operating revenues 165 98 with standard tax rules. The tax expense amortisation. In practice loans are there- Total operating revenues 165 98 in the profit and loss account consists of fore initially recognised at their face value Cash flow statement tax payable and changes in deferred tax/ less arrangement fees, which means that The cash flow statement has been pre- Employee benefits 0 1 tax assets. Tax payable is calculated on the debt is not carried on the balance pared using the indirect method. Cash and Other operating expenses 16 40 the taxable profit for the year. ­Deferred sheet at its nominal value. cash¬ equivalents includes cash, bank de- Total operating expenses 17 42 tax/tax assets are calculated on the basis­ posits and other short-term, liquid invest- of the temporary differences that exist be- A provision is made for Agder Energi AS’s ments that can be converted into known Cash flows from investments in subsidiaries 6 1,249 1,399 tween accounting and tax values,­ as well proposed dividends at 31 December. cash values immediately and at insignifi- Other interest and finance income 267 231 as the tax effect of any loss carryforwards.­ cant risk, and that mature less than three Other interest and finance costs 38 83 Deferred tax assets are only recognised months after their acquisition dates. Net finance income/costs 1,478 1,548

NOTE 2 EMPLOYEE BENEFITS, MANAGEMENT COMPENSATION, ETC.

(Amounts in NOK millions) Note 2013 2012

Employee benefits Wages and salaries 1) 141 104 Employers’ National Insurance Contributions 22 15 Pension expense including employers’ NICs 3 24 16 Other benefits and reimbursements 2) 8 28 Total 195 163

Number of permanent full-time equivalents at 31 December 167 156

For details of management compensation and non-executive Directors’ fees at Agder Energi AS, please see Note 33 to the ­consolidated financial statements.

1) In 2012, as part of the restructuring of the Agder Energi Group, all administrative and support functions were centralised at Agder Energi AS. This was done through several business combinations, most of which were effective on 1 June 2012. In total, approximately 130 employees were transferred to Agder Energi AS. In 2013, Solvea was merged with Agder Energi AS. The merger resulted in 17 employees being transferred to Agder Energi AS. 2) For 2012, the item “Other benefits and reimbursements” includes NOK 14 million for the redundancy packages that have been paid out or agreed as part of the restructuring exercise. For 2013, this item includes NOK 3.2 million of redundancy packages paid out or agreed in 2013. Qualified mechanic Halldis Marita Fagerbakke (left) and trainee power plant operator Anette Bjørgum enjoy working at Agder Energi Vannkraft. Here they are working at Brokke power station at Rysstad in the Setesdal valley.

AGDER ENERGI ANNUAL REPORT 2013 98 AGDER ENERGI ANNUAL REPORT 2013 99 NOTE 3 PENSIONS (Amounts in NOK millions) 2013 2012 The company’s pension plans Pension liabilities and pension plan assets For employees taken on before 1 April 2007, the company has a defined benefit pension plan run by Agder Energi Pensjonskasse, Gross funded pension liabilities 372 356 which meets the legal requirements for public sector occupational pension plans. Employees taken on after that date are members Unfunded pension liabilities 114 101 of a defined contribution pension plan. Gross pension liabilities at 31 December incl. emp. NICs 486 457 Fair value of pension plan assets at 31 December 465 385 Defined benefit pension plans Net pension liabilities at 31 December 21 71 The Group has a funded public pension plan for its employees, which entitles them to defined future pension benefits, based on number of years of service and salary on reaching retirement age. Pension liabilities were calculated by an independent actuary Change in defined benefit pension liabilities in December, and represent an estimate of the situation at 31 December 2013. Net defined benefit pension liabilities at 1 January 71 135 Pension expense recognised in the profit and loss statement 20 13 Employees taken on after 1 April 2007 are part of a defined contribution pension plan. Acquisitions/disposals of businesses/other movements during period -7 114 Company contributions incl. employers’ NICs -22 -13 Early retirement schemes (AFP schemes) Pension benefits included under operating expenses -3 0 Employees are covered by various different AFP schemes, depending on whether they are part of the defined benefit or defined Actuarial gains and losses -39 -179 contribution pension plans. Net pension liabilities at 31 December 21 71

Employees covered by a public pension plan have, in addition to their occupational pension, an early retirement scheme, known Pension fund receivables 93 29 as an AFP scheme. This is a so-called public sector AFP scheme, set up as of 2011. The scheme does not receive a government Pension liabilities 114 101 subsidy, so the company is liable for all of the obligations under the scheme. A few former employees who took early retirement Net pension liabilities at 31 December 21 71 prior to 2011 have so-called private AFP schemes, for which the obligation is calculated by assuming that the employer will cover 25% of the remaining cost of the AFP pension. The schemes are considered unfunded pension plans. Actuarial gains and losses are made up of Changes in demographic assumptions 5 40 Employees covered by the defined contribution plan are entitled to a private AFP scheme, which from 2011 onwards means a lifelong Changes in financial assumptions -22 -99 supplement to their retirement pensions from the National Insurance Scheme. This AFP scheme is funded by contributions made by Excess return on assets -21 -122 the employer. It is considered a defined benefit plan, but for the moment it is being accounted for as a defined contribution plan. This Actuarial gains and losses recognised on balance sheet -39 181 is because the administrator has not yet calculated the total obligations under the scheme. The annual contribution to the plan was 1.75% in 2012, rising to 2% in 2013. For 2014 the rate has been set at 2.3%, and further rises are expected over the coming years. Actuarial gains and losses in 2013 were mainly due to the impact of a higher discount rate and good returns on pension plan assets.

Actuarial assumptions When calculating the pension expense and net pension liabilities, a number of assumptions have been made (see table below). Assumptions used to determine pension liabilities at 31 December Since 31 December 2012 the discount rate has been based on the interest rate on covered bonds, rather than the yield on 10-year 2013 2012 government bonds. The wage growth assumption also reflects past observed wage growth at the company. Discount rate 4.10% 3.80% Annual wage growth 3.50% 3.50% The Group uses GAP 07, which contains the latest life tables for life expectancy, probability of disability, etc. Increase in the National Insurance Scheme’s basic amount (”G”) 3.50% 3.50% Annual indexing of pensions 2.75% 2.75% Expected return on pension plan assets 5.50% 5.00% (Amounts in NOK millions) 2013 2012 Expected average remaining years of service 10 years 11 years The pension expense for the year has been calculated as follows Current service cost 17 14 The expected return on pension plan assets for the purposes of calculating the pension expense for 2014 is 4.1%. Interest cost 17 8 Expected return on pension plan assets -15 -8 The assumptions used to calculate pension liabilities do not significantly deviate from the Norwegian Accounting Standards Board’s Employers’ National Insurance Contributions 2 0 guidelines on actuarial assumptions of January 2014. Employee contributions -1 -1 Pension expense for the year, defined benefit plans 20 13 Number of people covered by the pension plans Defined contribution pension plans (incl. emp. NICs) 3 3 2013 2012 Total pension expense recognised in the profit and loss account 24 16 Defined benefit plan: current employees 94 100 Defined benefit plan: accrued entitlements and retired employees 311 278 Defined contribution plan: current employees 79 73 Current employees entitled to public sector AFP, and early retirees 81 70

AGDER ENERGI ANNUAL REPORT 2013 100 AGDER ENERGI ANNUAL REPORT 2013 101 NOTE 4 AUDITOR’S FEE

(Amounts in NOK 000s excl. VAT) 2013 2012 Statutory audit 637 630 Other auditing services 0 17 Tax advice 37 24 Other services not related to auditing 79 44 Total 753 715

NOTE 5 OTHER OPERATING EXPENSES

(Amounts in NOK millions) 2013 2012 Property-related expenses, lease of machinery and office equipment 31 27 Purchase of plant and equipment 2 2 External services 70 89 Office supplies, telecommunications, postage, etc. 3 3 Travel expenses, subsistence allowances, mileage expenses, etc. 7 5 Sales, advertising, representation, membership fees and gifts 5 9 Other operating expenses -2 -1 Total 117 134

NOTE 6 FINANCE INCOME AND COSTS

(Amounts in NOK millions) 2013 2012 Income from investments in subsidiaries* 1,249 1,399 Profit on investments in associates 3 3 Exchange rate gain 95 167 Other interest and finance income 263 269 Total finance income 1,609 1,838

Impairment charge against non-current financial assets 25 44 Exchange rate losses 90 153 Other interest and finance costs 325 348 Total finance costs 440 545

Net finance income 1,169 1,293

* Profit/loss from investments in subsidiaries comprises allocated dividends, intra-group distributions from subsidiaries and gains on the disposal of subsidiaries. These amounts are recognised in the profit and loss account as they are considered to reflect the return on the investment.

Iveland 2 power station will generate sufficient renewable energy for around 7.500 detached houses once it enters operation in summer 2016. The crane has already been installed in the turbine hall of the new power station.

AGDER ENERGI ANNUAL REPORT 2013 102 AGDER ENERGI ANNUAL REPORT 2013 103 NOTE 7 TAX NOTE 8 INTANGIBLE ASSETS

(Amounts in NOK millions) 2013 2012 (Amounts in NOK millions) Software

The tax expense consists of Cost as of 01/01/2013 36 Income tax payable 213 282 Acquisitions 3 Change in deferred income tax 17 -37 Disposals - Corrections to previous years’ tax assessments -1 -1 Cost as of 31/12/2013 39 Tax expense recognised in the profit and loss account 229 244 Accumulated deprecation as of 31/12/2013 26 Accumulated impairment losses as of 31/12/2013 6 Tax payable on the balance sheet Carrying amount at 31/12/2013 7 Profit/loss before tax 1,023 1,102 Permanent differences 21 -141 Depreciation for the year 5 Change in temporary differences -59 133 Impairment losses for the year 4 Non-taxable intra-group distributions -223 -87 Useful life/depreciation period 3-8 years Profit/loss for income tax purposes 761 1,007

Income tax payable 213 282 Taxable intra-group distributions -24 -111 NOTE 9 PROPERTY, PLANT AND EQUIPMENT Tax payable on the balance sheet 190 171 (Amounts in NOK millions) Properties Vehicles, Work in Total Reconciliation of nominal tax rate with effective tax rate fixtures, progress property, Profit/loss before tax 1,023 1,102 fittings, plant and Expected tax based on nominal rate 286 309 machinery, etc. equipment Cost as of 01/01/2013 9 45 7 61 Tax effect of Acquisitions - 2 - 2 Non-deductible expenses 6 13 Disposals - - 5 5 Non-taxable income -62 -76 Cost as of 31/12/2013 9 47 2 58 Corrections to previous years’ tax assessments -1 -1 Accumulated deprecation as of 31/12/2013 1 26 - 26 Tax expense recognised in the profit and loss account 229 244 Accumulated impairment losses at 31/12/2013 - 7 - 7 Effective tax rate 22% 22% Carrying amount at 31/12/2013 8 15 2 25

Breakdown of temporary differences/deferred tax assets Depreciation for the year - 7 - 6 Property, plant and equipment. -18 -3 Impairment losses for the year - 7 - 7 Current assets/liabilities -9 -18 Pension liabilities 74 33 Useful life/depreciation period 25 years 3-8 years Derivatives -33 -97 - not depreciated Total taxable (+)/deductible (-) temporary difference 14 -84 Net deferred income tax liabilities (+)/assets (-) at 27%/28% 4 -24 Total capitalised deferred tax assets (-) 4 -24 NOTE 10 OTHER NON-CURRENT FINANCIAL ASSETS Changes in net deferred income tax over the year Net deferred tax liabilities (+)/assets (-) at 1 January -24 -37 (Amounts in NOK millions) Note 2013 2012 Change in net deferred tax liabilities (+)/assets (-) on items recognised in equity 10 51 Loans to Group companies 1 5,337 5,123 Change in deferred tax liabilities (+)/assets (-) recognised through profit or loss 17 -37 Loans to associates 201 180 Net deferred income tax liabilities (+)/assets (-) at 31 December 4 -24 Investments in shares and ownership interests 171 188 Other non-current receivables 1) 3 93 29 Changes in deferred tax on items recognised in equity Pension assets 5,803 5,521 Actuarial gains/losses and change in tax rate -10 51 Total change -10 51 1) Other non-current financial assets includes a NOK 40 million subordinated loan to Agder Energi Pensjonskasse. In 2014 the loan has been converted into equity. The item also includes a NOK 15 million default fund (guarantee to NASDAQ), a NOK 1 million subordinated loan to Interkraft AS and a subordinated loan and vendor credit granted to Ventelo AS in conjunction with the sale of the shares in Ventelo, with a combined value of NOK 115 million.

AGDER ENERGI ANNUAL REPORT 2013 104 AGDER ENERGI ANNUAL REPORT 2013 105 NOTE 11 SHARES IN SUBSIDIARIES AND ASSOCIATES NOTE 12 CASH AND CASH EQUIVALENTS

(Amounts in NOK millions) Business The company’s The company’s Ownership interest Carrying (Amounts in NOK millions) 2013 2012 office equity profit/loss and voting amount* Cash and cash equivalents 0 5 for the year rights Deposits in cash pooling arrangement 544 323 Subsidiaries Total 544 328 Agder Energi Vannkraft AS Kristiansand 2,258 693 100% 1,937 Agder Energi Kraftforvaltning AS Kristiansand 22 1 100% 20 Agder Energi AS has established a NOK 67 million bank guarantee to secure tax deductions at source. The guarantee covers the Agder Energi Nett AS Arendal 691 295 100% 602 parent company and subsidiaries. The company has also set up a cash pooling arrangement with an associated NOK 500 million LOS AS Kristiansand 339 66 100% 324 overdraft facility. Almost all subsidiaries in which the company holds an ownership interest of at least 50% take part in the cash Otera AS Kristiansand 70 -22 100% 137 pooling arrangement and are jointly and severally liable for the overdraft facility. Agder Energi Varme AS Kristiansand 125 -1 100% 125 Agder Energi Venture AS Kristiansand 37 5 100% 67 Innovasjon og FoU AS Kristiansand 1 -1 100% 3 Agder Energi Næringsbygg AS Kristiansand 12 -4 100% 8 NOTE 13 EQUITY Lundevågveien 11 AS Kristiansand 1 - 100% 2 Bjerkreim Vind AS Egersund 10 -12 51% 24 (Amounts in NOK millions) Note Share Share premium Other paid-in Other Total Baltic Hydroenergy AS Kristiansand 21 1 66% 21 capital account capital reserves equity Total shares in subsidiaries 3,269 Equity at 31/12/2012 1,809 47 51 542 2,449 Actuarial gains and losses on pensions 3 - - - 28 28 Profit/loss for the year - - - 793 793 Associates 1) Allocated for dividends 15 - - - -707 -707 Småkraft AS** Bergen 622 -5 20% 138 Equity at 31/12/2013 1,809 47 51 656 2,563 Statkraft Agder Energi Vind DA*** Kristiansand 188 -28 38% 135 Total for associates 273 For details of share capital and shareholder information, please refer to Note 21 to the consolidated financial statements.

* Carried at the lower of cost and fair value. ** Associated company. *** Jointly controlled entity. NOTE 14 INTEREST-BEARING LIABILITIES

In 2013, Agder Energi AS swapped its 50% ownership interest in Dalane Vind for an increased ownership interest in Bjerkreim Vind. (Amounts in NOK millions) 2013 2012 The trade made Bjerkreim Vind a subsidiary of Agder Energi. Non-current liabilities with a term to maturity of more than 5 years In February 2014, Agder Energi AS bought the remaining shares in Baltic Hydroenergy AS. Liabilities to financial institutions 1,409 661 Bonds 775 615 1) The equity and profit of associates and jointly controlled entities has been estimated for 2013. Total 2,184 1,276 2) Agder Energi AS has lent NOK 200 million to Småkraft AS. In September 2013, the Board of Directors of the Agder Energi Group agreed to make an additional NOK 10 million capital infusion into Småkraft AS, made up of loans or equity over and above what Non-current liabilities with a term to maturity of less than 5 years had previously been agreed. This brings the total value of Agder Energi’s investment to NOK 410 million. Liabilities to financial institutions 600 1,647 3) In 2013, Agder Energi AS sold its remaining shares in Rejlers Consulting AS. The sale of the company gave a NOK 11 million Bonds 3,804 3,566 accounting gain. The company LOS Bynett Vestfold was also sold in 2013. The sale of the company gave a NOK 0.8 million Total 4,404 5,212 ­accounting gain. Total interest-bearing non-current liabilities 6,588 6,488

Interest-bearing current liabilities Commercial paper 900 400 Total interest-bearing current liabilities 900 400

Guarantees and obligations relating to interest-bearing non-current liabilities are described in greater detail in Note 19.

AGDER ENERGI ANNUAL REPORT 2013 106 AGDER ENERGI ANNUAL REPORT 2013 107 NOTE 15 OTHER NON-INTEREST-BEARING CURRENT LIABILITIES The parent company’s debt portfolios include foreign currency loans. 168 million euros in loans are used as a hedge against fluctua- tions in the Group’s revenues in that currency. Agder Energi AS has lent a similar amount in euros to Agder Energi Vannkraft AS. (Amounts in NOK millions) Note 2013 2012 Trade payables 16 14 Put/call conditions in the debt portfolio entail a certain liquidity risk. The clauses are related to loans guaranteed by municipalities. Intra-group trade payables 1 6 12 Also see Note 29 to the consolidated financial statements for a description of credit risk and liquidity risk. Unpaid government taxes and duties, tax deducted at source, etc. 15 16 Allocated dividends 13 707 620 Other current liabilities 116 135 Other current liabilities to Group companies 1 84 129 NOTE 18 CONTINGENT LIABILITIES Total other non-interest-bearing current liabilities 945 927 Agder Energi AS had no significant contingent liabilities at the end of the year.

NOTE 16 PROVISIONS NOTE 19 MORTGAGED ASSETS, LIABILITIES AND GUARANTEES ISSUED (Amounts in NOK millions) Note 2013 2012 Pension liabilities 3 114 101 Mortgages Other non-current provisions 9 16 Agder Energi AS currently has no mortgage loans. The company has restricted cash provided as collateral for cash-settled elec- Total provisions 123 117 tricity trading.

Liabilities and guarantees issued Agder Energi AS has no covenants relating to financial key figures in its loan agreements. NOTE 17 MARKET AND FINANCIAL RISK Of the company’s interest-bearing liabilities, NOK 600 million have a bank guarantee in favour of the lender. Agder Energi AS’s Risk policy and risk strategy loan agreements contain negative pledge clauses, which also cover its subsidiaries. This means that any new security interests The Group’s Board of Directors has formulated an overall risk policy containing frameworks and guidelines to ensure a uniform require the consent of the lenders. approach to risk management throughout the Group. In order to manage exposure to market and financial risk, and based on the risk policy, separate risk strategies have been drawn up for the following areas: Agder Energi AS has NOK 696 million in off-balance sheet bank guarantees. NOK 361 million of this relates to a cash-settled power • Generation exchange agreement, NOK 67 million to electricity trading, NOK 67 to tax deducted at source and NOK 201 million to contractual • Electricity trading guarantees. • Retail market • Finance (interest rates and foreign currency) At the close of the year, the parent company had issued guarantees worth NOK 24 million in relation to subsidiaries’ external liabilities.

One of the main purposes of the risk policy and risk strategies is to hedge against fluctuations in future cash flows.

Electricity derivatives with subsidiaries and NASDAQ as counterparties Several of Agder Energi AS’s subsidiaries trade cash-settled electricity derivatives on NASDAQ. Formally, this involves Agder Energi AS acting as NASDAQ’s counterparty, and Agder Energi entering into identical contracts with the relevant subsidiaries in parallel. The company uses hedge accounting for these contracts, and so they are not capitalised. The net value of contracts with NASDAQ was NOK 836 million at 31 December 2013. The value of the company’s contracts with its subsidiaries was NOK -836 million.

Loan portfolio The Agder Energi Group’s whole loan portfolio is held by Agder Energi AS. This exposes the company to a significant interest rate risk. The Group has a central finance department within Agder Energi, which has overall responsibility for bank services, financing, currency operations, corporate finance and other financial services.

Interest rate risk is measured by modified duration, which is kept within a target period of 1 to 5 years. Rules on durations and other rules relating to interest rate portfolios, liquidity risk, etc. are given in the risk policy and finance strategy. The chosen strategy aims to minimise net finance costs over the long term, while reducing risk to an acceptable level. Exposure to interest rate risk is measured and monitored by the Risk Management and Internal Control department. The group finance department is responsible for taking positions. The value of interest rate derivatives designated as accounting hedges – and hence not included on the bal- ance sheet – was NOK -99 million at the close of the year.

AGDER ENERGI ANNUAL REPORT 2013 108 AGDER ENERGI ANNUAL REPORT 2013 109 AUDITOR’S REPORT

AGDER ENERGI ANNUAL REPORT 2013 110 AGDER ENERGI ANNUAL REPORT 2013 111 Agder Energi P.O.Box 603 Lundsiden, 4606 Kristiansand Agder Energi Vannkraft has started using a Visiting adress (head office): Kjøita 18, 4630 Kristiansand helicopter-borne radar to more accurately measure Tel. no.: +47 38 60 70 00 snow depth in the drainage areas of the Otra and Organisation number: NO 981 952 324 Mandal rivers

Design: Kikkut reklamebyrå AS Photo: Agder Energi, Kjell Inge Søreide, Anders Martinsen, Kristofer Ryde