2019 Annual Report Embracing New Challenges “The common thread I see through all Nord Pool’s activities is a determination to deliver benefit to our customers, regardless of their size or where they trade from.”

Kari Ekelund Thørud CEO

2 NORD POOL 4 Foreword 7 New Year – New Owners 8 2019 Highlights 10 Key facts and figures 13 Expanding influence 14 Embracing Competition in the Nordic Region 16 Central to Our Success 20 Watching the Market 23 Directors’ and Financial reports

ANNUAL REPORT 2019 3 Foreword Embracing New Realities

Kari Ekelund Thørud CEO

As I approach the end of my second year But there have been some inward-facing In 2019 that certainly seemed to continue. as Chief Executive at Nord Pool, I am developments too, as we have worked to The total volume of power traded through once again delighted to take the oppor- accommodate, understand and simplify Nord Pool stood at 494 TWh, with Nordic and tunity to speak directly to our expanding the new landscape of power trading in our Baltic day-ahead market trading standing at body of customers and stakeholders so-called ‘home’ territories, doing everything 381.5 TWh, UK day-ahead achieving 94 TWh, wherever they are placed within Europe’s we can to aid the smooth and effective and volume on our intra­day markets setting thriving energy sector. implementation of the multi-NEMO arrange- a record of 15.8 TWh – nearly doubling the ments in the Nordic region. The common previous years’ figure. For Nord Pool the main theme of the past thread that I see through all our activities year has once again been that of ‘change’. during 2019, has been a continued determi- But for me perhaps our proudest achieve- Our expert team is continually faced with nation to deliver benefit to our customers, ment was in our newly launched central fresh developments and newly-emerging regardless of their size or where they trade and western Europe day-ahead market, challenges which they must work with – as from. which finally completed our offering for the they always do – to ensure our continued region and grew to almost 2.5 TWh of power delivery of the simple, efficient and secure You can discover more about these aspects traded by year end. The performance of power trading for which we are rightly known of our business as key members of our team our intraday markets was also remarkable, and trusted. expand on them later in this year’s Annual with all-time high results being recorded. Report. This included year-on-year intraday trading When I travel across Europe to consult with growth in Germany of more than 200%. customers and hear their concerns, I am A date with the data frequently struck by the fact that Nord Pool I am, at heart, a ‘commercial animal’ and I But if ‘change’ was the theme for our year must continue to expand and provide an see a highly customer-focused approach here at Nord Pool then this was truly innovative offering to the market. And that and mindset at work everywhere within reflected in July when the ever-more-prev- offering needs to be focused on our core Nord Pool. That is something that we can alent automated trading made its presence products and services, which allow the never let go of, given the fully competitive felt. It was then that, for the first time, more market to function efficiently and effectively, power exchange environment in which we than half (52%) of intraday volume traded to make our customers’ trading lives easier. are located today. through Nord Pool across all markets was by Application Programming Interface (API). After some ‘quieter’ years recently, in terms I find two important aspects of working of external visibility, 2019 was back to being life at Nord Pool continually pleasing. Though these important numbers may serve a year in which Nord Pool expanded what First among these is our people. We enjoy to illuminate our continued upward trajectory, we could offer to Europe. And with the such diversity in terms of age, gender, plain figures are, I think, deceptive to some advent of new majority owners in the shape expertise, culture and ethnicity among our extent. They say nothing of the complicated of Euronext, I would say we are now looking team. But there is also the firm ­commercial tasks being tackled across the year by forward to an even stronger European focus that we have here, perhaps best Nord Pool’s expert teams in a variety of areas presence. expressed by an unspoken sense of land- and in offices sited to be in close physical mark achievements in our figures barely proximity to our customers. being worth a raised eyebrow!

4 NORD POOL Kari Ekelund Thørud CEO

That way we can be sure that we are Staying focused What never changes, I think, is the need to never out of earshot of their interests and Although a continued ‘habit’ of getting ensure that our customers – who are, after all, concerns. But what the numbers do show is records under our belt might be seen very the most important people in our business – that our business is moving forward proudly much as ‘business as usual’ for Nord Pool, can continue to depend on us to create and and as one, with our integrity maintained and it would be a mistake to assume that such bring to market the products, services and with our goal the pursuit of excellence. With achievements are somehow either unre- innovations they tell us they must have to that in mind it is pleasing that our figures for markable or unrecognised. With evidence of make their trading lives simpler. 2019 continued to provide the underpinning power market competition all around us, we for our robust and continued growth. must never permit complacency to establish Changing with the challenges itself within our operations. While the The end of the year at Nord Pool heralded a If there is one inescapable conclusion to absolute necessity to serve our customers fundamental change for us, as we announced draw from our numbers for the year, it is, remains, that would be unforgiveable. a new ownership structure – pan-European I believe, that, in power exchange terms, exchange group Euronext had agreed to we exist at the centre of increasingly real Our core customer focus, the individual purchase 66% of the share capital and voting competition. In that atmosphere it is vital and personalised attention that we are able rights of Nord Pool Holding AS. that we continue to achieve reliably strong to bring to all of our extremely valuable numbers in existing markets, while main- customer relationships, serves Nord Pool The agreement, a most welcome develop- taining positive momentum in new ones. well in two ways. For a start, it ensures that ment from our perspective, saw Euronext Doing so will surely create the solid ground our existing customers are comfortable enter into partnership with the previous on which to construct expansion not just and confident to continue to work with us. owners of Nord Pool, the Nordic and Baltic into new geographical locations, but in terms But it also creates an appealing prospect for Transmission System Operators (TSOs). of the products and services we can offer. new customers, attracting them to contact us about getting the most from Europe’s Nordic-based power market.

ANNUAL REPORT 2019 5 There was a real sense of excitement among Our world, as a power exchange, is increas- the team at Nord Pool to have a strong ingly characterised by change and new European company like Euronext as our developments. Some might see that as a new majority owner. But of course, there cause for concern. At Nord Pool we prefer to are two-way benefits stemming from this embrace the challenge it presents, adapting new relationship. While we see Euronext what we do for the benefit of our customers, as a superb partner, playing to Nord Pool’s while remaining true to our core values – strengths, we know that we also have a role delivering transparency and integrity to the to play in the wider success of Euronext, benefit of all market participants. too. That will require us to contribute to the Euronext group’s broader ambitions towards On a personal note it is incumbent upon me diversification of revenue mix, while also to express my gratitude to all my colleagues helping to reinforce its commodity presence. at Nord Pool, to our existing owners and our new majority owners at Euronext, and – most With this news I am very confident to say importantly – to all of our customers, for their that we are undoubtedly moulding our on-going support as well as for their forth- business into one that is entirely fit for the right sharing of viewpoints and challenges. competitive future we face. Nord Pool has been an active power exchange for more I began with an examination of the encour- than a quarter of a century now, and we aging volumes of trade which continue to be know from our accumulated experience placed with us by our customers, no matter that a pioneering drive is an unnegotiable their size or geographical location. But necessity if we are to establish new means equally important to everyone at Nord Pool by which to achieve the best results for our are the honest views that our customers customers. provide. I can assure you that we listen, we act and we react because that feedback is Looking ahead invaluable in helping to shape everything 2019 was, I think, a year we spent playing a we do to deliver efficient, simple and secure central part not only in contributing to the power trading, where, when and how our greater good of the pan-European power customers tell us they need it. I would ask market, but also helping to engineer its – our customers please to remain equally frank and our – success, by working to accommo- and challenging in this new decade – at date the multi-NEMO landscape which Nord Pool we depend upon that in order to wider power market competition demands. remain always at our best.

6 NORD POOL New Year – New Owners

As 2019 came to a close, Nord Pool Welcoming the change of ownership Kari Stéphane Boujnah, Chief Executive Officer welcomed the news that Euronext, the Ekelund Thørud, CEO of Nord Pool, said: and Chairman of the Managing Board of pan-European exchange group, had “Everyone at Nord Pool was excited to have Euronext, added: “Acquiring Nord Pool entered into a binding agreement to a strong technology-driven, European represents a new milestone in developing acquire 66% of the share capital and company like Euronext as our new majority Euronext into the leading pan-European voting rights of Nord Pool Holding AS. owner. With a solid European footprint, ambi- market infrastructure, as well as in achieving tious Nordic expansion plans and in-depth our ambition to grow further in the Nordics. Under the agreement Euronext, which exchange technology know-how, we see ­operates regulated markets in Belgium, Euronext as the ideal partner, comple- “Expanding to the power market is key to France, Ireland, The Netherlands, Norway, menting Nord Pool’s established strengths. Euronext’s mission of financing the real Portugal and the UK, committed to enter economy. By joining forces with Euronext, into a partnership with the former sole “At Nord Pool we make it our business to Nord Pool will be even better positioned to owners of Nord Pool, the Nordic and Baltic continuously adapt to evolving market support the shift to new ways of managing Transmission System Operators (TSOs), demands and strive to deliver simple, power supply in the face of climate change governed by a shareholders’ agreement. efficient and secure power trading to our and the transition to sustainable growth. customers. This welcome development The transaction also contributed to the with Euronext was something that our “We have been very pleased to welcome Euronext group’s ambition to diversify its customers and ­partners undoubtedly saw Nord Pool’s highly skilled employees, whose revenue mix and reinforce its commodity as a positive outcome. expertise in running power markets will franchise, at the same time as growing its reinforce Euronext’s commodities franchise, presence in the Nordic region. Euronext is “What the change of ownership did not do, into our family.” headquartered in Amsterdam and primary however, was to change the fundamentals listed on Euronext Paris. of the power markets where we operate. The transaction was subject to regulatory Nord Pool will continue to deliver trans­ and competition approvals, completed in parency and integrity to the benefit of all January 2020. market participants.”

ANNUAL REPORT 2019 7 2019 Highlights

January May November

The year begins with Nord Pool starting A statement from Ofgem, the government Nord Pool’s European Market Coupling delivery of services to the newly regulator for gas and electricity markets Operator (EMCO) business completes commissioned Nemo Link Interconnector in Great Britain, concerning GB – Ireland the IT implementation project to support between the UK and Belgium (the first market coupling, is welcomed by Nord Pool, day-ahead implicit auctions on the new new inter­connector in the UK since as it emphasises the importance of 1GW ElecLink interconnector between the 2011) providing shipping services to ­establishing a level playing field between UK and France, providing shipping services help facilitate NEMO Link’s regulatory power exchanges. when ElecLink goes live in 2020. obligations under EU Capacity Allocation and Congestion Management (CACM) Nominated Electricity Market Operators guidelines. June (NEMOs) and Transmission System Operators (TSOs) confirm the successful Monthly trading records are achieved in go-live of the Single Intraday Coupling – March Nord Pool’s intraday markets in Austria, SIDC (formerly known as XBID) second Belgium, Denmark, France, Germany and wave, with significant increases in traded Nord Pool celebrates the 20th anniversary Norway. volumes across the seven countries which of launching the world’s first multi- joined the SIDC. This brings to 21 the country intraday continuous trading number of countries coupled through SIDC. market – Elbas – established in Finland July and Sweden. Completing its market offer for central December The split of Nord Pool into two separate and western Europe (CWE), Nord Pool entities is confirmed, in response to CACM successfully launches day-ahead power Nord Pool extends its proven Urgent and a sale process for the business begins. trading – making it the first power Market Message (UMM) transparency exchange to offer day-ahead trading platform to include Transmission Outage Berza električne energije d.o.o. (BELEN), across the Nordic and Baltic region, the Messages, Offshore Grid and other the power exchange of Montenegro, UK and CWE. Market Information Messages available in announces the selection, after an open the Nordic Transmission System Operators’ competition, of Nord Pool as its partner to In an acknowledgement of the increasing system NUCS, providing all relevant create the first competitive Montenegrin role of technology in power trading, for unavailability information for the Nordic day-ahead power market. It is planned the first time more than half (52%) of and Baltic region. the new market will become operational intraday volume traded through Nord Pool in early 2020. across all markets is done by Application Intraday trading on Nord Pool sees a Programming Interface (API). monthly total volume record of 1.95 TWh achieved. The day-ahead markets newly launched by Nord Pool in Austria, Belgium, Pan-European exchange group Euronext France, Germany / Luxembourg and announces an agreement to acquire The Netherlands, attract volume of 66% of the share capital and voting rights 13.8 GWh in their first week of trading. of Nord Pool Holding AS (the Nord Pool group), thereby becoming the new majority owner of Nord Pool.

8 NORD POOL ANNUAL REPORT 2019 9 Key facts and figures

94 TWh 15.8 TWh UK day-ahead market Nord Pool intraday markets (a new record) 494 TWh Total volume traded

381.5 TWh Nordic and Baltic day-ahead market

10 NORD POOL Nordic system price (average price in EUR/MWh) The system price is an unconstrained market clearing reference price for the Nordic region. It is calculated without any congestion restrictions by setting capacities to infinity. The system price is calculated locally at Nord Pool after area prices are calculated for all bidding areas. Flows between the Nordics and The Netherlands, Germany, Poland and the Baltics from the area price calculation are taken into account in system price calculation. Average system price (Nordic) 60

50

40

30 20 38.97 €/MWh 10

0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

ANNUAL REPORT 2019 11 Day-ahead

Nordic / Baltic day-ahead volume turnover 2019 Traded volume growth (in TWh) (per country in TWh) A total of 494 TWh traded in 2019

600

500

400

300 381 TWh 200

100

0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Norway Sweden Finland Denmark Lithuania Estonia Latvia

Intraday

Intraday volume turnover 2019 Percentage of trading undertaken by (per country in TWh) Application Programming Interface

from 2017 from 2018 100% + 23% to 2018 + 90% to 2019

80%

60%

40% 15.8 TWh

20%

0 2016 2017 2018 2019 Germany Sweden Others Austria Lithuania Denmark Finland Belgium The Netherlands Norway France Estonia United Kingdom Non-API API Latvia

12 NORD POOL Expanding influence

Where we operate now

Additional NEMO-expansion

Serviced markets FINLAND

Nord Pool offices SWEDEN

NORWAY Helsinki

Oslo Stockholm Tallinn ESTONIA

DENMARK LATVIA

LITHUANIA

IRELAND UNITED KINGDOM Berlin London NETHERLANDS POLAND BELGIUM GERMANY

LUEMBOURG

AUSTRIA

FRANCE CROATIA

BULGARIA

ANNUAL REPORT 2019 13 Embracing Competition in the Nordic Region

In recent years, playing a central role “For that reason, power markets ought • Creating a clearing model to reduce in implementing the Multi-NEMO best to be designed and implemented in a collateral for all customers (a visible and (Nominated Electricity Market Operator) way that accounts for customers’ opinions, very real benefit of Nord Pool providing a Arrangements (MNA) for the Nordic challenges and needs. We are here, as we single clearing and settlement solution) region has been key for Nord Pool. always have been in the Nordics, to provide • An intraday fallback solution outside of the ease of access for market participants and pan-European Single Intraday Coupling’s The introduction in the Nordic area of the to facilitate efficient use of power production XBID platform with local trading for the same competitive environment seen in assets and consumption, locally and across Nordics, where customers can trade local central and western Europe (CWE) is some- borders, to benefit wider society.” products with Nord Pool within the region thing Nord Pool embraced from the start. • Ensuring power market transparency We see this as an important, logical step in Our ambition by active engagement with TSOs and full delivery of the Capacity Allocation and Hilde Rosenblad, Senior Advisor Public and regulators in the region Calculation Management (CACM) guidelines. Regulatory Affairs, echoes Marja’s viewpoint: • Enabling one single data source for “For us, Nordic MNA is about providing a transparency data – Urgent Market Our belief, drawn from experience, is that simple market, available to all levels of partic- Messages; including core information from competition among NEMOs is good; bringing ipants in a cost-effective way. Nordic TSOs after launch of their NUCS increasing value and efficiency to customers. But realising that potential assumes compe- “Nord Pool is widely seen as the Nordic And Marja Eronen believes parity is important: tition is fully and properly implemented. champion. Our focus for some time has been “Looking at the Nordic region compared with We cannot take that for granted and must developing the Nordic market to enable the central Europe we see differences around give it our full attention, to attain. resolution of real challenges, whether from implementation of MNA. Regulators, TSOs customers or TSOs. We are proud to be and other industry bodies need to understand Looking forward to competition engaging in – and solving – Nordic-specific that competition and markets only work Much work has gone into realising the problems for our customers. After all, that is ­properly in a level playing field.” Nordic MNA. At the time of writing we feel what we are good at!” the finishing line almost within touching Establishing common ground distance. The proof of Nord Pool’s ‘Nordic champion’ One example is the differing Nordics and position lies in the practical innovations CWE fallback methodology. Marja continues: Marja Eronen, Development Manager at delivered – and on-going – for the area. “If the Nordic market is decoupled from Nord Pool, feels customers must be at the These include; Europe, locally agreed rules allow more time very heart of market design: “We are very to achieve a price from the shared order book, aware that, although NEMOs and Trans­ • Offering extended intraday trading in than in central western Europe. The Nordic mission Service Operators (TSOs) are Finland region decouples from the pan-European responsible for implementing, for example, • Consulting on new directions for ‘Nordic market and if it is unable to find a solution the CACM guidelines, it is often our market design 2.0’ by 8pm the ­fallback, though perhaps not customers who feel the impact. perfect, is to reference the previous day’s prices and volumes.

14 NORD POOL “In central Europe, the combination of shadow “The market needs to be enabled and incen- “They will have access to the same kind of auctions on each border, TSO nomination tivised to resolve balancing of the power liquid transparent market they have had deadlines and each NEMO calculating prices system through market-based mechanisms since 1993 – though there have been many separately in certain fallback scenarios, is up-to-delivery. That would allow a TSO market developments since then, of course! hard for market participants to manage.” focus on handling unexpected ‘emergencies’ And they will also continue to play a central beyond the markets’ ability to manage.” role in – and benefit from – our on-going Hilde adds: “A perfect solution with fallback work on market development.” positions in market decoupling has yet to be True to our principles found – and both the situation and customer Hilde Rosenblad sums up the situation At Nord Pool we believe broader power priorities in the Nordic and central European as Nord Pool sees it: “We want to be the market competition allows us to provide regions differ, with the CWE’s highrenewables ­ preferred provider of power exchange customers with efficient, simple and secure market component. But the key seems to lie services in the Nordic region. We would power trading giving the very best value. in granting market participants more time to not be doing our job properly if we did not handle a complex and pressurised situation, believe that we can, and do, offer customers These have been long-held principles. while not separating order books. This is the best products and services – as we have We would be letting customers down if we what Nord Pool advocates.” for many years. changed them now!

This situation highlights some of the less “With Nordic MNA live we want traders to feel desirable aspects of the CACM guidelines. that, fundamentally, nothing need change; Nord Pool’s concerns are twofold. First there they can continue to trade confidently and remains a risk market participants end up securely with Nord Pool as they always have. Marja Eronen on the paying side if NEMO competition Development Manager is not on equal terms in all regions. Second at Nord Pool is an increased operational risk with multiple prices in varying bidding zones. There is a need to find a way forward. Nord Pool is working hard to realise it.

The Challenge of diversity The future of physical power markets, whether in the Nordics or elsewhere, involves the participation of increasingly diverse assets, while facing greater challenges­ in the form of large changes in assets and ­production facilities.

“That makes it even more essential to ensure the Nordic market is transparent and simple to participate in,” comments Marja. “Providing high liquidity, an efficient supply/demand balance and non-discriminatory access to markets and cross-border capacity.

“We strongly advocate a ‘participant-centric design’ to attract market participants and assets while allowing the economically and technically efficient resolution of future challenges.

ANNUAL REPORT 2019 15 Central to Our Success

In the central and western Europe (CWE) “2019 was the first full year of Nord Pool’s much represents the backbone of power region (comprising Austria, Belgium, intraday offering in CWE and I’m delighted trading. To get the full benefit of trading at France, Germany, Luxembourg and to say that our intraday market increased Nord Pool you really need to be active both The Netherlands), 2019 was truly a land­ by over three times, when compared to our in day-ahead and intraday. Today we have mark year for Nord Pool. At long last 2018 volumes. For a challenger Nominated more than 20 customers in day-ahead and we were able to realise our full ambitions Electricity Market Operator (NEMO) that is more than 50 in intraday and that number is by launching a day-ahead market in no small achievement.” growing.” the region. Although Nord Pool’s market share, for the Bringing down the barriers Pietro Rabassi, Nord Pool’s Director Central time being, may be relatively modest, it Nord Pool has always prided itself on European Markets, believes the importance is continuously growing. But why? Pietro lowering barriers to entry to the power of this development should not be under­ believes he has the answer, from talking – market for businesses of all sizes, no matter estimated: “Providing robust day-ahead and listening – to a great many market where they trade from. In CWE, as Pietro trading was the missing link in our CWE participants and other stakeholders active in reveals, we are remaining true to that goal. offering. The fact that we have made good the region, over the past few years. progress in the region during the year is very “Our customers in CWE are finding out for much down to our being able to have a full, “It’s clear that customers want to see viable themselves that with Nord Pool they can active and appealing power trade offering.” trading alternatives without having to think trade simply, easily and in a cost competitive about the ‘liquidity trap’. Shared order books manner,” he says. “We are already seeing the Today, Nord Pool brings intraday and in intraday and day-ahead mean they can first cases of customers that are able to join day-ahead markets, plus a broad range disregard liquidity concerns and focus on the open market for the first time through of related services to the CWE region. the rest of their operations and on what the Nord Pool. It is a pleasure to bring these new “We are experiencing steady organic growth. NEMOs can offer them. participants into the market.” The only ‘missing’ part of the equation in the area, geographically at least, is Poland, “That’s where we feel we can contribute in Charles Lapierre, Nord Pool’s Central Europe which is coming soon,” comments Pietro. valuable ways. Customers tell us they find Key Account Manager, continues: “We also Nord Pool simple and easy to use, as well want to provide an attractive alternative to Core markets as being more competitive from a total cost OTC (Over the Counter) trading, which is Nord Pool has offered intraday trading in of trading perspective. That’s great news still quite prevalent in CWE. Bringing those Germany since 2006, but only since the for our future growth.” volumes of trade into the open market would advent of the XBID (now Single Intraday certainly help make it more transparent and Coupling – SIDC) project in 2018 have Steady success create more robust pricing, which would be there been the all-important shared order Throughout 2019 Nord Pool has seen good news for all participants, we believe.” books, a highly significant development for positive momentum, with steadily increasing customers, as Pietro outlines. trading volumes, in CWE. Pietro Rabassi Find out more about why energy trading believes that this is growth built on solid businesses such as European Commodities foundations: “Our day-ahead market and Sunnic welcome Nord Pool’s presence in CWE is highly important, as it very in the CWE region.

16 NORD POOL Future direction “And in a more dynamic energy environ- Taking-on challenges A key part of Pietro and his team’s brief is to ment we see that big utilities focus on new In an atmosphere of change, maintaining understand – and cater for – new develop- arenas such as ‘smart’ digital services. a robust market in CWE is not without its ments in the CWE power sector. They are The traditional market participants are challenges, as Pietro outlines. seeing a variety of trends, as he explains. changing and adapting, taking advantage of new opportunities – new types of busi- “We are seeing that many, if not most, traders “There are a number of key trends we see in nesses are emerging. At Nord Pool we need in intraday are API traders, with orders the market which we are constantly working to be on the lookout for how to best cater being placed by automated and algorithmic to accommodate. Intermittent renewables for the changes in our customer base, for systems. At Nord Pool we continuously work are playing an ever-greater role across the new types of customers and markets to ensure our systems are able to facilitate Europe. We already see about 40% renew- that we see coming through.” for increased API trading and the greater able generation in Germany. That is set to load that it represents.” rise to 65% by 2030.

“Trading closer to delivery is being driven by the increased role of renewables in the market, as weather forecasts become more certain the closer you get to delivery and market participants seek to avoid the potential costs related to being in imbalance. To accommodate this need, we were the first NEMO to shorten gate closure in intraday trading in Germany; up until delivery in a single TSO area and down to 20 minutes Germany-wide, a big improvement on the situation a few years ago.”

Charles Lapierre sees additional changes in the market: “We also have an ever more complex market environment with a related Pietro Rabassi increase in API (Application Programming Director Central Interface) trading – that is, automation and / or European Markets trading by algorithms – which we must cater for in both intraday and day-ahead.

“Intermittent renewables tend to drive down prices in the wholesale power market, making customers increasingly cost conscious. We know we need to reflect that by being as cost competitive as possible.”

Pietro continues: “With more renewables in the mix and consumption patterns changing thanks to new developments such as electric vehicles and batteries, decentralised flexi- bility markets are also becoming increasingly important.

ANNUAL REPORT 2019 17 “Nord Pool’s presence in the market brings a much more cost competitive structure and more dynamic collateral management for us.”

Axel Baudson Director of Business Development, European Commodities

18 NORD POOL Pietro also believes that, to create a better the EEG law in Germany – such laws or We are in central Europe for the long term market environment for all participants, frameworks should not favour one NEMO and will continue the journey together with there are some wider aspects of trading in over another. After all, the daily price does the many customers that welcome us. CWE that need to change. not ‘belong’ to one NEMO anymore. Pushing ahead “We are firm advocates of shared order books “In some respects it is a new world in power Of course, power market competition is not in all timeframes and for all products. Why? markets and there is some catching up universal within Europe, but Pietro Rabassi Because that is the only way to diminish the to do. Established habits need to change. lives in hope of change here, too. concerns traders have over liquidity and When it comes to lobbying activities, we see hence allow businesses freely to choose increasing numbers of customers supporting “Some European countries are still closed which NEMO they prefer to trade with. us in forums and meetings organised by to competition,” he points out. “We want to third parties such as TSOs and regulators. see them open up. That may chiefly be a “In the intraday arena we must make the We are pleased and proud to be a voice matter for the European Commission, but as SIDC available in all timeframes – for for our customers and it’s clear that they a NEMO the question is on our agenda too example in the increasingly important last appreciate it. Many industry bodies and and we are pushing for change. After all, we half hour of trading in Germany, Austria lobby groups welcome a fresh, alternative have a taste for growth now – we want to and France, where there is no shared order viewpoint to that of the incumbent. We are expand into new markets.” book today. Why should this hour be traded happy to provide that.” in local order books rather than shared to And Pietro believes that developments at benefit market participants? In the all-important area of provision of the end of 2019 may strengthen Nord Pool’s market data, it is Nord Pool’s view that position: “We are very aware that we are “We would be delighted to see further there also remains room for improvement. the challenger in CWE, but now we are development of the intraday market, such as All NEMO data should be included in all a part of the wider and more influential cross-matching of intraday products, under relevant indexes on equal terms. If data from Euronext group. That brings the prospect of the SIDC banner and not in local markets.” the incumbent is ‘favoured’, there is a real a broader reach and the potential for new risk of not including an important part of opportunities. “We have also had frustration expressed to the market, while trading entities will lack us by customers,” comments Charles, “that ­information for their analytics. “We feel there is a very positive future for certain popular products have fallen outside Nord Pool and our CWE customers. That’s the boundaries of the SIDC. Our view is that A challenger needs to turn every stone to especially true as long as, as a power market, having the full suite of products available in achieve equal treatment. At Nord Pool we we remain true to our core principles – the SIDC is important to truly achieve shared are doing just that and finding established staying well priced, providing the very best liquidity. Without that, businesses can feel structures, legislation and procedures that customer service and a full, robust, market- that they are ‘tied’ to the NEMO that offers still need to change to create truly equal leading and easy to use offering of products these – and that inevitably limits choice.” treatment of NEMOs. However, we are and services. very happy to be an integral part of offering Influencing change an alternative to what already exists. “And you can trust us to do that.” And there are other areas where the expe- rience with market coupling in CWE so far proves a need for some important changes.

“In the day-ahead market, should there OUR CWE MARKET AT A GLANCE ever be a difficulty in coupling the different NEMOs’ orderbooks, customers and NEMOs Participating countries Day-ahead alike need more time to be able to detect Austria, Belgium, France, Launched in 2019 and solve problems,” explains Pietro. Germany, Luxembourg, 2.5TWh traded The Netherlands “In the realms of legislation and ­regulation, Intraday we see the need for rules to apply Customers 7.7TWh traded in 2019 across countries and, where necessary, ~ 60 in 2019 for domestic laws to be changed to Intraday allow for the equal treatment of all NEMOs. Customers growth year-on-year For example, the price index in a given growth year-on-year + 200% country is frequently very important for ~ + 30% renewables subsidies, as is the case with

ANNUAL REPORT 2019 19 Watching the Market – in Fairness to All

Key to the robustness of Nord Pool’s “Our chief task has always been to monitor And with trained, knowledgeable and markets and to the transparent and trading activity to maintain trust, robustness, experienced experts on hand at Nord Pool, reliable trading on which trust in those fairness and transparency,” says Niklas. communication on rules and regulations is markets relies, is a small group of “That’s all well and good, but we cannot just an open, and two-way, street: “Our members experts in our Market Surveillance team. do that, sit back and be satisfied. We under- very often come to us with questions Just as the power sector has developed stand our role today as being much more. relating, for example, to compliance with the and, indeed, transformed significantly in EU Regulation on Energy Market Integrity the past decade, so too has Nord Pool’s “Although we have an explicit regulatory and Transparency (REMIT). Market Surveillance function. obligation to find and report any and all cases of market abuse, we have taken a “They often want to discuss specific trading Perhaps the most pronounced sign of that conscious decision to adopt a more pro­- practices, updates to regulatory guidance transformation has been a move towards active approach. We firmly believe that or how best to handle insider information. more automated trading, which Market it is much more effective to do all we can The team here has plenty of experience in Surveillance has mirrored with an increase to prevent market abuse from happening these areas and is always happy to help. in its own automated surveillance tools. in the first place!” In fact, together with a number of market Recently this has been a particular focus participants, we have taken the initiative and area, where the team has used its expert A complex picture produced a dedicated REMIT Best Practice market knowledge to develop tailor-made Of course, it goes without saying that Report to help with the do’s and don’ts.” solutions. This capability allows Market members of Nord Pool’s markets operate to Surveillance to react rapidly to unpredict- the highest of standards in their work around Customer dialogue able developments in the market, such as regulatory compliance. But as the power Customer dialogue is an important common changes to market design or new regulatory market world is complex and changing, a thread running through Nord Pool’s business guidance. common cause of market abuse stems from and the Market Surveillance team is no simply misunderstanding the rules. exception. Maintaining the fundamentals Niklas Cremer, part of Nord Pool’s four- Niklas continues: “This problem is something Throughout the year the team holds regular strong Market Surveillance team, believes which we address head-on by actively en- meetings with customers in order to better that, although change is inevitable and gaging in dialogue with market participants. understand their business, how they view necessary, the fundamentals of keeping an That allows both sides of the surveillance the market and how they see their role eye on a busy and complex market remain equation to reach a common understanding within it. In addition, the Market Surveillance the same. of how to interpret the important regulations team takes an active role in exporting its that apply to power trading activity.” knowledge to benefit the wider market, seeking out regular opportunities to present at conferences and industry gatherings, working towards a common understanding of the regulations.

20 NORD POOL Market Surveillance team members (left-to-right) Jon Rokne Bolkesjø, Niklas Cremer and Christian Giswold

That is a further plank of the team’s wider effort and there is huge value in guidance “It sometimes becomes apparent,” explains mission to listen, learn and guide, as Niklas from regulators and the Agency for the Niklas, “that some market abuse is only made explains: “We try to be open in our views and Cooperation of Energy Regulators (ACER). possible due to imperfections in market encourage discussion with market partici- design. We try to identify and understand pants and regulators alike, in order to align “We see our role very much as that of a these imperfections and, alongside our everyone’s understanding. Without such a middleman between regulatory authorities colleagues across the business, to actively close dialogue it would be difficult to main- and customers. Our aim with this active work towards market design that neither tain the competence necessary for properly dialogue is to positively contribute to a allows nor encourages abusive behaviour. performing our tasks. well-functioning and fair market.” What that means in practice is that the team has an active role to play engaging in on-going “Uncovering a divergence in views over, say, In pursuit of perfection regulatory work and consultations to help how a particular rule or regulation is viewed Another aspect of this widely consultative­ shape emerging regulation for the better.” or interpreted is immensely valuable. We see approach is to help identify inherent flaws in the power market world one way, but that the rules and guidelines themselves – adding does not necessarily mean that we have all to the Market Surveillance team’s elusive the answers at our fingertips. It is a true team and never-ending pursuit of perfection!

ANNUAL REPORT 2019 21 At Nord Pool several dedicated market design “In this respect we lead by example; “For those alerts that we do not dismiss after experts are fully committed to striving for a information on our Urgent Market Message first assessment, we start a more in-depth better market. Market Surveillance supports platform can be accessed, free of charge, analysis. We may also decide to ask questions­ these efforts and provides its input to rele- through an API, web feed, or web interface. of the market participant in order to be able vant consultations, in some circumstances Market Surveillance sees this as the best to decide on the case. actually taking the lead. For example, during solution for the market and would like it to summer 2019 the team responded to a draft become standard across Europe.” “Before contacting the market participant guidance note on price spikes in wholesale involved, we do, however, always consider electricity markets by the German ­regulator Making a case whether this could, in any way, damage any and also on the European Network of Market Surveillance is also on the receiving subsequent investigation by a regulator. That Transmission System Operators consultation end of contact from market participants said, in most cases we contact the market on co-optimisation methodology for cross- whenever and wherever they come across participant to obtain their explanation of the zonal capacity allocation. behaviour they suspect to be market behaviour we have seen. Insight into these ­manipulation or insider trading. When reports matters from market participants is a really Following closely any consultations and and enquiries like this reach the Nord Pool valuable resource. More often than not a regulatory updates allows the team to team, they are always followed up closely. simple consultation will provide a legitimate defend and maintain the fundamental market explanation of the observed trading patterns. principles on which our business is built. Market Surveillance Analyst Jon Rokne Bolkesjø reveals more: “A case can be “Based on the available information, we During 2019, Market Surveillance was generated with us in three different ways. then have to decide whether we have a especially pleased to see ACER’s updated Most regularly Nord Pool’s custom-made reasonable suspicion that this behaviour guidance on the publication of inside automated systems detect a suspicious might represent a breach of REMIT. information, as Niklas explains: “The update trading pattern and alert us accordingly. If that is the case, it is our legal obligation specifies that inside information shall be In other circumstances we discover what we to inform the relevant regulator(s).” published on central information platforms term an ‘outlier’ through our manual moni- and sets out certain minimum requirements toring routine. Or we will be informed about A message to the market for those platforms. a specific incident in the market by a third So the overall message is clear – Nord Pool’s party. Those observations are of particular Market Surveillance team is constantly “For us, this is an important step towards value, since they show how the market ­vigilant over suspicious trading activity ensuring that all market participants will looked from a trader’s perspective. Such in order to ensure regulatory compliance, have equal access to significant changes communication is of course always treated fairness and transparency for all market in market fundamentals. Our view is that in the strictest confidence and the incident participants, regardless of their size or where publishing inside information on individual carefully investigated.” they trade from. company websites or through paid access is not in the spirit of REMIT. Assessing behaviour The team’s door is always open for questions All unusual events and notifications are or information on unusual trading activity passed through a first assessment by a in the market. Like the market itself, the Market Surveillance analyst. Jon explains, Market Surveillance team never – well hardly “We are looking for market fundamentals or ever – sleeps! known trading behaviour by the market participant that could explain things. Our established alarms generate several hundred ‘events’ every week and it is important to be able to efficiently filter out ‘false positives’.

22 NORD POOL Directors’ and Financial reports

29 Profit and loss account 30 Balance sheets 32 Cash flow analysis 33 Accounting principles

ANNUAL REPORT 2019 23 Report of the Board of Directors

Nord Pool Group The Group also offers compliance services Nord Pool Group also took part in the TSO Holding AS (formerly Nord Pool Holding for its customers and for transmission second wave launch for the European Single AS) is located in Oslo. As per 31st December system operators (TSOs), around European Intraday Coupling (SIDC, formerly known as 2019 TSO Holding AS embodied the regulatory requirements such as the XBID). The launch marked another important Nord Pool Group which is constituted by Regulation on Energy Market Integrity and step towards expanding the single inte- the parent company TSO Holding AS, and Transparency (REMIT) and others. grated European intraday market. Significant subsidiaries: the European Market Coupling efforts were also made in advance of this Operator AS (EMCO), Nord Pool AS (PX), The Nord Pool Group has its main office launch to ensure technical readiness and Nord Pool Holding 2 AS, Nodes AS and in Lysaker, and branch offices in Espoo, to increase the capacity of our intraday Nodes Tech AS. The structure originates Stockholm, London and Berlin. As of trading platform to cater for growth in the from the 2018-demerger of Nord Pool AS, 31st December 2019 the Nord Pool Group intraday market. The SIDC solution is based separating the EMCO (monopolistic) and is owned by the Nordic and Baltic TSOs on a common IT system with one shared Nord Pool (competitive) operations into two Energinet, Fingrid Oyj, Statnett SF, Svenska order book, a Capacity Management Module separate legal entities. kraftnät, Elering AS, Augstsprieguma tīkls AS and a Shipping Module. It allows for orders and Litgrid AB. entered by market participants for contin- European Market Coupling Operator AS has uous matching in one bidding zone to be two subsidiaries, European Market Coupling Operational Highlights matched by orders similarly submitted by Operator AB (Sweden) and European Market 2019 was a successful year for the Nord Pool market participants in another bidding zone, Coupling Operator Oy (Finland). Nord Pool AS Group as we launched day-ahead power if transmission capacity is available. has three subsidiaries, Nord Pool AB trading for customers in the central and (Sweden), Nord Pool Finland Oy (Finland) western Europe region (CWE), making us Research and development (R&D) efforts and Nord Pool Consulting AS (Norway). the first power exchange to offer day-ahead in the Nord Pool Group are largely related trading across the Nordic and Baltic region, to IT in general, and software development European Market Coupling Operator AS the UK and CWE. Significant efforts were related to our core systems in particular. holds NEMO licenses in 15 countries. made in developing and upgrading Nord Pool’s Software development during 2019 in Through delegation of these to Nord Pool AS day-ahead trading platform ahead of the CWE particular related to projects such as launch the Group organises simple, efficient and launch. The launch is a result of the go-live of day-ahead trading in CWE and the second secure physical power trading – centred of the Multi Nemo Arrangements (MNA) wave launch for the SIDC. on day-ahead and intraday markets – for arising from the European CACM (Capacity customers in the Nordic and Baltic countries, Allocation and Congestion Management) the UK and the central and western Regulation, which allow multiple power European region (Germany / Luxemburg, exchanges to operate in the same markets France, Austria, The Netherlands and across Europe. This is part of the EU Belgium). Additionally, the Group services target model towards creating a single the power markets in Croatia and Bulgaria. pan-­European market to improve efficient use of energy across national borders, with shared access to market liquidity.

24 NORD POOL During 2019 a total of 494 TWh of power By the end of 2019, total equity and Risks was traded through Nord Pool, including liabilities for the Group were NOK 1.833,7m Nord Pool Group’s activities have no negative the Nordic and Baltic day-ahead market (2018: NOK 2.677m). The equity and liabilities impact on the environment. The group oper- (381.5 TWh) and the UK day-ahead market of TSO Holding AS were NOK 334.7m as at ates in an environment increasingly defined (94 TWh). Our intraday markets achieved 31st December 2019 (2018: NOK 333.6m). by regulatory requirements. This gives rise to all-time high results, with 15.8 TWh traded – new business risks – and opportunities – such nearly doubling the figure of 8.2 TWh The two 50% owned companies Nodes AS as potential market entry of new competitors, achieved in 2018. Meanwhile Nord Pool’s and Nodes Tech AS are in a build-up phase regulatory or other legal amendments, tech- newly launched central and western Europe and the negative result stemming from these nical changes or modifications of the product day-ahead market achieved almost 2.5 TWh companies is expected to yield long-term landscape, etc. of power traded by year end. positive contributions to the Group. Market Risk The company administration has The Board of Directors considers the The Nord Pool Group is exposed to currency supported a process initiated by the Board equity to be adequate with regards to the risk, as physical power trades are settled in of Directors with the objective of considering ­company’s exposures and collateral posted multiple currencies. This exposure is hedged ­strategic options for the Nord Pool Group. by market participants. using contracts where settlement and VAT On 5th December 2019, the current owners is hedged daily, while revenues are locked-in and the pan-European exchange group The annual accounts are prepared on the once a week. Euronext, jointly announced that Euronext going concern principle, and the Board of had entered into a binding agreement Directors confirms the basis for this. No In the UK market, the Nord Pool Group also to acquire 66% of the share capital and events of material significance (for the 2019 faces imbalance risk due to being a nomi- voting rights of Nord Pool Holding 2 AS, annual accounts) have occurred up to and nation agent and thus requires members to including the subsidiaries Nord Pool AS and including the signatory date of this report. post collateral reflecting replacement cost in European Market Coupling Operator AS. case of non-delivery or rejection of notified The trans­action was formally completed on Liquidity volumes. 15th January 2020. Group cash and cash equivalents changed from NOK 555m at the end of 2018 to As we enter a more competitive environment The Board wants to express its gratitude NOK 1,137.5m at the end of 2019. among power exchanges due to the advent to its customers and employees for their of a single European power market, Nord Pool contribution in 2019. anticipates greater competition in its estab- lished markets, mirroring our own growth in Annual Accounts 2019 the CWE region. The Board regards Nord Pool Group revenues in 2019 were NOK 384.5m to be very well positioned for competition. (2018: NOK 382.9m) whereas operating profit was NOK 73.6m (2018: NOK 103.2m). Nord Pool is campaigning to ensure robust Net income amounted to NOK 26.2m (2018: cost recovery associated with work under- NOK 62m) for the Group. Corresponding taken in relation to European market coupling. numbers for TSO Holding AS were revenues At the time of writing, this is not assured. of NOK 0m, operating profit of NOK -15.9m and net income of NOK 41.7m.

ANNUAL REPORT 2019 25 Credit Risk Counterparty Risk Organisation and working All Nord Pool trades are settled on the day of Counterparty risk for Nord Pool is regarded environment trading or on the following business day, with as low and is mitigated through members The talent base of the Group is significant. invoices and credit notes being dispatched and financial counterparties being subject to As per 31st December 2019 the Nord Pool in the afternoon. Financial settlement is due an internal risk assessment prior to trading Group had 149 employees based in Norway, one banking day after trading for net buyers and financial exposure, as well as monthly Sweden, Finland, Denmark, the UK, Estonia, and two banking days after trading for net monitoring and reporting using both internal Germany and Lithuania. Of these 40 were sellers. The credit risk related to financial and external sources. Members must comply in European Market Coupling Operators AS settlement is mitigated by holding collateral with and fulfil daily security requirements, and 109 were employed in Nord Pool AS. as a payment guarantee for unpaid invoices. while the solidity of financial intermediates Nord Pool Group had 51 female employees Collateral requirements are regulated by is monitored using external credit ratings. and 98 male. the Clearing Rules. Collateral can be posted There was no debtor loss registered for either in the form of cash on a pledged Nord Pool in 2019. In the case of a member As per 23rd March 2020 the TSO Holding AS account, or as an on-demand-guarantee or default, Nord Pool expects to recover Board of Directors consists of two men and letter of credit. Year-end accounts receiv- all outstanding claims by calling on the two women. The Chairman of the Board able amounted to NOK 582.8m (2018: member’s collateral. in TSO Holding AS is male, while the CEO NOK 1.752m) of which NOK 568.7m referred is female. The Nord Pool Group corporate to trading. Risk capital management team consists of five women The concessions granted to the companies and four men. Variations in settlement cycle following in the Nord Pool Group from the Norwegian variations in banking days over the new year Water and Energy Directorate (NVE) require Health-related absence during the year period combined with variations in physical that the company holds sufficient risk capital was 1.4%. No lost-time accidents or personal power prices traded on our markets give and that the size of this is reviewed regularly. injuries were suffered in 2019. Nord Pool rise to significant fluctuations in accounts Nord Pool AS holds a sales concession from human resources policy is based on equality, receivables from year-to-year. NVE and has conservatively calculated meaning that there shall be no differences that the minimum risk capital is NOK 154m. between male and female salary when Liquidity Risk EMCO AS holds a marketplace concession expertise and experience are comparable. Nord Pool has a solid liquidity position, as from NVE and has conservatively calculated invoices from physical power sold as a main that the minimum risk capital is NOK 35m. The Group has an equal opportunity rule are due one banking day prior to self- The required risk capital for both companies approach and encourages all employees to billing invoices for purchased volumes. is derived from assessments of counterparty establish solutions which make it easier to risk and operational risk, based on the same combine work and family life. There were six methodologies as for banks and securities employees on maternity / paternity leave as firms. per 31st December 2019, and the company had one employee working part time at the The Group companies comply with the end of the year. concessions and continuously monitor the situation.

26 NORD POOL Lysaker, 25 March 2020

Chris Topple Chairman

Allocation of profit holds the remaining 66% of the shares. Camille Beudin The Board proposes to distribute From this date Nord Pool Holding 2 AS Member of the Board NOK 49,536,088 as dividend for 2019, embodies the two subsidiaries European and to allocate NOK 0 to other equity. Market Coupling Operator AS (EMCO) and Nord Pool AS (power exchange). This new Outlook for 2020 structure will be reflected in reporting going Geir Heggem The Nord Pool Group has 25 years of power forward as Nord Pool Holding 2 AS, accounts Member of the Board market experience built on offering flexibility, will be reported instead to represent the transparency, innovation and greater choice entirety of Nord Pool Group activities. to our customers. These themes will be The 50% ownership in each of the essential for our continued success in the companies Nodes AS (reg. no.: 920 321 844) years ahead. and Nodes-Tech AS (reg. no.: 920 824 404) Nicholas Kennedy will be retained in TSO Holding AS. Member of the Board The Board welcomes future competition between power exchanges following the imple- The COVID-19 pandemic has created some mentation of Multi-NEMO arrangements in uncertainty with regards to the outlook the Nordic and Baltic markets. The opening for 2020. The short-term impact on the of the Nordic and Baltic markets is expected Group’s main business, electricity supply to take place in 2020, following the opening and demand, has been minor so far as of CWE markets for competition in 2019. the power sector is considered part of Torger Lien Nord Pool is prepared to extend its market ­critical infrastructure. Although there may Member of the Board offerings for day-ahead and intraday trading be some variation in electricity demand across the Nordic and Baltic region, the UK due to temporarily reduced activity and and CWE. thus a lowered need for power in certain sectors, it is expected that overall electricity Positive developments from last year are con­sumption will stay reasonably stable expected to continue into 2020 and the and any decline should be short-lived. Camilla Vedeler Member of the Board Group expects strong results for the year The Group also has clear processes in overall. Nord Pool remains committed to place to ensure operational robustness pioneering European power markets, and and to mitigate risk. Through its licenses to driving innovation for the benefit of all the Group is required to keep subordinated customers and stakeholders. capital to ensure its financial soundness. Subsequently, the impact on the Group’s Marja Eronen Further, a project to divest the majority share future profitability from the COVID-19 Member of the Board of the Nord Pool Group (EMCO and power pandemic is expected to be low; it should exchange) was closed on 15th January 2020. have no impact on the annual dividend for From this date TSO Holding AS holds 34% 2019. Further consequences of the COVID-19 of the newly created Nord Pool Holding 2 AS pandemic need to be assessed as the (org. no.: 823 268 572), while Euronext situation continues to develop. Kari Ekelund Thørud Nordics Holding AS (reg. no.: 923 861 564) CEO

ANNUAL REPORT 2019 27 The Board of Directors

Chris Topple Camille Beudin Chairman Member of the Board CEO at Euronext, London Head of Strategic Development Global Head of Sales for Euronext and M&A at Euronext

Geir Heggem Nicholas Kennedy Member of the Board Member of the Board CFO of Oslo Børs VPS Head of Commodities at Euronext

Torger Lien Camilla Vedeler Member of the Board Member of the Board Representing the TSOs Employee Representative at Nord Pool Trading Adviser

Marja Leena Eronen Member of the Board Employee Representative at Nord Pool Senior Project Manager

28 NORD POOL Profit and loss account

Nord Pool Group

Amounts in NOK 1 000 2019 2018 Fixed fee revenues 36 032 34 966 Volume dependent fees 230 888 223 584 Other operating income 117 623 124 441 Total operating income 384 543 382 991

Depreciation 8 395 6 773 Payroll expenses 155 169 141 111 Other operating expenses 147 361 131 899 Total operating expenses 310 925 279 783

Operating profit 73 618 103 208 Net financial items -30 402 -20 733 Profit before taxes 43 216 82 475

Taxes 17 035 20 441 Net income 26 181 62 034

ANNUAL REPORT 2019 29 Balance sheet Assets

Nord Pool Group

Amounts in NOK 1 000 31.12.2019 31.12.2018

ASSETS FIXED ASSETS Intangibles Intangibles assets 19 370 14 971 Deferred tax benefit 1 930 1 191 Total intangible 21 300 16 162

Tangible fixed assets 5 467 1 264

Financial assets Investment in subsidiaries Investment in associated companies 34 062 32 578 Total financial assets 34 062 32 578

TOTAL FIXED ASSETS 60 829 50 004

CURRENT ASSETS Receivables Accounts receivables 582 768 1 752 416 Other receivables 52 565 319 193 Total receivables 635 333 2 071 609 Bank deposits 1 137 495 555 127 TOTAL CURRENT ASSETS 1 772 828 2 626 736 TOTAL ASSETS 1 833 657 2 676 740

30 NORD POOL Lysaker, 25 March 2020 Balance sheet Equity and liabilities Chris Topple Chairman

Nord Pool Group Camille Beudin Amounts in NOK 1 000 31.12.2019 31.12.2018 Member of the Board

EQUITY AND LIABILITIES EQUITY Paid-in-equity Geir Heggem Share capital 53 720 53 720 Member of the Board Share premium 51 300 51 300 TOTAL PAID-IN-EQUITY 105 020 105 020

Nicholas Kennedy Retained earnings Member of the Board Other equity 207 411 182 054 TOTAL RETAINED EARNINGS 207 411 182 054 TOTAL EQUITY 312 431 287 074

LIABILITIES Provisions for liabilities Torger Lien Member of the Board Pension liabilities 3 286 3 517 TOTAL PROVISIONS FOR LIABILITIES 3 286 3 517

Current liabilities Derivatives 189 767 Camilla Vedeler Member of the Board Accounts payable 1 352 919 2 234 793 Taxes payable 15 988 18 557 Public duties 55 447 5 920

Dividend – 45 889 Marja Eronen Member of the Board Other current liabilities 93 397 80 223 TOTAL CURRENT LIABILITIES 1 517 940 2 386 149 TOTAL LIABILITIES 1 521 226 2 389 666

TOTAL EQUITY AND LIABILITIES 1 833 657 2 676 740 Kari Ekelund Thørud CEO

ANNUAL REPORT 2019 31 Cash flow analysis

Nord Pool Group

Amounts in NOK 1 000 2019 2018

Cash flow from operating activities Net income 26 181 62 034 Ordinary depreciation 8 395 6 773 Change in accounts receivable 1 169 648 -757 969 Change in accounts payable -881 874 766 669 Change in pension liabilities -231 -441 Change in other current receivables and liabilities 323 338 28 026 NET CASH FLOW FROM OPERATING ACTIVITIES 645 457 105 092

Cash flow from investment activities Income from sale of fixed assets 130 0 Income liquidiation from subsidiary 0 6 000 Purchase of tangible fixed assets -5 470 -1 181 Purchase of intangible fixed assets -11 830 -10 560 Purchase of associated companies 0 -37 528 Investment in subsidiaries -30 -73 NET CASH FLOW FROM INVESTMENT ACTIVITIES -17 200 -43 342

Cash flow from financing activities Payment of dividend -45 889 -33 179 NET CASH FLOW FROM FINANCING ACTIVITIES -45 889 -33 179

Net change in liquid assets 582 368 28 571 Liquid assets as of 1 January 555 127 526 556 LIQUID ASSETS AS OF 31 DECEMBER 1 137 495 555 127

32 NORD POOL Accounting principles

The annual accounts have been prepared Associated companies are valued in the Income from fees in accordance with the Norwegian Group accounts in accordance with the The income base of the TSO Holding Group Accounting Act of 1998 and generally equity method. The allocated proportion consists of: accepted accounting principles. of the profit of the associated company is based on the after tax results of the associ- • annual fees Consolidation principles ated company, after deducting any internal • volume-dependent fees The Group accounts include the parent gains and any depreciation on any excess • FX fees company, TSO Holding AS, and the value caused by a higher acquisition price of subsidiaries Nord Pool Holding 2 AS, the shares than the acquired part of equity Volume fees in the physical market relate European Market Coupling Operator AS, recorded in the balance sheet. The allocated to power traded (MWh) and are invoiced European Market Coupling Operator AB, proportion of the profits is recorded in the together with the power following delivery. European Market Coupling Operator Oy, profit and loss accounts as “Income from FX fees apply for customers buying or selling Nord Pool AS, Nord Pool Finland Oy, associated companies”. electricity in currencies other than EUR. Nord Pool AB and Nord Pool Consulting AS. This is calculated as a % of invoice value. Subsidiary The Group accounts have been prepared The company’s subsidiary is valued Other operating revenues as if the Group was a single financial entity. according to the cost method in the The Group follows generally accepted Intercompany transactions and balances company accounts. Investments are valued accounting principles for accounting of have been eliminated. The Group accounts at acquisition cost for the shares unless a revenues. According to these principles, have been prepared based on similar write-down has been necessary. Investments revenues related to subcontractor principles, the subsidiary applying the are written down to market value if the reinvoicing as agent and without mark-up same accounting principles as the parent decline in value is viewed as non-transi- added should be netted with related costs. company. tory in nature and it is deemed necessary This principle has been adopted from 2019, according to generally accepted accounting comparable numbers are not changed A purchased subsidiary is recorded in the principles. Write-downs are reversed if the in 2018. Group accounts based on the parent compa- conditions for the write-down are no longer ny’s acquisition cost. The acquisition cost present. Classification and valuation of is based on identifiable assets and liabilities balance sheet items of the subsidiary, which are recorded in the Power turnover Current assets and short-term liabilities Group accounts at market value at the time Purchases and sales of electrical power include items that fall due within one year of of purchase. If the acquisition price exceeds and gas are settled at the same price. acquisition date. Other items are classified (or is less than) amounts attributable to Consequently, the monetary value of trading as fixed assets / long-term liabilities. identifiable assets and liabilities, the excess has no effect on the profit level of the is recorded in the balance sheet as goodwill Nord Pool Group. Current assets are valued at the lower of (or negative goodwill) and amortised on a acquisition cost and market value. Short- straight-line basis over the expected useful term liabilities are recorded in the balance lives of the purchased assets. sheet at face value at the time of recording.

ANNUAL REPORT 2019 33 Fixed assets are recorded at acquisition improvements are added to the cost base of Contributions to the pension fund are made cost but are written down to market value in the operating assets and depreciated at the in accordance with the actuarial method of the event of a decline in value which cannot same rate as the assets to which they refer. calculation. Pension assets in the pension be expected to be transitory in nature. fund are primarily invested in securities. Long-term liabilities are recorded in the Intangible assets Pension liabilities are calculated in accord- balance sheet at face value at the time of The Group has Intangible assets relating to ance with the Norwegian accounting standard assuming such liabilities. development of software, IT systems, R&D (NRS) for pension costs. and intellectual property (IP) related to our Receivables own clearing and trading system. Pension obligations are valued at the present Accounts receivable and other ­receivables value of future pension liabilities earned as at are recorded in the balance sheet at Expenditure on own development of the balance sheet date, which are to be paid face value after provision for bad debts. intangible assets, including costs for own through the company’s own pension fund or Provisions for bad debts are based on research and development, is recognised in financed by operations. an assessment of individual accounts. the balance sheet when it is probable that In addition, a general provision for bad debts the future economic benefits associated with Taxes is made covering assumed losses for other the assets will flow to the company and the Tax expenses in the profit and loss account accounts receivable. acquisition cost can be measured reliably. consist of tax payable for the period and changes in deferred tax. Deferred tax is Foreign currency Intangible assets that are purchased individ- ­calculated on the basis of the temporary Accounts receivable and accounts payable ually are capitalised at cost. differences between accounting and tax in foreign currencies are valued at the year- values, as well as the tax deficit at the end of end exchange rate on 31st December 2019. Intangible assets with a limited economic life the year to be carried forward. Tax-increasing are depreciated according to plan. Intangible and tax-decreasing ­temporary differences, Financial instruments assets are written down to the recoverable which are reversed or reversible in the same The Group uses financial instruments to amount if the expected economic benefits period, have been eliminated. Any net manage foreign exchange exposure. do not cover the carrying amount and any deferred tax benefits are recorded in the Spot exchange contracts are used solely remaining manufacturing costs. balance sheet to the extent they are expected to hedge currency exposures incurred in to be utilised. connection with the settlement of physical Pension costs and liabilities trading. Gains and losses on spot exchange The Group has a contribution-based pension As of 31st December 2019, net negative contracts are reported and evaluated in plan for all employees, where the current temporary differences between accounting tandem with the hedged item. Gains and year’s pension costs correspond to the and tax values have been recorded by the losses on hedging instruments rolled over current year’s premium payment. Group. The associated deferred tax benefit is prior to their expiry are recognised in the recorded in the balance sheet under assets. balance sheet and income statement over Net pension costs for the year are included time along with the hedged item. Financial as a salary expense in the profit and loss Cash flow derivatives are booked at market value. account. Premiums paid are treated as The cash flow analysis has been prepared investments in pension funds. using the indirect method. The model is Tangible fixed assets based on an adjustment of the after-tax net Tangible fixed assets are recorded in the Nord Pool AS has in addition a defined income resulting in the net cash flow from balance sheet and linearly depreciated benefit pension plan which provides operating activities. Cash flows from invest- over the expected useful lives of the assets. employees with the right to defined future ment and financing activities are presented Direct maintenance costs related to tangible pension benefits (defined benefit plans). as gross figures. fixed assets are currently expensed as Benefits are based on the number of years operating expenses, whereas upgrades and of employment and salary at retirement age. This plan covers two former employees.

34 NORD POOL ANNUAL REPORT 2019 35 Norway Estonia Photos: P. O. Box 121 Tornimäe 5

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