III
ANNUAL REPORT 2015
Trainee mechanic Ida Gunstveit Foss (left) and mechanic Halldis Marita Fagerbakke of Agder Energi Vannkraft working at Skjerka power station in Åseral.
IntroductionIntruduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
CONTENT
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Key Figures 3 Group management 6 Group structure 7 Where we operate 8 Agder Energi in brief 9 Our business 10 Important events in 2015 11 CEO 13
Corporate governance 15 Enterprise risk management 18 Corporate sosial responsibility 21 Directors’ report 23 Declaration from Board of Directors 33
The Agder Energi Group 34 Income statement 36 Comprehensive income 37 Statement of financial position 38 Statement of cash flow 39 Statement of changes in equity 40 Accounting principles 41 Notes 49
Agder Energi AS 88 Income statement 90 Statement of financial position 91 Statement of cash flows 92 Accounting principles 93 Notes 95 Auditor’s report 105
Corporate sosial responsibility (CSR) 108 CSR report 109
AGDER ENERGI ANNUAL REPORT 2015 2
Intruduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
KEY FIGURES
RESULTS
NOK mill. % 3,200
2,800 35
2,400 30
2,000 25
1,600 20
1,200 15
800 10
400 5
0 0 2015 2014 2013 2015 2014 2013
EBITDA Operating income Net income EBITDA margin Return on equity after tax Return on capital employed (after tax)
Def. 2015 2014 2013 2012 2011
AS PRESENTED IN INCOME STATEMENT Operating revenues NOK millions 8,361 7,808 9,391 8,946 10,684 EBITDA 1 NOK millions 2,975 2,303 2,856 2,283 2,908 Operating profit NOK millions 2,399 1,715 2,354 1,818 2,470 Profit before tax NOK millions 1,929 998 1,726 1,581 2,163 Net income from discontinued operations NOK millions 1,220 475 846 1,045 1,161
ITEMS EXCLUDED FROM UNDERLYING OPERATIONS Unrealised gains/losses on energy contracts NOK millions 740 -156 552 326 984 Unrealised gains/losses on currency and interest rate contracts NOK millions -138 -449 -403 -25 -111 Major exceptional items NOK millions 0 -7 0 0 0 Resultat fra ikke videreført virksomhet NOK millions 0 -33 -35 145 6
UNDERLYING OPERATIONS EBITDA NOK millions 2,235 2,466 2,304 1,957 1,924 Operating profit NOK millions 1,658 1,878 1,802 1,492 1,486 Profit before tax NOK millions 1,221 1,609 1,577 1,280 1,290 Net income for the year NOK millions 664 875 772 683 526
STATEMENT OF FINANCIAL POSITION Total assets NOK millions 18,520 16,418 16,091 15,243 14,647 Equity NOK millions 4,569 3,760 4,210 3,917 3,123 Interest-bearing liabilities NOK millions 9,029 8,299 7,668 7,222 7,028 Capital employed 2 NOK millions 13,597 12,058 11,878 11,139 10,151 Unrestricted liquidity 3 NOK millions 1,969 1,416 1,412 1,265 1,460 Net interest-bearing liabilities 4 NOK millions 8,560 8,257 7,647 7,155 6,976 Interest-bearing liabilities due over coming 12 months NOK millions 1,745 1,184 1,773 2,433 1,769 Bank deposits excluding restricted assets NOK millions 469 42 21 67 52
CASH FLOW Net cash provided by operating activities NOK millions 1,502 1,512 1,486 970 2,097 Dividends paid NOK millions 706 713 626 653 902 Maintenance investments NOK millions 571 331 509 355 355 Investments in expansion NOK millions 715 805 790 601 373 Net change in loans to associates and joint arrangements NOK millions -105 22 23 44 -1 Acquisition of shares/ownership interests NOK millions 81 42 56 60 78
AGDER ENERGI ANNUAL REPORT 2015 3
Intruduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
KEY FIGURES
FINANCIAL POSITION 2015 2014 2013
Equity 4,569 3,760 4,210
Interest-bearing liabilities 9,029 8,299 7,668
Capital employed 13,597 12,058 11,878
Total assets 18,520 16,418 16,091
Def. 2015 2014 2013 2012 2011
FINANCING FIGURES Funds from operation (FFO) 5 NOK millions 1,865 1,992 1,611 1,438 1,398 FFO/Net interest-bearing liabilities % 21.9 25.1 21.8 20.0 19.8 Net interest-bearing liabilities/Underlying EBITDA 3.8 3.3 3.3 3.7 3.6 FFO interest cover 6 6.7 6.8 5.4 4.6 4.1 Equity ratio 7 % 24.7 22.9 26.2 25.7 21.3
KEY FIGURES EBITDA margin 8 % 35.6 29.5 30.4 25.5 27.2 EBITDA margin, underlying % 29.3 31.0 26.1 22.7 19.8 Return on capital employed before tax 9 % 17.3 10.8 17.6 17.8 23.5 Return on capital employed after tax 10 % 11.1 5.8 9.2 11.9 13.0 Return on equity after tax 11 % 29.3 11.9 20.8 29.7 35.1
HYDROELECTRIC POWER Underlying EBITDA NOK millions 1,920 1,920 1,675 1,570 1,440 Actual electricity generation 12 GWh 8,995 9,060 7,738 8,138 6,550 Expected electricity generation 12 GWh 7,900 7,900 7,700 7,700 7,700 Reservoir reserves at 31 Dec. GWh 5,185 3,900 4,250 4,450 4,500 Reservoir capacity GWh 5,250 5,250 5,250 5,250 5,250 Average spot price øre/kWh 17.7 22.8 29.1 21.8 36.0 Electricity price realised øre/kWh 25.8 28.2 29.0 26.3 30.0 Cost of generation/kWh øre/kWh 10.9 10.6 9.1 8.7 8.3
NETWORK Underlying EBITDA NOK millions 410 359 685 324 328 Number of transmission and distribution customers 1,000 190 190 188 184 178 Energy supplied GWh 5,624 5,454 5,308 5,295 5,422 Power grid capital (NVE capital) 13 NOK millions 3,833 3,691 3,523 3,322 3,139 KILE cost 14 NOK millions 61 50 45 27 55
AGDER ENERGI ANNUAL REPORT 2015 4
Intruduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
KEY FIGURES
Def. 2015 2014 2013 2012 2011
ELECTRICITY SALES Underlying EBITDA NOK millions 104 114 101 61 81 EBITDA margin % 4.6 4.2 2.6 1.8 1.7 Electricity sales GWh 8,470 8,670 9,849 9,777 10,409
CONTRACTING Underlying EBITDA NOK millions -8 22 16 -31 40 EBITDA margin % -0.8 2.4 1.9 -2.0 2.8 Share of turnover from intra-group transactions % 17.5 20.1 25.1 15.2 16.5 Order backlog NOK millions 791 625 810 823 842
DISTRICT HEATING Underlying EBITDA NOK millions 28 25 29 29 20 District heating supplied GWh 125 118 130 122 105 Price of energy sold øre/kWh 56 57 60 56 70 Gross margin øre/kWh 24 25 39 44 39 Share of renewable generation % 98 98 97 97 92
EMPLOYEES, HEALTH AND SAFETY Number of permanent and temporary staff at 31 Dec. 1,294 1,245 1,551 1,529 1,579 Number of permanent and temporary full-time equivalents at 31 Dec. 1,270 1,220 1,526 1,494 1,536 Sickness absence % 3.5 3.6 3.6 3.9 4.7 Lost time injury frequency (H1) 3.0 3.5 3.9 6.8 7.9 Total injury frequency (H2) 6.4 8.4 11.2 12.9 16.2
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)/ 3. Bank deposits and unused credit facilities. average capital employed Excludes restricted assets 11. Profit for the year/average equity 4. Interest-bearing liabilities – unrestricted liquidity 12. All power generation figures are quoted prior to pumping 5. Underlying EBITDA + dividends from A and JV + finance income and losses – 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
AGDER ENERGI ANNUAL REPORT 2015 5
Intruduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
GROUP MANAGEMENT
Tom Nysted Steffen Syvertsen
Pernille Kring Gulowsen Frank Håland
Jan T. Tønnessen Edvard Lauen
AGDER ENERGI ANNUAL REPORT 2015 6
Intruduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
GROUP STRUCTURE
CEO Tom Nysted
HR AND FINANCE AND RISK MANAGEMENT SHARED SERVICES Pernille K. Gulowsen Frank Håland
CSR AND CORPORATE DEVELOPMENT Unni Farestveit
MARKET ENERGY MANAGEMENT HYDROELECTRIC POWER NETWORK Steffen Syvertsen Edvard Lauen Jan T. Tønnessen Svein Are Folgerø
OTERA AS
LOS AS Administrative and shared service
Business areas
AE VARME AS Subsidiaries
AE VENTURE AS
AGDER ENERGI ANNUAL REPORT 2015 7
Intruduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
WHERE WE OPERATE
Kraftstasjon
Fremmøteplass/kontor Power station
Fjernvarme/-kjøling Premises/offices
District heating/coolingAnlegg under bygging
Oslo Power stations under construction Skien Langhus Stockholm
Gøteborg
Holen Skarg
Brussel Valle
Finndøla Brokke Nomeland Rysstad Zürich
Hekni Nisserdam Tjønnefoss Hovatn Dynjanfoss Høgefoss Berlifoss Jørundland
Logna Kuli Longerak
Tonstad Osen Smeland Finså
Skjerka dammer Evje Skjerka Uleberg Lislevatn Hanefoss Evenstad Håverstad
Stoa ARENDAL Iveland 2 Rygene Kvinesdal Iveland Nomeland Trøngsla GRIMSTAD Steinsfoss FLEKKEFJORD Høylandsfoss Hunsfoss Færåsen Laudal LILLESAND Tryland
LYNGDAL
KRISTIANSAND FARSUND
MANDAL Lindesnes
AGDER ENERGI ANNUAL REPORT 2015 8
Intruduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
AGDER ENERGI IN BRIEF
Agder Energi manages natural, rene tise and an important employer. The The electricity retailer LOS AS operates wable energy sources and converts them Group has around 1,250 employees, under two brand names: LOS Energy in into electricity. The Group’s activities mainly based in the counties of Aust- the Scandinavian business energy supply comprise the generation, distribution and Agder and Vest-Agder in southern market and LOS in the Norwegian sale of renewable energy, as well as Norway, but also elsewhere in Norway, as domestic market. LOS Energy is the providing energy-related services. well as in Sweden, Belgium and leading supplier of Norwegian businesses, Switzerland. The Group’s head office is in while LOS is one of the top three suppli- Hydroelectric power is a perpetual Kristiansand. ers to the domestic market. natural resource, and by harnessing it Agder Energi is able to add value for its Measured in hydroelectric power Otera supplies technical services to shareholders, employees and wider generation, Agder Energi is Norway’s customers responsible for building, ope- society. Agder Energi has a significant fourth-largest energy supplier. Each year, rating and maintaining infrastructure. impact on the wider economy of south- the Group’s 49 wholly-owned and part- The company specialises in power grids ern Norway, both by purchasing local owned power stations produce around and renewable energy, and it operates in goods and services and through the divi- 7.9 TWh of renewable energy. Norway and Sweden. dends and taxes that we pay to the shareholder municipalities. Agder Energi Nett owns and operates the Agder Energi Varme operates district transmission and distribution networks in heating plants in places such as Agder Energi is owned by the 30 munici- Vest-Agder and Aust-Agder, which Kristiansand, Arendal and Grimstad. palities in the region (54.5%) and comprise 20,600 km of power lines and Statkraft Industrial Holding AS (45.5%). cables. The company has 190,000 trans- Agder Energi is a major centre of exper- mission and distribution customers.
VISION AND VALUES
Agder Energi’s vision is to be one of the leading companies in the Norwegian renewable energy sector. This involves taking a long- term view and thinking on an industrial scale. Moreover, it means that while the Group has regional and national roots, it also has an international perspective.
The Group has defined its values as closeness, credibility, dynamism and innovation:
• 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.
AGDER ENERGI ANNUAL REPORT 2015 9
Intruduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
OUR BUSINESS
Agder Energi has four business areas, Network • LOS AS is Norway’s biggest supplier of which reflect the Group’s core activities and The Network business area, which operates electricity to businesses, and the how it generates added value: Hydroelectric a monopoly, has a duty to society to provide country’s third biggest electricity supplier Power, Energy Management, Network and electrical energy to end users. The govern- overall. LOS generates profit from the Marketing/Business Development. ment caps its revenues, which means that margin it achieves on electricity sales, efficient operation and successful manage- and by having a cost-efficient business The parent company, Agder Energi AS, ment of the power grid well are the main model. performs strategic management and drivers of value for the business area. provides shared services. • Agder Energi Varme AS supplies district The business area, which operates through heating and cooling in the Agder region. The business areas and administrative Agder Energi Nett AS, is responsible for The company adds value by investing in departments at the parent company are led building, operating and maintaining the infrastructure for generating and by directors. They and the CEO constitute transmission and distribution grid in Aust- distributing water-based heating and the senior management team. Agder and Vest-Agder. The company is an cooling to buildings. It generates energy independent entity controlled by its own using waste heat and renewable energy Hydroelectric Power AGM and Board. sources. The Hydroelectric Power business area is responsible for developing, operating and Marketing/Business development • Agder Energi Venture AS invests in maintaining the Group’s wholly-owned and The Marketing/Business development energy-related businesses from start-up part-owned hydroelectric power stations. business area comprises the contractor through to maturity, and adds value by The biggest driver of value creation for the Otera AS, the retail supplier LOS AS, and actively helping to develop them. business is its power generating capacity. the district heating supplier Agder Energi This is affected by the availability of plant at Varme AS, as well as the Group’s strategic Goals and results power stations, reservoir volumes permitted and financial investments. The goals and results of the business by its licence terms and addition of new areas are discussed in the Directors’ capacity through reinvestment and by • Otera AS is one of Norway’s largest Report and in Note 1 Segment Infor- obtaining new licences. electrical infrastructure contractors. Its mation to the consolidated financial financial results are driven by its ability to statements of the Agder Energi Group. It operates through the company Agder implement projects successfully and Energi Vannkraft AS. efficiently.
Energy Management The Energy Management business area is responsible for maximising profit from the electricity generated by the Group. It does this by trying to optimise scheduling and by managing market risks, taking into account hydrology, weather data and in- formation about markets. The business area is also responsible for the Group’s trading portfolios.
These activities are performed by the company Agder Energi Kraftforvaltning AS, which acts on behalf of Agder Energi Vann- kraft AS.
Senior business process advisor Eli Eik-Hvidsten and senior ICT advisor Ole Fredrik Sunde-Dahl of Agder Energi.
AGDER ENERGI ANNUAL REPORT 2015 10
Intruduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
IMPORTANT EVENTS IN 2015
In April the government announced that In November Agder Energi, Statkraft, opened in October. Its installed capacity it wanted to introduce a requirement for BKK and Skagerak Energi signed an is 4.2 MW, and its annual electricity legal and functional separation at all agreement to sell all of the shares in generation will be 18.5 GWh, equivalent companies which operate power grids. Småkraft AS, Norway’s largest developer to the consumption of around 900 Agder Energi’s organisational structure of small hydro projects. The transaction households. is already in line with the government’s was completed in December, and the proposal, so it would only need to make shares were acquired by the German NorgesGruppen signed in December a minor adaptations. For the power grid investment fund Aquila Capital. The sale threeyear electricity supply agreement industry as a whole, however, the frees up capital that can be reinvested with LOS Energy. The agreement, which proposal might lead to consolidation. in Agder Energi’s core business, and is worth around NOK 600 million, covers confirms the value generated through 1,600 retail outlets whose annual Otera signed in March a contract with Småkraft AS. consumption is 730 GWh. That is Nordlandsnett to build 132 kV high- equivalent to the consumption of around voltage lines across Svartisen. The Lislevatn power station in Evje og 40,000 households. contract is worth around NOK 60 million. Hornnes municipality was officially
In June Bergen City Council chose LOS Energy as its new electricity supplier. The agreement, which has an annual value of almost NOK 80 million, will run for two years, with a possible two-year extension.
The Norwegian Water Resources and Energy Directorate recommended in September that the Ministry of Petroleum and Energy grant licences for the Åseral projects. These projects include a new generator at Skjerka power station, a tunnel between the lakes Langevatn and Nåvatn, two new power stations and a new dam to regulate Langevatn. If the projects are completed, they will add 143 GWh of annual electricity generation.
Otera signed in September an agreement with Sognekraft to build a 132 kV power line in Sogn og Fjordane. The contract is worth just over NOK 30 million.
Miriam Rosland Hvass Johannessen is a customer service agent at LOS.
AGDER ENERGI ANNUAL REPORT 2015 11
IntroductionIntruduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
Agder Energi Vannkraft is building two new rock-fill dams at Lake Skjerkevatn in Åseral. The dams will replace five old concrete dams, and the water level in the lake will be raised by 23 metres. A spillway is also being built, as well as a diversion tunnel with outlet gates to ensure that flood water is safely diverted.
After the project is completed, annual generation at Skjerka power station will increase by around 35 GWh. That is equivalent to the energy consumption of 1,750 average households.
AGDER ENERGI AND THE ENERGI INDUSTRY
AGDER ENERGI ANNUAL REPORT 2015 12
Intruduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
AGDER ENERGI AND THE ENERGY INDUSTRY: OUTLOOK 2030
Hydroelectric power represents the is what we did in 2015. In spite of elec- implemented a number of measures in- future for Norway – and for Agder tricity prices falling to levels last seen cluding restructurings, pay moderation Energi. As a country, Norway has unique at the start of the millennium, Agder and contract renegotiations. We are hydropower resources: 1,500 hydro Energi managed to deliver strong finan- working systematically on continuous power stations generating 25 percent cial results. In 2001 our profit after tax improvement throughout our organi- of Europe’s hydroelectric power and was NOK 134 million, whereas in 2015 it sation. We are in a strong position to 1,200 reservoirs with 50 percent of was NOK 746 million. proactively respond to the challenges Europe’s reservoir capacity. In spite of of the future in order to add value for Norway being a small country, it is the Over the long term, we must aim to our owners, our employees and the world’s sixth biggest producer of hydro- add even more value. To achieve that, people of Aust-Agder and Vest-Agder, electric power. we must promote closer integrati- by exploiting the opportunities that on of European energy markets and arise. We are proud of the fact that Agder greater efficiency within the fragmen- Energi is one of the major players in ted Norwegian energy industry. Various A low sickness absence rate is one sign the Norwegian hydropower industry. amendments to the legal framework that an organisation thrives on, and is The price of our product fluctuates proposed for 2016 may influencethese inspired by, challenges and change. In – just like in other industries. In 2015, developments. The biggest impacts 2014 we had a sickness absence rate of prices were consistently very low. It are likely to come from amendments 3.6 percent – a new record low. In 2015 is also likely that they will remain low that will facilitate faster development it fell even further, to 3.5 percent. Our for some time. Nevertheless, we must of international interconnectors, make goal for 2016 is to reduce this figure to think and act for the long term. With it easier for energy-intensive busines- 3 percent. nuclear power on the wane, and oil and ses to invest in hydropower and require gas markets in turmoil, Europe’s green functional separation at all companies In other words, Agder Energi is striving transition needs our electricity, We may which both generate power and operate hard to become an even healthier have to wait some time, but prices will power grids. At Agder Energi we have business, in every sense of the word. eventually rise. We have the most se- put a lot of thought into these questions cure, cleanest and longest-term energy over the past year. resource available. If we are to add more value, we must In the short term, our job is to manage also continue to improve our own or- this asset as efficiently as possible. That ganisation. In recent years we have Tom Nysted CEO
AGDER ENERGI ANNUAL REPORT 2015 13
IntruductionIntroduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
CORPORATE GOVERNANCE
AGDERAGDER ENERGI ENERGI ANNUAL ÅRSRAPPORT REPORT 20152014 14
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
CORPORATE GOVERNANCE
Statement of Compliance with high ethical standards, and it dis- there are separate internal rules in place In accordance with Section 3-3b of the cusses ethical issues openly both within of the joint guidelines. Norwegian Accounting Act, Agder Energi the company and with third parties. Our has a duty to report on its corporate business partners are also expected to 2. Business activities governance procedures. Agder Energi have high ethical standards consistent Agder Energi’s purpose is defined in the has chosen to follow the corporate with those of the Group. Our internal company’s articles of association: «The governance recommendations set out in control system, including our whistle- company’s purpose is to: exploit, produce the 8th edition of the Norwegian Code of blowing procedures and ethics and sell energy; contribute to the safe Practice published by the Norwegian committee, are designed to ensure that and efficient supply of energy; and Corporate Governance Committee our organisation and employees are exploit related, profitable business opp- (NUES), published on 30 October 2014. able to follow the guidelines. ortunities within the energy and infra- structure sectors.» As Agder Energi is not a publicly traded The ethical guidelines can be found on company, it is not obliged to follow the the Group’s website ae.no. Agder Energi is one of Norway’s biggest recommendations. Nevertheless, it has energy companies, as well as being a chosen to implement them in so far as it Corporate social responsibility (CSR) major employer, with 1,250 employees. considers them relevant and appropriate. The Norwegian Accounting Act, The Group’s core business consists of Norwegian Corporate Governance hydropower generation, energy manage- Below we have set out how Agder Energi Committee’s Code of Practice and Global ment and grid operation. Agder Energi has chosen to follow the recommenda- Reporting Initiative (GRI) all establish also has extensive business operations tions. Each heading represents one rules on how Agder Energi must fulfil its in contracting, retail electricity sales and topic covered by the recommendations. corporate social responsibility and district heating. Agder Energi has chosen to adapt communicate what it does. These Section 4 to Section 8 to reflect its ope- Norwegian and international guidelines Agder Energi has goals and strategies rations and ownership structure. Apart all emphasise the following four areas: covering the whole group, for each busi- from this, Agder Energi considers that it Human rights, employment rights, envi- ness area and subsidiary, and for certain complies fully with the Code of Practice. ronmental protection and combating aspects of its operations. corruption. Agder Energi’s corporate so- 1. Corporate Governance Statement cial responsibility strategy sets out the There is a more detailed description of The adopted corporate governance Group’s definitions, goals, plan of action, the Group’s business activities in a principles regulate the relationship areas of responsibility and reporting separate section of this annual report. between the shareholders, Board of structure in relation to CSR. Directors and executive management of 3. Equity and dividends a company, as well as describing the This annual report includes a separate At 31 December 2015, the Group had relevant roles and reporting structures. section with more information about NOK 4,569 million of equity, giving it an CSR at Agder Energi. equity ratio of 24.7%. The Board of Ethical guidelines Directors considers it important for the Ethics constitutes an integral part of Exemption from the Group’s joint Group to have sufficient equity to provi- the Group’s operations and of its overall guidelines de financial stability, bearing in mind its risk management process. Along with The operations of some the subsidiaries stated goals, strategy and risk profile. its values, the ethical guidelines adop- in the Group are very remote from, and ted by the Group provide the foundation have little in common with, the core The Group’s dividend policy reflects the and framework for its activities and set activities of Agder Energi, and there are stated aim of giving shareholders a sta- out model and obligatory conduct at our few synergies to be realised by inte ble and predictable return on their in- organisation. The guidelines apply to all grating them more closely with the vestment through cash dividends. The employees, Board members, contrac- Group’s other activities. This may apply Group’s future dividend policy will de- tors, consultants, intermediaries, lobby- to companies in the Group’s develop- pend on parameters such as the Group’s ists and other people acting on behalf ment portfolio, subsidiary groups or joint strategic priorities, expected cash flow, of Agder Energi. ventures. These companies are exemp- investment plans, financing require- ted from some of the Group’s joint guide ments, the need for adequate financial Agder Energi requires all people who lines. Any exemptions are specified in flexibility and debt-servicing ability. act on behalf of the Group to comply the relevant internal guidelines, and
AGDER ENERGI ANNUAL REPORT 2015 15
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
Equity raising The shareholders’ agreement contains Limited Liability Companies Act and Equity increases shall be proposed by the certain rules on the work of the election other relevant legislation, the company’s Board and discussed by the AGM. The committee, designed to ensure compli- articles of association and the Board gui- Board is not currently authorised to carry ance with the stipulations of the agree- delines. Each year, the Board reviews its out equity increases. ment. own work and its combined expertise.
4. Equal treatment of shareholders 8. Composition and independence of The Board appoints the CEO. The Board and transactions with related parties the corporate assembly and Board of has drawn up instructions for, and dele- Agder Energi has two classes of shares: Directors gated authority to, the CEO. A and B. Class A shares can only be ow- There are 15 members of Agder Energi’s ned by hydropower licensors. Beyond corporate assembly. Five representati- Audit committee this, class A and B shares confer the ves are elected by and from the In accordance with the Stock Exchange same rights. employees, five from the municipal Regulations, the Board of Agder Energi shareholders and five from Statkraft. has established an audit committee that For significant transactions between The corporate assembly is elected for a assists and advises the Board in relation the company and shareholders, Board two-year term, and elects its own Chair to its supervision of the Group’s finan- members, key employees or any of their and Deputy Chair. The corporate assem- cial reporting and the effectiveness of related parties, the Board shall obtain a bly is invested with the authority and its internal control systems. valuation from an independent third entrusted with the tasks specified in party. current legislation governing limited 10. Risk management and internal liability companies. controls 5. Free negotiability Agder Energi has designed its risk Restrictions established by the share- Details of the current members of the management principles based on the holders’ agreement between the owners corporate assembly can be found on the guidance of the COSO framework for en- of Agder Energi mean that the shares Group’s website ae.no. terprise risk management (2004/2005), are not freely negotiable. and risk management and internal Under the shareholder agreement, controls are fully integrated into its 6. Annual General Meeting twelve people sit on the Group’s Board corporate governance. Under the agreements between share- of Directors. Four members, including holders, the AGM is only attended by the Chair and Deputy Chair, are elected The Group is inevitably exposed to risks one representative of the shareholder at the proposal of the municipal share- in a variety of areas throughout the municipalities and one representative of holders, four members are elected at value chain. The most important risks Statkraft Industrial Holding. The Chair of the proposal of Statkraft and four at the relate to market price movements, the Board, CEO and external auditor proposal of the employees. The executi- capital scarcity, operational issues, the shall also attend. The election commit- ve management is not represented on regulatory environment and re- tee and Board members are also entit- the Board. Board members are elected structuring. led to attend. for a two-year term. In line with the Board’s guidelines, the 7. Election committee Board members are listed in Note 32 to Group performs an annual review of The articles of association specify that the consolidated financial statements. internal controls and risk management the company shall have an election in collaboration with the external committee. It consists of five members, Entitlement of Board members to own auditor. Risk assessments and changes who are appointed for a two-year term. shares to the regulatory environment are Under the current shareholders’ agree- Under the company’s articles of associ- reported regularly to the Board, and all ment, the municipal shareholders can ation and the shareholders’ agreement, subsidiaries produce an annual self- appoint three members, while Statkraft neither Board members nor other declaration on their internal controls. can appoint two. The election commit- private individuals are entitled to own tee nominates candidates for the corpo- shares in Agder Energi. There is a more detailed description of rate assembly and for the Board of Di- Agder Energi’s internal control and risk rectors. 9. The work of the Board management systems in a separate The Board’s tasks are regulated by the section of this annual report.
AGDER ENERGI ANNUAL REPORT 2015 16
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
11. Board fees established for this purpose: the owners’ cial year to the audit committee and Members of the Board are paid based on meeting and the work committee. points out any major weaknesses un their roles. Their fees are not profit- covered in the internal controls related related. No Board members are entitled The municipal owners understand that to financial reporting. to a pension, options or termination the procedures for reporting financial compensation from the company, apart information to Statkraft mean that the The external auditor must also: from the entitlements of the employee latter owner is frequently updated • confirm his independence each year representatives on the Board in their before the municipalities. • state which services other than sta- capacity as employees of the company. tutory auditing that he has provided The Group’s website ae.no provides to the Group during the financial year Details of the fees paid to individual access to financial reports and other • describe any threats to his indepen- Board members are presented in Note 32 important information about Agder dence and document any measures to the consolidated financial statements. Energi. implemented to mitigate them
12. Management compensation 14. Acquisitions and disposals The Group’s central finance function is Management compensation reflects the The shareholders’ agreement defines kept informed of any consulting, tax Group’s guidelines on compensation. the pre-emptive rights of current share- advice and other services provided by Members of the senior management holders in the event of shares being the external Group auditor that are not team are not entitled to any options, bo- sold. related to the normal auditing process. nuses or performance-related pay. The external Group auditor is responsi- The disposal and acquisition of owner ble for constantly assessing his own in- Details of the compensation of each ship interests and subsidiaries is hand- dependence. individual member of the senior manage- led in accordance with the relevant ment team are presented in Note 32 to authorisations at Agder Energi. Dispo- The external auditor attends the audit the consolidated financial statements. sals and acquisitions can take place as a committee’s meetings, as well as the result of the strategic decisions of com- Board meeting at which the financial 13. Information and communication panies in the Group or through the statements are approved. The auditor Agder Energi satisfies all statutory requi- wholly-owned subsidiary Agder Energi also meets the Board at least once a rements relating to financial reporting Venture. year without Agder Energi’s executive and disclosure. The Group considers management being present. Norwegian maintaining good, appropriate lines of 15. External auditor laws and regulations define which types communication with its owners and ex- Ernst & Young was the Group’s external of non-audit services the external ternal stakeholders to be a priority. auditor in 2015. auditor can provide to Agder Energi. The auditor’s fee is set out in Note 10 to the The thirty municipal shareholders coordi- The external auditor describes the key consolidated financial statements. nate their activities through two forums points of the audit of the previous finan-
AGDER ENERGI ANNUAL REPORT 2015 17
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
ENTERPRISE RISK MANAGEMENT
RISK MANAGEMENT
At Agder Energi, risk management is an operational efficiency. The relative priority activities and using shared communication integrated part of corporate governance, given to these four elements depends on channels. both at the strategic and operational levels. the nature of the businesses and their bu- siness models. Areas that involve trading The general analysis of Agder Energi’s Corporate governance in financial markets have special risk ma- overall risk exposure takes place at the In order to ensure that the instructions nagement strategies and limits on risk Group level, based on individual compa- of the owners are followed, and that the exposure. nies’ reports combined with the strategic Group is managed appropriately, the assessments of the senior management Board has established guidelines for its Risk assessments and risk management team, the technical assessments of shared own activities, instructions at subsidiaries The Group’s risk management systems deal services and the technical groups, and the and instructions and an authorisation ma- with potential positive and negative out Group auditor’s comments. The analysis is trix for the Group CEO. These documents comes in relation to the company’s goals. summarised under three main headings: underpin the Group’s strategy, which in HSE has top priority and is always the HSE risk, which covers sickness absence turn sets out goals and priorities for the first item on the agenda at management and accidents; profitability, which relates Group and its business areas. The Board meetings, both at a Group level and within to potential impacts on financial results; has also approved a general description the individual companies. and long-term returns on investment, which of its corporate governance model, which is particularly sensitive to changes in the together with the adopted limits on risk Individual companies are responsible for regulatory framework. Risk assessments exposure and company guidelines provides identifying and monitoring their own risk are included in reports to the Board. the basis for the executive management’s exposures, and risk management at the integrated risk management activities. operational level takes place across the Tools and processes organisation as an integrated part of In order to promote integrated corporate Business plans and risk management normal business activities. Companies governance processes, the Group has im- strategies report their risk assessments and risk plemented a combined governance and As part of the implementation of the management activities to the Group. information management solution, which Group’s strategy and limits on risk helps to further integrate financial and risk exposure, all of the Group’s business areas Inter-company technical groups have been management into management processes. have drawn up business plans. The business set up for HSE, quality, risk management We will continue to develop our corporate plans set out goals, areas of priority and and controlling. They help to strengthen governance systems in parallel with the strategies for managing risk. The areas technical expertise and increase efficien- development of the Group as a whole. covered are HSE, markets, finance and cy by sharing experiences, coordinating
INTERNAL CONTROLS
Internal control system Through SLIK, the full range of the tablished to ensure that suggestions Internal controls at the company are Group’s governance documents – from and proposed changes are recorded and implemented through clear guidelines and steering documents through manuals discussed. This helps to continuously de- established processes. This is documented to descriptions of work processes – are velop and improve the company’s estab- by the fact that governance documents easily accessible on the Group’s intranet lished practices. have been made available to all employees «Energisk». Subsidiaries in the Group through our quality management system implement SLIK across the organisation Control mechanisms «THIS is how we do things at Agder through their own corporate governance Agder Energi has established control Energi », generally abbreviated to the systems with company-specific gover- mechanisms for critical aspects of first word of the Norwegian name – SLIK. nance documents. processes in order to prevent, or rapidly SLIK has been established in accordance correct, any nonconformities. These with the recommendations contained in SLIK is an important foundation for the comprise a combination of manual controls the COSO framework and in the Code Group’s work on integrated risk manage such as check lists, access controls such of Practice drawn up by the Norwegian ment, internal controls and continuous as electronic approval processes follow- Corporate Governance Committee (NUES). improvement. Systems have been es- ing the four eyes principle and automatic
AGDER ENERGI ANNUAL REPORT 2015 18
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
notification systems such as position Auditing in place for dealing with whistleblower monitoring for trading portfolios. Agder Energi has an internal audit service, reports. Such reports are treated in strict which assists the Board, senior manage- confidence unless criminal conduct is In addition, all subsidiaries must submit an ment team and business areas by providing involved. Agder Energi has established annual self-declaration on their internal an independent, unbiased assessment of procedures that safeguard the rights of controls. This is done through a common the Group’s risk management procedures. whistleblowers. reporting format that makes it clear what The internal audit service’s mandate and kinds of controls the Group expects its guidelines are approved by the Board, In the past, Agder Energi’s system for re- subsidiaries to implement. which also reviews the internal audit ser- porting unwanted incidents mainly dealt vice’s annual report and its audit plans. with HSE issues. In 2015 the system was Monitoring extended to also cover suggested im- In order to pick up on changes that are The external auditor is chosen by the provements, leading to an increase in relevant to the company’s business, Agder AGM, and is responsible for the financial the number of reports on processes un- Energi has introduced an Early Warning audit of the parent company, Group and related to HSE. During 2015 the system system. This system is used to carefully subsidiaries. Agder Energi has a Group- for reporting unwanted incidents and sug- monitor developments in the regulatory wide agreement with Ernst & Young, which gested improvements was rolled out to environment and markets in which the must be used by all subsidiaries for the more platforms, including a mobile phone Group operates, as well as technological statutory audit. Companies in the Group’s app and a new web-based reporting solu- developments. The information thus ob- seed and venture capital portfolios can tion. Here people can report and record tained is used in strategic and commercial have a different auditor. nonconformities, observations, suggested decision-making procedures. The manage- improvements, accidents and near misses. ment and Board are given regular updates, Whistleblowing procedures The reports are analysed with a view to lim- and are notified explicitly of any critical The Group has several channels for whistle iting potential consequences, ensuring that scenarios. blowing, one of which is independent of the causes are uncovered and implement- the company. There are formal procedures ing measures for continuous improvement.
RISK MANAGEMENT
The Group is inevitably exposed to risks amount of electricity sold through futures heavy investment, both in power stations in a variety of areas throughout the value contracts is continuously adjusted, bearing and grid upgrades, Agder Energi has more chain. The most important risks relate to in mind the company’s price expecta- investment opportunities than it is capable market price movements, capital scarcity, tions and generating capacity. The sale of pursuing. Agder Energi considers poor operational issues, the regulatory environ- of currency futures also takes into account capital allocation to be one of the most ment and adaptation. electricity price hedging and the total risk important strategic risks that it faces dur- associated with the generation portfolio. ing this period. Information used to reach Market risk The Group’s hedging strategy significantly decisions about investment projects is Agder Energi is exposed to significant reduced the potential impacts of market entered in a model for long-term capital market risk through the generation and movements on profitability in 2015. allocation, which is designed to ensure trading of electricity, with its revenues optimal use of capital at the Group. from electricity sales being exposed to At the retail business, which is considered electricity price risk and currency risk. a margin business, financial instruments That same model is also used to stress are used to minimise the electricity price test the Group’s profitability and debt- Hedging strategies for the power risk and currency risk. servicing capacity in the critical scenarios generation portfolio are subject to limits reported by the Early Warning system. The on how much power can be sold through Capital allocation Group has drawn up a financial conting futures contracts and close monitoring Agder Energi has a clearly stated goal for ency plan in order to make clear the of downside risks. Agder Energi has built its shadow rating, both to ensure that the financial resources it can draw on should up a strong team specialising in energy company is managed well and to provide the need arise. management, analysis and modelling. access to credit markets. With the power Subject to the above constraints, the sector currently going through a period of
AGDER ENERGI ANNUAL REPORT 2015 19
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
Operational risk Regulatory environment offered to the market and new entrants There are operational risks associated Changes in the regulatory environment taking the fight to the traditional players. with all of the processes in the value and political decisions affect the compa- Companies offering technologies based on chain. The most important ones are the ny’s room for manoeuvre and constitute batteries, wind, solar, hydro and hydrogen risk of injuries to the Group’s employees a significant element of the Group’s risk are all competing for space in the electric and third parties, damage to power plants, exposure. Agder Energi works systemati- power market of the future. Agder Energi distribution networks and other assets, cally to understand how the regulatory en- will need to adapt if it wants to remain a negative impacts on the environment and vironment is changing and to exploit any key player in the electric power industry, climate, negative impacts on the Group’s available room for manoeuvre. Reports although we do not yet know the exact reputation and the risk of failures in ad- from the Early Warning system describe nature and extent of those adaptations. ministrative and management processes. external developments and uncertain- The Group is working to prepare itself Operational risk is managed through ties, including their potential impacts for this, through measures including a procedures governing activities at op- on the Group, and help to determine the management development programme erating units, and through contingency Group’s stance on issues and processes that focuses on change management plans. Agder Energi participates in the relating to the regulatory environment. and teamwork, and significant investment organisation «Kraftforsyningens bered- These stances underpin Agder Energi’s in frameworks and tools for continuous skapsorganisasjon» (KBO) as a power messages in consultation processes, and improvement. generating company, district heating provide a guide for any internal adjust- company and grid operator. This requires ments that need to be carried out by it to have appropriate contingency plans Agder Energi. The Group believes strongly and preventive measures in place. For the in open dialogue with all relevant decision- purpose of risk management, Agder En- makers and in maintaining good relation- ergi has chosen to establish contingency ships with all stakeholders. plans, training exercises and preventive measures even at companies not covered Adaptation by the KBO requirements. Change is coming to the power sector, with a variety of energy solutions being
AGDER ENERGI ANNUAL REPORT 2015 20
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
CORPORATE SOCIAL RESPONSIBILITY
Renewable energy is part of the solution Agder Energi has adopted a Group stra- Labour rights to the global crisis arising from climate tegy and methodology that establish gui- Agder Energi and its suppliers shall comply change, and electricity plays a key role delines for the business areas’ activities with the eight fundamental conventions in society. Consequently, the Group’s with respect to CSR. of the International Labour Organisation core business is inherently sustainable. (ILO) on the right to organise, the right to Nevertheless, we realise the importance In June 2014, the Agder Energi Group collective bargaining and the elimination of how we conduct our core business at adopted a new CSR strategy, and Group of forced labour, child labour and discri- Agder Energi. CSR goals were adopted in autumn 2014. mination at the workplace. In autumn 2014 we signed up to the UN Agder Energi’s CSR goals: Global Compact on sustainable develop- The environment ment. Agder Energi’s CSR goals are linked Each company within the Agder Energi Agder Energi is one of Norway’s largest to the ten basic principles of the UN Group draws up environmental goals for producers of renewable energy, and its Global Compact. The joint goals for the its operations, reflecting the nature of its CSR activities are designed to ensure that Group are implemented by the individual business. Suppliers must have procedu- its operations are run in a sustainable and companies, which also draw up company- res in place for environmental protection ethical way. specificgoals. Agder Energi requires its measures. suppliers to take into account the Group’s The Norwegian Accounting Act, Norwegian CSR goals. Anti-corruption Corporate Governance Committee’s Code Agder Energi’s goal is that no form of Practice and Global Reporting Initia- The joint Group CSR goals are: of active or passive corruption shall tive (GRI) all establish rules on how Agder take place within the Group’s business Energi must fulfil its corporate social re- Human rights activities. sponsibility and communicate what it Agder Energi and its suppliers (a supplier does. These Norwegian and international is defined as anyone who performs More information about the Group’s CSR guidelines all emphasise the following services for, or sells products to, Agder activities can be found in the section of four areas: human rights, labour rights, Energi) shall conduct themselves in accor- the annual report on CSR and in the CSR the environment and anti-corruption. dance with the UN’s internationally accep- appendix for 2015 on www.ae.no. Agder Energi wishes to integrate social ted human rights conventions. The Group and environmental considerations into its and its suppliers shall not be complicit in operations, its decision-making processes the breach of human rights. and the activities of its suppliers.
AGDER ENERGI ANNUAL REPORT 2015 21
IntruductionIntroduction Corporate governance The Agder Energi Group Agder Energi AS CSR III III < >
DIRECTORS’ REPORT
AGDERAGDER ENERGI ENERGI ANNUAL ÅRSRAPPORT REPORT 2015 22
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
DIRECTORS’ REPORT
Agder Energi manages renewable energy sources and converts them into electricity. The Group’s activities comprise the generation, distribution and sale of energy, as well as energy-related services. Our vision is to be one of the leading companies in the Norwegian renewable energy sector. Most of Agder Energi’s business is done in southern Norway, and the company has its head office in Kristiansand.
The Group’s profit for the year was NOK 2014. Agder Energi’s hydropower stations 1,220 million in 2015 (controlling interest’s generated 8,995 GWh of clean energy in share), compared with NOK 475 million in 2015 (2014: 9,060 GWh).
HIGHLIGHTS IN 2015
In April the government announced that In September the Norwegian Water to sell all of the shares in Småkraft AS, it wanted to introduce a requirement for Resources and Energy Directorate recom- Norway’s largest developer of small hydro legal and functional separation at all mended that the Ministry of Petroleum projects. The transaction was comple- companies which operate power grids. and Energy should grant a licence to the ted in December, and the shares were Agder Energi’s organisational structure Åseral projects. These projects include a acquired by the German investment fund is already in line with the government’s new generator at Skjerka power station, a Aquila Capital. The sale freed up capital proposal, so the Group would only need tunnel between the lakes Langevatn and that can be reinvested in Agder Energi’s to make minor adaptations. For the power Nåvatn, two new power stations and a new core business, and gave a NOK 105 million grid industry as a whole, however, the dam to regulate Langevatn. If the projects accounting gain. proposal might lead to consolidation. are completed, they will add 143 GWh of annual electricity generation. In December LOS Energy signed a In June Statkraft, TrønderEnergi, NTE, three-year electricity supply agreement Agder Energi and Statnett agreed to Lislevatn power station in Evje og Hornnes with NorgesGruppen. The agreement, review opportunities for developing wind municipality was opened in October. The which is worth around NOK 600 million, projects in central Norway with a total power station’s installed capacity is 4.2 covers 1,600 retail outlets whose annual nameplate capacity of 1,000 MW. All of MW, and its annual electricity generation consumption is 730 GWh. That is equi the four power companies’ relevant wind will be 19 GWh, equivalent to the consump- valent to the consumption of around power projects in central Norway will be tion of around 900 households. 40,000 households. jointly reviewed, including all of the rele- vant licensed projects of Fosen Vind, SAE In November, Agder Energi, Statkraft, BKK Vind and Sarepta Energi. and Skagerak Energi signed an agreement
FINANCIAL PERFORMANCE
Agder Energi’s operating revenues in 2015 energy sales at the Group’s power genera- operating profit fell at the hydroelectric were NOK 8,361 million, up NOK 553 mil- tion and retail businesses fell by NOK 520 power business. lion from NOK 7,808 million in 2014. The million, pushed down by lower electricity main reason for the increase was unreali- prices in 2015. Net financial expenses came to NOK 470 sed gains on electricity contracts. Higher million, compared with NOK 717 million in turnover at Otera and the Group’s venture The Group made an operating profit of 2014. The improvement was attributable capital investments also helped to push NOK 2,399 (1,715) million, up NOK 684 to a stronger performance at associates up other operating revenues by NOK 245 million over 2014. The biggest contribu- and lower unrealised foreign exchange million. Although there was only a slight tion to the increase came from unrealised and interest rate losses. Realised foreign decline in sales by volume, the value of gains on electricity contracts. Meanwhile, exchange losses, meanwhile, rose.
AGDER ENERGI ANNUAL REPORT 2015 23
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
Share of profit of associates and joint of 2016 reduced the tax expense for 2015 cash provided by operating activities. Over ventures benefited from a NOK 115 mil- by NOK 32 million. 90% of the investments in property, plant lion gain on the disposal of Småkraft and and equipment related to the Network a final settlement relating to the sale of The Group’s net income for the year was and Hydroelectric Power business areas. NorGer in 2013. NOK 1,220 million (controlling interest’s Cash received from the sale of Småkraft share), compared with NOK 475 million was the main reason why net cash used Unrealised gains and losses on interest in 2014. in investing activities fell in 2015, in spite rate and currency contracts have a sig- of higher gross investment. nificant impact on the financial state- Capital structure and cash flow ments. Interest rates and exchange rates Agder Energi’s assets had a book value of NOK 706 (713) million in dividends were fluctuated less in 2015 than in 2014, but NOK 18,520 million at the close of 2015, paid out to controlling and non-controlling the Group still recognised a loss of NOK compared with NOK 16,418 in 2014. A interests. Net cash flow less dividends the- 138 (449) million arising from unrealised number of factors were responsible for refore came to NOK 796 (799) million. This changes in the value of interest rate and the increase. High levels of investment means that 90% (69%) of the net invest- currency contracts and euro-denominated in the Hydroelectric Power and Network ment for the year was financed from cash loans. This included an unrealised loss of business areas pushed up the value of flow from operating activities, while the NOK 14 million on interest rate contracts, property, plant and equipment. There was remaining 10% (31%) was debt-financed. compared with a NOK 161 million loss in a spike in the Group’s bank deposits at 2014. Meanwhile, unrealised losses on the turn of the year, while the value of Proposed dividends currency contracts and foreign currency the Group’s portfolio of derivatives rose Agder Energi’s dividend policy states that loans came to NOK 26 (178) million and significantly during 2015. Book equity the proposed dividend for 2015 should be NOK 98 (110) million respectively. rose to NOK 4,569 (3,760) million. This set based on the Group’s net income for was the result of strong net income, as 2014 under NGAAP (Norwegian generally The main components of the NOK 424 well as remeasurements on pensions. The accepted accounting principles). This is to (283) million financial expense were in- Group’s equity ratio at the end of the year ensure that shareholders receive a pre- terest rate expenses and realised foreign was 25% (23%). At the end of the year, the dictable dividend income. The minimum exchange losses. Interest on the Group’s Group had NOK 9,029 (8,299) million of dividend payout is set at NOK 400 mil- debt portfolio remained relatively stable interest-bearing liabilities. Falling interest lion. If NGAAP net income exceeds NOK at NOK 277 million, against NOK 293 rates have reduced the cost of borrowing, 400 million, 60 percent of the excess shall million in 2014. A rise in interest-bearing and the average interest rate on Agder be distributed as dividends. In 2014, the liabilities was offset by lower interest Energi’s debt portfolio was 3.4% in 2015, controlling interest’s share of NGAAP net rates. Heavy investment in projects in the down from 3.7% in 2014. The Group had income was NOK 834 million. Based on Hydroelectric Power and Network busi- NOK 1,969 (1,458) million of unrestricted that, the Board of Directors proposes a ness areas resulted in NOK 31 (26) million liquid assets and undrawn credit facilities. dividend payout of NOK 660 million for being capitalised as construction loans the 2015 financial year. on work in progress. This meant that the Cash flow from operations was strong interest expense recognised in the income at NOK 1,502 (1,512) million. Underlying The net income for the year of the parent statement was NOK 246 (267) million. A EBITDA was slightly down from 2014, but company Agder Energi AS was NOK 688 loss of NOK 150 million was realised on this was offset by a reduction in tax paid. (888) million under NGAAP. The Board currency contracts, compared with NOK proposes that Agder Energi AS’s net inco- 3 million in 2014. There was a NOK 11 mil- Agder Energi is in the midst of a period me for the year be appropriated as follows: lion impairment loss on financial assets, of heavy investment, and net investment compared with NOK 2 million in 2014. came to NOK 885 million, against NOK (Amounts in NOK millions) 1,156 million the previous year. Invest- Allocated for dividends 660 The Group’s pre-tax profit amounted ment in property, plant and equipment Transferred to other reserves 28 to NOK 1,929 (998) million, and its tax and intangible assets amounted to NOK Total allocations 688 expense was NOK 718 (473) million. The 1,286 (1,136) million. NOK 90 (100) million income tax expense rose, primarily due of this comprised investments in power Going concern assumption to an increase in profit before tax. The distribution networks paid for by custo- In accordance with the Norwegian expensed resource rent tax fell from NOK mers. On the statement of cash flows Accounting Act, the Board of Directors 295 million in 2014 to NOK 251 million in investments are presented gross, with confirms that the going concern as- 2015. The introduction of new tax rates as customer payments included under net sumption is justified, and that the annual
AGDER ENERGI ANNUAL REPORT 2015 24
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
financial statements have been prepared result, energy sales for 2014 have fallen on delivery. In March 2016, the Financial on that basis. by NOK 459 million to NOK 5,355 million. Supervisory Authority of Norway informed Similarly, energy purchases have risen by Agder Energi that it may require the Group Accounting principles NOK 459 million to NOK 2,624 million. The to separate out the currency portion as In 2015 Agder Energi changed the way change has not had any impact on Agder an embedded derivative at fair value in that it accounts for transmission tariffs Energi’s reported profit. future financial reporting. Agder Energi invoiced to customers by its retail bu- disagrees with the Financial Supervisory siness on behalf of the grid operators. Agder Energi has contracts to supply Authority’s view and will therefore issue a Previously these tariffs were presented electricity to power-intensive industries defence of its current practice within the gross in the income statement under that are settled in euros. The accounting deadline given. If the proposed change is energy sales and energy purchases. This treatment of the currency portion of these finally enforced, it could have a significant practice was reviewed in 2015, and as of contracts varies in the power sector. Ag- impact on the Group’s accounts. If it had 2015 they are being presented net. The der Energi has chosen to treat it as an been used for the presentation of the 2015 comparative figures for 2014 have also integrated part of the contract, and the- financial statements, it would have signifi- been restated to reflect this change. As a refore recognises it through profit or loss cantly increased the Group’s book equity.
2015 PERFORMANCE BY BUSINESS AREA
The accounts for the business areas have Operating profit was NOK 1,350 million, for developing, operating and maintai- been prepared under NGAAP. compared with NOK 1,623 million in 2014. ning the transmission and distribution This reduction was due to the spot value grid in Aust-Agder and Vest-Agder. This The Hydroelectric Power and Energy of power generated falling by 18%, from business area had NOK 1,161 (1,096) mil- Management business areas NOK 2,102 million to NOK 1,731 million. lion of operating revenues in 2015, while The Hydroelectric Power and Energy Meanwhile, realised gains on hedges rose operating profit was NOK 212 (141) mil- Management business areas are respon- from NOK 482 million to NOK 570 million. lion). Operating profit was higher than in sible for developing, operating and main- 2014, when the income cap was unusu- taining the Group’s hydroelectric power As well as paying ordinary income tax, ally low. Nevertheless, profit was slightly stations, and for optimising revenues from the hydroelectric power business also below expectations. This was primarily the power generated by the company. pays resource rent tax. When calcula- due to the storm Nina in January, as well 8,995 GWh (9,060 GWh) of power was ge- ting resource rent tax, gains and losses as an increase in the rate charged for nerated in 2015. This figure includes both on cash-settled contracts are excluded. energy not supplied (KILE). In addition, power generated by wholly-owned power The fall in the spot value of electricity low interest rates have a negative impact stations and Agder Energi’s share of power generated resulted in resource rent tax on the income cap. Other controllable generation at part-owned ones. Average payable falling by NOK 53 million to NOK costs were lower than the previous year. annual power generation is 7,900 GWh. 216 million. Net income amounted to NOK 674 (824) million. The business area invested NOK 453 The average spot price in Agder Energi’s (366) million in 2015, of which NOK pricing region (NO2) was 17.7 øre/kWh NOK 598 (538) million was invested in 299 (229) million related to invest- (22.8 øre/kWh), down 22% from 2014. 2015, of which NOK 230 (345) million ments in new projects. NOK 70 (49) Concession power and electricity related to investments in new projects. The million was invested in the smart meter supplied under various long-standing majority of the latter investments were at project. Including NOK 90 (100) million contracts with industrial customers are the Iveland 2 power station. Test running of customer contributions, gross invest- sold at prices below current spot prices. of Iveland 2 began in February 2016. In ment in the business area was NOK 543 Nevertheless, gains on physical and Åseral Municipality we are building two (466) million. cash-settled contracts allowed Agder new rock-fill dams on LakeSkjerkevatn. Energi to achieve an average price of This project is the main reason why in- Marketing and Business Development 25.8 øre/kWh (28.2 øre/kWh) on the vestments required by the authorities have business area power that it generated in 2015. risen to NOK 201 (69) million. This business area comprises the companies LOS, Agder Energi Varme The turnover of these two business areas The Network business area and Otera. It also includes the Group’s was NOK 2,513 (2,773) million in 2015. The Network business area is responsible venture capital investments, as well as
AGDER ENERGI ANNUAL REPORT 2015 25
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
strategic ownership interests in the wind and servicing of electricity, transport of energy supplied. However, customer power and small hydro sectors. The bu- and communications infrastructure. The growth helped to push up volumes. siness area’s turnover was NOK 4,196 company’s turnover totalled NOK 996 Electricity price hedges made a positive (4,337) million in 2015, while its opera- (899) million in 2015, while its operating contribution in the period. The business ting profit was NOK 108 (127) million. profit was NOK -20 (10) million. Opera- area invested NOK 25 (27) million. ting profit was negatively impacted by LOS’s turnover in 2015 was NOK 2,279 restructuring costs and a provision for The Group’s venture capital investments million, compared with NOK 2,696 mil- losses on fixed-price contracts at Otera are managed through the company lion 2014. Its operating profit was NOK Infra, which together came to NOK 20 Agder Energi Venture. The company did 100 (110) million. In total, the company million. not carry out any major transactions in supplied 8,470 GWh (8,670 GWh) over 2015. The venture capital portfolio’s two the course of the year. By far the most Agder Energi Varme’s turnover in 2015 biggest investments, NEG and NetNordic, important reason for the decline in was NOK 92 (83) million, while its contributed a combined operating profit turnover was lower spot prices. operating profit was NOK 10 (7) million. on turnover of NOK 609 (490) million, It supplied 125 GWh (118 GWh) of energy. before depreciation and amortisation Otera supplies contracting services for In 2015, above normal temperatures (EBITDA) of NOK 52 (46) million. the installation, operation, maintenance once again led to relatively low volumes
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Agder Energi is one of Norway’s largest nies in the venture capital portfolio. The During the year, 13 (19) occupational producers of renewable energy, and its parent company had 154 (161) permanent accidents resulting in injury were recorded. CSR activities are designed to ensure that employees at the end of the year. Of these, 6 (8) resulted in total lost time all of its operations are run in a sustaina- of 88 (42) days. The accident figures are ble and ethical way. We work hard to keep and develop our equivalent to a lost time injury frequency best employees. This is done by offering (number of LTIs per million work hours) of In its efforts to meet its responsibilities to competitive compensation packages, 3.0 (3.5), a total injury frequency (number society, Agder Energi bases its work on implementing a life phase-conscious HR of injuries, whether or not they resulted globally recognised initiatives and stan- policy and providing good training, as in lost time, per million work hours) of 6.4 dards, including the UN Global Compact, well as by promoting a results-oriented (8.4) and an injury severity rate (number which promotes sustainable and socially culture, high HSE standards and good of days lost per million work hours) of 43.4 responsible policies, and the conventions of management. (19.0). the International Labour Organisation (ILO). Health and safety In 2015 high priority was given to the way The Group’s strategy establishes Agder In 2015, the Group’s sickness absence rate in which unwanted incidents are reported Energi’s values and has a strong focus on was 3.5%, compared with 3.6% in 2014. Of and dealt with. New systems and tools have ethical conduct. All conduct at the Group that, 1.3% (1.4%) was short-term absence been implemented, which has raised the re- should adhere to its ethical guidelines. and 2.2% (2.2%) was long-term absence porting rate per employee. Agder Energi will Agder Energi has set up an ethics com- (more than 16 days). This is the lowest continue its efforts to prevent accidents, mittee that helps managers and employ- sickness absence figure recorded since and what can be learned from unwanted ees to deal with difficult ethical dilemmas. Agder Energi was established in 2000. The incident reports has a key role to play. The committee also monitors how whistle Group aims to have a sickness absence blowing is dealt with. rate below 3%, and in view of that we have Diversity and equal opportunity been working hard to improve the way in Our ethical guidelines set out how the Staff and organisational structure which we deal with absences. The com- Group shall be governed and managed, At the close of the year, the Group had panies in the Group have signed up to the and how our employees and business 1,294 (1,245) permanent and temporary Norwegian government’s inclusive working partners are expected to conduct them- employees, representing 1,270 (1,220) life scheme for the period 2014-2018. selves. The guidelines also incorpo- full-time equivalents. Most of the increa- rate principles relating to equality and se in staff numbers occurred at compa- diversity.
AGDER ENERGI ANNUAL REPORT 2015 26
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
Agder Energi shall show respect for in- activities do not have a bigger impact on Power grid dividuals, and shall strive proactively for nature or society than is usual for this In principle our operation of the power a good and diverse working environment kind of business. Furthermore, we make grid is non-polluting. However, for ope- where there is equal opportunity for all. a significant positive contribution to the rational reasons, components are used Our activities in this area are carried out environment by generating on average 7.9 that may cause pollution in the event within the framework of the ten corporate TWh of clean, renewable energy each year. of an accident. The activities of our grid social responsibility principles defined by operating business largely take place in the UN Global Compact. Damming river systems can affect the the countryside and close to both towns ability of fish to live and reproduce. In and villages. In 2015 there were five Agder Energi does not accept any form order to mitigate this, we have implemen- minor incidents involving transformer oil of discrimination. This means that people ted both statutory and voluntary measures leaks from substations. The company has shall not be treated differently, excluded or in several river systems. procedures describing how these incidents shown preference based on their gender, should be dealt with in order to limit the age, any disability, sexual orientation, There is a lot of bulbous rush in the rivers negative consequences. religion, political opinions or national in the Agder area. The reasons for this are or ethnic origin, and that no other form complex. The company is participating in a District heating of discrimination shall be tolerated. regional project supported by the County Agder Energi Varme makes an impor- Nevertheless, in certain circumstances it Governor to reduce the amount of bulbous tant contribution to promoting the use may be both legal and justified to treat rush in rivers. of green, renewable energy sources. In people differently in order to ensure equal Kristiansand it does this by using the opportunity and diversity. The licensing authorities are legally surplus heat from waste incineration and entitled to modify licence terms, inclu- from a nickel refinery, while in Arendal Women make up 16% (17%) of the Group’s ding clauses relating to minimum flow and Grimstad the heat is generated from employees, and 42% of the parent and reservoir restrictions. Based on the biomass. Of the total heat supplied by company’s. The senior management team Norwegian water regulations, Vest-Agder the company in 2015, 97.6% came from has one woman and five men. Women County Council has established a regional renewable sources that help to reduce
occupy 33% (42%) of the seats on the water management plan for Agder. One of emissions of pollutants like CO2 and NOx. Board. the important aims is to describe all water resources and establish specific environ- Agder Energi Varme aims to phase out the The environment mental goals for each one. The plan should use of fossil fuels for its district heating The Group’s businesses in the hydropower be approved by the Ministry of Climate production in normal years, including peak and grid operation sectors are run through and Environment in the first half of 2016. loads. However, in unusual circumstances, wholly-owned and part-owned subsidia- emergencies and long cold snaps it may ries. These companies operate in accor- The control centre recorded ten breaches be necessary to use fossil fuels for short dance with their licences and with a large of the rules governing the operation of periods of time. number of laws and regulations. dams in 2015. No environmental impacts were recorded as a result of these Further information about the Group’s Hydroelectric Power breaches, which were handled in accor- corporate social responsibility activities Dams and power stations change the dance with the current guidelines. can be found in a separate section of this natural environment, but the Group’s annual report.
RISK MANAGEMENT AND INTERNAL CONTROLS
Risk management and internal risk management activities, together with ness plans set out goals, areas of priority controls the adopted authorisations, limits on risk and strategies for managing risk. Areas The Board has established general guideli- exposure and company guidelines. that involve trading in financial markets nes for the Group’s corporate governance have their own risk management strateg model. The Group’s strategy sets out As part of the implementation of the ies and limits on risk exposure. goals and priorities for the Group and its Group’s strategy and limits on risk ex- business areas, which provide the basis for posure, all of the Group’s business areas The Group’s risk management systems deal the executive management’s integrated have drawn up business plans. The busi- with potential positive and negative out-
AGDER ENERGI ANNUAL REPORT 2015 27
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
comes in relation to the company’s goals. section on «Integrated risk management». employees and third parties, damage to Individual companies are responsible for power plants, distribution networks and identifying and monitoring their own risk Risks other assets, negative impacts on the exposures, and risk management at the The most important risks relate to market environment and climate, negative im- operational level takes place across the price movements, capital scarcity, opera- pacts on the Group’s reputation and the organisation as an integrated part of nor- tional issues, the regulatory environment risk of failures in administrative and ma- mal business activities. General analysis of and adaptation. There follows a brief nagement processes. Operational risk is Agder Energi’s overall risk exposure takes description of these risks. Risks and risk managed through procedures governing place at the Group level and is reported to management are described in greater activities at operating units, and through the Board. detail in this report’s section on «Inte- contingency plans. For the purpose of risk grated risk management». management, Agder Energi has chosen In order to promote integrated corporate to establish contingency plans, training governance processes, the Group has im- Market risk exercises and preventive measures even plemented a combined governance and Agder Energi is exposed to significant at companies not covered by «Kraftforsy- information management solution, which market risk through the generation and ningens beredskapsorganisasjon» (KBO). helps to further integrate financial and risk trading of electricity, with its revenues management into management processes. from electricity sales being exposed to Regulatory environment electricity price risk and currency risk. Changes in the regulatory environ- Internal controls at the company are im- Hedging strategies for the power gene- ment and political decisions affect the plemented through clear guidelines and ration portfolio are subject to limits on company’s room for manoeuvre and established processes that are made avail how much power can be sold through constitute a significant element of the able to all employees through our quality futures contracts and close monitoring Group’s risk exposure. Reports from the management system SLIK. Through SLIK, of downside risks. At the retail business, Early Warning system describe external all of the Group’s governance documents – which is considered a margin business, developments and uncertainties, including from steering documents through manuals financial instruments are used to minimise their potential impacts on the Group, and to descriptions of work processes – are the electricity price risk and currency risk. help to determine the Group’s stance available on the Group’s intranet. Subsidia- on issues and processes relating to the ries in the Group implement SLIK across Capital allocation regulatory environment. These stances the organisation through their own corpo- Agder Energi has a clearly stated goal of underpin Agder Energi’s messages in con- rate governance systems with company- having a shadow rating of BBB+. Agder sultation processes, and provide a guide specific governance documents. Energi considers poor capital allocation for any internal adjustments that need to to be one of the most important strategic be carried out by Agder Energi. Agder Energi has established control risks that it currently faces. A model for mechanisms for critical aspects of long-term capital allocation is designed Adaptation processes in order to prevent, or rapidly to encourage optimal use of capital at the Change is coming to the power sector, correct, any nonconformities. These com- Group. The Group has drawn up a financial with a variety of energy solutions being prise a combination of manual controls, contingency plan in order to make clear offered to the market and new entrants access controls and automatic notifica- the financial resources it can draw on taking the fight to the traditional players. tion systems. In addition, all subsidiaries should the need arise. The Group is working to prepare itself must submit an annual self-declaration on for this, through measures such as its their internal controls. Risk management Operational risk management development programme and internal controls at Agder Energi are The most important operational risks and significant investment in frameworks described in greater detail in this report’s are the risk of injuries to the Group’s and tools for continuous improvement.
SHAREHOLDER INFORMATION The company’s share capital consists by shareholders who meet the conditions ters such as pre-emptive rights for exis- of 2,700,000 shares with a face value for being allocated indefinite waterfall ting shareholders in the event of shares of NOK 670. Of these, 1,800,000 are licences under the relevant current legisla- in the company being sold. In addition, class A shares and 900,000 are class B tion. Class B shares are freely negotiable. the municipal shareholders have agreed shares. Class A shares can only be owned A shareholders’ agreement regulates mat- to coordinate their votes at the AGM.
AGDER ENERGI ANNUAL REPORT 2015 28
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
CORPORATE GOVERNANCE
Matters relating to corporate governance are described in a separate section of this annual report.
RESEARCH AND DEVELOPMENT
The Group’s investment in R&D and Within the field of hydropower, the Group In 2015 the grid operating company in- innovation helps it to build up relevant participates in several jointly-financed vested in R&D activities relating to the expertise, which in turn lays the founda- research projects with organisations such development of smart grids, power quality, tions for long-term, profitable growth and as the Norwegian University of Science and environmental measures and maintenance development. Technology, other research institutes, the management. industry association Energy Norway and other energy and industrial companies.
EVENTS AFTER THE REPORTING PERIOD
There have been no incidents in 2016 that In 2016 Agder Energi has sold its invest- pact on profitability in the first quarter of have a significant impact on the financial ments in Fosen Vind and Bjerkreim Vind. 2016 will be negligible. statements for 2015. These disposals have had a positive im- pact on cash flows in 2016, but their im-
OUTLOOK
Power generation The climate change conference in Paris In a grid with a high proportion of non- Unusually large hydrological resources produced a new, ambitious agreement. dispatchable generation from solar and going into the start of the year mean that The energy sector is responsible for the wind power, there may be periods when Agder Energi expects hydroelectric power majority of global greenhouse gas emis- insufficient electricity is generated to generation to remain high in 2016. Elec- sions, and the Paris Agreement lays the meet consumers’ demand. Flexible sources tricity prices are affected by factors such foundations for further reductions in emis- of electricity will be needed during such as hydrology, supply and demand and the sions through a transition from fossil fuels periods, and it is likely that the value of economic and regulatory environment in to renewable energy. Norway has adopted flexibility will increase. With the help of Scandinavia and Europe. The average spot the EU’s goal of reducing greenhouse gas cross-border interconnectors, dispatcha- price in 2015 was 17.7 øre/kWh, down 22% emissions by at least 40 percent by 2030. ble Norwegian hydropower can provide a from the previous year. Futures markets flexible source of electricity for overseas indicate that prices will remain low both Roughly 30 percent of Europe’s electri- markets. Meanwhile, a lot of work is be- in 2016 and beyond. The Group’s hedging city is currently generated from renewable ing done to ensure that consumers have activities made a significant positive con- sources, and this proportion is expected flexible access to electricity, through the tribution in 2015, and we expect them to to increase over the coming years. The development of both energy storage tech- do so in 2016 as well. Nevertheless, we growth in solar and wind power means nologies and smart solutions to promote are likely to achieve lower prices going there is less need for electricity generated consumer flexibility. forward. from fossil fuels. In the current market, the electricity price is determined by the cost The transition from a grid based on fossil Agder Energi is working on several major of the last (marginal) producer needed to fuels to one that increasingly relies on re- projects that will gradually increase its meet demand. Currently this is often coal newable energy has created challenges in power generating capacity, and entitle power. As the penetration of solar and the shape of lower electricity prices and a it to electricity certificates. In terms of wind power increases, we can expect lo- growing need for dispatchable power. The hydroelectric power, we are investing in a wer electricity prices during periods when EU has therefore started work on redesig- portfolio of new projects with an annual solar and wind power generation is high. ning the electricity market in preparation generating capacity of 400-500 GWh, for the transition to a grid based on rene- including projects already started. wable energy sources.
AGDER ENERGI ANNUAL REPORT 2015 29
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
The regional water authority in Agder has of 2016 the Norwegian Water Resources are now served by LOS Energy, whose established a regional water management and Energy Directorate (NVE) is adjusting business concept is based on becoming plan based on the Norwegian water regu- the relevant regulations in a way that will its customers’ preferred energy partner. lations. The plan should be approved by reduce annual fluctuations. the Ministry of Climate and Environment We expect growth in the main markets of in the first half of 2016. The environmental The Norwegian parliament’s decision to our electrical contracting business Otera goals that it sets may affect future de introduce a requirement for legal and in both Norway and Sweden, particularly cisions relating to minimum river flow and functional separation at all companies in power grids and power station infra- water levels in reservoirs. We are working which operate power grids may have a big structure. This is creating opportunities, proactively to ensure that our views are impact on the industry. Thanks to Agder but new players are entering the market taken into account when environmental Energi’s size and the measures adopted at and competition is increasing in some goals are set and action plans are drafted. Agder Energi Nett, we are well prepared areas. The company will therefore have Our power stations are not only company for the expected changes. to focus on operational efficiency, adap- assets, they are also assets to society, as ting to the market and profitable growth well as playing an important role in flood New digital solutions provide opportunities in new areas. prevention and regional grid reliability. It for improvements within both operations is probable that several of our licences will and investments, and our grid operating The district heating company Agder Energi face slightly stricter terms. If so, that will company is focusing on how it can benefit Varme is helping to develop solutions that reduce their ability to add value. from cutting-edge technology. will make it simpler and cheaper to provide water-based energy to residential build- Power grid Marketing and business development ings. Along with densification in areas with The financial results of our grid opera- The prospects of the companies in our established infrastructure, expanding the ting company should improve in 2016 Marketing and Business Development area supply of cooling energy in Kristiansand over 2015, thanks to a higher income will depend on changes to the regulatory will also play a key role in enabling conti- cap. In subsequent years we also expect framework, greater customer-orientation nued growth in the sale of heating energy the income cap and profitability of our and technological developments. to commercial buildings. grid operating company to remain higher than in 2015. The income cap has fluc- The retail electricity provider LOS perfor- tuated significantly from year to year. As med strongly in 2015. Business customers
Kristiansand, 5 April 2016 Board of Directors of Agder Energi AS
Lars Erik Torjussen Chair
Lars Petter Maltby Bente Rist Leif Atle Beisland Steinar Bysveen
Marit Grimsbo Steinar Asbjørnsen Siw Linnea Poulsson Johan Ekeland
Øyvind Østensen Tore Kvarsnes Gro Granås Tom Nysted CEO
AGDER ENERGI ANNUAL REPORT 2015 30
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
Helge Håland (right) and Roar Heimdal in Agder Energi Vannkraft working at Rygene power station in Arendal.
AGDER ENERGI ANNUAL REPORT 20132015 31
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
BOARD OF DIRECTORS
Lars Erik Torjussen Bente Rist Leif Atle Beisland
Steinar Bysveen Marit Grimsbo Steinar Asbjørnsen
Siw Linnea Poulsson Johan Ekeland Øyvind Østensen
Tore Kvarsnes Gro Granås
AGDER ENERGI ANNUAL REPORT 2015 32
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
Declaration pursuant to Section 5-5 of the Securities Trading Act
We confirm that, to the best of our knowledge, the annual financial statements have been prepared in accordance with current accounting standards, and that the informa- tion contained therein provides 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 position 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, 5 April 2016 Board of Directors of Agder Energi AS
Lars Erik Torjussen Chair
Lars Petter Maltby Bente Rist Leif Atle Beisland Steinar Bysveen
Marit Grimsbo Steinar Asbjørnsen Siw Linnea Poulsson Johan Ekeland
Øyvind Østensen Tore Kvarsnes Gro Granås Tom Nysted CEO
AGDER ENERGI ANNUAL REPORT 2015 33
IntruductionIntroduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
THE AGDER ENERGI GROUP
AGDER ENERGI ANNUAL REPORT 2015 34
IntruductionIntroduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
THE AGDER ENERGI GROUP FINANCIAL STATEMENTS
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Income statement 36 Comprehensive income 37 Statement of financial position 38 Statement of cash flow 39 Statement of changes in equity 40 Accounting principles 41 Notes 49
Note 1 Segment information 49 Note 2 Energy sales 52 Note 3 Transmission revenues 54 Note 4 Other operating revenues and other raw materials and consumables used 54 Note 5 Long-term manufacturing contracts 55 Note 6 Unrealised gains and losses on energy contracts 55 Note 7 Employee benefits 55 Note 8 Property taxes and licence fees 56 Note 9 Other operating expenses 56 Note 10 Auditor’s fee 57 Note 11 Financial income and expenses 57 Note 12 Tax 58 Note 13 Depreciation and impairment losses 59 Note 14 Intangible assets 60 Note 15 Property, plant and equipment 61 Note 16 Associates and joint arrangements 63 Note 17 Non-current Financial Assets 65 Note 18 Receivables 66 Note 19 Cash and cash equivalents 66 Note 20 Share capital and shareholder information 66 Note 21 Provisions 68 Note 22 Pensions 68 Note 23 Interest-bearing liabilities 72 Note 24 Other non-interest-bearing current liabilities 72 Note 25 Financial instruments 72 Note 26 Derivatives 73 Note 27 Fair value of financial instruments 75 Note 28 Financial risk management 76 Note 29 Accounting hedges 80 Note 30 Mortgaged assets, liabilities and guarantees issued 81 Note 31 Contingent liabilities and events after the end of the reporting period 82 Note 32 Management compensation, etc. 82 Note 33 Related parties 84 Note 34 Acquisitions, disposals and buy-out of non-controlling interests 84 Note 35 Group structure 85 Note 36 Changes to accounting principles 87
AGDER ENERGI ANNUAL REPORT 2015 35
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
INCOME STATEMENT
(Amounts in NOK millions) Note 2015 2014*
Energy sales 2 4,835 5,355 Transmission revenues 3 1,071 1,139 Other operating revenues 4 1,715 1,470 Unrealised gains/losses on energy contracts 6 740 -156 Total operating revenues 8,361 7,808
Energy purchases 2 -2,212 -2,624 Transmission expenses -247 -220 Other raw materials and consumables used 4 -1,006 -815 Employee benefits 7 -899 -810 Depreciation and impairment losses 13 -577 -588 Property taxes and licence fees 8 -214 -209 Other operating expenses 9 -807 -827 Total operating expenses -5,962 -6,093
Operating profit 2,399 1,715
Share of profit of associates and joint ventures 11 84 -11 Financial income 11 8 26 Unrealised gains/losses on currency and interest rate contracts 11 -138 -449 Financial expenses 11 -424 -283 Net financial income/expenses -470 -717
Profit before tax 1,929 998
Income tax 12 -467 -178 Resource rent tax 12 -251 -295 Tax expense -718 -473
Net income from continuing operations 1,211 525 Net income from discontinued operations 34 0 -33 Net income 1,211 492
Of which attributable to non-controlling interests 35 -9 17 Of which attributable to controlling interest 1,220 475
Earnings per share/Earnings per share, diluted (NOK) 452 176
* Restated.
AGDER ENERGI ANNUAL REPORT 2015 36
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
COMPREHENSIVE INCOME
(Amounts in NOK millions) Note 2015 2014
Net income 1,211 492
Other comprehensive income and expenses Cash flow hedges 29 8 -95 Translation differences 1 3 Tax impact 12 2 26 Total items that may be reclassified to income statement 11 -66
Remeasurements of pensions 22 487 -209 Tax impact 12 -151 63 Total items that will not be reclassified to income statement 336 -146
Total other comprehensive income and expenses 347 -212
Comprehensive income 1,558 280
Of which attributable to non-controlling interests 35 -6 17 Of which attributable to controlling interest 1,564 263
AGDER ENERGI ANNUAL REPORT 2015 37
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
STATEMENT OF FINANCIAL POSITION
(Amounts in NOK millions) Note 31/12/2015 31/12/2014
Deferred tax assets 12 374 415 Intangible assets 14 277 223 Property, plant and equipment 15 13,143 12,534 Investments in associates and joint ventures 16 61 297 Other non-current financial assets 17 819 455 Total non-current assets 14,674 13,924
Inventories 37 38 Receivables 18 1,512 1,538 Derivatives 26 1,824 864 Cash and cash equivalents 19 473 54 Total current assets 3,846 2,494
TOTAL ASSETS 18,520 16,418
Paid-in capital 20 1,907 1,907 Retained earnings 2,604 1,770 Non-controlling interests 58 83 Total equity 4,569 3,760
Deferred tax 12 817 439 Provisions 21 1,348 1,475 Interest-bearing non-current liabilities 23 7,284 7,115 Total non-current liabilities 9,449 9,029
Interest-bearing current liabilities 23 1,745 1,184 Tax payable 463 498 Derivatives 26 924 710 Other non-interest-bearing current liabilities 24 1,370 1,237 Total current liabilities 4,502 3,629
TOTAL EQUITY AND LIABILITIES 18,520 16,418
Kristiansand, 5 April 2016 Board of Directors of Agder Energi AS
Lars Erik Torjussen Lars Petter Maltby Bente Zeline Rist Leif Atle Beisland Steinar Bysveen Chair
Marit Grimsbo Steinar Asbjørnsen Siw Linnea Poulsson Johan Ekeland Øyvind Østensen
Tore Kvarsnes Gro Granås Tom Nysted CEO
AGDER ENERGI ANNUAL REPORT 2015 38
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
STATEMENT OF CASH FLOWS
(Amounts in NOK millions) Note 2015 2014
Cash flow from operating activities Profit before tax from continuing operations 1,929 998 Profit before tax from discontinued operations 34 0 -37 Depreciation and impairment losses 13 588 590 Unrealised gains/losses on energy, currency and interest rate contracts 6, 11 -602 604 Share of profit of associates and joint ventures 11 -84 11 Loss/gain on disposals 0 21 Tax paid -484 -755 Change in trade receivables 18 -41 176 Change in trade payables 24 107 -122 Change in net working capital, etc. 89 26 Net cash provided by operating activities 1,502 1,512
Investing activities Purchase of property, plant, equipment and intangible assets 14, 15 -1,196 -1,036 Purchase of property, plant and equipment paid for by customers 14, 15 -90 -100 Purchase of businesses/financial assets -81 -42 Net change in loans 105 -22 Sale of property, plant, equipment and intangible assets 11 2 Sale of businesses/financial assets 366 42 Net cash used in investing activities -885 -1,156
Financing activities New long-term borrowings 1,450 2,325 Repayment of long-term borrowings -1,108 -1,344 Net change in current liabilities 166 -603 Dividends paid -706 -713 Net cash used in financing activities -198 -335
Net change in cash and cash equivalents 419 21 Cash and cash equivalents at start of period 54 33 Cash and cash equivalents at end of period 19 473 54
AGDER ENERGI ANNUAL REPORT 2015 39
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
STATEMENT OF CHANGES IN EQUITY
(Amounts in NOK millions) Paid- Cash Translation Retained Total for Non- Total in flow differences earnings controlling controlling equity capital hedges interest interests
Equity at 01/01/2014 1,907 -74 7 2,284 4,124 86 4,210 Net income for the year 0 0 0 475 475 17 492 Other comprehensive income and expenses 0 -69 3 -146 -212 0 -212 Dividends paid 0 0 0 -707 -707 -6 -713 Other changes in equity 0 0 0 -3 -3 -14 -17 Equity at 31/12/2014 1,907 -143 10 1,903 3,677 83 3,760
Equity at 01/01/2015 1,907 -143 10 1,903 3,677 83 3,760 Net income for the year 0 0 0 1,220 1,220 -9 1 211 Other comprehensive income and expenses 0 10 6 336 352 -5 347 Dividends paid 0 0 0 -700 -700 -6 -706 Other changes in equity 0 0 0 -38 -38 -5 -43 Equity at 31/12/2015 1,907 -133 16 2,721 4,511 58 4,569
AGDER ENERGI ANNUAL REPORT 2015 40
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
ACCOUNTING PRINCIPLES
Generell informasjon accordance with International Financial gross in the income statement under Agder Energi’s activities comprise the Reporting Standards (IFRS) as approved energy sales and energy purchases. This generation, distribution and sale of by the EU. The consolidated financial practice was reviewed in 2015, and as of energy, as well as providing energy- statements apply the historical cost 2015 they are being presented net. The related services. Most of the Group’s principle, except in the cases of certain comparative figures for 2014 have also operations are in southern Norway. The financial assets and liabilities (including been restated to reflect this change. As a parent company Agder Energi AS is a cash-settled derivatives) that are measu- result, energy sales for 2014 have fallen Norwegian limited liability company, red at fair value through profit or loss. by NOK 459 million to NOK 5,355 million. founded and domiciled in Norway. The Similarly, energy purchases have risen by address of the company’s head office is Changes to accounting principles NOK 459 million to NOK 2,624 million. Kjøita 18, 4630 Kristiansand. In 2015 Agder Energi changed the way The change has not had any impact on that it accounts for transmission tariffs Agder Energi’s reported profit. Also see Basis of preparation invoiced to customers by its retail Note 36. Agder Energi’s consolidated financial business on behalf of the grid operators. statements have been prepared in Previously these tariffs were presented
SUMMARY OF THE MOST IMPORTANT ACCOUNTING PRINCIPLES
Consolidation principles This is when the risks and rewards of For step acquisitions, previously held The consolidated financial statements ownership have been transferred, and assets are measured at fair value at the present the overall financial performance normally coincides with the acquisition date control is obtained. Any gains or and position of the parent company and date. Transaction costs are not included losses are recognised through profit or its subsidiaries when considered as a in the purchase price, and are instead loss. single entity. Companies in which the expensed as incurred. The cost of shares Group holds a controlling interest are in subsidiaries is eliminated against Changes in ownership interests in consolidated. A controlling interest equity on the acquisition date. Bargain subsidiaries normally exists if Agder Energi holds purchase gains are based on fair values. Changes in the parent’s ownership inter- more than 50% of voting rights, either These gains are attributed to any of the est in a subsidiary that do not result in through an ownership interest or through company’s assets and liabilities with fair loss of control are accounted for as agreements. Subsidiaries acquired or values that differ from their carrying equity transactions. established during the year are consoli- amounts. A provision is made for deferred dated from the date of acquisition or tax relating to any such asset write-ups Joint operations establishment. The non-controlling inter- or write-downs. Any part of the bargain Ownership interests in part-owned power ests’ share of profit or loss after tax is purchase gain that cannot be attributed stations and water management associa- specified on a separate line. to identifiable assets and liabilities is tions are classified as joint operations treated as goodwill. No provision is made and are accounted for by including the All of the financial statements ofindividual for deferred tax on goodwill. If the value Group’s share of assets, liabilities, reve- companies included in the consolidated of the assets and liabilities transferred in nues and expenses on the relevant lines financial statements have been restated conjunction with an acquisition exceeds in the consolidated financial statements to ensure that equivalent statement of fi- the purchase price, the difference is (proportionate consolidation). nancial position items and transactions recognised through profit and loss under are treated consistently throughout the other operating revenues. Joint arrangements and associates Group. All intra-group transactions, re- A joint arrangement is a company that is ceivables, liabilities and unrealised gains Non-controlling interests in the acquiree subject to a contractual arrangement and losses have been eliminated in the are measured either at fair value, or as whereby two or more parties have joint consolidated financial statements. the non-controlling interest’s share of control. Special rules on voting rights the acquiree’s net identifiable assets. may give owners more or less control Acquisitions The measurement method should be than their ownership interests would Purchase price allocation is performed chosen individually for each business imply. on the date when control was obtained. combination.
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Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
Associates are companies over which the the applicable tariff. The difference covered by purchased electricity certifi- Group wields significant influence. between the income cap and the actual cates is included on the statement of Normally this applies to companies in tariff revenues creates a surplus or financial position under current liabilities which it has a 20-50% ownership shortfall. This surplus or shortfall is measured at fair value. Green electricity interest. recognised through profit or loss as it certificates purchased are measured at arises. Details of the surplus or shortfall cost. If the company has more electricity Joint arrangements and associates are are given in Note 3. certificates than it needs to cover the accounted for using the equity method. volume of electricity sold, the excess is The Group’s proportionate share of the Long-term contracts presented as a current asset. Any such profit or loss for the year of these entities Revenues associated with long-term excess is measured at the lower of cost is recognised under financial income/ex- manufacturing contracts are recognised and fair value less costs to sell. penses. On the statement of financial in accordance with the percentage of position, these investments are classified completion method. Under this method, Foreign currency as non-current financial assets, and are revenues and profit are recognised The consolidated financial statements carried at cost adjusted for the Group’s gradually as the work related to the are presented in Norwegian kroner share of retained earnings since acquisi- contract is completed. The percentage of (NOK), which is also the functional tion, impairment losses and equity trans- completion is normally estimated by currency of the parent company and actions at the companies. looking at incurred expenses as a main subsidiaries. Subsidiaries with percentage of total expected project functional currencies other than NOK are Revenues expenses. Accrued revenues are included responsible for less than 5% of the Recognition of revenues – general on the statement of financial position Group’s turnover. These are translated Proceeds from the sale of goods and under current receivables, while advance into NOK using the current-rate method. services are recognised as revenues payments received are included under when the goods or service are delivered. current liabilities. When preparing the accounts of the individual companies, transactions in Energy sales Disposal of property, plant and currencies other than the functional Revenues from the sale of electricity are equipment currency of the company are translated recognised when the electricity is When disposing of property, plant and into the functional currency using the supplied. Realised gains or losses on equipment, any gain or loss is calculated exchange rate on the date of transaction. physical and cash-settled energy by comparing the sales price with the Foreign currency-denominated state- contracts are presented as energy sales remaining carrying amount of the asset ment of financial position items are mea- under operating revenues. In the case of sold. Any gain or loss is presented under sured using the exchange rate on the physical and cash-settled energy other operating revenues or other opera- statement of financial position date. contracts, changes in fair value are ting expenses respectively. Translation differences are recognised presented as operating revenues under under financial income/expenses. unrealised gains and losses on energy Green electricity certificates contracts. Realised gains or losses on Green electricity certificates received as Financial instruments trading portfolios are presented net as a result of qualifying electricity genera- The Group designates financial instru- energy sales. When a contract is closed tion are recognised at fair value under ments in the following categories: a) out, the associated unrealised gain or energy sales when the electricity is Financial assets and liabilities at fair loss is reversed, and the realised gain or generated. Green electricity certificates value through profit or loss; b) Loans and loss is presented under energy sales. held by the electricity generation receivables; c) Financial liabilities at business are presented as current assets amortised cost. Designation is based on Transmission revenues on the statement of financial position, the type of instrument and its purpose. Grid operation is subject to the regula- and are measured at the lower of their Instruments are classified when they are tions of the Norwegian Water Resources value when acquired and current fair acquired. and Energy Directorate (NVE) on income value less costs to sell. caps. Each year, NVE specifies an income a) Financial assets and liabilities at fair cap for each individual grid operator, The When the retail business sells electricity, value through profit or loss revenues recognised in the income state- the estimated cost of purchasing electri- ment represent the volumes delivered city certificates to cover the volume sold Financial assets and liabilities at fair during the financial period multiplied by is expensed. A provision for volumes not value through profit or loss are financial
AGDER ENERGI ANNUAL REPORT 2015 42
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
instruments held for trading purposes. All Presentation of derivatives in the income attributable transaction costs. Subse derivatives must be designated as held statement and statement of financial posi- quently financial liabilities are carried at for trading, unless they are part of an tion amortised cost using the effective accounting hedge. For derivatives other Derivatives are presented on separate interest rate method. than cash flow hedges, unrealised gains lines in the statement of financialposition and losses are recognised through profit under assets and liabilities respectively. Hedging or loss. Derivatives are presented gross on the In order to manage its risk exposures statement of financial position, unless arising from fluctuations in electricity Physical contracts for the purchase and there exists a legal right to offset, and prices, exchange rates and interest rates, sale of energy and CO2 quotas that form that right will actually be used when the the Group uses euro-denominated loans part of the trading portfolio are defined contracts are settled. Electricity and derivatives, such as futures contracts as financial instruments. Like their cash- contracts traded in markets satisfy the for electricity and currency, as well as settled equivalents, they are measured at offsetting requirements, so contracts interest rate swaps. The purpose of these fair value. expiring in the same calendar year are instruments is to secure cash flows from presented net in the statement of future electricity generation, as well as to Physical contracts for the purchase and financial position. avoid large variations in the interest sale of energy and CO2 quotas that have expense payable on the Group’s debt been entered into for the purpose of ob- In the income statement, gains and losses portfolio. taining electricity needed by the Group, on the fair value of derivatives are shown or as a means of selling the electricity it on separate lines. Gains and losses on the Most of the Group’s hedging instruments generates, and which do not contain em- value of energy derivatives are presented do not meet the documentation require- bedded derivatives, are normally recog- under operating revenues, while gains and ments established by the accounting nised on delivery. Contracts entered into losses on the value of interest rate and standards for hedge accounting. These for different purposes are recorded in currency derivatives are presented under contracts are therefore not accounted separate books. financial income/expenses. When they are for as hedges, even if they have been realised, the proceeds from the sale of entered into as hedges. These kinds of Agder Energi has some contracts for electricity derivatives are included under hedges are treated as financial assets or physical energy sales that are settled in energy sales, while the proceeds from financial liabilities measured at fair value euros. The currency portion of these con- currency derivatives are presented net through profit or loss. tracts is not considered an embedded under financial income/expenses. Regular derivative that must be separated from payments relating to interest rate swaps Certain interest rate swaps, including the host contract and be accounted for are presented as a financial expense. combined currency and interest rate separately as an independent derivative. swaps, do meet the conditions for hedge Contracts of this kind are accounted for b) Loans and receivables accounting under IAS 39, and they are in their entirety on delivery. In March On initial recognition, loans and receiv accounted for accordingly. These hedging 2016, the Financial Supervisory Authori- ables are measured at fair value plus di- relationships are presented in the ty of Norway informed Agder Energi that rectly attributable transaction costs. consolidated financial statements as it may require the Group to separate out Subsequently loans and receivables are follows: the currency portion as an embedded de- carried at amortised cost using the rivative at fair value in future financial effective interest rate method. Cash flow hedges reporting. Agder Energi disagrees with In so far as possible, Agder Energi uses the Financial Supervisory Authority’s Trade and other receivables with an cash flow hedges to eliminate its view and will therefore issue a defence of insignificant interest component are exposure to fluctuations in cash flows. its current practice within the deadline recognised at their nominal value less any This includes fixing interest payments on given. If the Financial Supervisory impairment losses. An impairment loss is a small proportion of the Group’s debt. Authority’s view prevails and becomes a recognised if there is objective evidence final decision, it could have a significant that the Group will not receive payment in The effective part of gains or losses on impact on the Group’s accounts. If the accordance with the original conditions. hedging instruments is recognised under proposed method had been used for the other comprehensive income and presentation of the 2015 financial state- c) Financial liabilities at amortised cost expenses in the statement of comprehen- ments, it would have significantly increa- On initial recognition, financial liabilities sive income, whereas the ineffective part sed the Group’s book equity. are measured at fair value plus directly is recognised under financial
AGDER ENERGI ANNUAL REPORT 2015 43
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
income/expenses in the income state- the Norwegian parliament. Revenues will be possible to utilise deferred tax ment. Any effective gain or loss on a from this «concession power» are recog- assets, and any amount that can probably hedging instrument is recycled to profit nised as they are earned, based on the be utilised is included on the statement or loss if the hedged item is recognised in regulated price. The present value of the of financial position. the income statement. future loss of revenue due to the diffe- rence between the regulated price and Natural resource tax Fair value hedges spot price is not included on the state- The natural resource tax payable is not Agder Energi uses fair value hedges to ment of financial position, but it is pre- affected by profit, and is calculated on hedge the currency risk associated with sented in Note 2. the basis of the individual power station’s its USD-denominated interest-bearing average generation over the past seven liabilities and the interest rate risk on Each year, the Group pays licence fees to years. The tax is charged at 1.3 øre/kWh. fixed-rate loans. the central government and municipa Natural resource tax can be deducted lities for the increase in generating capa- from income tax. As a result, natural The Group’s fair value hedges are deriva- city achieved by damming and piping resource tax normally neither affects tives, which are measured at fair value water. Licence fees are expensed as they Agder Energi’s tax expense nor its tax through profit or loss. The hedged items are incurred. The capitalised value of payable. are loans whose carrying amounts future fees is not included on the state- fluctuate in parallel with the hedged ment of financial position, but is calcula- Resource rent tax risks. These changes in value are also ted and presented in Note 8. Resource rent tax is calculated by apply- recognised in profit or loss. Changes in ing the Norwegian Taxation Act’s special the value of hedged items and hedges Tax rules on the taxation of companies that are recognised under financial income/ All of the companies in the Group have to generate electricity. The expense in the expenses. pay ordinary income tax. In addition, income statement consists of resource Agder Energi Vannkraft is covered by the rent tax payable and changes in deferred Compensation special rules on the taxation of compa resource rent tax liabilities/assets. The Group pays compensation to land nies that generate electricity. The Group owners for the right to use waterfalls and therefore pays income tax, natural Resource rent tax is profit-related, and is land. Compensation is also paid for any resource tax and resource rent tax. payable at a rate of 31% of the net damage to forests, land, etc. The compen resource rent estimated for each indivi- sation is a combination of one-off pay- Income tax dual power station. The resource rent is ments and perpetual charges or obliga- Income tax is calculated in accordance estimated from the hourly output of the tions to supply electricity free of charge. with standard tax rules. The tax expense individual power station, multiplied by The present value of annual charges and in the income statement consists of tax the spot price for the corresponding the cost of supplying free electricity are payable and changes in deferred tax hour. In the case of concession power presented under provisions. If a contract liabilities/assets. This does not apply to and power supplied under long-term con- to supply free electricity includes the deferred tax liabilities/assets relating to tracts with a duration of more than seven option of settlement in cash, it is consi- items recognised as other comprehen years, the actual contract price is applied. dered a derivative and is measured at fair sive income and expenses in the state- Actual operating expenses, tax- value through profit or loss. On initial ment of comprehensive income or deductible depreciation and a tax-free recognition, the cross entry of the provi- directly in equity, or to deferred tax allowance are deducted from the sion is a hydropower licence, which is liabilities/assets arising in conjunction estimated gross rent in order to reach presented under property, plant and with business combinations. Tax payable the net taxable resource rent. The tax- equipment. In subsequent periods, annual is calculated on the taxable profit for the free allowance is determined each year compensation payments, as well as year. Deferred tax liabilities/assets are by multiplying the tax value of the power changes to provisions, are considered calculated on the basis of the temporary station’s property, plant and equipment other operating expenses, whereas one- differences that exist between accoun- by a standard interest rate set by the off payments are deducted from the ting and tax values, as well as the tax Ministry of Finance. In 2015 the standard provision. effect of any loss carryforwards. Deferred interest rate was 0.7%. Resource rent tax income tax liabilities and assets that are is covered by the so-called «verksamord- Concession power and licence fees expected to be reversed in the same ning», which allows the offsetting of Each year, the Group supplies electricity period are offset against each other. As positive and negative resource rent at to local municipalities at a price set by assessment is made of to what extent it different power stations. This
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Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
arrangement only applies to negative b) it is primarily held for trading; straight-line method over the expected resource rent tax arising in or after 2007. c) it is due for payment within twelve useful life. The residual value is taken into Negative resource rent that arose before months of the end of the reporting account when calculating annual depre- 2007 can only be offset at the power period; or: ciation. Sites are not depreciated. Hydro- station where it arose. Any negative d) the company has no unconditional power licences are not depreciated resource rent can be carried forward with right to delay settlement of the liability either, as they do not revert to public ow- interest to be offset against future positi- beyond twelve months after the state- nership. Periodic maintenance is capitali- ve resource rent. The interest rate applied ment of financial position date. sed and depreciated over the maintenan- to carryforwards was 2.4% for 2015. ce interval. The estimated useful life, All other assets are classified as depreciation method and residual value Deferred resource rent tax assets and non-current assets and all other liabilities are reassessed each year. liabilities are classified as non-current liabilities. When calculating the deferred tax When assets are sold or disposed of, their liabilities and assets to be included on the For non-current liabilities, any principal carrying amount is deducted, and any statement of financial position, temporary repayments due over the first year are loss or gain is recognised in the income differences and part of the accumulated presented as current liabilities. statement under other operating expen- negative resource rent are taken into ses and revenues. Repairs and regular account. The part of the negative resource Intangible assets maintenance are expensed as incurred. If rent tax that can be offset against Intangible assets, including goodwill, are new parts are capitalised on the state- temporary differences is capitalised on carried at cost less accumulated depre- ment of financial position, the carrying the statement of financialposition, as is ciation and impairment losses, provided amount of the parts that were replaced is the part that is likely to be used within a that they meet the criteria for capitali deducted, and any gain or loss is recogni- 10-year time frame. Tax-free allowances sation. Intangible assets with an uncer- sed in profit or loss. are treated as a permanent difference in tain useful life, including goodwill, are not the year for which they are calculated, and depreciated, and are instead tested Each year, Agder Energi Nett receives do therefore not affect the calculation of annually for impairment. customer contributions that fully or par- deferred resource rent tax. Deferred tially pay for new connections or grid up- resource rent tax liabilities and assets Property, plant and equipment grades. These contributions are presen- are presented gross. Investments in production facilities and ted on the statement of financial position other property, plant and equipment are as unearned revenue under provisions, Classification of current and non- carried at cost, less accumulated depre- and are taken to income over the useful current assets and liabilities ciation and impairment losses. Hydro life of the relevant investments. An asset is classified as a current asset if power licences are classified as property, it fulfils one of the following criteria: plant and equipment. Depreciation starts Lease contracts a) it is expected to be realised in, or is when the assets are available for use. Almost all of Agder Energi’s leases are held for sale or consumption in, the The acquisition cost of property, plant operational leases. Rent payable under ordinary business cycle; and equipment includes the expenses in- these leases is expensed as it arises. b) it is primarily held for trading; volved in acquiring and preparing the as- c) it is expected to be realised within set for use. For large investments, inter- Impairment losses twelve months of the end of the est payable is calculated using the Property, plant, equipment and intangible reporting period, or: average interest rate on the Group’s assets that are depreciated are also d) it is a form of cash or cash equivalent, borrowings during the investment period, tested for impairment if there is any indi- unless it is subject to restrictions and the interest is capitalised as part of cation to suggest that future cash flows which mean that it cannot be realised the acquisition cost. Costs incurred after cannot justify the carrying amount. Any or used to settle a liability within the item entered service, such as regular difference between the carrying amount twelve months of the end of the maintenance, are expensed. and the recoverable amount is expensed reporting period. in the income statement. The recoverable Costs accrued in relation to internal in- amount is the higher of fair value less A liability is classified as a current liabili- vestments within the Group are capitali- costs to sell and the utility value. ty if it fulfils one of the following criteria: sed. The acquisition cost only includes a) it is expected to be settled as part of directly attributable costs. When testing for impairment, non-current the ordinary business cycle; Depreciation is calculated using the assets are grouped at the lowest possible
AGDER ENERGI ANNUAL REPORT 2015 45
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
level at which it is possible to identify Provisions, contingent assets and The pension expense for the period is independent cash flows (cash flow gene- contingent liabilities included under employee benefits. It rating units). Most of the Group’s non- A provision is recognised if the Group has consists of the sum of the current service current assets are held by the hydro a present obligation arising from a past cost, interest on net pension liabilities electric power and network business event, and if it is probable that it will have and employers’ NICs. areas. Within hydroelectric power, any to settle the obligation. Provisions are power stations on the same river system measured using the management’s best Defined contribution pension plans that are managed collectively are estimate of the cost of settling the In the case of a defined contribution plan, considered to be a single cash flow obligations on the statement of financial the Group makes regular contributions generating unit. position date, and are discounted to their into a separate legal entity, but has no present value if this makes a significant further liabilities once the contributions In conjunction with each financial report, difference. have been made. the Group assesses whether any past impairment of non-financial assets, Pensions The contributions are expensed as except goodwill, should be reversed. Defined benefit plans employee benefits when they are made. A defined benefit plan is a pension plan Inventories which defines the pension benefit an Statement of cash flows Inventories are carried at the lower of employee will receive on retirement. The The statement of cash flows has been cost and fair value less costs to sell. The pension liability recognised for defined prepared using the indirect method. acquisition cost is calculated using the benefit plans is the present value of the FIFO principle. pension benefits earned as of the state- New accounting standards and inter- ment of financial position date, less the pretations Reservoir reserves fair value of the pension plan assets. The Agder Energi did not implement any new The Group’s most valuable raw material pension obligation is calculated annually accounting standards or interpretations is the water stored in its reservoirs. The by an independent actuary using the that had a significant impact on its value of this water is not capitalised on projected credit unit method. financial statements in 2015. the statement of financial position. Remeasurements are recognised in the The IASB has published a number of Cash pooling arrangement statement of comprehensive income amendments to accounting standards Agder Energi AS has a cash pooling under other comprehensive income or and interpretations that had not yet arrangement with its subsidiaries, and expenses. entered into force when the financial the Group has a joint bank account for statements were presented. Of these, the short-term deposits and short-term Changes to defined benefit pension following amendments may have a signi- loans. External interest income and obligations arising from plan amend- ficant impact on Agder Energi’sfinancial interest expenses arising from the cash ments that are applied retrospectively, statements: pooling arrangement are presented as i.e. where the change in entitlement also interest income and interest expenses applies to past years of service, are IFRS 9 – Financial instruments: In July on the consolidated income statement. recognised directly in profit or loss. 2014 the IASB published the final IFRS 9 On the consolidated statement of finan- Changes that are not applied retrospec sub-project, which means that the cial position, net deposits and overdrafts tively are recognised through profit or standard is now complete. IFRS 9 intro- are presented as cash and cash equiva- loss over the remaining years of service. duces changes to classification and lents and current liabilities respectively. measurement, hedge accounting and im- The net pension liabilities associated pairment. IFRS 9 will replace IAS 39 Liquid assets with underfunded pension plans, and Financial instruments – recognition and Cash and cash equivalents includes cash unfunded pension plans that are trea- measurement. The parts of IAS 39 that and bank deposits. ted as operating expenses, are classi- have not been changed as part of this fied as provisions for non-current liabi- project have been transferred and Dividends lities. For pension plans with a surplus, included in IFRS 9. For Agder Energi, the Proposed dividends are classified as the surplus is presented as a net pension most important change is that the new equity. Dividends are reclassified as asset under other non-current financial standard simplifies the rules on the use current liabilities when they are adopted assets. of accounting hedges. No conclusion has by the AGM. yet been reached on the extent to which
AGDER ENERGI ANNUAL REPORT 2015 46
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
this will result in Agder Energi making tion. The core principle of IFRS 15 is that sets out principles for recognition, greater use of hedge accounting. Beyond revenue recognition will reflect the trans- measurement, presentation and this, the new standard is not expected to fer of promised goods or services to disclosures in relation to lease contracts. result in any significant changes for the customers in an amount that reflects the The new standard requires the lessee to Group. The IASB has set the effective consideration to which the entity expects recognise assets and liabilities for most date of IFRS 9 as 1 January 2018. The to be entitled in exchange for those leasing transactions, which represents a standard has not yet been approved by goods or services. The standard applies significant change from the current the EU. Agder Energi has not assessed to all revenue contracts. The IASB has principles. The IASB has set the effective the impacts of IFRS 9. set the effective date of IFRS 15 as 1 Ja- date of IFRS 16 as 1 January 2018. The nuary 2018. The standard has not yet standard has not yet been approved by IFRS 15 – Revenue from contracts with been approved by the EU. Agder Energi the EU. Agder Energi has not assessed customers: The IASB and FASB have has not assessed the impacts of IFRS 15. the impacts of IFRS 15. issued a new, joint standard on revenue recognition, IFRS 15. The standard IFRS 16 – Leases: This standard replaces replaces all existing standards and inter- the existing IFRS standard governing pretations relating to revenue recogni lease contracts, IAS 17 – Leases. IFRS 16
CRITICAL ACCOUNTING JUDGEMENTS
Below we have set out the areas where separate out an embedded derivative as- proposed change is finally enforced, it the judgements made by management sociated with the currency part of the could have a significant impact on the in applying the Group’s accounting contract. In the latter case, they are con- Group’s accounts. If it had been used for principles potentially have a material sidered to be hybrid contracts, with the the presentation of the 2015 financial impact on the consolidated financial host contract being a NOK-denominated statements, it would have significantly statements. electricity contract and the conversion increased the Group’s book equity. from NOK to EUR being an embedded Non-financial energy contracts currency derivative, which should be Contracts classified as financial instru- Non-financial energy contracts, which measured at fair value. ments are carried at fair value, with gains in accordance with IAS 39 are conside- and losses recognised in profit or loss, red to be contracts that can be «settled Based on the criteria set out in IAS 39, while other contracts are recognised on net in cash», are treated as though they the senior management team has used delivery. were financial instruments. This applies its best judgement to assess which con- unless the contracts have been ente- tracts should be defined as financial in- Concession power and licence fees red into and continue to be held for the struments and which contracts should The concession power provided and the purpose of the receipt or delivery of the not. Amongst other things, Agder Energi licence fees paid to the central govern- energy in accordance with the Group’s has reached the conclusion that no cur- ment and municipalities are supposed to expected purchase, sale or usage requi- rency derivative should be separated out compensate for the damage or inconve- rements (the «own use» exemption). In in the case of electricity contracts sett- nience caused by hydropower projects. some cases determining whether a con- led in euros. In March 2016, the Financial Liabilities arising from the fact that fu- tract of this kind should be classified as Supervisory Authority of Norway infor- ture concession power may be supplied cash-settled is based on best judgement. med Agder Energi that it may require at a discount to the market price, as well the Group to separate out the currency as the cost of future licence fees, are re- Non-financial electricity contracts are portion as an embedded derivative at gulatory requirements and are therefore normally settled in euros. The accoun- fair value in future financial reporting. non-contractual liabilities. Consequen- ting treatment of these contracts varies Agder Energi disagrees with the Finan- tly they are not included in the financial in the industry. Some companies consi- cial Supervisory Authority’s view and will statements, but their present value has der them to be covered by the own use therefore issue a defence of its current been calculated, and is presented in Note exemption in their entirety, while others practice within the deadline given. If the 2 and Note 8.
AGDER ENERGI ANNUAL REPORT 2015 47
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
UNCERTAINTIES – CRITICAL ACCOUNTING ESTIMATES
In conjunction with the preparation of as well as of short-term electricity deri- of return, prices, operating margins and the financial statements, the manage- vatives, is based on market practice and sales volumes being the most important ment has to make certain estimates and confirmed by external market players. factors. assumptions. These affect the reported assets and liabilities, including contin- Property, plant and equipment Deferred tax assets gent assets and liabilities at the end of Property, plant and equipment is The Group has capitalised deferred tax the reporting period, and the reported depreciated over its expected useful life, assets arising from negative resource revenues and expenses for the period. giving rise to depreciation in the income rent that has been carried forward. Actual results may deviate from these statement. The expected useful life is Deferred tax assets are capitalised when estimates. estimated on the basis of experience, it is expected that it will be possible to past performance and best judgement, make use of the negative resource rent The most important assumptions concer- and is adjusted if there are any changes within a ten-year time frame. The timing ning the future and other key sources of to those estimates. The residual value, of when it may be possible to make use estimation uncertainty are set out below. which is taken into account when calcu- of negative resource rent is particularly lating depreciation, is also estimated. dependent on assumptions regarding Fair value of financial instruments future electricity prices. The manage The fair value of long-term cash-settled Impairment losses ment has used its best judgement electricity contracts and electricity The Group has significant investments when making assumptions about future contracts not covered by the own use in intangible assets, property, plant electricity prices and other assumptions exemption is partly calculated using and equipment and joint arrangements. that affect future resource rent. See assumptions that are not observable in These non-current assets are tested for Note 12 for a more detailed description. the market. Where that is the case, the impairment if there is an indication that management has based its estimates on they have fallen in value. This might be Pensions the information available in the market indicated by changes in market prices or Calculating pension liabilities involves in combination with its best judgement. contract structures, negative events or using best judgement and estimates for There is a more detailed description of other operating conditions. When calcu- a number of parameters. See Note 22 the assumptions used to value those lating the recoverable amount, a number for a more detailed descriptions of the contracts in Note 27. The fair value of of estimates must be made regarding assumptions that have been applied. interest rate and currency derivatives, future cash flows, with required rates
AGDER ENERGI ANNUAL REPORT 2015 48
Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
NOTES
NOTE 1 SEGMENT INFORMATION
(Amounts in NOK millions) The Hydroelectric Power and Energy Network LOS Management business areas business area 2015 2014 2015 2014 2015 2014
INCOME STATEMENT Note Operating revenues 2,513 2,773 1,161 1,096 2,279 2,696 - of which external operating revenues 2,397 2,626 1,073 998 2,264 2,678 - of which internal operating revenues 116 147 88 98 15 17 Energy and transmission expenses -260 -268 -305 -291 -2,025 -2,469 Other raw materials and consumables used 4 0 0 0 0 -3 -1 Employee benefits 7 -176 -166 -95 -95 -70 -51 Other operating expenses 9 -470 -460 -351 -350 -77 -62 Operating profit before depreciation and impairment losses 1,608 1,878 410 359 104 114 Depreciation and impairment losses 13 -257 -255 -197 -218 -3 -4 Operating profit 1,350 1,623 212 141 100 110 Share of profit of associates and joint ventures 11 0 0 0 0 0 0 Financial income 11 52 27 1 1 5 6 Financial expenses 11 -128 -109 -74 -84 -4 -6 Net financial income/expenses -76 -82 -73 -84 1 0 Profit before tax 1,274 1,542 139 57 102 110 Tax expense 12 -600 -717 -21 -16 -28 -30 Net income from continuing operations 674 824 118 42 74 80 Net income from discontinued operations 0 0 0 0 0 0
STATEMENT OF FINANCIAL POSITION Total assets 8,051 7,762 4,692 4,214 880 635 Equity 2,281 2,257 759 665 335 330 Total segment liabilities 5,770 5,505 3,933 3,549 544 306 Capital employed 1) 5,936 5,502 3,449 3,208 335 338 Interest-bearing liabilities 23 3,655 3,245 2,690 2,543 0 8 Funds from operation (FFO) 2) 1,323 1,530 409 347 107 105 Carrying amount of associates and joint ventures 16 0 0 0 0 0 0 Investments in intangible assets 3) 0 0 82 3 0 0 Investments in property, plant and equipment 3) 598 538 370 364 12 11 Full-time equivalents (continuing operations) 216 218 163 170 73 64
1) Equity + interest-bearing liabilities. 2) Underlying EBITDA + dividends from associates and joint ventures + financial income - tax payable. 3) Includes additions of intangible assets and property, plant and equipment through business combinations.
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(Amounts in NOK millions) Otera Parent/Other Eliminations
2015 2014 2015 2014 2015 2014
INCOME STATEMENT Note Operating revenues 996 899 1,186 963 -687 -659 - of which external operating revenues 822 718 922 762 -31 -15 - of which internal operating revenues 174 181 263 201 -656 -644 Energy and transmission expenses 0 0 -38 -37 180 224 Other raw materials and consumables used 4 -534 -446 -470 -368 1 0 Employee benefits 7 -337 -297 -370 -348 149 148 Other operating expenses 9 -133 -134 -319 -261 327 293 Operating profit before depreciation and impairment losses -8 22 -10 -51 -30 6 Depreciation and impairment losses 13 -12 -12 -69 -92 -37 -15 Operating profit -20 10 -79 -142 -68 -10 Share of profit of associates and joint ventures 11 0 0 96 -2 -12 -8 Financial income 11 2 0 1,939 1,976 -1,840 -1,999 Financial expenses 11 -9 -9 -1,104 -719 883 682 Net financial income/expenses -8 -8 931 1,255 -969 -1,325 Profit before tax -28 2 851 1,113 -1,037 -1,335 Tax expense 12 9 0 -168 -153 242 310 Net income from continuing operations -19 2 682 959 -795 -1 025 Net income from discontinued operations 0 -29 0 0 0 0
STATEMENT OF FINANCIAL POSITION Total assets 615 459 13,415 12,440 -11,791 -10 873 Equity 33 92 3,158 3,684 -3,645 -3 699 Total segment liabilities 582 367 9,597 8,755 -8,146 -7,175 Capital employed 1) 251 224 13,243 12,426 -10,926 -10,073 Interest-bearing liabilities 23 218 132 9,425 8,741 -7,281 -6,375 Funds from operation (FFO) 2) -11 20 Carrying amount of associates and joint ventures 16 0 0 67 423 -7 -126 Investments in intangible assets 3) 0 1 36 -6 0 0 Investments in property, plant and equipment 3) 5 10 107 133 -25 -26 Full-time equivalents (continuing operations) 424 399 394 369
1) Equity + interest-bearing liabilities. 2) Underlying EBITDA + dividends from associates and joint ventures + financial income - tax payable. 3) Includes additions of intangible assets and property, plant and equipment through business combinations.
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(Amounts in NOK millions) Total (NGAAP) IFSR adjustments Total (IFRS)
2015 2014 2015 2014 2015 2014
INCOME STATEMENT Note Operating revenues 7,447 7,767 914 40 8,361 7,808 - of which external operating revenues 7,447 7,767 914 40 8,361 7,808 - of which internal operating revenues 0 0 0 0 0 0 Energy and transmission expenses -2,447 -2,840 -12 -3 -2,459 -2,843 Other raw materials and consumables used 4 -1,006 -815 0 0 -1,006 -815 Employee benefits 7 -899 -810 0 0 -899 -810 Other operating expenses 9 -1,023 -973 2 -63 -1,021 -1,036 Operating profit before depreciation and impairment losses 2,072 2,329 904 -26 2,976 2,303 Depreciation and impairment losses 13 -577 -596 -1 7 -577 -588 Operating profit 1,495 1,733 903 -18 2,399 1,715 Share of profit of associates and joint ventures 11 84 -11 0 0 84 -11 Financial income 11 159 11 -289 -434 -130 -423 Financial expenses 11 -436 -245 12 -38 -424 -283 Net financial income/expenses -193 -244 -277 -472 -470 -717 Profit before tax 1,302 1,489 627 -491 1,929 998 Tax expense 12 -567 -607 -151 133 -718 -473 Net income from continuing operations 735 882 476 -357 1,211 525 Net income from discontinued operations 0 -29 0 -3 0 -33
STATEMENT OF FINANCIAL POSITION Total assets 15,861 14,636 2,659 1,782 18,520 16,418 Equity 2,920 3,329 1,649 431 4,569 3,760 Total segment liabilities 12,280 11,307 1,670 1,352 13,951 12,659 Capital employed 1) 12,287 11,624 1,310 433 13,597 12,058 Interest-bearing liabilities 23 8,707 8,295 321 3 9,028 8,299 Funds from operation (FFO) 2) 1,631 1,992 Carrying amount of associates and joint ventures 16 61 297 0 0 61 297 Investments in intangible assets 3) 118 -1 0 11 118 9 Investments in property, plant and equipment 3) 1,067 1,030 101 100 1,168 1,130 Full-time equivalents (continuing operations) 1,270 1,220 1,270 1,220
1) Equity + interest-bearing liabilities. 2) Underlying EBITDA + dividends from associates and joint ventures + financial income - tax payable. 3) Includes additions of intangible assets and property, plant and equipment 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 resources 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 business area is responsi- ble for power distribution in Agder. The Hydroelectric Power and Energy Management business areas are presented jointly as a single segment. The business areas are involved in the generation and sale of hydroelectric power. Within the Marketing and Business Development business area, LOS and Otera are presented as separate segments, due to their size and the differences between their areas of activity, while the rest of the business area is presented under parent company/other. LOS sells energy to retail customers, while Otera provides electrical contracting services. The financial statements follow Norwegian generally accepted accounting principles (NGAAP), as they are also used for internal corporate governance purposes.
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The Eliminations segment relates to the elimination of intra-group transactions and balances. Transactions between segments are on an arm’s-length basis.
The IFRS adjustments segment covers items arising from the fact that the accounts of segments are presented in accordance with NGAAP, while the consolidated financial statements are presented in accordance with IFRS. The main reason for the differences between the segment reporting and the consolidated financial statements is that changes in unrealised gains/ losses on derivatives are not included in the segment reporting. In addition, the segment reporting for the Network business area uses the approved income cap, whereas the consolidated statements are based on invoiced revenues; see Note 3.
The vast majority of Agder Energi’s turnover comes from customers in Norway or from Nord Pool Spot (the marketplace for trading physical power contracts). The turnover of the subsidiary group Otera AB comes from the Swedish market.
NOTE 2 ENERGY SALES
Agder Energi optimises its generation of hydroelectric power based on an assessment of the value of available water in relation to current and expected future spot prices. If Agder Energi’s contractual obligations to supply electricity to customers deviate from actual generation, the difference is bought or sold in the spot market. Physical and cash-settled contracts are used secure cash flows from underlying power generation. All contracts are recognised as an adjustment to the underlying revenues from electricity generation based on the difference between the contract price and the spot price (system price for cash-settled contracts).
The cash-settled contracts are described in greater detail in Note 28. In addition, Agder Energi has long-term physical delivery contracts with industrial customers. In total it has signed contracts for around 21 TWh of energy, to be delivered between now and 2030.
The Group’s energy sales and purchases are specified in the table below. Electricity generated by the hydropower business and sold through Nord Pool Spot and electricity bought through Nord Pool Spot for the retail business are presented gross.
Energy sales (Amounts in NOK millions) 2015 2014 Spot and balancing markets 1,463 1,863 Concession power and contracts for physical delivery signed before 1991 1) 97 159 Contracts for physical delivery signed after 1991 1) 353 62 Financial contracts used for hedging purposes 2) 553 513 Electricity certificates (own generation) 20 4 Other 77 103 Total for power generation 2,564 2,704 Retail market 2,257 2,669 Grid operation 29 30 District heating 92 83 Eliminations -107 -131 Total 4,835 5,355
1) The Energy Act came into force in 1991. 2) Figures refer to realised gains and losses; unrealised gains and losses are specified in Note 6. Although these contracts are used for hedging purposes, hedge accounting is not applied.
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Energy purchases (Amounts in NOK millions) 2015 2014 Spot and balancing markets 69 71 Other 58 59 Total for power generation 127 130 Retail market 2,042 2,469 Grid operation 105 113 District heating 38 37 Eliminations -100 -124 Total 2,212 2,624
The table below shows key figures for our power generating activities, as well as gains/losses in relation to spot prices.
2015 2014 Net electricity generation (less pumping) (GWh) 8,995 9,060 Reservoir reserves at 31 Dec. (GWh) 5,185 3,900 Reservoir reserves as % of capacity 99% 74%
(Amounts in NOK millions) 2015 2014 Spot value of net generation 1,731 2,102 Gains/losses on concession power and contracts for physical delivery signed before 1991 -56 -109 Gains/losses on hedges 715 531 Electricity certificates (own generation) 20 4 Gains/losses on other items 27 46 Net energy sales from power generation 2,437 2,574
Hedges include both cash-settled contracts and long-term physical contracts with industrial clients that are used as part of a hedging strategy.
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 arrangements – licences to regulate watercourses and to acquire ownership rights to waterfalls. These licences do not revert to public ownership, with the exception of a few minor regulations of the Arendal river system, which constitute less than 1% of the total river regulation capacity. Agder Energi has a perpetual obligation to supply 543 GWh each year to local municipalities, who are entitled to buy electricity at a regulated price. In most cases this price is set by the Ministry of Petroleum and Energy, but Agder Energi has some licences where the price is established individually based on government guidelines. Revenues from concession power are recognised as income when the electricity is supplied.
The future loss of revenue arising from the obligation to supply concession power at below market prices is estimated at NOK 2.2 billion. No provisions have been made for this in the financial statements, as it is estimated that the agreed price covers electricity 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 10 øre/kWh and an expected inflation rate of 2.5%.
(Volume in GWh) 2015 2014 Volume of concession power (GWh) 543 542 Regulated price (øre/kWh) 10.6 10.8
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NOTE 3 TRANSMISSION REVENUES
The Norwegian Water Resources and Energy Directorate regulates the revenues of power grid operators by setting an annual 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 volumes, revenues from transmission tariffs will show a surplus or shortfall relative to the permitted revenues (income cap). In the accounts of Agder Energi Nett AS, this difference is treated as either a liability or an asset. However, in the consolidated financial statements, which are presented in accordance with IFRS, this surplus or shortfall does not qualify for inclusion on the statement of financial position, and only the actual transmission tariff revenues are recognised in the income statement.
(Amounts in NOK millions) 2015 2014 Revenues under next year’s income cap recognised in the consolidated income statement 44 188 Accumulated surplus transmission revenues not included on the statement of financial position 404 360
NOTE 4 OTHER OPERATING REVENUES AND OTHER RAW MATERIALS AND CONSUMABLES USED
Other operating revenues (Amounts in NOK millions) Note 2015 2014 Contracting 5 996 899 Services 118 105 Communication 373 285 Other revenues 228 181 Total 1,715 1,470
Electrical contracting services are provided through Otera, and cover areas such as electrical power systems, transportation and telecommunications.
Other raw materials and consumables used (Amounts in NOK millions) Note 2015 2014 Contracting 5 534 446 Communication 212 142 Other purchases 260 227 Total 1,006 815
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NOTE 5 LONG-TERM MANUFACTURING CONTRACTS
The projects included under this item relate to the electrical contracting business. They are carried out for customers and are 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 esti- mated project costs. Estimated losses on projects are also recognised in profit or loss.
(Amounts in NOK millions) 2015 2014 Revenues from fixed-price contracts included under operating revenues 403 382 Revenues, work in progress 264 281 Accrued revenues included under other receivables 12 18 Deferred revenues included under other liabilities 3 0 Costs incurred to date, work in progress 220 238 Share of outstanding receivables not yet due under contract terms 7 1 Remaining turnover from loss-making projects 8 1
NOTE 6 UNREALISED GAINS AND LOSSES ON ENERGY CONTRACTS
Breakdown of profit and loss effects of financial instruments by class of instrument:
(Amounts in NOK millions) Note 2015 2014 Portfolio of production hedges, excluding power for industrial users 26 670 -139 Cash-settled contracts, compensation power 21 61 -71 Long-term cash-settled electricity contracts 21 34 28 Retail customer portfolio 26 -25 26 Total 740 -156
Reversal of unrealised gains and losses at 1 January on contracts closed out during the year 1) -313 -368 Gains and losses on contracts that had not been closed out as of 31 December. 1,053 212 Total 740 -156
The above table refers to electricity contracts that must be measured at fair value through profit or loss under IAS 39.
1) Value at start of 2015 (2014) of contracts that were closed out during 2015 (2014).
NOTE 7 EMPLOYEE BENEFITS
(Amounts in NOK millions) Note 2015 2014 Wages and salaries 874 831 Employers’ National Insurance Contributions 137 127 Pension expense (incl. employers’ NICs) 22 109 44 Other benefits and reimbursements 24 24 Capitalised wage costs arising from own investments -245 -216 Total 899 810
Number of full-time equivalents in continuing operations at 31 Dec. 1,270 1,220
For details of senior management compensation, please see Note 32.
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NOTE 8 PROPERTY TAXES AND LICENCE FEES
(Amounts in NOK millions) 2015 2014 Licence fees 51 48 Property taxes 163 161 Total 214 209
Licence fees are perpetual payments designed to compensate for the damage or inconvenience caused by hydropower projects. The fees are paid annually and are adjusted in line with the consumer price index, initially at the first turn of the year five years after the licence was granted 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.
The present value of the Group’s future licence fees, for which no provision has been made in the financial statements, has been calculated to be NOK 1.9 billion using a discount rate of 2.5%.
NOTE 9 OTHER OPERATING EXPENSES
(Amounts in NOK millions) 2015 2014 Property-related expenses 87 78 Lease of machinery and office equipment 25 15 Purchase of plant and equipment 62 41 Repairs and maintenance to equipment 24 19 Contractors 82 115 Operation/maintenance of IT systems 32 46 Technical consultants 51 40 Administrative consultants 82 58 Other external services 35 40 Office supplies, telecommunications, postage, etc. 41 41 Cost of vehicles 39 31 Leasing 34 26 Travel expenses, subsistence allowances, mileage expenses, etc. 56 52 Sales, advertising, representation, membership fees and gifts 30 33 Insurance premiums 16 18 Share of other operating expenses at joint arrangements 80 85 Free electricity and compensation *) -2 63 Other operating expenses 33 26 Total 807 827
*) Of the NOK -2 (63) million provision for free electricity and compensation, NOK 0 (56) million was the result of changing the discount rate used to calculate provisions. There is no impact on cash flows.
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NOTE 10 AUDITOR’S FEE
The Group’s auditor is Ernst & Young, who audits the parent company and its subsidiaries with the exception of a few small subsidiaries.
(Amounts in NOK millions excl. VAT) 2015 2014 Statutory audit 3.0 3.6 Other certification services 0.4 0.4 Tax advice 0.1 0.1 Other services not related to auditing 0.1 0.3 Total 3.6 4.4
NOTE 11 FINANCIAL INCOME AND EXPENSES
(Amounts in NOK millions) Note 2015 2014
Share of profit of associates and joint ventures 16 84 -11
Interest income on loans 1) 8 9 Other interest income 0 11 Other financial income 0 6 Financial income 8 26
Unrealised gains and losses on foreign currency contracts 2) 26 -26 -178 Unrealised gains and losses on foreign currency loans -98 -110 Unrealised gains and losses on interest rate contracts and basis swaps 26 -14 -161 Unrealised gains/losses on currency and interest rate contracts -138 -449
Interest expense on loans 3) 216 241 Interest expense on interest rate swaps 61 52 Interest on capitalised construction loans -31 -26 Net realised exchange rate losses 150 3 Realised loss on shares 5 0 Impairment of non-current financial assets4) 11 2 Other financial expenses 12 12 Financial expenses 424 283
Net financial income/expenses -470 -717
1) Relates to interest income on financial assets carried at amortised cost. 2) The breakdown is as follows:
(Amounts in NOK millions) Note 2015 2014
Reversal of unrealised gains and losses at 1 Jan. on contracts closed out during the year *) 195 53 Gains and losses on contracts that had not been closed out as of 31 Dec. -221 -231 Total -26 -178
*) The value of contracts that had already been signed at the start of 2015 (2014) and that were closed out during 2015 (2014).
3) Relates to interest expenses on loans carried at amortised cost. 4) Impairment of shares and other non-current financial assets.
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NOTE 12 TAX
(Amounts in NOK millions) 2015 2014 Tax expense in income statement Income tax payable 254 238 Resource rent tax payable 216 269 Changes in deferred income taxt 226 -54 Changes in deferred resource rent tax 35 26 Corrections to previous years’ tax assessments -14 -6 Total tax expense recognised in income statement 718 473
Reconciliation of nominal and effective tax rates Profit before tax 1,929 998 Expected tax 521 269
Tax effect of Permanent differences -9 -4 Utilisation of previously unrecognised tax losses 0 -80 Resource rent tax 251 295 Changes relating to prior years -14 -6 Net impact of changes in tax rates -32 0 Total tax expense 718 473
Effective tax rate 37% 47%
Breakdown of temporary differences and negative resource rent carried forward
Taxable income Property, plant and equipment 2,628 2,303 Current assets/liabilities -96 15 Pension liabilities 416 -196 Other non-current provisions -781 -825 Derivatives 116 -328 Other 8 -185 Gross differences 2,290 784 Tax rate 25% 27% Net deferred income tax assets (-)/liabilities (+) 573 212
Resource rent Temporary differences 312 218 Negative resource rent carryforwards expected to be offset against profit over the coming 10 years -704 -824 Gross differences -392 -606 Tax rate 33% 31% Net deferred income tax assets (-)/liabilities (+) -129 -188
Of which presented in the financial statements as: Deferred tax 817 439 Deferred tax assets -374 -415
Deferred tax assets arising from negative resource rent carryforwards not included on the statement of financial position -518 -456
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When assessing whether it is likely that the Group will be able to make use of its accumulated negative resource rent carryforwards, deferred resource rent tax assets are calculated using a conservative estimate of future electricity prices and on the assumption that future yields on short-term government debt will be between 1.3% and 2.9%.
(Amounts in NOK millions) 2015 2014 Changes in net deferred tax liabilities (+)/ assets (-) over the year Net deferred tax liabilities (+)/assets (-) at 31 Dec. prior year 24 146 Net effect of disposals 0 1 Net additions from acquisitions during the year 0 -8 Change in deferred tax liabilities (+)/assets (-) recognised in equity* 8 0 Change in net deferred tax liabilities (+)/assets (-) included in comprehensive income** 149 -88 Change in deferred tax liabilities (+)/assets (-) recognised through profit or loss 261 -27 Net deferred tax liabilities (+)/assets (-) at 31 Dec. 443 24
* NOK 8 million of which relates to changes in tax rates in 2015. ** NOK -8 million of which relates to changes in tax rates in 2015.
Changes in deferred tax on items in the statement of comprehensive income Remeasurements of pensions -151 63 Cash flow hedges 2 26 Net change in deferred tax on items in the statement of comprehensive income -149 88
NOTE 13 DEPRECIATION AND IMPAIRMENT LOSSES
(Amounts in NOK millions) Note 2015 2014 Amortisation of intangible assets 14 21 19 Impairment of intangible assets 14 42 0 Depreciation of property, plant and equipment 15 513 556 Impairment of property, plant and equipment 15 1 14 Total depreciation, amortisation and impairment losses recognised in operating profit 577 588 Impairment of financial assets 11 11 2 Total depreciation, amortisation and impairment losses recognised in statement of cash flows 588 590
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NOTE 14 INTANGIBLE ASSETS
(Amounts in NOK millions) Goodwill Software Other Total intangible intangible assets assets
Acquisition cost 141 57 110 308 Accumulated depreciation and impairment losses 0 -30 -55 -85 Carrying amount at 31/12/2014 141 27 55 223
Carrying amount at 01/01/2015 141 27 55 223 Additions 9 103 6 118 Translation differences -1 0 0 -1 Depreciation 0 -16 -5 -21 Impairment losses 0 0 -42 -42 Carrying amount at 31/12/2015 149 114 14 277
Acquisition cost 150 161 116 427 Translation differences -1 0 0 -1 Accumulated depreciation and impairment losses 0 -47 -102 -149 Carrying amount at 31/12/2015 149 114 14 277
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. The test is performed in the fourth quarter, and in 2015 it did not result in any charge, as was also the case in 2014. 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 statement of financial position (Amounts in NOK millions) 2015 2014 Otera 94 94 LOS 12 12 NetNordic 18 11 NEG 9 9 Others 16 15 Carrying amount of goodwill 149 141
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NOTE 15 PROPERTY, PLANT AND EQUIPMENT
HYDROELECTRIC POWER GENERATION GRID OPERATION (Amounts in NOK millions) Rights and Tunnels and Machinery and Power station Regional power Lokal licences dams electrical buildings nett trans- distribution infrastructure and sites mission grid network
Carrying amount at 01/01/2014 1,137 2,299 1,987 876 1,113 2,315 Additions -2 514 201 125 142 298 Disposals at book value 0 0 0 0 0 0 Depreciation -5 -55 -143 -51 -66 -125 Impairment losses 0 0 0 0 0 0 Carrying amount at 31/12/2014 1,130 2,758 2,045 950 1,189 2,488
Acquisition cost 1,168 3,972 4,418 1,872 1,978 4,386 Accumulated depreciation and impairment losses -38 -1 214 -2 373 -922 -789 -1,898 Carrying amount at 31/12/2014 1,130 2,758 2,045 950 1,189 2,488
Carrying amount at 01/01/2015 1,130 2,758 2,045 950 1,189 2,488 Additions 11 93 184 25 98 249 Disposals at book value 0 0 0 0 0 0 Depreciation -5 -58 -136 -51 -56 -113 Impairment losses 0 0 0 0 0 0 Carrying amount at 31/12/2015 1,136 2,793 2,093 924 1,231 2,624
Acquisition cost 1,179 4,065 4,602 1,897 2,076 4,635 Accumulated depreciation and impairment losses -43 -1 272 -2 509 -973 -845 -2,011 Carrying amount at 31/12/2015 1,136 2,793 2,093 924 1,231 2,624 Depreciation period (years) 67/ 67-99 20-50 50-67/ 15-50 15-50 not depreciated not depreciated
(Amounts in NOK millions) District heating Property Other Work in Total property progress lant and equipment
Carrying amount at 01/01/2015 507 155 215 1,375 11,979 Additions 18 1 117 -284 1,130 Disposals at book value 0 -3 -2 0 -5 Depreciation -18 -7 -86 0 -556 Impairment losses 0 -6 -8 0 -14 Carrying amount at 31/12/2014 507 140 236 1,091 12,534
Acquisition cost 637 199 669 1,091 20,390 Accumulated depreciation and impairment losses -130 -59 -433 0 -7,856 Carrying amount at 31/12/2014 507 140 236 1,091 12,534
Carrying amount at 01/01/2015 507 140 236 1,091 12,534 Additions 31 7 70 400 1,168 Disposals at book value -2 -2 -25 -15 -45 Depreciation -18 -9 -67 0 -513 Impairment losses 0 0 -1 0 -1 Carrying amount at 31/12/2015 518 135 213 1,476 13,143
Acquisition cost 669 203 694 1,476 21,496 Accumulated depreciation and impairment losses -151 -68 -481 0 -8,353 Carrying amount at 31/12/2015 518 135 213 1,476 13,143 Depreciation period (years) 8-60 25-99/ 3-20 not depreciated
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Additions for work in progress are calculated as gross additions less completed projects within the relevant category. Periodic maintenance is included within the relevant category. Capitalised loan arrangement fees amounted to NOK 31 (26) million in 2015, calculated using an interest rate of 3.4% (3.6%). NOK 3,138 million of property, plant and equipment at joint arrangements is included in the main groups under hydroelectric power generation and under work in progress. Of the additions under distribu- tion networks, NOK 90 (100) million were financed through customer contributions. The stated depreciation periods apply to the majority of the assets in each category, although there may be some minor deviations from them.
Below the useful lives of the most important assets on the statement of financial position are set out:
Hydroelectric power stations Hydroelectric power stations Depreciation period (years) Depreciation period (years) Waterfall rights Not depreciated Machinery – Runners 40 Structures – Turbines 40 – Rock-fill dams 99 – Turbine regulators 40 – Caverns 99 – Turbine hall cranes, air handling units, pumps 25 – Concrete dams 67 – Grating cleaners 10 – Power station buildings 67 – Other buildings 50 Process equipment and communication - Grid control systems 20 Penstock – Control centre 10 – Underground 99 – Communications/Control/Logging 10 – Underground pipeline 67 – Above ground pipeline 40 Electrical systems – Transformers 40 Gates, gratings, entrances, etc. – Generators 40 – Intake gates 50 – Auxiliary systems (switches, low-voltage systems) 25 – Dam gates 50 – Switchgear and other high-voltage systems 25 – Gratings 50 – Entrances 50 Periodic maintenance (interval) – Stream intakes 50 – Refurbishment of buildings 25 – Machinery – major service 20 Roads and bridges – Electrical systems – major service 20 – Roads/quays 67 – Bridges 50
Power distribution networks Other assets Depreciation period (years) Depreciation period (years) Regional power transmission grid: – Sites Not depreciated – Power and ground cables 50 – Office buildings 50 – High-voltage power lines 40 – Vehicles 8 - Grid control systems 20 – Fixtures and fittings 5 – Office and IT equipment 3 Local power distribution network: – High-voltage lines and cables 50 – Low-voltage lines and cables 40 – Distribution substations 35
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NOTE 16 ASSOCIATES AND JOINT ARRANGEMENTS
Agder Energi has various investments in associates and joint arrangements. Joint arrangements include joint ventures and joint operations. Associates and joint ventures are accounted for using the equity method, whereas proportionate consolidation is used for investments in joint operations.
Associates and joint ventures (accounted for using the equity method)
(Amounts in NOK millions) 2015 2014
Associates 21 252 Joint ventures 40 45 Carrying amount at 31 Dec. 61 297
Profit from associates -8 2 Profit from joint ventures -23 -13 Gain on disposals 115 0 Share of profit of associates and joint ventures 84 -11
Breakdown of investments in associates:
(Amounts in NOK millions) Ownership Carrying amount Additions Disposals Consolidated Carrying amount interest at 31/12/2014 share of profit/loss at 31/12/2015
Småkraft AS 1) 20.0% 234 6 -240 0 0 Steinsvik Kraft AS 20.0% 0 8 0 0 8 Skagerak Venture Capital I KS/GP KS 19.6% 16 0 0 -4 12 Teknova Invest AS 38.9% 0 0 0 0 0 NorthConnect KS/NorthConnect AS 22.3% 1 3 0 -4 1 Grønn Kontakt AS 25.2% 1 0 0 -1 0 Total for associates 252 17 -240 -8 21
1) The company was sold in 2015.
Breakdown of investments in joint ventures:
(Amounts in NOK millions) Ownership Carrying amount Additions Disposals Consolidated Carrying amount interest at 31/12/2014 share of profit/loss at 31/12/2015
Statkraft Agder Energi Vind DA 38.0% 4 14 0 -17 2 Fosen Vind AS 1) 20.9% 40 4 0 -5 38 Viking Varme AS 50.0% 1 0 0 -1 0 Total for joint ventures 45 18 0 -23 40
1) Fosen Vind was sold in 2016, but the income statement impact was negligible.
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Summarised financial information for material associates and joint ventures is presented below.
(Amounts in NOK millions) SAE Vind Fosen Vind 2015 2014 2015 2014
Operating revenues 0 1 0 0 Net income -28 -24 -26 -28
Non-current assets 93 85 173 176 Current assets 5 5 15 65 Non-current liabilities 0 0 0 7 Current liabilities 9 4 6 44 Equity 89 86 182 190
Joint operations (proportionate consolidation) Joint operations consist of power stations and water management associations. Agreements regulate key areas of cooperation, and the joint owners receive their respective shares of the electricity generated in return for covering an equivalent proportion of the expenses. The Group uses the proportional consolidation method to account for joint operations, and the Group’s share of revenues, expenses, assets and liabilities are consolidated on a pro-rata basis. Agder Energi is a joint owner of the following power stations and water management associations:
Otra Kraft owns the Holen, Brokke and Skarg power stations on the River Otra. Otra Kraft is owned by Agder Energi Vannkraft, which has a 68.6% interest, and Skagerak Kraft, which has a 31.4% interest, and is managed through the general meeting. The company has its head office at Rysstad in Valle.
Ulla Førre is owned by Statkraft, Lyse Energi, Skagerak Energi, Haugaland kraftlag and Agder Energi Vannkraft. Agder Energi Vann- kraft has a 6.0% ownership interest in Ulla Førre, which entitles it to an equivalent proportion of the power generated by the facility.
The power station Finndøla kraftverk is 50:50 owned by Agder Energi Vannkraft and Skagerak Kraft.
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. Agder Energi Vannkraft represents the co-ownership in dealings with third parties.
The water management association Otteraaens Brugseierforening comprises Agder Energi Vannkraft, Skagerak Kraft and Vigelands Brug. The association is managed through its Board. Agder Energi Vannkraft’s ownership interest, including its indirect interest through Otra Kraft, is approximately 73.8%. Otteraaens Brugseierforening has its business address in Valle.
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.
Sira-Kvina is owned by Agder Energi Vannkraft (12.2%), Lyse Produksjon (41.1%), Statkraft Energi (32.1%) and Skagerak Kraft (14.6 %). It is managed through its Board. The company has its business address at Tonstad.
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Below there follows a summary of the Group’s share of assets, liabilities, revenues and expenses at jointly controlled assets. The energy sales in the table do not represent actual revenues, and have instead been calculated by multiplying Agder Energi Vannkraft’s actual power generation by the average electricity price, and adding Agder Energi Vannkraft’s share of revenues from concession power.
(Amounts in NOK millions) 2015 2014 Energy sales 845 813 Other operating revenues 6 3 Total operating revenues 851 816
Transmission expenses -51 -43 Energy purchases -13 -12 Property taxes and licence fees -26 -22 Depreciation -94 -92 Other operating expenses -82 -89 Total operating expenses -266 -258
Operating profit 585 558
Non-current assets 3,138 3,151 Current assets 84 165 Total assets 3,222 3,316
Other provisions 5 12 Current liabilities 63 146 Net assets 3,154 3,158
NOTE 17 NON-CURRENT FINANCIAL ASSETS
(Amounts in NOK millions) Note 2015 2014 Investments in shares and ownership interests 14 31 Loans to associates and joint arrangements 7 123 Other receivables 1) 196 163 Pension assets 22 602 138 Total 819 455
1) The majority of the amount relates to a subordinated loan to Ventelo AS and a vendor credit in conjunction with the sale of the shares in Ventelo, as well as NOK 48 million of non-current trade debtors.
The fair value of non-current financial assets is described in greater detail in notes 25 and 27.
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NOTE 18 RECEIVABLES
(Amounts in NOK millions) 2015 2014 Trade debtors 1,131 1,080 Bad debt provision 23 13 Total trade debtors 1,108 1,067 Accrued revenues 180 213 Prepaid expenses 74 27 Receivables from joint arrangements 26 73 Other receivables 66 66 Share of current assets at joint arrangements 58 92 Total receivables 1,512 1,538
Ageing analysis of trade debtors
(Amounts in NOK millions) Not overdue 0-30 days 31-60 days 61-90 days Over 90 days Total overdue overdue overdue overdue
2015 985 70 33 6 37 1,131 2014 939 90 14 8 29 1,080
NOTE 19 CASH AND CASH EQUIVALENTS
(Amounts in NOK millions) 2015 2014 Deposits in cash pooling arrangement 193 0 Cash and cash equivalents 276 42 Restricted assets (e.g. term deposits, tax withholding account and client assets) 4 12 Total 473 54
The parent company has set up a cash pooling arrangement with an associated NOK 500 million overdraft facility. Most subsidiaries in the Group in which the parent company holds an ownership interest of at least 50% take part in the cash pooling arrangement and are jointly and severally liable to the bank for the overdraft facility.
A NOK 52 million bank guarantee covering the parent company and subsidiaries has been used as security for tax deductions at source.
NOTE 20 SHARE CAPITAL AND SHAREHOLDER INFORMATION
The share capital is made up of Number Face value Share capital of shares (in NOK 000s)
Share capital 2,700,000 670 1,809,000 Total 2,700,000 1,809,000
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List of shareholders in Agder Energi AS
Number of % of Number of % class Total number % of tot. Share class A shares class A shares class B shares B shares of shares number of shares capital
Statkraft Industrial Holding AS 743,197 41.289% 485,990 53.999% 1,229,187 45.525% 823,555 Arendal Municipality 115,017 6.390% 57,507 6.390% 172,524 6.390% 115,591 Kristiansand Municipality 95,400 5.300% 47,700 5.300% 143,100 5.300% 95,877 Grimstad Municipality 53,327 2.963% 26,663 2.963% 79,990 2.963% 53,593 Flekkefjord Municipality 53,269 2.959% 14,650 1.628% 67,919 2.516% 45,506 Lyngdal Municipality 49,745 2.764% 13,680 1.520% 63,425 2.349% 42,495 Kvinesdal Municipality 49,254 2.736% 13,545 1.505% 62,799 2.326% 42,075 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 Mandal Municipality 42,343 2.352% 11,644 1.294% 53,987 2.000% 36,171 Vennesla Municipality 42,343 2.352% 11,644 1.294% 53,987 2.000% 36,171 Froland Municipality 31,847 1.769% 15,924 1.769% 47,771 1.769% 32,007 Søgne Municipality 33,601 1.867% 9,240 1.027% 42,841 1.587% 28,703 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 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 Åmli Municipality 21,921 1.218% 10,960 1.218% 32,881 1.218% 22,030 Risør Municipality 21,052 1.170% 10,525 1.169% 31,577 1.170% 21,157 Valle Municipality 20,327 1.129% 10,164 1.129% 30,491 1.129% 20,429 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 Tvedestrand Municipality 19,066 1.059% 9,533 1.059% 28,599 1.059% 19,161 Åseral Municipality 21,776 1.210% 5,988 0.665% 27,764 1.028% 18,602 Vegårshei Municipality 14,553 0.809% 7,277 0.809% 21,830 0.809% 14,626 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
The NOK 1,809 million of share capital is made up of class A and class B shares.
Class A shares can only be owned by shareholders who meet the conditions for being allocated indefinite waterfall licences under the 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.
The proposed dividend payout for 2015 comes to NOK 660 million in total, equivalent to NOK 244 per share.
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NOTE 21 PROVISIONS
(Amounts in NOK millions) Note 2015 2014 Pension liabilities 22 296 415 Other non-current provisions 1,052 1,060 Total 1,348 1,475
Breakdown of other non-current provisions
(Amounts in NOK millions) Supply of free Supply of free Cash-settled Other Total electricity and electricity and contracts 3) provisions compensation 1) compensation 2)
Carrying amount at 01/01/2014 521 137 105 70 833 Unrealised gains and losses 71 0 -28 0 43 New provisions 0 63 0 132 195 Provisions used 0 0 0 -11 -11 Carrying amount at 31/12/2014 592 200 77 191 1,060
Carrying amount at 01/01/2015 592 200 77 191 1,060 Unrealised gains and losses -61 0 -34 0 -95 New provisions 0 9 0 103 112 Provisions used 0 0 0 -25 -25 Carrying amount at 31/12/2015 531 209 43 269 1,052
1) Perpetual obligations to supply free electricity that are presented as financial instruments at fair value in accordance with IAS 39, as they can be settled in cash. Also see notes 25 and 27. 2) Perpetual obligations to supply free electricity and pay compensation that are accounted for in accordance with IAS 37. These obligations to supply free electricity cannot be settled in cash. Compensation involves annual cash payments that are adjusted by inflation every five years. 3) Non-current cash-settled contracts measured in accordance with IAS 39. Also see notes 25 and 27.
NOTE 22 PENSIONS
The Group’s pension plans For employees taken on before 1 April 2007, the Group has a defined benefit pension plan run by Agder Energi Pensjonskasse, which meets the legal requirements for public sector occupational pension plans. Employees taken on after 1 April 2007, as well as employees at companies outside Norway, are part of a defined contribution pension plan. The Group’s pension plans satisfy the requirements laid down in the Act on Mandatory Occupational Pensions.
Defined benefit pension plans The Group has a funded public pension plan for its employees in Norway, which entitles them to defined future pension benefits, based on their 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 remeasurements that arise over the course of the financial year are presented under other comprehensive income and expenses in the statement of comprehensive income. Changes in defined benefit pension plan liabilities arising from changes to plan arrangements (past service cost), are recognised directly in profit or loss.
Pension liabilities were calculated by an independent actuary in December, and represent an estimate of the situation at 31 December. Similarly, the gross pension plan assets at 31 December were estimated by the Group’s management in December.
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Certain current and former senior managers are entitled to pension benefits over and above those covered by the company pension plan; see Note 32. Provisions for these plans are presented under unfunded pension liabilities.
Defined contribution pension plan Employees taken on after 1 April 2007 are entitled to membership of a defined contribution pension plan.
Early retirement schemes (AFP schemes) Employees covered by a public pension plan have an early retirement scheme, known as an AFP scheme. This is a so-called public 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.
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 on joining the Group, whichever is later.
Employees in Norway covered by the defined contribution plan are entitled to a private AFP scheme, which from 2011 onwards means a lifelong supplement to their retirement pensions from the National Insurance Scheme. This AFP scheme is partly funded by contributions made by the employer. The state covers the remaining 33% of the cost. The AFP scheme is considered a defined benefit plan, but for the moment it is being accounted for as a defined contribution plan. In 2015, the annual contribution to the scheme was 2.4% (2014: 2.3%) of qualifying pay between 1 and 7.1 times the National Insurance Scheme’s basic amount (“G”) for each employee covered by the scheme.
Actuarial assumptions When calculating the pension expense and net pension liabilities, a number of assumptions have been made (see table below). The discount rate is now based on the interest rate on covered bonds, as opposed to the yield on 10-year government bonds used previously. The assumptions used to calculate pension liabilities are consistent with the most recent guidelines on actuarial as- sumptions as of 31 December 2015, with the exception of the discount rate, which was 2.7% in the latest guidelines based on the interest rate on covered bonds. The 2.5% discount rate applied is considered to be within the acceptable/normal deviation from the recommended point estimate, and the calculations have therefore not been updated.(Using the most recent point estimate would be expected to reduce gross pension liabilities by approximately 2-3%.)
The Group uses the latest version of the Norwegian life tables (GAP 07) for its estimates of life expectancy, probability of disa- bility, etc. Extracts from the actuarial tables are reproduced below. This table shows life expectancy and the probability that an employee in a given age bracket will suffer disability or die within a year.
Age Disability risk in % Mortality risk in % Life expectancy Man Woman Man Woman Man Woman 20 0.07 0.07 0.01 0.01 85 89 40 0.22 0.22 0.06 0.05 84 88 60 2.16 2.59 0.52 0.37 84 87 80 - - 6.04 3.35 87 90
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(Amounts in NOK millions) Note 2015 2014 The pension expense for the year has been calculated as follows Current service cost 64 55 Interest expense on net pension liabilities 7 7 Past service cost 0 -49 Employers’ National Insurance Contributions 9 8 Employee contributions -6 -7 Pension expense for the year, defined benefit plans 73 14 Cost of AFP scheme including employers’ NICs 6 6 Defined contribution pension plans (including employers’ NICs) 30 24 Total pension expense recognised in the income statement 7 109 44
Pension liabilities and pension plan assets
Change in gross pension liabilities Gross pension liabilities at 1 Jan. 2,348 1,972 Current service cost (incl. emp. NICs) 73 63 Interest cost 66 79 Past service cost 0 -49 Benefits paid/paid-up policies -82 -72 Disposals 0 -12 Remeasurements -519 366 Gross pension liabilities at 31 Dec. (including employers’ NICs) 1,886 2,348
Breakdown of defined benefit pension liabilities Funded pension liabilities 1,599 2,044 Unfunded pension liabilities 287 304 Gross pension liabilities at 31 Dec. 1,886 2,348
Change in gross pension plan assets Fair value of pension plan assets at 1 Jan. 2,071 1,764 Expected return on pension plan assets 59 73 Remeasurements -32 158 Pension contributions 149 96 Disposals 0 -8 Conversion of subordinated loan to paid-in capital 0 40 Benefits paid/paid-up policies -54 -51 Fair value of pension plan assets at 31 Dec. 2,192 2,071
Net pension liabilities/assets (-) at 31 Dec. -306 277
Net pension assets recognised on statement of financial position 17 602 138 Pension liabilities recognised on statement of financial position 21 296 415 Net pension liabilities/assets (-) recognised at 31 Dec. -306 277
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(Amounts in NOK millions) 2015 2014 Change in net defined benefit pension liabilities Net defined benefit pension liabilities at 1 Jan. 277 208 Pension expense recognised in profit or loss 73 14 Conversion of subordinated loan to paid-in capital 0 -40 Disposals 0 -4 Company net contributions incl. employers’ NICs -164 -103 Pension benefits included under operating expenses -6 -6 Remeasurements -487 208 Net pension liabilities/assets (-) recognised at 31 Dec. -306 277
Remeasurements are made up of Changes in demographic assumptions -136 80 Changes in financial assumptions -384 286 Excess return on assets 32 -158 Total remeasurements included in statement of comprehensive incomet -487 208
The remeasurements in 2015 were mainly due to a lower indexing of retirement pensions, higher interest rates and a slight upward adjustment to the assumed age for take-up of early retirement.
Sensitivity analysis for a +/- 0.5% percentage point change in the discount rate Increase in pension liabilities if the discount rate falls 158 224 Fall in pension liabilities if the discount rate rises -141 -196
The sensitivity analysis only looks at potential changes in the discount rate, as it is the only parameter considered to have a significant impact on recognised pension liabilities.
Assumptions used to determine pension liabilities at 31 Dec. Discount rate 2.50% 2.30% Annual wage growth 2.25% 2.50% Increase in the National Insurance Scheme’s basic amount (”G”) 2.25% 2.50% Annual indexing of pensions 1.50% 2.50% Expected average remaining years of service (funded) 8.7år 9.2 år Expected average remaining years of service (unfunded) 5.9 år 4.9 år Staff turnover in % 100% 100% at 64.5 years at 64 years
Assumptions used to calculate the pension expense for the year Discount rate 3.00% 4.10% Annual wage growth 3.00% 3.50% Increase in the National Insurance Scheme’s basic amount (”G”) 3.00% 3.50% Annual indexing of pensions 2.25% 2.75%
Distribution of the pension scheme assets by investment category at 31 Dec. Property funds 12% 10% Interest-bearing financial instruments 38% 49% Shares 39% 35% Other (hedge funds, etc.) 11% 6% Total 100% 100%
Pension plan assets consist of instruments traded on a stock exchange or funds that publish daily market prices.
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2015 2014 Number of people covered by the pension plans Defined benefit plan: current employees 466 499 Defined benefit plan: accrued entitlements and retired employees 1,028 1,161 Defined contribution plan: current employees 791 608 Current employees entitled to public sector AFP, and early retirees 369 381
NOTE 23 INTEREST-BEARING LIABILITIES
(Amounts in NOK millions) 2015 2014 Interest-bearing non-current liabilities Bonds 5,336 5,557 Liabilities to financial institutions 1,944 1,558 Other interest-bearing non-current liabilities 4 0 Total 7,284 7,115
Interest-bearing current liabilities Commercial paper 550 300 Overdraft with cash pooling arrangement 0 84 Current portion of non-current liabilities (principal repayments due within one year) 1,195 800 Total 1,745 1,184
The fair value of the Group’s interest-bearing liabilities is described in Note 25. All of the above statement of financial position items are carried at amortised cost in accordance with IAS 39. Note 28 sets out further details of interest rates, durations, liquidity risk, credit facilities, etc. Some loans form part of hedging relationships in accordance with IAS 39. See Note 29 for a more detailed description.
NOTE 24 OTHER NON-INTEREST-BEARING CURRENT LIABILITIES
(Amounts in NOK millions) 2015 2014 Trade payables 399 292 Unpaid government taxes and duties, tax deducted at source, etc. 355 296 Share of non-current liabilities at joint arrangements 63 121 Other current liabilities 553 528 Total 1,370 1,237
NOTE 25 FINANCIAL INSTRUMENTS
Financial instruments constitute a significant proportion of Agder Energi’s total assets, and they have a big impact on the Group’s financial position and results. The majority of the financial instruments are used in energy trading or as financial hedges.
Within energy trading, financial instruments are used as part of a hedging strategy. When managing the Group’s exposure to risks associated with future electricity prices and exchange rates, these instruments are viewed together with future physical trading; see Note 28. Physical energy trading is only recognised in the financial statements when the energy is supplied/bought, whereas energy and currency derivatives are measured at fair value through profit or loss. If there are large volumes of these derivatives, they can therefore cause great volatility in the Group’s reported statement of financial position and net income, without it reflecting the overall financial results.
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Financial hedges 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 Group’s other interest rate risks; see Note 28. 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, without it reflecting its overall financial performance. There are some minor exceptions to this asymmetrical treatment; see Note 29 on accounting hedges.
In order to highlight the unrealised impact of these electricity, currency and interest rate contracts, their values and changes in value are presented on separate lines in the statement of financial position and income statement.
The table below shows the carrying amount and fair value of the Group’s financial instruments, with the exception of trade debtors and payables, whose carrying amounts are almost identical to their fair values.
(Amounts in NOK millions) Note Carrying Fair Carrying Fair amount value amount value 2015 2015 2014 2014 Financial assets at fair value through profit or loss Derivatives 26 1,824 1,824 864 864 Total financial assets at fair value through profit or loss 1,824 1,824 864 864
Available-for-sale assets Shares 17 14 14 31 31 Total available-for-sale assets 14 14 31 31
Loans and receivables at amortised cost Loans to associates 17 7 7 123 123 Other non-current receivables 17 196 196 163 163 Cash and cash equivalents 19 473 473 54 54 Total loans and receivables at amortised cost 676 676 340 340
Financial liabilities at fair value through profit or loss Non-current liabilities, obligation to provide free electricity and pay compensation 21 531 531 592 592 Non-current liabilities, cash-settled contracts 21 43 43 77 77 Derivatives 26 924 924 710 710 Total financial liabilities at fair value through profit or loss 1,498 1,498 1,379 1,379
Financial liabilities at amortised cost Bonds 23 6,343 6,318 6,357 6,385 Liabilities to financial institutions 23 2,136 2,214 1,558 1,668 Commercial paper 23 550 550 300 300 Overdraft and other interest-bearing current liabilities 23 0 0 84 84 Total financial liabilities at amortised cost 9,029 9,082 8,299 8,437
NOTE 26 DERIVATIVES
Agder Energi has both independent derivatives (simply referred to as derivatives) and embedded derivatives.
The embedded derivatives are components of perpetual contractual obligations to supply free electricity and pay compensation, as well as of 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 are classified as non-current liabilities; see Note 21.
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In the table below, derivatives with positive and negative fair values are shown separately by portfolio. The portfolios are described in greater detail in Note 28. The figures for energy derivatives are the accounting values of contracts which, under the criteria set out in IAS 39, fall within the definition of financial instruments. Power contracts for physical delivery covered by the own use -ex emption in IAS 39 are not defined as financial instruments. There are therefore significant discrepancies between accounting values and underlying financial values, as the portfolios contain both contracts that fall within the scope of IAS 39 and ones that do not. A small proportion of the Group’s interest rate derivatives are designated as accounting hedges; see Note 29 on accounting hedges.
Agder Energi offers several managed electricity trading products to the retail market. With these products, Agder Energi supplies physical electricity to a portfolio of customers, on whose behalf it actively trades electricity through NASDAQ (the marketplace for cash-settled electricity futures). These NASDAQ positions are measured symmetrically. In other words, Agder Energi recog- nises equivalent contracts with respect to the retail customers covered by the electricity trading products, but with the opposite exposure of the NASDAQ positions. This symmetrical treatment means that these financial positions do not have any impact on Agder Energi’s income statement, but it does result in an increase in total assets, as the gross value of derivatives on the state- ment of financial position rises. At the end of 2015, the Group had derivatives worth NOK 5 (0) million that were assets in relation to NASDAQ and liabilities in relation to customers. Similarly, it had derivatives worth NOK 203 (109) million that were assets in relation to customers and liabilities in relation to NASDAQ. In total the value of these positions is higher than the NOK 9 (1) 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 when they are settled. These NASDAQ positions are therefore presented net on the statement of financial position.
(Amounts in NOK millions) Note Change 2015 2014 Derivative assets Portfolio of cash-settled electricity contracts* 1,510 857 Currency derivatives, electricity sales 0 7 Interest rate swaps and basis swaps 314 0 Total derivatives 1,824 864
Derivative liabilities Portfolio of cash-settled electricity contracts* 9 1 Currency derivatives, electricity sales 515 496 Interest rate swaps and basis swaps 401 213 Total derivatives 924 710
Net value of derivatives Portfolio of cash-settled electricity contracts* 6 645 1,501 856 Currency derivatives, electricity sales 11 -26 -515 -489 Interest rate swaps and basis swaps** 126 -87 -213 Total derivatives 746 900 154
* 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 11 -14 Gains and losses on cash flow hedges 29 8 Gains and losses on fair value hedges 29 132 Net gain/loss on interest rate swaps and basis swaps 126
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NOTE 27 FAIR VALUE OF FINANCIAL INSTRUMENTS
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.
(Amounts in NOK millions) Note Total Level 1* Level 2** Level 3***
2015 Derivatives 26 1,824 0 1,824 0 Shares and ownership interests 17 14 3 0 11 Total assets 1,838 3 1,824 11
Supply of free electricity and compensation 21 531 0 0 531 Cash-settled contracts 21 43 0 0 43 Derivatives 26 924 0 924 0 Total liabilities 1,498 0 924 574
2014 Derivatives 26 864 0 864 0 Shares and ownership interests 17 31 2 0 29 Total assets 895 2 864 29
Supply of free electricity and compensation 21 592 0 0 592 Cash-settled contracts 21 77 0 0 77 Derivatives 26 710 0 710 0 Total liabilities 1,379 0 710 669
* Level 1 assets are financial instruments the fair values of which can be determined from market prices in an active market. ** 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. *** 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 inputs. In 2015 the Group recognised a net gain of NOK 81 million on level 3 financial instruments.
Level 3 assets and liabilities at fair value* (Amounts in NOK millions) Shares and ownership Supply of free electricity Cash-settled interests and compensation contracts Opening balance at 01/01/2015 29 -592 -77 Gains and losses recognised in profit or loss -14 61 34 Disposals -4 0 0 Closing balance at 31/12/2015 11 -531 -43
* Liabilities are shown with a minus sign.
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FAIR VALUE OF ENERGY DERIVATIVES
In measuring the fair value of energy derivatives, the following parameters and assumptions have been applied:
Electricity prices NASDAQ and other bilateral contracts are measured using a smooth forward curve based on the final price at the end of the reporting period. The prices used are discounted.
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 first five years. For subsequent periods, best estimates of future prices are used.
Foreign currency For currency derivatives and contracts quoted in foreign currency, the calculation for the first five years is based on the exchange rate at the end of the reporting period and the associated forward exchange rates. For subsequent periods separate exchange rate assumptions are used.
Commodities For certain electricity contracts, the contract price is linked to the prices of various commodities. Valuations are based on the forward prices on the relevant commodity exchanges. If there are no quoted prices for the relevant time period, the commodity prices are inflation-adjusted from the last quoted market price.
CO2
CO2 contracts are valued using the forward price of emission quotas (EUAs) on NASDAQ and ICE.
Interest rates Energy derivatives are discounted by the market interest rate curve (swap curve). For the purpose of discounting perpetual supply contracts related to compensation power, a risk-adjusted nominal interest rate is used.
FAIR VALUE OF CURRENCY AND INTEREST RATE DERIVATIVES
Interest rate swaps, currency swaps and currency futures Interest rate and currency swaps, as well as currency futures, 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 (swap curves) and the observed exchange rates, which are used to derive forward exchange rates. The estimated present values are checked against the equivalent calculations carried out by the counterparties to the contracts.
NOTE 28 FINANCIAL RISK MANAGEMENT
MARKET RISK 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.
There are internal guidelines on exposure to market risk, for both the hedging and trading portfolios. Agder Energi’s back and 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 the Group’s risk management section.
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MARKET RISK ARISING FROM ELECTRICITY PRICES Power generation portfolio Agder Energi’s hydroelectric power generation business is exposed to risks arising from fluctuations in prices and volumes, as both future prices and precipitation levels are unknown. The power generation portfolio aims to manage the market risks associated with power generation.
The net exposure of the portfolio at any given time consists of expected future power generation, purchase and sale commit- ments 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.
Agder Energi enters into contracts and trades various cash-settled instruments in order to secure its revenues from electricity sales. This helps to stabilise revenues from one year to another, which is considered desirable on account of the great uncertainty surrounding electricity prices. Hedging activities take into account both the Group’s risk profile and expected electricity prices. For risk management purposes, cash-settled and physical contracts are considered together.
The physical contracts in the portfolio comprise contracts concluded on normal commercial terms, contracts to supply concession power and various contracts to supply free power and compensation power. The durations of the commercial contracts vary, but they all expire by the end of 2030. 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.
Retail customer portfolio The retail market covers sales to private customers, state-owned entities and private companies. It includes both contracts for physical delivery and cash-settled contracts. Contracts for physical delivery are mainly based on spot prices, variable prices or fixed prices. Electricity for immediate use is purchased at the spot price. A number of the contracts for physical delivery 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 or with other counterparties. Various managed electricity supply products are also offered to customers, which involve cash-settled trades on NASDAQ based on expected physical deliveries.
The net exposure of the retail portfolio at any given time consists of sale contracts with prices that are fixed for varying lengths of 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 portfolio maintains a net long position in cash-settled contracts.
The retail business area exposes itself to variations in electricity prices by agreeing fixed prices with retail customers or by agreeing to give retail customers notice of changes in variable rates. Where this kind of price risk exists, prices are hedged through cash-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 are also exposed to volume risks, as many of the physical fixed-price contracts are flexible in terms of the volumes delivered. Based on experience, knowledge of normal seasonal variation and knowledge of other specific issues that affect end users’ electricity consumption, Agder Energi calculates the volumes likely to be needed, and which consequently need to be hedged.
Trading portfolios Agder Energi has various trading portfolios which are managed independently of its expected power generation. All trading contracts are measured at fair value.
VaR calculations are the most important tool used to manage the risk exposures arising from these portfolios. The financial exposure at any given time is limited in relation to the power generation portfolio. Electricity trading authorisations are expressed in terms of limits on potential losses. At an operating level, risk management focuses on minimising any losses.
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Electricity price sensitivity
Impact on profit of gains and losses on assets and liabilities at fair value in the event of electricity price fluctuations (Amounts in NOK millions) Change in electricity prices -10% 10% Total impact on profit before tax 228 -228
The table shows a partial risk analysis of how the Group’s pre-tax profit would be affected by changes in the values of assets and liabilities in the event of a parallel 10% decrease/increase in forward electricity prices. The analysis only covers assets and liabilities measured at fair value in accordance with IAS 39.
MARKET RISK – CURRENCY Agder Energi is exposed to currency risk through its electricity generation business and retail business.
The biggest exposure to currency risk arises from physical electricity sales by the electricity generation business. Nord Pool Spot contracts are settled in euros, and Agder Energi has also entered into long-term contracts to sell electricity that are payable in euros. In addition, currency risk arises as a result of financial trading on NASDAQ OMX being settled in euros.
Exposure to currency risk arising from electricity generation over the coming years is hedged in accordance with adopted limits on risk exposure. Exchange rate hedging can be done separately from electricity price hedging.
The retail business pays for the electricity that it buys on Nord Pool in euros. This gives rise to a currency risk when NOK-denominated fixed-price contracts are signed with customers. The currency risk associated with these fixed-price contracts is transferred to the parent company and is managed at Group level.
An independent risk management section is responsible for checking that trading in foreign exchange instruments adheres to the adopted strategies and limits on risk exposure.
The exchange rate sensitivity of currency derivatives is shown in the table below:
Effekt på resultat av verdiendring på eiendeler og gjeld til virkelig verdi ved endring i valutakurs (Amounts in NOK millions) Change in exchange rate (NOK/EUR) -5% 5% Total impact on profit before tax 290 -290
The table shows a partial risk analysis of how the Group’s pre-tax profit would be affected by changes in the values of assets and liabilities in the event of a parallel 5% decrease/increase in the NOK/EUR exchange rate. A decrease is taken to mean the Norwegian krone strengthening in relation to the euro. The analysis covers changes in the value of currency futures, basis swaps, foreign currency loans, electricity derivatives and long-term contracts to sell electricity measured at fair value under IAS 39.
MARKET RISK – INTEREST RATES The vast majority of the Group’s exposure to interest rate risk arises from its debt portfolio. The Group also has an offsetting exposure to interest rate fluctuations through the deductible interest rate for resource rent purposes, and through the reference interest rate applied to the 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 fixed interest period is set by using fixed-interest loans and interest rate derivatives.
Sensitivity to interest rates is measured by modified duration within a defined period of 1 to 5 years. Average duration at the close of the year was 3.0 years. The chosen strategy aims to minimise net financial expenses 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 calculate the resource rent tax payable by the power generation business. The group finance department is responsible for taking positions. Exposure to interest rate risk is measured. Current exposure to interest rate risk in relation to the limit specified in the finance strategy is reported monthly to the CFO. Interest rate exposure is also reported to the Group’s Board of Directors in the risk report.
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Impact on profit of interest rate fluctuations (Amounts in NOK millions) Change in interest rates -1 percentage point +1 percentage point Impact on interest expense (- indicates higher expense) 63 -63 Gains and losses on interest rate swaps recognised in profit or loss -154 140 Impact on profit before tax -91 77 Gains and losses on hedging instruments, cash flow hedges -67 60 Total impact on comprehensive income (before tax) -158 137
The table shows a partial risk analysis of how the Group’s pre-tax profit would be affected by a parallel 1% increase/decrease in the yield curve. It also shows the impact on other comprehensive income and expenses as a result of certain interest rate deriva- tives being designated as cash flow hedges. All impacts are shown before tax. The analysis only covers interest-bearing liabilities measured at amortised cost under IAS 39 and interest rate derivatives.
Breakdown of interest rates by currency 2015 2014 Nominal average interest rate, NOK 3.4% 3.7% Nominal average interest rate, euros 3.0% 3.1%
Fixed-interest periods within loan portfolio (Amounts in NOK millions) 1-3 years 3-5 years Over 5 years Total NOK-denominated loans 1,185 593 222 2,000 Euro-denominated loans 162 129 711 1,002 Total 1,347 722 933 3,002
The above table shows the volume of loans with fixed-interest periods of more than one year. The table includes both the face value of fixed-interest loans and the face value of variable-to-fixed interest rate swaps.
CREDIT RISK 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. The trading of financial instruments also gives rise to counterparty risk. The majority of cash-settled electricity contracts are cleared through NASDAQ. For these contracts, there is assumed to be little counterparty risk. For all other electricity contracts, the maximum exposure to any individual counterparty is determined based on an internal credit rating. The credit rating is based on information such as key financial figures. Counterparties are then grouped in various risk classes, each of which is allocated a maximum exposure level. Bilateral contracts are subject to limits on exposure to individual counterparties, both in terms of value and duration.
In order to limit credit risk, bank guarantees are sometimes demanded when a contract is signed. Parent company guarantees are also used. In those cases, the parent company is assessed and classified in the normal way. Agder Energi has good procedures for ensuring that outstanding receivables are paid on time. An ageing 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. Limits on exposure to individual counterparties are regularly monitored and reported. Total counterparty risk is calculated and reported, as well as being consolidated at Group level.
The maximum credit risk arising from energy derivatives is virtually identical to the carrying amount on the statement of financial position. For energy derivatives, the credit risk associated with all contracts traded through NASDAQ is limited by the fact that counterparties provide cash collateral or bank guarantees. For bilateral contracts, including long-term electricity contracts with industrial customers, there is not normally any such security.
LIQUIDITY RISK 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 are generated, as well as from variations in margin requirements on futures traded through NASDAQ. Agder Energi manages this
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risk through liquidity forecasts and simulations, as well as by establishing minimum liquidity requirements. To protect itself against refinancing risk, Agder Energi has set up NOK 1,000 million of credit facilities with banks. This amount is big enough to provide suf- ficient time to set up alternative financing arrangements. In addition, a 125 million euro bank guarantee facility has been established to cover collateral requirements in relation to electricity trading, as well as a NOK 500 million overdraft facility to cover day-to-day operating expenses. All of these facilities were unused at the end of the year. The capital markets consider Agder Energi to be a low-risk borrower, and the Group has good access to credit.
Liquidity risk is assessed regularly, and the Group finance department is responsible for ensuring that the Group has sufficient 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. Targets have been established for the minimum remaining term to maturity of the debt portfolio, the minimum pro- portion of loans maturing within a year covered by credit facilities with banks, the minimum liquidity reserve and the use of bank guarantee facilities for electricity trading.
Maturity structure of liabilities (Amounts in NOK millions) Due in Due in Due in Due in Due in Due after Unspecified 2016 2017 2018 2019 2020 2020 maturity Bonds and liabilities to financial institutions 1,195 1,420 955 1,350 1,350 2,205 0 Commercial paper and overdraft facility 550 0 0 0 0 0 0 Interest payments 259 230 212 175 140 335 0 Total interest-bearing liabilities 2,004 1,650 1,167 1,525 1,490 2,540 0
Financial liabilities at fair value through profit or loss 220 202 96 19 22 0 939 Other non-interest-bearing current liabilities 1,370 0 0 0 0 0 0 Total non-interest-bearing liabilities 1,590 202 96 19 22 0 939
Total 3,594 1,852 1,263 1,544 1,512 2,540 939
Breakdown of loans by currency (Amounts in NOK millions) 2015 2014 NOK-denominated loans * 7,408 6,780 Euro-denominated loans 1,617 1,519 Total 9,025 8,299
* 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 swaps to ensure that it has no exposure to USD exchange rates arising from the loan. See Note 29 on accounting hedges.
The Group has 168 million euros of euro-denominated loans. In addition, in 2015 Agder Energi used basis swaps to convert NOK 700 million of loans into 75 million euros of euro-denominated loans. This is not reflected in the above table. The fair value of the swaps at the end of 2015 was NOK -24 million, which was included under derivatives on the statement of financial position; see Note 26. Basis swaps are contracts to swap principal and interest payments between currencies. When the contract expires, the principal is swapped back to the original currency.
Euro-denominated loans are used as cash flow hedges to secure future cash flows in euros, but hedge accounting is not used.
Credit facilities with banks The parent company has a long-term NOK 1,000 million committed facility with a bank to back-stop its short-term borrowing pro- gramme in the event of problems in financial markets. The parent company has also set up a cash pooling arrangement with an associated NOK 500 million overdraft facility. At the close of the year, the Group had NOK 1,500 million in total in unused credit facilities.
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NOTE 29 ACCOUNTING HEDGES
Agder Energi has various interest swaps linked to specific loans that serve as cash flow hedges, i.e. they are variable-to-fixed interest rate swaps. The face value of the hedged items is 91 million euros.
Beyond this, the Group has two basis swaps that qualify as accounting hedges. The Group has issued a 7-year, USD-denominated fixed-interest bond, which matures in 2017. In relation to this, it has entered into swap agreements which see it receive fixed USD interest payments, and make a combination of fixed and variable NOK interest payments. From an accounting 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 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 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 a cash flow hedge.
In addition to the above, until the end of 2013 Agder Energi had designated 168 million euros worth of loans as cash flow hedges of highly probable future revenues from electricity sales. As of 2014, Agder Energi decided not to meet the documentation requirements in relation to accounting for these foreign currency loans as hedges. Consequently, hedge accounting was discontinued for these loans as of 2014. 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.
For its other financial hedging relationships, the Group does not satisfy the extensive documentation requirements specified in the IFRS rules on hedge accounting.
(Amounts in NOK millions) 2015 2014 Fair value of derivatives designated as hedging instruments Derivatives designated as fair value hedges 321 189 Derivatives designated as cash flow hedges -103 -112 Total fair value of derivatives designated as hedging instruments 218 77
Fair value hedges Gains/losses on derivatives used as fair value hedges 132 142 Gains/losses on hedged items in fair value hedges, hedged risk -132 -142 Hedge ineffectiveness recognised in profit or loss 0 0
Cash flow hedges Gains/losses recognised in statement of comprehensive income 8 -95 Total gains and losses on hedging instruments recognised in statement of comprehensive income 8 -95
Cash flow hedge ineffectiveness recognised in profit or loss 0 0
NOTE 30 MORTGAGED ASSETS, LIABILITIES AND GUARANTEES ISSUED
Mortgages Agder Energi AS has no mortgage debt. Subsidiaries held NOK 1 million in mortgage debt. In addition, NOK 18 million of lease liabilities are classified as financial leases and hence included on the statement of financial position. The Group has NOK 4 million of restricted cash provided as collateral for cash-settled electricity trading.
Liabilities and guarantees issued Agder Energi has no covenants relating to financial key figures in its loan agreements.
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Agder Energi’s loan agreements do contain negative pledge clauses, which also cover its subsidiaries. This means that any new security interests require the consent of the lenders.
Agder Energi has NOK 506 million in off-statement of financial position bank guarantees. NOK 314 million of this relates to a cash- settled power exchange agreement, NOK 35 million to electricity trading, NOK 52 to tax deducted at source and NOK 105 million to contractual guarantees.
At the close of the year, the parent company had issued guarantees worth NOK 9 million in relation to subsidiaries’ external liabilities.
Contractual obligations At any given time the Group has several ongoing investment projects that involve obligations to fulfil contracts with subcontractors. The Group also has obligations arising from its ownership interests in joint arrangements and water management associations; cf. Note 16. Agder Energi Varme has entered into a long-term contract to buy heating energy from the municipally-owned enterprise Returkraft. The contract, which runs for 20 years with an optional extension, commits Agder Energi Varme to buying an agreed volume from Returkraft’s waste-to-energy plant in Kristiansand from 2010 onwards.
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. In addition, several companies in the Group have leased cars. NOK 62 million was expensed in relation to these lease contracts in 2015.
NOTE 31 CONTINGENT LIABILITIES AND EVENTS AFTER THE END OF THE REPORTING PERIOD
Agder Energi’s operations are extensive, and it can therefore get involved in major and minor disputes from time to time.
Contingent liabilities Tax The Central Tax Office for Large Enterprises has questioned the tax treatment of one of Agder Energi Vannkraft’s contracts to supply free electricity. The company has commented on, and responded to, the tax office’s preliminary evaluation. If the tax office’s interpretation of the tax rules were to be applied, the company would have to expense a tax charge of approximately NOK 20 mil- lion. However, negative resource rent carryforwards mean that there would only be a small impact on cash flows.
Final payment for construction of power station The Brokke Nord/Sør and Skarg power station hydroelectric project was completed in May 2014. Otra Kraft DA was the client for the project. The project was executed by two main contractors. One of the main contractors was responsible for the water transfer systems at Brokke Sør. The other main contractor was responsible for the construction of Skarg power station, the water transfer systems to the upper reservoir for Skarg power station and Sarvsfoss dam.
Otra Kraft, in which Agder Energi holds a 68.6 percent ownership interest, was in December 2015 sued by the main contractor responsible for the construction of Skarg power station, the water transfer systems to the upper reservoir for Skarg power station and Sarvsfoss dam. The total contract value of this part of the project was NOK 472 million. In his complaint, the main contractor demands that Otra Kraft pay up to NOK 186 million in addition to the final payment made. Otra Kraft, meanwhile, has held back NOK 8 million of the final payment to cover a counterclaim against the main contractor.
Otra Kraft considers that the main contractor has received the full amount that he is entitled to. Based on this assessment, no pro- vision has been made for this case in Agder Energi’s 2015 financial statements. If the main contractor’s suit were to be successful, Agder Energi’s share of the project cost would increase by approximately NOK 133 million.
Events after the end of the reporting period In 2016 Agder Energi has sold its 20.9% ownership interest in Fosen Vind. It has also sold its subsidiary Bjerkreim Vind. The income statement impact of these transactions was insignificant.
There have not been any other incidents in 2016 that have a significant impact on Agder Energi’s financial position and results.
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NOTE 32 MANAGEMENT COMPENSATION, ETC.
Board of Directors The compensation of the Board of Directors and Corporate Assembly for 2015 was NOK 967,500 and NOK 16,000 respectively. The equivalent figures in 2014 were NOK 1,102,500 and NOK 10,000 respectively. The Board members are not entitled to any special termination benefits such as bonuses, profit-sharing or options. All of the stated figures exclude employers’ NICs.
Board of Directors (Amounts in NOK) Directors’ fees Lars Erik Torjussen, chair 200,000 Katja Lehland, deputy chair 62,500 Bente Z. Rist, Board member 110,000 Leif Atle Beisland, Board member 110,000 Steinar Bysveen, Board member* 0 Steinar Asbjørnsen, Board member* 0 Marit Grimsbo, Board member* 0 Siw Linnea Poulsson, Board member* 0 Johan Ekeland, employee representative 110,000 Øyvind Østensen, employee representative 110,000 Gro Granås, employee representative 110,000 Tore Kvarsnes, employee representative 110,000
* Employees of Statkraft are not paid Directors’ fees.
In 2015, no separate fees were paid to the audit committee appointed by the Board.
In 2015, Board members’ deputies received NOK 45,000 in fees.
None of the Board members received compensation from any other companies in the Group, with the exception of the employee representatives, who receive salaries for their ordinary jobs. Their compensation as Agder Energi employees is not included in the above figures. No Board members have any loans from the company.
Senior management team (Amounts in NOK 000s) Basic salary Other Total taxable Pension benefits1) income expense Tom Nysted – CEO 2,733 131 2,864 1,052 Pernille K. Gulowsen – CFO 1,720 111 1,831 627 Steffen Syvertsen – Business Area Director, Marketing and Business Development 1,877 111 1,988 76 Frank Håland – Director of HR and Shared Services 1,721 111 1,832 77 Jan Tønnessen – Business Area Director, Hydroelectric Power 1,723 111 1,834 90 Edvard Lauen – Business Area Director, Energy Management 2,166 127 2,293 898
1) Other benefits include mileage allowance, mobile phone and other minor benefits. A flat in Kristiansand has been made available to the CEO.
Loans/guarantees issued and share option schemes No members of the senior management team have been granted loans or had guarantees issued on their behalf by Agder Energi. Agder Energi does not have any share option schemes for management or other employees.
Bonuses and pension plans The senior management team has no bonus arrangement for 2015.
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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. 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 this pension, he must have 30 years of qualifying service. The CEO must retire at the age of 67, but between the ages of 62 and 67 both the company and the CEO can decide that he should vacate his position as CEO. The notice period is six months.
For other members of the senior management team, the notice period is also six months. There are no special agreements on termi- nation compensation. The executive directors Pernille K. Gulowsen and Edvard Lauen are entitled to a pension equivalent to 66% of their qualifying salaries on retirement at the age of 67. In order to receive this pension, they must have 30 years of qualifying service. These two 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. Jan Tønnessen, Steffen Syvertsen and Frank Håland have defined contribution pension plans in line with the Group’s standard pension plan.
NOTE 33 RELATED PARTIES
All subsidiaries and joint arrangements specified in Note 16 are classified as related parties of Agder Energi. The people specified in Note 32, 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 companies in the Statkraft Group amounted to NOK 69 million in 2015 and NOK 26 million in 2014. Purchases from those companies amounted to NOK 76 million in 2015 and NOK 37 million in 2014. Statkraft Industrial Holding AS is also a joint owner of several of the joint arrangements in which Agder Energi holds an ownership interest.
All transactions with related parties are carried out on an arm’s length basis.
NOTE 34 ACQUISITIONS, DISPOSALS AND BUY-OUT OF NON-CONTROLLING INTERESTS
Acquisitions The Group made the following acquisitions in 2015 and 2014. All acquisitions are accounted for using the acquisition method. The list below does not include capital increases or other financing from Agder Energi.
Acquisitions in 2015 Company Country Interest Ownership interest Activities bought in 2015 in % at 31/12/2015 Otera Sverige AB Sweden 24.0 100.0 Financial investments NetNordic Enterprise Communications AS Sweden 100.0 100.0 Telecommunications
The total cost of ownership interests acquired in 2015 was NOK 46 million.
Acquisitions in 2014 Company Country Interest Ownership interest Activities bought in 2014 in % at 31/12/2014 Baltic Hydroenergy AS Norway 34.1 100.0 Hydroelectric Power Cleanpower AS Norway 100.0 100.0 Sale of turbines
The total cost of ownership interests acquired in 2014 was NOK 14 million.
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Disposals Agder Energi did not sell any subsidiaries or businesses in 2015.
In 2014 it sold Otera Elektro AS. Net income from discontinued operations in 2014 related to Otera Elektro. The agreement to sell the company was signed in April 2014, and the transaction was completed in June of that year.
The table below shows how the figure for profit from discontinued operations is calculated, broken down into the operating performance until disposal and the gain/loss on disposal:
(Amounts in NOK millions) 2015 2014 Operating revenues 0 147 Operating expenses 0 -163 Operating profit 0 -16 Tax expense 0 3 Net income 0 -13 Gain on disposal of discontinued operations 0 -20 Tax on gain on disposal of discontinued operations 0 0 Net income from discontinued operations 0 -33
Net cash provided by operating activities 0 -1 Net cash provided by/used in investing activities 0 11 Net cash provided by financing activities 0 0 Net cash flow from discontinued operations 0 10
NOTE 35 GROUP STRUCTURE
The table below shows the companies in the Agder Energi Group at 31 December 2015.
Subsidiaries Ownership interest in %* Country Agder Energi Nett AS 100.0 Norway Agder Energi Vannkraft AS 100.0 Norway Agder Energi Kraftforvaltning AS 100.0 Norway LOS AS 100.0 Norway LOS Energy AB 100.0 Sweden Otera AS 100.0 Norway Otera Infra AS 100.0 Norway Otera XP AS 100.0 Norway Otera Sverige AB 100.0 Sweden Otera AB 70.0 Sweden Otera Ratel AB 100.0 (70.0) Sweden Otera Ratel AS 100.0 (70.0) Norway Agder Energi Varme AS 100.0 Norway Norsk Varme- og Energiproduksjon AS 100.0 Norway Baltic Hydroenergy AS 100.0 Norway UAB Baltic Hydroenergy 100.0 Lithuania JSC Latgales Energetika 64.0 Latvia Bjerkreim Vind AS 51.2 Norway Stoaveien 14 AS 100.0 Norway Stoa 192 AS 100.0 Norway Stoa 234 AS 100.0 Norway Trøngsla 8 AS 100.0 Norway Åneveien 9 AS 100.0 Norway
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Subsidiaries Ownership interest* Country Agder Energi Venture AS 100.0 Norway NEG AS 67.1 Norway Norsk Energigjenvinning AS 100.0 (67.1) Norway NEG Skog AS 100.0 (67.1) Norway NEG Flis AS 100.0 (67.1) Norway Norsk Biobrensel AS 100.0 (67.1) Norway Norbio AB 100.0 (67.1) Sweden Norbio Energi AS 100.0 (67.1) Norway NetNordic Holding AS 59.4 Norway NetNordic Bedriftskommunikasjon AS 100.0 (59.4) Norway NetNordic Bredbånd AS 100.0 (59.4) Norway NetNordic Services AS 100.0 (59.4) Norway NetNordic Finland OY 100.0 (59.4) Finland NetNordic AB 100.0 (59.4) Sweden NetNordic Enterprise Communications AB 100.0 (59.4) Sweden NetNordic Denmark AS 100.0 (59.4) Denmark NetNordic Enterprise Communications AS 100.0 (59.4) Denmark HPE Holding AS 100.0 Norway Cleanpower AS 100.0 Norway Bioenergy AS 67.9 Norway Bio Energy Sales AS 100.0 (67.9) Norway Lahaugmoen Drift AS 100.0 (67.9) Norway Smart Grid Norway AS 90.6 Norway Verdisikring Safety AS 100.0 (90.6) Norway Meventus AS 95.0 Norway Meventus ApS 100.0 (95.0) Denmark Meventus AB 100.0 (95.0) Sweden ReSiTec AS 100.0 Norway Netsecurity AS 81.9 Norway AE Venture Energy AS 100.0 Norway Enfo AS 100.0 Norway Enfo Technology AS 100.0 Norway Enfo Consulting AS 100.0 Norway
* Figures in brackets indicate Agder Energi AS’s indirect ownership interest in companies where it holds minority interests through intermediate companies.
Bjerkreim Vind was sold in 2016, but the income statement impact was negligible.
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Non-controlling interests Most of the Group’s non-controlling interests relate to the three subsidiary groups Otera AB, NEG AS and NetNordic Holding AS. Their turnover and profit are shown in the table below, together with a summary statement of financial position.
(Amounts in NOK millions) Otera AB NEG AS NetNordic Holding AS 2015 2014 2015 2014 2015 2014 Operating revenues 309 284 235 210 373 280 Net income 15 21 9 7 13 15 Non-controlling interest’s share of net income 5 5 3 2 5 7
Assets 136 98 138 128 160 118 Liabilities 249 30 100 98 107 79 Equity 1) -113 67 38 30 52 39 Non-controlling interest’s share of equity 0 16 13 10 21 18
1) In the case of Otera AB, the parent company is a pure holding company, and the group’s activities are carried out through two subsidiaries. The group’s negative equity is due to a business combination that resulted in the parent company being financed through a vendor credit from its sister company Otera Sverige AB.
NOTE 36 CHANGES TO ACCOUNTING PRINCIPLES
As described in the section on accounting principles, in 2015 Agder Energi changed the way that it accounts for transmission tariffs invoiced to customers by its retail business on behalf of the grid operators. This change has been implemented retrospectively. The table below shows the impact of the change for 2014.
(Amounts in NOK millions) Reported in 2014 annual Change Restated comparative figures for financial statements 2014 in 2015 financial statements Energy sales 5,814 -459 5,355 Energy purchases 3,083 -459 2,624
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AGDER ENERGI AS
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IntruductionIntroduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
AGDER ENERGI AS FINANCIAL STATEMENT
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Income statement 90 Statement of financial position 91 Statement of cash flows 92 Accounting principles 93 Notes 95 Auditor’s report 105
NOTES Note 1 Intra-group transactions and balances 95 Note 2 Employee benefits, management compensation, etc. 95 Note 3 Pensions 96 Note 4 Auditor’s fee 98 Note 5 Other operating expenses 98 Note 6 Financial income and expenses 98 Note 7 Tax 99 Note 8 Intangible assets 100 Note 9 Property, plant and equipment 100 Note 10 Other non-current financial assets 100 Note 11 Investments in subsidiaries and associates 101 Note 12 Cash and cash equivalents 102 Note 13 Equity 102 Note 14 Interest-bearing liabilities 102 Note 15 Other non-interest-bearing current liabilities 103 Note 16 Provisions 103 Note 17 Market and financial risk 103 Note 18 Contingent liabilities 104 Note 19 Mortgaged assets, liabilities and guarantees issued 104
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INCOME STATEMENT
(Amounts in NOK millions) Note 2015 2014
Other operating revenues 1 256 204 Total operating revenues 256 204
Employee benefits 1, 2, 3 -178 -178 Depreciation and impairment losses 8, 9 -13 -21 Other operating expenses 1, 4, 5 -177 -154 Total operating expenses -368 -353
Operating profit -112 -149
Financial income 1, 6 2,028 1,967 Financial expenses 1, 6 -1,052 -687 Net financial income/expenses 976 1,280
Profit before tax 864 1,131
Tax expense 7 -176 -243
Net income 688 888
Allocation of profit Proposed dividends 13 660 700 Transferred to other reserves 13 28 188 Total appropriations 688 888
Earnings per share/Earnings per share, diluted (NOK) 255 329
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STATEMENT OF FINANCIAL POSITION
(Amounts in NOK millions) Note 2015 2014
Intangible assets 8 18 4 Property, plant and equipment 9 37 56 Investments in subsidiaries 11 3,274 3,285 Investments in associates 11 55 403 Other non-current financial assets 10 7,259 6,648 Total non-current assets 10,643 10,396
Receivables 1 1,299 1,691 Cash and cash equivalents 12 919 224 Total current assets 2,218 1,915
TOTAL ASSETS 12,862 12,311
Paid-in capital 13 1,907 1,907 Retained earnings 13 963 821 Total equity 2,870 2,728
Deferred tax 7 88 27 Provisions 3, 16 143 160 Interest-bearing non-current liabilities 14 8,135 7,687 Total non-current liabilities 8,366 7,874
Interest-bearing current liabilities 14, 17 550 300 Tax payable 7 118 94 Other non-interest-bearing current liabilities 1, 13, 15 957 1,315 Total current liabilities 1,626 1,709
TOTAL EQUITY AND LIABILITIES 12,862 12,311
Kristiansand, 5 April 2016 Board of Directors of Agder Energi AS
Lars Erik Torjussen Lars Petter Maltby Bente Z. Rist Leif Atle Beisland Steinar Bysveen Chair
Marit Grimsbo Steinar Asbjørnsen Siw Linnea Poulsson Johan Ekeland Øyvind Østensen
Tore Kvarsnes Gro Granås Tom Nysted CEO
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STATEMENT OF CASH FLOWS
(Amounts in NOK millions) Note 2015 2014
Cash flow from operating activities Profit before tax 864 1,131 Depreciation and impairment losses 6, 8, 9 170 21 Cash flows from investments in subsidiaries -1,104 -1,318 Tax paid -90 -177 Change in net working capital, etc. -406 98 Net cash provided by operating activities -566 -246
Investing activities Purchase of property, plant, equipment and intangible assets -26 -18 Acquisitions/financial investments and equity investments in subsidiaries -36 -28 Net change in loans -455 -933 Sale of property, plant, equipment and intangible assets 7 1 Sale of businesses/financial assets 361 5 Net cash used in investing activities -149 -973
Financing activities New long-term borrowings 1,450 2,325 Repayment of long-term borrowings -773 -1,336 Net change in current interest-bearing liabilities 250 -600 Intra-group distributions received 1,474 1,301 Intra-group distributions paid out -473 -84 Dividends received from subsidiaries 182 0 Dividends paid -700 -707 Net cash used in financing activities 1,410 899
Net change in cash and cash equivalents 695 -320
Cash and cash equivalents at start of year 224 544 Cash and cash equivalents at end of year 919 224
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ACCOUNTING PRINCIPLES
The financial statements have been costs, which are expensed as they are in- and the value of the portfolio is kept off presented in compliance with the curred. This means that expenses associ- the statement of financial position. Norwegian Accounting Act and generally ated with intangible assets are included on accepted accounting principles. the statement of financial position if it is Foreign currency and currency instru- considered probable that future economic ments Accrual, classification and measure- benefits attributable to the assets will flow The finance department manages the ment principles to the company and it has been possible Group’s overall exposure to currency In accordance with generally accepted to reliably measure the acquisition cost risk. To some extent Agder Energi AS accounting principles, the financial state- of the asset. acts as a counterparty within the Group ments are based on the historical cost, when it does not make sense to hedge revenue recognition, matching, conserva- Property, plant and equipment subsidiaries’ exposure to currency risk tism, hedging and congruence principles. Property, plant and equipment is depreci- directly in the market. Where the parent In the event of uncertainty, best judge- ated in a straight line over its anticipated company has acted as a counterparty in ment is applied. Financial statements are useful life. Maintenance on property, plant conjunction with the need of subsidiar- prepared using uniform principles that and equipment is considered an operat- ies to hedge their currency risk exposure are applied consistently over time. The ing expense, while upgrades and replace- arising from electricity sales, the con- financial statements have been prepared ments are added to the acquisition cost tracts are accounted for as part of the on the assumption of the business being of the asset and are depreciated together Group’s currency hedging activities. These a going concern. with the asset. The distinction between contracts are presented on the statement maintenance and upgrades/improvements of financial position at fair value, with Recognition of revenues and expenses is judged on the basis of the condition of changes in fair value recognised through Revenues and expenses are recognised the asset when it was acquired. profit or loss. in profit or loss when they are earned/ incurred. Revenues from the sale of goods Non-current financial investments Receivables are recognised on delivery. Revenues from The historical cost method is used for Trade debtors and other receivables are services are recognised in the income shares, bonds and other financial instru- presented on the statement of finan- statement as they are supplied. ments. This means that shares/owner- cial position at their nominal value less ship interests are carried at cost, and anticipated bad debts. Provisions for bad General principles for measurement any dividends received are recognised debts are made on the basis of individual and classification as other financial income. Intra-group assessments of the individual receivables. Current assets and current liabilities cover distributions received are recognised items that are due for payment within one in the year that they are allocated by Cash pooling arrangement year of the transaction date, as well as subsidiaries. Dividends from subsidi Agder Energi AS is part of a cash pooling items relating to the business cycle. Other aries are also recognised in the year that arrangement with its subsidiaries. This items are classified as non-current assets they are appropriated by the subsidiary. means that the Group has a joint bank or non-current liabilities. Current assets Investments are written down to fair account for short-term deposits and short- are carried at the lower of cost and fair value if there is evidence of other-than- term loans. Interest income and interest value. Current liabilities are carried at their temporary impairment. Dividends from expenses arising from the cash pooling nominal value on the initial date. associates are recognised when they are arrangement are classified as external in approved. the company’s income statement. Non-current assets are carried at cost, but are written down to the recoverable Interest rate swaps Pensions amount if there is evidence of impair- Interest rate swaps are used to match Defined benefit pension plan ment, in compliance with the Norwegian the duration and interest rate sensitiv- Pension costs and pension liabilities are accounting standard on the impairment of ity of the company’s debt portfolio to the calculated using a linear accumulation non-current assets. Group’s policy and strategy. Interest rate model based on assumptions relating to swaps are managed within the context of discount rates, projected salaries, the level Intangible assets the Group’s overall debt portfolio. Instru- of benefits from the National Insurance Intangible assets are included on the ments in the hedging portfolio thus meet Scheme and future returns on pension statement of financial position if they meet the criteria for hedge accounting, which plan assets, as well as actuarial calcula- the criteria for capitalisation, with the means that all income statement effects tions of mortality, voluntary turnover, etc. exception of research and development are recognised over the contract period Pension plan assets are measured at their
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fair value, and have been deducted in the exist between accounting and tax val- A provision is made for Agder Energi AS’s net pension liabilities presented on the ues, as well as the tax effect of any loss proposed dividends at 31 December. statement of financial position. Remea- carryforwards. Deferred tax assets are surements over the course of the year are only recognised on the statement of finan- Contingent liabilities and contingent recognised in the statement of financial cial position if it is likely that they will be assets position at the end of the year, so that realised in the future. Tax on equity trans- If there is a greater than 50% probability the carrying amount always reflects the actions is recognised directly in equity. that an uncertain liability will need to be full extent of the liabilities. In the event settled, a provision is made based on a of changes in pension obligations arising Liabilities best estimate of what the settlement will from plan amendments, the portion of the Agder Energi AS uses the amortised cost be. If there is a smaller than 50% prob- change that has already been accrued at principle, and consequently the effective ability that an uncertain liability will need the time of the amendment is recognised interest rate method, for interest and li- to be settled, information is provided directly in the income statement. Pension abilities. Under the effective interest rate in the notes. Contingent assets are not expenses and net pension liabilities method, the carrying amount of a loan is recognised, but if there is a greater than include a charge for employers’ national the sum of future cash flows attributable 50% probability that the company will insurance contributions. to the loan discounted by the original receive payment, information is provided effective interest rate calculated for the in the notes. The amount is not estimated Defined contribution plan cash flows. This means that loan arrange- if it would be inappropriate to do so under For defined contribution plans, the pension ment fees are deducted on initial recog- generally accepted accounting principles. expense is equivalent to the premiums/con- nition, and that over the duration of the Furthermore, under generally accepted tributions paid over the course of the year. loan, the difference between the nominal accounting principles entities shall be able interest rate (the rate charged) and the to recognise liabilities/provide information Taxes effective interest rate (the rate expensed) based on best judgement without this Income tax is calculated in accordance is recognised in the statement of financial prejudicing the outcome of any court case. with standard tax rules. The tax expense position under amortisation. In practice in the income statement consists of tax loans are therefore initially recognised at Statement of cash flows payable and changes in deferred tax li- their face value less arrangement fees, The statement of cash flows has been abilities/assets. Tax payable is calculated which means that the debt is not carried prepared using the indirect method. Cash on the taxable profit for the year. Deferred on the statement of financial position at and cash equivalents includes cash, bank tax liabilities/assets are calculated on the its nominal value. deposits and other short-term, liquid basis of the temporary differences that investments that can be converted into known cash values immediately and at insignificant risk, and that mature less than three months after their acquisition dates.
Agder Energi Venture owns ReSiTeC, which recycles silicon powder from the solar cell industry, by purifying it and selling it on for applications such as the production of fire bricks, ceramers and electronics. From left Håkon Tanem, port- folio manager at Agder Energi Venture who sits on the Board of ReSiTec, Tor Øystein Repstad, who is CEO of Agder Energi Venture and chairs ReSiTec’s Board and Knut Mørk, CEO of ReSiTec.
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NOTES
NOTE 1 INTRA-GROUP TRANSACTIONS AND BALANCES
(Amounts in NOK millions) Note 2015 2014 Intra-group balances Other non-current financial assets 10 6,825 6,248 Trade debtors 56 13 Other current receivables 1,225 1,664 Total receivables 8,106 7,926
Trade payables 15 1 1 Other current liabilities 15 153 475 Total liabilities 154 476
Revenues and expenses relating to intra-group transactions Other operating revenues 236 176 Total operating revenues 236 176
Other operating expenses 13 5 Total operating expenses 13 5
Cash flows from investments in subsidiaries 6 1,104 1,319 Other interest and financial income 267 211 Other interest and financial expenses 65 45 Net financial income/expenses 1,306 1,484
NOTE 2 EMPLOYEE BENEFITS, MANAGEMENT COMPENSATION, ETC.
(Amounts in NOK millions) Note 2015 2014 Employee benefits Salary 128 143 Employers’ National Insurance Contributions 20 20 Pension expense including employers’ NICs 3 20 3 Other benefits and reimbursements 10 12 Total 178 178
Number of full-time equivalents at 31 Dec. 147 157
For details of management compensation and non-executive Directors’ fees at Agder Energi AS, please see Note 32 to the consolidated financial statements
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NOTE 3 PENSIONS
The company’s pension plans For employees taken on before 1 April 2007, the company has a defined benefit pension plan run by Agder Energi Pensjonskasse, which meets the legal requirements for public sector occupational pension plans. Employees taken on after that date are members of a defined contribution pension plan.
Defined benefit pension plans The company 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 in December, and represent an estimate of the situation at 31 December 2015. Similarly, the gross pension plan assets at 31 December 2015 were estimated by the management in December.
Remeasurements that arose during the year were recognised directly in the statement of financial position, increasing equity by NOK 114 million.
Early retirement schemes (AFP schemes) Employees are covered by different AFP schemes, depending on whether they are part of the defined benefit or defined contribu- tion pension plans.
Employees covered by a public pension plan have, in addition to their occupational pension, an early retirement scheme, known as an AFP scheme. This is a so-called public sector AFP scheme, set up as of 2011. The scheme does not receive any government subsidy. The company is therefore liable for all of its obligations under the scheme.
Employees covered by the defined contribution plan are entitled to a private AFP scheme. This AFP scheme is funded by contri- butions made by the employer. The contribution for 2015 was 2.4% (2.3%). The contribution is likely to increase further over the coming years.
Actuarial assumptions When calculating the pension expense and net pension liabilities, a number of assumptions have been made (see table below). Since 31 December 2012 the discount rate has been based on the interest rate on covered bonds.
The company uses the latest version of the Norwegian life tables (GAP 07), for life expectancy, probability of disability, etc.
(Amounts in NOK millions) 2015 2014 The pension expense for the year has been calculated as follows Current service cost 16 15 Interest income/expenses on pension assets/liabilities -1 0 Past service cost 0 -16 Employers’ National Insurance Contributions 2 2 Employee contributions -1 -2 Pension expense for the year, defined benefit plans 17 0 Defined contribution pension plans (including employers’ NICs) 3 3 Total pension expense recognised in the income statement 20 3
The total pension expense also includes unfunded plans for senior managers.
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Pension liabilities and pension plan assets (Amounts in NOK millions) 2015 2014 Gross funded pension liabilities 342 422 Unfunded pension liabilities 112 124 Gross pension liabilities at 31 Dec. (including employers’ NICs) 454 546 Fair value of pension plan assets at 31 Dec. 644 560 Net pension liabilities at 31 Dec. -190 -13
Change in defined benefit pension liabilities Net defined benefit pension liabilities at 1 Jan. -13 21 Pension expense recognised in profit or loss 17 0 Conversion of subordinated loan to paid-in capital 0 -40 Company contributions incl. employers’ NICs -36 -22 Pension benefits included under operating expenses -2 -3 Remeasurements -156 31 Net pension liabilities at 31 Dec. -190 -13
Net pension assets 302 138 Net pension assets 112 124 Net pension liabilities at 31 Dec. -190 -13
Remeasurements are made up of: Changes in demographic assumptions -42 15 Changes in financial assumptions -68 41 Excess return on assets -45 -25 Remeasurements recognised on statement of financial position -156 31
The remeasurements in 2015 were mainly due to a lower indexing of retirement pensions and an excess return on pension plan assets.
Assumptions used to determine pension liabilities at 31 Dec. 2015 2014 Discount rate 2.50% 3.00% Annual wage growth 2.25% 3.00% Increase in the National Insurance Scheme’s basic amount (”G”) 2.25% 3.00% Annual indexing of pensions 1.50% 2.25% Expected average remaining years of service (funded) 8.3 8.3 Expected average remaining years of service (unfunded) 6.3 6.0
The assumptions used to calculate pension liabilities are consistent with the most recent guidelines on actuarial assumptions as of January 2016, with the exception of the discount rate, which was 2.7% in the latest guidelines. The 2.5% discount rate applied is considered to be within the acceptable/normal deviation from the recommended point estimate, and the calculations have therefore not been updated. Using the most recent point estimate would be expected to reduce gross pension liabilities by approximately 2-3%.
Number of people covered by the pension plans 2015 2014 Defined benefit plan: current employees 77 86 Defined benefit plan: accrued entitlements and retired employees 316 308 Defined contribution plan: current employees 70 67 Current employees entitled to public sector AFP, and early retirees 73 81
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NOTE 4 AUDITOR’S FEE
Total fees paid to auditor for auditing and other services comprise the following: (Amounts in NOK 000s excl. VAT) 2015 2014 Statutory audit 462 626 Other certification services 0 41 Tax advice 21 17 Other services not related to auditing 11 51 Total 494 735
NOTE 5 OTHER OPERATING EXPENSES
(Amounts in NOK millions) 2015 2014 Property-related expenses, lease of machinery and office equipment 47 59 Purchase of plant and equipment 3 3 External services 101 80 Office supplies, telecommunications, postage, etc. 4 3 Travel expenses, subsistence allowances, mileage expenses, etc. 7 6 Sales, advertising, representation, membership fees and gifts 5 6 Other operating expenses 9 -4 Total 177 154
NOTE 6 FINANCIAL INCOME AND EXPENSES
(Amounts in NOK millions) 2015 2014 Income from investments in subsidiaries* 1,104 1,318 RProfit/loss on investments in associates 100 0 Exchange rate gain 557 383 Other interest and financial income 267 266 Total financial income 2,028 1,967
Impairment charge against non-current financial assets 157 2 Exchange rate losses 557 365 Other interest and financial expenses 338 320 Total financial expenses 1,052 687
Net financial income/expenses 976 1,280
* Profit/loss from investments in subsidiaries comprises allocated dividends, intra-group distributions from subsidiaries and gains on the disposal subsidiaries.of These amounts are recognised in the income statement as they are considered to reflect the return on the investment.
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NOTE 7 TAX
(Amounts in NOK millions) 2015 2014 The tax expense consists of Income tax payable 160 221 Change in deferred income tax 20 34 Corrections to previous years’ tax assessments -3 -12 Tax expense in income statement 176 243
Tax payable on the statement of financial position Profit before tax 864 1,131 Permanent differences -174 -158 Change in temporary differences -100 -94 Non-taxable intra-group distributions 0 -59 Profit/loss for income tax purposes 591 820
Income tax payable 160 221 Taxable intra-group distributions -41 -128 Tax payable on the statement of financial position 118 94
Reconciliation of nominal tax rate with effective tax rate Profit before tax 864 1,131 Expected tax based on nominal rate 233 305 Tax effect of Non-deductible expenses/non-taxable income -47 -58 Corrections to previous years’ tax assessments -3 -4 Impact of change in tax rate -7 0 Tax expense in income statement 176 243 Effective tax rate 20% 21%
Breakdown of temporary differences/deferred tax assets Property, plant and equipment -15 -16 Current assets/liabilities 258 87 Pension liabilities 237 98 Derivatives -127 -70 Total taxable (+)/deductible (-) temporary difference 354 99 Total capitalised deferred tax liabilities (+)/assets (-) 88 27
Changes in net deferred income tax over the year: Net deferred tax liabilities (+)/assets (-) at 1 Jan. 27 4 Correction to net deferred tax liabilities (+)/assets (-) for business combination 0 -3 Change in net deferred tax liabilities (+)/assets (-) on items recognised in equity 42 -8 Change in deferred tax liabilities (+)/assets (-) recognised through profit or loss 20 34 Net deferred income tax liabilities (+)/assets (-) at 31 Dec. 88 27
Changes in deferred tax on items recognised in equity Remeasurements of pensions and change in tax rate -42 8 Total change -42 8
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NOTE 8 INTANGIBLE ASSETS
(Amounts in NOK millions) Software Cost as of 01/01/2015 21 Additions 20 Disposals 0 Cost as of 31/12/2015 41 Accumulated depreciation at 31/12/2015 21 Accumulated impairment losses at 31/12/2015 2 Carrying amount at 31/12/2015 18
Depreciation for the year 6 Useful life/depreciation period 3-8 year
NOTE 9 PROPERTY, PLANT AND EQUIPMENT
(Amounts in NOK millions) Properties Vehicles, Work Total fixtures, in property, machinery, progress plant and etc. equipment Cost as of 01/01/2015 32 46 15 93 Additions 3 2 -15 -10 Disposals 3 1 0 4 Cost as of 31/12/2015 32 47 0 79 Accumulated depreciation at 31/12/2015 7 27 0 34 Accumulated impairment losses at 31/12/2015 0 8 0 8 Carrying amount at 31/12/2015 25 12 0 37
Depreciation for the year 2 5 0 7
Useful life/depreciation period 25 years - not depreciated 3-8 years
The NOK 15 million decline in work in progress in 2015 is included under capitalised work in progress (additions) in Note 8 Intangible assets.
NOTE 10 OTHER NON-CURRENT FINANCIAL ASSETS
(Amounts in NOK millions) Note 2015 2014 Loans to Group companies 1 6,825 6,248 Loans to associates 2 119 Other non-current receivables 1) 130 143 Pension assets 3 302 138 Total non-current financial assets 7,259 6,648
1) Other non-current receivables mainly comprise a vendor credit provided in conjunction with the sale of the shares in Ventelo. There is also a guarantee to NASDAQ.
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NOTE 11 INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
(Amounts in NOK millions) Business The company’s The company’s Ownership Carrying office equity profit/loss interest and amount* voting rights Subsidiaries Agder Energi Vannkraft AS Kristiansand 2,248 672 100% 1,937 Agder Energi Kraftforvaltning AS Kristiansand 33 2 100% 20 Agder Energi Nett AS Arendal 758 118 100% 613 LOS AS Kristiansand 325 74 100% 324 Otera AS Kristiansand 41 -17 100% 137 Agder Energi Varme AS Kristiansand 116 -4 100% 125 Agder Energi Venture AS Kristiansand 45 -19 100% 68 Stoaveien 14 AS Kristiansand 2 1 100% 1 Stoa 192 AS Kristiansand 1 1 100% 2 Stoa 234 AS Kristiansand 1 0 100% 2 Trøngsla 8 AS Kristiansand 3 0 100% 2 Åneveien 9 AS Kristiansand 1 0 100% 1 Bjerkreim Vind AS 2) Egersund 40 0 51% 10 Baltic Hydroenergy AS Kristiansand 22 0 100% 34 Total shares in subsidiaries 3,274
Associates and joint ventures 1) Statkraft Agder Energi Vind DA*** Kristiansand 89 -28 38% 2 Fosen Vind AS*** 2) Trondheim 181 -26 21% 38 North Connect KS** Kristiansand 4 -10 22% 4 North Connect AS** Kristiansand 1 0 22% 1 Steinsvik Kraft AS Bergen 112 0 20% 8 Grønn Kontakt AS Kristiansand 1 -2 25% 1 Teknova Invest AS Kristiansand 0 -1 39% 1 Total for associates and joint ventures 55
* Carried at the lower of cost and fair value. ** Associates *** Joint ventures
In 2015 Agder Energi sold its ownership interest in Småkraft AS.
1) The equity and profit of associates and joint ventures has been estimated for 2015. 2) In 2016 Agder Energi has sold its ownership interest in Fosen Vind AS. The subsidiary Bjerkreim Vind AS has also been sold. The income statement impact of these transactions was insignificant.
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NOTE 12 CASH AND CASH EQUIVALENTS
(Amounts in NOK millions) 2015 2014 Cash and cash equivalents 212 11 Deposits in cash pooling arrangement 707 213 Total 919 224
Agder Energi AS has established a NOK 52 million bank guarantee to secure tax deductions at source. The guarantee covers the parent company and subsidiaries. The company has also set up a cash pooling arrangement with an associated NOK 500 million overdraft facility. Most subsidiaries in which the parent company holds an ownership interest of at least 50% take part in the cash pooling arrangement and are jointly and severally liable to the bank for the overdraft facility.
NOTE 13 EQUITY
(Amounts in NOK millions) Note Share Share Other Other Total capital premium paid-in reserves equity account capital
Equity at 31/12/2014 1,809 47 51 821 2,728 Remeasurements of pensions 3 0 0 0 114 114 Net income for the year 0 0 0 688 688 Allocated for dividends 15 0 0 0 -660 -660 Equity at 31/12/2015 1,809 47 51 963 2,870
For details of share capital and shareholder information, please refer to Note 20 to the consolidated financial statements.
NOTE 14 INTEREST-BEARING LIABILITIES
(Amounts in NOK millions) 2015 2014
Non-current liabilities with a term to maturity of more than 5 years Liabilities to financial institutions 1,069 1,012 Bonds 1,125 1,275 Total 2,194 2,287
Non-current liabilities with a term to maturity of less than 5 years Liabilities to financial institutions 1,049 507 Bonds 4,892 4,893 Total 5,941 5,400
Total interest-bearing non-current liabilities 8,135 7,687
Interest-bearing current liabilities Commercial paper 550 300 Total interest-bearing current liabilities 550 300
Guarantees and obligations relating to interest-bearing non-current liabilities are described in greater detail in Note 19.
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NOTE 15 OTHER NON-INTEREST-BEARING CURRENT LIABILITIES
(Amounts in NOK millions) Note 2015 2014 Trade payables 24 11 Intra-group trade payables 1 1 1 Unpaid government taxes and duties, tax deducted at source, etc. 14 14 Allocated dividends 13 660 700 Other current liabilities 104 115 Other current liabilities to Group companies 1 153 475 Total other non-interest-bearing current liabilities 957 1,315
NOTE 16 PROVISIONS
(Amounts in NOK millions) Note 2015 2014 Pension liabilities 3 112 124 Other non-current provisions 31 36 Total provisions 143 160
In 2015, other non-current provisions included a NOK 1 million provision for redundancy packages, as well as a NOK 30 million provision for losses on leases at Kraftsenteret. In 2014 there was a NOK 6 million provision for redundancy packages and a NOK 30 million provision for leases at Kraftsenteret.
NOTE 17 MARKET AND FINANCIAL RISK
Risk policy and risk strategy The Group’s Board of Directors has formulated an overall risk policy containing frameworks and guidelines to ensure a uniform 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: • Production • Electricity trading • Retail market • Finance (interest rates and foreign currency)
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 OMX 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 1,262 million at 31 December 2015. The value of the company’s contracts with its subsidiaries was NOK -1,262 million.
Debt portfolio The Agder Energi Group’s whole debt 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.
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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 financial expenses over the long term, while reducing risk to an acceptable level. Exposure to interest rate risk is measured and monitored. The group finance department is responsible for taking positions.
The parent company’s debt portfolios include foreign currency loans. 168 million euros in loans are used as a hedge against fluctuations in the Group’s revenues in that currency. Agder Energi AS has lent a similar amount in euros to Agder Energi Vannkraft AS. In addition, Agder Energi AS has entered into 86 million euros of interest rate and currency swaps related to its loans.
NOTE 18 CONTINGENT LIABILITIES
Agder Energi AS had no significant contingent liabilities at the end of the year.
NOTE 19 MORTGAGED ASSETS, LIABILITIES AND GUARANTEES ISSUED
Mortgages Agder Energi AS has no mortgage loans.
Liabilities and guarantees issued Agder Energi AS has no covenants relating to financial key figures in its loan agreements. Agder Energi AS’s loan agreements do contain negative pledge clauses, which also cover its subsidiaries. This means that any new security interests require the consent of the lenders.
Agder Energi AS has made use of NOK 506 million of its bank guarantee facilities. NOK 314 million of this relates to a cash-settled power exchange agreement, NOK 35 million to guarantees linked to electricity trading, NOK 52 million to tax deducted at source and NOK 105 million to contractual guarantees.
At the close of the year, the parent company had issued guarantees worth NOK 9 million in relation to subsidiaries’ external liabilities.
Contractual obligations Agder Energi leases office premises at Kjøita in Kristiansand. The lease contract is between KN Kjøita AS and Agder Energi AS. At the end of the year, the contract had 10 years left to run, with a renewal option for a further five years.
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AUDITOR´S REPORT
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AUDITOR´S REPORT
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CORPORATE SOCIAL RESPONSIBILITY (CSR) AT AGDER ENERGI IN 2015
Mats Grande (left) and Niklas Syvertsen in Otera Infra.
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Introduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
AGDER ENERGI CORPORATE SOCIAL RESPONSIBILITY (CSR) AT AGDER ENERGI IN 2015
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Social and environmental consideration 109 GRI reporting at Agder Energi 109 Analysis of material aspects 111 Changes in relation to the 2014 report 112 Stakeholders and Agder Energi 112 Ethical guidelines and values 113 The group´s values 113 Group CSR goals 113 Business environment and innovation 114 Agder Energi ´s suppliers 115 Generation of economic value 115 Value added statement 116 Energy 117 Impact on biodiversity 118 Greenhouse gas emissions 119 Lokal pollution 120 Waste 120 Greenhouse gas challange 121 Health, safety and environment: our top priority 121 Employees at Agder Energi 122 Competition law 123 Method 123
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CORPORATE SOCIAL RESPONSIBILITY (CSR) AT AGDER ENERGI IN 2015
SOCIAL AND ENVIRONMENTAL CONSIDERATIONS
The Agder Energi Group takes social and environmental factors into consideration in its operations. Our main responsibility is the safe and reliable generation and distribution of renewable energy.
The ways in which we meet our CSR Energi Group, and are designed to protect ensure that the necessary HSE training is responsibilities are set out in a number of the Group’s profitability and optimise its implemented and documented. steering documents. The most important capital allocation. Individual companies ones include: must identify, assess, review and monitor Ethics at Agder Energi their own exposure to risks. They must «Ethics at Agder Energi» is guide on proper Group HR guidelines also review their risk management conduct for employees, Board members, The Group HR guidelines aim to ensure strategies each year. contractors, consultants and anyone else that the management and governance of who acts on behalf of Agder Energi. The key HR processes is consistent at all Group HSE guidelines guide sets out clearly the kinds of dilem- companies in the Group. The guidelines The Group HSE guidelines set out the mas individuals may face in their work and include a description of the Group’s underlying principles governing activities explains what is acceptable and unaccep- values and of how they should be imple- related to Health, Safety and the Environ- table conduct. Our ethical guidelines are mented in HR policy, training, the corpo- ment (HSE). The document also deals based on loyalty, integrity and trust. All rate culture and staff welfare policy. with the duties and areas of responsibili- new employees must take an e-learning ty of managers and employees within course on our ethical guidelines. They also state that Agder Energi should these areas. Agder Energi has a zero have a good working environment. Agder accident approach to safety, and aims to Group procurement guidelines Energi shall perform regular working maintain a low level of sickness absence The Group guidelines regulate the frame environment surveys and ensure that any (<3.5%). Agder Energi has chosen to have work for procurement, as well as estab- necessary corrective measures are iden- a joint HSE management system for the lishing goals and corrective measures. tified and implemented. All Agder Energi whole Group. In addition, individual They also regulate ethical aspects of our employees must adhere to the adopted companies have company manuals for relationships with our subcontractors. values and ethical guidelines. company-specific issues. Procurement processes must be carried out in a way that ensures high ethical Group risk management guidelines New staff must always be given a general standards within the Group. Anyone who The Group risk management guidelines introduction to their company. This acts on behalf of the Group must adhere lay the foundations for integrated, appro- should include information specifically to high ethical standards in their dealings priate risk management at the Agder about HSE. Companies have a duty to with bidders and subcontractors.
GRI REPORTING AT AGDER ENERGI
The sustainability report covers the Together these companies are conside- it owns 100 and 64 percent ownership following companies: red to represent the vast majority of the interests respectively. • Agder Energi AS Group’s business activities. Based on a • Agder Energi Vannkraft AS cost/benefit analysis, smaller companies Agder Energi Venture and Bjerkreim Vind • Agder Energi Kraftforvaltning AS have been excluded, but we do not are included in Agder Energi’s annual • Agder Energi Nett AS believe that this significantly distorts the report, and each year an assessment will • Agder Energi Varme AS overall picture of the Group’s impact on be made as to whether it would be appro- • LOS AS society and the environment. priate and relevant to include them in the • Otera Infra AS sustainability report. • Otera XP AS Agder Energi owns all of the shares in • Otera AB Baltic Hydroenergy AS, which is made The section of the annual report on • Baltic Hydroenergy AS up of the companies UAB Baltic Hydro corporate social responsibility (CSR) energy and Latgales Energetika, in which covers the period from 1 January 2015 to
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31 December 2015. The Group produces For the report, all of the reporting com- a picture as possible of the situation in an annual CSR report, but the 2015 panies performed an analysis of material question. The environmental data on report is the first one to be integrated aspects. A certain level of stakeholder which the report is based include data into Agder Energi’s annual report. As engagement was achieved by holding a from direct measurements, self-declared well as the discussion of corporate social meeting with the chief employee repre- aggregate figures for our companies and responsibility at the Group level in the sentative for the Group, who represents subcontractors, and calculated averages. annual report, an appendix has been the employee’s interests. Moreover, at The level of accuracy of the data is published that breaks down the report the consultation meetings with the com- therefore variable. to the company level. The appendix is panies the latter reported what their available at www.ae.no. customers wanted. The GRI index only covers the areas where the Group has chosen to report. Reporting process The Group wishes to increase stake The sustainability report takes into holder engagement for future reporting. Only the General Standard Disclosu- account the stakeholder groups that As such, its ambition is to consult directly res and Specific Standard Disclosures are its target groups and focuses on the with as many stakeholders as possible. that are actually used in the report are aspects of GRI reporting that are consi- discussed. A complete list of the GRI dered material to the stakeholders and The Group has also decided to sign up to reporting categories can be found on the the Group. For the 2015 CSR report, the the global Greenhouse Gas (GHG) proto website of the Global Reporting Initiative: analysis of material aspects involved two col established by the World Resource www.globalreporting.org. stages. Institute, adopted in January 2015. The GHG protocol requires the company to First the materiality of all of the optio- report CO2 emissions from its electri- nal reporting categories was analysed city consumption using a market-based at the Group level, in order to identify system and assuming the national power the categories that were likely to be mix. In this report the Group has chosen most relevant to the companies in the to present CO2 emissions both under the Group. Subsequently individual compa- guarantee of origin system and using the nies carried out their own assessments national power mix. of potential material aspects at consulta- tion meetings, in order to identify repor- The Group considers that this report ting categories that appeared important complies with the GRI G4 guidelines. to the company and/or its stakeholders. These principles help to ensure that the report contains reliable information Definition of contents that is assumed to be relevant to stake Agder Energi defined shareholders, em- holders. ployees and customers as the target groups for its sustainability reports for The sustainability report for 2014 was 2012, 2013 and 2014. These target groups audited by Agder Energi’s group audit have remained unchanged for this report, function. The audit report pointed out after consultation with the companies areas for improvement, and is thus an and the chief employee representative important tool for further work on repor- for the Group. ting. The report has not been externally verified to check that the figures collec- The purpose of sustainability reporting is ted adhere to GRI guidelines, but our goal to give a balanced view of the Group’s is that this will happen in the future. most important economic, environmental and social impacts on society. We have striven to collect information for the report, and present it, in the best Report quality possible way. In so far as background in- The CSR report for 2015 adheres to the formation has been interpreted, the aim reporting principles set out in GRI G4. has been to give as accurate and relevant
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ANALYSIS OF MATERIAL ASPECTS
Aspects that are relevant to Agder Energi.
AE Energy Vann- AE Manage- AE Code Aspect kraft Nett Otera LOS ment Varme
Economic G4-EC9 Procurement Local suppliers Practices •
Environmental G4-EU13 Biodiversity Comparison with • unaffected areas
Society G4-HR4 Freedom of Risks to freedom of Association association and collective • and Collective bargaining in operations Bargaining and at suppliers G4-SO8 Compliance Sanctions for non-compliance with laws and regulations • G4-PR1-PR2 Customer Health Safety of customer when using Health and Safety our products and services • G4-PR3-PR5 Product and Product information Service Labeling and customer satisfaction • • G4-PR6-PR7 Marketing Illegal/controversial products Communications and unacceptable marketing •
Compulsory G4-EU10 Availability Planned capacity against and Reliability projected electricity demand over the long term • • G4-EU15 Employment % eligible to retire -EU18 in 5-10 years, subcontractors (HSE) • • • • • • G4-EU22 Local People displaced physically Communities or economically • • G4-EU25 Customer Injuries and deaths of non- and Safety employees involving company • • • • G4-EU26 Access Power outages, -EU30 availability and reliability • •
The figure shows the outcome of our consultation with the companies, and which reporting categories each company considered relevant to itself.
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CHANGES IN RELATION TO THE 2014 REPORT
The application of G4 Electric Utilities on the new obligatory categories set out definition of CO2 emissions from electri- Sector Disclosures resulted in the in the Electric Utilities Sector Disclosu- city consumption by reporting emission companies having to consider signifi- res. Another change from 2014 is that figures for individual companies and the cantly more potential reporting catego- this year’s report has been incorporated group using both the guarantee of origin ries in their analyses of material aspects. into Agder Energi’s annual report. This system and the actual power mix in In order to make the number of potential only applies to information at the Group Norway. In the 2014 sustainability report, reporting categories manageable for the level, while the data for each company, Agder Energi implemented the GHG companies, Agder Energi first carried out together with the GRI index, have been protocol’s definition of CO2 emissions by an analysis at the Group level. Based on published in an appendix available on reporting emission figures for individual the results of the analysis for the Group, www.ae.no. companies using both the certificate of each company analysed the relevance of origin system and the actual power mix in a selection of optional reporting catego- In the CSR report for 2015, Agder Energi Norway, but it did not do this at the Group ries. All of the companies have reported has implemented the GHG protocol’s level.
STAKEHOLDERS AND AGDER ENERGI
Agder Energi defines stakeholders as people or groups who are affected by, or who could affect, the Group’s business activities. Cooperation with stakeholders is a high priority for the Group.
Agder Energi is a state-owned limited lia- Shareholders ourselves for the future. This is one of the bility company, and its core business is Each year, the senior management team reasons why the Group, its subsidiaries entirely dependent on maintaining the meets the shareholder municipalities at and employees both participate in, and trust of its stakeholders. Cooperation meetings with their executive boards or are members of, a number of regional, with stakeholders is part of our day-to- municipal councils. The municipal share- national and international groups, day activities. Each company defines its holders hold regular shareholder councils and committees working on most important stakeholders in its busi- meetings. The last shareholder meeting questions relating to the regulatory ness plan. The ones who are relevant to in 2015 was held in May 2015. The main framework for the Group and the indus- the largest number of companies are topic for shareholder meetings is often try. These include technical organisa- considered most relevant to the Group. matters relating to the ownership of the tions and trade associations. One of the The important stakeholders include Group, but other issues of concern to most important ones is Energi Norge, the employees, shareholders, customers, municipalities can also be raised, such as organisation which represents busines- government authorities, subcontractors new power stations and reliability of ses in the energy sector affiliated to the and other business partners. CSR repor- supply. Confederation of Norwegian Enterprise ting is a key aspect of our communication (NHO). Other organisations in which with the Group’s most important stake- Customers Agder Energi participates include: holders. LOS carries out regular customer Eurelectric – The association of the elec- surveys. The results are used to make tricity industry in Europe, NORWEA – Employees adjustments to how the company com- Norwegian Wind Energy Association and Employee representatives and managers municates with its customers. Agder NECS – Norwegian Energy Certificate at Agder Energi have several regular, Energi Nett also performs regular custo- System. formal channels for discussing both stra- mer surveys. These are described in tegic and operational issues. There are greater detail in the section on «Society» Power station projects also a number of informal channels of in this report. In conjunction with all power station pro- communication. A working environment jects, good communication with local survey of the Group’s employees is Organisations authorities and other stakeholders in the carried out every two years, and one was The big changes taking place in the local community is a priority. The issues performed in 2015. energy industry make it vital to have the that are typically of most interest to sta- information that we need to position keholders include secondary economic
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impacts on local businesses and environ- ZERO since 2013. ZERO has challenged Reputation mental questions. When a licence Agder Energi to reduce its greenhouse We carry out reputation surveys at application is submitted, the Norwegian gas emissions in 2015. regular intervals. The results have been Water Resources and Energy Directorate stable for a number of years, and reveal organises stakeholder and public Education that people in the Agder region are highly consultations. Each year, the Group fulfils its statutory duty aware of the Group. Two thirds of respon- to give lessons on electrical safety to all dents believe that the Group has a good Partnerships students in years 6 and 9 at schools in south- or very good reputation. We have had a partnership agreement ern Norway. The students also learn about with the environmental organisation renewable energy during these lessons.
ETHICAL GUIDELINES AND VALUES Agder Energi’s Group strategy establishes our values and has a strong focus on ethical conduct. All conduct at the Group should adhere to its ethical guidelines.
The ethical guidelines were revised and how to handle them. It was checked that The committee also monitors how whist- approved by the Board in December the employees had completed the course. leblowing is dealt with. Agder Energi 2013. The document «Ethics at Agder The aim of these measures is to further strives to be as transparent as is practi- Energi» describes how anyone represen- raise awareness about ethical conduct at cable in its work on CSR. In 2014 the ting the Group should conduct themsel- Agder Energi. Group signed up to the UN Global ves. The main points were published in a Compact, which means that it under separate booklet in 2014. In May/June Agder Energi has set up an ethics takes to run its operations in accordance 2014 all employees were sent an e- committee that helps managers and with specific principles. learning course on ethical dilemmas and employees to deal with ethical dilemmas.
THE GROUP’S VALUES
Closeness reaching them. Individual employees volves exploiting any opportunities that We shall be close to our customers and must safeguard their integrity and credi- exist within the framework of our overall the region. Customers shall know that we bility in all of their activities, both within strategy. are there for them. An open dialogue and outside the business. based on a joint understanding of the Innovation facts helps us to bring out the best in Dynamism We shall promote innovation and creati- each other. By cooperating we preserve We shall be dynamic, and have a clear vity, so that our employees become more our regional identity and help to develop corporate strategy that helps us to im- skilled and efficient, enabling them to the region. plement projects and achieve our goals. help to grow and develop our business. This dynamism shall be shown both by Innovation is a process in which people Credibility the organisation and by individual em- build on each other’s contributions and We shall gain credibility by keeping pro- ployees. Organisational dynamism invol- ideas. We have to think in new ways and mises, both to third parties and within ves having decision-making procedures create new processes, while also retai- our organisation. The way in which we that ensure successful implementation ning the best aspects of what we achieve our goals is just as important as and profitability. Individual dynamism in- currently do.
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GROUP CSR GOALS
Based on our CSR strategy, and suppor- shall never be complicit in the breach of business. Subcontractors must have ted by the Group’s ethical guidelines and human rights. procedures in place for environmental HR guidelines, we have set joint Group protection measures. goals for human rights, labour rights, the Labour rights environment and anti-corruption. The Agder Energi and its subcontractors shall Anti-corruption joint Group goals are implemented by the comply with the eight fundamental con- Agder Energi’s goal is that no form of ac- individual companies. ventions of the International Labour Or- tive or passive corruption shall take pla- ganisation (ILO) on the right to organise, ce within the Group’s business activities. Human rights the right to collective bargaining and the Agder Energi and its subcontractors (a elimination of forced labour, child labour subcontractor is defined as anyone who and discrimination at the workplace. performs services for, or sells products to, Agder Energi) shall conduct themsel- The environment ves in accordance with the UN’s interna- Each company within the Agder Energi tionally accepted human rights conven- Group draws up environmental goals for tions. The Group and its subcontractors its operations, reflecting the nature of its
BUSINESS ENVIRONMENT AND INNOVATION
In order to increase the value added by protection and electricity generation ding of the economic benefits of the in- the Group, Agder Energi aims to be the with the aim of finding solutions that are terconnectors between Norway and Eu- industry leader with respect to under- good in terms of both power generation rope and of how to further exploit standing, exploiting and influencing the and salmon management. opportunities in this area. Electricity business environment. Market develop- markets and energy policy are under- ments and relevant technology are clo- Agder Energi is involved in a four-year going important changes, providing new sely monitored. This work informs our research project in collaboration with the opportunities for green, renewable ener- continual improvement processes, lobby- University of Stavanger. The project will gy from Norway through greater integra- ing activities and policy positions. give Agder Energi an in-depth understan- tion with Europe. ding of how Norwegian environmental Research and development policy relates to renewable energy policy, Innovation The Group’s investment in R&D shall lay and to what extent it promotes invest- In order to ensure that we are in a posi- the foundations for long-term, profitable ment in wind power. The project involves tion to exploit the technologies and mar- growth and promote development activi- one of Agder Energi’s employees doing a kets of the future, we are always on the ties to increase the potential of the core PhD that is part-funded by the Research look-out for opportunities outside our business. Through our ownership interest Council of Norway through its Industrial current core activities. Through our sub- in Teknova, we support the research PhD scheme. The candidate defended his sidiary Agder Energi Venture, we are try- community in the region studying rene- thesis on 9 March 2016. ing to create long-term opportunities for wable energy. Agder Energi also partici- growth in the industrial sector. The main pates in a national research centre for Agder Energi wants to support the de- focus is on investments in companies in- green energy: CEDREN (Centre for Envi- velopment of a research programme loo- volved in renewable energy generation ronmental Design of Renewable Energy). king into electricity trading between and their subcontractors, as well as CEDREN focuses on local challenges as- Norway and other European countries. A smart grids and energy efficiency. The sociated with renewable energy genera- joint project has been initiated with part- aim is to create a new, profitable busi- tion. One project is looking at the inter- ners including the University of Agder ness that can be integrated into the face between salmon, environmental that aims to build up a better understan- Group’s future activities.
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AGDER ENERGI’S SUPPLIERS
Each year, Agder Energi buys goods and services worth around NOK 1.8 billion.
We aim to combine the purchasing Technical installations often involve Anyone acting on behalf of the Group in expertise of all of the companies in the subcontractors in a number of different its dealings with bidders and subcontrac- Group. Competitive bids are invited for countries. The Group must follow guideli- tors must adhere to high ethical stan- joint agreements covering all companies nes laid down by the Norwegian authori- dards. in the Group after first studying the ties, as well as comply with the ten prin- market. ciples of the UN Global Compact in the In its contracts, Agder Energi requires areas of human rights, labour standards, subcontractors to comply with the Agder Energi Nett AS and Agder Energi the environment and anti-corruption. Group’s rules on CSR and HSE. In 2015 Varme AS are covered by the Norwegian This is defined in separate Group goals, the Group carried out audits to check Public Procurement Act. Subcontractors which can be found under the section on that its subcontractors are complying to the grid operating company must «Group CSR Goals». with these requirements. With the help of qualify through SELLIHCA, which is a an external supplier, the Group audited supplier register and pre-qualification The Group enters into a variety of agre- around 5 percent of its subcontractors in system used by Scandinavian utilities. ements covering day-to-day purchasing, 2015. That is equivalent to 12-15 of the covering everything from consumables Group’s subcontractors with framework For major investment projects, the total to administrative services. These are agreements. The audits were based on value of goods and services purchased often designed as framework agree- recognised auditing standards. The can be of the order of one billion ments, under which there are mini- Group chose which subcontractors to Norwegian kroner. Purchases for these competitions between subcontractors. audit in 2015 based on an overall risk projects range from construction servi- All procurement shall be done in a way assessment. ces to advanced technical components. that promotes high ethical standards.
GENERATION OF ECONOMIC VALUE
Our vision of being a market leader in- profitability. Generating economic value nual reports, and the accompanying no- volves Agder Energi positioning itself and sustainability are prerequisites for a tes. Consolidated financial statements as one of the three leading renewable responsible approach to the other areas for the Group are presented in accordan- energy companies in Norway, measu- covered by CSR. The Group reports key ce with International Financial Reporting red by criteria such as turnover, size and financial indicators in its interim and an- Standards (IFRS).
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VALUE ADDED STATEMENT
The value added statement gives an account of the wealth created by the Group over the year, and shows how it is distributed amongst the stakeholder groups: employees, lenders, the public sector, shareholders and the company itself. The figure for value added is adjusted for unrealised gains and losses on energy, currency and interest rate contracts.
(Amounts in NOK millions) 2015 2014
Operating revenues 7,621 7,964 Goods consumed/operating expenses -4,084 -4,318 Gross added value 3,537 3,646 Capital depreciation -578 -588 Net added value 2,959 3,058 Net financial items, excl. interest -116 -27 Discontinued operations - -33 Available for distribution 2,843 2,998
DISTRIBUTION OF ADDED VALUE
Employees Gross salaries and benefits 1,138 1,025 Tax paid by employees -288 -272 Employers’ National Insurance Contributions -137 -127 Net amount received by employees 713 626
Lenders Interest, etc. paid to lenders 216 241 Net amount received by lenders 216 241
The public sector Ordinary taxes 467 178 Property taxes 163 162 Resource rent tax 251 295 Tax paid by employees 288 272 Employers’ National Insurance Contributions 137 127 Net amount received by the public sector 1,306 1,034
Shareholders Allocated for distributions by the company 660 700 Net amount received by shareholders 660 700
The company Retained earnings -43 380 Non-controlling interest’s share of profit -9 1 7 Net amount received by the company -52 397
Total amount distributed 2,843 2,998
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ENERGY
AE’s energy production (GWh)
Source 2015 2014 2013 2012 2011
Power generation Water 9,003 9,068 7,740 8,100 6,550 Solar PV 0.04 0.04 0.04 0.04 0.01 Wind 0 0 0 5,4 6,1 Delivered district heating 139 1 33 151 142 122 Total AE energy production 9,142 9,201 7,891 8,247 6,678 Renewable share in district heating (%) 95% 91% 83% 79% 72%
In the company social responsibility report In 2015 the Group’s hydroelectric power free cooling plant uses cold sea water part, Baltic Hydroenergy AS is included as stations generated 9,003 GWh of from a depth of 150 metres to provide a reporting company, but in the annual electricity. cooling for customers including Agder report part, Baltic Hydroenergy AS is not Energi’s head office in Kristiansand. Agder included as a reporting company. This The high proportion of renewable energy Energi is building several hydroelectric difference in reporting companies is the in district heating supplied mainly comes power plants that will be completed over reason that the numbers for energy from Returkraft’s waste-to-energy plant the coming years. The Group is also production in the annual report and this in Kristiansand. There is a trial photo working on several major hydroelectric report have some variations. voltaic system on the roof the Group’s projects that may increase the Group’s head office in Kristiansand that generated renewable energy generation in the 0.04 GWh in 2015. Agder Energi Varme’s future.
AE’s stationary energy consumption (GWh)
Source 2015 2014 2013 2012 2011
Energy consumption in buildings and other facilities Electricity 14 17 13 14 15 Oil 0 0 0 0 0 District heating and cooling 1 1 1 1 1 Total for buildings and other facilities 15 18 14 14 16 Pumping stations Electricity 100 91 66 79 90 Transmission and distribution Transmission and network distribution losses 390 360 369 350 294 Total stationary energy consumption 500 469 449 443 400
Agder Energi’s premises include offices, tion. An average figure for consumption reduction in actual energy consumption warehouses and installations for the per square metre is therefore not very from 116.3 kWh/m2 in 2014. Distribution generation and distribution of energy. relevant. Energy consumption at our head losses in Agder Energi Nett’s local and They are built in accordance with build- office, which was completed in 2010, was regional distribution grids came to 390 ing regulations at the time of construc- 115 kWh/m2 in 2015. This represented a GWh in 2015.
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IMPACT ON BIODIVERSITY
Environment Technical installations
2015 2014 2013 2012 2011
Total number of power stations 45 40 36 34 34
Aerial cables (km) 13,520 13,500 13,477 13,442 13,309 Underground/undersea cables (km) 7,675 7,423 7,169 6,963 6,721 Length of district heating and cooling network (km) 72 69 66 62 52 Total km 21,267 20,992 20,712 20,467 20,082
In the company social responsibility report 21,195 km of power cables. Grid operation situated in areas that are not specially part, Baltic Hydroenergy AS is included as is not as such polluting, but the power protected. a reporting company, but in the annual cables have an impact on the landscape, report part, Baltic Hydroenergy AS is not and there is a risk of birds colliding with There are several reservoirs in the Setesdal included as a reporting company. This them or suffering electric shocks. Dams Vesthei Ryfylkeheiane protected landsca- difference in reporting companies, is the and power stations also change the pe. Agder Energi helps to assess the envi- reasons that the numbers presented in natural environment, but our activities do ronmental impacts of power generation, the annual report and this report may not have a bigger impact on nature or particularly at its own power stations. Wit- have some variations. society than is usual for this kind of hin the framework of our existing licences, business. Our power stations are not loca- we are trying to reduce negative environ- Agder Energi has 61 wholly-owned and ted in protected areas or in protected mental impacts through various statutory part-owned power stations, located in river systems. We do have six power and voluntary measures, such as releasing Vest-Agder, Aust-Agder, Telemark, Latvia stations along the River Mandalselva, water to entice fish to swim up rivers and and Lithuania. Agder Energi Nett supplies which is a national salmon river. Most of building salmon ladders, as well as putting electricity through a grid consisting of the Group’s more than 120 dams are out fish and roe in reservoirs.
Environment Biodiversity
2015 2014 2013 2012 2011
Trout released 40,100 48,700 48,700 45,200 57,200 Juvenile fish released 0 0 0 100,764 100,000 Roe put out 300,000 300,000 506,000 344,764 380,000 Total 340,100 348,700 554,700 490,728 537,200
Juvenile salmon were not released in dammed rivers. A more detailed CSR – water management in 2015 2015. In 2012 and 2011, juvenile salmon description is provided under «local Agder Energi is entitled to exploit rivers were only released in the River Nidelva. pollution». within the limits set by the rules on the They are no longer released in Mandals- operation of its dams and its licences elva due to an improvement in fish stocks. The Iveland 2 power station, which is under the Water Resources Act or Water- wholly owned by Agder Energi, will gene- course Regulation Act. Each licence There were some breaches of the rules rate additional renewable energy by normally includes detailed rules on the governing the operation of the company’s exploiting more of the flow in the Otra water levels of reservoirs over the course dams in 2015. These rules specify the mi- river system. The project, which is under of the year and on the amount of water nimum flow needed to preserve recreati- construction, is altering the landscape in that must be allowed to pass by the power on areas and to protect fish stocks in accordance with its licence. station – in other words, the minimum flow.
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In some cases more water is allowed to At Steinsfoss power station in Otra, the Some of the reservoir restrictions and pass than specified by the licence, nor- flow of water past the power station is minimum flow requirements on the Man- mally due to special agreements or be- regulated by a separate agreement with dal river system are self-imposed due to cause the stipulations of the licence are Vennesla Municipality. At Byglandsfjord environmental considerations. On the Ul- ambiguous. In some cases Agder Energi the rules governing the operation of the dal river system there are certain self- applies minimum flow requirements or dams refer to a salmonid fish called the imposed reservoir restrictions in the reservoir restrictions that are stricter bleke, but some of the details on water summer, and we aim to avoid very low ri- than required by its licences, out of con- levels during the spawning season are ver flow in the Tovdalselva. sideration for the environment or stake- left up to the licencee Otteraaens Brug- holders along the river systems. seierforening.
GREENHOUSE GAS EMISSIONS
AE’s greenhouse gas emissions (tonnes of CO2e)
Source 2015 2014 2013 2012 2011
Total for buildings and other facilities 542 1,708 1,116 612 1,901 Total for transport 3,271 1,972 3,341 2,688 2,979 Total for district heating production 1,029 1,114 2,489 3,955 2,358 Power grids Transmission and 192,270 180,000 155,000 37,100 31,164 distribution losses
Total greenhouse gas emissions 197,112 184,794 161,946 44,355 38,402
Greenhouse gas emissions using European power mix 197,112 184,794 161,946 157,243 129,626 Greenhouse gas emissions using Norwegian power mix 4,146
Greenhouse gas emissions are calcula- document that the electricity generated regulated by the government. The income ted by converting energy consumption by the Group is based on Norwegian cap takes little account of the need to and energy carriers relating to the hydropower. buy guarantees of origin to cover distri- Group’s buildings and facilities, distribu- bution losses. tion losses, and energy used for district Greenhouse gas emissions from electri- heating. Electricity covered by guarante- city have been calculated using a conver- Guarantees of origin are regulated by EU
es of origin is deducted from total elec- sion factor of 493 grams CO2/kWh, equi- law and are traded in various national tricity consumption when calculating valent to the European power mix, in markets. Several of our power stations greenhouse gas emissions. Agder Energi accordance with the Norwegian Water are certified by the German company Nett, Agder Energi AS, Agder Energi Var- Resources and Energy Directorate’s TÜV SÜD, which audits them each year. me and Agder Energi Vannkraft have in product declaration for 2014. Other power stations have been appro- total bought 13.8 GWh of guarantees of ved for the Swedish eco-label Bra origin. Statnett redeems guarantees of Of the 14.5 GWh of electricity consumed Miljøval. Some of our turnover is put into origin for the electricity from pumping by the Group at its buildings and other a fund that is used for environmental stations for 2015 and the previous year. facilities, 13.8 GWh comes from renewable protection measures. One such measure energy sources. In other words, 13.8 GWh is the electric fish guard that Agder Electricity is a neutral energy carrier wit- of the physical consumption of electric Energi has installed over the discharge hout any direct emissions. Nevertheless, power at the Group’s buildings and other pipe from Rygene power station. some of the fuels used to generate elec- facilities (14.5 GWh) is matched by equiva-
tricity do produce emissions. Guarantees lent guarantees of origin. CO2 emissions have also been calculated of origin, which Statnett allocates to pro- based on total electricity consumption ducers of renewable energy in Norway, Agder Energi Nett’s revenues are and the Norwegian power mix according
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Intruduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
to the Norwegian Water Resources and of the location-specific power mix using both market-based and location- Energy Directorate, disregarding any reflects the global GHG protocol, which based methods.
guarantees of origin purchased. This use requires CO2 emissions to be reported
LOCAL POLLUTION
Local environmental pollution
2015 2014 2013 2012 2011
NOx emissions (kg) 613 330 524 395 2,600 Serious environmental incidents 0 2 1 0 2 Minor environmental incidents 15 10 6 5 1
In 2015 there were ten breaches of the pect this to improve the situation. The dent at Heisel. OB successfully appealed rules governing the operation of the other breaches of the regulations were against the decision to the Ministry of Group’s dams, and the Norwegian Water the result of technical faults or failures to Petroleum and Energy. Resources and Energy Directorate (NVE) follow procedures. Corrective measures was informed of all of them. have been initiated, which have either al- Dissolved gas supersaturation, which can ready been completed or will be completed be harmful to fish, has been observed in One of the incidents took place at Aren- in conjunction with the upgrade to the the Otra downstream from Brokke power dals Vasdrags Brugseierforening’s site at Brokke control centre in the winter of 2016. station’s discharge pipe. Otra Kraft is wor- Rusdam, where Agder Energi Vannkraft is king to establish the extent and cause of the operator, while the remaining nine In 2014, NVE notified us that it was consi- the dissolved gas supersaturation. breaches were spread across several of dering fining us for the for the rapid re- Agder Energi Vannkraft’s sites. We do not ductions in flow at Bjelland on the River There were six minor environmental believe that any of the breaches caused Mandalselva and at Heisel on the Otra. In incidents at Agder Energi Nett involving environmental damage, as they were wit- winter 2015 NVE imposed a fine on Agder transformer oil leaks at substations. hout exception brief and small. Neverthe- Energi Vannkraft for infringement of the less, we would like to mention that issues first paragraph of Section 5 of the Water You would not normally expect the Group’s relating to the new Skripelandsfoss power Resources Act. Agder Energi Vannkraft business activities to result in significant station, owned by Bekk og Strøm, caused accepted the fine, and is working to im- emissions of ozone-depleting substances, several of the breaches of the minimum prove procedures to prevent a repeat oc- so collecting data on this has not been flow regulations for Kolstraumen, where currence. NVE also imposed a fine on given priority. Agder Energi Varme has Agder Energi Vannkraft is the licencee. To Otteraaens Brugseierforening (OB) for permits to emit exhaust gases into the air improve the situation, we have started breach of the rules governing the opera- and to release warm water from its district working together to share data. We ex- tion of its dams on the Otra after the inci- cooling system in Kristiansand.
WASTE
Environment Waste (tonnes)
Type 2015 2014 2013 2012 2011
Hazardous waste 200 122 237 129 105 Paper (tonnes) 43 44 47 67 139 Other sorted waste (tonnes) 309 315 627 443 452 Unsorted waste for energy recovery (tonnes) 103 89 207 79 87 Other unsorted waste (tonnes) 96 146 228 162 182 Total waste (tonnes) 751 716 1,346 880 965 Recycling percentage 74 67 83 73 72
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Reporting covers the Group’s biggest of- Agder Energi Varme. The quantity of has not been included. The recycling fice buildings, as well as the operations waste in 2015 was estimated to be 750 percentage at Otera Infra is 74%. This of the companies Agder Energi Vann- tonnes. Construction waste that is high level of recycling is the result of kraft, Agder Energi Nett, Otera and handled by contractors other than Otera long-term, systematic work.
GREENHOUSE GAS CHALLENGE
In 2014, Agder Energi was challenged by A number of measures were implemen- of by air. A number of all-electric and the environmental organisation ZERO to ted to reduce emissions from air and hybrid cars were also bought, which em-
reduce its CO2 emissions from air travel, road travel, including changes to the ployees can use for business travel, and a road travel and meat consumption. The Group’s travel guidelines. Before travel- course was held on fuel efficient driving. goal was to reduce these emissions by ling to meetings, employees must now
30 percent in 2015. consider whether the journey is neces- Work on reducing the Group’s CO2 emis- sary, or whether the meeting could in- sions from its operations is a long-term Consumption of red meat was quickly re- stead be held by Lync/video conference. process, and it will be some time before duced by 100 percent, after the Group’s If the journey is deemed necessary, they the results of the measures that have canteens stopped serving it altogether. must consider travelling by train instead been implemented start to show.
HEALTH, SAFETY AND THE ENVIRONMENT: OUR TOP PRIORITY
Health, safety and the environment (HSE) is a priority area at all levels of Agder Energi. Activities in this area are regulated by legislation, company guidelines, instructions and procedures, as set out in the Group’s HSE management system.
We have a zero accident vision and we lots of on-site activities such as Otera and are the result of systematic work, and want all of our employees to experience Agder Energi Vannkraft have additional developing a good safety culture has job satisfaction. The HSE figures for re- HSE training programmes. played a key role. cent years show a positive trend. HSE has been prioritised throughout the organisa- The sickness absence rate in 2015 fell to Employees take part in and support HSE tion, and it is the first item on the agenda 3.5%. The number of incidents resulting activities through company working envi- at management meetings at both the in injury has also fallen. The lost time in- ronment committees and safety repre- Group and company levels. All employees jury frequency was 3, which is a record sentatives. All of the companies in the receive HSE training, and companies with low for the Group. These improvements Group have a company health service.
HSE
2015 2015 2014 2014 2013 2012 2011 goal achievement goal achievement achievement achievement achievement
HSE results Sickness absence, Group <3,5% 3,5% <3,5% 3,6% 3,6% 3,9% 4,7% Lost time injuries, Group (H1)*) 0 3 <2,5 3,6 3,9 6,8 7,5 Unwanted incident reports 1,500 1,573 >2,500 1,083 2,024 1,263 763
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Intruduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
EMPLOYEES AT AGDER ENERGI
At the end of the year, Agder Energi had 1,250 of its own employees.
In 2015, 73 new employees were taken regular management development ces. Discrimination is defined as:« Giving on by companies in the Group. 12 perma- courses for all new managers and different treatment, excluding or showing nent employees moved to new positions potential managers at the Group. preference based on race, gender, age, within the group. Agder Energi has 55 any disability, sexual orientation, religion, temporary staff, and 26 contractors. The Group held 85 internal courses political opinions or national or ethnic during 2015, covering everything from origin, or any other similar action that All employees must have at least two statutory training through HSE to how to obstructs or reduces equal treatment.» appraisals per year with their immediate use new IT systems. The Group shall work systematically to line manager. We wish to continue increase the proportion of women developing our employees’ skills in order Agder Energi does not accept any form working at the Group, particularly in to prepare us for the future. We hold of discrimination under any circumstan- operational positions.
Agder Energi’s employees
Proportion Proportion Proportion Proportion Proportion 2015 2014 2013 Men Women of women, of women, of women, of women, of women, total total total 2015 2015 2015 2014 2013 2012 2011
Total for Group *) 1,004 1,029 1,450 842 162 16% 17% 15% 14% 15% Board members, Group and reporting companies 58 54 68 46 12 21% 13% 21% 18% 21% Group Board 12 12 12 7 5 42% 42% 33% 33% 25% Management positions 112 118 87 91 21 19% 18% 14% 11% 17% % in trade unions 48 54 55 % reaching retirement age within 5 years 9.4 8.3 % reaching retirement age within 6-10 years 10.9 9
* Excl. employees in the companies owned by Agder Energi Venture and Baltic Hydroenergy AS.
Labour organisations Working conditions are regulated by the following agreements: Employees are free to join labour orga- • The basic collective wage agreements for NHO-Tekna, LO-NHO, NHO-NITO and NHO-YS nisations. The Electrician and IT Workers • The collective agreement for power stations (NHO/EBL (Energi Norge) –LO/EL&IT) Union, The Norwegian Society of • The national collective agreement (NHO/NE LFO-LO/EL&IT) Graduate Technical and Scientific Pro- • The collective agreement with NITO (NHO-NITO) fessionals (Tekna), The Norwegian • The collective agreement for civil servants (NHO-YS/Negotia) Society of Engineers and Technologists • Agder Energi’s local agreement from 2007 covering Agder Energi Varme (NITO) and Negotia each have a chief (AE-EL&IT/NITO/NEGOTIA/TEKNA) employee representative for the Group. • Agder Energi’s joint agreement from 2015 (local agreement) They also have a joint chief representa- (AE-EL&IT/NITO/NEGOTIA/TEKNA) for the following companies: tive for the Group. There are a number - Agder Energi AS of channels through which employee - Agder Energi Vannkraft AS representatives, the Group manage- - Agder Energi Kraftforvaltning AS ment and company managers can meet. - Agder Energi Nett AS The most important ones include the • Local agreement covering LOS AS from 2015 Group works council, Group meetings, • Local agreement between Otera Infra AS and NITO/Negotia working environment committees and • Local agreement between Otera Infra AS and EL&IT company works councils.
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Intruduction Corporate governance The Agder Energi Group Agder Energi AS CSR III < >
COMPETITION LAW
The Group did not receive any fines or face any other restrictions as a result of breaches of laws or regulations on anti-competitive practices.
Customer survey LOS. LOS achieved a high score in the survey. Its retail customers gave the LOS company a score of 74 out of 100, above An external survey run by EPSI Norway the industry average of 72. That was up measured customer satisfaction with from 72.8 in 2014.
METHOD
Theme Factor Unit Source Note
Petrol emissions 2.32 kg CO2/litre Norwegian Pollution Control Authority (SFT) as reported by Klimaløftet
Diesel emissions 2.66 kg CO2/litre Norwegian Pollution Control Authority (SFT) as reported by Klimaløftet
Paraffin emissions 2.55 kg CO2/litre SFT quota calculator
Car, 2011 model 134 g CO2/km Norwegian Public Roads Administration
Average CO2 emissions for new cars in 2011
CO2, air travel – grams of CO2 144 g CO2/km Average of Scandinavian figure Source: DEFRA equivalents per passenger km of 158 g and European one of (Department of Environment, 130.4 g, excluding Food and Rural Affairs) 2012 indirect emissions
Heating oil 2.76 kg CO2/litre
Heating oil incl. efficiency 311 g CO2/kWh
Gas (LPG) incl. efficiency 259 g CO2/kWh
2015 product declaration, European 493 g CO2/kWh 2014 product declaration, NVE energy mix
GHG location-specific power mix for 10 g CO2/Kwh GHG protocol 2015 and NVE Norwegian Norway actual power mix for 2014
GWP – SF66 23,900 CO2e
People with a flat car allowance for business travel, assumed average annual driving distance 20,000 km/year
AGDER ENERGI ANNUAL REPORT 2015 123 Agder Energi P.O. Box 603 Lundsiden, 4606 Kristiansand Visiting address (head office): Kjøita 18, 4630 Kristiansand Tel. no.: +47 38 60 70 00 Organisation number: NO 981 952 324
Kikkut Photo: Kjell Inge Søreide, Anders Martinsen, Arild de Lange Nilsen, Realf Ottesen