ANNUAL REPORT 2014
The spiral casing, which weighs 26 tonnes, is lifted into place at Iveland Agder Energi 2 power station in Aust-Agder. 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 reklamebyrå AS Photo: Anders Martinsen, Kjell Inge Søreide, Gaute B. Iversen, Arild de Lange Nilsen og LOS. CONTENT Click on the text to go to the page of your choice
Key Figures 4 Group structure 8 Here we operate 9 Agder Energi in brief 10 Our business 11 Important events in 2014 12 CEO – Agder Energi in a changing word 13
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Bossvatn in Setesdal. AGDER ENERGI ANNUAL REPORT 2014 3 KEY FIGURES
RESULTS FINANCIAL POSITION 2014 2013 2012
NOK mill. %
2,800 35 Equity 3,760 4,210 3,917 2,400 30 Interest-bearing liabilities 8,299 7,668 7,222 2,000 25
1,600 20 Capital employed 12,058 11,878 11,139 1,200 15
800 10 Total assets 16,418 16,091 15,243 400 5
0 0 2014 2013 2012 2014 2013 2012
EBITDA Operating income Net income EBITDA margin Return on equity after tax Return on capital employed (after tax)
Def. 2014 2013 2012 2011 2010 Def. 2014 2013 2012 2011 2010
AS PRESENTED IN INCOME STATEMENT FINANCING FIGURES Operating revenues NOK millions 8,267 9,391 8,946 10,684 9,345 Funds from operation (FFO) 5 NOK millions 1,992 1,611 1,438 1,398 1,549 EBITDA 1 NOK millions 2,303 2,856 2,283 2,908 2,047 FFO/Net interest-bearing liabilities % 25.1 21.8 20.0 19.8 23.4 Operating profit NOK millions 1,715 2,354 1,818 2,470 1,634 Net interest-bearing liabilities/Underlying EBITDA 3.3 3.3 3.7 3.6 3.4 Profit before tax NOK millions 998 1,726 1,581 2,163 1,380 FFO interest cover 6 6.8 5.4 4.6 4.1 5.4 Net income for the year NOK millions 492 846 1,045 1,161 751 Equity ratio 7 % 22.9 26.2 25.7 21.3 20.9
ITEMS EXCLUDED FROM UNDERLYING OPERATIONS KEY FIGURES Unrealised gains/losses on energy contracts NOK millions -156 552 326 984 -354 EBITDA margin 8 % 27.9 30.4 25.5 27.2 21.9 Unrealised gains/losses on currency and interest rate contracts NOK millions -449 -403 -25 -111 203 EBITDA margin, underlying % 29.3 26.1 22.7 19.8 23.3 Major exceptional items NOK millions -7 0 0 0 2 Return on capital employed before tax 9 % 10.8 17.6 17.8 23.5 16.1 Net income from discontinued operations NOK millions -33 -35 145 6 2 Return on capital employed after tax 10 % 5.9 9.2 11.9 13.0 9.4 Return on equity after tax 11 % 12.3 20.8 29.7 35.1 20.8 UNDERLYING OPERATIONS EBITDA NOK millions 2,466 2,304 1,957 1,924 2,260 HYDROELECTRIC POWER Operating profit NOK millions 1,878 1,802 1,492 1,486 1,847 Underlying EBITDA NOK millions 1,920 1,675 1,570 1,440 1,728 Profit before tax NOK millions 1,610 1,577 1,280 1,290 1,490 Actual electricity generation 12 GWh 9,060 7,738 8,138 6,550 6,586 Net income for the year NOK millions 892 772 683 526 858 Expected electricity generation 12 GWh 7,900 7,700 7,700 7,700 7,700 Reservoir reserves at 31 Dec. GWh 3,900 4,250 4,450 4,500 2,000 STATEMENT OF FINANCIAL POSITION Reservoir capacity GWh 5,050 5,050 5,050 5,050 5,050 Total assets NOK millions 16,418 16,091 15,243 14,647 16,725 Average spot price øre/kWh 22.8 29.1 21,8 36.0 40.7 Equity NOK millions 3,760 4,210 3,917 3,123 3,488 Electricity price realised øre/kWh 28.8 29.0 26,3 30.0 33.7 Interest-bearing liabilities NOK millions 8,299 7,668 7,222 7,028 7,621 Cost of generation/kWh øre/kWh 9.1 9.1 8,7 8.3 8.3 Capital employed 2 NOK millions 12,058 11,878 11,139 10,151 11,109 Unrestricted liquidity 3 NOK millions 1,416 1,412 1,265 1,460 1,339 NETWORK Net interest-bearing liabilities 4 NOK millions 8,257 7,647 7,155 6,976 7,577 Underlying EBITDA NOK millions 359 685 324 328 563 Interest-bearing liabilities due over coming 12 months NOK millions 1,184 1,773 2,433 1,769 1,727 Number of transmission and distribution customers 1,000 190 188 184 178 176 Bank deposits excluding restricted assets NOK millions 42 21 67 52 44 Energy supplied GWh 5,454 5,308 5,295 5,422 5,873 Power grid capital (NVE capital) 13 NOK millions 3,691 3,523 3,322 3,139 2,986 CASH FLOW KILE cost 14 NOK millions 50 45 27 55 30 Net cash provided by operating activities NOK millions 1,512 1,486 970 2,097 226 Dividends paid NOK millions 713 626 653 902 900 Maintenance investments NOK millions 331 509 355 355 316 Investments in expansion NOK millions 805 790 601 373 442 Net change in loans to associates and joint arrangements NOK millions 22 23 44 -1 53 Acquisition of shares/ownership interests NOK millions 42 56 60 78 142
AGDER ENERGI ANNUAL REPORT 2014 4 AGDER ENERGI ANNUAL REPORT 2014 5 KEY FIGURES
Def. 2014 2013 2012 2011 2010
ELECTRICITY SALES Underlying EBITDA NOK millions 114 101 61 81 83 EBITDA margin % 3.6 2.6 1.8 1.7 1.9 Electricity sales GWh 8,670 9,849 9,777 10,409 8,677
CONTRACTING Underlying EBITDA NOK millions 22 16 -31 40 36 EBITDA margin % 2.4 1.9 -2.0 2.8 2.9 Share of turnover from intra-group transactions % 20.1 25.1 15.2 16.5 22.8 Order backlog NOK millions 625 810 823 842 814
DISTRICT HEATING Underlying EBITDA NOK millions 25 29 29 20 23 District heating supplied GWh 118 130 122 105 118 Price of energy sold øre/kWh 57 60 56 70 71 Gross margin øre/kWh 28 39 44 39 33 Share of renewable generation % 98 97 97 92 76 At Bjelland on the Mandal river EMPLOYEES, HEALTH AND SAFETY system in Vest-Agder. Number of permanent and temporary staff at 31 Dec. 1,245 1,551 1,529 1,579 1,692 Number of permanent and temporary full-time equivalents at 31 Dec. 1,220 1,526 1,494 1,536 1,647 Sickness absence % 3.6 3.6 3.9 4.7 4.5 Lost time injury frequency (H1) 3.6 3.9 6.8 7.9 5.1 Total injury frequency (H2) 8.6 11.2 12.9 16.2 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 2014 6 AGDER ENERGI ANNUALANNUAL REPORTREPORT 20142014 7 GROUP STRUCTURE WHERE WE OPERATE
CEO Tom Nysted Kraftstasjon
Fremmøteplass/kontor HR AND FINANCE AND RISK MANAGEMENT SHARED SERVICES Pernille K. Gulowsen Fjernvarme/-kjøling Frank Håland Power station Vannkraftverk under bygging
CSR AND CORPORATE Premises/offices DEVELOPMENT Oslo District heating/cooling Unni Farestveit Langhus Porsgrunn Stockholm Power stations under construction
MARKET ENERGY MANAGEMENT HYDROELECTRIC POWER NETWORK Gøteborg Steffen Syvertsen Edvard Lauen Jan T. Tønnessen Svein Are Folgerø
OTERA AS AE KRAFTFORVALTNING AS AE VANNKRAFT AS AE NETT AS Edvard Lauen Jan T. Tønnessen Svein Are Folgerø LOS AS
Holen AE VARME AS Administrative and shared service Skarg Business areas AE VENTURE AS Brussel Subsidiaries Valle
Finndøla Brokke Nomeland Rysstad Zürich GROUP MANAGEMENT Hekni Nisserdam Tjønnefoss Hovatn Dynjanfoss Høgefoss Berlifoss Jørundland
Logna Kuli Longerak
Tonstad RISØR Osen Smeland Finså
Skjerka dammer Evje Skjerka Uleberg Lislevatn Hanefoss Evenstad Håverstad Evenstad
Tom Nysted Steffen Syvertsen Pernille Kring Gulowsen Stoa ARENDAL Iveland 2 Rygene Kvinesdal Iveland Nomeland Trøngsla GRIMSTAD Steinsfoss FLEKKEFJORD Høylandsfoss Hunsfoss Færåsen Laudal LILLESAND Tryland
LYNGDAL
KRISTIANSAND FARSUND
MANDAL Lindesnes
Frank Håland Jan T. Tønnessen Edvard Lauen
AGDER ENERGI ANNUAL REPORT 2014 8 AGDER ENERGI ANNUAL REPORT 2014 9 AGDER ENERGI IN BRIEF OUR BUSINESS
Agder Energi manages natural, renewable based in the counties of Aust-Agder and Vest-Agder and Aust-Agder, which Agder Energi has four business areas, which acts on behalf of Agder Energi Vann- implement projects successfully and energy sources and converts them into Vest-Agder in southern Norway, but also comprise 20,600 km of power lines and which reflect the Group’s core activities and kraft AS. efficiently. electricity. The Group’s activities comprise elsewhere in Norway, as well as in Sweden, cables. The company has 190,000 trans- how it generates added value: Hydroelectric the generation, distribution and sale of Belgium and Switzerland. The Group’s mission and distribution customers. Power, Energy Management, Network and Network • LOS AS is Norway’s biggest supplier of renewable energy, as well as providing head office is in Kristiansand. Marketing/Business Development. The Network business area, which operates electricity to businesses, and the energy-related services. The company LOS is Norway’s biggest a monopoly, has a duty to society to provide country’s third biggest electricity supplier Measured in hydroelectric power genera- supplier of electricity to businesses, and The parent company, Agder Energi AS, electrical energy to end users. The govern- overall. LOS generates profit from the Hydroelectric power is a perpetual natural tion, Agder Energi is Norway’s fourth- the country’s third biggest electricity performs strategic management and ment caps its revenues, which means that margin it achieves on electricity sales, resource, and by harnessing it Agder largest energy supplier. Each year, the supplier overall. provides shared services. efficient operation and successful manage- and by having a cost-efficient business Energi is able to add value for its sharehol- Group’s 48 wholly-owned and part-owned ment of the power grid well are the main model. ders, employees and wider society. Agder power stations produce around 7.9 TWh of Otera supplies technical services to The business areas and administrative drivers of value for the business area. Energi has a significant impact on the renewable energy. customers responsible for building, ope- departments at the parent company are led • Agder Energi Varme AS supplies district wider economy of southern Norway, both rating and maintaining infrastructure. by directors. They and the CEO constitute The business area, which operates through heating and cooling in the Agder region. by purchasing local goods and services The Group also has significant ownership The company specialises in power grids the senior management team. Agder Energi Nett AS, is responsible for The company adds value by investing in and through the dividends and taxes that interests in the wind industry, through and renewable energy, and it operates in building, operating and maintaining the infrastructure for generating and we pay to the shareholder municipalities. the companies Statkraft Agder Energi Norway and Sweden. Hydroelectric Power transmission and distribution grid in Aust- distributing water-based heating and Agder Energi is owned by the 30 munici- Vind (SAE Vind), Bjerkreim Vind and The Hydroelectric Power business area is Agder and Vest-Agder. The company is an cooling to buildings. It generates energy palities in the region (54.5%) and Stat- Fosen Vind. These companies are plan- Agder Energi Varme operates district responsible for developing, operating and independent entity controlled by its own using waste heat and renewable energy kraft Industrial Holding AS (45.5%). ning to build wind farms in various heating plants in places such as maintaining the Group’s wholly-owned and AGM and Board. sources. locations in Norway. Kristiansand, Arendal and Grimstad. part-owned hydroelectric power stations. Agder Energi is a major centre of expertise The biggest driver of value creation for the Marketing/Business development • Agder Energi Venture AS invests in and an important employer. The Group Agder Energi Nett owns and operates the business is its power generating capacity. The Marketing/Business development energy-related businesses from start-up has around 1,200 employees, mainly transmission and distribution networks in This is affected by the availability of plant at business area comprises the contractor through to maturity, and adds value by power stations, reservoir volumes permitted Otera AS, the retail supplier LOS AS, and actively helping to develop them. by its licence terms and addition of new the district heating supplier Agder Energi capacity through reinvestment and by Varme AS, as well as the Group’s strategic Goals and results VISION AND VALUES obtaining new licences. and financial investments. The goals and results of the business areas are discussed in the Directors’ Agder Energi’s vision is to be one of the leading companies in the Norwegian renewable energy sector. This involves taking a long- It operates through the company Agder • Otera AS is one of Norway’s largest Report and in Note 1 Segment Infor- term view and thinking on an industrial scale. Moreover, it means that while the Group has regional and national roots, it also has Energi Vannkraft AS. electrical infrastructure contractors. Its mation to the consolidated financial an international perspective. financial results are driven by its ability to statements of the Agder Energi Group. Energy Management The Group has defined its values as closeness, credibility, dynamism and innovation: The Energy Management business area is responsible for maximising profit from the • Agder Energi shall be close to its customers and the region. electricity generated by the Group. It does this by trying to optimise scheduling and • Agder Energi shall gain credibility by keeping promises, both to third parties and within the company. by managing market risks, taking into account hydrology, weather data and in- • Agder Energi shall be dynamic, with a conscious corporate strategy that helps it to implement projects and achieve its goals. formation about markets. The business area is also responsible for the Group’s • Agder Energi shall promote innovation and creativity, so that its employees become more skilled and efficient, trading portfolios. enabling them to help to grow and develop the Group. These activities are performed by the company Agder Energi Kraftforvaltning AS,
Anne Gjerden and Jon Sverre Monsen in Agder Energi Kraftforvaltning are part of a large, high-qualified team of specialists who manage the power generated by our hydroelectric power stations.
AGDER ENERGI ANNUAL REPORT 2014 10 AGDER ENERGI ANNUAL REPORT 2014 11 IMPORTANT EVENTS IN 2014 AGDER ENERGI IN A CHANGING WORLD
Shares acquired by Rejlers New dams at Åseral Meter replacement programme In January Rejlers acquired the remaining 51 Agder Energi has decided to build two new The Norwegian power grid will be undergo percent of the shares in Rejlers Consulting, dams at Skjerkevatn and Nåvatn in Åseral significant upgrades and modernisation which was previously called Nettkonsult. Municipality. The two new dams will over the coming years, and an important The Swedish-owned company Rejlers replace five dams in the area, which the part of that is the Norwegian Water Resour- acquired 49 percent of Nettkonsult in Norwegian Water Resources and Energy ces and Energy Directorate’s requirement 2011. Directorate had ordered Agder Energi to that smart meters be introduced. In Decem- upgrade. The new dams will increase the ber, Agder Energi’s Board adopted its smart Otera Elektro sold Group’s electricity generation by increas- meter project, which involves replacing the The Group sold the company Otera Elektro ing the reservoir capacity and head. meters of all electricity customers in the to Bravida in April. and the shares in the Agder region. In total, around 190,000 company were transferred in June. In the New power station officially opened meters will need to be replaced by 2019. consolidated financial statements, Otera Skarg power station (Brokke Nord/Sør) Elektro is presented under discontinued was officially opened in October. It was de- LOS Energy wins important contract operations. From now on, Otera will con- veloped by Otra Kraft, which is a joint ven- Trondheim City Council has chosen LOS centrate on developing its subsidiaries ture between Agder Energi and Skagerak Energy as its electricity supplier until Otera Infra, Otera XP and Otera AB. Energi. The project will add 175 GWh of an- 2017, with an option to extend the contract nual electricity generation, of which Agder to 2019. The contract involves supplying Electricity supply contracts Energi’s share is around 120 GWh. 140 GWh each year. Yet again we can look back on a year that The world around us is changing at changing the retail electricity market In the second quarter, Agder Energi signed Agder Energi’s employees can be proud an ever faster pace. The government through technological innovation. a contract to supply Hydro Energi with 1.5 International interconnectors of. In spite of the average spot price for has just published its proposed chan- TWh of electricity annually over the period In October Statnett was licensed to build electricity falling by 22 percent, Agder ges to the Energy Act, which if imple- Political goals and incentives in relation 2021 to 2030, i.e. 15 TWh in total. two interconnectors, one to Germany Energi achieved net income of NOK 492 mented would extend the requirement to climate change are some of the (2018) and one to the UK (2020). When million, compared with NOK 846 million for legal and functional separation to key drivers of this process, which will they are completed, they are expected to in 2013. I would also like to highlight two all power companies that both have a make society even more dependent be of benefit to Agder Energi’s business. other important achievements: Sickness grid monopoly and generate electricity. on renewable energy. The transition to absence remained at record low levels, Currently this requirement only applies a low-emission society creates both and in 2014 we had fewer accidents than to companies with more than 100,000 business opportunities and challen- ever before. customers. This change would make the ges for the power sector, as it is largely Skarg power station in Bykle, Aust-Agder grid structure and distribution of rene- dependent on the ability of the sector to was officially opened in 2014. It should Agder Energi is continuing to develop wable energy more efficient and robust. deliver sufficient quantities of renewable generate around 69 GWh annually, which hydroelectric power resources, and It would also lay the foundations for energy. is enough electricity to supply roughly in 2014 we invested over a half a bil- further, much-needed consolidation in 3 500 homes. lion Norwegian kroner. Meanwhile, our the power sector. Agder Energi is in a Currently the sector is not ready to do grid operating company invested a total good position to play an important part this on a grand scale. Equally, Norwegian of NOK 366 million over the course of in that process. energy policy is not yet adapted to the year, helping to make the grid more this new reality. The power companies robust. Meanwhile, rapid technological and digi- and politicians must work together to tal developments are changing the way overcome these challenges. At the administrative level we want to in which electricity is used. The number create a modern organisational structure, of electric vehicles is rising significantly, At Agder Energi we are ready to play our in parallel with developing a highly more and more people are getting house part. results-oriented business culture. That hold appliances like induction cookers is vital if we are to achieve our vision of and instantaneous water heaters, digital being one of the leading companies in the load management systems are entering Norwegian renewable energy sector. the market and new businesses are
Tom Nysted CEO
AGDER ENERGI ANNUAL REPORT 2014 12 AGDER ENERGI ANNUAL REPORT 2014 13 CONTENT Click on the text to go to the page of your choice
Norwegian code of practice 16 Corporate governance structure 18 Corporate social responsibility 21 Directors´ report 24 Declaration pursuant to Section 5-5 of the Securities Trading Act 33
The Agder Energi Group Income statement 36 Total comprehensive income 37 Statement of financial position 38 Statement of cash flows 39 Statement of changes in equity 40 Accounting principles 42 Notes 50
Agder Energi AS Income statement 94 Statement of financial position 95 Statement of cash flows 96 Accounting principles 97 Notes 99
Longerak in Setesdal. Auditor´s report 110
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AGDER ENERGI ANNUAL REPORT 2014 14 AGDER ENERGI ANNUALANNUAL REPORTREPORT 20142014 15 NORWEGIAN CODE OF PRACTICE
Statement of Compliance be of critical importance to society. Directors considers it important for the Board, CEO and external auditor shall Entitlement of Board members to own capacity as employees of the company. Agder Energi has chosen to follow the Agder Energi’s CSR obligations include Group to have sufficient equity toprovide also attend. The election committee and shares corporate governance recommendations taking social and environmental factors financial stability, bearing in mind its Board members are also entitled to Under the company’s articles of associa- Details of the fees paid to individual set out in the Norwegian Code of Practice into account in its operations. Moreover, stated goals, strategy and risk profile. attend. tion and the shareholders’ agreement, Board members are presented in Note 33 published by the Norwegian Corporate the Group shall exploit opportunities to neither Board members nor other private to the consolidated financial statements. Governance Committee (NUES), based on create additional value where the inter- The Group’s dividend policy reflects the Election committee individuals are entitled to own shares in the 23 October 2012 edition, as corrected ests of society and its own interests stated aim of giving shareholders a The articles of association specify that Agder Energi. Management compensation on 21 December 2012. Agder Energi is not coincide. Where possible, it shall fulfil its return on their investment through cash the company shall have an election Management compensation reflects the a publicly traded company, so it is not responsibility by using knowledge and dividends. The Group’s future dividend committee. It consists of five members, The work of the Board Group’s guidelines on compensation. obliged to follow the recommendations. technology related to the Group’s positi- policy will depend on parameters such as who are appointed for a two-year term. The Board’s tasks are regulated by the Members of the senior management Nevertheless, Agder Energi implements on as a supplier of renewable energy. the Group’s strategic priorities, expected Under the current shareholders’ agree- Limited Liability Companies Act and team are not entitled to any options, them in so far as they are considered cash flow, investment plans, financing ment, the municipal shareholders can other relevant legislation, the company’s bonuses or performance-related pay. appropriate to Agder Energi’s business Exemption from the Group’s guidelines requirements, the need for adequate appoint three members, while Statkraft articles of association and the Board and ownership structure. The operations of some the subsidiaries financial flexibility and debt-servicing can appoint two. The election committee guidelines. The Board guidelines are Details of the compensation of each in the Group are very remote from, and ability. nominates candidates for the corporate publicly available. The Board appoints individual member of the senior manage- Below we have set out to what extent, have little in common with, the core acti- assembly and for the Board of Directors. the CEO. The Board has drawn up ment team are presented in Note 33 to and how, Agder Energi has chosen to vities of Agder Energi, and there are few Equity raising instructions for, and delegated authority the consolidated financial statements. follow the recommendations. Each head- synergies to be realised by integrating Equity increases shall be proposed by The shareholders’ agreement contains to, the CEO. ing represents one topic covered by the them more closely with the Group’s other the Board and discussed by the AGM. certain rules on the work of the election Information and communication recommendations. activities. The Board is not currently authorised to committee, designed to ensure compli- Audit committee Agder Energi satisfies all statutory requi- carry out equity increases. ance with the stipulations of the agree- In accordance with the Stock Exchange rements relating to financial reporting Ethical guidelines This may apply to companies in the ment. Regulations, The Board of Agder Energi and disclosure. The Group considers Along with its values, the ethical guideli- Group’s development portfolio, subsidiary Equal treatment of shareholders and has established an audit committee. maintaining good, appropriate lines of nes adopted by the Group provide the groups or joint ventures that are exemp- transactions with related parties Corporate assembly and Board of communication with its owners and foundation and framework for its activi- ted from some of the Group’s guidelines. Agder Energi has two classes of shares: Directors: Composition and indepen- Risk management and internal controls external stakeholders to be a priority. ties. The target groups are all employe- The exemptions, which are detailed in the A and B. Each share has one vote at the dence Agder Energi’s internal control and risk es, members of the boards of Agder relevant internal guidelines, entitle these AGM, and has an equal entitlement to di- There are 15 members of Agder Energi’s management systems are described in Acquisitions and disposals Energi and its subsidiaries and other companies to replace certain require- vidends. Class A shares can only be ow- corporate assembly. Five representatives the following section on corporate gover- The disposal and acquisition of compani- people who act on behalf of Agder ments with their own rules. ned by hydropower licensors. The arti- are elected by and from the employees, nance structure, and satisfy NUES’ es is handled in accordance with the Energi. Ethics constitutes an integral cles of association do not restrict voting five from the municipal shareholders and recommendations. Agder Energi has relevant authorisations within the Agder part of the Group’s operations and of its Business activities rights in any way. five from Statkraft. The corporate assem- designed its internal control systems and Energi Group. Disposals and acquisitions overall risk management process. Agder Energi’s purpose is defined in the bly is elected for a two-year term, and risk management principles based on the can take place as a result of the strategy company’s articles of association: “The For significant transactions between the elects its own Chair and Deputy Chair. The guidance of the highly-respected COSO decisions of companies in the Group or Agder Energi requires all people who act company’s purpose is to: exploit, produce company and shareholders, Board mem- corporate assembly is invested with the framework for enterprise risk manage- through the wholly-owned subsidiary on behalf of the Group to comply with and sell energy; contribute to the safe bers, key employees or any of their rela- authority and entrusted with the tasks ment (2004/2005). Agder Energi Venture. high ethical standards, and it discusses and efficient supply of energy; and ted parties, the Board shall obtain a va- specified in current legislation governing ethical issues openly both within the exploit related, profitable business opp- luation from an independent third party. limited liability companies. The Board guidelines require an annual Auditor company and with third parties. Our bu- ortunities within the energy and review of internal controls and risk mana- Ernst & Young was the Group’s external siness partners are also expected to infrastructure sectors.” Free negotiability Under the shareholder agreement, twel- gement to be carried out in collaboration auditor in 2014. All of NUES’ recommen- have high ethical standards consistent The shareholders’ agreement between ve people sit on the Group’s Board of Di- with the external auditor. dations relating to auditors are satisfied. with those of the Group. Our internal Agder Energi has goals and strategies the owners of Agder Energi means that rectors. Four members, including the control system, including our whistleblo- covering the whole group, for each the shares are not freely negotiable. Chair and Deputy Chair, are elected at Non-executive Directors’ fees wing procedures and ethics committee, business area and subsidiary, and for the proposal of the municipal sharehol- Members of the Board are paid based on are designed to ensure that our organi- certain aspects of its operations. Annual General Meeting ders, four members are elected at the their roles. Their fees are not profit- sation and employees are able to follow Under the agreements between share- proposal of Statkraft and four at the pro- related. No Board members are entitled the guidelines. Equity and dividends holders, the AGM is only attended by one posal of the employees. The executive to a pension, options or termination At 31 December 2014, the Group had representative of the shareholder muni- management is not represented on the compensation from the company, apart Corporate social responsibility (CSR) NOK 3,760 million of equity, giving it an cipalities and one representative of Stat- Board. Board members are elected for a from the entitlements of the employee Agder Energi considers its business to equity ratio of 23%. The Board of kraft Industrial Holding. The Chair of the two-year term. representatives on the Board in their
AGDER ENERGI ANNUAL REPORT 2014 16 AGDER ENERGI ANNUAL REPORT 2014 17 CORPORATE GOVERNANCE STRUCTURE
Corporate governance principles regulate the relationship between the shareholders, INTEGRATED RISK MANAGEMENT Board of Directors and executive management of a company, as well as describing In order to ensure that the instructions that involve trading in financial markets on the Group’s venture capital investments, the relevant roles and reporting structures. Integrated risk management provides of the owners/Board of Directors are fol- have their own risk management strategies analysing potential impacts on financial guidelines on how the company should act to control the uncertainties associated lowed, and that the Group is managed and limits on risk exposure. results and a more long-term assessment with future events and the achievement of targets. Internal controls are one appropriately, the Board has established of areas such as changes in the regula- guidelines for its own activities, its subsi- Our risk management activities form an tory framework. The Group’s policies and element of integrated risk management, and are designed to ensure appropriate diaries and the Group CEO, as well as an integrated part of the business operations systems ensure that risk management risk assessment, reliable financial reporting and compliance with existing laws authorisation matrix. These documents un- at individual companies within the Group, becomes an integrated part of corporate derpin the Group’s strategy, which in turn which are responsible for mapping and ma- governance. Over the course of the year, and regulations. sets out goals and priorities for the Group naging their own risks. Overall exposure to the Group has developed new presenta- and its business areas. The Board has also risk is also monitored at the Group level, tion and management tools to assist with approved a general description of its cor- and is included in reports to the senior corporate governance, further integrating CORPORATE GOVERNANCE porate governance model, which together management team and Board of Directors. financial and risk management into overall with the adopted limits on risk exposure management processes. We will continue The Group has implemented NUES’ corporate governance recommendations in so far as they are considered appropriate to Agder and company guidelines provides the basis The Group’s risk management systems to develop our corporate governance sys- Energi’s business and ownership structure. See the “Statement of Compliance” in this annual report. The levels of authority and for integrated risk management. Business cover all areas that could affect its ability tems in parallel with the development of areas of responsibility in the corporate governance structure are shown in the figure below. plans for all of the Group’s business areas to meet its goals: strategic, operational, the Group as a whole. have been drawn up based on the Group’s reporting-related and compliance risks. strategy and limits on risk exposure. Areas This includes setting and monitoring limits
Integrated corporate governance model, levels and governance documents INTERNAL CONTROLS AND WHISTLEBLOWING PROCEDURES
Level Responsibilities Description Internal control system documents through manuals to descrip- Monitoring, auditing and whistle For many years, Agder Energi has worked tions of work processes – are easily acces- blowing procedures hard to establish and improve its internal sible on the Group’s intranet “Energisk”. In order to pick up on changes that are
Corporate governance controls. The company’s internal control SLIK provides an important foundation for relevant to the company’s business, Agder Shareholders Corporate governance system is documented in governance the Group’s work on integrated risk mana- Energi has introduced an Early Warning documents that are available to all em- gement, internal controls and continuous system. This system is used to carefully ployees. The system used by the parent improvement. This lays the foundations monitor developments in the regulatory company Agder Energi AS is called “THIS for a business culture that promotes high- environment and markets in which the is how we do things at Agder Energi”, quality and efficient day-to-day operations Group operates, as well as technological Board of Directors (Group) Frameworks, generally abbreviated to the first word and reporting to the company’s executive developments. The information thus obtai- of the Norwegian name – SLIK. SLIK has management and Board. ned is used in strategic and commercial
guidelines and Management and governance at the AE Group group strategy been established in accordance with the decision-making procedures. recommendations contained in the COSO Subsidiaries in the Group have their own CEO framework and in the Code of Practice corporate governance systems with com- Agder Energi has an internal audit service, Senior management team Authorisations, drawn up by the Norwegian Corporate pany-specific documentation describing which assists the Board, senior manage- Executive Directors goals and guidelines Governance Committee (NUES). Systems their management structures and work ment team and business areas by provi- have been established to ensure that sug- processes, within frameworks and guideli- ding an independent, unbiased assess- gestions and proposed changes are recor- nes documented in the parent company’s ment of the Group’s risk management Instructions, frameworks, Boards of subsidiaries ded and discussed. This provides a basis SLIK system. procedures. The internal audit service’s guidelines and business plans for continuously developing and improving mandate and guidelines are approved by the company’s established practices. The Group has established a reporting the Board, which also reviews the internal Authorisations, target-based contracts format for internal controls that will help audit service’s annual report and its audit Management and development plans SLIK describes the Group’s corporate to clarify what kinds of controls companies plans. governance model and the internal are expected to implement. All subsidia- frameworks and guidelines employees ries must use this reporting format to The external auditor is chosen by the AGM, must adhere to in their day-to-day work. present an annual internal control report and is responsible for the financial audit Through SLIK, the full range of the Group’s to their board. of the parent company, Group and subsi- governance documents – from steering diaries. Agder Energi has a Group-wide
AGDER ENERGI ANNUAL REPORT 2014 18 AGDER ENERGI ANNUAL REPORT 2014 19 CORPORATE SOCIAL RESPONSIBILITY
agreement with Ernst & Young, which must and there are formal procedures in place marily HSE-related concerns), the Group has Renewable energy is part of the solution Agder Energi adopted a new CSR strategy fundamental principles relating to human be used by all subsidiaries for the statu- for dealing with whistleblower reports. established the “RUH” system for reporting to the global crisis arising from climate that incorporates environmental policy rights, labour, the environment and anti- tory audit. Companies in the Group’s seed Such reports are treated in strict confi- unwanted incidents. This system is used to change, and electricity plays a key role in and replaces the environmental strategy corruption. Agder Energi undertakes to and venture capital portfolios can have a dence unless criminal conduct is involved. report and record potential dangers, unwan- society. Consequently, the Group’s core for 2011-2014. Agder Energi is one of always do its utmost to operate in accor- different auditor. Agder Energi has established procedures ted incidents and injuries. The reports are business is inherently sustainable. Norway’s largest producers of renewable dance with these principles. that safeguard the rights of whistleblowers. analysed with a view to limiting any conse- energy, and its CSR activities are designed The Group has several channels for whist- quences, as well as to uncover causes and Nevertheless, we realise the importance to ensure that its operations are run in a Work in these areas is nevertheless a con- leblowing, including one independent one, For issues of a more operational nature (pri- implement corrective measures. of how we conduct our core business at sustainable and ethical way. tinuous process. We regularly review the Agder Energi. The business plans and relevant governing documents, as well as day-to-day operations of the Group and The conduct of the Group’s representati- their implementation. The aim is to ensure RISK MANAGEMENT its subsidiaries are guided by the Group’s ves is governed by the ethical guidelines, that we fulfil our CSR obligations in the strategy. This document makes it clear which also describe the ethical standards best possible way. Identifying and managing risks is one of Capital allocation and financing through procedures governing activities at that value must be created within an ethi- expected of its business partners. By the keys to adding value, and it forms an The energy industry is currently going operating units, and through contingency cal framework, and that value should also permeating all activities at Agder Energi, More information about the Group’s integrated part of Agder Energi’s corpora- through a period of heavy investment, plans. Agder Energi participates in the be added for society wherever possible. these guidelines will help to keep the CSR activities can be found in the 2014 te governance model. The Group is expos- both in generating capacity and grid in- organisation “Kraftforsyningens bered- Group competitive and to safeguard its sustainability report. ed to risks in a variety of areas throughout frastructure, which increases the risk of skapsorganisasjon” (KBO) as a power Group guidelines on HSE, CSR, HR, risk reputation. the value chain. The most important risks sub-optimal investment decisions. A joint generating company, district heating management and purchasing set out are related to market price movements, Group-wide model for the corporate go- company and grid operator. This requires specific aspects of how the Group should Agder Energi is a member of the UN capital allocation and financing, operatio- vernance of projects is designed to ensure it to have appropriate contingency plans meet its responsibilities. In spring 2014 Global Compact, which is based on ten nal issues and the regulatory environment. that decisions are taken at the right mo- and preventive measures in place. For the ment and based on reliable information, purpose of risk management, Agder Energi Market risk and that projects are managed efficiently has chosen to establish contingency Agder Energi is exposed to significant and in accordance with best practice. The plans, training exercises and preventive market risk through the generation and Group’s central project management, fi- measures even at companies not covered trading of electricity, with its revenues nance and risk management teams help by the KBO requirements. from electricity sales being exposed to to ensure that investment decisions are electricity price risk and currency risk. based on detailed, quality-assured back- Regulatory environment ground information, and act as advisory Changes in the regulatory environ- Hedging strategies for the power gene- bodies for decision-makers. That back- ment and political decisions affect the ration portfolio are subject to limits on ground information is entered in a model company’s room for manoeuvre and how much power can be sold through fu- for long-term capital allocation, which is constitute a significant element of the tures contracts and close monitoring of designed to ensure optimal use of capital Group’s risk exposure. Agder Energi works downside risks. Agder Energi has built up at the Group. systematically to understand how the a strong team specialising in energy ma- regulatory environment is changing and to nagement, analysis and modelling. Subject Agder Energi has a clearly stated goal for exploit any available room for manoeuvre. to the above constraints, the amount of its shadow rating, both to ensure that the Reports from the Early Warning system electricity sold through futures contracts company is managed well and to provide describe external developments and is continuously adjusted, bearing in mind access to credit markets. uncertainties, including their potential im- the company’s price expectations and pacts on the Group, and help to determine generating capacity. The sale of currency Operational risk the Group’s stance on issues and proces- futures also takes into account electricity There are operational risks associated ses relating to the regulatory environ- price hedging and the total risk associated with all of the processes in the value chain. ment. These stances underpin Agder with the generation portfolio. The most important ones are the risk of Energi’s messages in consultation proces- injuries to the Group’s employees, damage ses, and provide a guide for any internal The retail business is considered a margin to power plants, distribution networks and adjustments that need to be carried out by business, and financial instruments are other assets, negative impacts on the en- Agder Energi. The Group believes strongly used to minimise the electricity price risk vironment and climate, negative impacts in open dialogue with all relevant decision- and currency risk. on the Group’s reputation and the risk of makers and in maintaining good relation failures in administrative and management ships with all stakeholders. processes. Operational risk is managed
AGDER ENERGI ANNUAL REPORT 2014 20 AGDER ENERGI ANNUAL REPORT 2014 21 Torbjørnsbu substation in Arendal is very important to the town’s electricity supply.
AGDER ENERGI ANNUAL REPORT 2014 22 AGDER ENERGI ANNUALANNUAL REPORTREPORT 20142014 23 DIRECTORS’ REPORT
Agder Energi manages renewable energy sources and converts them into electricity. exchange loss, compared with a NOK 52 Capital structure and cash flow lion. This means that 69% (63%) of the The Group’s activities comprise the generation, distribution and sale of energy, as well million gain in 2013. The impairment loss on Agder Energi’s assets had a book value of net investment for the year was financed financial assets was NOK 2 million, compa- NOK 16,418 million at the close of 2014, from cash flow from operating activities, as providing energy-related services. Our vision is to be one of the leading companies red with NOK 27 million in 2013. compared with NOK 16,091 in 2013. The while the remaining 31% (37%) was debt- in the Norwegian renewable energy sector. Most of Agder Energi’s business is done increase was due to high investments in financed. Large fluctuations in interest rate and the Hydroelectric Power and Network in southern Norway, and the company has its head office in Kristiansand. currency markets have had a significant business areas. The equity ratio was Proposed dividends impact on financial items. The fall in in- 23% (26%). At the end of the year, the The dividend for the year has been set The Group’s profit for the year was NOK in 2013. Agder Energi’s hydropower terest rates led to an unrealised loss of Group had NOK 8,299 (7,668) million of based on the Group’s profit under NGAAP 475 million in 2014 (controlling interest’s stations generated 9,060 GWh of clean NOK 161 million on interest rate contracts, interest-bearing liabilities. Falling interest (Norwegian generally accepted accounting share), compared with NOK 834 million energy in 2014 (2013: 7,738 GWh). as opposed to a NOK 35 million gain in rates have reduced the cost of borrowing, principles). The controlling interest’s NOK 2013. Change in unrealised gains/losses and the average interest rate on Agder 834 (845) million share of NGAAP profit on currency forward contracts contribu- Energi’s debt portfolio was 3.6% in 2014, reflects the true underlying performance KEY EVENTS OF 2014 ted NOK -178 million, compared with NOK down from 4.0% in 2013. The Group had of the Group better than the IFRS figure, -438 million in 2013. In addition there was NOK 1,416 (1,412) million of unrestricted as it is less affected by unrealised gains In April, an agreement was reached to to require an investment of around NOK 7 by Tord Lien, the Minister of Petroleum a NOK 110 million unrealised loss on Euro- liquid assets and undrawn credit facilities. and losses. Moreover, the NGAAP profit sell Otera Elektro to Bravida, and the billion. Preparations have been made for and Energy. The project, which cost just denominated loans. In 2013 hedge accoun- more closely matches changes in the transaction was completed in June. The Fosen Vind to raise external equity capital over NOK 900 million, will add 175 GWh of ting was used for the Euro-denominated Cash flow from operations was strong at Group’s distributable reserves. The Board company had around 340 employees, and ahead of deciding whether to go ahead with annual hydropower generation. The project loans, so they had no impact on profit or NOK 1,512 (1,486) million. Viewed in iso- of Director proposes that NOK 700 million its turnover in 2013 was NOK 500 million. the investment. The final investment deci- is owned by Otra Kraft and Otteraaens loss in 2013. lation, an increase in underlying EBITDA be paid out in dividends, which represents The reason for the disposal was to allow sion will be made in June 2015. Brugseierforening, and Agder Energi’s share would point to an improvement in cash 84% of the Group’s NGAAP profit. The Otera to concentrate on developing its core of this additional generation is 120 GWh. The Group’s pre-tax profit amounted to flow. However, this was partially offset by profit for the year of the parent company business. In August, Agder Energi decided to build NOK 998 (1,726) million, and its tax expen- an increase in tax paid. Agder Energi AS under NGAAP was NOK two new dams at Skjerkevatn and Nåvatn The Norwegian power grid will be undergo se was NOK 473 (845) million. In terms of 888 (793) million. The Board proposes In May and June, Agder Energi signed in Åseral Municipality. The two new dams significant upgrades and modernisation tax, the biggest reduction was in income Agder Energi is in the midst of a period that Agder Energi AS’s profit for the year contracts to supply Hydro Energi with a will replace five dams in the area, which the over the coming years, and an important tax, which fell from NOK 475 million in of heavy investment, and net investment be appropriated as follows: total of 15 TWh of electricity. The contract Norwegian Water Resources and Energy part of that is NVE’s requirement that smart 2013 to NOK 178 million in 2014. This was came to NOK 1,156 (1,355) million. This involves 1.5 TWh being supplied annually Directorate (NVE) had ordered Agder Energi meters be introduced. In December, Agder due to both a lower pre-tax profit and the included NOK 1,136 (1,299) million of in- (Amounts in NOK millions) over the period 2021-2030. to upgrade. The new dams will increase the Energi took the decision to go ahead with recognition of NOK 80 million in deferred vestment in property, plant and equipment Allocated for dividends 700 Group’s electricity generation by increasing its smart meter project, which involves tax assets that were not previously inclu- and intangible assets. Around 90% of the Transferred to other reserves 188 During the summer, the wind power projects the reservoir capacity and head. Site work replacing the meters of all electricity custo- ded on the statement of financial position. investments in property, plant and equip- Total allocations 888 at Storheia, Kvenndalsfjellet and Roan were started in September, and the estimated mers in the Agder region. In total, around The expensed resource rent tax fell from ment related to the Network and Hydro- combined into the company Fosen Vind, in cost of the project is over NOK 600 million. 190,000 meters will need to be replaced by NOK 370 million in 2013 to NOK 295 mil- electric Power business areas. Going concern assumption which Agder Energi has a 20.9% ownership 2019. We estimate that just over NOK 900 lion in 2014. In accordance with the Norwegian Accoun- interest. The rated capacity of the three pro- The Skarg hydropower station (Brokke million will need to be invested to satisfy NOK 713 (626) million in dividends were ting Act, the Board of Directors confirms jects is over 600 MW, and they are expected Nord/Sør) was officially opened in October regulatory requirements. Agder Energi’s net income was NOK 475 paid out to controlling and non-controlling that the going concern assumption is jus- million (controlling interest’s share), com- interests. Net cash flow less dividends tified, and that the annual financial state- pared with NOK 834 million in 2013. therefore came to NOK 799 (860) mil- ments have been prepared on that basis. FINANCIAL PERFORMANCE Agder Energi’s operating revenues came to 2013. Operating profit was also affected by Several companies in the Marketing and 2014 PERFORMANCE BY BUSINESS AREA NOK 8,267 million in 2014, down from NOK a NOK 56 million increase in provisions for Business Development business area also 9,391 million in 2013. The biggest decline the compensation paid to landowners for made a positive contribution. The grid ope- The accounts for the business areas have Group generated 9,060 GWh (7,738 GWh) (29.1 øre/kWh), down 22% from 2013. occurred at the retail electricity provider the right to use waterfalls and land. This rating company’s profit fell, after a strong been prepared under NGAAP. of energy in 2014, the third highest volume Concession power and electricity supplied LOS, which saw turnover fall as a result non-cash charge was the result of a reduc- performance in 2013. since Agder Energi was established. This under various long-standing contracts of lower prices and slightly lower volumes. tion in the discount rate. In addition, Agder The Hydroelectric Power and Energy figure includes both power generated by with industrial customers are sold at Energi recognised a NOK 48 million gain Net financial expenses came to NOK 717 Management business areas wholly-owned power stations and Agder prices far below current spot prices. Operating profit was NOK 1,715 (2,354) arising from life expectancy adjustments million, compared with NOK 628 million in The Hydroelectric Power and Energy Energi’s share of power generation at Nevertheless, gains on physical and cash- million, down NOK 639 million from 2013. to pensions. This was also a non-cash item. 2013. The interest expense was virtually Management business areas are respon- part-owned ones. Average annual power settled contracts allowed Agder Energi The main reason that profit fell was that The company’s underlying performance was unchanged at NOK 293 (299) million, with sible for developing, operating and main- generation is 7,900 GWh. to achieve an average price of 28.8 øre/ the change in unrealised gains/losses on somewhat better than in 2013, thanks to the increase in interest-bearing debt being taining the Group’s hydroelectric power kWh (29.0 øre/kWh) on the power that it electricity contracts was NOK -156 million an improvement in the Hydroelectric Power cancelled out by lower interest rates. Agder stations, and for optimising revenues from The average spot price in Agder Energi’s generated in 2014. in 2014, compared with NOK 552 million in and Energy Management business areas. Energi realised a NOK 3 million foreign the power generated by the company. The pricing region (NO2) was 22.8 øre/kWh
AGDER ENERGI ANNUAL REPORT 2014 24 AGDER ENERGI ANNUAL REPORT 2014 25 The turnover of these two business areas in the income cap. The income cap for any course of the year. The 12% fall in volumes We work hard to keep and develop our best of 42 (112) days. The accident figures are at the company attended a one-day HSE was NOK 2,815 (2,596) million in 2014. given year depends on the company’s own was mainly due to higher temperatures. employees. This is done by offering compe- equivalent to a lost time injury frequency course. Operating profit was NOK 1,666 million, expenses and on overall expenses in the titive compensation packages, implementing (number of LTIs per million work hours) of compared with NOK 1,445 million in 2013. industry two years ago. In 2013 the in- Otera is a contractor that provides services a life phase-conscious HR policy and provi- 3.6 (3.9), a total injury frequency (number of Diversity and equal opportunity The increase was due to NOK 531 (72) mil- come cap was exceptionally high due to related to high-voltage and low-voltage po- ding good training, as well as by promoting injuries, whether or not they resulted in lost Our ethical guidelines set out how the Group lion of realised gains on electricity price extraordinary expenses in 2011. The 2014 wer supply, electricity for road and rail, as a results-oriented culture, HSE and good time, per million work hours) of 8.6 (11.2) and shall be governed and managed, and how hedges. This was partially offset by lower income cap was low, due to lower expen- well as mobile phone and radio networks. management. an injury severity rate (number of days lost our employees and business partners are spot prices, which meant that the spot ses across the industry as a whole in 2012 The turnover of its continuing operations per million work hours) of 19 (43.3). These expected to conduct themselves. The gui- value of electricity generated fell by 9% than in 2011. The fact that interest rates was NOK 899 (848) million in 2014, while it Health and safety are record low figures for accidents. delines also incorporate principles relating to NOK 2,102 (2,317) million, in spite of have fallen also has a negative impact on made an operating profit of NOK 10 (5) mil- In 2014, the Group’s sickness absence rate to equality and diversity. We support the higher volumes. the income cap. Moreover, powerful winds lion. At the end of 2014, the order backlog was 3.6%, compared with 3.6% in 2013. Of In 2014 we once again placed a strong em- principles set out in the UN’s Universal and heavy precipitation at the start of the for delivery in 2015 was NOK 625 million. that, 1.4% (1.7%) was short-term absence phasis on HSE work, including monitoring. Declaration of Human Rights and the ILO A NOK 47 million foreign exchange loss year, as well as very many lightning strikes In the second quarter Otera Elektro was and 2.2% (1.9%) was long-term absence The Board wants to underline the impor- Convention. Agder Energi does not accept was realised in 2014, compared with a in the summer, resulted in higher than nor- sold to Bravida. The company’s turnover in (more than 16 days). This is the same as tance of continuing this work, so that we any form of discrimination. This means that NOK 75 million gain in 2013. Pre-tax profit mal costs for fault resolution and energy 2013 was around NOK 500 million, but for last year, which was the lowest sickness ab- learn from near misses and thus minimise people shall not be treated differently, ex- amounted to NOK 1,542 million, compa- not supplied (KILE). The KILE cost was the past couple of years its financial results sence figure recorded since Agder Energi the number of accidents and injuries. Our cluded or shown preference based on their red with NOK 1,452 million in 2013. The NOK 50 million, roughly unchanged from have been weak. Otera Elektro is presen- was established in 2000. The Group aims to goal is for all unwanted incidents to be re- race, gender, age, any disability, sexual tax expense was NOK 717 (758) million, 2013. Over the past 10 years, the average ted under discontinued operations, and the have a sickness absence rate below 3.5%, ported, so that we can discover faults and orientation, religion, political opinions or resulting in net income of NOK 824 (694) KILE cost has been NOK 38 million. company’s turnover and financial results are and we have been working hard to improve prevent serious incidents from happening national or ethnic origin, and that no other million. The fall in the tax expense was not included in the figures quoted above. the way in which we deal with absences. The in the future. While we managed to reduce form of discrimination shall be tolerated. related to resource rent tax. Lower spot NOK 366 (429) million was invested in companies in the Group have signed up to the number of accidents, unwanted incident prices for electricity generated resulted in 2014, of which NOK 229 (216) million Agder Energi Varme’s turnover in 2014 was the Norwegian government’s inclusive wor- reporting moved in the wrong direction. We Women make up 20% (13%) of the Group’s a reduction in the resource rent tax paya- related to investments in new projects. NOK 83 (90) million, while its operating king life scheme for the period 2014-2018. must reverse this trend in 2015. employees, and the senior management ble. In addition, there was a lower expense profit was NOK 7 (14) million. The energy team has one woman and six men. Women related to deferred resource rent tax. In 2014, the transmission tariff for the it supplied fell by 18 GWh to 118 GWh (136 During the year, 19 (29) occupational ac- Success in our HSE work is dependent on occupy 41% (33%) of the seats on the local distribution network was reduced GWh). Lower volumes were due to the mild cidents resulting in injury were recorded. managers having the right expertise and Board. NOK 538 (777) million was invested in by approximately 1%. weather in 2014, although this was partly Of these, 8 (10) resulted in total lost time attitudes. During the autumn, all managers 2014, of which NOK 345 (535) million re- offset by growth in the company’s custo- lated to investments in new projects. Most Marketing and Business Development mer base. In 2014, the company’s electricity of the new investment related to Brokke business area hedges made a larger positive contribution THE ENVIRONMENT Nord/Sør, Skarg power station and Iveland This business area comprises the compa- than the previous year. Investment in 2014 2 power station. The former was officially nies LOS, Agder Energi Varme and Otera. amounted to NOK 27 (52) million. Looking The Group’s businesses in the hydropo- TWh of clean, renewable energy each year. Environmental goals must be based on a opened in October, while the test running It also includes the Group’s venture capi- forward, investment will remain at a similar wer and grid operation sectors are run cost-benefit analysis. Agder Energi has of Iveland 2 should start in the second tal investments, as well as strategic ow- level to 2014. through wholly-owned and part-owned Damming river systems can affect the responded to the public consultation, to- quarter of 2016. nership interests in the wind power and subsidiaries. Those companies operate ability of fish to live and reproduce. In or- gether with the two water management as- small hydro sectors. The business area’s The Group’s venture capital investments in accordance with government licences der to mitigate this, we have implemented sociations in southern Norway, Otteraaens The Network business area turnover was NOK 4,796 (5,450) million in are managed through the company Agder and rules based on current legislation and various statutory and voluntary measures brugseierforening and Arendals Vasdrags The Network business area is responsible 2014, while its operating profit was NOK Energi Venture. In 2014, the Group did not court decisions. in several river systems. Brugseierforening. The recommendations for developing, operating and maintaining 127 (116) million. sell any significant investments, but it did put in the regional water management plan are the transmission and distribution grid in additional resources into past investments The Group reports in detail on matters There is a lot of bulbous rush in the rivers non-binding suggestions to the relevant na- Aust-Agder and Vest-Agder. Its turnover The electricity supplier LOS achieved and invest in new projects. The venture relating to the environment in a separate in the Agder area. The reasons for this are tional authorities, which are the Norwegian in 2014 was NOK 1,096 (1,423) million, on turnover of NOK 3,155 million in 2014, capital portfolio’s two biggest investments, sustainability report, which forms part of complex. The company is participating in a Water Resources and Energy Directorate which it made an operating profit of NOK compared with NOK 3,930 million in 2013. NEG and NetNordic, contributed a combi- the Group’s corporate social responsibility joint regional project, which is supported (NVE) and the Ministry of Petroleum and 141 million, compared with NOK 479 million Operating profit was NOK 110 (98) million, ned operating profit before depreciation and reporting. by the County Governor. Energy. By actively engaging in dialogue the previous year. Lower operating profit which was an all-time record. In total, LOS amortisation (EBITDA) of NOK 46 (44) mil- with the local authorities and other stake- was expected, mainly due to a reduction supplied 8,670 GWh (9,849 GWh) over the lion, on turnover of NOK 490 (443) million. Hydroelectric Power The water management authority in holders, Agder Energi will promote the im- Dams and power stations change the Agder has established seven sub-districts, plementation of appropriate environmental natural environment, but the Group’s and has carried out two rounds of public measures that protect the value to society EMPLOYEES activities do not have a bigger impact on consultation on its draft regional water ma- of its power stations. nature or society than is usual for this nagement plan for the period 2016-2021. Staff and organisational structure es, representing 1,220 (1,526) full-time equi- parent company had 161 (175) permanent kind of business. Furthermore, we make One of the important aims of the plan is to In 2014 there were two incidents that led to At the close of the year, the Group had 1,245 valents. The sale of Otera Elektro was the employees at the end of the year. a significant positive contribution to the describe all water resources and establish sudden changes in water levels. The fall in (1,551) permanent and temporary employe- reason for the reduction in headcount. The environment by generating on average 7.9 specific environmental goals for each one. the water level by Bjelland power station led
AGDER ENERGI ANNUAL REPORT 2014 26 AGDER ENERGI ANNUAL REPORT 2014 27 to juvenile fish being stranded in the River which Agder Energi is a member of, was reasons, components are used that may futures also add to the liquidity risk. Capital The most important operational risks are has chosen to establish contingency plans, Mandalselva at the end of June. NVE conclu- fined NOK 400,000 for breaking the terms cause pollution in the event of an accident. markets consider Agder Energi to be a low- the risk of injuries to the Group’s employ- training exercises and preventive measures ded that Agder Energi had broken the Water of its licence for the River Otra. risk borrower. The Group mainly finances ees, damage to power plants, distribution even at companies not covered by the KBO Resources Act, and imposed a fine of NOK In 2014 there were six minor incidents its operations through the Norwegian com- networks and other assets, negative impacts requirements. 700,000. Around the same time, the water The control centre recorded one breach of involving oil leaks from distribution mercial paper and bond markets, but it also on the environment and climate, negative level of the Otra suddenly fell downstream the rules governing the operation of dams substations. uses the banking market to some extent. impacts on the Group’s reputation and the Changes in the regulatory framework and of the Vigeland power station. This incident, in 2014. The breach related to a private The Group has credit facilities with banks to risk of failures in administrative and ma- political decisions both affect the company’s which was related to regulation of the water power station on the Uldal river system. District heating backstop its commercial paper programme. nagement processes. Operational risk is room for manoeuvre and constitute a signi- flow in the river system in conjunction with In its efforts to become climate-neutral, Exposure to liquidity risk is managed by the managed through procedures governing ficant part of its risk exposure, so the Group testing the new power station Skarg, once Network Agder Energi’s district heating business finance and risk management department. activities at operating units, and through works systematically to understand how the again led to juvenile fish being stranded. The In principle our operation of the power grid plans to phase out the use of fossil fuels contingency plans. Agder Energi participa- regulatory environment is changing and to association Otteraaens Brugseierforening, is non-polluting. However, for operational to cover peak loads in 2015. We take on credit risk by selling electricity, tes in the organisation “Kraftforsyningens exploit any available leeway. The Group other goods and services, as well as by tra- beredskapsorganisasjon” (KBO) as a po- believes strongly in open dialogue with all ding financial instruments. The Group has wer generating company, district heating relevant decision-makers and in maintaining RISK MANAGEMENT AND INTERNAL CONTROLS good procedures for chasing up unpaid company and grid operator. This requires good relationships with all stakeholders. receivables, and the limits on exposure to it to have appropriate contingency plans We use a balanced scorecard to manage which describes the Group’s corporate go- The retail business is considered a margin individual parties are monitored and repor- and preventive measures in place. For the the implementation of our strategy and to vernance model. SLIK also sets out which business, and financial instruments are used ted regularly. purpose of risk management, Agder Energi measure the results achieved. This system rules and guidelines employees need to to minimise the electricity price risk and cur- involves specifying key goals, strategies and follow in their day-to-day work, including rency risk. parameters on scorecards, which are speci- the company’s values and its guidelines on SHAREHOLDER INFORMATION fied for the Group as a whole, for the busi- ethics and corporate social responsibility. We are exposed to interest rate risk through ness areas and for each individual subsidiary. changes in the interest rates on the Group’s The company’s share capital consists of being allocated indefinite waterfall licen- existing shareholders in the event of Risk management and internal controls at interest-bearing liabilities, as well as through 2,700,000 shares with a face value of ces under the relevant current legislation. shares in the company being sold. In Integrated risk management draws on the Agder Energi are described in greater detail the impact of interest rates on the Network NOK 670. Of these, 1,800,000 are class Class B shares are freely negotiable. addition, the municipal shareholders have Board’s general description of its corporate in this report’s section on “Corporate Gover- business area’s income cap and the deduc- A shares and 900,000 are class B sha- agreed to coordinate their votes at the governance model, as well as the adopted nance Structure”. tible interest rate used to calculate the res. Class A shares can only be owned by A shareholders’ agreement regulates AGM. limits on risk exposure and company guid- resource rent tax payable by the power shareholders who meet the conditions for matters such as pre-emptive rights for elines. Business plans for all of the Group’s Risks generation business. The Group’s shared business areas have been drawn up based The Group is exposed to risks in a variety of finance department coordinates and mana- on the Group’s strategy and limits on risk areas throughout the value chain. The most ges financial risk. This is done using fixed- CORPORATE GOVERNANCE exposure. Areas that involve trading in fi- important areas are related to market price interest loans and with the help of financial nancial markets have their own risk manage- movements, capital allocation and financing, instruments. Matters relating to corporate governance are described in a separate section of this annual report. ment strategies and limits on risk exposure. operational issues and the regulatory envi- ronment. The Norwegian power sector is currently in- Our risk management activities form an in- vesting heavily, both in power stations and RESEARCH AND DEVELOPMENT tegrated part of the business operations at We are exposed to several types of market the grid. Greater uncertainty about future individual companies within the Group, and risk. Generating and selling electricity is developments in markets, technology and The Group’s investment in R&D and Agder Energi participates in a number relation to the environment and society, the companies are responsible for mapping associated with the risk of fluctuations in regulatory frameworks increases the com- innovation helps it to build up relevant of joint R&D projects. One example is as well as the role of dispatchable hydro- and managing their own risks. Overall ex- volumes and prices, which are directly af- plexity of investment decisions. Information expertise, which in turn lays the founda- CEDREN (Centre for Environmental Design power in future electric power systems. posure to risk is also monitored at the Group fected by variations in precipitation levels used to reach decisions about individual pro- tions for long-term, profitable growth and of Renewable Energy), which studies the level, and is included in reports to the senior and temperatures, and indirectly influenced jects is entered in a model for long-term development. role of hydropower and wind power in management team and Board of Directors. by fluctuations in the prices of gas, coal, oil capital allocation, which is designed to
and CO2 quotas. Electricity trading, which ensure optimal use of capital at the Group. The Group’s risk management systems co- is done in euros, also introduces currency Agder Energi aims to have a shadow rating EVENTS AFTER THE END OF THE REPORTING PERIOD ver all areas that could affect its ability to risk. Market risks are managed with the help of BBB+, both to ensure that the company meet its goals. This includes setting and mo- of various physical and cash-settled instru- is managed well and to provide access to There have been no incidents in 2015 that have a significant impact on the financial statements for 2014. nitoring limits on the Group’s venture capital ments, which are used to secure stable re- credit markets. investments, as well as analysing potential venues from energy sales in NOK. The use of impacts on financial results. futures is designed to stabilise and optimise We are exposed to liquidity risk arising from OUTLOOK the Group’s revenues. Limits on trading elec- the fact that liabilities do not mature at the Agder Energi’s corporate governance do- tricity and currency forward contracts are same time as when cash flows are genera- Power generation projects that will gradually increase its po- electricity certificates. In terms of hydro- cument SLIK is an internal control system, based on the desired hedge ratio. ted. Variations in margin requirements on Agder Energi is working on several major wer generating capacity, and entitle it to electric power, we are investing in a port-
AGDER ENERGI ANNUAL REPORT 2014 28 AGDER ENERGI ANNUAL REPORT 2014 29 folio of new projects with an annual gene- process of finalising a water management to Agder Energi’s size and the measures rating capacity of 400-500 GWh, including plan for Agder. The plan’s environmental go- adopted at Agder Energi Nett, we are well projects already started. Agder Energi also als may affect our power stations. We are prepared for the expected changes in the holds ownership interests in several major working proactively to ensure that our views industry. wind power projects with final consent. are taken into account when environmental goals are set and action plans are drafted. Marketing and Business Development Climate change, technological develop- Our power stations are not only company The prospects of the companies in our ments, a growing focus on grid reliability assets, they are also assets to society, as Marketing and Business Development area and the need for new sources of economic well as playing an important role in flood will depend on changes to the regulatory growth have helped to change the face of prevention and regional grid reliability. framework, greater customer-orientation European energy markets and energy policy. and technological developments. Subsidies and technological progress mean Forward prices suggest that electricity that a large amount of non-dispatchable re- prices will remain relatively low over the In 2014 the retail electricity provider LOS newable energy is being developed. There is coming years. The contribution from the established a clearer distinction between growing uncertainty about future prices of Group’s hedging activities, which was sig- its services for domestic and business electricity and electricity certificates. This nificant in 2014, is likely to fall in 2015, customers. Business customers are served will affect how Agder Energi prioritises its so we expect to achieve lower prices by LOS Energy, whose business concept future investments. going forwards. At the end of the year, is based on becoming its customers’ pre- the Group’s hydrological resources (water ferred energy partner. Political decisions Greater market integration and measures and snow) were significantly above nor- have been taken at the national level that to mitigate climate change will increase the mal. Assuming normal precipitation levels, affect the regulatory framework for our need for flexible electricity supplies in Euro- we expect hydroelectric power generation retail business. These include the intro- pe. There is an EU-wide target for renewable to remain high in 2015. duction of smart meters and the estab- sources to meet 27 per cent of total energy lishment of a national data hub. consumption in 2030. Renewable energy will Network consequently play a growing role in the Eu- The financial results of our grid operating We expect the market for our electrical ropean energy transition between now and company should improve in 2015 over contracting business Otera to grow over 2050. For Norwegian renewable energy, this 2014, thanks to a higher income cap. We the coming years, particularly in relation creates both challenges and opportunities. expect the income cap and profitability of to power grids. Compulsory competitive If good grid interconnectors are available, our grid operating company to continue tendering will create new opportunities we can benefit from this trend. rising over the coming years. for contractors like Otera that already operate as independent companies. We Vest-Agder County Council, which is the In 2014 the Reiten committee proposed expect profitability to improve in 2015. regional water authority in Agder, is in the a new grid structure for Norway. Thanks
Kristiansand, 26 March 2015 Board of Directors of Agder Energi AS Technicians at Otera working on power lines.
Lars Erik Torjussen Katja Lehland Bente Z. Rist Leif Atle Beisland Steinar Bysveen Chair Deputy Chair
Marit Grimsbo Steinar Asbjørnsen Siw Linnea Poulsson Johan Ekeland Øyvind Østensen
Tore Kvarsnes Gro Granås Tom Nysted CEO
AGDER ENERGI ANNUAL REPORT 2014 30 AGDER ENERGI ANNUAL REPORT 20132014 31 BOARD OF DIRECTORS Declaration pursuant to Section 5-5 of the Securities Trading Act
We confirm that, to the best of our know- ledge, the annual financial statements have been prepared in accordance with current accounting standards, and that the information contained therein pro- vides a true and fair view of the assets, liabilities, financial position and overall results of the parent company and of the Group. We also confirm that the annual report gives a true and fair view of the performance, results and financial positi- Lars Erik Torjussen Katja Lehland Bente Z. Rist Leif Atle Beisland on of the parent company and the Group, as well as describing the most important areas of risk and uncertainty facing the Group’s businesses.
Kristiansand, 26 March 2015 Board of Directors of Agder Energi AS
Steinar Bysveen Marit Grimsbo Steinar Asbjørnsen Siw Linnea Poulsson Lars Erik Torjussen Chair
Katja Lehland Bente Z. Rist Leif Atle Beisland Steinar Bysveen Marit Grimsbo Deputy Chair
Johan Ekeland Øyvind Østensen Tore Kvarsnes Gro Granås Steinar Asbjørnsen Siw Linnea Poulsson Johan Ekeland Øyvind Østensen Tore Kvarsnes
Gro Granås Tom Nysted CEO
AGDER ENERGI ANNUAL REPORT 2014 32 AGDER ENERGI ANNUAL REPORT 2014 33 THE AGDER ENERGI GROUP FINANCIAL STATEMENTS CONTENT Click on the text to go to the page of your choice
Income statement 36 Statement of comprehensive income 37 Statement of financial position 38 Statement of cash flows 39 Statement of changes in equity 40 Accounting principles 42
NOTES Note 1 Segment information 50 Note 2 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 62 Note 16 Associates and joint arrangements 65 Note 17 Non-current Financial Assets 67 Note 18 Receivables 68 Note 19 Cash and cash equivalents 68 Note 20 Share capital and shareholder information 68 Note 21 Provisions 70 Note 22 Pensions 70 Note 23 Interest-bearing liabilities 74 Note 24 Other non-interest-bearing current liabilities 74 Note 25 Financial instruments 74 Note 26 Derivatives 75 Note 27 Fair value of financial instruments 77 Note 28 Financial risk management 78 Note 29 Accounting hedges 82 Note 30 Mortgaged assets, liabilities and guarantees issued 83 Note 31 Contingent liabilities and events after the end of the reporting period 84 Samkom in Vennesla, Note 32 Management compensation, etc. 84 Vest-Agder. Note 33 Related parties 86 Note 34 Acquisitions, disposals and buy-out of non-controlling interests 86 Note 35 Group structure 88
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AGDER ENERGI ANNUAL REPORT 2014 34 AGDER ENERGI ANNUAL REPORT 2014 35 INCOME STATEMENT STATEMENT OF COMPREHENSIVE INCOME
(Amounts in NOK millions) Note 2014 2013 (Amounts in NOK millions) Note 2014 2013
Energy sales 2 5,814 6,278 Net income 492 846 Transmission revenues 3 1,139 1,245 Other operating revenues 4 1,470 1,316 Other comprehensive income and expenses Unrealised gains/losses on energy contracts 6 -156 552 Cash flow hedges 29 -95 -139 Total operating revenues 8,267 9,391 Translation differences 3 10 Tax impact 12 26 38 Energy purchases 2 -3,083 -3,920 Total items that may be reclassified to income statement -66 -91 Transmission expenses -220 -163 Other raw materials and consumables used 4 -815 -734 Remeasurements of pensions 22 -209 216 Employee benefits 7 -810 -827 Tax impact 12 63 -51 Depreciation and impairment losses 13 -588 -502 Total items that will not be reclassified to income statement -146 165 Property taxes and licence fees 8 -209 -204 Other operating expenses 9 -827 -687 Total other comprehensive income and expenses -212 74 Total operating expenses -6,552 -7,037 Total comprehensive income 280 920 Operating profit 1,715 2,354 Of which attributable to non-controlling interests 35 17 15 Share of profit of associates and joint ventures 11 -11 -5 Of which attributable to controlling interest 263 905 Financial income 11 26 78 Unrealised gains/losses on currency and interest rate contracts 11 -449 -403 Financial expenses 11 -283 -298 Net financial income/expenses -717 -628
Profit before tax 998 1,726
Income tax 12 -178 -475 Resource rent tax 12 -295 -370 Tax expense -473 -845
Net income from continuing operations 525 881 Net income from discontinued operations 34 -33 -35 Net income 492 846
Of which attributable to non-controlling interests 35 17 12 Of which attributable to controlling interest 475 834
Earnings per share/Earnings per share, diluted (NOK) 176 309
AGDER ENERGI ANNUAL REPORT 2014 36 AGDER ENERGI ANNUAL REPORT 2014 37 STATEMENT OF FINANCIAL POSITION STATEMENT OF CASH FLOWS
(Amounts in NOK millions) Note 31.12.14 31.12.13 (Amounts in NOK millions) Note 2014 2013
Deferred tax assets 12 415 374 Cash flow from operating activities Intangible assets 14 223 259 Profit before tax from continuing operations 998 1,726 Property, plant and equipment 15 12,534 11,979 Profit before tax from discontinued operations 34 -37 -40 Investments in associates and joint ventures 16 297 182 Depreciation and impairment losses 13 590 529 Other non-current financial assets 17 455 530 Unrealised gains/losses on energy, currency and interest rate contracts 6, 11 604 -149 Total non-current assets 13,924 13,324 Share of profit of associates and joint ventures 11 11 5 Gain on disposals 21 2 Inventories 38 35 Tax paid -755 -654 Receivables 18 1,538 1,677 Change in trade receivables 18 176 105 Derivatives 26 864 1,022 Change in trade payables 24 -122 14 Cash and cash equivalents 19 54 33 Change in net working capital, etc. 26 -52 Total current assets 2,494 2,767 Net cash provided by operating activities 1,512 1,486
TOTAL ASSETS 16,418 16,091 Investing activities Purchase of property, plant, equipment and intangible assets 14, 15 -1,136 -1,299 Paid-in capital 20 1,907 1,907 Purchase of businesses/financial assets -42 -56 Retained earnings 1,770 2,217 Net change in loans -22 -23 Non-controlling interests 83 86 Sale of property, plant, equipment and intangible assets 2 15 Total equity 3,760 4,210 Sale of businesses/financial assets 42 8 Net cash used in investing activities -1,156 -1,355 Deferred tax 12 439 520 Provisions 21 1,475 1,134 Financing activities Interest-bearing non-current liabilities 23 7,115 5,931 New long-term borrowings 2,325 1,933 Total non-current liabilities 9,029 7,585 Repayment of long-term borrowings -1,344 -1,835 Net change in current liabilities -603 341 Interest-bearing current liabilities 23 1,184 1,737 Dividends paid -713 -626 Tax payable 12 498 771 Net cash used in financing activities -335 -187 Derivatives 26 710 464 Other non-interest-bearing current liabilities 24 1,237 1,324 Net change in cash and cash equivalents 21 -56 Total current liabilities 3,629 4,296 Cash and cash equivalents at start of period 33 89 TOTAL EQUITY AND LIABILITIES 16,418 16,091 Cash and cash equivalents at end of period 19 54 33
Kristiansand, 26 March 2015 Board of Directors of Agder Energi AS
Lars Erik Torjussen Katja Lehland Bente Z. Rist Leif Atle Beisland Steinar Bysveen Chair Deputy Chair
Marit Grimsbo Steinar Asbjørnsen Siw Linnea Poulsson Johan Ekeland Øyvind Østensen
Tore Kvarsnes Gro Granås Tom Nysted CEO
AGDER ENERGI ANNUAL REPORT 2014 38 AGDER ENERGI ANNUAL REPORT 2014 39 STATEMENT OF CHANGES IN EQUITY
(Amounts in NOK millions) Paid-in Cash flow Translation Retained Total for Non-controlling Total capital hedges differences earnings controlling interest interests equity
Equity at 01/01/2013 1,907 27 0 1,923 3,857 60 3,917 Net income for the year 0 0 0 834 834 12 846 Other comprehensive income and expenses 0 -101 7 165 71 3 74 Dividends paid 0 0 0 -620 -620 -6 -626 Other equity transactions 0 0 0 -18 -18 17 -1 Equity at 31/12/2013 1,907 -74 7 2,284 4,124 86 4,210
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 equity transactions 0 0 0 -3 -3 -14 -17 Equity at 31/12/2014 1,907 -143 10 1,903 3,677 83 3,760
AGDER ENERGI ANNUAL REPORT 2014 40 AGDER ENERGI ANNUAL REPORT 2014 41 ACCOUNTING PRINCIPLES
General information domiciled in Norway. The address of the Reporting Standards (IFRS) as approved by Revenues expenses as a percentage of total expec- are translated into NOK using the current- Agder Energi’s activities comprise the company’s head office is Kjøita 18, 4630 the EU. The consolidated financial state- Recognition of revenues – general ted project expenses. Accrued revenues rate method. generation, distribution and sale of energy, Kristiansand. ments apply the historical cost principle, Proceeds from the sale of goods and are included on the statement of financial as well as providing energy-related except in the cases of certain financial services are recognised as revenues when position under current receivables, while When preparing the accounts of the indi- services. Most of the Group’s operations Basis of preparation assets and liabilities (including cash-settled the goods or service are delivered. advance payments received are included vidual companies, transactions in curren- are in southern Norway. The parent Agder Energi’s consolidated financial derivatives) that are measured at fair value under current liabilities. cies other than the functional currency company Agder Energi AS is a Norwegian statements have been prepared in accor- through profit or loss. Energy sales of the company are translated into the limited liability company, founded and dance with International Financial Revenues from the sale of electricity are Disposal of property, plant and equipment functional currency using the exchange recognised when the electricity is supplied. When disposing of property, plant and rate on the date of transaction. Foreign Realised gains or losses on physical and equipment, any gain or loss is calculated currency-denominated statement of cash-settled energy contracts are pre- by comparing the sales price with the financial position items are measured sented as energy sales under operating remaining carrying amount of the asset using the exchange rate on the statement SUMMARY OF THE MOST IMPORTANT ACCOUNTING PRINCIPLES revenues. In the case of physical and cash- sold. Any gain or loss is presented under of financial position date. Translation settled energy contracts, changes in fair other operating revenues or other opera- differences are recognised under financial Consolidation principles acquisition date. Bargain purchase gains Joint operations value are presented as operating revenues ting expenses respectively. income/expenses. The consolidated financial statements are based on fair values. These gains are Ownership interests in part-owned power under unrealised gains and losses on ener- present the overall financial performance attributed to any of the company’s assets stations and water management associa- gy contracts. Realised gains or losses on Green power certificates Financial instruments and position of the parent company and its and liabilities with fair values that differ tions are classified as joint operations and trading portfolios are presented net as Green power certificates received as a The Group designates financial instru- subsidiaries when considered as a single from their carrying amounts. A provision are accounted for by including the Group’s energy sales. When a contract is closed result of qualifying electricity generation ments in the following categories: a) entity. Companies in which the Group is made for deferred tax relating to any share of assets, liabilities, revenues and out, the associated unrealised gain or loss are recognised at fair value under energy Financial assets and liabilities at fair holds a controlling interest are consolida- such asset write-ups or write-downs. Any expenses on the relevant lines in the con- is reversed, and the realised gain or loss is sales when the electricity is generated. value through profit or loss; b) Loans ted. A controlling interest normally exists part of the bargain purchase gain that solidated financial statements (proportio- presented under energy sales. Green power certificates held by the elec- and receivables; c) Financial liabilities if Agder Energi holds more than 50% of cannot be attributed to identifiable as- nate consolidation). This applies even if tricity generation business are presented at amortised cost. Designation is based voting rights, either through an owners- sets and liabilities is treated as goodwill. the power station is operated as an inde- Transmission revenues as current assets on the statement of on the purpose of the instrument, and hip interest or through agreements. Sub- No provision is made for deferred tax on pendent enterprise, which sells all of the Grid operation is subject to the regulations financial position, and are measured at instruments are designated when they are sidiaries acquired or established during goodwill. If the value of the assets and lia- electricity that it generates to its owners. of the Norwegian Water Resources and the lower of their value when acquired and acquired. the year are consolidated from the date bilities transferred in conjunction with an Energy Directorate (NVE) on income caps. current fair value less costs to sell. of acquisition or establishment. The non- acquisition exceeds the purchase price, Joint arrangements and associates Each year, NVE specifies an income cap a) Financial assets and liabilities at fair controlling interests’ share of profit or loss the difference is recognised through profit A joint arrangement is a company that for each individual grid operator, which is When the retail business sells electricity, value through profit or loss after tax is specified on a separate line. and loss under other operating revenues. is subject to a contractual arrangement adjusted in the event of changes in the the estimated cost of purchasing power Financial assets and liabilities at fair whereby two or more parties have joint quality of supply, in order to compensate certificates to cover the volume sold is value through profit or loss are financial All of the financial statements of individu- Non-controlling interests in the acquiree control. Special rules on voting rights may customers for energy not supplied. This expensed. A provision for volumes not instruments held for trading purposes. All al companies included in the consolidated are measured either at fair value, or as give owners more or less control than gives the so-called KILE income cap. The covered by purchased power certificates derivatives must be designated as held financial statements have been restated the non-controlling interest’s share of their ownership interests would imply. revenues recognised in the income state- is included on the statement of financial for trading, unless they are part of an to ensure that equivalent statement of the acquiree’s net identifiable assets. The ment represent the volumes delivered du- position under current liabilities measured accounting hedge. For derivatives other financial position items and transactions measurement method should be chosen Associates are companies over which ring the financial period multiplied by the at fair value. Green power certificates than cash flow hedges, unrealised gains are treated consistently throughout the individually for each business combina- the Group wields significant influence. applicable tariff. The difference between purchased are measured at cost. If the and losses are recognised through profit Group. All intra-group transactions, re- tion. Normally this applies to companies in the income cap and the actual tariff re- company has more power certificates than or loss. ceivables, liabilities and unrealised gains which it has a 20-50% ownership interest. venues creates a surplus or shortfall. This it needs to cover the volume of electricity and losses have been eliminated in the For step acquisitions, previously held surplus or shortfall is recognised through sold, the excess is presented as a current Physical contracts for the purchase and consolidated financial statements. assets are measured at fair value at the Joint arrangements and associates are profit or loss as it arises. Details of the asset. Any such excess is measured at sale of energy and CO2 quotas that form date control is obtained. Any gains or accounted for using the equity method. surplus or shortfall are given in Note 3. the lower of cost and fair value less costs part of the trading portfolio are defined Acquisitions losses are recognised through profit or The Group’s proportionate share of the to sell. as financial instruments. Like their cash- Purchase price allocation is performed on loss. profit or loss for the year of these enti- Long-term contracts settled equivalents, they are measured at the date when control was obtained. This ties is recognised under financial income/ Revenues associated with long-term ma- Foreign currency fair value. is when the risks and rewards of owners- Changes in ownership interests in sub- expenses. On the statement of financial nufacturing contracts are recognised in The consolidated financial statements are hip have been transferred, and normally sidiaries position, these investments are classified accordance with the percentage of com- presented in Norwegian kroner (NOK), Physical contracts for the purchase and coincides with the acquisition date. Changes in the parent’s ownership inte- as non-current financial assets, and are pletion method. Under this method, reve- which is also the functional currency of sale of energy and CO2 quotas that have Transaction costs are not included in the rest in a subsidiary that do not result in carried at cost adjusted for the Group’s nues and profit are recognised gradually the parent company and main subsidiari- been entered into for the purpose of purchase price, and are instead expensed loss of control are accounted for as equity share of retained earnings since acquisiti- as the work related to the contract is com- es. Subsidiaries with functional currencies obtaining electricity needed by the Group, as incurred. The cost of shares in subsi- transactions. on, dividends received, impairment losses pleted. The percentage of completion is other than NOK are responsible for less or as a means of selling the electricity diaries is eliminated against equity on the and equity transactions at the companies. normally estimated by looking at incurred than 5% of the Group’s turnover. These it generates, and which do not contain
AGDER ENERGI ANNUAL REPORT 2014 42 AGDER ENERGI ANNUAL REPORT 2014 43 embedded derivatives, are normally re- carried at amortised cost using the effec- Cash flow hedges and equipment. In subsequent periods, sets arising in conjunction with business station’s property, plant and equipment cognised on delivery. Contracts entered tive interest rate method. In so far as possible, Agder Energi uses annual compensation payments, as well combinations. Tax payable is calculated by a standard interest rate set by the into for different purposes are recorded in cash flow hedges to eliminate itsexposure as changes to provisions, are considered on the taxable profit for the year. Deferred Ministry of Finance. In 2014 the standard separate books. Trade and other receivables with an to fluctuations in cash flows. This inclu- other operating expenses, whereas one-off tax liabilities/assets are calculated on interest rate was 1.3%. Resource rent tax insignificant interest component are des fixing interest payments on a small payments are deducted from the provision. the basis of the temporary differences is covered by the so-called “verksamord- Agder Energi has some physical energy recognised at their nominal value less any proportion of the Group’s debt. that exist between accounting and tax ning”, which allows you to offset positive sale contracts that are settled in euros. impairment losses. An impairment loss is Concession power and licence fees values, as well as the tax effect of any and negative resource rent at different The currency portion of these contracts recognised if there is objective evidence The effective part of gains or losses Each year, the Group supplies electricity loss carryforwards. Deferred income tax power stations. This arrangement only is not considered an embedded derivati- that the Group will not receive payment in on hedging instruments is recognised to local municipalities at a price set by liabilities and assets that are expected to applies to negative resource rent tax ari- ve that must be separated from the host accordance with the original conditions. under other comprehensive income and the Norwegian parliament. Revenues from be reversed in the same period are off- sing in or after 2007. Negative resource contract and be accounted for separately expenses in the statement of compre- this “concession power” are recognised as set against each other. An assessment is rent tax that arose before 2007 can only as an independent derivative. Contracts c) Financial liabilities at amortised cost hensive income, whereas the ineffective they are earned, based on the regulated made as to whether it will be possible to be offset at the power station where it of this kind are accounted for in their On initial recognition, financial liabilities part is recognised under financial income/ price. Some agreements on concession make use of the deferred tax assets, and arose. Any negative resource rent can be entirety on delivery. are measured at fair value plus directly at- expenses in the income statement. power are cash-settled, which means that if it is probable that this is the case, they carried forward with interest to be offset tributable transaction costs. Subsequently Any effective gain or loss on a hedging Agder Energi is invoiced for the difference are included on the statement of financial against future positive resource rent. The Presentation of derivatives in the income financial liabilities are carried at amorti- instrument is recycled to profit or loss between the spot price and the regulated position. interest rate applied to carryforwards was statement and statement of financial sed cost using the effective interest rate if the hedged item is recognised in the price. The present value of the future loss 2.4% for 2014. position method. income statement. of revenue due to the difference between Natural resource tax Derivatives are presented on separate the regulated price and spot price is not The natural resource tax payable is not Deferred resource rent tax assets and lines in the statement of financial posi- Hedging Fair value hedges included on the statement of financial po- affected by profit, and is calculated on liabilities tion under assets and liabilities respecti- In order to manage its risk exposures Agder Energi uses fair value hedges to sition, but it is presented in Note 2. the basis of the individual power station’s When calculating the deferred tax lia- vely. Derivatives are presented gross on arising from fluctuations in electricity hedge the currency risk associated with average generation over the past seven bilities and assets to be included on the the statement of financial position, unless prices, exchange rates and interest rates, its interest-bearing liabilities and the Each year, the Group pays licence fees to years. The tax is charged at 1.3 øre/kWh. statement of financial position, tempora- there exists a legal right to offset, and the Group uses euro-denominated loans interest rate risk on fixed-rate loans. the central government and municipalities Natural resource tax can be deducted ry differences and part of the accumula- that right will actually be used when the and derivatives, such as futures contracts for the increase in generating capacity from income tax. ted negative resource rent are taken into contracts are settled. In the latter case, for electricity, currency and CO2 quotas, as The Group’s fair value hedges are achieved by damming and piping water. account. The part of the negative resour- the relevant contracts are presented net well as interest rate swaps. The purpose of derivatives, which are measured at fair Licence fees are expensed as they are Resource rent tax ce rent tax that can be offset against in the statement of financial position. these instruments is to secure cash flows value through profit or loss. The hedged incurred. The capitalised value of future Resource rent tax is calculated by apply- temporary differences is capitalised on from future electricity generation, as well items are loans whose carrying amounts fees is not included on the statement of ing the Norwegian Taxation Act’s special the statement of financial position, as is Electricity contracts traded in markets as to avoid large variations in the inter- fluctuate in parallel with the hedged risks. financial position, but is calculated and rules on the taxation of companies that the part that is likely to be used within a are presented net. In the income state- est expense payable on the Group’s debt These changes in value are also recognised presented in Note 8. generate electricity. The expense in the 10-year time frame. Provisions for defer- ment, gains and losses on the fair value of portfolio. in profit or loss. Changes in the value of income statement consists of resource red resource rent tax are based on the derivatives are shown on separate lines. hedged items and hedges are recognised Tax rent tax payable and changes in deferred nominal tax rate of 31%. Tax-free allowan- Gains and losses on the value of energy Most of the Group’s hedging instruments under financial income/expenses. All of the companies in the Group have resource rent tax liabilities/assets. ces are treated as a permanent difference derivatives are presented under opera- do not meet the documentation requi- to pay ordinary income tax. Agder Energi in the year for which they are calculated, ting revenues, while gains and losses on rements established by the accounting Compensation Vannkraft is also covered by the special Resource rent tax is profit-related, and is and do therefore not affect the calcula- the value of interest rate and currency standards for hedge accounting. These The Group pays compensation to rules on the taxation of companies that payable at a rate of 31% of the net resour- tion of deferred resource rent tax. derivatives are presented under financial contracts are therefore not accounted for landowners for the right to use waterfalls generate electricity. The Group therefore ce rent estimated for each individual po- income/expenses. When they are realised, as hedges, even if they have been ente- and land. Compensation is also paid for any pays income tax, natural resource tax and wer station. The resource rent is estimated Deferred resource rent tax liabilities and the proceeds from the sale of electricity red into as hedges. These kinds of hedges damage to forests, land, etc. The compen- resource rent tax. from the hourly output of the individual assets are presented gross. derivatives are included under energy are treated as financial assets or financial sation is a combination of one-off payments power station, multiplied by the spot price sales, while the proceeds from currency liabilities measured at fair value through and perpetual charges or obligations to Income tax for the corresponding hour. In the case of Classification of current and non- derivatives are presented net under finan- profit or loss. supply electricity free of charge. The pre- Income tax is calculated in accordance concession power and power supplied un- current assets and liabilities cial income/expenses. Regular payments sent value of annual charges and the cost with standard tax rules. The tax expense der long-term contracts with a duration An asset is classified as a current asset if relating to interest rate swaps are presen- Certain interest rate swaps, including of supplying free electricity are presented in the income statement consists of tax of more than seven years, the actual con- it fulfils one of the following criteria: ted as a financial expense. combined currency and interest rate under provisions. If a contract to supply payable and changes in deferred tax tract price is applied. Actual operating ex- a) it is expected to be realised in, or is swaps, do meet the conditions for hedge free electricity includes the option of sett- liabilities/assets. This does not apply to penses, tax-deductible depreciation and held for sale or consumption in, the b) Loans and receivables accounting under IAS 39, and they are lement in cash it is considered a derivative deferred tax liabilities/assets relating to a tax-free allowance are deducted from ordinary business cycle; On initial recognition, loans and receiva- accounted for accordingly. These hedging and is measured at fair value through profit items recognised as other comprehensive the estimated gross rent in order to reach b) it is primarily held for trading; bles are measured at fair value plus relationships are presented in the consoli- or loss. On initial recognition, the cross en- income and expenses in the statement the taxable net resource rent. The tax- c) it is expected to be realised within directly attributable transaction costs. dated financial statements as follows: try of the provision is a hydropower licence, of comprehensive income or directly in free allowance is determined each year twelve months of the end of the repor- Subsequently loans and receivables are which is presented under property, plant equity, or to deferred tax liabilities/as- by multiplying the tax value of the power ting period, or
AGDER ENERGI ANNUAL REPORT 2014 44 AGDER ENERGI ANNUAL REPORT 2014 45 d) it is a form of cash or cash equivalent, quisition cost of property, plant and equip- Lease contracts Cash pooling arrangement Remeasurements are recognised in the line of the statement of financial position. unless it is subject to restrictions which ment includes the expenses involved in Lease contracts are classified as either Agder Energi AS has a cash pooling statement of comprehensive income The same applies to liabilities. In the in- mean that it cannot be realised or used acquiring and preparing the asset for use. finance leases or operational leases, de- arrangement with its subsidiaries, and under other comprehensive income or come statement, discontinued operations to settle a liability within twelve months For large investments, interest payable pending on whether the majority of the the Group has a joint bank account for expenses. are presented on a separate line as “Net of the end of the reporting period. is calculated using the average interest risks and benefits associated with ow- short-term deposits and short-term income from discontinued operations”. rate on the Group’s borrowings during nership are transferred to Agder Energi as loans. External interest income and in- Changes to defined benefit pension obli- Comparative figures are only restated in A liability is classified as a current liability the investment period, and the interest is the lessee. Agder Energi mainly has ope- terest expenses arising from the cash gations arising from plan amendments the income statement. if it fulfils one of the following criteria: capitalised as part of the acquisition cost. rational leases, and the volume of finance pooling arrangement are presented as that are applied retrospectively, i.e. where a) it is expected to be settled as part of Costs incurred after the item entered leases is limited. In the case of operational interest income and interest expenses on the change in entitlement also applies to Statement of cash flows the ordinary business cycle; service, such as regular maintenance, are leases, rent is expensed as it arises. the consolidated income statement. On past years of service, are recognised di- The statement of cash flows has been pre- b) it is primarily held for trading; expensed. the consolidated statement of financial rectly in profit or loss. Changes that are pared using the indirect method. c) it is due for payment within twelve Impairment losses position, net deposits and overdrafts are not applied retrospectively are recognised months of the end of the reporting Costs accrued in relation to internal Property, plant, equipment and intangi- presented as cash and cash equivalents through profit or loss over the remaining New accounting standards and inter- period; or investments within the Group are capita- ble assets that are depreciated are also and current liabilities respectively. years of service. pretations d) the company has no unconditional lised. The acquisition cost only includes tested for impairment if there is any indi- In 2014 Agder Energi implemented several right to delay settlement of the liability directly attributable costs. cation to suggest that future cash flows Liquid assets The net pension liabilities associated with new or revised accounting standards. The beyond twelve months after the state- cannot justify the carrying amount. Any Cash and cash equivalents includes cash underfunded pension plans, and unfunded following ones had no significant impact ment of financial position date. Depreciation is calculated using the difference between the carrying amount and bank deposits. pension plans that are treated as opera- on the financial statements: straight-line method over the expected and the recoverable amount is expensed ting expenses, are classified as provisions All other assets are classified as non- useful life. The residual value is taken into in the income statement. The recovera- Dividends for non-current liabilities. IAS 32 – Financial instruments – presenta- current assets and all other liabilities are account when calculating annual depre- ble amount is the higher of fair value less Proposed dividends are classified as tion: This standard has been amended in classified as non-current liabilities. ciation.. Sites are not depreciated. Hydro- costs to sell and the utility value. equity. Dividends are reclassified as The pension expense for the period is in- order to clarify the criteria for offsetting. power licences are not depreciated either, current liabilities when they are adopted cluded under employee benefits. It consis- For non-current liabilities, any principal as they do not revert to public ownership. When testing for impairment, non-cur- by the AGM. ts of the sum of the current service cost, IAS 28 – Investments in associates and repayments due over the first year are Periodic maintenance is capitalised and rent assets are grouped at the lowest interest on net pension liabilities and em- joint arrangements: IAS 28 now describes presented as current liabilities. depreciated over the maintenance inter- possible level at which it is possible to Provisions, contingent assets and con- ployers’ NICs. the application of the equity method for val. The estimated useful life, depreciation identify independent cash flows (cash tingent liabilities investments in joint arrangements, as well Intangible assets method and residual value are reassessed flow generating units). Most of the Group’s A provision is recognised if the Group Defined contribution pension plans as associates. Intangible assets, including goodwill, are each year. non-current assets are held by the hydroe- has a present obligation arising from a In the case of a defined contribution plan, carried at cost less accumulated depre- lectric power and network business areas. past event, and if it is probable that it will the Group makes regular contributions IFRS 10 – Consolidated financial state- ciation and impairment losses, provided When assets are sold or disposed of, their Within hydroelectric power, any power have to settle the obligation. Provisions into a separate legal entity, but has no ments: This standard contains a new that they meet the criteria for capitalisa- carrying amount is deducted, and any loss stations on the same river system that are are measured using the management’s further liabilities once the contributions definition of control, although it builds on tion. Intangible assets with an uncertain or gain is recognised in the income sta- managed collectively are considered to be best estimate of the cost of settling the have been made. the principles of IAS 27. The purpose is to useful life, including goodwill, are not de- tement under other operating expenses a single cash flow generating unit. obligations on the statement of financial clarify the requirements that were either preciated, and are instead tested annually and revenues. Repairs and regular main- position date, and are discounted to their The contributions are expensed as em- implicit or stated in less detail in IAS 27. for impairment. tenance are expensed as incurred. If new In conjunction with each financial report, present value if this makes a significant ployee benefits when they are made. parts are capitalised on the statement of the Group assesses whether any past im- difference. IFRS 11 – Joint arrangements: This Development costs are capitalised on the financial position, the carrying amount of pairment of non-financial assets, except Non-current assets held for sale and standard contains new guidelines on when statement of financial position if it is pro- the parts that were replaced is deducted, goodwill, should be reversed. Pensions discontinued operations to use proportionate consolidation and bable that future economic benefits attri- and any gain or loss is recognised in profit Defined benefit plans Non-current assets and groups of non- when to use the equity method; amongst butable to the development of an identifi- or loss. Inventories A defined benefit plan is a pension plan current assets and liabilities are classified other things, the proportionate consoli- able intangible asset will flow to the entity. Inventories are carried at the lower of which defines the pension benefit an as held for sale if their carrying amount dation method can no longer be used for Each year, Agder Energi Nett receives cost and fair value less costs to sell. The employee will receive on retirement. The will primarily be recovered through sale joint ventures. Property, plant and equipment customer contributions that fully or par- acquisition cost is calculated using the pension liability recognised for defined and not through future usage. This applies Investments in production facilities and tially pay for new connections or grid up- FIFO principle. benefit plans is the present value of the to cases where the management has com- IFRS 12 – Disclosure of interests in other other property, plant and equipment are grades. These contributions are presented pension benefits earned as of the state- mitted itself to selling them, and where entities: This standard contains all of the carried at cost, less accumulated depreci- on the statement of financial position as Reservoir reserves ment of financial position date, less the negotiations with another party have been note disclosure requirements relating ation and impairment losses. Hydropower unearned revenue under provisions, and The Group’s most valuable raw material fair value of the pension plan assets. The initiated prior to the end of the financial to consolidated financial statements licences are classified as property, plant are taken to income over the useful life of is the water stored in its reservoirs. The pension obligation is calculated annually period. Assets held for sale are measured previously found in IAS 27, as well as the and equipment. Depreciation starts when the relevant investments. value of this water is not capitalised on by an independent actuary using the pro- at the lower of their carrying amount and requirements previously found in IAS 28 the assets are available for use. The ac- the statement of financial position. jected credit unit method. fair value less costs to sell. Assets held for and IAS 31. sale are presented together on a separate
AGDER ENERGI ANNUAL REPORT 2014 46 AGDER ENERGI ANNUAL REPORT 2014 47 The following amendments to relevant ac- standard has not yet been approved by venue contracts. The standard has not yet UNCERTAINTIES – CRITICAL ACCOUNTING ESTIMATES counting standards and interpretations the EU. Agder Energi has not assessed the been approved by the EU. Agder Energi have been published, but had not entered impacts of IFRS 9. has not assessed the impacts of IFRS 15. In conjunction with the preparation of Property, plant and equipment rent that has been carried forward. into force when the financial statements the financial statements, the manage- Property, plant and equipment is Deferred tax assets are capitalised when were presented: IFRS 15 – Revenue from contracts with IFRIC 21 – Levies: Clarifies how to account ment has to make certain estimates and depreciated over its expected useful life, it is expected that it will be possible to customers: The IASB and FASB have for liabilities for levies within the frame assumptions. These affect the reported giving rise to depreciation in the income make use of the negative resource rent IFRS 9 – Financial instruments: In July issued a new, joint standard on revenue work of IAS 37 Provisions, contingent assets and liabilities, including contin- statement. The expected useful life is within a ten-year time frame. The timing 2014 the IASB published the final IFRS 9 recognition, IFRS 15. The standard repla- liabilities and contingent assets. The gent assets and liabilities at the end of estimated on the basis of experience, of when it may be possible to make use sub-project, which means that the stan- ces all existing standards and interpre- interpretation will not have any impact the reporting period, and the reported past performance and best judgement, of negative resource rent is particularly dard is now complete. IFRS 9 introduces tations relating to revenue recognition. on Agder Energi’s annual financial state- revenues and expenses for the period. and is adjusted if there are any changes dependent on assumptions regarding fu- changes to classification and measure- The core principle of IFRS 15 is that re- ments, but it will affect the recognition Actual results may deviate from these to those estimates. The residual value, ture electricity prices. The management ment, hedge accounting and impairment. venue recognition will reflect the transfer of levies in interim financial statements. estimates. which is taken into account when calcula- has used its best judgement when making IFRS 9 will replace IAS 39 Financial instru- of promised goods or services to custo- Agder Energi will start using the interpre- ting depreciation, is also estimated. assumptions about future electricity pri- ments – recognition and measurement. mers in an amount that reflects the con- tation as of 1 January 2015. The most important assumptions concer- ces and other assumptions that affect fu- The parts of IAS 39 that have not been sideration to which the entity expects to ning the future and other key sources of Impairment losses ture resource rent. See Note 12 for a more changed as part of this project have been be entitled in exchange for those goods estimation uncertainty are set out below. The Group has significant investments detailed description. transferred and included in IFRS 9. The or services. The standard applies to all re- in intangible assets, property, plant Fair value of financial instruments and equipment, joint arrangements and Pensions The fair value of long-term cash-settled associates. These non-current assets are Calculating pension liabilities involves CRITICAL ACCOUNTING JUDGEMENTS electricity contracts and electricity con- tested for impairment if there is an indi- using best judgement and estimates for a tracts not covered by the own use exemp- cation that they have fallen in value. This number of parameters. See Note 22 for a Below we have set out the areas where (the “own use” exemption). In some cases Concession power and licence fees tion is partly calculated using assumptions might be indicated by changes in market more detailed descriptions of the assump- the judgements made by management determining whether a contract of this The concession power provided and the that are not observable in the market. prices or contract structures, negative tions that have been applied. in applying the Group’s accounting prin- kind should be classified as cash-settled licence fees paid to the central govern- Where that is the case, the management events or other operating conditions. ciples potentially have a material impact is based on best judgement. ment and municipalities are supposed to has based its estimates on the informati- When calculating the recoverable amount, on the consolidated financial statements. compensate for the damage or inconve- on available in the market in combination a number of estimates must be made The senior management team has, based nience caused by hydropower projects. with its best judgement. There is a more regarding future cash flows, with required Non-financial energy contracts on the criteria in IAS 39, used its best jud- Liabilities arising from the fact that future detailed description of the assumptions rates of return, prices, operating margins Non-financial energy contracts, which in gement to assess which contracts should concession power may be supplied at used to value those contracts in Note 27. and sales volumes being the most impor- accordance with IAS 39 are considered be defined as financial instruments and a discount to the market price, as well The fair value of interest rate and curren- tant factors. to be contracts that can be “settled net which contracts should not, mainly due as the cost of future licence fees, are cy derivatives is based on market practice in cash”, are treated as though they were to the “own use” exemption. Contracts regulatory requirements and are there- and confirmed by external market players. Deferred tax assets financial instruments. This applies unless classified as financial instruments are fore non-contractual liabilities. Consequ- The Group has capitalised deferred tax the contracts have been entered into carried at fair value, with gains and losses ently they are not included in the financial assets arising from negative resource and continue to be held for the purpose recognised in profit or loss, while other statements, but their present value has of the receipt or delivery of the energy contracts are recognised on delivery. been calculated, and is presented in Note in accordance with the Group’s expec- 2 and Note 8. ted purchase, sale or usage requirements
AGDER ENERGI ANNUAL REPORT 2014 48 AGDER ENERGI ANNUAL REPORT 2014 49 NOTES
NOTE 1 SEGMENT INFORMATION
(Amounts in NOK millions) The Hydroelectric Power and Network business LOS Otera Parent/Other Eliminations Total (NGAAP) IFRS adjustments Total (IFRS) Energy Management areas area 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
PROFIT/LOSS Note Operating revenues 2,815 2,596 1,096 1,423 3,155 3,930 899 848 963 925 -659 -782 8,269 8,939 -2 452 8,267 9,391 - of which external operating revenues 2,668 1,842 998 1,375 3,137 3,911 718 635 762 699 -15 477 8,269 8,939 -2 452 8,267 9,391 - of which internal operating revenues 147 754 98 47 17 20 181 213 201 225 -644 -1 259 0 0 0 0 0 0 Energy and transmission expenses -268 -243 -291 -281 -2,928 -3,719 0 0 -37 -40 221 200 -3,302 -4,083 0 0 -3,302 -4,083 Other raw materials and consumables used 4 0 0 0 0 -1 -1 -446 -412 -368 -321 0 0 -815 -734 0 0 -815 -734 Employee benefits 7 -166 -164 -95 -112 -51 -53 -297 -309 -348 -352 148 162 -810 -827 0 0 -810 -827 Other operating expenses 9 -460 -514 -350 -346 -62 -58 -134 -110 -261 -270 293 405 -973 -892 -63 1 -1,036 -891 Operating profit before depreciation and impairment losses 1,920 1,675 359 685 114 101 22 16 -51 -60 3 -15 2,368 2,403 -65 453 2,303 2,856 Depreciation and impairment losses 13 -255 -231 -218 -206 -4 -3 -12 -11 -92 -74 -15 13 -596 -512 7 10 -588 -502 Operating profit 1,666 1,445 141 479 110 98 10 5 -142 -134 -13 -2 1,772 1,891 -57 463 1,715 2,354 Share of profit of associates and joint ventures 11 0 0 0 0 0 0 0 0 -2 12 -8 -15 -11 -3 0 -1 -11 -5 Financial income 11 27 309 1 2 6 4 0 0 1,976 1,611 -1,999 -1,798 11 129 -434 -454 -423 -325 Financial expenses 11 -151 -302 -84 -78 -6 -9 -9 -8 -719 -478 685 581 -284 -294 1 -4 -283 -298 Net financial income/expenses -124 7 -84 -76 0 -6 -8 -7 1,255 1,144 -1,322 -1,231 -283 -168 -433 -459 -717 -628 Profit before tax 1,542 1,452 57 403 110 92 2 -2 1,113 1,010 -1,335 -1,233 1,489 1,722 -491 4 998 1,726 Tax expense 12 -717 -758 -16 -107 -30 -26 0 1 -153 -227 310 265 -607 -853 133 8 -473 -845 Net income from continuing operations 824 694 42 296 80 66 2 -1 959 784 -1,025 -969 882 869 -357 12 525 881 Net income from discontinued operations 0 0 0 0 0 0 -29 -21 0 0 0 4 -29 -17 -3 -18 -33 -35
STATEMENT OF FINANCIAL POSITION Total assets 7,762 7,447 4,214 4,092 635 637 459 543 12,440 11,851 -10,873 -10,157 14,636 14,412 1,782 1,679 16,418 16,091 Equity 2,257 2,281 665 691 330 339 92 122 3,684 2,798 -3,699 -2,801 3,329 3,430 431 780 3,760 4,210 Total segment liabilities 5,505 5,166 3,549 3,400 306 298 367 421 8,755 9,053 -7,175 -7,356 11,307 10,982 1,352 899 12,659 11,881 Capital employed 1) 5,502 5,370 3,208 2,970 338 380 224 253 12,426 10,364 -10,073 -8,071 11,624 11,267 433 612 12,058 11,879 Interest-bearing liabilities 23 3,245 3,089 2,543 2,279 8 41 132 131 8,741 7,566 -6,375 -5,270 8,295 7,837 3 -169 8,299 7,668 Funds from operation (FFO) 2) 1,530 1,245 347 687 105 61 20 -1 1,992 1,596 Carrying amount of associates and joint ventures 16 0 0 0 0 0 0 0 0 423 292 -126 -111 297 181 0 0 297 182 Investments in intangible assets 3) 0 1 3 12 0 0 1 6 -6 39 0 22 -1 80 11 -6 9 74 Investments in property, plant and equipment 3) 538 777 364 417 11 0 10 7 133 118 -26 -28 1,030 1,291 100 -15 1,130 1,276 Full-time equivalents (continuing operations) 218 210 170 161 64 65 399 372 369 374 1,220 1,182 1,220 1,182
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 responsible for power distribution in Agder. The Hydroelectric Power and Energy Management business areas are presented jointly as a single segment. These 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.
AGDER ENERGI ANNUAL REPORT 2014 50 AGDER ENERGI ANNUAL REPORT 2014 51 The Eliminations segment relates to the elimination of intra-group transactions and balances. Transactions between segments Energy purchases are on an arm’s-length basis. (Amounts in NOK millions) 2014 2013 Spot and balancing markets 71 128 The IFRS adjustments segment covers items arising from the fact that the accounts of segments are presented in accordance Other 59 46 with NGAAP, while the consolidated financial statements are presented in accordance with IFRS. The main reason for the Total for power generation 130 174 differences between the segment reporting and the consolidated financial statements is that changes in unrealised gains/losses Retail market 2,928 3,713 on derivatives are not included in the segment reporting. In addition, the segment reporting for the Network business area uses Network 113 141 the approved income cap, whereas the consolidated statements are based on invoiced revenues; see Note 3. District heating 37 37 Other 0 2 The vast majority of Agder Energi’s turnover comes from customers in Norway or from Nord Pool (the marketplace for trading Eliminations -124 -147 physical power contracts). The turnover of the subsidiary group Otera AB comes from the Swedish market. Total 3,083 3,920
NOTE 2 ENERGY SALES The table below shows key figures for our power generating activities, as well as gains/losses in relation to spot prices.
Agder Energi optimises its generation of hydroelectric power based on an assessment of the value of available water in relation to 2014 2013 current and expected future spot prices. This assessment does not take into account any contractual obligations that it may have. Net electricity generation (less pumping) (GWh) 9,060 7,738 If Agder Energi’s contractual obligations to supply electricity to customers deviate from actual generation, the difference is bought Reservoir reserves at 31 Dec. (GWh) 3,900 4,250 or sold in the spot market. Physical and cash-settled contracts are used secure cash flows from underlying power generation. All Reservoir reserves as % of capacity 74% 81% 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 (Amounts in NOK millions) 2014 2013 contracts with industrial customers. In total it has signed contracts for around 22 TWh of energy, to be delivered between now Spot value of net generation 2,102 2,317 and 2030. Gains/losses on concession power and contracts for physical delivery signed before 1991 -109 -222 Gains/losses on hedges 531 72 The Group’s energy sales and purchases are specified in the table below. Electricity certificates (own generation) 4 2 Gains/losses on other items 46 55 Energy sales Net energy sales from power generation 2,574 2,224 (Amounts in NOK millions) 2014 2013 Spot and balancing markets 1,863 1,963 Hedges include both cash-settled contracts and long-term physical contracts with industrial clients that are used as part of a Concession power and contracts for physical delivery signed before 1991 1) 159 193 hedging strategy. Contracts for physical delivery signed after 1991 1) 62 70 Financial contracts used for hedging purposes 2) 513 59 The resources Agder Energi needs to generate power are available to it through licences. Agder Energi controls – either directly Electricity certificates (own generation) 4 2 or indirectly through water management associations and joint arrangements – licences to regulate watercourses and to acquire Other 103 111 ownership rights to waterfalls. These licences do not revert to public ownership, with the exception of a few minor regulations of the Total for power generation 2,704 2,398 Arendal river system, which constitute less than 1% of the total river regulation capacity. Agder Energi has a perpetual obligation Retail market 3,128 3,901 to supply 542 GWh each year to local municipalities, who are entitled to buy electricity at a regulated price. In most cases this Network 30 29 price is set by the Ministry of Petroleum and Energy, but Agder Energi has some licences where the price is established individually District heating 83 89 based on government guidelines. Revenues from concession power are recognised as income when the electricity is supplied. Other 0 9 Eliminations -131 -147 The future loss of revenue arising from the obligation to supply concession power at below market prices is estimated at NOK 3.3 Total 5,814 6,278 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 1) The Energy Act came into force in 1991. 15 øre/kWh and an expected inflation rate of 2.5%. 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. (Volume in GWh) 2014 2013 Volume of concession power (GWh) 542 541 Regulated price (øre/kWh) 10.8 10.8
AGDER ENERGI ANNUAL REPORT 2014 52 AGDER ENERGI ANNUAL REPORT 2014 53 NOTE 3 TRANSMISSION REVENUES NOTE 5 LONG-TERM MANUFACTURING CONTRACTS
The Norwegian Water Resources and Energy Directorate regulates the revenues of power grid operators by setting an annual The projects included under this item relate to the electrical contracting business. They are carried out for customers and are income cap. Based on the income caps they have been allocated and the volumes of electricity they expect to distribute, power accounted for using the percentage of completion method. Profit is recognised in proportion to the percentage of completion of grid operators set the transmission tariffs payable by customers. In the event of any difference between actual and expected the project. The percentage of completion is estimated to be the ratio between project costs incurred to date and total estimated volumes, revenues from transmission tariffs will show a surplus or shortfall relative to the permitted revenues (income cap). In the project costs. Estimated losses on projects are also recognised in profit or loss. 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 (Amounts in NOK millions) 2014 2013 of financial position, and only the actual transmission tariff revenues are recognised in the income statement. Revenues from fixed-price contracts included under operating revenues 382 373 Revenues, work in progress 281 320 Accrued revenues included under other receivables 18 19 (Amounts in NOK millions) 2014 2013 Deferred revenues included under other liabilities 0 4 Revenues under next year’s income cap recognised in the consolidated income statement 188 -79 Costs incurred to date, work in progress 238 290 Accumulated surplus transmission revenues not included on the statement of financial position 360 172 Share of outstanding receivables not yet due under contract terms 1 0 Remaining turnover from loss-making projects 1 3
NOTE 4 OTHER OPERATING REVENUES AND OTHER RAW MATERIALS AND CONSUMABLES USED NOTE 6 UNREALISED GAINS AND LOSSES ON ENERGY CONTRACTS Other operating revenues (Amounts in NOK millions) Note 2014 2013 Breakdown of profit and loss effects of financial instruments by class of instrument: Contracting 5 899 848 Services 105 99 (Amounts in NOK millions) Note 2014 2013 Communication 285 225 Portfolio of production hedges, excluding power for industrial users 26 -139 524 Other revenues 181 144 Cash-settled contracts, compensation power 21 -71 35 Total 1,470 1,316 Cash-settled contracts, power for industrial users 21 28 10 Retail customer portfolio 26 26 -17 Electrical contracting services are provided through Otera, and cover areas such as electrical power systems, transportation Total -156 552 and telecommunications. Reversal of unrealised gains and losses at 1 January on contracts closed out during the year 1) -368 -66 Gains and losses on contracts that had not been closed out as of 31 December 212 618 Other raw materials and consumables used Total -156 552 (Amounts in NOK millions) Note 2014 2013 Contracting 5 446 412 The above table refers to electricity contracts that must be measured at fair value through profit or loss under IAS 39. Communication 142 104 Other purchases 227 218 1) Value at start of 2014 (2013) of contracts that were closed out during 2014 (2013). Total 815 734
NOTE 7 EMPLOYEE BENEFITS
(Amounts in NOK millions) Note 2014 2013 Wages and salaries 831 796 Employers’ National Insurance Contributions 127 118 Pension expense (incl. employers’ NICs) 22 44 105 Other benefits and reimbursements 24 22 Capitalised wage costs arising from own investments -216 -214 Total 810 827
Number of full-time equivalents in continuing operations at 31 Dec. 1,220 1,182 Number of full-time equivalents in discontinued operations at 31 Dec. 0 344
For details of senior management compensation, please see Note 32.
AGDER ENERGI ANNUAL REPORT 2014 54 AGDER ENERGI ANNUAL REPORT 2014 55 NOTE 8 PROPERTY TAXES AND LICENCE FEES NOTE 10 AUDITOR’S FEE
(Amounts in NOK millions) 2014 2013 The Group’s auditor is Ernst & Young, who audits the parent company and its subsidiaries with the exception of a few small subsidiaries. Licence fees 48 47 Property taxes 161 157 (Amounts in NOK millions excl. VAT) 2014 2013 Total 209 204 Statutory audit 3.6 3.5 Other auditing services 0.4 0.0 Tax advice 0.1 0.2 Licence fees are perpetual payments designed to compensate for the damage or inconvenience caused by hydropower projects. Other services not related to auditing 0.3 0.5 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 Total 4.4 4.2 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 NOTE 11 FINANCIAL INCOME AND EXPENSES calculated to be NOK 1.9 billion using a discount rate of 2.5%. (Amounts in NOK millions) Note 2014 2013
Share of profit of associates and joint ventures 16 -11 -5 NOTE 9 OTHER OPERATING EXPENSES Net realised exchange rate gains 1) 0 52 (Amounts in NOK millions) 2014 2013 Interest income on loans 2) 9 12 Property-related expenses 78 61 Other interest income 11 12 Lease of machinery and office equipment 15 13 Other financial income 6 2 Purchase of plant and equipment 41 40 Financial income 26 78 Repairs and maintenance to equipment 19 8 Contractors 115 118 Unrealised gains and losses on foreign currency contracts 3) 26 -178 -438 Operation/maintenance of IT systems 46 48 Unrealised gains and losses on foreign currency loans -110 0 Technical consultants 40 52 Unrealised gains and losses on interest rate contracts 26 -161 35 Administrative consultants 58 47 Unrealised gains/losses on currency and interest rate contracts -449 -403 Other external services 40 30 Office supplies, telecommunications, postage, etc. 41 52 Interest expense on loans 4) 241 241 Cost of vehicles 31 21 Interest expense on interest rate swaps 52 58 Leasing 26 24 Interest on capitalised construction loans -26 -39 Travel expenses, subsistence allowances, mileage expenses, etc. 52 48 Net realised exchange rate losses 3 0 Sales, advertising, representation, membership fees and gifts 33 31 Impairment of non-current financial assets 5) 2 27 Insurance premiums 18 15 Other financial expenses 12 12 Share of other operating expenses at joint arrangements 85 82 Financial expenses 283 298 Free electricity and compensation *) 63 -1 Other operating expenses 26 -2 Net financial income/expenses -717 -628 Total 827 687 1) In 2013 this mainly reflected net realised gains on currency futures. *) Of the NOK 63 million provision for free electricity and compensation, NOK 56 million was the result of changing the discount rate used to calculate 2) Relates to interest income on financial assets carried at amortised cost. provisions. This is a non-cash item; see Note 21. 3) The breakdown is as follows:
(Amounts in NOK millions) Note 2014 2013 Reversal of unrealised gains and losses at 1 January on contracts closed out during the year *) 53 -76 Gains and losses on contracts that had not been closed out as of 31 December. -231 -362 Total -178 -438
*) The value of contracts that had already been signed at the start of 2014 (2013) and that were closed out during 2014 (2013).
4) Relates to interest expenses on loans carried at amortised cost. 5) Impairment of shares and other non-current financial assets.
AGDER ENERGI ANNUAL REPORT 2014 56 AGDER ENERGI ANNUAL REPORT 2014 57 NOTE 12 TAX 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 (Amounts in NOK millions) Note 2014 2013 that future yields on short-term government debt will be between 1.3% and 2.9%. Tax expense recognised in profit or loss Income tax payable 238 473 (Amounts in NOK millions) Note 2014 2013 Resource rent tax payable 269 298 Changes in net deferred tax liabilities (+)/ assets (-) over the year Changes in deferred income tax -54 11 Net deferred tax liabilities (+)/assets (-) at 31 Dec. prior year 146 55 Changes in deferred resource rent tax 26 72 Net effect of disposals 1 -1 Corrections to previous years’ tax assessments -6 -9 Net additions from acquisitions during the year -8 -8 Total tax expense recognised in profit or loss 473 845 Change in deferred tax liabilities (+)/assets (-) recognised in equity* 0 10 Change in net deferred tax liabilities (+)/assets (-) included in comprehensive income** -88 13 Reconciliation of nominal and effective tax rates Change in deferred tax liabilities (+)/assets (-) recognised through profit or loss -27 83 Profit before tax 998 1,726 Change in deferred tax liabilities (+)/assets (-) at discontinued operations 0 -6 Expected tax based on 27%/28% tax rate 269 483 Net deferred tax liabilities (+)/assets (-) at 31 Dec. 24 146
Tax effect of * NOK -4 million of which relates to changes in tax rates in 2013. Permanent differences -4 -2 ** NOK 7 million of which relates to changes in tax rates in 2013. Utilisation of previously unrecognised tax losses -80 0 Resource rent tax incl. deferred tax 295 370 Changes in deferred tax on items in the statement of comprehensive income Changes relating to prior years -6 -9 Remeasurements of pensions -63 51 Net impact of changes in tax rates 0 2 Cash flow hedges -26 -38 Total tax expense 473 845 Net change in deferred tax on items in the statement of comprehensive income -88 13
Effective tax rate 47% 49%
Breakdown of temporary differences and negative resource rent carried forward NOTE 13 DEPRECIATION AND IMPAIRMENT LOSSES Revenues Property, plant and equipment. 2,303 2,108 (Amounts in NOK millions) Note 2014 2013 Current assets/liabilities 15 -88 Amortisation of intangible assets 14 19 20 Pension liabilities -196 -68 Impairment of intangible assets 14 0 4 Other non-current provisions -825 -642 Depreciation of property, plant and equipment 15 556 472 Derivatives -328 142 Impairment of property, plant and equipment 15 14 7 Other -185 -142 Total depreciation, amortisation and impairment losses recognised in operating profit 588 502 Gross differences 784 1,310 Impairment of financial assets 11 2 27 Tax rate 27% 27% Total depreciation, amortisation and impairment losses recognised Net deferred income tax assets (-)/liabilities (+) 212 355 in statement of cash flows 590 529
Resource rent Temporary differences 218 533 Negative resource rent carryforwards expected to be offset against profit over the coming 10 years -824 -1 205 Gross differences -606 -672 Tax rate 31% 31% Net deferred income tax assets (-)/liabilities (+) -188 -208
Of which presented in the financial statements as: Deferred tax 439 520 Deferred tax assets -415 -374
Deferred tax assets arising from negative resource rent carryforwards not included on the statement of financial position -456 -435 Deferred tax assets arising from ordinary loss carryforwards not included on the statement of financial position 0 -77
AGDER ENERGI ANNUAL REPORT 2014 58 AGDER ENERGI ANNUAL REPORT 2014 59 NOTE 14 INTANGIBLE ASSETS
(Amounts in NOK millions) Goodwill Software Other Total intangible intangible assets assets Acquisition cost 192 99 103 394 Accumulated depreciation and impairment losses -27 -67 -41 -135 Carrying amount at 31/12/2013 165 32 62 259
Carrying amount at 01/01/2014 165 32 62 259 Additions 0 4 5 9 Disposals at book value -24 -1 -1 -26 Depreciation 0 -8 -11 -19 Carrying amount at 31/12/2014 141 27 55 223
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
Useful life/depreciation period Tested annually for impairment 3-5 years 3-8 years Part of the machinery in Hunsfoss Øst power station in Vennesla.
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 per- formed in the fourth quarter, and in 2014 it resulted in a NOK 0 million charge, compared with NOK 27 million in 2013. 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) 2014 2013 Otera 94 117 LOS 12 12 NetNordic 11 11 NEG 9 9 Others 15 16 Carrying amount of goodwill 141 165
AGDER ENERGI ANNUAL REPORT 2014 60 AGDER ENERGI ANNUALANNUAL REPORTREPORT 20142014 61 NOTE 15 PROPERTY, PLANT AND EQUIPMENT
(Amounts in NOK millions) Hydropower Dams Own Property Regional power Local distribution District Other Work in Total own property, Property, plant and Total property, licences power stations transmission grid network heating progress plant and equipment equipment at JCEs plant and equipment
Carrying amount at 01/01/2013 1,086 281 2,560 174 1,007 2,422 429 231 300 8,491 2,754 11 ,244 Additions 0 7 112 0 166 226 94 79 193 878 399 1,276 Disposals at book value 0 -0 -0 -2 0 -3 0 -58 0 -63 0 -63 Depreciation 0 -13 -120 -8 -59 -120 -15 -63 0 -399 -73 -472 Impairment losses 0 0 0 0 0 0 0 -7 0 -7 0 -7 Carrying amount at 31/12/2013 1,086 275 2,551 165 1,114 2,525 507 183 494 8,900 3,079 11,979
Acquisition cost 1,101 515 4,866 225 1,853 4,297 619 616 494 14,586 4,774 19,360 Accumulated depreciation and impairment losses -15 -240 -2,315 -60 -739 -1,772 -112 -433 0 -5,686 -1,695 -7,381 Carrying amount at 31/12/2013 1,086 275 2,551 165 1,114 2,525 507 183 494 8,900 3,079 11,979
Carrying amount at 01/01/2014 1,086 275 2,551 165 1,114 2,525 507 183 494 8,900 3,079 11,979 Additions 0 8 155 1 142 299 18 85 248 956 174 1,130 Disposals at book value 0 0 0 -3 0 0 0 -2 0 -5 0 -5 Depreciation 0 -20 -146 -7 -66 -126 -18 -71 0 -454 -102 -556 Impairment losses 0 0 0 -6 0 0 0 -8 0 -14 0 -14 Carrying amount at 31/12/2014 1,086 263 2,560 149 1,190 2,698 507 187 742 9,383 3,151 12,534
Acquisition cost 1,101 523 5,021 217 1,981 4,596 637 624 742 15,442 4,948 20,390 Accumulated depreciation and impairment losses -15 -260 -2,461 -68 -791 -1,898 -130 -437 0 -6,059 -1,797 -7,856 Carrying amount at 31/12/2014 1,086 263 2,560 149 1,190 2,698 507 187 742 9,383 3,151 12,534
Depreciation period (years) Not depreciated 50-99 25-99 25-99/ 15-40 15-35 8-60 3-20 indefinite
For work in progress, the net change is shown. Periodic maintenance is included within the relevant category. Capitalised loan arrangement fees amounted to NOK 26 (39) million in 2014, calculated using an interest rate of 3.6%.
AGDER ENERGI ANNUAL REPORT 2014 62 AGDER ENERGI ANNUAL REPORT 2014 63 Below the useful lives of the most important assets on the statement of financial position are set out: NOTE 16 ASSOCIATES AND JOINT ARRANGEMENTS
Agder Energi has various investments in associates and joint arrangements. Joint arrangements include joint ventures and joint Hydroelectric power stations Hydroelectric power stations operations. Associates and joint ventures are accounted for using the equity method, whereas proportionate consolidation is used Depreciation period (years) Depreciation period (years) for investments in joint operations. Machinery Waterfall rights Not depreciated - Runners 40 Associates and joint ventures (accounted for using the equity method) - Turbines 40 Structures - Turbine hall cranes, air handling units, pumps 25 (Amounts in NOK millions) 2014 2013 - Rock-fill dams 99 - Turbine regulators 15 Associates 252 140 - Caverns 99 - Grating cleaners 10 Joint ventures 45 42 - Concrete dams 67 Carrying amount at 31 Dec. 297 182 - Power station buildings 67 Process equipment and communication - Other buildings 50 - Grid control systems 20 Profit from associates 2 -1 - Control centres 10 Profit from joint ventures -13 -18 Penstock - Communications/Control/Logging 10 Gain/loss on disposal/reclassification* 0 14 - Underground 99 Share of profit of associates and joint ventures -11 -5 - Above ground pipeline 40 Electrical systems - Underground pipeline 67 - Transformers 40 *See footnote 1) under investments in joint ventures. - Generators 40 Gates, gratings, entrances, etc. - Auxiliary systems (switches, low-voltage systems) 25 - Intake gates 50 - Switchgear and other high-voltage systems 25 Breakdown of investments in associates - Dam gates 50 - Gratings 50 Periodic maintenance (interval) (Amounts in NOK millions) Ownership Carrying amount Additions Dividends Consolidated Carrying amount - Entrances 50 - Machinery – major service 20 interest at 31/12/2013 share of profit/loss at 31/12/2014 - Stream intakes 50 - Electrical systems – major service 20 Småkraft AS 1) 20.0% 123 112 0 -1 234 - Refurbishment of buildings 25 Skagerak Venture Capital I KS/GP KS 19.6% 16 -1 -4 5 16 Roads and bridges Teknova Invest AS 38.9% 1 0 0 -1 0 - Roads/quays 67 NorthConnect KS/NorthConnect AS 22.3% 0 2 0 -1 1 - Bridges 50 Other assets Grønn Kontakt AS 25.2% 0 1 0 0 1 Depreciation period (years) Total for associates 140 114 -4 2 252 - Office buildings 50 Power distribution networks - Sites Not depreciated 1) The Group has also lent NOK 118 million to Småkraft AS. Depreciation period (years) - Office and IT equipment 3 Regional power transmission grid: - Fixtures and fittings 5 - Power and ground cables 40 - Vehicles 8 Breakdown of investments in joint arrangements - Transmission substations 35 - High-voltage power lines 25 (Amounts in NOK millions) Ownership Carrying amount Additions Dividends Consolidated Carrying amount - Grid control systems 15 interest at 31/12/2013 share of profit/loss at 31/12/2014
Local power distribution network: Statkraft Agder Energi Vind DA 1) 38.0% 41 3 -33 -7 4 - High-voltage lines and cables 40 Fosen Vind AS 1) 20.9% 0 46 0 -6 40 - Low-voltage lines and cables 30 Viking Varme AS 50.0% 1 0 0 0 1 - Distribution substations 25 Total for joint ventures 42 49 -33 -13 45
1) Two of SAE Vind’s projects were transferred to Fosen Vind when the company was established in 2014. The impact of the transfer was negligible for accounting purposes.
AGDER ENERGI ANNUAL REPORT 2014 64 AGDER ENERGI ANNUAL REPORT 2014 65 Summarised financial information for material associates and joint ventures is presented below. 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 (Amounts in NOK millions) Småkraft SAE Vind Fosen Vind Vannkraft’s actual power generation by the average electricity price, and adding Agder Energi Vannkraft’s share of revenues from 2014 2013 2014 2013 2014 2013 concession power. Operating revenues 110 144 1 3 0 0 Net income -3 -5 -19 -41 -28 0 (Amounts in NOK millions) 2014 2013 Energy sales 813 882 Non-current assets 1,630 1,520 85 182 175 0 Other operating revenues 3 10 Current assets 118 131 5 17 60 0 Total operating revenues 816 892 Non-current liabilities 596 1,008 0 4 17 0 Current liabilities 23 22 4 7 30 0 Transmission expenses -43 -25 Equity 1,129 622 86 188 188 0 Energy purchases -12 -12 Property taxes and licence fees -22 -22 Depreciation -102 -73 Joint operations (proportionate consolidation) Other operating expenses -89 -85 Total operating expenses -268 -217 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 Operating profit 548 675 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 Non-current assets 3 151 3,079 stations and water management associations: Current assets 92 111 Total assets 3,243 3,190 Otra Kraft DA owns the Holen and Brokke 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 Other provisions 12 6 has its head office at Rysstad in Valle. Current liabilities 146 140 Net assets 3,085 3,044 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.
Finndøla kraftverk DA is 50:50 owned by Agder Energi Vannkraft and Skagerak Kraft. NOTE 17 NON-CURRENT FINANCIAL ASSETS
The power station Hekni kraftverk is a statutory co-ownership between Agder Energi Vannkraft, with a 66.67% interest, and (Amounts in NOK millions) Note 2014 2013 Skagerak Kraft, with 33.33%. The co-ownership is managed through a steering committee. Agder Energi Vannkraft represents the Investments in shares and ownership interests 31 31 co-ownership in dealings with third parties. Loans to associates and joint arrangements 1) 123 201 Other receivables 2) 163 205 The water management association Otteraaens Brugseierforening comprises Agder Energi Vannkraft, Skagerak Kraft and Pension assets 22 138 93 Vigelands Brug. The association is managed through its Board. Agder Energi Vannkraft’s ownership interest, including its indirect Total 455 530 interest through Otra Kraft, is approximately 73.8%. Otteraaens Brugseierforening has its business address in Valle. 1) Detailed information about loans to associates and joint arrangements can be found in Note 16. The water management association Arendals Vasdrags Brugseierforening comprises Agder Energi Vannkraft, Skafså Kraftverk, 2) 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. 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. The fair value of non-current financial assets is described in greater detail in notes 25 and 27.
Sira-Kvina DA 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.
AGDER ENERGI ANNUAL REPORT 2014 66 AGDER ENERGI ANNUAL REPORT 2014 67 NOTE 18 RECEIVABLES List of shareholders in Agder Energi AS
(Amounts in NOK millions) 2014 2013 Number of % of class Number of % of class Total number % of tot. number Share Trade receivables 1,080 1,263 class A shares A shares class B shares B shares of shares of shares capital Bad debt provision 13 20 Total trade receivables 1,067 1,243 Statkraft Industrial Holding AS 743,197 41.289% 485,990 53.999% 1,229,187 45.525% 823,555 Accrued revenues 213 100 Arendal Municipality 115,017 6.390% 57,507 6.390% 172,524 6.390% 115,591 Prepaid expenses 27 37 Kristiansand Municipality 95,400 5.300% 47,700 5.300% 143,100 5.300% 95,877 Receivables from joint arrangements 73 99 Grimstad Municipality 53,327 2.963% 26,663 2.963% 79,990 2.963% 53,593 Other receivables 66 86 Flekkefjord Municipality 53,269 2.959% 14,650 1.628% 67,919 2.516% 45,506 Share of current assets at joint arrangements 92 111 Lyngdal Municipality 49,745 2.764% 13,680 1.520% 63,425 2.349% 42,495 Total receivables 1,538 1,677 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 Ageing analysis of trade receivables 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 (Amounts in NOK millions) Not overdue 0-30 days 31-60 days 61-90 days Over 90 days Total Vennesla Municipality 42,343 2.352% 11,644 1.294% 53,987 2.000% 36,171 overdue overdue overdue overdue Froland Municipality 31,847 1.769% 15,924 1.769% 47,771 1.769% 32,007 2014 939 90 14 8 29 1,080 Søgne Municipality 33,601 1.867% 9,240 1.027% 42,841 1.587% 28,703 2013 1,058 120 13 15 56 1,263 Evje og Hornnes Municipality 27,511 1.528% 13,756 1.528% 41,267 1.528% 27,649 Songdalen Municipality 31,689 1.761% 8,714 0.968% 40,403 1.496% 27,070 Lindesnes Municipality 31,470 1.748% 8,654 0.962% 40,124 1.486% 26,883 Hægebostad Municipality 28,776 1.599% 7,913 0.879% 36,689 1.359% 24,582 NOTE 19 CASH AND CASH EQUIVALENTS Farsund Municipality 27,502 1.528% 7,563 0.840% 35,065 1.299% 23,494 Birkenes Municipality 22,679 1.260% 11,340 1.260% 34,019 1.260% 22,793 (Amounts in NOK millions) 2014 2013 Åmli Municipality 21,921 1.218% 10,960 1.218% 32,881 1.218% 22,030 Cash and cash equivalents 42 21 Risør Municipality 21,052 1.170% 10,525 1.169% 31,577 1.170% 21,157 Restricted assets (e.g. term deposits, tax withholding account and client assets) 12 12 Valle Municipality 20,327 1.129% 10,164 1.129% 30,491 1.129% 20,429 Total 54 33 Bygland Municipality 19,995 1.111% 9,998 1.111% 29,993 1.111% 20,095 Iveland Municipality 19,155 1.064% 9,578 1.064% 28,733 1.064% 19,251 A NOK 52 million bank guarantee covering the parent company and subsidiaries has been used as security for tax deductions at Tvedestrand Municipality 19,066 1.059% 9,533 1.059% 28,599 1.059% 19,161 source. The parent company has also set up a cash pooling arrangement with an associated NOK 500 million overdraft facility. Most Åseral Municipality 21,776 1.210% 5,988 0.665% 27,764 1.028% 18,602 subsidiaries in the Group in which the parent company holds an ownership interest of at least 50% take part in the cash pooling Vegårshei Municipality 14,553 0.809% 7,277 0.809% 21,830 0.809% 14,626 arrangement and are jointly and severally liable to the bank for the overdraft facility. Bykle Municipality 13,232 0.735% 6,616 0.735% 19,848 0.735% 13,298 Gjerstad Municipality 12,423 0.690% 6,211 0.690% 18,634 0.690% 12,485 Audnedal Municipality 8,284 0.460% 2,278 0.253% 10,562 0.391% 7,077 Total 1,800,000 100% 900 000 100% 2,700,000 100% 1,809,000 NOTE 20 SHARE CAPITAL AND SHAREHOLDER INFORMATION The NOK 1,809 million of share capital is made up of class A and class B shares. The share capital is made up of Number Face value Share capital of shares (in NOK 000s) Class A shares can only be owned by shareholders who meet the conditions for being allocated indefinite waterfall licences under the Share capital 2,700,000 670 1,809,000 relevant current legislation. Class B shares are freely negotiable. In all other respects, class A and class B shares have equal rights. Total 2,700,000 1,809,000 The company has entered into an industrial collaboration agreement with its biggest shareholder, Statkraft Industrial Holding AS. There is also a shareholders’ agreement between the shareholders in the company.
The company has a corporate assembly with 15 members, who are elected for a two-year term.
Proposed dividends for 2014 come to NOK 700 million in total, equivalent to NOK 259 per share.
AGDER ENERGI ANNUAL REPORT 2014 68 AGDER ENERGI ANNUAL REPORT 2014 69 NOTE 21 PROVISIONS 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. (Amounts in NOK millions) Note 2014 2013 Pension liabilities 22 415 301 Defined contribution pension plan Other non-current provisions 1,060 833 Employees taken on after 1 April 2007 are entitled to membership of a defined contribution pension plan. Total 1,475 1,134 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 Breakdown of other non-current provisions 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. (Amounts in NOK millions) Supply of free Supply of free Cash-settled Other Total electricity and electricity and contracts 3) provisions When calculating the pension liability, it has been assumed that there will be a 100% take-up of the early-retirement scheme by compensation 1) compensation 2) the age of 64. For accounting purposes, employees start accruing early-retirement pension rights on reaching the age of 50 or Carrying amount at 01/01/2013 556 138 115 81 890 on joining the Group, whichever is later. Unrealised gains and losses -35 0 -10 0 -45 New provisions 0 0 0 23 23 Employees in Norway covered by the defined contribution plan are entitled to a private AFP scheme, which from 2011 onwards Provisions used 0 -1 0 -34 -35 means a lifelong supplement to their retirement pensions from the National Insurance Scheme. This AFP scheme is funded by Carrying amount at 31/12/2013 521 137 105 70 833 contributions made by the employer. It is considered a defined benefit plan, but for the moment it is being accounted for as a defined contribution plan. This is because the administrator has not yet calculated the total obligations under the scheme. In 2014, Carrying amount at 01/01/2014 521 137 105 70 833 the annual contribution to the scheme was 2.3% (2013: 2.0%) of qualifying pay between 1 and 7.1 times the National Insurance Unrealised gains and losses 71 0 -28 0 43 Scheme’s basic amount (“G”) for each employee covered by the scheme. New provisions 0 63 0 132 195 Provisions used 0 0 0 -11 -11 Actuarial assumptions Carrying amount at 31/12/2014 592 200 77 191 1,060 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, rather than the yield on 10- 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 year government bonds. The assumptions used to calculate pension liabilities are consistent with the most recent guidelines on in cash. Also see notes 25 and 27. actuarial assumptions as of January 2015, except the wage growth assumption, which is 0.25 percentage points lower. 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. The Group uses the latest version of the Norwegian life tables (GAP 07) for its estimates of life expectancy, probability of disability, etc. 3) Non-current cash-settled contracts measured in accordance with IAS 39. Also see notes 25 and 27. 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.
NOTE 22 PENSIONS Age Disability risk in % Mortality risk in % Life expectancy The Group’s pension plans Man Woman Man Woman Man Woman 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 20 0.07 0.07 0.01 0.01 85 89 as employees at companies outside Norway, are part of a defined contribution pension plan. The Group’s pension plans satisfy the 40 0.22 0.22 0.06 0.05 84 88 requirements laid down in the Act on Mandatory Occupational Pensions. 60 2.16 2.59 0.52 0.37 84 87 80 - - 6.04 3.35 87 90 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.
AGDER ENERGI ANNUAL REPORT 2014 70 AGDER ENERGI ANNUAL REPORT 2014 71 (Amounts in NOK millions) Note 2014 2013 (Amounts in NOK millions) 2014 2013 The pension expense for the year has been calculated as follows Change in net defined benefit pension liabilities Current service cost 55 62 Net defined benefit pension liabilities at 1 Jan. 208 441 Interest expense on net pension liabilities 7 16 Corrections to opening balance/implementation 0 0 Past service cost -49 0 Pension expense recognised in profit or loss 14 80 Employers’ National Insurance Contributions 8 9 Pension contributions 0 0 Employee contributions -7 -7 Conversion of subordinated loan to paid-in capital -40 0 Pension expense for the year, defined benefit plans 14 80 Disposals of businesses -4 0 Cost of AFP scheme including employers’ NICs 6 4 Company net contributions incl. employers’ NICs -103 -90 Defined contribution pension plans (incl. emp. NICs) 24 20 Pension benefits included under operating expenses -6 -6 Total pension expense recognised in the income statement 7 44 105 Remeasurements 208 -216 Net pension liabilities at 31 Dec. 277 208 Pension liabilities and pension plan assets Remeasurements are made up of Change in gross pension liabilities Changes in demographic assumptions 80 -12 Gross pension liabilities at 1 Jan. 1,972 1,993 Changes in financial assumptions 286 -105 Current service cost (incl. emp. NICs) 63 71 Excess return on assets -158 -100 Interest cost 79 76 Total remeasurements included on the statement of financial position 208 -216 Past service cost -49 0 Benefits paid/paid-up policies -72 -53 The remeasurements in 2014 were mainly due to a fall in market interest rates/the discount rate. Due to life expectancy adjust- Disposals of businesses -12 0 ments to the pensions of current employees in the plan, as well as changes to the rules on disability pensions that came into force Remeasurements 366 -116 in 2014, a NOK 49 million past service adjustment was recognised. Gross pension liabilities at 31 Dec. (incl. employers’ NICs) 2,348 1,972 Sensitivity analysis for a +/- 0.5% percentage point change in the discount rate Breakdown of defined benefit pension liabilities Increase in pension liabilities if the discount rate falls 224 172 Funded pension liabilities 2,044 1 718 Fall in pension liabilities if the discount rate rises -196 -151 Unfunded pension liabilities 304 255 Gross pension liabilities at 31 Dec. 2,348 1,972 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. Change in gross pension plan assets Fair value of pension plan assets at 1 Jan. 1,764 1,552 Assumptions used to determine pension liabilities at 31 Dec. Expected return on pension plan assets 73 61 Discount rate 2.30% 4.10% Remeasurements 158 100 Annual wage growth 2.50% 3.50% Pension contributions 96 89 Increase in the National Insurance Scheme’s basic amount (”G”) 2.50% 3.50% Disposals of businesses -8 0 Annual indexing of pensions 1.75% 2.75% Conversion of subordinated loan to paid-in capital 40 0 Expected average remaining years of service (funded) 9.2 years 9.9 years Benefits paid/paid-up policies -51 -38 Expected average remaining years of service (unfunded) 4.9 years 5.2 years Fair value of pension plan assets at 31 Dec. 2,071 1,764 Staff turnover in % 100% by age of 64 100% by age of 64
Net pension liabilities at 31 Dec. 277 208 Assumptions used to calculate the pension expense for the year Discount rate 4.10% 3.80% Pension fund receivables recognised on statement of financial position 17 138 93 Annual wage growth 3.50% 3.50% Pension liabilities recognised on statement of financial position 21 415 301 Increase in the National Insurance Scheme’s basic amount (”G”) 3.50% 3.50% Net pension liability recognised at 31 Dec. 277 208 Annual indexing of pensions 2.75% 2.75%
Estimates Distribution of the pension scheme assets by investment category at 31 Dec. Actual return on pension plan assets in previous year 115 175 Property funds 10% 8% Interest-bearing financial instruments 49% 51% Shares 35% 38% Other 6% 3% Total 100% 100%
Pension plan assets consist of instruments traded on a stock exchange or funds that publish daily market prices.
AGDER ENERGI ANNUAL REPORT 2014 72 AGDER ENERGI ANNUAL REPORT 2014 73 2014 2013 Financial hedges mainly consist of loans and interest rate swaps. When managing the Group’s interest rate risk, these two types Number of people covered by the pension plans of financial instruments are assessed together, and they are also viewed in the context of the Group’s other interest rate risks; see Defined benefit plan: current employees 499 541 Note 28. In the financial statements, loans are measured at amortised cost, whereas interest rate swaps are measured at fair value Defined benefit plan: accrued entitlements and retired employees 1,161 1,146 through profit or loss. This can cause fluctuations in the Group’s reported profit or loss, without it reflecting its overall financial Defined contribution plan: current employees 608 982 performance. There are some minor exceptions to this symmetrical treatment; see Note 29 on accounting hedges. Current employees entitled to public sector AFP, and early retirees 381 418 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.
NOTE 23 INTEREST-BEARING LIABILITIES The table below shows the carrying amount and fair value of the Group’s financial instruments, with the exception of trade debtors and payables. (Amounts in NOK millions) 2014 2013 Interest-bearing non-current liabilities (Amounts in NOK millions) Note Carrying Fair Carrying Fair Bonds 5,557 3,876 amount value amount value Liabilities to financial institutions 1,558 2,055 2014 2014 2013 2013 Total 7,115 5,931 Financial assets at fair value through profit or loss Derivatives 26 864 864 1,022 1,022 Interest-bearing current liabilities Total available-for-sale assets 864 864 1,022 1,022 Commercial paper 300 900 Overdraft with cash pooling arrangement 84 84 Available-for-sale assets Current portion of non-current liabilities (principal repayments due within one year) 800 750 Shares 17 31 31 31 31 Other interest-bearing current liabilities 0 3 Total available-for-sale assets 31 31 31 31 Total 1,184 1,737 Loans and receivables at amortised cost The fair value of the Group’s interest-bearing liabilities is described in Note 25. All of the above statement of financial position Loans to associates 17 123 123 201 201 items are carried at amortised cost in accordance with IAS 39. Note 28 sets out further details of interest rates, durations, liqui- Other non-current receivables 17 163 163 205 205 dity risk, credit facilities, etc. Some loans form part of hedging relationships in accordance with IAS 39. See Note 29 for a more Cash and cash equivalents 19 54 54 33 33 detailed description. Total loans and receivables at amortised cost 340 340 439 439
Financial liabilities at fair value through profit or loss NOTE 24 OTHER NON-INTEREST-BEARING CURRENT LIABILITIES Non-current liabilities, obligation to provide free electricity and pay compensation 21 592 592 521 521 (Amounts in NOK millions) 2014 2013 Non-current liabilities, cash-settled contracts 21 77 77 105 105 Trade payables 292 414 Derivatives 26 710 710 464 464 Unpaid government taxes and duties, tax deducted at source, etc. 296 323 Total financial liabilities at fair value through profit or loss 1,379 1,379 1,090 1,090 Share of non-current liabilities at joint arrangements 121 140 Other current liabilities 528 447 Financial liabilities at amortised cost Total 1,237 1,324 Bonds 23 6,357 6,385 4,632 4,670 Liabilities to financial institutions 23 1,558 1,668 2,045 2,087 Commercial paper 23 300 300 900 900 Overdraft and other interest-bearing current liabilities 23 84 84 91 91 NOTE 25 FINANCIAL INSTRUMENTS Total financial liabilities at amortised cost 8,299 8,437 7,668 7,748
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. NOTE 26 DERIVATIVES 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; Agder Energi has both independent derivatives (simply referred to as derivatives) and embedded derivatives. 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, The embedded derivatives are components of perpetual contractual obligations to supply free electricity and pay compensation, they can therefore cause great volatility in the Group’s reported statement of financial position and net income, without it reflecting as well as certain non-current cash-settled contracts. These contracts are judged to fall entirely within the scope of IAS 39, and the overall financial results. 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.
AGDER ENERGI ANNUAL REPORT 2014 74 AGDER ENERGI ANNUAL REPORT 2014 75 In the table below, derivatives with positive and negative fair values are shown separately by portfolio. The portfolios are described NOTE 27 FAIR VALUE OF FINANCIAL INSTRUMENTS 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. There can be significant discrepancies between accounting values The below table sets out to what extent observable market data are used to value financial instruments measured at fair value. and underlying financial values, as the portfolios contain both contracts that are covered by IAS 39 and ones that are not. A small The financial instruments have been broken down into the various categories used by the Group for classification purposes. 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 (Amounts in NOK millions) Note Total Level 1* Level 2** Level 3*** 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- 2014 nises equivalent contracts with respect to the retail customers covered by the electricity trading products, but with the opposite Derivatives 26 864 0 864 0 exposure of the NASDAQ positions. This symmetrical treatment means that these financial positions do not have any impact on Shares and ownership interests 17 31 2 0 29 Agder Energi’s income statement, but it does result in an increase in total assets, as the gross value of derivatives on the state- Total assets 895 2 864 29 ment of financial position rises. At the end of 2014, the Group had derivatives worth NOK 0 (0) million that were assets in relation to NASDAQ and liabilities in relation to customers. Similarly, it had derivatives worth NOK 109 (140) million that were assets in Supply of free electricity and compensation 21 592 0 0 592 relation to customers and liabilities in relation to NASDAQ. In total the value of these positions is higher than the NOK 1 (8) million Cash-settled contracts 21 77 0 0 77 in electricity derivatives shown as liabilities in the table below. That is because Agder Energi has other positions at NASDAQ that Derivatives 26 710 0 710 0 are offset against the abovementioned positions when they are settled. These NASDAQ positions are therefore presented net on Total liabilities 1,379 0 710 669 the statement of financial position. 2013 Derivatives 26 1,022 0 1,022 0 (Amounts in NOK millions) Note Change 2014 2013 Shares and ownership interests 17 31 5 0 26 Derivative assets Total assets 1,053 5 1,022 26 Portfolio of cash-settled electricity contracts* 857 977 Currency derivatives, electricity sales 7 9 Supply of free electricity and compensation 21 521 0 0 521 Interest rate swaps 0 36 Cash-settled contracts 21 105 0 0 105 Total derivatives 864 1,022 Derivatives 26 464 0 464 0 Total liabilities 1,090 0 464 626 Derivative liabilities: Portfolio of cash-settled electricity contracts* 1 8 * Level 1 assets are financial instruments the fair values of which can be determined from market prices in an active market. Currency derivatives, electricity sales 496 321 ** Level 2 assets are financial instruments the fair values of which are estimated using a valuation model that only uses market data as its inputs. Interest rate swaps 213 135 *** 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. Total derivatives 710 464 In 2014 the Group recognised a net loss of NOK -40 million on level 3 financial instruments.
Nettoverdi derivater Finansiell kraftportefølje* 6 -113 856 969 Level 3 assets and liabilities at fair value* Valutainstrumenter, kraftomsetning 11 -178 -489 -312 Rentebytteavtaler** -114 -213 -99 (Amounts in NOK millions) Shares and Supply of free electricity Cash-settled Other Sum derivater 154 558 ownership interests and compensation contracts Opening balance at 01/01/2014 26 -521 -105 0 * Includes both the portfolio of financial production hedges and the retail customer portfolio. Gains and losses recognised in profit or loss 2 -71 28 0 ** For breakdown of net gain/loss on interest rate swaps, see table below. Additions 1 0 0 0 Closing balance at 31/12/2014 29 -592 -77 0
(Amounts in NOK millions) Note Change * Liabilities are shown with a minus sign. Unrealised gains and losses through profit or loss 11 -161 Gains and losses on cash flow hedges 29 -95 Gains and losses on fair value hedges 29 142 Net gain/loss on interest rate swaps -114
AGDER ENERGI ANNUAL REPORT 2014 76 AGDER ENERGI ANNUAL REPORT 2014 77 FAIR VALUE OF ENERGY DERIVATIVES MARKET RISK ARISING FROM ELECTRICITY PRICES
In measuring the fair value of energy derivatives, the following parameters and assumptions have been applied: Power generation portfolio Agder Energi’s hydroelectric power generation business is exposed to risks arising from fluctuations in prices and volumes, as both Electricity prices future prices and precipitation levels are unknown. The power generation portfolio aims to manage the market risks associated NASDAQ and other bilateral contracts are measured using a smooth forward curve based on the final price at the end of the re- with power generation. porting period. The prices used are discounted. The net exposure of the portfolio at any given time consists of expected future power generation, purchase and sale commitments Agder Energi has a number of perpetual supply contracts (compensation power), which are accounted for in accordance with IAS under long-term physical contracts, as well as contracts on NASDAQ and bilateral cash-settled contracts. Bilateral financial con- 39. The market value of these contracts has been calculated based on a 200 year term. NASDAQ market prices are applied for the tracts are only used to a limited extent. first five years. For subsequent periods, best estimates of future prices are used. Agder Energi enters into contracts and trades various cash-settled instruments in order to secure its revenues from electricity Foreign currency sales. This helps to stabilise revenues from one year to another, which is considered desirable on account of the great uncertainty For currency derivatives and contracts quoted in foreign currency, the calculation for the first five years is based on the exchange surrounding electricity prices. Hedging activities take into account both the Group’s risk profile and expected electricity prices. rate at the end of the reporting period and the associated forward exchange rates. For subsequent periods separate exchange For risk management purposes, cash-settled and physical contracts are considered together. rate assumptions are used. The physical contracts in the portfolio comprise contracts concluded on normal commercial terms, contracts to supply conces- Raw materials sion power and various contracts to supply free power and compensation power. The durations of the commercial contracts vary, For certain electricity contracts, the contract price is linked to the prices of various commodities. Valuations are based on the but they all expire by the end of 2030. The Group has perpetual agreements to supply compensation power, and the contracts to forward prices on the relevant commodity exchanges. If there are no quoted prices for the relevant time period, the commodity supply concession power are also perpetual. These perpetual contracts cover less than ten percent of the Group’s mean electricity prices are inflation-adjusted from the last quoted market price. generation.
CO2 Retail customer portfolio
CO2 contracts are valued using the forward price of emission quotas (EUAs) on NASDAQ and ICE. The retail market covers sales to private customers, state-owned entities and private companies. It includes both physical and cash-settled contracts. Physical contracts are mainly based on spot prices, variable prices or fixed prices. Electricity for immediate Interest rates use is purchased at the spot price. A number of the physical contracts are flexible in terms of the volumes delivered. Some of Energy derivatives are discounted by the market interest rate curve (swap curve). For the purpose of discounting perpetual supply the cash-settled contracts with retail customers are based on back-to-back contracts on NASDAQ or with other counterparties. contracts related to compensation power, a risk-adjusted nominal interest rate is used. Various managed electricity supply products are also offered to customers, which involve cash-settled trades on NASDAQ based on expected physical deliveries. FAIR VALUE OF CURRENCY AND INTEREST RATE DERIVATIVES The net exposure of the retail portfolio at any given time consists of sale contracts with prices that are fixed for varying lengths of Interest rate swaps, currency swaps and currency futures time, as well as contracts on NASDAQ and bilateral cash-settled contracts. The vast majority of the contracts expire in less than Interest rate and currency swaps, as well as currency futures, are valued by discounting future cash flows to their present value. three years. The portfolio shall minimise electricity price risk and hedge the value of future revenues from this area. The retail Expected cash flows are calculated and discounted by looking at the observed market interest rates on the various currencies portfolio maintains a net long position in cash-settled contracts. (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. 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 NOTE 28 FINANCIAL RISK MANAGEMENT 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 Agder Energi’s business activities expose it to market risk, credit risk and liquidity risk. There follows a more detailed description consumption, Agder Energi calculates the volumes likely to be needed, and which consequently need to be hedged. of these risks, and of how they are managed. Trading portfolios MARKET RISK Agder Energi has various trading portfolios which are managed independently of its expected power generation. All trading con- Market risk primarily consists of electricity price risk, currency risk and interest rate risk. Risk management at Agder Energi focuses tracts are measured at fair value. on entire portfolios of contracts, and not specifically on contracts that fall within the scope of IAS 39. VaR calculations are the most important tool used to manage the risk exposures arising from these portfolios. The financial exposure There are internal guidelines on exposure to market risk, for both the hedging and trading portfolios. Agder Energi’s back and at any given time is limited in relation to the power generation portfolio. Electricity trading authorisations are expressed in terms middle office staff have been given responsibility for continuously monitoring compliance with limits on risk exposure. Trading in of limits on potential losses. At an operating level, risk management focuses on minimising any losses. both cash-settled and physical contracts is monitored systematically and reported regularly, both to senior management and to the Group’s risk management section.
AGDER ENERGI ANNUAL REPORT 2014 78 AGDER ENERGI ANNUAL REPORT 2014 79 Electricity price sensitivity Impact on profit of interest rate fluctuations (Amounts in NOK millions) -1 percentage point 1 1 percentage point Impact on profit of gains and losses on assets and liabilities at fair value in the event of electricity price fluctuations Impact on profit before tax -95 87 (Amounts in NOK millions) Change in electricity prices Gains and losses on hedging instruments, cash flow hedges -68 61 -10% 10% Total impact on comprehensive income (before tax) -163 148 Total impact on profit before tax 340 -340 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 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 the yield curve. It also shows the impact on other comprehensive income and expenses as a result of certain interest rate deriva- liabilities in the event of a parallel 10% decrease/increase in forward electricity prices. The analysis only covers assets and liabilities tives being designated as cash flow hedges. All impacts are shown before tax. The analysis only covers interest-bearing liabilities measured at fair value in accordance with IAS 39. measured at amortised cost under IAS 39 and interest rate derivatives.
MARKET RISK – CURRENCY Breakdown of interest rates by currency Agder Energi is exposed to currency risk through its electricity generation business and retail business. 2014 2013 Nominal average interest rate, NOK 3.7% 4.2% The biggest exposure to currency risk arises from physical electricity sales by the electricity generation business. Nord Pool con- Nominal average interest rate, Euros 3.1% 3.2% tracts 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. Fixed-interest periods within loan portfolio (Amounts in NOK millions) 1-3 years 3-5 years Over 5 years Total Exposure to currency risk arising from electricity generation over the coming years is hedged in accordance with adopted limits NOK-denominated loans 732 1,331 1,797 3,860 on risk exposure. Exchange rate hedging can be done separately from electricity price hedging. Euro-denominated loans 0 410 775 1,185 Total 732 1,741 2,572 5,045 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 CREDIT RISK parent company and is managed at Group level. 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. An independent risk management section is responsible for checking that trading in foreign exchange instruments adheres to the The trading of financial instruments also gives rise to counterparty risk. The majority of cash-settled electricity contracts are adopted strategies and limits on risk exposure. 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 The exchange rate sensitivity of currency derivatives is shown in the table below: 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 Impact on profit of gains and losses on assets and liabilities at fair value in the event of exchange rate fluctuations and duration. (Amounts in NOK millions) Change in exchange rate (NOK/EUR) -5% 5% In order to limit credit risk, bank guarantees are sometimes demanded when a contract is signed. Parent company guarantees are Total impact on profit before tax 352 -352 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 aged analysis of customers is continuously monitored. If a counterparty 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 encounters financial difficulties, special procedures are followed. Historically Agder Energi’s losses on its receivables have been low. 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, foreign currency loans, Limits on exposure to individual counterparties are regularly monitored and reported. Total counterparty risk is calculated and electricity derivatives and long-term contracts to sell electricity measured at fair value under IAS 39. reported, as well as being consolidated at Group level.
MARKET RISK – INTEREST RATES The maximum credit risk arising from energy derivatives is virtually identical to the carrying amount on the statement of financial The vast majority of the Group’s exposure to interest rate risk arises from its debt portfolio. The Group also has an offsetting exposure position. For energy derivatives, the credit risk associated with all contracts traded through NASDAQ is limited by the fact that to interest rate fluctuations through the deductible interest rate for resource rent purposes, and through the reference interest rate counterparties provide cash collateral or bank guarantees. For bilateral contracts there is not normally any such security. 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. 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 Sensitivity to interest rates is measured by modified duration within a defined period of 1 to 5 years. Average duration at the close are generated, as well as from variations in margin requirements on futures traded through NASDAQ. The capital markets consider of the year was 3.2 years. The chosen strategy aims to minimise net financial expenses over the long term, while reducing risk to Agder Energi to be a low-risk borrower, and the Group has good access to credit. Agder Energi mainly covers its borrowing require- 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 ments through the Norwegian commercial paper and bond markets, but it also uses the banking market to some extent. The Group distribution business and the deductible interest rate used to calculate the resource rent tax payable by the power generation also has credit facilities with banks to backstop its commercial paper programme. The credit facilities would provide sufficient time business. The group finance department is responsible for taking positions. Exposure to interest rate risk is measured. Current to make alternative financing arrangements in the event of the commercial paper market no longer being an attractive source of exposure to interest rate risk in relation to the limit specified in the finance strategy is reported monthly to the CFO. Interest rate financing. A bank guarantee has been set up to cover significant fluctuations in NASDAQ’s margin requirements on futures. exposure is also reported to the Group’s Board of Directors in the risk report.
AGDER ENERGI ANNUAL REPORT 2014 80 AGDER ENERGI ANNUAL REPORT 2014 81 Liquidity risk is assessed regularly, and the Group Finance department is responsible for ensuring that the Group has sufficient liquidity For its other financial hedging relationships, the Group does not satisfy the extensive documentation requirements specified in 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. the IFRS rules on hedge accounting.
Maturity structure of liabilities Amounts in NOK millions 2014 2013 (Amounts in NOK millions) Carrying amount Due in Due in Due in Due in Due in Due after Unspecified 2014 2015 2016 2017 2018 2019 2019 Fair value of derivatives designated as hedging instruments Bonds and liabilities to financial institutions 7,915 800 1,481 1,277 978 1,324 2,055 0 Derivatives designated as fair value hedges 189 47 Commercial paper and overdraft facility 384 384 0 0 0 0 0 0 Derivatives designated as cash flow hedges -112 -17 Total interest-bearing liabilities 8,299 1,184 1,481 1,277 978 1,324 2,055 0 Total fair value of derivatives designated as hedging instruments 77 30
Financial liabilities at fair value Fair value hedges through profit or loss 1,379 213 165 137 52 20 6 786 Gains/losses on derivatives used as fair value hedges 142 44 Other non-interest-bearing current liabilities 1,237 1,237 0 0 0 0 0 0 Gains/losses on hedged items in fair value hedges, hedged risk -142 -44 Total non-interest-bearing liabilities 2,616 1,450 165 137 52 20 6 786 Hedge ineffectiveness recognised in profit or loss 0 0
Total 10,915 2,634 1,646 1,414 1,030 1,344 2,061 786 Cash flow hedges Gains and losses on foreign currency loans recognised in statement of comprehensive income 0 -144 Breakdown of loans by currency Gains and losses on derivatives recognised in statement of comprehensive income -95 5 (Amounts in NOK millions) 2014 2013 Total gains and losses on hedging instruments recognised in statement of comprehensive income -95 -139 NOK-denominated loans* 6,780 6,259 Euro-denominated loans 1,519 1,409 Cash flow hedge ineffectiveness recognised in profit or loss 0 0 Total 8,299 7,668
* 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. NOTE 30 MORTGAGED ASSETS, LIABILITIES AND GUARANTEES ISSUED
Credit facilities with banks Mortgages The parent company has a long-term NOK 1,000 million committed facility with a bank to back-stop its short-term borrowing programme Agder Energi AS has no mortgage debt. Subsidiaries held NOK 3 million in mortgage debt. In addition, NOK 22 million of lease in the event of problems in financial markets. The parent company has also set up a cash pooling arrangement with an associated liabilities are classified as financial leases and hence included on the statement of financial position. NOK 500 million overdraft facility. At the close of the year, the Group had NOK 1,416 million in total in unused credit facilities. Liabilities and guarantees issued Agder Energi has no covenants relating to financial key figures in its loan agreements. The Group has restricted cash provided as collateral for cash-settled electricity trading. NOTE 29 ACCOUNTING HEDGES Agder Energi’s loan agreements contain negative pledge clauses, which also cover its subsidiaries. This means that any new security Agder Energi has various interest swaps linked to specific loans that serve as cash flow hedges, i.e. they are variable-to-fixed interests require the consent of the lenders. interest rate swaps. The face value of the hedged items is 91 million euros. Agder Energi has NOK 598 million in off-statement of financial position bank guarantees. NOK 346 million of this relates to a In addition, the Group has two combined interest rate and currency swaps, which qualify as accounting hedges. The Group has cash-settled power exchange agreement, NOK 48 million to electricity trading, NOK 52 to tax deducted at source and NOK 152 issued a 7-year, USD-denominated fixed-interest bond, which matures in 2017. In relation to this, it has entered into swap agreements million to contractual guarantees. 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 At the close of the year, the parent company had issued guarantees worth NOK 24 million in relation to subsidiaries’ external liabilities. 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 Contractual obligations 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. At any given time the Group has several ongoing investment projects that involve obligations to fulfil contracts with subcontractors. 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 The Group also has obligations arising from its ownership interests in joint arrangements and water management associations; part of the swap is designated a cash flow hedge. cf. Note 16.
In addition to the above, until the end of 2013 Agder Energi had designated 168 million euros worth of loans as cash flow hedges Agder Energi Varme has entered into a long-term contract to buy heating energy from the municipally-owned enterprise Returkraft. of highly probable future revenues from electricity sales. As of 2014, Agder Energi has chosen not to meet the documentation The contract, which runs for 20 years with an optional extension, commits Agder Energi Varme to buying an agreed volume from requirements in relation to accounting for these foreign currency loans as hedges. Consequently, hedge accounting has been Returkraft’s waste-to-energy plant in Kristiansand from 2010 onwards. 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.
AGDER ENERGI ANNUAL REPORT 2014 82 AGDER ENERGI ANNUAL REPORT 2014 83 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 In 2014, no separate fees were paid to the audit committee appointed by the Board. 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 64 million was expensed in relation to these lease contracts in 2014. In 2014, Board members’ deputies received NOK 11,667 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 NOTE 31 CONTINGENT LIABILITIES AND EVENTS AFTER THE END OF THE REPORTING PERIOD the above figures. No Board members have any loans from the company.
Agder Energi’s operations are extensive, and it can therefore get involved in major and minor disputes from time to time. Senior management team (Amounts in NOK) Basic salary Other Total taxable Pension The Central Tax Office for Large Enterprises has questioned the tax treatment of one of Agder Energi Vannkraft’s contracts to benefits (1) income expense supply free electricity. The company has commented on, and responded to, the tax office’s preliminary evaluation. Under the tax Tom Nysted – CEO 2,864 131 2,995 1,052 office’s interpretation of the rules, the annual deduction from resource rent will be cut. Pernille K. Gulowsen – CFO 1,698 109 1,807 627 Jan Tønnessen – Business Area Director, Hydroelectric Power 1,693 110 1,803 80 After the completion of the project, disputes have arisen over the final accounts for Skarg power station and the structural work at Edvard Lauen – Business Area Director, Energy Management 2,135 130 2,265 898 Brokke Nord. Otra Kraft DA, which owns the installations, has been unable to reach agreement on the final account of two suppliers. Steffen Syvertsen – Business Area Director, Marketing and Otra Kraft has rejected both of the suppliers’ claims. The claims appear to be undocumented, and no provision has been made for Business Development (from 1 May) 1,171 74 1,245 47 them in Agder Energi’s financial statements. If the suppliers were to be successful in their claims, it would increase Agder Energi’s Frank Håland – Director of HR and Shared Services 1,685 110 1,795 72 share of the project cost by approximately NOK 115 million. Unni Farestveit – Director of Corporate Social Responsibility and Corporate Development (until 20 May) 635 43 678 310 There have not been any incidents during 2015 that have a significant impact on Agder Energi’s financial position and results. Hans Jakob Epland – Business Area Director, Market (until 20 May) 680 62 742 32 Svein Are Folgerø – Business Area Director, Network (until 20 May) 589 40 629 35
1) Other benefits include mileage allowance, mobile phone and other minor benefits. A flat in Kristiansand has been made available to the CEO. NOTE 32 MANAGEMENT COMPENSATION, ETC.
Board of Directors Loans/guarantees issued and share option schemes The compensation of the Board of Directors and Corporate Assembly for 2014 was NOK 1,102,500 and NOK 10,000 respectively. No members of the senior management team have been granted loans or had guarantees issued on their behalf by Agder Energi. The equivalent figures in 2013 were NOK 1,190,000 and NOK 10,000 respectively. The Board members are not entitled to any Agder Energi does not have any share option schemes for management or other employees. special termination benefits such as bonuses, profit-sharing or options. Bonuses and pension plans All of the stated figures exclude employers’ NICs. The senior management team has no bonus arrangement for 2014.
Board of Directors 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 (Amounts in NOK) Directors’ fees Attendance at Board meetings qualifying salary is based on his regular salary, and the cost of his pension includes retirement pension benefits in excess of 12G, which Lars Erik Torjussen, Chair (from 23 May 2014) 179,167 9 of 9 are not covered by the National Insurance Scheme or the public sector occupational pension plan. In order to receive this pension, he Sigmund Kroslid, Chair (until 23 May 2014) 100,000 4 of 4 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 Katja Lehland, Deputy Chair (from 23 May 2014) 133,333 5 of 9 and the CEO can decide that he should vacate his position as CEO. The notice period is six months. Bente Z. Rist, Board member 110,000 9 of 9 Leif Atle Beisland, Board member (from 23 May 2014) 82,500 5 of 5 For other members of the senior management team, the notice period is also six months. There are no special agreements on termi- Steinar Bysveen, Board member* 0 8 of 9 nation compensation. The executive directors Pernille K. Gulowsen and Edvard Lauen are entitled to a pension equivalent to 66% of Steinar Asbjørnsen, Board member* 0 8 of 9 their qualifying salaries on retirement at the age of 67. In order to receive this pension, he must have 30 years of qualifying service. Elisabeth Morthen, Board member (until 23 May 2014) 45,833 4 of 4 These two employees have pension agreements which state that their qualifying salaries are based on their regular salaries, and the Marit Grimsbo, Board member* (from 23 May 2014) 0 5 of 5 cost of their pensions includes retirement pension benefits in excess of 12G, which are not covered by the National Insurance Scheme Jon Vatnaland, Board member* (until 18 September 2014) 0 6 of 6 or the public sector occupational pension plan. Jan Tønnessen, Steffen Syvertsen and Frank Håland have defined contribution pension Siw Linnea Poulsson, Board member* (from 18 September 2014) 0 3 of 3 plans in line with the Group’s standard pension plan. Johan Ekeland, employee representative 110,000 9 of 9 Øyvind Østensen, employee representative 110,000 9 of 9 Gro Granås, employee representative 110,000 9 of 9 Oddvar E. Berli, employee representative (until 23 May 2014) 45,833 4 of 4 Tore Kvarsnes, employee representative (from 23 May 2014) 64,167 5 of 5
* Employees of Statkraft are not paid Directors’ fees.
AGDER ENERGI ANNUAL REPORT 2014 84 AGDER ENERGI ANNUAL REPORT 2014 85 NOTE 33 RELATED PARTIES The table below shows the acquisition statement of financial position for new businesses acquired in 2014. Transactions relating to the buy-out of non-controlling interests are not included in the table. 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. Calculation of net assets and goodwill at the acquisition date for acquisitions in 2014 (Amounts in NOK millions) Carrying amounts (IFRS) Asset write-up Acquisition statement Agder Energi’s largest shareholder is Statkraft Industrial Holding, which owns 45.525% of the shares in the company. Sales to the at acquisition date of financial position Statkraft Group amounted to NOK 26 million in 2014 and NOK 13 million in 2013. Purchases from companies in the group amounted Deferred tax assets 9 0 9 to NOK 37 million in 2014 and NOK 34 million in 2013. Statkraft Industrial Holding AS is also a joint owner of several of the joint Intangible assets 4 0 4 arrangements in which Agder Energi holds an ownership interest. Trade payables and other current liabilities -1 0 -1 Net assets 12 0 12 Agreements have also been signed with several cultural institutions in shareholder municipalities in Agder. Non-controlling interests 0 Net assets acquired 12 All transactions with related parties are carried out on an arm’s length basis. Goodwill 0 Total net assets acquired plus goodwill 12
Cash consideration for shares 1 NOTE 34 ACQUISITIONS, DISPOSALS AND BUY-OUT OF NON-CONTROLLING INTERESTS Value of shares in acquirees held prior to acquisition 1) 0 Total consideration 1 Acquisitions The Group made the following acquisitions in 2014 and 2013. All acquisitions are accounted for using the acquisition method. The In 2014 Agder Energi recognised a gain of NOK 11 million as a result of the fair value of assets and liabilities transferred exceeding list below does not include capital increases or other financing from Agder Energi. the consideration paid for them.
Acquisitions in 2014 Disposals Company Country Interest Ownership interest Business activities In 2014, Agder Energi sold Otera Elektro AS. Discontinued operations therefore refers to Otera Elektro. The agreement to sell the bought in 2014 at 31/12/2014 company was signed in April 2014, and the transaction was completed in June. Baltic Hydroenergy AS Norway 34.1 100.0 Hydroelectric Power Cleanpower AS Norway 100.0 100.0 Sale of turbines The table below shows how the figure for profit from discontinued operations is calculated, broken down into the operating per- formance until disposal and the gain/loss on disposal: The total cost of ownership interests acquired in 2014 was NOK 14 million. (Amounts in NOK millions) 2014 2013 Acquisitions in 2013 Operating revenues 147 499 Company Country Interest Ownership interest Business activities Operating expenses -163 -537 bought in 2013 at 31/12/2013 Operating profit -16 -38 Bjerkreim Vind AS Norway 1.2 51.2 Wind power Net financial income/expenses 0 -1 Enfo Energy AS Norway 100.0 100.0 Small generator Profit before tax -16 -39 technology Tax expense 3 4 Otera AB Sweden 9.0 76.0 Contracting Net income -13 -35 PacketFront Solutions AB Sweden 100.0 100.0 Telecommunications Gain on disposal of discontinued operations -20 0 Siemens Enterprise Communications AS Denmark 100.0 100.0 Telecommunications Tax on gain on disposal of discontinued operations 0 0 Smart Grid Norway AS Norway 24.3 60.0 Smart grids Net income from discontinued operations -33 -35 Verdisikring Safety AS Norway 20.0 71.0 Alarm systems Net cash provided by operating activities -1 0 Net cash provided by/used in investing activities 11 -1 The total cost of ownership interests acquired in 2013 was NOK 77 million. Net cash provided by financing activities 0 12 Net cash flow from discontinued operations 10 11
In 2013, Agder Energi’s disposals were negligible.
AGDER ENERGI ANNUAL REPORT 2014 86 AGDER ENERGI ANNUAL REPORT 2014 87
NOTE 35 GROUP STRUCTURE Subsidiaries Ownership interest* Country Smart Grid Norway AS 63.8 Norway The table below shows the companies in the Agder Energi Group at 31 December 2014. Verdisikring Safety AS 100.0 (63.8) Norway Meventus AS 95.0 Norway Subsidiaries Ownership interest* Country Meventus ApS 100.0 (95.0) Denmark Agder Energi Nett AS 100.0 Norway Meventus AB 100.0 (95.0) Sweden Agder Energi Vannkraft AS 100.0 Norway ResiTec AS 100.0 Norway Agder Energi Kraftforvaltning AS 100.0 Norway Netsecurity AS 89.4 Norway LOS AS 100.0 Norway Enfo Energy AS 100.0 Norway Otera AS 100.0 Norway Enfo Technology AS 100.0 Norway Otera Infra AS 100.0 Norway Enfo Nordic AS 100.0 Norway Otera XP AS 100.0 Norway Enfo Consulting AS 100.0 Norway Otera AB 76.0 Norway Otera Ratel AB 100.0 (76.0) Sweden * Figures in brackets indicate Agder Energi AS’s indirect ownership interest in companies where it holds minority interests through intermediate companies. Otera Ratel AS 100.0 (76.0) Norway Agder Energi Varme AS 100.0 Norway Norsk Varme- og Energiproduksjon AS 100.0 Norway Non-controlling interests Baltic Hydroenergy AS 100.0 Norway Most of the Group’s non-controlling interests relate to the three subsidiary groups Otera AB, NEG AS and NetNordic Holding AS. UAB Baltic Hydroenergy 100.0 Lithuania Their turnover and profit are shown in the table below, together with a summary statement of financial position. JSC Latgales Energetika 64.0 Latvia Innovasjon og FoU AS 100.0 Norway Bjerkreim Vind AS 51.2 Norway (Amounts in NOK millions) Otera AB NEG AS NetNordic Holding AS Stoaveien 14 AS 100.0 Norway 2014 2013 2014 2013 2014 2013 Stoa 192 AS 100.0 Norway Operating revenues 284 261 210 225 280 218 Stoa 234 AS 100.0 Norway Net income 21 20 7 13 15 6 Trøngsla 8 AS 100.0 Norway Non-controlling interest’s share of net income 5 5 2 4 7 3 Åneveien 9 AS 100.0 Norway Assets 98 104 128 129 118 101 Agder Energi Venture AS 100.0 Norway Liabilities 30 46 98 94 79 77 NEG AS 67.1 Norway Equity 67 58 30 35 39 24 Norsk Energigjenvinning AS 100.0 (67.1) Norway Non-controlling interest’s share of equity 16 14 10 11 18 11 Neg Skog AS 95.0 (63.7) 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 54.6 Norway NetNordic Bedriftskommunikasjon AS 100.0 (54.6) Norway NetNordic Bredbånd AS 100.0 (54.6) Norway NetNordic Services AS 100.0 (54.6) Norway NetNordic Finland OY 100.0 (54.6) Finland NetNordic AB 100.0 (54.6) Sweden NetNordic Denmark AS 100.0 (54.6) Denmark NetNordic Enterprise Communications AS 100.0 (54.6) 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
AGDER ENERGI ANNUAL REPORT 2014 88 AGDER ENERGI ANNUAL REPORT 2014 89
The Arendal river system in Aust-Agder.
AGDER ENERGI ANNUAL REPORT 2014 90 AGDER ENERGI ANNUALANNUAL REPORTREPORT 20142014 91 AGDER ENERGI AS FINANCIAL STATEMENTS
CONTENTS Click on the text to go to the page of your choice
Income statement 94 Statement of financial position 95 Statement of cash flow 96 Accounting principles 97 Auditor´s report 110
NOTES Note 1 Intra-group transactions and balances 99 Note 2 Employee benefits, management compensation, etc. 99 Note 3 Pensions 100 Note 4 Auditor’s fee 102 Note 5 Other operating expenses 102 Note 6 Financial income and expenses 102 Note 7 Tax 104 Note 8 Intangible assets 105 Note 9 Property, plant and equipment 105 Note 10 Other non-current financial assets 105 Note 11 Shares in subsidiaries and associates 106 Note 12 Cash and cash equivalents 107 Note 13 Equity 107 Note 14 Interest-bearing liabilities 107 Note 15 Other non-interest-bearing current liabilities 108 Note 16 Provisions 108 Note 17 Market and financial risk 108 Note 18 Contingent liabilities 109 The district heating plant in Arendal Note 19 Mortgaged assets, liabilities and guarantees issued 109 supplies the town with environmentally friendly energy. The areas are linked – the back arrow at the bottom of the page takes you to the previous page
AGDER ENERGI ANNUAL REPORT 2014 92 AGDER ENERGI ANNUALANNUAL REPORTREPORT 20142014 93 INCOME STATEMENT STATEMENT OF FINANCIAL POSITION
(Amounts in NOK millions) Note 2014 2013 (Amounts in NOK millions) Note 2014 2013
Other operating revenues 1 203 187 Intangible assets 8 4 7 Total operating revenues 203 187 Property, plant and equipment 9 56 25 Investments in subsidiaries 11 3,285 3,269 Employee benefits 1, 2, 3 -178 -195 Investments in associates 11 403 273 Depreciation and impairment losses 8, 9 -21 -22 Other non-current financial assets 10 6,648 5,803 Other operating expenses 1, 4, 5 -154 -117 Total non-current assets 10,396 9,377 Total operating expenses -352 -334 Receivables 1 1,691 1,392 Operating profit -149 -147 Cash and cash equivalents 12 224 544 Total current assets 1,915 1,936 Financial income 1, 6 1,967 1,609 Financial expenses 1, 6 -687 -440 TOTAL ASSETS 12,311 11,313 Net financial income/expenses 1,279 1,169 Paid-in capital 13 1,907 1,907 Profit before tax 1,131 1,022 Retained earnings 13 821 656 Total equity 2,728 2,563 Tax expense 7 -243 -229 Deferred tax 7 27 4 Net income 888 793 Provisions 3, 16 160 123 Interest-bearing non-current liabilities 14 7,687 6,588 Allocation of profit: Total non-current liabilities 7,874 6,715 Proposed dividends 13 700 707 Transferred to other reserves 13 188 86 Interest-bearing current liabilities 14, 17 300 900 Total appropriations 888 793 Tax payable 7 94 190 Other non-interest-bearing current liabilities 1, 13, 15 1,315 945 Earnings per share/Earnings per share, diluted (NOK) 329 294 Total current liabilities 1,709 2,035
TOTAL EQUITY AND LIABILITIES 12,311 11,313
Kristiansand, 26 March 2015 Board of Directors of Agder Energi AS
Lars Erik Torjussen Katja Lehland Bente Z. Rist Leif Atle Beisland Steinar Bysveen Chair Deputy Chair
Marit Grimsbo Steinar Asbjørnsen Siw Linnea Poulsson Johan Ekeland Øyvind Østensen
Tore Kvarsnes Gro Granås Tom Nysted CEO
AGDER ENERGI ANNUAL REPORT 2014 94 AGDER ENERGI ANNUAL REPORT 2014 95 STATEMENT OF CASH FLOWS ACCOUNTING PRINCIPLES
(Amounts in NOK millions) Note 2014 2013 The financial statements have been pre- are incurred. This means that expenses Foreign currency and currency sented in compliance with the Norwegian associated with intangible assets are instruments Cash flow from operating activities Accounting Act and generally accepted included on the statement of financial The finance department manages the Profit before tax 1,131 1,022 accounting principles. position if it is considered probable that Group’s overall exposure to currency risk. Depreciation and impairment losses 6, 8, 9 21 47 future economic benefits attributable to To some extent Agder Energi AS acts as a Cash flows from investments in subsidiaries -1,319 -1,249 Accrual, classification and measure- the assets will flow to the company and it counterparty within the Group when it does Tax paid -177 -171 ment principles has been possible to reliably measure the not make sense to hedge subsidiaries’ expo- Change in net working capital, etc. 98 -32 In accordance with generally accepted acquisition cost of the asset. sure to currency risk directly in the market. Net cash provided by operating activities -246 -383 accounting principles, the financial state- Where the parent company has acted as a ments are based on the historical cost, Property, plant and equipment counterparty in conjunction with the need Investing activities revenue recognition, matching, conserva- Property, plant and equipment is depreci- of subsidiaries to hedge their currency risk Purchase of property, plant, equipment and intangible assets -18 -5 tism, hedging and congruence principles. In ated in a straight line over its anticipated exposure arising from electricity sales, the Acquisitions/financial investments and equity investments in subsidiaries -28 -167 the event of uncertainty, best judgement is useful life. Maintenance on property, plant contracts are accounted for as part of the Net change in loans -933 -237 applied. Financial statements are prepared and equipment is considered an operat- Group’s currency hedging activities. These Sale of property, plant, equipment and intangible assets 1 - using uniform principles that are applied ing expense, while upgrades and replace- contracts are presented on the statement Sale of businesses/financial assets 5 8 consistently over time. The financial state- ments are added to the acquisition cost of financial position at fair value, with Net cash used in investing activities -973 -401 ments have been prepared on the assump- of the asset and are depreciated together changes in fair value recognised through tion of the business being a going concern. with the asset. The distinction between profit or loss. Financing activities maintenance and upgrades/improvements New long-term borrowings 2,325 1,933 Recognition of revenues and expenses is judged on the basis of the condition of Receivables Repayment of long-term borrowings -1,336 -1,833 Revenues and expenses are recognised the asset when it was acquired. Trade debtors and other receivables are Net change in current interest-bearing liabilities -600 500 in profit or loss when they are earned/ presented on the statement of financial Intra-group distributions received 1,301 1,128 incurred. Revenues from the sale of goods Non-current financial investments position at their nominal value less antici- Intra-group distributions paid out -84 -108 are recognised on delivery. Revenues from The historical cost method is used for pated bad debts. Provisions for bad debts Dividends paid -707 -620 services are recognised in the income shares, bonds and other financial instru- are made on the basis of individual assess- Net cash used in financing activities 899 1,000 statement as they are supplied. ments. This means that shares/owner- ments of the individual receivables. ship interests are carried at cost, and Net change in cash and cash equivalents -320 216 General principles for measurement any dividends received are recognised Cash pooling arrangement and classification as other financial income. Intra-group Agder Energi AS is part of a cash pooling Cash and cash equivalents at start of year 544 328 Current assets and current liabilities cover distributions received are recognised arrangement with its subsidiaries. This Cash and cash equivalents at end of year 224 544 items that are due for payment within one in the year that they are allocated by means that the Group has a joint bank year of the transaction date, as well as subsidiaries. Dividends from subsidiaries account for short-term deposits and short- items relating to the business cycle. Other are also recognised in the year that they term loans. Interest income and interest items are classified as non-current assets are appropriated by the subsidiary. Invest- expenses arising from the cash pooling or non-current liabilities. Current assets ments are written down to fair value if arrangement are classified as external in are carried at the lower of cost and fair there is evidence of other-than-temporary the company’s income statement. value. Current liabilities are capitalised at impairment. Dividends from associates are their nominal value on the initial date. recognised when they are approved. Pensions Defined benefit pension plan Non-current assets are carried at cost, Interest rate swaps Pension costs and pension liabilities but are written down to the recoverable Interest rate swaps are used to match are calculated using a linear accumula- amount if there is evidence of impair- the duration and interest rate sensitiv- tion model based on assumptions relat- ment, in compliance with the Norwegian ity of the company’s debt portfolio to the ing to discount rates, projected salaries, accounting standard on the impairment of Group’s policy and strategy. Interest rate the level of benefits from the National non-current assets. swaps are managed within the context of Insurance Scheme and future returns on the Group’s overall debt portfolio. Instru- pension scheme assets, as well as actuarial Intangible assets ments in the hedging portfolio thus meet calculations of mortality, voluntary turnover, Intangible assets are included on the the criteria for hedge accounting, which etc. Pension plan assets are measured at statement of financial position if they means that all profit and loss effects are their fair value, and have been deducted meet the criteria for capitalisation, with recognised over the contract period and in the net pension liabilities presented on the exception of research and develop- the value of the portfolio is kept off the the statement of financial position. Remea- ment costs, which are expensed as they statement of financial position. surements over the course of the year are
AGDER ENERGI ANNUAL REPORT 2014 96 AGDER ENERGI ANNUAL REPORT 2014 97 NOTES
recognised in the statement of financial of financial position if it is likely that they Contingent liabilities and contingent position at the end of the year, so that will be realised in the future. Tax on equity assets NOTE 1 INTRA-GROUP TRANSACTIONS AND BALANCES the carrying amount always reflects the transactions is recognised directly in equity. If there is a greater than 50% probability full extent of the liabilities. In the event that an uncertain liability will need to be (Amounts in NOK millions) Note 2014 2013 of changes in pension obligations arising Liabilities settled, a provision is made based on a best Intra-group balances from plan amendments, the portion of the Agder Energi AS uses the amortised cost estimate of what the settlement will be. If Other non-current financial assets 10 6,248 5,337 change that has already been accrued at principle, and consequently the effective there is a smaller than 50% probability that Trade receivables 13 29 the time of the amendment is recognised interest rate method, for interest and li- an uncertain liability will need to be settled, Other current receivables 1,664 1,311 directly in the income statement. Pension abilities. Under the effective interest rate information is provided in the notes. Contin- Total receivables 7,926 6,678 expenses and net pension liabilities include method, the carrying amount of a loan is gent assets are not recognised, but if there a charge for employers’ national insurance the sum of future cash flows attributable is a greater than 50% probability that the Trade payables 15 1 6 contributions. to the loan discounted by the original ef- company will receive payment, information Other current liabilities 15 475 84 fective interest rate calculated for the cash is provided in the notes. The amount is not Total liabilities 476 90 Defined contribution plan flows. This means that loan arrangement estimated if it would be inappropriate to do For defined contribution plans, the pension fees are deducted on initial recognition, and so under generally accepted accounting Revenues and expenses relating to transactions with Group companies expense is equivalent to the premiums/con- that over the duration of the loan, the dif- principles. Furthermore, under generally ac- Other operating revenues 176 165 tributions paid over the course of the year. ference between the nominal interest rate cepted accounting principles entities shall be Total operating revenues 176 165 (the rate charged) and the effective interest able to recognise liabilities/provide informa- Taxes rate (the rate expensed) is recognised in tion based on best judgement without this Other operating expenses 5 16 Income tax is calculated in accordance with the statement of financial position under prejudicing the outcome of any court case. Total operating expenses 5 16 standard tax rules. The tax expense in the amortisation. In practice loans are there- income statement consists of tax payable fore initially recognised at their face value Statement of cash flows Cash flows from investments in subsidiaries 6 1,319 1,249 and changes in deferred tax/tax assets. Tax less arrangement fees, which means that The statement of cash flows has been pre- Other interest and financial income 211 267 payable is calculated on the taxable profit the debt is not carried on the statement of pared using the indirect method. Cash and Other interest and financial expenses 45 38 for the year. Deferred tax/tax assets are financial position at its nominal value. cash equivalents includes cash, bank de- Net financial income/expenses 1,484 1,478 calculated on the basis of the temporary posits and other short-term, liquid invest- differences that exist between accounting A provision is made for Agder Energi AS’s ments that can be converted into known and tax values, as well as the tax effect of proposed dividends at 31 December. cash values immediately and at insignificant any loss carryforwards. Deferred tax as- risk, and that mature less than three months NOTE 2 EMPLOYEE BENEFITS, MANAGEMENT COMPENSATION, ETC. sets are only recognised on the statement after their acquisition dates. (Amounts in NOK millions) Note 2014 2013 Employee benefits Salary 143 141 Employers’ National Insurance Contributions 20 22 Pension expense including employers’ NICs 3 3 24 Other benefits and reimbursements 1) 11 8 Total 178 195
Number of full-time equivalents at 31 Dec. 157 171
For details of management compensation and non-executive Directors’ fees at Agder Energi AS, please see Note 32 to the consolidated financial statements.
1) In 2014 other benefits and reimbursements includes the cost of a joint event for all of the subsidiaries in the Group (NOK 4 million). In 2014 this item also includes a NOK 5.5 million provision for redundancy packages arising from the restructuring process. In 2013 the provision for redundancy packages was NOK 3.2 million.
In May 2014 our charitable foundation LOS Fondet gave the Birkenes IL boys’ football team a surprise gift of match tickets and brand new training tops.
AGDER ENERGI ANNUAL REPORT 2014 98 AGDER ENERGI ANNUAL REPORT 2014 99 NOTE 3 PENSIONS Pension liabilities and pension plan assets (Amounts in NOK millions) 2014 2013 The company’s pension plans Gross funded pension liabilities 422 372 For employees taken on before 1 April 2007, the company has a defined benefit pension plan run by Agder Energi Pensjonskasse, Unfunded pension liabilities 124 114 which meets the legal requirements for public sector occupational pension plans. Employees taken on after that date are members Gross pension liabilities at 31 Dec. (including employers’ NICs) 546 486 of a defined contribution pension plan. Fair value of pension plan assets at 31 Dec. 560 465 Net pension liabilities at 31 Dec. -13 21 Defined benefit pension plans The Group has a funded public pension plan for its employees, which entitles them to defined future pension benefits, based on Change in defined benefit pension liabilities number of years of service and salary on reaching retirement age. Pension liabilities were calculated by an independent actuary Net defined benefit pension liabilities at 1 Jan. 21 71 in December, and represent an estimate of the situation at 31 December. Similarly, the gross pension plan assets at 31 December Pension expense recognised in profit or loss 0 20 were estimated by the Group’s management in December. Conversion of subordinated loan to paid-in capital -40 0 Acquisitions/disposals of businesses/other movements during period 0 -7 Early retirement schemes (AFP schemes) Company contributions incl. employers’ NICs -22 -22 Employees are covered by different AFP schemes, depending on whether they are part of the defined benefit or defined contri- Pension benefits included under operating expenses -3 -3 bution pension plans. Remeasurements 31 -39 Net pension liabilities at 31 Dec. -13 21 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 Pension fund receivables 138 93 subsidy. The company is therefore liable for all of its obligations under the scheme. Pension liabilities 124 114 Net pension liabilities at 31 Dec. -13 21 Employees covered by the defined contribution plan are entitled to a private AFP scheme. This AFP scheme is funded by contribu- tions made by the employer. The contribution for 2014 was 2.3% (2013: 2.0%). The contribution is likely to increase further over Remeasurements are made up of: the coming years. Changes in demographic assumptions 15 5 Changes in financial assumptions 41 -22 Actuarial assumptions Excess return on assets -25 -21 When calculating the pension expense and net pension liabilities, a number of assumptions have been made (see table below). Remeasurements recognised on statement of financial position 31 -39 Since 31 December 2012 the discount rate has been based on the interest rate on covered bonds. Wage growth assumptions have taken into account past observed wage growth at the company. The remeasurements in 2014 were mainly due to a fall in market interest rates/the discount rate. Due to life expectancy adjustments to the pensions of current employees in the plan, as well as changes to the rules on disability pensions that came into force in 2014, The company uses the latest version of the Norwegian life tables (GAP 07), for life expectancy, probability of disability, etc. a significant past service adjustment was recognised.
Assumptions used to determine pension liabilities at 31 Dec. The pension expense for the year has been calculated as follows 2014 2013 (Amounts in NOK millions) 2014 2013 Discount rate 3.00% 4.10% Current service cost 15 17 Annual wage growth 3.00% 3.50% Interest income/expenses on pension fund receivables/liabilities 0 3 Increase in the National Insurance Scheme’s basic amount (”G”) 3.00% 3.50% Past service cost -16 0 Annual indexing of pensions 2.25% 2.75% Employers’ National Insurance Contributions 2 2 Expected average remaining years of service (funded) 7 - Employee contributions -2 -1 Expected average remaining years of service (unfunded) 5 - Pension expense for the year, defined benefit plans 0 20 Defined contribution pension plans (including employers’ NICs) 3 3 The assumptions used to calculate pension liabilities are internally inconsistent with the most recent guidelines on actuarial Total pension expense recognised in the income statement 3 24 assumptions as of January 2015. The changes would have resulted in an increase in the company’s gross pension liabilities. Conversely, the January 2015 estimate of pension plan assets as of 31 December 2014 was higher than the estimate at the start The total pension expense also includes unfunded plans for senior managers. of December 2014. The impact of these changes on the net pension liability is insignificant, so the management has decided that there is no need to perform new actuarial calculations based on the latest assumptions and estimate of the pension plan assets.
Number of people covered by the pension plans 2014 2013 Defined benefit plan: current employees 86 94 Defined benefit plan: accrued entitlements and retired employees 316 311 Defined contribution plan: current employees 67 79 Current employees entitled to public sector AFP, and early retirees 81 81
AGDER ENERGI ANNUAL REPORT 2014 100 AGDER ENERGI ANNUAL REPORT 2014 101 NOTE 4 AUDITOR’S FEE
Total fees paid to auditor for auditing and other services comprise the following: (Amounts in NOK 000s excl. VAT) 2014 2013 Statutory audit 626 637 Other auditing services 41 0 Tax advice 17 37 Other services not related to auditing 51 79 Total 735 753
NOTE 5 OTHER OPERATING EXPENSES
(Amounts in NOK millions) 2014 2013 Property-related expenses, lease of machinery and office equipment 36 31 Purchase of plant and equipment 3 2 External services 80 70 Office supplies, telecommunications, postage, etc. 3 3 Travel expenses, subsistence allowances, mileage expenses, etc. 6 7 Sales, advertising, representation, membership fees and gifts 6 5 Purchase of goods for resale 22 0 Other operating expenses -3 -2 Total 154 117
NOTE 6 FINANCIAL INCOME AND EXPENSES
(Amounts in NOK millions) 2014 2013 Income from investments in subsidiaries* 1,319 1,249 Profit/ loss on investments in associates 0 3 Exchange rate gain 381 95 Other interest and financial income 267 263 Total financial income 1,967 1,609
Impairment charge against non-current financial assets 2 25 Exchange rate losses 365 90 Other interest and financial expenses 320 325 Total financial expenses 687 440
Net financial income/expenses 1,279 1,169
* ∗Profit/loss from investments in subsidiaries comprises allocated dividends, intra-group distributions from subsidiaries and gains on the disposal of subsidiaries. These amounts are recognised in the income statement as they are considered to reflect the return on the investment.
AGDER ENERGI ANNUAL REPORT 2014 102 AGDER ENERGI ANNUALANNUAL REPORTREPORT 20142014 103 NOTE 7 TAX NOTE 8 INTANGIBLE ASSETS
(Amounts in NOK millions) 2014 2013 (Amounts in NOK millions) Software The tax expense consists of Cost as of 01/01/2014 39 Income tax payable 221 213 Acquisitions 0 Change in deferred income tax 34 17 Disposals 18 Corrections to previous years’ tax assessments -12 -1 Cost as of 31/12/2014 21 Tax expense recognised in profit or loss 243 229 Accumulated deprecation as of 31/12/2014 15 Accumulated impairment losses as of 31/12/2014 2 Tax payable on the statement of financial position Carrying amount at 31/12/2014 4 Profit before tax 1 131 1 022 Permanent differences -158 21 Depreciation for the year 3 Change in temporary differences -94 -59 Useful life/depreciation period 3-8 years Non-taxable intra-group distributions -59 -223 Profit/loss for income tax purposes 820 761
Income tax payable 221 213 NOTE 9 PROPERTY, PLANT AND EQUIPMENT Taxable intra-group distributions -128 -24 Tax payable on the statement of financial position 94 190 (Amounts in NOK millions) Properties Vehicles, Work in Total fixtures, progress property, Reconciliation of nominal tax rate with effective tax rate fittings. machinery, plant and Profit before tax 1,131 1,022 etc. equipment Expected tax based on nominal rate 305 286 Cost as of 01/01/2014 9 47 2 58 Tax effect of Acquisitions through business combinations 23 21 0 44 Non-deductible expenses/non-taxable income -58 -57 Acquisitions 0 5 13 18 Corrections to previous years’ tax assessments -4 -1 Disposals 0 27 0 28 Tax expense recognised in profit or loss 243 229 Cost as of 31/12/2014 32 46 15 93 Effective tax rate 21% 22% Accumulated deprecation as of 31/12/2014 6 22 0 28 Accumulated impairment losses at 31/12/2014 0 8 0 8 Breakdown of temporary differences/deferred tax assets Carrying amount at 31/12/2014 26 15 15 56 Property, plant and equipment. -16 -18 Current assets/liabilities 87 -9 Depreciation for the year 2 8 0 10 Pension liabilities 98 74 Impairment losses for the year 0 8 0 8 Derivatives -70 -33 Total taxable (+)/deductible (-) temporary difference 99 14 Useful life/depreciation period 25 years - not depreciated 3-8 years Net deferred income tax liabilities (+)/assets (-) 27 4 Total capitalised deferred tax liabilities (+)/assets (-) 27 4
Changes in net deferred income tax over the year: NOTE 10 OTHER NON-CURRENT FINANCIAL ASSETS Net deferred tax liabilities (+)/assets (-) at 1 Jan. 4 -24 Correction to net deferred tax liabilities (+)/assets (-) for business combination -3 0 (Amounts in NOK millions) Note 2014 2013 Change in net deferred tax liabilities (+)/assets (-) on items recognised in equity -8 10 Loans to Group companies 1 6,248 5,337 Change in deferred tax liabilities (+)/assets (-) recognised through profit or loss 34 17 Loans to associates 119 201 Net deferred income tax liabilities (+)/assets (-) at 31 Dec. 27 4 Other non-current receivables 1) 143 171 Pension assets 3 138 93 Changes in deferred tax on items recognised in equity Total non-current financial assets 6,648 5,803 Remeasurements of pensions and change in tax rate 8 -10 Total change 8 -10 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 NOK 20 million guarantee to NASDAQ.
AGDER ENERGI ANNUAL REPORT 2014 104 AGDER ENERGI ANNUAL REPORT 2014 105 NOTE 11 SHARES IN SUBSIDIARIES AND ASSOCIATES NOTE 12 CASH AND CASH EQUIVALENTS
(Amounts in NOK millions) Business The company’s The company’s Ownership Carrying (Amounts in NOK millions) 2014 2013 office equity net income interest and amount* for the year voting rights Cash and cash equivalents 11 0 Subsidiaries Deposits in cash pooling arrangement 213 544 Agder Energi Vannkraft AS Kristiansand 2,247 823 100% 1,937 Total 224 544 Agder Energi Kraftforvaltning AS Kristiansand 10 2 100% 20 Agder Energi Nett AS Arendal 665 42 100% 605 Agder Energi AS has established a NOK 52 million bank guarantee to secure tax deductions at source. The guarantee covers the LOS AS Kristiansand 330 80 100% 324 parent company and subsidiaries. The company has also set up a cash pooling arrangement with an associated NOK 500 million Otera AS Kristiansand 59 -12 100% 137 overdraft facility. Most subsidiaries in which the parent company holds an ownership interest of at least 50% take part in the cash Agder Energi Varme AS Kristiansand 116 -8 100% 125 pooling arrangement and are jointly and severally liable to the bank for the overdraft facility. Agder Energi Venture AS Kristiansand 65 85 100% 68 Innovasjon og FoU AS Kristiansand 1 -1 100% 1 Stoaveien 14 AS Kristiansand 2 -3 100% 1 Stoa 192 AS Kristiansand 1 0 100% 2 NOTE 13 EQUITY Stoa 234 AS Kristiansand 1 0 100% 2 Trøngsla 8 AS Kristiansand 3 0 100% 2 (Amounts in NOK millions) Note Share Share Other Other Total Åneveien 9 AS Kristiansand 1 0 100% 1 capital premium account paid-in capital reserves equity Bjerkreim Vind AS Egersund 30 0 51% 27 Baltic Hydroenergy AS Kristiansand 22 1 100% 34 Equity at 31/12/2013 1,809 47 51 656 2,563 Total shares in subsidiaries 3,285 Remeasurements of pensions 3 0 0 0 -23 -23 Net income for the year 0 0 0 888 888 Associates and joint ventures 1) Allocated for dividends 15 0 0 0 -700 -700 Småkraft AS** 2) Bergen 1,129 -3 20 % 250 Equity at 31/12/2014 1,809 47 51 821 2,728 Statkraft Agder Energi Vind AS DA*** Kristiansand 86 -19 38 % 107 Fosen Vind AS*** Trondheim 188 -28 21 % 46 For details of share capital and shareholder information, please refer to Note 20 to the consolidated financial statements. North Connect KS** Kristiansand 10 -8 22 % 1 North Connect AS** Kristiansand 1 0 22 % 0 Total for associates and joint ventures 403 NOTE 14 INTEREST-BEARING LIABILITIES * Carried at the lower of cost and fair value. ** Associates (Amounts in NOK millions) 2014 2013 *** Joint ventures Non-current liabilities with a term to maturity of more than 5 years In February 2014, Agder Energi acquired the remaining shares in Baltic Hydroenergy AS. Liabilities to financial institutions 507 600 Bonds 4,893 3,804 1) The equity and profit of associates and joint ventures has been estimated for 2014. Total 2,287 2,184 2) Agder Energi has NOK 118 million in outstanding loans to small hydro projects. The Board of Directors of Agder Energi has also agreed to make an ad- ditional NOK 40 million capital infusion made up of loans or equity. Total interest-bearing non-current liabilities Liabilities to financial institutions 507 600 Bonds 4,893 3,804 Total 5,400 4,404
Total interest-bearing non-current liabilities 7,687 6,588
Interest-bearing current liabilities Commercial paper 300 900 Total interest-bearing current liabilities 300 900
Guarantees and obligations relating to interest-bearing non-current liabilities are described in greater detail in Note 19.
AGDER ENERGI ANNUAL REPORT 2014 106 AGDER ENERGI ANNUAL REPORT 2014 107 NOTE 15 OTHER NON-INTEREST-BEARING CURRENT LIABILITIES 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 (Amounts in NOK millions) Note 2014 2013 aims to minimise net financial expenses over the long term, while reducing risk to an acceptable level. Exposure to interest rate Trade payables 11 16 risk is measured and monitored. The group finance department is responsible for taking positions. Intra-group trade payables 1 1 6 Unpaid government taxes and duties, tax deducted at source, etc. 14 15 The parent company’s debt portfolios include foreign currency loans. 168 million euros in loans are used as a hedge against fluctua- Allocated dividends 13 700 707 tions in the Group’s revenues in that currency. Agder Energi AS has lent a similar amount in euros to Agder Energi Vannkraft AS. Other current liabilities 115 116 Other current liabilities to Group companies 1 475 84 Total other non-interest-bearing current liabilities 1,315 945 NOTE 18 CONTINGENT LIABILITIES
Agder Energi AS had no significant contingent liabilities at the end of the year. NOTE 16 AVSETNING FOR FORPLIKTELSER
(Amounts in NOK millions) Note 2014 2013 Pension liabilities 3 124 114 NOTE 19 MORTGAGED ASSETS, LIABILITIES AND GUARANTEES ISSUED Other non-current provisions 36 10 Total provisions 160 123 Mortgages Agder Energi AS currently has no mortgage loans.
Liabilities and guarantees issued NOTE 17 MARKET AND FINANCIAL RISK Agder Energi AS has no covenants relating to financial key figures in its loan agreements. Agder Energi AS’s loan agreements contain negative pledge clauses, which also cover its subsidiaries. This means that any new security interests require the consent Risk policy and risk strategy of the lenders. 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 Agder Energi AS has NOK 598 million in off-statement of financial position bank guarantees. NOK 346 million of this relates to a risk policy, separate risk strategies have been drawn up for the following areas: cash-settled power exchange agreement, NOK 48 million to guarantees linked to electricity trading, NOK 52 to tax deducted at • Production source and NOK 152 million to contractual guarantees. • Electricity trading • Retail market At the close of the year, the parent company had issued guarantees worth NOK 24 million in relation to subsidiaries’ external liabilities. • Finance (interest rates and foreign currency) Contractual obligations One of the main purposes of the risk policy and risk strategies is to hedge against fluctuations in future cash flows. Agder Energi Group 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 11 years left to run, with a renewal option for a further five years. Electricity derivatives with subsidiaries and NASDAQ as counterparties Several of Agder Energi AS’s subsidiaries trade cash-settled electricity derivatives on NASDAQ. Formally, this involves Agder Energi AS acting as NASDAQ’s counterparty, and Agder Energi entering into identical contracts with the relevant subsidiaries in parallel.
The company uses hedge accounting for these contracts, and so they are not capitalised. The net value of contracts with NASDAQ was NOK 733 million at 31 December 2014. The value of the company’s contracts with its subsidiaries was NOK -733 million.
Debt portfolio The Agder Energi Group’s whole loan portfolio is held by Agder Energi AS. This exposes the company to a significant interest rate risk. The Group has a central Finance department within Agder Energi, which has overall responsibility for bank services, financing, currency operations, corporate finance and other financial services.
AGDER ENERGI ANNUAL REPORT 2014 108 AGDER ENERGI ANNUAL REPORT 2014 109 AUDITOR´S REPORT
AGDER ENERGI ANNUAL REPORT 2014 110 AGDER ENERGI ANNUAL REPORT 2014 111