MOVING ENERGY FORWARD GROUP ANNUAL REPORT 2011 AT One of the leading energy groups in Northern Europe A GLA DONG Energy is one of the leading energy groups in Northern Europe. We are head- quartered in Denmark. Our business is based NCE on procuring, producing, distributing and Owners at 31.12.2011 trading in energy and related products in The Danish State 76.49% SEAS-NVE Holding 10.88% Northern Europe. At the end of 2011, Syd Energi Net 6.95% DONG Energy employed 6,098 people. Others 5.68% R REVENUE EBITDA PROFIT FOR ESULTS DKK DKK THE YEAR DKK 56.8BN 13.8BN 2.9BN 2011 CASH FLOWS FROM NET INVESTMENTS RATING OPERATIONS DKK DKK 12.6BN 13.1 BN A-/Baa1 MA Offshore wind in operation Gas sales Denmark .......................................45% Denmark ...................................... 29% RK UK .....................................................21% Sweden ..........................................22% Netherlands ....................................... % ET Electricity generation 1 Denmark .......................................54% Electricity distribution S Heat generation Denmark ...................................... 28% HARES Denmark .......................................35% Gas distribution Electricty sales Denmark ...................................... 29% Denmark ...................................... 20% Netherlands .......................................1% More reliable and clean energy WHY DONG Energy works concertedly to produce more energy and to reduce emissions of CO2. Production of oil and gas is being increased to meet the growing demand for energy. Many new wind turbines are also being brought on stream. And we plan to convert our Danish power stations to more green generation through increased use of biomass. The financial statements show that it is possible to meet both the challenges in the energy area and achieve satisfactory financial results. WH Doubling EBITDA, DKK billion Halving CO2 emissions, g CO2 per kWh Realised Target Trend Realised Target ERE 17.6 18 650 638 Mål 16 Likvider 613 EBITDA600 590 14 13.8 574 Bindende lånefaciliteter Realiseret 550 TO 12 524 10 500 524 8.8 486 RATING 8 450 6 400 4 350 2 320 A-/Baa1 0 300 2009 2010 2011 2012 2013 2014 2015 2006 2008 2010 2012 2014 2016 2018 2020 DONG Energy’s strategic directions HO W Wind and biomass growth Robustness via the integrated business model Growth in the production Development of the flexible and sourcing of oil and gas energy system of the future CONTENTS Group annual report To make the annual report more user friendly, DONG the Group annual report is an extract of DONG Energy’s Energy has, for the first time, chosen to publish a Group complete annual report. The complete annual report, annual report that does not include accounting policies including accounting policies for the financial statements for the financial statements and non-financial statements, and non-financial statements, licence overview, company licence overview, company overview, the financial overview, the parent company financial statements and statements of the parent company, DONG Energy A/S, or the statutory corporate governance statement, can be the statement on corporate governance, including downloaded at www.dongenergy.com. Following adoption internal control and risk management systems in at the AGM, the complete annual report will also be connection with the financial reporting. Pursuant to available from the Danish Business Authority section 149(2) of the Danish Financial Statements Act, (Erhvervsstyrelsen). MANAGEMENt’s REviEw ADDITIONAL INFORMATION 1 Letter from the Chairman and the CEO 126 Company announcements published in 2011 2 Selected highlights in 2011 127 Glossary 4 Performance highlights, financial Inside front cover DONG Energy at a glance 6 Performance highlights, non-financial Inside back cover Definitions of performance highlights 6 CSR report 8 Market conditions 9 Business and strategy FURTHER INFORMATION 18 Business areas at a glance Media Relations Financial performance and outlook: Karsten Anker Petersen 28 Consolidated results +45 99 55 96 62 36 Review of business areas’ performance 40 Financial outlook for 2012 Investor Relations 42 Financial objectives Morten Hultberg Buchgreitz 43 DONG Energy and the capital market +45 99 55 97 50 44 Risk and risk management www.dongenergy.com Management information: 52 Corporate governance 52 Board of Directors 56 Executive Board Front and back cover photo Establishment of the Horns Rev 2 offshore wind farm CONSOLIDATED FINANCIAL STATEMENTS 60 Statement of comprehensive income 62 Balance sheet 64 Statement of changes in equity Language 66 Statement of cash flows The report has been prepared in Danish and 68 Notes to the consolidated financial statements in English. In the event of any discrepancies between the Danish and the English reports, the Danish MANAGEMENT STATEMENT, version shall prevail. INDEPENDENT AUDITOR’s REpORt aND ASSURANCE STATEMENT 57 Statement by the Executive Board and the Board of Directors 124 Independent auditor’s report, financial statements Design: Bysted/DONG Energy 125 Assurance statement, non-financial statements Print: Scanprint This report was printed by an ISO 14001 eco-certified and EMAS-registered printing firm More reliable and clean energy Modern society is using more and more energy. At the The aim is to deliver reliable and clean energy that meets same time, we want to slow down the impact on the envi- the requirements of modern society. The ability to achieve ronment to which traditional energy production contrib- satisfactory financial results at the same time is reflected utes. This is the dual challenge that we are facing. in DONG Energy’s financial statements. We are thus well DONG Energy sees it as its task to work concertedly on on the way towards our business target to double operat- both fronts. On a sound business basis, of course. ing income in 2015 compared with 2009. We are producing more energy by increasing our pro- In the context of the global challenge, DONG Energy’s duction of oil and gas, which will remain necessary sources initiatives may seem modest. But every effort counts. of energy for many years to come. At the same time, DONG And our rapid transition is equipping us well for the future Energy is a world leader in wind energy, and we are cur- while also demonstrating that it is possible to deliver more rently bringing row after row of new offshore wind turbines energy and more green energy on a sound commercial on stream. basis. At the same time, we are planning to convert our Danish power stations to more green generation. Consumption of coal is being reduced markedly while consumption of vari- 9 March 2012 ous forms of biofuel will be increased. Pollution with CO2 and other harmful substances is being reduced, and we are Fritz H. Schur Anders Eldrup thus producing the necessary energy more responsibly. Chairman of the Board of Directors CEO DONG ENERGY GROUP ANNUAL REPORT 2011 – MANAGEMENt’s REviEw 1 SE L ECTED Q1 Q2 13 January New hybrid capital bonds issued DONG Energy has successfully issued new hybrid capital HIGHLIGHTS IN 2011 with a coupon rate of 7.75% for EUR 700 million due in 3010 and repurchased EUR 500 million of the existing hybrid capital due in 3005. The capital base was strength- ened by DKK 1.3 billion. 24 February Construction of the offshore wind farm Borkum Riffgrund 1 Decision to build the offshore wind farm Borkum Riffgrund 1 in the German sector of the North Sea. The total invest- ment will be approximately EUR 1.25 billion. The farm will have a total capacity of 320 MW and will supply power 16 June from 2014. Construction of West of Duddon Sands offshore wind farm 28 March Decision to build the offshore wind farm West of Duddon PensionDanmark and PKA to become co-owners of Sands in the Irish Sea in a 50/50 partnership between Anholt offshore wind farm DONG Energy and ScottishPower Renewables with A consortium consisting of PensionDanmark and PKA has expected commissioning in 2014. The total investment is signed an agreement with DONG Energy on the acquisi- expected to be GBP 1.6 billion. tion of 50% of Anholt offshore wind farm for approximately DKK 6 billion. 20 June Divestment of Oil Terminals DONG Energy and the Canadian energy infrastructure business Inter Pipeline Fund agreed that Inter Pipeline Fund will take over DONG Energy Oil Terminals. The price was DKK 2.6 billion and the transaction was completed in January 2012. Note: Only selected highlights in 2011 are listed. A complete list of company announcements is available on page 126. 2 MANAGEMENt’s REviEw – DONG ENERGY GROUP ANNUAL REPORT 2011 Q2 Q3 Q4 17 August 18 October Signing of EUR 1.3 billion credit facility Acquisition of UK Shell Gas Direct DONG Energy has signed a EUR 1.3 billion 5-year revolving DONG Energy and Shell UK signed an agreement for credit facility which includes two 1 year extension options. DONG Energy to acquire the gas sales company Shell Gas Direct for GBP 30 million. The transaction has subse- 26 August quently been approved by the EU competition authorities. DONG Energy co-founder of bioenergy consortium in Måbjerg 27 October Together with local players, DONG Energy established a Vestas and DONG Energy enter into agreement on green energy consortium, Måbjerg Energy Concept. Over testing of new 7 MW offshore wind turbine 15 months, the consortium will determine whether a num- Vestas and DONG Energy have entered into cooperation on ber of bioenergy projects are feasible and will be profitable. testing of Vestas’ new V164-7.0 MW offshore wind turbine at DONG Energy’s demonstration site in the waters off Frede- 31 August rikshavn. DONG Energy’s total investment in the establish- Acquisition of Noreco’s interest in the Siri field ment of the test site will amount to around DKK 240 million. DONG Energy made an agreement to acquire Noreco’s interest in the Siri field in the Danish North Sea for DKK 70 04 November million. The transaction was completed at the end of 2011 Acquisition of rights to further develop and DONG Energy is now the sole owner of the field.